DCIT RG 19(2), MUMBAI V. DEPTH ENTERTAINMENT, MUMBAI

ITSSA 51/MUM/2011

• Counselvise Citation: [2015] 122 COUNSELVISE.COM (IT) 1182 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 28-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 26-11-2014
• Assessment Year: misc
• Appeal Filed On: 19-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHISHIR DHAMIJA
• Assessee Lawyers: DEEPAK TRALSHAWALLA
• Keywords: Loose papers; Period of limitation; Block assessment
• Section: 143(3); 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BE NCH, MUMBAI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER / I .T.(SS)A. NO.51/MUM/2011 BLOCK PERIOD 1.4.1989 TO 31.3.1999 AND BROKEN PERIOD 1.4.1999 TO 27.7.1999 THE ACIT 19(2), PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI-400 012 / VS. M/S. DEPTH ENTERTAINMENT, 101/102, MUKTA APARTMENT, 10 TH ROAD, KHAR (W), MUMBAI-400 052 ./ ./ PAN/GIR NO. :AWBPS 9428D ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI SHISHIR DHAMIJA / RESPONDENT BY: SHRI DEEPAK TRALSHAWALLA / DATE OF HEARING :19.10.2015 ! / DATE OF PRONOUNCEMENT :28.10.2015 '# / O R D E R PER N.K. BILLAIYA, AM: WITH THIS APPEAL THE REVENUE HAS CHALLENGED THE COR RECTNESS OF THE ORDER OF THE LD. CIT(A)-35, MUMBAI DATED 11. 07.2011 PERTAINING TO THE BLOCK ASSESSMENT PERIOD OF 1.4.1989 TO 31.3. 1999 AND BROKEN PERIOD OF 1.4.1999 TO 27.7.1999. 2. THE SUBSTANTIVE GRIEVANCES OF THE REVENUE READ A S UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ANNULLING THE ASSE SSMENT ORDER U/S. 158BD R.W.S. 158BC R.W.S. 143(3) OF THE I.T. ACT ITA. NO.IT(SS)A NO. 51/M/2011 2 AFTER HOLDING THAT THE SATISFACTION NOTE DATED 15.5 .2002 IS BELATED WHICH WOULD NOT CONFER JURISDICTION OF THE ASSESSING OFFICER TO INITIATE THE PROCEEDINGS U/S. 158BD OF THE I.T. ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT SEC. 158BD OF THE I.T. ACT REVEALS NO TIME LIMIT PR ESCRIBED FOR ISSUE OF NOTICE U/S. 158BD OF THE I.T. ACT AND SEC. 158BE(2) OF THE I.T. ACT ONLY TALKS ABOUT THE TIME LIMIT FOR COMPLETION OF ASSESSMENT U/S. 158BD OF THE I.T. ACT AFTER ISSUE OF NOTICE. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT A SEARCH U/S. 132 OF THE ACT WAS CONDUCTED ON 27.7.1999. DURING THE COU RSE OF THE SEARCH OPERATIONS, CERTAIN LOOSE PAPERS WERE FOUND WHICH C ONTAINED ALLEGED TRANSACTIONS BETWEEN THE ASSESSEE AND M/S. TIPS IND USTRIES LTD. SUCH INCRIMINATING DOCUMENTS WERE FOUND FROM THE RESIDEN CE OF SHRI RAMESH TAURANI. ON THE BASIS OF THE ENTRIES FOUND ON THE SEIZED MATERIALS IN THE CASE OF M/S. TIPS INDUSTRIES LTD ( SEARCHED PARTY) A SATISFACTION WAS RECORDED ABOUT THE ALLEGED TRANSAC TIONS BETWEEN M/S. TIPS INDUSTRIES LTD., AND THE ASSESSEE, THEREF ORE IT WAS A FIT CASE FOR THE APPLICATION OF PROVISIONS OF SEC. 158BD R.W . SEC. 158BC OF THE ACT. 3.1. THE AO OF THE PRESENT ASSESSEE ON RECEIVING SU CH SATISFACTION FROM THE AO OF THE SEARCHED PARTIES I.E. M/S. TIPS INDUSTRIES LTD ISSUED NOTICE U/S. 158BD OF THE ACT. PURSUANT TO W HICH, THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE BLOCK PERIOD AND THE BLOCK ASSESSMENT WAS COMPLETED AFTER COMPUTING ASSESSEES UNDISCLOSED INCOME AT RS. 13,77,571/- AND AFTER ADDING THE RETU RNED INCOME OF RS. 4,00,000/-. THE TOTAL INCOME WAS ASSESSED AT R S. 17,77,571/-. ITA. NO.IT(SS)A NO. 51/M/2011 3 4. THE ASSESSEE, AGGRIEVED BY THIS ORDER, CARRIED T HE MATTER BEFORE THE LD. CIT(A) AND VEHEMENTLY ARGUED THAT THE NOTIC E ISSUE U/S. 158BD OF THE ACT WAS AFTER AN INORDINATE DELAY AND THEREFORE WAS BAD IN LAW. IT WAS STRONGLY CONTENDED THAT THE ASSUMPT ION OF JURISDICTION BY THE AO BY RESORTING TO A NOTICE WHICH CANNOT BE CONSIDERED TO BE ISSUED WITHIN A REASONABLE TIME IS AGAINST THE PR OVISIONS OF THE LAW. STRONG RELIANCE WAS PLACED ON THE DECISION OF THE S PECIAL BENCH OF THE TRIBUNAL, DELHI IN THE CASE OF MANOJ AGGARWAL 113 I TD 377. 4.1. AFTER CONSIDERING THE FACTS AND THE SUBMISSION S, THE LD. CIT(A) OBSERVED THAT WHETHER THERE WAS PROPER ASSUMPTION O F JURISDICTION U/S. 158BD QUA THE ISSUE OF NOTICE. THE LD. CIT(A) OBSERVED THAT THE BLOCK ASSESSMENT IN THE CASE OF M/S. TIPS INDUSTRIE S LTD WAS COMPLETED ON 28.9.2001 AND THE SATISFACTION NOTE WA S ISSUED ON 15.5.2002. THUS, THERE WAS A TIME GAP OF 7 MONTHS BETWEEN THE COMPLETION OF BLOCK ASSESSMENT AND THE ISSUE OF SAT ISFACTION NOTE TO THE AO OF THE ASSESSEE. DRAWING SUPPORT FROM THE D ECISION OF THE SPECIAL BENCH OF THE TRIBUNAL, DELHI (SUPRA), THE L D. CIT(A) WAS CONVINCED THAT IN THE CASE OF THE ASSESSEE THE DELA Y WAS MORE THAN THE DELAY IN THE CASE OF MANOJ AGGARWAL (SUPRA) AND CONCLUDED BY HOLDING THAT THE SATISFACTION NOTE IS BELATED AND B ASED ON SUCH SATISFACTION NOTE, THE AO COULD NOT HAVE ISSUED NOT ICE U/S. 158BD OF THE ACT AND CONSEQUENTLY THE ENTIRE PROCEEDINGS ARE AB INITIO VOID AND ANNULLED THE ASSESSMENT. THE ASSESSMENT ORDER WAS ACCORDINGLY ANNULLED. 5. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. 6. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUB MITTED THAT THERE IS NO PERIOD OF LIMITATION PRESCRIBED UNDER T HE ACT FOR THE ITA. NO.IT(SS)A NO. 51/M/2011 4 ISSUANCE OF NOTICE U/S. 158BD OF THE ACT THEREFORE IT CANNOT BE SAID THAT THE NOTICE WAS TIME BARRED. ON MERITS OF THE CASE, THE LD. DR STRONGLY RELIED UPON THE FINDINGS OF THE AO. 7. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE REI TERATED WHAT HAS BEEN STATED BEFORE THE FIRST APPELLATE AUTHORITY. IT IS THE SAY OF THE LD. COUNSEL THAT THE ISSUANCE OF NOTICE GOES TO THE ROOT OF THE MATTER AS THE AO ASSUMES THE JURISDICTION AND WITHOUT PROP ER ASSUMPTION. THE ENTIRE ASSESSMENT PROCEEDINGS BECOME INVALID TH EREFORE THERE IS NO ERROR IN THE FINDINGS OF THE LD. CIT(A). RELIAN CE WAS PLACED ON THE DECISION OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT VS BHARAT BHUSHAN JAIN 61 TAXMANN.COM 89. 8. HAVING HEARD THE RIVAL SUBMISSIONS, WE HAVE GIVE N A THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELO W. LET US CONSIDER SOME DATE WHICH ARE VERY MUCH RELEVANT ON THE FACTS IN ISSUES BEFORE US. I) M/S. TIPS INDUSTRIES LTD WAS SEARCHED ON 27.7.1999. II) THE BLOCK ASSESSMENT IN THE CASE OF M/S. TIPS INDUS TRIES LTD WAS COMPLETED ON 28.9.2001. III) THE SATISFACTION NOTE WAS FORWARDED BY THE AO OF SEARCHED PERSON (M/S. TIPS INDUSTRIES LTD) TO THE A O OF THE ASSESSEE ON 15.5.2002 I.E. AFTER A GAP OF 7 M ONTHS. IV) THE AO OF THE ASSESSEE ISSUED AND SERVED THE NOTICE U/S. 158BD R.W. SEC. 158BC OF THE ACT ON 5.9.2005. THUS THE NOTICE U/S. 158BD WAS ISSUED AND SERVED AF TER A GAP OF MORE THAN 3 YEARS FROM THE DATE OF RECEIVING OF THE SATISFACTION NOTE FROM THE OFFICER OF THE SEARCHED PARTY. ITA. NO.IT(SS)A NO. 51/M/2011 5 9. WITH THIS UNDISPUTED FACTUAL MATRIX ALL THAT WE HAVE TO CONSIDER IS WHETHER THE ISSUANCE OF THIS NOTE CAN BE TREATED AS HAVING BEEN SERVED WITHIN THE REASONABLE PERIOD OF TIME. NO DO UBT, THERE IS NO PROVISION IN THE ACT TO PRESCRIBE THE PERIOD OF LIM ITATION FOR THE SERVICE OF NOTICE U/S. 158BD OF THE ACT. 9.1. THE HONBLE SUPREME COURT IN THE CASE OF CIT V S CALCUTTA KNITWEARS 362 ITR 673 HAS MADE A STRONG OBSERVATION THAT THE REVENUE HAS TO BE VIGILANT IN ISSUING NOTICE TO THE THIRD PARTY U/S. 158BD IMMEDIATELY AFTER THE COMPLETION OF ASSESSMEN T OF THE SEARCHED PERSON. THE FACTS OF THE CASE DISCUSSED H EREINABOVE DEFY THE OBSERVATIONS OF THE HONBLE SUPREME COURT MENTI ONED HEREINABOVE. 9.2. AS MENTIONED ELSEWHERE, THE BLOCK ASSESSMENT I N THE CASE OF SEARCHED PERSON I.E. M/S. TIPS INDUSTRIES LTD., WAS COMPLETED ON 28.9.2001. THE HONBLE SUPREME COURT SAYS THAT THE NOTICE U/S. 158BD SHOULD BE IMMEDIATELY ISSUED AFTER THE COMPLE TION OF THE ASSESSMENT OF THE SEARCHED PERSON, BUT IN THIS CASE THE NOTICE WAS ISSUED AND SERVED ON 5.9.2005, ALMOST 4 YEARS AFTER THE DATE OF THE COMPLETION OF THE ASSESSMENT OF THE SEARCHED PARTIE S. 9.3. IN OUR CONSIDERED OPINION, THIS SERVICE OF NOT ICE CANNOT BE CONSIDERED TO BE IMMEDIATELY AFTER THE COMPLETION O F THE ASSESSMENT OF THE SEARCHED PERSON AND IS CONTRARY TO THE OBSER VATIONS OF THE HONBLE SUPREME COURT (SUPRA). OUR VIEW IS ALSO FO RTIFIED BY THE DECISION OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF BHARAT BHUSHAN JAIN (SUPRA) WHEREIN THE HONBLE HIGH COURT HAS HELD AS UNDER: ITA. NO.IT(SS)A NO. 51/M/2011 6 HAVING REGARD TO THE INTENT OF THE SUPREME COURT I N PARAGRAPH 44 OF THE CALCUTTA KNITWEARS (SUPRA), WHE RE IT WAS INDICATED THAT THE REVENUE HAS TO BE VIGILANT IN IS SUING NOTICE TO THE THIRD PARTY U/S. 158BD, IMMEDIATELY AFTER THE C OMPLETION OF ASSESSMENT OF THE SEARCHED PERSON, THIS COURT IS OF THE OPINION THAT A DELAY RANGING BETWEEN 10 MONTHS OF ONE-AND H ALF YEARS CANNOT BE CONSIDERED CONTEMPORANEOUS TO ASSESSMENT PROCEEDINGS. WE ARE OF THE OPINION THAT NOTICES WE RE NOT ISSUED IN CONFORMITY WITH THE REQUIREMENTS OF SECTION 158B D, AND WERE UNDULY DELAYED. THE APPEALS OF THE REVENUE, ACCORD INGLY, FAIL AND ARE DISMISSED. 9.4. AS CAN BE SEEN THAT A DELAY RANGING BETWEEN 10 MONTHS TO 1 YEARS WAS NOT ACCEPTED BY THE HONBLE HIGH COURT OF DELHI, IN THE CASE IN HAND BEFORE US, THE DELAY IS OF 4 YEARS. 9.5. DRAWING SUPPORT FROM THE DECISION OF THE HONB LE HIGH COURT OF DELHI AND FROM THE OBSERVATION OF THE HONBLE SUPRE ME COURT (SUPRA), WE DECLINE TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). THE LD. CIT(A) HAS RIGHTLY ANNULLED THE IMPUGNED AS SESSMENT ORDER. AS THE IMPUGNED ASSESSMENT ORDER HAS BEEN ANNULLED, WE DO NOT FIND IT NECESSARY TO DWELL INTO THE MERITS OF THE CASE. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH OCTOBER, 2015 SD/- SD/- (AMARJIT SINGH ) (N.K. BILLAIYA) $% ' /JUDICIAL MEMBER ' / ACCOUNTANT MEMBER & ' MUMBAI; (' DATED : OCTOBER, 2015 . % . ./ RJ , SR. PS ITA. NO.IT(SS)A NO. 51/M/2011 7 ! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ) ( ) / THE CIT(A)- 4. ) / CIT 5. *+, %%-. , -.! , & ' / DR, ITAT, MUMBAI 6. ,/0 1 / GUARD FILE. ' / BY ORDER, * % //TRUE COPY// # / '$ % (DY./ASSTT. REGISTRAR) , & ' / ITAT, MUMBAI