DCIT, UDAIPUR V. M/s. Priyank Steels (Unit -II), UDAIPUR

ITSSA 10/JODH/2010

• Counselvise Citation: [2012] 124 COUNSELVISE.COM (IT) 7783 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 8 month(s) 21 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 13-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 13-12-2011
• Assessment Year: misc
• Appeal Filed On: 22-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G R KOKANI
• Assessee Lawyers: BHARAT R POPAT
• Keywords: Search and seizure; Period of limitation; Block assessment; Reason to believe
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH , JODHPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITSSA NO. 10/ JU/2010 BLOCK PERIOD: A.Y. 1994-95 TO 1999-2000 AND UPT O 07-12-1999 PAN: AABFP 8131 A THE DCIT VS. M/S. PRIYANK STEELS (UNIT-II) CENTRAL CIRCLE- 1 SOHAN PRATAP BHAWAN , UDAIPUR JAGAT MEHTA JI KI BARI NEW FATEHPURA, UDAIPUR (APPELLANT ) (RESPONDENT) C.O. 06/JU/2010 ITSSA NO. 10/ JU/2010 BLOCK PERIOD: A.Y. 1994-95 TO 1999-2000 AND UPTO 07-12-1999 PAN: AABFP 8131 A M/S. PRIYANK STEELS (UNIT-II) VS. THE DCIT SOHAN PRATAP BHAWAN , CENTRAL CIRCLE- 1 JAGAT MEHTA JI KI BARI UDIAPUR NEW FATEHPURA, UDAIPUR (APPELLANT ) (RESPONDENT) DEPARTMENT BY : SHRI G.R. KOKANI ASSESSEE BY : SHRI BHARAT R POPAT DATE OF HEARING: 13-12-2011 DATE OF PRONOUNCEMENT: 13-01-2012 ORDER PER N.L. KALRA, AM:- THE REVENUE HAS FILED AN APPEAL AGAINST THE ORDER O F THE LD. CIT(A)-CENTRAL , JAIPUR DATED 12-02-2010 FOR THE BLOCK PERIOD 19 9-95 TO 1999-2000 UPTO 7-12-1999. THE ASSESSEE HAS FILED THE CROSS OBJECTION. 2 2.1 FIRST OF ALL, WE TAKE UP THE CROSS OBJECTION OF THE ASSESSEE BECAUSE THE C.O. OF THE ASSESSEE IS AGAINST THE VALIDITY OF ISSUANCE OF N OTICE U/S 158BD. THE GROUNDS OF APPEAL RAISED IN THE C.O. ARE AS UNDER:- THE LD. CIT(A) HAS ERRED IN :- 1. DISMISSING THE FIRST GROUND CHALLENGING THE WRON G ASSUMPTION OF JURISDICTION AND CONSEQUENT ISSUANCE OF NOTICE U/S 158BD ON 13 TH JULY, 2004 WITHOUT COMPLYING WITH THE DUE PROCESS OF LAW. 2. DISMISSING THE SECOND GROUND CHALLENGING THE VALIDITY AND ENFORCEABILITY OF THE ORDER WHICH WAS PASSED ON 30 TH MARCH, 2009 AND SERVED UPON THE ASSESSEE ON 1 ST APRIL, 2009 THOUGH THE PERIOD OF LIMITATION WAS ALR EADY OVER IN 2006. 2.2 BEFORE US, THE LD. AR OF THE ASSESSEE HAS FURNI SHED THE SEQUENCE OF EVENTS. AFTER MENTIONING THE SEQUENCE OF EVENTS, THE LD. AR SUBMI TTED THAT THE NOTICE U/S 158BD IS INVALID. THE BLOCK ASSESSMENT ORDER HAS BEEN PASSED BEYOND THE PERMISSIBLE PERIOD AS DECIDED BY THE SPECIAL BENCH IN THE CASE OF MANOJ A GARWAL VS. DCIT, 113 ITD 371. IT WAS FURTHER SUBMITTED THAT BLOCK ASSESSMENT ORDER P ASSED ON 30-03-09 IS CLEARLY BARRED BY LIMITATION BECAUSE THE PERIOD FOR WHICH PROCEEDI NGS WERE STAYED ONLY FOR A PERIOD OF TWO WEEKS. 2.3 THE LD. DR RELIED UPON THE ORDER OF THE LD. CIT (A). 2.4 WE HAVE HEARD BOTH THE PARTIES. THE LD. CIT(A) HAS MENTIONED THAT SATISFACTION NOTE HAS BEEN RECORDED BY THE JCIT, RANGE-1, BHAVNA GAR WHO WAS HAVING THE CONCURRENT JURISDICTION WITH ALL THE AOS OF RANGE-1, BHAVNAGA R WHERE THE CASES OF THE PARTY 3 SEARCHED WERE ASSESSED TO INCOME TAX. THEREFORE, TH E LD. CIT(A) HELD THAT THE REQUIREMENT OF SATISFACTION STANDS COMPLIED WITH. THE LD. CIT(A ) HAS FURTHER HELD THAT THERE IS NO TIME LIMIT PROVIDED THEREIN FOR ISSUING NOTICE U/S 158BD . ON THESE BASIS, THE LD. CIT(A) HAS HELD THAT THE ORDER IS VALID. THE LD. CIT (. DR) SU PPORTED HIS CASE FROM THE FINDINGS OF THE LD. CIT(A). 2.5 WE HAVE HEARD BOTH THE PARTIES. BEFORE WE PROCE ED FURTHER, IT WILL BE USEFUL TO REPRODUCE THE SEQUENCE OF EVENTS AS MENTIONED BY TH E LD. AR IN HIS SUBMISSIONS. S.N. DATE PARTICULARS 1. 07-12-1999 SEARCH OPERATION CARRIED OUT BY THE D EPARTMENT IN THE CASE OF MAHENDRA SHAH AND HEMANT SHAH IN BHAVNAGAR 2. 10-07-2000 NOTICE U/S 158BC ISSUED BY THE ACIT, CIRCLE- 2 UDAIPUR FOR THE SAME BLOCK PERIOD. 3 .JULY 2000 THE ORIGINAL NOTICE RETURNED TO THE AO WITH A LETTER CONTENDING THAT SINCE NO CAUSE OF ACTION AROSE, THE SAME IS REQUIRED TO BE DROPPED OR CANCELLED. 4. NOV. 2001 SECOND NOTICE U/S 158BC R.W.S. 158BD I SSUED BY THE DCIT CIRCLE- 1, BHAVNAGAR FOR THE SAME BLOCK PERIOD 5. 28-12-2001 COMPLETION OF ASSESSMENT U/S 158BC I N THE CASE OF PERSON HAVING BEEN SEARCHED CARRIED OUT BY THE ACIT CIRCLE- 2, BHAVNAGAR 6. 03-01-2003 ORDER PASSED U/S 158BC R.W.S. SECTION 158BD BY THE DCIT CIRCLE- 1, BHAVNAGAR DROPPING THE BLOCK ASSESSMENT PROCEEDINGS (THIS ORDER WAS NEVER SERVED UPON THE APPELLANTS) 7. 13-07-2004 SATISFACTION NOTE RECORDED BYTHE ACIT , CIRCLE- 2, UDAIPUR FOR INITIATING ACTION U/S 158BD 8. 13-07-2004 THIRD NOTICE ISUED U/S 158BC R.W.S. 1 58BD BY ACIT UDAIPUR 9. AUGUST 2004 WRIT PETITION FILED BEFORE HON'BLE H IGH COURT OF RAJASTHAN 10. 18-8-2004 INTERIM ORDER PASSED BY HON'BLE HIGH COURT GRANTING INJUNCTION AGAINST FURTHER PROCEEDINGS FOR TWO WEEKS 11. 14-08-2006 THE LAST DATE BY WHICH THE ORDER FOR THE BLOCK 4 PERIOD WAS REQUIRED TO BE PASSED BY THE AO AFTER CONSIDERING THE PERIOD OF INJUNCTION GRANTED BY HON'BLE HIGH COURT 12. 25-08-2007 DISPOSAL OF THE WRIT PETITION BY HON 'BLE HIGH COURT IN WHICH THERE IS A CLEAR MENTION THAT THE INJUNCTI ON WAS NOT EXTENDED BEYOND TWO WEEKS 13. 30-03-2009 ORDER PASSED U/S 158BD R.W.S. 158BC/ BB AND SECTION 143(3) 2.6 THE AO AT PAGE 2 OF THE ASSESSMENT ORDER HAS ME NTIONED THAT IN ORDER TO BRING TO TAX SUCH TRANSACTIONS, A NOTICE IN THE CASE OF SEAR CH U/S 158BD R.W.S. 158BC WAS ISSUED ON 13-07-2004. THUS THE AO HAS MADE ASSESSMENT ON T HE BASIS OF THE NOTICE ISSUED U/S 158BD ON 13-07-04. ON THE ISSUE RAISED BEFORE US, T HE SPECIAL BENCH IN THE CASE OF MANOJ AGARWAL VS. DCIT (SUPRA) HAS HELD THAT NOTIC E U/S 158BD IS TO BE ISSUED BEFORE THE TIME PERIOD OF FINALIZATION OF ASSESSMENT U/S 1 58BC. SATISFACTION IS TO BE RECORDED BY THE AO HAVING JURISDICTION OVER THE SEARCHED PERSON . IT WILL BE USEFUL TO REPRODUCE THE HELD NOTE IN RESPECT OF THESE TWO ISSUES AS UNDER:- SEARCH AND SEIZURE-BLOCK ASSESSMENT-PROCEEDINGS U NDER S.158BD-CONDITIONS PRECEDENT AND LIMITATION-FIRST P RECONDITION IS THAT THE AO EXAMINING THE MATERIAL FOUND AS A RESULT OF SEAR CH OR OTHER RELATED PROCEEDINGS AS IN S. 132A SHOULD DETERMINE WHETHER THE MATERIAL THROWS UP ANY INCOME WHICH CAN BE TERMED AS UNDISCLOSED AN D TO IDENTIFY SUCH UNDISCLOSED INCOME-NEXT STEP IS TO DETERMINE TO WHO M SUCH UNDISCLOSED INCOME BELONGS-IF SUCH UNDISCLOSED INCOME IS FOUND NOT TO BELONG TO THE PERSON SEARCHED, THERE IS NO OTHER OPTION BUT TO GI VE A FINDING THAT THE UNDISCLOSED INCOME DOES NOT BELONG TO HIS ASSESSEE BUT THAT IT BELONGS TO ANOTHER PERSON WHOM HE HAS TO IDENTIFY AND DETERMIN E-AFTER ARRIVING AT THIS FINDING, HE HAS TO HANDOVER SUCH MATERIAL, DOC UMENTS ETC., TO THE AO 5 HAVING JURISDICTION OVER THE SAID OTHER PERSON AT T HAT MATERIAL POINT OF TIME AND IT IS AT THAT STAGE THE SECOND AO ASSUMES JURIS DICTION AND STEPS IN AND THEREAFTER HE SHALL PROCEED UNDER S.158BC AGAINST S UCH OTHER PERSON-SUCH FINDING HAS TO FORM PART OF S. 158BC PROCEEDING AND SO MUST FIND A PLACE IN THE ORDER UNDER S. 158BC-IF, IN THE COURSE OF S. 158BC PROCEEDINGS THE AO ASSESSING THE PERSON SEARCHED DOES NOT GIVE A FI NDING THAT ANY PART OF THE UNDISCLOSED INCOME UNEARTHED BELONGS TO A PERSO N OTHER THAN THE PERSON SEARCHED S. 158BD CAN NEVER BE INVOKED-IN OR DER TO INVOKE JURISDICTION UNDER S. 158BD, A FINDING TO THE EFFEC T THAT INCOME UNDISCLOSED DURING SEARCH BELONGS TO SOME PERSON OT HER THAN THE PERSON SEARCHED HAS TO BE RECORDED BY THE AO OF PERSON SEA RCHED BEFORE THE EXPIRY OF TIME-LIMIT PRESCRIBED IN S. 158BE EITHER IN PROCEEDINGS UNDER S.158BC OR IN THE NOTE HANDING OVER MATERIAL SEIZED TO THE AO OF SUCH OTHER PERSON AND AFTER EXPIRY OF TIME LIMIT PRESCRI BED UNDER S.158BE, NO PROCEEDINGS UNDER S. 158BD CAN BE INITIATED. SEARCH AND SEIZURE-BLOCK ASSESSMENT-PROCEEDINGS UND ER S. 158BD- IF NO SATISFACTION SHOWING REQUIREMENT OF INITIATIO N OF PROCEEDING UNDER S. 158BD IS NOT POSSIBLE-FURTHER, SUCH SATISFACTION CA NNOT BE RECORDED BEYOND THE DATE OF THE BLOCK ASSESSMENT IN THE S. 1 58BC PROCEEDING AND THE DATE OF THE BLOCK ASSESSMENT IS THE OUTER LIMIT FOR RECORDING SUCH SATISFACTION-ABSENCE OF THE WORDS IN THE COURSE OF THE PROCEEDING IN S.158BD IS NOT MATERIAL TO THE ISSUE IN THE CONTEXT OF THE SAID SECTION ITSELF-THE TERM SATISFACTION IN S. 158BD CONNOTES THAT THERE EXISTS UNDISCLOSED INCOME AND THAT SUCH UNDISCLOSED INCOME IS THAT OF THE PERSON NOT SEARCHED-USE OF THE EXPRESSION SATISFIED IN S . 158BD CANNOT BE READ IN ISOLATION-IT FURTHER USES THE EXPRESSION BELONG S TO ANY PERSON, OTHER THAN THE PERSON WITH RESPECT TO WHOM SEARCH WAS MAD E WHICH INDICATES THAT THE UNDISCLOSED INCOME IDENTIFIED BY THE AO FO UND TO BE BELONGING TO 6 THE OTHER PERSON-ALL THESE CONSTITUTE FINDINGS AND NOT A MERE BELIEF HELD BY THE AO ON THE EXAMINATION OF THE SEIZED MATERIAL AN D HENCE THE SATISFACTION CONTEMPLATED IN S.158 BD IS TOTALLY DI FFERENT THAN CONTEMPLATED IN S.147-CIRCUMSTANCES ENVISAGED AND T HE CONTEXT OF REASON TO BELIEVE IN S.147 AND SATISFACTION IN S.158BD ARE ENTIRELY DIFFERENT IN NATURE AND THE LAW RELATING TO S.147 CANNOT BE IMPO RTED IN PROCEEDINGS UNDER S.158BD-SATISFACTION FOR PURPOSES OF PROCEEDI NG UNDER S. 158BD RECORDED BY THE AO OF PERSON OTHER THAT THE PERSON SEARCHED AFTER ASSESSMENT UNDER S. 158 BC IS INVALID AND BELATED, MORE SO WHEN IT ADMITS THAT NO UNDISCLOSED INCOME IN THE HANDS OF THE ASSE SSEE HAS BEEN FOUND EVEN ON THE DATE OF SUCH NOTING AND CONSEQUENT PROC EEDINGS UNDER S.158BD ARE VOID AB INITIO. 2.7 THE DECISION OF SPECIAL BENCH IS BINDING ON US. FOLLOWING THE DECISION OF SPECIAL BENCH IN THE CASE OF MANOJ AGARWAL VS. DCIT (SUPRA) , WE HOLD THAT THE NOTICE ISSUED U/S 158BD IS INVALID IN THE EYE OF LAW AS NOTICE HAS BE EN ISSUED MUCH BEYOND THE TIME LIMIT OF FINALIZATION OF 158BC ASSESSMENT. 3.1 THE SECOND GROUND OF THE C.O. OF THE ASSESSEE IS AGAINST THE FINDINGS OF HE LD. CIT(A) THAT ORDER S PASSED ON 30 TH MARCH, 2009 AND SERVED UPON THE ASSESSEE ON 1 ST APRIL, 2009 IS VALID THOUGH PERIOD OF LIMITATION W AS ALREADY OVER IN 2006. 3.2 THE NOTICE WAS ISSUED ON 13-07-2004 U/S 158BD AND THE ASSESSEE FILED THE WRIT PETITION BEFORE THE HON'BLE JURISDICTIONAL HI GH COURT IN AUG. 2004 AND THE HON'BLE HON'BLE JURISDICTIONAL HIGH COURT PASSED T HE INTERIM ORDER ON 18-08-2004. THE DECISION OF HON'BLE HIGH COURT IS AVAILABLE AT PAGE S 39 TO 42 OF THE PAPER BOOK. IN THE ORDER DATED 25-08-2007, IT IS MENTIONED THAT THE PROCEEDINGS WERE STAYED FOR TWO WEEKS 7 WHEN THE NOTICE WAS ISSUED ON 17-08-2004. THE SAID ORDER WAS NOT EXTENDED BY HON'BLE HIGH COURT. THUS THE PERIOD OF EXTENSION WAS AVAILA BLE ONLY FOR TWO WEEKS BECAUSE EXPLANATION 1 TO SECTION 158BE MENTIONS THAT PERIOD OF LIMITATION IS TO BE CONSIDERED FOR EXCLUDING THE PERIOD DURING WHICH THE ASSESSMENT PR OCEEDINGS ARE STAYED BY THE ORDER OF ANY COURT. THUS THE PROCEEDINGS WERE STAYED ONLY FO R TWO WEEKS. HENCE THE ORDER PASSED U/S 158BD ON 31-03-2009 IS BEYOND TIME LIMIT PRESCR IBED U/S 158BE. THUS THE C.O. OF THE ASSESSEE IS ALLOWED. CONSIDERING OUR FINDINGS ON THE C.O., WE FEEL THAT THERE IS NO NEED TO ADJUDICATE UPON THE ISSUES IN RESPECT OF WH ICH THE RELIEF HAS BEEN ALLOWED BY THE LD. CIT(A) AND TO ADJUDICATE UPON OTHER GROUNDS OF APPEAL OF THE REVENUE. 4 IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMI SSED AND THE C.O. OF THE ASSESSEE IS ALLOWED THE ORDER IS PRONOUNCED ON 13-01-2012 SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 13 /01/2012 *MISHRA COPY FORWARDED TO :- 1. THE DCIT, CENTRAL CIRCLE- 1, UDAIPUR 2. M/S. PRYANK STEEL (UNIT II), UDAIPUR 3. THE LD. CIT BY ORDER 4. THE LD. CIT(A) 5. THE LD.DR 6. THE GUARD FILE (ITSSA NO. 10/JU /10) A.R, ITAT, JAIPUR 8 9 10