PADMINI M NAIR V. UNION OF INDIA

SCA/9349/2002

AI Insights

The case revolves around the challenge by Padmini M Nair against notices issued under Section 158BD of the Income-tax Act, 1961, following a search operation on her husband. The notices required her to file a return for a block period, asserting that undisclosed income belonged to her. The petitioner contested the validity of these notices on grounds including lack of recorded satisfaction by the Assessing Officer and undue delay in issuing the notices. The respondents argued that a note indicating undisclosed income was made post-assessment, which should suffice as satisfaction. However, the court found that this note was not in existence when the notices were issued, leading to the conclusion that the notices were improperly issued.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 723192 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 07-01-2013
• Assessment Year: misc
• Other Referred Cases: Manish Maheshwari Vs. Asst. Commissioner of Income-tax and another, Khandubhai Vasanji Desai Vs. Deputy CIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: MAUNA BHATT
• Assessee Lawyers: K R DIXIT
• Keywords: Block assessment; Delay in notice; Satisfaction of Assessing Officer; Undisclosed income
• Section: 158BD

Judgement Text

"C/SCA/9349/2002 JUDGEMNT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION NO. 9349 of 2002 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MS JUSTICE SONIA GOKANI ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ PADMINI M NAIR....Petitioner(s) Versus UNION OF INDIA & Ors.....Respondent(s) ================================================================ Appearance: MR KR DIXIT, ADVOCATE for the Petitioner(s) No. 1 MRS MAUNA M BHATT, ADVOCATE for the Respondent(s) No. 2 SERVED BY RPAD - (N) for the Respondent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and Page 1 of 7 C/SCA/9349/2002 JUDGEMNT HONOURABLE MS JUSTICE SONIA GOKANI Date : 07/01/2013 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. Petitioner has challenged a notice dated 29.10.2001 annexed at Annexure-A2 to the petition issued by the Deputy Commissioner of Income-tax, Ahmedabad under Section 158BD of the Income-tax Act, 1961 (Hereinafter referred to as “the Act). Petitioner has also challenged further notice dated 18.01.2002 issued by the same officer reminding her that pursuant to earlier notice dated 29.10.2001, the petitioner had to file return of income for the block period in question. 2. The brief facts leading to the petition are as under: 2.1 The petitioner is an individual and is liable to pay tax. The husband of the petitioner was subjected to search operation on 21.10.1999. During the course of block assessment proceedings, pursuant to such search in case of husband of the petitioner, the Assessing Officer appears to have collected certain materials prima facie, suggesting that the certain income/investments made belongs to the petitioner and not the person searched i.e. her husband. A notice under Section 158BD came to be issued to the petitioner on 29.10.2001 calling upon the petitioner to file a return in the prescribed form. Since the petitioner did Page 2 of 7 C/SCA/9349/2002 JUDGEMNT not respond to such a notice, a further communication came to be issued on 18.01.2002 in which as noted above, the petitioner was reminded of the requirement of filing the return pursuant to the notice under Section 158BD of the Act. These notices, the petitioner has challenged in the present petition on various grounds. 3. Mr. K.R. Dixit, counsel for the petitioner raised following contentions: 3.1 That no satisfaction was recorded by the Assessing Officer of searched person that any undisclosed income belongs to the petitioner i.e. person other than the person with respect to whom search was made. He submitted that in absence of any such satisfaction being recorded, no notice under Section 158BD could have been issued. In support of his contention, counsel relied on the decision of the Hon'ble Supreme Court reported in [2007] 289 ITR 341 (SC) in the case of Manish Maheshwari Vs. Asst. Commissioner of Income-tax and another. 3.2 Counsel contended that the impugned notice was issued after gross delay. He submitted that the search was carried out with respect to husband of the petitioner on 21.10.1999. The impugned notice was issued after two years. Relying on the decision of this Court reported in [1999] 236 ITR 73 (Guj) in the case of Khandubhai Vasanji Desai Vs. Deputy CIT, he submitted that only on this ground, notice should be quashed. 3.3 Counsel further submitted that there was total non Page 3 of 7 C/SCA/9349/2002 JUDGEMNT application of mind on the part of the officer issuing notice. He submitted that the description of the petitioner was inaccurate. The notice was issued in a printed format. 4. On the other hand, learned counsel Mr. M.M.Bhatt for the respondents sought to place reliance on undated note recorded by the Assessing Officer of the searched person in which, a reference was made to various aspects indicating that undisclosed income belonging to the petitioner was unearthed during the search operation concerning the husband of the petitioner. He submitted that such note should be treated as satisfaction of the Assessing Officer as required under Section 158BD of the Act. 4.1 Counsel further contended that notice issued cannot be labelled as belated. He relied on certain observations made in the case of Khandubhai Vasanji Desai(Supra), to contend that merely on the ground of delay, notice cannot be quashed in the present case. 4.2 Counsel further submitted that notice was issued after due deliberation and there was no lack of application of mind. 5. Having thus heard learned counsel for the parties, in our opinion, the entire petition can be decided on the basis of first contention of the petitioner. In this aspect, we may peruse the facts more closely. A search was carried out with respect to husband of the petitioner on 21.10.1999. The impugned notice against the petitioner under Section 158BD of the Act was issued on 29.10.2001. The assessment was framed in case of the husband of the petitioner pursuant to the search Page 4 of 7 C/SCA/9349/2002 JUDGEMNT operation on 31.10.2001. The affidavit-in-reply dated 11.10.2002 of one Shri S.K. Mehta, Assessing Officer of Income-tax records that the block assessment relating to the searched person was completed on 31.10.2001. It is further stated that additions on several points were made, however, a detailed office note made by the Assessing Officer below assessment order mentions every point which required action in case of the petitioner. Few things thus emerge. The office note on which learned counsel for the respondents placed reliance, which is produced along with the affidavit-in-reply annexed at Annexure-I, formed part of the assessment order. The assessment order in case of husband of the petitioner having been passed on 31.10.2001, such note, though undated, came in existence only on 31.10.2001. On 29.10.2001, when notice under Section 158BD was issued against the petitioner, above mentioned note was not in existence. 6. To support the notice under Section 158BD, revenue, therefore, cannot place any reliance on the above referred note. Apart from our prima facie view that such note also cannot be seen as any recording of the satisfaction as envisaged under Section 158BD of the Act, such note not being in existence when the notice was issued, cannot form the basis for sustaining the notice under Section 158BD of the Act. 7. Previously when the petition was heard, we inquired with the counsel for the revenue, if in addition to material already produced before us including the said note, there was any other material on the file of the department suggesting recording of Page 5 of 7 C/SCA/9349/2002 JUDGEMNT the satisfaction of the Assessing Officer as required under Section 158BD of the Act. Today, counsel produced on record a communication received by him dated 21.12.2012 from the Income-tax Officer, Ahmedabad. Such communication is taken on record. In the said letter, it is stated that upon perusal of file, no such satisfaction note was available on record in case of husband of the petitioner. 8. The situation, therefore, emerges is that on the date of issuing notice under Section 158BD of the Act, there was no satisfaction recorded by the Assessing officer of the searched person. In this context, we will refer to the decision of the Supreme Court in the case of Manish Maheshwari(Supra). In the context of requirement to be satisfied for an action under Section 158BD of the Act, the Supreme Court observed as under: “The condition precedent for revoking 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 158BC in respect of any other person, the conditions precedent wherefor are: (i) satisfaction mast 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 of the Act, (ii) 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 (ii) the Assessing Officer has proceeded under section 158BC against such other person. The conditions precedent for invoking the provisions of section 158BD, thus are required to be satisfied before the provisions of the said Chapter are applied in relation to any person other than the person whose premises had been searched or whose documents and other Page 6 of 7 C/SCA/9349/2002 JUDGEMNT assets had been requisitioned under section 132A of the Act.” 9. Under the circumstances, we have no hesitation in striking down the impugned notices annexed at Annexure- A1 & A2 to the petition. In view of the above conclusion, we are not required to go into the validity of other contentions of the counsel for the petitioner. Rule is made absolute. No cost. (AKIL KURESHI, J.) (MS SONIA GOKANI, J.) Chandrashehar* Page 7 of 7 "