GOPAL S. AGRAWAL, MUMBAI V. DCIT 26(1), MUMBAI

ITSSA 23/MUM/2011

• Counselvise Citation: [2012] 124 COUNSELVISE.COM (IT) 7777 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 19 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 27-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 09-01-2012
• Assessment Year: misc
• Appeal Filed On: 07-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: F V IRANI
• Keywords: Loose papers; Opportunity of being heard; Principle of natural justice; Period of limitation; Block assessment; Documents seized
• Section: 142(1); 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, G, MUMBAI BEFORE SHRI R.S. SYAL (A.M.) AND SHRI D.K.AGARWAL ( JM) IT(SS)A NO.23/MUM/2011 (BLOCK PERIOD 1.4.1996 TO 31.12.2002) GOPAL S AGRAWAL, 252, SHUBDHAS CHS, SIR, PACKHANWALA ROAD, WORLI, MUMBAI- 400018. PAN:ABEPA4674P DY. COMMISSIONER OF INCOME TAX, 26(2), AYURVED PRACHAR SANSTHA BUILDING, CHARNI ROAD, MUMBAI APPELLANT V/S RESPONDENT DATE OF HEARING : 13.1.2012 DATE OF PRONOUNCEMENT : 27.1.2012 APPELLANT BY : SHRI F.V.IRANI, RESPONDENT BY : SHRI PAWAN VED. O R D E R PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 17.1.2011 PASSED BY THE LD . CIT(A) FOR THE BLOCK PERIOD 1.4.1996 TO 31.12.2002 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE IS A MEMBER OF THE LEGISLATIVE COUNCIL OF MAHARASHTRA STATE. A SEARCH ACTION U/S 132 OF THE INCOME TAX ACT 1961 (THE ACT) WAS CARRIED OUT IN TH E IT(SS)A NO.23/MUM/2011 (BLOCK PERIOD 1.4.1996 TO 30.12.2002) 2 GROUP CASES OF M/S N.A.FABRICS PVT.LTD., (2) M/S M KT SALES, (3) SHRI NIRMAL A BANWANI AND (4) LATE SHRI PRAVIN M. SHAH ON 30.12.2002 AND ON SUBSEQUENT DATES. DURING THE COURSE OF SEARCH, VARIOUS DOCUMENTS/LOOSE PAPERS WERE FOUND AND SEIZED FROM THE PREMISES OF THIS GROUP. IN THE LIGHT OF THESE S EIZED MATERIAL/DOCUMENTS AND STATEMENTS RECORDED OF SHRI NIRMAL A.BANWANI AND LATE SHRI P.M.SHAH BLOCK ASSESSMENT ORDERS U/S 158BC OF THE ACT WERE PASSED IN THESE CASES ON 6.7.2007. IN THE COURSE OF ASSESSMENT PROCEEDINGS OF AFOREMENTIONED ASSESSEES IT WAS FOUND THAT DOCUMENTS/LOOSE PAPERS SEIZED DURING THE SEARCH ALSO REVEAL THAT SHRI GOPAL AGRA WAL, AN M.L.A.OF MAHARASHTRA LEGISLATIVE ASSEMBLY RECEIVED COMMISSION TO THE TUNE OF RS.2.75 CRORES APPROXIMATELY IN THE FINANCIAL YEARS 2001-02 AND 2002-03. CONSEQUENTLY, NOTICE U/S 158BD OF THE ACT WAS ISSUED BY THE DCIT, CIRCLE-7, NAGPUR ON 3.9.2007. IN RESPONSE, THE ASSESSEE FILED BLOCK RE TURN DECLARING UNDISCLOSED INCOME AT RS.NIL. NOTICE U/S 143(2) OF THE ACT WAS ISSUED ON 4.3.2008 AND SERVE D ON THE ASSESSEE ON 5.3.2008. LATER ON NOTICE U/S 142(1) OF THE ACT WAS ALSO ISSUED ON 7.10.2008 AND IT(SS)A NO.23/MUM/2011 (BLOCK PERIOD 1.4.1996 TO 30.12.2002) 3 SERVED ON THE ASSESSEE ON 10.10.2008. IN THE ABSENCE OF ANY COMPLIANCE A FINAL OPPORTUNITY WAS OFFERED TO THE ASSESSEE TO PRESENT HIS CASE. ACCORDINGLY, A SHOW CAUSE NOTICE WAS SERVED ON THE ASSESSEE ON 10.9.2009, WHEREIN THE ASSESSEE WAS INFORMED THAT ON THE BASIS OF DOCUMENTS SEIZED IN THE COURSE OF SEARCH A TOTAL ADDITION TO THE TUNE OF RS.2,78,40,000/- IS PROPOSED TO BE MADE FOR THE BLO CK PERIOD. IN RESPONSE, THE ASSESSEE OBJECTED TO THE ADDITION PROPOSED BY INTERALIA STATING THAT HE HAS ALREADY DENIED THE RECEIPT OF