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2015 (4) TMI 1106 - MADRAS HIGH COURT

2015 (4) TMI 1106 - MADRAS HIGH COURT - [2016] 382 ITR 312 - Assessment u/s 158BD - Held that:- The confusion has apparently happened because search under section 132 of the Act commenced in the case of other assessees as well and, therefore, all similarly placed persons were clubbed together and assessment orders were passed. However, neither in the course of passing the assessment order nor during the appeal proceedings before the Tribunal or this court, attention was drawn to the survey proce .....

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earlier round of litigation. The typed set of documents filed in the earlier round of litigation by the assessee shows that it is a case of only survey under section 133A and search has been clearly deleted. There is no dispute on this fact, as the same is borne out by document. If it is a case of survey under section 133A of the Act, as is evident from the document, the block assessment, invoking the provisions of sections 158BC does not arise, as there is no search in terms of section 132 of t .....

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questions of law for consideration : "1. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the plea regarding jurisdiction is bereft of cogency ? 2. Whether on the facts and in the circumstances of the case the Tribunal ought not to have held that in the absence of the warrant of authorisation in the name of the appellant, the issue of notice under section 158BC and consequently the block assessment made on the basis of the said notice i .....

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g the return had not expired before the date of search and also on the ground that such income is duly disclosed before the search ?" 2. The facts, in a nutshell, are as hereunder : It appears that the Income-tax Department conducted a search invoking the provisions of section 132 of the Income-tax Act (for short "Act") on various premises of different textile dealers in Godown Street on August 31, 1995 and on other dates. In the course of the said search operation, books of accou .....

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t appellant is concerned, assessment order came to be passed for the block assessment year 1986-87 to 1995-96 showing the address of the individual appellant-Rajkumari Chandak, 34, Godown Street, Chennai 600 001, and the assessment order reads as one under section 143(3) read with section 158BC of the Act. Notice under section 158BC(a) of the Act is said to have been issued on the assessee, copy of which is not available in the records, and return for the block period was filed by the assessee. .....

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sees that the Assessing Officer had no jurisdiction to issue the notice under section 158BC as there was no search or requisition made by the Income-tax Department have been recorded by the Tribunal. The said objections of the assessees is recorded based on an affidavit filed before the Tribunal that there was no search or requisition made by the Income-tax Department. The further stand of the assessees that on an earlier occasion, vide order dated October 8, 1997 (I. T. A. No. 1925 and 1926 of .....

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and Madanmohan Chandak. After recording the observations, the impugned assessment orders of all the appellants were set aside and the appeals were allowed. The relevant portion of the order of the Tribunal is extracted hereinbelow for better clarity : "2. We have heard both sides and perused the records. In these appeals, the block assessments were completed under section 158BC of the Income-tax Act. The assessee has challenged that the Assessing Officer has no jurisdiction to issue notice .....

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also produced a copy of the order of this Tribunal dated July 2, 1998 in R. A. Nos. 804 to 835/Mds/97 arising out of the order of this Tribunal dated October 8, 1997 in the aforesaid cases. The facts show that there was no search or requisition issued in the case of these asses sees. The search under section 132 took place only in the case of Shri Bhojraj Chandak and Shri Madanmohan Chandak. In the order of this Tribunal dated October 8, 1997 in the aforesaid cases (Urmila Chan dak and others) t .....

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ontended by Shri Kumbhat, the Assessing Officer had no jurisdiction to issue any notice and consequently the impugned assessments made pursuant to such illegal notices cannot stand in the eye of law and have to be annulled. Page 14 : Further the hon'ble Madras High Court again reiterated the same principle in the case of Mariam Aysha v. Commr. of Agrl. I.T. [1976] 104 ITR 381 (Mad) at page 384 that consent cannot give jurisdiction is an essential principle of law and the taxing authority can .....

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sing Officer did not possess valid jurisdiction to issue notices to various appellant assessees herein in terms of section 158BC of the Act nor he had any power, authority or jurisdiction to make or pass any orders of assessment in respect of the block period as are ques tioned by the appellants in these appeals. The impugned assessment orders of the block period made on August 29, 1996 are, therefore, clearly without jurisdiction and are liable to be quashed and we hereby quash the same.' & .....

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earch. However, this court was of the view that the Tribunal did not apply its mind to the facts of the case and that the facts necessary in respect of the two assessees were not examined and, therefore, this court held that it was not appropriate to decide the issue one way or the other. The order of this court, for better clarity, is extracted hereinbelow : "2. The order on which the Tribunal placed reliance contains a specific finding that there was no search in the premises of those ass .....

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onsider, having regard to the order that we now pro pose to make. 3. The Tribunal has not applied its mind to the facts of the case of the two assessees before us. Unless all the facts are placed before us and examined by us, it would be hazardous to hold that the Tribunal is either right or wrong in the conclusion that it has reached. We, therefore, set aside the order of the Tribunal and remand the matter back to the Tribunal leaving all contentions of the parties open. It will be open to the .....

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the present appellant, before the Tribunal on remand, for better clarity and appreciation of the case, is extracted hereinbelow : "6. At the threshold, the assessee has taken amiss to the jurisdictional aspect of the impugned block assessment order. Following has been urged : 'The learned Assessing Officer erred in law in assuming jurisdiction under section 158BC of the Income-tax Act, 1961 inasmuch as no authorisation under section 132 of the Income-tax Act, 1961, was issued in the nam .....

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the Assessing Officer has jurisdiction to proceed under section 158BC. In such a case, no separate authorisation as contemplated under section 132 for this assessee, i.e., the company, is required. The very object of section 158BD is to give jurisdiction to the Assessing Officer to proceed against any person (assessee) other than the person against whom a search warrant is issued under section 132 or section 132A provided any undisclosed income belonging to such person is recovered in the searc .....

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l question of law and if the same is answered, the other questions of law become academic. Accordingly, this court proposes to deal with the second substantial question of law. 9. The contention of Dr. Anitha Sumanth, learned counsel appearing for the appellant is that the jurisdictional issue, as relied on by the Tribunal, based on the decision of the Madhya Pradesh High Court, has been reversed by the Supreme Court and, therefore, the order of the Tribunal is liable to be set aside. 10. Before .....

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person other than the person against whom the search warrant is issued under section 132 or section 132A of the Act, provided any undisclosed income, belonging to such person is recovered in the said operation. 12. For better appreciation of the case on hand, section 158BD, on which thrust is given by the Department to proceed against the appellant/assessee, is quoted hereunder : "158BD. Undisclosed income of any other person.-Where the Assessing Officer is satisfied that any undisclosed i .....

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apply accordingly." 13. However, it is brought to the notice of this court by the learned counsel for the appellant/assessee that the above decision of the Madhya Pradesh High Court has been reversed by the Supreme Court in Indore Construction P. Ltd. v. CIT [2007] 289 ITR 341 (SC), wherein the Supreme Court has held that the condition precedent for invoking the provisions of section 158BD are to be satisfied before the provisions of the Chapter are followed. The relevant portion of the ord .....

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sessment in terms of section 158BC in respect of any other person, the conditions precedent wherefore are : (i) satisfaction must be recorded by the Assessing Officer that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 of the Act ; (ii) the books of account or other documents or assets seized or requisitioned had been handed over to the Assessing Officer having jurisdiction over such other person ; and (iii) the Assessin .....

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appearing for the respondent and perused the materials available on record as also the decisions relied on by the learned counsel on either side. Keeping the above ratio of the Supreme Court in mind, this court proceeds to analyse the case on hand. 15. In the present case, even at the threshold it is to be stated without any contradiction that the issue, as fell before the Madhya Pradesh High Court, which has been reversed by the Supreme Court, does not arise for consideration, as we find that t .....

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gation in TCA Nos. 240 and 241 of 2000. In the said documents, the objection raised by the learned counsel for the appellant that there was no search conducted by the respondent in the premises of the assessee, be it business premises or residence premises, is found to be justified from a reading of the record of proceedings dated August 31, 1995 in relation to Nav Bharat Corporation at No. 28, Godown Street. It was a case of survey under section 133A of the Act and on that basis alone the entir .....

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