M/s. Maruthi Constructions, Hyderabad V. The ACIT Central Circle-5, Hyderabad

ITSSA 72/HYD/2004

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8248 (ITAT-HYDERABAD)
• Duration Of Justice: 7 year(s) 15 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 22-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 22-06-2011
• Assessment Year: misc
• Appeal Filed On: 07-06-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS
• Assessee Lawyers: S RAMA RAO
• Keywords: Block assessment
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER I.T.(SS)A. NO. 72/HYD/2004 (BLOCK PERIOD: 1991-92 TO 2000-01 AND FROM 1.4.2000 TO 8.9.200) M/S. MARUTI CONSTRUCTIONS HYDERABAD; PAN: AEHPD1350B VS. THE ASST. CIT CENTRAL CIRCLE-5 HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SHRI S. RAMA RAO RESPONDENT BY: SHRI V. SRINIVAS O R D E R PER CHANDRA POOJARI, AM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A)-I, HYDERABAD DATED 18.03.2004 FOR THE BLOCK PERIOD 1991-92 TO 2000-01 AND FROM 1.4.2000 TO 8.9.2000. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APP EAL: 1. THE ORDER OF THE CIT(A) IS ERRONEOUS BOTH ON FAC TS AND IN LAW. 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER IN ESTIMATING THE INCOME FROM CONSTRUCTION AT 15% OR AT RS. 12,57,956/-. 3. THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT THE RECEIPTS FOR TWO OF THE ASSESSMENT YEARS ARE BELOW RS. 40,000/- AND, THEREFORE, EVEN IN ACCORDANCE WITH TH E PROVISIONS OF SEC. 44AD, INCOME CAN BE ESTIMATED AT 8%. 4. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ESTIM ATION OF INCOME AT 15%. 5. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTIO N OF THE ASSESSING OFFICER IN NOT ALLOWING INTEREST AND REMUNERATION PAID TO PARTNERS U/S. 40(B) OF THE I.T . ACT. 6. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTIO N OF THE ASSESSING OFFICER IN CHARGING SURCHARGE. I.T.(SS)A. NO. 72/HYD/2004 M/S. MARUTI CONSTRUCTIONS ===================== 2 3. THE ASSESSEE ALSO RAISED THE FOLLOWING ADDITIONA L GROUND: THERE WAS NO SEARCH WARRANT U/S. 132 OF THE I.T. A CT ON THE APPELLANT AND, AS SUCH THE SO CALLED SEARCH OF THE PREMISES OF THE APPELLANT WAS ILLEGAL AND, CONSEQUE NTLY, THE ASSESSMENT FRAMED U/S. 158BC WAS INVALID. 4. THE LEARNED COUNSEL FOR THE ASSESSEE DREW OUR AT TENTION TO THE COPY OF SEARCH WARRANT WHICH ISSUED IN THE NAMES OF MR. MADHAV REDDY AND MR. SANJEEV REDDY AND THE PLACE TO BE SEARCHED IS PREMISES OF THE ASSESSEE. ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE THERE IS NO REFERENCE TO THE ASSESSEE AGAINST THE COLUMN RELATI NG TO THE PERSON IN WHOSE NAME THE WARRANT WAS ISSUED EVEN THOUGH THE P REMISE IS TO BE SEARCHED IS THAT OF THE ASSESSEE FIRM. HE RELIED O N THE ORDER OF SPECIAL BENCH IN THE CASE OF G. RAMAIAH REDDY VS. AC (87 IT D 439) (BANGALORE) WHEREIN IT WAS HELD THAT THE TRIBUNAL H AS THE POWER AS WELL AS THE DUTY TO DECIDE WHETHER THE ORDER U/S. 158BC IS LEGALLY VALID OR NOT. ACCORDING TO THE LEARNED AR THE SEARCH WARRANT ISSU ED U/S. 132 IS PERSON SPECIFIC AND NOT PREMISES SPECIFIC. FOR THI S PURPOSE, HE RELIED ON THE ORDER OF BOMBAY BENCH OF ITAT IN THE CASE OF SM T. NASREEN YUSUF DHANANI VS. ACIT (24 SOT 31). IF THERE IS NO WARRA NT IN A PARTICULAR CASE, THE SEARCH IS INVALID AND CONSEQUENTLY THE AS SESSMENT U/S. 158BC IS ALSO INVALID. 5. HE RELIED ON THE DECISION OF ALLAHABAD HIGH COUR T IN THE CASE OF CIT V. SMT. VANDANA VERMA, 330 ITR 533 (ALL.) WHERE IN IT HAS BEEN HELD THAT IN THE CASE THAT A WARRANT HAS TO BE ISSUED IN DIVIDUALLY AND NOT IN JOINT NAMES. FURTHER, THE PANCHANAMA DOES NOT SPEA K AT ALL OF THE WARRANT BEING IN THE NAME OF THE ASSESSEE FIRM. IN TERMS OF THE RULE 112(7) OF THE IT RULES, THE SEARCH IS TO BE MADE IN THE PRESENCE OF TWO WITNESSES AND WHEN PANCHANAMA DOES NOT SPEAK OF THE ASSESSEE FIRM AS THE PERSON IN RESPECT OF WHOM THE WARRANT HAS BE EN ISSUED, IT HAS TO BE HELD THAT THERE IS NO SEARCH AND AS SUCH THE ASS ESSMENT U/S. 158BC IS INVALID. IF THERE IS ANY MATERIAL INCRIMINATING THE ASSESSEE FOUND IN THE COURSE OF SEARCH ON K. SANJEEVA REDDY AND K. MADHAV A REDDY, THE I.T.(SS)A. NO. 72/HYD/2004 M/S. MARUTI CONSTRUCTIONS ===================== 3 MATERIALS COULD HAVE BEEN USED FOR FRAMING AN ASSES SMENT U/S. 158BD. THE ORDER U/S. 158BC IS ILLEGAL AND INVALID. 6. THE LEARNED DR RELIED ON THE PROVISIONS OF SECTI ON 292B TO PLEAD THAT A SIMPLE OMISSION DOES NOT INVALIDATE THE ASSE SSMENT AND ACCORDING TO HIM, MENTIONING OF WRONG SECTION IN TH E ASSESSMENT ORDER AS 158BC INSTEAD OF SECTION 158BD DOES NOT INVALIDA TE THE ASSESSMENT ORDER. FURTHER, HE SUBMITTED THAT THE ADDITIONAL G ROUND QUESTIONING THE SEARCH WARRANT HAS BEEN RAISED BY THE ASSESSEE FIRS T TIME BEFORE THE TRIBUNAL AND NEITHER THE CIT(A) NOR THE ASSESSING O FFICER HAVE AN OCCASION TO GO THROUGH THIS ISSUE. AS SUCH, THE IS SUE MAY BE SET ASIDE TO THE FILE OF LOWER AUTHORITIES FOR FRESH CONSIDER ATION. 7. WE HAVE HEARD BOTH THE PARTIES AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. SIMILAR ISSUE WAS CONSIDERED BY THIS TRIBUNAL IN THE CASE OF LAKSHMISRI ENTERPRISES & OTHERS IN IT(SS)A NO. 67/HYD/2004 & OTHERS, ORDER DATED 31 ST MARCH, 2011 WHEREIN THE TRIBUNAL HELD AS FOLLOWS: 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E MATERIALS AVAILABLE ON RECORD. WE HAVE CAREFULLY GONE THROUGH THE SEARCH WARRANT (FORM NO. 45) DATED 6.9.2000 IS SUED U/S 132 READ WITH RULE 112 OF THE IT RULES, 1962. IN T HE CASE OF M/S LAXMI SREE ENTERPRISES, THE SEARCH WAS TAKEN PLACE CONSEQUENT TO SEARCH WARRANT DATED 6.9.2000 ISSUED IN THE NAME OF SHRI K. MADHAVA REDDY AND SHRI M.K. SANJEEVA REDDY AND THE PLACE TO BE SEARCHED IS M/S LAXMI SAI ENTERPRISES. WE HA VE ALSO GONE THROUGH THE PANCHANAMA DATED 8.9.2000 DRAWN IN THIS CASE. IN THE PANCHANAMA, THE COLUMN REGARDING WAR RANT IN THE CASE OF WAS FILLED AS FOLLOWS: A) WARRANT IN THE CASE OF: LAXMI SREE ENTERP RISES S/SH.K. MAHADAVA REDDY & SANJEEVA REDDY B) WARRANT TO SEARCH: LAXMI SREE ENTE RPRISES, (DETAILS OF OWNERSHIP OF KUKATPALLY, HYD. PLACE OF SEARCH) 14. AS SEEN FROM THE COPY OF SEARCH WARRANT, THERE IS NO VALID WARRANT IN THE CASE OF M/S LAXMI SREE ENTERPR ISES. NOW THE QUESTION BEFORE US IS WHETHER THE TRIBUNAL HAS THE POWER TO EXAMINE THE VALIDITY OF THE SEARCH WARRANT ISSUED I N THIS CASE OR NOT. IN OUR OPINION, NO APPEAL IS PROVIDED FOR AGA INST AN ORDER I.T.(SS)A. NO. 72/HYD/2004 M/S. MARUTI CONSTRUCTIONS ===================== 4 EITHER U/S 132(1) OR U/S 132(3) AND THE ASSESSEE CA NNOT CHALLENGE SUCH ADMINISTRATIVE ACTION OF THE REVENUE DEPARTMENT. HOWEVER, THE TRIBUNAL HAS THE POWER AS WELL AS THE DUTY TO DECIDE WHETHER THE ASSESSMENT ORDER IS PASS ED IS LEGALLY VALID OR NOT. FOR THIS PURPOSE, THE TRIBUNAL HAS T HE POWER TO SEE WHETHER THERE WAS ANY SEARCH WARRANT IN THE NAME OF THE ASSESSEE OR NOT. IT IS THE PREREQUISITE U/S 158BC, THAT A PERSON IN THE CASE OF WHOM ACTION U/S 132 OR U/S 132A HAS BEEN TAKEN, CAN BE CALLED UPON TO FILE A RETURN OF INCOME IN RE SPECT OF BLOCK PERIOD AND AGAINST SUCH PERSON ONLY ORDER U/S 158BC CAN BE PASSED. THE TRIBUNAL HAS THE POWER TO EXAMINE WHET HER THERE IS AN ACTION U/S 132 OF THE IT ACT AGAINST THE ASSE SSEE AND WHETHER THERE WAS VALID PANCHANAMA DRAWN IN THIS CA SE OR NOT. THE ASSESSING OFFICER BEFORE ISSUING THE NOTICE U/S 158BC SHOULD SEE THAT THERE IS A SEARCH ACTION CONDUCTED ON THE ASSESSEE U/S 132 OF THE ACT. IN VIEW OF THIS, WE REQUIRED TO VERIFY WHETHER THE JURISDICTIONAL FACTS EXISTS BEFO RE ISSUE OF NOTICE U/S 158BC OF THE ACT AND THEREAFTER WE HAVE TO SEE WHETHER AN ASSESSMENT PASSED U/S 158BC IS IN RESPEC T OF AN ASSESSEE AGAINST WHOM SEARCH WAS CONDUCTED U/S 132 OF THE ACT. THE SEARCH ACTION U/S 132 SHOULD BE A VALID A CTION AND IT SHALL BE CULMINATED INTO VALID ORDER U/S 158BC OF T HE ACT. AT THIS POINT WE MAKE IT CLEAR THAT WE ARE NOT ADJUDICATING THE PROPRIETY OF ACTION TAKEN U/S 132 OF THE ACT AND WE ARE ADJUD ICATING ONLY AN ORDER PASSED U/S 158BC BASED ON ACTION U/S 132 OF THE IT ACT. TO BE A VALID SEARCH ACTION, THERE SHOULD BE A WARRANT U/S 132 OF THE IT ACT AND THE SAID WARRANT SHALL IN THE NAME OF THE ASSESSEE ONLY. WE HAVE CAREFULLY GONE THROUGH THE SEARCH WARRANT. WE ARE UNABLE TO FIND OUT THE NAME OF THE ASSESSEE M/S LAXMISAI ENTERPRISES IN THE SEARCH WARRANT DATE D 6.9.2000 ISSUED U/S 132 OF THE IT ACT. THE SEARCH WARRANT W AS ISSUED IN THE NAMES OF S/SHRI K. MADHAVA REDDY & K. SANJEEVA REDDY AND THE PLACE TO BE SEARCHED IS BELONGS M/S LAXMI SAI ENTERPRISES. SECTION 158BB PRESCRIBES THAT WHERE A SEARCH IS INITIATION, U/S 132 OR BOOKS OF ACCOUNT, ETC. ARE R EQUISITIONED U/S 132A IN THE CASE OF ANY PERSON, THEN THE UNDISCLOSE D INCOME OF THAT PERSON SHALL BE ASSESSED IN ACCORDANCE WITH TH E CHAPTER XIV B OF THE IT ACT. SEARCH U/S 132 IS PERSON SPEC IFIC AND NOT PREMISES SPECIFIC. IT FOLLOWS THAT IF THE NAME OF T HE ASSESSEE, AGAINST WHOM THE BLOCK ASSESSMENT HAS BEEN MADE, DO ES NOT FIGURE IN THE WARRANT OF AUTHORIZATION ISSUED U/S 1 32, THE BLOCK ASSESSMENT WOULD BE UNAUTHORIZED AND VOID AB INITIO . IT IS THE CORRECT LEGAL POSITION, IT WOULD FOLLOW THAT THE AD DITIONAL GROUND IS WELL FOUNDED. THE CONTENTION OF THE REVENUE IS TH AT AS THE PREMISES SEARCHED BELONG TO THE ASSESSEE AS SUCH, PROCEEDINGS AGAINST IT U/S 158BC IS VALID WHICH CAN NOT BE ACCEPTED. AS PER SECTION 158BB (1) R.W.S. 132(1), THE POSITION IS CLEAR THAT IN ORDER TO ASSESS THE UNDISCLOSED INCOM E OF ANY PERSON IN ACCORDANCE WITH CHAPTER XIV B, A SEARCH I S A PREREQUISITE FOR THE INITIATION OF THE BLOCK ASSESS MENT PROCEEDINGS. IN THE PRESENT CASE, THERE IS NO VALI D SEARCH IN THE CASE OF THE ASSESSEE U/S 132 OF THE ACT. INITIATIO N OF PROCEEDINGS U/S 158BC IS NOT POSSIBLE. IN THIS CAS E, ANY ACTION TO BE TAKEN AGAINST THE ASSESSEE IS ONLY U/S 158BD, IF THERE IS I.T.(SS)A. NO. 72/HYD/2004 M/S. MARUTI CONSTRUCTIONS ===================== 5 ANY EVIDENCE FOUND DURING THE COURSE OF SEARCH ACTI ON IN RESPECT OF OTHER PERSON SHOWING UNDISCLOSED INCOME OF THE ASSESSEE. THERE IS SPECIFIC PROVISION U/S 158BD IN RESPECT OF WHOM INCRIMINATING MATERIAL IS FOUND IN CASE OTHER THAN THE PERSON WITH RESPECT TO WHOM THE SEARCH WAS MADE U/S 132 OF THE ACT AND THE ASSESSING OFFICER CANNOT ARROGATE H IMSELF TO BYPASS THE PRESCRIBED PROCEDURES AND ISSUE NOTICE U /S 158BC ON A PERSON WHO WAS NOT SUBJECT TO SEARCH. IN THE PRESENT CASE, SINCE THERE IS NO SEARCH WARRANT IN THE NAME OF M/S LAXMI SREE ENTERPRISES, THE BLOCK ASSESSMENT PROCEEDINGS INITI ATED U/S 158BC IS BAD IN LAW AND THE ASSESSMENT ORDER IS IN VALID. THE JUDGEMENT RELIED BY THE ASSESSEE COUNSEL IN THE CAS E OF SMT. NASREEN YUUSUF DHANANI VS. ACIT (24 SOT 31) (MUM), SHRI C RAMAIAH REDDY VS. ACIT (87 ITD 439) (BLORE) IS ALS O SUPPORTS OUR VIEW. THE SAME IS THE POSITION IN THE CASE OF M/S AMMA ENTERPRISES (IT(SS)A. 68/H/2004), SHRI JASWANT RAO (IT(SS)A.70/H/2004) AND SHRI M. BHIMA RAO (IT(SS)A.128/H/2004). IN THE CASE OF M/S AMMA ENTE RPRISES (IT(SS)A.68/H/2004), WARRANT HAS BEEN ISSUED IN THE NAME OF S/SHRI K. MADHAVA REDDY & K. SANJEEVA REDDY AND THE PLACE TO BE SEARCH IS THE PREMISES OF M/S AMMA FINANCE & M/S SIRI FINANCE, SHOP NO.22 & 127, ALLURI COMMERCIAL COMP LEX, KUKATPALLY, HYDERABAD. IN THE CASE OF SHRI JESWANT RAO (IT(SS)A. 70/H/2004), NO SEARCH WARRANT HAS BEEN PR ODUCED BEFORE US FOR OUR CONSIDERATION. THE PANCHANAMA SHOWS THE WARRANTS BEING ISSUED IN THE NAME OF S/SHRI K. MADH AVA REDDY & K. SANJEEVA REDDY AND NOT IN THE NAME OF THE ASSE SSEE. IN THE CASE OF SHRI M. BHIMA RAO (IT(SS)A. 128/H/2004, NO SEARCH WARRANT WAS PRODUCED BEFORE US. THE PANCHANAMA SHO WS THE WARRANTS BEING ISSUED IN THE NAME OF S/SHRI K. MADH AVA REDDY & K. SANJEEVA REDDY AND NOT IN THE NAME OF THE ASSE SSEE. SO, WE TAKE ADVERSE INFERENCE IN THESE CASES THAT THERE IS NO SEARCH ON THESE ASSESSEES. HENCE THE ASSESSMENT ORDER PA SSED IN ALL THESE CASES IS WITHOUT JURISDICTION AND BAD IN LAW. ACCORDINGLY, WE QUASH ALL THE ASSESSMENT ORDERS IN THE CASE OF M /S LAXMI SREE ENTERPRISES (IT(SS)A.67/H/2004), M/S AMMA ENTE RPRISES (IT(SS)A.68/H/2004), SHRI JESWANT RAO (IT(SS)A.70/H /2004) AND IN THE CASE OF SHRI M. BHIMA RAO (IT(SS)A.128/H /2004). 15. THE ASSESSMENT ORDER PASSED IN THE CASE OF M/S SREE ENTERPRISES (IT(SS)A.69/H/2004) IS U/S 158BD OF THE IT ACT. THIS ASSESSMENT IS FRAMED CONSEQUENT TO SEARCH ACTI ON CONDUCTED AT THE PREMISES OF SHRI M. HANUMANTHA RAO , PARTNER OF THE ASSESSEE FIRM. FURTHER, THE MATERIALS GATHE RED DURING THE COURSE OF SEARCH ACTION CONDUCTED IN THE CASE OF S/ SHRI K. MADHAVA REDDY & K. SANJEEVA REDDY AT THE PREMISES M /S LAXMI SRI ENTERPRISES IS ALSO USED. IN OUR OPINION , THE ASSESSING OFFICER IS CORRECT IN FRAMING THE ASSESSM ENT U/S 158BD OF THE ACT BY USING THE MATERIALS GATHERED FR OM THE SEARCH ACTION CONDUCTED IN THE CASE OF SHRI M. HANU MANTHA RAO AND ALSO IN THE CASE OF M/S SRI.K. MADHAVA REDD Y & SANJEEVA REDDY. IN THE CASE OF SHRI K. MADHAVA RED DY & SRI SANJEEVA REDDY, THE PREMISES SEARCHED WERE BELONGIN G TO M/S LAXMI ENTERPRISES. AS SUCH, WE CANNOT SAY THAT THE ASSESSING I.T.(SS)A. NO. 72/HYD/2004 M/S. MARUTI CONSTRUCTIONS ===================== 6 OFFICER USED ANY SEARCH MATERIAL UNEARTHED BY WAY O F ILLEGAL SEARCH ACTION. IN OUR OPINION, THERE IS A VALID SEA RCH ACTION IN THE CASE OF SHRI M. HANUMANTHA RAO AND IN THE CASE OF S /SHRI K MADHAVA REDDY & K SANJEEVA REDDY AND CONSEQUENT TO THESE SEARCH ACTIONS U/S 158BD NOTICE WAS ISSUED TO THESE ASSESSEES AND ASSESSMENT ORDERS FRAMED ACCORDINGLY. WE DO NO T FIND ANY MERIT IN THE ADDITIONAL GROUND RAISED BY THE ASSESS EE WITH REGARD THE VALIDITY OF THE ASSESSMENT ORDER U/S 158 BD OF THE IT ACT. THE ADDITIONAL GROUND IN THE CASE OF M/S SRE E ENTERPRISES STANDS DISMISSED. 8. IN VIEW OF THE ABOVE DISCUSSION, BEING THE FACTS AND CIRCUMSTANCES SIMILAR, WE INCLINED TO QUASH THE ASS ESSMENT ORDER. ACCORDINGLY THE ADDITIONAL GROUND RAISED BY THE ASS ESSEE IS ALLOWED. WE REFRAIN OURSELVES FROM GOING INTO THE OTHER GROU NDS RAISED BY THE ASSESSEE WHICH BECOME INFRUCTUOUS. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JUNE, 2011. SD/ - (G.C. GUPTA) VICE PRESIDENT SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 22 ND JUNE, 2011 TPRAO COPY FORWARDED TO: 1. M/S. MARUTI CONSTRUCTIONS, C/O. SRI S. RAMA RAO, ADVOCATE, 103, INDIRADEVI NILAYAM, 3-6-542/4, STREE T NO. 7, HIMAYATNAGAR, HYDERBAAD-29. 2. THE ASST. CIT, CENTRAL CIRCLE-5, HYDERABAD. 3. THE CIT(A)-I, HYDERABAD 4. THE CIT (CENTRAL), HYDERABAD. 5. THE DR A BENCH, ITAT, HYDERABAD