DCIT, Ludhiana V. M/s Davinder Sandhu Impex Limited, Ludhiana

ITSSA 1/CHANDI/2010

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 8834 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 12-10-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-07-2010
• Assessment Year: misc
• Appeal Filed On: 14-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SHRI
• Keywords: Search and seizure; Document seized; Block assessment; Documents seized
• Section: 132; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER IT(SS)A NO. 1/CHD/2010 BLOCK PERIOD 1.4.1996 TO 5.2.2003 THE DCIT, VS. M/S DAVINDER SANDHU, IMPEX LIMITED CHANDIGARH LUDHIANA PAN NO. AAACD6171C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VINOD KUMAR, CIT DR RESPONDENT BY: SHRI PANKAJ JAIN ORDER PER SUSHMA CHOWLA, JM THE APPEAL BY THE REVENUE IS AGAINST THE ORDER OF C IT(A) DATED 26.10.2009 RELATING BLOCK PERIOD 1.4.1996 TO 5.2.20 03 AGAINST THE ORDER PASSED UNDER SECTION 158BC R.W.S. BD OF THE I.T. AC T. 2. THE ONLY ISSUE ARISING IN THE PRESENT APPEAL IS AGAINST THE ORDER OF CIT(A) IN HOLDING THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS WITHOUT JURISDICTION IN THE ABSENCE OF THE SATISFACTION RECORDED U/S 158 BD OF THE INCOME TAX ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE SEARCH AND SEIZURE OPERATION U/S 132 OF THE ACT WERE CARRIED OUT IN THE CASE OF SHRI S.K.BHATIA GROUP OF CASES ON 5.2.2003. DURING THE COURSE OF SEARCH VA RIOUS INCRIMINATING 2 BOOKS OF ACCOUNT AND DOCUMENTS WERE SEIZED WHICH RE FLECTED SUBSTANTIAL PURCHASES AND SALES OF YARN OUTSIDE THE BOOKS OF AC COUNT. THE ASSESSMENT U/S 158 BC OF THE ACT WAS COMPLETED IN THE CASE OF SHRI S.K.BHATIA AND M/S SWASTIK TRADING COMPANY ON 31.3.2005. THE ASSE SSING OFFICER IN CHARGE OF THE SAID CASE I.E. ACIT, CENTRAL -II, LUD HIANA RECORDED HIS SATISFACTION THAT THE UNDISCLOSED INCOME OF THE ASS ESSEE BEFORE US HAD ESCAPED ASSESSMENT. THE SAID SATISFACTION WAS COMM UNICATED TO THE ASSESSING OFFICER IN CHARGE OF THE ASSESSEE VIDE LE TTER NO. 447 DATED 3.3.2006. THE PHOTOCOPIES OF THE SEIZED DOCUMENTS WERE ALSO FORWARDED. PURSUANT THERETO NOTICE, U/S 158BC(A) READ WITH SEC TION 158 BD OF THE INCOME TAX ACT WAS ISSUED AFTER RECORDING THE REASO NS FOR THE SAME ON 18.4.2006. THE ASSESSEE WAS REQUISITIONED TO FILE D THE RETURN OF INCOME. IN REPLY THE ASSESSEE FILED A LETTER STATING THAT A N APPLICATION BEFORE THE SETTLEMENT COMMISSION WAS PENDING HENCE THE PROCEED INGS INITIATED U/S 158 BD OF THE ACT BE WITHDRAWN. FURTHER PLEA OF TH E ASSESSEE WAS THAT THE SEARCH IN THE SWASTIK GROUP WAS CONDUCTED IN FE BRUARY, 2003 AND THE PROCEEDINGS WERE BARRED BY TIME. THE ASSESSEE ALSO SOUGHT REASONS FOR INITIATING THE PROCEEDINGS US/ 158 BD OF THE ACT. IN REPLY, THE ASSESSING OFFICER FORWARDED THE COPY OF THE LETTER RECEIVED FROM ACIT, CENTRAL CIRCLE-II, LUDHIANA ALONGWITH THE