TaxTMI 
TaxTMI 
2015 (8) TMI 1393
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....solidated order for the sake of convenience. 3. The facts and issues in all the appeals are similar. We proceed to take up first the appeal of the Revenue in ITA No.1782/PN/2013 and the Cross Objections filed by the assessee in CO No.87/PN/2014, to adjudicate the issue raised in this bunch of appeals and Cross Objections. 4. The Revenue in ITA No.1782/PN/2013 has raised the following grounds of appeal:- 1. The learned Commissioner of Income-tax (Appeals) erred on the facts and in circumstances of the case and in law by admitting the claim of the assessee that assessment was finalized without proper jurisdiction. 2. The learned Commissioner of Income-tax (Appeals) erred in relying upon the Apex Court's decision in the case of Hotel Blue Moon [361 ITR 362] when the facts of the case are not identical. In the present case no return was filed in response to notice u/s. 142(1) of the Income-tax Act, 1961. 3. The learned Commissioner of Income-tax (Appeals) has not considered the fact that the assessee did not raise any objection during assessment proceedings with regard to issue of notice, contradictory to the provisions of section 292BB of the Income-ta....
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.... on 12.10.2001. It was noted that Shri Ramanlal Shah i.e. main person covered under search, had unaccounted cash initially with him, which was generated from his various business activities. The Assessing Officer further noted as under:- "4.1 ..... This unaccounted cash was deposited initially in 1980s by Ramanlal into the accounts of the HUFs by opening scores of bank accounts in the names of different HUFs, Kartas of which were family members and friends. This process of deposit of cash in the accounts of HUFs started in 1989 and continued till 1997-98. To bring back this unaccounted cash, belonging to Ramanlal and the businessmen in Pune, in the regular books of accounts, two finance concerns were opened in Adoni, by Ramanlal Shah, which had their bank accounts in Pune in Bank of India, Bhavani Peth, Pune. (A/c No.1740 and 1728) Ramanlal himself was the proprietor of one concern Rajashree Enterprises and later on another concern Maheshwari Financiers was floated and Ramanlal's nephew Mahendra J. Shah was shown as the proprietor of this concern, whereas the financial affairs of both the concerns were managed by Ramanlal. 4.2 The cheques were issued from these ba....
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....ra 4.7, the Assessing Officer notes that perusal of the bank accounts and the books of account of the said concerns reflected that the persons who had received cheques of loan entries were mainly promoters and builders or persons involved in business i.e. in the field of timber, building material, finance companies, etc. The Assessing Officer also noted that the said loans and advances were made without any security. However, both the financial concerns Maheshwari Financiers and Rajashree Enterprises had charged interest from the parties to whom the loan entries were given and further interest payments were shown to the family members and friendly HUFs from whom the amounts were raised. The Assessing Officer in this regard observed that the circumstantial evidence relating to authenticity and genuineness of the loan transactions in the form of statement recorded during the course of search and post-search enquiries and other facts as mentioned in the assessment order had to be considered. 8. The Assessing Officer in view thereof, was of the opinion that the loan amount of Rs. 11 lakhs given by M/s. Maheshwari Financiers to M/s. Kalpak Ply i.e. assessee before us was latter's own....
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.... The CIT(A) further noted that though the Parliament had not provided limitation period for the issuance of notice under section 158BD of the Act, however, the requirement was that the Assessing Officer of the searched person had to be satisfied that the undisclosed income belonged to any person, other than the searched person and that the documents, books of account and other receipts had to be handed over to the Assessing Officer having jurisdiction over such other person. Further, reliance was placed on the ratio laid down by the Hon'ble Supreme Court in Manish Maheshwari Vs. ACIT and Another reported in 289 ITR 341 (SC) and the ratio laid down by the Punjab & Haryana High Court in CIT Vs. Om Parkash & Sons reported in 347 ITR 500 (P&H). The CIT(A) further held as under:- "4.4 .....The present case is a case involving money lending found in the books of AP based person / persons viz. Maheshwari Financiers who was found to have engaged in providing accommodation entries to several businessman in Pune comprising of timber merchants, building construction business, finance companies and builders. No doubt, examination of the searched persons, books of accounts, the seized ....
