TaxTMI 
TaxTMI 
2006 (2) TMI 213
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....the mandatory provisions of law were complied with. 3. The ld. Commissioner of Income-tax (Appeals) erred on facts as well as in law in holding that investment of Rs. 11,000 in M/s. Nasa Systems was undisclosed income of the assessee being from unexplained sources. 4. The ld. Commissioner of Income-tax (Appeals) erred on facts as well as in law in holding that investment of Rs. 1 lakh in Agriculture Land measuring 20 KBM was undisclosed income of the assessee being from unexplained sources. 5. The ld. Commissioner of Income-tax (Appeals) erred on facts as well as in law in holding that the investment of Rs. 43,750 in PUNB Building at Ballabgarh was undisclosed income of the assessee being from unexplained sources. 6. The ld. Commissioner of Income-tax (Appeals) erred on facts as well as in law in holding that advance of Rs. 10,000 paid for purchase of plot No. 438/3 was undisclosed income of the assessee being from unexplained sources. 7. The ld. Commissioner of Income-tax (Appeals) erred on facts as well as in law in holding that the source of payment of Rs. 34,155 towards booking of plot at Gurgaon was undisclosed income of the assesse....
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.... Investment by way of share application money para 3(i) above. Rs.10,000 (ii) Investment as share in capital para 3(ii) above. Rs. 1,000 (iii) Investment in 20 kanals 8 marlas of land at Village Dhatir, Tehsil Palwal, Distt. Faridabad para 3(iii) above Rs. 2,24,000 (iv) Investment in 1/4^th share in PNB Building at Ballabgarh - para 3(iv) above. Rs. 43,750 (v) Investment in Plot No. 438/3, Faridabad Para 3(v) above. Rs. 3,60,000 (vi) Investment in 6 marla plot at Gurgaon - para 3(vi) above. Rs. 34,155 (vii) Investment in various properties as mentioned in document No. A-I- para 3(vii) above. Rs. 1,13,41,500 Total undisclosed income Rs. 1,20,14,405 4.4 The assessee challenged the assessment order before the ld. CIT(A), before him, several grounds were taken. The assessee also moved application under Rule 46A for admitting evidence. This application was allowed by the ld. CIT(A) after obtaining comments from the Assessing Officer. 4.5 So far as the legal grounds are concerned, the ld. CIT(A) did not find force and rejected the same. The ld. CIT(A) also considered various additions made by the Assessing O....
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..... 7.3 The contention of the ld. counsel for the assessee was that regular jurisdiction was with ITO, Ward 8, Faridabad and, therefore, ACIT did not have any jurisdiction over the assessee in absence of order under section 127 of the Income-tax Act. He further pointed out that in this case, notice under section 158BD was issued by CIT, Inv. Circle and the assessment was made by ACIT, Range I, Faridabad. He also pointed out that the notification, dated 3-8-2001 was applicable on the date of issuance of notice and on the date of passing the assessment order and, therefore, neither the authority issuing notification under section 158BD was competent to do so nor the officer who passed the assessment order was empowered or authorized to pass the order. 8. The ld. Departmental Representative, on the other hand, justified the jurisdictional authority and competency of these authorities. He further submitted that the plea regarding lack of jurisdiction cannot be raised before the ITAT. 9. We have considered the entire material and rival submissions. 9.1 From the reply of the assessee dated 7-12-2004 available at page 87 of the paper book, it is found that the assessee had conte....
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....pport of this ground: "Your honour, jurisdiction of the assessee under the Income-tax Act, vested with the Assessing Officer Ward 1(3), Faridabad and not with ACIT, Range-1, Faridabad and, therefore, the assessment having been framed without jurisdiction, is illegal, bad in law and ab initio void, for want of jurisdiction. Not to mention. Assessing Officer was requested time and again to supply a copy of the jurisdiction on the basis of which he assumed jurisdiction to assess the assessee but nothing has been supplied to the assessee till today." 9.4 However, the ld. CIT(A) also failed to properly examine the issue. He has simply reproduced the reply of the Assessing Officer and as observed in para 5.1, as under: "5.1 The issue has been examined and the stand of the appellant is rejected in view of the fact that the appellant was not an existing assessee and it was only the ACIT, who was the Officer competent to issue a notice under section 158BD of the Income-tax Act." 9.5 On going through the material on record, it is found that the validity of the assessment made by the Assessing Officer cannot be challenged on the ground that the Assessing Officer did no....
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....isdiction. In the present case, the irregularity had occurred at the stage after a petition was filed objecting to the jurisdiction of the Income-tax Officer, 'C Ward, to proceed with the case and the Income-tax Officer without referring the matter to the Commissioner for deciding the matter, himself completed the assessment. Thus, the irregularity was at that stage and so the case had to be restored to that stage. The Appellate Assistant Commissioner was justified in setting aside the assessment order for making a fresh assessment according to law and the Appellate Tribunal was justified in upholding the order of the Appellate Assistant Commissioner." 9.8 In view of the above, the plea regarding validity of jurisdiction cannot be entertained and, therefore, the ground is rejected. 9.9 The next legal plea taken by the assessee is that the Assessing Officer has not recorded satisfaction for making assessment. The assessee has not taken specific plea by raising specific ground in the appeal before us. Neither the assessee nor the Department has filed the assessment in the case of the person searched. The satisfaction can be recorded in the case of the person searched or eve....
