DCIT, Ernakulam V. N.C.Thomas, Kothamangalam

ITSSA 3/COCH/2011

• Counselvise Citation: [2013] 121 COUNSELVISE.COM (IT) 8766 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 28-03-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 31-01-2013
• Assessment Year: misc
• Appeal Filed On: 21-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C B M WARRIER
• Assessee Lawyers: S VIJAYAPRABHA; M ANIL KUMAR
• Keywords: Block assessment
• Section: 132; 154

Judgement Text

1 IT(SS)A NO. 01 TO 03/COCH/2011 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T(SS)A NO. 01/COCH/2011 (BLOCK ASSESSMENT YEAR 1997-98 TO 2002-03) SHRI N.C. THOMAS VS THE DY.CIT, CENT.CIR.2 NADUKUDIYIL HOUSE ERNAKULAM KOTHAMANGALAM PAN : ABIPT3620L (APPELLANT) (RESPONDENT) I.T(SS)A NO. 02 & 03/COCH/2011 (BLOCK ASSESSMENT YEAR 1997-98 TO 2002-03 & PERIOD COVERING 01-04-2002 TO 18-12-2002) DY.CIT, CENT.CIR.2 VS SHRI N.C. THOMAS ERNAKULAM NADUKUDIYIL HOUSE KOTHAMANGALAM (APPELLANT) (RESPONDENT) TAXPAYER BY : SHRI CBM WARRIER RESPONDENT BY : SHRI M ANIL KUMAR, C.I.T.& SMT. S VIJAYAPRABHA DATE OF HEARING : 31-01-2013 DATE OF PRONOUNCEMENT : 28-03-2013 2 IT(SS)A NO. 01 TO 03/COCH/2011 O R D E R PER N.R.S. GANESAN (JM) BOTH THE TAXPAYER AND THE REVENUE FILED THE APPEAL AGAINT THE ORDER OF THE CIT(A)-III, KOCHI DATED 31-01-2011 FOR THE B LOCK PERIOD 1997-98 TO 2002-03 AND PERIOD COVERING 01-04-2002 TO 18-12-20 02. THE REVENUE HAS ALSO FILED APPEAL IN IT(SS)A NO.03/COCH/2011 AGAINS T THE ORDER OF RECTIFICATION PASSED BY THE CIT(A) U/S 154 OF THE A CT. SINCE ALL THE APPEALS ARE ARISING OUT OF THE SAME ORDER OF THE CIT(A), WE HEARD THE SAME TOGETHER AND DISPOSE OF THE SAME BY THIS COMMON ORDER. 2. SHRI CBM WARRIER, THE LD.REPRESENTATIVE FOR THE TAXPAYER SUBMITTED THAT THERE WAS A SEARCH U/S 132 OF THE ACT ON 18-12 -2012 AT THE RESIDENCE OF SHRI T.J GEOGE & SHRI C.P. DAVID. ON THE BASIS OF THE INCIRMINATING MATERIALS SAID TO BE FOUND AT THE RESIDENCE OF SHRI T.J GEOGE & SHRI C.P. DAVID, PROCEEDINGS U/S 158BD WERE INITIATED AGAINST THE TAXPAYER BY ISSUING NOTICE U/S 158BD OF THE ACT ON 20-03-2006. ACCORDI NG TO THE LD.REPRESENTATIVE, THE TAXPAYER IS UNDER THE JURISD ICTION OF THE ITO, WD.2, THODUPUZHA. THE DY.CIT, CENT.CIR.2, ERNAKULAM IS N OT HAVING JURISDICTION OVER THE TAXPAYER. THEREFORE, THE NOTICE ISSUED U/ S 158BD BY THE DY.CIT IS 3 IT(SS)A NO. 01 TO 03/COCH/2011 VOID AB INITIO. THE LD.REPRESENTATIVE FURTHER SUBM ITTED THAT THE ASSESSMENTS IN THE CASE OF SEARCHED PERSONS, VIZ. S HRI T.J GEOGE & SHRI C.P. DAVID WERE COMPLETED ON 30-12-2004. TILL COMPLETIO N OF THE ASSESSMENTS IN THE CASE OF SHRI T.J GEOGE & SHRI C.P. DAVID NO SATISFACTION WAS RECORDED IN RESPECT OF THE PRESENT TAXPAYER. ACCORDING TO T HE LD.REPRESENTATIVE, ONLY AFTER 20-03-2006 NOTICE WAS ISSUED U/S 158BD OF THE ACT. EVEN THIS NOTICE DOES NOT INDICATE THE RECORDING OF THE SATISFACTION . ACCORDING TO THE LD.REPRESENTATIVE, THERE WAS A DELAY OF ONE YEAR AN D THREE MONTHS IN ISSUING NOTICE U/S 158BD AFTER THE COMPLETION OF TH E ASSESSMENTS IN THE CASE OF THE SEARCHED PERSONS. ACCORDING TO THE LD. REPRESENTATIVE, THIS PERIOD IS UNREASONABLE. THEREFORE, THE ASSESSMENT PROCEEDINGS ARE ARBITRARY. THE LD.REPRESENTATIVE HAS ALSO ARGUED T HE MATTER ON MERIT WITH REGARD TO THE ADDITIONS. 3. ON THE CONTRARY, SHRI M ANIL KUMAR, THE LD.DR SU BMITTED THAT INCOME-TAX ACT DOES NOT PROVIDE FOR ANY TIME LIMIT FOR ISSUE OF NOTICE U/S 158BD OF THE ACT. ACCORDING TO THE LD.DR, THE ASSE SSING OFFICER COULD ISSUE NOTICE U/S 158BD IN RESPECT OF PERSONS OTHER SEARCH ED ONLY AFTER COMPLETION OF THE ASSESSMENT IN RESPECT OF THE PERS ON SEARCHED. IN THIS 4 IT(SS)A NO. 01 TO 03/COCH/2011 CASE, ACCORDING TO THE LD.DR, THE ASSESSMENTS OF TH E SEARCH PERSONS WERE COMPLETED ONLY ON 30-12-2004. THE NOTICE U/S 158BD WAS ISSUED ON 20-03- 2006. THEREFORE, ACCORDING TO THE LD.DR, THE NOTIC E WAS ISSUED WITHIN A REASONABLE PERIOD. THE LD.DR HAS ALSO ARGUED THE M ATTER WITH REGARD TO THE MERIT OF THE ADDITIONS MADE BY THE ASSESSING OFFICE R. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE MAIN CONTENTION OF THE LD.REPRESENTATIVE FOR THE TAXPAYER IS THAT INITIATI ON OF PROCEEDINGS AFTER LAPSE OF ONE YEAR AND THREE MONTHS FROM THE DATE OF COMPLETION OF THE ASSESSMENTS IN THE CASE OF PERSONS SEARCHED IS ARBI TRARY. THEREFORE, THE ASSESSMENT ORDER CANNOT STAND IN THE EYES OF LAW. WE FIND THAT THE KERALA HIGH COURT IN THE CASE OF CIT VS BIMBIS CREAMS & BA KES (2012) 254 CTR 633 (KER) HAD AN OCCASION TO CONSIDER THIS ISSUE. IN T HE CASE BEFORE THE KERALA HIGH COURT, THE ASSESSMENT IN THE CASE OF SEARCHED PERSON WAS COMPLETED ON 29-03-2001 AND THE NOTICE U/S 158BD WAS ISSUED I N RESPECT OF THE PERSON OTHER THAN SEARCHED ON 29-05-2001. THE KERA LA HIGH COURT, AFTER CONSIDERING THE PROVISIONS OF SECTION 158BC AND 158 BD FOUND THAT A PRUDENT OFFICER WHO FIRST COMPLETED THE ASSESSMENT U/S 158BC ON THE 5 IT(SS)A NO. 01 TO 03/COCH/2011 SEARCHED PERSON AND THEREAFTER BASED ON THE MATERIA LS AVAILABLE PROCEEDS FOR ASSESSMENT U/S 158BD AGAINST THE PERSON OTHER T HAN SEARCHED ABOUT WHOM THE MATERIALS WERE OBTAINED IN THE COURSE OF S EARCH. THE KERALA HIGH COURT FURTHER OBSERVED IN THE ABSENCE OF ANY PROVIS ION IN THE ACT REQUIRING THE DEPARTMENT TO ISSUE NOTICE U/S 158BD WITHIN A T IME FRAME, THE COURT CANNOT PRESCRIBE ANY TIME LIMIT FOR ISSUE OF SUCH N OTICE. THE KERALA HIGH COURT FURTHER OBSERVED THAT AT THE MAXIMUM, THE ASS ESSMENT COULD BE DECLARED ARBITRARY IF THE SAME WAS NOT INITIATED WI THIN A REASONABLE TIME. THE KERALA HIGH COURT FOUND THAT TWO MONTHS PERIOD FROM THE DATE OF COMPLETION OF THE ASSESSMENT U/S 158BC AGAINST THE SEARCHED PERSON WAS REASONABLE. ACCORDINGLY IT WAS FOUND THAT THE ASSE SSMENT U/S 158BD WAS VALIDLY INITIATED. 