Acit Cercle Chhindwara vs. Pinku Traders

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ITA/48/2014HC Madhya Pradesh27 June 2014Bench: HON'BLE SHRI JUSTICE RAJENDRA MENON5 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal held that recording of satisfaction by the Assessing Officer is a mandatory prerequisite for initiating block assessment proceedings under Section 158BD of the Income Tax Act, 1961. The Supreme Court in Manish Maheshwari Vs. Asstt. CIT (supra) clearly laid down that the Assessing Officer must record satisfaction that undisclosed income belongs to a person other than the one searched, and this is a mandatory requirement. While the Kerala High Court in Panchajanyam Management Agencies & Services (supra) had considered the provisions of Section 158BD, it did not refer to the Supreme Court's binding precedent in Manish Maheshwari. The Tribunal found that the facts in Manish Maheshwari were not entirely different and that the principle of recording reasons being mandatory under Section 158BD was applicable. Regarding the alternate submission, the Tribunal was not impressed, stating that the communications on record were merely statements of facts and did not constitute a specific recording of reasons for reopening the block assessment under Section 158BD. Therefore, the Tribunal concluded that the statutory requirement under Section 158BD had not been followed and found no error in the ITAT's order.

What were the facts?

This appeal by the assessee challenges an order of the Income Tax Appellate Tribunal (ITAT), Jabalpur. The ITAT had upheld the assessment orders passed by the Assessing Officer and the Appellate Authority concerning a block assessment for undisclosed income under Section 158BD of the Income Tax Act, 1961. The primary contention of the assessee before the ITAT was that the Assessing Officer had failed to record the necessary satisfaction and reasons before initiating the block assessment proceedings. The ITAT found that the statutory requirement of recording reasons was not met. The present appeal questions the tenability of the ITAT's order, specifically arguing that recording of reasons was not necessary or was sufficiently borne out by the communication on record.

What were the issues?

1. Whether the recording of reasons is a mandatory requirement for initiating block assessment proceedings under Section 158BD of the Income Tax Act, 1961, or if the facts and circumstances of the case render it unnecessary. Assessee's Contentions: - The assessee argued that recording of reasons was not necessary, relying on the Kerala High Court's decision in Commissioner of Income Tax Vs. Panchajanyam Management Agencies & Services (2011) 333 ITR 281, which distinguished the Supreme Court's ruling in Manish Maheshwari Vs. Asstt. CIT (2007) 208 CTR (SC) 97. - Alternatively, the assessee contended that if recording of reasons was necessary, it was indeed done, as evidenced by communications on record. Revenue's Contentions: - The judgment does not record any specific contentions made by the revenue.

Which sections of the Income-tax Act were involved?

Section 158BD,Section 132,Section 158BC,Section 132A,Section 142

AI-generated summary — verify with the full judgment below

1 ITA No.48/2014 27/6/2014. Shri S. A. Dharmadhikari, learned counsel for the appellant. Calling in question tenability of an order passed by the Income Tax Appellate Tribunal, Jabalpur in the matter of interfering with the assessment orders passed by the Assessing Officer and the Appellate Authority mainly on the ground that recording of satisfaction and reason before proceeding to conduct block assessment for undisclosed income under Section 158 BD has not been recorded, this appeal is filed and the only substantial question of law indicated in the appeal is that "recording of reasons was not necessary and in the facts and circumstances of this case, recording of reasons is borne out from the communication available on record". Shri S. A. Dharmadhikari, learned counsel for the appellant invites our attention to the judgment of Kerala High Court in the case of Commissioner of Income Tax Vs. Panchajanyam Management Agencies & Services reported in (2011) Vol. 333 ITR 281 to say that the Kerala High Court in the aforesaid case has considered the principles 2 ITA No.48/2014 laid down by the Supreme Court in the case of Manish Maheshwari Vs. Asstt. CIT - (2007) 208 CTR (SC) 97 and has distinguish the case. Shri Shushrut Dharmadhikari raised two contentions. His first contention was that in the light of the principles laid down by the Kerala High Court in the case of Panchajanyam Management Agencies & Services (supra) the recording of reasons was not necessary. His alternate submission was that even if the recording of reasons is necessary he invites our attention to the communication referred to in the order passed by the Tribunal, to say that recording of reasons has been done. We have considered the contention and we find that Supreme Court in the case of Manish Maheshwari (supra) has considered the conditions precedent that are to be followed as a mandatory requirement before initiating proceedings u/s 158 BD and the Supreme Court deals with the matter in the following manner:- "158BD, however, provides for taking

recourse

block assessment in terms of Section 158BC in respect of any other 3 ITA No.48/2014 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 account 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 158BC against such other person." ... "As the Assessing Officer has not recorded its satisfaction, which is mandatory; nor has it transferred the case to the Assessing Officer having jurisdiction over the matter, we are of the opinion that the impugned judgments of the High Court cannot be sustained, which are set aside accordingly. The appeals are allowed." It is therefore clear from the aforesaid principle laid down by the Supreme Court that satisfaction recorded by the assessment officer that any undisclosed income belonging to any person other than the person with respect to whom search was made under Section 132 is available. This recording of satisfaction is a mandatory requirement and the Kerala High Court while considering the 4 ITA No.48/2014 question in the case of Panchajanyam Management Agencies & Services (supra) in para 5 has in its own interpreted the provisions of Section 158 BD after considering the provisions of Section 132A and Section 142. However, in this para the learned Bench has not referred to the principles laid down by the Supreme Court in the case of Manish Maheshwari (supra). A perusal of the order passed by the Kerala High Court shows that they have only said that the facts in the case of Manish Maheshwari (supra) are entirely different. From the observations and law laid down in the case of Manish Maheshwari (supra), as is reproduced herein above, it is clear that recording of reason is a mandatory requirement as contemplated under Section 158 BD. That being so, we see no error in the order passed by the Tribunal that recording of reasons is mandatory provision. As far as alternate submission to the effect

that

the

present

case communications available do show that reason we are not impressed from the aforesaid contention. They are only communication of certain fact with regard to 5 ITA No.48/2014 issue in question but there is no specific recording of reason for re-opening of the block under Section 158 BD. That being so, the Tribunal has not committed any error in holding that the statutory requirement under Section 158 BD has not been followed. Accordingly, no substantial question of law arises for consideration in this appeal. The appeal is therefore, dismissed. (Rajendra Menon) (Sushil Kumar Gupta) Judge Judge

mrs.mishra

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