TaxTMI 
TaxTMI 
2026 (7) TMI 902
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....return of income for the block period and only thereafter complete the assessment under Section 158 BC of the Act? (ii) Whether the additions for undisclosed income in the block assessment under Section 158 BC of the Act can be made notwithstanding that the issue has already been adjudicated in the original assessment under Section 143 of the Act? (iii) Whether the ITAT was right in deleting the addition of Rs.21 crores made by the AO under Section 45 read with Section 47(v) of the Act?" 3. Before adverting to adjudication of the questions of law so framed, it would be apt to lay down the factual foundation giving rise to the present appeal. 4. The appellant - M/s. Sun Aero Ltd. (hereinafter referred to as 'Sun Aero'), claims itself to be a wholly owned subsidiary of a company known as Sun Air Hotels Ltd. (hereinafter referred to as 'Sun Air'), which was conferred right to develop a hotel at Bangla Sahib Road by the New Delhi Municipal Corporation (hereinafter referred to as 'NDMC') in the year 1970. However, in the year 1990, due to some difference which arose between the Sun Air and NDMC and the NDMC cancelled the development rights. Sun Air challenged the....
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....e revenue brought the matter before this Court by way of an appeal under Section 260(A) of the Act of 1961, bearing ITA No. 562/2008, in which the following questions of law were framed by the High Court : "(i) Whether the Income Tax Appellate Tribunal was right in deleting the addition of Rs. 21 crores made by the Assessing Officer under Section 45 read with Section 47(v) of the Income Tax Act, 1961? (ii) Whether the impugned order passed by the Income Tax Appellate Tribunal is perverse ?" 10. The High Court heard the appeal and, vide its order dated 01.06.2012, remitted the matter back to the Tribunal, holding the order of the Tribunal to be perverse. In other words, the High Court decided the question no. 2 only and left all the questions, including the ground relating to question no. 1 recorded hereinabove in para No. 5, to be dealt with and decided afresh by the Tribunal. 11. When the matter went before the Tribunal pursuant to the remand, the Tribunal allowed the appeal filed by the Revenue vide its order dated 20.09.2016, which is impugned in the present appeal before this Court. The appellant's legal grounds, more particularly, the ground that no inc....
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....estion, he submitted that while proceeding under Section 158BC of the Act, it is incumbent upon the Assessing Officer to issue a notice under Section 143(2) of the Act, as has been held by Hon'ble the Supreme Court in the case of Assistant Commissioner of Income Tax vs. Hotel Blue Moon, 2010 3 SCC 259 and by this Court in the case of Principal Commissioner of Income Tax vs. Silver Line, 2016 383 ITR 455. He invited Court's attention to paragraph 22 of the Hotel Blue Moon (supra) and paragraph 16 and 18 of the Silver Line (supra). The relevant paragraphs are as follows : In Hotel Blue Moon (supra), Hon'ble the Supreme Court observed as under : "22. Clause (b) of Section 158-BC by referring to Sections 143(2) and (3) would appear to imply that the provisions of Section 143(1) are excluded. But Section 143(2) itself becomes necessary only where it becomes necessary to check the return, so that where block return conforms to the undisclosed income inferred by the authorities, there is no reason, why the authorities should issue notice under Section 143(2). However, if an assessment is to be completed under Section 143(3) read with Section 158-BC, notice under Section ....
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....ection 158 BC cannot be passed, he relied upon and invited Court's attention to paragraph 18 of the Hotel Blue Moon (supra). The relevant paragraph is as follows : "18. Chapter XIV-B provides for an assessment of the undisclosed Income unearthed as a result of search without affecting the regular assessment made or to be made. Search is the sine qua non for the block assessment. The special provisions are devised to operate in the distinct field of undisclosed income and are clearly in addition to the regular assessments covering the previous years falling in the block period. The special procedure of Chapter XIV-B is intended to provide a mode of assessment of undisclosed income, which has been detected as a result of search. It is not intended to be a substitute for regular assessment. Its scope and ambit is limited in that sense to materials unearthed during search. It is in addition to the regular assessment already done or to be done. The assessment for the block period can only be done on the basis of evidence found as a result of search or requisition of books of accounts or documents and such other materials or information as are available with the assessing office....
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....g this fact that whether this company was actually a wholly owned subsidiary of M/s Sunair Hotels Ltd. were carried out during post search investigation. Vide reply of the assessee dated 29.08.2002 it was stated that "the assessee company is a 100% subsidiary of Sunair Hotels Ltd. right from its incorporation till date because as per the Company Act, minimum seven registered, shareholders should be there in any public limited company and therefore seven such persons were appointed as nominees to hold shares on behalf of the holding company M/s Sunair Hotels Ltd. It was also stated that the said nominee, shareholders did not make any investment to acquire the share of M/s Sunaero Ltd., but the entire investment was made by Sunair Hotels Ltd. Therefore, the consideration of Rs. 21 Crores so received by the assessee company was exempt from tax as it was a wholly owned subsidiary of M/s Sunair Hotels Ltd. for the reasons given above." 19. Having read the above quoted portion of the assessment order, learned counsel submitted that the fact that certain material was found is evident from the above part of the assessment order and therefore, the assessee's claim that no material was fo....
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....by the tribunal. A reading of the order passed by the Assessing Officer would show that he has referred to the evidence and material which was found during the search and thereafter, he has referred to the post search investigation and verification. As per the assessment order, the evidence/material found during the search and post search investigation had revealed that the respondent assessee was not 100% subsidiary of Sunair Hotels Ltd. As we are passing order or remit, this question, if raised, will be examined and considered by the tribunal. The second contention of the respondent relying upon the assessment order dated 9th February, 1998, does not help or assist the respondent for the said order has proceeded on the assumption that the respondent assessee was 100% subsidiary of Sunair Hotels Ltd. However, as per the case of the appellant, material and evidence found during the search and subsequent enquiries had revealed that the respondent assessee was not a 100% subsidiary of Sunair Hotels Ltd. It is, therefore, the contention of the appellant that the assessment order dated 9th February, 1998 does not help or protect the respondent assessee as the said order had proceeded o....
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.... cross-appeal. We are of the firm view that the Tribunal has erred in not considering the appellant's arguments that the assessment order was liable to be set aside or no proceedings could be taken against the appellant assessee, as no material was found during the search. 29. In any event, the Question Nos.1 & 2 framed by this Court are purely legal issues and go to the root of the matter. It is a settled legal position that legal issues can be raised at any stage, and, if they are jurisdictional issuesthey can be raised even before the High Court or before Hon'ble the Supreme Court. 30. We, therefore, reject the preliminary objection raised by Mr. Sinha that Question Nos.1 and 2 cannot be gone into by this Court, at this stage. 31. Moving on to Question No. 2, a perusal of the assessment order gives an indication that during search, the Assessing Officer had found some material such as share certificate, etc. but the Assessing Officer did not record any finding about the material on the basis of which he had inferred that the appellant was not a fully owned subsidiary of Sun Air. 32. A perusal of the above quoted part of the assessment order (Para No.14) clearly unrav....