5. IN THE CASE BEFORE US, THERE WAS A DELAY OF ONE YEAR AND THREE MONTHS. ADMITTEDLY, THE ASSESSMENT WAS COMPLETED O N 30-12-2004 IN RESPECT OF THE PERSON SEARCHED AND THE NOTICE WAS I SSUED U/S 158BD ON 20- 03-2006. THE QUESTION ARISES FOR CONSIDERATION IS CAN WE SAY THAT THE DELAY OF ONE YEAR AND THREE MONTHS IN ISSUING NOTIC E U/S 158BD FROM THE 6 IT(SS)A NO. 01 TO 03/COCH/2011 DATE OF COMPLETION OF THE ASSESSMENTS IN RESPECT OF THE PERSONS SEARCHED IS NOT REAOSNABLE? 6. WE FIND THAT THIS BENCH OF THE TRIBUNAL IN A.C. I.T. VS CICY P THOMAS IN IT(SS) A NO.32/COCH/2007 & C.O. NO.37/COCH/2007 ORD ER DATED 22-12-2011 HAD AN OCCASION TO CONSIDER THIS ISSUE ELABORATELY. AFTER CONSIDERING THE PROVISIONS OF SECTION 132(9A) OF THE ACT, IT WAS FO UND THAT THE OFFICER, WHO CONDUCTED THE SEARCH HAS TO EXAMINE THE DOCUMENT WI THIN 60 DAYS AND IF THE DOCUMENT DOES NOT RELATE TO THE PERSON AGAINST WHOM SEARCH WAS CONDUCTED, HE HAS TO HAND OVER THE SAME TO THE CONC ERNED OFFICER WHO IS HAVING JURISDICTION OVER THE PERSONS AGAINST WHOM T HE MATERIAL WAS FOUND. THE TRIBUNAL FOUND THAT THIS IS THE FIRST AVAILABLE OPPORTUNITY TO EXAMINE THE SEIZED MATERIAL. APART FROM THAT IN THE COURSE OF THE BLOCK ASSESSMENT PROCEEDINGS IN RESPECT OF THE PERSON SEARCHED, THE ASSESSING OFFICER HAS AN OCCASION TO EXAMINE ALL THE DOCUMENTS THOROUGHLY. THEREFORE, IT IS FOR THE ASSESSING OFFICER TO ISSUE A NOTICE WITHIN THE REAS ONABLE PERIOD OF TIME. THE TRIBUNAL FURTHER FOUND THAT EVEN THOUGH NO TIME LIM IT WAS PRESCRIBED FOR ISSUING NOTICE U/S 158BD UNDER THE SCHEME OF THE IN COME-TAX ACT, THE ASSESSING OFFICER HAS TO ISSUE NOTICE WITHIN A REAS ONABLE PERIOD. 7 IT(SS)A NO. 01 TO 03/COCH/2011 ACCORDINGLY, THIS TRIBUNAL FOUND THAT ISSUE OF NOTI CE U/S 158BD AFTER TWO YEARS FROM THE DATE OF COMPLETION OF THE ASSESSMENT IN RESPECT OF THE PERSON AGAINST WHOM SEARCH WAS CARRIED OUT IS BARRE D BY LIMITATION. THIS BENCH OF THE TRIBUNAL HAS PLACED ITS RELIANCE ON TH E DECISION OF THE HYDERABAD BENCH OF THIS TRIBUNAL IN DY.CIT VS P VEN KATARAMANA IT(SS)A NO.08/HYD /2010 DATED 11-10-2011. 7. THE DECISION OF THIS TRIBUNAL IN THE CASE OF CIC Y P THOMAS (SUPRA) WAS FOLLOWED IN THE SUBSEQUENT DECISION OF THIS TRIBUNA L IN THE CASE OF DY.CIT VS SUNIL DAS R IN IT(SS)A NO.30/COCH/2011 & ORS ORDER DATED 06-01-2012. THIS TRIBUNAL FOUND THAT A SIMILAR VIEW WAS TAKEN BY THE GUJARAT HIGH COURT IN THE CASE OF KHANDUBHAI VISANJI DESAI & ORS VS DY.C. I.T. (1999) 236 ITR 73 (GUJ). IN FACT, THE CONSTITUTIONAL VALIDITY OF SEC TION 158BD WAS CHALLENGED BEFORE THE GUJARAT HIGH COURT IN THE CASE OF KHAND UBHAI VISANJI DESAI & ORS (SUPRA). THE GUJARAT HIGH COURT, AFTER SCREENI NG THE ENTIRE PROVISIONS OF SECTION 132 AND 158BC AND 158BD OF THE ACT HAS OBSE RVED AS FOLLOWS AT PAGE 97 OF THE ITR: 8 IT(SS)A NO. 01 TO 03/COCH/2011 THE ASSESSING OFFICER, ONCE HE REACHES THE RE QUISITE SATISFACTION, IS BOUND TO ACT SWIFTLY TO PROCEED AG AINST SUCH OTHER PERSON AS SOON AS MAY BE IN REASONABLE TIME. THE SPEED AND DESPATCH WITH WHICH HE SHOULD ACT IS WRIT LARGE ON THE CONNECTED PROVISIONS OF SECTION 132(9A) OF THE ACT UNDER WHICH THE AUTHORISED OFFICER WHO HAS NO JURISDICTIO N OVER THE PERSON REFERRED TO IN CLAUSE (A), (B) OR (C) OF SUB -SECTION (1) OF SECTION 132 HAS TO HAND OVER THE BOOKS OF ACCOUNT, DOCUMENTS AND ASSETS SEIZED TO THE INCOME-TAX OFFICER HAVING JURISDICTION OVER SUCH PERSON WITHIN 15 DAYS OF SUCH SEIZURE AND THE ASSESING OFFICER IS REQUIRED TO SERVE A NOTICE TO S UCH PERSON UNDER SECTION 158BC REQUIRING HIM TO FURNISH A RETU RN IN THE PRESCRIBED FORM NO.2B AND TO COMPLETE THE BLOCK ASS ESSMENT IN ONE YEAR FROM THE END OF THE MONTH IN WHICH THE LAST AUTHORISATION FOR SEARCH OR REQUISITION WAS EXECUTE D. THUS, THE APPREHENSION THAT A NOTICE CAN BE ISSUED UNDER SECT ION 158BD READ WITH SECTION 158BC BY THE ASSESSING OFFICER IN THE CASE OF SUCH OTHER PERSON AT ANY TIME IS ILL-FOUNDED. 8. THE KERALA HIGH COURT ALSO IN THE CASE OF BIMBIS CREAMS & BAKES (SUPRA) HAS OBSERVED AS FOLLOWS AT PAGE 637 OF THE ITR: 5. WE NOTICE THAT THE ASSESSMENT OF THE SEARCHED ASSESSEES IN THE SAME GROUP WERE COMPLETED ON 29 TH MARCH, 9 IT(SS)A NO. 01 TO 03/COCH/2011 2001 WHICH WAS ADMITTEDLY WITHIN THE PERIOD OF LIMI TATION PRESCRIBED. HOWEVER, ONLY AFTER COMPLETION OF THE ASSESSMENT OF THE SAID ASSESSEES, NOTICE WAS ISSUED UNDER S. 1 58BD ON THE RESPONDENT-ASSESSEE ON 29 TH MAY, 2001. THE ASSESSMENT WAS COMPLETED ON THE RESPONDENT-ASSESSEE ON 29 TH MAY, 2003 WHICH IS WITHIN TWO YEARS FROM THE END OF THE MONTH IN WHICH NOTICE UNDER S. 158BD WAS ISSUED TO THE RESPONDENT- ASSESSEE AS PROVIDED UNDER S.158BE(2)(B) OF THE ACT. SO MUC H SO, THE ASSESSMENT UNDER S.158BD IS WELL WITHIN THE STATUTO RY PERIOD WITH REFERENCE TO DATE OF ISSUANCE OF NOTICE UNDER S.158BD. 6. RELYING ON THE DECISION IN PANCHAJANYAM MANAGEME NT AGENCIES (SIC-PARVEEN FABRICS (P) LTD) CASE SENIOR COUNSEL FOR THE RESPONDENT-ASSESSEE SUBMITTED THAT THE AO WAS B OUND TO INITIATE SIMULTANEOUS PROCEEDINGS UNDER S.158BD AGA INST THE RESPONDENT-ASSESSEE I.E. ALONG WITH S.158BC ASSESSM ENTS INITIATED AGAINST THE GROUP OF CONCERNS SEARCHED BY THE DEPARTMENT. SENIOR COUNEL FOR THE REVENUE SUBMITTE D THAT THERE IS NO TIME LIMIT PRESCRIBED UNDER THE ACT FOR ISSUANCE OF NOTICE UNDER S.158BD AND ACCORDING TO HIM, THE AO H AS TO FIRST COMPLETE THE ASSESSMENT THAT GETS TIME BARRED FIRST AND THEN PROCEED TO MAKE ASSESSMENT UNDER S.158BD LATER. BE SIDES FINDING FORCE IN THIS CONTENTION, WE