TMI Blog2013 (12) TMI 1112X X X X Extracts X X X X X X X X Extracts X X X X ..... enough in this case to invoke section 147 of the same - The reasons recorded by the Assessing Officer, reproduced in the earlier part of this order do not show any reasonable basis for the Assessing Officer to conclude that there was any escapement of income - The initiation of proceedings by issuance of notice under section 147/ 148 in the present case is flawed and void ab initio – Decided in favour of assessee. - - - - - Dated:- 28-2-2013 - Order G. S. Pannu (Accountant Member).- The captioned are four appeals preferred by different assessees belonging to one family. In all the appeals, the issues involved are common and since they relate to the assessees of the same family and pertain to a single assessment year 1998-99, they have been heard together and a consolidated order is being passed for the sake of convenience and brevity. In this background, the appeal vide I.T.A. No. 88/PN/2012 in the case of Shri Motilal P. Khinvasara, Hindu undivided family, was taken as a lead case in the course of the hearing. The facts and circumstances as emerging in this appeal are being considered in order to appreciate and determine the issues involved hereinafter. The appeal i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act has been set aside/quashed in appellate proceedings. For this proposition, reliance has been placed on various judgments, viz. : (1) Smt. Mira Ananta Naik v. Dy. CIT (Investigation) [2009] 183 Taxman 40 (Bom) ; 15 DTR 8 (Bom) ; (2) Cargo Clearing Agency (Gujarat) v. Joint CIT [2008] 307 ITR 1 (Guj) ; and (3) CIT v. C. Sivanandan [2011] 52 DTR (Ker) 428. In order to appreciate the aforesaid facet of an invalid invoking of section 147 of the Act as canvassed by the appellant, it would be appropriate to refer to the brief background of the case, which is as follows. The appellant Hindu undivided family was a co-owner of a piece of ancestral agricultural land at Vadgaon Sheri, Pune. It transpires that the assessee along with other co-owners transferred the right, title and interest in the aforesaid properties to M/s. Marigold Premises P. Ltd. (in short MPPL) through separate, but similarly worded agreements dated March 31, 1998. It also emerges that as MPPL could not make the payments readily, it offered residential house against sale consideration. In this manner, the appellant filed a return of income for the assessment year 1998-99 on November 2, 1998, which, inter alia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enable and the same be denied so as to result in an enhancement of income. The Assessing Officer stated so, for the reason that the assessee did not obtain dominion over the new residential house within the period specified in section 54F of the Act inasmuch as section 54F required that the new property be purchased within 2 years or constructed within 3 years from the date of transfer of original asset, and such period had lapsed by April 17, 1999 and April 17, 2000 respectively. The Commissioner of Income-tax (Appeals), however, did not accept the plea of the Assessing Officer that the assessee did not acquire domain over the new residential unit so as to disentitle it from exemption under section 54F of the Act. The Commissioner of Income-tax (Appeals) vide his order dated January 28, 2002, held that the assessee had entered into agreement for purchase of the new residential unit on March 31, 1998, which was within two years of the transfer of development rights in land and entire consideration was also paid on the date of agreement itself by adjustment out of the sale consideration of development rights. As per the Commissioner of Income-tax (Appeals), the assessee acquired dom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue before the Tribunal and the appeal of the Revenue stands dismissed, vide I. T. A. No. 1403/PN/05, dated October 26, 2007. Meanwhile, the Assessing Officer on March 29, 2005, recorded reasons under section 147 of the Act to the effect that certain income had escaped assessment in as much as the deduction claimed/allowed under section 54F of the Act was not in accordance with law. Accordingly, the Assessing Officer issued a notice under section 148 of the Act dated March 31, 2005. As per the Assessing Officer, the assessee had not acquired the domain over the new residential property within the stipulated period and therefore, the income to the extent of deduction allowed under section 54F of the Act of Rs. 51,02,700 was wrong and the same was chargeable for the assessment year 1998-99. A copy of the reasons recorded has been placed at page 58 of the paper book which reads as under : "Reasons for the belief that income has escaped assessment. The assessee is a co-owner of the property situated at Vadgaon Sheri. S. No. 15 admeasuring 45 acres and 25 guntas. The other coowners are nine legal heirs of late Shri. P. C. Khinvasara including the assessee and H. U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowing of deduction under section 54F of the Act for the reason that the assessee had not acquired the dominion over the new residential property within the stipulated two years is untenable. As per the appellant, the said issue was a subject matter of consideration in the block assessment framed under section 158BC read with section 158BD of the Act dated November 30, 2004 and the same point cannot be now taken up by the Assessing Officer to hold that any income has escaped assessment within the meaning of section 147/148 of the Act especially in view of the fact that the block assessment has been considered untenable by the Commissioner of Income-tax (Appeals) and as well as by the Tribunal. Per contra, the plea of the learned Departmental representative before us was to the effect that the scope of assessment under section 158BC/ 158BD is quite different in as much as, the same seeks to tax only undisclosed income found as a result of search whereas an assessment under section 147 is to charge tax on an income which had escaped assessment. With reference to the reasons recorded by the Assessing Officer which are reproduced above, the learned Commissioner of Income-tax-Depar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment proceedings under section 143(3) of the Act as well as during the block assessment proceedings under section 158BD of the Act. Therefore, it is in this background, one has to examine whether the Assessing Officer was justified in validly forming a belief that certain income has escaped assessment by way of deduction having been allowed under section 54F in the assessment framed under section 143(3) dated January 30, 2001 within the meaning of section 147 of the Act. In the aforesaid background, one has to examine as to whether the proceedings initiated by the issuance of notice under section 148 of the Act is valid or not. The hon'ble Gujarat High Court in the case of Cargo Clearing Agency (Gujarat) [2008] 307 ITR 1 (Guj) has observed that once the block assessment under section 158BA in relation to the undisclosed income from the block period as a consequence of search is carried out, the Assessing Officer would not be justified in issuing notice under section 148 of the Act for reopening such assessment. In this context, reference was made to the first proviso below section 158BC(a) of the Act which specifically contains a caveat that no notice under section 148 is to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provision he find appropriate. However, once the Assessing Officer after conducting search and based on materials gathered during search under section 132, proceeds to make the assessment under section 158BC, then he cannot, based on the same materials which in this case is deposit amounts found during search assessment was cancelled by the first appellate authority. The Assessing Officer obviously cannot get over the findings in the order of the first appellate authority against a block assessment by invoking powers under section 147. During the block assessment, the Assessing Officer obviously considered as to whether bank deposits in the names of family members of the assessee found during search represent his undisclosed income but accepted the assessee's contention that the same belong to his family members. Rightly or wrongly only the interests from these deposits were assessed as part of undisclosed income of the assessee for the block period. In appeal, the Commissioner of Income-tax (Appeals) cancelled the assessment on interest income. We are of the view that the Assessing Officer cannot after cancellation of block assessment by the Commissioner of Income-tax (Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e respective provisions based on the same materials. Once the material gathered during the course of search under section 132 is considered in the block assessment under section 158BC of the Act, thereafter it is not open for the Assessing Officer to initiate proceedings under section 147 of the Act on the same issue merely because the conditions in the block assessment proceedings were not found sustainable. In this context, the reasons recorded by the Assessing Officer, reproduced in the earlier part of this order do not show any reasonable basis for the Assessing Officer to conclude that there was any escapement of income. Clearly, the initiation of proceedings under section 147 based on such reasons recorded did not meet with the requirement of section 147 of the Act as understood in the aforesaid judicial pronouncements. In this view of the matter, having regard to the aforesaid legal position, the initiation of proceedings by issuance of notice under section 147/ 148 in the present case is flawed and void ab initio. The preliminary ground on the point of law so raised by the assessee is upheld and accordingly, the impugned assessment, is held as invalid. Since the point of la ..... X X X X Extracts X X X X X X X X Extracts X X X X
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