Shri Naverlal D.Desai, Surat V. The ACIT., Circle-3(1), Surat

ITSSA 58/AHD/2007

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 7900 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 29-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 29-12-2011
• Assessment Year: misc
• Appeal Filed On: 23-03-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANURAG SHARMA SS
• Assessee Lawyers: RASESH SHAH
• Keywords: Document seized; Question of law; Block assessment; Documents seized
• Section: 260A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE SHRI BHAVNESH SAINI, JM AND SHRI A. MOHAN A LANKAMONY, AM) IT(SS)A NO. 58/AHD/2007 B.P. 1990-91 TO 1999-2000 SHRI NATVARLAL D. DESAI, A-502, YOGI COMPLEX, NEW RANDER ROAD, SURAT PA NO. ACAPD 3882 D VS THE A. C. I. T., CIRCLE-3 (1), AAYAKAR BHAVAN, MAJURA GATE, SURAT (APPELLANT) (RESPONDENT) APPELLANT BY SHRI RASESH SHAH, AR RESPONDENT BY SHRI ANURAG SHARMA, SS. DR DATE OF HEARING: 29-12-2011 DATE OF PRONOUNCEMENT: 29-12-12-2011 O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)II, SURAT DATED 28 TH DECEMBER, 2006, FOR THE ABOVE BLOCK PERIOD. 2. IN THIS APPEAL THE ASSESSEE CHALLENGED THE ASSUM PTION OF JURISDICTION U/S 158 BD OF THE IT ACT AND ADDITION OF RS.3,40,000/- AS UNDISCLOSED INCOME OF THE ASSESSEE. THIS ORDER WAS EARLIER DISMISSED IN DEFAULT VIDE ORDER DATED 01-06-2010 BU T RESTORED WHILE ALLOWING MISC. APPLICATION OF THE ASSESSEE. IT (SS) A NO.58/AHD/2007 SHRI NATVERLAL D. DESAI VS ACIT, CIRCLE-3(1), SURAT 2 3. BRIEFLY, THE FACTS OF THIS CASE ARE THAT SEARCH WAS CONDUCTED IN THE PREMISES OF M/S. OHM DEVELOPERS AND M/S. OHM OR GANIZERS, EVIDENCE WAS FOUND REGARDING RECEIPT OF ON MONEY FR OM VARIOUS PERSONS WHO HAD BOOKED FLATS AND SHOPS AT YOGI COMP LEX, RANDER ROAD, SURAT. THE PARTNERS OF THE FIRMS WHOSE STATEM ENTS WERE RECORDED ON OATH, ADMITTED TO HAVE RECEIVED ON MONE Y AS PER THE ACCOUNTS SEIZED IN THE COURSE OF SEARCH. THE RECEIP T OF ON MONEY WAS ASSESSED IN THE BLOCK ASSESSMENT PROCEEDINGS AG AINST THE ABOVE TWO FIRMS. ON THAT BASIS, PROCEEDINGS U/S 158 BD OF THE IT ACT WERE INITIATED AGAINST THE ASSESSEE AND NOTICE U/S 158 BD OF THE IT ACT WAS ISSUED ON 10-06-2004. THE AO AFTER COMPLETI NG THE BLOCK ASSESSMENT MADE ADDITION OF RS.3,40,000/- IN RESPEC T OF CASH PAYMENT MADE TO THE ABOVE PARTIES. THE LEARNED CIT (A) DISMISSED THE APPEAL OF THE ASSESSEE. 4. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUTS ET SUBMITTED THAT SEARCH IN THE CASE OF M/S. OHM DEVELOPERS WAS CONDUCTED ON 29-10-1999 AND IN THAT CASE THE AO FRAMED THE BLOCK ASSESSMENT ORDER ON 30-11-2001. COPY OF THE ASSESSMENT ORDER I S PLACED ON RECORD. HE HAS SUBMITTED THAT NOTICE U/S 158 BD OF THE IT ACT WAS ISSUED IN THE CASE OF THE ASSESSEE ON 10-06-2004 I. E. ON COMPLETION OF THE BLOCK ASSESSMENT IN THE CASE OF THE PERSONS SEARCHED. THEREFORE, PROCEEDINGS AGAINST THE ASSESSEE ARE BAD IN LAW. HE HAS FILED COPIES OF SEVERAL ORDERS OF THE TRIBUNAL ON T HE SAME MATTER IN ISSUE WHICH ARE AS UNDER: IT (SS) A NO.58/AHD/2007 SHRI NATVERLAL D. DESAI VS ACIT, CIRCLE-3(1), SURAT 3 (1) ORDER OF THE TRIBUNAL IN THE CASE OF JAYESH T. DESAI (IT(SS)A NO.95 & 96/AHD/2007) DATED 28-5-2010 (PB-4 0) IN WHICH IT WAS HELD NOTICE ISSUED U/S 158 BD OF THE I T ACT WAS INVALID BECAUSE THE SAME WAS ISSUED AFTER COMPLETIO N OF THE ASSESSMENT IN THE CASE OF THE PERSONS SEARCHED I.E. M/S. OHM DEVELOPERS. (2) SIMILARLY, ORDER OF THE TRIBUNAL IN THE CASE OF VIMAL VADILAL SHAH (IT(SS)A NO.10 & 28/AHD/2008) DATED 21-05-2010 (PB-44) IS FILED IN WHICH SAME VIEW IS TAKEN. (3) ORDER OF THE TRIBUNAL IN THE CASE OF J & K ENGI NEERS PVT. LTD. (IT(SS)A NO.12/AHD/2007) DATED 30-04-2010 (PB-54) I S FILED IN WHICH ALSO SAME VIEW HAS BEEN TAKEN. 5. ON THE OTHER HAND, THE LEARNED DR RELIED UPON TH E ORDER OF THE ITAT BANGALORE BENCH IN THE CASE OF SUBHAN JAVEED V S ACIT, 122 ITD 307 IN WHICH IT WAS HELD THAT THE SATISFACTION WHICH IS CLEARLY INFERRED FROM RECORD IS SUFFICIENT COMPLIANCE FOR I NITIATION OF PROCEEDINGS U/S 158BD OF THE IT ACT. THE LEARNED DR HOWEVER, ADMITTED THAT THE ISSUE OF INITIATION OF PROCEEDING S U/S 158 BD OF THE IT ACT AFTER COMPLETION OF ASSESSMENT IN THE CASE O F PERSONS SEARCHED IS NOT IN ISSUE IN THIS CASE. THE LEARNED DR HEAVILY RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 6. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE ARE OF THE VIEW INITIATION OF PROCEEDINGS U/S 158 BD OF THE IT ACT IS INVALID, BAD IN LAW AND AGAINST THE PROVISIONS OF LAW. THE FACTS AND DA TES NOTED ABOVE REGARDING SEARCH IN THE CASE OF M/S. OHM DEVELOPERS , COMPLETION OF IT (SS) A NO.58/AHD/2007 SHRI NATVERLAL D. DESAI VS ACIT, CIRCLE-3(1), SURAT 4 BLOCK ASSESSMENT IN THEIR CASE AND 158 BD PROCEEDIN GS INITIATED AGAINST THE ASSESSEE ARE NOT IN DISPUTE. THE LEARNE D COUNSEL FOR THE ASSESSEE FILED COPIES OF VARIOUS ORDERS OF THE TRIB UNAL REFERRED TO ABOVE IN WHICH IT WAS HELD THAT INITIATION OF PROCE EDINGS/ISSUE OF NOTICE U/S 158BD OF THE IT ACT WAS INVALID BECAUSE THIS WAS ISSUED AFTER COMPLETION OF THE ASSESSMENT IN THE CASE OF T HE PERSONS SEARCHED I.E. M/S. OHM DEVELOPERS. 6.1 ITAT AHMEDABAD BENCH IN THE CASE OF SHRI SHAILE SH M. DESAI IN IT(SS) A NO. 66/AHD/2007 ETC. DATED 15-10-2010 A LSO TOOK THE SAME VIEW AND ALLOWED THE APPEAL OF THE ASSESSEE. T HE FINDINGS IN THIS CASE IN PARA 6 TO 8 ARE REPRODUCED AS UNDER: 6. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT THE ISSUE IS SQUARELY COVERED IN F AVOUR OF THE ASSESSEE BY THE ORDER OF ITAT, AHMEDABAD BENCH 'D' (CAMP AT SURAT) IN THE CASE OF VIMAL VADILAL SH AH & ORS (SUPRA) IN WHICH THE TRIBUNAL AT PARAGRAPH 11 O F THE ORDER HELD AS UNDER:- '11. IN E.J. ULAHANNA V. ACIT IN ITA NO.19/AHD/2007 PRONOUNCED ON 18-03-2009, FOLLOWING THE DECISION OF SPECIAL BENCH IN THE CASE OF MANOJ AGARWAL (SUPRA) HELD THAT WITHOUT THERE BEING SATIS FACTION RECORDED PRIOR TO COMPLETION OF ASSESSMENT OF THE P ERSON SEARCHED PROCEEDINGS SO INITIATED U/S 158BD OF THE ACT WILL NOT BE VALID. IN THAT CASE NOTICE U/S 158BD OF THE ACT WAS ISSUED ON 10-06-2004. BUT SEARCHED AGAINST OHM DEVELOPERS WAS CARRIED OUT ON 29-10-1999, THEREFORE ASSESSMENT U./S 158BD THEREOF COMPLETED AFTER 31-10 - 2001 COULD NOT BE HELD VALID. IN THE CASE OF SHRI VISHNUBHAI R BAROT V. ACIT IN IT(SS)A NO.104/AHD/2009 ITAT AHMEDABAD 'D' BENCH PRONOUNCED ON 18-12-2009, IT WAS HELD, FOLLOWING THE DECISION OF HON'BLE SUPR EME IT (SS) A NO.58/AHD/2007 SHRI NATVERLAL D. DESAI VS ACIT, CIRCLE-3(1), SURAT 5 CCURT IN THE CASE OF MANISH MAHESHWARI V. ACIT (200 7) 289 ITR 341 (SC) AND MANOJ AGARWAL (SUPRA) THAT IF THE ASSESSMENT U/S.158BC OF THE ACT IN THE CASE OF PERS ON SEARCH (OHM DEVELOPERS) WAS COMPLETED ON 30-11 -200 1 THEN ISSUING NOTICE U/S 158BD OF THE ACT ON 29-03-2 006 AGAINST ASSESSEE IS BARRED BY LIMITATION. SIMILAR V IEW WAS TAKEN BY THE ITAT AHEMDABAD BENCH IN IT(SS)A NO.25/AHD/2007 IN THE CASE OF ADIL PARVEZ RANDERIA V. ACIT, CC-3(1), SURAT PRONOUNCED ON 01-09-2008. FOLLOWING THESE DECISIONS WE HOLD THAT THE BLOCK ASSESSMENT FRAMED IN CASE OF ALL THE ABOVE ASSESSEE ARE NOT LEGALLY VALID AND THEREFORE ARE QUASHED FOR THE REASON THAT NOTICES U/S 158BD OF THE ACT WERE ISSUED IN TH ESE CASES LONG AFTER COMPLETION OF ASSESSMENT IMTHE CAS E OF PERSON SEARCHED I.E. OHM DEVELOPERS.' 7. WE MAY ALSO POINT OUT THAT RECENTLY THE H ON'BLE PUNJAB & HARYANA HIGH COURT IN ITS UNREPORTED JUDGM ENT IN ITA NO. 379 OF 2010 DATED 25-08-2010 IN THE CASE OF CIT-I, LUDHIANA VS M/S PARVEEN FABRICS PVT LTD DISMISSED THE APPEAL FILED BY THE DEPARTMENT BY PAS SING THE FOLLOWING ORDER: '1. THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE UNDER SECTION 260A OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') AGAINST THE ORDER OF THE INCOME TAX APPE LLATE TRIBUNAL, CHANDIGARH BENCH (B), CHANDIGARH (HEREINA FTER REFERRED TO AS 'THE TRIBUNAL') PASSED IN I.T.