PHOTOCOPIES OF TH E RELEVANT SEIZED DOCUMENTS OF THE ASSESSEE . THE PROCEEDINGS IN THE CASE FROM THE DATE OF RECEIPT OF INFORMATION TILL THE END OF THE PROCEEDI NGS ARE TABULATED AT PAGE 2 OF THE ASSESSMENT ORDER. THE ASSESSMENT WAS COMPLETED IN THE CASE U/S 158 BC READ WITH SECTION 158 BD OF THE INC OME TAX ACT VIDE ORDER DATED 30.4.2008 ON TOTAL UNDISCLOSED INCOME O F RS.64,65,949/-, AGAINST WHICH THE ASSESSEE HAD DECLARED INCOME FOR THE BLOCK PERIOD AT RS. 34,25,480/-. THE UNDISCLOSED INCOME FOR THE BLOCK PERIOD WAS DETERMINED AT RS. 30,40,469/-. 3 4.. IN APPEAL BEFORE THE CIT(A) THE FIRST CONTENTIO N RAISED WAS AGAINST THE SATISFACTION RECORDED U/S 158 BD OF THE ACT. THE SUBMISSION OF THE LEARNED AR BEFORE THE CIT(A) WAS THAT THE SATISFACT ION OF THE ASSESSING OFFICER WAS RECORDED AFTER COMPLETION OF THE SEARC H ASSESSMENT IN THE CASE OF M/S BHATIA GROUP OF CASES, WHICH WAS COMPLE TED ON 30.3.2005 AND AS SUCH WAS NOT SUSTAINABLE IN VIEW OF THE JUDGMENT OF THE SPECIAL BENCH OF THE TRIBUNAL IN MANOJ AGGARWAL VS. DCIT 113 ITD 377 (DEL)(SB). THE CIT(A) HELD THAT THE NOTICE ISSUED BY THE ASSES SING OFFICER U/S 158BD COULD NOT BE ISSUED AS NO SATISFACTION WAS RE CORDED DURING THE COURSE OF PROCEEDINGS U/S 158BC OF THE ACT IN THE C ASE OF PERSONS SEARCHED AND THE SATISFACTION WAS ISSUED AFTER THE EXPIRY OF TIME LIMIT U/S 158BE OF THE ACT. THE ASSESSMENT THUS COMPLETED BY THE ASSESSING OFFICER WAS ANNULLED AS IT WAS WITHOUT JURISDICTION . RELIANCE WAS PLACED ON THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNA L IN THE CASE OF MANOJ AGGARWAL (SUPRA) AND THE DECISION OF THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF SHAKUNTALA DEVI VS. ACIT (I TA NO. 1227/CHANDI/1996 DATED 27.11.2007. A REFERENCE WAS ALSO MADE TO THE DECISION OF THE CIT(A) IN THE CASE OF MRS MRIDULA P ROP. DHRUV FABRICS, LUDHIANA VIDE HIS ORDER IN APPEAL NO.85-IT/CIT(A)-1 /07-08 DATED 30.6.2008. 5. THE LIMITED ISSUE RAISED BEFORE US IS WHETHER TH E ASSESSING OFFICER HAD NECESSARY JURISDICTION U/S 158BD OF THE INCOME TAX ACT IN THE ABSENCE OF THE SATISFACTION BEING RECORDED DURING T HE COURSE OF PROCEEDING U/S 158BC IN THE CASE OF THE PERSONS SEARCHED. IN THE FACTS OF THE PRESENT CASE, SEARCH AND SEIZURE ACTION WAS CARRIED OUT ON 5.2.2003 ON THE BHATIA GROUP. THE ASSESSMENT U/S 158 BC OF THE ACT WAS CO MPLETED ON THE BHATIA GROUP ON 31.3.2005. THEREAFTER THE ASSESSING OFFICER INCHARGE OF 4 THE BHATIA GROUP I.E. ACIT, CENTRAL CIRCLE-II RECOR DED THE SATISFACTION THAT THE INCOME OF THE ASSESSEE HAD ESCAPED ASSESSM ENT. THE SAID SATISFACTION WAS COMMUNICATED VIDE LETTER NO. 447 D ATED 3.3.2006 TO THE ASSESSING OFFICER, IN CHARGE OF THE ASSESSEE BEFORE US. THE PHOTOCOPY OF THE SEIZED DOCUMENTS WERE ALSO FORWARDED ALONGWITH. THEREAFTER THE ASSESSING OFFICER RECORDED THE REASONS FOR ISSUING NOTICE U/S 158BC(A) READ WITH SECTION 158BD OF THE ACT ON 18.4.2006. A DMITTEDLY, ALL THE PROCEEDINGS IN CONNECTION WITH THE INITIATION OF AC TION AGAINST THE ASSESSEE U/S 158 BD OF THE ACT WAS INITIATED AFTER THE COMPLETION OF THE ASSESSMENT PROCEEDINGS IN BHATIA GROUP OF CASES WHI CH WAS COMPLETED ON 31.3.2005. 