CIT, FARIDABAD vs. JOGINDER SINGH M/S SABHARWAL ELECTRONICS FARIDABAD

This order shall dispose of ITA Nos.616 and 621 of 2009 as learned counsel for the parties are agreed that identical questions of law and facts are involved in both the cases. However, the facts are being extracted from ITA No.616 of 2009. 2. ITA No.616 of 2009 has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 23.2.2009, Annexure V passed by the Income Tax Appellate Tribunal, Delhi Bench 'I' New Delhi in IT (SS) A No.208/Del/2005 for the block period 1.4.1989 to 31.3.1999. 3. On 2.12.2009, the appeal was admitted to consider following substantial questions of law:- i) Whether on the facts and in the circumstances of the case, the learned ITAT was right in law in holding that the notice issued under Section 158BD by the Assessing Officer without giving 15 days time to the assessee to file the block return is ab initio void and invalid and accordingly, the assessment order made by the Assessing Officer under Section 158BD in pursuance to the said notice is also illegal and invalid disregarding the fact that the assessee himself had filed the return on 10.3.2003 in response to notice under Section 158BD dated 9.3.2001 i.e., after a considerable gap of time and after issue of various notices by the Assessing Officer? ii) Whether on the facts and in the circumstances of the case, the learned ITAT was right in law in declaring the proceedings pursuant to the notice as illegal and invalid despite the specific sever provided under the Act by way of Section 292B of the Income Tax Act, 1961 without even considering and discussing the said Section because in view of Section 292B the learned ITAT should have set aside the case if certain procedural at the time of service of notice remained to be followed as the service of notice under Section 158BD was in substance and effect in conformity with the intent and purpose of the Act?”

Briefly, the facts as narrated in ITA No.616 of 2009 may be noticed. A search was conducted under Section 132(1) of the Act on the business as well as residential premises of Shri Inderjit Singh Sabharwal and certain documents were found. Accordingly, notice under Section 158BD of the Act was issued to the assessee on 9.3.2001. When the said notice was not complied with, another notice under Section 142(1) of the Act was issued to the assessee on 23.4.2002. On 10.3.2003, the assessee filed its return of income for the block period declaring nil income. The assessment was completed vide order dated 31.3.2003, Annexure I under Section 158BD of the Act at an income for Rs.19,37,970/-. Aggrieved by the order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated 17.2.2005, Annexure III, the CIT(A) partly allowed the appeal of the assessee. Feeling aggrieved, the department went in appeal before the Tribunal against the order dated 17.2.2005 passed by the CIT(A). Vide order dated 23.2.2009, Annexure-V,

The primary issue that arises for consideration in these appeals is whether the proceedings in pursuance to notice issued to the assessee under Section 158BD of the Act giving less than 15 clear days time to the assessee to file the return for the block period were void ab initio.

The matter is no longer res integra. This Court in Commissioner of Income Tax V. Naveen Verma, (2012) 346 ITR 100 delving into identical issue had recorded as under:- “We are of the view that the Tribunal erred in concluding that failure to give notice of 15 days will vitiate the assessment itself without considering the prejudice to the assessee. Total absence of notice may be on a different footing but if notice is duly served, the assessee can either avail of the statutory time for filing of the return irrespective of shorter period mentioned in the notice or can be given fresh opportunity if it is held that the assessee suffered prejudice on account of shorter period mentioned in the notice. In any situation, it is not permissible to quash the assessment proceedings merely on the ground that the period mentioned in the notice was lesser than the statutory period specified under Section 158BC (a).”

It was held in Naveen Verma's case (supra) that unless prejudice was shown to have been caused to the assessee or no notice had been served, it was only in those circumstances that the proceedings could be held to be void which is not the question here.

Accordingly, the substantial questions of law are answered in favour of the revenue and against the assessee. Consequently, both the appeals are allowed. The impugned order dated 23.2.2009 in both the cases is set aside and the matter is remanded to the Tribunal for fresh decision on merits in accordance with law. (Ajay Kumar Mittal) Judge October 17, 2012 (Gurmeet Singh Sandhawalia) 'gs' Judge