Allahabad High Court
Savesh Kumar Agarwal vs Union Of India And Others on 25 November, 2011
Bench: Sunil Ambwani, Kashi Nath Pandey
HIGH COURT OF JUDICATURE AT ALLAHABAD AFR Judgment reserved on 02.11.2011 Judgment delivered on 25.11.2011 Civil Misc. Writ Petition No.692 of 2011 Savesh Kumar Agarwal v. Union of India & Ors. Hon. Sunil Ambwani, J.
Hon. K.N. Pandey, J.
We have heard Shri S.D. Singh, learned counsel for the petitioner. Shri Dhananjay Awasthi appears for the respondents.
The petitioner is engaged in the business of purchase and sale of jwellery etc. In the regular course of business the petitioner dispatched 69.900 kg. of silver bullion to M/s R.M. Silver, Rajkot and M/s Subh Enterprises at their address at Rajkot for manufacturing silver ornaments though M/s Harish Kumar Laxman Kumar, 225 Kacha Ghasiram, Chandni Chowk, New Delhi. The entire consignment of bullion was seized from the custody of petitioner's courier by Delhi Police.
The Deputy DIT (Inv), Unit-II (1), New Delhi requisitioned the entire seized bullion by order dated 17.6.2008 under Section 132A of the Income Tax Act, 1961 (the Act). Certain other courier service providers were also searched and seizures were carried out.
The petitioner applied for release of the bullion by making application dated 3.7.2008, under Section 132B of the Act stating that the entire consignment was duly accounted for and recorded in his account books. He produced all the account books and final accounts for the period 2006-07, 2007-08 along with stock register of 2008-09. The petitioner's statement was recorded on 18.8.2008. On 30.11.2009 the petitioner's assessing authority namely the Income Tax Officer, Unit-II (2), Bareilly passed an order under Section 132B, to release the entire quantity in favour of the petitioner, after examining his account books and all other relevant materials, and after recording findings that the silver bullion in question was part of stock in trade, and was duly disclosed by the petitioner. The order has not been challenged and has attained finality. The entire seized silver bullion has been released to the petitioner.
On 31.12.2010 the assessment was completed under Section 153 B (b) read with Section 143 (3) of the Act in the case of M/s Harish Kumar Laxman Kumar, the courier for the assessment year 2009-10 by Income Tax Officer Ward-III (2), Ahmedabad. He recorded all the facts and circumstances, and held that the silver bullion belongs to the petitioner. The assessment of M/s Harish Kumar Laxman Kumar was converted at 'Nil' income. He, however, referred the matter along with satisfaction note dated 31.2.2009 under Section 153 (c) of the Act to the Assessing Officer of the petitioner.
On the receipt of the satisfaction note dated 31.12.2010 of the Income Tax Officer Ward III (2), Ahmedabad the petitioner's Assessing Officer namely Income Tax Officer Ward-II (2), Bareilly acting under the provisions of Section 123 C of the Act has initiated assessment proceedings for 7 assessment years (A.Ys. 2003-04 to 2009-10) by issuing separate orders directing the petitioner to file return on prescribed form, directing further that no extension of time for filing the return under Section 153 (c) will be allowed.
By this writ petition the petitioner is challenging the initiation of the assessment proceedings against the petitioner under Section 153A rad with Section 153 B for assessment years 2003-04 to 2009-10 vide notice dated 30.3.2011 issued by the Income Tax Officer Ward-II (2), Bareilly. The petitioner has also challenged the vires of Section 153A and 153C of the Act as against the basic spirit and structure of the Income Tax Act, 1961 providing for mandatory assessment or re-assessment for six previous assessment years in advance on discovery of any undisclosed income of an assessee.
In the counter affidavit of Shri Amit Kumar Chaudhary, Income Tax Inspector, CIT Office, Bareilly it is stated in para 6 as follows:-
"6. That the contents of paragraphs no.3, 4, 5, 6, 7, 8, 9 & 10 of the Writ Petition it is averred that the silver taken into custody U/s 132 (A) on 17.6.2008 which was found to be in possession of M/s Harish Kumar & Laxman Kumar the assessment U/s 153 (B) (b) r.w. 143 (3) for A.Y. 2009-10 on 13.12.2010. The petitioner was issued notices and on basis of notices produced the books of account which were examined and it was found that the Bullion was duly recorded in the stock register, hence was released but though the silver was found register but the petitioner could not explain the source of funds for purchasing the Silver/ Bullion, hence notices were issued and since the Assessment of the petitioner was completed u/s 143 (A) it is necessary to investigate the source of investment in purchasing of silver and the Assessment should be completed U/s 153 (c) r.w. Section 153 (A). Rest of the facts stated are paragraph denied."
Before considering the submissions of learned counsel for the parties, it will be appropriate to quote the orders of the assessing authority of the petitioner dated 30.11.2009; the relevant portion of the order of the assessment of M/s Harish Kumar Laxman Kumar for the assessment 2009-10 and the short satisfaction note as follows:-
The assessment order of the petitioner under Section 132 B of the Act dated 30.11.2009 "GOVERNMENT OF INDIA DEPARTMENT OF REVENUE OFFICE OF THE INCOME TAX OFFICER-2 (2) BAREILLY Name & addrss of the assessee Shri Sarvesh Kumar Agarwal Prop: Sarvesh Jewellers, Sahukara, Bareilly ORDER U/S 132B OF THE I.T. ACT, 1961 DATED:30.11.2009 The assessee has moved an application u/s 132B of the I.T. Act, 1961 on 30.7.2008 before the undersigned stating that the silver bullion weighing 69.900 kg was sent through courier viz M/s Harish Kumar Laxmi Kumar 225, Kuncha Ghasi Ram Chandinichowk, Delhi for sending to M/s R.M. Silver, Shilp complex, Mandir Chowk, Rajkot and M/s Subh Enterprises. Ranchar Nagar, Bhan Nagar Road, Opp. Tinko Rajkot for manufacturing of silver ornaments. While sending the same by the aforesaid courier to the concerned parties the Police Party seized the same from Railway Station, Delhi along with goods relating to other parties also. Thereafter, the Assistant Director of Income-Tax (Inv.) Unit-II (3), A.R.A. Centre, Jhandewalan Extension, New Delhi requisitioned the same u/s 132A of I.T. Act, 1961 from the Police Department. Now, the above silver bullion is under the possession of ADIT (Inv.). Unit II (3) A.R.A. Centre, Jhandewalan Extension, New Delhi. Meanwhile, a letter F.No.DDIT (Inv.) Unit II (1) New Delhi was also forwarded to me for my report. The necessary report was accordingly submitted vide this office letter of even no. dated 29.01.2009 to the Commissioner of Income Tax, Bareilly wherein inquiries conducted in this case wee also reported to him.
I have gone through the details of the application furnished by the asssessee and have also perused the relevant books of accounts i.e. Stock register. Ledger and cash book. The Silver Bullion mentioned above has been found duly recorded in the stock register and necessary verification has also been made from ledger and cash book. The statement of the assessee i.e. Shri Savesh Kumar Agarwal S/o Shri Vishnu Kumar Agarwal Resident of Sahukara, Bareilly was recorded on 18.8.2008. The care full study of the statement of Shri Savesh Kumar Agarwal recorded on oath revealed nothing adverse. The assessee is Income Tax payer and is regularly assessed to tax for number of years. Since the application u/s 132B is well within time and seized goods as mentioned above are part of stock in trade and all the requirements mentioned under the provisions of section 132B are fulfilled, the silver bullion as mentioned above is released. The order has been passed after obtaining approval of Ld. Commissioner of Income Tax, Bareilly vide order u/s 132 B of the IT Act, 1961 dated 24.11.2009 circulated endorsement F.No.CIT.BLY/132B/Ser.Jew./2009-10 dated 24.11.2009.
(O.N. Misra) Income-tax Officer-2 (2) Breilly Copy to the assessee.
(O.N. Misra) Income-tax Officer-2 (2) Breilly"
The relevant extract of the assessment order of M/s Harish Kumar Laxman Kumar, the courier of the assessment year 2009-10 by Income Tax Officer Ward-III (2), Ahmedabad dated 31.12.2010 "10. Considering the above facts I am satisfied that the silver seized to the extent of 70.961 Kgs from the employee of the assessee firm belongs to M/s Sarvesh Jewellers Prop Shri Sarvesh Kumar Arawal, Shahukara, Bareilly who is assessed to Tax with PAN No.AETPA3062K ITO Wd 2 (2), Bareilly. Since the above referred seized Silver Bullion belongs to M/s Sarvesh Jewellers of Bareilly. So information along with the satisfaction note, appraisal report and seized documents/ assets is being forwarded to the ITO Wd, 2(2), Bareilly for necessary action u/s 153C of the I.T. Act. In view of the above no additions has been made on account of seized silver bullion in the case of the assessee.
Subject to the above discussion income of the assessee is assessed at returned income of Rs.NIL/-.
Assessed u/s. 153B (b) r.w.s.143 (3) of the I.T. Act, 1961. Give credit for prepaid taxes after due verification. This order is passed with the prior approval of the Jt. CIT, Range-3 A'bad conveyed vide letter No.Jt.CIT/AR-3/HL/153A/2010-11, dtd.30.12.2010."
Satisfaction Note for proceedings u/s 153C of the Income Tax Act, 1961 Search action u/s 132A was carried out by ADIT (INV), Unit II (I), New Delhi, on 17.6.2008 in the case of M/s Harishkumar Laxmankumar, Ahmedabad and seizure of silver bullion was made.
The case was selected for compulsory scrutiny and six assessment years from 2003-04 to 2008-09 was also selected for scrutiny u/s 153A (1) of the Income Tax Act. During the proceedings, the assessee was asked to prove the ownership of the above seized material. The assessee vide his written reply dtd. 13.12.2010 stated and proved that seized silver bullion belongs to M/s Sarvesh Jewellers Prop. of Shri Sarvesh Agrawal, Bareilly.
The ownership of consignment in the case of Shri Sarvesh Agrawal, Prop. of M/s. Sarvesh Jewellers, PAN-AETPA3062K had been confirmed by his A.O. i.e. ITO Wd. 2 (2) Bareilly. Hence, this person is required to be assessed u/s 153C of the Income Tax Act. Accordingly, the ITO Ward-2 (2), Bareilly is requested to proceed u/s 153C of the IT Act in the case of Shri Sarvesh Agrawal Prop. of M/s Sarvesh Jewellers, PAN-AETPA3062K.
(K.T. Pandya) Income-Tax Officer Ward-3 (2), Ahmedabad.
Dated.31/12/2010."
Shri S.D. Singh, learned counsel for the petitioner submits that there is no other material or evidence in any form that any undisclosed income was either received by or accrued to the petitioner during the assessment years 2003-04 to 2009-10. In the absence of any material there was no need or any justification to assess or re-assess the petitioner for earlier periods. All the disclosures made by assessee have already been accepted by the assessing authority under Section 143 (1). Just because of action under Section 132 or 132A of the Act was initiated against his courier without any fresh material on record, the notice for assessments is exfacie, arbitrary and unreasonable.
Shri S.D. Singh further submits that the provisions of Section 153A read with Section 153C, in so far as they permit for the second assessment, which is already complete, is arbitrary, illegal, unless search and seizure operation under Section 132 or Section 132A, result into discovery of any undisclosed income, or any such material, which may justify assessments of last 6 years. The power conferred under Section 153A read with Section 153C for necessary assessments or re-assessment for 6 years cannot be exercised mechanically without any material of undisclosed income. The notice has been given without any purpose. The exercise is mechanical, only to serve the statute.
Shri S.D. Singh submits that in the present case the petitioner's assessment officer after going through the relevant books of accounts, including stock register, ledger and cash book found that the silver bullion is duly recorded in the register and necessary verifications were made. The petitioner's statement was also recorded, which was carefully studied, and revealed nothing adverse. The petitioner is being assessed regularly for number of years. On the satisfaction recorded by the petitioner's assessing officer the entire bullion was released in his favour and thus in the circumstances the second assessment on the satisfaction note for proceeding under Section 153 (c) without disclosing any adverse material is wholly without jurisdiction. The Court should not permit the mechanical exercise for needless assessments, just to subserve the provisions of law.
Shri Dhananjay Awasthi on the other hand submits that though the petitioner's assessing authority did not find anything adverse and has allowed application under Section 132B and that nothing adverse was also reported in incomes' assessment of courier on 31.12.2010, the authorities were duty bound to record satisfaction note for proceedings under Section 153C and that in the proceedings of the second assessment the petitioner will be required to prove the source of income for purchase and dispatch of bullion, which was seized and released to him.
In Manish Maheshwari v. Asstt. Commissioner of Income Tax & Anr., (2007) 3 SCC 794 the Supreme Court held that condition precedent for invoking a block assessment is that a search has been conducted under Section 132, or documents or assets have been requisitioned under Section 132-A. These provisions would apply in the case of any person in respect of whom search has been carried out under Section 132 or documents or assets have been requisitioned under Section 132-A. Section 158-BD, however, provides for taking recourse to a block assessment in terms of Section 158-BC in respect of any other person, the conditions precedents wherefor are: (i) satisfaction must be recorded by the assessing officer that any undisclosed income belongs to any person, other than the person with respect to whom search was made under Section 132 of the Act; (ii) the books of accounts or other documents or assets seized or requisitioned had been handed over to the assessing officer having jurisdiction over such other person; and (iii) the assessing officer has proceeded under Section 158-BC against such other person.
The conditions precedent for invoking the provisions of Section 158-BD, thus, are required to be satisfied before the provisions of the said chapter are applied in relation to any person other than the person whose premises had been searched or whose documents and other assets had been requisitioned under Section 132-A of the Act.
The Supreme Court further held that a taxing statute, as is well known, must be construed strictly and relied upon Sneh Enterprises v. Commissioner of Customs, (2006) 7 SCC 714; J. Srinivasa Rao v. Govt. of A.P., (2006) 12 SCC 607 and Ispat Industries Ltd. v. Commissioner of Customs, (2006) 12 SCC 583 in holding that where law is clear and explicit, the only question that arises is whether the notice satisfies the requirement of the law. The notice should record satisfaction under Section 158 (B) (D) on the part of assessing officer, on which he gets jurisdiction over the matter, to transfer the case to the assessing officer.
The Act has been amended introducing provisions of Section 153A, 153B, 153C and 153D. The requirement of law is the same as have been spelled out in Manish Maheshwari's case (Supra).
In the present case all the requirements of Section 153 C having been complied with. After making assessment of the person in whose hands the goods were found, the satisfaction note was recorded and sent to the assessing officer of the petitioner.
In Manish Maheshwari's case (Supra) the Supreme Court observed that taxing statute must be constructed strictly. The Court, however, shall not interpret statutory provisions in such a manner, which would create an additional physical burden on a person. In case of any doubt or dispute, construction is to be made in favour of the tax payer and against the revenue.
In the present case we do not find anything wrong in the satisfaction note and the forwarding of the entire matter by the Income Tax Officer, Ward-III (2), Ahmedabad to the Assessing Officer of the petitioner at Bareilly. All the requirements of Section 153 (c) were complied with by the Income Tax Officer, Ward-III (2), Ahmedabad. A search under Section 132A was carried out and bullion was seized. The case was selected for compulsory scrutiny for six assessment years. The assessee established that the seized silver belongs to M/s Sarvesh Jwellers, Bareilly-the petitioner. The ownership and consignment of the petitioner was also confirmed by the Assessing Officer of the petitioner at Bareilly. The Income Tax Officer, Ward-III (2), Ahmedabad did not commit any error in law, in recording the satisfaction note requesting the petitioner's Assessing officer to proceed under Section 153 (c) of the I.T. Act.
After the assessment of the person in respect of whom search action was carried out is completed, the officer under Section 153C, where he find that seized articles belong to some other person, has to forward a satisfaction note to the Assessing Officer on such person. The satisfaction in such case is in respect of the material and disclosures of the person with which the articles or assets are found and not in respect of the person to whom they belong.
The question which now calls for consideration is whether on receipt of satisfaction note, even if the assessing authority receiving satisfaction note has already examined account books, and has not found anything adverse against the assessee, and further seized goods have already been released in favour of the assessee, he is required to issue notice under Section 153 (c) of the Act to file returns for six years.
The department has taken a stand that even if the books of accounts were examined by the Assessing Officer of the petitioner, and the bullion having found validly entered in the stock books was released under Section 132B, still the Assessing Officer can proceed under Section 153A and assess the petitioner to find out the source of income.
Where there is power to act in a particular manner, unless it is shown that power has been exercised without jurisdiction and lacks bonafide, the statutory notice given in exercise of such powers, may not be set aside by the Court under Art.226 of the Constitution of India. The argument that the second assessment for the same year and of the previous years will amount to duplication and will be needless exercise of power, overlooks the fact that such power actually exists and if there is any reason to believe namely the satisfaction of the Assessing Authority to examine the source of income, the Court would not interfere to close such enquiry.
If there is power to do something under the Act, the action taken in the fiscal matters cannot be set aside in exercise of writ jurisdiction on the ground that such power is to be exercised needlessly, without any purpose. The exercise of power in such case can only be challenged, if the power is being exercised with ulterior motive and malafide intentions. It is not open for the petitioner to contend before the writ court that the exercise of power, which admittedly exists in the authority, will expose the petitioner to assessment for the same period on which assessing authority has already recorded satisfaction.
The writ petition is dismissed.
Dt.25.11.2011 SP/