2008 (10) TMI 10 - HC - Income Tax

High Court Upholds Dismissal of Appeal on Block Assessment Proceedings

COMMISSIONER OF INCOME-TAX DELHI-IV, NEW DELHI Versus DAWN VIEW FARMS PVT. LTD.

COMMISSIONER OF INCOME-TAX DELHI-IV, NEW DELHI Versus DAWN VIEW FARMS PVT. LTD. - tmi Issues Involved:1. Assumption of jurisdiction under Section 158BD of the Income Tax Act, 1961.2. Validity of the block assessment proceedings in the absence of recorded satisfaction by the Assessing Officer.Issue-wise Detailed Analysis:1. Assumption of Jurisdiction under Section 158BD:The appeal under Section 260A of the Income Tax Act, 1961, challenges the order dated 7.12.2007 by the Income Tax Appellate Tribunal concerning the block period from 1.4.1995 to 7.3.2002. The core issue pertains to the assumption of jurisdiction under Section 158BD of the said Act. The search and seizure operations were carried out under Section 132 in the case of M/s Yadav and Co. Statements recorded during the search indicated that the bank accounts in question were not operated by the individuals named. The Additional Director of Income Tax (Investigation) informed the Commissioner of Income Tax, Delhi-IV, about bogus entries in the bank accounts related to the present assessee (Dawn View Farms Pvt Ltd). Based on this communication, the Assessing Officer issued notices under Section 158BC on 31.3.2003.The assessee objected to the jurisdiction, arguing that the notice under Section 158BD was not based on the satisfaction of the Assessing Officer of M/s Yadav and Co. The Additional Director of Investigation, who sent the report, was not the Assessing Officer of Yadav and Co. The Commissioner of Income Tax (Appeals) noted that there was no satisfaction recorded by the Assessing Officer of Yadav and Co and that the Assessing Officer of the assessee company acted merely on the advice of the Additional Director of Investigation. Consequently, the Commissioner concluded that the block assessment proceedings did not conform to the mandatory requirements of Section 158BD.2. Validity of Block Assessment Proceedings:The Commissioner of Income Tax (Appeals) determined that none of the ingredients of Section 158BD were satisfied. There was no material found during the search at Yadav and Co. premises indicating undisclosed income belonging to the appellant. The Commissioner cited the judgment in Amity Hotels Pvt Ltd vs CIT, concluding that the assumption of jurisdiction by the Assessing Officer was without authority of law.The Tribunal upheld the Commissioner's decision, noting that the Additional Director of Income Tax (Investigation), not the Assessing Officer of Yadav and Co, conducted the search and post-search inquiries. The Tribunal followed the decisions of the Gujarat High Court in Khandubhai Vasanji Desai vs. Deputy CIT and the Supreme Court in Manish Maheshwari vs. Asst. CIT, concluding that the assessment proceedings under Section 158BD were invalid due to the lack of recorded satisfaction.The High Court agreed with the Tribunal's conclusion, emphasizing that the satisfaction of the Assessing Officer is a prerequisite for invoking Section 158BD. The Supreme Court in Manish Maheshwari clarified that the conditions precedent for invoking Section 158BD include the recording of satisfaction by the Assessing Officer and the handing over of seized materials to the Assessing Officer having jurisdiction over the other person. In this case, neither condition was met.The High Court dismissed the appeal, stating that the satisfaction of the Additional Director of Income Tax was insufficient and that the plain reading of Section 158BD requires the satisfaction of the Assessing Officer of the person searched. The Tribunal correctly applied the law, and no substantial question of law arose for consideration.