SURESH B. DEDHIA, MUMBAI V. DCIT CIR 21(2), MUMBAI

ITSSA 16/MUM/2009

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 8692 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 29 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 03-12-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: misc
• Appeal Filed On: 04-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SONGATE
• Keywords: Source of fund; Question of law; Difference of opinion; Validity of assessment; Block assessment; Reassessment proceedings
• Section: 143(3); 147; 148; 132

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER. I.T.(SS)A. NO. 16/MUM/2009. BLOCK PERIOD : 01-04-1987 TO 10-09-1997. MR. SURESH B. DEDHIA, DY. COMMISSIONER OF INCOME-TAX, FLAT NO.9, 2 ND FLOOR, VS. CI RCLE-21(2), MUMBAI. UPADHYA NIWAS, 14 PARK ROAD, VILE PARLE(E), MUMBAI 400 057. PAN AAAPD9147K APPELLANT. RESPOND ENT. APPELLANT BY : SHRI VIJAY MEHTA. RESPONDENT BY : SHRI D. SONGATE. O R D E R PER J. SUDHAKAR REDDY, A.M. : THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED A GAINST THE ORDER OF THE CIT(APPEALS) XXI, MUMBAI DATED 10-12-2008 WHEREIN HE CONFIRMED THE PENALTY LEVIED BY THE AO U/S 158BFA(2) OF THE INCOME-TAX AC T, 1961. 2. THE FACTS OF THE CASE ARE BROUGHT OUT IN FIRST T HREE PARAS OF THE ORDER OF PENALTY U/S 158BFA. THEY ARE EXTRACTED BELOW FOR RE ADY REFERENCE: 2 THE ASSESSMENT IN THE CASE WAS MADE U/S 143(3) R. W.S. 158BD OF THE I.T. ACT ON 28/2/2000 DETERMINING TOTAL UNDISCLOSED INCOME AT RS.26,00,000/- AGAINST NIL RETURNED INCOME. A SEARCH & SEIZED (SEIZURE) U/S. 132 OF THE I.T. AC T WAS CONDUCTED ON 10/4/1997 ON SHRI R.N. GUPTA AT R.NO.7, JAI HIND ES TATE, NO.3B, BHULESHWAR, MUMBAI 400 020. DURING THE COURSE OF SE ARCH ACTION XEROX COPIES OF THE DEED OF CONVEYANCE DULY SIGNED BY THE SELLER, SHRI RAJENDRA KUMAR GUPTA AS WELL AS PURCHASERS SHRI SURESH B. DE DHIA, SHRI VADILAL M. DEDHIA & SMT. JAGRUTI V. DEDHIA AND WITNESSES WAS S EIZED ALONG WITH CASH RS.52 LAKHS. THE INVESTMENT MADE IN THE PROPERTY BY ASSESSEE WAS CASH OF RS.26,00,000/- LAKHS AND DRAFT OF RS.11,25,000/-. DURING THE ASSESSMENT PROCEEDINGS ASSESSEE EXPLAINE D THE SOURCES OF INCOME FOR THE DRAFT AMOUNT RS.11,25,000/- ON THE S ATISFACTION OF THE ASSESSING OFFICER. BUT THE SOURCE OF CASH PAYMENT O F RS.26,00,000/- WAS NOT EXPLAINED AND THE CASH RS.26,00,000/- IS TREATED AS UNDISCLOSED INCOME U/S 158BD FOR BLOCK PERIOD 1/4/87 TO 10/9/97 AFTER SATI SFACTION THAT THERE IS CONCEALED INCOME AND ASSESSEE HAS FILED INACCURATE PARTICULARS OF INCOME, NOTICE U/S 158 BFA(2) OF I.T. ACT WAS ISSUED CALLIN G UPON ASSESSEE TO SHOW CAUSE WHY ORDER IMPOSING PENALTY SHOULD NOT BE MADE . 