Sh. Daulat Ram (HUF), Chandigarh V. JCIT, Chandigarh

ITSSA 1/CHANDI/2009

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 0059 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 year(s) 1 month(s) 30 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 20-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 04-03-2014
• Assessment Year: misc
• Appeal Filed On: 21-01-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Document seized; Block assessment; Documents seized
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER IT(SS)A NO.1/CHD/2009 BLOCK PERIOD : 1.4.1999 TO 14.5.2001 SHRI DAULAT RAM (HUF), VS. THE J.C.I.T., H.NO.598, SECTOR 8-C, CIRCLE 1(1), CHANDIGARH. CHANDIGARH. PAN: AAEHD4223 Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JASPAL SHARMA RESPONDENT BY : SHRI MANJIT SINGH, DR DATE OF HEARING : 04.03.2014 DATE OF PRONOUNCEMENT : 20.03.2014 O R D E R PER SUSHMA CHOWLA, J.M. : THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), CHANDIGARH DA TED 18.12.2008 RELATING TO BLOCK PERIOD 1.4.1999 TO 14.5.2001 AGAI NST THE ORDER PASSED UNDER SECTION 158BC OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE IMPUGNED ORDER IS BOTH AGAINST FACTS AND E RRONEOUS IN LAW. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D.CIT(APPEALS) HAS ERRED IN NOT HAVING QUASHED THE ASSESSMENT WHICH IS WITHO UT JURISDICTION AND ILLEGAL. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D.CIT(APPEALS) HAS ERRED IN HAVING CONFIRMED THE ADDITION OF RS.3,47,479/- M ADE BY THE LD. ASSESSING OFFICER TOWARDS THE INCOME OF THE ASSESSE E FOR THE ASSTT. YEAR 200102 MERELY ON SURMISES AND CONJECTURES. 2 3. THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUND O F APPEAL WHICH READS AS UNDER: ' ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD .CIT(APPEALS) HAS ERRED IN NOT HAVING QUASHED THE BLOCK ASSESSMENT IN THE CASE OF ASSESSEE(HUF) WHICH IS WITHOUT JURISDICTION, ILLEGAL AND BAD IN LAW AS NO SATISFACTION HAVING BEEN RECORDED BEFORE COMPLETION OF BLOCK ASSESSMENT U/S 158BC IN THE CASE OF PERSON SEARCHED AND THE PROCEEDINGS IN THE CASE OF ASSESSEE(HUF) HAVING BEEN INITIATED MUCH AFTER FINALIZATION OF THE BLOCK ASSESSMENT U/S 158BC IN T HE CASE OF PERSON SEARCHED.' 4. THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT TH AT THE PRELIMINARY ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST THE A SSESSMENT FRAMED IN THE PRESENT CASE BEING WITHOUT JURISDICTION AND HENCE I LLEGAL. 5. THE BRIEF FACTS OF THE CASE ARE THAT SHRI DAULAT RAM WAS WORKING AS ACCOUNTANT WITH M/S TALWARSONS JEWELLERS, SECTOR 22 -D, CHANDIGARH. DURING THE COURSE OF SEARCH PROCEEDINGS CARRIED OUT IN THE PREMISES OF M/S TALWARSONS JEWELLERS ON 14.5.2001, THE RESIDENT IAL PREMISES OF SHRI DAULAT RAM AT HOUSE NO.598, SECTOR 8, CHANDIGARH WA S ALSO SEARCHED. ON THE BASIS OF THE DOCUMENTS SEIZED DURING THE COU RSE OF SEARCH, IT WAS FOUND THAT HUF OF SHRI DAULAT RAM WAS HAVING AGRICU LTURAL INCOME AND INTEREST INCOME AND NOTICE UNDER SECTION 158BD OF T HE ACT WAS ISSUED TO SHRI DAULAT RAM, HUF I.E. THE PRESENT ASSESSEE BEFO RE US ON 22.7.2004. THE ASSESSEE FILED RETURN FOR THE BLOCK PERIOD ON 4 .2.2005 DECLARING UN- DISCLOSED INCOME OF RS.89,650/- AND THEREAFTER SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE TO EXPLAIN VARIOUS ENTRIES I N THE SEIZED DOCUMENTS. THEREAFTER THE UN-DISCLOSED INCOME IN THE HANDS OF THE ASSESSEE FOR THE BLOCK PERIOD WAS COMPUTED AT RS.4,83,569/-. 6. BEFORE THE CIT (APPEALS), THE FIRST ISSUE RAISED BY THE ASSESSEE WAS THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING O FFICER WAS TIME BARRED. THE CIT (APPEALS) OBSERVED THAT DURING THE COURSE OF SEARCH 3 CERTAIN MATERIAL WAS FOUND WHICH REFLECTED THAT THE RE WAS UN-DISCLOSED INCOME IN THE STATUS OF HUF. THE INFORMATION IN TH IS REGARD WAS PASSED ON BY THE ASSESSING OFFICER-INCHARGE OF SHRI DAULAT RAM, INDIVIDUAL AND TO THE ASSESSING OFFICER HAVING JURISDICTION OVER T HE CASE OF THE ASSESSEE IN THE STATUS OF HUF, WHO IN TURN ISSUED NOTICE UND ER SECTION 158BD OF THE ACT ON 22.7.2004. THE PLEA OF THE ASSESSEE THA T NO PROCEEDINGS UNDER SECTION 158BD OF THE ACT COULD BE INITIATED I N THE STATUS OF HUF AFTER COMPLETING ASSESSMENT IN THE INDIVIDUAL CAPAC ITY, WAS REJECTED BY THE CIT (APPEALS) AND IT WAS HELD THAT THE PROCEEDI NGS COULD BE INITIATED IN BOTH THE CASES AS THE TWO WERE DIFFERENT PERSONS . THE CASE LAWS RELIED UPON BY THE ASSESSEE WERE DISTINGUISHED AND IT WAS OBSERVED THAT IN THE FACTS OF THE PRESENT CASE, THERE WERE INCRIMINATING MATERIAL SEIZED DURING THE COURSE OF SEARCH AND INFORMATION WAS PASSED ON TO THE ASSESSING OFFICER HAVING JURISDICTION OVER THE CASE OF THE AS SESSEE, HUF. IN RESPONSE TO THE NOTICE ISSUED UNDER SECTION 158BD O F THE ACT THE ASSESSEE HAD HIMSELF DECLARED UN-DISCLOSED INCOME. AS PER THE CIT (APPEALS), SELF ADMISSION OF THE ASSESSEE BY DECLAR ING UN-DISCLOSED INCOME PROVES THAT THERE WAS VALIDITY OF THE ASSESS MENT PROCEEDINGS IN AS MUCH AS THAT THERE WAS MATERIAL IN THE HANDS OF THE ASSESSEE. 7. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF T HE CIT (APPEALS). THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT THAT SEARCH WAS CONDUCTED ON 14.5.2001 AND THE ASSESSMENT OF THE PERSON SEARC HED WAS COMPLETED UNDER SECTION 158BC OF THE ACT ON 30.5.2003. THE A SSESSING OFFICER OF THE ASSESSEE TO WHOM THE INFORMATION WAS PASSED ON, RECORDED THE SATISFACTION ON 111.6.2003 AND EVEN THE INFORMATION WAS SENT TO THE SAID ASSESSING OFFICER ON 11.6.2003, WHO IN TURN ISSUED NOTICE AFTER A GAP OF ABOUT ONE YEAR I.E. ON 22.7.2004. THEREAFTER ASSE SSMENT UNDER SECTION 158BD OF THE ACT WAS COMPLETED IN THE CASE OF THE A SSESSEE ON 4 29.3.2006. IT WAS POINTED OUT BY THE LEARNED A.R. FOR THE ASSESSEE THAT THE DELAY IN ISSUING NOTICE UNDER SECTION 158BD OF THE ACT WAS ABOUT 14 MONTHS. THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT THAT IN VIEW OF THE RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COUR T IN CIT VS. MRIDULA, PROP. M/S DHRUV FABRICS [335 ITR 266 (P&H)], THE PR OCEEDINGS INITIATED UNDER SECTION 158BD OF THE ACT WERE TIME BARRED AND THE ASSESSMENT PURSUANT TO SUCH ISSUE OF NOTICE UNDER SECTION 158B D OF THE ACT BELATEDLY, WERE ILLEGAL. 8. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF THE CIT (APPEALS) AND POINTED OUT THAT ONCE THE ASS ESSEE HAD ACCEPTED NOTICE UNDER SECTION 158BC OF THE ACT AND THEREAFTE R EVEN FURNISHED THE RETURN OF INCOME DECLARING UN-DISCLOSED INCOME, THE RE WAS NO WORTH IN THE PLEA OF THE ASSESSEE. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS WITH REGARD TO THE INITIATION OF PROCEEDINGS UNDER SECTION 158BD OF THE ACT BY WAY O F RECORDING SATISFACTION ON 11.6.2003 AND THEREAFTER ISSUING NO TICE UNDER SECTION 158BD OF THE ACT ON 22.7.2004 TO FURNISH THE RETURN OF UN-DISCLOSED INCOME, WHERE THE ASSESSMENT IN THE CASE OF SEARCHE D PERSON WAS COMPLETED ON 30.5.2003. 10. WE FIND THAT IDENTICAL ISSUE AROSE BEFORE THE H ON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. MRIDULA, PROP. M/S DH RUV FABRICS (SUPRA) AND WHILE INTERPRETING THE PROVISIONS OF SE CTION 158BD AND 158BE OF THE ACT, IT WAS OBSERVED AS UNDER: SECTION 158BD WAS INSERTED IN CHAPTER XIV-B BY THE FINANCE ACT, 1995, WITH EFFECT FROM, JULY 1, 1995. THE AFORESAI D PROVISION IS MADE APPLICABLE WHEN THE FOLLOWING CONDITIONS ARE F ULFILLED: 5 (A) THERE SHOULD BE UNDISCLOSED INCOME WITHIN THE M EANING OF SECTION 158B(B) WHICH RELATES TO THE ASSETS OR BOOKS/DOCUMENTS FOUND AND SEIZED/REQUISITIONED; (B) THE ASSESSING OFFICER SHOULD RECORD A FINDING T HAT THERE WAS UNDISCLOSED INCOME IN SUCH ASSETS OR BOOKS OF A CCOUNT OR DOCUMENTS OF THE SEARCHED PERSON WHICH BELONGED TO THE PERSON OTHER THAN THE ONE SEARCHED. ACCORDING TO THE PLAIN READING OF SECTION 158BD IBI D, THE ASSESSING OFFICER, WHILE FRAMING THE ASSESSMENT OF AN ASSESSEE UNDER SECTION 158BC OF THE ACT AGAINST WHOM ACTION HAS BEEN TAKEN UNDER SECTION 132 OR 132A OF THE ACT IS MANDA TORY REQUIRED TO RECORD SATISFACTION BEFORE ACTION CAN BE INITIAT ED UNDER SECTION 158BD OF THE ACT AGAINST SUCH OTHER PERSON. IN OTH ER WORDS, THE SATISFACTION BY THE ASSESSING OFFICER MAKING ASSESS MENT UNDER SECTION 158BC OF THE ACT, IN THE CASE OF THE PERSON SEARCHED, THAT THERE IS CERTAIN UNDISCLOSED INCOME AS A RESULT OF EXAMINATION OF SEIZED MATERIAL WHICH BELONGS TO SOME OTHER IDENTIF IED PERSON, IS ESSENTIAL FOR ASSUMING JURISDICTION UNDER SECTION 1 58BD OF THE ACT. THE SATISFACTION REQUIRED TO BE RECORDED IS PRIMA F ACIE SATISFACTION AND IS NOT FIRM OR CONCLUSIVE SATISFACTION AT THAT STAGE. 11. IT WAS FURTHER OBSERVED BY THE HON'BLE PUNJAB & HARYANA HIGH COURT THAT SECTION 158BE PRESCRIBES THE TIME LIMIT FOR FRAMING OF ASSESSMENT UNDER SECTION 158BC AND 158BD OF THE ACT . HOWEVER, THE ACT NOWHERE SPECIFICALLY PRESCRIBES ANY TIME LIMIT OR LIMITATION FOR INITIATION OF PROCEEDINGS UNDER SECTION 158BD OF TH E ACT. THE HON'BLE HIGH COURT THUS HELD THAT FOR RECORDING THE SATISFA CTION FOR TAKING ACTION AGAINST ANY OTHER PERSON UNDER SECTION 158BD OF THE ACT, THE PLAIN AND REASONABLE CONSTRUCTION THAT COULD BE PLACED UPON T HE SAID PROVISION WOULD BE THAT IT HAD TO BE BETWEEN INITIATION OF PR OCEEDINGS UNDER SECTION 158BC AND BEFORE COMPLETION OF BLOCK ASSESS MENT UNDER SECTION 158BC OF THE ACT IN THE CASE OF THE PERSON SEARCHED . THE RELEVANT FINDINGS OF THE HON'BLE HIGH COURT IN CIT VS. MRIDU LA, PROP. M/S DHRUV FABRICS (SUPRA) WERE AS UNDER: SECTION 158BE OF THE ACT PRESCRIBES THE TIME LIMIT FOR FRAMING OF ASSESSMENT UNDER SECTION 158BC AND 158BD OF THE ACT . THE ASSESSING OFFICER OF THE PERSON AGAINST WHOM ACTION UNDER SECTION 132 OR 132A OF THE ACT HAS BEEN TAKEN, IS THE ASSES SING OFFICER WHO INITIATES THE PROCEEDINGS UNDER SECTION 158BD O F THE ACT BY RECORDING SATISFACTION THAT ANY UNDISCLOSED INCOME BELONGS TO SUCH 6 OTHER PERSON SO AS TO TAKE ACTION UNDER SECTION 158 BD OF THE ACT AGAINST THAT PERSON. THE ACT NOWHERE SPECIFICALLY PRESCRIBES ANY TIME LIMIT OR LIMITATION FOR INITIATION OF PROCEEDI NGS UNDER SECTION 158BD OF THE ACT OR FOR RECORDING OF SATISFACTION B EFORE TAKING ACTION UNDER THAT PROVISION. THE PLAIN AND REASONA BLE CONSTRUCTION THAT CAN BE PLACED ON THE AFORESAID PR OVISION WOULD BE THAT THE RECORDING OF SATISFACTION FOR TAKING AC TION AGAINST ANY OTHER PERSON UNDER SECTION 158BD OF THE ACT HAS TO BE BETWEEN INITIATION OF PROCEEDINGS UNDER SECTION 158BC AND B EFORE COMPLETION OF BLOCK ASSESSMENT UNDER SECTION 158BC OF THE ACT IN THE CASE OF THE PERSON SEARCHED. IT WOULD, THUS, M EANS THAT THE ACTION CONTEMPLATED UNDER SECTION 158BD OF THE ACT AGAINST A THIRD PARTY TO A SEARCH, IS NECESSARILY TO BE DURING THE COURSE OF BLOCK ASSESSMENT PROCEEDINGS UNDER SECTION 158BC OF THE S EARCHED PERSON. IT CANNOT BE AFTER THE CONCLUSION OF THE S AME AS THERE IS NO OCCASION FOR AN ASSESSING OFFICER TO EXAMINE THE SEIZED MATERIAL OR DOCUMENTS OF THE SEARCHED PERSON WHEN T HE BLOCK ASSESSMENT PROCEEDINGS HAVE CONCLUDED AND NO OTHER PROCEEDINGS ARE PENDING BEFORE HIM. IF ANY OTHER TIME LIMIT IS READ IN THE PROVISIONS/STATUTE, IT SHALL LEAD TO ANOMALY AND WO ULD BE ARBITRARY AND UNREASONABLE. IT COULD NOT BE READ IN THE PROV ISION THAT WHERE BLOCK ASSESSMENT UNDER SECTION 158BC OF THE ACT IN THE CASE OF AN ASSESSEE AGAINST WHOM ACTION UNDER SECTION 132 OR 1 32A OF THE ACT HAD BEEN CARRIED OUT IS FINALIZED, THE REVENUE CAN TAKE ACTION AT ANY TIME IN THE ABSENCE OF ANY SPECIFIC LIMITATION PRESCRIBED IN THE STATUTE. A CONSTRUCTION WHICH LEADS TO SUCH AN ANO MALY SHOULD BE AVOIDED. 12. IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE P UNJAB & HARYANA HIGH COURT, ANY ACTION CONTEMPLATED UNDER SECTION 1 58BD OF THE ACT AGAINST THE THIRD PARTY TO SEARCH WOULD NECESSARILY HAVE TO BE TAKEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS UNDER S ECTION 158BC OF THE ACT OF THE SEARCHED PERSON AND THE SAME COULD NOT B E TAKEN AFTER CONCLUSION OF THE BLOCK ASSESSMENT PROCEEDINGS OF THE SEARCHED PERSON. 13. IN THE FACTS OF THE PRESENT CASE BEFORE US THE BLOCK ASSESSMENT OF THE SEARCHED PERSON WAS COMPLETED ON 30.5.2003 AND THE COPY OF THE ASSESSMENT ORDER IS PLACED AT PAGES 7 AND 8 OF THE PAPER BOOK FILED BY THE ASSESSEE. THE SATISFACTION/INFORMATION TO THE ASSESSING OFFICER OF THE THIRD PERSON I.E. THE ASSESSEE BEFORE US WAS FO RWARDED ON 11.6.2003 AS PER THE INFORMATION SUPPLIED BY THE REVENUE AT P AGES 1 AND 2 OF THE PAPER BOOK FILED BY THE REVENUE. FURTHER THE NOTI CE UNDER SECTION 158BD OF THE ACT WAS ISSUED TO THE ASSESSEE ON 22.7 .2004 AS PER THE 7 COPY OF THE NOTICE PLACED AT PAGE 22 OF ASSESSEES PAPER BOOK. THE NOTICE IN THE PRESENT CASE WAS ISSUED AFTER ABOUT 1 4 MONTHS FROM THE COMPLETION OF ASSESSMENT UNDER SECTION 158BC OF THE ACT OF THE SEARCHED PERSON I.E. SHRI DAULAT RAM (INDIVIDUAL). IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE HIGH COURT, WHERE THE SATISFACTION/I NITIATION OF PROCEEDINGS UNDER SECTION 158BD OF THE ACT WERE AFT ER THE COMPLETION OF THE ASSESSMENT IN THE CASE OF THE SEARCHED PERSON, THEN SUCH SATISFACTION HAVING BEEN RECORDED IN THE PRESENT CASE AFTER THE FINALIZATION OF THE BLOCK ASSESSMENT IN THE CASE OF SEARCHED PERSON WAS BAD IN LAW AND THE ASSESSMENT FRAMED THEREAFTER WAS WITHOUT JURISDICTI ON. IN VIEW THEREOF, WE CANCEL THE ASSESSMENT FRAMED IN THE CASE OF THE ASSESSEE UNDER SECTION 158BD OF THE ACT. THE GROUND OF APPEAL NO. 2 RAISED BY THE ASSESSEE IS THUS ALLOWED AND THE OTHER GROUNDS OF A PPEAL RAISED BY THE ASSESSEE ON THE MERITS ARE ALSO ALLOWED. 14. THE ADDITIONAL GROUND OF APPEAL FILED BY THE AS SESSEE BEING NOT PRESSED IS DISMISSED. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF MARCH, 2014. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 20 TH MARCH, 2014 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 8