Income Tax Appellate Tribunal - Chandigarh
M/S Punnie Bko, Ludhiana vs Acit, C-Iii, Ludhiana on 30 September, 2021
आयकर अपील य अ धकरण, च डीगढ़ यायपीठ "बी", च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL,
CHANDIGARH BENCH 'B', CHANDIGARH
BEFORE: SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER
AND SHRI R.L. NEGI, JUDICIAL MEMBER
आयकर अपील सं./ ITSS(A) No.1/Chd/2018
नधा रण वष / Block Period: 01.04.1988 to 08.01.1999
M/s Punnie BKO, बनाम The A.C.I.T.,
155, Bharat Nagar, Ludhiana. Circle-III,
Ludhiana.
थायी लेखा सं./PAN NO: A A B F P 3 6 3 4 Q
अपीलाथ /Appellant यथ /Respondent
नधा रती क! ओर से/Assessee by : Shri Pankaj Bhalla, CA
राज व क! ओर से/ Revenue by : Shri Sandeep Dahiya, CIT
सन
ु वाई क! तार&ख/Date of Hearing : 07.09.2021
उदघोषणा क! तार&ख/Date of Pronouncement: 30.09.2021
(Hearing through webex)
आदे श/Order
Per Annapurna Gupta, Accountant Member :
Th e a b ove a p p ea l h a s be e n p r efe r re d b y t he a ss e ssee a ga i nst the or de r of th e Le a rne d C om mi ss io ne r of I n come Ta x (A pp e a ls )-I , Lud hi a n a [ i n s h o r t th e ' L d . C I T( A ) ] da te d 2 7 .1 1 .2 0 1 7 re la t in g to B loc k P e r i od 0 1 .0 4 . 19 88 t o 0 8 .0 1 . 19 9 9 -, co nf ir mi ng ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 2 of 38 the le vy of p e n a lt y u /s 1 5 8 B F A( 2) o f t he I n come Ta x A ct, 1 9 6 1 (h e re i n a fte r re fe rr e d to a s 'Ac t')
2. Th e a s se s see h a s r a is e d the fol l owin g e f fe c ti ve gr ound s of a pp e a l:
"1. The Ld. Commissioner of Income Tax (Appeals)-1, Ludhiana has erred in law arid on facts of the case:-
a) By arbitrarily and wrongly sustained the penalty of Rs.9,00,000/- imposed by the Ld. Assessing Officer u/s 158BFA (2) of the Income Tax Act, 1.961.
2. The above said order is bad in law s contrary to the facts of case."
3. Th e a s se s se e h a s a ls o r a i se d f oll ow i ng a d d it ion al gr ou nd s a nd h a d s oug ht a d mis si on of t he sa me u nd e r Rul e 1 1 of t he Ap p e l la te Tr i b un a l Ru le s, 1 9 63 :
"1. That the assessment framed and penalty levied is void obnitio in absence of satisfaction note of the A.O. of searched person prior to issuance of notice u/s 158BD of the Income Tax Act, 1961.
2. That the assessment framed and penalty levied is void obnitio in absence of satisfaction note of the A.O. of the assessee prior to issuance of notice u/s 158BD of the Income Tax Act, 1961.
3. That the notice issued u/s 158BD was without jurisdiction and thus the assessment framed and the penalty levied is a nullity.
4. That the assessment framed and penalty levied u/s 158BD r.w.s. 143(3) was without jurisdiction and thus a nullity.
5. Without prejudice to above, that the assessment framed and penalty levied is also invalid in absence of valid satisfaction note, if any revealing mental and ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 3 of 38 dispassionate thought process of the A.O. in arriving at conclusion.
6. That the assessment framed and penalty levied is illegal as the assessing officer fails to bring on record the material on which the satisfaction has been drawn."
4. Vi s-à -vi s th e a dd i ti ona l gr ou nd s ra i s e d , the Ld. C ou ns e l for th e a sse ssee co nte nde d th a t he w a s p re ss i ng on ly g r oun d N o.1 , 4 & 5 r a i se d a b ove . Th e Ld .C ou ns e l for th e a sse ssee con te n de d th a t th e y we re all le ga l gr ou nd s, a ga i n st t he va l id i ty of the or de r le vy in g p e n a l ty, by ch al le ng in g the va l id i ty of th e o rigi n a l a sse ss me nt p r oce e d i ngs w h ic h ga ve r ise to th e pe n a l pr oc ee d i ng s. Tha t all ma te r i a l r e le va n t for a dj ud i ca t ion of t h e gr ou nd s w e re a v a il a b l e on r e cor d a n d d i d not r e q u i re in ve sti ga ti on of a n y fa c ts. He the ref or e ple a de d a dmi ss io n of th e sa me a nd r e li e d o n t he de c is ion o f the Hon 'b l e A p e x cou rt i n th e c a se of N a ti on a l Th e rma l Po we r C or po ra t ion v s C I T 2 2 9 I TR 38 3 ( SC ) a n d th e H on 'b l e P u nj a b a nd H a r ya n a H i gh C ou r t i n t he ca se of Ab h is he k I nd u str i e s Ltd . vs C I T 2 90 I TR 6 56 (P & H ) i n thi s r e ga r d .
5. Th e Ld . D R ve he me n tl y o bj e c te d to th e a d mis si on of t he sa i d gr oun d s st a ti n g th a t i n th e q u a nt um p r oc ee d i ng s the I TA T had de a lt wi th th e or d er p a ss e d by th e AO a f te r con si de r in g i t t o b e v a li d a n d ha d a l l ow e d ce r ta in r e l ie f to t he a sse sse e . Tha t in n on e of th e a p p e l l a te pr oc ee d i ng s the a sse sse e had ev e r r a i se d the is sue of va l idi ty of t he ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 4 of 38 a sse ssme nt or der pa s se d . Th a t t he or de r of th e I TA T in q ua n tum p r oce ed in gs h a d b e come f in a l a n d c ou ld not be re vi si te d now .
6. To th is Ld . C oun se l fo r th e a s se sse e cou nte re d b y s a yi ng tha t i t h a s be e n h e l d in a n umb er of de ci si on s b y c our ts tha t the o ri gi n a l p r oce e d in gs c oul d be cha l le n ge d in co -la t e ral pr oc ee d i ng s a n d i n thi s r e ga r d h e d re w our a t te n ti on to t he fol l ow in g de ci si on s:
1) P. V. Dos hi Vs . C I T ( 1 97 8 ) 1 1 3 I TR 2 2 , ( pl a ce d a t comp i la ti on o f ca se l a w (C C L) p a ge N os .5 2 to 5 8 ).
2) DC I T Vs . BJD P a pe r P r od uct ( 2 01 2 ) 17 Ta x ma nn .c o m. 1 1 ( C C L 1 4 t o 2 5 ) .
3) Va l ia n t G la s sw or k P vt. Ltd . V s. AC I T, I TA N o.1 6 1 2 /M u m /2 01 3 (C C L 2 6 to 5 1 ).
7. We ha ve h e a r d b oth th e p a r ti e s . V ide the a dd iti on a l gr oun d s sou gh t to be a d mi tte d f or a d j ud i ca ti on by the Ld. C ou ns e l f or t he a s se s se e , the a ss e ssee h a s cha l le nge d t he va l id i ty of th e o rde r p a sse d le v yi ng p e n a lt y u /s 15 8 B FA of t he Act , on the b a si s th a t t he a sse s sme n t o rd e r p a ssed u /s 1 5 8 B D of th e A ct, of whi ch th e pe n a lt y or d e r w a s a n offs hoo t, was its e l f i nva li d .
8. Th e a d di ti on a l g r oun d s n o d oub t a r e le ga l gr ound s a n d ca n a d mi tte d l y b e a d ju d ic a te d on t he b a si s o f t h e ma te r i a l on re cor d . The sa me the re f ore n ee d to be ad mitt e d f or ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 5 of 38 a dj ud i ca t ion a s p e r t he d e c i si on of the H on 'b le a pe x cou rt i n N a ti ona l Th e r ma l P ow e r C o por a t ion ( su p r a ). A s f or t he Ld .D R's obj e c ti on to t he e f fe ct tha t th e v ali d i ty o f a n a s se s sme nt or de r wh i ch ha s a tta i n e d f in a l it y ca n no t now b e r a i se d i n col la t e r a l pr oc ee d i ng s, we d o n ot f in d a ny me r i t i n th e s a me . Thi s i ss ue is no l on ge r r e s in te g r a ha vi n g b ee n de a l t i n v a r iou s d e c is io ns a s po in te d out by th e Ld .C o un se l for the a sse ssee be f ore us ca te g or ic a ll y ho ld i ng th a t the v a li d it y o f or ig in a l p r ocee d in gs ca n be r a ise d i n col l a te r a l p ro cee di n gs. I t ha s bee n s o he ld ba s e d on th e p ri nc ip l e th a t ne i th e r the ru l e of e s top pe l n or pr i nc ip l e of re sju di ca t a , tha t n e ithe r con se nt n or w a i ve r can con fe r j ur i sd ic tion w he n no ne e x is ts a nd th a t f i na l i ty or con cl us iv e ne ss cou ld a r i se on ly in r e s pe ct of o rde r s w h ic h a re comp e te nt or de rs wi th ju r is di ct io n a nd i f p r oce ed i ngs a re not va l id l y i ni ti a te d th e or de r w oul d b e v oi d or d e r w h ic h c oul d ne ve r ha ve a ny fin a li ty or con cl us iv e ne ss .
9. I n the c a se o f Va l ia nt G la s s w or k s (P ) Lt d. ( su p r a ) t he I TA T h a s, a ft e r r e fe r r in g to va r i ous ca se l a ws he ld t ha t t he pr op os it ion tha t i s comi n g o ut is t ha t th e ju r is d ic tio n or t he le ga li ty of the pr oc ee d i ng s ca n b e a gi ta te d i n a sub s e q ue nt pr oc ee d i ng or e ve n i n a co ll a te ra l p r oc ee d i ng or e xe cu ti on pr oc ee d i ng a ls o. The r e le va n t fin d in gs o f th e I TA T a r e a s un de r :
ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 6 of 38 "So far as the issue as to whether the assessee could raise the plea before the AO during the fresh assessment proceedings u/s 153A of the Act pursuant to the direction of the learned CIT given in the revision order passed u/s 263 of the Act regarding the validity of initiation of the reopening proceedings u/s 147 of the Act is concerned, we find that various Courts of Law have been unanimous on the proposition that jurisdictional aspect of an order passed in a primary proceedings can be examined in the collateral proceedings also. The validity of an assessment order can be challenged during the appellate proceedings pertaining to examination of validity of the order passed u/s 263 of the Act.
11. In a recent decision in the case of the case of "M/s Westlife Development Ltd Vs. Principal Commissioner of Income Tax" [ITA No.688/Mum/2016 decided vide order dated 10-06-2016, the co-ordinate bench of this Tribunal has thoroughly examined the issue as to whether if the initiation of the primary proceedings is invalid without jurisdiction but, the same has not been agitated by way of any appeal or otherwise and thereafter on the basis of those primary proceedings, certain secondary proceedings such as reopening of the assessment u/s 147 of the Act or revision of the assessment u/s 263 of the Act is done, in such circumstances, whether the assessee has a right to challenge the very validity of the primary proceedings in an appeal filed against any order passed in such subsequent/collateral proceedings. The Tribunal has discussed various case laws in this respect. The relevant part of the findings of the Tribunal is reproduced hereunder:-
"3. During the course of hearing, the Ld. counsel of the assessee inter-alia stated that in this case the impugned order passed u/s 263 is bad in law on the jurisdictional ground, that is to say that the original assessment order passed u/s 143(3) dated 2440-2013 which has been sought to be revised by the Id.CIT was a nullity in the eyes of law, and therefore an order, which was a nullity in the eyes of law had no existence in the eyes of law and, therefore, the same could not have been revised by the Ld.CIT, thereby giving fresh life to the proceedings which had no legal existence in the eyes of law. In this regard, it has been further explained by the Id. counsel that the original assessment was framed u/s 143(3) upon an erstwhile company, viz. M/s 'Westpoint Leisureparks Pvt Ltd' (hereinafter called WLPL), which had already got amalgamated into another company namely M/s 'Westlife Development Ltd' (hereinafter called WDL) and therefore, on the date of framing of the assessment order, WLPL was not in existence. It was further submitted that this ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 7 of 38 fact was brought to the knowledge of the Assessing Officer; despite that, the Assessing Officer framed the assessment upon a non-existing entity. It was submitted by him that framing of an assessment upon a company which has already been amalgamated by way of an order of the High Court is nullity in the eyes of law and in support of his arguments he placed reliance upon the following judgments:
1. Judgment of Delhi High Court in the case of Spice Infotainment Ltd. Vs. Commissioner of Service Tax in ITA 475 & 476 of 2011, dated 03.08.2011
2. CIT v. Dimension Apparels P. Ltd. [370 ITR 288 (Del)]
3. I. K. Agencies P. Ltd. v CIT [347 ITR 664 (Cal)]
4. CIT v Express Newspapers Ltd. [40 ITR 38 (Mad)]
5. Judgment of Delhi High Court in the case of CIT v Micra India P. Ltd. (2015) 57 Taxmann.com 163 (Del)
6. Order of the Tribunal Mumbai Bench, in the case of Instant Holdings Ltd. ACIT in ITA no. 4593, 4748/Mum/2011 order dated 09.03.2016.
7. Order of the Tribunal Kolkata Bench, in the case of Emerald Company Ltd in ITA no. 428/Ko1/2015 order dated 13.01.2016
8. Judgment of Karnataka High Court in the case of CIT v Intel Techno India P. Ltd. (2015) 57 Taxmann.com 159 (Kar)
9. Order of the Tribunal Kolkata Bench, in the case of Gestener (India) ACIT in 1TA no. 275/Ko1/2007 "
4. It was further argued by him that the impugned assessment order was non est in the eyes of law and, therefore, the same could not have been revised by the Id.CIT. In this regard, he relied upon the judgment of Hon'ble Delhi High in CIT vs Escorts Farms Pvt Ltd 180 ITR 80 (Del) and upon the decision of the co- ordinate bench in the case of Krishna Kumar Saraf vs CIT ITA No.4562/De1/2011 dated 24-09-32015 and Steel Strips Ltd v ACIT 53 ITD 553 (Chd). He thus requested that the impugned revision order passed by the Id.CIT is illegal on this primary jurisdictional ground itself.
5. Per contra, Ld. Departmental Representative for the Revenue vehemently opposed the arguments of the Id. Counsel. It ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 8 of 38 was submitted by the Id. CIT-DR that even if the original assessment order was framed in the name of an erstwhile company, the same was only a mere irregularity and that does not make the assessment as nullity in the eyes of law. It was submitted that such lapses were protected u/s 292B of the Act.
6. In addition to the above, it was further submitted by him that the issue with regard to illegality in the original assessment order cannot be raised here during the proceedings challenging the order u/s 263. It was further submitted by him that in any case, the ld.CIT had proper jurisdiction to make revision of the impugned assessment order.
7. We have heard both the parties on this issue and also gone through the orders passed by the lower authorities as well as the judgments relied upon before us. In our view, we need to decide following issues, before we go into any other issues or merits of the impugned order:
1. Whether the assessee can challenge the validity of an assessment order during the appellate proceedings pertaining to examination of validity of order passed u/s 263?
2. Whether the impugned assessment order passed u/s 143(3) dated 24-10-2013 was valid in the eyes of law or a nullity as has been claimed by the assessee?
3. If the impugned assessment order passed u/s 143(3) was illegal or nullity in the eyes of law, then, whether the CIT had a valid jurisdiction to pass the impugned order u/s 263 to revise the non est assessment order?
In our considered view, since these issues are jurisdictional issues and go to the root of the matter, therefore before dealing with any other issue, we shall first deal with all above three issues one by one, as under:
8. Challenging the jurisdictional defects of assessment order for assailing the jurisdictional validity of the revision order passed u/s 263:
The first issue that arises for our consideration is - whether the assessee can challenge the jurisdictional validity of order passed u/s 143(3) in the appellate proceedings taken up for challenging the order passed u/s 263? If we analyse the nature of both of these proceedings, which are under consideration before us, we find that the original assessment proceedings can ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 9 of 38 be classified in a way as 'primary proceedings'. These are, in effect, basic / foundational proceedings and akin to a platform upon which any subsequent proceedings connected therewith can rest upon. The proceedings initiated u/s 263 seeking to revise the original assessment order is off shoot of the primary proceedings and therefore, these may be termed as 'collateral proceedings' in the legal framework. The issue that arises here is whether any illegality/invalidity in the order passed in the 'primary proceedings' can be set up in the 'collateral proceedings' and if yes, then of what nature?
8.1. We have analysed this issue carefully. There is no doubt that after passing of the original assessment order, the primary (i.e. original proceedings) had come to an end and attained finality and, therefore, outcome of the same cannot be disturbed, and therefore, the original assessment order framed to conclude the primary proceedings had also attained finality and it also cannot be disturbed at the instance of the assessee, except as permitted under the law and by following the due process of law. Under these circumstances, it can be said that effect of the original assessment order cannot be erased or modified subsequently. In other words, whatever tax liability had been determined in the original assessment order that had already become final and that cannot be sought to be disturbed by the assessee. But, the issue that arises here is that if the original assessment order is illegal in terms of its jurisdiction or if the same is null & void in the eyes of law on any jurisdictional grounds, then, whether it can give rise to initiation of further proceedings and whether such subsequent proceedings would be valid under the law as contained in Income Tax Act? It has been vehemently argued before us that the subsequent proceedings (i.e. collateral proceedings) derive strength only from the order passed in the original proceedings (i.e. primary proceedings). Thus, if order passed in the original proceedings is itself illegal, then that cannot give rise to valid revision proceedings. Therefore, as per law, the validity of the order passed in the primary (original) proceedings should be allowed to be examined even at the subsequent stages, only for the limited purpose of examining whether the collateral (subsequent) proceedings have been initiated on a valid legal platform or not and for examining the validity of assumption of jurisdiction to initiate the collateral proceedings. If it is not so allowed, then, it may so happen that though order passed in the original proceedings was illegal and thus order passed in the subsequent proceedings in turn would also be illegal, but in absence of a remedy to contest the same, it may give rise to an 'enforceable' tax liability without authority of law. Therefore, the ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 10 of 38 Courts have taken this view that jurisdictional aspects of the order passed in the primary proceedings can be examined in the collateral proceedings also. This issue is not res integra. This issue has been decided in many judgments by various courts, and some of them have been discussed by us in followings paragraphs.
8.2. In a matter that came up before Hon'ble Supreme Court in the case of Kiran Singh & Ors. v. Chaman Paswan & Ors., [1955] 1 5CR 117 the facts were that the appellant in that case had undervalued the suit at Rs.2,950 and laid it in the court of the Subordinate Judge, Monghyr for recovery of possession of the suit lands and mesne profits. The suit was dismissed and on appeal it was confirmed. In the second appeal in the High Court the Registry raised the objection as to valuation under Section 11. The value of the appeal was fixed at Rs.9,980. A contention then was raised by the plaintiff in the High Court that on account of the valuation fixed by the High Court the appeal against the decree of the court of the Subordinate Judge did not lie to the District Court, but to the High Court and on that account the decree of the District Court was a nullity. Alternatively, it was contended that it caused prejudice to the appellant. In considering that contention at page 121, a four Judge Bench of Hon'ble Supreme Court speaking through Vankatarama Ayyar, J. held that:
"it is a fundamental principle well-established that a decree passed by a Court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the Court to pass any decree and such a defect cannot be cured even by consent of parties."
8.3. This judgment was subsequently followed by Hon'ble Supreme Court in the landmark case of Sushil Kumar Mehta vs Gobind Ram Bohra, (1990) 1 SCC 193, wherein an issue arose whether a decree can be challenged at the stage of execution and whether a decree which remained uncontested operates as res-judicata qua the parties affected by it. Hon'ble apex court, taking support from aforesaid judgment, observed as under:
"In the light of this position in law the question for determination is whether the impugned decree of the Civil Court can be assailed by the appellant in execution. It is already held that it ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 11 of 38 is the Controller under the Act that has exclusive jurisdiction to order ejectment of a tenant from a building in the urban area leased out by the landlord. Thereby the Civil Court inherently lacks jurisdiction to entertain the suit and pass a decree of ejectment. Therefore, though the decree was passed and the jurisdiction of the Court was gone into in issue Nos. 4 and 5 at the ex-parte trial, the decree there-under is a nullity, and does not bind the appellant. Therefore, it does not operate as a res judicata. The Courts below have committed grave error of law in holding that the decree in the suit operated as res judicata and the appellant cannot raise the same point once again at the execution."
8.4. Similar view has been taken by Hon'ble Supreme Court by following aforesaid judgments recently in the case of Indian Bank vs Manual Govindji Khona reported in 2015 (3) SCC 712. Further, similar view was emphasized by Hon'ble Bombay High Court (GOA Bench) in the case of Mavany Brothers vs CIT (Tax Appeal No 8 of 2007) in its order dt 17th April, 2015 wherein it was held that an issue of jurisdiction can be raised at any time even in appeal or execution.
8.5. The aforesaid principles, enunciated by the Apex Court in the case of Kiran Singh & Ors. v. Chaman Paswan & Ors, supra were reiterated by the Apex Court in the cases of Superintendent of Taxes vs Onkarmal Nathmal Trust (AIR 1975 SC 2065) and Dasa Muni Reddy v. Appa Rao (AIR 1974 SC 2089). In the first of these decisions it was pointed out that revenue statutes protect the public on the one hand and confer power upon the State on the other, and the fetter on the jurisdiction is one meant to protect the public on the broader ground of public policy and, therefore, jurisdiction to assess or reassess a person can never be waived or created by consent. This decision shows that the basic principle recognized in Kiran Singh (supra) is applicable even to revenue statutes such as the Income Tax Act. Dasa Muni Reddy (supra) is a judgment where the principle of 'coram non judice' was applied to rent control law. It was held that neither the rule of estoppel nor the principle of res judicata can confer the Court jurisdiction where none exists. Here also the principle that was put into operation was that jurisdiction cannot be conferred by consent or agreement where it did not exist, nor can the lack of jurisdiction be waived.
8.6. These judgments were subsequently noticed by Hon'ble Gujarat High Court in the case of P. V. Doshi 113 ITR 22(Gujrat). This case arose under the Income Tax Act with reference to the ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 12 of 38 provisions of Section 147 dealing with re-assessment. The facts were that the assessment was sought to be reopened under Section 147 and notice under section 148 was issued. Validity of reopening was not challenged upto Tribunal and additions were challenged on merits only. The Tribunal restored the matter to the Assessing Officer with some directions to reexamine the issue on merits. When the matter came back to the assessing officer the assessee specifically raised the point of jurisdiction to reopen the assessment, contending that the notice of reopening was prompted by a mere change of opinion. The AO rejected plea of the assessee but the AAC accepted this ground and also held the reassessment to be bad in law on jurisdictional ground. Against the order of the AAC the Revenue went in appeal before the Tribunal and specifically raised the plea that the question of jurisdiction to reopen the assessment having been expressly given up by the assessee in the appeal against the reassessment order in the first round, the assessee was debarred from raising that point again before the AAC and the AAC was equally wrong in permitting the assessee to raise that point which had become final in the first round and in adjudicating upon the same. The plea of the Revenue impressed the Tribunal which took the view that after its earlier order in the first round of proceedings the matter attained finality with regard to the point of jurisdiction which was given up before the AAC and not agitated further and that in the remand proceedings what was open before the Assessing Officer was only the question whether the addition was justified on merits and the point regarding the jurisdictional aspect was not open before the Assessing Officer. According to the Tribunal, the assessee having raised the point in the first round and having given it up could not revive it in the second round of proceedings where the issue was limited to the merits of the additions. In this view, the Tribunal accepted the Revenues plea. The assessee thereafter carried order of the Tribunal in reference before the Gujarat High Court. The High Court after considering various judgments of the Supreme Court on the point of jurisdiction to reopen the assessment and also after specifically discussing the judgment of the Supreme Court in Onkarmal Nathmal Trust (supra) and Dasa Muni Reddy (supra) held that the Tribunal was in error in holding that the question of jurisdiction became final when it passed the earlier remand order. It was held that neither the question of res judicata nor the rule of estoppel could be invoked where the jurisdiction of an authority was under challenge. According to Hon'ble Gujarat High Court, the rule of res judicata cannot be invoked where the question involved is the competence of the Court to assume jurisdiction, either pecuniary or territorial or over the subject ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 13 of 38 matter of the dispute. Hon'ble High Court further held that since neither consent nor waiver can confer jurisdiction upon the Assessing Officer where it did not exist, no importance could be attached to the fact that the assessee, in the first round of proceedings, expressly gave up the plea against the erroneous assumption of jurisdiction by the assessing authority. According to the Hon'ble Court, the "finality or conclusiveness could only arise in respect of orders which are competent orders with jurisdiction and if the proceedings of reassessment are not validly initiated at all, the order would be a void order as per the settled legal position which could never have any finality or conclusiveness. If the original order is without jurisdiction, it would be only a nullity confirmed in further appeals'. In this view of the matter, Hon'ble High Court finally answered the reference in favour of the assessee.
8.7. It is further noted that many of these judgments were discussed and followed by the co-ordinate bench of the Tribunal in the case of Indian Farmers Fertilizers Co-operative Ltd vs KIT 105 lTD 33 (Del), wherein a similar issue had arisen. In this case, the issue raised before the bench was whether it is open to the assessee, not having appealed against the reassessment order, to set up or canvass its correctness in collateral proceedings taken for rectification thereof u/s 154. The bench minutely analysed law in this regard and applying the principle of 'coram non judice' and following aforesaid judgments of the supreme court, it was held that if an assessee seeks to challenge the reassessment proceedings as being without jurisdiction, when action for rectification is sought to be taken on the assumption of the validity of the reassessment order, then the assessee has to step in and protect its interests and the liberty to question even the validity of the reassessment proceedings ought to be given to it......." (emphasis supplied) 8.8. Similar view was taken in another decision of the Tribunal in the case of Dhiraj Suri vs ACIT 98 lTD 87 (Del). In the said case, appeal was filed by the assessee before the Tribunal against the levy of penalty. In the appeal challenging the penalty order, the assessee challenged the validity of block assessment order which had determined the tax liability of the assessee on the basis of which penalty was levied subsequently. The revenue objected with respect to the ground of the assessee raising jurisdictional issues of assessment proceedings in the appeal against the penalty order. After analysing the legal position, as clarified by Hon'ble Gujrat High Court in the case of P.V. Doshi, supra and Hon'ble Bombay High Court in the case of Jainaravan Babulal vs CIT. 170 ITR 399, the bench held as that if the block assessment itself is without jurisdiction then ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 14 of 38 there is no question of levy of any penalty u/s. 158BFA(2) and therefore it is open to the assessee to set up the question of validity of the assessment in the appeal against the levy of penalty.
8.9. We also derive support from another judgement of Hon'ble Bombay High Court in the case of Inventors Industrial Corporation Ltd vs CIT 194 ITR 548 (Bombay) wherein it was held that assessee was entitled to challenge the jurisdiction of the AO to initiate re- assessment proceedings before the CIT(A) in the second round of proceedings, even though he had not raised it in earlier proceedings before the Assessing Officer or in the earlier appeal.
8.10. Thus, on the basis of aforesaid discussion we can safely hold that as per law, the assessee should be permitted to challenge the validity of order passed u/s 263 on the ground that the impugned assessment order was non est and we hold accordingly."
10 . Th e d e ci si on of the I TA T i n the ca s e of Dh i ra j S ur i vs AC I T 98 I TD 87 ( D e l ) i s we f in d on th e i de n ti ca l fa cts a s be fore us w he re the o ri gi n a l a sse ssme nt or d e r p a ss e d in b loc k a sse ssme nt pr ocee di n gs w a s ch a ll e n ge d i n a p pe a l a ga i ns t l e vy of p e n a l ty a n d it wa s he ld th a t if the b loc k a sse ss me n t it se l f wa s w i th out j ur i sd ic ti on , no p e n a lty c oul d b e le vie d.
Ld .D R w a s un a b l e to p oi nt a ny de ci si on to th e c ontr a r y. I n vie w of the ab ove t he re fore the a dd i ti ona l gr ou nd s ra i se d and p re sse d be fo re us i.e . Gr ou nd N o.1, 4 &5 are a dmi tte d f or a d j ud i ca ti on .
ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 15 of 38 11 . S in ce the a d d it iona l gr ou nd s ch a ll e n ge the v a li d i ty o f the pe na l ty or de r p as se d it se l f , the sa me we re ta ke n u p fi r st f or he a r i n g.
12 . Th e Ld .C oun se l f or th e a sse ssee b ri e f l y p oi nte d ou t t he fa ct s of th e ca s e s ta ti ng t ha t the a sse ssee i s a par tn e r s hi p con ce r n a n d in con se q ue nce to se a r c h a c tio n u /s 1 3 2 of t he Act , con d uc te d on on e of the pa rt ne r s , S hr i La k h b ir Si n gh a t 18 3 -1 8 4-G , B RS N a ga r, Lu dh i a n a o n 0 8 .0 1 . 19 9 9 , du r in g t he cou rs e of w h ic h ce r ta in i nc ri mi na t in g d oc ume n ts pe r ta i ni n g to the a sse s see f ir m i. e . M /s P un ni e B .K .O . w e re se ize d , pr oc ee d i ng s u/s 1 5 8B D of th e Ac t w e re i n itia te d on t he a sse sse e . Th a t ta k i ng i nt o a cc ount the co nte nts of d oc ume n ts fou nd a nd se iz ed d ur i ng s e a r ch a nd th e con te nti on s of t he a sse sse e , a s se ssme nt u /s 1 5 8 B D of the A ct w a s comp l e te d vi de or de r d a te d 28 . 1 1. 2 0 01 . Th a t t he a ss e ssee h a d d e c la re d un di sc lo se d i nc ome of R s. 7, 5 0, 0 0 0/- in th e r e t ur n fi le d u/s 15 8 B D w h ic h wa s a sse sse d a t Rs. 7 0 ,1 3 ,5 5 7 /- i n th e o rde r pa s se d u/s 1 5 8 B D of th e Act . Th i s in come w a s comp u te d b y ca l cul a ti n g the sa l e s of t he a s se sse e fi r m on th e b a si s of t he doc ume nts se ized a nd b y a pp l yi ng th e gr os s pr of i t r a te of 2 3% on th e sa me . A cco rd i ng ly , a s t he a s se s se e ha d c onc e a le d thi s in come , p e n a lty pr oc ee d i n gs u/s 1 5 8 B F A of t he A ct were in it ia t e d . The r e afte r the a sse ssee w e nt i n a p pe a l aga i ns t t he ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 16 of 38 a sse ssme nt fr a me d , be f ore t he CIT( A) w h o con fi r m e d the or de r of the A O. Th e a s se s se e f i le d fu r the r a p pe a l b e f ore the H on 'ble I TA T w h o, v id e the ir or de r da te d 09 . 0 1. 2 01 2 in I TSS ( A) N o.4 1 /C h d /2 0 0 3 , d ir e cte d t he a pp l i ca ti on of n e t p r of it ra t e @
7. 8 5 % on th e s a le s out of the bo ok s, f or th e pu r po se of comp ut a tio n of un di sc lo se d in come of th e bl oc k p e r i od . In a ccor d a n ce w i th th e sa me the u nd i scl os e d i ncome of t he a sse sse e was comp u te d at Rs. 2 1, 8 8 ,9 8 8 /- as a g a in st Rs. 70 , 1 3, 5 5 7/- a ss e sse d .
13 . D ur i ng p e n a lt y p r oc ee d i ng s i n itia te d u/s 1 5 8 B FA of t he Act th e a s se s see wa s gi ve n opp or tu ni ty t o f i le i ts r e pl y, a fte r con si de r in g w h ich the AO p r oc eed e d to le v y pe na l ty o n t he e xce ss un d i scl ose d i nc ome no t re t ur ne d b y the a sse ssee @ 10 0 % of th e t ax s oug ht to be e va de d on the sa me and a ccor d i ng ly , a pe na l ty of Rs. 9 l a cs w a s l e v ie d on th e a s se s se e , ca l cul a ti on of wh i ch i s a s un d e r :
Undisclosed income after the appeal effect to the order of Hon'ble ITAT Rs.2 1 , 88 , 9 88 /-
Less:- Undisclosed income shown
By the assessee Rs.7,50,000/-
Balance undisclosed income liable for penalty Rs.14,38,988/-
Tax sought to be evaded - 60% of the above Rs. 8,63,393/-
Minimum penalty leviable- 100% of Tax
sought to be evaded
Maximum penalty leviable- 300% of Tax Rs.25,90,178/-
ITSS(A) No.1/Chd/2018
B.P.01.04.1988 to 08.01.1999
Page 17 of 38
sought to be evaded
Keeping in view all the facts arid circumstances of the case, the assessee is directed to pay an amount of Rs. 9,00,0007- as penalty u/s 158BFA(2) of the Income Tax Act, 1961."
14 . Af te r a p pr i si n g wi th the f a ct s a s a b ove , the Ld. C ou ns e l for th e a sse ssee t ook up th e a d diti on a l gr ou nd s r a i se d be fore us a n d st a te d tha t h i s a r gu me nts a n d h i s con te n ti on s in t he a dd i ti ona l gr oun d s ra is e d w as to the e f fe ct th a t the a sse ssme nt o rde r p a s se d u/s 1 58 B D of the Act in the ca se of the a sse s see w a s vo id a b n i tio a n d , th e r e f ore , th e pe na lty or de r p a sse d in c ons e q ue nce t o th e s a me a l so d id n ot s ur v ive .
Th e Ld. C ou ns e l f o r the a s se s see conte nde d tha t i n the p re se nt ca se le ga l i ty o f asse ssme nt or de r p a ss e d u /s 1 5 8 B D of th e A ct wa s b e i n g cha llen ge d b y h i m on t w o g ro un ds :
i) on th e a b se n ce o f th e va l id sa t is fa c ti on n ote of t he AO for a ss u mi n g j u ri sd i ct ion to fr a me a sse ssme nt u/s 1 58 B D of th e Act a n d ;
i i) on th e i ss ue of the j ur i sd i cti on of the A O to fr a me a ss e ss me n t.
15 . Ta k in g up t he i ssu e of a b se nce of va l id sa ti sf act ion t he Ld. C ou ns e l f or t he a s se sse e took us t o Pa p e r B ook p a ge N os. 7 2 to 7 3 of hi s Pa p e r B ook a n d poi n te d ou t th a t t he sa me wa s the sa ti sf a ct ion no te of the AO of the se a rc he d pe rs on obt a in e d by h im fr om th e D e p a r tme nt. He p oi nte d ou t fr om t he sa me th a t i t w a s a tw o pa g e s i nc omp le te sa ti sfa cti on n ote wh i ch w a s a l s o u nd a t e d a n d un si gn e d . I t w a s con te n de d tha t ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 18 of 38 it w a s n ot cl e a r th e re f r om a s t o w he n th e sa t is fa c ti on h a d be e n re cor de d w h e the r w i th in ti me l e ga l l y p e r mi ss ib l e to do so, w ho h a d r ec or de d the sa ti sfa ct io n w h e the r i t w as t he off ic e r w ho ha d jur i sd i cti on to d o so a nd e ve n the con te nts of the s a ti sf a cti on not e we re i nc omp le te . He con te nd e d tha t it wa s e vi de nt th a t t he sa ti sf a ct ion h a d n ot be e n re cor de d ta k i ng a d i sp a ss io na te vi e w on th e ma te r i a l a v a i la b l e a nd b e i ng un da t e d a n d u ns ign e d , w a s n ot le ga l ly su ff i cie n t s ati sf a cti on for a s sumi n g ju r is d ic tio n to fr a m e the a s se ssme nt u /s 1 5 8 B D of the A ct. I n this r e ga rd he re l ie d u po n the de cis i on in t he ca se of Ka t pa di Tr a d i ng P vt. Ltd . Vs . AC I T ( 2 01 7 ) 83 Ta x ma nn .c o m 8 3 ( Kol . ).
16 . Th e n e xt i ss ue ra i se d b y h i m c h a l l e ng in g th e valid i ty of a sse ssme nt fr a me d w a s vi s-à -v is j ur i sd i cti on of the AO . The Ld. C ou ns e l fo r th e a s se s se e c onte n de d th a t w h ile th e n oti ce to fr a me a s se s sme nt u/s 15 8 B D of t he A ct w a s i ssue d b y t he DC I T ( I nve sti ga t ion ) , C i r cl e -1 1 (1 ), Lu dh i a na , the asse ssme nt or de r ha d bee n p a s se d b y the AC I T, R a nge -I V, Lu d hi a na . H e dr e w ou r a tte ntion to the re le v ant d oc ume n ts pla ce d a t P a pe r B ook p a ge N o s. 74 a n d 1 6 re sp e cti ve l y. The Ld. C o u ns e l for the a sse sse e con te n de d tha t th e re w a s no me n ti on a n yw he re e i the r in th e a s se s sme nt o rd e r of a ny or de r ha v in g be e n p a sse d u/s 12 7 of the Ac t for ch a ng e of j ur i sd i cti on of the AO i n t he ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 19 of 38 pr e se n t ca se . H e, th e re f ore , c on te n de d t ha t i n th e a b se nce of the sa me the or d e r p a sse d i n th e pr e se n t ca se w a s n ot v a li d i n the e ye s o f l a w. He re lie d up on the f ol l ow in g ca s e la w s i n sup p or t of h is c onte nt ion s:
"1 ) D. S. B a h iy a & B r ot he rs (H U F ) V s. I TO (2 0 0 1 ) 1 1 6 Ta x ma nn .c o m m 1 7 8 ( C hd ) .
H e a ls o re lie d upon f ol low i n g c a se l a w s:
"Dillip Kumar Chatterjee v. Assistant Commissioner of Income Tax (OSD), Bhubaneswar [2018] 97 taxmann.com 283 (Cuttack - Trib.) "Where assessment proceedings under section 143(2) were initiated by Assistant Commissioner, Circle -2(1), Bhubaneswar but taken over in middle of proceedings by Assistant Commissioner, (OSD), Range, 2 Bhubaneswar and completed by him, since there was no any valid transfer of jurisdiction as required under section 127, impugned assessment order so passed was unjustified"
17 . H e fu rt he r re l ie d u p on the de ci sion of th e H on'b le Ape x C our t i n th e ca se of Ta p a n Kuma r D utt a V s. C I T, r e p or te d i n 92 Ta x ma nn .c o m 6 7 f or the p r opos it ion t ha t the s a ti sfa cti on note s ho ul d re vea l me nt a l a n d d i sp a ss ion a te th ought p r oce ss of th e A O i n a r r iv in g a t the c onc lu si on .
18 . I n re b u tta l , the Ld . DR p oin te d out tha t th e a s se s se e 's ma tte r h a d gon e th r ough si x l e ve ls of sc ru ti ny , thr ee time s in the q u a nt um p r ocee d in gs be f ore th e A O, CI T( A) a n d I TA T a n d tw ic e i n the pe n al ty p r oce e d i ngs be f ore t he AO a n d C I T( A) a n d si xth ti me n ow b e f ore us . He con te nde d t ha t i t h a s b e e n 20 ye a r s n ow si n ce th e se a r c h took pl a c e i n 1 9 9 9 a n d p r ocee d in gs ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 20 of 38 we re i ni ti a te d o n t he a sse ssee a nd i t i s on l y a f te r th e l a p se of so m uc h ti me a nd so mu ch of sc r uti ny t ha t th e a s se s see ha s now s ough t to r a ke up th i s i ss ue of j ur i sd i cti on , h a vi n g n e ve r cha ll e n ge d the m in a l l t he thre e le ve l s r ig ht up to t he I TA T i n q ua n tum p r oc e ed i ng s, nor i n pe na l ty p r oc ee d i ngs b e f ore t he AO or e ve n th e C I T(A ) . H a vi ng s a i d s o th e Ld . D R p oi nt e d out tha t i t ha d to b e k e p t i n min d tha t t he se a re ve r y old i ssu e s a nd the do cume nt s r e l a tin g the re t o a re a ls o ve ry o ld b e i ng some 2 0 ye a r s or s o. H e t he re a fte r p oi nte d ou t th at t he a sse sse e has bee n a b le to pr ocu r e tw o p age s of t he sa ti sf a cti on n ote a n d , the r e fo re , i t i s d i ff ic ul t to b e lie ve tha t the th ir d p a ge w a s n e ve r in e xis te n ce a t a l l b ut i n fa c t, he con te n de d , it w a s on ly mi ssi n g f r om t he r e c or ds . He c onte n de d tha t th e cu r r e nt AO of th e a s se s se e h a d sta te d on oa th in a n a ff id a v it, co py of wh i ch w a s f il e d b e f ore u s, tha t th ir d p a ge i s onl y mis si ng a n d not th a t i t wa s n e ve r i n e xi stenc e a nd t he sa me w a s e vi de nt f r om th e f a ct tha t s uf fi ci e n t op po rt un it y h a d be e n gi ve n to the a s se s se e fi r m con f ro nti n g a ll d ocu me n ts i n pos se ssi on of t he De p a r tme n t a nd t he a ss e s see ha d n e ve r in the p a st r a ise d a n y su ch ob je ction a n d th a t t he p r oce e d in gs we re i ni ti a te d a fte r re cor d i ng ne ce s sa r y sa tisf a cti on . Ou r a tte n ti on w a s d r a w n t o the con te n ts of th e a ff i da v it pl a ce d be fore u s a s A nn e x ure -D to t he s ub mis si on s fi le d b y the Ld . DR d a te d 1 6. 0 3 .20 2 1 a s un d e r :
ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 21 of 38 ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 22 of 38
19 . Th e Ld . D R s ta te d the re fore t hat the con te n ti on of t he Ld. C ou ns e l fo r the a s se s se e th a t the s a ti sfa cti on of th e A O wa s i n comp l e te , un da t e d a n d u ns ig ne d nee de d to b e re je cte d outr i gh tl y i n v ie w of th e a b ove .
20 . As fo r the a r gume nt vi s-a -v is the j ur i sd i cti on of the AO, the Ld . DR c onten de d t ha t the j ur i sd i cti on h a d be e n cha nge d on a cc oun t o f str u ctu ra l ch a nge s ma d e i n the ju ri sd ic ti on of the A O a t tha t p oi nt of t ime . Th e Ld . D R ho we ve r e x pre sse d hi s in a b il i ty to come ou t w i th a n y s uc h do cume nt s. H e ple a de d be fore u s t ha t th is c ont e nt ion of the a s se s se e sho ul d n ot b e e nte r ta i ne d at all s in ce he ha s r a is e d t hi s j ur i sd i cti on a pp r ov a l is su e a fte r 2 0 ye a rs h a vin g n e ve r r a i se d th is i ss ue on fi ve oc ca si on s w he n the ma tte r tr a v e l le d in th e q uan tu m pr oc ee d i ng s f r om t he AO to the I TA T or in th e pe na l ty pr oc ee d i ng s f r om th e AO to the CI T( A ) . H e sta t e d th a t i t w oul d not b e f a i r n ow t o h old th e or d e r p a ss e d in b lo ck asse ssme nt pr oc ee d i ng s to be voi d me rel y f or th e re aso n tha t an a dmi n is tr a ti ve a p p r ova l fo r t r a nsf e r r i ng the ca se fr om on e A O to a no the r c oul d not be loc a te d i n t he f i le t ha t t oo on t he is sue be i n g ra i sed a f te r 2 0 ye a rs .
S ub mi ssi on s i n th is r e g a r d we re fi l e d i n w ri ti n g bef or e us a s u n de r:
ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 23 of 38 "WRITTEN SUBMISSIONS BRIEF FACTS Brief facts of the case are that during the course of search & seizure operations u/s 132 carried out on 08.01.1999 on the residential premises of Sh. Lakhbir Singh. Ludhiana, several incriminating documents pertaining to the assessee i.e. M/s Punnie BKO were found and seized. Accordingly, the assessment proceedings in the case of the appellant assessee were initiated u/s 158BD of the Act and assessment order was passed on 28.11.2001.
The penalty proceedings u/s 158BFA was initiated and notice issued & served upon the assessee.
The assessment order passed u/s 158BD has got its finality with the order of the Hon'ble ITAT, Chandigarh Bench passed on 09.01.2012 in 1TSS No. 41/CHD/2003. Thereafter, the penalty proceedings were taken up and penalty order u/s 158BFA(2) was passed on 29.08.2012, which was challenged by the assessee before the Ld. CIT(A)- I, Ludhiana. This appeal was decided by the Ld. CIT(A)-I, Ludhiana vide order dated 27. 1 1 .20 17, which is now under appeal.
During the course of appellate proceedings before the Hon'ble ITAT, the appellant raised additional grounds of appeal, which are challenged and requested, not be admitted at this stage, for the detailed reasons submitted below.
2. In the quantum proceedings in ITSS No. 41/CHD/2003, the Hon'ble ITAT had dealt with the assessment order passed by the A.O. and after considering the said order a valid order, certain relief in the quantum has been allowed to the assessee. Further, the learned counsel in the written submissions dated 23.05.2019 made before the Hon'ble ITAT, has not made even a single sentence to state that the assessment order passed by the A.O. is invalid. All these issues of validity of notice u/s 158BD of the Act and the jurisdiction of the Assessing Officer have to be contested by the assessee or his A.R. in the assessment proceedings, which the assessee had not done and by the doctrine of merger of order, the order of the Assessing Officer and the Ld. CIT(Appeals) have now merged with this order of the Hon'ble ITAT. The Assessee has not submitted a single argument in the entire set of submission of more than 300 pages, as to how this order is invalid.
ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 24 of 38 2.1 It is requested that firstly the assessee may kindly be asked to prove that the order of the Hon'ble ITAT passed on 09.01.2012 is invalid. It may kindly be kept in mind that order of the Hon'ble ITAT has not been challenged at any Forum by the assessee and now it has attained finality. The plea of the assessee before the Hon'ble ITAT Bench to adjudicate another order of the same Bench passed by a different set of Hon'ble Members, after 9 years of the said order, is totally inappropriate. That order has now attained finality and cannot be revisited and hence it is beyond doubt that the assessment proceedings are valid proceedings and the notice issued u/s 158BD is a valid notice, and the same has stated in so many words by the final fact finding authority.
Without prejudice to the above, the submissions are being made on the additional grounds of appeal taken by the assessee, alongwith the observation that these grounds of appeal were not taken by the assessee in the penalty proceedings before the A.O. as well as at appellate stage before the Ld. CIT (Appeals) also. Similarly these grounds were not taken by the Assessee in the appellate proceedings for the quantum additions.
ADDITIONAL GROUND OF APPEAL NO. 1 The assessee has stated that the complete Satisfaction Note of the A.O. is now not available on the assessment records and only 2 pages are on record, whereby incomplete satisfaction is there.
But nonetheless, even now, the assessee has not submitted that there was no satisfaction note. It is categorically submitted by the Assessing Officer that there is a satisfaction note duly recorded and it was so mentioned clearly in the assessment order. Hence, the plea taken by the assessee that the Satisfaction Note of the A.O. is absent, is factually incorrect one. An affidavit submitted by Assessing Officer authenticating the two pages of the satisfaction note u/s 158BD is enclosed along with the copy of two pages certified by the undersigned as existing in the Assessment records. ADDITIONAL GROUND OF APPEAL NO. 2 The assessee has contended that there are two Satisfaction Notes required, one by the A.O. of the Search Party and the other by the Assessing Officer.
ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 25 of 38 This issue has clearly been decided by the Apex Court in the case of M/s Super Malls Pvt. Ltd. in Civil Appeal Nos. 2006-07 of 2020 (arising out of SLP (C) Nos. 8449-50/2017] vide order dated 05.03.2020, whereby need for recording of two Satisfaction Notes have been done away in a case where the Assessing Officer is the same in the case of searched party and the assessee. The Assessee has not taken a plea that these two A.O.s are not the same in the instant case, and hence this fact is not in dispute. The only criteria which has been upheld by the Hon'ble Supreme Court is that there must be comments in the Satisfaction Note that the documents seized belongs to the person to be assessed u/s 158BD of the Act. ADDITIONAL GROUND OF APPEAL NO. 3 The assessee has raised that the notice issued u/s 158BD was without jurisdiction and thus the assessment framed and the penalty levied is a nullity.
This is a very vague assertion made by the assessee that the DCIT (Inv. Circle), Ludhiana had no jurisdiction over the assessee's case, since search & seizure operation was not carried out at the premises of the assessee. It is just a lame assertion by the assessee, which is nor documentarily evidenced. He has just pronounced that the DC1T (lnv. Circle), Ludhiana had no jurisdiction over the case, but has not given any basis for this assertion. Further, he did not raise this issue during the assessment proceedings or at the appellate stage against the quantum order. This issue was not even raised during the penalty proceedings before the A.O. and the Ld. CIT (Appeals). He has now raised this preposterous argument without any evidence, only by making a general and vague statement.
Further, the assessee's reference to Section 124 is totally irrelevant in view of the above observations. ADDITIONAL GROUND OF APPEAL NO. 4 The assessee has again taken totally invalid and vague argument. The jurisdiction over an assessee changes from time to time and for this proper jurisdiction orders are passed. Accordingly, the assessments are completed by these officers having the jurisdiction over the case on that particular time. It is in hundreds of assessment/cases that the notice initiating ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 26 of 38 assessment proceedings are issued by different A.O. and the assessments are completed by the different A.O, holding the jurisdiction over the case at that time.
The case laws cited by the assessee are on different facts and are not relevant to this case, as much as the proceedings were initiated in those cases were by the A.O. not having jurisdiction over the case.
Apart from the lame and blatantly vague assertion by the assessee, he could not furnish any documentary evidence supporting these additional grounds of appeal taken.
3. In view of the foregoing it is prayed that the additional grounds of appeal raised may kindly be dismissed and appeal filed by the assessee may be dismissed." 21 . W e h a ve c a re f ul ly a nd p a tien tl y h e a r d bo th t he pa r t ie s. Th e ch a ll e n ge to the v a li d it y of t he pe n a lt y or der , p a ss e d i n the p re se n t ca se u/s 1 5 8 B FA of th e Ac t, i s on the b a s is tha t the a s se s sme nt or d e r p a sse d u /s 15 8 B D of the Ac t, of w h i ch the pe na l ty p r ocee d i ng s w e re a n off sh oot, w a s i tse lf b a d i n la w . I n sh or t, th e va l id i ty of th e or ig in a l p r oce e d i ngs , b a se d on wh i ch the p re se nt pe na l ty or de r ha s b ee n p a ssed , h a s be e n cha ll e n ge d be fo re u s. Th e ch a ll e n ge to th e va l i d ity of t he a sse ssme nt o rde r is on t he gr oun d of a b se nce of va l i d sa ti sf a cti on of t h e AO of t he s ea r ch e d p e r son for i ni ti a ti ng pr oc ee d i ng s u/s 15 8 B D of th e A ct, w h i ch i s a n e ce ssa r y pr e re q ui si te , a nd on th e a bse n ce of v a li d j u ri sd i ct ion o f the A O to f r a me a ss e ss me n t.
22 . We a re not c onv i nce d w i th the co nte nt ion s of the Ld. C ou ns e l f or th e a sse ssee .
ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 27 of 38 23 . To b e gi n wi th , t o ho ld a n or de r in va l id i n c ol la t e r a l pr oc ee d i ng s, h a vi ng n e ve r bee n so c ha l l e n ge d i n th e or ig in a l pr oc ee d i ng s, t he re ha s to be c on vi nc in g a nd co mpe ll i ng ba s is /r e a so ns to h ol d so , w i th n o oc ca si on or s cop e for a ny dou b t r e g a r di n g th e b a s is of ch a l le nge . Thi s i s so, con si d e r i ng tha t i n th e or ig in a l p r oce e d i ngs t he v a li d it y of th e or de r w a s ne ve r c ha l le nge d a n d the or de r s ur vi ve s a s be i ng me r ge d i n the a p pe ll a te ord e r . An d i t i s onl y i n se p a r a te , i n d e pe n de nt col la t e r a l p r oce ed i ngs tha t th e or d e r is b e in g sou gh t t o be di sl od ge d a s i nv ali d .
24 . H a vi ng s a id so, i n t he f a cts of t he p re se n t c a se w e f in d tha t th e Ld. C ou ns e l f or the a ssess ee ha s ch a llen ge d va l i di ty of the o rd e r p a sse d u /s 1 5 8 B D of t he Ac t, b a se d on d oc ume n ts a va i la b l e or a bse nt f ro m th e r e co rd s , w hi ch d oc ume n ts un dou b te d l y a re a t le a st 2 0 yea r s ol d . W i th res p e ct to t he a bs e n ce of a va l i d sa ti sf a cti on of th e A O of t he se a rc he d pe r son for i ni ti a ti ng p ro cee di n gs u /s 1 5 8 B D of th e A ct, hi s sub mi ss ion is th a t i t i s i nc o mp le te sa t is fa c tio n w i th th e f in a l pa g e mis si ng. Th a t, i t i s a n un sign e d i n comp l e te s ati sf a cti on note , a nd d oe s not r e ve a l a d is p assi on a te vie w of t he AO w h ile re cor d i ng t he sa ti sf a cti on on t he ma te r i a l w i th hi m. W i th re spe c t to the j ur i sd i cti on of th e AO to pa ss or de r hi s sub mi ss ion i s th a t t he re w a s n othi n g o n r e cor d to p r ov e t he ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 28 of 38 va l id t ra n sf e r o f j u ri sd i ct ion f r om th e A O w ho ha d is sue d noti ce u /s 1 58 B D of t he A ct to th e AO w ho h a d f in a l ly pa s se d t he or de r , t he re fore , d e mons tr a ti ng the la c k of ju ri s di ct ion of the AO to f r a me asse ss me nt u /s 15 8BD of t he Act .
25 . Th e a s se s see , b y r a i si ng th e se i ss ue s a f te r 20 yea r s , i s a pp a r e n tl y se e k ing r e p r ie ve o n th e b a si s of i n comp l e te doc ume nts o r d ocu me n ts n ot a va i l a bl e on re co rd , a f te r a la p se of s uc h a lon g p e r io d o f time , w hi ch in ou r v ie w is not con vi nc in g e no ugh to d is l odg e a n o rd e r a s be in g in va l i d. W e ca n not a l l ow th e a sse ssee to d o s o w he n th e p r ob a bi l it y of doc ume nts go in g mi s si ng fr om the f ile ca n not be de n ie d con si de r in g the la p se of su ch a l ong p e r i od of tim e of 2 0 ye a rs to w hi ch the docu me nt s r e l a te a n d t he a s se sse e ne ve r ha v in g r a is e d thi s i ss ue on a ny o f th e e a r l ie r o ccas io ns i n a pp e a l a va i l a b le to i t w he n the re c oul d n't h a ve bee n su ch pos si b il i ty. Mor e ove r we c a nn ot a l so i gn or e the a f fi d a vi t of the AO , w ho ha s sta t e d on oa th th a t t he re i s e ve ry pr ob a b i li ty tha t th i rd a n d f in a l p a ge of the s a ti sf a cti on n ot e , b ri n gi ng comp l e te ne s s to i t, i s mis si ng , b e in g a 2 0 ye a r s ol d r e cor d a n d a ls o p oi n tin g o ut th e ob se r v a ti on of th e JC I T, Ra nge -I V, Lud hi a n a , on th e a s se sse s a p p l ic ati on b e fore hi m u/s 1 4 4A of the Ac t, w .r . t. la ck of s uf fi cie n t op po rt un ity of h e a r i ng , t hat ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 29 of 38 a ll r e cor d s a nd ma te r i a ls w e re show n to th e a sse ssee d ur i ng a sse ssme nt p r oce e d in gs . W hi le the AO ha s s ta ted on oa th i n the a ff id a v it f i le d be fore us t ha t i t i s n ote d on reco rd th a t a l l doc ume nts w e r e sho wn to the a ss e ssee d ur in g a sse ssme nt pr oc ee d i ng s, the Ld .C ou ns e l fo r t he a sse ssee h a s b e e n un a ble to b ri n g b e fo re us a n y e v id e nce comp e l l in gl y p r ovi ng tha t t he thi r d p a ge of th e sa ti sf a cti on n ote w a s ne ve r in e xi ste nce a t a ll . Th e r e f ore , at t hi s st a ge i n th e si xth o cca s io n a va i l a b le wi th th e a s se sse e , we a re un a b le to a gree w ith the Ld. C ou ns e l for th e a sse ssee a nd a r e no t con vi nc e d w ith hi s a r g ume n ts tha t the a ss e ssme n t or d e r b e he l d in va l i d on a ccou nt of a pu r po rt e d ly i ncompl e t e s a tis fa c tion not e , or on a ccou nt of a bs e n ce of d oc ume n t d e mon str a ti n g v a li d t ra nsf e r of ju ri s di ct ion t o th e AO p a ss in g the or d e r . Th e c ont e nt ion o f t he Ld. D R, tha t in a l l p r ob a b i li ty t he thi r d a n d f i nal p a ge of t he sa ti sf a cti on n ote ha s a c tua l l y g one mi ssi n g f r om th e re cor ds so a l so the d ocu me n t a u tho ri z in g t he AO to p a ss the or de r, ca n not b e outr i gh tl y r e je cte d i n th e f a ct s a n d c ir cumst a nc e s of the c a se .
26 . W e the re fore do not fi nd a n y me ri t i n the gr ou nd s r a i se d by t he a s se sse e ch a l le ngi n g th e va l id i ty of th e or ig in a l pr oc ee d i ng s w hi l e c onte n di n g th e p re se nt pe na l ty p r oce e d in gs to b e i nv a li d .
ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 30 of 38 Th e a d di ti on a l g r ou nd s ra i se d by the a sse ssee i n g r oun d N os. 1 , 4 a n d 5 a cc or di n gl y a r e , th e re f ore , d i smi sse d b y us . 27 . Ta k in g u p th e or ig in a l gr oun d s r a i se d b y the Ld . C ou nse l for th e a s se sse e c ha l l e n gin g t he le vy of pe na l ty o n t he me r it s, in t hi s re ga r d he d re w ou r a tte nti on to the a sse ss me n t or de r pa s se d u /s 15 8 B D of th e Ac t, C I T(A ) or d e r a n d I TA T or de r poi n ti ng out th e r e f r om th a t the a d d it ion i n th e p r e se n t c ase ha d b e e n ma d e me r e l y by e sti ma ti ng th e gr oss p rof it e a r ne d by the a sse ssee on th e u nd i sc lose d s a le s @ 2 3 % a s a g a in st 6 % re tur ne d b y the a ss e ssee wh i ch esti ma ti on w a s u p h e l d b y the Ld. C I T( A) wh i le t he I TA T had d i r e cte d th e sa me to be e sti ma te d at n et p r ofi t rate of 7 . 85 % of the s a le s. The Ld. C ou ns e l f or t he a s se s se e con te n de d t ha t i t is e vi de n t t hat the u nd i sc lo se d i nc ome of t he a s se sse e on w h i ch p e n a l ty h ad be e n i ni ti a te d wa s a n e sti ma te d a d di ti on a n d n o p e na l ty w a s le vi a ble on s uc h e sti ma ti on . H e re lie d o n t he foll ow in g c a se la w s in su p po rt of hi s c ont e n tio n th a t n o p e n a l ty w a s le vi a ble on e s tima t e d a d di tio n;
1) Smt. B i tol i De vi vs . ACI T(2 0 0 9 ) 31 S O T 30
(Lu ck no w-U R O) , or d e r da te d 2 7 .04 . 20 0 7 .
2) Dr . Ha k e e mm S .A . Sy e d S a th a r vs . AC I T, C C - II ( 5 )
(2 0 0 9) 1 20 I TD 1 ( C h e n na i or de r d a te d
14 . 07 . 2 00 8 .
3) C I T vs . S a n gr ur Va n a sp a ti Mi l ls Ltd ., 3 03 I TR
53 (P & H ).
ITSS(A) No.1/Chd/2018
B.P.01.04.1988 to 08.01.1999
Page 31 of 38
4) C I T V s. R a va i l Si n gh & C o ., 2 5 4 I TR 1 9 1 ( P &H )
5) C I T vs . Ae r o Tr a d e r s Pv t. Ltd ., 3 2 2 I TR 3 1 6
(D e l ) .
6) AC I T vs . S ha n ti Ku ma r C hh a br a ( 20 0 9 ) 3 2 S O T
21 (Ja i p ur ) or d e r d a te d 26 . 1 0. 2 007 .
7) C ha n d ra k a n t A. G a nd h i v s. A C I T, C ir c le -3
(2 0 1 3) 40 Ta x ma nn .c om 4 3 2 ( A h me d a b a d - Tr ib .
8) C I T vs . D r .G i ri r a j Aga r w a l Gi r i (2 0 1 3) 3 3
Ta x ma nn .c o m 5 3 6 ( Ra j a sth a n ) or d e r d a te d
16 . 03 . 2 01 2 .
9) B ee n a R a ni v s. D C I T ( 20 1 1 ) 1 5 TAx ma n n .c o m
15 5 ( D e l hi ) -G ) ord e r d a te d 3 1 .0 5 .20 1 0 .
28 . Th e Ld . D R, on t he othe r ha n d , p oi nte d ou t t ha t i t w a s
not a ca se of me r e e s ti ma ti on b u t th e fa c t w a s t ha t t he e sti ma ti on w a s on ly w it h r e s pect to th e p r ofi t r a t e to be a pp l ie d on t he u nd i sc los e d /out of t he b ook sa l e s of the a sse sse e f or th e p u rp ose of d e te r min i ng the un d is cl ose d in come of t he a s se s see f or the b l ock pe r iod . Th e fac t t hat the re was u nd iscl os e d s a le s out of the bo oks, has be e n con fi r me d a n d t h e e sti ma ti on w a s o nl y f or t he p ur p ose of de te r mi ni n g t he i n come th e re f r om a nd , th e r e fore , th e pe na l ty re la te d to the u nd i sc los e d p r of its of th e a sse ssee pe r ta i ni n g to the un d i scl ose d s a le s f or the b lo ck p e r i od w h ic h had , the re fo re , bee n righ tl y le vie d .
29 . W e h a ve h e a r d b oth th e pa r ti e s . P e na lty i n the p r e se nt ca se h a s be e n i mpo se d u /s 15 8 B F A of the A ct, on th e a dd i ti on ma de to t he undi s cl ose d i n come re tu rne d b y the a sse ssee ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 32 of 38 con se q ue n t to se a rc h a ct ion un der ta k e n o n i t u /s 1 3 2 of t he Act . The un di s cl ose d i nc ome re t ur n e d by the a sse ss ee re l a te d to p r of i ts e a r ne d on sa l e s ou tsi d e the b ook s of t he a s se s se e . Th e or de r s p a s s e d i n q ua n tu m p r ocee d in gs b y th e AO ,C I T(A ) a nd th e I TA T, c op i e s of wh i ch w e re f i le d be f ore u s i n pa p e r boo k, r e ve a l that th e q ua n tum of sa l e s ou tsi de th e b ook s a s di sc lo se d b y the a sse sse e wa s simi l a r to tha t w or k e d ou t b y the AO . Th e d i ff e re n ce w a s onl y on a cc oun t of e sti ma ti on of pr of i ts, th e a sse ss ee h a vi ng e s ti ma te d t he G P a t the r a te o f 6 % of sa l e s , the AO i ncr e a si ng i t to 2 3 % on th e b a si s of a v e r age gr oss p r of it a s d i sc los e d b y the a sse ssee i n p r ec e d in g ye a r s, re je cti n g the gr oss p r of it r a te s ca l cu l a te d by the a sse sse e fo r the b loc k p e r io d fi nd i n g f la w s in th e ma n n e r of ca l cu la t ion . Th e C I T(A ) u p he ld th e s a me . The I TA T on th e other h a nd h e ld tha t a p p li ca t ion o f ne t p r of it r a te w a s a p pr op r i a te a nd held a n e st ima ti on o f N e t P ro fi t @ 7 .8 5% a s re a son a b le . 30 . I t i s a b un d a ntl y cl e a r th a t the a d d it ion ma de t o t he un di sc lo se d i n come is no t on a cc oun t of any p osi ti ve con ce a l me n t by th e a s se s se e b ut me r e l y a r e su lt of e sti ma ti on . Th e u na c cou nte d sa le s b a se d on d ocu me nt s f oun d du r in g s e a r ch ha ve be e n d ul y re t ur ne d b y the a s se s se e a n d the a d d iti on ma d e is no t on a c cou nt of the sa me . Th e a dd i ti on is me r e l y on a c cou nt of e sti ma ti on of pr of i ts o n the sa i d sa le s ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 33 of 38 wh i ch , a s i s e vi d e n t fr om th e or d e r s in q ua n tu m p r oc ee d i ng s, is n ot b a se d on a n y ma te r i a l f oun d d ur i ng s e a r ch. 31 . Th e D e l h i B e n ch of th e I TA T in th e ca se of Be e na Ra n i (s up r a ), r e l ie d up on b y t he Ld. C ou ns e l for t he a sse ssee be fore us, w e fi n d to ok n ote o f the a na l ys is of the p r ovi si on s of se c tio n 1 5 8 B F A o f t he Act b y th e H on'b le De lh i H ig h C o ur t i n C I T vs H a r ka r a n D a s V e d p a l ( 2 0 09) 1 1 7 Ta ma n 3 9 8 ,w h e re i n it wa s he ld th a t for t he p u r pose s of l e v y of pe na l ty u /s 1 5 8B F A of t he Ac t th e comp ut a tio n o f u nd i sc los e d i nc ome has to b e ba s e d on ma te r ia l fou nd d u ri n g s e a r ch , a n d de le te d pe na l ty le vie d on e sti ma te d a d d iti on of p r of it s, id e n ti ca l t o th a t in t he ca se be f ore us . The re le v a nt f in d in gs a r e a s un de r:
"We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. We find that this was one of the contentions raised by the assessee before the AO that there is no evidence gathered during search to enable the Department to estimate gross profit at higher rate. On p. 12 of the assessment order, the AO has noted about this contention of the assessee raised before him and in spite of this also, it is not the case of the AO that some evidence was gathered in the course of search suggesting some undisclosed income belonging to the assessee. As per the provisions of s. 158BB(1), the undisclosed income of the assessee for the block period has to be computed on the basis of evidence found as a result of search and requisition of books of accounts and other documents and such other material and information as are available with the AO and relatable to such evidence. In the present case, we do not find any mention of any evidence found as a result of search based on which any undisclosed income can be computed in the hands of the present assessee. The basis of addition made by the AO is the information available with the AO regarding under recording of purchase consideration but such other information is not ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 34 of 38 relatable to any evidence found in the course of search and hence in our considered opinion such an addition cannot be made in the course of block assessment and even if made, such addition cannot be equated with the undisclosed income. It was held by the Hon'ble High Court of Delhi in the case of CIT vs. Harkaran Das Ved Pal (supra) that a pre condition for imposition of penalty under s. 158BFA(2) is that there must be a determination of undisclosed income by the AO under cl. (c) of s. 158BC of the said Act and if this is not satisfied, then there would be no question of imposition of any penalty. Thereafter, it is observed by Hon'ble High Court of Delhi in para 22 of this judgment that in that case, the computation of undisclosed income by the AO cannot be construed as undisclosed income determined by the AO under cl. (c) of s. 158BC. It is further observed by the Hon'ble High Court of Delhi that the Tribunal has already returned a finding that there is no evidence found as a result of search. In that case also, the assessment was made in block assessment by estimating net profit @ 1 per cent and it was noted by the Tribunal that the same is mere a guesswork. In the present case also, addition has been made to the income of the assessee by estimating the gross profit at higher rate without any reference to any seized material found in the course of search and hence as per this judgment of Hon'ble High Court of Delhi, such an income cannot be treated as undisclosed income determined under cl. (c) of s. 158BC and hence no penalty under s. 158BFA(2) can be imposed in such a case. The relevant paras i.e. paras 20-22 of this judgment of Hon'ble High Court of Delhi are reproduced below :
"20. The expression 'undisclosed income determined' has to be understood in the context used in s. 158BFA(2). It refers to the undisclosed income determined by the AO under cl. (c) of s. 158BC. Sec. 158BC prescribes the procedure for block assessment. Clause (b) thereof stipulates as under :
'(b) the AO shall proceed to determine the undisclosed income of the block period in the manner laid down in s. 158BB and the provisions of s. 142, sub-ss. (2) and (3) of s. 143, s. 144 and s. 145 shall, so far as may be, apply;' This is followed by cl. (c) which reads as under :
'(c) the AO, on determination of the undisclosed income of the block period in accordance with this chapter, shall pass an order of assessment and determine the tax payable by him on the basis of such assessment;' ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 35 of 38 Thus, determination of the undisclosed income has to be done in the manner laid down in s. 158BB and the provisions of s. 142, sub-ss. (2) and (3) of s. 143, s. 144 and s. 145 shall, so far as may be, apply.
Sec. 158BB deals with computation of undisclosed income of the block period. Sec. 158BB(1), so much as is relevant for our purposes, reads as under :
'158BB. Computation of undisclosed income of the block period.--(1) The undisclosed income of the block period shall be the aggregate of the total income of the previous years falling within the block period computed, in accordance with the provisions of this Act, on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the AO and relatable to such evidence, as reduced by the aggregate of the total income, or as the case may be, as increased by the aggregate of the losses of such previous years, determined.' This provision clearly stipulates that the undisclosed income of the block period has to be determined or computed 'on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the AO and relatable to such evidence'. This Court in Ravi Kant Jain's case (supra), as indicated above, has already observed that the procedure of assessment under Chapter XIV-B is a special procedure intended to provide a mode of assessment of undisclosed income which has been detected as a result of search. The procedure under Chapter XIV-B is not intended as a substitute to regular assessment and its scope and ambit is limited in that sense to materials unearthed during the search. As pointed out in Ravi Kant Jain's case (supra), the assessment for the block period can only be done on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the AO and relatable to such evidence. It is, therefore, clear that the undisclosed income, which is to be determined under Chapter XIV-B, has to be determined on the basis of evidence discovered during the search. It is obvious that where the computation of undisclosed income is based on material other than what was found in the course of the search, the same could not be treated as undisclosed income determined under cl. (c) of s. 158BC.
ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 36 of 38
21. Going back to s. 158BFA(2), the AO has been empowered to impose penalty on a person when the undisclosed income determined under cl. (c) of s. 158BC, is in excess of the undisclosed income returned by such person in pursuance to a notice under s. 158BD/158BC. In other words, a pre-condition for the imposition of penalty under s. 158BFA(2) is that there must be a determination of the undisclosed income by the AO under cl. (c) of s. 158BC of the said Act. If this is not satisfied, then there would be no question of imposing any penalty.
22. In the present case, we find that the computation of undisclosed income by the AO cannot be construed as 'undisclosed income determined by the AO under cl. (c) of s. 158BC'. The Tribunal has already returned a finding that there is no evidence found as a result of search, which suggests that the transactions for the whole year of 1999-2000 required any investment in the first instance. The Tribunal has also found as a fact that no amount was found to have been invested by the assessee in the first instance for the transactions of the whole year. The Tribunal also found that even the estimate of 1 per cent net profit was mere guesswork. On the basis of these facts it is apparent that the undisclosed income has been computed merely on the basis of the surrender made by the assessee in the course of the block assessment proceedings. De hors the surrender, there is no evidence which could have been said to have been found as a result of the search and, therefore, the 'computation' of undisclosed income by the AO in the block assessment proceedings cannot be construed as a 'determination' of undisclosed income contemplated under s. 158BC(c) or 158BB. Thus, even de hors the question of applicability of the decision in Sir Shadi Lal Sugar & General Mills Ltd.'s case (supra) and without considering the provisions of s. 271(1)(c) of the said Act or the effect of the insertion of the Explanation therein, when there is a bona fide surrender and the undisclosed income is computed merely on the basis of such surrender, no penalty would be imposable under s. 158BFA(2) of the said Act. This would be because there is no 'determination' of undisclosed income by the assessee under cl.
(c) of s. 158BC, which is the requirement for imposition of penalty. The sum and substance of all this is that, had there been no surrender, the AO could not have determined the undisclosed income in as much as the Tribunal has returned a finding of fact that there is no evidence relatable to the search on the basis of which such undisclosed income could have been determined."
ITSS(A) No.1/Chd/2018 B.P.01.04.1988 to 08.01.1999 Page 37 of 38
6. By respectfully following this judgment of Hon'ble High Court of Delhi, we hold that after the consideration of the facts of the present case as per which, the addition is not made on the basis of any evidence found in the course of search, the penalty imposed by the AO under s. 158BFA(2) is not sustainable. Regarding two citations given by the learned Departmental Representative, we find that as per these citations, no judgment is available in the respective journals i.e. TTJ and in Taxman." 32 . Th e i ss ue i s s q ua r e ly c ove red by the a fore sa i d de ci si on fol l ow in g w hi ch w e h ol d th a t i n th e fa c ts of the p re se nt c ase wh e re a d di ti on to un d is cl ose d inco me i s on a cco un t of me r e e sti ma ti on /gue ssw o rk ,i t i s n ot a fi t ca s e f or le v y of pe na l ty u/s 1 58 B F A of t h e Ac t.
Th e p e n a l ty so le vi e d a mou nt in g t o Rs . 9 l a cs i s t h e re fore di r e c te d t o be de le te d .
G r oun d s o f a pp e a l N o. 1& 2 r a i se d b y t he a sse ssee are a ll ow e d .
33 . I n the re s ul t, the a p p e a l of t h e as s e s s e e is p a r t ly al l owe d O r de r p r on oun ce d on 3 0 t h Se p te mb e r , 2 0 2 1 .
Sd/- Sd/-
(R.L. NEGI) (ANNAPURNA GUPTA)
याय क सद य/Judicial Member लेखा सद य/Accountant Member
Dated: 30th September, 2021
*रती*
ITSS(A) No.1/Chd/2018
B.P.01.04.1988 to 08.01.1999
Page 38 of 38
आदे शक! त,ल-पअ.े-षत/ Copy of the order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकरआयु/त/ CIT
4. आयकरआयु/त (अपील)/ The CIT(A)
5. -वभागीय त न2ध, आयकरअपील&यआ2धकरण, च4डीगढ़/ DR, ITAT, CHANDIGARH
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