TaxTMI 
TaxTMI 
2012 (10) TMI 541
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....visions contained in Chapter XIV prescribing the period of limitation for reopening of assessment must be understood to be applicable to assessment under Chapter XIV-B. 3. That the ld. Commissioner of Income Tax (Appeals) has erred in law and on facts in holding the initiation of proceedings u/s 147 in the hands of individuals is justified in view of the ratio of decision of Hon'ble Guwahati High Court in the case of CIT v. Peer Chand Ratan Lal Baid HUF [2010] 322 ITR 544. 4. That the order of learned Commissioner of Income-tax (Appeals), Agra being erroneous in law and on facts deserves to be quashed and that of the Assessing Officer deserves to be restored. 5. That the appellant craves leave to add or alter any or more ground or grounds of appeal as may be deemed fit at the time of hearing of appeal." 3. The grounds raised by the assessee in its Cross Objection are as under :- "1. (a) Because as no valid proceedings u/s 147 read with section 148 of the Act has been initiated in the case of the respondent, thus in the light of facts and in law the learned CIT(A)-II, Agra has correctly annul the reassessment framed by the AO. (b) ....
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....s with the direction to the Department to decide as to whether the aforesaid amount which was seized was disclosed or undisclosed income of the petitioners and thereafter the Department should proceed in the matter. In consequence to the direction of the Hon'ble High Court, the DCIT, Circle-1, Jhansi passed an order dated 14.01.2000 and came to the conclusion that the seized amount was undisclosed income of these three persons from whose possession the cash was recovered and requisitioned under section 132A of the Act. Again the appellants filed second Writ Petitions before the Hon'ble High Court and the High Court dismissed the Writ Petitions holding that petitioners had the right to appeal under section 246A of the Act before the CIT(A). These three individuals filed appeal before the CIT(A) which was dismissed by the CIT(A). Again all the three persons filed Writ Petitions before the Hon'ble High Court. Again, the High Court dismissed the Writ Petitions holding that the appellant had right to appeal before the I.T.A.T. 5. Apart from the above proceedings, proceeding under section 158BC of the Act was initiated in the status of A.O.P. consisting of Shri Vidit Kumar....
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....r Agarwal and Sri Deepak Kumar Agarwal. On 3.6.1998 the Police informed the Income-tax Authorities at Jhansi who requisitioned the cash recovered under section 132A of the Act on the basis of authorization issued by the Director (Income-tax) Kanpur and issued notices under section 131 of the Act in the case of all the aforesaid three individuals on 3.6.1998. In their statements, all the three persons stated that they were carrying the cash so seized for the purpose of real state property through Sri Kailash Agarwal (Kamarya) to whom the cash was expected to be handed over. As regards to source of acquisition of the cash, Sri Deepak Agarwal stated that the cash of Rs. 8,34,600/- belongs to him. The remaining Rs. 16,00,000/- and Rs. 8,00,000/- was admitted by Sri Vidit Kumar Agarwal and Sri Ram Kishan Agarwal respectively as belongs to them. The statement of above named Sri Kailash Agarwal (Kamariya) was also recorded on oath on which he denied to have any connection with the cash seized and even knowledge of any land deal with them. In view of the above, block assessment proceedings were started u/s. 158 BC of the Income-tax, 1961. In the meantime, the assessee filed writ petitions ....
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....ed in depth before coming the conclusion on 14.1.2000 that the money found in possession of three persons S/Sri Ram Kishan Agarwal (appellant), Sri Deepak Kumar Agarwal (AOP) and also Sri Vidit Kumar Agarwal was found unexplained sources. It, was, therefore, held as undisclosed income of these persons. As there is no error such conclusion of the AO, it is upheld" On the perusal of order dated 20.01.2005 by Hon'ble ITAT, Agra Bench, Agra in Para No.7 of the order which is emerged as under :- "In the statement recorded by the Learned ACIT, Sri Ram Kishan Agarwal has admitted that cash of Rs. 8 lacs belonged to him, whereas cash amounting to Rs.l6 lacs belonged to Sri Vidit Kumar Agarwal, and cash amounting to Rs. 8,34,600/- belonged to Sri Deepak Agarwal." Thus from the above, the Hon'ble ITAT has held that the cash so seize actually was belonging to the three individuals namely:- 1. Sri Ram Kishan Agarwal S/o Sri Shiv Ram Agarwal 2. Sri Vidit Kumar Agarwal 3. Sri Deepak Kumar Agarwal The Hon'ble ITAT, Agra in the above order has further observed in Para No.42 on Page No.29 as under :- "In view of the....
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.... A.O. shall proceed to assess the undisclosed income in accordance with the provisions of Chapter XIVB of the Act. The CIT(A), after considering the assessee's submissions and various judgements and orders, found that the reassessment proceedings are void ab-initio. The relevant finding of CIT(A) is reproduced as below :- "2.1 I have analysed the matter and I agree with the Ld. AR that where books of accounts, assets etc. have been requisitioned after 30.6.1995, the AO can only invoke the provisions of Chapter XIV B and cannot take action under the provisions of sec. 147 of the Act. I also agree with the Ld. AR that the Hon'ble ITAT while deciding the appeal in the case of the AO has not given any direction to the AO to initiate proceedings u/s 147 of the Act. I am of the opinion as the cash had been requisitioned u/s132A of the Act, therefore, the action had to be taken under the provisions of Chapter XIVB of the Act notwithstanding whether in the case of AOP or individuals. For this proportion of law reliance is placed on the judgement of Cargo Clearing Agency Gujrat v. JCIT (307 ITR 1) (Guj) the held portion of which reads as under :- "When one consider....
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....procedure for assessment of search cases and assessment has to be framed in accordance with the provisions of chapter XIVB. On a harmonious reading of both sec. 158BA and sec. 158BH, it becomes clear that only where a provision is not made in chapter XIVB providing for a special, procedure for assessment will other provisions of the Act be made applicable." Also, recently Hon'ble High Court of Kerala in the case of CIT v. Sivanandan (52 DTR) Ker. 428 held that once the AO proceeds to make block assessment u/s 1588C based on materials gathered during search u/s 132 he cannot proceed to make reassessment u/s 147 on the basis of same material. Reliance in this regard has been aptly placed by the Ld. AR, on the following case laws :- (i) Mangal Singh, HUF v. ACIT 42 DTR 58 (Del) (ii) Western India Baker (P) Ltd. v. ACIT 87 ITD 607 (Mum.) Following these judgements I hold that initiation of reassessment proceedings in both the cases was avoid ab-initio and, therefore, I annul the assessments framed by AO, in case of both the appellants. It is not considered necessary to adjudicate upon other grounds of appeal as I have annulled the assessments. Ho....
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....equiring the assessee to furnish within the prescribed period a return of income, but even before issuing such notice under section 148 of the Act, the Assessing Officer is mandated under sub-section (2) of section 148 of the Act to record reasons. The return of income which an Assessing Officer may call for from an assessee is in relation to income which has escaped assessment, for which an assessee is assessable under the Act during the previous year corresponding to the relevant assessment year. 8.2 The Chapter XIV-B of the Act lays down a special procedure for assessment of search cases. When one considers the entire scheme relating to procedure for assessment/reassessment as laid down in the group of sections from section 147 to section 153 of the Act and compares the same with special procedure for assessment of search cases under Chapter XIV-B of the Act it becomes apparent that the normal procedure laid down in Chapter XIV of the Act has been given a go by. Under section 158B of the Act, "block period" and "undisclosed income" have been defined. Section 158BA of the Act opens with non obstante clause and provides that in a case of search initiated after June 30, 1995, th....
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....d. When this provision is read in the context of section 158BC, more particularly the first proviso thereunder, it becomes clear that the Legislature does not intend to reopen a block assessment. Any such interpretation would run counter to the legislative intent as noted hereinbefore from the contemporaneous exposition through the Memorandum Explaining the Finance Bill as well as various Circulars issued by the Central Board of Direct Taxes explaining different amendments. 8.4 Section 158BC of the Act itself indicates that where the Legislature wanted to incorporate other provisions of the Act a specific mention has been made, when a provision has been made for adopting sections 142, 143, 144 and 145 of the Act. Contra, where the Legislature does not want a provision, not falling within Chapter XIV-B of the Act, to be resorted to the two provisos under clause (a) of section 158BC of the Act have specifically made this clear. The first proviso stipulates that no notice under section 148 is required to be issued for the purpose of proceeding under Chapter XIV-B of the Act. The second proviso stipulates that person, who has already furnished a return under section 158BC (a) of the....
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....er. The Assessing officer cannot be heard to state that undisclosed income has escaped assessment because the officer failed to apply his mind to the material available on record, there being no lack of disclosure. 8.5 To appreciate the issue, we would like refer some relevant judgments. Hon'ble Gujarat High Court in the case of Cargo Clearing Agency (Gujarat) v. JCIT, 307 ITR 1 (Guj) held as under: (page no.29) "Thus, viewed from any angle, the stand of the Revenue does not merit acceptance. Once assessment has been framed under section 158BA of the Act in relation to undisclosed income for the block period as a result of search there is no question of the Assessing Officer issuing notice under section 148 of the Act for reopening such assessment as the said concept is abhorrent to the special scheme of assessment of undisclosed income of block period. At the cost of repetition it is required to be stated and emphasized that the first proviso under section 158BC(a) of the Act specifically provides that no notice under section 148 of the Act is required to be issued for the purpose of proceeding under Chapter XIV-B of the Act. In the circumstances, the impu....
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....of the Act. 8.9 In the light of above discussion, if we consider the facts of the case under consideration, we notice from the admitted facts that the stage of impugned assessment is not an assessment made under section 147/148 of the Act after completion of block assessment but it is a case of original block assessment itself. Therefore, the judgement of Hon'ble Guwahati High Court relied upon by the Revenue does not help to the Revenue, rather this judgement is against the Revenue as the Court has clearly held that the proviso deals with the stage of initiation of block proceeding and the said proviso provides that no notice under section 148 is required to be issued for the purpose of proceedings under the Chapter XIV of the Act whereas in the case under consideration, the A.O. initiated proceedings under section 147 by issuing notice under section 148 of the Act for the A.Y. 1999-2000 which is a part of block period assessment and there was no original block period assessment. Under the facts and circumstances, the action taken by the A.O. is not in accordance with law. The material based on which the A.O. reopened the regular assessment is the material pertained to requ....