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....t to various persons to whom they had given loans out of cash deposits from bank accounts and the action of the Assessing Officer in bringing to tax the cash deposited in Pune bank accounts, would be contrary to the action already initiated by the Department in other cases. The CIT(A) further noted that the Tribunal after examining the satisfaction note, the statements of assessees recorded by the Assessing Officer and the instructions received by the Assessing Officer for reopening the cases of other persons, held that the Commissioner was not justified in invoking provisions of section 263 of the Act and in directing the addition of cash in the hands of two proprietors. The CIT(A) held that Therefore, the issue regarding the assessment of the loans introduced in the form of cash credit and advanced by cheque to the appellant has now become final and it should logically be assessed in the hands of the appellant and other similarly placed persons. The CIT(A) in view of the circumstantial evidence brought on record by the Assessing Officer of the searched persons i.e. the deposit of huge amount of cash, upheld the addition in the hands of assessee both under sections 68 and 69C of t....
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....d thereafter assessment was completed, hence, the reliance by the CIT(A) on the said ratio laid down by the Hon'ble Apex court was mis-placed. In the facts of the present case, the learned Departmental Representative for the Revenue pointed out that no return of income was filed within 45 days and as such, no notice under section 143(2) of the Act was issued. Reference was made to the observations of the Assessing Officer in para 1 of assessment order and observations of CIT(A) in paras 4.7 and 4.8 of the appellate order. 14. The learned Authorized Representative for the assessee referring to the notice issued under section 158BD of the Act which is placed at page 1 of the Paper Book pointed out that the said notice issued under section 158BD of the Act is no notice, since it should be issued under section 158BC of the Act. The learned Authorized Representative for the assessee pointed out that the said plea of the assessee was a legal plea and could be raised for the first time. Another objection raised by the learned Authorized Representative for the assessee was that original search proceedings were carried out on 11/12 October, 2001 and the assessment of the searched person ....
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.... in the hands of the other persons, no addition was warranted as entries were part of the books of account. Our attention was drawn to the confirmation letter and ledger extracts of M/s. Maheshwari Financiers and it was pointed out that the amount received by the assessee was through cheque and the same were entered in its books of account and in the absence of any evidence being brought on record to establish the link between the cash and cheque deposits, there was no merit in the said addition. Further, no documents were supplied to the assessee and where the assessee had no means to controvert, the entire addition made on the basis of addition in Shri Ramanlal Shah, proprietor of M/s. Rajashree Enterprises wherein it was held that entries were made through books of account, no addition was warranted in the hands of the assessee. In conclusion, the learned Authorized Representative for the assessee pointed out that Chapter XIV-B was a code in itself and where the assessee had asked for the reasons and documents and also cross-examination, before completing the assessments on such documents, opportunity should have been given to the assessee. He further stressed that the notice is....
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....unt in favour of Pune based concerns, further interest @ 18% was charged from these concerns. It was also noted by the search team and thereafter by the Assessing Officer in-charge of search proceedings that when the money was received back from the said businessmen of Pune by cheque, then cash was withdrawn from the bank accounts and enquiries were made with regard to the aforesaid cash deposits and withdrawals from the said bank accounts. The finding of the Revenue in this regard was that in fact, no cash was transferred from Adoni in Andhra Pradesh to Pune for deposit of cash in bank account of respective parties, but the cash belonging to Pune parties was deposited in the said bank account and thereafter from there, the cheques were issued to the respective parties. The assessment in the case of searched persons was completed on 24.12.2003. Thereafter, notice under section 158BD dated 10.02.2006 was issued to the assessee as against the date of receipt of satisfaction note on 06.04.2004. In other words, after the completion of assessment of searched persons under section 158BC of the Act on 24.12.2003, the satisfaction note was recorded by the Assessing Officer in-charge of the....
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....ld neither add nor subtract the words from the provisions. The Hon'ble Apex Court held that where the words of statute were absolutely clear and un-ambiguous, recourse could not be made to the principles of interpretation other than the liberal rules. Referring to the provisions of section 158BD of the Act, the Hon'ble Supreme Court in CIT vs. Calcutta Knitwears (supra) held as under:- "The opening words of section 158BD of the Income-tax Act, 1961, are that the Assessing Officer must be satisfied that "undisclosed income" belongs to any person other than the person with respect to whom a search was made under section 132 of the Act or a requisition of books was made under section 132A of the Act and thereafter, transmit the records for assessment of such other person. Before initiating proceedings under section 158BD of the Act, the Assessing Officer who has initiated proceedings for completion of assessments under section 158BC of the Act should be satisfied that there is an undisclosed income which has been traced out when a search was carried out in respect of a person under section 132 or books of account were requisitioned under section 132A of the Act. This is in co....
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....ity to the Assessing Officer for recording the satisfaction after the completion of proceedings in respect of the person against whom search was conducted under section 158BC. Section 158BE(2)(b) only provides for the period of limitation for completion of block assessment under section 158BD in the case of a person other than the person against whom search was conducted as 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 carried out after January 1, 1997. The section neither provides for nor imposes any restrictions or conditions on the period of limitation for preparation the satisfaction note under section 158BD and consequent issuance of notice to the other person. To read the plain language of section 158BE(2)(b) such as to extend the period of limitation to recording of satisfaction would run counter to the avowed object of introduction of Chapter to provide for cost-effective, efficient and expeditious completion of search assessments and avoiding or reducing long drawn proceedings. Where the Assessing Officer had prepared a satisfaction note on July 15, 2005, though the assessmen....
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....rched persons were completed on 30.03.2005. It was held that the High Court was wrong in saying that the satisfaction note prepared after proceedings were completed by the Assessing Officer under section 158BC of the Act and consequent assessment under section 158BD of the Act was barred. The matter was set-aside to the High Court to consider the case in the light of observations of the Hon'ble Supreme Court. 22. In the facts of the present case, the assessment under section 158BC of the Act of the searched persons was completed on 24.12.2003 and thereafter, satisfaction note was received by the Assessing Officer in-charge of the assessee on 06.04.2004. In view of the proposition laid down by the Hon'ble Supreme Court in CIT vs. Calcutta Knitwears (supra), we hold that the Assessing Officer in-charge of the searched persons can record satisfaction note after the completion of assessment in the hands of the searched persons and forward the same to the Assessing Officer, who is in-charge of the other person, as provided under section 158BD of the Act. 23. The second aspect of the issue before us is the notice issued under section 158BD of the Act after a gap of about 20 months ....
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....after a considerable delay of about 20 months i.e. from the date of receipt of satisfaction note to the date of issue of notice under section 158BD of the Act, cannot be brushed aside. In view of the said notice under section 158BD of the Act being not issued within reasonable time, though there is no time limit provided under the Act to issue the said notice under section 158BD of the Act, the said notice issued under section 158BD of the Act is invalid notice. Following the ratio laid down by the Hon'ble Delhi High Court in CIT Vs. Bharat Bhushan Jain (supra) in line with the proposition laid down by the Hon'ble Supreme Court in CIT vs. Calcutta Knitwears (supra), we hold that the notice issued under section 158BD of the Act in the present case was unduly delayed and the same is held invalid and void. Reliance placed upon by the learned Departmental Representative for the Revenue on the ratio laid down in Venad Properties Pvt. Ltd. Vs. CIT (supra) is with regard to the service of said notice, which proposition is not applicable to the issue before us, since the service of notice upon the assessee is admitted by the assessee itself. In view thereof, we hold that where the notice i....