Sharda Dwelling P Ltd, Bhopal V. ACIT 2(1) , Bhopal

ITSSA 17/Ind/2002

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3414 (ITAT-INDORE)
• Duration Of Justice: 20 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 25-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-07-2022
• Assessment Year: misc
• Appeal Filed On: 21-04-2002
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Question of law; Block assessment
• Section: 132; 143(3); 158BC; 113; 13; 158BD; 153C

Judgement Text

आयकर अपील य अ धकरण, ,, , इंदौर यायपीठ, ,, , इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER (Conducted through Virtual Court) IT(SS)A No.17/Ind/2002 Assessment Year: Block-Period 21/05/1991 to 25/09/1995 Sharda Dwellings Pvt. Ltd. E-5/7, Arera Colony, Opp. Habibganj Thana, Bhopal बनाम/ Vs. ACIT,2(1) Bhopal (Appellant / Assessee) (Respondent/ Revenue) Assessee by Shri P.K. Jain, AR Revenue by Shri P.K. Mitra, CIT-DR Date of Hearing 05.07.2022 Date of Pronouncement 26.07.2022 आदेश / / / / O R D E R O R D E RO R D E R O R D E R Per B.M. Biyani, A.M.: 1. This appeal, which arose out of the order of block-assessment dated 26.03.2002 passed by Ld. ACIT-2(1), Bhopal [“Ld. AO”] u/s 143(3) read with section 158BC/158BD of the Income-tax Act, 1961 [“the Act”] for the block- period 21.05.1991 to 25.09.1995, was originally decided by Indore Bench of Tribunal vide order dated 08.04.2003, against which the assessee filed an appeal to the Hon'ble Jurisdictional High Court of Madhya Pradesh. The Hon'ble High Court registered assessee’s appeal as No. ITA-82-2003 and decided the same on 01.08.2019 by observing as under: Sharda Dwelling P. Ltd. IT(SS)A No.17/Ind/2002 Page 2 of 9 “At the outset, learned counsel for the appellant has stated before this court that before the Tribunal, three grounds were not adjudicated i.e. ground no. 2, 9 and 13 and the question of law framed by this Court is also to the same effect and the same reads as under: “1. Having specially formulated the questions No. 2, 9 and 13 for examining whether block assessment made in the case of assessee for the year in question is sustainable or not? Whether tribunal was justified in not giving finding on Ground No. 2, 9 and 13 as mentioned in the impugned order? 2. In the absence of any finding on the aforementioned 3 grounds – Whether the impugned order is liable to be sustained or whether it needs to be remanded?” Ld. counsel for the Income Tax Department has fairly stated before this Court that the matter be remanded back to the Tribunal for deciding ground No. 2, 9 and 13 of the appeal which was filed before the Tribunal. Therefore, the question of law is answered in favour of the assessee. The matter is remanded back to the Tribunal to decide the ground No. 2, 9 and 13 after hearing both the parties.” 2. Thus, the Hon’ble High Court had remanded the case back to Tribunal to decide Ground No. 2, 9 and 13. In pursuance of this direction of Hon'ble High Court, the appeal was restored and fixed for hearing on 26.08.2019. Thereafter during the course of hearing on 25.11.2019, it was observed that the assessment-record of revenue was required for disposal of Grounds. Therefore, the revenue was directed to submit assessment-record and hearing was adjourned. Thereafter, hearings had to be adjourned on multiple occasions since the revenue needed more time for production of assessment- record. Since the matter was old and it was in pursuance of remand made by Hon’ble Jurisdictional High Court, the Bench expressed displeasure on the attitude of revenue-authorities in not producing records as directed despite several opportunities. But, however, in the interest of justice and for proper disposal of the appeal, one more opportunity marked as “last and final opportunity” was given to the revenue for production of records and accordingly hearing was adjourned to 18.04.2022. We appreciate that lastly the revenue could trace the records and produce alongwith a covering-letter Sharda Dwelling P. Ltd. IT(SS)A No.17/Ind/2002 Page 3 of 9 bearing No. CIT(DR)/ITAT/Ind/2021-22 dated 18.04.2022 signed by Ld. DR. This way, the matter could be finally heard on 05.07.2022. 3. Ld. AR appearing on behalf of the assessee submitted that the impugned Ground No. 2, 9 and 13 to be decided by this bench in pursuance of the direction of Hon’ble High Court, are as under: “2. That on the facts and in the circumstances of the case, the provisions of chapter XIV-B were not applicable in the appellant company’s case and therefore, notice dated 25.4.1997 under section 158BC read with section 158BD of the Income Tax Act, 1961, was unlawful and could not form the basis of assessment in the appellant’s case. 9. That on the facts and in the circumstances of the case, Ld. AO is not justified in levying surcharge @15% on Income-Tax determined to be payable by the appellant contrary to the provision of section 113 of the Income Tax Act, 1961. 13. That on the facts and in the circumstance of the case, entire assessment proceedings are beyond the time limit prescribed by law and therefore the same kindly be quashed.” 4. Ld. AR further submitted that vide letter dated 25.02.2022 (received by the office of Tribunal through Inward Entry No. 462 dated 28.02.2022), the assessee has intimated about non-pressing of Ground No. 13 and therefore the Ground No. 13 may be treated as withdrawn. Ld. DR did not have any objection. Hence Ground No. 13 is treated as withdrawn and we proceed to decide other grounds i.e. Ground No. 2 and 9 only. 5. We first take up Ground No. 2, in which the assessee has claimed that the provisions of Chapter XIV-B of the act were not applicable to it and therefore, notice dated 25.04.1997 u/s 158BC read with section 158BD of the Income Tax Act, 1961 was unlawful and cannot be the basis of assessment. 6. Ld. AR submitted that a search u/s 132 of the act was conducted on 25.09.1995 on Mr. J.S. Kukreja wherein certain incriminating documents pertaining to the assessee were seized. Thereafter, action was initiated against the assessee u/s 158BC read with section 158BD of the act through Sharda Dwelling P. Ltd. IT(SS)A No.17/Ind/2002 Page 4 of 9 notice dated 25.04.1997 and in the sequel of this notice, the assessment was completed. Ld. AR submitted that Mr. J.S. Kukreja is a “searched person” and the assessee is “other person”, hence the assessment was made under the authority of section 158BD forming part of Chapter XIV-B of the act. 7. Ld. AR instantly carried us to section 158BD which reads as under: “Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or any assets were requisitioned under section 132A, then, the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against such other person and the provisions of this Chapter shall apply accordingly.” Thereafter, Ld. AR referred to the following Circular No. 24/2015 dated 31.12.2015 issued by the CBDT in the light of judgement of Hon’ble Supreme Court in M/s Calcutta Knitwears in Civil Appeal No. 3958 of 2014 dated 12.03.2014, on the interpretation of section 153BD: “Circular No. 24 / 2015 Subject: Recording of satisfaction note under section 115BD/153C of the Act – reg. The issue of recording of satisfaction for the purposes of section 158BD/153BC has been subject matter of litigation. 2. The Hon'ble Supreme Court in the case of M/s Calcutta Knitwears in its detailed judgment in Civil Appeal No.3958 of 2014 dated 12.3.20 14 (available in NJRS at 2014-LL-0312-51) has laid down that for the purpose of Section 158BD of the Act, recording of a satisfaction note is a prerequisite and the satisfaction note must be prepared by the AO before he transmits the record to the other AO who has jurisdiction over such other person u/s 158BD. The Hon'ble Court held that “the satisfaction note could be prepared at any of the following stages: (a) at the time of or along with the initiation of proceedings against the searched person under section 158BC of the Act; or (b) in the course of the assessment proceedings under section 158BC of the Act; or (c) immediately after the assessment proceedings are completed under section 158BC of the Act of the searched person." Sharda Dwelling P. Ltd. IT(SS)A No.17/Ind/2002 Page 5 of 9 3. Several High Courts have held that the provisions of section 153C of the Act are substantially similar/pari-materia to the provisions of section 158BD of the Act and therefore, the above guidelines of the Hon'ble SC, apply to proceedings u/s 153C of the IT Act, for the purposes of assessment of income of other than the searched person. This view has been accepted by CBDT. 4. The guidelines of the Hon'ble Supreme Court as referred to in para 2 above, with regard to recording of satisfaction note, may be brought to the notice of all for strict compliance. It is further clarified that even if the AO of the searched person and the "other person" is one and the same, then also he is required to record his satisfaction as has been held by the Courts. 5. In view of the above, filing of appeals on the issue of recording of satisfaction note should also be decided in the light of the above judgement. Accordingly, the Board hereby directs that pending litigation with regard to recording of satisfaction note under section 158BD /153C should be withdrawn/not pressed if it does not meet the guidelines laid down by the Apex Court." Analyzing the provision of section 153BD and the above-cited Circular No. 24/2015, Ld. AR argued that the position of law is crystal clear that if an action is to be taken against any person, other than the searched person, the the Assessing Officer shall recording his satisfaction. Ld. AR submitted that the Para No. 4 of the Circular further clarifies that even if the AO of the “searched person” and “other person” is one and same, then also the recording of satisfaction-note is compulsory. Referring to para No. 5 of the Circular, the Ld. AR also argued that the CBDT has even clarified that filing of appeal on the issue of recording of satisfaction note should also be decided in the light of the decision of Hon’ble Supreme Court and the pending litigation with regard to recording of satisfaction note u/s 153BD should also be withdrawn / not pressed if it does not meet the guidelines of the Apex Court. Ld. AR submitted that the decision of Hon’ble Supreme Court as well as the CBDT Circular are clear points to hold that recording of satisfaction note is not a mere formality; it is a mandate of law and has to be followed strictly. Therefore, according to Ld. AR, if the satisfaction note is not prepared, the whole proceeding u/s 153BD becomes invalid and unauthoritative. Sharda Dwelling P. Ltd. IT(SS)A No.17/Ind/2002 Page 6 of 9 8. Ld. AR submitted that despite such a legal requirement, the Ld. AO has not recorded any kind of satisfaction note in the present case. To demonstrate this, the Ld. AR initially referred to a copy of the letter dated 07.10.2019, placed at Page No. 86 of the Paper-Book No.-I, filed by the assessee to Income-tax Officer-5(1), Bhopal (stated to be the present AO), duly acknowledged, wherein the assessee had requested the AO to provide a copy of satisfaction note. Ld. AR submitted that despite this letter and subsequent oral reminders to the office of AO, the satisfaction note has not been provided till date which clearly shows that there exists no such satisfaction note. Ld. AR further requested that since the assessment-record is now available, the revenue should trace and show the satisfaction-note prepared by them, if any, to the Bench. Ld. AR submitted that if the satisfaction note is present, he would lose this Ground but if the satisfaction note is absent, the entire assessment made by revenue shall be invalid and liable to be quashed. 9. Ld. DR submitted that the matter is very old. However, he has furnished his submission in Para No. 9A to 9C of the aforesaid covering-letter dated 18.04.2022 already submitted in the file of assessment-record. These Paras are reproduced below: “9A. It is most politely submitted before your Honors, a perusal of above referred case records shows, that in the very beginning of the related assessment proceedings, a notice dated 25.04.1997 was issued by the office of the then ACIT, Circle - where the case was to be assessed for the A.Y. (Block period) 21.5.1991 to 25.09.1995. Thereafter Ld. counsel of the appellant viz. M/s. Sharda Dwellings Pvt. Ltd. Bhopal submitted vide his letter dated 07.05.1997 that no search u/s 132 of IT Act 1961 took place in the premises of the said appellant and therefore, before filing the required return of income in Form No. 2B for the required block period i.e. 21.05.1991 to 25.09.1995, the Ld. counsel also requested to provide an opportunity to inspect those information/documents on basis of which, the notice dated 25.04.1997 was issued by the ld. AO. 9B. In answer to that letter, the Ld. AO vide his office letter F.No. ACIT/Cir.1/S & S/97-98 dated 09.05.1997 replied that there was a search and seizure action in premises of Shri Jhamat Singh Sharda Dwelling P. Ltd. IT(SS)A No.17/Ind/2002 Page 7 of 9 Kukreja and documents found and seized from the premises of that assessee revealed that the appellant i.e. M/s. Sharda Dwelling Pvt. Ltd. Bhopal was a partner with the searched person viz. Shri Jhamat Singh Kukreja in different projects viz. Seeta Geeta Apartment and other similar projects and also the fact that the appellant had paid interest to the said searched person. Therefore, to bring undisclosed income to tax in the hands of the appellant i.e. M/s Sharda Dwelling Pvt. Ltd. Bhopal, the notice was issued. 9C. Lastly, it is submitted that from the side of the appellant, in pursuance of the above letter dated 09.05.1997 issued by Ld. AO without any protest the Return in Form No. 2B was filed.” 10. We have considered submission of both sides and also perused the records. On a careful consideration of section 158BD, the decision of Hon’ble Supreme Court and the CBDT Circular No. 24/2015 dated 31.12.2015, we agree with the submission of Ld. AR that the recording of satisfaction note was a necessary requirement of law before taking action against assessee u/s 158BD vide notice dated 25.04.1997. Thereafter, we observe that neither in Para No. 9A to 9C of the covering-letter dated 18.04.2022 reproduced above nor during the course of hearing, the revenue / Ld. DR has been able to produce the satisfaction note before us. Therefore, it is clear that there is no satisfaction note. Being so, we are of the considered view that action taken by the revenue against the assessee u/s 158BD read with section 158BC does not meet the mandatory requirement of law. Being so, we do not hesitate in concluding that the entire assessment-proceeding done by Ld. AO is illegal and liable to be quashed. Accordingly, we quash the assessment-order made by the Ld. AO. In this way Ground No. 2 is allowed. 11. Now we take up Ground No. 9 in which the assessee has challenged the levy of surcharge. Ld. AR submitted that the levy of surcharge in case of assessment u/s 158BD read with section 158BC, was introduced in the relevant section 113 by the Finance Act, 2002 w.e.f. 1 st June 2002 and therefore, surcharge was not applicable to the present case because the search was conducted on 25.09.1995 and the block-period is 21.05.1991 to 25.09.1995 which is very much prior to 01.06.2002. Ld. AR also relied upon the decision of jurisdictional High Court of Madhya Pradesh in the case of Sharda Dwelling P. Ltd. IT(SS)A No.17/Ind/2002 Page 8 of 9 Narmada Ginning and Pressing Factory (2007) 213 CTR 500 (MP). However, since we have already quashed the assessment-order itself, this issue would not survive and therefore does not require adjudication. Accordingly, we do not adjudicate Ground No. 9. 12. In the result, this appeal of assessee is allowed. Order pronounced as per Rule 34 of I.T.A.T. Rules 1963 on 26.07.2022. Sd/- Sd/- (SUCHITRA KAMBLE) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore Dated : 26.07..2022 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore 1. Date of taking dictation 11.7.22 2. Date of typing & draft order placed before the Dictating Member 3. Date on which the approved draft comes to the Sr. P.S./P.S. 4. Date on which the fair order is placed before the Sharda Dwelling P. Ltd. IT(SS)A No.17/Ind/2002 Page 9 of 9 Dictating Member for pronouncement 5. Date on which the file goes to the Bench Clerk 6. Date on which the file goes to the Head Clerk 7. Date on which the file goes to the Assistant Registrar for signature on the order 8. Date of dispatch of the Order