6 WE FIND THAT THE ISSUE IN THE PRESENT CASE IS COV ERED BY THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COU RT IN CIT VS. MRS MRIDULA PROP. M/S DHRUV FABRICS IN ITA NO. 591 OF 2009, DATE OF DECISION 20.7.2010. IN THE FACTS OF THE CASE BEFOR E THE HON'BLE COURT, PURSUANT TO THE SEARCH ON SHRI S.K.BHATIA, ASSESSME NT U/S 158 BC OF THE ACT WAS FINALIZED ON 30.3.2005 AND NOTICE WAS ISSUE D TO MRS MRIDUAL PORP. DHRUV FABRICS (SUPRA) ON 5.9.2005 AND THE TRI BUNAL DISMISSED THE APPEAL OF THE REVENUE BY ACCEPTING THE PRELIMINARY PLEA OF THE ASSESSEE THAT ASSUMPTION OF JURISDICTION U/S 158 BD OF THE A CT BY THE ASSESSING OFFICER WAS NOT VALID AS THE ASSESSING OFFICER OF T HE PERSON SEARCHED, WHILE FRAMING THE BLOCK ASSESSMENT U/S 158 BC IN TH E CASE OF S.K. BHATIAS GROUP WAS REQUIRED TO RECORD HIS SATISFACT ION THAT UNDISCLOSED INCOME DISCOVERED BELONGED TO SOME PERSON OTHER THA N SEARCHED. THE HON'BLE PUNJAB & HARYANA HIGH COURT HELD AS UNDER:- 5 ACCORDING TO PLAIN READING OF SECTION 158BD IBID, THE ASSESSING OFFICER, WHILE FRAMING ASSESSMENT OF AN A SSESSEE UNDER SECTION 158BC OF THE ACT AGAINST WHOM ACTION HAS BEEN TAKEN UNDER SECTION 132 OR 132A OF THE ACT, IS MAND ATORY REQUIRED TO RECORD SATISFACTION BEFORE ACTION CAN B E INITIATED UNDER SECTION 158BD OF THE ACT AGAINST SUCH OTHER P ERSON. IN OTHER WORDS, THE SATISFACTION BY THE ASSESSING OFFI CER MAKING ASSESSMENT UNDER SECTION 158BC OF THE ACT, IN THE C ASE OF THE PERSON SEARCHED, THAT THERE IS CERTAIN UNDISCLOSED INCOME AS A RESULT OF EXAMINATION OF SEIZED MATERIAL WHICH BELO NGS TO SOME OTHER IDENTIFIED PERSON, IS ESSENTIAL FOR ASSUMING JURISDICTION UNDER SECTION 158 BD OF THE ACT. THE SATISFACTION REQUIRED TO BE RECORDED IS PRIMA FACIE SATISFACTION AND IS NOT FIRM OR CONCLUSIVE SATISFACTION AT THAT STAGE. SECTION 158 BE OF THE ACT PRESCRIBES TIME LIMIT FOR FRAMING OF ASSESSMENTS UNDER SECTION 158BC AND 158BD OF THE AC T. THE ASSESSING OFFICER OF THE PERSON AGAINST WHOM ACTIO N UNDER SECTION 132 OR 132A OF THE ACT HAS BEEN TAKEN, IS T HE ASSESSING OFFICER WHO INITIATES THE PROCEEDINGS UNDER SECTIO N 158BD OF THE ACT BY RECORDING SATISFACTION THAT ANY UNDISCLO SED INCOME BELONG TO SUCH OTHER PERSON SO AS TO TAKEN ACTION U NDER SECTION 158BD OF THE ACT AGAINST THAT PERSON. THE ACT NOWHERE SPECIFICALLY PRESCRIBES ANY TIME LIMIT OR L IMITATION FOR INITIATION OF PROCEEDINGS UNDER SECTION158BD OF THE ACT OR FOR RECORDING OF SATISFACTION BEFORE TAKING ACTION UNDE R THAT PROVISION. THE PLAIN AND REASONABLE CONSTRUCTION TH AT CAN BE PLACED ON THE AFORESAID PROVISION WOULD BE THAT THE RECORDING OF SATISFACTION FOR TAKING ACTION AGAINST ANY OTHER PERSON UNDER SECTION158BD OF THE ACT HAS TO BE BETWEEN INI TIATION OF PROCEEDINGS U/S 158BC AND BEFORE COMPLETION OF BLOC K ASSESSMENT UNDER SECTION 158BC OF THE ACT IN THE CA SE OF THE PERSON SEARCHED. IT WOULD, THUS, MEANS THAT THE AC TION CONTEMPLATED U/S 158BD OF THE ACT AGAINST A THIRD P ARTY TO A SEARCH, IS NECESSARILY TO BE DURING THE COURSE OF B LOCK ASSESSMENT PROCEEDINGS UNDER SECTION158BC OF THE SE ARCHED PERSON. IT CANNOT BE AFTER THE CONCLUSION OF THE S AME AS THERE 6 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 AN OMALY AND WOULD BE ARBITRARY AND UNREASONABLE. IT COULD NOT BE READ IN THE PROVISION THAT WHERE BLOCK ASSESSMENT UNDER SEC TION 158BC OF THE ACT IN THE CASE OF AN ASSESSEE AGAINST WHOM ACTION UNDER SECTION 132 OR 132A OF THE ACT HAD BEE N CARRIED OUT IS FINALIZED, REVENUE CAN TAKE ACTION AT ANY T IME IN THE ABSENCE OF ANY SPECIFIC LIMITATION PRESCRIBED IN TH E STATUTE. A CONSTRUCTION WHICH LEADS TO SUCH AN ANOMALY SHOUL D BE AVOIDED. IT IS NOT DISPUTED THAT THE PREMISES OF S.K.BHATIA AND GROUP WERE SEARCHED ON 19.2.2003 AND BLOCK ASSESSMENT UND ER SECTION 158BC WAS FRAMED ON 30.3.2005. THE SATISFA CTION AS CONTEMPLATED UNDER SECTION 154 BD IN THE CASE OF TH E ASSESSEE WAS RECORDED ON 15.7.2005 AS OBSERVED BY THE ASSESS ING OFFICER OF THE PERSON SEARCHED, I.E. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-II, LUDHIANA AND NOTI CE WAS ISSUED ON 2.9.2005. THE SATISFACTION HAVING BEEN RECORDED AND THE PROCEEDINGS INITIATED AFTER FINALIZATION OF THE BLOCK ASSESSMENT IN THE CASE OF S.K.BHATIA AND GROUP ON 30.3.2005, SAME WERE BAD IN LAW. IN VIEW OF THE ABOVE, THE SUBSTANTIAL QUESTION OF L AW CLAIMED BY THE REVENUE IS ANSWERED AGAINST THE REVENUE AND FINDING NO MERIT IN THE APPEAL, THE SAME IS ACCORDINGLY DIS MISSED. 7. IN THE FACTS OF THE PRESENT CASE, PROCEEDINGS U/ S 158BC IN THE CASE OF S.K.BHATIA WERE COMPLETED ON 31.3.2005 AND THE N OTICE U/S 158BD OF THE ACT WAS ISSUED TO THE ASSESSEE ON 3.3.2006 I.E. AFTER THE COMPLETION OF THE BLOCK ASSESSMENT PROCEEDINGS IN THE CASE OF THE PERSON SEARCHED. 7 FOLLOWING THE PARITY OF REASONING AND THE RATIO LAI D DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. MRS MRIDULA PROPRIETOR M/S DHRUV FABRICS LTD (SUPRA), WE HOLD THAT THE ASSUMPT ION OF JURISDICTION U/S 158 BD OF THE ACT BY THE ASSESSING OFFICER WAS NOT VALID AS THE SATISFACTION WAS RECORDED BY THE ASSESSING OFFICER OF THE PERSONS SEARCHED AFTER FRAMING THE BLOCK ASSESSMENT U/S 158BC IN THE CASE OF SHRI S.K.BHATIA. WE UPHOLD THE ORDER OF CIT(A) IN THIS REGARD AND DISMISS THE GROUNDS OF APPEAL RAISED BY THE REVENUE. 8 IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF OCTOBER, 2010. SD/- SD/- (G.S.PANNU) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 12 TH OCTOBER, 2010 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR