Income Tax Appellate Tribunal - Ahmedabad
Shri Dharamshibhai H. Patel,, ... vs The Income Tax Officer, Ward-4(4),, ... on 24 June, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
"B" BENCH, AHMEDABAD
BEFORE SHRI PRAMOD KUMAR, VICE PRESIDENT &
Ms. MADHUMITA ROY, JUDICIAL MEMBER
I.T.(SS)A. No.199/Ahd/2014
(Block Period : 1990 to 2000 (01.04.1990 to 20.10.2000))
Dharamshibhai H. Patel Vs. Income Tax Officer,
A-1/2, Jivan Park Co-op. Ward - 4(4),
Housing Society, Opp. Ashram Road,
Samratnagar, Isnapur, Ahmedabad - 380 009.
Ahmedabad - 380 443.
[PAN No. AAMPP 6622 P]
(Appellant) .. (Respondent)
Appellant by : Shri S. N. Soparkar & S. V. Agarwal, A.R.
Respondent by : Shri M. S. A. Khan, CIT-D.R.
Date of Hearing 27.03.2019
Date of Pronouncement 24.06.2019
ORDER
PER Ms. MADHUMITA ROY - JM:
The instant appeal filed by the assessee is directed against the order dated 21.03.2014 passed by the Commissioner of Income Tax (Appeals) - XVI, Ahmadabad arising out of the order dated 28.12.2010 passed by the Asstt. Commissioner of Income Tax, Circle - 6, Ahmedabad for Block Period 1990 to 2000 (01.04.1990 to 20.10.2000) under section 158BD r.w.s. 254 of the Income Tax Act, 1961 (hereinafter referred as to 'the Act') with the following grounds:
IT(SS)A No.199/Ahd/2014 Dharmshibhai H. patel Block Period - 01.04.1990 to 20.10.2000 -2- "The order of learned Commissioner of Income Tax (Appeals)- XVI, Ahmedabad [CIT(A)] confirming addition made by AO is bad in law as well on facts on the following grounds:
1) The Ld CIT(A) has erred in confirming addition of Rs.98,01,000/- made by AO in block assessment u/s 158BD r.w.s. 254 in as much as.
i) AO did not allow cross examination of searched party Jivraj V. Desai (JVD) though specifically directed by Hon. ITAT in its order.
ii) JVD had by its letter dated 11.12.2010 to AO categorically denied any transactions with appellant.
iii) Hon. ITAT had in case of JVD held that seized dairy A-1 is record of finance transactions. Treating same as land transaction is wrong.
iv) The land transaction is between Virabhagat Co-op housing society (seller) and New Virabhagat Co-op Housing Society (buyer). Sale of land is after permission and at rate directed by State Co-op. Registrar. Payment is made by New Virabhagat Society by account payee cheque. There is no evidence of unaccounted money paid by appellant. New Virabhagat Society may be inquired for unaccounted investment.
2) Without prejudice to ground no.1 since Hon. ITAT had hold that diary Annex A-1 page 45 is record of finance transactions, the peak credit may be considered.
3) The Learned CIT(A) has erred in confirming addition made by AO of surcharge of Rs.9,99,702/- on Tax.
4) The learned CIT(A) has erred in confirming interest charged by AO u/s 158BFA(1) of Rs.16,03,272/- since delay in filing block return is not attributable to appellant.
5) The assessee carves liberty to amend, modify and add any grounds of appeal or furnish additional evidences."
IT(SS)A No.199/Ahd/2014 Dharmshibhai H. patel Block Period - 01.04.1990 to 20.10.2000 -3-
2. The additional grounds of appeal was also taken by the assessee in the said appeal before us:
"(1) The Ld CIT(A) had erred in confirming action of AO who erred in passing order u/s 158BD without forming/noting or specifying the satisfaction note, and search records were not forwarded as well by ADIC. The satisfaction of ADIT is not sufficient for block assessment u/s 158BD. Therefore, the block assessment is invalid & without law requires to be quashed."
3. The additional ground since touches the very root of the matter challenging the foundation of the proceeding under section 158BD, as argued by the Learned Senior Counsel appearing for the assessee, we propose to consider the same first.
4. This case has a chequered history. Initially a search and seizure action u/s 132 of the Act was conducted upon one Master Group on 20.10.2000 where one Shri Jivrajbhai V Desai (JVD) was reportedly the main person of the said Master Group. Connected search was also conducted at the residence of one Shri Arvind A Shah (AAS) being the accountant of the JVD group, wherein documents inter alia a dairy described as Annexure-A-1 was seized. The assessee's name appeared at Page 45 of the said dairy. The dairy also contained the details of sharafi finance business conducted by the said Group. However, as per the statement recorded u/s 131 of the said AAS on 19.09.2002 while explaining the ledger account of Page-45 of the said dairy, in land deals transaction was done between the assessee and one Virbhagat Co-op Society. Further field inquiries conducted by the Learned ACIT, Central IT(SS)A No.199/Ahd/2014 Dharmshibhai H. patel Block Period - 01.04.1990 to 20.10.2000 -4- Circle - 1(1), Ahmedabad indicated that the Master Group has sold land in Isanpur on which new Virbhagat Society was built. This new Virbhagat Society was carried out of land of Virbhagat Society. Thereafter, upon receipt of satisfactory note through a confidential letter dated 29.10.2002 issued by the Learned ACIT, Circle - 1(1), Ahmedabad, the Learned DCIT, Circle - 6, Ahmedabad proceeded to pass the order u/s 158BC r.w.s. 158BD on 30.11.2004 after issuing necessary notices u/s 158BD in the case of the appellant before us. Addition to the tune of Rs.98,01,000/- was made by the Learned AO which was in turn deleted by the Learned CIT(A). The Hon'ble ITAT in appeal, preferred by the department, by way of a reasoned order dated 07.08.2009 in IT(SS)A No.91/Ahd/2007 restored the matter to the file of the Learned Assessing Officer for doing the assessment de novo in accordance with law and after giving an opportunity of being heard to the assessee as required under the law including cross examination of the parties concerned. Ultimately, the said assessment was finalized de novo on 28.12.2010 by the Learned ACIT, Circle -6, Ahmedabad, upon making addition of Rs.98,01,000/- as unexplained investment of the assessee which was in turn confirmed by the Learned CIT(A) in appeal preferred by the assessee. Hence, the instant appeal before us.
5. At the time of hearing of the instant appeal the Learned Senior Counsel appearing for the assessee submitted before us that the additional ground taken before us was also taken before the Learned IT(SS)A No.199/Ahd/2014 Dharmshibhai H. patel Block Period - 01.04.1990 to 20.10.2000 -5- CIT(A) challenging the authority of the Learned AO who initially passed the order u/s 158BD without forming/noting, specifying the satisfaction note; the search records were also not forwarded by the Learned ACIT in terms of the statutory provision u/s 158BD. Furthermore, the satisfaction of the ACIT is not sufficient for block assessment u/s 158BD which goes to the root of the matter and thus vitiates the entire proceedings the assessment is therefore liable to be quashed as the case made out by the assessee before the First appellate authority as also before us by way of an additional ground. Apart from that it was also contended by the Learned Senior Counsel that the notice intimating change of jurisdiction of the assessing officer though ought to have been issued and served by the authority under section 127 of the Act has not been complied with rendering the entire proceeding bad in law and thus liable to be set aside. In support of his argument he relied upon a judgment passed by the Hon'ble Bombay High Court in the matter of CIT, Nagpur-vs-Lalitkumar Bardia. On the other hand, the Learned Departmental Representative relied upon the order passed by the authorities below.
6. Heard the respective parties, perused the relevant materials available on records. It appears from the records that while restoring the matter to the file of the Learned AO for de novo proceeding on 07.08.2009 the Hon'ble ITAT observed as follows:
"We have perused the material on record and heard the rival parties. In our considered view, the authorities below have not applied their mind and provided opportunity of being heard to the assessee. It is true that Assessing Officer has not allowed cross-examination of JVD and AAS of IT(SS)A No.199/Ahd/2014 Dharmshibhai H. patel Block Period - 01.04.1990 to 20.10.2000 -6- the basis of whose statements, in addition to page No. 45 of Diary A-1, the Assessing Officer is trying to make addition. But, it is also true that notice u/s 158BD was served on the assessee on 18/11/2002 and return of block assessment was filed on 08/11/2004 on nil income. Thus, the assessee also wasted almost two years in filing return of undisclosed income at nil. The reason apparently was that photocopies of the documents on which A.O. was replying were not provided, but if assessee, has no relation with the seized documents i.e. page No. 45 of seized dairy filing the A-1 and it did not contain .the transaction of the assessee than question of filing the return u/s 158BD so late could not be appreciated. It is giving an impression that the assessee also wanted to delay the proceedings for its advantage. It is not a case that diary of Annexure A-1 of page 45 has a record of imaginary transactions. Page 239 to 241 of paper book filed by the assessee showed copy of page No. 45 of Annexure A-1 including English transaction of the page written in Gujarati. It showed the name of New Virabhagat as well as the name of Dharamsinbhai of Isanpur i.e. the assessee. It recorded a credit of gs.109.85 lacs being the amount of cheque paid in respect of land purchased by New Virabhagat Society. To our mind, transaction recorded in Diary A-1 and in particular page No.45. cannot be said to be imaginary as no such stand has been taken either by AAS or JVD. Their statements have been recorded and no stage they have denied or averted that transactions recorded in Diary A.1 are imaginary or have not taken place. In addition, we have examined page No.45 of Annexure "A-1" and we also noticed that there is nothing which could indicate that recording on that page would be imaginary of false. Thus, there is no material to hold that what was recorded by AAS in the Diary, atleast on page No.45 would be unreal transactions. A prima- facie impression of the page shows that it has been recorded in natural course of events. Had it been the transactions of only New Virabhagat Society, then question of recording the name Shri Dharmasinbhai of Isanpur in addition to the name of New Virabhagat would not have arisen. Further, the relationship of the assessee with M/s Mahadev Construction Pvt. Ltd, of whom he is one of the two directors along with his son and the relationship of M/s Mahadev Construction Pvt. Ltd. With New Virabhagat society is not so remote to be ignored or to be not worth of proper examination. It seems that for the reasons unknown, the Assessing Officer chose the sleep over the matter and did not follow the procedure for framing a proper IT(SS)A No.199/Ahd/2014 Dharmshibhai H. patel Block Period - 01.04.1990 to 20.10.2000 -7- assessment by not providing photocopies of documents in time and then by initiating proper assessment proceedings only after filing of the return by the assessee and not immediately after the expiry time allowed to the assessee to file the return. The assessee also thought to avoid to remain present before the Assessing Officer to avail the opportunity of cross - examination. He chose the remain absent for attending a social function between 22/12/2004 to 27/10/2004 (and, assessment getting barred by limitation on 30/10/2004). In our considered view, on worthwhile cross - examination of JVD/AAS could be feasible in absence of the assessee, even if the Assessing Officer thought it to give such an opportunity to him. In the statement of the assessee the assessee recorded by the Assessing Officer, nowhere any indication of any animosity, discord or revenge with either JVD or AAS has been indicated. It is also a fact that New Virabhagat society floated by M/s Mahadev Construction Pvt. Ltd, received the contact to supervise of construction flats for New Virabhagat Society and that the assessee signed on the purchase - deed as a witness indicating that he was to some extent privy to the transactions of purchase of land by New Virabhagat Society. Further the Ld. CIT(Appeals) has apparently ignored to examine the contents of page.45 of Annexure "A-1" so as to arrive at a reasonable conclusion that page No. 45 of Diary Annexure "A-1" is a record of imaginary / superfluous or real transactions. His power is co-terminus with that of Assessing Officer. He could has also given an opportunity of cross-examination. Support is derived from the decision of Hon'ble Supreme Court in the case of CIT vs. Kanpur Coal Syndicate (1964) 53 ITR 225 (SC). We note that non-allowing cross- examination has not been taken as main argument by the assessee against the order of the Assessing officer which has been accepted by the Ld. CIT(A) without considering the legal position that if for a certain reasons, the Assessing Officer was not able to allow cross- examination, then he is duty bound to allowed the same. In our considered view, not allowing cross-examination of JVD and AAS is only a procedural defect and cannot vitiate the assessment order and cross-examination. Witnesses, JVD and AAS, before filing the return by the assessee could not have served any useful purpose because contents of the return would have been relevant for considering the examination and cross-examination. The assessee chose the file the return of block assessment almost two years, after issuance of notice u/s 158 BD of the I.T. Act, 1961, thus leaving no worthwhile time to the IT(SS)A No.199/Ahd/2014 Dharmshibhai H. patel Block Period - 01.04.1990 to 20.10.2000 -8- Assessing Officer to follow strictly the rule of evidence by conferring the opportunity of cross-examination. We may note in this Chemicals Ltd. vs. ACIT (2001) 248 ITR 318 (Alia.) that it is not necessary that there must be always a cross-examination of a witness before discarding his evidence. The Hon'ble Madras High Court in the case of T. Devasahay Nadar vs. CIT (1964) 51 ITR 20 ( Mad.) held that it cannot be laid down as a general proposition of law that IT. Department cannot rely upon any evidence which has not been subjected to cross-examination. Therefore, not allowing the cross-examination of JVD and AAS will not be fatal to the assessment proceedings, but will only create curable irregularities for which, in our considered view, the assessee is equally responsible and which deficiencies can be cured by restoring, the matter the matter to the Assessing Officer. In our considered view, we have to strike a balance between individual interest and public interest and where public interest is disallowed to suffer by the two parties either by delaying tactics as by the assessee or by showing indifference as in the present case by the assessing authorities, then courts are not supposed to support the stand of either of the parties. As the Id. CIT(A) has also not considered the genuineness of transactions recorded in the diary, his order cannot be upheld. We, therefore, restore the matter to the file of the Assessing Officer for doing the assessment de novo according to law and after giving an opportunity of being heard to the assessee, as required under the law including cross - examination of the parties concerned."
However, when the additional ground of appeal was preferred by the assessee by and under the letter dated 21.08.2013, the assessee replied to the remand report submitted by the Learned AO in connection with the said ground with the following submission:
"In this case, additional ground of appeal was filed in your office on 21/11/2011 vide letter dated of same date, as under;
ADDITIONAL GROUND OF APPEAL (1) The learned A.O. has erred in passing order u/s. 158BD without forming / noting or specifying the satisfaction note, and search records were not forwarded as well by IT(SS)A No.199/Ahd/2014 Dharmshibhai H. patel Block Period - 01.04.1990 to 20.10.2000 -9- ADIT. The satisfaction of ADIT is not sufficient for block assessment u/s. 158 BD. Therefore, the block assessment is invalid & without law requires to be quashed.
The Hon. CIT(Appeal) directed the A.O. to send Satisfaction Note in the case of above assessee and comment on additional ground raised by assessee.
The A.O. has alongwith his Remand Report, sent the copy of the Satisfaction Note issued by ACIT, Cen. Cir. 1(1), Ahmedabad for initiating proceedings u/s. 158BD of the Act. However, the A. O. has not commented upon the additional ground raised by the assesses.
Objection against Remand Report The additional ground is raised that the Assessing Officer, without forming / noting or specifying the Satisfaction Note, cannot issue notice u/s. 158BD.
Sec. 158BD provides that, "158BD. Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or any assets were requisitioned under section 132A, then, the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person- and that Assessing Officer shall proceed - [under section 158BC] against such other person and the provisions of this Chapter shall apply accordingly."
Here, in sec. 158BD, for making assessment under that, section, first of all, A.O. of other person is required to prepare Satisfactory Note and thereafter issue notice u/s. 158BC/158BD to make assessment under that section.
IT(SS)A No.199/Ahd/2014 Dharmshibhai H. patel Block Period - 01.04.1990 to 20.10.2000
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Sec. 158BD specifically provides that the A. O. of the searched parties shall hand over to the Assessing Officer having jurisdiction of other person and Assessing Officer of the other person shall proceed against such other person to make assessment u/s. 158BD, after recording his Satisfaction Note.
Sec.158BD do not provide that the A.O. of the searched party shall also send the Satisfactory Note to the A.O. of the other person. Sec. 158BD provides that books of accounts, other documents or assets seized or requisitioned shall be handed over to the A. O. having jurisdiction over other person and he shall proceed to make assessment against such other person.
Sec. 158BD relates to assessment of other person and not the searched party. Therefore, the satisfaction of A.O. referred to in beginning of sec. 158BD is, satisfaction of A.O. of other party and not satisfaction of A.O. of searched party.
In the present case, A. O. of assessee (Other person) has not prepared Satisfaction Note before issue of notice u/s. 158BD and therefore, assessment made u/s. 158BD in case of assessee is bad in law and assessment is required to be annulled."
It also appears that after taking into consideration the objection raised by the assessee while addressing the issue raised by the assessee by way of the additional ground on the non-compliance of mandatory compliance of recording satisfaction before issuance of notice u/s 158BD by the concerned Learned AO the Learned CIT(A) observed as follows:
"5.0 A perusal of discussions made in para-2.2 above, indicates that through additional ground the appellant has attempted to strike at the very foundation of the block assessment raising serious issues about legality thereof. The appellant has argued that in his case the AO has not recorded his mandatory satisfaction before the issue of notice u/s. 158BD. It has been argued that law provides that satisfaction of the A O who is assessing the assessee is required and the satisfaction of the A O who assessed the originally search party is not sufficient. It has been IT(SS)A No.199/Ahd/2014 Dharmshibhai H. patel Block Period - 01.04.1990 to 20.10.2000
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submitted that consequently the assessment has become invalid and therefore deserves to be annulled. The appellant has also indicated in the additional ground that the satisfaction was recorded by ADIT, which is not sufficient for initiation for valid assessment proceeding u/s. 158BD, In support of its contentions, the appellant has placed reliance upon decisions of Hon'ble Calcutta High Court in the case of Subhashchand Bhaniramka 320 ITR 349, of Hon'ble Gujarat High Court in the case of Hynoop Food & Oil Industries and few other decisions to draw home his point that the block assessment order per se suffers from serious legal infirmities and deserves to be annulled.
5.1 I have carefully considered the facts of the case in the light of submissions made by the appellant, the arguments taken by the assessing officer & material available on records. Before proceeding further, it is pertinent to point out statutory provisions governing the matter.
Section 158 BD Undisclosed income of any other person.
158BD. Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or any assets were requisitioned under section 132A, then, the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed 95[under section 158BC] against such other person and the provisions of this Chapter shall apply accordingly.
Section 2 Definition of different words and phrases used in the Act
2. In this Act, unless the context otherwise requires, [(7A) "Assessing Officer" means the Assistant Commissioner 27[or Deputy Commissioner] 28[or Assistant Director] 27[or Deputy Director] or the Income-tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub-section (1) or subsection (2) of section 120 or any other provision of this Act, and the 29[Additional Commissioner or] 30[Additional Director or] 31 IT(SS)A No.199/Ahd/2014 Dharmshibhai H. patel Block Period - 01.04.1990 to 20.10.2000
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[Joint Commissioner or Joint Director] who is directed under clause
(b) of sub-section (4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act;] 5.2 Upon receipt of additional ground from the appellant the same was forwarded to the A O calling for a Remand Report vide letter No CIT(A)-XVI/Remand Report/2013-14 dt 14-03-2012. The A O was requested to examine the veracity of contentions raised by the appellant and to file his remand report. Consequently, the A O currently having jurisdiction over this case being ITO, Ward-4(4), Ahmedabad submitted his report dated 31/05/2013 inter alia providing copy of satisfaction note recorded by ACIT, Central Circle-1 (1), A'bad dt 29-10-2002 which was conveyed to ACIT, Cir-6, A'bad through Confidential Letter No ACIT/CC.1(1)/Master/02-03 dt 29-10-20002.
5.3 The arguments taken by the appellant have accordingly been analyzed in detail in the light of facts available on records as well as contemporary statute. The argument of the appellant is that action under section 158BD can be taken provided the A O issuing notice u/s. 158BD is satisfied that the appellant is guilty of possessing some undisclosed income. In the additional ground of appeal the appellant has also argued that satisfaction of ADIT is not sufficient for making block assessment u/s. 158BD. Thus, it is also a case of the appellant that in this case the satisfaction for initiating proceedings u/s. 158BD was recorded by the ADIT. There is apparently no merit in the said argument of the appellant. The remand report dt 31-5-2013 supra, clearly indicates that the satisfaction for initiation of proceedings u/s. 158BD against the appellant was recorded by ACIT, Cent.Cir. 1(1), A'bad. There is nothing on records which conclusively alludes recording of any satisfaction note u/s. 158BD against appellant by any officer of the level of ADIT. Without prejudice to the same, it is worthwhile to mention that apparently no defect would have come in the assessment order of the AO had satisfaction u/s. 158BD was recorded by any officer of the rank of ADIT. This observation is made in view of the categorical statutory stipulation contained in sub section 7A of section 2 reproduced above which provides that the phrase A O would include officers designated as ADsIT / DDslT.
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Thus, there would have been no imperfection in the order had any satisfaction u/s. 158BD was recorded by any ADIT.
5.4 Without prejudice to above, the argument of the appellant that the A O who has issued notice u/s. 158BD being DCIT, Circle-6, A'bad and completed subsequent assessment proceedings ought to have recorded his satisfaction and that since no such satisfaction was recorded by him therefore the assessment order becomes invalid, illegal has been analyzed in detail and found to be bereft of any meritorious consideration. Presumably the appellant is trying to read and interpret law prescribed u/s. 158BD in a fashion so as to suit his particular interest. The same is impermissible since it is a settled principle of law as laid down by honourable Apex Court and reiterated by several high Courts that if the provisions of law are un ambiguous and clear then no interpretation is to be applied. Hon'ble Apex Court in the case of Smt Tarulata Shyamv vs CIT (1977) 108 ITR 345 observed that 'to us there appears no justification to depart from the normal rule of construction according to which the intention of legislature is primarily to be gathered from the words used in the statute'. In the said case, the court observed views of rowlatt J in case of 'Cape Brandy Syndicate' that ' in a taxing act one has to look merely at what is clearly said. There is no room for any intendment, there is no equity about the tax, there is no presumption as to a tax. Nothing is to be read in, nothing is to be applied. One can only look fairly at the language used. 'Again in the case of Padma Sundarrao vs State of Tamilnadu (2002) 255 ITR 147 and also in the case of Prakashnath Khanna vs CIT (2004) 266 ITR 1 (SC) Hon'ble Apex Court observed that 'once it is shown that the case of the assessee comes within the latter of the law, he must be taxed, however great the hardship may appear to the judicial mind to be'. It is further seen that in several other judgements as in the cases quoted at 40 ITR 142(SC), 72 ITR 286(SC), 222 ITR 831 (Guj) etc it has been held time and again that once the provisions of a statute are clear, no meanings or intentions are required to be attached therein and that they have be followed in the letter and spirit. It has been held that an interpretation of law is to be attempted only when the statute suffers from any ambiguity.
5.5 The statutory conditions laid down u/s. 158BD reproduced above alludes towards a scenario in which an A O while completing search IT(SS)A No.199/Ahd/2014 Dharmshibhai H. patel Block Period - 01.04.1990 to 20.10.2000
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assessment against a person over whom he exercises valid jurisdiction, finds that the documents seized during the search against said person also contain some information of undisclosed income in respect of some other person (over whom he does not exercise his jurisdiction), then the said A O would pass on the requisite information about incriminating documents and possible undisclosed income to the A O of the person in respect of whom said information pertains to. The phrase used in section 158BD is 'where the A O is satisfied' alludes towards act of arriving at satisfaction of the first original A O that the incriminating document pertains to a person, that the said person is assessed under a particular A O and that the incriminating document contains details of some undisclosed income.
5.6 The argument of the appellant that the A O issuing notices u/s. 158BD is required to record satisfaction before issuing said notice is totally incorrect. There is no such legal stipulation. Contemporary law of section 158BD, only provides that upon arrival of satisfaction and receipt of incriminating documents forwarded by the first AO, the second AO would proceed to complete assessment u/s. 158BD rws 158BC. There is no mandate for recording of any satisfaction by the second AO which is responsibility of the first A O. As per facts of the case satisfaction for initiation of proceedings u/s. 158BD was recorded by ACIT, Cent Cir.1(1) A'bad through his satisfaction dt 29-10-2002. The same was done by him while conducting block assessment proceedings in the case of JVD. Consequently ACIT, Cent Cir.1(1), A'bad has discharged the onus placed upon his shoulders u/s. 158BD and no fault can be found. Thus, it is clear that there is no legal infirmity in the assessment u/s. 158BD done by the ACIT, Circle-6, A'bad. The arguments of the appellant are therefore rejected and the additional ground of appeal raised is dismissed."
Upon a plain reading of the observation made by the Learned CIT(A) we found that the case of the revenue in order to defend the contention made by the assessee is this that the "satisfaction" as mentioned in Section 158BD refers to the act of arriving at satisfaction by the first original Assessment Officer that the incriminating document IT(SS)A No.199/Ahd/2014 Dharmshibhai H. patel Block Period - 01.04.1990 to 20.10.2000
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pertains to the person, the said person is assessed under a particular AO and the incriminating documents contains details of some undisclosed income. According to the Learned CIT(A) the first AO is required to be specified on the factual aspect that the incriminating documents pertain to that person and upon arrival of such satisfaction and upon receipt of incriminating documents forwarded by the First AO the Second AO would proceed to complete the assessment u/s 158BD r.w.s. 158BC. No mandatory recording of any personal satisfaction by the second AO is stipulated in the provision u/s 158BD; the responsibility to prepare a satisfaction lies upon the first AO and not the concerned AO as the case sought to be made out by the revenue before us.
According to the Learned CIT(A) section 158BD clearly provides jurisdiction of being satisfied by any officer of the level of ADIT and it does not mandate for recording of such satisfaction by the concerned AO who issues the notice u/s 158BC of the Act.
But the case of the assessee is this that action under section 158BD can be initiated provided the Assessing Officer issuing notice u/s 158BD specifies that the appellant is guilty of possession of some undisclosed income. In that view of the matter, the satisfaction of ADIT, as in the case in hand, is not sufficient for making block assessment u/s 158BD. The satisfaction for initiating proceeding u/s 158BD, since recorded by the ACIT and not by the concerned Assessing Officer having jurisdiction IT(SS)A No.199/Ahd/2014 Dharmshibhai H. patel Block Period - 01.04.1990 to 20.10.2000
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to assess the case of the appellant before us, the assessment order becomes illegal and become a product of non compliance of the statutory provision u/s 158BD.
We have also gone through the satisfaction note for initiating the proceeding u/s 158BD forwarded by the ACIT, Central Circle - 1(1), Ahmedabad to ACIT, Circle - 6, Ahmedabad being part of the record at Page 215 to 221 of the paper book before us dated 29.10.2002. The notice u/s 158BC r.w.s. 158BD issued by the ACIT, Circle - 6, Ahmedabad dated 30.10.2002 is also before us.
It also appears from the records that the assessee made an application dated 27.09.2018 seeking information under the R.T.I Act, 2005 and also requested for supply of the order u/s 127 of the Income Tax Act, 1961 being the intimation of the change of jurisdiction from ITO, Ward - 6(4), Ahmedabad to DCIT, Circle - 6 as required by the said provision of law. However, the certified copy of the said order was not provided to the appellant by the concerned authority being the CPIO and ITO, Ward - 2(1)(4), Ahmedabad on the ground that such copy of the order u/s 127 of the Act is not available on record as it appears from the reply dated 12.10.2008 by the concerned authority. However, the DCIT, Circle - 6, Ahmedabad has been requested to provide such copy of the order u/s 127 of the Act whereby and whereunder his jurisdiction was IT(SS)A No.199/Ahd/2014 Dharmshibhai H. patel Block Period - 01.04.1990 to 20.10.2000
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changed from the then ITO, Ward - 6(4) to DCIT, Circle - 6, Ahmedabad.
The assessee preferred an appeal on 04.12.2018 against the order dated 12.10.2018 passed by the CPIO and the said appeal was disposed of by and under an order dated 04.12.2018 issued by the ACIT, Range - 2(1), Ahmedabad and First Appellate Authority under RTI whereby and whereunder the very necessity of issuing the order u/s 127 of the Act upon the assessee intimating change of Assessing Officer has been negated with the following observation:
"4.3 The CPIO/AO was asked to verify the case records and report in this matter. To which the AO vide his letter dtd. 04.11.2018 has submitted his comments as "On perusal of the case record, it is found that vide letter dtd. 29.10.2002 received from ACIT, Central Circle- 1(1), Ahmedabad (copy enclosed), it is informed that the jurisdiction over the assessee i.e. Shri Dharamshibhai Harijibhai Patel (PAN :
AAMPP 6622 P) is ITO, Ward - 6(4), Ahmedabad as per the departmental ITD database. However, for initiation of proceeding u/s 158BD of the Act, as per provisions of Chapter XIVB the search assessments are to be done by AOs not below the rank of ACsIT. Further jurisdiction over the assessee was changed from Ward - 6(4), Ahmedabad to Circle - 6, Ahmedabad and both the charges are under the then CIT-VI, Ahmedabad. The ACIT/DCIT has concurrent jurisdiction over all the cases of the Range. Therefore, as per section 127 of the Act, there is no need to pass an order u/s 127 of the Act for change of jurisdiction."
In view of above facts and reasons, the appeal is disposed as above. In case the appellant wishes to file an appeal against this order, he may do so within 90 days of the receipt of this order, before the Central Information Commission at the following address:
Central Information Commission, Room No.305, 2nd Floor, IT(SS)A No.199/Ahd/2014 Dharmshibhai H. patel Block Period - 01.04.1990 to 20.10.2000
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'B' Wing, August Kranti Bhawan, Bhikaji Cama Place, New Delhi - 110 066."
While dealing with this particular issue, we have also considered the relevant judgment passed by the Hon'ble High Court of Bombay in the matter of CIT, Nagpur-vs-Lalitkumar Bardia which decided the issue in favour of the assessee. The Hon'ble Court observed as follows:
13. It is undisputed position that the respondent/assessee was being assessed at Rajnandgaon (M.P.). It was as a consequence of search upon the Motwani group at Nagpur that a search was carried on upon the Respondent/Asseessee. In view of the above, the Commissioner of Income Tax, Raipur for facilitating detailed and coordinated investigation, passed an order on 6.7.1999, under Section 127 of the Act transferring the respondent/assessee's case from Rajnangaon to Nagpur. However, the Order dated 6.7.1999 of the Commissioner of Income Tax, Nagpur was quashed and set aside on 17.9.1999 by the Hon'ble M.P. High Court. The notice u/s.158BC of the Act was issued on 22.9.1999 i.e. after the order of transfer dated 6.7.1999, u/s.127 of the Act was quashed and set aside. Thus, it ceased to exist.
Consequently, on 22.9.1999, when the Deputy Commissioner of Income Tax, Nagpur ceased to have jurisdiction to assess the Respondent/Assessee as there was no order of transfer of the respondent/assessee's case to Nagpur. In terms of Section 2(7A) of the Act, the Assessing Officer means 'an Officer of the Income Tax vested with jurisdiction either by virtue of Section 120 or any other provision of the Act'. Admittedly, the Deputy Commissioner of Income Tax, Nagpur does not have jurisdiction over the respondent/assessee by virtue of Section 120 of the Act. However, the claim of jurisdiction as a Assessing Officer over respondent/assessee is the Order dated 6.7.1999 which has been passed u/s.127 of the Act, while issuing notice on 22.9.1999, under Section 158 BC of the Act. But, as the Order dt.6.7.1999 under Section 127 of the Act by the Commissioner of Income Tax, Raipur was set aside before issuing of notice, the Deputy Commissioner of Income Tax, Nagpur ceased to be the Respondent/Assessee's Assessing Officer. In the result, the notice dated IT(SS)A No.199/Ahd/2014 Dharmshibhai H. patel Block Period - 01.04.1990 to 20.10.2000
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22.9.1999 issued u/s.158BC of the Act was issued by the Deputy Commissioner of Income Tax, who was not the Assessing 15 itl127.06.odt Officer of the respondent/assessee. It is the Assessing Officer alone who has to serve notice upon the assessee calling upon him to furnish a return in terms of Section 158BC of the Act. This notice the Deputy Commissioner of Income Tax could not issue as, on 22.9.1999, he was not the Assessing Officer. As a consequence, the notice being without jurisdiction, all the proceedings subsequent thereto are without authority of law.
14. In fact, as the Apex Court held in A.C.I.T. vs. Hotel Blue Moon, (2010) 321 I.T.R. 362 (SC) that the issue of notice under Section 158 BC of the Act, consequent to search is mandatory, as it is the very foundation for jurisdiction. Therefore, the notice u/s.158 BC of the Act has necessarily to be issued by a person who is the Assessing Officer and not by any Officer of the Income Tax Department. In view of the above, on 22.9.1999, when the notice under Section 158 BC of the Act was issued by Deputy Commissioner of Income Tax, Nagpur, he was not the Assessing Officer of the Respondent/Assessee. Therefore, no fault can be found on the above count with the Order of the Tribunal."
It appears from the aforesaid judgment that the Hon'ble MP High Court quashed and set aside the notice u/s 127 of the Act on the ground that the notice u/s 158BC of the Act was issued on 22.09.1999 i.e. after the order of transfer dated 06.07.1999. The concerned AO being the DCIT, Nagpur ceased to have the jurisdiction to assess the assessee when he has issued the notice u/s 158BC of the Act on 22.09.1999. In the case in hand, it appears that upon receipt of the satisfaction note dated 29.10.2002 issued by the ACIT, Circle - 1(1), a notice u/s 158BC r.w.s. 158BD of the Act, 1961 on 30.10.2002 i.e. on the very next day. But the same was served upon the assessee as it appears from the order passed by the Hon'ble High Court was only on 18.11.2002. Nowhere admittedly the IT(SS)A No.199/Ahd/2014 Dharmshibhai H. patel Block Period - 01.04.1990 to 20.10.2000
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issuance of the notice u/s 127 intimating the assessee of such transfer of jurisdiction of AO appeared to have been issued. The plea in this respect as taken by the revenue is this that the jurisdiction over the assessee though was changed from Ward - 6(4), Ahmedabad to Circle - 6, Ahmedabad, both the charges are under the then CIT-VI, Ahmedabad. The ACIT/DCIT has concurrent jurisdiction over all the cases of the Range. Therefore, admittedly notice of intimation of change of jurisdiction under the provision of Section 127 has not been issued to the assessee. In this case the assessee is in a better footing than that of the judgment cited above. Notice u/s 127 though required to be issued the same is not in existence at all. Furthermore, the satisfaction note was neither prepared by such ACIT, Circle - 6 who has issued the notice u/s 158BC r.w.s. 158BD on 30.10.2002. The mandatory provision of issuing the said note by the concerned AO having jurisdiction to assess the case of the appellant as thus not been complied with. The satisfaction note was issued by the ACIT, Circle - 1(1), Ahmedabad and not the DCIT, Circle
- 6 or the ACIT, Circle - 6. This is the settled principle of law that the notice u/s 158BD r.w.s. 158BC is required to be issued only upon being specified that the undisclosed income belongs to the appellant only by the concerned AO and not by any other authority having the same rank. The judgment as discussed above in the matter of ACIT-vs-Hotel Blue Moon reiterates the same principle. Section 158BD further provides the books of account or other incriminating documents or assets ceased or requisitioned u/s 132A shall be handed over to the Assessing Officer IT(SS)A No.199/Ahd/2014 Dharmshibhai H. patel Block Period - 01.04.1990 to 20.10.2000
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having jurisdiction of such other person. In the instant case, the same was also not complied with by the statutory authorities. The entire proceeding has been initiated by the authorities by not applying the provision u/s 127 of the Act by not issuing notice intimating the assessee regarding transfer of jurisdiction of the Learned AO and further by not applying the provision of Section 158BC r.w.s. 158 BD by not recording the satisfaction by the jurisdictional AO. In that view of the matter, we find when the very foundation of the block assessment is not stable in the absence of compliance of the statutory provisions as discussed above, the entire proceeding initiated against the assessee is vitiated. Upon considering all the aspect of the matter, we find no merit in the order passed by the authorities below. Further that on the basis of the above discussion and observation we find the entire proceeding is void ab initio i.e. invalid from the very outset and therefore is liable to be quashed and hence the entire proceeding under section 158BD of the Act as initiated by the revenue against the assessee is hereby quashed.
7. In the result, assessee's appeal is allowed.
This Order pronounced in Open Court on 24/06/2019
Sd/- Sd/-
( PRAMOD KUMAR ) ( Ms. MADHUMITA ROY )
VICE PRESIDENT JUDICIAL MEMBER
Ahmedabad; Dated 24/06/2019
Priti Yadav, Sr.PS
IT(SS)A No.199/Ahd/2014
Dharmshibhai H. patel
Block Period - 01.04.1990 to 20.10.2000
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आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. संबं धत आयकर आयु त / Concerned CIT
4. आयकर आयु त(अपील) / The CIT(A)-XVI, Ahmedabad.
5. वभागीय त न ध, आयकर अपील य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड" फाईल / Guard file.
आदे शानुसार/ BY ORDER, स या पत त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad
1. Date of dictation 31.05.2019 (dictation pages 6)
2. Date on which the typed draft is placed before the Dictating Member 04.06.2019
3. Other Member.....................
4. Date on which the approved draft comes to the Sr.P.S./P.S 07.06.2019
5. Date on which the fair order is placed before the Dictating Member for pronouncement......
6. Date on which the fair order comes back to the Sr.P.S./P.S.......
7. Date on which the file goes to the Bench Clerk.....................
8. Date on which the file goes to the Head Clerk..........................................
9. The date on which the file goes to the Assistant Registrar for signature on the order..........................
10. Date of Despatch of the Order..........................................