Income Tax Appellate Tribunal - Delhi
Raja Ram Aggarwal (Huf), Delhi vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'G' : NEW DELHI
BEFORE SHRI A.D.JAIN, JM AND SHRI R.C.SHARMA, AM
IT(SS) A.No.57/Del/2009
Block Period : 1.4.1990 to 20.8.2000
Asstt.Commissioner of Vs. Shri Raja Ram Aggrawal HUF,
Income Tax, 486, Chauhan Bangar,
Circle-34(1), Shahdara,
New Delhi. Delhi.
PAN No.AADHR0574B.
(Appellant) (Respondent)
Cross Objection No.311/Del/2009
Block Period : 1.4.1990 to 20.8.2000
Shri Raja Ram Aggrawal Vs. Asstt.Commissioner of
HUF, Income Tax,
486, Chauhan Bangar, Circle-34(1),
Shahdara, New Delhi.
Delhi.
PAN No.AADHR0574B.
(Appellant) (Respondent)
Revenue by : Shri Gajanand Meena, CIT-DR.
Assessee by : Shri Sameer Kapoor, CA.
ORDER
PER BENCH :
This is an appeal filed by the Revenue and cross-objection of the assessee against the order of CIT(A) dated 1.5.2009 for the block period 1.4.1990 to 20.8.2000.
2. Facts in brief are that the AO issued notice u/s 158BD on 13.9.2004 and completed assessment u/s 158BD read with Section 158BC on 11.3.2005. The assessee challenged the validity of assessment framed u/s 158BD and also the 2 IT(SS)-57/D/2009 & CO-311/D/2009 quantum of addition of Rs.6,24,800/- made on account of undisclosed income. By the impugned order, CIT(A) after following the decision of the Tribunal annulled the assessment. Following was the observation of the CIT(A) :-
"I have considered facts of the case. It is seen that a search and seizure operation u/s 132 was carried out in the case of Sh.Manoj Aggarwal on 03.08.2000. The assessment u/s 158BC was completed in his case on 29.08.2002. The notice u/s 158BD in the case of the appellant was issued on 13.09.2004 on the basis of a letter dated 23.01.2003 received from DCIT Central Circle III, the Assessing Officer of the searched person namely, Sh.Manoj Aggarwal. Thus, the facts of this case are identical to the facts found in the case of Sh. Radhey Shyam Bansal and two other cases which have been decided by the Hon'ble Tribunal vide order dated 24.08.2007 in IT(SS) No.12, 14 and 18/Del/2007. In the said order the Hon'ble Tribunal has observed as under:
"In addition notice u/s 158BD has been issued to the assessee Sh. Radhey Shyam Bansal well beyond a reasonable period of time - reckoned either from the date of search (03.08.2000) or from the date of block assessment of Sh.Manoj Aggarwal (29.08.2002) or even from the date on which the Assessing Officer of Sh.Manoj Aggarwal wrote a letter to the Assessing Officer of Sh. Radhey Shyam Bansal (15.07.2003). Thus, even on the ground that there was no effective notice to the assessee within a reasonable period, the assessment requires to be vacated."
In view of the facts mentioned above, it is obvious that the case of the appellant is squarely covered by the decision of the Hon'ble Tribunal in the case of Sh. Radhey Shyam Bansal (supra). Following the decision of the Hon'ble Tribunal, the assessment in the case of the appellant is annulled."
3. Aggrieved by the above order of CIT(A), the Revenue is in appeal before us and the assessee has also filed cross objection alleging the action of the CIT(A) for not deciding the issue on merits.
4. We have considered the rival contentions and carefully gone through the orders of authorities below and also deliberated on the case laws referred to by the 3 IT(SS)-57/D/2009 & CO-311/D/2009 lower authorities in their respective orders with reference to the factual matrix of the present case. There is no dispute to the fact that search in case of Manoj Aggarwal was carried on 20.8.2000 wherein A.O. passed orders u/s 158BC on 29.8.2002. The assessee was issued notice u/s 158BD on 13.9.2004 and the assessment was finalized on 11.3.2005. Thus after more than 6 months from the completion of assessment of the searched person, the notice u/s 158BD was issued. The first question, which arises for our consideration is as to whether it is mandatory on the part of the A.O. assessing the person searched u/s 132(4) of the Act to record satisfaction of any undisclosed income belonging to any person other than the searched person. Hon'ble Supreme Court in the case of Manish Maheshwari (supra) has elaborately discussed the provisions of Section 158BD and held that in case of search u/s 132, while invoking provisions of Section 158BD against a person other than the person whose premises were searched u/s 132, the conditions have to be satisfied that the A.O. assessing the searched person had to (i) record his satisfaction that any undisclosed income belonging to any person other than the searched person and (ii) hand over the books of account and other documents and assets seized to the A.O. having jurisdiction against the other person. In the case before the Hon'ble Supreme Court, the premises of the director of the company and his wife were searched u/s 132. In the course of search, it was transpired from the seized material that this income belongs to the company. No satisfaction was recorded u/s 158BD of the Act by the A.O. who searched the director and his wife nor did he transfer the relevant record to the A.O. having jurisdiction over the company. The Hon'ble Supreme Court held that since no satisfaction has been recorded by the A.O. assessing the director and his wife to the effect that certain income which could be gathered from the seized material belongs to the company, the mandatory condition for invoking section 158BD was not satisfied and accordingly quashed the block assessment made on the company u/s 158BD read with section 158BC. If this judgement is applied to the presents case, we found that no satisfaction has been recorded by the A.O. assessing Manoj Aggarwal. The notice dated 19.2.2003 issued u/s 158BD read with Section 4 IT(SS)-57/D/2009 & CO-311/D/2009 158BC does not refer to any satisfaction of the A.O. assessing Manoj Aggarwal and "satisfaction note" as referred by the CIT(A) at page 6 of his appellate order, cannot be regarded as satisfaction note as the same is dated 23.1.2003, much after the completion of the assessment of Manoj Aggarwal, at that point the A.O. of Manoj Aggarwal has become functious officio.
5. Further, undisputed facts is that notice issued on 5.8.2003 was more than 6 months after the completion of assessment in case of searched person, the issue relating to the determination of period for issuing notice came before the Hon'ble High Court of Gujarat in case of Khandubhai Vasanji Desai and others Vs DCIT 236 ITR 73, wherein the Hon'ble High Court made reference to the time limit taken u/s 158BD having regard to the fact that u/s 132(9A), the authorized officer conducting search against any person had to handover the books of accounts, documents and the assets seized during the course of search to the ITO having jurisdiction over the person to whom such seized material relates, within 15 days of seizure and thereafter, the A.O. was required to serve the notice to such person. This decision of Hon'ble High Court of Gujarat was considered in detail by the ITAT Chandigarh Bench in case of Anil Kumar Jagdhari and others in IT(SS) No.19/Chd./2005 dated 29.6.2007 and by Delhi bench in case of Shri Ajit Singh HUF, Gurgaon in IT(SS) 135/Del/2005, IT(SS) No.140/Del/2005. Chandigarh Bench of the tribunal in case of Anil Kumar Jagdhari (supra) had examined the relevant provisions of the I. T. Act, 1961 in detail and considered several decisions including the decision of Gauhati High Court in the case of Arman Sekh (293 ITR
266) and the decision of Hon'ble Supreme Court in case of Manish Maheshwari (supra) and made a detailed observation in Para 26 of its order. The observations of the bench are as under:
"26. We can examine this from another angle also. The authorized officer who carries out a search u/s 132 or makes a requisition u/s 132A is required to hand over the books of account or other documents, materials seized u/s 132(1) or requisition u/s 132A to the Assessing Officer of t he person who is referred to in clauses (a), (b) 5 IT(SS)-57/D/2009 & CO-311/D/2009 or (c of Section 132(1) of the Act i.e. the person who has been put to search or a requisition u/s 132A of the Act. This is the first instance where the Assessing Officer who has the jurisdiction over the person put to search u/s 132 or requisition u/s 132A comes into picture and he is required to make an assessment for the block period computing the undisclosed income under Chapter XIV-B of the act. In order to frame such assessment, the said Assessing Officer is authorized, in terms of Section 158BC, to issue notice to the person who has been put to search u/s 132 or requisition u/s 132A requiring him to furnish a return of undisclosed income for the block period as denied under Chapter XIV-B. At this stage when the said Assessing Officer proceeds to make an assessment of undisclosed income he comes in possession of the evidence and the material found as a result of search u/s 132 or a requisition u/s 132A an which has been handed over to him by the authorized officer. In so far as the person put to search or requisition is concerned, the Assessing Officer proceeds to frame assessment on the strength of the presumption that the material seized belongs to the person in whose possession it was found. It is for this reason that the invoking of Section 158BC is automatic in the case of a person who has been put to search or requisition. Now in so far as a person who is not put to search or requisition but is required to be subjected to the rigors of Chapter XIV-B, the mechanism is provided in Section 158BD of the Act. In order to invoke the mechanism of Section 158BD it is imperative that Assessing Officer