The ACIT, Central Circle-2(2), Ahmedabad V. Shri Vikas A. Shah, Ahmedabad

ITSSA 380/AHD/2018

AI Insights

The case revolves around a block assessment for the years 1995 to 2001 concerning unexplained investments amounting to Rs. 1,15,29,000 attributed to Shri Vikas A. Shah. The addition was initially made by the Assessing Officer (AO) following a search and seizure operation under section 132 of the Income Tax Act, 1961 at the premises of 'Master Group', which included documents allegedly linked to Shri Vikas A. Shah. The CIT(A) later deleted this addition, noting that the necessary procedural satisfaction required to use documents from the search against Shri Vikas A. Shah was not recorded by the AO. The Tribunal upheld the CIT(A)'s decision, emphasizing the lack of procedural compliance by the AO.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135642 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 30-03-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 01-02-2023
• Assessment Year: misc
• Appeal Filed On: 26-12-2018
• Other Referred Cases: Manish Maheshwari Vs ACIT, Manoj Agrawal Vs DCIT, Jute Corporation India Ltd. Vs CJT, National Thermal Power Co. Ltd. Vs Crr
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Search and seizure; Principle of natural justice; Additional evidence; Block assessment; Set aside
• Section: 132; 154; 143(3); 69A; 158BC; 113; 158BD

Judgement Text

आयकर आयकरआयकर आयकर अपी अपीअपी अपीलीय लीयलीय लीय अिधकरण अिधकरणअिधकरण अिधकरण, अहमदाबाद अहमदाबादअहमदाबाद अहमदाबाद यायपीठ यायपीठ यायपीठ यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’A’’ BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And MS MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./IT(SS)A No.380/AHD/2018 Block Asstt. Year: 1995 to 2001 A.C.I.T, Central Circle-2, Ahmedabad. Vs. Vikas A. Shah, 210, Anal Flats, Nr. Vijay Char Rasta, Navrangpura, Ahmedabad. PAN: APWPS4465G (Applicant) (Respondent) Revenue by : Shri Vijay Kumar Jaiswal CIT. D.R Assessee by : Shri Suresh Gandhi, A.R सुनवाई क तारीख/Date of Hearing : 02/02/2023 घोषणा क तारीख /Date of Pronouncement: 31/03/2023 आदेश आदेशआदेश आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)-7, Ahmedabad, dated 30/09/2019 arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Block Assessment Year 1995-2001. IT(SS)A no.380/AHD/2018 Block A.Y. 1995-2001 2 2. The only interconnected issue raised by the Revenue is that the learned CIT (A) erred in deleting the addition made by the AO for Rs. 1,15,29,000/- on account of unexplained investments under section 69A of the Act. 3. There was a search and seizure operation under section 132 of the Act dated 20 th October 2000 at the premises of “Master Group”. Shri Jivraj V Desai, an individual belonging to such group, was also subjected to the search and seizure operation. Based on the search, block assessment proceedings were initiated against Shri Jivraj Desai under the provisions of section 158BC of the Act. The AO finally among other addition has also made an addition of ₹1,15,29,000/- representing the unexplained investments in the property. Shri Jivraj V Desai carried the matter before the learned CIT(A) who deleted the addition made by the AO by observing as under: "Coming to the deduction sought for an amount of Rs.1,15,29,000/- in the name of Shri Vikas Shah which has been added in the hands of the assessee on the basis of his account as appearing in page 114 of the diary, I have gone through the loose page 7 and 8 of Annexure A3 which are dated 22/04/1998 being prior to MOU as referred to herein above dated 05/07/1998 ..... It is very clear that impugned land seems to have been sold earlier to Shri Vikas Shah as there is a reference of title clearance to be furnished to Vikas Shah and sale deed has been proposed to be executed from 01/06/1998 and if the sale deed is not executed, interest @ 4.5% has been stated to be worked out and amount has been proposed to be repaid by 15/06/1998...... I have also carefully gone through the accounts of Shri Vikas Shah wherein his account is debited on 15/03/1999 by an amount of Rs.11,000/- i.e. Rs. 1,10,00,000/-with a narration 'Hawala Jigneshbhai' and corresponding debits is also given the same amount on the same date with the same narration. This hawala is telling with the account of Shri Jignesh Desai on page 2 of Annexure A-3 wherein a single amount is debited with a narration of 'Hawala VS' i.e. Vikas Shah............ from these evidences existence of Mansi Builders Ltd. stands establish and therefore the AO is directing to initiate necessary proceedings in the case of Shri Vikas Shah. Thus the amount in the name of Shri Vikas Shah) of Rs.1,15,29,000/- is deleted. 3.1 In view of the above directions, the proceedings against the assessee were initiated by issuing show cause notice dated 5 th May 2005 which was completed vide order dated 28-06-2007 by making an addition of ₹1,15,29,000/-, representing the unexplained investments in the property, to the total income of the assessee under the provisions of section 69A of the Act in the order framed under section 158BC read with section 158BD of the Act. IT(SS)A no.380/AHD/2018 Block A.Y. 1995-2001 3 4. Assessee carried the matter before the learned CIT(A) and contended that he was not subject to the search proceedings and therefore any document found from the premises of the search party in the search proceedings can be used against the assessee only after recording the satisfaction of the AO of the search person that the document belongs to the assessee. However, the assessment has been framed in the hands of the assessee without recording the satisfaction, meaning thereby, the due process prescribed under the law was not followed by the AO and therefore in the absence of such satisfaction, the proceedings against the assessee are not maintainable. The learned CIT(A) after considering the submission of the assessee allowed the ground of appeal of the assessee by holding as under: 9.2 In the context of the additional ground of appeal now being taken by the appellant it has been alleged that the said assessment order u/s 158BD made on 28/03/2007 is void ab initio being barred by the limitation of time because the AO doing the assessment of Shri Jivraj Desai u/s 158BC did not record the required satisfaction for (initiating) proceedings u/s 158BD in the case of Shri Vikas Shah j which was required to be recorded by him within the time limit prescribed u/s 158BE for completion of assessment u/s 158BC in the case of Shri Jivraj Desai. For the purpose the appellant is relying on the judgment of Hon’ble Supreme Court in the case of Manish Maheshwari Vs ACIT 289 ITR 341 and of Hon’ble Delhi ITAT (Special Bench) in the case of Manoj Agrawal Vs DCIT 113 KTD 377 wherein it has been held that satisfaction has to be recorded for the purpose of proceeding u/s 158BD in the case of a person not searched and the recording of satisfaction must be completed within the time limit prescribed for completion of assessment u/s 158BC in the case of the person searched. 9.3 As it has already been narrated and seen that the assessment proceedings u/s 158BD for the block period in the case of the appellant, Shri Vikas A. Shah was required to be taken because of finding and direction of the Ld. C1T(A) in the appellate order dated 19.01.2004 in the appeal by Shri Jivaraj V Desai against the assessment order 31.10.2002 (for the block period 1.4.1990 to 20.10.2000 u/s 158BC). The notice u/s 158BC in the case the appellant, Shri Vikas A. Shah was lued on 5.5.2005 (served on 1.6.2005) which was corrected to be read as notice u/s 158BD vide letter dated 28.03.2007. Though 1 am of the view that error in mentioning the block period in the notice or/and in the assessment order should not vitiate the impugned assessment order dated 28.06.2007 because it is rectifiable u/s 154 and protected by section 292B. The CIT(A) can also make such corrections. Accordingly the errors in block period where ever occurred will stand corrected. 9.4 The appellant has taken the additional ground that the assessment is void ab initio as the said assessment for the block period has been framed without any satisfaction having been recorded and otherwise also, the assessment is barred by limitation. The AO has objected to admission of the additional ground taken before me on the ground that the assessee is not eligible for admissibility of additional evidence at this point of time as the same does not appear fair and justified. However, it is the case of the appellant that the additional ground of appeal is required to be admitted since it is based on legal issues IT(SS)A no.380/AHD/2018 Block A.Y. 1995-2001 4 which go to the roots of the additions made and that the mistake of not taking the ground earlier was noticed while preparing the submission to be filed now and on the realisation that the order passed by the then AO was without jurisdiction and barred by the limitation. The appellant has relied upon the decision of the Supreme Court in Jute Corporation India Ltd. Vs CJT and National Thermal Power Co. Ltd. Vs Crr. The appellant being supported by various case laws where by the additional grounds arc required to be admitted and even the hon'ble ITATs and the Hon'ble Courts admitting the additional grounds, the legal ground challenging the assessment is admitted. 9.6 The time limit for issue of notice for proceedings u/s 15BD is not explicitly provided under the Act but as per the provisions of section 158BE, the assessment u/s 158BD should be completed within 2 years from the end of month in which notice was served for assessment in respect of the person searched. In the case of the appellant, related search was conducted on 20/10/2000, notice for assessment u/s 15SBC in the case of Shri Jivraj V. Desai was issued and served on 23/3/2001 and the assessment u/s 158BC r.w.s. 143(3) was completed on 31/10/2002. Accordingly, the time limit of completing the assessment u/s 158BD, if at all required in the case of Shri Vikas A. Shah was 30/04/2003. The notice u/s 158BC/ 158BD in the case of Shri Vikas A. Shah was issued on 5/5/2005 which is de the prescribed time limit. Thus the assessment proceedings leading to the order dated 28/06/2007 is invalid being beyond the time limit prescribed u/s 158BE. Further thereto, the Courts have held that the AO of the person searched is also required to record the reason for initiating the proceedings u/s 158BD in case(s) of other person(s) to whom the material seized at the premises of the person searched belong. In the Remand Report dated 02/05/2018, the JCIT, OSD CC-2(2), Ahmedabad has narrated the chronology of various events related to the case and narrated that it is not feasible to report as to whether the AO of Shri Jivraj Desai u/s 158BC had recorded any satisfaction for initiating proceedings in the case of the appellant u/s 158BD or not. Thereafter letter was written to DCIT, Mehsana vide 15/05/2018. However, no response has been received till date. Though not admitted by the AOs, it can be concluded that the satisfaction was not recorded in/for the case. Thus on both the grounds the assessment order dated 28.06.2007 is not sustainable. 5. Being aggrieved by the order of the learned CIT(A), the Revenue is in appeal before us. 6. The learned DR before us vehemently supported the order of the AO by reiterating the findings contained in the assessment order. 7. On the other hand, the learned AR submitted that the assessment has been framed without recording the satisfaction which was mandatory under the provisions of law. Thus, the assessment in itself is not valid. The ld. AR vehemently supported the order of the ld. CIT-A. IT(SS)A no.380/AHD/2018 Block A.Y. 1995-2001 5 8. We have heard the rival contentions of both the parties and perused the materials available on record. Undeniably, the assessee was not subject to the search and seizure operation under section 132 of the Act. However, it was alleged that the document belonging to the assessee was recovered in the search and seizure operation carried out in the case of Shri Jivraj V Desai. Based on such document an inference was drawn that the assessee has made unaccounted investment. But the learned CIT(A) deleted the addition made by the AO on the ground that the document recovered from the 3 rd party premises can be used against the assessee only in a situation where the satisfaction is recorded by the AO of the search party to the fact that the document belongs to the assessee. 8.1 At the time of hearing, a question was posed to the learned DR whether any satisfaction was recorded by the AO of the search party before using the documents against the assessee. The learned DR could not bring anything on record suggesting that the satisfaction was recorded by the AO of the search party. 8.2 The provisions of section 158 BD of the Act reads as under: 158BD. Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or any assets were requisitioned under section 132A, then, the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed under section 158BC against such other person and the provisions of this Chapter shall apply accordingly. 8.3 On the plain reading of the above provisions, there remains no ambiguity that the document used from the premises of the 3 rd party can only be used against the assessee i.e. other than the search person where the AO of the search party records the satisfaction that the document belongs to the assessee. It is mandatory requirement which has not been complied with by the AO while framing the assessment of the assessee. Therefore, we are of the view that the assessment itself is not sustainable in the eyes of law. IT(SS)A no.380/AHD/2018 Block A.Y. 1995-2001 6 8.4 Before parting, it is equally important to note that it is the 2 nd round of litigation before us. On the previous occasion the ITAT vide order dated 06-02- 2015 in IT(SS)A No. 793/AHD/2010 was pleased to set aside the issue to the file of the learned CIT(A) for fresh adjudication as per the provisions of law. The relevant direction of the ITAT is extracted below: "2.1 It is undisputed that assesses has moved application for adjournment on 01.09.2010. Consequently, we find that ignoring the same, CIT(A) has reached to certain conclusions having discussed the matter with concern ACIT as discussed above. There is nothing on record to suggest that assesses was confronted with discussion of ACIT by CIT(A), which is basis for reaching certain conclusion. It is not justified. Opportunity of hearing is essence of principle of natural justice, which has been ignored in this case. So, in the interest of justice, we set aside the order of CIT(A) and restore the matter to him with direction to decide the same as per fact and law after providing due opportunity of hearing to assesses. Since, we are restoring the issue on preliminary ground, so we are refraining ourselves to comment on merit of issue at hand." 8.5 From the above direction, it is revealed that there was the direction by the ITAT for making the fresh assessment and there was no specific direction with regard to addition made by the AO. As such, in the present case, the assessee, though set aside proceedings, was entitle to raise the jurisdictional issue discussed above. 8.6 Since we have decided the issue on technical ground and held that the assessment framed under section 153BC r.w.s 153BD r.w.s 143(3) is not maintainable, the other issues raised by the Revenue become academic and same are being dismissed as infructuous. 9. In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the Court on 31/03/2023 at Ahmedabad. Sd/- Sd/- (MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 31/03/2023 Manish