TMI Blog2003 (3) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be addressed first. Accordingly, the appeal itself was posted for hearing and heard. In view of the fact that the appeal was taken up for hearing, the stay petition filed by the assessee becomes infructuous and is accordingly dismissed. 3. Shri Pradeep, learned counsel for assessee, submitted that the Tribunal had valid jurisdiction to hear this appeal under s. 253(1)(b) of the IT Act, 1961 (hereinafter referred to as "the Act"). Sec. 253(1)(b) is in the following terms: "253(1) Any assessee aggrieved by any of the following orders may appeal to the Tribunal against such order:- (b) an order passed by an AO under cl. (c) of s. 158BC, in respect of search initiated under s. 132 or books of account, other documents or any assets requisitioned under s. 132A, after the 30th day of June, 1995, but before the 1st day of January, 1997...." 4. It was submitted by the learned counsel that the assessment order under s. 158BC of the Act was passed on 29th Jan., 1999, consequent upon the notice under s. 158BC issued to the assessee on 13th Jan., 1997. As per the warrant of authorisation issued by the DIT, Bangalore, dt. 30th Dec., 1996, the assessee's premises were subjected to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date covered in s. 253(1)(b) which confers the jurisdiction to the Tribunal. 5. As to the meaning of the word "initiation", learned counsel brought to our attention several decisions to stress on the point that "initiation" would mean the very first act in a series of acts. In the case of a search under s. 132, the authority which issues warrant under s. 132 has to satisfy itself about the applicability of conditions outlined in s. 132(1)(a), (b) and (c) of the IT Act. Once the authority is satisfied, then warrant is issued authorising lower authorities to actually execute the warrant and conduct the search. Thus, issue of warrant of authorisation, being the first firm and authenticate step, for conduct of search would mean "initiation" of the search. The learned counsel further drew our attention to s. 158BE, Expln. 2, which was inserted in Finance Act, 1998, with retrospective effect from 1st July, 1995, reads as under: "Explanation 2: For the removal of doubts, it is hereby declared that the authorisation referred to in sub-s. (1) shall be deemed to have been executed (a) in the case of search, on the conclusion of search as recorded in the last panchnama drawn in relatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y objections on 13th Dec., 2002, even before the assessee had made its submissions. He further submitted another written statement consisting of 20 pages, dt. 3rd Jan., 2003. The contents of the written statement were also submitted orally. The submissions in brief are: Though the initiation of the search is prior to 1st Jan., 1997, yet since the AO has indicated in the demand notice the appellate authority as CIT(A) and not the Tribunal, the jurisdiction would lie with CIT(A) under s. 246A(1)(k) and not under s. 253(1)(b). In support of his argument, he relied on his written submission dt. 3rd Jan., 2003. The relevant portion reads: "Since there is a difference of only two days between the date of issue of warrant of authorisation in this case and the date from which the amended provision of Chapter XIV-B came into effect, the assessee is trying to make out a case that "date of issue of a warrant of authorisation" meant the same thing as "date of initiation of search" and that the two expressions were identical in meaning. However, the date of issue of a warrant of authorisation for a search can, by no stretch of imagination, be interpreted as the date of initiation of the sea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoking that jurisdiction were absent, an appeal against this order on the ground that he was not competent to pass the order did lie to the AAC. The AAC is under the Act constituted an appellate authority against certain orders of the ITO, and exercise of that jurisdiction is not made conditional upon the competence of the ITO to pass the orders made appealable. The AAC had as a Court of appeal jurisdiction to determine the soundness of the conclusions of the ITO both on questions of fact and law and even as to his jurisdiction to pass the order appealed from'. In the light of the foregoing legal position, it is reiterated that the present appeal preferred by the assessee before this Tribunal is not maintainable." 10. The stand of the Revenue on the question of deciding the appellate jurisdiction is linked to the passing of order of the AO. It is submitted that the AO in the present case has passed the order considering the search is deemed to have been initiated after 1st Jan., 1997. The learned Departmental Representative submitted that even if the stand of the AO was not in conformity with the law, yet the said assessment order was the only order existing on the date and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds with different meanings and purposes and the Department's argument that all of them or many of them would mean the same will render understanding of the Act in an overlapping manner and also such interpretation would render reading of the provision in an irrational manner. Rational and harmonious interpretation giving meaning to each and every expression is preferable to an attempt by the Department which renders use of different words meaningless. 12. We have considered the rival submissions, perused the evidence on record and applied the ratio of the decisions relied on by the parties. The crux of the dispute revolves around the jurisdiction of the Tribunal to entertain the impugned appeal of the assessee. The issue before us is fairly simple and does not involve high complication canvassed by the parties. Sec. 253 deals with the scope and the jurisdiction of the Tribunal to deal with the appeals before it. A perusal of s. 253(1)(b) brings out an incontrovertible, unambiguous and clear conclusion that in cases where the search is initiated after 30th June, 1995, and before 1st Jan., 1997, the appeal against the block assessment framed by the AO in such cases shall lie with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order sheet initiating the penalty would be sufficient and notice of penalty issued later is only a communication of initiation. However, the same argument strangely is opposed in this case. The above case law and arguments enable us to come to the conclusion that "initiation of search" commences with the "issue of authorisation" by the authorities. 16. Adverting to the second question as to when the search was initiated in this case, we find that warrant of authorisation to search the premises of the assessee was issued by the DIT, Bangalore, on 30th Dec., 1996. This fact is undisputed as the same is evidenced by the panchnama issued by the Department. We had to rely on the panchama though the warrant issued by the DIT, Bangalore, would have been a better evidence to rely on. When the Bench sought for the warrant and the related records to be produced for perusal, the same was not produced for the reasons best known to the Department. However, we are not handicapped by such non-production of the evidence, as the date of issue of authorization is not disputed by the Department. Hence, we proceed to decide the case based on the records and material available before us. The c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated between 30th June, 1995 and 1st Jan., 1997. Therefore, the issue of jurisdiction to entertain the appeal in terms of cl. (b) is not only dependent on the passing of the order by the AO but is also required to be decided vis-a-vis the date of initiation of search. In this manner, the appeal provisions envisaged under cl. (b) of sub-s. (1) of s. 253 are on a different footing. It is in this light that the decision of the apex Court in the case of CIT vs. Bikaji Dadabhai Co. (1961) 42 ITR 123 (SC), which is vehemently canvassed before us by the learned Departmental Representative, needs to be read and understood. From this angle also, in our considered view, the present appeal of the assessee is within the four corners of s. 253(1)(b) and enjoin the Tribunal to entertain the same. Accordingly, the appeal is maintainable. 17. Now, we may refer to various submissions made by the counsel with regard to the issue of limitation and technical objection vis-a-vis the impugned order of the AO. The learned counsel submitted that the notice issued under s. 158BC dt. 13th Jan., 1997, is bad in law inasmuch as: (a) the AO has issued the notice without himself satisfying that there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entioned is understood as previous years, then the period mentioned would go beyond the date of commencement of search. If the period is understood as assessment years, then it would not include the previous year upto the date of commencement of search. Hence, it is canvassed that the block period is not correctly mentioned having regard to the facts obtaining on record. 20. The notice in this case is not properly addressed as required under s. 282(2) of the Act. Sec. 282(2) reads as under "Any such notice or requisition may be addressed: (a) in the case of a firm or a HUF, to any member of the firm or to the manager or any adult member of the family; (b) in the case of a local authority or company, to the principal officer thereof; (c) in the case of any other association or body of individuals, to the principal officer or any member thereof; (d) in the case of any other person (not being an individual), to the person who manages or controls his affairs". In this case, the notice was not addressed to the principal officer of the company. Further, the notice did not mention the status in which the return is to be filed. The notice leaves it blank by mentioning ".... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... less such a notice is issued the ITO does not get jurisdiction to make an assessment on a particular assessee. In this view of the matter, in our opinion, the Tribunal has been right in holding that the assessment in question was not valid in law." (d) Lala Madan Lal Agarwal vs. CIT (1983) 32 CTR (All) 179 : (1983) 144 ITR 745 (All): "It is now well-settled, and we do not consider it necessary to advert to numerous authorities in this regard cited at the Bar, that issuing of a valid notice to the assessee under s. 148 of the IT Act within the period specified under s. 149 of the Act is a condition precedent to the validity of any assessment to be made against such assessee under s. 147 of the Act. Accordingly, where no such notice has been issued or if the notice issued is not valid or the same has not been served on the assessee in accordance with law, it will not be possible to sustain the eventual assessment made under s. 147 on the basis of such notice. We may also take it that where the notice issued to an assessee is vague, it would not be possible to rely upon it to sustain an assessment made under s. 147 of the IT Act." (e) CIT vs. Thayaballi Mulla Jeevaji Kapasi (Decd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erve a notice to such person requiring him to furnish within such time not being less than fifteen days." The words used in the section are "where any search has been conducted" clearly imply that notice should be issued only after the search is conducted and not prior to that. The learned counsel argued that prior to issue of notice the AO must convince himself of the desirability or the requirement for issue of notice. The AO should convince himself by proper application of mind that there was a valid search, such a search has at least on a prima facie basis has material or valuables which could be termed as undisclosed income assessable in the hands of the person who has been searched. The Act provides two sections, viz., 158BC where the assessment is in the hands of the person searched and another section, viz., 158BD where material found in another person's search is assessed in the hands of the third party. Hence, unless the search is complete and the material seized and other details are obtained and gone through by the AO, no notice could be issued. Further, the AO should record reason for issue of notice. In the case of a notice issued prior to completion of search, all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search in this case was not a valid search as envisaged under s. 132 of the IT Act. The requirements of sub-cls. (a), (b) and (c) of s. 132(1) could not be satisfied on an objective analysis based on the facts obtaining on record. It was submitted that the assessee is an existing assessee and has always complied with all the notices in all proceedings. Even as late as on 2nd Dec., 1996 notice under s. 143(2) was issued seeking innumerable number of details and the case was fixed on 13th Dec., 1996, and all the details were submitted by the assessee as could be made out from the notice and other correspondence enclosed in paper book IV(1) at p. Nos. 31 to 36. Hence, the conditions mentioned in sub-cls. (a) and (b) of sub s.