TMI Blog2010 (11) TMI 366X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn - So much so, issuance of notice under section 158BD read with section 158BC is sufficient for initiation of assessment which in this case is admittedly done and the assessee has filed return in Form 2B in terms of notice issued - Decided against the assessee - IT Appeal No. 1011 and 1069 of 2009 - - - Dated:- 15-11-2010 - RAMACHANDRAN NAIR C. N., RAY B. P. JJ JUDGMENT C. N. Ramachandran Nair J.- These appeals are filed by the Revenue challenging the order of the Tribunal declaring the respondent's assessment made under section 158BD read with section 158BC as invalid. We have heard senior counsel Sri P. K. R. Menon, appearing for the revenue and Sri T. M. Sreedharan, counsel appearing for the respondent assessee. 2. The assessee is a partnership firm, which was engaged in various lines of business, including running of bar hotels. A search was made under section 132 of the Income-tax Act in the premises of the managing partner of the assessee-firm in which documents and records pertaining to undisclosed income of the respondent-firm, particularly unaccounted income of two hotels run by the firm were recovered. The Assessing Officer who has jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax (Appeals) were not considered by the Tribunal. It is against this finding of the Tribunal that the Department has filed both appeals raising only one question, that is, whether the Tribunal was justified in cancelling the assessment completed under section 158BD read with section 158BC as invalid for the reason that the Assessing Officer did not record and communicate his satisfaction under section 158BD of the Act. 3. Since the Tribunal has cancelled the assessment mainly following the decision of the Supreme Court above stated, we have gone through the entire judgment and we notice that the case decided by the Supreme Court pertains to assessment of a limited company based on materials seized in the search conducted under section 132 in the premises of one of the directors of the said company and his wife. In that case, the Assessing Officer who had jurisdiction to assess the director and his wife did not have jurisdiction to assess the company and so much so the file had to be transferred to another officer located in another station for assessment of the company under section 158BD read with section 158BC of the Act. The Supreme Court after going through the noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of June, 1995, but before the 1st day of January, 1997 serve a notice to such person requiring him to furnish within such time not being less than fifteen days ; (ii) in respect of search initiated or books of account or other documents or any assets requisitioned on or after the 1st day of January, 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days but not more than forty-five days,as may be specified in the notice a return in the prescribed form and verified in the same manner as a return under clause (i) of sub-section (1) of section 142, setting forth his total income including the undisclosed income for the block period : Provided that no notice under section 148 is required to be issued for the purpose of proceeding under this Chapter : Provided further that a person who has furnished a return under this clause shall not be entitled to file a revised return ; (b) the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of section 143, section 144 and section 145 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the documents or materials obtained on search made under section 132 or based on the documents or accounts requisitioned under section 132A is satisfied that such records or documents or materials seized reveal undisclosed income of any other person that is of any person other than the searched assessee, or the assessee whose accounts or documents are called for, then he shall hand over all those records pertaining to search or inspection to the Assessing Officer having jurisdiction over such other person who is to be assessed based on such materials. It is specifically provided that such other Assessing Officer to whom the file is transferred shall proceed for assessment under section 158BC and the provisions of Chapter XIV-B are applicable for such assessment. In our view, this is only an enabling provision to assess a person other than the assessee searched or other than the assessee whose books of account and documents were called for and verified under section 132A of the Act. What the statute visualises is the possibility of recovery of cash, valuables or records in the course of search of an assessee which may pertain to another assessee or other assessees. In the normal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 158BC will not invalidate assessment completed under section 158BD read with section 158BC. In fact when records are received by the Assessing Officer from another officer under section 158BD he has to only issue notice to file return in Form 2B. The reasons and materials based on which undisclosed income is proposed to be assessed should be communicated to the assessee when assessment is made based on the return filed which is a step after issuing notice and after receipt of return. By virtue of operation of section 142 every assessee assessed under sections 158BC and 158BD gets an opportunity to file objections. In other words, the validity of the assessment is not affected by reason of the Assessing Officer's failure to record his satisfaction under section 158BD which is only for the purpose of transferring the file and once the file is transferred, the transferring officer becomes functus officio and the jurisdiction for all purposes is transferred to the officer to whom the file is transferred and who has jurisdiction to assess the assessee about whom details are obtained in the course of search of another assessee. The peculiar features of this case are such th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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