Sh. Ashok Kumar Aggarwal, New Delhi V. ACIT, New Delhi

ITSSA 6178/DEL/1996

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 3645 (ITAT-DELHI)
• Duration Of Justice: 21 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 28-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 20-06-2017
• Assessment Year: misc
• Appeal Filed On: 02-11-1996
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: C S AGGARWAL
• Keywords: Search and seizure; Validity of assessment; Procedural lapse; Assessment record; Block assessment
• Section: 143(3); 145; 144

Judgement Text

IT(SS)A NO. 6178/DEL/1996 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A: NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER IT(SS)A NO. 6178/DEL /1996 BLOCK PERIOD: 1.4.1985 TO 17.10.95 SHRI ASHOK KUMAR AGGARWAL, (PROPRIETOR OF M/S N. AGGARWAL & CO., 810, ANSAL BHAVAN, K.G. MARG, NEW DELHI. VS ACIT, CENTRAL CIRCLE 11, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI C.S. AGGARWAL, SR. ADVOC ATE RESPONDENT BY : SMT. APARNA KARAN, CIT DR DATE OF HEARING : 30.11.2017 DATE OF PRONOUNCEMENT: 28.02.2018 ORDER PER SUDHANSHU SRIVASTAVA, J.M. THIS APPEAL, FILED BY THE ASSESSEE, CHALLENGES THE ASSESSMENT MADE U/S 158BC OF THE INCOME TAX ACT, 19 61 (HEREINAFTER REFERRED TO AS 'THE ACT') FOR THE BLOC K PERIOD RELATING TO ASSESSMENT YEARS 1986-87 TO 1996-97. T HE ASSESSEES APPEAL WAS EARLIER HEARD AND DISPOSED OF BY THE DELHI BENCH OF THE ITAT BUT AS THERE WAS A DIFF ERENCE IT(SS)A NO. 6178/DEL/1996 2 OF OPINION BETWEEN THE TWO HONBLE MEMBERS OF THE BENCH ON INTERPRETATION OF SECTION 158BC OF THE ACT , THE MATTER WAS REFERRED TO THE THIRD MEMBER. THEREAFTER , AGGRIEVED BY THE ORDER OF THE HONBLE THIRD MEMBER, THE REVENUE APPROACHED THE HONBLE DELHI HIGH COURT. T HE HONBLE DELHI HIGH COURT IN ITA NO. 167/2001, VIDE ORDER DATED 24.07.2014, ON A CONCESSION BY THE ASSESSEES COUNSEL REMITTED THE MATTER FOR A FRESH ADJUDICATION BY THE ITAT. NOW, THE APPEAL HAS BEEN FIXED BEFORE THIS BENCH AFTER REMIT FROM THE HONBL E HIGH COURT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND DURING THE RELEVANT PERIOD WAS ENGAG ED IN THE BUSINESS OF PURCHASE AND SALE OF SHARES ON ITS OWN BEHALF AS WELL AS ON BEHALF OF ITS CUSTOMERS. THE ASSESSEE HAS BEEN AN INCOME TAX PAYEE FROM ASSESSME NT YEAR 1988-89 AND THE RETURN OF INCOME FOR ASSESSMEN T YEAR 1994-95 HAD BEEN FILED BEFORE THE SEARCH WHICH TOOK PLACE ON 17 TH OCTOBER, 1993. THE RETURNS FOR ASSESSMENT YEARS 1995-96 AND 1996-97 WERE FILED AFTER THE SEAR CH. THE ASSESSMENTS FOR ASSESSMENT YEARS 1988-89 TO 199 4- IT(SS)A NO. 6178/DEL/1996 3 95 WERE COMPLETED BEFORE THE SEARCH. CONSEQUENT TO THE SEARCH AND SEIZURE OPERATION, A NOTICE U/S 158BC OF THE ACT WAS ISSUED ON 31.05.1996 AND SERVED UPON THE ASSESSEE ON 21.06.1996. IN RESPONSE TO THE NOTICE, THE ASSESSEE DID NOT OFFER ANY INCOME AS UNDISCLOSED IN COME BUT FURNISHED DETAILS OF INCOME, RETURNED AND ASSES SED, FALLING WITHIN THE BLOCK PERIOD. THE ASSESSING OFF ICER, HOWEVER, VIDE ORDER DATED 31.10.1996, COMPLETED THE ASSESSMENT U/S 158BC(C) OF THE ACT AFTER COMPUTING THE UNDISCLOSED INCOME OF THE ASSESSEE AT RS. 13,13,49,778/-. 