2009 (8) TMI 969 - AT - Income Tax

Summary

Issues Involved:

1. Validity of the assessment order under sections 143(3), 158BC, and 158BD due to non-issuance of notice under section 158BD.
2. Jurisdiction of the Assessing Officer to complete the assessment in the absence of a valid notice under section 158BD.
3. Notification and transfer of the case to the Deputy Commissioner of Income-tax, Central Circle-2(1), Bangalore.
4. Various procedural and substantive grounds raised by the assessee in the cross-objections.

Issue-wise Detailed Analysis:

1. Validity of the Assessment Order:

The primary issue was whether the assessment order passed under sections 143(3), 158BC, and 158BD was valid given the contention that no notice under section 158BD was issued to the assessee. The Commissioner of Income-tax (Appeals) quashed the assessment order on the grounds that:

- No search warrant or panchanama was issued in the name of the assessee.
- The search was conducted in the name of Shri Lalchand Balar.
- The only notice issued was under section 158BC, not 158BD.
- Procedural defects, such as the non-issuance of a proper notice, invalidate the proceedings.

The Tribunal examined whether the notice under section 158BD was a prerequisite for initiating proceedings against the assessee. It was established that the Assessing Officer had recorded satisfaction and issued a notice under section 158BC read with section 158BD, which was deemed sufficient. The Tribunal held that non-mentioning of section 158BD in the notice was not fatal and any defect in the notice was curable under section 292B of the Act.

2. Jurisdiction of the Assessing Officer:

The Commissioner of Income-tax (Appeals) held that the Assessing Officer lacked jurisdiction to complete the assessment due to the absence of a valid notice under section 158BD. However, the Tribunal found that:

- The satisfaction of the Assessing Officer was recorded, and the notice under section 158BC read with section 158BD was issued.
- The jurisdiction to assess undisclosed income in search cases is conferred under section 158BA, and section 158BC is procedural.
- The Tribunal referred to various judicial precedents, including the Gujarat High Court and the Supreme Court, to support that the notice under section 158BC read with section 158BD was valid.

3. Notification and Transfer of the Case:

The Revenue contended that the case was notified to the Deputy Commissioner of Income-tax, Central Circle-2(1), Bangalore, along with the rest of the Bhansali Group cases. The Tribunal noted that:

- The same Assessing Officer had jurisdiction over both the searched person and the assessee.
- The transfer of the case was valid, and the assessment was completed by the appropriate authority.

4. Procedural and Substantive Grounds in Cross-Objections:

The assessee raised several cross-objections, including:

- The block assessment was without jurisdiction.
- Mandatory satisfaction was not recorded.
- The notice issued was under section 158BC and not section 158BC read with section 158BD.
- Mere noting without notice under section 158BD does not confer jurisdiction.
- The Commissioner of Income-tax (Appeals) admitted an additional ground regarding the non-issuance of notice under section 158BD.
- The transfer of the case without giving an opportunity to the assessee.

The Tribunal addressed these objections as follows:

- The block assessment order was held to be within jurisdiction.
- Satisfaction was recorded, and the same Assessing Officer had jurisdiction.
- The notice under section 158BC read with section 158BD was procedurally valid.
- The Commissioner of Income-tax (Appeals) was justified in admitting the additional ground.
- The transfer of the case was valid and did not affect the legality of the assessment.

Conclusion:

The Tribunal partly allowed the appeal of the Revenue and the cross-objections of the assessee. The assessment order was held to be valid, and the procedural defects were deemed curable. The issue of disallowance of expenses was remanded back to the Commissioner of Income-tax (Appeals) for consideration on merits.