RS.2,78,40,000/- FROM SHRI NIRMAL BANWANI AND LATE SHRI PRAVIN M. SHAH, I N THE COURSE OF THEIR ASSESSMENT PROCEEDINGS. HE FURT HER STATED THAT HE DOES NOT KNOW THESE PERSONS AND, THEREFORE, THERE IS NO QUESTION OF RECEIPT OF ANY COMMISSION PAYMENT FROM THESE PERSONS. HE ALSO STATED THAT AS, HE DID NOT RECEIVE MONEY FROM THESE PERSONS, THEREFORE, HE FILED NIL RETURN FOR THE BLO CK PERIOD. THE AO RECORDED THE STATEMENT OF SHRI GO PAL AGARWAL, THE ASSESSEE U/S.131 OF THE ACT WHEREIN HE DENIED KNOWING EITHER SHRI NIRMAL BANWANI AND LATE SHRI PRAVIN M. SHAH. HE ALSO DENIED THE RECEIPT OF ANY COMMISSION/ PAYMENT FROM THESE PERSONS. HOWEVER, IT(SS)A NO.23/MUM/2011 (BLOCK PERIOD 1.4.1996 TO 30.12.2002) 4 THE AO IN VIEW OF THE DOCUMENTS SEIZED DURING THE COURSE OF THE SEARCH AND THE STATEMENTS OF SHRI NIR MAL BANWANI AND LATE SHRI PRAVIN M. SHAH HAS DETERMINED UNDISCLOSED INCOME OF THE ASSESSEE AT RS. 2,78,40,000/- VIDE ORDER DATED 29.9.2009 PASSED U/ S 158BD OF THE ACT. 3. ON APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS : 1. THE LD. ASSESSING OFFICER ERRED IN PASSING HIS IMPUGNED BLOCK ASSESSMENT ORDER U/S 158BD DATED 29.9.2009 ASSESSING THE APPELLANT AT AN UNDISCLOSED INCOME OF RS.2,78,40,000/-.THE LEARNED ASSESSING OFFICER HERE FAILED TO NOTE THAT THE APPELLANTS CASE WAS NOT COVERED UNDER THE PROVISIONS OF SECTION 158BD IN THE FIRST PLACE AND THAT THE NOTICE ISSUED U/S. 158BD WAS THUS WITHOUT ANY JURISDICTION. 2. THE LEARNED ASSESSING OFFICER ALSO FAILED TO APPRECIATE THAT THE BLOCK ASSESSMENT ORDER U/S.158BD PASSED ON 29.9.2009 WAS TIME BARRED AND HENCE BAD IN LAW. 3. WITHOUT PREJUDICE TO THE ABOVE AND EVEN ON MERITS, THE LD. ASSESSING OFFICER ERRED IN MAKING THE ADDITION OF RS.2,78,40,000/- ON MERE SUSPICION AND WITHOUT ANY PROOF ON HAND. 4. THAT LD A.O. ERRED IN PASSING THE ORDER U/S.158BD WITHOUT GRANTING THE APPELLANT AN ADEQUATE OPPORTUNITY OF BEING HEARD. THE ORDER PASSED BY HIM IS IN CONTRAVENTION OF PRINCIPLES OF NATURAL JUSTICE AND HENCE BAD IN LAW. IT(SS)A NO.23/MUM/2011 (BLOCK PERIOD 1.4.1996 TO 30.12.2002) 5 4. THE LD. CIT(A) AFTER CONSIDERING THE ASSESSEES SUBMISSIONS OBSERVED AND HELD THAT ..THE LETTER WRITTEN ON DT. 13.7.2007 AFTER CONCLUDING THE ASSESSMENT U/S 158BC IN THE CASE OF SHRI NIRMAL A.BANWANI CLARIFY ALL THE FACTS OF THE CASE. ALL T HESE FACTS ARE CLEAR AND REQUIREMENTS OF LAW, IN MY OPIN ION, WAS COMPLIED BEFORE COMPLETION OF ASSESSMENT, THEREFORE, THE AO HAS PROPERLY ASSUMED THE JURISDICTION TO ISSUE A VALID NOTICE U/S 158BD AS P ER THE INCOME TAX ACT. ON MERITS, THE LD. CIT(A) WH ILE OBSERVING THAT THE ASSESSING OFFICER AFTER TAKING I NTO CONSIDERATION VARIOUS DOCUMENTS HAS PROPERLY MADE THE ADDITION, UPHELD THE ADDITION OF RS.2,78,40,00 0/- MADE BY THE AO. 5. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 6. GROUND NO.1 READS AS UNDER : 1. THE LD.CIT(A) FAILED TO APPRECIATE THAT THE BLOCK ASSESSMENT PROCEEDINGS INITIATED AGAINST THE APPELLANT U/S. 158BD ARE INVALID, CONTRARY TO THE PROVISIONS OF LAW AND WITHOUT REACHING AT SATISFACTION IN AN OBJECTIVE MANNER NOR BASED ON COGENT MATERIALS/ DOCUMENTS SEIZED AT THE TIME OF SEARCH. IT(SS)A NO.23/MUM/2011 (BLOCK PERIOD 1.4.1996 TO 30.12.2002) 6 7. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT UNDER THE PROVISIONS OF SECTI ON 158BD, THE ASSESSING OFFICER MAKING THE BLOCK ASSESSMENT IN CASE OF PERSON SEARCHED HAS TO BE SATISFIED THAT UNDISCLOSED INCOME DETECTED BELONGS TO SOME PERSONS OTHER THAN PERSON SEARCHED. ON BEING SO SATISFIED, AO WILL HANDOVER THE SEIZED MATERIALS TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON SO THAT HE CAN MAKE A BLOCK ASSESSMENT ON HIM. SUCH SATISFACTION MUST BE RECORDED BY THE ASSESSING OFFICER MAKING THE SEARCH RELATED ASSESSMENT IS A MANDATORY CONDITION, FAILURE OF WHI CH AN ASSESSMENT MADE U/S 158BD WILL BE WITHOUT JURISDICTION AND CANNOT BE SUSTAINED IN LAW. HE FURTHER SUBMITS THAT THE ASSESSEE VIDE LETTER DATED 30.4.2010 APPEARING AT PAGE 37 OF THE ASSESSEES PAPER BOOK SOUGHT FROM THE ASSESSING OFFICER A COPY THE SATISFACTION NOTE SENT TO THE JURISDICTIONAL ASSESSING OFFICER OF THE ASSESSEE. HE FURTHER SUBMI TS THAT IN THIS REGARD THE ASSESSEE HAS RECEIVED THE FOLLOWING DOCUMENTS FROM THE ASSESSING OFFICER: (A) LETTER DATED 13.7.2007 BY DY. CIT, CENTRAL CIRCLE -47, MUMBAI TO THE INCOME TAX OFFICER, GONDIYA AND (B) IT(SS)A NO.23/MUM/2011 (BLOCK PERIOD 1.4.1996 TO 30.12.2002) 7 CERTIFIED COPY OF ORDER SHEET DATED 3.9.2007 OF DCI T, CIRCLE -7, NAGPUR APPEARING AT PAGE 27 TO 29 OF THE ASSESSEES PAPER BOOK. HE FURTHER SUBMITS THAT THE SE DOCUMENTS DO NOT EVEN SHOW AN IOTA OF EVIDENCE THAT SUCH SATISFACTION HAS BEEN RECORDED BY THE SAID ASSESSING OFFICER. THEREFORE, THE BLOCK ASSESSMENT MADE BY THE ASSESSING OFFICER U/S 158BD IS WITHOUT JURISDICTION AND BAD IN LAW. IN SUPPORT, THE REFERE NCE WAS ALSO MADE TO THE COPY OF SHOW CAUSE NOTICE ISSU ED BY THE AO APPEARING AT PAGES 1,2 AND 3 OF THE ASSESSEES PAPER BOOK. THE RELIANCE WAS ALSO PLAC ED ON THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNA L IN (A) MANOJ AGGARWAL V/S DCIT (2008) 113 LTD 377 (DEL) (SB), (B) CIT V/S. PARVEEN FABRICS(P.) LTD. {2011} 198 TAXMAN 463 (P & H.), (C) CIT V/S MRIDULA, PROP. DHRUV FABRICS (2011) 335 ITR 266 (P&H), (D) CIT V/S RAMESH KUMAR, PROPRIETOR (2011) 14 TAXMAN.COM 163 (P&H) AND (E) THE DECISION OF THE TRIBUNAL IN DCIT V/S M/S ARIHANT IMPEX AND VICE-VER SA IN IT(SS)A NO.63/MUM/2007 AND IT(SS)A NO.52/MUM/2007 (BLOCK PERIOD 1.4.1995 TO 10.5.2007) DATED 4.2.2009. HE, THEREFORE, SUBMITS THAT SINCE NO SATISFACTION HAS BEEN RECORDED, THE B LOCK IT(SS)A NO.23/MUM/2011 (BLOCK PERIOD 1.4.1996 TO 30.12.2002) 8 ASSESSMENT ORDER PASSED U/S.158BD OF THE ACT BE QUASHED. 8. ON THE QUERRY RAISED BY THE BENCH AS TO WHETHER ANY SUCH SATISFACTION WAS RECORDED IN THE GROUP CAS ES OF M/S.N.A. FABRICS PVT. LTD.; (2) M/S. M K T SALES , (3) SHRI. NIRMAL A. BANWANI AND (4) LATE SHRI PRAVIN M. SHAH, THE LD. COUNSEL FOR THE ASSESSEE, ON THE NEXT DATE OF HEARING, PLACED ON RECORD THE COPY OF ITAT ORDER IN THE CASE OF LATE PRAVIN M.SHAH V/S DCIT AN D NIRMAL A.BANWANI V/S DCIT VICE-VERSA IN IT(SS) NO.31/MUM/2008, IT(SSA) NO.32/MUM/2008, IT(SS)A NO.52/MUM/2008 AND IT(SS)A NO.53/MUM/2008 (BLOCK PERIOD 1.4.1996 TO 31.12.2002) DATED 31.3.2011, TO SHOW THAT IN THE CASE OF LATE PRAVIN M.SHAH, THE TRIBUNAL HAS HELD THAT THE ASSESSMENT ORDER PASSED IN THIS CASE IS BEYOND THE PERIOD OF LIMITATION SPECIF IED U/S 158BE AND THE SAID ASSESSMENT ORDER IS BAD IN L AW AND HAS TO BE CANCELLED. HE FURTHER SUBMITS THAT TH E SIMILAR