is satisfied on the bass of material before him that any disclosed income belongs to a person other than the person put to search u/s 132 or requisition u/s 132A of the Act. Now we may visualize a situation whereby the evidence and material found as a result of search u/s 132 or requisition u/s 132A, and which is in the possession of the Assessing Officer, straightway shows undisclosed income and also the person to whom it belongs, being a person other than the person who has been put to search u/s 132 or a requisition u/s 132A of the Act. At this stage itself the AO is competent to proceed against such other person by issuing notice u/s 158BD r.w.s. 158BC of the Act after recording the requisite satisfaction. If the person so identified is not within the jurisdiction of the said Assessing Officer, then after recording the necessary satisfaction, the Assessing Officer required to transmit books of account, other documents or assets seized or requisitioned to the Assessing Officer having jurisdiction over such "other person". Such an Assessing Officer, after receipt of the material referred above, shall proceed to issue notice u/s 158BD r.w.s. 158BC requiring such person to file return of income for block period of undisclosed income belonging to such "other person". Now a second situation 6 IT(SS)-57/D/2009 & CO-311/D/2009 could also be visualized. In this situation, after having initiated the proceedings of assessment under Chapter XIV-B in the case of a person put to search u/s 132 or a requisition u/s 132A, the Assessing Officer in the course such assessment examines the material and evidence found as a result of search and makes enquiries relatable to such evidence and acquires a satisfaction that an undisclosed income belongs to a person other than the person with respect to whom search was made u/s 132 or a requisition u/s 132A was made. Again at this stage, the Assessing Officer is competent to proceed against such other person by issuing notice u/s 158BD r.w.s. 158BC of the Act after recording the necessary satisfaction. Similarly if the person so identified is not within the jurisdiction of the said AO, then the AO after recording the satisfaction proceeds to transmit books of account, other documents or seized material to the Assessing Officer having jurisdiction over such person. In the scheme of Chapter XIV- B, it is discernible that the recording of satisfaction that any undisclosed income belongs to "other person" is the point which triggers the subsequent invoking of Section 158BD. In both situations, the material on the basis of which such satisfaction is to be arrived at is within the domain of the Assessing Officer of the person put to search u/s 132A. Therefore, logically speaking, the point of time whereby the Assessing Officer, after having examined the entire material and evidence for the purpose of making an assessment in the case of person searched shall be in a position to satisfy himself as to whether any undisclosed income belongs to a person other than the person being assessed. Thus the date of finalization of assessment u/s 158BC of the person put to search u/s 132 or to requisition u/s 132A. Therefore, logically speaking, the point of the time whereby the Assessing Officer, after having examined the entire material and evidence for the purpose of making an assessment in the case of person searched shall be in a position to satisfy himself as to whether any disclosed income belongs to a person other than being assessed. Thus the date of finalization of assessment u/s 158BC of the person put to search is a relevant point of time to deduce the period of limitation available with the AO to arrive at the satisfaction contemplated u/s 158BD."
6. After having the above observation, the bench finally held that the date of finalization of the assessment u/s 158 BC and person put to search is relevant point of time to determine the period of limitation available with the A.O. to arrive at the satisfaction as contemplated u/s 158 BC. It was further held that argument of the department that satisfaction can be recorded at any time and notice u/s 158 BD 7 IT(SS)-57/D/2009 & CO-311/D/2009 can be issued any time for the reason that there is no time limit prescribed, is fallacious having regard to the scheme of block assessment under Chapter XIV B as also the objective for which the special procedure for assessment in case of search person has been brought out on the statute by the Finance Act 1995.
7. The Delhi Bench of the ITAT in the case of Ajit Singh (supra) has reproduced para 23 to 39 of Anil Kumar Jagadhari and has followed the findings of the Bench on this issue by observing as under:
"8. In the above background we now come back to the facts of the present case. In the instant case the salient facts which assessment u/s 132(1) took place on one Shri Mangal Singh on 18.12.97, as a consequence of which assessment u/s 158BD on the said person was made by DCIT, Inv. Circle, Gurgaon on 26.2.99. The satisfaction contemplated u/s 158BD to rope in the assessee to the provisions of section XIV-B in the present case has been canvassed by the Revenue to be recorded in 2001 by the Assessing Officer of the impugned assessee. Clearly the said satisfaction is much after the date of assessment of undisclosed income in the case of present searched i.e. Shri Mangal Singh and hence the satisfaction so recorded is belated having regard to the reasoning elaborated by the Tribunal in the case of Anil Kumar, Jagadhri & others (supra). The assessment in the case of Mangal Singh u/s 158 BC has been completed on 26.2.99 whereas the satisfaction has been recorded in the year 2001. Moreover in the year 2001 the DCIT, Inv. Circle, Gurgaon could not be construed to be acting as an Assessing Officer of the person searched i.e. Mangal Singh qua his duty of recording of satisfaction contemplated u/s 158BD of the Act which was to be done before finalization of assessment u/s 158BC on 26.2.99. The vesting of jurisdiction of DCIT, Gurgaon over the case of the assessee is operative only from 21.8.2001 as is evident from the copy of the order of the Commissioner of Income Tax, Faridabad dated 21.8.2001 (supra) and therefore it cannot be said that on 26.2.99, the Assessing Officer was common. Thus, in the background of the aforesaid fact position, we are of the opinion that the satisfaction contemplated u/s 158BD has not been recorded and hence issuance of notice u/s 158BD dated 24.8.2001 is bad in law."
8 IT(SS)-57/D/2009 & CO-311/D/2009
8. The ITAT Delhi Bench again considered the issue in the case of R.S. Bansal Vs. ACIT (supra) and following the decision of Hon'ble Gujarat High Court in the case of Khandubhai Vasanji Desai & others Vs. DCIT (supra) and that of the earlier decision of ITAT Chandigarh in the case of Anil Kumar Jagadhari, observed as under:
"The next question to be addressed is whether the notice u/s 158BD requires to be issued within a reasonable time and if it is not so issued, whether the assessment made pursuant to the notice is liable to be set aside on that ground. The contention of the Ld. Representative for the assessee, it may be recalled, was that the notice should have been issued at least within a reasonable time after the completion of the assessment of the searched person. In the present case, the block assessment of Manoj Aggarwal was completed on 29.8.2002 but the notice u/s 158BD was issued only on 22.3.2004, that is about 19 months later. The further contention based on the judgment of the High Court in Khandubhai Vasanji Desai's case (supra) was that the notice should be issued within 15 days from the date of completion of the block assessment in the case of the searched person or at any rate within 60 days from that date, the sanctity behind this period being the provisions of s. 132(9A). In Khandubhai's case, the Gujarat High Court referred to the time limit of 15 days having regard to the fact that u/s 132(9A) as it stood at the relevant time the authorized officer who conducted the search against a person has to hand over the books of account, documents and assets seized to the ITO having jurisdiction over the person to whom the books of accounts, documents and assets seized relate, within 15 days of the seizure and thereafter the AO is required to serve notice on such person to whom the books of account etc. relate requiring him to furnish a block return u/s 158BC. The Gujarat High Court was concerned with the constitutional validity of s. 158BD of the Act and one of the contentions was expressed in the form of an apprehension that a notice u/s 158BD can be issued by the AO in the case of the other person (other than the person who was searched) t 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 u/s 158BD has to be issued within a reasonable period from the date of the search itself and it was
9 IT(SS)-57/D/2009 & CO-311/D/2009 pointed out taking cue from s. 132(9A), that it should be done within 15 days of the seizure. The obvious implication is that the satisfaction that the income reflected in the seized material belongs to some person other than the person searched should also be reached within the aforesaid period of 15 days so that the same can be transmitted along with the books of accounts, documents etc. seized during the search. The period of 15 days has been amended to 60 days by the Finance Act, 2002 w.e.f. 1st June, 2002. It is noteworthy that the amendment had come into force even during the pendency of the block assessment proceedings in the case of Manoj Aggarwal. However, even after the completion of the block assessment of Manoj Aggarwal on 29.08.2002, the AO of the assessee took about 19 months to issue the notice u/s 158BD. The period of 60 days mentioned in s. 132(9A) is actually for handling over the books of account etc. to the AO having jurisdiction over the person who is a person other than the person searched and it actually starts from the date of search. The period was highlighted by the Gujarat High Court only to emphasize the speed and swiftness within which the proceedings should be taken against such persons. That object does not appear to have been achieved in the present case in view of the unreasonable delay in issuing the notice u/s 158BD not only after the date of search but also after the date of completion of the block assessment of Manoj Aggarwal. Even f the period of 60 days is to be reckoned from 15.07.03, the date on which the AO Manoj Aggarwal wrote a letter to the O of Radhey Shyam Bansal, there is a delay of almost 8 months before issue of the notice u/s 158BD. In such circumstances, we hold that the notice having been issued well beyond a reasonable period of time, this assessment made on the assessee is bad in law."
9. Now, we come to letter-dated 23.1.2003 written by the DCIT Circle-3, New Delhi, who is the A.O. having jurisdiction over Manoj Agarwal, to the A.O. of the assessee concerned in this appeal. On this issue, Chandigarh Bench of the tribunal has passed elaborate order in case of ACIT, Yamunanagar Vs Kishorelal Balwantrai, order dated 29.6.2007. On the basis of this decision, Ld. A.R. contended that satisfaction should have been recorded before the block assessment of Manoj Aggarwal was completed. Our attention was also drawn to the 10 IT(SS)-57/D/2009 & CO-311/D/2009 observation at Para 25.1 of the order, to the effect that such a satisfaction has to be recorded during the course of assessment proceedings of the person put to search u/s 132 or requisition u/s 132A because only in the course of assessment proceedings, let the A.O. be put in a position not only to detect the undisclosed income but also to identify the person to whom it belongs. It was also observed that after the assessment of a person searched is completed, the A.O. would become 'functious officio' regarding the power and function outlined in section 158BC and he can no longer be construed as A.O. for the purpose of Chapter XIVB in so far as the person searched is concerned. In the assessment of the person searched is completed, the task of the A.O. to identify the undisclosed income and the person to whom such income belongs, attaining finality and thereafter, it is not open to him to record any satisfaction of any kind. He is no longer inseisin of any kind of assessment of the searched person and, therefore, cannot assume jurisdiction over the same and record any satisfaction. We respectfully agree with the view taken by the Chandigarh Bench as to the time frame within which the satisfaction should be recorded by the A.O. having jurisdiction over such assessment of the person searched. Undisputedly, in the instant case, the assessment of Manoj Aggarwal was completed u/s 158BC on 29.8.2002, thereafter, the A.O. assessing him became 'functious officio' and was legally under a disability to record any satisfaction to the effect that any undisclosed income belongs to Gulshan Kumar Luthra (HUF). Thereafter, the letter written on 23.1.2003 by the DCIT, Circle-3, New Delhi, who was the A.O. having jurisdiction over Manoj Aggarwal cannot be construed to be the satisfaction as required by Section 158BD since it was much after the completion of block assessment of Manoj Aggarwal.
10. In the case of R S Bansal (supra), since the notice was issued after the delay of almost 8 months, it was held that notice was issued beyond the reasonable period of time. On this ground itself the assessment was held to be bad in law. However, no decision was brought to our notice by Ld. CIT DR, by any 11 IT(SS)-57/D/2009 & CO-311/D/2009 authorities for supporting the argument that no time limit has been prescribed for issuing notice u/s 158BD. As held by Hon'ble Supreme Court in case of Honda Siel (295 ITR 466) the decision of coordinate bench has to be followed, hence respectfully following the aforesaid decisions, we hold that in this case also notice issued after the expiry of period of 60 days from the date of passing the assessment order in the case of person searched i.e. Manoj Aggarwal, was beyond a reasonable period and hence, such notice was not validly issued. Accordingly, the jurisdiction assumed on the basis of such invalid notice and the assessment on this basis do not have any legs to stand and therefore, the same is liable to be quashed.
11. The issue with regard to recording of satisfaction in the notice u/s 158BD has also been considered by the ITAT Special Bench in case of Manoj Aggarwal Vs DCIT (113 ITD 477) wherein it was held that for initiating action u/s 158BD, first and foremost requirement is that the A.O. making block assessment of a person searched, has to be satisfied that undisclosed income detected belongs to some other person other than person searched and, thus, section itself contemplates satisfaction on the part of the A.O. making assessment in case of person searched; recording of satisfaction is mandatory and imperative before assuming of jurisdiction u/s 158BD. It was further observed that note of satisfaction must contain positive finding by the A.O. making assessment u/s 158BC indicating therein undisclosed income found as a result of his examination of seized material and the person to whom searched income belongs.
12. Undisputedly, in the instant case, notice u/s 158BD was issued to the assessee on 13.9.2004 which was much after 6 months from the end of the completion of the assessment of searched person, the notice u/s 158BD was bad in law, consequently, the block assessment framed u/s 158BD had no legs to stand.
12 IT(SS)-57/D/2009 & CO-311/D/2009
13. In view of the above, as we have already upheld the action of the CIT(A) for annulling the assessment, we are not going into the merits of the addition which the CIT(A) had also not dealt with.
14. In the result, the appeal of the Revenue is dismissed whereas cross- objection of the assessee is also dismissed as infructuous.
Decision pronounced in the open Court on conclusion of hearing on 29th September, 2009.
Sd/- Sd/-
(A.D.JAIN) (R.C.SHARMA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 29.09.2009.
VK.
Copy forwarded to: -
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT
Deputy Registrar