Sri. JAYANT S. JAIN -HUF, MUMBAI V. DCIT Rg. - 15(2), MUMBAI

ITSSA 33/MUM/2007

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8360 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 month(s) 24 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 20-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 10-05-2011
• Assessment Year: misc
• Appeal Filed On: 26-02-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS KU SUM INGALE
• Assessee Lawyers: G P MEHTA
• Keywords: Block assessment
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER IT(SS)A NO. 33/MUM./2007 (BLOCK PERIOD FROM 1.4.1990 TO 4.8.2000 ) DATE OF HEARING: 10.5.2011 MR. JAYANT S. JAIN (HUF) C/O G.P. MEHTA & CO., C.AS 807, TULSIANI CHAMBERS NARIMAN POINT, MUMBAI 400 021 PAN AAAHJ0039G .. APPELLANT V/S DY. COMMISSIONER OF INCOME TAX RANGE-15(2), MUMBAI .... RESPONDENT ASSESSEE BY : MR. G.P. MEHTA REVENUE BY : MRS. KUSUM INGALE O R D E R PER J. SUDHAKAR REDDY, A.M. THIS APPEAL PREFERRED BY THE ASSESSEE, IS DIRECTED AGAINST THE IMPUGNED ORDER DATED 21 ST DECEMBER 2006, PASSED BY THE COMMISSIONER (APPEALS)-XV, MUMBAI, WHEREIN HE HAD CONFIRMED THE BLOCK ASSESSMENT ORDER DATED 29 TH DECEMBER 2005, PASSED BY THE ASSESSING OFFICER UND ER SECTION 158BD R/W SECTION 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ). 2. WE HAVE HEARD THE LEARNED COUNSEL, MR. G.P. MEHTA, APPEARING ON BEHALF OF THE ASSESSEE AS WELL AS THE LEARNED DEPAR TMENTAL REPRESENTATIVE, MRS. KUSUM INGALE. MR. JAYANT S. JAIN (HUF) IT(SS)A NO.33/MUM./2007 2 3. THE SHORT POINT FOR OUR ADJUDICATION IN THIS APPEAL IS, WHETHER OR NOT THE NOTICE ISSUED UNDER SECTION 158BD OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ), IS BAD-IN-LAW. 4. WE FIRST EXAMINE THE DATES AND EVENTS, WHICH ARE EN UMERATED BELOW:- DATE OF SEARCH 4.8.2000 NOTICE UNDER SECTION 158BC ISSUE ON 16.2.2001 RETURN OF INCOME FOR THE BLOCK PERIOD FILED UNDER PROTEST ON 2.7.2002 ASSESSMENT ORDER UNDER SECTION 158B(C) ON 27.9.200 2 CIT(A) PASSED THE ORDER CANCELING THE ASSESSMENT ON 25.3.2003 APPEAL FILED BEFORE THE HONBLE TRIBUNAL BY THE ASSESSING OFFICER ON 26.5.2003 HONBLE TRIBUNAL PASSED THE ORDER IN ITA NO.IT(SS)A NO.443/MUM./2003 ON 21.7.2006 NOTICE UNDER SECTION 158BD DATED 22.12.2003 SERVED ON 3.2.2004 ASSESSMENT ORDER PASSED UNDER SECTION 158BD ON 29.12.2005 5. THE COMMISSIONER (APPEALS), IN A REVIEW NOTE DATED 8 TH DECEMBER 2003, STATED AS FOLLOWS:- REVIEW REMARKS OF THE CIT : THIS IS A CASE WHERE THE ASSESSMENT HAS BEEN CONCLU DED UNDER SECTION 158BC CONSEQUENT UPON A SEARCH CARRIED OUT IN THE P REMISES OF THE GROUP ON 4.8.2000. IT IS SEEN THAT A NOTICE U/S 158 BC HAS BEEN ROUTINELY ISSUED WITHOUT BOTHERING TO VERIFY WHETHE R ANY WARRANT OF