CIT vs. RAM SINGH( DISMISSED ON 5.2.2013)

Date of Decision:05.2.2013 Commissioner of Income Tax-II, Ludhiana

ITA No.599 of 2010 Date of Decision 05.2.2013 Commissioner of Income Tax-II, Ludhiana

ITA No.604 of 2010 Date of Decision 05.2.2013 Commissioner of Income Tax-II, Ludhiana

ITA No.664 of 2010 Date of Decision 05.2.2013 Commissioner of Income Tax-II, Ludhiana

ITA No.665 of 2010 Date of Decision 05.2.2013 Commissioner of Income Tax-II, Ludhiana

Whether on the facts and in the circumstances of the case, the Tribunal was legally justified in cancelling the assessment by holding that the assumption of juri iction by issuance of notice under Section 158 158BC was invalid and void ab-initio though the juri iction over the person (Lal Singh) in whose case search warrant was issued and the other person (the assessee under consideration) in whose case warrant was not issued vested with thesame assessing officer ?.” These questions of law have arisen on the basis of information received from some person to the effect that Prem Jain and Rattan Jain, residents of village Malerkotla are big property dealers of the town and have given various moveable and immovable assets disproportionate to their known sources of income and income declared to the Income Tax Department. Statement of the informer was recorded which also revealed that these two brothers had kept their account books with Lal Singh resident of Malerkotla. On that basis, Additional Director of Income Tax (Investigation) recorded his satisfaction for searching the premises of Prem Jain, Rattan Jain, Ram Singh, Lal Singh and Gurcharan Singh big property dealers resident of Railway Road, Malerkotla and issued warrant of authorization under Section 132 (1) of the Income Tax. Premises of the aforesaid persons were searched, wherein as per revenue, many incriminating documents and material were found and was seized. During search of premises of Lal Singh, same incriminating documents were found which pertained to the respondents/assessees herein who are the sons of Lal Singh. On the basis of that material, notices were issued to Lal Singh as well as assessees herein (sons of Lal Singh) under Section 158 BC of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') for 01.4.1985 and 05.10.1985 and ultimately, they filed their returns and declared undisclosed income. The Assessing Officer thereafter carried out the assessment. The returns filed by these persons were not accepted. Many additions were made on various accounts as is clear from the assessment order. However, having regard to the nature of question of law involved, it is not necessary to take note of the nature of these additions. Suffice to state that because of these additions of amount treated as undisclosed income, appellants preferred separate appeals (five in number) before the Income Tax Appellate Tribunal. Main contention of learned counsel for the appellants was that the entire assessment proceedings were without juri iction and void ab-initio for the reason that there was no authorization for issuing search warrants against them and in these circumstances, there could not have been any proper assessment against them under Section 158 BC of the Act. It was submitted that in such circumstances, block assessment, if any, could have been only under section 158 BD of the Act but the procedure for carrying out the assessment in that manner, which was mandatory in nature, was not followed. Learned Tribunal has found force in the aforesaid submission of the learned counsel for the appellants and it is for this reason that the Tribunal while accepting the appeals of these assessees, have set aside the order of Additional Director of Income Tax treating the same as invalid and void ab-initio. The admitted facts which emerge from the record are that there is no authorization of search or search warrants under Sections 132 (i) of the Act in respect of these assessees. No doubt, while searching the premises of their father Lal Singh, some documents and other material which were not belonging to the assessees were seized and on that basis, there could be block assessment. However, in such a situation when there was no authorization in respect of these assessees, it is the provisions of Section 158 BD of the Act which would be attracted and not the provisions of 158 BC. The Tribunal has rightly pointed out that juri iction to assess the undisclosed income for the block period under Chapter XIV-B vests in the Assessing Officer by virtue of the provisions of Section 158BA in a case where a search under Section 132 is initiated after 30.6.1995. Again, in term of Section 158 BC, a notice under that Section can be issued where any search has been conducted under Section 132 of the Act. However, assessment is to be carried out in respect of undisclosed income of other person i.e. a person in whose case, there was no search made under Section 132 of the Act, the provisions of Section 158 BD are to be invoked. These provisions are reproduced below:- “Section 158BD of the Income Tax Act, 1961, authorises the Department to asses a person other than the searched person based on materials recovered during search. No independent notice is contemplated under the section because it only givens juri iction to the Assessing Officer to assess a person other than the searched person based on materials gathered during search. The procedure for assessment of a person other than the searched person under Section 158 BD is the same procedure contained in Section 158 BC. Since no notice is prescribed under Section 158 BD, which is required is to issue an intimation about the initiation of proceedings under Section 158BD by the officer, and then to call for return in Form 2 B prescribed under rule 12 (1) (a) of the Income Tax Rules,162, for assessment under Section 158 BC”.