Income Tax Appellate Tribunal - Chennai
T. Vijayakumar (Indl). , Trichy vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
Bench 'D' Chennai
Before Shri N.S. Saini, AM and
Shri George Mathan, JM
.....
I.T.[SS].A. No. 13/Mds/2010
Block Period Assessment Years 14.1996 to 13.7.2001
Assistant Commissioner of Vs. Shri T. Vijayakumar [Ind]
Income tax No. 28-B, NVV Enclave, Tennur
Circle -III Trichy
Trichy
(PAN No. APKPV 3576 C)
(Appellant) (Respondent)
I.T.[SS].A. No. 14/Mds/2010
Block Period Assessment Years 14.1996 to 13.7.2001
Assistant Commissioner of Vs. Shri T. Vijayakumar [HUF]
Income tax No. 28-B, NVV Enclave, Tennur
Circle -III Trichy
Trichy
(PAN No. APKPV 3576 C)
(Appellant) (Respondent)
Assessee by : Shri S. Srivatsan
Department by : Shri K.E.B. Rengarajan
Jr. Standing Counsel
Page 2 of 18
I.T.SS.A. No. 13 & 14/Mds/2010
ORDER
Per N.S. SAINI, A.M :-
These two appeals filed by the Revenue are directed against the separate orders passed by the ld. CIT(A), Tiruchirapalli dated 10.03.2010 for Block Period Assessment Year 1.4.1996 to 13.7.2001.
As the facts and issue involved in both the appeals are common, they are being disposed off together for the sake of convenience.
2. The common grounds of appeal taken by the Revenue in both the appeals are as follows:
1. The order of the ld. CIT(A) is contrary to law, facts and in the circumstances of the case.
2. The ld. CIT(A) erred in deleting the addition of Rs.
41,66,250/- added on account of on money paid, on the basis of evidence collected during the search and on the basis of independent evidence available from the other flat purchasers and evidence from the bank for settlement of tenancy rights.
Page 3 of 18I.T.SS.A. No. 13 & 14/Mds/2010 2.1 The ld. CIT(A) erred in accepting the argument of the assessee that the contents written by Shri Dhananjay Khadare was not know to him and cannot be relied upon in as much as the said Dhananjay Khadare is only an accountant, who need not know all the financial implications/veracity or correctness of the accounts or facts written by him under the instructions of his employer Shri T.K. Chawla.
2.2 The ld. CIT(A) erred in overlooking the fact the addition in this case was made not on the basis of a single loose sheet but on the basis of a bunch of loose sheet containing 177 loose sheets from which one can understand the entire sequence of events chronologically.
2.3 The ld. CIT(A) failed to observe that the jottings in the loose sheet are all contemporary recordings of events as is evident from the settlement made for surrender of tenancy rights and the legal notice issued by the landowners.
2.4 The ld. CIT(A) failed to appreciate the facts available in sheet No. 80 as per sheet no 80 the assessee had paid Rs. 88,32,500/- as on 25.5.1999 out of total value of Rs. 1,58,05,000/- for flat no 701 and the original Page 4 of 18 I.T.SS.A. No. 13 & 14/Mds/2010 landowners were not charged with any amount due for payment for the four flats allotted to them. This is in conformity with the agreement signed by all the purchasers. The ld. CIT(A) has failed to note this.
2.5 The ld. CIT(A) erred in not noticing the facts of the case are in stark contrast with human probabilities, economic and realities and facts of life 2.6 The ld. CIT(A) failed to appreciate that is well settled law that the provisions of the Evidence Act do not have application in the strict sense in which they are applicable in judicial proceedings before the court.
2.7 The ld. CIT(A) erred in accepting the argument of the assessee and carrying it too far in holding that the loose sheet written by the accountant under the instructions of the employer should bear the signature of the accountant and the employer, which is totally against the realities of life.
2.8 The ld. CIT(A) has completely ignore the principles to be followed as laid down by the Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd Vs. CIT [1954] 26 ITR 775 [SC] that he Assessing Officer is not fettered by technical rules of evidence and pleadings Page 5 of 18 I.T.SS.A. No. 13 & 14/Mds/2010 that he is entitled to act on materials which may not be accepted as evidence in a court of law.
2.9 The ld. CIT(A) ought to have confirmed the addition on the basis of facts emerged from the loose sheets which clearly shows receipt of money to the extent of Rs. 88,32,500/- as on 25.5.1999.
2.10 The ld. CIT(A) erred in concluding that 'it is the duty of the person in whose records or books the credit appears to explain to the satisfaction of the Assessing Officer and that it is genuine, in as much as the addition was made only as unexplained investment and not as unexplained credit as held by the ld. CIT(A).
3. The assessee has moved an application under Rule 27 of the Income-tax Appellate Tribunal Rules, 1963 and has submitted that as there is no satisfaction recorded by the Assessing Officer of Rama Recycling P. Ltd., the searched person, that the search material found at the premises of the searched person relates to the assessee and income therefrom is taxable in the hands of the assessee, the assessment made u/s 158BD r.w.s. 158 BC of the Act is bad in law. Further, the notice u/s 158BD issued on 16.11.2005 Page 6 of 18 I.T.SS.A. No. 13 & 14/Mds/2010 being after two years from the assessment order passed u/s 158 BC on 11.7.2003 in the case of M/s Rama News Print & Papers Pvt. Ltd is barred by limitation u/s 158BE of the Act as held by the Delhi Special Bench of the Tribunal in the case of Manoj Aggarwal Vs. DCIT reported at [2008] 113 ITD 377.
4. The ld. D.R. submitted that it will be observed from page one of the Paper Book filed by the department that the ACIT, Circle - 2, Mumbai, vide letter dated 29.8.2005 written to the Assessing Officer of the assessee has stated that the proceedings u/s 158BD r.w.s 158BC has already been initiated in one of the case, i.e. M/s Rama Scrap Recycling Pvt. Ltd and order u/s 158BD r.w.s 158BC was passed on 29.7.2005 whereby it was held that on the basis of page 80 of the seized file A-1, unaccounted consideration was paid for the purchase of flat in the said project 'Ronak Residency' at Khar. During the said proceedings, the addresses of the persons named in the said office note were obtained. Accordingly, a copy of the said office note along with the copies of the seized paper 80, 81, and 82 of the seized file A-1 [pages 177] is being forwarded to Page 7 of 18 I.T.SS.A. No. 13 & 14/Mds/2010 you for necessary action at your end, as the territorial jurisdiction lies with you.
5. He, therefore, contented that the satisfaction was recorded by the Assessing Officer of the searched person and hence the contention of the ld. A.R. that no satisfaction was recorded prior to the issue of notice u/s 158BD of the Act is not correct and therefore, the proceedings initiated u/s 158BD of the Act in the case of the present assessees was a valid proceeding.
6. As regards the issue of notice on 16.11.2005 after two years u/s 158BD of the Act from the passing of the order u/s 158BC of the Act on 11.7.2003 in the case of M/s Rama News Print & Papers Pvt.
Ltd., he submitted that u/s 158BE of the Act no such time limit was provided under the Act, and therefore, the order passed by the Assessing Officer was a valid order.
7. After hearing the rival submissions and perusing the relevant material on record, we find that in the instant case, the preliminary issue raised by the assessee in the departmental appeal, as stated Page 8 of 18 I.T.SS.A. No. 13 & 14/Mds/2010 above, is that they are not arising out of the order of the ld. CIT(A).
However, we find that in similar circumstances decided in the case of DCIT Vs. Turquoise Investment and Finance Ltd [2008] 299 ITR 143 [MP] by the Hon'ble Madhya Pradesh High Court, Question No. 3 framed before the Hon'ble High Court was as under:
"Whether the Income-tax Appellate Tribunal was justified in law in recording a finding on an issue which was not raised by the assessee either before the Assessing Officer or before the ld. CIT(A) but was raised for the first time before the Tribunal and that too in an appeal filed by the department."
8. The Hon'ble High Court decided the above question at para 16 as under:
"Reference has also been made to the decision of the Hon'ble Apex Court in National Thermal Power Co. Ltd Vs. CIT [1998] 229 ITR 383 in which their Lordships have observed that the power of the Tribunal in dealing with appeals is expressed in widest possible terms. The purpose of assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of judicial decision given while the Page 9 of 18 I.T.SS.A. No. 13 & 14/Mds/2010 appeal is pending before the Tribunal, it is found that a non taxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of the item. From the above position, it is clear that eh if the material is on record on the basis whereof objection can be raised the parties to the appeal cannot be precluded from raising such contention, especially the respondent in view of Rule 27 of the ITAT, Rules, 1963 quoted above, We are, therefore, of the considered view that both the questions Nos. 3 and 4 in the department's appeal deserved to be answered against the department."
9. In view of the above, the parties were allowed to make submissions on the preliminary issues and they were heard.
10. After considering the rival submissions, we find that in the instant case, assessment was completed in pursuance to proceedings initiated u/s 158BD of the Act. The relevant search was conducted in the case of M/s Rama News Print & Papers Pvt.
Ltd. on 13.7.2001. Assessment u/s 158BC in the case of the said person was completed on 11.7.2003. Notice u/s 158BD of the Act in Page 10 of 18 I.T.SS.A. No. 13 & 14/Mds/2010 the case of the assessee was issued on 16.11.2005 i.e. more than 28 months after the date of completion of the assessment in the case of the person in whose case relevant search was conducted. We find that the Tribunal in the case of Raghuveer Singh Garg Vs. CIT [2009] 31 DTR [Del] [Trib] 489 held that notice issued u/s 158 BD after 60 days from the date of passing of assessment order in the case of the person in whose case search was conducted is beyond reasonable time and therefore, not valid in law. The relevant observations and findings of the Tribunal is as under:
"16. The Tribunal Delhi Bench again considered the issue in the case of Radhey Shyam Bansal vs. Asstt. CIT (supra) and following the decision of Hon'ble Gujarat High Court in the case of Khandubhai Vasanji Desai & Ors. vs. Dy. CIT (supra) and that of the earlier decision of Tribunal Chandigarh in the case of Anil Kumar Jagadhari (supra), observed as under :
"The next question to be addressed is whether the notice under s. 158BD requires to be issued within a reasonable time and if it is not so issued, whether the assessment made pursuant to the notice is liable to be set aside on that ground. The contention of the learned representative for the assessee, it may be recalled, was that the notice should have Page 11 of 18 I.T.SS.A. No. 13 & 14/Mds/2010 been issued at least within a reasonable time after the completion of the assessment of the searched person. In the present case, the block assessment of Manoj Aggarwal was completed on 29th Aug., 2002 but the notice under s. 158BD was issued only on 22nd March, 2004, that is about 19 months later. The further contention based on the judgment of the High Court in Khandubhai Vasanji Desai's case (supra) was that the notice should be issued within 15 days from the date of completion of the block assessment in the case of the searched person or at any rate within 60 days from that date, the sanctity behind this period being the provisions of s. 132(9A). In Khandubhai's case (supra), the Gujarat High Court referred to the time-limit of 15 days having regard to the fact that under s. 132(9A) as it stood at the relevant time the authorized officer who conducted the search against a person has to hand over the books of account, documents and assets seized to the ITO having jurisdiction over the person to whom the books of accounts, documents and assets seized relate, within 15 days of the seizure and thereafter the AO is required to serve notice on such person to whom the books of account etc. relate requiring him to furnish a block return under s. 158BC. The Gujarat High Court was concerned with the constitutional validity of s. 158BD of the Act and one of the contentions was expressed in the form of an apprehension that a notice under s. 158BD can be issued by the AO in the case of the other person (other than the person who was Page 12 of 18 I.T.SS.A. No. 13 & 14/Mds/2010 searched) at any time. While repelling this contention and putting at rest the apprehension saying that it is ill--founded, the Gujarat High Court held that the notice under s. 158BD has to be issued within a reasonable period from the date of the search itself and it was pointed out taking clue from s. 132(9A), that it should be done within 15 days of the seizure. The obvious implication is that the satisfaction that the income reflected in the seized material belongs to some person other than the person searched should also be reached within the aforesaid period of 15 days so that the same can be transmitted along with the books of accounts, documents, etc. seized during the search. The period of 15 days has been amended to 60 days by the Finance Act, 2002 w.e.f. 1st June, 2002. It is noteworthy that the amendment had come into force even during the pendency of the block assessment proceedings in the case of Manoj Aggarwal (supra). However, even after the completion of the block assessment of Manoj Aggarwal on 29th Aug., 2002, the AO of the assessee took about 19 months to issue the notice under s. 158BD. The period of 60 days mentioned in s. 132(9A) is actually for handing over the books of account etc. to the AO having jurisdiction over the person who is a person other than the person searched and it actually starts from the date of search. The period was highlighted by the Gujarat High Court only to emphasize the speed and swiftness within which the proceedings should be taken against such persons. That object Page 13 of 18 I.T.SS.A. No. 13 & 14/Mds/2010 does not appear to have been achieved in the present case in view of the unreasonable delay in issuing the notice under s. 158BD not only after the date of search but also after the date of completion of the block assessment of Manoj Aggarwal. Even if the period of 60 days is to be reckoned from 15th July, 2003, the date on which the Assessing Officer of Manoj Aggarwal wrote a letter to the AO of of Radhey Shyam Bansal, there is a delay of almost 8 months before issue of the notice under s. 158BD. In such circumstances, we hold that the notice having been issued well beyond a reasonable period of time, this assessment made on the assessee is bad in law."
17. Now, we come to letter dt. 23rd Jan., 2003 written by the Dy. CIT, Circle-3, New Delhi, who is the AO having jurisdiction over Manoj Agarwal, to the AO of the assessee concerned in this appeal. On this issue, Chandigarh Bench of the Tribunal has passed elaborate order in case of Asstt. CIT vs. Kishore Lal Balwant Rai, order dt. 29 June, 2007. On the basis of this decision, learned Authorised Representative contended that satisfaction should have been recorded before the block assessment of Manoj Aggarwal was completed. Our attention was also drawn to the observation at para 25.1 of the order, to the effect that such a satisfaction has to be recorded during the course of assessment proceedings of the person put to search under s. 132 or requisition under s. 132A Page 14 of 18 I.T.SS.A. No. 13 & 14/Mds/2010 because only in the course of assessment proceedings, let the AO be put in a position not only to detect the undisclosed income but also to identify the person to whom it belongs. It was also observed that after the assessment of a person searched is completed, the AO would become 'functious officio' regarding the power and function outlined in s. 158BC and he can no longer be construed as AO for the purpose of Chapter XIV-B insofar as the person searched is concerned. In the assessment of the person searched is completed, the task of the AO is to identify the undisclosed income and the person to whom such income belongs, attaining finality and thereafter, it is not open to him to record any satisfaction of any kind. He is no longer in seisin of any kind of assessment of the searched person and, therefore, cannot assume jurisdiction over the same and record any satisfaction. We respectfully agree with the view taken by the Chandigarh Bench as to the timeframe within which the satisfaction should be recorded by the AO having jurisdiction over such assessment of the person searched. Undisputedly, in the instant case, the assessment of Manoj Aggarwal was completed under s. 158BC on 29th Aug., 2002, thereafter, the AO assessing him became 'functious officio' and was legally under a disability to record any satisfaction to the effect that any undisclosed income belongs to Gulshan Kumar Luthra (HUF). Thereafter, the letter written on 23 Jan., 2003 by the Dy. CIT, Circle-3, New Delhi, who was the AO having Page 15 of 18 I.T.SS.A. No. 13 & 14/Mds/2010 jurisdiction over Manoj Aggarwal cannot be construed to be the satisfaction as required by s. 158BD since it was much after the completion of block assessment of Manoj Aggarwal.
18. In the case of Radhey Shyam Bansal (supra), since the notice was issued after the delay of almost 8 months, it was held that notice was issued beyond the reasonable period of time. On this ground itself the assessment was held to be bad in law. However, no decision was brought to our notice by learned CIT-Departmental Representative, by any authorities for supporting the argument that no time-limit has been prescribed for issuing notice under s. 158BD. As held by Hon'ble Supreme Court in case of Honda Siel Power Products Ltd. vs. CIT (2007) 213 CTR (SC) 425 : (2007) 295 ITR 466 (SC) the decision of Co-ordinate Bench has to be followed, hence respectfully following the aforesaid decisions, we hold that in this case also notice issued after the expiry of period of 60 days from the date of passing the assessment order in the case ofperson searched i.e., Manoj Aggarwal, was beyond a reasonable period and hence, such notice was not validly issued. Accordingly, the jurisdiction assumed on the basis of such invalid notice and the assessment on this basis do not have any legs to stand and therefore, the same is liable to be quashed.
19. The issue with regard to recording of satisfaction in the notice under s. 158BD has also been considered by the Page 16 of 18 I.T.SS.A. No. 13 & 14/Mds/2010 Tribunal Special Bench in case of Manoj Aggarwal vs. Dy. CIT (supra) wherein it was held that for initiating action under s. 158BD, first and foremost requirement is that the AO making block assessment of a person searched, has to be satisfied that undisclosed income detected belongs to some other person other than the person searched and, thus, section itself contemplates satisfaction on the part of the AO making assessment in case of person searched; recording of satisfaction is mandatory and imperative before assuming of jurisdiction under s. 158BD. It was further observed that note of satisfaction must contain positive finding by the AO making assessment under s. 158BC indicating therein undisclosed income found as a result of his examination of seized material and the person to whom searched income belongs.
20. Undisputedly, in the instant case, notice under s. 158BD was issued to the assessee on 5th Aug., 2003 which was much after 6 months from the end of the completion of the assessment of searched person, the notice under s. 158BD was bad in law, consequently, the block assessment framed under s. 158BD had no legs to stand.
21. In the result, the appeal of the assessee is allowed in part in terms indicated hereinabove."
Page 17 of 18I.T.SS.A. No. 13 & 14/Mds/2010
11. We find that the ld. D.R. could not bring any authority before us to show that any notice u/s 158BD can be validly issued at any time without any restriction and even after 28 months from the date of passing of assessment order in the case of person in whose case search was conducted. We, therefore, respectfully following the above cited decision of the Tribunal find that in the instant case notice u/s 158 BD being issued after more than 28 months from the date of completion of the assessment order u/s 158BC of the Act in the case of M/s Rama News Print & Papers Pvt. Ltd. in whose case relevant search was conducted was beyond reasonable time and therefore, notice u/s 158BD was not valid in law.
12. We are alive to the fact that in the instant case the appeal is filed by the Revenue and no appeal or cross objection has been filed by the assessee. It is settled position of law that the Tribunal cannot put the appellant in a more disadvantageous position. We, therefore, do not find any reason to interfere with the order of the ld. CIT(A). We, therefore, confirm the order of the ld. CIT(A) and dismiss the appeal of the Revenue.
Page 18 of 18I.T.SS.A. No. 13 & 14/Mds/2010
13. In view of our above decision, the appeals of the Revenue for the above stated reason and the other plea raised by the assessee have become infructuous and requires no adjudication by us being only academic in nature. We, therefore, refrain from adjudicating the same. In coming to this conclusion, we are fortified by the decision of the Special Bench of the Tribunal in the case of Rahul Kumar Bajaj Vs. ITO [2000] 241 ITR [AT] [Nag] [SB].
14. In the result, appeals filed by the Revenue stand dismissed.
Order pronounced in the court at the close of the hearing in the presence of the parties on 28.6.2011.
Sd/- Sd/-
(GEORGE MATHAN) (N.S. SAINI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Chennai,
Dated the 13th June, 2011.
VL/-
Copy to: Assessee/AO/CIT (A)/CIT/D.R./Guard file