2015 (4) TMI 44 - AT - Income Tax

Block assessment - Assessment u/s 158BD r.w.s. 158BC - addition on Unexplained loan and unexplained expenditure u/s 69C - absence of satisfaction note - Held that - After examining the record CIT(A) came to conclude that though the satisfaction note was recorded by the Assessing Officer yet a copy of the same has not been provided to the assessee. Therefore in the aforesaid factual background following the parity of reasoning laid down in the case of Janki Exports International (2004 (3) TMI 21 - DELHI High Court ) as well as M/s Bhagyashree Steel Center 2015 (4) TMI 82 - ITAT PUNE we setaside the impugned orders of the lower authorities and restore the matter back to the file of the Assessing Officer who shall supply the reasons recorded for arriving at the satisfaction for invoking section 158D of the Act to the assessee. On receipt of such reasons assessee shall be entitled to file objections which shall be disposed-off by the Assessing Officer by way of a speaking order and only thereafter he shall proceed to pass a fresh assessment order in accordance with law. Since we have set-aside the matter back to the file of the Assessing Officer on the preliminarily ground the merits of the impugned addition of Rs. 39, 55, 062/- have not been examined by us which would be re-visited by the Assessing Officer in accordance with law in the ensuing proceedings. - Decided in favour of assessee for statistical purposes.

Summary

Issues Involved
1. Admission of Additional Ground of Appeal.
2. Non-provision of the satisfaction note to the assessee.
3. Legality of additions made under sections 68 and 69C of the Income Tax Act, 1961.

Detailed Analysis

1. Admission of Additional Ground of Appeal:
The primary issue in this case revolves around the admission of an Additional Ground of Appeal, which was not raised before the lower authorities. The appellant contends that the principles of natural justice were contravened as the satisfaction note prepared by the Assessing Officer of the searched party was not provided to the assessee. It was argued that this omission amounts to a denial of reasonable opportunity to the assessee to raise objections. The Tribunal found that the Additional Ground of Appeal involves a point of law relating to a jurisdictional aspect and justified its admission based on the facts available on record.

2. Non-provision of the Satisfaction Note to the Assessee:
The core of the dispute is the non-provision of the satisfaction note to the assessee, which is a prerequisite for invoking section 158BD of the Act. The Tribunal noted that the assessment was finalized for the block period from 01.04.1995 to 11.10.2001 following a search action under section 132(1) of the Act. The assessee argued that the assessment under section 158BD could only be invoked after recording the mandated satisfaction, which was not provided to them. The Tribunal referenced the judgment of the Hon'ble Delhi High Court in the case of Janki Exports International vs. Union of India, which mandates that a person to be proceeded with under section 158BD must be informed about the satisfaction recorded by the Assessing Officer and given a reasonable opportunity to object.

3. Legality of Additions Made Under Sections 68 and 69C of the Income Tax Act, 1961:
The Tribunal did not examine the merits of the impugned additions of Rs. 32,00,000/- under section 68 and Rs. 7,55,062/- under section 69C, as the matter was set aside on the preliminary ground of non-provision of the satisfaction note. The Tribunal directed the Assessing Officer to supply the reasons recorded for arriving at the satisfaction for invoking section 158BD to the assessee. Upon receipt of such reasons, the assessee shall be entitled to file objections, which the Assessing Officer must dispose of by way of a speaking order before proceeding to pass a fresh assessment order.

Consolidated Decision for Other Appeals:
The Tribunal noted that the facts and circumstances in the other two cases, namely, Rikabchand R. Oswal and Kokila Rikabchand Oswal, were pari materia to those in the case of M/s Manoj Himmatlal Shah. Therefore, the Tribunal's decision in the lead case applied mutatis mutandis to the other two appeals. The impugned orders of the lower authorities in these cases were also set aside, and the matter was restored to the file of the Assessing Officer with similar directions.

Conclusion:
In conclusion, the Tribunal allowed the appeals for statistical purposes, emphasizing that the Assessing Officer must first provide the satisfaction note to the assessee and dispose of any objections raised before proceeding with a fresh assessment. The order was pronounced on 18th March 2015.