Income Tax Appellate Tribunal - Delhi
Shri Virender Kumar Bhatia, New Delhi vs Dcit, New Delhi on 13 December, 2018
1 IT(SS)A N0. 6 & C.O No. 93/Del/2011
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'B' NEW DELHI
BEFORE SHRI N. K. SAINI, VICE PRESIDENT
AND
MS SUCHITRA KAMBLE, JUDICIAL MEMBER
IT(SS)A NO. 9/DEL/2011
BLOCK PERIOD: 1998-99 TO 2003-04
DCIT Vs Virender Kumar Bhatia
Central Circle-20, Room No. 333 N-71, Panchsheel Park
E-2, ARA Centre, Jhandewalan New Delhi
Extension (RESPONDENT)
New Delhi
(APPELLANT)
C.O NO. 93/DEL/2011
BLOCK PERIOD: 1998-99 TO 2003-04
Appellant by Sh. Vijay Varma, Sr. DR
Respondent by Sh. C. S. Agarwal, Sr. Adv
Date of Hearing 24.09.2018
Date of Pronouncement 13.12.2018
ORDER
PER SUCHITRA KAMBLE, JM
This appeal is filed by the Revenue and the Cross Objection is filed by the assessee against the order dated 30/11/2010 passed by CIT(A)-1, New Delhi for BLOCK PERIOD: 1998-99 TO 2003-04).
2. The grounds for appeal are as under:- IT(SS)A NO. 9/DEL/2011 "1. The order of the Id. CIT(A) is not correct in law and facts.
2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and facts in holding block assessment under section 158BC read with 2 IT(SS)A N0. 6 & C.O No. 93/Del/2011 section 158D of Income Tax Act, 1961 as invalid while ignoring the fact that satisfaction has been recorded on the basis of incriminating seized documents scanned in the assessment order, by the AO who had jurisdiction over the cases of Vatika Group.
3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and facts in relying on the arguments reproduced in the appellate order that block assessment proceedings were initiated under section 158BD on 27.7.2007 during pendency of original provisions initiated under section 15BD on 14/7/2005 whereas this issue has been adequately addressed in the assessment order by scanning the D & CR to substantiate that original proceedings had been dropped prior in initiation of proceedings on 27.7.2007.
4. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and facts in relying on the judicial pronouncements in Manoj Maheshwari 289 ITR 341 in assessment order and Hon'ble Delhi High Court in Amity Hotels Pvt. Limited in 272 ITR 75, which are vastly on different fact and have been amply discussed in assessment order and remand report.
5. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and facts in holding that similar addition has been made in the case of M/s Baani Technologies Pvt. Ltd. and deleted in appeal whereas the Departmental appeal is pending before Hon'ble Delhi High Court and the addition in that case was made on different basis.
6. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and facts in holding assessment as beyond reasonable time whereas no such provision is laid down in section 158BE(2) of Income Tax Act, 1961
7. On the facts and in the circumstances of the case, the Ld.CIT(A) has erred in law and facts in deleting the addition of undisclosed income at Rs.2,44,58,812/- without adversely adjudicating contents of incriminating documents scanned in the assessment order."
C.O NO. 93/DEL/2011 "1. That the learned Commissioner of Income Tax (Appeals) has failed to 3 IT(SS)A N0. 6 & C.O No. 93/Del/2011 appreciate that, since no order dropping the proceedings initiated under section 158BD of the Act dated 14.7.2005 had ever been served on the assessee therefore, subsequent notice issued under section 158BD of the Act dated 27/7/2007 was not a valid notice and, hence the impugned order of assessment dated 30.07.2009 was without jurisdiction. Infact, the learned Commissioner of Income Tax (Appeals) has failed to comprehend the alleged dropping of proceeding on the purported date of dropping of proceedings was merely a cloak or a colorable device and was shown only for collateral purposes, to circumvent the non framing the assessment within the period of limitation.
1.2. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that, the finding of the learned Assessing Officer that "the mere fact that the decision to drop the proceedings was not communicated to the assessee cannot be interpreted as evidence of the fact that proceedings were barred by limitation or that they remained pending till the date of limitation"
is misconceived, misplaced and erroneous conclusion. Infact, once, it is not disputed that no order dropping proceedings had been communicated to the appellant them, it ought to have been held that notice issued under section 158BD of the Act dated 27.7.2007 was without jurisdiction as has been held by the Hon'ble Apex Court in the case of Trustees of H.H.H. The Nizam's Supplemental Family Trust vs. CIT reported in 242 ITR 381, AIR 2001 SC 3471 and, Hon'ble Delhi High Court in the case of CIT vs. K.L.M. Royal Dutch Airlines vs. CIT reported in 292 ITR 49.
2. That the learned Commissioner of Income Tax (Appeals) has otherwise to failed to appreciate that, notice under section 158BD of the Act was without jurisdiction since notice under section 158BD of the Act dated 27.7.2007 did not record any satisfaction as has been held by the Hon'ble Delhi High Court in the case of New Delhi Auto Finance Private Limited vs. JCIT reported in 300 ITR 83 following the judgment of the Hon'ble Apex Court in the case of CIT vs. Manish Maheshwari reported in 289 ITR 341.
4 IT(SS)A N0. 6 & C.O No. 93/Del/2011
3. That the learned Commissioner of Income Tax (Appeals) has also failed to appreciate that satisfaction recorded by the learned Deputy Commissioner of Income Tax, Central Circle-20 on the order sheet and, not in the notice is not a valid satisfaction since satisfaction under section 158BD of the Act has to be recorded by the Assessing Officer of the searched person and, not the Assessing Officer of the appellant and therefore, such purported satisfaction as has been recorded in the order sheet and, not communicated to the assessee, is not a valid satisfaction and therefore, does not confer valid jurisdiction to frame the impugned assessment."
3. A search and seizure operation was conducted u/s 132 of the Income tax Act, 1961 on 8/5/2003 in Vatika Group of cases headed by Shri Anil Bhalla who is a leading developer of premium corporate complexes resorts and restaurants. In this search, the premises of M/s Baani Technologies Pvt. Ltd. (presently known as Vatika Landmark Projects Pvt. Ltd.) at FIP Gurgaon was also covered. Further residence of Shri Anupam Nagalia at Gurgaon was also searched. Shri Anupam Nagalia is chartered accountant and, is a Director in M/s Vatika Land base Pvt. Ltd. Shri Virender Bhatia floated a company M/s Baani Technologies Pvt. Ltd. He purchased a land at village Wazirabad, Gurgaon in the name of M/s Baani Technologies Pvt. Ltd. Vatiak Group has taken over the company M/s Baani Technologies Pvt. Ltd. during Financial Year 2002-03 from Shri Virender Bhatia of Delhi. This Company had only one asset in the form of land measuring around 2.36 acres at Village Wazirabad. The value of land as per balance sheet of the company was at Rs.2,37,05,540/- as on 31/3/2003. Thus, Vatika Group purchased land at Wazirabad from Shri Virender Bhatia. On the basis of evidence collected during pre-search enquiry and from the seized record, the Assessing Officer held that Vatika Group Company had in-fact made investment of Rs.4,95,61,000/- in the purchase of land measuring 2.36 acres from Shri Virender Bhatia and his family members. The details of transactions relating to the deal of the said land were said to be 5 IT(SS)A N0. 6 & C.O No. 93/Del/2011 recorded in a diary marked as Annexure A-9, particularly on pages 6, back side of Page 10 and Page 18 of the Annexure. There are entries relating to deal of 2.36 acres of land at Wazirabad in document A-9 seized from residence of Shri Anupam Nagalia, Director of Vatika Land base (P) Ltd. who admitted in his statement on oath during search and seizure operations that the entries in this Annexure A-9 relate to the aforesaid project and the said land was purchased from Virender Bhatia. In view of the above facts, notice u/s 158BD of the Act was issued on 14/7/2005 requiring the assessee to file the return of income. The Assessing Officer recorded reasons as under:-
"3.1 "A search & seizure operation was conducted at the residence of Sh. Virender ""'Kumar Bhatia in Vatika Group of cases.
Perusal of seized documents, Annexure A-13, page 14, 15, 18 to 32 seized from the office of the Vatika Group of companies, Annexure A-l, page 24 to 27 seized from the residence of Sh. Anupam Nagalia reveals that the assessee Sh. Virender Kumar Bhatia had received unaccounted cash of Rs. 2.42 crores against sale of land at Wazirabad which was not disclosed in the regular return of income.
In view of the facts stated above and material available in the form of seized documents, I am satisfied that Sh. Virender Kumar Bhatia had undisclosed income for the block period 1.04.1997 to 08.05.2003 which was not disclosed in the regular return of income.
Therefore, notice u/s 158BC read with section 158BD is issued."
4. Subsequently, the assessee filed return of undisclosed income on 1/8/2005 showing undisclosed income at NIL. The Assessing Officer issued notice u/s 143(2) of the Act on 17/9/2006. C A of the assessee attended the proceedings u/s 158BD. On 18/7/2007. The assessee raised an objection 6 IT(SS)A N0. 6 & C.O No. 93/Del/2011 that name of the assessee and his associated concern did not appear in the seized annexure supplied to him. The Assessing Officer examined the objection of Ld. AR and found it to be correct. Therefore, the assessment proceedings u/s 158BD read with Section 158BC of the Act initiated vide notice issued on 14/7/2005, were dropped on 27/7/2007 after obtaining approval of the Additional Commissioner of Income Tax, Central Range-iii, New Delhi. After disposal of the earlier block assessment proceedings. Fresh Block assessment proceedings were again initiated on 27/07/2007 after recording satisfaction note that unaccounted amount of Rs.2,44,58,812/- was paid by Vatika Group to the assessee as mentioned on Page 6, backside of Page 10 & Page 18 of diary as per Annexure A-9. In response to the said notice, the assessee filed reply dated 14/8/2007 containing therein that fresh notice is without jurisdiction since no assessment order has been passed in respect of previous notice. Thereafter, another notice u/s 142(1) of the Act dated 22/6/2009 was issued. The assessee in response, filed a reply on 17/7/2006, stating that neither notice dated 27/7/2007 nor notice dated 26/2/2009 are valid and both notices are without jurisdiction. The Assessing Officer rejected the objections raised by the assessee Company and determined total undisclosed income of the assessee company at Rs. 2,44,58,812/-.
5. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A) who allowed the appeal of the assessee. Now the department is in appeal and the assessee has filed cross objection.
6. The Ld. DR submitted that there was a search in Vatika Group on 08.05.2003. Assessee had floated a company M/s Baani Technologies Pvt. Ltd. which was taken over by Vatika Group in A.Y.2003-04. The only asset with the company was land of 2.36 Acers valued at Rs.2.37 crore on 31.03.2003 as per Balance Sheet. The Vatika Group executed a commercial project Vatika World on the said land. As per seized material unaccounted consideration for the above purchase of land through company amounting to Rs.2,44,58,812/- was 7 IT(SS)A N0. 6 & C.O No. 93/Del/2011 paid to the assessee for which proceedings u/s 158BD were initiated vide notice dated 14.07.2005 issued by ACIT, Cen.Cir.20, New Delhi who has completed the assessment in the case of assessee. The Assessing Officer also recorded his satisfaction. The assessee objected to the satisfaction note vide letter dated 25.06.2007. The AO noticed that the seized annexure referred to in the satisfaction note was incorrect, so he issued fresh notice u/s 158BD on 27.07.2007. The assessment order was passed on 30.07.2009 i.e. the limitation has been counted from the second notice u/s 158BD. The LD. DR further submitted that fresh satisfaction note appears on page 5 of the assessment order. As mentioned on page 6 of the assessment order, the old proceedings were in respect of different annexure and new proceedings were in respect of another annexure. The earlier proceedings were dropped as the same were initiated on the basis of incorrect facts/wrong annexure. Against a disclosed consideration of Rs.2.51 crores, actual consideration was Rs.5.49 crore as mentioned on page 7 of assessment order. The Ld. DR submitted that seized documents appeared on page 12 and 13 of assessment order, mentions the name of the assessee as well. The Ld. DR further submitted that Page 18 of assessment order clearly mentions that original deal was of Rs.5,48,50,000/- out of the same, an amount of Rs.52,89,000/- has been reduced, being loss shared by seller and remaining amount is mentioned as new amount of purchase. The AO discussed the reasons for addition in para 8.1 onwards. All entries in the seized material have been deciphered upto para 9.4 of the order of AO and the addition was made. The Ld. DR submitted that CIT(A) deleted the addition by relying upon the order in the case of M/s Baani Technologies Pvt. Ltd which is confirmed by ITAT vide order dated 25.09.2009 for deleting the addition. The Ld. DR submitted that the said order of ITAT is on different grounds. The assessee controlled the said company and the company purchased land in question apparently in January, 2001 for Rs. 1,57,50,000/- while the AO took purchase consideration at Rs.3,07,12,496/- on the basis of statements of brokers/farmers etc. So the addition was for purchase. The Ld. DR submitted that the land remained in the name of said company and the 8 IT(SS)A N0. 6 & C.O No. 93/Del/2011 name of company was changed to Vatika Land Marketing (P) Ltd. Thus, the Ld. DR submitted that the issue involved here is the sale of company (and indirectly the land), the consideration for which has gone to the assessee. The Ld. DR submitted that this sale consideration obviously cannot be added in the hands of the company, though the AO discussed this issue to justify the market value of land. So the reliance of CIT(A) is not well placed. In para 7.5 the CIT(A) also held that the notice u/s 158BD to be void. The main reason is that the AO of searched person should have recorded the satisfaction. Apparently, the AO of searched person and assessee were same in this case as all orders in group cases available in Paper Book of the assessee have been passed by him. Therefore, the Ld. DRT relied upon the decision in the case of Ganapati Fincap Services Pvt. Ltd., 99 CCH 27 (Del High Court).
7. The Ld. AR submitted that the proceedings initiated on 27.07.2007 do not record any satisfaction note and earlier satisfaction note is not relevant as the said assessment made is barred by limitation u/s 158BF of the Act. The addition disputed in this appeal is of Rs. 2,44,58,812/-. The Ld. AR submitted that this sum represents the alleged receipt of alleged on-money by the assessee on the sale of land of M/s Banni Technologies to Vatika Ltd. not belonging to assessee. It is an admitted fact that the aforesaid land was held by M/s Baani Technologies Pvt. Ltd. presently known as Vatika Landmark Projects Pvt. Ltd. The Ld. AR submitted that the A.O. has admitted that declared consideration of land is Rs. 2,51,02,188/- and is declared sale consideration of land of M/s Baani Technologies Pvt. Ltd. to Vatika. In none of the sheets, there is any reference to a sum which shows receipt of the amount by the assessee. Thus the initiation of proceedings without recording any note of satisfaction in the case of person searched, the proceedings initiated itself is bad in law as held by the Hon'bel Apex Court in the case of Manish Maheshwari vs. ACIT reported in 289 ITR 341 and in the case of CIT vs. Calcutta Knitwears, reported in 362 ITR 673. The Ld. AR also relied upon the judgment of Hon'ble Apex Court in the case of Tapan Kumar Dutta vs. CIT 9 IT(SS)A N0. 6 & C.O No. 93/Del/2011 (2018) 92 taxmann.com 367 (SC) wherein it is held that proceeding initiated are entirely without jurisdiction, without any material and hence no proceedings u/s I58BD can be initiated. Further if the proceedings were initiated on 27.07.2009 than there ought to have been a note of satisfaction, whereas there is only one note of satisfaction prepared and is dated 14/7/2005 and the search was conducted on 08.05.2003 and the present assessment has been framed on 30.07.2009. The sequence of event shows that the proceedings are without any jurisdiction.
8. We have heard both the parties and perused the material available on record. The CIT(A) vide allowing the appeal of the assessee held as under:-
"7. I have carefully considered the facts of the case, submissions made by Assessing Officer as well as by the appellant and, documentary evidence placed on record. The appellant has raised as many as Ground 1 to 8 of the Grounds of Appeal. Ground No. 4 of Grounds of Appeal is in regard to the contention of the appellant that assessment framed is without jurisdiction since notice under section 158BD of the Act dated 14.7.2005 has been served on the appellant after the termination of assessment proceedings in the case of searched person namely Vatika Group. The appellant has submitted that notice under section 158BD of the Act dated 27/7/2007 is without jurisdiction since notice under section 158BD of the Act dated 27.7.2007 has been served on the appellant after termination of the assessment proceedings in the case of searched person namely Vatika Group. It is submitted that, since proceedings in the case of Vatika Group had been terminated on 31.5.2005 as a result of search, action having been taken on them on 8.5.2003, notice issued under section 158BD of the Act on 27.7.2007 is apparently beyond the period of limitation and therefore, unsustainable. In support reliance has been placed on the following decisions:
a) 113 ITD 377 (SB)(Del) Manoj Aggarwal vs. DCIT
b) 17 SOT 380 (Chd) ACIT vs. Kishore Lai Balwant Rai
c) Shri Radhey Shyam Bansal vs. ACIT in IT(SS) No. 12/D/2007 for Block 10 IT(SS)A N0. 6 & C.O No. 93/Del/2011 Peirod 1991-92 to 2001-02 (upto 3.08.2002) 7.1. The Assessing officer neither in the comments and, nor in the order of assessment has recorded any adverse findings in rebuttal to the above submission. Thus, the foremost issue which arises for consideration is whether the following order sheet entry dated 27.07.2007 recorded prior to issue of notice under section 158BD of the Act dated 27.7.2007 is a valid satisfaction for the purpose of assumption of jurisdiction u/s 158BD of the Act:
"A notice u/s 158BD was issued & served in the above case by my predecessor on the following satisfaction note:-
A search & seizure operation was conducted at the residence of Sh. Virender Kumar Bhatia in Vatika Group of cases.
Perusal of seized documents, Annexure A-13, page 14, 15, 18 to 32 seized from the office of the Vatika Group of companies, Annexure A-l, page 24 to 27 seized from the residence of Sh. Anupam Nagalia reveals that the assessee Sh. Virender Kumar Bhatia had received unaccounted cash of Rs. 2.42 crores against sale of land at Wazirabad which was not disclosed in the regular return of income.
In view of the facts stated above and material available in the form of seized documents, I am satisfied that Sh. Virender Kumar Bhatia had undisclosed income for the block period 1.4.1997 to 8.5.2003 which was not disclosed in the regular return of income..."
While completing the assessment in the above case, it has been noticed that the name of the assessee viz., Shri Virender Bhatia does not appear on any of the pages mentioned in the Annexures as described in the satisfaction note. These annexures have also been examined by your goodself.
11 IT(SS)A N0. 6 & C.O No. 93/Del/2011 However, page 6, back of page 10 and page 18 of Annexure A-9, seized by Party No. 5, show that an unaccounted amount of Rs.2,44,58,812/- was paid by Vatika Group to the assessee in the land deal at Wazirabad, Delhi.
It is therefore proposed that the present proceedings u/s 158BD may be dropped and a fresh notice u/s 158 BD may be issued on the basis Annexure A-9, seized by Party No. 5. This proposal has also been disallowance caused with the Ld. C.l.T. (C)0I, New Delhi in your presence.
7.2. An identical issue came up before Delhi Bench of the Tribunal in the case of Shri Radhey Shyam Bansal in 1T(SS) No. 12/D/2007 for Block Period 1991-92 to 2001-02 (upto 3.08.2002) wherein the Hon'ble Tribunal held that, any satisfaction recorded after completion of assessment in the case of searched person does not constitute valid satisfaction for the purpose of section 158BD of the Act. In that case, the letter was dated 15.07.2003 and, was after the completion of assessment in the case of Shri Manoj Aggarwal (searched person) on 29.08.2002. It was held following the decision in the case of ACIT vs. Kishore Lai Balwant Rai (Chd.) (reported in 17 SOT 380) as under:
"7 That takes us to the question whether the letter dated 15.07.2003 written by the DCIT, Central-3, New Delhi, who is the Assessing officer having jurisdiction over Manoj Aggarwal, to the Assessing Officer, Circle 37(1), New Delhi, who is the Assessing Officer assessing Radhey Shyam Bansal (aasessee before us) can be construed to represent the requisite satisfaction. On this issue, the Chandigarh Bench of the Tribunal has passed an elaborate order on 29th June, 2007 in the case of ACIT, Yamunanagar Vs Kishore lal Balwant Rai and other connected cases. A copy of this order is at pages 75 to 168 of the paper book. Strong reliance was placed on this order by the learned representative for the assessee to contend that the satisfaction has to be recorded during the course of the assessment proceedings of the person put to search under Section 132 or 12 IT(SS)A N0. 6 & C.O No. 93/Del/2011 requisition under Section 132A because only in the course of such assessment proceedings, will the Assessing Officer be in a position not only to detect the undisclosed income but also to identify the person to whom it belongs. It has been further observed that after the assessment of the person searched is completed, the Assessing Officer would become "functus officio" regarding the powers and functions and outlined in Section 158BC and he can no longer be construed as an Assessing Officer for the purpose of Chapter XIV-B in so far as the person search is concerned. Once the assessment of the person searched is completed, the task of the Assessing Officer to identify the undisclosed income and the person to whom such income belongs, on the basis of the material seized during the search, attains finality and thereafter it is not open to him record any satisfaction of any kind. He is no longer "in seisin" of the assessment of the searched person and can not therefore assume jurisdiction over the same and record any satisfaction. We respectfully agree with the view taken by the Chandigarh Bench as to the time frame within which the satisfaction should be recorded by the Assessing Officer having jurisdiction over the assessment of the person searched. In the case on hand, the block assessment of Manoj Aggarwal was completed under Section 158BC on 29.8.2002. Thereafter, The Assessing officer assessing him became functus officio and was legally under a disability to record any satisfaction to the effect that any undisclosed income belongs to Radhey Shaym bansal. Therefore, the letter written on 15.7.2003 by the DCIT. Central-3, New Delhi who was the Assessing Officer having jurisdiction over Manoj Aggarwal, can not be construed to be the satisfaction as required by Section 158BD since it was written after the completion of the block assessment of Manoj Aggarwal.
8. We thus hold that no satisfaction has been recorded under Section 158BD by The Assessing Officer having jurisdiction over the assessment of Manoj Aggarwal and that the letter written by him on 15.7.2003 to the 13 IT(SS)A N0. 6 & C.O No. 93/Del/2011 Assessing Officer having jurisdiction over Radhey Sham Bansal cannot be legally taken to be the requisite satisfaction. The result is that the assessment of Radhey Shyam Bansal has been made without satisfying the mandatory precedent under Section 158BD."
7.3 It may be added here that the Hon'ble Tribunal further in para 9 and 10, held that the notice dated 22.03.2004 is also belated since such notice was issued about 19 months from the completion of assessment in the case of Shri Manoj Aggarwal. It was held therein as under:
"9 The next question to be addressed is whether the notice under Section 158BD requires to be issued within a reasonable time and if it is not to 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 been issued at least within a reasonable tie after the completion of the assessment of the searched person. In the present case, the block assessment of Manoj Aggarwal was completed on 29.08.2002 but the notice under Section 158BD was issued only on 22.03.2004, that is about 19 months later. The further contentions based on the judgment of the Gujarat High Court in Khandubhai Vasanji Desai's case (supra) was that the notice should be issued within 15 days from the 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 Section 132(9A). In Khandubhai's case, the Gujarat High Court referred to the time limit of 15 days having regard to the fact that under Section 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 Income Tax Officer having jurisdiction over the person to who the books of account, documents and assets seized relate, within 15 days of the seizure and thereafter the 14 IT(SS)A N0. 6 & C.O No. 93/Del/2011 Assessing Officer is required to serve notice on such person to whom the books of accounts etc. relate requiring him to furnish a block return under Section 158BC. The Gujarat High Court was concerned with the constitutional validity of Section 158BD of the Act and one of the contentions was expressed in the form of an apprehension that a notice under Section 158BD can be issued by the Assessing Officer I the case of the other person (other than the person who was 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 Section 158BD has to be issued within a reasonable period from the date of the search itself and it was pointed out, taking cue from Section 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 alongwith the books of account, 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 tendency of the block assessment proceedings in the case of Manoj Aggarwal. However, even after the completion of the block assessment of Manoj Aggarwal on 29.08.2002, the Assessing Officer of the assessee took about 19 months to issue the notice under Section 15BD. The period of 60 days mentioned in section 132(9A) is actually for handling over the books of account etc, to the Assessing Officer 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 emphasis the speed and swiftness within which the proceedings should be taken against such persons. That object does not appear to have been achieved in the present case I view of the unreasonable delay in issuing the notice under Section 158BD not only after the date of completion of the 15 IT(SS)A N0. 6 & C.O No. 93/Del/2011 block assessment of Manoj Aggarwal. Even if the period of 60 days is to be reckoned from 15.07.2003, the date on which the Assessing Officer of Radhey Syam Bansal, there is a delay of almost 8 months before issue of the notice under section 158BD . In such circumstances, we hold that the notice having been issued well beyond a reasonable period of time, the assessment made on the assessee is bad in law."
7.4. Further, Special Bench in the case of Bishan Chand Mukesh Kumar reportedas Shri Manoj Aggarwal vs. DCIT reported in 113 ITD 377 also upheld the aforesaid proposition by observing as under:
"125. In the instant case, we may now examine whether there is any record of satisfaction that meets the requirement of law as enunciated above. We have already reproduced the copy of the said record dated 19- 12-2002. It is signed by the Dy. Commissioner of Income-tax, Central Circle
- 3, New Delhi. It is therefore admittedly recorded by the Assessing Officer making the section 158BD assessment as the notice under the said section has also been issued by him. This note records that search in the case of Shri Manoj Aggarwal and associate concerns and the block assessment made on him conclusively establishes the fact that he was involved in providing bogus accommodation book entries to various persons on commission basis and for this purpose he had used the names and bank accounts of various companies, benami proprietorship concerns in the names of his employees, in the names of relatives, various HUF entities and firms and one such concern is M/s. Bishanchand Mukesh Kumar the bank accounts of which were operated by S/Shri Mukesh Kumar and Bishanchand Aggarwal; that the sources of cash and clearing deposits and the withdrawals from these bank accounts need to be examined; these accounts have been used for accommodation book entries and hence, undisclosed income has arisen in the hands of this concern which has been found during the course of search and seizure operations in the 16 IT(SS)A N0. 6 & C.O No. 93/Del/2011 case of Shri Manoj Aggarwal and his associate concerns; thus, proceedings under section 158BD are applicable in this case. Admittedly, this note is after the date of block assessment in the case of Manoj Kumar Aggarwal which was finalized on 29-8-2002. Further, the note of satisfaction is not recorded by the Dv. CIT, Central Circle-3, New Delhi acting as the Assessing Officer making the assessment under section 158BC of Manoj Kumar Aggarwal since the said assessment has been finalized earlier. Clearly the note of satisfaction dated 19-12- 2002 is beyond the date of block assessment in the section 158BC proceedings dated 29-8-2002 in the case of Shri Manoj Aggarwal. Therefore, the satisfaction recorded is belated."
7.5. I find that the facts of the appellant are identical to the aforesaid judicial decisions in as much as hereto the satisfaction was recorded on 27.07.2007 i.e. subsequent to the completion of assessment in the case of M/s Vatika Group on 31.05.2005 which does not meet the requirements of section 158BD of the Act and as such, respectfully following the above decisions, notice issued on 27.07.2007 is held to be without jurisdiction. In fact, in the case of the appellant also the notice was issued on 27.07.2007 i.e. after a gap of approximately 25 months and hence, even the notice issued is highly belated. In otherwords, the notice under section 158BD has been issued to the appellant well beyond a reasonable period of time- reckoned either from the date of search (8.05.2003), or from the date of block assessment on M/s Vatika Group (31.05.2005). Thus, since there was no effective notice to the assessee within a reasonable period, the assessment requires to be vacated and, is thus quashed. Infact, the satisfaction has been recorded on 27/7/2007 i.e. after the completion of assessment of searched person itself shows that this is not a satisfaction recorded by the Assessing Officer of a searched person as is the mandate of section 158BD of the Act, judgment of Apex Court in the case of CIT vs. Manish Maheshwari reported in 17 IT(SS)A N0. 6 & C.O No. 93/Del/2011 289 ITR 341 and. Delhi High Court in the case of Amity Hotels Pvt. Ltd. vs. CIT reported in 272 ITR 75. Accordingly, it is held that, initiation of proceedings without fulfilling the mandatory preconditions is without jurisdiction. Keeping in view my discussion on the legal issue rendered above holding the assessment made by the AO to be invalid, I do not deem it necessary or expedient to consider other legal grounds raised by the assessee in the present appeal since the same have became only of academic nature. This disposes off Ground No(s). 1 to 4 of Grounds of Appeal.
8. Ground No. 5 to 5.6 of the Grounds of Appeal are in respect of addition made of Rs. 2,44,58,812/- by concluding that material seized from the residential premises of Shri Anupam Nagalia, director in Vatika Group clearly makes out a case of concealment by the assessee and receipt of on money on the sale of land by appellant to Vatika Group. The documents as seized and relied are marked as page 6 of Annexure A-9 and page 18 of Annexure A-9 and backside of page 10. According to the Assessing Officer though undisputedly the land was held in the name of M/s Baani Technologies Pvt. Ltd. (presently known as Vatika Landmark Projects Pvt. Ltd.) but yet the unaccounted out of books receipt have to be assessed in the hands of the appellant since it was the appellant who had transferred Baani Technologies Pvt. Ltd. to Vatika. In arriving at the above conclusion the learned Assessing Officer has noted that the net considered on sale of land was Rs. 4,95,61,000/- and declared consideration was Rs. 2,51,02,188/-, sum of Rs. 2,44,58,812/- represented undisclosed income of the appellant. I find that the document as relied upon have already been subject matter of consideration in the case of M/s Baani Technologies Pvt. Ltd. wherein too addition was made of Rs. 2,59,55,460/- on identical basis i.e. by holding that net consideration received was Rs. 4.95,61,000/- on the basis of documents found from Sh. Anupam Nagalia. It was held by the learned Commissioner of Income Tax (Appeals) in the said order as under:
18 IT(SS)A N0. 6 & C.O No. 93/Del/2011
"9.30 I have considered the reasoning given by the Assessing Officer and submissions made by the Ld. Counsel. I have also carefully seen the copies of the seized documents filed by the appellant in the paper book. Before the issue is decided it is pertinent to mention that appellant company earlier had name of M/s Banni Technologies Pvt. Ltd. At that time this company was controlled by Shri Virender Bhatia and his family members. A search in Virender Bhatia group u/s 132(1) of the IT Act conducted on 20.3.2002. In the said search, the appellant company was also covered. In the assessment u/s 158BC of the M/s Banni Technologies Pvt. Ltd. The Assessing Officer made addition of Rs. 1,49,62,500/- u/s 158BC on account of under statement in purchase price of 2.36 Acres land in Wazirabad, Gurgaon. In that order, the Assessing Officer concluded that actual purchase consideration was Rs.3,07,12,496/- against the amount is recorded in books of accounts of Rs. 1,57,50,000/-. Accordingly, addition of Rs. 1,49,62,500/- was made. This addition made by DCIT, Central Circle-20, New Delhi was deleted by Ld. CIT(A)-XVIII, New Delhi vide his order dated 26.12.2005 in appeal No.2/05-06. The main reason for deleting the addition by Ld. CIT(A) was that no incriminating document was found during the course of search and seizure action and the addition was made on the basis of statements of the broker and farmers who sold their land to M/s Banni Technologies Pvt. Ltd. Clearly the addition made in this assessment is also in respect of same piece of land of 2.36 acres at Wazirabad, Gurgaon. The addition has been made by the Assessing Officer holding that the appellant company purchased the land for consideration of Rs.4,95,61,000/- from M?s Baani Technologies Pvt. Ltd. controlled by Shri Virender Bhatia. It is an admitted fact that appellant, M/s Vatika Landmark (P) Ltd. is a new name of M/s Banni Technologies Pvt. Ltd. This fact has been mentioned by the Assessing Officer in the assessment order under the head "Name of the assessee". Thus M/s Vatika Landmark (P) Ltd. (appellant) is same as M/s Banni Technologies (P) Ltd. except the change of name, I fail to understand as to how the 19 IT(SS)A N0. 6 & C.O No. 93/Del/2011 appellant could purchase land from itself and pay money to itself. There is no evidence on record to suggest that the appellant company paid any un- accounted money to M/s Banni Technologies (P) Ltd. or Shri Virender Bhatia. As a matter of fact, the Assessing Officer has strongly contended that the plea of the appellant that Shri Anupam Nagalia is not employee of the appellant and therefore documents seized from his residence cannot be used against the appellant has to be rejected. While making this contention the Assessing Officer has stated that Shri Anupam Nagalia is looking after the financial affairs of the appellant company. Even if it is presumed that Shri Anupam Nagalia is in fact looking after the financial affairs of Vatika Groups of Companies he could not be aware of the actual purchase consideration paid by the appellant company for purchased of 2.36 acres of land at Wazirabad, Gurgaon. This is so because at the time of purchase of the said land the appellant was not in control of Vatika Group. A perusal of the documents found from the residence of Shri Anupam Nagalia and seized as per annexure A-9 clearly indicates that they are some calculations. No definite conclusion can be drawn from these documents. Any conclusion from these documents could have been drawn only if such conclusion is supported by the author of the document i.e. Shri Anupam Nagalia. The Assessing Officer has failed to record any statement of Shri Anupam Nagalia page No.5 of the assessment order refers to an statement of Shri Anupam Nagalia and in this statement Shri Anupam Nagalia has clearly stated that page No.6 of annexure A-9 is a rough working done to arrive at a decision whether at all there is viability in the project. It was further stated that figures stated are rough and hypothetical. In view of this statement and the nature of documents I am an agreement with the submissions of the appellant that these documents are dumb documents and are incapable of ay interpretation. The Assessing Officer has merely done some calculations and has arrived at a conclusion that there was undisclosed investments of Rs.2,58,55,460/-. Other documents being share purchase agreement and letter to Director, 20 IT(SS)A N0. 6 & C.O No. 93/Del/2011 Town & Country Planning, Chandigarh, Haryana also do not indicate towards any unexplained investments in purchase of land. In view of these facts, I am of the opinion that the Assessing Officer was not justified in making addition of Rs.2,59,55,460/-. The same is deleted."
8.1. The above order stands confirmed by the Hon'ble Tribunal by order dated 25.09.2009 by holding as under:
"8 We have heard the rival submissions and have gone through the material available on record. We find that on page no. 10 of the assessment order, it is seen that the Assessing Officer has made addition on the basis that originally, the property in question was purchased by the assessee at a cost of Rs. 3.07 crores at the rate of Rs. 1.30 crores per acre in January, 2001 and thereafter Vatika Group headed by Shri Anil Bhalla purchased this land in November' 2002. The Assessing Officer has also observed that the property rates have increased manifold during the period January, 2001 to November, 2002 ad on this basis, he has justified the consideration of cost of property at Rs. 495.61 lakhs. In this background, we find that when the property in question was purchased by the assessee in January, 2001, there cannot be any addition on the basis of property rates in November, 2002 when it is said that the property in question was sold by the assessee company to Vatika Group headed by Shri Anil Bhalla. Regarding purchase consideration at the time of purchase in January, 2001, we find that it is noted by the learned CIT(A) in para no. 9.30 of his order as reproduced above that there was search in Varinder Bhatia group conducted on 20.03.2002 in which the assessee under its former name of M/s Banni Technologies Pvt. Ltd. was also covered and the Assessing Officer made addition of Rs. 1,49,62,500/- on account of under statement in purchase price of Rs. 2.36 acres of land on the basis that actual purchase consideration was Rs. 3,07,12,496/- as against the amount of Rs. 157.50 lakhs recorded in the books. That addition has been 21 IT(SS)A N0. 6 & C.O No. 93/Del/2011 deleted by learned CIT(A) by way of his order dated 26.12.2005. A clear finding is given by learned CIT(A) that the land in question in the present case is the same land of 2.36 acres land in Wazirabad, Gurgaon. In view of this fact, no addition can be made on the basis of its value in November, 2002. This is not the case of the Assessing Officer that the property in question was sold by the assessee company in the present year for a sale consideration of Rs. 495.61 lakhs and the assessee has accounted for lesser amount of sale consideration. The Assessing Officer is making addition on the basis that the assessee has purchased land for a consideration of Rs. 495.61 lakhs but has declared lesser amount of purchase value. This value of Rs. 495.61 lakhs is being justified by the Assessing Officer on the basis that the value of this land was Rs. 3.07 crores in January, 2001 to November 2002, its value of Rs. 495.61 lakhs in November, 2002 is very much reasonable and justified. This addition made by the Assessing Officer shows that as per him Rs. 495.61 lakhs, is the value of land in question in November, 2002 but the same was purchased by the assessee in January, 2001 and hence we are of the considered opinion that no addition can be made in the present case on the basis that purchase consideration was under accounted for by the assessee considering all these facts, we find no good reason to interfere in the order of learned CIT(A) on this issue. We, therefore, uphold the same.
9 In the result, the appeal filed by the revenue is dismissed."
8.2. Lastly, the Assessing Officer has also referred as to the allegation that land sold was purchased in January, 2001 of Rs. 3.07 crores as against the declared amount of Rs. 1.57 crores and, thus sale at Rs. 2.51 crores is not acceptable. In this regard, it is seen that addition was also deleted by an order dated 26.12.2005 by holding as under:
"8.12 Moreover, it is a matter of record that there is no corroborative positive evidence in addition to the statements of the searched parties to 22 IT(SS)A N0. 6 & C.O No. 93/Del/2011 draw a conclusion that the appellant had undisclosed income which he had invested in the purchase of the land. On a perusal of the Assessment order, it is noted that the assessment proceedings were taken at the fag end of the limitation period. The addition has been made on the basis of the statements of the sellers of the land and, Shri Satpal. These statements had been put to cross-examination, inspite of specific request by the assessee. All such material is of no evidentiary value in view of the judgment of the Apex Court in the case of Kishni Chand Chella Ram vs. CIT reported in 125 ITR 713. The agreement have also no evidentiary value, since they are cancelled and, mere photocopies. Infact, none has been confronted to the persons stated to be signatories to the agreement. Thus, even they cannot be relied upon. In support of his averments, the appellant has also submitted the valuation report by a Registered Valuer. Similarly, the appellant has also provided comparable instances of properties in the same vicinity alongwith photocopies of the title deeds. The appellant has further stated that no extra ordinary amount of cash or any other liquid asset or investment or any agreement to sell etc. has been found during the course of search and seizure operations which could be attributed towards any unexplained investment over and above the stated consideration. I therefore hold that the addition of Rs. 1,49,62,500/- towards alleged investment of undisclosed income in land at Wazirabad. Gurgaon has not been made on the basis of evidence found as a result of search and the same is deleted."
8.3. In light of the aforesaid, I find that, addition so made of Rs. 2,48,58.812/- is not in accordance and is thus deleted."
Thus, the CIT(A) has given the categorical finding that the addition is not sustainable due to the detailed reasons given by the CIT(A). Further, the initiation of proceedings without recording any note of satisfaction in the case of person searched, the proceedings initiated itself is bad in law as held by the 23 IT(SS)A N0. 6 & C.O No. 93/Del/2011 Apex Court in the case of Manish Maheshwari vs. ACIT 289 ITR 341 and in the case of CIT vs. Calcutta Knitwears, 362 ITR 673. Therefore, there is no need to interfere with the findings of the CIT(A). Thus, appeal filed by the Revenue is dismissed.
9. Regarding the Cross-Objection filed by the assessee, the Ld. AR contended that the CIT(A) failed to appreciate the fact that since no order dropping the proceedings initiated u/s 158BD of the Act dated 14/7/2005 was ever been served on the assessee. Therefore, subsequent notice issued u/s 158BD of the Act dated 27/7/2007 was not a valid notice and hence the impugned order of assessment dated 30/07/2009 was without jurisdiction. The Ld. AR further contended that the findings of the Assessing Officer that mere fact that the decision to drop the proceedings is not communicated to the assessee cannot be integrated as evidence of the fact that proceedings were barred by limitation that remain pending till the date of limitation as misconceived and erroneous conclusion. In fact, once it is not disputed that no order dropping proceedings had been communicated to the assessee, it ought to have been held that notice issued u/s 158BD of the Act dated 22/7/2007 was without jurisdiction held by Hon'ble Apex Court inc case of Trustees HHH, the Nizam Supplemental Family Trust Vs. CIT 242 ITR 381 and the decision of Hon'ble Delhi High Court in case of CIT Vs. KLM Royal Touch Airlines Vs. CIT 292 ITR 49. The Ld. AR contended that notice u/s 158BD of the Act was without jurisdiction since, the notice u/s 158BD dated 27/7/2007 did not record any satisfaction as has been held by the Hon'ble Delhi High Court in case of New Delhi Auto Finance Pvt. Ltd. Vs. JCIT 300 ITR 83 following the judgment of the Hon'ble Apex Court in case of CIT Vs. Mahesh Maheshwari 289 ITR 341. The Ld. AR further contended that satisfaction recorded by the Assessing Officer on the order sheet and not in the notice is not valid satisfaction since satisfaction u/s 158BD of the Act has to be recorded by the Assessing Officer of the search person and not the Assessing Officer of the assessee and, therefore, such purported satisfaction as has been 24 IT(SS)A N0. 6 & C.O No. 93/Del/2011 recorded in the order sheet and not communicated to the assessee is not a valid satisfaction. And, therefore, does not confer valid jurisdiction to frame the impugned assessment.
10. The Ld. DR supported the order of the Assessing Officer.
11. As regards the Cross Objection of the assessee, we have heard at length both the parties. Section 158BD which reads as under:-
"158BD. Undisclosed income of any other person where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or Whose books of account or other documents or any assets were requisitioned under section 132A, then, the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against such other person and the provisions of this Chapter shall apply accordingly."
The satisfaction recorded by the Assessing Officer as per Revenue is incorporated in the order sheet and not in the notice. Thus, it is not a valid satisfaction, as satisfaction u/s 158BD of the Act has to be recorded by the Assessing Officer of the searched person and not by the Assessing Officer of the other person i.e. assessee. Therefore, this satisfaction which was recorded in the order sheet and also not communicated to the assessee, is not a valid satisfaction, this preposition of the Ld. AR sustains. The contention of the Ld. DR is that the Assessing Officer is same for all the mentioned assessees do not permit/allow the Assessing Officer not to record satisfaction for each of the assessee separately. It is a mandate as per the provisions of the Act and cannot be overlooked. Therefore, the Assessing Officer does not have valid jurisdiction to frame the assessment. Thus, the cross objection of the assessee is allowed.
25 IT(SS)A N0. 6 & C.O No. 93/Del/2011
14. In result, appeal of the Revenue is dismissed and the cross objection of the assessee is allowed.
Order pronounced in the Open Court on 13th December, 2018.
Sd/- Sd/-
(N. K. SAINI) (SUCHITRA KAMBLE)
VICE PRESIDENT JUDICIAL MEMBER
Dated: 13/12/2018
R. Naheed
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
26 IT(SS)A N0. 6 & C.O No. 93/Del/2011
Date of dictation 15.11.2018
Date on which the typed draft is placed 15.11.2018
before the dictating Member
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Date on which the approved draft comes to
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27 IT(SS)A N0. 6 & C.O No. 93/Del/2011