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2016 (6) TMI 894 - PUNJAB AND HARYANA HIGH COURT

2016 (6) TMI 894 - PUNJAB AND HARYANA HIGH COURT - [2016] 384 ITR 442 - Validity of proceedings under section 158BD - proceedings initiated on the basis of satisfaction made from the seized materials found as a result of search conducted on the assessee - Held that:- In the present case, the Tribunal being a final fact finding authority had not recorded any finding with regard to the recording of satisfaction note on 31.5.2005. Further, nothing was observed whether the satisfaction note dated 31 .....

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K.Joshi, Advocate For The Respondent : Mr. C.S.Aggarwal, Advocate with Mr. Prakash Kumar and Mr. Ashim Aggarwal, Advocates Ajay Kumar Mittal,J. 1. This appeal has been filed by the appellant-revenue under Section 260A of the Income Tax Act, 1961 (in short, the Act ) against the order dated 11.7.2014, Annexure A.3 passed by the Income Tax Appellate Tribunal, Bench 'A', New Delhi (in short, the Tribunal ) in IT(SS) No.36/Del/2010 for the block period 1.4.1997 to 8.5.2003, claiming followin .....

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TAT has erred in law by not appreciating that the name of the assessee was not appearing in the search warrant executed on 8.5.2003 at his residence (which was containing name of Vatika Group of entities namely M/s Vatika Landbase Pvt. Limited, S/Shri Anil Bhalla, Gaurav Bhalla and Gautam Bhalla) and thus the assessee has not been covered under section 132(1) of the IT Act, 1961? 3. Whether in the facts and circumstances of the case, the learned ITAT has erred in law by not appreciating that pro .....

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companies. The Assessing Officer having jurisdiction over Vatika group of companies recorded satisfaction in the case of the assessee and notice under section 158BD of the Act was issued to the assessee on 31.5.2005. The assessee filed his return under section 158BD of the Act declaring nil income. The copy of the satisfaction note was provided to the assessee. Undisclosed income of ₹ 1,89,53,900/- was assessed under section 158BD read with section 158BC of the Act on the basis of document .....

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sed income assessed by the Assessing Officer was based on the documents seized from his own residence during the search and seizure operation. Thus, the Assessing Officer was not having jurisdiction to assess his case under section 158BD of the Act. In the remand report before the CIT(A), it was submitted by the Assessing Officer that the assessee had complied with the notice under section 158BD of the Act. The assessee did not raise any objection on the issue of block assessment under sections .....

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ribunal. It was pleaded by the department that the name of the assessee was not appearing in the search warrant under section 132(1) of the Act. The search warrant was issued in the name of M/s Vatika Landbase Pvt. Limited, S/Shri Anil Bhalla, Gaurav Bhalla and Gautam Bhalla. The assessee submitted that once the search team entered his premises, he was covered under section 132(1) of the Act and thus proceedings should have been initiated under section 158BC of the Act. The assessee also questio .....

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the Act, these documents could not form the basis. Hence the instant appeal by the revenue. 3. We have heard learned counsel for the parties. 4. Learned counsel for the appellant-revenue submitted that the Apex Court in CIT vs. Calcutta Knitwears Limited, (2014) 362 ITR 673 dealing with the issue regarding recording of satisfaction note for purposes of Section 158BD of the Act had remanded the case to the Tribunal. Further, this Court while examining identical issue in ITA No.591 of 2009 decided .....

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the Apex Court in State of Andhra Pradesh vs. M.Ramakishtaiah & Co., (1994) 93 STC 406. It was urged that presumption was that no satisfaction had ever been recorded by the revenue. It was further urged that infact the alleged satisfaction note was recorded on 27.1.2006 by the Assessing Officer of the person having jurisdiction over the assessee and not of the searched person which is sine qua non for assumption of jurisdiction under Section 158BD of the Act. 6. In Calcutta Knitwears Limited .....

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nst whom search was conducted under Section 158BC of the Act; (b) alongwith the assessment proceedings under section 158BC of the Act; and (c) immediately after the assessment proceedings are completed under Section 158BC of the Act of the person against whom search was conducted. It was observed thus:- 41. We would certainly say that before initiating proceedings under Section 158BD of the Act, the assessing officer who has initiated proceedings for completion of the assessments under Section 1 .....

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belong to a person other than the searched person is necessary for initiation of action under Section 158BD. The bare reading of the provision indicates that the satisfaction note could be prepared by the assessing officer either at the time of initiating proceedings for completion of assessment of a searched person under Section 158BC of the Act or during the stage of the assessment proceedings. It does not mean that after completion of the assessment, the assessing officer cannot prepare the .....

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er than the searched person. 42. Further, Section 158BE(2)(b) only provides for the period of limitation for completion of block assessment under section 158BD in case of the person other than the searched person as two years from the end of the month in which the notice under this Chapter was served on such other person in respect of search carried on after 01.01.1997. The said section does neither provides for nor imposes any restrictions or conditions on the period of limitation for preparati .....

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r Section 158BC of the Act which is contrary to the provisions of Section 158BD read with Section 158BE(2)(b) and therefore, have dismissed the case of the Revenue. In our considered opinion, the reasoning of the learned Judges of the High Court is contrary to the plain and simple language employed by the legislature under Section 158BD of the Act which clearly provides adequate flexibility to the assessing officer for recording the satisfaction note after the completion of proceedings in respec .....

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158BD of the Act a satisfaction note is sine qua non and must be prepared by the assessing officer before he transmits the records to the other assessing officer who has jurisdiction over such other person. The satisfaction note could be prepared at either of the following stages: (a) at the time of or along with the initiation of proceedings against the searched person under Section 158BC of the Act; (b) along with the assessment proceedings under Section 158BC of the Act; and (c) immediately .....

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ention canvassed by the learned counsel since we are remanding the matters to the High Court for consideration of the individual cases herein in light of the observations made by us on the scope and possible interpretation of Section 158BD of the Act. 46. With these observations, the appeals are disposed of. The matters are remanded to the respective High Courts for deciding the matters afresh after affording an opportunity of hearing to the parties. Ordered accordingly. 7. This Court in Mridula .....

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y, however, contended that the satisfaction must be recorded not at any time after the assessment proceedings are completed under section 158BC of the Act of the searched person but immediately thereafter. 11. The question that falls for our consideration, therefore, is the meaning of the words "immediately after" in the judgment. The Supreme Court did not specify any outer limit. In our view, the words indicate that the satisfaction note must be prepared as soon as practicably possibl .....

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words "immediately after" so rigidly arisen on account of considering them in isolation instead of reading the judgment as a whole. For instance, in paragraph 43, the Supreme Court observed:- "Section 158BD of the Act which clearly provides adequate flexibility to the assessing officer for recording the satisfaction note after the completion of proceedings in respect of the searched person under Section 158BC." (emphasis supplied). 12. It is neither possible nor necessary to .....

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issible if he took some time after completing such pending work to prepare the satisfaction note. Each case must be judged upon its own facts. 13. Our view is supported by the judgment of a Division Bench of this Court dated 14.02.2011 in Income Tax Appeal No. 147 of 2010 Commissioner of Income Tax, Faridabad v. M/s Om Parkash and sons. The Division Bench held as under::- "17. .........................As regards delay in issuing notice to the assessee, we find merit in the contention that i .....

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g block assessment of searched person, action must be promptly taken as submitted on behalf of the assessee and as held by the Gujarat High Court in Khandubhai Vasanji Desai and others Vs. DCIT and another (1999) 236 ITR 73. Whether or not action was prompt depends upon circumstances of each case." 14. In the present case, the notices were issued to about 70 persons on the documents seized from the Bhatia Group. The Assessing Officer, therefore, had to take action against the 70 persons on .....

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