ALSO FEEL THAT IT IS ONLY ON COMPLETION OF ASSESSMENT UNDER S.158BC ON THE SEARC HED ASSESSEE THE AO CAN CONCLUDE THAT THE REMAINING INC OME IN 10 IT(SS)A NO. 01 TO 03/COCH/2011 RESPECT OF WHICH DETAILS WERE COLLECTED DURING SEAR CH COULD BE ASSESSED IN THE HANDS OF OTHER ASSESSEES. IN FACT, BIFURCATION OF INCOME RELATING TO SEARCHED ASSESSEES AND INCOME RE LATING TO OTHERS WILL BE CLEAR ONLY AFTER DETERMINING THE INC OME OF THE SEARCHED ASSESSEES. SO MUCH SO, IN OUR VIEW, A PRU DENT OFFICER SHOULD FIRST COMPLETE ASSESSMENT UNDER S.158BC ON S EARCHED ASSESSEES AND THEREAFTER BASED ON THE MATERIALS AVA ILABLE, PROCEED FOR ASSESSMENT UNDER S.158BD AGAINST OTHER ASSESSEES ABOUT WHOM DETAILS WERE OBTAINED IN THE COURSE OF S EARCH. IN THE ABSENCE OF ANY PROVISION IN THE ACT REQUIRING T HE DEPARTMENT TO ISSUE NOTICE UNDER S.158BD WITHIN A T IME FRAME, WE DO NOT THINK THE COURT CAN PRESCRIBE ANY TIME LIMIT. AT THE MAXIMUM WE CAN DECLARE AN ASSESSMENT ARBITRA RY. IF ASSESSMENT IS NOT INITIATED WITHIN A REASONABLE TIM E WHICH IS NOT THE CASE HERE BECAUSE ASSESSMENT WAS INITIATED UNDER S.158BD WITHIN TWO MONTHS FROM COMPLETION OF ASSESS MENT UNDER S.158BC AGAINST SEARCHED ASSESSEES WHICH WAS MADE WITHIN TIME. SO MUCH SO, WE HOLD THAT THE ASSESSME NT UNDER S.158BD WAS INITIATED WITHIN A REASONABLE TIME AND THE SAME WAS COMPLETED WITHIN THE STATUTORY PERIOD OF 2 YEAR S S CONTEMPLATED UNDER S.158BE(2)(B) OF THE ACT. 9. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS OF THE CO NSIDERED OPINION THAT THE DELAY OF ONE YEAR THREE MONTHS IN ISSUING NOTIC E U/S 158BD AFTER COMPLETION OF THE ASSESSMENTS IN THE CASE OF SEARCH ED PERSONS IS 11 IT(SS)A NO. 01 TO 03/COCH/2011 UNREASONABLE AND ARBITRARY. NO REASON IS FORTHCOMI NG FROM THE DEPARTMENT FOR THE DELAY IN ISSUING THE NOTICE U/S 158BD WHILE CLAIMING THAT NO LIMITATION IS PROVIDED UNDER THE ACT. THE ACT DOES NOT ENVISAGE THAT THE NOTICE U/S 158BD COULD BE ISSUED AT ANY POINT O F TIME. THEREFORE, BY RESPECTFULLY FOLLOWING THE JUDGMENT OF THE KERALA H IGH COURT IN THE CASE OF BIMBIS CREAMS & BAKES (SUPRA) AND THE JUDGMENT OF T HE GUJARAT HIGH COURT IN THE CASE OF KHANDUBHAI VISANJI DESAI & OS (SUPRA ) WE HOLD THAT THE ISSUE OF NOTICE U/S 158BD AFTER EXPIRY OF ONE YEAR AND TH REE MONTHS IS ARBITRARY AND UNREASONABLE. ACCORDINGLY, THE CONSEQUENTIAL O RDER PASSED BY THE ASSESSING OFFICER CANNOT STAND IN THE EYES OF LAW. HENCE, THE SAME IS QUASHED. 10. IN THE RESULT, APPEAL OF THE TAXPAYER IN IT(SS) A NO.01/COCH/2011 IS ALLOWED AND THE APPEALS OF THE REVENUE IN IT(SS)A. NO.02 & 03/COCH/2011 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH MARCH, 2013. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 28 TH MARCH, 2013 PK/- 12 IT(SS)A NO. 01 TO 03/COCH/2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH