Smt. Nilu Devi, Patna V. DCIT, Central Circle-1, Patna

ITSSA 35/PAT/2016

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 4729 (ITAT-PATNA)
• Duration Of Justice: 5 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 17-04-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 22-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Block assessment
• Section: 143(2); 158BC; 158B(b); 158BD

Judgement Text

IT(SS)A No. 35/PAT/2016 Block Assessment Year 1991-92 to 2001-02 Smt. Nilu Devi, Patna 1 IN THE INCOME TAX APPELLATE TRIBUNAL, ‘PATNA BENCH’ AT KOLKATA, [Virtual Court Hearing] Before Shri Rajpal Yadav, Vice-President (KZ) & Shri Girish Agrawal, Accountant Member I.T.(SS)A. No. 35/PAT/2016 Assessment Year: Block Period 1991-92 to 2001-02 Smt. Nilu Devi,..........................................................................Appellant W/o. Sri Mahendra Prasad, IAS Colony, West of Canal, Boring Road, Patna -Vs.- Deputy Commissioner of Income Tax,.......................................Respondent Central Circle-1, Patna Appearances by: Shri S.C. Sannigrahi, C.A., appeared on behalf of the assessee Shri Sanjay Mukherjee, CIT(D.R), appeared on behalf of the Revenue Date of concluding the hearing : March 24, 2022 Date of pronouncing the order : April 18, 2022 O R D E R Per Rajpal Yadav, Vice-President (KZ):- The assessee is in appeal before the Tribunal against the order of ld. Commissioner of Income Tax (Appeals)-3, Patna dated 23.09.2016 passed for the block period starting from assessment year 1991-92 to 2001-02. In the first preliminary objection, the assessee has challenged the action taken under section 158BD of the Income Tax Act. The assessee has taken the following grounds of appeal:- “1. For that, on the fact & circumstances of the case, order of the learned Commissioner of Income Tax (Appeal) is without jurisdiction and bad in law & facts. Without prejudice to above. IT(SS)A No. 35/PAT/2016 Block Assessment Year 1991-92 to 2001-02 Smt. Nilu Devi, Patna 2 2. For that, on the fact & circumstances of the case, the learned Commissioner of Income Tax (Appeal(‘s order by making addition of Rs.5,000/-, ever and above t4he assessed income of Rs.2,45,000/- by the ld. Assessing Officer is baseless and without any authorities and as such, bad in law & facts. 3. For that on the fact and circumstances of the case, the learned Commissioner of Income Tax (Appeal)’s confirmation of addition of Rs.50,000/- is also against the order of learned Assessing Officer. As such this confirmation of addition is totally baseless and hypothetical and hence, such addition is liable to be deleted. 4. For that, on the fact and circumstances of the case, both the authorities below failed to appreciate the fact that the sum of Rs.1,50,000/- was received by the appellant in the assessment year 2001-02, the regular return of which was to be filed by the appellant subsequent to search as per law. Hence, this addition and confirmation in block assessment without any material found in search is not legal, proper and justified and hence, such addition is liable to be deleted. 5. For that, the appellant craved leaved to add, modify and amend any of the grounds of appeal at the time of hearing”. ~ 2. The ld. counsel for the assessee at the very outset submitted that for taking cognizance under section 158BD of the Income Tax Act, the pre-requisite conditions are that during the course of search, some incriminating material should be recovered which belonged to the person other than the searched person. The ld. Assessing Officer of the searched person should record a satisfaction that income assessable in the hands of other person is embedded in the seized material and, therefore, action against such other person than the searched person is required to be taken. After recording the satisfaction, he is required to transmit copy of such satisfaction to the Assessing Officer having jurisdiction on such other person and thereafter the Assessing Officer of the such other person is also required to record his satisfaction for initiating the proceeding against such person. In the present case, search was conducted on the assessee’s husband and according to the Revenue, certain material was found and seized exhibiting the fact that income assessable in the hands of the assessee required to be considered for the block period. Therefore, the action under section 158BD was taken against the assessee. He submitted that no such satisfaction is available on the record. He further contended that an additional ground to this IT(SS)A No. 35/PAT/2016 Block Assessment Year 1991-92 to 2001-02 Smt. Nilu Devi, Patna 3 effect was taken before the ld. 1 st appellate authority, but such ground has been adjudicated by the ld. CIT(Appeals) by observing that it was not pressed. According to him, a jurisdictional issue cannot be waived even with the consent of the assessee. The assessee even if not pressed this ground, the Commissioner should have decided it, whether Assessing Officer has a jurisdiction to initiate the proceeding under section 158BD or not. 3. As far as the grounds taken on merits of the addition are concerned, we take all the grounds together, i.e. Grounds No. 2 to 4. Before adverting to the specific grounds of appeal raised by the assessee, we deem it appropriate to make reference to the facts discussed by the ld. Assessing Officer. According to the ld. Assessing Officer, the assessee is wife of Shri Mahendra Prasad, who is a partner in the firm M/s. Navrang. She is a partner of M/s. Marble House also. A search was conducted on the residential premises of Shri Mahendra Prasad on 23.11.2000. The ld. Assessing Officer was of the view that during the course of search, incriminating material belonging to the assessee was found and therefore, action under section 158BD is required to be taken against the assessee. Accordingly he issued a notice under section 158BD inviting the assessee to file her return of income. In response to such notice, she filed return of income on 17.09.2003 disclosing ‘nil’ income. The ld. Assessing Officer has passed a block assessment on 22.11.2004. He computed the undisclosed income as under:- Total income for the assessment year 1991-92 Undisclosed income of the respective assessment years of the block period Total income as per return filed by the assessee for the block period Rs.24,980/- IT(SS)A No. 35/PAT/2016 Block Assessment Year 1991-92 to 2001-02 Smt. Nilu Devi, Patna 4 Less: As per section 158BB (income disclosed by the assessee in the regular return of income) Rs.24,980/- NIL Total income for the assessment year 1992-93 Total income as per return filed by the assessee for the block period Rs.24,700/- NIL Less: As per section 158BB (income disclosed by the assessee in the regular return of income Rs.24,700/- Total income for the assessment year 1993-94 Total income as per return filed by the assessee for the block period Rs.32,150/- NIL Less: As per section (income disclosed by the assessee in the regular return of income) Rs.32,150/- Total income for the assessment year 1994-95 Total income as per return filed by the assessee for the block period Rs.36,855/- NIL Less: As per section 158BB (income disclosed by the assessee in the regular return of income) Rs.36,855/- NIL Total income for the assessment year 1995-96 IT(SS)A No. 35/PAT/2016 Block Assessment Year 1991-92 to 2001-02 Smt. Nilu Devi, Patna 5 Total income as per return filed by the assessee for the block period Rs.36,270/- Less: As per section 158BB (income disclosed by the assessee in the regular return of income) Rs.36,270/- NIL Total income for the assessment year 1996-97 Total income as per return filed by the assessee for the block period Rs.41,280/- Less: As per section 158BB (income disclosed by the assessee in the regular return of income) Rs.41,280/- NIL Total income for the assessment year 1997-98 Total income as per return filed by the assessee for the block period Rs.38,178/- Less: As per section 158BB (income disclosed by the assessee in the regular return of income) Rs.38,178/- NIL Total income for the assessment year 1998-99 Total income as per return filed by the assessee for the block period Rs.51,230/- Add.: Undisclosed business income (as discussed in para 3) Rs.50,000/- IT(SS)A No. 35/PAT/2016 Block Assessment Year 1991-92 to 2001-02 Smt. Nilu Devi, Patna 6 Less: As per section 158BB (income disclosed by the assessee in the regular return of income) Rs.51,230/- Rs.50,000/- Total income for the assessment year 1999-2000 Total income as per return filed by the assessee for the block period Rs.62,730/- Add.: Undisclosed business income (as discussed in para 3) Rs.45,000/- Less: As per section 158BB (income disclosed by the assessee in the regular return of income) Rs.62,730/- Rs.45,000/- Total income for the assessment year 2000-01 Total income as per return filed by the assessee for the block period Rs.92,480/- Less: As per section 158BB (income disclosed by the assessee in the regular return of income) Rs.92,480/- NIL Total income as per return filed by the assessee for the block period 2001-02 (till the date of search i.e. 23.11.2000) Total income as per return filed by the assessee for the block period Rs.56,684/- Add: Undisclosed business income (as discussed in para 3) Rs.1,50,000/- IT(SS)A No. 35/PAT/2016 Block Assessment Year 1991-92 to 2001-02 Smt. Nilu Devi, Patna 7 Less: As per section 158BB (income disclosed by the assessee in the regular return of income) Rs.56,684/- Rs.1,50,000/- 4. With the assistance of ld. representatives, we have gone through the record carefully. Before adverting to the specific addition, we deem it appropriate to bear in mind the scheme of assessment of undisclosed income under section 158BD of the Income Tax Act. It is pertinent to note that section 158B(b) provides the definition of undisclosed income for the block period and section 158BB provides mechanism of computing undisclosed income. The undisclosed income for the block period either under section 158BC or 158BD is to be determined on the basis of seized material found during the course of search. Section 158BD contemplates if during the course of search any incriminating material was found, which belongs to any other person than the searched person, then the Assessing Officer of the searched person would record his satisfaction exhibiting the assessment of such undisclosed income in the hands of other person than the searched person. The Assessing Officer of the searched person thereafter transmits such satisfaction to the Assessing Officer having jurisdiction on the other person and in this way, the machinery for assessment under section 158BD would be set in the motion. The income thereafter has to be determined on the basis of seized material recovered during the course of search. Keeping in view the above scheme, let us examine the facts of the present case. We have perused the computation of income. Ld. Assessing Officer did not make any addition from assessment year 1991-92 upto 1997-98. He made additions in A.Y. 1998-99, 1999-2000 and 2001-02. These additions are Rs.50,000/-, Rs.45,000/- and Rs.1,50,000/-. He thus determined the undisclosed income at Rs.2,45,000/-. A perusal of the assessment order would indicate that he has not made reference to any seized material. Rather he has treated the loans taken by the assessee in these assessment IT(SS)A No. 35/PAT/2016 Block Assessment Year 1991-92 to 2001-02 Smt. Nilu Devi, Patna 8 years as undisclosed business income of the assessee. It is also pertinent to observe that the assessee has been filing her return of income and did file return for A.Ys. 1991-92 to 2001-02. In the Fund Flow Statement, she has shown loan of Rs.45,000/- from Mahendra Prasad, HUF in 1999-2000. The Assessing Officer has treated it as business income. Similarly he treated the loan of Rs.1,50,000/- as undisclosed income for the period 2001-02 upto 23.11.2000. This Rs.1,50,000/- was found to be deposited in the Bank account found during the search, i.e. Account No. 3842. This account was seized by the CBI. Her due date for filing of the regular return has not expired. Therefore, we fail to understand how these amounts become undisclosed income of the assessee. The time for regular return, for the accounting period during which these amounts have been deposit was yet to expire. How it could be anticipated that these deposits would not be considered in the return. Therefore, it was premature for the AO to treat it as undisclosed income. The loans in earlier years, i.e. A.Y. 1998-99 and 1999-2000 were part of the regular return. He just rejected this stand of the assessee on the ground that copies of the balance-sheets were not filed in those years. It is for the Revenue to ascertain this aspect by issuance of a notice under section 143(2) in those years, because in the scheme of block assessment under section 158BD, a simultaneous regular assessment was required to be framed. Once certain items have been disclosed by the assessee and were part of regular return, those items cannot become undisclosed income and more so the business income. The authorities have totally failed to appreciate the circumstances and apply the correct provisions of the Income Tax Act. Therefore, these additions are deleted. 5. One of the grounds raised by the assessee is that the ld. CIT(Appeals) has erred in making further addition of Rs.5,000/-. The ld. CIT(Appeals) has again treated all these loans taken by the assessee in earlier years, which were part of her regular return as undisclosed business income. He has just enhanced the amount by Rs.5000 more, IT(SS)A No. 35/PAT/2016 Block Assessment Year 1991-92 to 2001-02 Smt. Nilu Devi, Patna 9 therefore, this addition is also not sustainable for the reasons given by us while dealing with Rs.2,45,000/- added by the ld. Assessing Officer. This addition is also deleted. 6. As far as preliminary jurisdictional issue is concerned that there is no satisfaction note available on the record. We find that ld. counsel for the assessee has relied upon nine decisions and more particularly upon the decision of the Hon’ble Supreme Court in the case of Manish Maheswari –vs.- ACIT reported in 289 ITR at page 341. This appeal is lying in the Tribunal from the last six years. On repeated occasions, Department has been seeking time but was unable to place on record copy of such satisfaction note. Even the ld. CIT(Appeals) has rejected this ground simply for the reason that the assessee has withdrawn it. A jurisdictional aspect can never be waived by the parties even by consent, the ld. CIT(Appeals) ought to have decided it. We have been waiting continuously for a long period for the copy of such satisfaction note but the same has not been provided. Considering the pendency of this appeal and involvement of small addition, we heard this appeal since we have deleted the additions on merit. We are refraining ourselves from recording any finding on this primary issue for the time being, and treat this ground as redundant in view of our finding on the merits of the addition. 7. In the result, the appeal of the assessee is partly allowed and all the additions confirmed by the ld. CIT(Appeals) are deleted. Order pronounced in the open Court on April 18 th , 2022. Sd/- Sd/- (Girish Agrawal) (Rajpal Yadav) Accountant Member Vice-President (KZ) Kolkata, the 18 th day of April, 2022 IT(SS)A No. 35/PAT/2016 Block Assessment Year 1991-92 to 2001-02 Smt. Nilu Devi, Patna 10 Copies to : (1) Smt. Nilu Devi, W/o. Sri Mahendra Prasad, IAS Colony, West of Canal, Boring Road, Patna (2) Deputy Commissioner of Income Tax, Central Circle-1, Patna (3) Commissioner of Income Tax (Appeals)-3, Patna (4) Commissioner of Income Tax- (5) The Departmental Representative (6) Guard File TRUE COPY By order Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.