M/s. Kamini Construction Company Pvt. Ltd., JODHPUR V. DCIT, JODHPUR

ITSSA 4/JODH/2010

• Counselvise Citation: [2012] 124 COUNSELVISE.COM (IT) 7784 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 13-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 13-12-2011
• Assessment Year: misc
• Appeal Filed On: 25-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G R KOKANI
• Assessee Lawyers: U C JAIN
• Keywords: Opportunity of being heard; Block assessment; Documents seized
• Section: 143(3); 133A; 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH , JODHPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITSSA NO. 4/ JU/2010 BLOCK PERIOD: 01-04-1996 TO 06-02-2003 PAN: AABCK 8963 G M/S. KAMANI CONSTRUCTION COMPANY (P) LTD. VS. THE DCIT E-119/20, KALPATRU SHOPPING CENTRE CENTRAL CIRC LE- 1 SHASTRI NAGAR, JODHPUR JODHPUR (APPELLANT ) (RESPONDENT) ASSESSEE BY : SHRI U.C. JAIN DEPARTMENT BY : SHRI G,.R. KOKANI DATE OF HEARING: 13-12-2011 DATE OF PRONOUNCEMENT: 13-01-2012 ORDER PER N.L. KALRA, AM:- THE ASSESSEE HAS FILED AN APPEAL AGAINST ORDER O F THE LD. CIT (A), CENTRAL, JAIPUR DATED 25-02-2010 FOR THE BLOCK PERIOD 01-04-1996 TO 06-02-2003. 2.1 THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE AR E AS UNDER:- 1. THAT O THE FACTS AND IN THE CIRCUMSTANCES OF THE LD. CIT(A) ERRED IN UPHOLDING THE VALIDITY OF NOTICE ISSUED U/ S 158BD OF I.T. ACT AND CONSEQUENTIAL ASSESSMENT ORDER PASSED U/S 1 58BD READ WITH SECTION 143(3) WHICH WAS CHALLENGED ON THE FOL LOWING GROUNDS BEFORE HIM. (A) THAT THE BASIS OF ISSUE OF NOTICE U/S 158BD IS THE SEARCH AT THE BUSINESS AND RESIDENTIAL PREMISES OF SHRI BADRI RAM CHOUDHARY WHICH ITSELF IS ILLEGAL AND VOI D AND 2 SUBJECT TO CHALLENGE BEFORE HON'BLE CIT (A) AS WEL L AS BEFORE THE HON'BLE RAJASTHAN HIGH COURT. (B) THAT NOTICE U/S 158BD IS BASED ON MATERIAL FOUN D AS A RESULT OF SURVEY U/S 133A AND AS SUCH THE PROVISI ONS OF CHAPTER XIV-B ARE NOT APPLICABLE THAT THE LD. AO WHILE PASSING THE ASSESSMENT ORDE R IN THE CASE OF PERSON SEARCHED ON27-06-2005 FAILED TO RECORD ANY SATISFACTION AS REQUIRED U/S 158BD TO IS SUE ANY NOTICE U/S 158BD IN THE NAME OF APPELLANT AND THE SATISFACTION RECORDED IN THE CASE OF ASSESSEE ON 21 -05-2007 I.E. AFTER EXPIRY OF A PERIOD OF MORE THAN 22 MONTH S IA BAD IN LAW AND BAD IN FACTS AND IS BARRED BY LIMITATION . (D) THAT MATERIAL ALLEGED TO BE FOUND AS A RESULT O F SURVEY U 133A WHICH WAS SUBSEQUENTLY SEIZED IN AN I LLEGAL MANNER NOWHERE SUGGESTS ANY UNDISCLOSED INCOME IN T HE HANDS OF THE APPELLANT SO AS TO FORM A BELIEF AS RE QUIRED U/S 158BD. (E) THAT THE LD. AO IS BEING A QUASI JUDICIAL AUTHO RITY UTTERLY FAILED TO PROVIDE A REASONABLE OPPORTUNITY OF BEING HEARD AND THE MANNER IN WHICH OPPORTUNITY WAS DENIE D AND THE ASSESSMENT WAS FRAMED IN THE MANNER AS PROVIDED U/S 144 AND THE ADDITIONS MADE WITHOUT DUE OPPORTUNITY OF BEING HEARD MAKES THE ORDER ILLEGAL AND LIABLE TO B E QUASHED. 2.2 BEFORE THE LD. CIT(A),THE VALIDITY OF THE ORDER WAS CHALLENGED ON THE GROUND THAT THAT SINCE THE ASSESSMENT ORDER IN THE CASE OF BADR I RAM CHOUDHARY WAS PASSED ON 27- 06-2005, THEREFORE, THE NOTICE ISSUED U/S 158BD BY HIM ON 21-05-2007 I.E. AFTER EXPIRY OF PERIOD OF MORE THAN 22 MONTHS IS BAD IN LAW AND IN FACT IS BARRED BY LIMITATION. IT WAS 3 FURTHER SUBMITTED BEFORE THE LD. CIT(A) THAT SATISF ACTION HAS BEEN RECORDED IN THE CASE OF THE ASSESSEE AND NOT IN THE CASE OF SHRI BADRI RAM CHOUDHARY , THE CASE IN WHICH ASSESSMENT WAS MADE U/S 158BC OF THE ACT. RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS. 1. MANISH MAEHSHWARI VS. ACIT, 289 ITR 341 (SC) 2. PANCHRATNA COMPLEX VS. ACIT, (ITSSA NO. 45/JU/2004 DATED 31- 08-2009) 2.3 THE LD. CIT(A) SENT THE CONTENTIONS OF THE ASSE SSEE TO THE AO. THE AO SUBMITTED HIS REMAND REPORT VIDE LETTER DATED 20-01-2010. IT WAS SUBMITTED THAT THE DELAY WAS DUE TO THE REASON THAT SHRI BADRI RAM CHOUDHARY HAS CHALLE NGED THE LEGALITY OF SEARCH ITSELF BEFORE THE HON'BLE RAJASTHAN HIGH COURT AS WELL AS BEFORE THE TRIBUNAL, JODHPUR. HENCE, THERE WAS DELAY IN TAKING ACTION U/S 158BD OF THE A CT IN THE CASE OF THE ASSESSEE. 2.4 IN THE REJOINDER, THE LD. AR OF THE ASSESSEE RE ITERATED THE SAME SUBMISSIONS AS MADE EARLIER. IT WAS SUBMITTED THAT THE ASSESSEE H AS CHALLENGED THE FACTS THAT NO SATISFACTION HAS BEEN RECORDED BY THE AO AT THE TIM E OF PASSING OF THE ASSESSMENT ORDER OF THE SEARCHED PERSONS. THE LD. CIT(A) VIDE PARA 5.3 OF HIS ORDER DISMISSED THE GROUND OF APPEAL OF THE ASSESSEE IN RESPECT OF VALIDITY OF T HE ORDER ON THE GROUND THAT NOTICE ISSUED U/S 158BD IS VALID. IT WILL BE USEFUL TO REPRODUCE PARA 5.3 OF LD. CIT(A)S ORDER AS UNDER:- 5.3 I HAVE CONSIDERED THE SUBMISSION MADE BY THE LD. LD. AR AND HAVE PERUSED THE MATERIAL ON RECORD. FROM THE P ERUSAL OF THE BLOCK ASSESSMENT ORDER DATED 27-06-2005 U/S 158BC IN THE CSE OF SHRI BADRI RAM CHOUDHARY, IT IS SEEN THAT AT MANY PLACES IN TH IS ORDER, THE AO HAS MENTIONED THAT VARIOUS DOCUMENTS SEIZED IN THE CASE OF SHRI BADRI RAM 4 CHOUDHARY RELATE TO THE ASSESSEE COMPANY AND ACTION U/S 158BD WILL BE TAKEN IN ITS CASE BY RESORTING TO THE PROVISIONS OF SECTION 158BD. FOR EXAMPLE, IN PLARA 25.1( PAGE 26) OF THE ORDER, THE AO HAS REFERRED TO PAGE NO. 6 OF EXHIBIT -5 WHICH PERTAINS THE ACCOUNT OF S HRI RAJESH BOHRA IN CONNECTION WITH THE CONSTRUCTION OF THE HOTEL BUILD ING OF THE ASSESSEE COMPANY AT JAISALMER. IN PARA 26 (PAGE 28), HE HAS MADE REFERENCE TO PAGE NO. 5A OF EXHIBIT 6 WHICH IS RECEIPT OF RS. 5,000/- DATED 15-11-01 PERTAINING TO THE ASSESSEE COMPANY. AGAIN IN PARA 3 5 (PAGE 34), HE HAS REFERRED TO EXHIBIT-16 WHICH CONTAINS DETAILS OF EX PENDITURE THAN THE EXPENDITURE SHOWN HAS BEEN MENTIONED AND THE SAME W OULD BE CONSIDERED IN THE HANDS OF THE COMPANY BY RESORTING TO ACTION U/S 158BD OF THE ACT. IN PARAS 41.1 AND 41.2 (PAGE 59 AND 60), HE HAS REF ERRED TO THE DOCUMENTS REGARDING SHARE CAPITAL OF RS.43,52,110/- IN THE CA SE OF THE ASSESSEE COMPANY AND HAS STATED THAT THE SAME WOULD BE CONSI DERED BY RESORTING TO SECTION 158 BD IN THE CASE OF THE ASSESSEE COMPANY. FURTHER, IN PARA 53 (PAGE 64), THERE IS REFERENCE OF PAGE NO.103 OF EXH IBIT-51 WHICH IS BILL OF M/S. VANDANA ENGINEERING COMPANY PERTAINING TO MAHA DEV PALACE, JAISALMER. SIMILARLY, THE A.O. HAS REFERRED TO EXHI BIT 59 ON PAGE 68 OF THE ORDER AND ALSO PRINTOUTS TAKEN FROM CPUS INCLUDING THE ACCOUNTS RELATING TO THE ASSESSEE COMPANY AS MENTIONED AT PAGE 70 OF THE ASSESSMENT ORDER IN THE CASE OF SH. BADRI RAM CHOUDHARY STATING THAT THESE DOCUMENTS RELATE TO THE ASSESSEE COMPANY AND SHALL BE EXAMINE D IN ITS CASE BY TAKING ACTION U/S 158BD. THUS IT IS NOTICED THAT DURING TH E COURSE OF BLOCK ASSTT. PROCEEDINGS IN THE CASE OF SH. BADRI RAM CHOUDHARY (THE SEARCHED PERSONL), THE A.O. HAD EXAMINED THE MATERIAL WHICH WAS SEIZED DURING THE COURSE OF SEARCH IN HIS CASE. AFTER EXAMINATION OF THE SEIZED DURING THE COURSE OF SEARCH IN HIS CASE. AFTER EXAMINATION OF THE SEIZED MATERIAL, HE CAME TO THE CONCLUSION THAT SOME OF THE SEIZED DOCU MENTS RELATED, INTER- ALIA, TO THE ASSESSEE. THUS THE A.O. OF THE SEARCHE D PARTY WAS SATISFIED ON 5 THE BASIS OF MATERIAL BEFORE HIM THAT THE UNDISCLOS ED INCOME REFLECTED IN SOME OF THESE DOCUMENTS BELONGED TO THE ASSESSEE. A S MENTIONED ABOVE, THE A.O. HAS GIVEN FINDING IN THE ASSTT. ORDER OF S H. BADRI RAM CHOUDHARY ABOUT THE SPECIFIC DOCUMENTS PERTAINING TO THE ASSE SSEE AND AT VARIOUS PLACES HAS MENTIONED THAT THESE DOCUMENTS WILL BE C ONSIDERED IN THE CASE OF THE ASSESSEE BY RESORTING TO THE PROVISIONS OF S ECTION 158BD. THUS THERE WAS AN APPLICATION OF MIND AND CLEAR CUT FINDING BY THE AO THAT SOME OF THE DOCUMENTS SEIZED FROM THE PREMISES OF THE SEARC HED PARTY WAS RELATING TO THE UNDISCLOSED INCOME OF THE ASSESSEE. HENCE, T HIS IS THE SATISFACTION RECORDED BY THE AO OF THE SEARCHED PARTY AS CONTEMP LATED IN SECTION 158BD. FURTHER, AT THE TIME OF ISSUING NOTICE U/S 158BD TO THE ASSESSEE , THE AO OF THE ASSESSEE AND OF THE PARTY SEARCHED WE RE THE SAME AND THE ENTIRE SEIZED MATERIAL INCLUDING THE SEIZED DOCUMEN TS RELATING TO THE ASSESSEE WERE WITH THE AO OF THE ASSESSEE I.E. DCI T, CENTRAL CIRCLE- 1, JODHPUR AND HENCE THE REQUIREMENT OF HANDING OVER O F THE DOCUMENTS PERTAINING TO THE ASSESSEE IS ALSO FULFILLED. THERE FORE, IN MY VIEW BOTH THE CONDITIONS FOR INVOKING SECTION 158BD I.E. RECORDIN G OF SATISFACTION BY THE AO OF THE PARTY SEARCHED AND HANDING OVER OF THE SE IZED MATERIAL TO THE AO OF THE OTHER PERSON ARE SATISFIED. 2.5 WE HAVE HEARD BOTH THE PARTIES. THE REASONS REC ORDED ARE AVAILABLE AT PAGES 5 AND 6 OF THE PAPER BOOK FILED BY THE LD. AR . THE REASO NS HAVE BEEN RECORDED BY THE AO HAVING JURISDICTION OVER THE ASSESSEE. THE AO WHO H AS RECORDED THE REASONS SATISFACTION IS NOT THE AO IN THE CASE OF THE PERSON SEARCHED BU T IS IN THE CASE OF THE ASSESSEE. THESE REASONS HAVE BEEN RECORDED ON 21-05-2007. NOTICE U/ S 158BD HAS ALSO BEEN ISSUED ON THE SAME DATE. IN THE REASONS RECORDED, IT IS MENTIONED THAT CERTAIN DOCUMENTS WERE FOUND DURING SEARCH IN THE CASE OF SHRI BADI RAM CHOUDHAR Y. THE BLOCK ASSESSMENT U/S 158BC 6 IN THE CASE OF SHRI BADRI RAM CHOUDHARY WAS PASSED ON 27-06-2005. THE ITAT JODHPUR BENCH IN THE CASE OF PANCHRATNA COMPLEX VS. ACIT VI DE ORDER DATED 31-08-2009 IN ITSSA NO. 45/HU/2004 HAD AN OCCASION TO CONSIDER TH E VALIDITY OF NOTICE ISSUED U/S 158BD. THE SATISFACTION WAS RECORDED BY THE AO HAVI NG JURISDICTION OVER THE PERSON AGAINST WHOM NOTICE U/S 158BD WAS ISSUED. IN THAT C ASE, THE AO WAS THE SAME WHO WAS HAVING JURISDICTION OVER THE SEARCHED PERSON AND TH E ASSESSEE AND IT WAS CONTENDED BEFORE THE TRIBUNAL THAT REQUIREMENT OF SECTION 158BD STAN DS SATISFIED. THE ITAT JODHPUR BENCH HELD THAT THE NOTICE ISSUED IS AB INITO VOID. THE ITAT MUMBAI BENCH IN THE CASE OF ACIT VS. KISHORE LAL BALWANT RAI AND OTHERS HAS HEL D THAT REQUIREMENT OF SECTION 158BD WITH RESPECT TO RECORDING OF SATISFACTION IS NOT DILUTED IN THE CASE WHERE THE AO OF THE PERSON SEARCHED AND OTHER PERSON IS COMMON. IN THIS CASE BEFORE THE MUMBAI TRIBUNAL, THE ASSESSMENT U/S 158BC WAS MADE ON 21-0 5-2001 WHILE SATISFACTION WAS RECORDED ON 15-03-2002. SUCH SATISFACTION WAS TREAT ED AS BELATED AND IT WAS HELD THAT NOTICE U/S 158BD IS INVALID. THE SPECIAL BENCH IN T HE CASE OF MANOJ AGARWAL VS. DCIT, 113 ITD 377 (DEL.) HAD AN OCCASION TO CONSIDER IN R ESPECT OF TIME LIMIT FOR ISSUING NOTICE U/S 158BD. THE LEGISLATURE HAS FIXED THE TIME LIMIT U/S 158BE FOR PASSING THE BLOCK ASSESSMENT U/S 158BC AND THEREFORE, THIS TIME LIMIT AUTOMATICALLY APPLIES FOR INVOKING THE PROVISIONS OF SECTION 158BD. THE SPECIAL BENCH HELD THAT SATISFACTION IS TO BE RECORDED BY THE AO HAVING JURISDICTION OVER THE SEA RCHED PERSON. THE DELHI BENCH IN THE CASE OF ACIT VS. ASHNA MONGA, 2010-TIOL -531-ITAT D ELHI HAD AN OCCASION TO CONSIDER THE VALIDITY OF ISSUE OF NOTICE U/S 158BD AFTER 30 MONTHS OF ORDER PASSED U/S 158BC. IN THIS CASE, THE SATISFACTION WAS RECORDED ON 13-01-2004 I.E. BEYOND THE TIME 7 LIMIT PRESCRIBED U/S 158BE FOR PASSING THE ORDER U/ S 158BC. THIS TIME LIMIT STOOD EXPIRED ON 29-08-2002. THE DELHI BENCH HELD THAT NOTICE U/S 158BD IS INVALID. IN THIRD MEMBER DECISION OF JABALPUR BENCH IN THE CASE OF ADDL. CIT VS. MUKTA GOYANKA, 129 ITD 201, IT WAS HELD THAT SATISFACTION SHOULD BE RECORDED BY TH E AO OF THE SEARCHED PERSON. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. CALCUTTA KNITWEARS, 338 ITR 239 HELD THAT SATISFACTION U/S 158BD RECORDED A FTER COMPLETION OF BLOCK ASSESSMENT U/S 158BC WILL MAKE THE NOTICE U/S 158BD AS INVALID . CONSIDERING THE ORDER OF THE SPECIAL BENCH AND THE DECISIONS AS REFERRED ABOVE, WE HOLD THAT NOTICE U/S 158BD IS NOT VALID IN THE EYE OF LAW. ONCE THE NOTICE IS INVALID THEN CONSEQUENTIAL ORDER PASSED IS ALSO INVALID. WE THEREFORE, CANCEL THE ORDER OF THE AO AND WE DO NOT FEEL TO ADJUDICATE UPON THE OTHER GROUNDS OF APPEAL. THUS THE ORDER OF THE AO STANDS CANCELLED. 3. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. THE ORDER IS PRONOUNCED ON 13-01-2012 SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 13 /01/2012 *MISHRA COPY FORWARDED TO :- 1. M/S. KAMANI CONSTRUCTION COMPANY (P) LTD. , JODHPUR 2. THE DCIT, CENTRAL CIRCLE- 1, JODHPUR 3. THE LD. CIT BY ORDER 4. THE LD. CIT (A) 5. THE LD.DR 6. THE GUARD FILE (ITSSA NO.04/JU /10) A.R, ITAT, JAIPUR 8 9 10