3. THE ASSESSEE HAS RAISED AS MANY AS 25 GROUNDS OF APPEAL BEFORE THE ITAT. LD. SR. ADVOCATE SHRI C.S. AGARWAL SUBMITS THAT GROUND NO. 2 IS GERMANE TO THE ENTIRE CASE AND THIS IS A LEGAL GROUND BEING RAISED BY THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT IF THE ASSE SSEE SUCCEEDS ON THIS GROUND, THEN THERE WILL BE NO REQUIREMENT FOR ARGUMENTS ON OTHER GROUNDS/MERITS O F THE APPEAL. 3.1 THE LD. CIT DR AGREED TO THE SUBMISSION OF THE LD. SENIOR ADVOCATE AND SUBMITTED THAT GROUND NO. 2 SHO ULD IT(SS)A NO. 6178/DEL/1996 4 BE TAKEN FIRST. ACCORDINGLY, WE PROCEED TO HEAR BO TH THE PARTIES ON GROUND NO. 2 WHICH READS AS UNDER:- 2. THAT THE INITIATION OF PROCEEDING AND COMPLETIO N THEREOF BY THE AFORESAID ORDER IS WITHOUT SATISFYIN G THE MANDATORY REQUIREMENTS OF THE AFORESAID CHAPTER AND WITHOUT FULFILLING THE PRE-CONDITION FOR MAKING THE ORDER OF ASSESSMENT. 4. THE LD. SENIOR ADVOCATE SUBMITTED THAT IN GROUND NO.2, THE ASSESSEE HAS CHALLENGED THE VALIDITY OF ASSESSMENT ON THE GROUND THAT WHILE FRAMING ASSESSMENT U/S 158BC, THE MANDAT ORY REQUIREMENT OF CHAPTER XIVB OF THE ACT HAD NOT BEEN FULFILLED AS THE ASSESSING OFFICER HAD FAILED TO ISSUE THE STATU TORY NOTICE U/S 143(2) OF THE ACT. THE LD. SR. ADVOCATE SUBMITTE D THAT THE ACT CASTS A STATUTORY OBLIGATION ON THE ASSESSING OFFIC ER TO ISSUE NOTICE U/S 143(2) BEFORE PROCEEDING TO MAKE AN ASSE SSMENT. THE LD. SR. ADVOCATE DREW OUR ATTENTION TO THE IMPUGNED ASSESSMENT ORDER AND SUBMITTED THAT IN THE ASSESSMENT ORDER, T HE ASSESSING OFFICER HAS MERELY STATED THAT NOTICE U/S 158BC HAD BEEN ISSUED AND THAT THE ASSESSEE HAD APPEARED ON A FEW DATES A ND THE CASE WAS DISCUSSED. THE LD. SENIOR ADVOCATE FURTHER SUB MITTED THAT THE ASSESSEE HAD APPEARED IN COMPLIANCE TO NOTICE U /S 158BC OF THE ACT AND, THEREAFTER, THE ASSESSING OFFICER WAS DUTY BOUND IN LAW TO HAVE ISSUED A NOTICE U/S 143(2). THE LD. SR . ADVOCATE IT(SS)A NO. 6178/DEL/1996 5 VEHEMENTLY ARGUED THAT IN ABSENCE OF ANY NOTICE BEI NG ISSUED U/S 143(2), THE ASSESSING OFFICER COULD NOT HAVE MADE A NY ADDITION IN THE HANDS OF THE ASSESSEE. IT WAS SUBMITTED THAT T HE IMPUGNED ASSESSMENT WAS BAD IN LAW AND VOID AB INITIO. 5. THE LD. CIT DR STRONGLY SUPPORTED THE IMPUGNED O RDER IN THIS REGARD AND VEHEMENTLY ARGUED THAT THE ASSESSEE SHOULD ARGUE ON MERITS ALSO AND SHOULD NOT TAKE SHELTER BE HIND A TECHNICAL GROUND OF THE STATUTORY NOTICE NOT HAVING BEEN ISSUED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. A PERUSAL OF THE ASS ESSMENT ORDER SHOWS THAT THE ASSESSING OFFICER HAS ONLY MENTIONED ISSUANCE OF NOTICE U/S 158BC OF THE ACT BUT THE ISSUANCE AND SE RVICE OF NOTICE U/S 143(2) HAS NOWHERE BEEN MENTIONED. ON A QUERY FROM THE BENCH, THE LD. CIT DR EXPRESSED HER INABILITY T O PRODUCE THE ASSESSMENT RECORDS AT THIS STAGE. ACCORDINGLY, IN ABSENCE OF ANY PROOF THAT NOTICE U/S 143(2) WAS ISSUED PRIOR TO TH E ASSESSMENT PROCEEDINGS HAVING BEEN TAKEN UP AND THE INABILITY OF THE DEPARTMENT TO COUNTER THE CLAIM OF THE ASSESSEE, TH AT THE STATUTORY NOTICE U/S 143(2) OF THE ACT WAS NOT SERV ED ON THE ASSESSEE WITH COGENT EVIDENCE TO THE CONTRARY, WE A RE CONSTRAINED TO HOLD THAT THE STATUTORY NOTICE U/S 143(2) WAS NO T IT(SS)A NO. 6178/DEL/1996 6 ISSUED/SERVED UPON THE ASSESSEE PRIOR TO THE ASSESS MENT PROCEEDINGS HAVING BEEN TAKEN UP. UNDER SIMILAR CI RCUMSTANCES, THE HONBLE APEX COURT IN THE CASE OF ACIT & ANOTHE R VS. HOTEL BLUE MOON REPORTED IN 321 ITR 362 (SC) HELD AS UNDE R:- SECTION 158 BC (B) PROVIDES FOR ENQUIRY AND ASSESS MENT. THE SAID PROVISION READS 'THAT THE ASSESSING OFFICER SH ALL PROCEED TO DETERMINE THE UNDISCLOSED INCOME OF THE BLOCK PE RIOD IN THE MANNER LAID DOWN IN SECTION 158 BB AND THE PROVISIO NS OF SECTION 142, SUB-SECTION (2) AND (3) OF SECTION 143, SECTION 144 AND SECTION 145 SHALL, SO FAR AS M AY BE, APPLY.' AN ANALYSIS OF THIS SUB SECTION INDICATES T HAT, AFTER THE RETURN IS FILED, THIS CLAUSE ENABLES THE ASSESS ING OFFICER TO COMPLETE THE ASSESSMENT BY FOLLOWING THE PROCEDURE LIKE ISSUE OF NOTICE UNDER SECTIONS 143(2)/142 AND COMPLETE TH E ASSESSMENT UNDER SECTION 143(3). THIS SECTION DOES NOT PROVIDE FOR ACCEPTING THE RETURN AS PROVIDED UNDER SECTION 143(I)(A). THE ASSESSING OFFICER HAS TO COMPLETE TH E ASSESSMENT UNDER SECTION 143(3)ONLY. IN CASE OF DEF AULT IN NOT FILING THE RETURN OR NOT COMPLYING WITH THE NOT ICE UNDER SECTIONS 143(2)/142, THE ASSESSING OFFICER IS AUTHORIZED TO COMPLETE THE ASSESSMENT EX-PARTE UNDE R SECTION 144. CLAUSE (B) OF SECTION 158 BC BY REFERRING TO S ECTION 143(2) (3) WOULD APPEAR TO IMPLY THAT THE PROVISIO NS OF SECTION 143(1) ARE EXCLUDED. BUT SECTION 143(2) ITSELF BECOMES NECESSARY ONLY WHERE IT BECOMES NECESSARY T O CHECK THE RETURN, SO THAT WHERE BLOCK RETURN CONFORMS TO THE UNDISCLOSED INCOME INFERRED BY THE AUTHORITIES, THE RE IS NO IT(SS)A NO. 6178/DEL/1996 7 REASON, WHY THE AUTHORITIES SHOULD ISSUE NOTICE UND ER SECTION 143(2). HOWEVER, IF AN ASSESSMENT IS TO BE COMPLETE D UNDER SECTION 143(3) READ WITH SECTION 158-BC, NOTI CE UNDER SECTION 143(2) SHOULD BE ISSUED WITHIN ONE YE AR FROM THE DATE OF FILING OF BLOCK RETURN. OMISSION ON THE PART OF THE ASSESSING AUTHORITY TO ISSUE NOTICE UNDER SECTION 143(2) CANNOT BE A PROCEDURAL IRREGULARITY AND THE SAME IS NOT CURABLE AND, THEREFORE, THE REQUIREMENT OF NOTI CE UNDER SECTION 143(2) CANNOT BE DISPENSED WITH. THE OTHER IMPORTANT FEATURE THAT REQUIRES TO BE NOTICED IS TH AT THE SECTION 158 BC(B) SPECIFICALLY REFERS TO SOME OF TH E PROVISIONS OF THE ACT WHICH REQUIRES TO BE FOLLOWED BY THE ASS ESSING OFFICER WHILE COMPLETING THE BLOCK ASSESSMENTS UNDE R CHAPTER XIV-B OF THE ACT. THIS LEGISLATION IS BY INCORPORAT ION. THIS SECTION EVEN SPEAKS OF SUB- SECTIONS WHICH ARE TO B E FOLLOWED BY THE ASSESSING OFFICER. HAD THE INTENTION OF THE LEGISLATURE WAS TO EXCLUDE THE PROVISIONS OF CHAPTER XIV OF THE ACT, THE LEGISLATURE WOULD HAVE OR COULD HAVE INDICATED THAT ALSO. A READING OF THE PROVISION WOULD CLEARLY INDICATE, IN OUR OPINION, IF THE ASSESSING OFFICER, IF FOR ANY REASON, REPUDI ATES THE RETURN FILED BY THE ASSESSEE IN RESPONSE TO NOTICE UNDER SECTION 158 BC (A), THE ASSESSING OFFICER MUST NECE SSARILY ISSUE NOTICE UNDER SECTION 143(2) OF THE ACT WITHIN THE TIME PRESCRIBED IN THE PROVISO TO SECTION 143(2) OF THE ACT. WHERE THE LEGISLATURE INTENDED TO EXCLUDE CERTAIN PROVISI ONS FROM THE AMBIT OF SECTION 158 BC(B) IT HAS DONE SO SPECIFICA LLY. THUS, WHEN SECTION 158 BC(B) SPECIFICALLY REFERS TO APPLI CABILITY OF THE PROVISO THERETO CANNOT BE EXCLUDE. WE MAY ALSO NOTICE IT(SS)A NO. 6178/DEL/1996 8 HERE ITSELF THAT THE CLARIFICATION GIVEN BY CBDT IN ITS CIRCULAR NO.717 DATED 14TH AUGUST, 1995, HAS A BINDING EFFEC T ON THE DEPARTMENT, BUT NOT ON THE COURT. THIS CIRCULAR CLA RIFIES THE REQUIREMENT OF LAW IN RESPECT OF SERVICE OF NOTICE UNDER SUB- SECTION (2) OF SECTION 143 OF THE ACT. ACCORDINGLY, WE CONCLUDE EVEN FOR THE PURPOSE OF CHAPTER XIV-B OF T HE ACT, FOR THE DETERMINATION OF UNDISCLOSED INCOME FOR A BLOCK PERIOD UNDER THE PROVISIONS OF SECTION 158 BC, THE PROVISI ONS OF SECTION 142 AND SUB-SECTIONS (2) AND (3) OF SECT ION 143 ARE APPLICABLE AND NO ASSESSMENT COULD BE MADE WITHOUT ISSUING NOTICE UNDER SECTION 143(2) OF THE ACT. 6.1 THUS, THE HONBLE APEX COURT HAS HELD THAT WHER E THE AO REPUDIATES THE RETURN FILED U/S 158BC (A) OF THE AC T AND PROCEEDS TO MAKE AN ENQUIRY, HE HAS TO NECESSARILY FOLLOW TH E PROVISIONS OF SECTION 142, 143(2) AND 143(3) OF THE ACT. IN THE C ASE BEFORE US, THE DEPARTMENT HAS NOT BEEN ABLE TO NEGATE THE ASSE RTION OF THE ASSESSEE THAT NO NOTICE U/S 143(2) OF THE ACT WAS I SSUED BY THE AO PRIOR TO THE FRAMING OF ASSESSMENT U/S 158BC OF THE ACT. THUS, THE IMPUGNED ASSESSMENT WAS FRAMED WITHOUT AS SUMPTION OF JURISDICTION. ACCORDINGLY, RESPECTFULLY FOLLOWIN G THE RATIO OF THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF H OTEL BLUE MOON (SUPRA), WE QUASH THE IMPUGNED ASSESSMENT AS B EING VOID AB INITIO HAVING BEEN FRAMED WITHOUT JURISDICTION. IT(SS)A NO. 6178/DEL/1996 9 6.2 SINCE THE IMPUGNED ASSESSMENT ITSELF STANDS NUL LIFIED AND NOTHING SURVIVES TO BE HEARD ON MERITS, THE OTHER G ROUNDS BECOME ACADEMIC IN NATURE AND ARE NOT BEING DEALT WITH. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 28 TH FEB. 2018. SD/- SD/- (R.K. PANDA) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 28 TH FEBRUARY, 2018 GS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER ASSISTANT REGISTRAR