Income Tax Appellate Tribunal - Lucknow
Saroj Nursing Home vs Assistant Commissioner Of Income Tax on 23 September, 2004
Equivalent citations: (2005)98TTJ(LUCK)446
ORDER
B.R. Mittal, J.M.
1. The assessee has filed this appeal against the block assessment order dt. 25th Sept., 1997, passed for the financial years 1986-87 to 1995-96 and for the period 1st April, 1996 to 25th Sept., 1996, passed under Section 143(3)/158BC of the IT Act, 1961.
2. One of the grounds taken by the assessee is disputing the validity of the block assessment order passed by the AO under Section 158BC of the Act, on the ground that there was no search warrant in the name of the assessee and as such the framing of the assessment order under Section 158BC of the Act is not in accordance with law as no notice under Section 158BD was given to the assessee.
3. The learned Authorised Representative of the assessee submitted that the assessee is a partnership firm, which has been running a nursing home. He submitted that search warrants were in the name of Dr. (Mrs.) Saroj Shrivastava and Dr. D.C. Shrivastava only and there was no search warrant in the name of the assessee. The learned Authorised Representative of the assessee further submitted that the Panchnamas were also in the name of Dr. Saroj Shrivastava and Dr. D.C. Shrivastava only and as such there was no search against the assessee and consequently block assessment order could be passed under Section 158BC of the Act after giving notice under Section 158BD of the Act. He submitted that the assessee is a regular income-tax assessee and in support of his submission referred to pp. 22 to 96 of the paper book, which contain the copy of the assessment orders from 1987-88 onwards. The learned Authorised Representative of the assessee further submitted that the AO issued notice under Section 158BC of the Act and the assessee filed the return for the block period and pursuant thereto, the AO completed the assessment order even though there was no search under Section 132 of the Act against the assessee. He submitted that the assessment under Section 158BC of the Act could be framed against those persons, who are subjected to search and in case any material during the search operation of the person, who is searched is found and seized indicating that some other persons than the persons searched had also undisclosed income, then Section 158BD will come into force, which provides that where the AO is satisfied that any undisclosed income belonged to another person other than the person with respect to whom the search was made, then he shall handover the necessary documentary evidence or any other assets to the AO having jurisdiction over such person. He submitted that the satisfaction is not only to be recorded, it is also to be established prima facie to proceed under Section 158BD of the Act. He submitted that the present assessment order framed against the assessee-firm is a nullity, as the assessment could be made against the assessee only under Section 158BD of the Act and not under Section 158BC of the Act. In support of his submission, the learned Authorised Representative of the assessee placed reliance on the decision of the Tribunal, Allahabad Bench, in the case of Vishwanath Prasad v. Asstt. CIT (2003) 86 ITD 516 (All), and submitted that in the said case, an identical issue was involved and the Bench after considering the provisions of Section 158BC and Section 158BD held that if there was no search warrant in respect of M/s Vishwanath Ashok Kumar, a firm, though there was a search warrant issued in the name of Ashok Kumar, permitting the authorities to conduct search at his residential premises and business premises, but the AO completed the assessment under Section 158BC of the Act in respect of M/s Vishwanath Prasad Ashok Kumar Saraf, a firm, for block period without complying the requirement of Section 158BD of the Act, the assessment so framed was not legal and the same was quashed. The learned Authorised Representative of the assessee also filed a copy of the decision of the Tribunal, Lucknow Bench, in the case of Smt. Susan Tandon v. Dy. CIT in ITA No. 684/Luc/2002, dt. 3rd Nov., 2003, and submitted that a similar issue was considered in the said case and the Tribunal quashed the block assessment order framed under Section 158BC/143(3) of the Act, on the ground that the search was carried out at the residence of Dr. V.K. Tandon, the husband of the assessee, and the search warrant was also in his name and not in the name of his wife and as such the block assessment completed without giving notice under Section 158BD of the Act was liable to be set aside. He submitted that the facts in the case of the present assessee are identical and as such the block assessment order framed by the AO under Section 158BC of the Act against the assessee is not a valid assessment order. The learned senior Departmental Representative in his submission conceded that the search warrants were in the names of Dr. (Mrs.) Saroj Shrivastava and Dr. D.C. Shrivastava and not in the name of the assessee, but the AO issued notice under Section 158BC of the Act and completed the block assessment under Section 158BC of the Act. However, he submitted that the assessee-firm is a partnership firm and Dr. (Mrs.) Saroj Shrivastava and Dr. D.C. Shrivastava are the main partners, who are running the nursing home and as such the search warrant issued in the name of Dr. (Smt.) Saroj Shrivastava and Dr. D.C. Shrivastava be also considered the search warrants in the name of assessee-firm. The learned senior Departmental Representative justified the assessment completed by the AO under Section 158BC of the Act. Alternatively, he also submitted that the assessment completed by the AO under Section 158BC of the Act be construed as an assessment under Section 158BD of the Act. The learned senior Departmental Representative submitted that the block assessment order passed by the AO be confirmed.
4. We have carefully considered the material placed on record and the submissions of the learned representatives of the parties.
5. We have also perused the earlier orders of the Tribunal cited by the learned Authorised Representative of the assessee in support of his submission. There is no dispute that the search warrants were in the names of Dr. Saroj Shrivastava and Dr. D.C. Shrivastava, who are admittedly partners of the assessee-firm. It is also a fact that the assessee-firm is a regular income-tax payer and has been regularly filing return from the asst. yr. 1987-88 onwards, as is evident from pp. 22 to 96 of the paper book. It is also a fact that the AO issued notice under Section 158BC of the Act and completed the assessment under Section 143(3)/158BC of the Act. However, there are two separate provisions under Chapter XIV-B of the Act, which deals with the block assessment. It provides that the assessment is to be completed under Section 158BC of the Act in respect of the person, who is subjected to search under Section 132 of the Act. However, the provisions of Section 158BD of the Act provide the procedure to be followed in respect of undisclosed income detected in respect of any other person other than the searched person during the search operation. It is an admitted fact that the assessee before us is a person against whom no search warrant was issued under Section 132 of the Act. Therefore, the AO before relying on the seized documents detected during the course of the search related to any other person had to follow the procedure as laid down under Section 158BD of the Act and if the assessment is completed against, any other person without complying with the provisions of Section 158BD of the Act, it has been held by the Lucknow Bench of the Tribunal, vide order dt. 3rd Nov., 2003, in the case of Smt. Susan Tandon (cited supra) that such an assessment is liable to be quashed as the same is against the provisions of Chapter XIV-B of the Act. A similar issue was also considered by the Allahabad Bench of the Tribunal in the case of Vishwanath Prasad (supra) and it was held that the assessment completed without complying with the provisions of Section 158BD of the Act, had resulted into illegalities and as such the entire assessment order was vitiated and was to be quashed. Since the facts are identical to the cases (cited supra), we hold that the assessment completed by the AO in the case of the present assessee under Section 158BC of the Act is not in accordance with the provisions of the Act and as such the assessment is not a valid assessment order and as such the same is not tenable in law. Accordingly, we quash the block assessment order in the case of the assessee by allowing the preliminary ground of appeal taken by the assessee. In view of the above, we do not propose to consider the other grounds of appeal taken by the assessee disputing the addition made by the AO.
6. In the result, the appeal filed by the assessee is allowed.