TMI Blog2009 (8) TMI 969X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals)-V has erred in holding that the Assessing Officer has no jurisdiction to complete the assessment and the assessment made by the Assessing Officer is illegal in the absence of valid notice under section 158, though there was no ground from the assessee on the jurisdiction of the Assessing Officer. Much force has been given by the learned Commissioner of Income-tax (Appeals)-V on this issue. (iii) The learned Commissioner of Income-tax (Appeals)-V has erred in not appreciating the fact that this case was notified to the Deputy Commissioner of Income-tax, Central Circle-2(1), Bangalore along with the rest of the group of cases (Bhansali Group). Vide notification F. No. CC-1/ITO (Tech)-I/14/01-02 dated October 6, 2001 and, accordingly, the assessment was completed by the Deputy Commissioner of Income-tax, Central Circle-2(1), Bangalore. The Assessing Officer in his order has mentioned that a search was conducted during April, 2000 in the case of Lalchand Balar and Arun Kumar Bansal. Mr. Lalchand Balar is the father of the assessee. Several incriminating documents evidencing undisclosed income in the case of the assessee were seized. As there was a clear case made out of und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee without notice to him will be void and will not be sustainable in law. (Banarsi Das v. CIT [1936] 4 ITR 217 (Lah)). (8) When the assessee pleads that he has not been properly served with any notice it was for the Department to place the relevant material to substantiate their plea that the assessee was served with proper notices. Reliance has been placed on the decision reported at Venkat Naicken Trust v. ITO [2000] 242 ITR 141 (Mad). (9) If an invalid notice is served then proceedings taken by the Assessing Officer in pursuance of such invalid notice are invalid and inoperative. Y. Narayana Chetty v. ITO [1959] 35 ITR 388 (SC). (10) Procedural defects will always invalidate a notice is not correct. For this reliance has been placed on the decision reported at 347 ITR 975. (11) If a notice for reassessment is invalid for any reason then the entire proceedings will become void for want of jurisdiction. Reliance has been placed on the following decisions reported at CIT v. Ramsukh Motilal [1955] 27 ITR 54 (Bom) ; Kurbanhussein Ibrahimji Mithiborwala v. CIT [1968] 68 ITR 407 (Guj). (12) Reliance was placed on the decision of the Delhi Tribunal in the case of Rakesh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of notice issued by the Assessing Officer is available at page 2 of the paper book. Page 3 of the paper book is a letter from the Assessing Officer vide which the assessee was required to make compliance with the notice issued for filing the block return. Pages 4 to 6 contain statement of the assessee recorded under section 131 on August 23, 2002. In answer to question No. 5, the assessee admitted the undisclosed income as per the letter of his authorised representative. The learned Departmental representative drew our attention to statement of Shri Lalchand Balar recorded on June 19, 2000 under section 132(4) of the Income-tax Act. In answer to question No. 4, Shri Lalchand Balar admitted that his son Dilip Kumar sold 3 acres 10 guntas of land in Nelamangala to one Mr. Manick Chand for Rs. 9,35,000 during February, 1998. There was a profit of Rs. 4,05,000. It was further submitted that this profit was shown in the income-tax return. The learned Departmental representative submitted that return for the assessment year 1998-99 was filed on May 8, 2000. The search proceedings were initiated in April, 2000. It was, therefore, submitted that the return by the assessee was filed after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been collected from the Sub-Registrar and is made as Annexure `H' to this report. It appears that the assessee has concocted his accounts so as to fit his story with the sites registered with the Sub-Registrar. In my opinion and also based on the local enquiries it is found that these assessees have successfully sold the sites in the installment schemes. However, only few sites would have been registered. Therefore, they have presented these limited facts before the income-tax authorities. In view of the above, continuous information may be required to be sought from the Sub-Registrars so as to know about the future registrations which the assessee may claim as direct sales instead of selling to members in the above installment scheme." The appraisal report contains the details of transactions done by the assessee and the undisclosed income has been estimated by the Investigation Wing. The details of such estimation are available at pages 40 to 42 of the paper book filed by the learned authorised representative. Finally it was observed that an amount of Rs. 37,64,447 may be assessed in the hands of the assessee as undisclosed income for the block period. The learned Departme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer has mentioned as "143(3) read with sections 158BC and 158BD". Before issuing notice, the Assessing Officer has made the following entries in the order sheet : "August 4, 2000-There was a search in the case of Lalchand Balar on April 26, 2000. During the course of search, documents indicating hitherto undisclosed income were found and seized, which pertains to Dilip Kumar Balar. The amount of such income is about Rs. 37 lakhs. To bring to tax this income, issue notice under section 158BC read with section 158BD." The assessee filed the block return in Form No. 2B on February 19, 2001. The return under Form No. 2B was prescribed by rule 12(1A). Rule 12(1A) is as under : "The return setting forth the total income including the undisclosed income for the block period required to be furnished under clause (a) of section 158BC shall be in Form No. 2B and be verified in the manner indicated therein." (We have reproduced this rule as was applicable during the period when notice under section 158BC was issued). The object of our drawing attention to rule 12(1A) is that the rule talks of the return filed under section 158BC. There is no mention of section 158BD. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y accordingly. It means to assess the undisclosed income of any other person ; other provisions of Chapter XIV-B will be applicable including 158BC. Hence, a notice required to be issued will be a notice under section 158BC. The hon'ble Gujarat High Court in the case of Khandubhai Vasanji Desai v. Deputy CIT [1999] 236 ITR 73 had an occasion to consider the constitutional validity of the provisions of section 158BD of the Income-tax Act. The hon'ble Gujarat High Court at page 85 has observed as under : "This provision indicates that where the Assessing Officer, who is seized of the matter and has jurisdiction over the person other than the person with respect to whom search was made under section 132 or whose books of account or other documents or any assets were requisitioned under section 132A, he shall proceed against such other person as per the provisions of Chapter XIV-B which would mean that on such satisfaction being reached that any undisclosed income belongs to such other person, he must proceed to serve a notice to such other person as per the provisions of section 158BC of the Act. If the Assessing Officer who is seized of the matter against the raided person reache ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quired to be taken then notice under section 158BC is to be issued. It was observed that non-mentioning of section 158BD in the notice under section 158BC is not fatal to the assumption of jurisdiction. Vide paragraph 8.2 of the order, the Tribunal has observed as under : "In our considered view a bare perusal of the provisions of Chapter XIV-B would reveal that only one type of notice is contemplated for starting the block assessment proceedings under that chapter. Section 158BD does not require issue of prior notice before the section is invoked. Once section 158BD is invoked the only notice to be given to the assessee would be under section 158BC. May be for practical purposes in the notices issued under section 158BC if it refers to section 158BD, any confusion that may arise to the assessee (by reason of the fact that he was not the person searched) could be avoided, but the non-mentioning of section 158BD in the notice under section 158BC is not fatal to the assumption of jurisdiction. The jurisdiction under section 158BD is based on the satisfaction of the Assessing Officer that (a) there is undisclosed income ; (b) such undisclosed income does not belong to the person wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of notice. Issue of notice is part of procedure. If there is a defect in notice then it will not invalidate block assessment. Defect in notice is curable and it is an irregularity and not an illegality. The Chandigarh Bench in the case of Asst. CIT v. Amolak Ram Jerath [2007] 15 SOT 661 held that where facts show that the assessee was aware that proceedings against him were under section 158BD, non-mentioning of section 158BD in notice issued to the assessee will not render block assessment proceedings against him null and void. In this case, it was also held that the notice issued should be considered as notice issued under section 158BC read with section 158BD in view of the provisions of section 292B of the Act. The hon'ble Madras High Court in the case of Sakthivel Bankers v. Asst. CIT [2002] 255 ITR 144 held as under : "Held, that absence of mention of the provision in the notice was not a circumstance which could be said to vitiate the ultimate order. The fact that notice was issued to the eight firms and to the wife of L, even though the search warrant was not issued against them, was of no consequence, having regard to section 158BD. It had been rightly found by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to the assessing authority having jurisdiction over him. In the instant case, the same Assessing Officer was having jurisdiction over the searched person as well as on other person." We had already noticed the noting in the order sheet and the facts mentioned in the assessment order and the section under which the Assessing Officer has completed the assessment and from it, it is clear that the notice was issued under section 158BC read with section 158BD. Non-mentioning of section 158BD in the notice dated August 9, 2000 is not fatal. Any defect in this notice is curable as issuing of notice under section 158BC read with section 158BD is procedural. Section 292B will cure such irregularity. The assessee has filed cross-objections. The first cross-objection is that the block assessment made by the Assessing Officer by issuing of notice under section 158BC is without jurisdiction. This cross-objection stands disposed of in view of our finding recorded against the appeal filed by the Revenue. We hold that the block assessment order passed by the Assessing Officer is with jurisdiction. The second cross-objection is that the mandatory satisfaction was not recorded. We had po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to prevent the transfer of the case after issue of notice under section 158BD. Hence, this crossobjection is dismissed. The last cross-objection is that the disallowance of expenses were not warranted. It has been further mentioned in this last cross-objection that long-term capital gain of Rs. 2,18,781 could not have been added. The learned Commissioner of Income-tax (Appeals) has held that the sum of Rs. 2,18,781 cannot be included in the undisclosed income because the same stands disclosed in the returns filed. On the issue of disallowance of expenses, the learned Commissioner of Income-tax (Appeals) has not recorded any finding in his appellate order. The Assessing Officer in the assessment order has disallowed business promotion expenses, commission and interest. The learned Commissioner of Income-tax (Appeals), on technical ground held that the assessment is not legally valid and, therefore, has not decided the issues on the merits. Thus, the additions which have been made by the Assessing Officer have not been considered by the learned Commissioner of Income-tax (Appeals) in his appellate order. Hence, the issue of disallowance of expenses is required to be restored back on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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