(1) 132 are not complied with. Insofar as sub-section (c) is concerned, verification of all the material including assessment order indicates that it was not a case for any seizure of valuable or money, bullion, etc. To verify the veracity and validity of search, learned counsel requested for summoning of the search records including satisfaction note. He further contended that the Tribunal has the requisite authority and responsibility to satisfy the validity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and such non-furnishing should enable the Tribunal to draw adverse inference on the Department. 25. The next ground taken by learned counsel was that the return filed by the assessee on 30th April, 1997, was a return under protest and the AO has not taken cognizance of the accompanying objections and alternative computation of income filed. Consequently, the assessment is invalid as it has not acted upon properly. 26. The learned counsel further submitted that the assessment made in this case on 29th Jan., 1999, is barred by limitation for two different reasons: (a) The first reason is that s. 158BC(b), extracted herein: "the AO shall proceed to determine the undisclosed income of the block period in the manner laid down in s. 158BB and the provisions of s. 142, sub-ss. (2) and (3) of s. 143, s. 144 and s. 145 shall, so far as may be, apply." requires the AO to issue notice under s. 143(2) before completion of any assessment under s. 158BC, whereas s. 143(2) mentions that no notice shall be issued after the expiry of 12 months from the end of the month in which the return is furnished. In this case notice under s. 143(2) has been issued only on 6th Oct., 1998, whereas va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed herein: "(13) As submitted earlier, the appellant has preferred the present appeal, on the footing that the search in their case is initiated after 30th June, 1995, but before 1st Jan., 1997 and, thereby the time-limit of one year as provided under s. 158BE(1)(a) of the Act is applicable. This position is disputed by the Revenue. In those cases, where the search is initiated after 30th June., 1995, but before 1st Jan., 1997, an appeal would lie, in terms of s. 253(1)(b) of the Act before the Tribunal. Now, in the present case, when the issue of maintainability of the present appeal, as raised by the Revenue, is dealt with by this Hon'ble Tribunal' and even if it is held that the provisions of s. 158BE(1)(a) of the Act would be applicable and consequently rendering the assessment barred by time, in such a situation, it would be wholly impermissible in law to adjudicate the other issues on merits. Normally, in an appellate forum, when the plea of limitation and jurisdiction is accepted holding the order under appeal to be bad in law either was time-barred or without jurisdiction, the appellate forum may not be precluded from adjudicating the other issues on merits. But the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal rendered on merits cannot be gone into at all. In view of this peculiar position of the jurisdiction involved in the present case, it is submitted that the issue on merits cannot be gone into at this stage by this Hon'ble Tribunal. At this stage, it may also be mentioned that in a recent case in the case of Gagandeep Prathisthan (P) Ltd. Ors. vs. Mechano Anr. AIR 2002 SC p. 204, the Supreme Court has held that the preliminary issue of maintainability should be considered before proceeding with appeal any further. In that context, the Supreme Court has held as under: '6. In view of the peculiar facts of this case without going into the merits of the contentions raised by the counsel for the appellants, we think it is just and fair that we should not at this point of time interfere with the impugned order though the High Court could have avoided passing such orders in proceedings where the maintainability itself was being seriously questioned. Be that as it may, we at this stage think it appropriate that the High Court should consider the question of condonation of delay and the objection of the appellants herein in regard to maintainability of the appeal first, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, this is not a normal case wherein the appellate forum can go into both the question of maintainability, jurisdiction as well as the merits. In other words, the restoration or revival of the assessment held to be barred by time by the Tribunal would mean that the block assessment stands and as such by virtue of the provisions of s. 246(1)(k) of the Act providing for an appeal against such assessment to the CIT(A), the Tribunal cannot go into the question of merits. Thus, it may be noticed that in the order passed in the case of G. Dharmichand Jain vs. Dy. CIT, there is inherent contradiction, in that, on restoration of block assessment, the question of dealing with the other issues on merit will not arise at all. (15) In the light of the foregoing position, it is submitted that in the present appeal preferred by the appellant-assessee, the question of dealing with the issues on the merits of the block assessment does not arise. As such, the present appeal may be heard only on the issue of maintainability, in that, as to whether the appellant's case, for the purpose of conclusion of block assessment, is governed by the provisions of s. 158BE(1)(a) or 158BE(1)(b) of the Act. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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