ACIT Circle 18(2), MUMBAI V. M/s. Gyan Construction Co., MUMBAI

ITSSA 174/MUM/2004

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 2051 (ITAT-MUMBAI)
• Duration Of Justice: 12 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 27-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 29-03-2016
• Assessment Year: misc
• Appeal Filed On: 26-03-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HEMANT J LAL
• Assessee Lawyers: DR K SHIVARAM; NEELAM C JADHAV
• Keywords: Search and seizure
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE S/SHRI B.R. BASKARAN (AM) & AMARJIT SINGH (JM) I.T. (SS) NO. 174 /MUM/ 2004 (BLOCK PERIOD 1.4.1998 TO 17.12.1998 ) I.T.(SS) NO. 19/MUM/2007 (BLOCK PERIOD 1.4.1988 TO 17.12.1998) ACIT, CIRCLE 18(2) 1 ST FLOOR, PIRAMAL CHAMBERS, PAREL MUMBAI - 400 012. VS. M/S. GYAN CONSTRUCTION CO. 136, MADHANI ESTATE 542, SENAPATI BAPAT MARG, DADAR (WEST) MUMBAI - 40 028. ( APPELLANT ) ( RESPONDENT ) PAN NO . AAAFG0650E ASSESSEE BY DR. K. SHIVARAM & MS. NEE LAM C. JADHAV DEPARTMENT BY SHRI HEMANT J. LAL DATE OF HEARING 30.3 . 201 6 DATE OF PRONOUNCEMENT 27 . 5 . 201 6 O R D E R PER B.R. BASKARAN, A M : - THE APPEALS FILED BY THE REVENUE ON THE QUANTUM PROCEEDINGS AS WELL AS PENALTY PROCEEDINGS ARE DIRECT ED AGAINST THE ORDER DATED 28 - 01 - 2004 PASSED BY LD CIT(A) - XVIII, MUMBAI AND THEY RELATE TO THE BLOCK PERIOD FROM 1.4.1988 TO 17.12.1998. 2. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN CIVIL CONSTRUCTION BUSINESS. THE REVENUE CARRIED OUT SEARCH AND SEIZURE OPERATIONS ON M/S R.K. MADHANI & CO. U/S 132 OF THE ACT O 17.12.1998. CONSEQUENT THERETO A NOTICE U/S 158BC WAS ISSUED TO THE ASSESSEE AND THE ASSESSMENT WAS FRAMED. THE CIT(A) ANNULLED THE ASSESSMENT, VIDE HIS ORDER DATED 31.5.2001, SINCE THE RE VENUE HAS NOT CARRIED OUT ANY SEARCH IN THE HANDS OF THE ASSESSEE. THE ORDER PASSED BY LD M/S. GYAN CONSTRUCTION CO. 2 CIT(A) WAS CONFIRMED BY THE TRIBUNAL. SUBSEQUENTLY, THE REVENUE ISSUED NOTICE U/S 158BD OF THE ACT AND THE ASSESSMENT UNDER THAT SECTION WAS PASSED ON 28 - 07 - 2003. THE LD CIT(A) GRANTED PARTIAL RELIEF AND THE REVENUE FILED APPEAL BEFORE THE TRIBUNAL. 3. THE ASSESSEE MOVED A PETITION UNDER RULE 27 OF THE APPELLATE TRIBUNAL RULES PLEADING THAT THE ASSESSING OFFICER OF THE SEARCHED PERSON DID NOT RECORD SATISFACTI ON AS MANDATED U/S 158BD OF THE ACT. THE TRIBUNAL, VIDE ITS ORDER DATED 29 - 12 - 2010, QUASHED THE ASSESSMENT ORDER HOLDING THAT THE NOTICE ISSUED U/S 158BD IS BAD IN LAW. IN THE PROCEEDINGS BEFORE THE TRIBUNAL, THE REVENUE HAD FILED A LETTER 21.08.2000 ISS UED BY THE ASSESSING OFFICER OF THE SEARCHED PERSON TO THE AO OF THE ASSESSEE. THE TRIBUNAL PASSED THE ORDER ON THE PRESUMPTION THAT THE PARTIES HAD AGREED THAT THERE WAS NO SATISFACTION RECORDED AND THE SAID FACT WAS AN ADMITTED POSITION. 4. THE R EVENUE FILED A MISCELLANEOUS PETITION SEEKING RECALL OF THE ORDER DATED 29.12.2010 PASSED BY THE TRIBUNAL ON THE PLEA THAT THE REVENUE HAS ALWAYS STATED THAT THE SATISFACTION U/S 158BD WAS RECORDED. IT WAS SUBMITTED THAT THE LETTER DATED 21.8.2000 WRITTEN BY THE AO OF THE SEARCHED PERSON TO THE AO OF THE ASSESSEE WAS CONTENDED AS THE SATISFACTION CONTEMPLATED U/S 158BD OF THE ACT. ACCORDINGLY THE TRIBUNAL, VIDE ITS ORDER DATED 17.10.2014, RECALLED THE ORDER PASSED BY IT ON 29.12.2010. WHILE PASSING THE O RDER ON THE MISCELLANEOUS PETITION, THE TRIBUNAL EXPRESSED ITS VIEW ON THE LETTER DATED 21.8.2000 CLAIMED BY THE REVENUE AS SATISFACTION NOTE. 5. THE ASSESSEE CHALLENGED THE ORDER PASSED BY THE TRIBUNAL ON THE MISCELLANEOUS PETITION FILED BY THE REVEN UE BEFORE HONBLE HIGH COURT OF BOMBAY. THE HONBLE HIGH COURT, VIDE ITS ORDER DATED 23 - 01 - 2015 PASSED IN W.P. NO.162 OF 2015 AND W.P. NO.150 OF 2015, UPHELD THE RECALL OF THE ORDER, M/S. GYAN CONSTRUCTION CO. 3 BUT SET ASIDE THE OBSERVATIONS MADE THEREIN WITH REGARD TO THE SATISFAC TION NOTE. FOLLOWING OBSERVATIONS MADE BY HONBLE HIGH COURT OF BOMBAY ARE RELEVANT HERE: - 13. IN VIEW OF THE ABOVE, WHILE WE UPHOLD THE IMPUGNED ORDER TO THE EXTENT IT HOLDS THAT THERE IS AN ERROR APPARENT ON THE RECORD IN THE ORDER DATED 29 TH DECEMB ER, 2010 IN NOT HAVING CONSIDERED THE LETTER DATED 21 ST AUGUST, 2000, WE DO NOT UPHOLD THE OTHER OBSERVATIONS MADE BY THE TRIBUNAL IN THE IMPUGNED ORDER WITH REGARD TO THE EXACT NATURE, SCOPE, EFFECT AND CONSEQUENCES OF THE COMMUNICATION DATED 21 ST AUGUST, 2000. THE REGULAR BENCH OF THE TRIBUNAL TO WHOM THE REVENUES APPEALS BOTH ON QUANTUM AND PENALTY ARE RESTORED FOR HEARING WOULD NOT BE INFLUENCED IN ANY MANNER BY THE OBSERVATIONS MADE IN THE IMPUGNED ORDER ON THE MERITS OF THE CONTROVERSY. 6. ACCOR DINGLY THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF THE ASSESSEE CAME TO BE HEARD BY THIS BENCH OF TRIBUNAL. THE HONBLE BOMBAY HIGH COURT, IN ITS ORDER DATED23.01.2015 REFERRED ABOVE, HELD THAT THE ASSESSEE SHOULD BE ALLOWED TO CONTEST THE PETITIO N FILED UNDER RULE 27 OF THE APPELLATE TRIBUNAL RULES, WHEREIN THE ASSESSEE HAS CONTENDED THAT THERE WAS NO SATISFACTION AS MANDATED U/S 158BD OF THE ACT. 7. THE CONTENTION OF THE ASSESSEE IS THAT THE LETTER DATED 21.08.2000 ISSUED BY THE ASSESSING O FFICER OF THE SEARCHED PERSON TO THE AO OF THE ASSESSEE WAS A MERE INTIMATION ABOUT A PART OF SEARCH PROCEEDINGS CONDUC TED IN THE CASE OF M/S R.K. MADH ANI & CO AND THE SAME CANNOT BE CONSIDERED AS SATISFACTION NOTE CONTEMPLATED U/S 158BD OF THE ACT. HOW EVER, THE CONTENTION OF THE REVENUE IS THAT THE ACT DOES NOT PRESCRIBE ANY FORMAT FOR RECORDING SATISFACTION AND HENCE THE LETTER DATED 21.8.2000 SHALL CONSTITUTE THE SATISFACTION NOTE CONTEMPLATED U/S 158BD OF THE ACT. 8. WE HEARD THE PARTIES ON THIS ISSUE AND PERUSED THE RECORD. SINCE THE CONTROVERSY SURROUNDS THE LETTER DATED 21.8.2000, REFERRED ABOVE, WE EXTRACT THE M/S. GYAN CONSTRUCTION CO. 4 SAME HEREUNDER, FOR THE SAKE OF CONVENIENCE: - CIR.25(3)/APPRA/2000 - 2001 OFFICE OF THE A.C.I.T., CIR. 25(3) ROOM NO. 120, 1 ST FLOOR MATRU MANDIR TARDEO ROAD, MUMBAI - 7. DATED : 21.8.2000 THE ASST. COMMISSIONER OF INCOME TAX CIRCLE 9(3) PIRAMAL CHAMBER LALBAUG, MUMBAI. SUB : SEARCH AND SEIZURE ACTION CARRIED OUT IN THE CASE OF M/S. R.K. MADHANI & CO. AND ITS GROUP OF CASES ON 17.12.98 AND 18.12.98 REGARDING REF : M/S. GYAN CONSTRUCTION CO. SEARCH ACTION U/S. 132 OF THE I.T. ACT WAS CARRIED OUT AT THE OFFICE PREMISES OF M/S. R.K. MADHANI & CO., AND ITS GROUP OF CASES ON 17.12.98 & 18.12.98. DURING THE COURSE OF SEARCH ACTION, STATEMENT OF SHRI GYANCHAND WAS RECORDED U/S. 132 OF THE I.T.ACT ON 18.12.98. SHRI GYANCHAND R. MADHANI HAS MADE DISCLOSURE OF RS. 46,00,000/ - IN THE GROUP OF CASES WHICH ARE AS UNDER : RS. 30 LACS IN THE HANDS OF M/S. R.K. MADHANI & CO. RS. 10 LACS IN THE HANDS OF M/S. GYAN CONSTRUCTION CO. RS. 60 LACS IN THE HANDS OF M/S. R.K. CHEMICAL DISCLOSURES ARE MADE ON ACCOUNT OF INFLATED EXPENSES AND INCRIMINATING DOCUMENTS FOUND AT THE TIME OF SEARC H ACTION. APPRAISAL REPORT OF DDIT(INV.), UNIT VII(4), MUMBAI, WHICH IS SELF EXPLANATORY. YOU ARE THEREFORE REQUESTED TO TAKE NECESSARY ACTION AT YOUR END IMMEDIATELY. COPY OF STATEMENT, WARRANT OF AUTHORISATION AND APPRAISAL REPORT ARE ENCLOSED HEREWITH. IN CASE YOU REQUIRE ANY FURTHER INFORMATION/DETAILS, YOU MAY CONTACT THE UNDERSIGNED WHEN YOU FEEL FREE. SD/ - (S.B. RAJAPATI) ACIT, CIR. 25(3), MUMBAI M/S. GYAN CONSTRUCTION CO. 5 ON A CAREFUL PERUSAL OF THE LETTER CITED ABOVE, WE ARE OF THE VIEW THAT THE AO OF TH E SEARCHED PERSON MAKES A REFERENCE TO THE DISCLOSURE MADE BY SHRI GYANCHAND R MAD H ANI AND FURTHER STATES THAT DISCLOSURES HAVE BEEN MADE ON ACCOUNT OF INFLATED EXPENSES. THE AO FURTHER INTIMATES THAT THE APPRAISAL REPORTS ARE SELF EXPLANATORY AND ACCORDI NGLY REQUESTS THE AO OF THE ASSESSEE TO TAKE NECESSARY ACTION. 9. THE PROVISIONS OF SEC. 158BD 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 SEA RCH 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 HAV ING JURISDICTION OVER SUCH OTHER PERSON AND THE ASSESSING OFFICER SHALL PROCEED UNDER SECTION 158BC AGAINST SUCH OTHER PERSON AND THE PROVISIONS OF THIS CHAPTER SHALL APPLY ACCORDINGLY. 10 . THE PROVISIONS OF SEC. 158BD, IN OUR VIEW, CONTEMPLATES THAT THE SATISFACTION SHOULD BE ARRIVED IN AN OBJECTIVE MANNER BY THE AO OF SEARCHED PERSON AND THEREAFTER, HE SHOULD HAND OVER THE RELEVANT DOCUMENTS TO THE AO OF OTHER PERSON. A CAREFUL READING OF THE LETTER DATED 21.8.2000, REFERRED ABOVE, WOULD SHOW THAT THE AO OF THE SEARCHED PERSON HAS MERELY GIVEN THE FACTS RELATING TO THE ADMISSIONS MADE BY SHRI GYANCHAND R MAD H ANI AND FURTHER REFERS TO THE DISCLOSURE MADE ON ACCOUNT OF INFLATED EXPENSES. WHILE SECTION 158BD REFERS TO THE UNDISCLOSED INCOME, THE AO DID NOT REFER TO ANY UNDISCLOSED INCOME EMANATING FROM THE DOCUMENTS FOUND DURING THE COURSE OF SEARCH. THE AO SIMPLY REFERS TO THE ADMISSION MADE IN THE SWORN STATEMENT AND ALSO TO THE DISCLOSURE RELATING TO INCRIMINATING DOCUMENTS, BUT NOT TO THE UNDISC LOSED INCOME. IT IS PERTINENT TO NOTE THAT THE ADMISSION MADE IN THE SWORN STATEMENT TAKEN U/S 132(4) OF THE ACT IS REBUTTABLE ONE. M/S. GYAN CONSTRUCTION CO. 6 11. ACCORDINGLY, WE ARE OF THE VIEW THAT THE AO OF THE SEARCHED PERSON HAS MERELY INTIMATED THE DETAILS OF SEARCH PROC EEDINGS TO THE AO OF THE ASSESSEE AND THE SAME, IN OUR CONSIDERED VIEW, SHALL NOT CONSTITUTE SATISFACTION ABOUT UNDISCLOSED INCOME AS CONTEMPLATED U/S 158BD OF THE ACT. ACCORDINGLY, WE FIND MERIT IN THE CONTENTIONS OF THE ASSESSEE ON THE LEGAL ISSUE. ACCORDINGLY, WE HOLD THAT THE SATISFACTION MANDATED U/S 158BD OF THE ACT WAS NOT RECORDED BY THE AO OF THE SEARCHED PERSON. IN VIEW OF THE ABOVE, WE QUASH THE ASSESSMENT ORDER PASSED BY THE AO. 12. SINCE WE HAVE QUASHED THE ASSESSMENT ORDER, THE OR DER PASSED BY LD CIT(A) ALSO WOULD NOT SURVIVE. ACCORDINGLY, THERE IS NO REQUIREMENT TO PASS ORDERS ON THE ISSUES URGED BY THE REVENUE ON MERITS. ON THE SAME GROUND, THE APPEAL FILED BY THE REVENUE IN PENALTY PROCEEDINGS SHALL NOT SURVIVE. 13. IN TH E RESULT, BOTH THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER HAS BEEN PRONOU NCED IN THE OPEN COURT ON 27 .5 .2016 . SD/ - SD/ - (AMARJIT SINGH ) (B.R.BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 27 / 5 /20 1 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) ITAT, MUMBAI PS