NARESH CHAND BAID vs. ASSISTANT COMMISSIONER OF INCOME TAX

JUDGMENT on ..l.7.f?lay ofOctober, 201 1) (Delivered Per Satish K. Agnihotri, J. This instant appeal arises from the order dated 28.07.2004 passed in I.T. (SS) A No. 41/Nag/2000 by the Income Tax Appellate Tribunal (for short ‘the Tribunal ’), Nagpur Bench, Nagpur, whereby the appeal filed by the appellant/department against the order dated 16.02.2000 passed by the Commissioner of Income Tax (Appeal) [far short ‘the CIT (A)], Raipur, was partly upheld.

thé Finance Act 1997 the appellant was precluded from making a declaration under the V.D.I.S. scheme 1997 in respect of the sum of Rs. 4,00,000/— as held by the Tribunal.

\ held that the action of the AO was incorrect in bringing to tax the sum of Rs. 4,00,000/— and the same was liable to be deleted. However, the objection of the appellant regarding jurisdiction for making assessment was rejected on the ground that it had not been raised before the AO. Against the order dated 16.02.2000 (Annexure A/2) passed by the CIT (A), the appellant as well as the respondent flled separate appeals before the Tribunal. The Tribunal held that the CIT (A) was not justified in allowing the claim of the assessee for immunity under the Scheme, 1997 and deleting the addition of Rs. 4,00,000/- made by the AO. As regards objection regarding jurisdiction for making assessment, it was held that it can only be challenged in writ proceedings and not in appeal. Shri Shashank Dubey, learned senior counsel appearing with Shri Neelabh Dubey, learned Advocate for the appellant would submit that no warrant of authorization was in the name of the appellant which could lead to a valid search and then a valid ’ assessment under section 158 BC of the Act. The Tribunal has erred in equating warrant of authorization issued in the name of the firm containing name of appellant as partner with a warrant of authorization issued in the name of the appellant. Further, there was no existence of any satisfaction of the concerned authority, which is a prerequisite for issue of warrant of authorization in the instant case. Shri Dubey would further submits that under the Scheme, 1997, the certificate issued by the Commissioner is final and confers immunity upon the declarant which the AO had no M

4 4) \ jurisdiction to dispute or doubt or ignore the same. He would next contend that the question ofjurisdiction can be raised at any stage. In support of his contention, Shri Dubey relies on a decision of the Supreme Court in Manish Maheshwarz‘ v. ACIT’, A.C.I. V vi Hotel Blue M00n2, CIT. v. Vandana Verma3. 6. Shri Dubey would further contend that in the instant case, no notice under section 158 BC (a)(ii) of the Act was issued by the AO. The assessee flled return in form 2-B on 18.08.1989 for the block period as before the order, no notice under section 143(2) of the Act, which is mandatory, was issued before making assement on the return tiled. The satisfaction with regard to the fact that undisclosed income belonging to the assessee was not recorded. There was no notice under section 158 BD before recording the satisfaction. Since there was no search carried out agains the assessee individually, rejection of the declaration under the Scheme,l997 was bad in law. The case of Anita Parekh is distinguishable as in case of Anita Parekh the Tribunal itself has recorded that warrant of authorization was issued in her name. In the instant case, there was no individual warrant in the name of the assessee. If the firm and partners had made any declaration under the Scheme, 1997, that would be barred since was conducted against them as a person but that would not bar the assessee from making a declaration. 1 2007) 3 SCC 794 2 (2010) 321 ITR 362 s 2010) 330 ITR 533 (AII) \ ‘ \\ I.

4 Tax Case No. 98 of2010 & Other connected matters, decided on 20.10.2010 5 l.T.A. No. 28/2004, decided on 29.04.2009 \\ On the other hand, Shri Rajeev Shrivastava, learned counsel appearing with Shri Sameer Shrivastava, learned Advocate for the department would submit that the return of two years (1996-1997 and 1997-1998) were due from the assessee on the date of search i.e. 03.11.1997. The returns were flled by the assessee, after search, on 18.08.1999 declaring undisclosed income for the block period at nil. Assessment order was accordingly passed under the provisions of section 158 BC of the Act, 1961 declaring undisclosed income to the tune of Rs. 7,04,919/— . Shri Shrivastava would further submit that the assessee participated in the proceeding initiated on the basis of warrant of authorization. The assessee may not be permitted to question the validity of the search proceedings in this appeal. In support of his contention, Shri Shrivastava would rely on a decision of this Court in Trilok Singh Dhillon v. Commissioner 0flnc0me Tax, Raipur". The Tribunal had already recorded the finding that in the search warrant, the name of the assessee was clearly mentioned. There is no requirement under law to issue separate search warrant in case of each and every assessee when combined search warrant has been in the name of all the assesses. In support of this contention, Shri Shrivastava would rely on a decision of this Court in Smt. Anita Parakh v. Commissioner oflncome Tax, Raipur5. He would next contend that even if it is assumed that the search was illegal, however, the material collected during the cannot be ignored and the same can be used against the assesse in \

\l‘ the assessment proceeding. In support of this contention, he would rely on a decision of the Supreme Court in Pooran Mal v. Director oflnspeétor (investigation) oflncome Tax, New Delhi & 0thers6 and State ofPunjab v. Baldev Singh7. In respect ofv second question of law, Shri Shrivastava would submit that the issue is squarely covered by the decision of this Court in Smt. Anita Parakh5. In respect of the contention of the appellant/assessee that the assessment ought to have been done under section 158 BD of the Act, 1961, it is submitted that it was not applicable in the facts of the case as the warrant of was in the name of the assessee. The provisions of section 158 BD is applicable'only in case of those assesses, wherein search and assessment was not done on the basis of warrant of authorization. It is next contended that the appellant is estopped from raising a new ground in this appeal flled under section 260A of the Act, 1961. He relies on a decision ofthis Court in Durga Prasad Verma v. Union oflndio & Othersg.

A. \ 7 no valid search, the assessment order could not have been passed under section 158 BC of the Act. Contrary to the said submission, \ Shri Shrivastava contended that there may not be an individual warrant of authorization, however, the name of the assessee found place in the combined warrant of authorization and the assessee, after search, has declared undisclosed income for the block period. Thus, the order was rightly passed under section 158 BC of the Act. l3. Section 158 BC provides for procedure for block assessment and section 158 BD provides for on the basis of undisclosed income of any other person, which reads as under: “158-BC. Procedure for block assessment. Where any search has been conducted under Section 132 or books of account, other or assets are requisitioned under Section 132—A, in the case of any person, then, (a) the Assessing Officer shall (i) in respect of search initiated or books of account or other documents or any assets requisitioned after the 30th day of June, 1995 but before the 1st day of January, 1997, serve a notice to such person requiring him to furnish within such time not being less than fmeen days; (ii) in respect of search initiated or books of account or other documents or any assets requisitioned on or after the 1st day of January, 1997 serve a notice to such person requiring him to furnish within such time not being less than flfteen days but not more than forty-flve days, as may be specified in the notice a return in the prescribed form and verified in the same manner as a return under clause (i) of sub-section (1) of Section 142, setting forth his total income including the undisclosed income for the block period: Provided that no notice under Section 148 is required to be for the purpose of proceeding under this Chapter: V

Provided further that a person who has furnished a retum under this clause shall not be entitled to flle a revised return;] (b) the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in Section 158-BB and the provisions of Section 142, sub-sections (2) and (3) of Section 143, Section 144 and Section 145] shall, so far as may be, apply; (c) the Assessing Officer, on determination of the undisclosed income of the block period in accordance with this Chapter, shall pass an order of assessment and determine the tax payable by him on the basis of such assessment; (d) the assets seized under Section 132 or requisitioned under Section 132-A shall be dealt with in accordance With the provisions of Section 132—B. 158-BD. Undisclosed income of any other person. Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under Section 132 or Whose books of account or other or any assets were requisitioned under Section 132-A, then, the books of account, other or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed under Section 158-BC against such other person V and the provisions of this Chapter shall apply accordingly.” The Tribunal found that identical facts and circumstances had been decided by the Bench in the case of Smt. Anita Parekh, by its consolidated order dated 30.04.2009, wherein order of the CIT (A) upholding the action of the AO in denying immunity by the assessee under the Scheme, 1997, was upheld by the Tribunal. The cross objection of the assessee in respect of validity of the order under section 158 BC on the .round that no warrant of g authorization was issued in the name of the assessee, was rejected. In Manish Maheshwaril, relied on by learned counsel for the appellant, the Supreme Court held as under: l4. “ll. Condition precedent for invoking a block is that a has been conducted under Section 132, or documents or assets have been requisitioned under Section 132-A. The said provision would apply in the case of any person in respect of Whom search has been carried out under Section or or assets have been requisitioned under Section 132—A. Section 158- BD, however, provides for taking recourse to a 'block assessment in terms of Section 158-BC in respect of any other person, the conditions precedents wherefor are: (i) satisfaction must be recorded by the assessing officer that any undisclosed income belongs to any person, other than the person with respect to whom search was made under Section 132 of the Act; (ii) the books ’of accounts or other documents or assets seized or requisitioned had been handed over to the assessing officer having jurisdiction over such other person; and (iii) the assessing officer has proceeded under Section 158-BC against such other person.

10 effected under Section 132 or on requisition of books of accounts, other documents or assets under Section 132-A. By making the notice issued under this section mandatory, it makes such notice the very foundation for jurisdiction. Such notice under the section is required to be served on the person who is found to be having undisclosed income. The section-itself prescribes the time—limit of 15 days for compliance. In respect of searches on or after l— 1-1997, the time-limit may be given up to 45 days instead of 15 days for compliance. Such notice is prescribed under Rule 12(1-A) which in tum prescribes Form 2-B for block return.

g. KEV period 11.11.1997 to 22.11.1997 and as such, it was rightly held that she could not take benefit of the Scheme, 1997. 20. In Pooran Mal6, a Constitution Bench of the Supreme Court held that if the and seizure were in contravention of the provisions of section 132 of the Act, still the material seized was liable to be used against the assessee in the proceedings. The said ratio laid down was referred with approval by another Constitution Bench in Baldev Singh 7. 21. ln case of declaration under Scheme, 1997, the CIT (A) accepted the declaration and a certificate was issued accordingly. The CIT (A) held that the AO was not competent to hold such acceptance by the Commissioner as null and void. The CIT (A), accordingly held as under: h “3.2 On receipt of this clarification, the CIT on the basis ofthe facts verifiable from the records, having been satisfied that no search and seizure proceedings were initiated against the assessee, had given the certificate u/s 68(2) of the VDIS, 1997 vide No. 6574 dated 22.4. 98. When once the Commissioner after having been satisfied with the correctness and lawfulness of the declaration made by the assessee under the VDIS,1997, had certificate under that scheme, the assessee (the declarant) will have to be given immunity proclaimed under that scheme, since as per provisions of VDIS, 1997 the declaration accepted by the CIT by issue of a certificate u/s. 68(2) of the Scheme was final and the AO was not, therefore, entitled to dispute or disbelieve the same to deny the immunity and to bring to tax the said declared sum, as undisclosed income within the ambit of Chapter XIV-B read with section 158 BB.”

\m served on the assessee by the DCIT, Circle, Bhilai, was withdrawn vide letter dated 22.01.1999 on the ground that the case of the assessee was transferred to the office of the Assistant Commissioner of Income Tax, Circle Raipur and the notice issued by the DCIT, Circle Bhilai, was withdrawn. Thereafter, no notice was issued and as such, withdrawal of the notice on 22.01.1999 constituted dropping of the block assessment proceedings and once such block proceedings had been withdrawn on 22.1.1999, the assessment under section 158 BCvpassed by the AO was set aside and the appeal was allowed. The‘department preferred an appeal before the Tribunal challenging the action of the CIT (A) on the ground that deleting the addition of Rs. 2,69,116/- made by the AO to the undisclosed income of the assessee for the assessment year 1996-97 and 1997-98 that the assessee had not filed returns for the said years before the date of search under section139(1). The department also challenged the action of the CIT (A) in deleting the addition of Rs. 37,800/- made by the AO for 7 months of assessment year 1998-99 on the same ground. The Tribunal, after having considered all the facts, came to the conclusion that the findings recorded by the CIT (A) and the decision taken thereader, was just and proper. Accordingly, the said grounds were rejected.

\W/ assessee was not eligible for immunity benefit under the Scheme, 1997, as the assessee, in whose case search was conducted under section 132 of the Act, was not eligible for making a declaration of his undisclosed income in respect of any earlier years prior to the previous year in which the search had been initiated and this position was further clarified in the circular No. 753 issued on 10.06.1997. 24. There is no dispute that in the warrant of authorization for search, the name of the assessee was clearly stated and pursuant to the search conducted on 11.1 1.1997, it was found that a declaration of undisclosed income of Rs. 4 lacs was made by the appellant under 'the Scheme, 1997 on 13.12.1997, for which the there was no immunity to the appellant. Thus, the finding recorded by the Tribunal was strictly in accordance with law and the same cannot be held as perverse.

14 had not raised this objection in the course of sealch proceedings or immediately, thereafter.