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2015 (3) TMI 1141 - ITAT PUNE

2015 (3) TMI 1141 - ITAT PUNE - TMI - Reopening of assessment - assessment has been framed u/s.158BA - Addition on unaccounted investments - Held that:- It is an admitted fact that action u/s.132 of the I.T. Act was carried out simultaneously in the case of the Pat Sanstha as well as that of the assessee. No evidence whatsoever was found during the course of search in case of the assessee that he has made such fictitious fixed deposits. No investigation whatsoever was carried out by the AO to fi .....

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he Tribunal vide order dated 31-12- 2012 has allowed the appeal of the assessee and dismissed the appeal of the revenue. We therefore find merit in the argument of the Ld. Counsel for the assessee that the AO could not have issued notice u/s.147 of the I.T. Act before the order attained finality.

Also find merit in the submission of the Ld. Counsel for the assessee that once an assessment has been framed u/s.158BA of the Act in relation to undisclosed income for the Block Period as a .....

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ppeals filed by the Revenue are directed against the common order dated 28-11-2008 of the CIT(A)-I, Nashik relating to Assessment Year 2000-01 and 2001-02 respectively. For the sake of convenience, both the appeals were heard together and are being disposed of by this common order. ITA No.160/PN/2009 (A.Y.2000-2001) : 2. Ground of appeal No.1 by the Revenue reads as under : 1. On the facts and in the circumstances of the case the Ld. CIT(A)-I, Nashik has erred in deleting the addition made by AO .....

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ockbrokers Pvt. Ltd. Apart from this he also derives income from house property and income from other sources. The assessee is also the founder and Chairman of a credit cooperative society namely M/s.Chintamani Nagari Sahakari Patsanstha Maryadit, Dhule. An action u/s.132 of the I.T. Act was carried out against M/s.Chintamani Nagari Sahakari Patsanstha Maryadit, Dhule on 17-09-2002. Order u/s.158BC r.w.s. 143(3) dated 26-10-2004 was passed in the case of M/s.Chintamani Nagari Sahakari Patsanstha .....

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of ₹ 68,80,000/, i.e. ₹ 23,50,000/- in the A.Y. 2000-2001 and ₹ 45,30,000/- in the A.Y. 2001-02. 2.2 So far as the addition of ₹ 68,80,000/- is concerned the Ld.CIT(A) at para 5 of his order has summarized the reasons given by the AO which reads as under : i) M/s.Chintamani Nagari Sahakari Patsanstha Maryadit, Dhule, as well as the appellant failed to prove that the said fixed deposits appearing in the books of the patsanstha were genuine and could not produce the fixed d .....

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and is controlling all these businesses on his own. iv) that there is great possibility that the funds represented by the said fixed deposits of ₹ 68,80,000/- in fact belonged to the appellant. v) that the preparation of fixed deposits in benami names or in the names of non-existent persons and also preparation of loan documents in respect of such fixed deposits could not have been done without the express instruction and knowledge of the appellant. vi) that an employee Shri Anil Agrawal c .....

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0 persons claimed to have been introduced by Shri Ramakant V.Agrawal, Manager, Dhule Vikas Sahakari Bank were also not genuine as Shri Ramakant V. Agrawal vide his letter dated 24/09/2004 had categorically denied to have introduced the said persons. In view of the above observations, in the absence of any proof regarding genuineness of these deposits and in view of the observations of the A.O. in the assessment order of M/s.Chintamani Nagari Sahakari Patsanstha Maryadit, Dhule, the A.O. held tha .....

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ing the peak of the credit by holding that the assessee Mr. Radhe Shyam Agrawal only has made the investments in the fictitious names of non-existing persons. 3. Before CIT(A) it was submitted that the information required by the A.O. in respect of the alleged unexplained fixed deposits as was available with the patsanstha was filed before him. It was explained that the following information in respect of each fixed deposit was filed : a. The name of the depositor holder alongwith the address pr .....

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then C.I.T.(Appeals) has directed the A.O. in his appellate order dated 29/12/2006 in the case of M/s.Chintamani Nagari Sahakari Patsanstha Maryadit, Dhule, that the deposits ought to be brought to tax in the hands of actual depositors and not in the hands of the assessee. It was submitted that the observations and allegations made by the A.O. in his assessment order in the case of M/s.Chintamani Nagari Sahakari Patsanstha Maryadit are nothing but A.O's surmises, suspicions and conjectures w .....

