2015 (12) TMI 1236 - AT - Income Tax

Appellate Tribunal affirms annulment of assessment order due to significant delay

The ACIT, Mumbai Versus M/s Depth Entertainment

The Appellate Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) to annul the assessment order due to a significant delay in issuing ... Validity of assessment order u/s. 158BD r.w.s. 158BC r.w.s. 143(3) - as per CIT(A) satisfaction note is belated which would not confer jurisdiction of the assessing officer to initiate the proceedings u/s. 158BD - Held that:- The Hon'ble Supreme Court in the case of CIT Vs Calcutta Knitwears [2014 (4) TMI 33 - SUPREME COURT] has made a strong observation that the Revenue has to be vigilant in issuing notice to the third party u/s. 158BD immediately after the completion of assessment of the searched person. The facts of the case discussed hereinabove defy the observations of the Hon'ble Supreme Court mentioned hereinabove. As mentioned elsewhere, the block assessment in the case of searched person i.e. M/s. Tips Industries Ltd., was completed on 28.9.2001. The Hon'ble Supreme Court says that the notice u/s. 158BD should be immediately issued after the completion of the assessment of the searched person, but in this case the notice was issued and served on 5.9.2005, almost 4 years after the date of the completion of the assessment of the searched parties. In our considered opinion, this service of notice cannot be considered to be immediately after the completion of the assessment of the searched person and is contrary to the observations of the Hon'ble Supreme Court (supra). Also see BHARAT BHUSHAN JAIN AND OTHERS case [2015 (1) TMI 705 - DELHI HIGH COURT] wherein a delay ranging between 10 months to 1½ years was not accepted. Thus we decline to interfere with the findings of the Ld. CIT(A). The Ld. CIT(A) has rightly annulled the impugned assessment order. As the impugned assessment order has been annulled, we do not find it necessary to dwell into the merits of the case. - Decided against revenue Issues:Challenge to correctness of order of Ld. CIT(A) for Block assessment period of 1.4.1989 to 31.3.1999 and broken period of 1.4.1999 to 27.7.1999.Analysis:The appeal before the Appellate Tribunal ITAT Mumbai involved a challenge by the Revenue regarding the correctness of the order of the Ld. CIT(A)-35, Mumbai dated 11.07.2011 concerning the Block assessment period from 1.4.1989 to 31.3.1999 and a broken period from 1.4.1999 to 27.7.1999. The primary grievances of the Revenue focused on the annulment of the assessment order under sections 158BD, 158BC, and 143(3) of the Income Tax Act by the Ld. CIT(A) due to a perceived delay in the issuance of the satisfaction note dated 15.5.2002. The Revenue contended that the delay did not affect the jurisdiction of the assessing officer to initiate proceedings under section 158BD. The case originated from a search conducted under section 132 of the Act on 27.7.1999, leading to the discovery of incriminating documents related to alleged transactions between the assessee and a searched party. Subsequently, the block assessment was completed, resulting in the assessment of undisclosed income. The Revenue challenged the annulment of the assessment order based on the timing of the satisfaction note and the issuance of notice under section 158BD.Upon review, the Ld. CIT(A) found the delay between the completion of the block assessment and the issuance of the satisfaction note to be significant, relying on a decision by the Special Bench of the Tribunal in a related case. The Ld. CIT(A) concluded that the delay rendered the satisfaction note belated, thereby invalidating the jurisdiction of the assessing officer to issue notice under section 158BD. Consequently, the assessment order was annulled. The Revenue, dissatisfied with this decision, appealed before the Appellate Tribunal.During the Tribunal proceedings, the Ld. Departmental Representative argued that there was no statutory limitation for issuing notice under section 158BD, emphasizing the lack of time constraints. Conversely, the Ld. Counsel for the assessee reiterated the importance of timely notice issuance for the validity of assessment proceedings, citing relevant legal precedents. The Tribunal deliberated on the timeline of events, noting the considerable gap between the completion of the block assessment of the searched party and the issuance of notice to the assessee under section 158BD. The Tribunal referenced the Supreme Court's stance on timely notice issuance and the observations made in a specific case, highlighting the necessity for prompt action after the completion of the searched party's assessment.Ultimately, the Tribunal upheld the decision of the Ld. CIT(A) to annul the assessment order, citing the delay of almost four years between the completion of the searched party's assessment and the issuance of notice to the assessee. Drawing from relevant judicial interpretations, including a judgment by the High Court of Delhi, the Tribunal concluded that the delay was excessive and not in line with the requirements of section 158BD. As a result, the appeal by the Revenue was dismissed, affirming the annulment of the assessment order based on procedural irregularities related to the timing of notice issuance.In summary, the Tribunal's decision centered on the critical issue of the timeliness of notice issuance under section 158BD, emphasizing the necessity for prompt action following the completion of the searched party's assessment to maintain the validity of subsequent assessment proceedings.