(SS)A. NO19/CHAND/2009 DATED 127.8.2009 FOR THE BLOCK PERI OD 01.04..1996 TO 05.02.2003, PROPOSING TO RAISE THE FOLLOWING SUBSTANTIAL QUESTION OF LAW:- 'WHETHER ON THE FACTS AND IN LAW, THE HON'BLE INCOME TAX APPELLATE TRIBUNAL WAS JUSTIFIED IN HOLDING THE RECORDING OF SATISFACTION U/S 158BD BY THE ASSESSING OFFICER OF THE PERSON SEARCHED AND CONSEQUENCE ISSUANCE AND SERVICE OF NOTICE U/S 158BDE ON 2.12.2006 WAS BELATED AND BEYOND THE PERIOD PRESCRIBED BY LAW WHEN THE SECTION 158 BD READ WITH SECTION 158BE DOES NOT SPECIFY THAT IT (SS) A NO.58/AHD/2007 SHRI NATVERLAL D. DESAI VS ACIT, CIRCLE-3(1), SURAT 6 SATISFACTION HAS TO BE RECORDED BY THE ASSESSING OFFICER BEFORE COMPLETION OF ASSESSMENT U/S 158BC OF THE INCOME TAX ACT, 1961 ?' 2 A SEARCH WAS CONDUCTED ON 5.2.2003 AT THE RESIDENCE OF ONE S.K. BHATIA, AND FROM THE SEIZED DOCUMENTS AND AFTER FINALIZING BLOCK ASSESSMENT AGA INST THE SEARCHED PERSON ON 28.2.2005, PROCEEDINGS WERE ALSO TAKEN AGAINST THE RESPONDENT AFTER RECORDING SATISFACTION ON 31.3.2006. NOTICE UNDER SECTION 158 BD WAS ISSUED ON 2.12.2006 WHICH WAS CONTESTED BY THE RESPONDENT ON THE GROUND THAT THE SATISFACTION NOTE ITSELF WAS AFTER CONCLUSION OF THE PROCEEDINGS AND NOT DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS. THIS PLEA WAS UPHELD BY THE CIT(A) FOLLOWING EARLIER JUDGMENT OF THE TRIBUNAL IN MANOJ AGGARWAL V. DCIT (2008) 113 KTD 377 (DEL)(SB). THE TRIBUNAL AFFIRMED THE SAID VIEW. 3. WE HAVE HEARD LEARNED COUNSEL FOR THE REVENUE. 4. AN IDENTICAL MATTER WAS CONSIDERED BY THIS COURT IN ORDER DATED 207.2010 IN ITA NO.591 OF 2009, COMMISSIONER OF INCOME-TAX-L, LUDHIANA V. MRIDULA, PROP . M/S DHRUV FABRICS, LUDHIANA AND IT WAS OBSERVED: 'THE ACT NO WHERE SPECIFICALLY PRESCRIBES ANY TIME LIMIT OR LIMITATION FOR INITIATION OF PROCEEDINGS U NDER SECTION 158BD OF THE ACT OR FOR RECORDING OF SATISFACTION BEFORE TAKING ACTION UNDER THAT PROVISION. THE PLAIN AND REASONABLE CONSTRUCTION THAT CAN BE PLACED ON THE AFORESAID PROVISION WOULD BE THAT THE RECORDING OF SATISFACTION FOR TAKING ACTION AGAINST ANY OTHER PERSON UNDER SECTION 158BD OF THE ACT HAS TO BE BETWEEN INITIATION OF PROCEEDINGS UNDER SECTION 158BC AND BEFORE COMPLETION OF BLOCK ASSESSMENT UNDER SECTION 158BC OF THE ACT IN THE CASE OF THE PERSON SEARCHED I WOULD, THUS, MEAN THAT THE ACTION CONTEMPLATED UNDER SECTION 158BD OF THE ACT AGAINST A THIRD PARTY TO A SEARCH, IS IT (SS) A NO.58/AHD/2007 SHRI NATVERLAL D. DESAI VS ACIT, CIRCLE-3(1), SURAT 7 NECESSARILY TO BE DURING THE COURSE OF BLOCK ASSESSMENT PROCEEDINGS UNDER SECTION 158BC OF THE SEARCHED PERSON. IT CANNOT BE AFTER THE CONCLUSION OF THE SAME AS THERE IS NO OCCASION FOR AN ASSESSING OFFICER TO EXAMINE THE SEIZED MATERIAL OR DOCUMENTS OF THE SEARCHED PERSON WHEN THE BLOCK ASSESSMENT PROCEEDINGS HAVE CONCLUDED AND NO OTHER PROCEEDINGS ARE PENDING BEFORE HIM. IF ANY OTHER TIME LIMIT IS READ IN THE PROVISIONS / STATUT E, IT SHALL LEAD TO ANOMALY AND WOULD BE ARBITRARY AND UNREASONABLE. IT COULD NOT BE READ IN THE PROVISION THAT WHERE BLOCK ASSESSMENT UNDER SECTION 1 53BC OF THE ACT IN THE CASE OF AN ASSESSEE AGAINST WHOM ACTION UNDER SECTION 132 OR 132A OF THE ACT HAD BEEN CARRIED OUT IS FINALIZED, REVENUE CAN TAKE ACTION AT ANY TIME IN THE ABSENCE OF ANY SPECIFIC LIMITATION PRESCRIBED IN THE STATUTE. A CONSTRUCTIO N WHICH LEADS TO SUCH AN ANOMALY SHOULD BE AVOIDED.' 5. THE VIEW TAKEN BY THE TRIBUNAL IS, THUS, IN ACCORDANCE WITH THE VIEW TAKEN BY THIS COURT. NO SUBSTANTIAL QUESTION OF LAW ARISES. 6. THE APPEAL IS DISMISSED.' 8. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF THE ABOVE DECISIONS, WE DO NOT FIND ANY JUSTIFICATION F OR INITIATION OF BLOCK ASSESSMENT PROCEEDINGS U/S 1 58 BD OF THE IT. ACT AGAINST THE ASSESSEE AFTER LONG GAP OF COMPLETION OF THE ASSESSMENT IN THE CASE OF PERSONS SEARCHED, VIZ. M/S OHM DEVELOPERS. WE_ ACCORDINGLY SET ASIDE THE ORDER OF AUTHORITIES BELOW AND QUASH THE SAME. AS A RESULT, GROUNDS 1 & 2 OF THE APPEAL OF THE ASS ESSEE ARE ALLOWED. 6.2 THE HONBLE PUNJAB & HARYANA HIGH COURT IN DECI SION IN THE CASE OF CIT VS MRIDULA, PROP. DHRUV FABRICS REPORTE D IN 335 ITR 226 HELD AS UNDER: IT (SS) A NO.58/AHD/2007 SHRI NATVERLAL D. DESAI VS ACIT, CIRCLE-3(1), SURAT 8 ACTION UNDER SECTION 158 BD MUST BE TAKEN BEFORE COMPLETION OF ASSESSMENT OF SEARCHED PERSON BLOCK ASSESSMENT UNDER SECTION 158BC COMPLETED ON 30-03-2 005 SATISFACTION UNDER SECTION 158BD RECORDED ON 15-7 -2005 PROCEEDING NOT VALID. THE ORDER CITED BY THE LEARNED DR IS, THEREFORE, NO T APPLICABLE TO THE MATTER IN ISSUE. 7. IN VIEW OF THE ABOVE DISCUSSIONS AND IN THE LIGH T OF THE ABOVE DECISIONS, WE DO NOT FIND ANY JUSTIFICATION IN INIT IATION OF BLOCK ASSESSMENT PROCEEDINGS U/S 158BD OF THE IT ACT AGAI NST THE ASSESSEE AFTER LONG GAP OF COMPLETION OF THE BLOCK ASSESSMENT IN THE CASE OF THE PERSONS SEARCHED I.E. M/S. OHM DEVELOPE RS. WE ACCORDINGLY SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND QUASH THE SAME. RESULTANTLY, THE ADDITION MADE AGAINST TH E ASSESSEE IS DELETED. 8. IN THE RESULT, THE ASSESSEE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 29/12/11 SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER LAKSHMIKANT/- IT (SS) A NO.58/AHD/2007 SHRI NATVERLAL D. DESAI VS ACIT, CIRCLE-3(1), SURAT 9 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD