Vijay Amratlal Shethna, Surat V. The Dy.CIT.,Circle-3, Surat

ITSSA 166/AHD/2007

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 9247 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 04-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 24-05-2010
• Assessment Year: misc
• Appeal Filed On: 14-12-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHOK BAL
• Keywords: Search and seizure; Document seized; Block assessment; Documents seized
• Section: 133(6); 32; 147; 132; 15

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AT SURAT CAMP BEFORE S/SHRI T.K. SHARMA, JM AND D.C.AGRAWAL, AM SHRI VIJAY AMRITLAL SHETHNA, A-705, YOGI COMPLEX, NEW RANDER ROAD, SURAT. V/S . DY.CIT, CIRCLE-3(1), SURAT. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI RAJESH UPADHYAY, AR RESPONDENT BY:- SHRI ASHOK BAL, CIT, DR O R D E R PER D. C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FO LLOWING GROUNDS:- 1. LD. DCIT, CIRCLE-3, SURAT HAS ERRED IN LAW AND ON F ACTS TO ISSUE NOTICE U/S 158 BD R.W.S. 158BC OF THE ACT ON THE BA SIS OF STATEMENT OF ONE OF THE PARTNERS OF M/S OHM ORGANIS ERS OF SURAT AND RELYING ON THEIR SEIZED RECORD, IGNORING FACT T HAT ON THE SAME SET OF FACTS, ACTION U/S 147 OF IT ACT, 1961 WAS TA KEN AGAINST THE APPELLANT AND NO ADDITION WAS MADE FOR ALLEGED PAYM ENT OF ON MONEY TO THE SAID ORGANIZER FOR PURCHASING FLAT NO .A_705, YOGI COMPLEX, NEW RANDER ROAD, SURAT OF THE ORGANIZERS F OR RS.3,36,876/-. LD. CIT(A) HAS ALSO ERRED TO CONFIRM DCIT CIRCLE- 3S ACTION. 2. LD. DCIT CIRCLE-3, SURAT HAS ERRED IN LAW AND ON FA CTS TO ADD AN AMOUNT OF RS.2,15,600/- AS ON MONEY TOWARDS PURCH ASE OF FLAT NO.A-705, YOGI COMPLEX,NEW RANDER ROAD, SURAT. IT(SS)A NO.166/AHD/2007 BLOCK PERIOD 1989-90 TO 1999-00 2 2. THE ASSESSEE HAS ALSO RAISED THE FOLLOWING ADDIT IONAL GROUNDS :- (1) ON FACTS AND CIRCUMSTANCES OF THE CASE, THE PROCEED INGS INITIATED U/S 158BD OF THE ACT AGAINST ME IN MUCH A FTER FRAMING OF BLOCK ASSESSMENT OF M/S OHM ORGANIZERS I .E. SEARCHED PERSON IS BAD IN THE EYES OF LAW AND LIABL E TO BE QUASHED. (2) ON FACTS AND CIRCUMSTANCES OF THE CASE, THERE WAS N O JUSTIFICATION FOR INITIATING THE PROCEEDINGS UNDER SECTION 158BD OF THE ACT IN ABSENCE OF SATISFACTION THAT RE QUIRED UNDER THE LAW AND AS SUCH THE ASSESSMENT FRAMED THE REOF IS NULL AND VOID AND LIABLE TO BE DECLARED SO. 3. THE ISSUE INVOLVED IN THIS APPEAL IS THAT SATISF ACTION U/S.158BD HAS NOT BEEN RECORDED BY THE ASSESSING OFFICER OF THE P ERSON SEARCHED AND NOTICES U/S.158BD HAS BEEN ISSUED MUCH AFTER THE CL OSER OF BLOCK ASSESSMENT PROCEEDINGS U/S.158BC OF THE PERSON SEAR CHED. THEREFORE BLOCK ASSESSMENT U/S.158BD MADE IN THIS CASE IS BAD IN LAW AND THEREFORE IS REQUIRED TO BE QUASHED. 