AUTHORIZATION WAS ISSUED IN RESPECT OF THE ASSESSEE . THE ASSESSMENT ITSELF HAS BEEN CONCLUDED ON INCOME OF ` 8.20 LAKHS, BUT ON APPEAL, THE CIT(A) HAS ANNULLED THE ASSESSMENT ON THE GROUN D THAT THE CASE DID NOT FALL UNDER THE PROVISIONS OF SECTION 158BC SINCE NO WARRANT WAS ISSUED IN RESPECT OF THE ASSESSEE. NO DOUBT A SECON D APPEAL HAS BEEN FILED AND IS PENDING BEFORE THE ITAT, BUT THE A.O. IS DIRECTED TO TAKE THE FOLLOWING SECTION IMMEDIATELY. 2. THIS IS A CASE WHERE A WARRANT WAS ISSUED IN RES PECT OF SHRI JAYANT S. JAIN INDIVIDUAL, AND IN THE COURSE OF SEA RCH, CERTAIN MATERIAL RELATING TO HUF HAS ALSO BEEN FOUND APART FROM CERT AIN UNDISCLOSED JEWELLERY BELONGING TO THE HUF. THEREFORE, THIS IS A FIT CASE FOR ISSUE OF MR. JAYANT S. JAIN (HUF) IT(SS)A NO.33/MUM./2007 3 NOTICE UNDER SECTION 158BD ON THE ACT. THE A.O. SHO ULD CAREFULLY RECORD REASONS AS TO HIS SATISFACTION THAT THE UNDI SCLOSED INCOME, DETECTED BASED ON THE SEARCH CARRIED OUT IN RESPECT OF THE ASSESSEE IN HIS INDIVIDUAL STATUS, BELONGS TO THE HUF, AND ISSU E NOTICE U/S 158BD OF THE ACT AND COMPLETE THE ASSESSMENT EXPEDITIOUSL Y. A REPORT AS TO THE ISSUE OF NOTICE U/S 158BD SHOULD BE SENT WITHIN 10 DAYS. 6. IN PURSUANCE OF THIS REVIEW ORDER DATED 8 TH DECEMBER 2003, PASSED BY THE COMMISSIONER OF INCOME TAX, THE ASSESSING OFFIC ER ISSUED NOTICE DATED 22 ND DECEMBER 2003, UNDER SECTION 158BD OF THE ACT. THE ORDER UNDER SECTION 158BC R/W SECTION 158BD, IN THE CASE OF SHR I JAYANT S. JAIN (INDIVIDUAL), WAS PASSED ON 28 TH SEPTEMBER 2002. 7. FROM THE ABOVE, IT IS EVIDENT THAT WHEN THE ASSESSM ENT ORDER DATED 27 TH SEPTEMBER 2002, PASSED UNDER SECTION 158BC IN JAYA NT S. JAIN (INDIVIDUAL), THE REASONS RECORDING SATISFACTION, I N THE CASE OF JAYANT S. JAIN (HUF) FOR ISSUANCE OF NOTICE UNDER SECTION 158BD, W ERE NOT RECORDED PRIOR TO THE COMPLETION OF THE ASSESSMENT OF THE CASE OF JAY ANT S. JAIN (INDIVIDUAL). FROM THE REVIEW OF ASSESSMENT ORDER DATED 8 TH DECEMBER 2003, IT IS CLEAR THAT THE SATISFACTION NOTE, IF ANY, WOULD HAVE BEEN PREPARED MUCH AFTER THE DATE OF COMPLETION OF ASSESSMENT IN THE CASE OF JAY ANT S. JAIN (INDIVIDUAL). THE LEARNED COUNSEL FOR THE ASSESSEE POINTS OUT THA T THE ISSUE IS NO MORE RES-INTEGRA IN VIEW OF THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MANOJ AGGARWAL V/S DCIT, (2008) 113 ITD 377 (DEL.) (SB), AND THAT THE NOTICE ISSUED UNDER SECTION 158BD IS BAD-IN-LAW AND CONSEQUENTLY, THE ASSESSMENT IS BAD-IN-LAW. 8. LEARNED DEPARTMENTAL REPRESENTATIVE, THOUGH NOT LEA VING HER GROUND, SUBMITS THAT THE SATISFACTION CAN BE RECORDED BY TH E ASSESSING OFFICER AT ANY TIME BEFORE ISSUANCE OF NOTICE UNDER SECTION 158BD, AND RECORDING OF SATISFACTION FOR ISSUE OF NOTICE UNDER SECTION 158B D, NEED NOT NECESSARILY BE DONE BY THE ASSESSING OFFICER BEFORE HE COMPLETES T HE ASSESSMENT UNDER SECTION 158BC. THESE ARGUMENTS ARE AGAINST THE PROP OSITION LAID DOWN BY THE SPECIAL BENCH OF THE TRIBUNAL, WHEREIN IT IS HE LD AS FOLLOWS:- HELD : SEC. 158BD PROVIDES FOR ASSUMPTION OF JURISDICTIO N TO MAKE A BLOCK ASSESSMENT IN THE CASE OF A PERSON NOT SEARCH ED AND AGAINST WHOM NO PROCEEDINGS HAVE TILL THEN BEEN INITIATED. CAN IT BE SAID THAT MR. JAYANT S. JAIN (HUF) IT(SS)A NO.33/MUM./2007 4 SUCH JURISDICTION CAN BE ASSUMED WITHOUT RECORDING SATISFACTION? NOT SO. IT HAS TO BE NOTED THAT THE PROCEEDINGS UNDER S . 158BC ARE AGAINST THE PERSON SEARCHED AND IF IN THE COURSE OF SUCH PR OCEEDING THE AO ASSESSING THE PERSON SEARCHED COMES ACROSS MATERIAL INDICATING THE PRESENCE 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 OTHER PERSON. AS S. 158BC RELATE S TO A PERSON SEARCHED, THERE HAS TO BE DIFFERENT PROVISION FOR M AKING A SIMILAR ASSESSMENT IN THE CASE OF THE OTHER PERSON AND HENC E S. 158BD HAS BEEN ENACTED. SO, THE SAID SECTION STATES THAT IF T HE AO IS SATISFIED THAT THE UNDISCLOSED INCOME BELONGS TO THE OTHER PERSON, THEN HE SHALL HANDOVER THE SEIZED MATERIAL SO AS TO ENABLE THE SE COND AO TO MAKE A BLOCK ASSESSMENT IN A SIMILAR MANNER AND THAT IS NO T POSSIBLE IF THE SATISFACTION IS NOT RECORDED. AND THIS CAN BE RECOR DED ONLY AND ONLY IN THE COURSE OF THE S. 158BC PROCEEDING AND NOWHERE E LSE. IT IS THE AO 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 SEARCH, IF SO ITS NATURE A ND TO WHOM IT BELONGS. IF THE SAID UNDISCLOSED INCOME BELONGS 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 THEREUPON TRANSMIT THE RELATED SEIZED MATERIAL TO T HE AO HAVING JURISDICTION OVER THE OTHER PERSON. ALL THESE FINDI NGS HAVE TO BE RECORDED AFTER AN HONEST APPRECIATION OF THE SEIZED MATERIAL WITH AN OBJECTIVE MIND AND THERE HAS TO BE A RECORD REFLECT ING SUCH FINDINGS ON THE BASIS OF WHICH ALONE THE OTHER AO CAN ASSUME JU RISDICTION TO PROCEED AGAINST THE OTHER PERSON AND IT IS THIS REC ORD WHICH FORMS THE NOTE OF SATISFACTION OR THE RECORD OF SATISFACTI ON , AS ONE MAY CALL IT. IN SUCH CIRCUMSTANCE, THE RECORDING OF SUCH SATISFA CTION IS IMPLIEDLY TO BE DONE IN THE COURSE OF THE S. 158BC PROCEEDING AS THE SATISFACTION HAS TO BE RECORDED ONLY BY THE AO MAKING THE BLOCK ASSESSMENT IN THE CASE OF THE PERSON SEARCHED WHICH IN TURN MEANS THE S. 158BC PROCEEDINGS. SUCH SATISFACTION CANNOT BE RECORDED B EYOND THE DATE OF THE BLOCK ASSESSMENT IN THE S. 158BC PROCEEDING AND THE DATE OF THE BLOCK ASSESSMENT IS THE OUTER LIMIT FOR RECORDING S UCH SATISFACTION . THIS IS FOR THE REASON THAT THE SATISFACTION HAS TO BE R ECORDED BY THE AO EXAMINING THE MATERIAL IN THE CASE OF THE PERSON SE ARCHED AND HE WILL HAVE TO FIND OUT WHETHER THERE IS ANY UNDISCLOSED I NCOME AT ALL UNEARTHED WHICH AGAIN CAN BE ONLY IN THE COURSE OF SUCH PROCEEDING. AFTER FINDING THAT THERE IS UNDISCLOSED INCOME, HE WILL HAVE TO GIVE A FINDING AS TO WHETHER SUCH INCOME BELONGS TO THE PE RSON SEARCHED AND THIS TOO HAS TO BE IN THE COURSE OF THE SAID PROCEE DING ONLY. IF HE FINDS THAT ANY OR ALL OF SUCH INCOME BELONGS TO A PERSON NOT SEARCHED, THEN HE HAS TO RECORD SUCH FINDING IN THIS BEHALF AND TA KE FOLLOW-UP ACTION AS ENVISAGED IN S. 158BD WHICH AGAIN HAS TO BE ONLY IN THE COURSE OF THE S. 158BC PROCEEDING AND HENCE IF NO SUCH SATISF ACTION IS RECORDED IN THE COURSE OF THE S. 158BC PROCEEDING, THEN ASSU MPTION OF JURISDICTION UNDER S. 158BD IS NOT POSSIBLE. IN THE CIRCUMSTANCE, THE ABSENCE OF THE WORDS 'IN THE COURSE OF THE PROCEEDI NG' IN S. 158BD IS NOT MATERIAL TO THE ISSUE IN THE CONTEXT OF THE SAI D SECTION ITSELF. AMITY HOTELS (P) LTD. VS. CIT & ANR. (2004) 192 CTR (DEL) 607 : (2005) 272 ITR 75 (DEL) AND PRIYA BLUE INDUSTRIES ( P) LTD. VS. JT. CIT (2001) 166 CTR (GUJ) 306 : (2001) 251 ITR 615 (GUJ) RELIED ON; LALTA PRASAD GOENKA VS. CIT (1980) 122 ITR 399 (BOM), CIT VS. AJODHYA MR. JAYANT S. JAIN (HUF) IT(SS)A NO.33/MUM./2007 5 PRASAD GOPINATH (1977) 107 ITR 951 (ALL), ASSTT. CI T VS. RAJESH JHAVERI STOCK BROKERS (P) LTD. (2007) 210 CTR (SC) 30 : (2007) 291 ITR 500 (SC), CIT VS. GOPAL KRISHNA SINGHANIA (1973 ) 89 ITR 27 (ALL), CIT VS. BANKEY LAL HIRA LAL (1973) 92 ITR 587 (ALL) AND NAVAYUGA TRADERS GUNNIES FIRM VS. CIT (1971) 79 ITR 519 (AP) DISTINGUISHED. [EMPHASIS ADDED ] CONSEQUENTLY, WE DISMISS THE ARGUMENTS OF THE LEARN ED DEPARTMENTAL REPRESENTATIVE AS DEVOID OF MERIT AND APPLY THE DEC ISION OF THE SPECIAL BENCH OF THE TRIBUNAL TO THE FACTS OF THE CASE AND AGREE WITH THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE . 9. IN VIEW OF THE BINDING DECISION OF THE DELHI SPECIA L BENCH OF THE TRIBUNAL CITED SUPRA AND AS THE ASSESSING OFFICER C OMPLETING THE ASSESSMENT UNDER SECTION 158BC IN THE CASE OF JAYANT S. JAIN ( INDIVIDUAL), HAS NOT RECORDED THE SATISFACTION FOR ISSUE OF NOTICE UNDER SECTION 158BD, PRIOR TO COMPLETION OF ASSESSMENT, THE ISSUE OF NOTICE UNDER SECTION 158BD IS BAD-IN- LAW AND HENCE WE CANCEL THE ASSESSMENT. 10. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH MAY 2011 SD/- N.V. VASUDEVAN JUDICIAL MEMBER SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI, DATED: 20 TH MAY 2011 COPY TO : (1) THE ASSESSEE (2) THE RESPONDENT (3) THE CIT(A), MUMBAI, CONCERNED (4) THE CIT, MUMBAI CITY CONCERNED (5) THE DR, J BENCH, ITAT, MUMBAI TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT, MUMBAI BENCHES, MUMBAI