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....r section 132A, in the case of any person, then,- (i) in respect of search initiated or books of account or other documents or any assets requisitioned after the 30th day of June, 1995, but before the 1st day of January, 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days; (ii) in respect of search initiated or books of account or other documents or any assets requisitioned on or after the 1st day of January, 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days but not more than forty-five days, as may be specified in the notice a return in the prescribed form and verified in the same manner as a return under clause (i) of sub-section (1) of section 142, setting forth his total income including the undisclosed income for the block period." 10.2.1 In view of the above provisions contained under section 158BC(a), the notice is to be served upon the assessee, requiring him to furnish the return within such time not being less than 15 days. The provision is unambiguous and clear. The intention of the Legislature in using the words "not less than 15 d....
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.... 10.5 Since the notice of 30 days was not given, the assessee challenged the assessment order. The issue involved was as to whether the assessment was illegal on account of the defect in the notice. Before the Hon'ble Allahabad High Court for justifying the notice it was urged that the specification of the period for furnishing the return was not a requirement which was to be included in the notice. According to learned DR, the law only required that the notice for filing of return must be issued and if the notice specifies that condition, then it is a valid in law. The Hon'ble Court did not accept this contention and observed as under: "We are unable to accept the contention advanced on behalf of the State. The notice under section 25 must contain the requirements which may be included in a notice under section 15(3). The notice under section 15(3) requires an assessee to furnish a return. The requisition does not stop there, it proceeds further, and, indeed, must proceed further. It requires the assessee to furnish a return within a certain period. It appears to us that unless the period for furnishing the return is specified in the notice, it is an incomplete....
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....9;ble Supreme Court of India considered the issue which arose regarding the requirement of 'period not less than seven years', appearing in proviso to rule 1(v) of Schedule II to the Companies (Profits) Surtax Act, 1964. After making reference to the decision of Hon'ble Bombay High Court in the case of CIT v. Ramsukh Motilal [1955] 27 ITR 54, the Hon'ble Court held that the only interpretation which could be given to the expression 'during a period of not less than seven years' for the proviso is that the period should go beyond seven years. 10.9 In the case of CIT v. Ikbal & Co. [1945] 13 ITR 154 (Bom.), the question for consideration before the Hon'ble High Court was, as to whether a notice under section 22(2) of the Act, requiring the assessee to furnish the return of income (within thirty days of the receipt of the notice), as against the required period of 'not less being less than 30 days', was a valid notice. The assessee had challenged the validity of the notice in that case, but the Tribunal upheld the plea of the assessee though the assessee had filed return. It was observed that the fact that the assessee submitted return later on o....
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....atory requirement of legal provision was not satisfied. Such a notice is illegal and void and neither the departmental authorities are capable to cure the defect nor the assessee can waive such a prerequisite requirement of law. In view of the above, the notice is held to be illegal, void and the assessment order passed in consequence of such illegal notice is void ab initio and such assessment is to be quashed. Ground No. 2, taken by the assessee is therefore allowed. 10.12 We may mention here that in the case of Smt. Mahesh Kumari Batra v. Joint CIT [2005] 95 ITD 152 (Asr.), the Special Bench of the ITAT was considering the issue relating to an irregularity of notice under section 158BC. However, the statutory provision as contained under section 158BC(1) requiring notice providing time of not less than 15 days, was not an issue before that Bench and, therefore, the same was not considered. In that case, defect in the notice as pointed out, was that the notice was served upon one lawyer Shri R.K. Dhawan who was assessee's advocate and who was appearing on behalf of the assessee. The plea of the Department was that under a bona fide belief, the Assessing Officer handed over....
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....nsidered the issue relating to recording of satisfaction in the case of Amity Hotels (P.) Ltd. v. CIT [2005] 272 ITR 75 (Delhi). The Hon'ble Court has observed, in categorical terms, as under: "Thus, it is very clear that satisfaction is required and it cannot be said that proceedings can be initiated without such satisfaction." 10.17 On the basis of the above preposition, it is observed that the foundation for assumption of jurisdiction is the satisfaction to proceed under section 158BD against a person not searched. The issuance of notice, after record of such satisfaction, is another requirement, which entitles the Assessing Officer to assume jurisdiction to assess the undisclosed income of such person. Thus, if necessary satisfaction has not been recorded prior to making of assessment under section 158BD, such assessment cannot be legally justified. Thus, on this basis the assumption of jurisdiction to assess under section 158BD is on different footing than the assumption of jurisdiction under section 158BC. It can, therefore, be concluded that if the Assessing Officer does not record satisfaction prior to the making of assessment under section 158BD, such asses....