2012 (2) TMI 697

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.... said notice under Section 158BD, assessee filed return for the block period 3.1.2006 wherein NIL income was declared. Thereafter, the block assessment was completed on 26.12.2007 determining undisclosed income of Rs. 7,75,98,890/-. 3. Assessee moved in appeal before ld. CIT(Appeals). There, it assailed the jurisdiction of the A.O. to pass a block assessment along with other grounds taken on merits. As per the assessee, the notice issued under Section 158BD was after the block assessment done on the searched person, namely, Shri M.V. Narayana Gupta. As per the assessee, in view of the decision of Special Bench of this Tribunal in the case of Manoj Aggarwal v. DCIT (117 ITD 377), such proceedings initiated after the last date was invalid. Ld. CIT(Appeals) sought a report from Assessing Officer since the above issue was raised by the assessee as an additional ground. Though the Assessing Officer objected to the admission of such an additional ground, ld. CIT(Appeals) proceeded to adjudicate the issue, since according to him, the question raised was a question of law and the facts necessary for reaching a decision thereon were on record. Ld. CIT(Appeals) was of the opinion that the....

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....yana Gupta. Hon'ble Punjab & Haryana High Court in the case of Mridula, Prop. M/s Dhruv Fabrics (supra) has held as under:- "The point for consideration in this appeal is, whether initiation of proceedings under s. 158BD of the Act, by recording satisfaction on 15th July, 2005 and issuing a notice dt. 2nd Sept., 2005, which was served on the assessee on 8th Sept., 2005, was valid when block assessment against the person searched had been finalized under s. 158BC of the Act on 30th March, 2005. It would be advantageous to refer to the provisions of s. 158BD of the Act which deals with cases of undisclosed income of persons other than those against whom search has been conducted under s. 132 of the Act and s. 158BE which relates to limitation for framing of assessment under s. 158BC in the case of the person whose premises have been searched, and also under s. 158BD of the Act against whom action under the said section has been initiated. The said provisions read thus : "158BD. Undisclosed income of any other person.-Where the AO is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under ....

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....hole or any part of the proceeding or giving an opportunity to the assessee to be reheard under the proviso to s. 129; or (iv) in a case where an application made before the Settlement Commission under s. 245C is rejected by it or is not allowed to be proceeded with by it, the period commencing on the date on which such application is made and  ending with the date on which the order under sub-s. (1) of s. 245D is received by the CIT under sub-s. (2) of that section, shall be excluded : Provided that where immediately after the exclusion of the aforesaid period, the period of limitation referred to in sub-s. (1) or sub-s. (2) available to the AO for making an order under cl. (c) of s. 158BC is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly. Explanation 2.-For the removal of doubts, it is hereby declared that the authorization referred to in sub-s. (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 warra....

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....158BC and before completion of block assessment under s. 158BC of the Act in the case of the person searched. It would, thus, means that the action contemplated under s. 158BD of the Act against a third party to a search, is necessarily to be during the course of block assessment proceedings under s. 158BC of the searched person. It cannot be after the conclusion of the same as there is no occasion for an AO to examine the seized material or documents of the searched person when the block assessment proceedings have concluded and no other proceedings are pending before him. If any other time-limit is read in the provisions/statute, it shall lead to anomaly and would be arbitrary and unreasonable. It could not be read in the provision that where block assessment under s. 158BC of the Act in the case of an assessee against whom action under s. 132 or 132A of the Act had been carried out is finalized, Revenue can take action at any time in the absence of any specific limitation prescribed in the statute. A construction which leads to such an anomaly should be avoided." Ld. CIT(Appeals) had in para 11 of his order, reproduced the paras relevant for the issue from the decision of Spe....