The ACIT, Circle-11, Ahmedabad V. Nalin D.Shah, Ahmedabad

ITSSA 23/AHD/2009

• Counselvise Citation: [2011] 130 COUNSELVISE.COM (IT) 0010 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 29-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 29-12-2011
• Assessment Year: misc
• Appeal Filed On: 12-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANURAG SHARMA
• Assessee Lawyers: SUNIL H TALATI
• Keywords: Document seized; Question of law; Block assessment; Documents seized
• Section: 260A; 132; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE SHRI BHAVNESH SAINI, JM AND SHRI A. MOHAN A LANKAMONY, AM) IT (SS)A NO. 23/AHD/2009 B.P. 1991-92 TO 20-10-2000 THE A. C. I. T., CIRCLE-11, 1 ST FLOOR, NARAYAN CHAMBERS, ASHRAM ROAD, AHMEDABAD VS NALIN D. SHAH, PROP. USHMA ADVERTISING, 4, LOWER LEVEL, HARIKRISHNA COMPLEX, OPP. KOTHAWALA FLATS, PALDI, AHMEDABAD PA NO. ATFPS 9391 F (APPELLANT) (RESPONDENT) APPELLANT BY SHRI ANURAG SHARMA, SR. DR RESPONDENT BY SHRI SUNIL H. TALATI, AR DATE OF HEARING: 29-12-2011 DATE OF PRONOUNCEMENT: 29-12-12-2011 O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)XVI , AHMEDABAD DATED 15-01-2009, FOR THE ABOVE BLOCK PERIOD, ON TH E FOLLOWING GROUNDS: 1. THE LD. CIT(A) ERRED IN LAW AS WELL AS ON FACTS BY DELETING THE PROTECTIVE ADDITION MADE BY THE A. O. IN RESPEC T OF UNEXPLAINED PAYMENT MADE BY THE USHMA ADVERTISING, THE ASSESSEE DISREGARDING THE FACTS THAT THE LD. CIT(A) IN THE CASE OF SHRI JIVRAJ DESAI HAS HELD THAT THE PAYMENTS REF LECTED IN THE SEIZED MATERIALS PERTAIN TO M/S. USHMA ADVERTISING. IT (SS) A NO.23/AHD/2009 ACIT, CIRCLE-11, AHMEDABAD VS NALIN D. SHAH 2 2. THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FA CTS IN DISREGARDING THE FACTS THAT THERE IS NO BAN TO MAKE PROTECTIVE ASSTT. U/S. 158BC R. W. S. 158BD OF T4HE I. T. ACT. 2. BRIEFLY, THE FACTS OF THIS CASE ARE THAT SEARCH WAS CARRIED OUT IN THE CASE OF SHRI JIVRAJ DESAI OF MASTER GROUP ON 20-10-2000. IN THE BLOCK ASSESSMENT ORDER IN HIS CASE U/S 158BC OF THE IT AC T WAS PASSED ON 31-10-2002 MAKING ADDITION OF RS.12,00,000/- ON THE BASIS OF SEIZED PAPER. THE LEARNED CIT(A) IN THAT CASE VIDE ORDER DATED 19-1-2004 HELD THAT NO EVIDENCE HAS BEEN BROUGHT ON RECORD AB OUT THE PAYMENT MADE BY THAT ASSESSEE AND TOTAL PAYMENT WAS FOUND T O BE MADE OF RS.22,48,000/-.IT WAS ALSO OBSERVED THAT SAME ADDIT ION IS TO BE CONSIDERED IN THE CASE OF USHMA ADVERTISING. THEREF ORE, ADDITION OF RS.12,00,000/- WAS DELETED. BUT, ADDITION OF RS.1,4 9,000/- WAS CONFIRMED. ON THE BASIS OF THE ORDER OF THE LEARNE D CIT(A) IN THE CASE OF JIVRAJ DESAI THE AO ISSUED NOTICE U/S 