4. THE FACTS OF THE CASE ARE THAT ON 29.10.1999 A S EARCH WAS CARRIED OUT U/S 132 OF THE IT ACT AT THE PREMISES OF M/S OH M ORGANISERS AND M/S OHM DEVELOPERS WHO HAD DEVELOPED AND CONSTRUCTED FL ATS AND SHOPS AT YOGI COMPLEX, NEW RANDER ROAD, SURAT. IN COURSE OF THE SEARCH, SEVERAL INCRIMINATING BOOKS OF ACCOUNT AND DOCUMENTS WERE F OUND AND SEIZED. THESE CONTAINED NOTINGS OF PAYMENTS RECEIVED BY M/S OHM ORGANIZERS AND M/S OHM DEVELOPERS FROM BUYERS OF THE FLATS AND SHOPS. SUCH BOOKS AND DOCUMENTS WERE INVENTORISED AS PER ANNEXURE-BS TO THE PANCHNAMA DATED 29.10.1999. PAGES 120 & 121 OF THE KHATAVAHI SEIZED AS PER ANNEXURE BS-4 AND PAGES 68 & 69 OF THE KHATAVAHI SE IZED AS PER ANNEXURE -B-1 COTNAINED NOTINGS OF THE PAYMENTS MAD E BY THE ASSESSEE 3 TOWARDS THE PURCHASE OF FLAT NO.A/705 AT YOGI COMPL EX. THE DCIT,CENTRAL CIRCLE-1, SURAT WHO HELD JURISDICTION OVER THE CASE OF M/S. OHM ORGANISERS AND M/S. OHM DEVELOPERS ISSUED A LET TER TO THE ASSESSEE U/S. 133(6) OF THE I.T. ACT, REQUESTING HIM TO FURN ISH CERTAIN INFORMATION AND DOCUMENTS. IN REPLY (PARA-3), THE ASSESSEE SUBM ITTED THAT THE SAID FLAT HAD BEEN PURCHASED FOR A SUM OF RS.3,36,875.THIS IN CLUDED A SUM OF RS.2.5 LACS TAKEN AS LOAN FROM LIC AND PAID BY CHEQ UES NO.172615 AND 177114 DRAWN ON CENTRAL BANK OF INDIA. NO PAYMENT W AS MADE IN CASH. THE DOCUMENT WAS REGISTERED FOR THE SAID SUM AND NO FURTHER AMOUNT WAS PAYABLE. THE ASSESSEE FURNISHED A COPY OF THE SALE DEED AS ALSO A COPY OF THE ACKNOWLEDGEMENT OF THE RETURN OF INCOME FILED B Y HIM. IT WAS HOWEVER SEEN FROM THE SEIZED DOCUMENTS THAT THE ASS ESSEE HAS PAID ON MONEY OF RS.2,15,000 AND THAT THE TOTAL CONSIDERATI ON PAID WAS RS. 5,50,000.THE DCIT CENTRAL CIRCLE-1, THEREFORE PASSE D ON THE REQUISITE INFORMATION ALONG WITH THE SEIZED DOCUMENTS TO THE ACIT CCIR.3,SURAT WHO HELD JURISDICTION OVER THE ASSESSEE.AFTER SCRUT INIZING THE SEIZED DOCUMENTS AND SATISFYING HIMSELF THAT THE ASSESSEE HAD INDEED PAID ON MONEY TOWARDS PURCHASE OF THE SAID FLAT, THE ACIT C CIR.3, (AO) ISSUED A NOTICE U/S. 158 BD R.W.S. 158 BC OF THE ACT ON 24.0 1.2005. IN RESPONSE, THE ASSESSEE FILED THE REQUISITE RETURN OF INCOME D ECLARING THE UNDISCLOSED INCOME AT NIL. THE ASSESSMENT WAS COMPLETED ON 29.0 1.2007. THE ISSUE WAS CHALLENGED BEFORE LD. CIT(APPEALS) ABOUT THE LE GALITY OF ACTION U/S.158BD OF THE ACT, LD. CIT(APPEALS) REJECTED THI S ISSUE. 5. AFTER DISCUSSING THE ISSUE WITH AR AND LD. SR. D R WE ADMIT ADDITIONAL GROUNDS FOR ADJUDICATION, IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CORPORATION LTD. V. CIT (1998) 229 ITR 383 (SC). 4 6. THE LD. AR SUBMITTED THAT ASSESSMENT IS BAD IN L AW BECAUSE NOTICE U/S 158 BD WAS ISSUED AFTER COMPLETION OF ASSESSMEN T UNDER SECTION 158BC IN THE CASE OF M/S OHM DEVELOPERS AND M/S OHM ORGANISERS. DURING THE COURSE OF SEARCH AT THEIR PREMISES ALLEG ED EVIDENCES WERE FOUND THAT THIS ASSESSEE HAS PAID ON MONEY ON PUR CHASE OF SHOPS. 7. THE LD. DR RELIED ON THE ORDERS OF AUTHORITIES B ELOW. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. A SEARCH AND SEIZURE ACTION AGAINST M/S. OHM ORGANIZERS AND OHM DEVELOPERS WAS CARRIED OUT ON 29-10-1999 WHEREA S NOTICES U/S.158BD OF THE ACT WAS ISSUED AGAINST THE ASSESSE E ON 04-02-2005. THE ASSESSEE CHALLENGED THE ACTION U/S.158BD OF THE ACT . BUT LD. CIT(APPEALS) REJECTED THE GROUNDS OF APPEAL. THE LD . AR TOOK THE COMMON ARGUMENTS THAT NOTICE U/S.158BD OF THE ACT C ANNOT BE ISSUED AFTER CLOSER OF THE BLOCK ASSESSMENT PROCEEDINGS U/ S.158BC OF THE ACT IN THE CASE OF PERSON SEARCHED FROM WHICH CASE THE PRO CEEDINGS U/S.158BD OF THE ACT AGAINST THIS ASSESSEE ARE INITIATED. THE LD. AR RELIED ON SEVERAL JUDGMENTS WHICH ARE DISCUSSED HEREINBELOW:- (I) ITAT CHANDIGARH BENCH IN THE CASE OF ACIT V. K ISORILAL BALBANT RAI (2007) 17 SOT 380 (CHANDIGARH) HELD AS UNDER:- THE NATURE OF THE PROVISIONS OF SECTION 158BD HAS B EEN CONSIDERED BY THE APEX COURT IN THE CASE OF MANISH MAHESHWARI V. ASSTT. CIT [2007] 289 ITR 341/159 TAXMAN 258 (SC). THE APEX COURT HELD THAT BEFORE CHAPTER XIV-B COULD BE INVOKED AGAINST A PERSON OTHER THAN A PERSON WHO IS PUT TO SEARCH UNDER SECTION 13 2 OR A REQUISITION UNDER SECTION 132A, THE CONDITIONS PRES CRIBED UNDER SECTION 158BD ARE REQUIRED TO BE STRICTLY COMPLIED WITH. THE SUPREME COURT HAS HELD THAT CONDITIONS PRECEDENT IN SUCH CASES, FOR TAKING RECOURSE OF BLOCK ASSESSMENT IN TERMS OF SECTION 158BD, REQUIRE THE ASSESSING OFFICER TO RECORD A SATISFACT ION THAT ANY 5 UNDISCLOSED INCOME BELONGS TO ANY PERSON OTHER THAN THE PERSON WITH RESPECT TO WHOM SEARCH IS MADE UNDER SECTION 1 32 OR A REQUISITION IS PUT UNDER SECTION 132A. SECONDLY, TH E BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR ASSETS SEIZED OR REQU ISITIONED ARE REQUIRED TO BE HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON. THE SUPREME COURT HAS FURTHER HELD THAT ONLY UPON THE HAPPENING OF THE AF ORESAID THAT THE ASSESSING OFFICER HAVING JURISDICTION OF THE OTHER PERSON SHALL PROCEED UNDER SECTION 158BC AGAINST SUCH OTHER PERS ON. WITH THE ABOVE DISCUSSION, A PREMISE, WHICH CAN BE SAFELY DE DUCED, IS THAT THE SATISFACTION AS CONTEMPLATED UNDER SECTION 158B D IS TO BE OF THE ASSESSING OFFICER OF THE PERSON WHO HAS BEEN PU T TO SEARCH OR REQUISITION UNDER SECTION 132 OR 132A RESPECTIVELY. ANOTHER PREMISE WHICH CAN BE SAFELY DEDUCED FROM THE DECISI ON OF THE SUPREME COURT IS THAT THE REQUIREMENT OF RECORDING OF SUCH SATISFACTION IS A MANDATORY CONDITION. THEREFORE, T HE PLEA ADVANCED ON BEHALF OF THE REVENUE THAT THE SATISFAC TION IN SUCH CASES COULD ONLY BE DISCERNIBLE ON THE BASIS OF MAT ERIAL AVAILABLE ON RECORD AND SUCH SATISFACTION NEED NOT BE SPECIFI CALLY RECORDED, COULD NOT BE ACCEPTED. IN THIS VIEW OF THE MATTER, IT COULD BE SAID THAT THE SATISFACTION CONTEMPLATED UNDER SECTION 15 8BD TO THE EFFECT THAT ANY UNDISCLOSED INCOME BELONGS TO ANY PERSON OTHER THAN THE PERSON WITH RESPECT TO WHOM SEARCH WAS MA DE UNDER SECTION 132 OR REQUISITION MADE UNDER SECTION 132A, IS TO BE RECORDED IN WRITING BY THE ASSESSING OFFICER OF THE PERSON WITH RESPECT TO WHOM SEARCH UNDER SECTION 132 OR A REQUI SITION UNDER SECTION 132A IS MADE. [PARA 23] FURTHER, THE SATISFACTION CONTEMPLATED UNDER SECTIO N 158BD, IS REQUIRED TO BE RECORDED BY THE ASSESSING OFFICER OF THE PERSON SEARCHED AT ANY TIME BUT NOT LATER THAN THE FINALIZ ATION OF ASSESSMENT OF UNDISCLOSED INCOME FOR THE BLOCK PERI OD UNDER CHAPTER XIV-B IN THE CASE OF THE PERSON PUT TO SEAR CH OR REQUISITION, AS THE CASE MAY BE. SECONDLY, INSOFAR AS THE ISSUANCE OF NOTICE UNDER SECTION 158BD IS CONCERNED, THE SAM E IS TO BE ISSUED BY THE ASSESSING OFFICER OF THE PERSON OTHER THAN THE PERSON PUT TO SEARCH UNDER SECTION 132 OR REQUISITION UNDE R SECTION 132A. THAT TOO, AFTER TRANSMISSION OF THE RELEVANT MATERI AL FROM THE FIRST MENTIONED ASSESSING OFFICER, I.E., THE ASSESSING OFFICER OF THE PERSON PUT TO SEARCH UNDER SECTION 132 OR REQUISITI ON UNDER SECTION 132A. THEREFORE, A REASONABLE TIME LAG BETWEEN THE DATE OF 6 RECORDING OF SATISFACTION AND ISSUANCE OF NOTICE UN DER SECTION 158BD IS ENVISAGED IN THE ACT ITSELF. [PARA 27] SIMILAR VIEW WAS TAKEN BY ITAT DELHI BENCH IN THE C ASE OF MANOJ AGARWAL V. DCIT (2008) 113 ITD 377 (DEL) (SB), IT WAS HELD AS UNDE R:- SECTION 158BD, READ WITH SECTIONS 158BC AND 147, OF THE INCOME- TAX ACT, 1961 - BLOCK ASSESSMENT IN SEARCH CASES - UNDISCLOSED INCOME OF ANY OTHER PERSON - BLOCK PERIOD 1-4-1990 TO 20-8-2000 - WHETHER FOR INITIATING ACTION UNDER SECTION 158BD, FIRST AND FOREMOST REQUIREMENT IS THAT ASSESSING OFFICER MAKI NG BLOCK ASSESSMENT IN CASE OF PERSON SEARCHED, HAS TO BE SA TISFIED THAT UNDISCLOSED INCOME DETECTED BELONGS TO SOME PERSON OTHER THAN PERSON SEARCHED AND, THUS, SECTION ITSELF CONTEMPLA TES SATISFACTION ON PART OF ASSESSING OFFICER MAKING ASSESSMENT IN C ASE OF PERSON SEARCHED; RECORDING OF SATISFACTION IS MANDATORY AN D IMPERATIVE BEFORE ASSUMPTION OF JURISDICTION UNDER SECTION 158 BD - HELD, YES WHETHER NOTE OF SATISFACTION MUST CONTAIN A POSIT IVE FINDING BY ASSESSING OFFICER MAKING ASSESSMENT UNDER SECTION 1 58BC INDICATING THEREIN UNDISCLOSED INCOME FOUND AS A R ESULT OF HIS EXAMINATION OF SEIZED MATERIAL AND PERSON TO WHOM S UCH INCOME BELONGS - HELD, YES IN THE CASE OF BHARAT BHUSHAN JAINS V. ACIT (2009) 17 DTR 498 (DEL) TRIBUNAL HELD THAT PROCEEDINGS U/S.158BD INITIATED AFTER 19 MONTHS OF COMPLETION OF PROCEEDINGS U/S.158BC CANNOT BE SUSTA INED. IT WAS HELD IN THE CASE OF SAROJ NURSING HOME V. ACIT (2009) 116 ITD 311 (LUCKNOW) THAT PROCEEDINGS U/S.158BD CAN BE INITIATED ON THE SATISFACTION OF THE ASSESSING OFFICER HAVING JURISDICTION OVER PERSON S EARCHED TO TAX UNDISCLOSED INCOME-TAX PERTAINING TO THIRD PERSON W HO IS NOT SUBJECTED TO SEARCH AND BOOKS OF ACCOUNTS AND IN OTHER DOCUMENTS WERE HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDICTION OVER S UCH THIRD PERSON BUT PROCEEDINGS INITIATED U/S.158BD OF THE ACT AFTER A PERIOD OF SIX YEARS CANNOT BE REGARDED AS VALID. 7 9. IN E.J. ULAHANNA V. ACIT IN ITA NO.19/AHD/2007 PRONOUNCED ON 18-03-2009, FOLLOWING THE DECISION OF SPECIAL BENCH IN THE CASE OF MANOJ AGARWAL (SUPRA) HELD THAT WITHOUT THERE BEING SATISFACTION RECORDED PRIOR TO COMPLETION OF ASSESSMENT OF THE P ERSON SEARCHED PROCEEDINGS SO INITIATED U/S.158BD OF THE ACT WILL NOT BE VALID. IN THAT CASE NOTICE U/S.158BD OF THE ACT WAS ISSUED ON 10-0 6-2004. BUT SEARCHED AGAINST OHM DEVELOPERS WAS CARRIED OUT ON 29-10-199 9, THEREFORE ASSESSMENT U/S. 158BD THEREOF COMPLETED AFTER 31-10 -2001 COULD NOT BE HELD VALID. IN THE CASE OF SHRI VISHNUBHAI R BAROT V. ACIT IN IT(SS)A NO.104/AHD/2009 ITAT AHMEDABAD D BENCH PRONOUNCED ON 18-12- 2009, IT WAS HELD, FOLLOWING THE DECISION OF HONBL E SUPREME COURT IN THE CASE OF MANISH MAHESHWARI V. ACIT (2007) 289 ITR 341 (SC) AND MANOJ AGARWAL (SUPRA) THAT IF THE ASSESSMENT U/S.158BC OF THE AC T IN THE CASE OF PERSON SEARCHED (OHM DEVELOPERS) WAS COMPLE TED ON 30-11-2001 THEN ISSUING NOTICE U/S.158BD OF THE ACT ON 29-03-2 006 AGAINST ASSESSEE IS BARRED BY LIMITATION. SIMILAR VIEW WAS TAKEN BY THE ITAT AHMEDABAD BENCH IN IT(SS)A NO.25/AHD/2007 IN THE CASE OF ADIL PARVEZ RANDERIA V. ACIT, CC-3(1) SURAT PRONOUNCED ON 01-09-2008. FOLLOWING THESE DECISIONS WE HOLD THAT THE BLOCK ASSESSMENT FAMED I N CASE OF ALL THE ABOVE ASSESSEE ARE NOT LEGALLY VALID AND THEREFORE ARE QUASHED FOR THE REASON THAT NOTICES U/S.158BD OF THE ACT WERE ISSUE D IN THESE CASES LONG AFTER COMPLETION OF ASSESSMENT IN THE CASE OF PERSO N SEARCHED I.E. OHM DEVELOPERS . 8 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER WAS PRONOUNCED IN OPEN COURT ON 04/06/2010 SD/- SD/- (T. K. SHARMA) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED : 04/06/2010 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD