Sri. ABDUL REHMAN DAMDA, MUMBAI V. ACIT CIR. - 13(3), MUMBAI

ITSSA 1/MUM/2007

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 9432 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 11-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 04-01-2010
• Assessment Year: misc
• Appeal Filed On: 04-01-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: N M PORWAL
• Keywords: Block assessment
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI A.L.GEHLOT, AM & SMT. P.MADHAVI DEVI, JM I.T.[S.S]A.NO.1/MUM/2007 BLOCK PERIOD 1-4-91 TO 5-3-2001 MR.ABDUL REHMAN DAMDA, M/S SNOVITE CLEANING WORKS, 145, HABIB BUILDING, SVP RD., DONGRI, MUMBAI 400 009 PAN NO.AABPD 5485 F VS. ASST. COMMISSIONER OF I.T., CIRCLE 13(3), MUMBAI. (APPELLANT) (RESPONDENT) AND I.T.[S.S]A.NO.3/MUM/2007 BLOCK PERIOD 1-4-91 TO 5-3-2001 MR. ZIA UR REHMAN, M/S SNOVITE CLEANING WORKS, 145, HABIB BUILDING, SVP RD., DONGRI, MUMBAI 400 009 PAN NO.AEKPD 7973 H VS. ASST. COMMISSIONER OF I.T., CIRCLE 13(3), MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE S BY : MR. N.M.PORWAL. REVENUE BY : MR. MOHD. USMAN. O R D E R PER P.MADHAVI DEVI, JM: THESE APPEALS OF THE ASSESSEES ARE DIRECTED AGAINS T CIT[A] S SEPARATE ORDER DATED 3/10/2006 FOR THE BLOCK PERIOD 1-4-91 TO 5-3- 2001. SINCE ISSUES INVOLVED ARE IDENTICAL THEY ARE HEARD TOGETHER AND DISPOSED OF BY THIS COMMON ORDER. 2. I.T.[SS]A.NO.1/M/07 : IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT[A] ERRED IN CONFIRMING THE ENTERTAINMENT OF A BELIEF THAT THE AMOUNT IN POSSESSION OF MR. J.K.GANDHI REPRESEN TED INCOME WHICH WOULD NOT HAVE BEEN DISCLOSED BY HIM F OR THE 2 PURPOSES OF THE ACT U/S.132A(1). THE LD. CIT[A] FAILED TO APPRECIATE THAT AS HELD BY THE HON'BLE SUPREME COUR T IN THE CASE OF CIT VS. VINDHYA METAL CORPORATION AND OTHER S, 224 ITR 614 (SUPREME COURT IN THE CASE OF) THAT MERE UN EXPLAINED POSSESSION OF THE AMOUNT, WITHOUT ANYTHING MORE, CO ULD HARDLY BE SAID TO CONSTITUTE INFORMATION WHICH COULD BE TR EATED AS SUFFICIENT BY A REASONABLE PERSON, LEADING TO AN IN FERENCE THAT IT WAS INCOME WHICH WOULD NOT HAVE BEEN DISCLOSED B Y THE PERSON IN POSSESSION FOR THE PURPOSES OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT[A] ERRED IN CONFIRMING THE ADDITION A SUM OF RS.5 LAK HS AS THE INCOME FROM UNDISCLOSED SOURCE. 3. THE LD. CIT[A] ERRED IN CONFIRMING THE ISSUANCE OF NOTICE U/S.158BD AS VALID NOTICE SERVED ON THE ASSESSEE ON 24-11- 2003. THE LD. CIT[A] FAILED TO APPRECIATE THAT THE EXISTENCE OF MATERIAL IS A SINE-QUA-NON FOR TAKING ACTION U/S.15 8BD. SINCE THIS REQUIREMENT WAS NOT FULFILLED IN THIS CASE AND THE LD. AO HAD NOT DEMONSTRATED HIS SATISFACTION ABOUT THERE B EING ANY UNDISCLOSED INCOME HIDDEN IN SEARCH MATERIAL, WHICH AS PER SECTION 158BD HAS TO BE NOTIFIED TO THE LD. AO HAVI NG JURISDICTION OVER THE APPELLANT. 4. THE LD. CIT[A] ERRED IN NOT APPRECIATING, ON PERUSAL OF THE ASSESSMENT ORDER, THAT THE REVENUE HAS FAIRLY AGREE D THAT THERE WAS NO MATERIAL FOUND AS A RESULT OF SEARCH, WHICH WOULD PIN POINT EXISTENCE OF UNDISCLOSED INCOME OF THE ASSESSEE WHO WAS NOT SUBJECTED TO SEARCH AND THEREFORE ISSUANCE OF NOTICE U/S.158 BD WAS NOT JUSTIFIED. 5. WITHOUT PREJUDICE TO THE GENERALITY OF CONTENTIO NS IN GROUNDS NO.1 TO 4 ABOVE, THE LD. CIT[A] ERRED IN NOT APPRECIATING THAT CASH AND BANK BOOK OF THE ASSESSEE FOR THE PERIOD 1.4.95 TO 2-3-2001 PRODUCED BEFORE THE AO, SHOWED ENOUGH CASH BALANCE TO THE EXTENT OF RS.5 LAKHS PAID TO SHRI JI TENDRA KUMAR GANDHI ON 2 ND MARCH, 2001. 3. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE RAISED IN THE GROUNDS OF A PPEAL NO.3 IS COVERED BY THE DECISION OF THE HON'BLE SUPREME COUR T IN THE CASE OF MANISH MAHESHWARI VS. ASST. CIT & ANOTHER REPORTED IN 289 ITR 341 AND AS THE JURISDICTION ISSUE ITSELF IS TO BE ALLOW ED IN FAVOUR OF THE ASSESSEE, THE OTHER GROUNDS NEED NO ADJUDICATION AN D, THEREFORE, THE APPEAL HAS TO BE ALLOWED. THE LD. DR, HOWEVER SUPPO RTED THE ORDERS OF THE AUTHORITIES BELOW. 4. BRIEF FACTS OF THE CASE ARE THAT ONE SHRI JITEND RA KUMAR GANDHI, RESIDENT OF LOWER PAREL, MUMBAI WAS ARRESTED BY RAI LWAY POLICE, VASCO, GOA ON 3-3-2001 AS HE WAS IN POSSESSION OF R S.9,25,000/- 3 WHICH WERE SEIZED BY THE RAILWAY POLICE. AS HE COUL D NOT GIVE SATISFACTORY ANSWER ABOUT THE CASH, A WARRANT OF AU THORIZATION U/S.132A DATED 5-3-2001 WAS ISSUED AND THE STATEMEN T OF SHRI J.K.GANDHI WAS RECORDED U/S.132(4) OF THE I.T.ACT. IN HIS STATEMENT SHRI J.K.GANDHI STATED THAT THE CASH BELONGED TO TH E PROPRIETOR OF SNOVITE LAUNDRY AND HE WAS ASKED BY THE SAID PROPRI ETOR TO HAND OVER THE MONEY AT HIS RESIDENCE AT BHATKAL. ANOTHER STAT EMENT WAS RECORDED ON 31-12-2001 WHEREIN HE CONFIRMED THAT TH E AMOUNT OF RS.9,25,000/- WAS GIVEN TO HIM BY THE ASSESSEE HERE IN TO DELIVER THE SAME AT HIS NATIVE PLACE AT BHATKAL. ON 28-12-01, T HE DDIT, MUMBAI RECORDED THE STATEMENT OF THE ASSESSEE I.E. SHRI A. R.DAMDA WHO CONCEDED THAT THE AMOUNT OF RS.9,25,000/- SEIZED BY THE DEPARTMENT FROM SHRI J.K.GANDHI WAS TO BE DELIVERED TO HIS WIF E AT BHATKAL TO ACQUIRE 45% PARTNERSHIP SHARE HELD BY SHRI R.ABDUL LATIF AND SMT. S.LATIF. HE ALSO TALKED ABOUT INDUCTION OF TWO NEW PARTNERS I.E. SHRI LOKESH JAIN AND SHRI ZIA UR REHMAN I.E. ASSESSEE IN I.T.[SS]A.NO.8/MUM/07. IT WAS ALSO STATED THAT OUT OF RS.9,25,000/-, RS.5,00,000/- BELONGED TO HIM, WHEREAS RS.1,00,000/ - BELONGED TO SHRI ZIA UR REHMAN AND RS.2,25,000/- BELONGED TO S HRI MOHD. ZUBAIR AND SHRI LOKESH JAIN RESPECTIVELY. ON THE SAME DATE I.E. 28-12-2001, STATEMENTS OF OTHER PERSONS I.E. SHRI MOHD.ZUBAIR, SHRI LOKESH JAIN AND SHRI ZIA UR REHMAN WERE TAKEN AND ALL OF THEM CONFIRMED THE STATEMENT OF SHRI A.R.DAMDA. ACCORDINGLY, NOTICE U/ S.158BD WAS ISSUED AND ASSESSEE FILED ITS RETURN OF INCOME DECL ARING UNDISCLOSED INCOME AT NIL. DURING THE PROCEEDINGS U/S.158BD, AO MADE AN ADDITION OF RS.5,00,000/- AS UNDISCLOSED INCOME OF THE BLOCK PERIOD. 4 5. AGGRIEVED, ASSESSEE FILED AN APPEAL BEFORE THE C IT[A] NOT ONLY CHALLENGING THE VALIDITY OF THE PROCEEDINGS U/S.158 BD AND ALSO ON MERITS OF THE ADDITION. THE CIT[A] CONFIRMED THE V ALIDITY OF THE BLOCK ASSESSMENT AND ALSO THE MERITS OF THE ADDITION. AGG RIEVED, ASSESSEE IS IN SECOND APPEAL BEFORE US. 6. THE LD. COUNSEL FOR THE ASSESSEE WHILE REITERATI NG THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW SUBMI TTED THAT THERE WAS NO MATERIAL BELONGING TO THE ASSESSEE FOUND DUR ING THE COURSE OF SEARCH. HE SUBMITTED THAT AS REQUIRED UNDER THE PRO VISIONS OF SEC.158BD, AO HAS TO RECORD THE SATISFACTION THAT I NCOME BELONGED TO THE ASSESSEE. HE DREW OUR ATTENTION TO THE NOTICE U /S.158BD OF THE ACT DATED 18-11-2005 PLACED AT PAGE 70 OF THE PAPER BOOK TO DEMONSTRATE THAT THE AO HAS NOT RECORDED HIS SATISF ACTION AS REQUIRED UNDER LAW. HE PLACED RELIANCE UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF MANISH MAHESHWARI [CIT ED SUPRA], WHEREIN THE HON'BLE SUPREME COURT HAS HELD AS UNDER - THE CONDITION PRECEDENT FOR INVOKING A BLOCK ASSE SSMENT IS THAT A SEARCH HAS BEEN CONDUCTED UNDER SECTION 132, OR DOCUMENTS OR ASSETS HAVE BEEN REQUISITIONED UNDER SECTION 132A. THE SAID PROVISION WOULD APPLY IN THE CASE OF ANY PERSON IN RESPECT OF WHOM SEARCH HAS BEEN CARRIED OUT UNDER SECTION 132A OR D OCUMENTS OR ASSETS HAVE BEEN REQUISITIONED UNDER SECTION 132A. SECTION 158BD, HOWEVER, PROVIDES FOR TAKING RECOURSE TO A BLOCK AS SESSMENT IN TERMS OF SECTION 158BC IN RESPECT OF ANY OTHER PERSON, TH E CONDITIONS PRECEDENT WHEREFOR ARE: (I) SATISFACTION MUST BE RE CORDED BY THE ASSESSING OFFICER THAT ANY UNDISCLOSED INCOME BELO NGS TO ANY PERSON, OTHER THAN THE PERSON WITH RESPECT TO WHOM SEARCH WAS MADE UNDER SECTION 132 OF THE ACT; (II) THE BOOKS OF ACC OUNT OR OTHER DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED HAD BEE N HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUC H OTHER PERSON; AND (III) THE ASSESSING OFFICER HAS PROCEEDED UNDER SE CTION 158BC AGAINST SUCH OTHER PERSON. THE CONDITIONS PRECEDENT FOR INVOKING THE PROVISIO NS OF SECTION 158BD, THUS, ARE REQUIRED TO BE SATISFIED BEFORE TH E PROVISIONS OF THE SAID CHAPTER ARE APPLIED IN RELATION TO ANY PERSON OTHER THAN THE PERSON WHOSE PREMISES HAD BEEN SEARCHED OR WHOSE DO CUMENTS AND OTHER ASSETS HAD BEEN REQUISITIONED UNDER SECTION 1 32A OF THE ACT. 5 XX XX XX XX LAW IN THIS REGARD IS CLEAR AND EXPLICIT. THE ONLY QUESTION WHICH ARISES FOR OUR CONSIDERATION IS AS TO WHETHER THE N OTICE DATED FEBRUARY 6, 1996, SATISFIES THE REQUIREMENTS OF SECTION 158B D OF THE ACT. THE SAID NOTICE DOES NOT RECORD ANY SATISFACTION ON THE PART OF THE ASSESSING OFFICER. DOCUMENTS AND OTHER ASSETS RECOV ERED DURING THE SEARCH HAD NOT BEEN HANDED OVER TO THE ASSESSING OF FICER HAVING JURISDICTION IN THE MATTER. 7. THE LD. DR, ON THE OTHER HAND, SUPPORTED THE OR DERS OF THE AUTHORITIES BELOW. 8. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDE RED THEIR RIVAL CONTENTIONS, WE FIND THAT THE NOTICE DATED 18-11-20 05 ISSUED U/S.158BD DOES NOT CONTAIN ANY SATISFACTION OF THE AO THAT THE INCOME PERTAINS TO THE ASSESSEE. THIS NOTICE IS SIMILAR TO THE NOTICE CONSIDERED BY THE HON'BLE SUPREME COURT IN THE CASE OF MANISH MAHESHWARI [CITED SUPRA] WHICH IS REPRODUCED AT PAGE 345 OF 289 ITR. FOR THE SAKE OF CLARITY THE SAME IS REPRODUCED AS UNDER- TO INDORE CONSTRUCTION CO.PVT.LTD. 380, JAWAHAR MARG, INDORE. IN PURSUANCE OF THE PROVISIONS OF SECTION 158BC OF THE INCOME TAX ACT, 1961, YOU ARE REQUESTED TO PREPARE A TRUE AND CORRECT RETURN OF YOUR TOTAL INCOME INCLUDING THE UNDISCLOSED INCO ME IN RESPECT OF WHICH YOU AS INDIVIDUAL/HUF/FIRM/COMPANY/AOP/BODY O F INDIVIDUAL/LOCAL AUTHORITY ARE ASSESSABLE FOR THE B LOCK PERIOD MENTIONED IN SECTION 15L8B(A) OF THE INCOME TAX ACT , 1961. THE RETURN SHOULD BE IN THE PRESCRIBED FORM NO.2B A ND BE DELIVERED IN THIS OFFICE WITHIN 16 DAYS OF SERVICE OF THIS NOTICE DULY VERIFIED AND SIGNED IN ACCORDANCE WITH THE PROVISIO NS OF SECTION 140 OF THE INCOME TAX ACT, 1961. THE NOTICE ISSUED U/S.158BD IN THE CASE OF THE ASSE SSEE IS AS UNDER- IN PURSUANCE OF THE PROVISIONS OF SECTION 158BD O F THE I.T.ACT,1961, YOU ARE REQUESTED TO PREPARE A TRUE A ND CORRECT RETURN OF YOUR TOTAL INCOME INCLUDING THE UNDISCLOSED INCOME IN RESPECT OF WHICH YOU, AS AN INDIVIDUAL, IS ASSESSABLE FOR THE BLOCK PERIOD MENTIONED IN SECTION 158B(A) OF THE INCOME TAX ACT, 1961. THE RETURN SHOULD BE IN THE PRESCRIBED FORM NO.2B AND BE DELIVERED IN THIS OFFICE WITHIN 30 DAYS OF SERVICE OF THIS NOTICE, DULY VERIFIED AND SIGNED IN ACCORDANCE WITH THE PROVISIO NS OF SECTION 140 OF THE I.T.ACT,1961. 6 THUS, IT CAN BE SEEN THAT THE NARRATION IN THE NOTI CES IN THE ASSESSEES CASE AS WELL AS THE CASE BEFORE THE HON'BLE SUPREME COURT IN THE CASE OF MANISH MAHESHWARI [CITED SUPRA] ARE SAME EXCEPT FOR THE NUMBER OF DAYS FOR FILING THE RETURN. IT IS AFTER CONSIDERING THE NOTICE THAT THE HON'BLE SUPREME COURT HAS OBSERVED THAT THE NOTICE IN WHICH AO HAS NOT RECORDED HIS SATISFACTION IS NOT VALID. THEREFO RE, THE ISSUE IS COVERED BY THE SAID DECISION OF THE HON'BLE APEX CO URT. FURTHER, THIS DECISION HAS BEEN FOLLOWED BY VARIOUS HIGH COURTS A ND TRIBUNALS IN THE FOLLOWING CASES- A) NEW DELHI AUTO FINANCE (P) LTD. VS. JT. CIT 4 DT R 318 [DEL] B) CIT VS. FEATHER BREWERIES & MARKET 166 TAXMAN 27 1 [DEL] C) ASST.CIT V. KISHORE LAL BALWANT RAJ 17 SOT 380 [ CHD] D) SHRI BALRAJ GUPTA V. ACIT IN IT[SS]A.NO.40/M/07 [MUM] E) SHORELINE HOTEL (P) LTD. VS. DY. CIT (2008) 8 D TR 168 [TRI] F) DY. CIT V. NITS SOFTECH LTD. (2OO8) 8 DTR (DEL) (TRIB) 269 G) AMITY HOTELS PVT. LTD. V. CIT & ORS. 272 ITR 75 (DEL) 9. RESPECTFULLY FOLLOWING THE AFORESAID DECISIONS, WE ALLOW GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE. 10. AS THE VERY ASSESSMENT HAS BEEN KNOCKED DOWN TH E OTHER GROUNDS RAISED HAVE BECOME ONLY ACADEMIC IN NATURE AND, THEREFORE, NEED NO ADJUDICATION. ACCORDINGLY, THESE GROUNDS AR E DISMISSED. 11. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED ON THIS 11 TH DAY OF MARCH,, 2010. SD/- SD/- (A.L.GEHLOT) (P.MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI: 11 TH MARCH, 2010. P/-*