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eipts the signatures at the time of encashment are similar, it was submitted that the said signatures were not of Shri Radheshyam B. Agrawal. As regards deposits in the name of Shri Rajendra Sharma are concerned it was submitted that adequate proof regarding deposit and withdrawal of the said deposit were submitted during the assessment proceedings and the appellate proceedings to prove that the same were encashed by him only. The available proofs were filed which were ignored by the A.O. and st .....

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3.3 As regards fixed deposit in the name of Shri Mukesh Suhagmal Jain is concerned, it was submitted that the deposit was accepted and the loan was given against the said deposit, thereafter the deposit was encashed and loan was repaid. The documentary evidence in respect of the transaction available with the patsanstha was filed with the A.O. However, the A.O. ignored the same and believed the statement given by Shri Mukesh Suhagmal Jain that the deposit did not belong to him. 3.4 The assessee .....

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t assessment years. He was the only person in the relevant years who had the complete knowledge regarding procedural aspects of running a credit cooperative society as he had worked previously in the banking industry in various capacities. After noting the various irregularities he was removed from the Board and was only retained as General Manager (an employee). 3.6 The assessee submitted that M/s.Chintamani Nagari Sahakari Patsanstha Maryadit is registered under Maharashtra Co.Operative Societ .....

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y decisions and the same are implemented by the manager and staff of the society. The chairman and directors are working honorary to serve the society and cannot be expected to know and look after each and every transaction of accepting and repaying the fixed deposits to the members. 3.7 It was submitted that M/s.Chintamani Nagari Sahakari Patsanstha Maryadit is governed by 11 Directors and 5 members of Advisory Committee and various employees. There are many renowned persons in the Board of Dir .....

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ught on record any evidence to show that the said amount of ₹ 68.80 lakhs was available with the assessee in his personal capacity and the AO has not brought on record a single evidence to prove that the alleged unexplained fixed deposits belonged to the assessee. 4. Based on the arguments advanced by the assessee the Ld.CIT(A) deleted the addition for both the assessment years by observing as under : 7. I have carefully considered the contentions of the A.O.in his assessment orders and th .....

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hands of the actual investors. The C.I.T.(Appeals) has not directed to tax the said unexplained deposits appearing in the books of the patsanstha in the hands of the appellant. 7.1 It is also a known fact that the Credit Cooperative societies having substantial transactions as that of M/s.Chintamani Nagari Sahakari Patsanstha Maryadit are governed by the provisions of the Cooperative Societies' Act and managed by the Board of Directors, Advisory Committee and various employees and not by the .....

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wever this failure to maintain proper record shall not result into addition of these benami fixed deposits in the hands of the Chairman of the patsanstha without bringing on record any evidence proving that the investment in the said fixed deposits was made by him. 7.2 In the case under appeal, it is noticed that the amount credited in the books of the patsanstha in the form of fixed deposits remained unexplained. Further, it was also noticed and held by the then C.I.T.(Appeals)-I, Nashik, in hi .....

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and Jain Vaidya reported at 98 ITR 280. The brief facts of this case are that investment in shares of Navjeevan & Co. Ltd. was made by the wife and sons of the assessee. The A.O. found the explanation in respect of shares purchased by wife and two major sons as unsatisfactory. However, as the revenue had not brought on record material from which it could be concluded that the investment made by the wife and two major sons were in fact made by the assessee himself, it was held that the additi .....

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d by any evidence. The allegation of the A.O. that the appellant is controlling and managing all the businesses of his family members from behind the curtain is also not supported by any evidence. The probability suspected by the A.O. that the appellant has parked unaccounted income of the family businesses in the said alleged fixed deposits with the patsanstha and the same were utilized as and when required for unaccounted transactions, is also not supported by any evidence. It is a well-establ .....

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O. was specifically asked vide this Office letter dated 30/09/2008 as under: "2. It has been mainly contended by the appellant that the addition in respect of the deposits has already been made U/S.158BC of the Act in the case of M/s.Chintamani Nagari Patsanstha Maryadit, Dhule. The addition was deleted by the C.I.T.(Appeals) and the Department has filed appeal before the Hon'ble I.T.A.T. It has further been contended that the C.I.T.(Appeals) had observed that the deposits ought to be t .....

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report by letter dated 18/11/2008. In the said report also, the A.O. has not brought on record any evidence in support of his claim that the fixed deposits amounting to ₹ 68,80,000/- belonged to the appellant. The A.O. has reiterated the contentions stated in the assessment order and also in the case of M/s.Chintamani Nagari Sahakari Patsanstha Maryadit. The A.O. has proceeded in a manner as if the fixed deposits were found noted in the books of accounts of the appellant individual and th .....

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de by the A.O. is hereby deleted. 4.1 Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 5. The Ld. Counsel for the assessee submitted that the assessee is the chairman of the Pat Sanstha. The search took place in case of the Pat Sanstha as well as the assessee. On the basis of the Benami deposits found, the AO made addition of ₹ 68,80,000/- in the hands of the Pat Sanstha on substantive basis. An amount of ₹ 20 lakhs was also added in the hands of Anil Agarw .....

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2001-02. 5.1 The Ld. Counsel for the assessee submitted that during the course of search no document whatsoever was found to show that the assessee has made the fixed deposits. Therefore, under the facts and circumstances of the case, the AO could have taken recourse to the provisions of section 158BD and not the provisions of section 147. Referring to pages 71 to 84 of the paper book he submitted that the AO has passed the order u/s.158BC(c) of the I.T. Act on 29-09-2004 in case of the assessee .....

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2004. Referring to page 69 of the paper book the Ld. Counsel for the assessee drew the attention of the Bench to para 22.3 of the assessment order of the Pat Sanstha for the Block Period which reads as under : 22.3 The present pat -pedhi ie. Chintamani Nagri Sahakari Pat Pedhi , Maryadit, Dhule is floated byShri Radheshyam B. Agrawal who is also the Chairman. It is gathered that other Directors are practically dummy. Shri Radheshyam B. Agrawal is practically the whole sole of the pat pedhi and c .....

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The preparation of instruments of fixed deposits in benami names or names of non existent persons and also preparation of loan documents as discussed in cases of Shri Rajkumar alias Rajendra Jain, Shinder and Shri Mudane could not have been done by the employees of the Pat Pedhi without the express instructions and knowledge of Shri Radheshyam B. Agrawal. Any employer would not tolerate any breaches. The moment such breaches are noticed the concerned employee would be pulled up. If the claim of .....

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uch breaches and would sack such employee. The fact that not only shri Anil Agrawal continues to be in service of the Pat Pedhi but has been elevated to the post of General manager, despite Shri Radheshyam B. Agrawal having become aware of the transactions in names of non existent persons clearly shows that the said transactions, i.e. preparation or writing of fixed deposits receipts in benami names or names of non existent persons or in names of persons whose identity is not known, could not ha .....

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dhi and other disallowables are emanating from the books of the Pat Pedhi, the income is taxed in the hands of the Pat Pedhi itself. If, however, at a later date during course of any proceedings under the I.T. Act either by way of appeal, reference or revision or by court in any proceedings under any other law if such authority is satisfied that the income now taxed in the hands of the Path Pedhi is taxable in the hands of any person other than the Pat Pedhi and if such authority gives a finding .....

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f payment of taxes on such income by raising a claim that his liability is limited to the extent of shares held by him, as it would amount to holding that it was his money which was parked by him and withdrawn by him in different names as and when needed by him for unrecorded transactions of businesses of his family and hence would be taxable in his individual hands and hence would be liable to be recovered from his personal assets He submitted that when the same AO passed the orders in all 3 ca .....

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t. However, he has not specifically mentioned the name of the assessee. 5.2 The Ld. Counsel for the assessee drew the attention of the Bench to Explanation 3 to provisions of section 153 which reads as under : 153. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Explanation 3.- Where, by an order 1 referred to in clause (ii) of subsection (3)],; any income is excluded from the total income- of one person and held to be the income of another person, then, an asse .....

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e taxed in the hands of Mr. Radhe Shyam B. Agrawal. However, the CIT(A) has not given any such specific direction, therefore, giving such general directions u/s.153 does not come to the rescue of the Department. 5.4 In his second plank of argument, the Ld. Counsel for the assessee submitted that the AO should have issued notice u/s.158BD in the instant case if he wanted to tax the same in the hands of the assessee and issuing notice u/s.147 is not the proper recourse. Referring to provisions of .....

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wal. Therefore, when he has made protective assessment in the case of Anil Agarwal he could have very well made protective assessment in the case of the assessee also. However, since the AO has missed the bus by not making any protective assessment, now he cannot take the recourse to the provisions of section 147. 5.5 Referring to the decision of the Hon ble Gujarat High Court in the case of Cargo Clearing Agency (Gujarat) Vs. JCIT reported in 307 ITR 1 he submitted that the Hon ble High Court i .....

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.148 of the I.T. Act is required to be issued for the purpose of proceedings under Chapter XIVB. He also relied on the decision of the Mumbai Bench of the Tribunal in the case of Western India Bakers Pvt. Ltd. Vs. DCIT reported in 87 ITD 607 to the proposition that provisions of section 147 cannot be applied in context of block assessment in terms of Chapter XIVB and claim of re-assessment. Referring to the decision of the Amristar Bench of the Tribunal in the case of ITO Vs. Arun Kumar Kapoor r .....

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(HUF) Vs. ACIT and other connected appeals vide ITA Nos. 1474/PN/2011, 1479/PN/2011 order dated 21-11-2012. 5.6 While arguing the merit of the case, the Ld. Counsel for the assessee submitted that during the course of search no evidence whatsoever was found by the revenue that those deposits were made by the assessee. No investigation was carried out by the AO to find out as to who are the real depositors or beneficiaries. The AO has not brought any material on record to show that the proceeds o .....

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rted in 358 ITR 471 he submitted that the Hon ble High Court in the said decision has held that recourse to section 148 of the I.T. Act cannot be founded in law on a hypothesis of what would be the position in future should an appeal before the appellate authority, being the Tribunal or the High Court, result in a particular outcome. The statute does not contemplate the reopening of an assessment under section 148 on such a hypothesis or a contingency which may emerge in the future. He according .....

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dhe Shyam B. Agrawal. Therefore, once this has been done, there is no question of issuing notice u/s.158BD to the assessee. Notice u/s.158BD has to be issued only for non-searched person. Therefore, the decision of the Amritsar Bench of the Tribunal relied on by the Ld. Counsel for the assessee is not applicable to the facts of the present case. Referring to page 3 para 4 of the re-assessment order, the Ld. Departmental Representative submitted that the AO has made the assessment order prior to .....

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and it is not of any hoax and it is not out of nothing. Since the assessee was the whole and sole of the Pat Sanstha and without his knowledge such thing could not have happened, therefore, the AO was justified in treating the said unaccounted fixed deposits as the undisclosed income of the assessee. He accordingly submitted that the order of the AO should be upheld. 7. The Ld. Counsel for the assessee in his rejoinder submitted that the AO has passed the assessment order in the case of Mr. Ani .....

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see directly or indirectly, therefore, there is no question of making any addition in the hands of the assessee. He accordingly submitted that the order of the CIT(A) be upheld and the grounds raised by the revenue be dismissed. 8. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find in the instant case act .....

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n appeal filed by the said Pat Sanstha, the CIT(A) in his order dated 29-12-2006 deleted the addition from the hands of the Patsanstha and directed the AO to tax the unexplained fixed deposits in the hands of the actual investors. However, he has not directed to tax the said unexplained deposits appearing in the books of the Pat Sanstha in the hands of the present assessee. We find on the basis of such direction the AO issued notice u/s.147 to the assessee and brought to tax an amount of ₹ .....

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n record by the AO even during the course of the assessment proceedings. According to the Ld.CIT(A) no addition can be made on the basis of surmises, suspicion and conjectures without any supporting evidence. 8.1 It is the case of the revenue that since the assessee Mr. Radhe Shyam B. Agrawal was the Chairman of the Pat Sansth and was the whole and sole of the Pat Sanstha, therefore, without his support and knowledge the deposits could not have been made. Further, he was involved in a number of .....

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ha has only directed to tax the fixed deposits in the hands of the real persons and he has not given any specific direction to tax the same in the hands of the assessee. 8.2 We find merit in the above contention of the Ld. Counsel for the assessee. It is an admitted fact that action u/s.132 of the I.T. Act was carried out simultaneously in the case of the Pat Sanstha as well as that of the assessee. No evidence whatsoever was found during the course of search in case of the assessee that he has .....

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sanstha as well as the revenue have challenged the order of the CIT(A) before the Tribunal and the Tribunal vide order dated 31-12- 2012 has allowed the appeal of the assessee and dismissed the appeal of the revenue. We therefore find merit in the argument of the Ld. Counsel for the assessee that the AO could not have issued notice u/s.147 of the I.T. Act before the order attained finality. 8.3 The Hon ble Bombay High court in the case of DHFL Venture Capital Fund (Supra) has held that recourse .....

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assessment order under section 148 is the formation of a reason to believe by the Assessing Officer that income has escaped assessment. The formation of the reason to believe and the existence of that reason must be in the present. Recourse cannot be taken to the provisions of section 148 where the Assessing Officer has a reason in present, meaning thereby, a reason which is present to his mind when he forms his reason to believe, that income has escaped assessment. cannot be founded in law on a .....

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on has been made in the hands of Mr. Anil Agrawal, however, no addition on protective basis has been made in the case of Mr. Radhe Shyam B. Agrawal despite the observation of the AO at para 22.3 of the assessment order in the case of the Pat Sanstha which has already been reproduced in the preceding paragraphs (Para 5.1 of the impugned order). We therefore find merit in the submission of the Ld. Counsel for the assessee that once an assessment has been framed u/s.158BA of the Act in relation to .....

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e, the entire scheme under Chapter XIV of the Act, more particularly from Sections 147 to 153 of the Act pertaining to reassessment, and the special procedure for assessing the undisclosed income of the block period under Chapter XIV-B of the Act are not only separate and distinct from each other, but if an effort is made to incorporate the scheme under Chapter XIV of the Act for the purpose of assessment of the block period there is a conflict between the provisions which becomes apparent on a .....

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f Chapter XIV-B of the Act shall prevail and have primacy. Thus, viewed from any angle, the stand of the Revenue does not merit acceptance. Once assessment has been framed under section 158BA of the Act in relation to undisclosed income for the block period as a result of search there is no question of the Assessing Officer issuing notice under section 148 of the Act for reopening such assessment as the said concept is abhorrent to the special scheme of assessment of undisclosed income for block .....

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the assessee has to succeed. In this view of the matter and in view of the detailed reasoning given by the CIT(A) while deleting the addition, we find no infirmity in the same. Accordingly, the order of the CIT(A) on this issue is upheld and the ground raised by the revenue is dismissed. 9. Grounds of appeal No.2 to 4 by the Revenue read as under : 2. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in holding that the assessment completed by AO u/s. 143(3) r.w.s.147 is .....

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to Sec. 158BA(2). 4. Whether in the circumstances and facts of the case the CIT(A) was right in holding that provisions of Sec. 158BD were applicable and not that of Sec. 147. 9.1 Facts of the case, in brief, are that the assessee challenged the validity of the reassessment proceedings before the CIT(A) stating that income assessed under Chapter XIV B cannot be assessed in regular assessment. Explanation (c) to provisions of section 158BA(2) was brought to the notice of the CIT(A). It was submit .....

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ai Bench of the Tribunal in the case of Snowcem vs. CIT, Central Circle-3, Mumbai reported in 12 SOT 333 and the decision of the Hon'ble Gujarat High Court in the case of Cargo Clearing Agency (Gujarat) vs. Jt.CIT reported in 218 CTR 541. Various other decisions were also brought to the notice of the CIT(A) to the proposition that once assessment has been made u/s.158BA in relation to undisclosed income of the block period as a result of search, the A.O. cannot issue notice u/s.148 for re-op .....

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assessed under the general provisions of the Act u/s.143(3) r.w.s. 147 of Chapter XIV. He accordingly held that the assessment order is bad in law. The relevant observations of the CIT(A) reads as under : 8.1 I have carefully considered the above contentions of the appellant. The same is supported by the ratio laid down by the Hon'ble I.T.A.T., Mumbai "I" Bench, Mumbai, in the case of Snowcem vs. C.I.T., Central Circle-3, Mumbai - 12 SOT 333 (Mum.) wherein the issue that where the .....

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ome which was assessable u/s.158BC r.w.s, 158BD as per the special provisions of Chapter XIV-B, cannot be assessed under the general provisions of the Act u/s.143(3) r.w.s. 147 of Chapter XIV and hence the assessment order is bad in law. 10.1 Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 11. After hearing both the sides, we do not find any infirmity in the order of the CIT(A). The Hon ble Gujarat High Court in the case of Cargo Clearing Agency (Gujarat) (Supra) has .....

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cisions relied on by the Ld. Counsel for the assessee in support of the above proposition are also mentioned at para 5.5 of the impugned order. In view of the decision of Hon ble Gujarat High Court cited (Supra) it has to be held that once an assessment has been framed u/s.158BA of the I.T. Act in relation to undisclosed income for the Block Period as a result of search there is no question of the AO issuing notice u/s.148 of the I.T. Act for reopening such assessment as the said concept is repu .....

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