DAULAT J RAMSINGHANI, MUMBAI V. JT CIT (OSD) RG 3(3), MUMBAI

ITSSA 7/MUM/2012

• Counselvise Citation: [2015] 122 COUNSELVISE.COM (IT) 1185 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 21 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 18-02-2015
• Assessment Year: misc
• Appeal Filed On: 08-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: J D MISTRY
• Keywords: Search and seizure; Loose papers; Assessment record; Block assessment
• Section: 143(3); 132

Judgement Text

MS. POOJA D RAMSINGHANI IT (SS) NO. 22 /M UM /20 11 SHRI DAULAT J. RAMSINGHANI IT(SS) NO. 07/MUM/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C , MUMBAI . , , BEFORE SHRI D. KARUNAKARA RAO , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBER IT (SS) NO. : 22 / MUM/20 11 BLOCK PERIOD 01.04.1995 TO 3 1 .07.2001 RELEVANT TO A.Y. 1996 - 97 TO 2002 - 03 MS. POOJA D RAMSINGHANI, 51 - 52, FREE PRESS HOUSE, NARIMAN POINT, MUMBAI - 400 021 .: PAN: AAQPR 4455 E VS DEPUTY DIRECTOR OF INCOME TAX (I.T.) RG. 2(1), SCINDIA HOUSE, NAROTTAM MAORARJI ROAD, BALLARD ESTATE, MUMBAI - 400 038 ( APPLICANT) (RESPONDENT) APPLICANT BY : SHRI J D MISTRY RESPONDENT BY : SHRI DEEPAK PRASAD IT(SS) NO. : 07/ MUM/20 12 BLOCK PERIOD 01.04.1995 TO 3 1 .07.2001 RELEVANT TO A.Y. 1996 - 97 TO 2002 - 03 SHRI DAULAT J. RAMSINGHANI, 51 - 52, FREE PRESS HOUSE, NARIMAN POINT, MUMBAI - 400 021 .: PAN: AAQPR 4378 G VS JT. CIT (OSD) RG. 3(3), AAYAKAR BHAVAN, MAHARSHI KARVE MARG, MUMBAI - 400 020 ( APPLICANT) (RESPONDENT) APPLICANT BY : SHRI J D MISTRY RESPONDENT BY : SHRI DEEPAK PRASAD /DATE OF HEARING : 2 8 - 0 7 - 201 5 / DATE OF PRONOUNCEMENT : 30 - 10 - 201 5 ORDER , . . : PER AMIT SHUKLA, J M : THE A FORESAID APPEAL S HA VE BEEN FILED BY THE ABOVE MENTIONED ASSESSEES AGAINST SEPARATE IMPUGNED ORDER S DATED 2 8 . 0 1 .20 11 AND 27.09.2007, IN THE CASE OF MS. POOJA D. MS. POOJA D RAMSINGHANI IT (SS) NO. 22 /M UM /20 11 SHRI DAULAT J. RAMSINGHANI IT(SS) NO. 07/MUM/2011 2 RAMSINGHANI AND DAULAT J . RAMSINGHANI , RESPECTIVELY FOR THE QUANTUM OF ASSESSMENT PASSED U/S 158BD R.W.S. 143(3) FOR THE BLOCK PERIOD 01.04.1995 TO 31 ST JULY, 2001. 2. BESIDES LEGAL GROUNDS CHALLENGING THE VALIDITY OF THE INITIATION OF THE PROCEEDINGS U/S 158BD AND THE PASSING OF THE IMPUGNED ORDER U/S 158BD R.W.S. 158 BC, THE COMMON ISSUE ON MERITS IN BOTH THE CASES IS WITH REGARD TO ADDITION OF RS.26,25,000 AS UNDI SCLOSED INCOME ON ACCOUNT OF ON - MONEY PAID FOR PURCHASE OF FLAT . ONE OF THE LEGAL GROUND CHALLENGING THE PROCEEDINGS INITIATED UNDER SECTION 158BD IS THAT , M ANDATORY REQUIREMENT OF RECORDING OF THE SATISFACTION U/S 158BD HAS NOT BEEN COMPLIED WITH IN ACC ORDANCE WITH THE PROVISION OF LAW. 3. BRIEF FACTS QUA THE LEGAL ISSUE RAISED BY THE ASSESSEE IN BOTH THE CASES ARE THAT , A SEARCH AND SEIZURE ACTION U/S 132(1) WAS CARRIED OUT IN THE OFFICE PREMISES OF M/S RAMA NEWSPRINT & PAPERS PVT. LTD. IN PURSUANCE OF SUCH SEARCH ACTION , BLOCK ASSESSMENT U/S 158BC WAS PASSED IN THE CASE OF M/S RAMA NEWSPRINT & PAPERS PVT. LTD. ON 11.07.2003. SUBSEQUENTLY, NOTICE S U/S 158B D R.W.S. 158BC WAS ISSUED IN THE CASE OF THE ASSESSEES AND WAS SERVED ON 05.09.205 , REQUIRING THEM TO FILE RETURN OF INCOME FOR THE BLOCK PERIOD. AS BORNE OUT FROM THE BLOCK ASSESSMENT ORDER SU CH A PROCEEDING W ERE INITIATED ON THE BACKGROUND THAT DURING THE COURSE OF SEARCH AND SEIZURE OPERATION IN THE CASE OF M/S RAMA NEWSPRINT & PAPERS PVT. LTD., CERTAIN LOOSE PAPERS IN WHICH DETAILS OF ON - MONEY PAID BY THE SE ASSESSEE S FOR PURCHASE OF A RESIDENTIAL FLAT NO. 402 IN RONAK RESIDENCY, KHAR, MUMBAI WAS FOUND. THUS , AO OF THE ASSESSEE CAME TO THE CONCLUSION THAT THE FLAT WERE PURCHASED BY THESE PERSONS FROM THEIR UNACCOUNTED / UNDISCLOSED INCOME . IN THE CASE OF S MT. POOJA RAMSINGHANI, THE ADDITION HAS BEEN MADE ON SUBSTANTIVE BASIS , WHEREAS IN THE CASE OF SHRI MS. POOJA D RAMSINGHANI IT (SS) NO. 22 /M UM /20 11 SHRI DAULAT J. RAMSINGHANI IT(SS) NO. 07/MUM/2011 3 DAULAT J. RAMSINGHANI, THE ADDITION HAS BEEN MADE ON PROTECTIVE BASIS FOR THE SAME AMOUNT. 4. BEFORE US, LD. SENIOR COUNSEL, SHRI J . D . MISTRY SUBMITTED THAT , NO SATISFACTION U/S 158BD HAS BEE N RECORDED BY THE AO OF THE PERSON SEARCHED , I.E. IN THE CASE OF M/S RAMA NEWSPRINT & PAPERS PVT. LTD. IN WAKE OF SUCH A LEGAL PLEA RAI SED BY THE LD. SR. COUNSEL OF THE ASSESSEE, THE BENCH HAD EARLIER DIRECTED THE DEPARTMENTAL REPRESENTATIVE TO PRODUCE THE SATISFACTION N OTE IF ANY WHICH HAS BEEN MENTIONED AT PARA 2 OF THE IMPUGNED BLOCK ASSESSMENT ORDER. SUCH A DIRECTION WAS GIVEN TO TH E DEPARTMENT WAY BACK ON 10 TH JANUARY, 2013. THEREAFTER, VARIOUS OPPORTUNITIES WERE GIVEN TO THE DR REITERATING THE SAME DIRECTIONS , WHICH IS EVIDENT FROM THE RECORDS AND ORDER SHEET ENTRIES . ON 06.05.2015, LAST OPPORTUNITY WAS GIVEN TO THE DR TO PRODUCE S ATISFACTION N OTE AND ASSESSMENT RECORDS AND THE CASE WAS FINALLY FIXED FOR HEARING ON 27.06.2015. HOWEVER, ON THE DATE OF HEARING , AGAIN NO SUCH S ATISFACTION N OTE WAS PRODUCED , I NSTEAD , A LETTER DATED 16.06.2014 HAD BEEN FILED BY ITO (INTERNATIONAL TAX ATION II(1), MUMBAI ) ADDRESSED TO CIT DR, STATING THAT , THERE IS NO REQUIREMENT TO RECORD SATISFACTION U/S 158BD AND HE REITERATED THE OBSERVATION MADE IN PARA 2 OF THE ASSESSMENT ORDER THAT AO HAS RECORDED HIS SATISFACTION. HOWEVER, NO ACTUAL S ATISFA CTION N OTE RECORDED BY THE AO OF PERSON SEARCHED HAS BEEN PRODUCED BEFORE US OR REFERRED. THE LD. DR ALSO ADMITTED THAT, DESPITE SEVERAL LETTERS WRITTEN AND REMINDER TO THE AO TO PRODUCE THE SATISFACTION NOTE IF RECORDED, NO SUCH SATISFACTION OR RECORD HAS BEEN MADE AVAILABLE TO THE OFFICE OF THE DR. HE ALSO SHOWED US COPIES OF SUCH LETTERS /REMINDERS SENT TO THE AO. 5. NOW THAT AMPLE OPPORTUNITIES HAVE BEEN GIVEN TO THE DEPARTMENT TO PRODUCE SATISFACTION NOTE , HOWEVER, TILL THE DATE OF HEARING AND PASSING OF THIS ORDER, NO SUCH SATISFACTION NOTE OR RECORD HA S BEEN PRODUCED BEFORE US. THIS LEADS TO ONLY CONCLUSI ON MS. POOJA D RAMSINGHANI IT (SS) NO. 22 /M UM /20 11 SHRI DAULAT J. RAMSINGHANI IT(SS) NO. 07/MUM/2011 4 AND INFERENCE THAT , NO SATISFACTION HAS BEEN RECORDED IN THE CASE OF THE PERSON WHO WAS SUBJECTED TO THE SEARCH , I.E. M/S RAMA NEWSPRINT & PAPERS PVT. LTD. SO AS TO ACQUIRE JURISDICTION U/S 158BD IN THE CASE OF THE ASSESSEE S BEFORE US. IT IS NOW QUITE A TRITE AND SETTLED LAW THAT IF SATISFACTION HAS NOT BEEN RECORDED, IN RESPECT OF UNDISCLOSED INCOME BELONGING TO A PERSON OTHER THAN A PERSON WHO WAS SUBJECTED TO THE SEARCH, TH EN NO PROCEEDINGS U/S 158BD CAN BE INITIATED IN THE CASE OF THE OTHER PERSON. THIS LAW HAS BEEN SETTLED BY THE HONBLE SUPREME COURT IN THE CASE OF MAHESH MAHESHWARI VS CIT [2007] (289 ITR 341) , WHEREIN THE HONBLE SUPREME COURT HELD THAT RECORDING OF SATISFACTION IS MANDATORY BEFORE INVOKING THE PROVISIONS OF SECTION 158BD AGAINST A PERSON OTHER THAN THE PERSON WHO HAS SUBJECTED TO SEARCH. THE RELEVANT OBSERVATION AND PROPOSITION LAID DOWN BY THE HONBLE SUPREME COURT IS AS UNDER: - CONDITION PRECEDENT FOR INVOKING A BLOCK ASSESSMENT IS THAT A SEARCH HAS BEEN CONDUCTED UNDER SECTION 132, OR DOCUMENTS OR ASSETS HAVE BEEN REQUISITIONED UNDER SECTION 132A. THE SAID PROVISION WOULD APPLY IN THE CASE OF ANY PERSON, IN RESPECT OF WHOM SEARCH HAS BEEN CARRIED OUT UNDER SECTION 132A OR DOCUMENTS OR ASSETS HAVE BEEN REQUISITIONED UNDER SECTION 132A. SECTION 158BD, HOWEVER, PROVIDES FOR TAKING RECOURSE TO A BLOCK ASSESSMENT IN TERMS OF SECTION 1 58BC IN RE SPECT OF ANY OTHER PERSON, THE CONDITIONS PRECEDENT WHEREFOR ARE : (I) SATISFACTION MUST BE RECORDED BY THE ASSESSING OFFICER THAT ANY UNDISCLOSED INCOME BELONGS TO ANY PERSON, OTHER THAN THE PERSON WITH RESPECT TO WHOM SEARCH WAS MADE UNDER SECTION 132; ( H) THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED HAD BEEN HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON; AND (III) THE ASSESSING OFFICER HAS PROCEEDED UNDER SECTION 158BC AGAINST SUCH OTHER PERS ON. THE CONDITIONS PRECEDENT FOR INVOKING THE PROVISIONS OF SECTION 158BD THUS, ARE REQUIRED TO BE SATISFIED BEFORE THE PROVISIONS OF THE CHAPTER XIV - B ARE APPLIED IN RELATION TO ANY PERSON, OTHER THAN THE PERSON WHOSE PREMISES HAD BEEN SEARCHED UNDER SE CTION 132 OR WHOSE DOCUMENTS AND OTHER ASSETS HAD BEEN REQUISITIONED UNDER SECTION 132A. A TAXING STATUTE, AS IS WELL - KNOWN, MUST BE CONSTRUED STRICTLY. LAW IN THIS REGARD IS CLEAR AND EXPLICIT. THE NOTICE IN QUESTION ISSUED UNDER SECTION 158BD DID NOT RECORD SATISFACTION ON THE PART OF THE ASSESSING OFFICER. DOCUMENTS AND OTHER ASSETS RECOVERED DURING SEARCH HAD NOT BEEN HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDICTION IN THE MATTER. MS. POOJA D RAMSINGHANI IT (SS) NO. 22 /M UM /20 11 SHRI DAULAT J. RAMSINGHANI IT(SS) NO. 07/MUM/2011 5 NO PROCEEDING UNDER SECTION 158BC HAD BEEN INITIATED. THERE WAS, THUS, A PATENT NON - APPLICATION OF MIND. A PRESCRIBED FORM HAD BEEN UTILIZED. EVEN THE STATUS OF THE ASSESSEE HAD NOT BEEN SPECIFIED. IT HAD ONLY BEEN MENTIONED THAT THE SEARCH WAS CONDUCTED IN THE MONTH OF NOVEMBER, 1995. NO OTHER INFORMATION HAD BEEN FURNISHED. THE PROVISIONS CONTAINED IN CHAPTER XIV - B ARE DRASTIC IN NATURE. IT HAS DRACONIAN CONSEQUENCES. SUCH A PROCEEDING CAN BE INITIATED ONLY IF A RAID IS CONDUCTED. WHEN THE PROVISIONS ARE ATTRACTED, LEGAL PRESUMPTIONS ARE RAISED AGAINST THE ASSESSE E. THE BURDEN SHIFTS ON THE ASSESSEE. AUDITED ACCOUNTS FOR A PERIOD OF TEN YEARS MAY HAVE TO BE REOPENED. SINCE THE ASSESSING OFFICER HAD NOT RECORDED ITS SATISFACTION, WHICH IS MANDATORY AND THE ASSESSING OFFICER ALSO HAD NOT TRANSFERRED THE CASE TO THE ASSESSING OFFICER HAVING JURISDICTION OVER THE MATTER, THE IMPUGNED JUDGMENTS OF THE HIGH COURT COULD NOT BE SUSTAINED . THE AFORESAID RATIO AND PRINCIPLE LAID DOWN BY THE HONBLE APEX COURT HAS BEEN REITERATED AND FOLLOWED IN CATENA OF CASES SOME OF WHICH HAS ALSO BEEN REFERRED BEFORE US. THUS , WE HOLD THAT, IN ABSENCE OF ANY SATISFACTION NOTE RECORDED U/S 158BD BY THE AO OF THE PERSONS SEARCHED I.E. M/S RAMA NEWSPRINT & PAPERS PVT. LTD. , IN WHOSE CASE THE ASSESSMENT U/S 158BC HAS BEEN COMPLETED, THE ENTIRE PROCEEDINGS INITIATED U/S 158B D BY ISSUANCE OF NOTICE DATED 05.09.2005 IS BAD IN LAW AND SAME DESERVES TO BE QUASHED. THUS, IN BOTH THE APPEALS THE IMPUGNED ASSESSMENT ORDERS ARE QUASHED, BEING WITHOUT JURISDICTION. ACCORDINGLY, GROUNDS IN BOTH THE APPEALS ARE ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE RESPECTIVE ASSESSEE S IN IT(SS) 07/MUM/2012 AND IT(SS) 22/MUM/2011 STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH OCTOBER , 2015. SD/ - SD/ - ( . ) ( ) ( D. KARUNAKARA RAO ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 30 TH OCTOBER , 2015 MS. POOJA D RAMSINGHANI IT (SS) NO. 22 /M UM /20 11 SHRI DAULAT J. RAMSINGHANI IT(SS) NO. 07/MUM/2011 6 / COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3) THE CIT (A) - 11 , MUMBAI. 4 ) THE DIT (INT. TAXN.) - I/ CIT - CONCERNED , MUMBAI. 5 ) , , / THE D.R. C BENCH, MUMBAI. 6 ) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS