ACIT CIR. - 4, THANE V. Sri. HARESH N. SANGHVI, THANE

ITSSA 27/MUM/2007

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8369 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 27-04-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 07-04-2011
• Assessment Year: misc
• Appeal Filed On: 15-02-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SATBIR SINGH
• Keywords: Search and seizure; Period of limitation; Block assessment
• Section: 143(3); 132

Judgement Text

1 IT(SS)A.NOS. 27 & 32/MUM/2007 BLOCK PERIOD 01-04-1995 TO 19-12-2001. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H, MUMBAI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER. I.T.(SS)A. NO.27/MUM/2007. BLOCK PERIOD : 1-4 -1995 TO 19-12-2001. ASSTT. COMMISSIONER OF INCOME-TAX, S HRI HARESH N. SANGHVI. CIRCLE-4, THANE. VS. NIKUNJ SIGNATURE, MANAV MANDIR COMPLEX, AMBADI ROAD, VASI ROAD (W), DIST. THANE. PAN AFCPS7828F APPELLANT RESPONDENT. I.T.(SS)A. NO.32/MUM/2007. BLOCK PERIOD : 1-4 -1995 TO 19-12-2001. SHRI HARESH N. SANGHVI, ASSTT. COMMISSIONER OF THANE. VS. INCOME-TAX, CIRCLE-4, THANE. APPELLANT. RESPONDENT. DEPARTMENT BY : SHRI SATBIR SINGH. ASSESSEE BY : SHRI K. SHIVRAM. O R D E R PER J. SUDHAKAR REDDY, A.M. : THESE ARE CROSS APPEALS AND ARE DIRECTED AGAINST T HE ORDER OF THE CIT(APPEALS)-II, THANE DATED 30-11-2006. 2. THE FACTS ARE BROUGHT OUT AT PARA 1 AND 2 OF THE ASSESSMENT ORDER WHICH ARE EXTRACTED BELOW FOR READY REFERENCE: 2 IT(SS)A.NOS. 27 & 32/MUM/2007 BLOCK PERIOD 01-04-1995 TO 19-12-2001. 1. A SEARCH AND SEIZURE ACTION U/S 132 OF THE I.T. ACT, 1961, WAS CARRIED OUT IN THE CASE OF SHRI JAYESH DAVE OF M/S JAYARAJ GROUP, BARODA, ON 19.12.2001. DURING THE COURSE OF SEARCH PROCEEDINGS , SOME PAPERS PERTAINING TO SHRI HARESH N. SANGHVI WERE FOUND FRO M THE OFFICE PREMISES OF SHRI JAYESH DAVE WHICH CONTAINED LOAN TRANSACTIONS OF RS.225 LACS AND CALCULATIONS OF INTEREST. SHRI JAYESH DAVE IN HIS S TATEMENT ON OATH U/S 132(4) DTD. 31.12.2001 HAD UNEQUIVOCALLY ADMITTED NET UNDI SCLOSED INCOME OF RS.225 LACS AS UNEXPLAINED ADVANCES/LOANS TAKEN BY HIM IN CASH. ON 25.1.2002 & 4.4.2002, STATEMENTS WERE RECORDED U/S 131(1A), WHEREBY SHRI HARESH SANGHVI UNEQUIVOCALLY DENIED THE TRANSACTION S OF TAKING/GIVING ANY LOANS/ADVANCES TO JAYRAJ GROUP. 1.1 INFORMATION WAS RECEIVED FROM THE DDIT(INV)-I, BARODA PASSING INFORMATION GATHERED AS AN AFTERMATH OF SEARCH AND SEIZURE ACTION IN JAYRAJ GROUP ON 19.12.2001 IN THE CASE OF SHRI HARESH N. S ANGHVI. CONSEQUENT UPON RECEIPT OF INFORMATION, A NOTICE U/S 158BD WAS ISSUED TO THE ASSESSEE ON 19.2.2004 WHICH WAS DULY SERVED ON THE SAME DATE . INITIALLY, AN OBJECTION TO THE VALIDITY AS TO THE SERVICE OF NOTICE U/S 158 BD ON THE EMPLOYEE OF THE C.A. M/S THAR & CO., C.AS. WAS RAISED BUT AS THE RE TURN FOR THE BLOCK PERIOD IN THE FORM NO.2B HAS BEEN FILED AND THE FAC T THAT THE ASSESSEE SUBSEQUENTLY PARTICIPATED IN THE PROCEEDINGS, THE O BJECTION TO THE VALIDITY TO THE SERVICE IS DEEMED TO HAVE BEEN WAIVED. IN REPLY TO THE NOTICE U/S 158BD THE ASSESSEE HAS FILED RETURN IN FORM 2B ON 2.4.200 4, DECLARING UNDISCLOSED INCOME AT RS.NIL. THE AO DETERMINED THE UNDISCLOSED INCOME AT RS.3,86 ,97,000/-. THE ASSESSEE CARRIED THE MATTER IN APPEAL. THE FIRST APPELLATE A UTHORITY GRANTED PART RELIEF. AGGRIEVED, BOTH THE REVENUE AS WELL AS THE ASSESSEE FILED THESE CROSS APPEALS. 3. WE FIRST TAKE UP THE ASSESSEES APPEAL. THE FOLL OWING REVISED GROUNDS HAVE BEEN FILED: 3 IT(SS)A.NOS. 27 & 32/MUM/2007 BLOCK PERIOD 01-04-1995 TO 19-12-2001. I. NOTICE U/S 158BD OF THE ACT BAD IN LAW. 1. THE LEARNED COMMISSIONER OF INCOME-TAX (A) FAIL ED TO APPRECIATE THAT THE ASSESSING OFFICER HAD COMPLETED THE ASSESSMENT U/S 158BC IN CASE OF THE PERSON SEARCHED I.E. MR. JAYESH DAVE OF M/S JAYRAJ GROUP ON 30.01.2004 AND THEREFORE THE SUBSEQUENT NOTICE U /S 158BD DATED 19.2.2004 WAS BAD IN LAW AS IT WAS ISSUED BEYOND TH E PERIOD OF LIMITATION. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (A) FAILE D TO APPRECIATE THAT THE DATE OF FINALIZATION OF ASSESSMENT U/S 158BC OF THE PERSON PUT TO SEARCH IS THE RELEVANT POINT OF TIME UPTO WHICH THE ASSESSING OFFICER HAS TO RECORD THE SATISFACTION CONTEMPLATED U/S 158 BD OF THE ACT. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (A) FAILE D TO APPRECIATE THAT THE NOTICE U/S 158BD WAS NOT SERVED ON THE ASSESSEE . THE NOTICE WAS SERVED ON THE EMPLOYEE OF THE CHARTERED ACCOUNTANT, THEREFORE NOTICE IS BAD IN LAW. ON MERIT 4. THE LEARNED COMMISSIONER OF INCOME-TAX (A) ERRE D IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER CONFIRMING THE ADDIT ION OF RS.53.36 LAKHS BEING THE EARNED ON THE ALLEGED LOAN OF RS.2. 25 CRORES PURPORTED TO HAVE BEEN GIVEN BY THE ASSESSEE TO ONE MR. JAYES H DAVE. 5. THE LEARNED COMMISSIONER OF INCOME-TAX (A) FAILE D TO APPRECIATE THAT THE DECLARATION OF ADDITIONAL INCOME OF RS.2.25 CRO RES MADE ON 11/2/2006 WAS IMMEDIATELY RETRACTED ON 13/2/2006, THEREFORE, THERE CANNOT BE ANY ADDITION BASED ON THE ABOVE DECLARATI ON MORESO WHEN THE SAME HAS NOT E REFUTED BY THE ASSESSING OFFICE R IN REMAND PROCEEDINGS. 6. WITHOUT PREJUDICE TO THE ABOVE THE SAID AMOUNT O F RS.2.25 CRORE NEITHER BELONGED TO THE ASSESSEE NOR ANY INTEREST E VER RECEIVED BY HIM AS HE ACTED ONLY AS A FINANCIAL BROKER BY ARRANGIN G FUNDS FOR MR. JAYESH DAVE, THEREFORE WHAT MIGHT HAVE BEEN EARNED WAS COMMISSION OF RS.4.5 LAKHS @ ON TOTAL FUND MOBILIZED OF RS.2.2 5 CRORES. 7. THE CIT(A) ERRED IN CONFIRMING THE ORDER OF ASSE SSING OFFICER LEVYING SURCHARGE U/S 113 OF THE ACT. 4 IT(SS)A.NOS. 27 & 32/MUM/2007 BLOCK PERIOD 01-04-1995 TO 19-12-2001. 4. WE HAVE HEARD MR. K. SHIVRAM, LEARNED COUNSEL FO R THE ASSESSEE AND SHRI SATBIR SINGH, THE LEARNED CIT-DR. 5. AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND A PERUSAL OF THE PAPERS ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW, WE HOLD AS FOLLOWS. 6. THE DATES AND EVENTS ARE AS FOLLOWS : S.NO. DATE EVENT. 1. 19-12-2001 SEARCH AND SEIZURE ACTION ON JAYESH DAVE, BARODA. 2. 30-01-2004 BLOCK ASSESSMENT ORDER PASSED IN THE CASE OF JAYESH DAVE, BARODA. 3. 31-01-2004 BLOCK ASSESSMENT ORDER PASSED IN THE CASE OF M/S HINDUSTAN EARTH MOVERS P. LTD. 4. 13-02-2004 SATISFACTION NOTE PREPARED. 5. 19-02-2004 NOTICE U/S 158BD SERVED ON THE ASSES SEE. FROM THE ABOVE DATES, IT IS CLEAR THAT THE SATISFAC TION NOTE HAS BEEN PREPARED BY THE AO I.E. DCIT, CIRCLE-4, THANE ON 13-02-2004. THE SA TISFACTION NOTE FILED BEFORE US, IS NOT PREPARED BY THE AO WHO HAS COMPLETED THE BLOCK ASSESSMENT PROCEEDINGS IN THE CASE OF SHRI JAYESH DAVE. FOR RE ADY REFERENCE, THE SATISFACTION NOTE SUBMITTED TO US BY THE DEPARTMENT IS EXTRACTED BELOW FOR READY REFERENCE : 13.2.2004 A SEARCH AND SEIZURE ACTION U/S 132 OF THE I.T. ACT , 1961, WAS CARRIED OUT IN THE CASE SHRI JAYESH DAVE OF M/S JAYARAJ GRO UP, BARODA, ON 19.12.2001. DURING THE COURSE OF SEARCH PROCEEDINGS , SOME LOOSE 5 IT(SS)A.NOS. 27 & 32/MUM/2007 BLOCK PERIOD 01-04-1995 TO 19-12-2001. PAPERS PERTAINING TO SHRI HARESH N. SANGHVI WERE FO UND FROM THE OFFICE/RESIDENTIAL PREMISES OF SHRI JAYESH DAVE WHI CH CONTAINED LOAN TRANSACTIONS OF RS.225 LACS AND CALCULATIONS OF INT EREST THEREOF. IN THIS REGARD, A LETTER DTD. 14.6.2002 WAS RECEIVE D FROM THE DDIT(INV)-I, BARODA REGARDING PASSING OF INFORMATIO N GATHERED AS AN AFTERMATH OF SEARCH AND SEIZURE ACTION IN JAYRAJ GR OUP ON 19.12.2001 IN THE CASE OF SHRI HARESH N. SANGHVI AND SHRI HITE SH N. SANGHVI IN WHICH THE DDIT HAS CATEGORICALLY STATED THAT THE SE IZED MATERIALS ANNEXURE A/1 (PAGE NO.46, PAGES 99-100), A-3/6, P AGES 133, A-3/8, PAGES 1-8,A-3/12, Z-2, PAGE NO.1 DATED 25.12.2001 P ERTAINED TO SHRI HARESH N. SANGHVI. ON THE BASIS OF MATERIAL FOUND AND SEIZED DURING TH E COURSE OF SEARCH ACTION CONDUCTED U/S 132 OF THE I.T. ACT, 1961 IN T HE CASE OF SHRI JAYESH DAVE (JAYRAJ GROUP OF CASES), I AM SATISFIED THAT AN AMOUNT OF RS.2.25 CRORES AND INTEREST RECEIVED AND RECEIVABLE THEREON BELONGS TO SHRI HARESH N. SANGHVI WHO IS ASSESSED IN THIS CHAR GE AND WHICH THE ASSESSEE HAS NOT SHOWN IN HIS REGULAR RETURN FILED. THEREFORE, I INVOKE THE PROVISIONS OF SECTION U/S 158BD OF THE ACT IN T HE CASE OF SHRI HARESH N. SANGHVI. [VIRENDRA OJHA) DY. COMMISSIONER OF INCOME TAX CIRCLE-4, TH ANE. THE ADMITTED FACT IS THAT THE SATISFACTION NOTE HAS BEEN PREPARED ONLY AFTER THE CONCLUSION OF THE PROCEEDINGS U/S 158BC IN THE CAS E OF JAYESH DAVE. THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MANOJ AGGARWAL VS. DCIT 113 ITD 377 (DEL.)(S.B.) HELD AS FOLLOWS : RECORDING OF SATISFACTION BEFORE COMMENCEMENT OF PROCEEDING UNDER SECTION 158BD SECTION 158BD PROVIDES FOR ASSUMPTION OF JURISDICTI ON TO MAKE A BLOCK ASSESSMENT IN THE CASE OF A PERSON NOT SEARCHED AND AGAINST WHOM NO 6 IT(SS)A.NOS. 27 & 32/MUM/2007 BLOCK PERIOD 01-04-1995 TO 19-12-2001. PROCEEDINGS HAVE BEEN INITIATED. IT CANNOT BE SAID THAT SUCH JURISDICTION CAN BE ASSUMED WITHOUT RECORDING SATISFACTION. IT HAS T O BE NOTED THAT THE PROCEEDINGS UNDER SECTION 158BC ARE AGAINST THE PE RSON SEARCHED AND IF IN THE COURSE OF SUCH PROCEEDING THE ASSESSING OFFICER ASSESSING THE PERSON SEARCHED COMES ACROSS MATERIAL INDICTING THE PRESEN CE OF UNDISCLOSED INCOME IN THE HANDS OF THE PERSON NOT SEARCHED, THERE HAS TO BE A PROVISION FOR MAKING A SIMILAR ASSESSMENT IN THE CASE OF THE OTHE R PERSON. AS SECTION 158BC RELATES TO A PERSON SEARCHED, THERE HAS TO BE DIFFERENT PROVISION FOR MAKING A SIMILAR ASSESSMENT IN THE CASE OF THE OTHE R PERSON AND HENCE SECTION 158BD HAS BEEN ENACTED. SO, THE SAID SECTIO N STATES THAT IF THE ASSESSING OFFICER IS SATISFIED THAT THE UNDISCLOSED INCOME BELONGS TO THE OTHER PERSON, THEN HE SHALL HAND OVER THE SEIZED MA TERIAL SO AS TO ENABLE THE SECOND ASSESSING OFFICER TO MAKE A BLOCK ASSESSMENT IN A SIMILAR MANNER AND THAT IS NOT POSSIBLE IF THE SATISFACTION IS NOT RECORDED. AND THIS CAN BE RECORDED ONLY AND ONLY IN THE COURSE OF THE SECTION 158BC PROCEEDING AND NOWHERE ELSE. IT IS ASSESSING OFFICER ASSESSING THE PERSON SEARCHED WHO GOES THROUGH THE SEIZED MATERIAL AND COMES TO A DECISION AS TO WHETHER THERE IS ANY UNDISCLOSED INCOME UNEARTHED AS A RESULT OF SEA RCH, IF SO ITS NATURE AND TO WHOM IT BELONGS. IF THE SAID UNDISCLOSED INCOME BEL ONGS TO THE PERSON SEARCHED THAT IS THE END OF THE MATTER. IF, ON THE OTHER HAND, THE MATERIAL EXAMINED SHOWS THAT THE UNDISCLOSED INCOME PERTAINS TO SOME OTHER PERSON HE HAS TO GIVE A FINDING TO THIS EFFECT AND THEREUP ON TRANSMIT THE RELATED SEIZED MATERIAL TO THE ASSESSING OFFICER HAVING JUR ISDICTION OVER THE OTHER PERSON. ALL THESE FINDINGS HAVE TO BE RECORDED AFTE R AN HONEST APPRECIATION OF THE SEIZED MATERIAL WITH AN OBJECTIVE MIND AND THER E HAS TO BE RECORD REFLECTING SUCH FINDINGS ON THE BASIS OF WHICH ALON E THE OTHER ASSESSING OFFICER CAN ASSUME JURISDICTION TO PROCEED AGAINST THE OTHER PERSON AND IT IS THIS RECORD WHICH FORMS THE NOTE OF SATISFACTION OR THE RECORD OF SATISFACTION. IN SUCH CIRCUMSTANCES, THE RECORDING OF SUCH SATISFACTION IS IMPLIEDLY TO BE DONE IN THE COURSE OF THE SECTION 1 58BC PROCEEDING AS THE SATISFACTION HAS TO BE RECORDED ONLY BY THE ASSESSI NG OFFICER MAKING THE BLOCK ASSESSMENT IN THE CASE OF THE PERSON SEARCHED WHICH IN TURN MEANS THE SECTION 158BC PROCEEDINGS SUCH SATISFACTION CANNOT BE RECORDED BEYOND THE DATE OF THE BLOCK ASSESSMENT IN THE SECTION 158BC P ROCEEDING AND THE DATE OF THE BLOCK ASSESSMENT IS THE OUTER LIMIT FOR RECO RDING SUCH SATISFACTION . THIS IS FOR THE REASON THAT THE SATISFACTION HAS TO BE RECORDED BY THE ASSESSING OFFICER EXAMINING THE MATERIAL IN THE CAS E OF THE PERSON SEARCHED AND HE WILL HAVE TO FIND OUT WHETHER THERE IS ANY U NDISCLOSED INCOME AT ALL UNEARTHED WHICH AGAIN CAN ONLY BE IN THE COURSE OF SUCH PROCEEDING. AFTER FINDING THAT THERE IS UNDISCLOSED INCOME, HE WILL H AVE TO GIVE A FINDING AS TO 7 IT(SS)A.NOS. 27 & 32/MUM/2007 BLOCK PERIOD 01-04-1995 TO 19-12-2001. WHETHER SUCH INCOME BELONGS TO THE PERSON SEARCHED AND THIS TOO HAS TO BE IN THE COURSE OF THE SAID PROCEEDING ONLY. IF THE FIND S THAT ANY OR ALL OF SUCH INCOME BELONGS TO A PERSON NOT SEARCHED, THEN HE HA S TO RECORD SUCH FINDING IN THIS BEHALF AND TAKES FOLLOW-UP ACTION AS ENVISA GED IN SECTION 158BD WHICH AGAIN HAS TO BE ONLY IN THE COURSE OF SECTION 158BC PROCEEDING AND, HENCE, IF NO SUCH SATISFACTION IS RECORDED IN COURS E OF SECTION 158BC PROCEEDING, THEN ASSUMPTION OF JURISDICTION UNDER S ECTION 158BD IS NOT POSSIBLE. IN THE CIRCUMSTANCES, THE ABSENCE OF THE WORDS IN THE COURSE OF THE PROCEEDING IN THE SECTION IS NOT MATERIAL TO T HE ISSUE IN THE CONTEXT OF THE SAID SECTION ITSELF. [PARA 122] [EMPHASIS ADDED] 7. THE HONBLE SUPREME COURT IN THE CASE OF MANISH MAHESHWARI 289 ITR 341 HELD AS FOLLOWS : HELD ACCORDINGLY, THAT WHERE THE PREMISES OF A DI RECTOR OF A COMPANY AND HIS WIFE WERE SEARCHED UNDER SECTION 132 OF THE INCOME-TAX ACT, 1961, AND A BLOCK ASSESSMENT HAD TO BE DONE IN RELATION T O THE COMPANY, THE ASSESSING OFFICER HAD TO (I) RECORD HIS SATISFACTIO N THAT ANY UNDISCLOSED INCOME BELONGED TO THE COMPANY, AND (II) HAND OVER THE BOOKS OF ACCOUNT AND OTHER DOCUMENTS AND ASSETS SEIZED TO THE ASSES SING OFFICER HAVING JURISDICTION AGAINST THE COMPANY. APPLYING THESE PROPOSITIONS LAID DOWN IN BOTH THESE CASE LAWS TO THE FACTS OF THIS CASE, WE HAVE TO NECESSARILY UPHOLD GROUND NO. 1 AN D 2 OF THE ASSESSEE AND HOLD THAT THE NOTICE ISSUED U/S 158BD IS BAD IN LAW, AS THE SATISFACTION; A) HAS NOT BEEN RECORDED BY THE AO WHO HAS COMPLETED THE ASSESSMEN T U/S 158BC IN THE CASE OF THE PERSON SEARCHED I.E. JAYESH DAVE OF M/S JAYARAJ GROUP; AND B) AS THE SATISFACTION HAS NOT BEEN RECORDED PRIOR TO THE CO MPLETION OF ASSESSMENT U/S 158BC IN THE CASE OF THE PERSON SEARCHED I.E. MR. JAYESH DAVE. THUS WE CANCEL THE ASSESSMENT FRAMED U/S 158BD READ WITH SECTION 1 58BC READ WITH SECTION 143(3) ON 24 TH FEB., 2006 FOR THE BLOCK PERIOD 01-04-1995 TO 19-1 2-2001 AND ALLOW THE APPEAL OF THE ASSESSEE. 8 IT(SS)A.NOS. 27 & 32/MUM/2007 BLOCK PERIOD 01-04-1995 TO 19-12-2001. 8. COMING TO THE REVENUE APPEAL, AS THE BLOCK ASSES SMENT HAS BEEN QUASHED, NOTHING SURVIVES. ACCORDINGLY, THE REVENUES APPEAL IS DISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH APRIL, 2011. SD/- SD/- (VIJAY PAL RAO) (J. SU DHAKAR REDDY) JUDICIAL MEMBER. ACCOUNT ANT MEMBER MUMBAI, DATED: 27 TH APRIL 2011. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, H -BENCH (TRUE COPY) BY ORDER ASSTT. 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