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TMI Blog2017 (6) TMI 291X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order on technical ground, the assessee in alternate submission has assailed the additions confirmed by the Commissioner of Income Tax (Appeals) on merits. 4. Shri Neelesh Khandelwal appearing on behalf of the assessee submitted that a search and seizure action u/s. 132 of the Act was carried out at the business and residential premises of Sanghvi Group on 11-10-2001. Initially, notice u/s. 158BC was issued on 06-05-2002 in the name of „Onkarmal Ratanlal & Co.‟. In response to the said notice the assessee vide letter dated 21-06-2002 informed the Department that there is no such firm in existence at the given address. The ld. AR referred to the notice dated 06-05-2002 and the reply of the assessee dated 21-06-2002 at pages 1 and 2 of the paper book. Thereafter, second notice u/s. 158 BC was issued on 30-10- 2002 in the name of „M/s. Sanghavi Onkarlal Ratanlal & Co. (RF)‟. Again the assessee vide communication dated 29-11-2002 informed the Assessing Officer that at the given address no firm exists by the said name. The ld. AR referred to the copy of notice at page 3 and the reply of the assessee at page 4 of the paper book. Thereafter, notice u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had raised the issue of validity of assessment proceedings and issuance of notice u/s. 158BD before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) has categorically pointed that proceedings u/s. 158BD were initiated against the assessee as a consequence of documents seized during the search. The ld. DR vehemently supporting the findings of Commissioner of Income Tax (Appeals) prayed for dismissing the appeal filed by the assessee. 6. In respect of appeal filed by the Department the ld. DR submitted that the Commissioner of Income Tax (Appeals) has erred in deleting the addition of Rs. 21,00,000/- made by the Assessing Officer on account of bogus loan entries. During the course of assessment proceedings it was found that M/s. Rajashree Enterprises and Maheshwari Financiers provided loan entries to the assessee. The modus operandi of these two concerns were that cash was taken from the parties and deposited in the bank account of the aforesaid firms. Thereafter, cheque equivalent to the cash already taken were issued by the aforesaid firms to the parties from whom cash was received. Similar, transactions were carried out by the assessee with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 158BC of the Act. Once, the proceedings u/s. 158BC are dropped on account of technical defect the subsequent proceedings are vitiated. The provisions relating to Block assessment in search cases are contained in Chapter XIV-B of the Act. The chapter is an independent Code. The power to search and seize are conferred on tax authority u/s. 132 of the Act. The powers exercised by the tax authority under special Code are extra ordinary powers. It therefore, becomes necessary to construe the provisions of special Code strictly. 9. The ld. AR has pointed that the notice issued u/s. 158BD is invalid as for initiating any action under the provisions of section 158BD, the notice has to be given in accordance with the provisions of section 158BC of the Act. Before proceedings further it would be relevant to first refer provisions of section 158BD are reproduced herein- below : "158BD. Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or any assets were requisitioned under section 132A, then, the books of account, other docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person other than searched u/s. 158BC. The notice was challenged on the ground that since, the block assessment proceedings are initiated against the assessee u/s. 158BD the notice issued u/s. 158BC is void ab initio. The Hon‟ble High Court rejecting the plea of assessee upheld the validity of notice u/s. 158BC. The Hon‟ble High Court held : "Thus by Finance Act 2002, which came into effect from 01-06-2002 the word "under section 158BC" is introduced. Prior to the said amendment if any assessment has to be made of undisclosed income of any other person the provisions of Chapter XIV-B was made applicable. As is clear from the wordings of the said section that if the AO seizes the books of account or other documents or of any other person other than the person whose premises is searched he shall proceed against such other person under the provisions of Chapter XIV-B. There was no provision in the said section as such for issue of any notice to such person. Sec. 158BC provides for procedure for block assessment which reads as under:- "158BC. Where any search has been conducted under s. 132 or books of account, other documents or assets are requisitioned under s. 132A, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chapter shall apply and in that chapter, s. 158BC which is the provision which prescribes the procedure for block assessment the assessment under s. 158BD has to be in terms of s. 158BC. When proceedings are initiated in terms of s. 158BC against a person who is covered under s. 158BD and the notice to be issued is prescribed under the Act and in the absence of any prescription of a notice in a prescribed manner under s. 158BD the only notice that requires to be issued both under s. 158B and 158BD is the notice which is prescribed. It is the notice prescribed under s. 158BC. Therefore, the contention that the assessment is under s. 158BD whereas notice issued under s. 158BC and therefore the entire proceedings in pursuance of such notice is void and is untenable." 12. Thus, in view of the facts of the case, provisions of section 158BD r.w.s. 158BC and the decision of Hon‟ble Karnataka High Court in the case of Commissioner of Income Tax Vs. Smt. Annapoornamma Chandrashekar (supra) we are of the considered view that the assessment proceedings initiated against the assessee u/s. 158BD are invalid and are liable to be quashed. Accordingly, the appeal of the assessee is allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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