2011-VIL-729-ITAT-CHN

Income Tax Appellate Tribunal COCHIN

I.T(SS)A. No. 32/Coch/2007 & C.O. No.37/Coch/2007 (Arising out of I.T(SS)A. No. 32/Coch/2007)

Date: 22.12.2011

AC, CIR. 1

Vs

SMT. CICY P THOMAS

For the Petitioner : Ms. Vijayaprabha
For the Respondent : shri Z.T. Zachariah

BENCH

SHRI N.R.S. GANESAN (JM) AND SHRI SANJAY ARORA (AM)

JUDGMENT

Per N.R.S. Ganesan (JM)

The revenue has filed the appeal against the order of CIT(A)-IV, Kochi dated 07-03-2007 for the block period 1989-90 to 1998-99 and the assessee has filed cross objection against the very same order. Therefore, we heard the appeal and the cross objection together and dispose of the same by this common order.

2. In the cross objection, the assessee has raised the issue of limitation in passing the order u/s 158BD of the Act. Since the issue of limitation goes to the very root of the matter, we take up the cross objection first.

3. Shri Z.T. Zacharia, the ld.representative for the assessee submitted that there was a search on 03-03-1999 at the premises of Shri PK Kurien. On the basis of the material found in the course of search proceedings in the case of Shri P.K Kurien, the proceedings u/s 158BD was initiated in the case of the assessee. According to the ld.representative, the block assessment proceedings u/s 158BC was completed on 30-03-2001 in the case of Shri P.K Kurien. The notice u/s 158BD dated 22-04-2003 was served on the asseessee on 22-04-2003 after expiry of more than two years from the date of assessment in the case of Shri PK Kurien. According to the ld.representative, the assessing officer has to issue notice u/s 158BD within a reasonable period from the date of search. Referring to section 158BE(2), the ld.representative submitted that the assessment proceedings u/s 158BD shall be completed within two years from the end of the month in which notice u/s 158BD was served on the assessee. According to the ld.representative, though the assessment order in the case of assessee u/s 158BD was dated 29-04- 2005, in fact, it was served on the assessee on 30-04-2005. Therefore, it was beyond the period of two years. Thus, according to the ld representative, the block assessment proceedings is invalid and consequently, the block assessment has to be quashed.

4. Ms. Vijayaprabha, the ld.DR submitted that no limit is prescribed for issuing notice u/s 158BD of the Act in respect of the other than searched person. Therefore, so long as the delay in issuing the notice cannot be attributed to the assessing officer, the assessment order passed u/s 158BD is valid. Therefore, according to the ld.DR, the assessing officer has validly passed the assessment order after issuing notice.

5. We have considered the rival submissions and also perused the material available on record. It is not in dispute that the block assessment proceedings in the case of Shri PK Kurien were completed u/s 158BC on 30-03-2001. No doubt, there is no provision in the Income-tax Act fixing the time limit for issuing notice u/s 158 of the Act in respect of the person other than searched, but, it does not mean that the assessing officer can issue the notice at his sweet will at any time. Finality of the proceedings cannot be seen so lightly. Section 132(9A) enables the authorized officer to examine the books of account or other documents or any money, bullion, jewellery or other valuable articles and if it is not relatable to any person against whom search was conducted, he has to hand over the same to the concerned assessing officer having jurisdiction over such person within the period of 60 days from the date on which the last authorization for the search was executed. Therefore, u/s 132(9A) of the Act, the officer, who has conducted the search has to examine the documents within 60 days and if it does not relate to the person against whom search was conducted, he has to handover the same to the concerned officer, who is having jurisdiction over the person against whom the material was found. This is the first available opportunity to examine the seized material. Moreover, in the course of block assessment proceedings, the assessing officer has thoroughly examined all the documents. Therefore, it is for the assessing officer to issue the notice within the reasonable time. Therefore, even though no time limit for issuing notice u/s 158BD was prescribed under the scheme of the Act, the assessing officer has to issue the notice within a reasonable period of time after expiry of 60 days from the date of last authorization for search was executed. In this case, admittedly, the search was conducted on 30- 03-1999 and the assessment proceedings in the case of the person who was searched was completed on 30-03-2001. Therefore, we are of the opinion that the issue of notice u/s 158 BD on 22-04-2003 after expiry of two years and a month is beyond the reasonable period. We find that this issue was examined by a Five Member Bench of this Tribunal at Delhi in Manoj Agarwal vs DCIT (2008) 113 ITD 377 (Del)(SB). The special Bench of the Tribunal examined the scheme of the Act and observed on page 481, paragraph 110 & 111, as under

110. It is clear from the above that the provisions of section 158BD are thus inextricably interlinked and intertwined with section 158BC and they are like Siamese twins. In the circumstance, it is not possible to view section 158BD in isolation and de hors section 158BC as that would militate against the intention behind the enactment of Chapter XIV-B to provide for a complete code for assessment of undisclosed income as different from the assessment of normal income in regular assessment. The concept of undisclosed income as different from what we may call as ‘normal’ or ‘regular’ income is at the very core of this chapter.

111. It is in this context that we have to view the provisions of section 158BD of the Act. It is not as if the said provision can be invoked at the whims of the Assessing Officer. On the other hand, the section has certain built in requirements which have to be scrupulously followed as held in the case of Manish Maheshwari (supra) if an attack against an order under this section has to be repelled. The first pre-condition is that the Assessing Officer examining the material found as a result of search or other related proceedings as in section 132A should determine whether the material throws up any income which can be termed as undisclosed. If so, he has to identify such undisclosed income. The next step is to determine to whom such undisclosed income belongs. It may happen that such income may not belong to the person searched in respect of whom he has jurisdiction, in which even he has no other option but to give a finding that the undisclosed income does not belong to his assessee but that it belongs to another person whom he has to identify and determine. These have to be positive findings for the reason that the section does not give any elbow room for the Assessing Officer to say it may belong to A or to B or to C. He has to infer on the basis of the material and evidence found that such income belongs to a specified person and identified by him. After arriving at this finding, he has to hand over such material, documents etc., to the Assessing Officer having jurisdiction over the said other person at that material point of time and it is at that stage the second Assessing Officer assumes jurisdiction at that point of time. If the Assessing Officer assessing the person searched does not find any undisclosed income at all, or does not arrive at any finding in respect of the same or having arrived at such finding does not hand over the material to the second Assessing Officer, the provisions of section 158BD do not come into operation at all.”

The Special Bench again observed as follows on page 484 at paragraph 114 & 115:

114. Section 158BE provides for time limit for completion of block assessment. It stipulates that the order under section 158BC shall be passed within two years from the end of the month in which the last of the authorization for search under section 132 was executed or for requisition under section 132A a the case may be and so the order envisaged under section 158BC has necessarily to be passed within this time frame set in law. If there is a timelimit for passing such order, there is an implied time limit for giving a finding as to the person to whom the undisclosed income belongs which under no circumstance can be beyond the time-limit set in section 158BE. If there is no such finding given in the order under section 158BC, the provisions of section 158BD stand ousted at the expiry of the said time limit for the reason that such a finding is the very basis for invoking section 158BD.

115. Section 158BD as said earlier begins with the expression “where the Assessing Officer is satisfied” and so the very section implies a recording of satisfaction. The satisfaction contemplated is a judicious satisfaction and not a subjective satisfaction and unless the same is recorded it is not possible for any person to discern whether the satisfaction meets the requires of law at all. The satisfaction can be found in the order passed under section 158BC and if no such order is passed then it will have to be found in the note handing over the material seized to the Assessing Officer assessing the other person. In any event, it has to be in writing and in view of section 158BE, the said recording has to be made before the time set in section 158BE expires. After the said date, it is not possible to invoke section 158BD at all.”

In view of the above, issue of notice u/s 158BD after two years from the date of completion of the assessment in respect of the person against whom search was carried out is barred by limitation. A similar view was taken by Hyderabad Bench of this Tribunal in the case of Dy.CIT, Cir. Vs Shri P Venkata Ramana in ITSSA No.08/HYD/2010 order dated 11-02-2011. A similar view was also taken by the Gujarat High Court also in the case of Khandubhai Vasanji Desai & Ors vs DCIT (1999) 236 ITR 73 (Guj)

7. In view of the above, in our opinion, the block assessment order passed against the assessee u/s 158BD is barred by limitation. Accordingly, the same is quashed.

8. In view o the above, it is not necessary to go into the merit of the contentions raised by the revenue in the revenue’s appeal.

9. Accordingly, the revenue’s appeal in ITSS A No.32/Coch/2007 is dismissed and assessee’s CO No.37/Coch/2007 is allowed.

Order pronounced in the open court on 22nd December, 2012

 

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