VIEW WAS TAKEN IN THE CASE OF NIRMAL A.BANWANI. HE FURTHER SUBMITS THAT AGAINST THE ORD ER PASSED BY THE TRIBUNAL, IN THE CASE OF LATE PRAVIN M. SHAH, THE REVENUE HAS FILED APPEAL BEFORE THE IT(SS)A NO.23/MUM/2011 (BLOCK PERIOD 1.4.1996 TO 30.12.2002) 9 HONBLE JURISDICTIONAL HIGH COURT. THE HONBLE JURISDICTIONAL HIGH COURT IN CIT V/S LATE P.M.SHAH IN INCOME TAX APPEAL (LOD) NO.1243 OF 2011, DATED 29.11.2011 HELD THAT NO FAULT CAN BE FOUND WITH THE DECISION OF THE ITAT IN HOLDING THAT THE BLOCK ASSESSMENT ORDER PASSED BY THE AO WAS TIME BARRED AND ACCORDINGLY DISMISSED THE REVENUES APPEAL. IN THE LIGHT OF THE ABOVE, HE SUBMITS THAT SINCE NO SATISFACTION HAS BEEN RECORDED IN THE CASE OF LATE PRAVIN .M. SHAH AND NIRMAL A BANWANI, THEREFORE, TH E BLOCK ASSESSMENT ORDER PASSED BY THE AO IN THE CA SE OF THE ASSESSEE BE QUASHED. HE FURTHER SUBMITS THA T EVEN OTHERWISE, AS HELD BY THE LD. CIT(A), THAT LET TER WRITTEN ON 13.7.2007(SUPRA) AFTER CONCLUDING THE ASSESSMENT U/S 158BC IN THE CASE OF NIRMAL A BANWANI SHOWS THAT THE SAID LETTER WAS WRITTEN AFT ER COMPLETION OF THE ASSESSMENTS OF SHRI NIRMAL A BANWANI AND LATE SHRI PRAVIN M. SHAH WHICH WERE COMPLETED ON 06.07.2007, THEREFORE, THE SATISFACTIO N WAS RECORDED AFTER THE COMPLETION OF ASSESSMENT OF SHRI NIRMAL A BANWANI AND LATE SHRI PRAVIN M.SHAH. HE FURTHER SUBMITS THAT IN ANY CASE SINCE THE ASSESSMENT OF SHRI NIRMAL A BANWANI AND LATE PRAV IN IT(SS)A NO.23/MUM/2011 (BLOCK PERIOD 1.4.1996 TO 30.12.2002) 10 M. SHAH HAVE BEEN QUASHED BY THE TRIBUNAL, THEREFORE, NO SATISFACTION AS PROVIDED U/S 158BD EXISTS AND THEREFORE, THE ORDER PASSED IN THE CASE OF THE ASSESSEE BE QUASHED. 9. ON THE OTHER HAND, THE LD. DR WHILE RELYING ON THE ORDER OF THE AO AND THE LD. CIT(A) FAIRLY ADMIT S THAT THE ASSESSMENTS IN THE CASE OF SHRI NIRMAL A BANWANI AND LATE SHRI PRAVIN M. SHAH HAVE BEEN QUASHED BY THE TRIBUNAL AND THE ASSESSMENTS IN THE GROUP CASES OF M/S N.A.FABRICS PVT.LTD. AND M/S MK T SALES HAVE BEEN MADE ON THE PROTECTIVE BASIS, THEREFORE, THE ISSUE MAY BE DECIDED ACCORDINGLY. 10. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABL E ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE . WE FURTHER FIND THAT IN THIS CASE, THE AO HAS MADE T HE ASSESSMENT ON THE BASIS OF LETTER DATED 13.7.2007 (WRONGLY MENTIONED BY THE AO IN THE ORDER SHEET DATED 3.9.2007 IN THE ASSESSEES CASE APPEARING AT PAGE 29 OF THE ASSESSEES PAPER BOOK AS 13.8.2007). THE LETTER DATED 13.7.2007 IS REPRODUCED AS UNDER : NO.DCIT/CC-47/NAF GROUP/2007-08 OFFICE OF THE IT(SS)A NO.23/MUM/2011 (BLOCK PERIOD 1.4.1996 TO 30.12.2002) 11 DY. COMMISSIONER OF INCOME-T AX, CENTRAL CIRCLE-47, R.NO.658, AAYAKAR BHAVAN, M.K,ROAD, MUMBAI-400 020. DATE: 1 3.07.2007. THE INCOME-TAX OFFICER, GONDIYA WARD, FULCHUR ROAD, GONDIYA-441601. SUB: INTIMATION OF CASH TRANSACTIONS WITH M/S.N.A.FABRICS GROUP CASES BY SHRI GOPAL AGRAWAL,MLC/MLA, GONDIYA FOR A.Y.20O2-03/2OO3-O4 -- REG. A SEARCH ACTION U/S 132 WAS CARRIED OUT IN THE GRO UP CASES OF M/S N.A.FABRICS PVT. LTD., VIZ (1) M/S N.A.FABRICS PVT.LTD. (2) M/S MKT SALES, (3) SHRI NI RMAL A BANWANI AND (4) LATE SHRI PRAVIN M. SHAH ON 30.12.2002 AND ON SUBSEQUENT DATES. DURING THE COURSE OF SEARCH, VARIOUS DOCUMENTS /LOOSE PAPERS AND COMPUTERIZED DATA WERE FOUND AND SEIZED FROM TH E PREMISES OF THIS GROUP, WHICH PERTAIN TO UNACCOUNT ED TRANSACTIONS OF THE BUSINESSES OF THESE ASSESSEE, V IZ. SUPPLY OF VARIOUS ITEMS TO THE DIFFERENT GOVT./SEMI GOVT. ORGANIZATIONS, WHICH WERE NOT DISCLOSED TO TH E INCOME-TAX DEPARTMENT AT ALL. 2. CONSIDERING THESE SEIZED MATERIAL/ DOCUMENTS/ COMPUTERIZED BOOKS OF ACCOUNTS AND THE STATEMENTS RECORDED OF SHRI NIRMAL A. BANWANI AND LATE SHRI PRAVIN M. SHAH DURING THE COURSE OF SEARCH AS WELL AS POST INVESTIGATION WORK AND BLOCK ASSESSMENT PROCEEDINGS, THE BLOCK ASSESSMENT U/S 158BC IN ABOVE MENTIONED CASES HAVE BEEN COMPLETED ON 6.7.2007. 3. SHRI GOPAL AGRAWAL, MLC/MLA, THROUGH HIS CONTACTS IN POLITICAL / BUREAUCRATIC CIRCLE USED T O PROCURE CONTACTS FOR THE ASSESSEE(S). FOR THIS HE U SED TO PAY COMMISSION IN CASH TO POLITICIANS AND BUREAUCRATS. THE ASSESSEE(S) HAVE PAID RS.2.75 CRORES TO SHRI GOPAL AGRAWAL FOR PROCURING THE CONTRACTS. THESE PAYMENTS WERE DISALLOWED U/S 37(1 ) OF THE IT ACT AND HAVE TO BE ADDED IN THE INCOME O F SHRI GOPAL AGRAWAL. AS PER PAGES 110 TO 113 OF ANNEXURE A-33 TO PANCHNAMA DATED 31.12.2002 (COPY ENCLOSED) THESE ASSESSES HAVE SHOWN PAYMENT OF RS.2,75,00,000/- TO SHRI GOPAL AGRAWAL BETWEEN THE PERIOD FROM 1.4.2001 TO 31.03.2002 AND 01.04.2002 T O 3012.2002. THE PAYMENT OF COMMISSION TO SHRI GOPAL HAS BEEN ADMITTED BY BOTH THE ASSESSEES (SHRI NIRM AL IT(SS)A NO.23/MUM/2011 (BLOCK PERIOD 1.4.1996 TO 30.12.2002) 12 A.BANWANI AND LATE SHRI PRAVIN M.SHAH) IN THEIR RESPECTIVE STATEMENTS RECORDED AT SEVERAL TIMES. 4. I AM ALSO ENCLOSING HEREWITH COPY OF PAGE NO.39 OF ANNEXURE A/37 TO PANCHNAMA DATED 31.12.2002, SHOWING THE STATEMENT OF COMMISSION ACCOUNT OF SHRI GOPAL AGRAWAL FROM THE PERIOD FROM 1.4.2001 TO 31.3.2002, WHICH ALSO REVEALS NET COMMISSION PAYMENT OF RS.1,38,40,055/- 5. IN PARA 14.3 (C) OF THE BLOCK ASSESSMENT ORDER IN THE CASE OF SHRI NIRMAL A BANWANI, THE EXTRACTS OF STATEMENTS RECORDED OF SHRI NIRMAL A BANWANI AND LATE SHRI PRAVIN M.SHAH HAVE BEEN RE - PRODUCED VIZ. I) STATEMENT OF LATE SHRI PRAVIN M.SHAH RECORDED ON 30.1.2003 II) STATEMENT OF LATE SHRI PRAVIN M.SHAH RECORDED ON 5.2.2003 III) STATEMENT OF SHRI NIRMAL A BANWANI RECORDED ON 30.12.2002 IV) STATEMENT OF SHRI NIRMAL A BANWANI RECORDED ON 6.1.2003 6. AS PER RECORDS, SHRI GOPAL AGRAWAL RECEIVED APPROXIMATELY RS.2.75 CRORES IN F.Y. 2001-02 AND 2002-03. THESE ASSESSMENTS FOR AY 2002-03 AND 2003-04 NEED TO BE RE-OPENED FOR TAXING THE AMOUNTS RECEIVED FROM THE ASSESSEE(S). I AM ALSO ENCLOSING HEREWITH A COPY OF THE ASSESSMENT ORDER U/S 158BC DATED 6.7.2007 IN THE CASE OF SHRI NIRMAL A BANWAN I FOR YOUR READY REFERENCE FOR TAKING NECESSARY ACTIO N IN THE CASE OF SHRI GOPAL AGRAWAL, MLA AS DEEM FIT. 7. IF ANY SEIZED RECORDS/ DOCUMENTS OR FURTHER DETAILS ARE NEEDED, PLEASE INTIMATE US IMMEDIATELY SO THAT I CAN BE SUPPLIED WELL IN TIME. SD/- (V.V.SHASTRI) DY.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE -47, MUMBAI. ENCL: 1.PAGE NO.110 TO 113 OF ANNEXURE A/33 2.PAGE NO.39 OF ANNEXURE A/37 3.ASSTT.ORDER U/S 158BC IN THE CASE OF SHRI NIRMAL A BANWANI IT(SS)A NO.23/MUM/2011 (BLOCK PERIOD 1.4.1996 TO 30.12.2002) 13 COPY SUBMITTED FOR INFORMATION TO 1. THE COMMISSIONER OF INCOME TAX-IV, NAGPUR. 2. THE ADDL. COMMISSIONER OF INCOME TAX, RANGE-7, NAGPUR. 3. THE ADDL.COMMISSIONER OF INCOME TAX, C.R.- MUMBAI. SD/- D.C.I.T., C.C.-47, MUMBAI. 11. WE FURTHER FIND THAT THE BLOCK ASSESSMENTS IN T HE CASE OF LATE .SHRI PRAVIN M. SHAH AND SHRI NIRMAL A BANWANI WERE COMPLETED ON 6.7.2007 I.E. PRIOR TO THE ABOVE LETTER DATED 13.7.2007. WE FURTHER FIND THAT THE SAID ASSESSMENTS WERE QUASHED BY THE, TRIBUNAL VIDE ORDER DATED 31.3.2011 (SUPRA) . WE FURTHER FI ND THAT THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF LATE PRAVIN M.SHAH HAS ALSO UPHELD THE VIEW OF THE TRIBUNAL IN HOLDING THAT THE BLOCK ASSESSMENT ORDE R PASSED BY THE AO WAS TIME BARRED. 12. IN MANOJ AGGARWAL(SUPRA) THE SPECIAL BENCH OF THE TRIBUNAL AS HELD VIDE PARA 126 AT PAGE 495 OF T HE REPORT AS UNDER: .. IN ORDER TO ASCERTAIN WHETHER IN THE COURSE OF THE ASSESSMENT PROCEEDING IN THE CASE OF MANOJ AGGARWAL U/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 THE UNDISCLOSED INCOME BELONGS TO IT(SS)A NO.23/MUM/2011 (BLOCK PERIOD 1.4.1996 TO 30.12.2002) 14 THE APPELLANT OR ANY REFERENCE TO ANY MATERIAL THEREIN INDICATING THE SAME. IN THE CIRCUMSTANCES, WE HAVE TO HOLD THAT THE SATISFACTION NOTE DATED 19.12.2002 IS NOT THE ONE CONTEMPLATED IN SECTION 158BD AND FURTHER THAT EVEN IF ITS 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 U/S.158BD. IN THE CIRCUMSTANCE, WE HOLD THAT THE SAID NOTE OF SATISFACTION 158BD. IN THE CIRCUMSTANCE, WE HOLD THAT THE SAID NOTE OF SATISFACTION IS NON-ESTABLISHED IN LAW AND FURTHER THAT THE SECTION 158BD PROCEEDINGS PURSUANT THERETO IS INVALID AND VOID AB INITIO ON THIS GROUND ALSO. 13. IN CIT V/S MRIDULA, PROP. DHRUV FABRICS (2011) 335 ITR 266 (P&H) IT HAS BEEN HELD (PAGE. 271) : THE ACT NOWHERE SPECIFICALLY PRESCRIBES ANY TIME LIMIT OR LIMITATION FOR INITIATION OF PROCEEDI NGS UNDER 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. IT WOULD, THUS, MEANS 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 OTHER TIME LIMIT IS READ IN THE PROVISIONS/STATUTE , IT(SS)A NO.23/MUM/2011 (BLOCK PERIOD 1.4.1996 TO 30.12.2002) 15 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 158BC 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, THE REVENUE CAN TAKE ACTION AT ANY TIME IN THE ABSENCE OF ANY SPECIFIC LIMITATION PRESCRIBED IN THE STATUTE. A CONSTRUCTION WHICH LEADS TO SUCH AN ANOMALY SHOULD BE AVOIDED. 14. THE TRIBUNAL, IN THE CASE OF DCIT V/S M/S ARIHA NT IMPEX AND VICE-VERSA (SUPRA) VIDE PARAGRAPHS 4 OF I TS ORDER HAS HELD AS UNDER : 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE ABOUT THE FACT THAT THE SEARCH ACTION WAS TAKEN U/S 132(1) ON SHRI ASHOK P.SHAH, SHRI NIRANJAN P. SHAH AND SHRI CHIRAG A SHAH ON 10.5.2001. THE BLOCK ASSESSMENTS IN THEIR CASES HAVE BEEN FRAMED U/S 158BC VIDE ORDERS OF THE ASSESSING OFFICER ON 14.5.2003, COPIES OF WHICH ORDERS HAVE BEEN PLACED IN THE PAPER BOOK. ADMITTEDLY THE SATISFACTION IN THE CASE OF THE PRESENT ASSESSEE, WHICH IS A PRE-CONDITION FOR INITIATING PROCEEDINGS U/S 158BD WAS RECORDED ON 22.3.2004. THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MANOJ AGGARWAL HAS HELD THAT SECTION 158BE PROVIDES THE TIME LIMIT FOR COMPLETION OF BLOCK ASSESSMENT WHICH IMPLIES THAT THE ORDER U/S 158BC SHALL BE PASSED WITHIN TWO YEARS FROM THE END OF THE MONTH IN WHICH THE LAST OF THE AUTHORIZATIONS FOR SEARCH U/S 132 WAS EXECUTED. IT HAS FURTHER BEEN HELD IN THIS CASE THAT IF THERE IS A TIME LIMIT FOR PASSING SUCH ORDER, THEN THERE IS AN IMPLIED TIME LIMIT FOR GIVING A FINDING AS TO T HE PERSON TO WHOM THE UNDISCLOSED INCOME BELONGS WHICH UNDER NO CIRCUMSTANCES CAN BE BEYOND THE TIME LIMIT SET IN SECTION 158BE. GOING BY THE MANDATE OF THE SPECIAL BENCH ORDER IT IS CLEAR THAT THE ORDER U/S 158BC IN RESPECT OF THE PERSONS SEARCHED U/S 132(1) COULD HAVE BEEN IT(SS)A NO.23/MUM/2011 (BLOCK PERIOD 1.4.1996 TO 30.12.2002) 16 PASSED UP TO 31.5.2003 BEING TWO YEARS FROM THE END OF THE MONTH IN WHICH THE LAST OF THE AUTHORIZATION WAS EXECUTED, WHICH DATE IN THESE CASES IN 10.5.2001. THE PASSING OF THE BLOCK ASSESSMENT ORDERS IN THE CASE OF SHRI ASHOK P.SHAH ETC. ON 14.5.2003 IS WITHIN THE PRESCRIBED TIME LIMIT U/S 158BC,NOW AS PER THE SPECIAL BENCH ORDER THE SAME TIME LIMIT HAS TO BE CONSIDERED FOR RECORDING SATISFACTION IN RESPECT OF ANY OTHER PERSON REFERRED TO IN SECTION 158BD, WHICH IN THE INSTANT CASE IS THE PRESENT ASSESSEE. GOING BY THE SAME YARDSTICK THE SATISFACTION OUGHT TO HAVE BEEN RECORDED ON OR BEFORE 31.5.2003 BEFORE TAKING ACTION AGAINST THE ASSESSEE IN TERMS OF SECTION 158BD. SINCE THE SATISFACTION WAS RECORDED BY THE ASSESSING OFFICER ON 22.3.2004, AS IS EMANATING FROM THE BLOCK ASSESSMENT ORDER PASSED IN THE CASE OF THE ASSESSEE ITSELF, IT IS CLEAR THAT SUCH SATISFACTION WAS RECORDED BEYOND THE TIME LIMIT PROVIDED U/S 158BE. WE ARE BOUND BY THE DECISION TAKEN BY THE SPECIAL BENCH IN THEAFORE NOTED CASE OF MANOJ AGGARWAL. RESULTANTLY ALL THE PROCEEDINGS FLOWING OUT OF THE TIME BARRED INITIATION U/S 158BD NEED TO BE QUASHED. WE ORDER ACCORDINGLY. IN SUCH SITUATION THERE IS NO NEED FOR DISPOSING OFF THE CROSS APPEALS ON MERITS. 15. IN C.I.T. VS. RAMESH KUMAR (2011) 338 ITR 126 (P & H) IT HAS BEEN OBSERVED AND HELD (HEAD NOTE): IN A SEARCH OPERATION U/S.132(1) OF THE INCOME TAX ACT, 1961, CARRIED OUT AT THE RESIDENCE OF B CERTAIN DOCUMENTS WERE SEIZED WHICH RELATED TO TWO BUSINESS CONCERNS. THE ASSESSEE MADE PURCHASES FROM ONE OF THE TWO CONCERNS DURING THE FINANCIAL YEARS 2001-02 AND 2002-03. THE ASSESSING OFFICER HAVING JURISDICTION OVER B SENT HIS SATISFACTION U/S.158BD OF THE ACT IN THE CASE OF THE ASSESSEE FOR THE BLOCK PERIOD FROM APRIL 1, 1998, TO FEBRUAR Y 5, 2003, ON JULY 15, 2005. THE UNDISCLOSED INCOME OF THE ASSESSEE FOR THE BLOCK PERIOD WAS FINALIZED AT RS.8,81,830 U/S.158BC R.W.S. 158BD OF THE ACT, ON DECEMBER 18, 2007. THE COMMISSIONER(APPEALS) HELD THAT ASSUMPTION OF IT(SS)A NO.23/MUM/2011 (BLOCK PERIOD 1.4.1996 TO 30.12.2002) 17 JURISDICTION BY THE ASSESSING OFFICER U/S.158BD OF THE ACT AND THE PROCEEDINGS INITIATED PURSUANT THERETO WERE INVALID AND VOID AS THE BLOCK ASSESSMENT ORDERS IN THE CASE OF B WERE PASSED ON MARCH 30, 2005, WHEREAS THE SATISFACTION NOTE IN THE CASE OF THE ASSESSEE WAS RECORDED ON JULY 15, 2005. THE TRIBUNAL UPHELD THE ORDER PASSED BY THE COMMISSIONER (APPEALS). ON FURTHER APPEAL: HELD, DISMISSING THE APPEAL, THAT THE ACTION CONTEMPLATED U/S.158BD OF THE ACT AGAINST A THIRD PERSON WAS NECESSARILY TO BE DURING THE COURSE OF BLOCK ASSESSMENT PROCEEDINGS U/S.158BC OF THE PERSON SEARCHED. IT COULD NOT BE AFTER THE CONCLUSION OF THE BLOCK ASSESSMENT AS THERE WAS NO OCCASION FOR AN ASSESSING OFFICER TO EXAMINE THE SEIZED MATERIAL OR DOCUMENTS OF THE PERSON SEARCHED WHEN THE BLOCK ASSESSMENT PROCEEDINGS HAD CONCLUDED AND NO OTHER PROCEEDINGS WERE PENDING BEFORE HIM. 16. IN C.I.T. VS. CALCUTTA KNITWEARS (2011) 338 ITR 239 (P & H) IT HAS BEEN HELD (HEAD NOTE): HELD, DISMISSING THE APPEAL, THAT SINCE THE BLOCK ASSESSMENT IN THE CASE OF THE S GROUP U/S.158BC OF THE ACT WAS FRAMED ON MARCH 30, 2005, WHEREAS THE SATISFACTION AS CONTEMPLATED U/S.158BD IN THE CASE OF THE ASSESSEE WAS RECORDED ON JULY 15, 2005, THE PROCEEDINGS WERE BAD IN LAW. 17. JUDGED ON THE ANVIL OF THE AFORESAID DECISIONS TO THE FACTS OF THE PRESENT CASE WE FIND THAT SINCE T HE BLOCK ASSESSMENT IN THE CASES OF SHRI NIRMAL A BANWANI AND LATE SHRI PRAVIN M.SHAH WERE FRAMED ON 6.7.2007, WHEREAS THE SATISFACTION NOTE/LETTER WAS WRITTEN ON 13.7.2007 AND THE FACT THAT DESPITE MOR E THAN ONE OPPORTUNITY PROVIDED TO THE REVENUE, THE IT(SS)A NO.23/MUM/2011 (BLOCK PERIOD 1.4.1996 TO 30.12.2002) 18 REVENUE HAS PLACED NO MATERIAL ON RECORD TO SHOW INCLUDING THE OFFICE NOTE, IF ANY, IN THE RELEVANT BLOCK ASSESSMENT ORDERS PASSED U/S.158BC, AS HELD IN THE CASE OF CIT V/S MUKTA METAL WORKS (2011) 336 ITR 555 (P&H) THAT THE OFFICE NOTE BY ITSELF MET THE REQUIREMENT FOR PROCEEDING U/S 158BD, AS TO WHETHER ANY SUCH SATISFACTION HAS BEEN RECORDED BY THE RESPECTIVE AOS IN THE CASES OF M/S N.A.FABRICS, M /S MKT SALES, SHRI NIRMAL A. BANWANI AND LATE SHRI PRAVIN M. SHAH AS ACCORDING TO THE PROVISIONS OF SECTION 158 BD OF THE ACT THE SATISFACTION HAS TO BE RECORDED BETWEEN THE INITIATION OF THE PROCEEDINGS U/S 158BC AND BEFORE COMPLETION OF BLOCK ASSESSMENT U/ S 158BC OF THE ACT IN THE CASE OF PERSON SEARCHED. IT COULD NOT BE AFTER THE CONCLUSION OF THE BLOCK ASSESSMENT AS THERE WAS NO OCCASION FOR AN AO TO EXAMINE THE SEIZED MATERIAL OR DOCUMENTS OF THE PERSON SEARCHED WHEN THE BLOCK ASSESSMENT PROCEEDINGS HAD CONCLUDED AND NO OTHER PROCEEDINGS WERE PENDING BEFORE HIM. IN THIS VIEW OF THE MATTER AND KEEPING IN VIEW THAT THE ASSESSMENTS IN THE CAS E OF LATE SHRI PRAVIN M SHAH AND SHRI NIRMAL A BANWA NI HAVE BEEN QUASHED BY THE TRIBUNAL AND CONFIRMED BY IT(SS)A NO.23/MUM/2011 (BLOCK PERIOD 1.4.1996 TO 30.12.2002) 19 THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF LATE SHRI PRAVIN M SHAH, WE ARE OF THE VIEW THAT THE ASSESSMENT ORDER PASSED BY THE AO AND CONFIRMED BY THE LD. CIT(A) IS CONTRARY TO THE PROVISIONS OF SEC TION 158BD OF THE ACT AND NEEDS TO BE QUASHED AND ACCORDINGLY, WE QUASH THE IMPUGNED ASSESSMENT ORDER PASSED BY THE AO AND CONFIRMED BY THE LD. CIT(A). W E HOLD AND ORDER ACCORDINGLY. THE LEGAL GROUND TAKEN BY THE ASSESSEE IS, THEREFORE, ALLOWED. 18. SINCE WE HAVE QUASHED THE ASSESSMENT, THEREFORE, WE DO NOT CONSIDER IT NECESSARY TO ADJUDICATE THE OTHER GROUNDS TAKEN BY THE ASSESSEE ON MERITS AND ACCORDINGLY THE SAME ARE TREATED AS INFRUCTUOUS AND, HENCE, REJECTED. 19. IN THE RESULT, THE ASSESSEES APPEAL STANDS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH JAN., 2012. SD SD (R.S. SYAL) (D.K.AG ARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, 27TH JANUARY, 2012 IT(SS)A NO.23/MUM/2011 (BLOCK PERIOD 1.4.1996 TO 30.12.2002) 20 SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI