Income Tax Appellate Tribunal - Delhi
Daily Foods, vs Department Of Income Tax
IT A NO. 102/DEL/2007
Block Assessment 1.4.1996 to 18.12.2002
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "C" NEW DELHI
BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER
AND
SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER
I.T.A. No. 102/Del/2007
Block Assessment 1.4.1996 to 18.12.2002
Asstt. Commissioner of Income Tax, vs. M/s Daily Foods,
Central Circle-18, Village, Goena, Modi Nagar, UP
Room No. 327, ARA Centre, E-2
Jhandewalan Extn., New Delhi
(Appellant) (Respondent)
Assessee by : Shri Anil Sharma, Adv.
Department by : Shri L.M. Pandey, CIT(DR)
ORDER
PER SHAMIM YAHYA : AM This appeal by the revenue is directed against the orders of CIT(A) dated 28.2.2007 pertaining to block assessment 1.4.1996 to 18.12.2002.
2. The issue raised is that the ld. CIT(A) has erred in annulling the block assessment order passed by the AO.
3. At the outset ld. counsel of the assessee fairly conceded that the issue involved has been considered and adjudicated by the Special Bench of the Tribunal in the case of ACIT Vs. M/s. Sushila Milk Specialities in IT(SS)A.No. 100/Del/2007 and vide order dated 30.10.2009, the matter had been restored back to the files of the AO for framing assessment afresh.
1IT A NO. 102/DEL/2007 Block Assessment 1.4.1996 to 18.12.2002
4. The brief facts of the case are that block assessment proceedings under section 158BC in this case was annulled by the ld. CIT(A).
5. Before the ld. CIT(A) the crux of assessee's submission was as under:-
"In the instant case, it is submitted that the assessment u/s 158BC of the Act framed by an order dated 3.6.2005 is barred by limitation within the meaning of the provision contained in section 158BE(1)(b) of the Income Tax Act, which provides that the order u/s 158BC shall be passed within two years from the end of the month in which the last of authorization for search u/s 132 or requisition u/s 132A, as the case may be was executed in cases where a search is initiated or books of account or other document or any assets are requisitioned on or after the first day of January, 1997.
In the instant case a search had been carried out on 18th December, 2002 and as such in view of the provisions contained in section 158BE(1)(b), an assessment u/s 158BC was required to be made by 31st December, 2005. However, evidently such an assessment has been framed on 3rd June, 2005 which is apparently beyond the period of limitation provided u/s 158BE(1)(b) of the Act. It is submitted that the learned 2 IT A NO. 102/DEL/2007 Block Assessment 1.4.1996 to 18.12.2002 AO by order dt. 7th December, 2004 directed the assessee to get the account-audited u/s 142(2A) within 60 days of the date of the order. The time was further extended to 120 days. In view of the aforesaid u/s 142(2A) the AO took benefit of the extended period as provided in Clause
(ii) of Explanation I to sub-section 2 of 158BE r/w proviso to Explanation I and framed the impugned assessment by an order dated 3rd June, 2005. Against the aforesaid order u/s 142(2A), the assessee filed a writ petition before the Hon'ble Delhi High Court which was however dismissed as per judgement reported in 275 ITR
641. The assessee being aggrieved filed an SLP before the Hon'ble Supreme Court. The Hon'ble Supreme Court granted lave to the assessee and by an order dated 1st November, 2006 reported in 287 ITR 91, allowed the appeal and held that the order u/s 142(2A) dated 7.12.2004 was bad in law.
In view of the judgement of the Hon'ble Supreme Court, it is submitted, the impugned assessment order dated 3rd June, 2005 has become barred by limitation in as much as the extended period provided under proviso to Explanation I to section 158BE(2) of the Act would not be available as the order directing audit u/s 142(2A) itself has been held to be illegal and without authority of law. It is settled that all proceedings emerging/ flowing from an illegal order would be nullity and would not 3 IT A NO. 102/DEL/2007 Block Assessment 1.4.1996 to 18.12.2002 have any effect in law. It is submitted there is no provision under section 158BE of the Act which extends the period of limitation for completion of an assessment u/s 158BC except Explanation I red with Proviso to sub- section (2) of section 158BE of the Act. However, in the instant cased the order u/s 142(2A) having been held as illegal by the Supreme Court, the extended period as provided would not be available. As such the assessment as framed is liable to be annulled."
6. The ld. CIT(A) has elaborately considered the issue and concluded as under:-
"I have considered the issue involved in totality keeping in view the decision given by Hon'ble Supreme Court in the case of appellant himself. Fact remains that in spite of this office letter dated 27.11.2006 to the Assessing Officer whereby he was required to offer his comments on additional ground so far no communication could be sent confirming that the decision given by Hon'ble Supreme Court in the case of appellant has been stayed. Consdiering such factual position, facts remains that as on this date the decision given by Hon'ble Supreme Court is in force and fully operative. As per the aforesaid decision of Hon'ble Supreme court given in the case of the appellant, the order directing audit u/s 142(2A) has been held to be illegal and without authority 4 IT A NO. 102/DEL/2007 Block Assessment 1.4.1996 to 18.12.2002 of the law. When as per aforesaid decision by Hon'ble Supreme Court order directing audit u/s 142(2A) has been held to tbe illegal then no additional time limit is available to pass the block assessment order. Considering such judicial position, block assessment order passed on 3.6.2005 against which the present appeal has been filed, in my considered view, has become barred by limitation as per provisions of section 158BE of the IT Act, since extended period provided under proviso to explanation-1 to Section 158BE(2) of the IT Act would not be available to the assessing officer. With this discussion, by allowing the said additional grounds of appeal, block assessment order passed by the Assessing Officer on 3.6.2005 in this case is hereby annulled since it is barred by limitation."
7. Against this order the revenue is in appeal before us.
8. We have heard both the counsels and perused the records. We find that the same issue was considered by the Special Bench in the case cited above. The issue before the Special Bench was as under:-
"Whether on the facts and in the circumstances of the case, keeping in view two decision of Hon'ble Supreme court, namely, (i) Rajesh Kumar and others vs. DCIT 287 ITR 91 and (ii) Sahara India (Firm) vs. CIT 300 ITR 403 (SC), assessment is required to be set aside to the file of assessing officer to pass a fresh assessment as held in 5 IT A NO. 102/DEL/2007 Block Assessment 1.4.1996 to 18.12.2002 the case of Shri Rajesh Kumar vs. DCIT by ITAT in its order dated 3rd June, 2008 in IT(SS) NO. 100/Del/2007 or the assessment is time barred as held by the ITAT in its order dated 25th August, 2008 in IT(SS) No. 101/Del/2007 in the case of ACIT Vs. Rakesh Kumar?"
9. The Special Bench of the Tribunal had elaborately considered the issue and referred inter-alia to the decision of the Hon'ble Supreme Court in the case of Rajesh Kumar and others Vs. DCIT 287 ITR 91 and also the decision of the Larger Bench of the Hon'ble Apex Court in the case of Sahara India (Firm) vs. CIT 300 ITR 403. The Tribunal had concluded as under:-
"Applying the principle in the present case, we hold that even if direction of special audit under section 142(2A) without affording an opportunity of being heard was not correct, the Assessing Officer was not lacking the jurisdiction for framing assessment thereafter. The only requirement was to afford reasonable opportunity while framing assessment also. Since the Tribunal in the case of Rajesh Kumar have upheld the validity of assessment but as remanded the matter back to the Assessing Officer which decision of Tribunal has been approved by the jurisdiction High Court in the present case also the assessee cannot seek annulling of the assessment as done by the Commissioner (Appeals). Constitution 6 IT A NO. 102/DEL/2007 Block Assessment 1.4.1996 to 18.12.2002 Bench of the Hon'ble Supreme Court in the case of Guduthur Bros. Vs. ITO, 40 ITR 298 held -
"Held, that as the Appellate Assistant Commissioner pointed out only to an illegality which vitiated the proceedings after they were lawfully initiated, the notice issued under section 28(1)(a) did not cease to be operative and it was open to the Income Tax Officer to take up the matter at the point at which the illegally supervened and to correct his proceedings. The notice under section 28(1)(a) having remained still to be disposed of, the proceedings started after the order passed by the Appellate Assistant Commissioner could be described as during the course of the assessment proceedings, because the action would relate back to the time when the first notice was issued. The Income Tax Officer had jurisdiction to continue the proceedings from the stage at which the illegality had occurred."
Applying the decisions of Hon'ble Supreme Court in the case of Guduthur Bros. (supra) as also in the case of Deepak Agro Foods (Supra) and in view of the observations of the Hon'ble Delhi High Court in the case of Shri Rajesh Kumar vs. CIT by order dated 9th April, 2009 (supra), we answer the question referred for the opinion of Special Bench as under:-
In view of the two decisions of the Hon'ble Supreme Court namely Rajesh Kumar and others vs. DCIT, 287 ITR 91 and Sahara India (Firm), 300 ITR 403, the assessment is required to be set aside to the file of the 7 IT A NO. 102/DEL/2007 Block Assessment 1.4.1996 to 18.12.2002 Assessing Officer to pass a fresh assessment as held in the case of Shri Rajesh Kumar vs. DCIT by ITAT in its order dated 3rd June, 2008 and do not hold the assessment as time barred as held in the case of ACIT vs. Rakesh Kumar. We, therefore, approve the view taken by the Tribunal in the case of Shri Rajesh Kumar and do not approve the decision of Tribunal in the case of ACIT vs. Rakesh Kumar.
8. In view of the findings above, the learned CIT(A) erred in annulling the block assessment order passed by the Assessing Officer. Therefore, we hold that the assessment cannot be annulled in the present case but is required to be restored back to the file of the Assessing Officer for framing an assessment afresh after affording reasonable opportunity of being heard to the assessee."
10. Since the issue in the present case are identical and both the counsels have fairly agreed to the proposition expounded as above, we hold that the ld. CIT(A) erred in annulling the block assessment order passed by the AO. The matter is therefore, restored back to the files of the AO for framing the assessment afresh after affording reasonable opportunity of being heard to the assessee.8
IT A NO. 102/DEL/2007 Block Assessment 1.4.1996 to 18.12.2002
11. In the result, the appeal filed by the revenue is allowed for statistical purposes.
Order pronounced in the Open Court on 04/12/2009.
Sd/- Sd/-
[I.P. BANSAL] [SHAMIM YAHYA]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 04/12/2009
SRB
Copy forwarded to: -
1. Appellant 2. Respondent 3. CIT
4. CIT (A) 5. DR, ITAT
TRUE COPY
By Order,
Deputy Registrar, ITAT, Delhi Benches 9