The ACIT, Circle-9, Ahmedabad V. Shri Ketan D.Desai(HUF), Ahmedabad

ITSSA 160/AHD/2005

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 9539 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 18-02-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 04-02-2010
• Assessment Year: misc
• Appeal Filed On: 06-05-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N S DAYAM
• Assessee Lawyers: P M MEHTA ADVOCA; S N SOPARKAR
• Keywords: Gift; Search and seizure; Block assessment; Reason to believe
• Section: 147; 132; 15

Judgement Text

1 1 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'A' (BEFORE S/SHRI N S SAINI AND MAHAVIR SINGH) IT(SS)A NO.160/AHD/2005 WITH C O NO.173/AHD/2005 [BLOCK PERIOD 01-04-1990 TO 31-03-2000] [BROKEN PERIOD 19-07-2000] THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-9, AHMEDABAD V/S SHRI KETAN DHIRAJLAL DESAI (HUF), A-4, VASHISHTH APARTMENT, OPP. POLYTECHNIC, AMBAWADI, AHMEDABAD [APPELLANT] [RESPONDENT] IT(SS)A NO.161/AHD/2005 WITH C O NO.174/AHD/2005 [BLOCK PERIOD 01-04-1990 TO 31-03-2000] [BROKEN PERIOD 19-07-2000] THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-9, AHMEDABAD V/S SMT. KUSUMBEN D DESAI, A- 4, VASHISHTH APARTMENT, OPP. POLYTECHNIC, AMBAWADI, AHMEDABAD [APPELLANT] [RESPONDENT] APPELLANTS BY :- SHRI N S DAYAM, CIT DR RESPONDENT BY:- SHRI S N SOPARKAR, SR. ADVOCATE A ND SHRI P M MEHTA, ADVOCATE O R D E R PER N S SAINI (ACCOUNTANT MEMBER): THESE ARE THE APPEALS FILED BY THE REVENUE AND THE CROS OBJECTIONS FILED BY THE AS SESSEES AGAINST SEPARATE DATED 01-02-2005 AND 16-02-2005 PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS). 2 THE GROUNDS RAISED BY THE REVENUE IN THE APPEALS ARE AS UNDER: 2 2 IT(SS)A NO.160/AHD/2005 : 1 THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.5,86,400/- MADE BY THE AO ON ACCOUNT OF GIFTS RE CEIVED BY THE ASSESSEE. IT(SS)A NO.161/AHD/2005 : 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.5,86,400/- MADE BY THE AO ON ACCOUNT OF GIFTS RE CEIVED BY THE ASSESSEE. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.4,26,076/- MADE BY THE AO ON ACCOUNT OF UNEXPLAI NED INVESTMENT IN GOLD ORNAMENTS. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.55,690/- MADE BY THE AO ON ACCOUNT OF UNEXPLAINE D INVESTMENTS IN SHARES AND FIXED DEPOSITS . 3 THE GROUNDS RAISED IN THE CROSS OBJECTIONS BY THE ASSESSEES, ARE AS UNDER:- CO NO.173/AHD/2005 : 1 IN LAW AND IN THE FACTS AS WELL AS CIRCUMSTANCES OF THE RESPONDENTS CASE THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE ORDE R PASSED BY THE AO IS BAD IN LAW AND AB INITIO VOID PARTICULARLY WHEN THE NOTICE ISSUED U/S 158BD R.W.S. 158BC OF THE IT ACT WAS WITHOUT ANY BASIS AN D WAS NOT BASED ON THE SEIZED MATERIAL. 2 IN LAW AND IN THE FACTS AS WELL AS CIRCUMSTANCES OF THE RESPONDENTS CASE THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE ORDE R PASSED BY THE AO IS VOID IN VIEW OF THE FACT THAT NO REASONS FOR THE IS SUANCE OF NOTICE U/S 158BD HAS EVER BEEN COMMUNICATED TO THE RESPONDENT. 3 IN LAW AND IN THE FACTS AS WELL AS CIRCUMSTANCES OF THE RESPONDENTS CASE THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE NOTI CE ISSUED U/S 158BD TO THE RESPONDENT IS NOT BASED ON ANY SUBSTANTIVE DOCU MENT SEIZED DURING THE COURSE OF SEARCH. 4 IN LAW AND IN THE FACTS AS WELL AS CIRCUMSTANCES OF THE RESPONDENTS CASE THE LEARNED CIT(A) HAS GROSSLY ERRED IN DISMISSING THE GROUND REGARDING THE ORDER BEING BAD IN LAW WHEN A SUBSTANTIAL QUEST ION OF LAW IS INVOLVED 3 3 WHEN HE OUGHT TO HAVE HELD THAT THE ORDER IS BAD IN LAW PARTICULARLY WHEN THE ORDER PASSED BY THE AO U/S 158BC OF THE IT ACT IS SO PASSED WITH THE PREVIOUS APPROVAL OF THE JT. CIT, RANGE-9, AHMEDABA D INSOFAR AS THE SAID JCIT HAS NOT HEARD THE ASSESSEE BEFORE GRANTING SUC H APPROVAL PARTICULARLY WHEN THE APPROVAL WAS STATUTORY. THIS HONBLE TRIBU NAL MAY BE PLEASED TO HOLD THAT THE ORDER IS BAD IN LAW AND DIRECT THE CA NCELLATION THEREOF. 5 IN LAW AND IN THE FACTS AS WELL AS CIRCUMSTANCES OF THE RESPONDENTS CASE THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE LEVY OF SURCHARGE OF RS.59,800 IS ILLEGAL AND DIRECT THE DELETION THEREO F. 6 IN LAW AND IN THE FACTS AS WELL AS CIRCUMSTANCES OF THE RESPONDENTS CASE THE LEARNED CIT(A) HAS GROSSLY ERRED IN HOLDING THA T THE LEVY OF INTEREST U/S 158BFA(1) OF THE IT ACT IS CONSEQUENTIAL WHEN THE R ESPONDENT OBJECTED TO THE VERY LEVY OF SUCH INTEREST WHICH OUGHT TO HAVE BEEN DELETED. 7 THIS HONBLE TRIBUNAL MAY, THEREFORE, BE PLEASED TO SO HOLD AND DIRECT THE DELETION OF THE INTEREST OF RS.10,292 LEVIED U/S 15 8BFA(1) OF THE IT ACT. CO NO.174/AHD/2005 : 1 IN LAW AND IN THE FACTS AS WELL AS CIRCUMSTANCES OF THE RESPONDENTS CASE THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE ORDE R PASSED BY THE AO IS BAD IN LAW AND AB INITIO VOID PARTICULARLY WHEN THE NOTICE ISSUED U/S 158BD R.W.S. 158BC OF THE IT ACT WAS WITHOUT ANY BASIS AN D WAS NOT BASED ON THE SEIZED MATERIAL. 2 IN LAW AND IN THE FACTS AS WELL AS CIRCUMSTANCES OF THE RESPONDENTS CASE THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE ORDE R PASSED BY THE AO IS VOID IN VIEW OF THE FACT THAT NO REASONS FOR THE IS SUANCE OF NOTICE U/S 158BD HAS EVER BEEN COMMUNICATED TO THE RESPONDENT. 3 IN LAW AND IN THE FACTS AS WELL AS CIRCUMSTANCES OF THE RESPONDENTS CASE THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE NOTI CE ISSUED U/S 158BD TO THE RESPONDENT IS NOT BASED ON ANY SUBSTANTIVE DOCU MENT SEIZED DURING THE COURSE OF SEARCH. 4 IN LAW AND IN THE FACTS AS WELL AS CIRCUMSTANCES OF THE RESPONDENTS CASE THE LEARNED CIT(A) HAS GROSSLY ERRED IN DISMISSING THE GROUND REGARDING THE ORDER BEING BAD IN LAW WHEN A SUBSTANTIAL QUEST ION OF LAW IS INVOLVED WHEN HE OUGHT TO HAVE HELD THAT THE ORDER IS BAD IN LAW PARTICULARLY WHEN THE ORDER PASSED BY THE AO U/S 158BC OF THE IT ACT IS SO PASSED WITH THE PREVIOUS APPROVAL OF THE JT. CIT, RANGE-9, AHMEDABA D INSOFAR AS THE SAID JCIT HAS NOT HEARD THE ASSESSEE BEFORE GRANTING SUC H APPROVAL PARTICULARLY 4 4 WHEN THE APPROVAL WAS STATUTORY. THIS HONBLE TRIBU NAL MAY BE PLEASED TO HOLD THAT THE ORDER IS BAD IN LAW AND DIRECT THE CA NCELLATION THEREOF. 5 IN LAW AND IN THE FACTS AS WELL AS CIRCUMSTANCES OF THE RESPONDENTS CASE THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE LEVY OF SURCHARGE OF RS.1,51,138 IS ILLEGAL AND DIRECT THE DELETION THER EOF. 6 IN LAW AND IN THE FACTS AS WELL AS CIRCUMSTANCES OF THE RESPONDENTS CASE THE LEARNED CIT(A) HAS GROSSLY ERRED IN HOLDING THA T THE LEVY OF INTEREST U/S 158BFA(1) OF THE IT ACT IS CONSEQUENTIAL WHEN THE R ESPONDENT OBJECTED TO THE VERY LEVY OF SUCH INTEREST WHICH OUGHT TO HAVE BEEN DELETED. 7 THIS HONBLE TRIBUNAL MAY, THEREFORE, BE PLEASED TO SO HOLD AND DIRECT THE DELETION OF THE INTEREST OF RS.26,005 LEVIED U/S 15 8BFA(1) OF THE IT ACT. 4 BOTH THE ASSESSEES VIDE THEIR SEPARATE LETTERS DA TED 17-09-2009 HAD TAKEN AN ADDITIONAL COMMON GROUND OF CROSS OBJE CTION WHICH READS AS UNDER:- IN LAW AND IN THE FACTS AS WELL AS CIRCUMSTANCES OF THE RESPONDENTS CASE THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE ORDER PA SSED BY THE AO IS BAD IN LAW AND AB INITIO VOID PARTICULARLY (I) WHEN THE NOTICE U/S 158BD ISSUED ON 3.9.2002 BY THE DCIT, CIRCLE-10, AHMEDABAD, IS TIME BARRED CONSIDERING THE DATE OF S EARCH 18/19-7- 2000; AND (II) WHEN THE ASSESSMENT PROCEEDINGS IN THE CASE OF SMT. ALKA DESAI FOR THE BLOCK PERIOD WAS FINALIZED ON 31-7-2002 U/S 158BC O F THE I.T. ACT. FOR THIS ASSESSEE RELIES UPON THE SPECIAL BENCH DECISIO N IN THE CASE OF MANOJ AGRAWAL VS. DCIT 113 ITD 377 (DEL) . 5 DURING THE COURSE OF THE HEARING, THE ASSESSEE SU BMITTED THAT THE ABOVE GROUND OF CROSS OBJECTION INVOLVED A LEGAL IS SUE AND THE SAME GOES TO THE ROOT OF THE ASSESSMENT AND THEREFORE PR AYED FOR ADMISSION OF THE SAID ADDITIONAL GROUND. AFTER HEARING BOTH THE PARTIES, THE TRIBUNAL ALLOWED THE PRAYER OF THE ASSESSEE AND ADMITTED THE ADDITIONAL GROUND OF CROSS OBJECTION. 6 AS THE ADDITIONAL GROUND OF CROSS OBJECTION RAISE D BY THE ASSESSEES INVOLVES A JURISDICTIONAL ISSUE, THE SAME WAS HEARD FIRST. THE 5 5 ASSESSEE SUBMITTED THAT IN THE INSTANT CASE PROCEED INGS U/S 158BD WAS INITIATED VIDE ISSUE OF NOTICE ON 3-9-2002. THE ASS ESSEE CONTENDED THAT THE AFORESAID PROCEEDING WAS INSTITUTED IN PURSUANC E TO A SEARCH OPERATION U/S 132 CARRIED OUT ON 18/19-07-2000 IN T HE CASE OF DR. ALKA K DESAI. THE LEARNED AUTHORISED REPRESENTATIVE OF T HE ASSESSEE ALSO SUBMITTED AT BAR THAT THE ORDER U/S 158BC IN PURSUA NCE TO THE SAID SEARCH WAS PASSED IN THE CASE OF SAID DR. ALKA K DE SAI ON 31-07-2002. ON THE ABOVE FACTS, HE ARGUED THAT ON 03-09-2002, T HE ISSUE OF NOTICE U/S 158BD WAS BARRED BY LIMITATION AND FOR THIS HE PLACED RELIANCE ON THE DECISION OF THE HON'BLE DELHI SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MANOJ AGRAWAL VS. DCIT 113 ITD 377 (DELHI). THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE ARGUED TH AT IN VIEW OF THE AFORESAID DECISION OF THE SPECIAL BENCH THE FINDING OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) TO THE EFFECT T HAT AS THERE IS NO TIME LIMIT SPECIFIED IN THE INCOME-TAX ACT FOR ISSU E OF NOTICE U/S 158BD OF THE ACT, THE ISSUE OF SUCH NOTICE ON 03-09-2002 CANNOT BE HELD TO BE TIME-BARRED, IS NOT CORRECT. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 7 WE FIND THAT IN THE INSTANT CASE IT IS NOT IN DIS PUTE THAT THE NOTICE U/S 158BD WAS ISSUED ON 03-09-2002 WHEREAS THE RELE VANT BLOCK ASSESSMENT ORDER U/S 158BC WAS PASSED ON 31-07-2002 . THUS, THE NOTICE U/S 158BC WAS ISSUED AFTER COMPLETION OF ASS ESSMENT U/S 158BC OF THE ACT. THE HON'BLE DELHI SPECIAL OF THE TRIBUN AL IN THE CASE OF MANOJ AGGRAWAL (SUPRA) HELD AS UNDER:- 113. SEC. 158BD COMMENCES WITH THE WORDS 'WHERE TH E AO IS SATISFIED THAT ANY UNDISCLOSED INCOME BELONGS TO ANY PERSON, OTHER THAN THE PERSON WITH RESPECT TO WHOM SEARCH WAS MADE' AND THUS IT IS CLE AR THAT THE SATISFACTION OF THE AO ASSESSING THE PERSON SEARCHED IS THE FIRST A ND FOREMOST REQUIREMENT. THE AO CAN ARRIVE AT THIS SATISFACTION ONLY AFTER A SCERTAINING WHETHER THERE IS ANY UNDISCLOSED INCOME AT ALL AND THIS FINDING CAN BE ARRIVED AT BY HIM ONLY IN THE COURSE OF THE S. 158BC ASSESSMENT PROCEEDING. T HEREAFTER, HE HAS TO ARRIVE 6 6 AT A FINDING AS TO THE PERSON TO WHOM SUCH INCOME B ELONGS. THIS FINDING ALSO CAN BE ARRIVED AT ONLY IN THE COURSE OF THE S. 158B C PROCEEDING IN THE CASE OF THE PERSON SEARCHED. HE MAY FIND THAT PART OF THE S AID UNDISCLOSED INCOME BELONGS TO THE PERSON SEARCHED AND THE REST BELONGS TO OTHER PERSON OR PERSONS. AT THIS STAGE, HE HAS TO GIVE A FINDING IN THIS BEHALF AS TO WHICH OF THE UNDISCLOSED INCOME BELONGS TO THE PERSON SEARCHED A ND THE OTHER PERSON TO WHOM THE REST OF THE INCOME BELONGS. THIS FINDING T OO HAS TO BE ARRIVED AT IN THE COURSE OF THE S. 158BC PROCEEDING. AFTER ARRIVI NG AT THIS FINDING, HE MAKES AN ASSESSMENT OF THE UNDISCLOSED INCOME RELATING TO THE PERSON SEARCHED IN HIS HANDS AND HANDS OVER THE MATERIAL RELATING TO THE U NDISCLOSED INCOME BELONGING TO THE OTHER PERSON OR PERSONS TO THE RES PECTIVE AOS. AS S. 158BC PROCEEDING IS SPECIFICALLY INTENDED FOR DETERMINING THE UNDISCLOSED INCOME, THE MATERIAL UNEARTHED HAS TO BE EXAMINED IN THE COURSE OF THE SAID PROCEEDING AND IF SUCH EXAMINATION SHOWS THAT THE UNDISCLOSED INCOME BELONGS TO SOME OTHER PERSONS A FINDING IN THIS BEHALF HAS TO BE RE CORDED IN THE COURSE OF THE S. 158BC PROCEEDING AS SUCH FINDING HAS TO FORM AN INT EGRAL PART OF THE SAID PROCEEDING AND IN CONFORMITY WITH THE INTENTION BEH IND THE SAID PROVISION. SO, IT IS ESSENTIAL THAT SUCH FINDING HAS TO FORM PART OF THE S. 158BC PROCEEDING AND SO MUST FIND A PLACE IN THE ORDER UNDER S. 158B C. THE AO ASSESSING THE PERSON SEARCHED HAS TO GIVE A FINDING ON EACH AND E VERY MATERIAL AND EVIDENCE UNEARTHED AFTER A CAREFUL AND JUDICIOUS EVALUATION AND SUCH EXERCISE INVOLVES A FINDING THAT THE UNDISCLOSED INCOME BELONGS TO A SP ECIFIED PERSON AS FOUND BY HIM ON SUCH EVALUATION. IT IS THIS FINDING THAT IS THE PIVOT AROUND WHICH THE S. 158BD PROCEEDING REVOLVES. IF, THEREFORE, IN THE CO URSE OF THE S. 158BC PROCEEDINGS THE AO ASSESSING THE PERSON SEARCHED DO ES NOT GIVE A FINDING THAT ANY PART OF THE UNDISCLOSED INCOME UNEARTHED BELONG S TO A PERSON OTHER THAN THE PERSON SEARCHED, S. 158BD CAN NEVER BE INVOKED. IT IS THIS FINDING THAT IS AN INTEGRAL PART OF BOTH THE PROCEEDINGS WHETHER UNDER S. 158BC OR S. 158BD. FOR, SUCH FINDING DETERMINES IN WHOSE HANDS THE UND ISCLOSED INCOME UNEARTHED HAS TO BE TAXED. IF THE UNDISCLOSED INCOM E BELONGS TO THE PERSON SEARCHED, HE IS SUBJECTED TO BLOCK ASSESSMENT ON SU CH INCOME UNDER S. 158BC BUT IF SUCH INCOME OR PART OF SUCH INCOME BELONGS T O A PERSON NOT SEARCHED, S. 158BD TAKES OVER. THIS IS THE ESSENCE OF THE ENTIRE ENACTMENT RELATING TO SEARCH. 114. SEC. 158BE PROVIDES FOR TIME-LIMIT FOR COMPLET ION OF BLOCK ASSESSMENT. IT STIPULATES THAT THE ORDER UNDER S. 158BC SHALL BE P ASSED WITHIN TWO YEARS FROM THE END OF THE MONTH IN WHICH THE LAST OF THE AUTHO RIZATIONS FOR SEARCH UNDER S. 132 WAS EXECUTED OR FOR REQUISITION UNDER S. 132A A S THE CASE MAY BE AND SO THE ORDER ENVISAGED UNDER S. 158BC HAS NECESSARILY TO BE PASSED WITHIN THIS TIME FRAME SET IN LAW. IF THERE IS A TIME-LIMIT FOR PASSING SUCH ORDER, THERE IS AN IMPLIED TIME-LIMIT FOR GIVING A FINDING AS TO THE P ERSON TO WHOM THE UNDISCLOSED INCOME BELONGS WHICH UNDER NO CIRCUMSTA NCE CAN BE BEYOND THE TIME-LIMIT SET IN S. 158BE. IF THERE IS NO SUCH FIN DING GIVEN IN THE ORDER UNDER S. 158BC, THE PROVISIONS OF S. 158BD STAND OUSTED AT T HE EXPIRY OF THE SAID TIME- LIMIT FOR THE REASON THAT SUCH A FINDING IS THE VER Y BASIS FOR INVOKING S. 158BD. 7 7 115. SEC. 158BD AS SAID EARLIER BEGINS WITH THE EXP RESSION 'WHERE THE AO IS SATISFIED' AND SO THE VERY SECTION IMPLIES A RECORD ING OF SATISFACTION. THE SATISFACTION CONTEMPLATED IS A JUDICIOUS SATISFACTI ON AND NOT A SUBJECTIVE SATISFACTION AND UNLESS THE SAME IS RECORDED IT IS NOT POSSIBLE FOR ANY PERSON TO DISCERN WHETHER THE SATISFACTION MEETS THE REQUIREM ENTS OF LAW AT ALL. THE SATISFACTION CAN BE FOUND IN THE ORDER PASSED UNDER S. 158BC AND IF NO SUCH ORDER IS PASSED THEN IT WILL HAVE TO BE FOUND IN TH E NOTE HANDING OVER THE MATERIAL SEIZED TO THE AO ASSESSING THE OTHER PERSO N. IN ANY EVENT, IT HAS TO BE IN WRITING AND IN VIEW OF S. 158BE, THE SAID RECORD ING HAS TO BE MADE BEFORE THE TIME SET IN S. 158BE EXPIRES. AFTER THE SAID DA TE, IT IS NOT POSSIBLE TO INVOKE S. 158BD AT ALL. 116. A VIEW IS EXPRESSED THAT WHEREVER A TIME-LIMIT IS INTENDED, THE PARLIAMENT HAS PROVIDED FOR THE SAME AND IN THE ABSENCE OF A S PECIFIC PROVISION MADE IN THIS RESPECT IT HAS TO BE ASSUMED THAT THERE IS NO TIME-LIMIT INTENDED IN LAW. IT HAS TO BE REMEMBERED THAT THE MATTER RELATES TO FIX ING HUGE FINANCIAL AND OTHER CIVIL LIABILITY ON THE PERSON AFFECTED AND IT HAS B EEN REPEATEDLY HELD THAT THERE MUST BE A FINALITY TO ANY PROCEEDING UNDER THE ACT AND THAT A CONCLUDED PROCEEDING CANNOT BE REOPENED AT THE WHIM AND FANCY OF THE AO WITHOUT THE DUE PROCESS OF LAW. STRICT INTERPRETATION OF FISCAL STATUTES IS THE ORDER OF THE DAY AND AS THE PROVISIONS FOR SEARCH ARE DRACONIAN IN NATURE SUCH PROVISIONS HAVE NECESSARILY TO BE STRICTLY CONSTRUED. IT WILL HAVE TO BE REMEMBERED THAT S. 158BD PROVIDES FOR INVOKING JURISDICTION UNDER THE SAID SECTION ENABLING THE AO ASSESSING THE OTHER PERSON IN RESPECT OF WHOM TH E AO ASSESSING THE PERSON SEARCHED GIVES A FINDING THAT THE UNDISCLOSED INCOM E UNEARTHED AS A RESULT OF SEARCH BELONGS TO THE SAID PERSON AND ONCE SUCH A F INDING IS GIVEN THE PROVISIONS OF S. 158BD COME INTO OPERATION. THIS, T HEREFORE, INVOLVES ASSUMPTION OF JURISDICTION AND CANNOT BE CONSTRUED AS A PROCEDURAL MATTER. IN THE ABSENCE OF A FINDING IN THIS BEHALF, THERE IS N O JURISDICTION TO THE OTHER AO AT ALL TO PROCEED FURTHER IN THE MATTER. AS THE TIM E-LIMIT SET IN S. 158BE APPLIES TO SUCH FINDING, IT IS ONLY LOGICAL THAT THE SAID T IME-LIMIT AUTOMATICALLY APPLIES FOR INVOKING THE PROVISIONS OF S. 158BD AND IT IS F OR THIS REASON THAT THE PARLIAMENT DID NOT FIND IT NECESSARY TO SPECIFY A S EPARATE TIME-LIMIT FOR THE SAME, AS THE ENACTMENT ITSELF SHOWS THAT BOTH SS. 1 58BC AND 158BD ARE INTERLINKED, INTERLACED AND INTERTWINED AND BOTH FO RM PART AND PARCEL OF THE SAME CHAPTER. 8 FURTHER, AS REGARDS TO THE LIMITATION FOR ISSUANC E OF NOTICE U/S 158BD OF THE ACT, THE SPECIAL BENCH IN MANOJ AGGRAW AL (SUPRA) IN PARA 123 TO 127 HAS HELD AS UNDER:- 123. HAVING HELD THAT RECORDING OF SATISFACTION IS IMPERATIVE BEFORE ASSUMPTION OF JURISDICTION UNDER S. 158BD, WE MAY N OW TURN TO EXAMINE THE MEANING OF THE EXPRESSION 'WHERE THE AO IS SATISFIE D' APPEARING AT THE BEGINNING OF S. 158BD FOR THE MEANING SO ASCERTAINE D GIVES US A CLUE AS TO THE 8 8 NATURE OF THE NOTE OF SATISFACTION THAT IS ENVISAGE D IN THE SAID SECTION. IT IS THE SUBMISSION OF THE LEARNED REPRESENTATIVE FOR THE AP PELLANT THAT SUCH SATISFACTION MUST CLEARLY SHOW DETECTION OF UNDISCL OSED INCOME ON EXAMINATION OF THE SEIZED MATERIAL AS BELONGING TO THE PERSON N OT SEARCHED AND THAT IT CANNOT BE BASED ON ASSUMPTIONS AND SURMISES OR GUES SWORK. THE LEARNED DEPARTMENTAL REPRESENTATIVE ARGUED THAT THE TERM SA TISFACTION APPEARS IN VARIOUS PARTS OF THE ACT ITSELF AND THAT EVEN IN S. 147/148 DEALING WITH CASES OF REASSESSMENT FOR ASSESSING INCOME WHICH HAD ESCAPED ASSESSMENT, THE ONLY REQUIREMENT IS THAT THE AO MUST HAVE REASON TO BELI EVE THAT THERE IS A PRIMA FACIE CASE OF EXISTENCE OF ESCAPED INCOME AND THAT THERE IS NO REQUIREMENT THAT THERE MUST BE A CLEAR FINDING OF UNDISCLOSED INCOME AS SUGGESTED. IN THIS CONTEXT, REFERENCE HAS BEEN MADE TO THE APEX COURT DECISION IN THE CASE OF RAJESH JHAVERI STOCK BROKERS (P) LTD. (SUPRA) WHERE IN THE TERM 'REASON TO BELIEVE' HAS BEEN INTERPRETED AND THE APEX COURT HE LD THEREIN THAT 'WHAT IS REQUIRED IS REASON TO BELIEVE BUT NOT THE ESTABLISH ED FACT OF ESCAPEMENT OF INCOME. AT THE STAGE OF ISSUE OF NOTICE, THE ONLY Q UESTION IS WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A RESONABLE PERSON COULD HAVE FORMED THE REQUISITE BELIEF. WHETHER MATERIAL WOULD CONCLUSIVELY PROVE E SCAPEMENT OF INCOME IS NOT THE CONCERN AT THAT STAGE. THIS IS SO BECAUSE THE F ORMATION OF THE BELIEF IS WITHIN THE REALM OF THE SUBJECTIVE SATISFACTION OF THE AO'. IT IS THEREFORE SUBMITTED THAT IN THE RECORDING OF SATISFACTION IT IS ENOUGH IF A PRIMA FACIE CASE IS MADE OUT. 124. IT IS TRUE THAT THE TERM 'REASON TO BELIEVE' H AS COME TO BE JUDICIALLY INTERPRETED EVER SINCE THE PROVISION FOR REASSESSME NT WAS INTRODUCED IN THE ACT AND SO THE VIEW EXPRESSED BY THE APEX COURT IN THE DECISION CITED SUPRA IS IN TUNE WITH ITS OWN EARLIER DECISIONS. BUT, THE POINT THAT HAS TO BE CONSIDERED IS WHETHER THE USE OF THE TERM 'REASON TO BELIEVE' AND 'SATISFACTION' HAVE THE SAME MEANING WHEREVER THE SAID TERMS ARE USED DE HO RS THE CONTEXT IN WHICH THE SAID TERM APPEARS ? THE TERM 'REASON TO BELIEVE ', AS THE APEX COURT HELD, IMPLIES THAT THE AO SUBJECTIVELY BELIEVES THAT HE H AS REASON TO BELIEVE ON THE BASIS OF THE MATERIAL BEFORE HIM THAT THERE IS ESCA PEMENT OF INCOME IN THE CASE OF AN ASSESSEE AND SO THAT ESCAPED INCOME HAS TO BE BROUGHT TO TAX BY RE- OPENING HIS ASSESSMENT AS PER THE PROVISIONS OF S. 147/148 OF THE ACT. ON THE OTHER HAND, THE TERM 'SATISFACTION' IN S. 158BD CON NOTES THAT THERE EXISTS UNDISCLOSED INCOME AND THAT SUCH UNDISCLOSED INCOME IS THAT OF THE PERSON NOT SEARCHED. THE USE OF THE EXPRESSION 'SATISFIED' IN S. 158BD CANNOT BE READ IN ISOLATION AND IT HAS TO BE UNDERSTOOD IN THE CONTEX T IN WHICH THE SAID TERM APPEARS IN THE SAID SECTION. IT WILL BE SEEN THAT S . 158BD STARTS WITH THE EXPRESSION 'WHERE THE AO IS SATISFIED THAT ANY UNDI SCLOSED INCOME BELONGS TO ANY PERSON OTHER THAN THE PERSON WITH RESPECT TO WH OM SEARCH WAS MADE.......'. IT IS SIGNIFICANT THAT THE TERM 'SATISFIED' IS NOT USED IN A VACUUM BUT ALONG WITH THE WORDS 'THAT ANY UNDISCLOSED INCOME BELONGS TO . ........... OTHER THAN THE PERSON WITH RESPECT TO WHOM SEARCH WAS MADE........ .....' AND THE WORDS IN THE CONTEXT ARE 'UNDISCLOSED INCOME' AND 'BELONGS TO' W HICH CLEARLY INDICATE THAT AT THAT POINT OF TIME WHEN SATISFACTION IS RECORDED BY THE AO THE UNDISCLOSED INCOME IS TO BE IDENTIFIED. FURTHER, THE SAID EXPRE SSION DOES NOT STOP THERE. IT 9 9 FURTHER USES THE EXPRESSION 'BELONGS TO ANY PERSON, OTHER THAN THE PERSON WITH RESPECT TO WHOM SEARCH WAS MADE' WHICH INDICATES TH AT THE UNDISCLOSED INCOME IDENTIFIED BY THE AO IS FOUND TO BE BELONGIN G TO THE OTHER PERSON. IT WOULD THUS MEAN THAT AT THE STAGE OF RECORDING, THE AO HAS REACHED A FINDING THAT UNDISCLOSED INCOME HAS BEEN DETECTED AS A RESU LT OF SEARCH AND ALSO FURTHER THAT SUCH INCOME BELONGS TO THE PERSON NOT SEARCHED. ALL THESE CONSTITUTE FINDINGS AND NOT A MERE BELIEF HELD BY T HE AO ON THE EXAMINATION OF THE SEIZED MATERIAL AND HENCE THE SATISFACTION CONT EMPLATED IN S. 158BD IS TOTALLY DIFFERENT THAN CONTEMPLATED IN S. 147. IT I S FUNDAMENTAL THAT THE AO FINDS OUT WHETHER THERE IS UNDISCLOSED INCOME. IF H E FINDS THAT THERE EXISTS UNDISCLOSED INCOME, THEN HE HAS TO GIVE A FINDING A S TO WHOM THE SAID INCOME BELONGS. IN THE ABSENCE OF SUCH A FINDING, IT IS NO T POSSIBLE TO CONCLUDE A BLOCK ASSESSMENT UNDER S. 158BC. ONLY THEREUPON, THE S. 1 58BD PROCEEDING IN RESPECT OF THE OTHER PERSON FOR MAKING A SIMILAR BL OCK ASSESSMENT OF SUCH UNDISCLOSED INCOME WOULD COMMENCE. HENCE, IN OUR CO NSIDERED VIEW, THE NOTE OF SATISFACTION MUST CONTAIN A POSITIVE FINDING BY THE AO MAKING THE ASSESSMENT UNDER S. 158BC INDICATING THEREIN THE UN DISCLOSED INCOME FOUND AS A RESULT OF HIS EXAMINATION OF THE SEIZED MATERIAL, THE PERSON TO WHOM SUCH INCOME BELONGS AND PROCEED ACCORDINGLY AS PROVIDED FOR IN THE SAID SECTION. THE CIRCUMSTANCES ENVISAGED AND THE CONTEXT IN S. 1 47 AND S. 158BD ARE ENTIRELY DIFFERENT IN NATURE AND SO IT IS NOT POSSI BLE TO IMPORT THE APEX COURT DECISION IN THE CASE CITED SUPRA INTO THE S. 158BD PROCEEDING FOR THE REASONS DETAILED HEREIN. 125. IN THE INSTANT CASE, WE MAY NOW EXAMINE WHETHE R THERE IS ANY RECORD OF SATISFACTION THAT MEETS THE REQUIREMENT OF LAW AS E NUNCIATED ABOVE. WE HAVE ALREADY REPRODUCED THE COPY OF THE SAID RECORD DT. 19TH DEC., 2002. IT IS SIGNED BY THE DY. CIT, CENTRAL CIRCLE-3, NEW DELHI. IT IS THEREFORE ADMITTEDLY RECORDED BY THE AO MAKING THE S. 158BD ASSESSMENT A S THE NOTICE UNDER THE SAID SECTION HAS ALSO BEEN ISSUED BY HIM. THIS NOTE RECORDS THAT SEARCH IN THE CASE OF SHRI MANOJ AGGARWAL AND ASSOCIATE CONCERNS AND THE BLOCK ASSESSMENT MADE ON HIM CONCLUSIVELY ESTABLISHES THE FACT THAT HE WAS INVOLVED IN PROVIDING BOGUS ACCOMMODATION BOOK ENTRIES TO VARIO US PERSONS ON COMMISSION BASIS AND FOR THIS PURPOSE HE HAD USED T HE NAMES AND BANK ACCOUNTS OF VARIOUS COMPANIES, BENAMI PROPRIETORSHI P CONCERNS IN THE NAMES OF HIS EMPLOYEES, IN THE NAME OF RELATIVES, VARIOUS HUF ENTITIES AND FIRMS AND ONE SUCH CONCERN IS M/S BISHAN CHAND MUKESH KUMAR T HE BANK ACCOUNTS OF WHICH WERE OPERATED BY S/SHRI MUKESH KUMAR AND SHRI BISHAN CHAND AGGARWAL; THAT THE SOURCES OF CASH AND CLEARING DEP OSITS AND THE WITHDRAWALS FROM THESE BANK ACCOUNTS NEED TO BE EXAMINED; THESE ACCOUNTS HAVE BEEN USED FOR ACCOMMODATION BOOK ENTRIES AND HENCE, UNDISCLOS ED INCOME HAS ARISEN IN THE HANDS OF THIS CONCERN WHICH HAS BEEN FOUND DURI NG THE COURSE OF SEARCH AND SEIZURE OPERATIONS IN THE CASE OF SHRI MANOJ AG GARWAL AND HIS ASSOCIATE CONCERNS; THUS, PROCEEDINGS UNDER S. 158BD ARE APPL ICABLE IN THIS CASE. ADMITTEDLY, THIS NOTE IS AFTER THE DATE OF BLOCK AS SESSMENT IN THE CASE OF MANOJ KUMAR AGGARWAL WHICH WAS FINALIZED ON 29TH AUG., 20 02. FURTHER, THE NOTE OF SATISFACTION IS NOT RECORDED BY THE DY. CIT, CENTRA L CIRCLE- 3, NEW DELHI, 10 10 ACTING AS THE AO MAKING THE ASSESSMENT UNDER S. 158 BC OF MANOJ KUMAR AGGARWAL SINCE THE SAID ASSESSMENT HAS BEEN FINALIZ ED EARLIER. CLEARLY THE NOTE OF SATISFACTION DT. 19TH DEC., 2002, IS BEYOND THE DATE OF BLOCK ASSESSMENT IN THE S. 158BC PROCEEDINGS DT. 29TH AUG., 2002, IN TH E CASE OF SHRI MANOJ AGGARWAL. THEREFORE, THE SATISFACTION RECORDED IS B ELATED. 126. FURTHER, THE SAID NOTE OF SATISFACTION SPEAKS OF MANOJ KUMAR AGGARWAL DOING ACCOMMODATION BUSINESS THROUGH VARIOUS BENAMI CONCERNS AND IN THE NAMES OF VARIOUS PERSONS AND EARNING COMMISSION THR OUGH SUCH ACCOMMODATION AND THAT ONE SUCH CONCERN USED BY HIM IS THE APPELLANT FIRM. IT FURTHER STATES THAT THE BANK ACCOUNTS OF THE FIRM H AVE TO BE EXAMINED AND THE SOURCE OF THE CASH AND CLEARING DEPOSITS AND THE WI THDRAWALS FROM THE BANKS HAVE TO BE EXAMINED. THERE IS THUS NO FINDING IN TH E SAID NOTE THAT ON EXAMINATION OF THE SEIZED MATERIAL BY HIM IN THE CA SE OF MANOJ KUMAR AGGARWAL HE HAS FOUND THAT THERE IS UNDISCLOSED INC OME AND THAT SUCH UNDISCLOSED INCOME BELONGS TO THE ASSESSEE FIRM. ON THE OTHER HAND, IT SAYS THAT THE BANK ACCOUNTS OF THE FIRM HAVE TO BE EXAMI NED. THERE IS NOT EVEN A WHISPER OF DETECTION OF UNDISCLOSED INCOME IN THE H ANDS OF THE FIRM. THE VERY RECORD LEAVES A TELL TALE EVIDENCE TO THE EFFECT TH AT NO FINDING HAS BEEN ARRIVED AT TO SHOW THAT THERE EXISTS UNDISCLOSED INCOME OF THE ASSESSEE FIRM. HAD IT BEEN SO, THERE WOULD HAVE BEEN A REFERENCE TO THE S AME AND THERE WAS NO NEED TO STATE THAT FURTHER EXAMINATION OF VARIOUS ACCOUN TS WAS REQUIRED. HENCE, THE NOTE ITSELF ADMITS THAT NO UNDISCLOSED INCOME IN TH E HANDS OF THE APPELLANT HAS BEEN FOUND EVEN ON THE DATE OF SUCH NOTING WHICH MI LITATES AGAINST THE REQUIREMENT OF A NOTE OF SATISFACTION IN TERMS OF S . 158BD. IN ORDER TO ASCERTAIN WHETHER IN THE COURSE OF THE ASSESSMENT P ROCEEDING IN THE CASE OF MANOJ AGGARWAL UNDER S. 158BC THERE IS ANY FINDING OF ANY UNDISCLOSED INCOME IN THE CASE OF THE APPELLANT; EVEN THERE, WE DID NOT COME ACROSS ANY FINDING THAT ANY PART OF UNDISCLOSED INCOME BELONGS TO THE APPELLANT OR ANY REFERENCE TO ANY MATERIAL THEREIN INDICATING THE SA ME. IN CIRCUMSTANCES, WE HAVE TO HOLD THAT THE SATISFACTION NOTE DT. 19TH DE C., 2002, IS NOT THE ONE CONTEMPLATED IN S. 158BD AND FURTHER THAT EVEN IF I T IS ASSUMED TO BE IN TERMS OF THE SAID SECTION IT DOES NOT EVEN REMOTELY SHOW THAT THERE IS UNDISCLOSED INCOME BELONGING TO THE APPELLANT FIRM CALLING FOR THE ASSUMPTION OF JURISDICTION UNDER S. 158BD. IN THE CIRCUMSTANCE, W E HOLD THAT THE SAID NOTE OF SATISFACTION IS NON-ESTABLISHED IN LAW AND FURTHER THAT THE S. 158BD PROCEEDING PURSUANT THERETO IS INVALID AND VOID AB INITIO ON T HIS GROUND ALSO. 127. WE ARE OF THE FIRM VIEW THAT THE PROCEEDINGS U NDER S. 158BD ARE INVALID FOR THE REASONS ABOVE STATED AND SO THE ASSESSMENT MADE PURSUANT TO THESE PROCEEDINGS IS BAD IN LAW. THE SAME IS ACCORDINGLY LIABLE TO BE CANCELLED. 9 WE FIND THAT IN THE INSTANT CASE NOTICE U/S 158BD WAS ISSUED ON 03-09-2002. NO MATERIAL WAS BROUGHT ON RECORD BY TH E LEARNED DEPARTMENTAL REPRESENTATIVE TO SHOW THAT THE SATISF ACTION NOTE WHICH 11 11 WAS REQUIRED TO BE RECORDED BEFORE COMPLETION OF AS SESSMENT U/S 158BC ON 31-07-2002 WAS SO RECORDED. THE LEARNED DEPARTME NTAL REPRESENTATIVE ALSO NOT ASKED FOR PROVIDING OF TIME TO BRING SUCH A MATERIAL ON RECORD. IN ABSENCE OF ANY SUCH MATERIAL HAVING BEEN BROUGHT ON RECORD TO SHOW THAT SATISFACTION NOTE WAS RECORD ED WITHIN TIME, WE FIND THE NOTICE U/S 158BD ISSUED ON 03-09-2002 WAS BARRED BY LIMITATION IN VIEW OF THE DECISION OF THE HON'BLE D ELHI SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MANOJ AGGRAWAL (SUPRA). THEREFORE THE ORDER PASSED U/S 158BC READ WITH SECTION 158BD WAS WITHOU T JURISDICTION AND HENCE BAD IN LAW AND IS THEREFORE QUASHED. THUS, TH IS GROUND OF CROSS OBJECTION IS ALLOWED. 10 IN VIEW OF OUR ABOVE DECISION, THE GROUNDS OF AP PEAL TAKEN BY THE REVENUE IN ITS APPEAL AND THE OTHER GROUNDS OF CROS S OBJECTION RAISED BY THE ASSESSEE ALL HAVE BECOME INFRUCTUOUS AND ACADEM IC IN NATURE. WE THEREFORE REFRAIN FROM ADJUDICATING THE SAME. 11 IN THE RESULT THE APPEALS OF THE REVENUE ARE DIS MISSED AND THE CROSS OBJECTIONS OF THE ASSESSEE ARE ALLOWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 18-02 -2010 SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (N S SAINI) ACCOUNTANT MEMBER DATE : 18-02-2010 COPY OF THE ORDER FORWARDED TO : 1. SHRI KETAN DHIRAJLAL DESAI (HUF), A-4, VASHISHTH APARTMENT, OPP. POLYTECHNIC, AMBAWADI, AHMEDABAD 2. THE ACIT, CIRCLE-9, AHMEDABAD 12 12 3. CIT CONCERNED 4. CIT(A)-XV, AHMEDABAD 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD