Madras High Court
Commissioner Of Income Tax vs M.K.M.Mohamed Nazar on 27 July, 2011
Author: Chitra Venkataraman
Bench: Chitra Venkataraman, M.Jaichandren
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 27.07.2011 CORAM: THE HONOURABLE MRS.JUSTICE CHITRA VENKATARAMAN and THE HONOURABLE MR.JUSTICE M.JAICHANDREN Tax Case (Appeal) No.684 of 2005 Commissioner of Income Tax Madurai. .. Appellant versus M.K.M.Mohamed Nazar 57 C Rhmath Nagar Palayamkottai. .. Respondent ----- PRAYER: Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal, Madras 'C' Bench, dated 20.12.2004 in ITA No.55/Mds/97 (Block Assessment Period 1.4.1985 to 23.1.1996). ----- For appellant : Mr.J.Naresh Kumar Standing Counsel for Income Tax For respondent : No appearance ----- JUDGMENT
(Judgment of the Court was delivered by CHITRA VENKATARAMAN,J.) The Revenue is on appeal as against the order of the Tribunal, relating to the block assessment period 1.4.1984 to 23.1.1995, raising the following substantial questions of law:
" 1. Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the block assessment framed by the Assessing Officer is invalid and setting aside the whole block assessment under Section 158BC read with Section 158 BG?
2. Whether in the facts and circumstances of the case, the Tribunal was right in setting aside the block assessment without verifying whether the assessee was a partner during the block assessment period from 1.4.1984 to 23.1.1996?
2. The assessee carries on business in jewellery. A perusal of the order of assessment shows that there was a search in the premises of the assessee on 23.1.1996 and 24.1.1996, during which, the assessee was found to be in possession of 1265 grams of jewellery and also had completed construction of a commercial building in the years 1989 to 1991 at an admitted cost of Rs.9,74,890/-. A notice under Section 158 BC of the Income Tax Act was issued to the assessee, calling upon the assessee to file the return for the block period from 1.4.1985 to the date of search i.e., 23.1.1996. The assessee filed a 'nil' return.
3. In the course of the proceedings, the assessee offered his explanation. Accepting the contention of the assessee that part of the jewellery belonged to the family, the Assessing Officer brought to tax the value of the jewellery of an extent of 310 grams. As regards the construction of M.H. Complex, the Assessing Officer assessed a sum of Rs.2,98,665/- as undisclosed income. Aggrieved by the said assessment, the assessee filed an appeal before the Income Tax Appellate Tribunal, contending that there was no reasonable opportunity granted to the assessee in the course of the proceedings. The assessee also contended that the income could not be treated as an undisclosed income within the meaning of Section 158B of the Income Tax Act and consequently, the assessment could not be treated as falling within the scope of Section 158B of the Income Tax Act. In the course of the proceedings before the Tribunal, it was pointed out that since the search was conducted only in the premises of M.H.Jewellers, Tirunelveli, there being no such warrant in the assessee's case for making the block assessment period under Section 158BC of the Income Tax Act, the proceedings was not maintainable.
4. We have gone through the records and heard the learned Standing Counsel appearing on behalf of the Revenue.
5. As regards the factual issues, the Tribunal found that there was no search warrant in the case of the assessee; that there was a search under Section 132 of the Income Tax Act only as regards the premises of M.H.Jewellers, Tirunelveli. Since, at the material point of time, the assessee was not at all a partner in the firm, the block assessment made was not sustainable and that the income for 1995-96 should have been taken up under the normal assessment procedure. The Tribunal held that when there was no valid search, as admitted by the Department, there could not be any valid block assessment as far as the assessee is concerned. The Tribunal further pointed out that even otherwise, this was not a case where, in respect of some search on some other assessee, the books of accounts, other documents or assets seized or requisitioned under Section 132A of the Act in the case of the assessee were handed over to the Assessing Officer. In view of this, the Tribunal set aside the block assessment.
6. On a query made by this Court on the above aspect, after verifying through the Officer, learned Standing Counsel appearing for the Revenue reported that there was no search warrant issued to the assessee. He also produced before us the letter written by the concerned Officer dated 11.7.2011 to the effect that the assessee was not a partner in the firm M/s.M.H.Jewellers at the time of search made on 23.1.1996. The Panchnama drawn in the case of the assessee pointed out that the premises of the assessee was searched on the basis of the warrant issued in the case of M/s.M.H.Jewellers. It was also pointed out that on the date when the premises was searched, the assessee was not a partner in the firm M/s.M.H.Jewellers. The Additional Director of Income Tax (Investigation), Madurai (in charge) had stated that even after a thorough verification, they could not trace any warrant in the name of the assessee in connection with the search operation carried out on 23.1.1996. On the background of the above facts, the Revenue reported that there was no search warrant issued in the assessee's case.
7. Recording the said averment, we hold that the assessment made under Section 158BC of the Income Tax Act could not be sustained. However, it is a matter of relevance to point out that under Section 158 BD of the Income Tax Act, undisclosed income of any other person can also be brought under block assessment procedure under Chapter XIVB. The said provision merits to be extracted hereunder:
" Section 158 BD: 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 under section 158BC against such other person and the provisions of this Chapter shall apply accordingly. "
8. Thus going by the above-said conclusion, if, on a search conducted in the premises other than that of the assessee materials are recovered, which have relevance to any person other than the person in whose premises search was conducted, then the books of accounts and other materials have to be handed over to the jurisdictional Officer of such other person to proceed in accordance with Section 158BC. In view of the above, the provisions of Chapter XIVB would have application to the facts of this case.
9. As far as the present case is concerned, going by the letter produced before this Court, it is clear that there was no search warrant on the assessee to conclude that the case would fall under Section 158BC of the Income Tax Act. If the case has to come under Section 158BD of the Income Tax Act, then in respect of the search conducted in the premises of M/s.M.H.Jewellers, the materials recovered ought to have been handed over to the territorial Officer having jurisdiction over the assessee for considering any undisclosed income in accordance with Section 158 BC of the Income Tax Act.
10. As far as the present case is concerned, the finding of the Tribunal in paragraph 7 is that even in respect of search carried on in the business premises of M/s.M.H.Jewellers, books of accounts, which they ought to have handed over, were not handed over. If that is the factual finding of the Tribunal, then the assessment even to invoke Section 158 BD of the Income Tax Act cannot be sustained.
11. In the light of the facts thus found by the Tribunal, we have no hesitation in confirming the order of the Tribunal. Hence, this Tax Case Appeal stands dismissed. No costs.
ksv To
1. The Income Tax Appellate Tribunal, Chennai Bench 'C'.
2. The Assistant Commissioner of Income Tax Circle-I Tirunelveli