158BD OF THE IT ACT IN THE CASE OF THE PRESENT ASSESSEE ON 06-09-2005 WHIC H WAS SERVED UPON THE ASSESSEE ON 14-09-2005 AND PASSED THE ORDE R U/S 158 BD OF THE IT& ACT ON 28-09-2007 BY MAKING PROTECTIVE A SSESSMENT OF RS.12,00,000/- IN THE CASE OF THE ASSESSEE BECAUSE SUBSTANTIVE ADDITION WAS ALREADY MADE IN THE CASE OF JIVRAJ DES AI AND THE ORDER OF THE LEARNED CIT(A) IS CONTESTED BY THE DEPARTMEN T IN SECOND APPEAL. THE ASSESSEE PREFERRED APPEAL BEFORE THE LE ARNED CIT(A) AND IT WAS SUBMITTED THAT THERE WAS NO SATISFACTION RECORDED BY THE AO IN THE CASE OF JIVRAJ DESAI FOR INITIATING PROCE EDINGS U/S 158 BD OF THE IT ACT AND FURTHER NO PROTECTIVE ASSESSMENT COU LD BE MADE AGAINST THE ASSESSEE. THE ASSESSEE RELIED UPON SEVE RAL DECISIONS INCLUDING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF IT (SS) A NO.23/AHD/2009 ACIT, CIRCLE-11, AHMEDABAD VS NALIN D. SHAH 3 MANISH MAHESHWARI VS ACIT, 289 ITR 341 AND THE ORDE R OF ITAT DELHI SPECIAL BENCH IN THE CASE OF MANOJ AGARWAL VS DCIT, 113 ITD 377. 3. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION O F THE ASSESSEE IN THE LIGHT OF THE FINDINGS OF THE AO ALL OWED THE APPEAL OF THE ASSESSEE. THE LEARNED CIT(A) NOTED THAT WHEN NO REASONS ARE RECORDED BY THE AO IN THE CASE OF THE SEARCHED PERS ONS, NO PROCEEDINGS U/S 158 BD OF THE IT ACT COULD BE INITI ATED AS IS HELD IN THE CASE OF MANISH MAHESHWARI (SUPRA). THE LEARNED CIT(A) ALSO NOTED THAT THE AO MADE SUBSTANTIVE ADDITION IN THE CASE OF JIVRAJ DESAI BECAUSE THE SEIZED PAPER PERTAINED TO UNDISCL OSED INCOME AND THAT THE PRESENT PROCEEDINGS WERE INITIATED BECAUSE OF THE FINDING OF THE LEARNED CIT(A) AND THE ORDER OF THE LEARNED CIT (A) IS NOT ACCEPTED BY THE DEPARTMENT BY FILING APPEAL BEFORE THE TRIBUNAL. THEREFORE, IN THE ABSENCE OF ANY SATISFACTION RECOR DED BY THE AO IN THE CASE OF JIVRAJ DESAI, PROCEEDINGS U/S 158 BD OF THE IT ACT ARE NOT VALID. THE LEARNED CIT(A), THEREFORE, NOTED THAT IN SUCH A SITUATION PROTECTIVE ASSESSMENT U/S 158 BD OF THE IT ACT AGAI NST THE ASSESSEE IS INVALID. THE LEARNED CIT(A) ALSO RELIED UPON THE DECISION OF ITAT DELHI SPECIAL BENCH IN THE CASE OF MANOJ AGARWAL (S UPRA) IN WHICH IT WAS HELD THAT FURTHER PROCEEDINGS U/S 158 BD OF THE IT ACT COULD NOT BE INITIATED AFTER CONCLUSION OF PROCEEDINGS U/S 15 8BC OF THE IT ACT IN THE CASE OF THE PERSONS SEARCHED AFTER LAPSE OF 5 Y EARS. THE LEARNED CIT(A) ACCORDINGLY ALLOWED THE APPEAL OF THE ASSESS EE. IT (SS) A NO.23/AHD/2009 ACIT, CIRCLE-11, AHMEDABAD VS NALIN D. SHAH 4 4. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE 4.1 ITAT AHMEDABAD BENCH IN THE CASE OF SHRI SHAILE SH M. DESAI IN IT(SS) A NO. 66/AHD/2007 ETC. DATED 15-10-2010 A LSO TOOK THE SAME VIEW AND ALLOWED THE APPEAL OF THE ASSESSEE. T HE FINDINGS IN THIS CASE IN PARA 6 TO 8 ARE REPRODUCED AS UNDER: 6. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT THE ISSUE IS SQUARELY COVERED IN F AVOUR OF THE ASSESSEE BY THE ORDER OF ITAT, AHMEDABAD BENCH 'D' (CAMP AT SURAT) IN THE CASE OF VIMAL VADILAL SH AH & ORS (SUPRA) IN WHICH THE TRIBUNAL AT PARAGRAPH 11 O F THE ORDER HELD AS UNDER:- '11. 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 SATIS FACTION 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 10-06-2004. BUT SEARCHED AGAINST OHM DEVELOPERS WAS CARRIED OUT ON 29-10-1999, 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 HON'BLE SUPR EME CCURT IN THE CASE OF MANISH MAHESHWARI V. ACIT (200 7) 289 ITR 341 (SC) AND MANOJ AGARWAL (SUPRA) THAT IF THE ASSESSMENT U/S.158BC OF THE ACT IN THE CASE OF PERS ON SEARCH (OHM DEVELOPERS) WAS COMPLETED ON 30-11 -200 1 THEN ISSUING NOTICE U/S 158BD OF THE ACT ON 29-03-2 006 AGAINST ASSESSEE IS BARRED BY LIMITATION. SIMILAR V IEW WAS TAKEN BY THE ITAT AHEMDABAD BENCH IN IT(SS)A NO.25/AHD/2007 IN THE CASE OF ADIL PARVEZ RANDERIA V. IT (SS) A NO.23/AHD/2009 ACIT, CIRCLE-11, AHMEDABAD VS NALIN D. SHAH 5 ACIT, CC-3(1), SURAT PRONOUNCED ON 01-09-2008. FOLLOWING THESE DECISIONS WE HOLD THAT THE BLOCK ASSESSMENT FRAMED IN 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 ISSUED IN TH ESE CASES LONG AFTER COMPLETION OF ASSESSMENT IMTHE CAS E OF PERSON SEARCHED I.E. OHM DEVELOPERS.' 7. WE MAY ALSO POINT OUT THAT RECENTLY THE H ON'BLE PUNJAB & HARYANA HIGH COURT IN ITS UNREPORTED JUDGM ENT IN ITA NO. 379 OF 2010 DATED 25-08-2010 IN THE CASE OF CIT-I, LUDHIANA VS M/S PARVEEN FABRICS PVT LTD DISMISSED THE APPEAL FILED BY THE DEPARTMENT BY PAS SING THE FOLLOWING ORDER: '1. THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE UNDER SECTION 260A OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') AGAINST THE ORDER OF THE INCOME TAX APPE LLATE TRIBUNAL, CHANDIGARH BENCH (B), CHANDIGARH (HEREINA FTER REFERRED TO AS 'THE TRIBUNAL') PASSED IN I.T.(SS)A. NO19/CHAND/2009 DATED 127.8.2009 FOR THE BLOCK PERI OD 01.04..1996 TO 05.02.2003, PROPOSING TO RAISE THE FOLLOWING SUBSTANTIAL QUESTION OF LAW:- 'WHETHER ON THE FACTS AND IN LAW, THE HON'BLE INCOME TAX APPELLATE TRIBUNAL WAS JUSTIFIED IN HOLDING THE RECORDING OF SATISFACTION U/S 158BD BY THE ASSESSING OFFICER OF THE PERSON SEARCHED AND CONSEQUENCE ISSUANCE AND SERVICE OF NOTICE U/S 158BDE ON 2.12.2006 WAS BELATED AND BEYOND THE PERIOD PRESCRIBED BY LAW WHEN THE SECTION 158 BD READ WITH SECTION 158BE DOES NOT SPECIFY THAT SATISFACTION HAS TO BE RECORDED BY THE ASSESSING OFFICER BEFORE COMPLETION OF ASSESSMENT U/S 158BC OF THE INCOME TAX ACT, 1961 ?' 2 A SEARCH WAS CONDUCTED ON 5.2.2003 AT THE RESIDENCE OF ONE S.K. BHATIA, AND FROM THE SEIZED DOCUMENTS AND AFTER FINALIZING BLOCK ASSESSMENT AGA INST THE SEARCHED PERSON ON 28.2.2005, PROCEEDINGS WERE IT (SS) A NO.23/AHD/2009 ACIT, CIRCLE-11, AHMEDABAD VS NALIN D. SHAH 6 ALSO TAKEN AGAINST THE RESPONDENT AFTER RECORDING SATISFACTION ON 31.3.2006. NOTICE UNDER SECTION 158 BD WAS ISSUED ON 2.12.2006 WHICH WAS CONTESTED BY THE RESPONDENT ON THE GROUND THAT THE SATISFACTION NOTE ITSELF WAS AFTER CONCLUSION OF THE PROCEEDINGS AND NOT DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS. THIS PLEA WAS UPHELD BY THE CIT(A) FOLLOWING EARLIER JUDGMENT OF THE TRIBUNAL IN MANOJ AGGARWAL V. DCIT (2008) 113 KTD 377 (DEL)(SB). THE TRIBUNAL AFFIRMED THE SAID VIEW. 3. WE HAVE HEARD LEARNED COUNSEL FOR THE REVENUE. 4. AN IDENTICAL MATTER WAS CONSIDERED BY THIS COURT IN ORDER DATED 207.2010 IN ITA NO.591 OF 2009, COMMISSIONER OF INCOME-TAX-L, LUDHIANA V. MRIDULA, PROP . M/S DHRUV FABRICS, LUDHIANA AND IT WAS OBSERVED: 'THE ACT NO WHERE SPECIFICALLY PRESCRIBES ANY TIME LIMIT OR LIMITATION FOR INITIATION OF PROCEEDINGS U NDER SECTION 158BD OF THE ACT OR FOR RECORDING OF SATISFACTION BEFORE TAKING ACTION UNDER THAT PROVISION. THE PLAIN AND REASONABLE CONSTRUCTION THAT CAN BE PLACED ON THE AFORESAID PROVISION WOULD BE THAT THE RECORDING OF SATISFACTION FOR TAKING ACTION AGAINST ANY OTHER PERSON UNDER SECTION 158BD OF THE ACT HAS TO BE BETWEEN INITIATION OF PROCEEDINGS UNDER SECTION 158BC AND BEFORE COMPLETION OF BLOCK ASSESSMENT UNDER SECTION 158BC OF THE ACT IN THE CASE OF THE PERSON SEARCHED I WOULD, THUS, MEAN THAT THE ACTION CONTEMPLATED UNDER SECTION 158BD OF THE ACT AGAINST A THIRD PARTY TO A SEARCH, IS NECESSARILY TO BE DURING THE COURSE OF BLOCK ASSESSMENT PROCEEDINGS UNDER SECTION 158BC OF THE SEARCHED PERSON. IT CANNOT BE AFTER THE CONCLUSION OF THE SAME AS THERE IS NO OCCASION FOR AN ASSESSING OFFICER TO EXAMINE THE SEIZED MATERIAL OR DOCUMENTS OF THE SEARCHED PERSON WHEN THE BLOCK ASSESSMENT PROCEEDINGS HAVE CONCLUDED AND NO OTHER PROCEEDINGS ARE PENDING BEFORE HIM. IF ANY IT (SS) A NO.23/AHD/2009 ACIT, CIRCLE-11, AHMEDABAD VS NALIN D. SHAH 7 OTHER TIME LIMIT IS READ IN THE PROVISIONS / STATUT E, IT SHALL LEAD TO ANOMALY AND WOULD BE ARBITRARY AND UNREASONABLE. IT COULD NOT BE READ IN THE PROVISION THAT WHERE BLOCK ASSESSMENT UNDER SECTION 1 53BC OF THE ACT IN THE CASE OF AN ASSESSEE AGAINST WHOM ACTION UNDER SECTION 132 OR 132A OF THE ACT HAD BEEN CARRIED OUT IS FINALIZED, REVENUE CAN TAKE ACTION AT ANY TIME IN THE ABSENCE OF ANY SPECIFIC LIMITATION PRESCRIBED IN THE STATUTE. A CONSTRUCTIO N WHICH LEADS TO SUCH AN ANOMALY SHOULD BE AVOIDED.' 5. THE VIEW TAKEN BY THE TRIBUNAL IS, THUS, IN ACCORDANCE WITH THE VIEW TAKEN BY THIS COURT. NO SUBSTANTIAL QUESTION OF LAW ARISES. 6. THE APPEAL IS DISMISSED.' 8. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF THE ABOVE DECISIONS, WE DO NOT FIND ANY JUSTIFICATION F OR INITIATION OF BLOCK ASSESSMENT PROCEEDINGS U/S 1 58 BD OF THE IT. ACT AGAINST THE ASSESSEE AFTER LONG GAP OF COMPLETION OF THE ASSESSMENT IN THE CASE OF PERSONS SEARCHED, VIZ. M/S OHM DEVELOPERS. WE_ ACCORDINGLY SET ASIDE THE ORDER OF AUTHORITIES BELOW AND QUASH THE SAME. AS A RESULT, GROUNDS 1 & 2 OF THE APPEAL OF THE ASS ESSEE ARE ALLOWED. 4.2 THE HONBLE PUNJAB & HARYANA HIGH COURT IN DECI SION IN THE CASE OF CIT VS MRIDULA, PROP. DHRUV FABRICS REPORTE D IN 335 ITR 226 HELD AS UNDER: ACTION UNDER SECTION 158 BD MUST BE TAKEN BEFORE COMPLETION OF ASSESSMENT OF SEARCHED PERSON BLOCK ASSESSMENT UNDER SECTION 158BC COMPLETED ON 30-03-2 005 SATISFACTION UNDER SECTION 158BD RECORDED ON 15-7 -2005 PROCEEDING NOT VALID. IT (SS) A NO.23/AHD/2009 ACIT, CIRCLE-11, AHMEDABAD VS NALIN D. SHAH 8 5. IN THE PRESENT CASE, SINCE SUBSTANTIVE ASSESSMEN T WAS MADE IN THE CASE OF JIVRAJ DESAI AND THE ORDER OF THE LEARN ED CIT(A) MAKING OBSERVATION AGAINST THE ASSESSEE WAS NOT ACCEPTED B Y THE REVENUE BY FILING APPEAL BEFORE THE TRIBUNAL, THE IMPUGNED ORDER OF THE LEARNED CIT(A) WAS JUSTIFIED IN HOLDING THAT NO SAT ISFACTION HAS BEEN RECORDED IN THE CASE OF JIVRAJ DESAI FOR INITIATING PROCEEDINGS U/S 158 BD AGAINST THE ASSESSEE. IN THE ABSENCE OF ANY REAS ONS RECORDED U/S 158 BD OF THE IT ACT, THERE WAS NO JUSTIFICATION FO R THE AO TO INITIATE PROCEEDINGS AGAINST THE ASSESSEE. MORE SO, ISSUE OF NOTICE U/S 158 BD OF THE IT ACT AFTER COMPLETION OF ASSESSMENT IN THE CASE OF PERSON SEARCHED I.E. JIVRAJ DESAI, THE PROCEEDINGS WOULD N OT BE JUSTIFIED IN THE MATTER. THE LEARNED CIT(A) ON PROPER APPRECIATI ON OF FACTS AND MATERIAL ON RECORD RIGHTLY ALLOWED THE APPEAL OF TH E ASSESSEE. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER O F THE LEARNED CIT(A). WE CONFIRM HIS ORDER AND DISMISS THE DEPARTMENTAL A PPEAL. 6. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT 29/12/11 SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER LAKSHMIKANT/- IT (SS) A NO.23/AHD/2009 ACIT, CIRCLE-11, AHMEDABAD VS NALIN D. SHAH 9 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD