TaxTMI 
TaxTMI 
2013 (7) TMI 419
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....he appellant herein and hence, the business premises of M/s.BBC Associates Limited at No.23/1, Mylai Ranganathan Street, T.Nagar, Chennai and the residential premises of the assessee V.Ramaiah and his family at No.15, Neelakanta Mehta Street, T.Nagar, Chennai were also subjected to search under Section 132 on the same date viz. 15.3.1996. According to the Department, the Authorised Officer seized four receipts for a value of Rs.1.10 crores and 18 blank agreements signed by the assesssee, Proprietor of M/s.Barath Building Constructions (in short BBC) and Managing Director of M/s.BBC Associates Ltd. during the search. The assessee had filed his returns of income, in his individual status, for the assessment years 1987-88 to 1996-97 and also block returns for the period 1986-87 to 1996-97. According to the Department, there are four unaccounted cash receipts issued by the appellant V.Ramaiah to four persons, totalling to Rs.4,34,000/=; undisclosed payment made by him for one Prabhat Talkies to the extent of Rs.1,61,843/=; unaccounted investment in shares in benami names to the tune of Rs.4,13,000/=; unaccounted receipts to the tune of Rs.1,60,00,000/=; unexplained cash credit of Rs.4,....
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..../s.Nikki Enterprises to the tune of Rs.1,48,00,000/= and other unexplained credits to the tune of Rs.11,14,300/=, thus totalling to Rs.5,69,14,300/=; (iii) The Assessing Officer erred in levying interest under Section 220(2) of the IT Act to the tune of Rs.3.36 crores as the assessee was deemed to be in default; (iv) The learned Assessing Officer erred in omitting to follow the procedure laid down under section 158BB of the Act by erroneously making the combined Assessment Order on BBC Associates Ltd. against whom warrant of authorisation was issued under section 132 of the Act as well as the appellant and other persons against whom no warrant of authorisation under section 132 of the Act was issued and no assessment is made under Section 158BD as required by law as the warrant of search was issued only in the name of Shri Anand Agarwal and the search at the place of assessee is consequential; (v) The Learned Assessing Officer erred in making an assessment on the appellant in terms of Section 158BC as the Officer has no jurisdiction over the appellant. (vi) The Learned Assessing Officer who made the assessment for the block assessment on the appellant and M/s. BBC Assoc....
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.... consideration :- "1. Whether on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the block assessment made on the appellant under section 158BC of the Income Tax Act, 1961 is valid in law and in accordance with the provisions of Chapter XIVB of the Act? 2. Whether on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in holding that even without a search warrant under section 132 of the Income Tax Act against the appellant the block assessment under section 158BC without invoking section 158BD is valid and sustainable? 3. Is the Income Tax Appellate Tribunal correct in law in taking the view that the failure to issue notice under section 158BD of the Act to the appellant is only an irregularity in the assessment and not a nullity of the block assessment ? 4. Is the Income Tax Appellate Tribunal is justified in invoking the provisions of Section 292B of the Act to cure the defect in not issuing notice to the appellant under section 158BD of the Income Tax Act and hence the block assessment on the appellant under section 158BC is legal and valid in law? 5. Whether on the facts ....
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....books of account, other documents or assets are requestioned under section 132A, in the case of any person, then, - (a) the Assessing Officer shall - (i) in respect of search initiated or books of account or other documents or any assets requestioned 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 requestioned 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. Provided that no notice under section 148 is required to be issued for the purpose of proceeding under this Chapter: Provided further that a person who has furnished a return under this clause shall not be entitled to file....
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....earch 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; and (b) two years from the end of the month in which the notice under the Chapter was served on such other person in respect of search initiated or books of account or other documents or any assets are requisitioned on or after the 1st day of January. 1997. Explanation 1. - omitted as not necessary Explanation 2.- For the removal of doubts, it is hereby declared that the authorisation referred to in sub-section (1) shall be deemed to have been executed, - (a) in the case of search, on the conclusion of search as recorded in the last panchnama drawn in relation to any person in whose case the warrant of authorisation has been issued; (b) in the case of requisition under section 132A, on the actual receipt of the books of account or other documents or assets by the Authorised Officer." 10. So far as Substantial Questions of Law Nos.1 to 5 are concerned, learned Senior Counsel appearing for the assessee contended as follows:- (i) The Assessing Officer has committed error by making an assessment in terms of Se....
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....Chennai-17. Admittedly, no search warrant was issued in the name of the present Assessee-Mr.Ramaiah. First warrant was issued in the name of a company and the second one was issued without any name, but there was only mention about the address where the assessee was carrying on business under the name and style of M/s.BBC Associates Ltd. and Bharat Building Construction. When there was no search warrant in the name of the appellant Ramaiah, whether the procedure contemplated under Section 158BC has to be followed or Section 158BD has to be proceeded is the question to be decided. 13. According to the Department, though the name of the appellant was not found in the search warrant, he being the Managing Director of M/s.BBC Associates and the Proprietor of M/s.Bharat Building Construction, which are located in the address mentioned in the authorisation of warrant, there is nothing wrong in following the procedure contemplated under Section 158BC. 14. It is not in dispute that the first search warrant was issued for searching the business place of M/s.Petro Plast Group of Companies, of which Anand Agarwal and Om Prakash Agarwal are the Managing Partners. During the search made i....
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....justified. The observation of the Tribunal in this regard is as follows :- "Regarding validity of invoking the section 158BC we observe that two search warrants were issued on 15.3.96 in the name of M/s.Petro Plast group of companies, Anand Agarwal and Om Prakash Agarwal at No.23/2, Mylai Ranganathan St., T. Nagar, Chennai. The second warrant was issued for search of the premises, at No.15, Neelakanta Mehta St., T.Nagar, Chennai-17 where the business of BBC Associates Ltd. and Bharat Building Construction are conducted for which the assessee is the Managing Director and proprietor respectively and no two warrants was issued in the individual name of the assessee but warrants were issued at the business and residential premises of the assessee. In view of this, the assessment under sec.158BC is justified." 16. From the above, it is apparent that the Tribunal without offering any justifiable grounds for invoking Section 158BC by the Revenue, has simply concluded that "In view of this, the assessment under sec.158BC is justified." At this juncture, we feel it apt to mention the difference between Sections 158BC and 158BD. While Section 158BC lays down the procedure for conductin....
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....of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act." 21. A reading of the aforesaid provision makes it clear that this provision enables an invalid assessment or a proceeding as valid for three reasons, viz., mistake, defect or omission. Even if the assessment order suffers from any mistake or any defect or any omission, such assessment order/proceeding cannot be stated to be invalid. Now, one has to see whether the assessment order passed by the Assessing Officer invoking Section 158BC suffers from any procedural irregularities as contemplated under Section 292B so as to make such assessment order valid. According to the Tribunal, by applying Section 292B the procedural irregularity, if any, can be rectified and, on that score, confirmed the decision of the Assessing Officer in invoking Section 158BC to the case of the appellant. It is not the case of....
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....edural irregularity can be rectified by applying the provisions of Section 292B is unwarranted and cannot be accepted. 23. When it is found that the assessment should have been proceeded only as contemplated under Section 158BD, instead of Section 158BC and the invocation of Section 292B is by the Tribunal is wrong, the next question to be dealt with is regarding the period of limitation. 24. According to the assessee, if the assessment proceeds in the manner provided under Section 158BC, it is definitely barred by limitation in view of Section 158BE(1)(a). The stand of the Revenue is that as per Section 158BE(2)(a), the period of limitation for completion of block assessment is one year from the end of the month in which the notice was served and in the present case as the notice was served on the assessee on 13.12.1996 and the assessment order was passed on 30.6.1997, it is well within time. 25. To find out as to whether the assessment is barred by limitation in view of Section 158BE(1)(a) or saved by limitation as per Section 158BE(2)(a), one has to go by the provisions contemplated in Section 158BE. The relevant portion of Section 158BE, which stipulates time limit for....
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....and it is as follows :- "Even the assessment u/s.158BC is invalid as the date of search was on 15.3.1996 and the assessment ought to have been completed on or before 31.3.1997 and the assessment is time barred as per sec.158BE(1)(a) as assessment was concluded on 30.6.1997." 29. Before answering the aforesaid question, the Tribunal dealt with the validity of invoking section 158BC to the present proceedings. While upholding the action of the Assessing Officer in invoking Section 158BC, calling in aid the provisions of Section 292B, the Tribunal has held that though none of the warrants were issued in the individual name of the appellant, they were issued with the address of the business and residential address of the assessee and hence the assessment under Section 158BC is justified. Thereafter, while answering the question regarding limitation, the Tribunal observed as follows :- "... An order of Block assessment is required to be passed only u/s 158BC on or before 30.12.97 as per sec.158BE(2)(a), the period of limitation for completion of Block Assessment is one year from the end of the month in which the notice under chapter XIV B was served on such person in respect of....
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....the Revenue). As already stated, the Tribunal has rejected the claim of the appellant/assessee that if at all his case should have been dealt with only under Section 158BD and definitely not under Section 158BC. Having thus rejected the claim of the appellant/assessee and having upheld the action of the Revenue in invoking Section 158BC, the Tribunal should have followed the limitation contemplated under Section 158BE(1)(a) but not the one provided for under Section 158BE(2)(a). One cannot be allowed to follow a particular procedure contemplated in one Section and borrow the limitation contemplated in the other Section. When the Assessing Officer as well as the Tribunal proceeded on the footing that invocation of Section 158BC is justifiable and the appellant/assessee is liable for action under Section 158BC, they should have noted whether order has been passed within the period stipulated under Section 158BE(1)(a). Issuance of notice in respect of search initiated would not save the period of limitation under Section 158BC because it is not the case of the Revenue that Section 158BD is the provision to be invoked rather than 158BC. The assessment order passed in this case, under S....
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....ected by the Tribunal. 34. The Tribunal, while setting aside the order of assessment in the appeal preferred by the Assessee, vide order dated 9.5.2001, issued the following directions :- (a) enquire into the receipts given by the assessee as they are said to have been given in relation to the transaction of the immovable properties. (b) provide a copy of statement of Shri Anand Agarwal and allow the assessee to examine/cross examine Shri Anand Agarwal as the assessee has claimed that no opportunity was given to him for cross examination. (c) Consider fresh material produced before the Tribunal in respect of cash credit; and (d) Consider objections raised by the assessee with regard to validity of proceedings and jurisdiction of the Assessing Officer." 35. Pursuant to the aforesaid order, the Department, vide letter dated 24.2.2003, had requested the assessee to make further submissions, if any, regarding addition of Rs.1.60 crores in view of the order of the Tribunal. It is further indicated in the said letter as follows :- "You are also requested to note that vide order sheet noting dated 24.6.1997 you were given an opportunity to cross examine Mr. Anand Agar....
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....provided to the assessee. In the absence of any material on record to show that such opportunity was given to the assessee as directed by the Tribunal at the time of remand, we hold that the order passed by the authorities as well as the Tribunal is against the principles of natural justice and liable to be set aside. 40. The next issue is regarding addition of Rs.3 crores. On this aspect, the observation of the Tribunal, being relevant, is extracted hereunder:- "37. . . . On the above, we observe that an amount of Rs.2.98 crores was received from M/s.Venkateswara Agencies, vide pay order dated 3.11.94 bearing No.014573 drawn on Catholic Syrian Bank, II Line Beach Branch, Madras 1. The said current account No.1349 was opened by one Mr.V.M. Kumar on 19.10.94 which was introduced by V.S. Natarajan. As such, this is a propriety concern of V.M. Kumar. Further, the amount of Rs.2.98 crores was generated in the account within 15 days from the date of opening the above account and the account was closed on 24.9.97 and the entire transaction was under the cloud of suspicion. This in our opinion is only a benami concern of the assessee. To say this is benami concern of Mr.S.M. Pandiya....
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....ssessment made under Chapter XIVB of the Act. 46. As per the aforesaid Section, when the assessee has no explanation about the nature and source for the sum found credited in the books of accounts maintained to the satisfactory of the Assessing Officer, the sum so credited may be charged to income tax as the income of the assessee of that previous year. For attracting Section 68, two conditions to be satisfied, first is that the sum in dispute should be reflected in the books of account and second is that when the assessing officer questions about the said sum, the explanation offered by the assessee towards the source of the said sum should be satisfactory to the assessing officer. It is not the case of the Revenue that the undisclosed income is reflected in the books of account. Section 14 of the Act gives the Heads of Income and they are (A) Salaries, (B) Interest on securities (omitted w.e.f.1.4.1989) (C) Income from house property (D) Profits and gains of business or profession (E) Capital gains and (F) Income from other sources. 47. On a thorough perusal of the entire materials placed on record, we are unable to accept the contention that Section 68 is applicable to the....
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....ny sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Income-tax Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. The section only gives statutory recognition to the principle that cash credits which are not satisfactorily explained might be assessed as income. The section enacts that if a sum is found credite din the books of an assessee maintained for any previous year (which might be different from the financial year), the cash credit might, in case where it is assessed as undisclosed income, be treated as the income of that previous year, and the financial year may not be taken as the previous year for such a cash credit even if the undisclosed income was not found to be from the assessee's regular business for which the books were maintained. The cash credit might be assessed either as business profits or as income from other sources." 50. In CIT vs. Mohim Udma [(2000) 158 CTR (Ker) 100], the Kerala High Court has held as follows:....