SAPPHIRE GLOBAL FINANCE PVT LTD vs. UNION OF INDIA AND ORS

PDF · subscribers
WPO/60/2022HC CalcuttaWBCHCO000072202220 January 2022Bench: HON'BLE JUSTICE MD. NIZAMUDDIN6 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the satisfaction note reproduced in the assessment order was that of the AO of the respondent/assessee, not the AO of the searched person (UIC Group). The summons under Section 131, which formed the basis of this purported satisfaction note, were issued by the assessee's AO and could not be served. The judgment notes that the AO of the assessee attempted to mislead by suppressing dates to create an impression that it was a satisfaction note of the searched person's AO. The ITAT correctly found that the satisfaction was recorded by the AO having jurisdiction over the assessee, not the AO of the searched person. Furthermore, the ITAT found that the procedure prescribed in Section 158BD, including the handing over of documents by the AO of the searched person to the AO of the respondent/assessee, was not followed. The Court concluded that the initiation of proceedings by the assessee's AO under Section 158BD was without jurisdiction and unauthorized. The ITAT's finding on the satisfaction note did not suffer from perversity. The Court relied on the Supreme Court's decision in Manish Maheshwari Vs. Asst. Commissioner of Income-Tax. The appeal was dismissed, and the substantial question of law was answered in favor of the assessee.

What were the facts?

A search was conducted on the UIC Group on May 7, 2002, during which share certificates in the name of M/s. Milia Tracon (P) Ltd. (the assessee) were found. The Assessing Officer (AO) of the assessee initiated proceedings under Section 158BD of the Income Tax Act, 1961, and passed an assessment order on November 30, 2006, for the block period April 1, 1996, to May 7, 2002. The assessee appealed to the CIT(Appeals), who dismissed the challenge to the initiation of proceedings under Section 158BD but allowed the appeal on other grounds regarding an addition of Rs. 1,39,50,000/-. The assessee then appealed to the ITAT, challenging the validity of the Section 158BD proceedings due to the absence of a satisfaction note from the AO of the searched person. The ITAT allowed the assessee's appeal. The Revenue (Principal Commissioner of Income Tax-5, Kolkata) has filed this appeal before the High Court.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the learned Tribunal was justified in law in reversing the order of the CIT(A) & AO, without looking into the facts that the satisfaction note for initiating proceedings under Section 158BD of the Income Tax Act, against the assessee was duly recorded by the AO of UIC Group and as such the said order suffers from perversity? Assessee's contentions (as inferred from the ITAT's findings and the High Court's analysis): The proceedings under Section 158BD were wrongly initiated because the satisfaction note was not recorded by the AO of the searched person (UIC Group) but by the AO of the assessee. The prescribed procedure for handing over documents by the AO of the searched person was not followed. Therefore, the initiation of proceedings under Section 158BD was without jurisdiction. Revenue's contentions: The satisfaction note for initiating proceedings under Section 158BD was duly recorded by the AO of the UIC Group, and the ITAT's order reversing the lower authorities' decisions suffers from perversity.

Which sections of the Income-tax Act were involved?

Section 158BD,Section 144,Section 131,Section 142(1),Section 158BC

AI-generated summary — verify with the full judgment below

O – 148

IN THE HIGH COURT AT CALCUTTA Special Jurisdiction [Income Tax] ORIGINAL SIDE

ITA/60/2022 PRINCIPAL COMMISSIONER OF INCOME TAX- 5, KOLKATA VS M/S. MILIA TRACON (P) LTD.

BEFORE : THE HON’BLE JUSTICE SURYA PRAKASH KESARWANI

And THE HON’BLE JUSTICE AJAY KUMAR GUPTA Date : 3rd July, 2024

Appearance : Smt. Smita Das De, Adv. .. . for the appellant.

1.

Heard Smt. Smita Das De, learned senior standing counsel for the appellant/revenue. None has appeared for the respondent/assessee. 2. This appeal was admitted by this Court by order dated 2.8.2022 on the following substantial question of law : “i) Whether on the facts and in the circumstances of the case, the learned Tribunal was justified in law in reversing the order of the CIT(A) & A.O., without looking into the facts that the satisfaction note for initiating proceedings under Section 158BD of the Income Tax Act, against the assessee was duly recorded

by the A.O. of UIC Group and as such the said order suffers from perversity?

3.

Briefly stated facts of the present case are that a search in the premises of UIC Group was conducted by the income tax department on 7.5.2022 in which certain share certificates issued in the name of the respondent/assessee were found. There is nothing on record to show that any action by the assessing officer of the searched person was taken or any adverse inference was drawn by the assessing officer of the searched person against the respondent/assessee. However, the assessing officer of the respondent/assessee passed an assessment order under Section 158BD of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act, 1961’) dated 30.11.2006. Against the aforesaid assessment order, the respondent/assessee filed an appeal before the CIT(Appeals), Central -3, Kolkata which was dismissed on the point of challenge to the initiation of proceedings under Section 158BD. However, the appeal was allowed on ground nos.2 and 3 with respect to addition of a sum of Rs.1,39,50,000/-. 4. Aggrieved with the order of the CIT(Appeals), the respondent/assessee filed IT(SS)A No.68/Kol/2013 raising the question of validity of initiation of proceedings under Section 158BD of the Act, 1961 without any satisfaction note of the assessing officer of the searched person. The Income

Tax Appellate Tribunal Kolkata Bench ‘A’, Kolkata allowed the appeal of the respondent/assessee by the impugned order dated 27.4.2016. 5. Aggrieved with the order of the ITAT, the revenue has filed the present appeal. 6. Perusal of the assessment order dated 30.11.2006 passed under Section 158BD/144 of the Act, 1961 for the block period of 1.4.1996 to 7.5.2022 shows that the search and seizure operation was conducted in the UIC Group of cases on 7.5.2002. A notice under Section 158BD was issued by the assessing officer of the respondent/assessee which was served upon the respondent/assessee on 2.7.2004. In response, the respondent/assessee submitted a letter dated 20.1.2006 stating that he has no undisclosed income. On 6.3.2006 the assessing officer of the respondent/assessee issued summons to four persons under Section 131 of the Act, 1961. On 10.3.2006 the inspector submitted a report stating that he had visited the preemies of the four persons at their given addresses. Thus, the summons issued to four persons under Section 131, namely, Shankar Lal Godh, Surendra Kumar Hirawat, Sunil Kumar Jain and Rajendra Kumar Surana could not be served by the inspector who submitted a report to the assessing officer of the respondent/assessee. Thereafter, the assessing officer of the respondent/assessee communicated

reasons for initiation of proceedings under Section 158BD of the Act, 1961 to the respondent/assessee vide letter dated 4.5.2006. A notice under Section 142(1) of the Act, 1961 dated 22.8.2006 was issued which was served upon the respondent/assessee on 27.8.2006. In response, the respondent/assessee submitted block return for the period 1.4.1996 to 7.5.2002 on 2.11.2006 and appeared through his authorized representative before his assessing officer on 8.11.2006 and submitted two written representations contending that the proceedings under Section 158BD has been wrongly initiated and it deserves to be dropped. Thereafter, the assessing officer passed the assessment order dated 30.11.2006. 7. The satisfaction note reproduced in paragraph 3 of the assessment order refers to the issuance of summons under Section 131 of the Act which could not be served as per report of the inspector. The summons were admittedly issued by the Assessing Officer of the respondent/assessee on 6.3.2006 and the report of the inspector is dated 10.3.2006. Thus, the satisfaction note which has been reproduced by the assessing officer of the respondent/assessee in paragraph 3 of the assessment order is his note and not of the Assessing Officer of the searched person. He attempted to mislead by suppressing the dates of issuance of summon so as to give an

impression as if it is a satisfaction note of the Assessing Officer of the searched person so as to satisfy the provisions of Section 158BD of the Act, 1961. The CIT(Appeals) misguided itself to assume as if it was a satisfaction note recorded by the assessing officer of the searched person. The ITAT examined the entire matter and recorded findings of fact in paragraphs 5.1 and 7 of the impugned order that “In the instant case satisfaction was to be recorded by the assessing officer of the UIC Group where the search was conducted but in the instant case in hand satisfaction has been recorded by the assessing officer having jurisdiction over the assessee”. 8. It has also been found by the ITAT that the procedure as prescribed in Section 158BD i.e. for handing over of documents by the Assessing Officer of the searched person to the Assessing Officer of the respondent/assessee, were also not followed. 9. Under Section 158BD satisfaction has to be recorded by the assessing officer of the searched person and then to send it to the Assessing Officer of such other person. The facts of the present case clearly based on documentary evidences clearly reveals that the assessing officer of the searched person has neither recorded any satisfaction as required under Section 158BD nor handed over to the assessing officer

of the respondent/assessee seized documents etc. to enable the assessing officer of the respondent/assessee to proceed under Section 158BC. Under the circumstances, the initiation of proceedings by the assessing officer of the respondent/assessee under Section 158BD of the Act, 1961 was without jurisdiction and unauthorized. The finding recorded by the ITAT in the impugned order with regard to the satisfaction note as aforementioned, does not suffer from any perversity. The view being taken by us is also supported by the law laid down by Hon’ble Supreme Court in Manish Maheshwari Vs. Asst. Commissioner of Income-Tax And Another, [2007] 289 ITR 341 (SC). 10. For all the reasons afore-stated, we do not find any illegality in the impugned order of the ITAT. The appeal lacks merit and is, therefore, dismissed. The substantial question of law is answered in favour of the assessee and against the revenue.

(SURYA PRAKASH KESARWANI, J.)

(AJAY KUMAR GUPTA, J.) S. Das /

More judgments on Section 158BD

All 209 judgments and leading authorities on Section 158BD →

Recent GST High Court judgments

Search GST case law →