V.Kumarasamy & Co., Erode V. DCIT, Salem

ITSSA 8/CHNY/2014

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9267 (ITAT-CHENNAI)
• Duration Of Justice: 5 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 09-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 19-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: G BASKAR
• Keywords: Search and seizure; Procedural lapse; Block assessment; Set aside; FORM 2B
• Section: 250; 158BC; 13

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI , , BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./I.T(SS)A. NO.8/CHNY/2014 BLOCK ASSESSMENT PERIOD : 1.4.1986 TO 20.02.1 997. V. KUMARASAMY & CO, 1/5, SANKARI MAIN ROAD, PALLIPALAYAM, ERODE 638 007. [PAN AABFV 4783A] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE II, SALEM ( / APPELLANT) ( /RESPONDENT) ! ' / APPELLANT BY : SHRI. G. BASKAR, ADV #$ ! ' /RESPONDENT BY : SHRI.A.SUNDARARAJAN, ADDL. CIT. % & ! ' /DATE OF HEARING : 06-01-2020 ()*+ ! ' /DATE OF PRONOUNCEMENT : 09-01-2020 / O R D E R PER INTURI RAMA RAO , ACCOUNTANT MEMBER: . THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED A GAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), SALEM ( CIT(A) FOR SHORT) DATED 06.03.2014 FOR THE BLOCK ASSESSMENT PERIOD 1.4.1986 TO 20.02.1997. IT(SS)A NO.8/2014 :- 2 -: 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE CIT(A) SHOULD HAVE CANCELLED THE ENTIRE BL OCK ASSESSMENT MADE FOR THE PERIOD FROM 01-04-1986 TO 2 0-02- 1997, AS THE NOTICE DATED 05-11-1997 ISSUED TO MAKE AN ASSESSMENT U/S 158 BD RESTRICTING TIME STIPULATED B Y SECTION 158 BC(A)(II) IS NOT CURABLE (11 DTR 1 AT 101 PARA 120 = 117 T1J 145 SB, 348 ITR 75 KARNATAKA). 2. THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFI CER TO TREAT THE ENTITY AS A FIRM TILL THE DEATH OF SRI V.KUMA RASAMY ON 17- 09-1995, THE INTERVENING PERIOD AS AOP AND FROM 1 8-09-1995 TILL THE END OF BLOCK PERIOD AS FIRM , WITHOUT BE ING ABLE TO IDENTIFY THE BLOCK PERIOD AND THE STATUS, FOR WHICH THE NOTICE WAS ISSUED, AS THE FIRST FIRM GOT DISSOLVED ON 17-0 9- 1995; 3. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT AS NO INCRIMINATING MATERIAL WAS UNEARTHED DURING SEARCH, GROSS PROFIT SHOULD NOT HAVE BEEN ON ESTIMATE IN A BLOCK ASSESSM ENT, MADE U/S 158 BD (222 CTR 438 AT 453 DELHI, 250 ITR 141 D ELHI, 249 ITR 4 ALLAHABAD, 248 ITR 350 RAJASTHAN). EVEN OTHER WISE, NET PROFIT CAN BE ASSESSED UNDER THE INCOME-TAX ACT AND NOT GROSS PROFIT ( 327 ITR 312 GUJARAT). 4. THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN TREATING THE INCOME OF THE ASSESSMENT YE ARS 1987-88 TO 1990-91 AS UNDISCLOSED INCOME, AS COPIES OF PROF IT AND LOSS ACCOUNT AND BALANCE SHEET FOR THE YEARS FROM 01-04- 1986 TO 31-03-1990 ATTESTED BY A CHARTERED ACCOUNTANT WERE FILED WITH THE ASSESSING OFFICER (67 LTD 151 INDORE, 65 LTD 11 CALCUTTA) 5. THE CIT(A) IS NOT CORRECT IN IGNORING THE CLAIM TO ALLOW THE INTEREST TO PARTNERS FOR ARRIVING AT THE TAXABLE IN COME. 6. THE CIT(A) SHOULD HAVE DISCUSSED THE CLAIM OF DE PRECIATION ALLOWANCE MADE EVEN IN THE RETURNS OF INCOME FILED PRIOR TO SEARCH. 7. THE CIT(A) SHOULD HAVE ACCEPTED THE PLEA THAT TH E DIFFERENCE BETWEEN THE CAPITAL AS ON THE OPENING DATE OF BLOCK PERIOD AND ITS CLOSING DATE, SHOULD HAVE BEEN COMPUTED AS UNDI SCLOSED INCOME, ESPECIALLY WHEN NO OTHER UNDISCLOSED ASSET OR INVESTMENT OR OUTGOINGS HAVE BEEN FOUND (66 TTJ 305 JAIPUR). FOR THE ABOVE GROUNDS AND OTHER GROUNDS THAT MAY BE SUBMITTED AT THE TIME OF HEARING BEFORE THE INCOME- TAX APPELLATE TRIBUNAL, IT IS PRAYED THAT THE BLOCK ASS ESSMENT MADE IT(SS)A NO.8/2014 :- 3 -: BE CANCELLED OR ADDITIONS MADE MAY PLEASE BE DELETE D OR REDUCED. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT-ASSESSEE NAMELY M/S. V. KUMARASAMY & CO IS A PARTNERSHIP FIRM CONSTITUTED UNDER THE PARTNERSHIP ACT. CONSEQUENT TO SEARCH AND SEIZURE ACTION ON 20.02.1997 U/S.132 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) IN THE PREMISES OF ONE SHRI. V.K. PONNUSAMY, PARTNERS OF THE APPELLANT FIRM CERTAIN MATERIALS SUGGESTING EXISTENCE OF UNDISCLOSED INCOME PERTAIN ING TO THE APPELLANT FIRM STATED TO HAVE BEEN FOUND. ACCORDING LY, ACTION U/S.158BD OF THE ACT WAS INITIATED AND NOTICE U/S .158BC(A) OF THE ACT WAS ISSUED. IN RESPONSE TO WHICH THE APPELLANT FIR M FILED RETURN OF UNDISCLOSED INCOME ADMITTING INCOME OF M1,52,500/-. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY THE ASSESSING OFFICER VIDE ORDER DATED 25.11.1999 PASSED U/S.158B C (C) R.W.S. 158BD OF THE ACT AT UNDISCLOSED TOTAL INCOME OF M21,49,36 0/- FOR THE BLOCK PERIOD. 4. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE LD. CIT(A), SALEM, WHO VIDE ORDER DATED 10.06.2004 IN ITA N O.135/99-00 AND 136/99-00, FOR THE BLOCK ASSESSMENT PERIOD 01.04.19 86 TO 20.02.1997 PARTLY ALLOWED THE APPEAL. THE MATTER WAS FURTHER CARRIED TO THE IT(SS)A NO.8/2014 :- 4 -: TRIBUNAL, THE TRIBUNAL VIDE ORDER DATED 13.08.2007 IN IT(SS) A. NO.95/MDS/2004, FOR BLOCK ASSESSMENT PERIOD 01.04.1 986 TO 20.02.1997 ON THE GROUND THAT NOTICE U/S.158BC OF THE ACT WAS INVALID ON THE GROUND THAT NOTICE GRANTING TIME TO THE ASSESSEE TO FILE RETURN OF INCOME LESS THAN PERIOD OF FIFTEEN DAYS. THE TRIBUNAL HELD THAT SUCH DEFECT IS CURABLE U/S.292B OF THE ACT. I T IS MERE PROCEDURAL IRREGULARITY AND SET ASIDE THE ASSESSMENT TO THE A SSESSING OFFICER TO REDO THE ASSESSMENT. BEING AGGRIEVED BY THE ORDER O F THE TRIBUNAL, THE ASSESSEE FURTHER FILED AN APPEAL U/S.260A OF THE A CT BEFORE THE HONBLE JURISDICTIONAL HIGH COURT. THE HONBLE HI GH COURT VIDE ORDER DATED 21.03.2019 IN TAX CASE APPEAL NOS.711 AND 71 2 OF 2008 HAD DISMISSED THE APPEAL INFRUCTUOUS BUT GRANTED LIB ERTY TO THE ASSESSEE TO RAISE ALL FACTUAL AND LEGAL ISSUES RAISED IN THI S APPEAL BEFORE LOWER AUTHORITIES. 5. THE ASSESSING OFFICER PURSUANT TO THE ORDER OF THI S TRIBUNAL, COMPLETED THE ASSESSMENT VIDE ORDER DATED 31.12.200 8 AT TOTAL INCOME OF M21,49,360/- AFTER MAKING CERTAIN ADDITIONS. 6. THE SAID ASSESSMENT ORDER WAS CHALLENGED BEFORE TH E LD. CIT(A) ON THE GROUND THAT NOTICE ISSUED U/S. 158BC(A) OF T HE ACT IS INVALID AS THE TIME GRANTED TO THE ASSESSEE TO FILE RETURN O F INCOME IS LESS THAN IT(SS)A NO.8/2014 :- 5 -: FIFTEEN DAYS. THE SAID CONTENTION WAS OVERRULED B Y THE LD. CIT(A) VIDE IMPUGNED ORDER. 7. BEING AGGRIEVED BY THE ORDER OF THE CIT(A), THE AP PELLANT IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. LD. AUTHOR ISED REPRESENTATIVE SUBMITTED BEFORE US THAT NOTICE ISSUED U/S. 158BC(A ) OF THE ACT IS INVALID AS THE TIME GRANTED TO THE ASSESSEE TO FILE RETURN OF INCOME IS LESS THAN FIFTEEN DAYS. IT IS FURTHER SUBMITTED THA T DEFECT CANNOT BE CURED U/S.292B OF THE ACT. HE PLACED RELIANCE ON THE DECISIONS OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF SURYA DEVKUMAWAT VS. CIT, (2017) 392 ITR 0369 AND HONBLE GUJARAT HIGH C OURT IN THE CASE OF CIT VS. AMIT K. JAIN, 388 ITR 113. HE ALSO PLACED RELIANCE ON CBDT CIRCULAR NO.762, DATED 18.02.1998 IN SUPPORT OF THE CONTENTION THAT WHEREIN THE TERM WITHIN PERIOD WERE INTERPRETE D BY THE BOARD TO MEAN THAT LESS THAN FIFTEEN DAYS'. 8. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE PLACED RELIANCE ON THE DECISION OF HONBLE PUNJAB AND HARY ANA HIGH COURT IN THE CASE OF SURJEET BAHADUR KHURANIA VS. CIT, (2016) 75 TAXMANN .COM 229, IN SUPPORT OF THE CONTENTION THAT MERE FACTUM OF GRANTING TIME LESS THAN FIFTEEN DAYS TO FILE RETURN, IPSO FACTO DOES NOT MAKE NOTICE VOID. IT(SS)A NO.8/2014 :- 6 -: 9. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE ONLY ISSUE IN THE PRESENT APPEAL RELATE S TO VALIDITY OF NOTICE ISSUED U/S.158BC OF THE ACT ON THE GROUND T HAT TIME GRANTED TO FILE THE BLOCK RETURN OF INCOME IS LESS THAN FIFTEE N DAYS IS VALID IN LAW OR NOT. UNDISPUTEDLY, IN THE PRESENT CASE, NOTICE U/S.158BC OF THE ACT DATED 05.11.1997 WAS ISSUED PRESCRIBING THAT BLOCK RETURN OF INCOME IN FORM 2B SHOULD BE FILED WITHIN FIFTEEN DAYS F ROM THE SERVICE OF THE NOTICE. THE SAID NOTICE IS PLACED AT PAGE NO.12 OF THE PAPER BOOK. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V S. EKBAL & CO,(1945) 13 ITR 154, INTERPRETED THE EXPRESSION S WITHIN THIRTY DAYS TO MEAN THAT LESS THAN FIFTEEN DAYS. THE SAI D INTERPRETATION WAS ACCEPTED BY CBDT VIDE CIRCULAR NO.762, DATED 18.02. 1998. THE PROVISIONS OF SECTION 158BC OF THE ACT PROVIDES TH AT ASSESSING OFFICER SHALL GRANT PERIOD NOT LESS FIFTEEN DAYS TO FILE R ETURN OF INCOME. THIS PROVISION HELD TO BE MANDATORY. THE DEFECT OF LESS ER PERIOD OF TIME IS NOT A CURABLE DEFECT UNDER THE PROVISIONS OF SECT ION 292B OF THE ACT. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CI T VS. MICRO LABS LTD, (2012) 348 ITR 75, FOLLOWING THE JUDGMENT OF H ONBLE BOMBAY HIGH COURT IN THE CASE OF SHIRISH MADHUKAR DALVI VS . ACIT, (2006) 287 ITR 242, HELD THAT DEFECT IN NOTICE IS VITAL A ND NOTICE ISSUED U/S.158BC OF THE ACT IS MANDATORY AND OBSERVED AS U NDER:- IT(SS)A NO.8/2014 :- 7 -: THE CONTENTION IS UNACCEPTABLE. THE TIME TO BE GRA NTED IN TERMS OF SECTION 158BC IS MANDATORY. HAVING FAILED TO COM PLY WITH THE SAME, GRANTING ANOTHER OPPORTUNITY TO THE REVENUE I S HIGHLY IMPROPER. IF THAT WERE TO BE SO, THEN EACH AND EVER Y VIOLATION OF LAW BY THE REVENUE WOULD STAND RECTIFIED BY ORDERS OF REMAND. THAT IS NOT THE INTENT AND PURPORT OF THE ACT. THE PERIOD AS SPECIFIED IN THE ACT REQUIRES TO BE STRICTLY COMPLI ED WITH. THEREFORE, THE PLEA OF THE REVENUE FOR A DIRECTION TO PASS FRESH ORDERS OF ASSESSMENT AFTER COMPLYING WITH THE PROVI SIONS OF SECTION 158BC REQUIRES TO BE REJECTED . THE HONBLE HIGH COURT OF RAJASTHAN IN THE CASE OF SURYA DEVKUMAWAT (SUPRA) FOLLOWING THESE JUDGMENTS HELD THAT NOTICE ISSUED BY THE ASSESSING AUTHORITY ASKING ASSESSEE TO FILE RETURN WITHIN FIFTEEN DAYS IS NOT IN ACCORDANCE WITH PROVISIONS OF THE ACT AND THEREFORE HELD TO BE INVALID. SIMILARLY, HONBLE GUJARAT HIGH COURT IN THE CASE OF AMIT K. JAIN (SUPRA) TOOK THE SIMILAR VIEW. HOWEVER, WE NOTICE CONTRARY DECISION BY THE PUNJAB AND HARYANA HIGH COURT IN TH E CASE OF SURJEET BAHADUR KHURANIA (SUPRA). IT IS SETTLED POSITION OF LAW THAT IN THE CASE OF CLEAVAGE OF JUDICIAL OPINIONS, THE VIEW WHI CH IS IN FAVOUR OF THE ASSESSEE SHOULD BE ADOPTED AS HELD BY HONBLE SUPR EME COURT IN THE CASE OF CIT VS VEGETABLE PRODUCTS, 88 ITR 192. IN VIEW OF THE ABOVE LEGAL POSITIONS, WE HOLD THAT NOTICE ISSUED U/S.158 BC OF THE ACT IS INVALID IN LAW. ACCORDINGLY, WE ALLOW THE APPEAL FILED BY THE ASSESSEE. IT(SS)A NO.8/2014 :- 8 -: 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS ALLOWED. ORDER PRONOUNCED ON 9TH DAY OF JANUARY, 2020, AT CHENNAI. SD/- SD/- ( ) (GEORGE MATHAN) /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER ,& / CHENNAI - / DATED:9TH JANUARY, 2020. KV ./ !/# '01/21*' / COPY TO: / 1 . / APPELLANT 3. / % 3'/45 / CIT(A) 5. 167 /# ' 89 / DR 2. #$ / RESPONDENT 4. / % 3' / CIT 6. 7:/;& / GF