TMI Blog2012 (10) TMI 541X X X X Extracts X X X X X X X X Extracts X X X X ..... is a part of block period assessment and there was no original block period assessment. Under the facts and circumstances, the action taken by the A.O. is not in accordance with law. The material based on which the A.O. reopened the regular assessment is the material pertained to requisition under section 132A and such material is subject to only block assessment. As decided in Ramballabh Gupta Versus Assistant Commissioner of Income-Tax And Others.(2005 (8) TMI 99 - MADHYA PRADESH HIGH COURT ) wherein it has been held that the A.O. does not have jurisdiction to issue notice under section 148 in respect of those 6 Assessment Years which falls within the exclusive jurisdiction of section 153A. Thus once the A.O. proceed to make block assessment under section 158BC based on material gathered during the search under section 132, he cannot proceed to make reassessment under section 147 on the basis of same material - in favour of assessee. - IT APPEAL NO. 279 (AGRA) of 2011, C.O. No. 57 (Agra) of 2011 - - - Dated:- 12-10-2012 - Bhavnesh Saini And A. L. Gehlot, JJ. ORDER A. L. Gehlot, Accountant Member The appeal by the Revenue and the Cross Objection by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilities of initiation of penalty proceedings u/s 271D of the Act for alleged prima-facie violation of section 269SS of the Act, though the issue relating to penalty u/s 271D of the Act was not subject matter of appeal or even under consideration of AO or learned CIT(A)-II, Agra. 3. Because the direction made by the learned CIT(A)-II, Agra to the concerned Range Heads to explore the possibilities of initiation of penalty proceedings u/s 271D of the Act for alleged prima-facie violation of section 269SS of the Act being both against the facts and in law thus the same is illegal and bad in law. The respondent seeks permission to modify and/or add any other ground/grounds of cross objection as the circumstances of the case might require or justify. 4. The brief facts of the case are that on 03.06.1998 Police Authorities at Jhansi intercepted a car in which three persons namely Shri Ram Kishan Agarwal, Shri Vidit Kumar Agarwal (assessee) and Shri Deepak Agarwal were traveling. The Driver of the car was Shri Kamta Prasad Agarwal. On search of the vehicle, the Police authorities found cash of ₹ 32,34,600/- in three bags. The Police authorities recorded the statement o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment in the status of A.O.P. was bad in law and, therefore, quashed the order passed under section 158BC of the Act. The relevant finding of I.T.A.T. which has been reproduced by the CIT(A) at page no.3 of his order from paragraph no.48 of the order of I.T.A.T. is as under :- So far as issue relating to assessee's claim that cash belonging to three individuals stand explained by them, we are of the opinion that in view of above discussion, the issue, so far as present assessee is concerned, is only academic because whether the cash was explained or unexplained, the fact remains that action can be taken only in the hands of individuals and not in the hands of AOP. 6. On receipt of I.T.A.T.'s order, the A.O. initiated proceedings under section 148 of the Act and made the assessment which is the impugned Assessment Order. The reasons for reopening recorded by the A.O. which is reproduced in Paper Book filed by the assessee at page nos.101 to 104 reads as under :- Reasons recorded u/s 147 of the Income-tax Act, 1961 in the case of Sri Vidit Kumar Agarwal, Behind Bandhu Press Sabun Gram, Mauranipur, Jhansi for A.Y. 1999-2000 According to brief facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash seized was disclosed or undisclosed income of the petitioners and therefore, they shall be entitled to proceed in the matter. Consequent upon these orders of the Hon'ble High Court, Allahabad, the block assessment proceedings were stayed for the time being and in compliance with the directions of the Hon'ble High Court, a speaking order dated 14.1.2000 was passed by the AO, whereby after making necessary inquiries and the material brought on record, it was held by the AO that the entire cash seized was undisclosed income of the persons, namely S/Sri Sri Vidit Kumar Agarwal Ram Kishan Agarwal, and Sri Deepak Kumar Agarwal (AOP). The appeals filed before CIT(A)-II against three orders dated 14.1.2000 have been dismissed, upholding the action of the AO, vide orders dated 21.7.2000 in Appeal No.CIT(A)-II/20 and 2l/Cir.I/Jhs/2000-0l/596 and 597. After passing the orders dated 14.1 2000 by the Id CIT(A)-II, orders u/s 158BC(C) of the Income-tax Act, 1961 were passed by the AO on 29.6.2000. During the course, the assessee moved petitions u/s. 144A of the Income-tax Act, 1961 which were decided by the Ld. JCIT, Range-2, Agra vide his order dated 29.6.2000, issuing directi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be available with the Director of Income-tax (Investigation), Kanpur and that evidence in the light of the facts and circumstances of the case could be as follows :- (i) Information from the Police authorities for having intercepting the car and recovered the cash in question contained in three bags. (ii) Statements of three concerned persons given before the police authorities and their admission to own their respective cash. (iii) Statements recorded by the ACIT, Jhansi on 03.6.1998 of all the three individuals wherein they had owned their respective cash and explained the source of the same. Once again, in the same order in para No.47 48 at Page No.33 it has again been held by the Hon'ble ITAT, Agra as under :- Para 47. Even otherwise we are further of the opinion that the issue is squarely covered by the decision of Hon'ble High Court, Allahabad in the case of Jaiswal Motor Finance (Supra) because all the three individuals having accepted the cash as belonging to them or as theirs cash, no addition could be made in the hands of AOP Para 48. So far as issue relating to the assessee's claim that cash belonging to three individuals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own that the said chapter provides for a special procedure for assessment of search cases. The stand of revenue that sec. 158BH permits all other provisions of the Act to apply to assessment made under chapter XIVB does not merit acceptance. Sec. 158BH begins with the words 'save as otherwise provided in this chapter. Therefore, before going to any other provision of the Act one has to consider whether any provision has been made in chapter XIVB which is dealing with the assessment of undisclosed income so as to warrant exclusion of other provisions of the Act. Not only this, the chapter heading indicates that the chapter is relatable to a distinct self contained procedure for assessment of search cases, and when one considers the relevant provisions of the chapter this becomes abundantly clear. On a plain reading of sec. 158BH it becomes apparent that once a provision has been made for assessment under chapter XIVB no other proviso of the act shall be applicable, but if there is no provision made in chapter XIVB all other provisions of the Act shall apply to assessment made under chapter XIVB. The sec, 158BH does not stipulate application of other provisions of the Act to an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opening proceedings under section 147 of the Act by issuing notice under section 148 dated 31.10.2005 where cash has been requisitioned under section 132A dated 30.06.1998 (block period 01.04.1988 to 04.06.1998) of the Act. To examine the issue, we would like to discuss some aspects of the relevant schemes of the Act. Chapter XIV of the Act, in juxtaposition, provides for procedure for assessment. Sections 147 of the Act deals with income escaped assessment. An Assessing Officer may assess or reassess any income chargeable to tax which has escaped assessment for any assessment year if the Assessing Officer has reason to believe that such income has escaped assessment. The power to assess or reassess such income and also any other income which is liable to tax and has escaped assessment is subject to the provisions of sections 148 to 153 of the Act. Under section 147 of the Act, the Assessing Officer is empowered not only to assess or reassess income which has escaped assessment but also recompute the loss or depreciation allowance or any other allowance, as the case may be. Explanation 2 to section 147 of the act lays down three classes of cases wherein it shall also be deemed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of search cases and assessment has to be framed in accordance with the provisions of Chapter XIV-B of the Act. On a harmonious reading of both sections 158BA and section 158BH of the Act it becomes clear that only where a provision is not made in Chapter XIV-B of the Act providing for a special procedure for assessment will other provisions of the Act be made applicable. Thus, on a plain reading of provisions of Chapter XIV-B of the Act, it becomes apparent that once a provision has been made for assessment under Chapter XIV-B of the Act, no other provision of the Act shall be applicable, but if there is no provision made in Chapter XIV-B of the Act, all other provisions of the Act shall apply to assessment made under Chapter XIV-B of the Act. 8.3 Section 158BB of the Act provides for modality of computation of undisclosed income of the block period. Such undisclosed income of the block period has to be the aggregate of the total income of the previous yeas falling within the block period. If the different aggregates which are provided for in clauses (a) to (f) are seen, it becomes clear that the computation of undisclosed income is first made in accordance with the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... result of search. One cannot envisage escapement of undisclosed income once a search has taken place and material recovered, on processing of which undisclosed income is brought to tax. Section 147 of the Act itself indicate that the same is in relation to income escaping assessment and applies in a case where either income chargeable to tax has escaped assessment by virtue of either non-disclosure by way of non-filing of return, or non-disclosure by way of omission to disclose fully and truly all material facts for the purpose of assessment, or processing of material already available on record, if the same is within the stipulated period of limitation. Therefore, to contend that undisclosed income has escaped assessment despite an assessment having been framed under Chapter XIV-B of the Act by adopting the special procedure prescribed by the said Chapter is to contend what is inherently not possible. It cannot be a case of non-fling of return considering the provisions of section 158BC of the Act. It cannot be a case of non-disclosure of material facts considering the fact that everything which was undisclosed has already been unearthed at the time of search and the definition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of same material. 8.7 The Hon'ble Guwahati High Court has considered the judgement of Hon'ble Gujarat High Court in the case of Cargo Clearing Agency (Gujarat) v. JCIT and observed that the view taken by the Hon'ble Gujarat High Court does not take care of situation that has arisen in the case before the Guwahati High Court. The Court has also examined section 158BC(a) of the Act including first proviso to section 158BC(a) of the Act. The relevant finding of the Court is reproduced as below :- (322 ITR page no.557) The exclusion of section 148 by the first proviso to section 158BC(a) of the Act has been understood by us to be in the context of the notice that is required to be issued by the Assessing Officer following an action taken under section 132 and/or section 132A of the Act, as the case may be. Such notice, in the fact of a concluded assessment for any of the assessment years included in the block period, may partake of the character of reopening such an assessment, to clarify which the first proviso to section 158BC(a) has been inserted. The question that confronts the court in the present case is a stage after conclusion of the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A of the Act. The Hon'ble High Court of Kerala in the case of CIT v. Sivanandan, 52 DTR Kerala 428 held that once the A.O. proceed to make block assessment under section 158BC based on material gathered during the search under section 132, he cannot proceed to make reassessment under section 147 on the basis of same material. 9. In the light of above discussions, the CIT(A) has rightly quashed the assessment order framed by the A.O. The order of the CIT(A) is confirmed on the issue. Cross Objection No.57/Agr/2011 by the assessee 10. Ground no.1 of the Cross Objection is in support of order of the CIT(A). 11. Ground nos. 2 3 are in respect of some observation of CIT(A) directing the A.O. to explore the possibility of initiation of penalty proceedings under section 271D of the Act. 12. After hearing the ld. Representatives of the parties, we find that when the CIT(A) has annulled the assessment made by the A.O., under the circumstances, such unwarranted direction and observation are not required. Therefore, the same are deleted. 13. The assessee in it's C.O. has raised some additional grounds which read as under : - 1. Because no valid reassessment pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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