3. THE ASSESSEE SUBMITTED THAT THE INCOME IN QUESTI ON WAS OFFERED IN HIS REGULAR ASSESSMENT AND THAT THE AMOUNT OF RS.26 LAK HS WERE DULY REFLECTED IN THE BOOKS AND HENCE IT CANNOT BE CONCEALMENT OF INCOME. THE AO REJECTED THE CONTENTION AND LEVIED A PENALTY OF RS.15,60,000/- U /S 158BFA(2). THE ASSESSEE CARRIED THE MATTER IN APPEAL. THE FIRST APPELLATE A UTHORITY OBSERVED THAT IN THE QUANTUM PROCEEDINGS BOTH THE CIT(APPEALS) AND THE I TAT HELD THAT THE ASSESSMENT MADE IN BLOCK PERIOD IS THE CORRECT ONE AND HENCE PROTECTIVE ASSESSMENT IN THE REGULAR RETURN WAS TO BE CANCELLE D. HE HELD THAT THE ASSESSEE CHOSE NOT TO AVAIL OF THE OPPORTUNITY TO ESCAPE THE PENALTY BY FULLY AND TRULY DISCLOSING HIS UNDISCLOSED INCOME WHEN THE OPPORTUN ITY WAS GRANTED TO HIM TO FILE 3 THE BLOCK RETURN OF INCOME U/S 158BD. THUS HE CONFI RMED THE PENALTY. AGGRIEVED, THE ASSESSEE IN APPEAL ON THE FOLLOWING GROUNDS : 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. COMMISSIONER OF INCOME TAX (A) ERRED IN CONFIRMING THE PENALTY OF RS.15,60,000/- IMPOSED U/S.158 BFA(2) OF INCOME TAX ACT. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. COMMISSIONER OF INCOME TAX (A) ERRED IN APPRECIATIN G THE FACT THAT THE IMPUGNED INCOME OF RS.26,00,000/- ASSESSED AS UNDISCLOSED INCOME WAS ALREADY OFFERED IN THE RETUR N OF INCOME FOR THE A.Y. 1998-99. 3) WITHOUT PREJUDICE TO THE ABOVE GROUNDS ALTERNATIVEL Y THE LD. CIT(A) OUGHT TO HAVE GIVEN A CREDIT OF RS.7,80,000/ - PAID BY WAY OF ADVANCE TAX UNDER THE NORMAL PROVISIONS OF THE A CT WHILE WORKING OUT THE AMOUNT OF TAX SOUGHT TO BE EVADED F OR THE PURPOSE OF IMPOSING A PENALTY. 4) THE APPELLANT RESERVES ITS RIGHT TO ADD, AMEND, ALT ER OR DELETE ANY OF THE GROUNDS OF APPEAL. 4. THE LEARNED COUNSEL FOR THE ASSESSEE FILED AN AD DITIONAL GROUND WHICH READS AS FOLLOWS : THE LEARNED CIT(APPEALS) OUGHT TO HAVE APPRECIATED THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS BAD IN LAW , INVALID AND VOID AB INITIO VOID AND HENCE NO PENALTY U/S 158BFA(2) OF T HE ACT CAN BE LEVIED. 5. THE LEARNED COUNSEL FOR THE ASSESSEE MR. VIJAY M EHTA, SUBMITTED THAT DURING THE COURSE OF APPELLATE PROCEEDINGS IN THE QUANTUM APPEAL, THE ASSESSEE HAD CHALLENGED THE ASSESSMENT ORDER ON THE GROUND THAT NOTICE U/S 143(2) OF THE ACT WAS NOT ISSUED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND HENCE THE ENTIRE 4 ORDER WAS BAD IN LAW. HE SUBMITTED THAT, THE JUDGME NT OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF NAVALKISHORE AND SONS 265 I TR (AT) 75 (SB) HAD, AT THAT POINT OF TIME, TAKEN A VIEW THAT THE PROVISIONS OF SECTION 143(2) OF THE ACT WERE NOT APPLICABLE TO THE BLOCK PROCEEDINGS. HE SUBMITTED T HAT IN VIEW OF THE DECISION OF THE SPECIAL BENCH, THE ASSESSEE DID NOT PURSUE THIS GROUND AND HAD NOT PRESSED THE SAME. HE FURTHER SUBMITTED THAT IN THE PRESENT APPE AL, THE ASSESSEE DID NOT RAISE THIS GROUND OF APPEAL, DUE TO LACK OF PROPER ADVICE. HE SUBMITTED THAT THE ADDITIONAL GROUND OF APPEAL MAY KINDLY BE ADMITTED IN THE INT EREST OF JUSTICE, EQUITY AND FAIR PLAY. HE FURTHER ARGUED THAT THE ADDITIONAL GROUND RAISES MERELY A LEGAL ISSUE WHICH GOES TO THE ROOT OF THE MATTER AND THAT ALL THE FAC TS ARE VERY MUCH AVAILABLE ON RECORD AND NO FURTHER INVESTIGATION OF FACTS IS RE QUIRED. THUS HE SUBMITS THAT THE ADDITIONAL GROUND SHOULD BE ADMITTED. HE RELIED ON THE FOLLOWING CASE LAWS: I) JUTE CORPORATION OF INDIA LTD. VS CIT 187 ITR 383 (SC). II) AHMEDABAD ELECTRICITY CO. LTD. VS CIT 199 ITR 351 (BOM)(FB). 6. THE LEARNED DR, SHRI D. SONGATE, ON THE OTHER H AND, OPPOSED THE ADMISSION OF THE ADDITIONAL GROUND BY SUBMITTING THAT IN THE QUANTUM PROCEEDINGS THE ASSESSEE HAD NOT RAISED THIS GROUND AND HENCE HE IS DEBARRED FROM RAISING THE ISSUE IN THE PENALTY PROCEEDINGS. 7. IN REPLY, MR. VIJAY MEHTA RELIED ON THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF TIDEWATER MARINE INTERNATIO NAL INC. VS. DCIT (2005) 96 ITD 406 (DEL) WHEREIN AT PARA 16 THE TRIBUNAL HAS O BSERVED THAT THERE COULD NEVER BE A WAIVER OF A MANDATORY PROVISION FOR THE SIMPLE REASON THAT IN SUCH CASES JURISDICTION COULD NOT BE CONFERRED ON ANY AUTHORIT Y BY MERE CONSENT. 5 8. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERAT ION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND A PERUSAL OF THE PAPE RS ON RECORD AND THE CASE LAWS CITED ON THE ISSUE OF ADMISSION OF ADDITIONAL GROUN D, WE HOLD AS FOLLOWS. 9. THE DELHI C-BENCH OF THE TRIBUNAL IN THE CASE OF TIDEWATER MARINE INTERNATIONAL INC. VS. DCIT (SUPRA) HAD CONSIDERED THE ISSUE AT PARA 9, WHEREIN IT IS STATED AS FOLLOWS : THE BASIC QUESTION ARISES FOR CONSIDERATION WHETHE R THE ASSESSEE HAVING FAILED TO RAISE THE QUESTION OF VALIDITY OF ASSESSM EN EITHER BEFORE THE ASSESSING OFFICER IN THE ASSESSMENT PROCEEDINGS OR IN THE QUANTUM APPEAL AND HAVING NEITHER RAISED THIS ISSUE BEFORE THE ASS ESSING OFFICER IN THE PENALTY PROCEEDINGS OR IN THE APPELLATE PROCEEDINGS AGAINST THE PENALTY ORDER COULD RAISE THE QUESTION OF VALIDITY OF ASSESSMENT ORDER BEFORE THE TRIBUNAL AT THIS STAGE. AFTER CONSIDERING THE JUDICIAL PRECEDENT ON THE ISS UE AT PARA 14 THE TRIBUNAL HELD AS FOLLOWS : IN VIEW OF THE ABOVE LEGAL POSITION, WE ARE OF TH E VIEW THAT IT IS OPEN TO THE ASSESSEE TO SET UP/RAISE THE QUESTION OF VALIDITY O F ASSESSMENT IN THE APPEAL AGAINST THE LEVY OF PENALTY. SINCE THE QUESTION OF VALIDITY OF ASSESSMENT MADE IN THE MATTER IS RAISED, WHICH IS A PURE QUEST ION OF LAW AND NOT INVOLVING ANY INVESTIGATION INTO THE FACTS AS THE S AME ARE ON RECORD, WE ADMIT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE FOR DECISION. FURTHER AT PARA 16 OF THE ORDER IT IS HELD AS FOLL OWS: 16. IN THE CASE OF P.V. DOSHI (SUPRA), THEIR LORDS HIPS OF THE HONBLE GUJARAT HIGH COURT HAVE HELD THAT THE CONDI TIONS PRECEDENT FOR INITIATING THE REASSESSMENT PROCEEDINGS UNDER SECTI ON 147 READ WITH SECTION 148 ARE MANDATORY. THERE COULD NEVER BE A WAIVER OF A MANDATORY PROVISION FOR THE SIMPLE REASON THAT IN SUCH CASES JURISDICTI ON COULD NOT BE CONFERRED ON THE AUTHORITY BY MERE CONSENT BUT ONLY ON CONDIT IONS PRECEDENT FOR THE EXERCISE OF JURISDICTION BEING FULFILLED. IF JURISD ICTION CANNOT BE CONFERRED BY CONSENT, THERE WOULD BE NO QUESTION OF WAIVER, ACQU IESCENCE OR ESTOPPEL OR THE BAR OF RES JUDICATA BEING ATTRACTED BECAUSE THE ORDER IN SUCH CASES WOULD LACK INHERENT JURISDICTION AND WOULD BE A VOID ORDE R OR A NULLITY. IF AN 6 ORIGINAL ORDER IS WITHOUT JURISDICTION IT WOULD BE A NULLITY CONFIRMED IN FURTHER APPEALS. THE APPELLATE ORDER OF THE TRIBUNA L THEREON WOULD ALSO BE A NULLITY AND THE TRIBUNAL CANNOT CONFER ANY JURISDIC TION ON THE INCOME-TAX OFFICER BY MAKING A REMAND ORDER. (EMPHASIS OURS) THUS RESPECTFULLY FOLLOWING THE SAME, WE ADMIT THI S ADDITIONAL GROUND. 10. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED T O PAGE 1 OF THE ASSESSMENT ORDER AS WELL AS THE ORDER OF THE CIT(APPEALS) IN Q UANTUM PROCEEDINGS WHICH IS DATED 20-01-2003 AS WELL AS THE REMAND REPORT OF TH E AO ON THIS ISSUE AND SUBMITTED THAT THE FACT THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 10-04-1997 AND THAT THE AO ISSUED NOTICE U/S 143(2) ON 09-11-1 999, WHICH IS BEYOND THE PERIOD OF 12 MONTHS IS NOT IN DISPUTE. HE POINTED O UT THAT THE AO IN THE REMAND REPORT DID NOT CONTROVERT THE STATEMENT ABOVE BUT O NLY ADVANCED A LEGAL ARGUMENT THAT THE ASSESSMENT IS NOT ILLEGAL. HE SUBMITTED TH AT ONCE THE NOTICE IS NOT ISSUED U/S 143(2) WITHIN A PERIOD OF 12 MONTHS FROM THE END OF THE MONTH IN WHICH THE RETURN OF INCOME WAS FILED, THE ASSESSMENT BECOMES BAD IN LAW, BY RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF HOTEL BLUE MOON 188 TAXMAN 113 (SC). HE FURTHER RELIED ON THE DECISION OF DELHI A-BENCH OF THE TRIBUNAL IN THE CASE OF DHIRAJ SURI VS. ADDL. CIT 98 ITD 187 AS WELL AS ON THE DECISION OF DELHI C-BENCH OF THE TRIBUNAL IN THE CASE OF TIDEWATER MARINE INT ERNATIONAL INC. (SUPRA). THUS HE SUBMITS THAT THE ASSESSMENT ITSELF SHOULD BE UPHEL D AS BAD IN LAW AND UNDER THOSE CIRCUMSTANCES THE PENALTY CANNOT SURVIVE. 11. ON MERITS THE LEARNED COUNSEL SUBMITTED THAT TH E AMOUNTS IN QUESTION WERE VERY MUCH RECORDED IN THE BOOKS OF ACCOUNT AND WERE OFFERED TO TAX IN THE REGULAR ASSESSMENT. HE SUBMITTED THAT THE REVENUE HAS CONTE NDED THAT IT WAS AN AFTER THOUGHT WITHOUT ANY PROOF AND BROUGHT TO TAX THIS V ERY AMOUNT IN THE BLOCK 7 ASSESSMENT. HE POINTED OUT THAT THESE AMOUNTS WERE FOUND REFLECTED IN THE BOOKS OF ACCOUNT WHICH WERE FOUND BUT NOT SEIZED. HE VEHEMEN TLY CONTENDED THAT MERELY BECAUSE THE REVENUE FELT THAT THE ASSESSEE HAD RECO RDED THESE ENTRIES ON A LATER DATE, IT CANNOT BE CONSIDERED AS A CONCEALMENT. HIS CASE IS THAT, THE ONLY ISSUE IS WHETHER THE AMOUNTS SHOULD BE TAXED IN THE BLOCK AS SESSMENT OR IN THE REGULAR ASSESSMENT AND IN SUCH CIRCUMSTANCES THERE IS A DIF FERENCE OF OPINION AND THE REVENUE BROUGHT IT TO TAX IN THE SEARCH ASSESSMENT. HE RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELI ANCE PETRO PRODUCTS 322 ITR 158 FOR THE PROPOSITION THAT WHEN THERE IS A GENUI NE DIFFERENCE OF OPINION ON THE ISSUE WHETHER A PARTICULAR AMOUNT IS TAXABLE UNDER THE REGULAR ASSESSMENT OR IN THE SEARCH ASSESSMENT, NO PENALTY CAN BE LEVIED. 12. THE LEARNED SR. DR, MR. D. SONGATE, ON THE OTHE R HAND, ADMITTED THE FACT THAT THE NOTICE U/S 143(2) WAS ISSUED BEYOND A PERI OD OF 12 MONTHS. HE REPEATED HIS ARGUMENT THAT THE GROUND ITSELF SHOULD NOT BE E NTERTAINED. FURTHER HE SUBMITTED THAT THE HONBLE SUPREME COURT IN THE CASE OF HOTEL BLUE MOON HAD CONCLUDED THAT THE ISSUE OF NOTICE U/S 143(2) WITHIN THE TIME PRESCRIBED IN PROVISO TO SECTION 143(2), IS MANDATORY AND NON-ISSUAL OF NOTICE WOUL D RENDER THE ASSESSMENT ILLEGAL. 13. ON MERITS HE REFERRED TO PARA 4.4 TO 4.7 OF THE CIT(APPEALS) ORDER AND SUBMITTED THAT THE ASSESSEE HAD NOT DISCLOSED THE I NCOME TILL THE DATE OF SEARCH AND HAD MADE AN ATTEMPT TO CAMOUFLAGE THE SOURCE OF RS, 26 LAKHS AS SPECULATION INCOME UNDER NORMAL PROVISIONS OF THE ACT AND THIS HAS BEEN DISAPPROVED BY THE TRIBUNAL IN THE QUANTUM PROCEEDINGS. HE POINTED OU T THAT THE ASSESSEE HAD NOT OFFERED A CONVINCING REASON OR SOME REASONABLE CAUS E NECESSITING NON-INCLUSION OF INCOME. HE SUBMITTED THAT THE ASSESSEE HAD IN FACT OFFERED THIS INCOME IN THE REGULAR RETURN, BUT HE SHULD HAVE ACTUALLY OFFERED IT IN THE BLOCK PROCEEDINGS. HE SUBMITTED THAT THE ASSESSEE TRIED TO AVOID TAX BY PAYING ONLY 50% BY DISCLOSING 8 THIS INCOME IN THE REGULAR RETURN. ON THIS REQUEST, THE DR WAS GRANTED ONE WEEK TIME TO PRODUCE WRITTEN SUBMISSIONS. 14. THE LEARNED DR IN HIS WRITTEN SUBMISSIONS SUBMI TTED THAT, THE ASSESSEE HAS NOT PRESSED THE GROUND OF JURISDICTION IN THE QUANT UM PROCEEDINGS BEFORE THE TRIBUNAL AND HAD ALSO NOT FILED AN APPEAL BEFORE TH E HONBLE HIGH COURT AND THUS THE ISSUE OF VALIDITY OF BLOCK ASSESSMENT, HAS ATTA INED FINALITY AND CANNOT BE QUESTIONED NOW. HE ARGUED THAT THE ADDITIONAL GROUN D OF APPEAL CANNOT BE ADMITTED, AS THE ISSUE IS LEVY OF PENALTY U/S 158BF A AND NOT ON VALIDITY OF ASSESSMENT. HE SUBMITTED THAT THE TRIBUNAL CANNOT S IT IN JUDGMENT OVER THE ISSUE WHETHER THE ASSESSMENT ITSELF IS BAD IN LAW AS IT WOULD AMOUNT TO REVIEW. HE TRIED TO DISTINGUISH THE CASE LAWS RELIED UPON BY THE ASS ESSEE. HE FURTHER SUBMITTED THAT THE BENCH MAY FIX THE CASE FOR A RE-HEARING IF IT W ANTS FURTHER CLARIFICATION. 15. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERA TION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND A PERUSAL OF THE PAPE RS ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW, WE HOLD AS FOLLOWS : 16. THE FACTS ARE BROUGHT OUT IN THE ORDER OF THE A O PASSED U/S 143(3) R..W.S.158BD DATED 28-2-2000 WHEREIN AT PARA 1 HE OBSERVED AS UNDER : THIS OFFICE WAS IN RECEIPT OF A LETTER FROM A.C.I .T. (INV.), CIR.9(1) DATED 24.11.1997, WHEREIN COPY OF THE APPRAISAL REPORT AN D OTHER DOCUMENTS AND TATEMENTS ETC. IN THE CASE OF SEARCH OPERATION CARR IED OUT AT THE PREMISES OF SHRI RAJENDRA KUMAR GUPTA ON 10.04.1997. IN PURSUAN CE TO SUCH INFORMATION, A NOTICE U/S 58BD DATED 02.02.1998 WAS SERVED ON THE ASSESSEE ON 06.02.1998. IN RESPONSE, THE ASSESSEE FILED BLOCK RETURN IN FO RM 2B FOR THE PERIOD 01.04.1987 TO 10.04.1997 ON 23.02.1998. (EMPHASIS OURS) THEREAFTER AT PARA 4 HE HELD AS UNDER : IN THE LIGHT OF THE ABOVE INFORMATION, NOTICE U/S 143(2) ALONG WITH A DETAILED QUESTIONNAIRE VIDE LETTER NO. 226 DATED 9/ 11/1999 WAS SERVED ON THE ASSESSEE CALLING FOLLOWING INFORMATION: (EMPHASIS OURS) 9 17. FROM THE ABOVE IT IS CLEAR THAT THE BLOCK RETUR N OF INCOME IN FORM NO.2B FOR THE PERIOD 1-4-87 TO 10-4-97 WAS FILED ON 23-2-98 A ND THE NOTICE U/S 143(2) WAS ISSUED ON 9-11-99. THE ASSESSEE RAISED THIS ISSUE I N APPEAL AND THE CIT(APPEALS) VIDE HIS ORDER DATED 20-1-2003 IN THE QUANTUM PROCE EDINGS. THE CIT(APPEALS) CALLED FOR THE REMAND REPORT AND ULTIMATELY CONCLUD ED THAT THE AO CAN COMPLETE THE BLOCK ASSESSMENT WITHOUT RESORTING TO SECTION 143(2). 18. THE HONBLE SUPREME COURT IN THE CASE OF HOTEL BLUE MOON (SUPRA) HELD THAT IT IS NECESSARY TO ISSUE NOTICE U/S 143(2) WIT HIN THE TIME PRESCRIBED IN PROVISO TO SECTION 143(2) FOR MAKING AN ASSESSMENT AND THAT NO ASSESSMENT CAN BE MADE WITHOUT ISSUAL OF SUCH NOTICE. THUS THE ISSUE HAS A TTAINED FINALITY. APPLYING THIS CASE LAW TO THE FACTS OF THE CASE, WE HAVE TO NECES SARILY HOLD THAT THE BLOCK ASSESSMENT ORDER IS BAD IN LAW. 19. WE NOW CONSIDER THE DECISION OF THE DELHI-A BEN CH OF THE TRIBUNAL IN THE CASE OF DHIRAJ SURI VS. ADDL. CIT 98 ITD 97. IN TH IS CASE IT IS HELD AS FOLLOWS : THE ASSESSEE HAD CANVASSED THE VALIDITY OF THE BLO CK ASSESSMENT BOTH IN THE APPEAL AGAINST THE BLOCK ASSESSMENT AND IN THE APPE AL BEFORE THE COMMISSIONER (APPEALS) AGAINST THE LEVY OF PENALTY. THE COMMISSIONER (APPEALS) HAD ACTUALLY REJECTED THE PLEA FOLLOWING HIS ORDER IN THE APPEAL AGAINST THE BLOCK ASSESSMENT, WHICH IMPLIED THAT TH E ASSESSEE HAD TAKEN THE PLEA EVEN IN THE APPEAL AGAINST THE BLOCK ASSESSMEN T. THUS, THE POINT HAD ALREADY BEEN TAKEN BEFORE THE INCOME-TAX AUTHORITIE S AND THERE WAS NO ELEMENT SURPRISE OF. IN FACT, EVEN WITHOUT THE HELP OF THE ADDITIONAL GROUND THE ASSESSEE COULD HAVE CANVASSED THE VALIDITY OF T HE BLOCK ASSESSMENT WITHIN THE SCOPE OF THE FIRST AND THIRD GROUNDS OF THE ORIGINAL GROUNDS OF APPEAL. FURTHER, THE ADDITIONAL GROUND DID NOT INVO LVE AN INVESTIGATION INTO THE FACTS. THE PANCHANAMA AND THE SEARCH WARRANT WE RE A MATTER OF RECORD. THAT APART, THIS WENT TO THE VERY ROOT OF THE MATTE R. THE QUESTION OF JURISDICTION IS OF VITAL IMPORTANCE AND IT WOULD BE OPEN TO THE ASSESSEE TO 10 RAISE THE QUESTION OF VALIDITY OF ASSESSMENT ON ACC OUNT OF LACK OF JURISDICTION AT ANY TIME AND AT ANY STAGE OF THE PROCEEDINGS. IN VIEW OF THE IMPORTANCE OF THE QUESTION OF VALIDITY OF THE ASSESSMENT AND SINC E THE MATTER INVOLVED A PURE LEGAL QUESTION NOT INVOLVING ANY INVESTIGATION INTO FACTS, THE ADDITIONAL MGROUND WAS TO BE ADMITTED. THE INITIAL WARRANT AND THE PANCHANAMA WERE IN THE NAME OF THE ASSESSEES HUSBAND AND NOT IN THE NAME OF THE ASSESSEE. THE SA ME WAS THE CASE RELATING TO THE SEARCH OF THE LOCKER. THUS, THERE WAS NO SEA RCH WARRANT IN THE NAME OF THE ASSESSEE. SECTION 158BB(1) SAYS THAT WHERE A SE ARCH INITIATED UNDER SECTION 132 OR BOOKS OF ACCOUNT, ETC., ARE REQUISIT IONED UNDER SECTION 132A IN THE CASE OF ANY PERSON THEN THE UNDISCLOSED INC OME OF THAT PERSON SHALL BE ASSESSED IN ACCORDANCE WITH CHAPTER XIV-B. A SEA RCH IS A PRE-REQISITE FOR THE INITIATION OF BLOCK ASSESSMENT PROCEEDINGS. A S EARCH UNDER SECTION 132 IS PERSON SPECIFIC AND NOT PREMISES SPECIFIC. IT FOLLO WS THAT IF THE NAME OF THE ASSESSEE, AGAINST WHOM THE BLOCK ASSESSMENT HAS BEE N MADE, DOES NOT FIGURE IN THE WARRANT OF AUTHORIZATION ISSUED UNDER SECTIO N 132, THE BLOCK ASSESSMENT WOULD BE UNAUTHORIZED AND VOID AB INITIO . IF IT IS THE CORRECT LEGAL POSITION, IT WOULD FOLLOW THAT THE ADDITIONAL GROUN D IS WELL-FOUNDED. IF THE BLOCK ASSESSMENT ITSELF WAS WITHOUT JURISDICTION, T HEN THERE WAS NO QUESTION OF LEVY OF ANY PENALTY UNDER SECTION 158BFA(2). IT, THEREFORE, APPEARED TO BE A CORRECT POSITION TH AT THE BLOCK ASSESSMENT IN THE INSTANT CASE, WAS VOID AB INITIO SINCE THERE WA S NO WARRANT OF AUTHORIZATION UNDER SECTION 132 IN THE NAME OF THE ASSESSEE. THEREFORE, THE PENALTY LEVIED COULD NOT BE SUSTAINED. (EMPHASIS OURS) SIMILARLY, THE DELHI C-BENCH OF THE TRIBUNAL IN THE CASE OF TIDEWATER MARINE INTERNATIONAL INC. 96 ITD 406 HELD AS FOLLOWS : IT IS OPEN TO THE ASSESSEE TO SET UP/RAISE THE QU ESTION OF VALIDITY OF ASSESSMENT IN THE APPEAL AGAINST THE LEVY OF PENALT Y. SINCE THE QUESTION OF VALIDITY OF ASSESSMENT MADE IN THE MATTER WAS RAISE D, WHICH WAS A PURE QUESTION OF LAW AND NOT INVOLVING ANY INVESTIGATION INTO THE FACTS AS THE SAME WERE ON RECORD, THE ADDITIONAL GROUND RAISED BY THE ASSESSEE WAS ADMITTED FOR DECISION. SECTION 149(3) PROVIDES THAT NO NOTICE UNDER SECTIO N 148 SHALL BE SERVED ON A PERSON TREATING AS AGENT OF A NON-RESIDENT UNDER SE CTION 163 AFTER EXPIRY OF 11 THE PERIOD OF TWO YEARS FROM THE END OF THE RELEVAN T ASSESSMENT YEAR. IN THE INSTANT CASE, NOTICE UNDER SECTION 148 WAS ISSUED O N 13-2-2001 I.E., BEYOND THE PERIOD OF TWO YEARS FROM THE END OF THE RELEVAN T ASSESSMENT YEAR IN THE NAME OF T TREATING IT AS AGENT OF NON-RESIDENT AS SESSEE. THUS, IT WOULD APPEAR THAT A VALID AND PROPER NOTICE UNDER SECTION 148 WAS NOT ISSUED AND SERVED ON THE ASSESSEE, WHICH IS A CONDITION PRECED ENT FOR ASSUMPTION OF VALID JURISDICTION FOR INITIATING PROCEEDINGS UNDER SECTION 147. IN THE INSTANT CASE, SINCE INITIATION OF THE REASSE SSMENT PROCEEDINGS WERE VITIATED AS THE NOTICE UNDER SECTION 148 HAD BEEN I SSUED BEYOND THE STATUTORY PERIOD PRESCRIBED UNDER SECTION 149(3), CONSEQUENTL Y, ASSESSMENT MADE ON THE BASIS OF SUCH NOTICE WOULD BE NULL AND VOID. SI NCE IN THE INSTANT CASE, THE VERY BASIS OF IMPOSITION OF PENALTY CEASED TO EXIS T BY VIRTUE OF VOID ASSESSMENT ORDER, THE PENALTY IMPOSED UNDER SECTION 271(1)(C) WAS LIABLE TO BE CANCELLED. IN THE RESULT, THE APPEALS OF THE ASSESSES WERE TO BE ALLOWED. 20. RESPECTFULLY APPLYING THESE TWO DECISIONS TO TH E FACTS OF THIS CASE, WE HAVE TO NECESSARILY TO COME TO A CONCLUSION THAT THE BLO CK ASSESSMENT ORDER WAS BAD IN LAW FOR THE REASON THAT THE NOTICE U/S 143(2) WAS N OT ISSUED WITHIN THE TIME PRESCRIBED UNDER THE PROVISO TO SECTION 143(2). WHE N THE BLOCK ASSESSMENT ITSELF WAS WITHOUT JURISDICTION, THEN THERE WAS NO QUESTIO N OF LEVY OF PENALTY U/S 158BFA(2). THUS WE QUASH THE PENALTY. 21. NOW COMING TO THE WRITTEN SUBMISSIONS OF THE LE ARNED DR, WE FIND NO MERIT WHATSOEVER IN IT. THE DR FAILED TO EXPLAIN HOW THE ISSUE IS NOT COVERED BY THE DECISION IN THE CASE OF DHIRAJ SURI (SUPRA) AND TID EWATER MARINE INTERNATIONAL INC (SUPRA). A PERUSAL OF THESE TWO DECISIONS WILL ANSW ER THE ISSUE RAISED BY THE D.R. AT THIS STAGE, WE EXPRESS OUR DISPLEASURE AT THE BE HAVIOR AND ATTITUDE OF THE LEARNED DR. HE NEVER SOUGHT AN ADJOURNMENT AT THE FIRST INS TANCE AND ONLY ON COMPLETION OF ARGUMENTS, WANTED AN ADJOURNMENT IN THE CASE. T HE SAME ARGUMENTS ARE REPRODUCED IN THE WRITTEN SUBMISSIONS GIVEN AFTER 1 0 DAYS. A STATEMENT IS MADE 12 THAT THE BENCH STATED THAT THE CASE WOULD BE REFIXE D. NO SUCH STATEMENT WAS MADE BY THE BENCH. THE CASE WAS HEARD AND TIME GIVEN FOR FILING OF WRITTEN SUBMISSIONS. TO OUR MIND NOTHING NEW IS SUBMITTED IN THE WRITTE N SUBMISSIONS. NO CASE LAWS ARE CITED. THE PROPOSITIONS LAID DOWN BY CO-ORDINAT E BENCHES COULD NOT BE PROPERLY DISTINGUISHED. NO REQUEST FOR CONSTITUTION OF SPECI AL BENCH U/S 255(3) HAS BEEN MADE. AFTER READING THE WRITTEN SUBMISSIONS, WE DO NOT FEEL IT NECESSARY TO FIX THE CASE OF ORAL ARGUMENTS ONCE AGAIN. THE WRITTEN SUBM ISSIONS ARE DEVOID OF MERIT AND ARE DISMISSED AS SUCH. 22. AS WE QUASH THE LEVY OF PENALTY ON THE GROUND O F JURISDICTION, IT IS NOT NECESSARY FOR US TO ADJUDICATE THE ISSUE ON MERITS WHEREIN THE ASSESSEE HAS RELIED ON A NUMBER OF CASE LAWS FOR THE PROPOSITION THAT THE LEVY OF PENALTY U/S 158BFA IS NOT MANDATORY BUT DISCRETIONARY AND FOR THE PROP OSITION THAT NO PENALTY CAN BE LEVIED WHEN THE ISSUE IS DEBATABLE. 23. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD DEC. , 2010. SD/- SD/- (V. DURGA RAO) (J. SUDHAKAR REDDY) JUDICIAL MEMBER. ACCO UNTANT MEMBER MUMBAI, DATED: 3 RD DEC., 2010. WAKODE 13 COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, E-BENCH (TRUE COPY) BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI B ENCHES, M UMBAI.