TMI Blog2006 (4) TMI 581X X X X Extracts X X X X X X X X Extracts X X X X ..... riminating material/document during the course of search indicating undisclosed income of Sri N.R. Sudhir. The notice under section 158BD dated 8-2-2000 was served on the appellant on 14-2-2000 requiring him to file a return for the block period from 1987-88 to 1996-97 (it may be noted that the block period was noted assessment yearwise ignoring in toto the remaining part of the block period from 1-4-1996 till the date of search on 11-10-1996). Thus, there is a prima facie defect in issuing the notice. Hence the notice is invalid to the extent stated above as it covered only a part of block period. It has been held in Sukhdeo Prasad v. Asstt. CIT [2004] 87 TTJ (All.) 604 that the omission to specify the block period properly is a significant lapse affecting the validity of the entire proceedings. The issue of notice under section 158BD dated 8-2-2000 is also barred by limitation. The reason is that for proceedings under section 158BD, the incriminating material indicating undisclosed income of the appellant should have been found as a result of search in the premises of Sri K.R. Prabhu on 11-10-1996. At the time of scrutiny of search material found during the course of raid, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld in the following cases: (i) Nitin P. Shah v. Dy. CIT [2005] 276 ITR 411 (Guj.) page No. 424 1st para which - among other things - refers to the following question of law considered by the High Court in the appeal. (iii) Whether the Appellate Tribunal was right in law and on facts in upholding the directions of the Commissioner of Income-tax (Appeals) that the provisions of section 158BD of the Income-tax Act were not applicable in this case with regard to bringing to tax the amount of Rs. 67.75 lakhs? Wherein the court observed in page 433 para 45 as follows: On a plain reading before the section (158BD) comes into play, the following conditions are required to be satisfied: (i) The Assessing Officer who is assessing the person searched has to be satisfied that any undisclosed income belongs to a person other than the person searched; (ii) Secondly, the books of account, other documents or assets seized shall be handed over to the Assessing Officer having jurisdiction over such other person. Thus, the satisfaction has to be of the Assessing Officer having jurisdiction over the person searched,... The said Assessing Officer having jurisdiction over the perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustifiable and when called in question, the authorities cannot escape to demonstrate the material that led to the satisfaction that undisclosed income of other person has been detected by the Department as a result of search. In these cases, absolutely there is no iota of material from the proceedings of search that there was undisclosed income. When such is the case, the satisfaction that undisclosed income belongs to such other person is wanting. When that is the case, the entire proceedings framed with the issuance of notice under section 158BD will have to go. In other words, if the basis for notice is not there, the notice itself is wrongly issued making further assessment on such other person is wholly outside the purview of the scheme. Satisfaction in the very nature precedes the issue of notice and it would not be correct to equate satisfaction of the ITO with the actual issuance of notice. Issuance of notice by itself is not the display or record of satisfaction which is the basic requirement under section 158BD.... The basic ingredient of section 158BD is the existence of some material. If there is no material, the question of Assessing Officer's satisfaction does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is submitted that when survey is conducted and regular books are impounded, the impounding of regular books of account is not the same as finding of material as a result of search under section 132 and the material impounded in a survey/or regular books impounded is wholly subject matter of regular assessment only. In the above cases, it has been held undisclosed income should come only out of cases made under section 132 or proceedings under section 132A and not on the information obtained in an action under section 133A. The action under section 133A is not within the purview of section 158BA and to be considered only as part of the regular assessment. In the instant case the undisclosed income assessed are from sources from share in the 'Indian' film and the alleged cash credits which are accounted in the regular books of account impounded in an action under section 133A. The return in respect of these income was due only after the date of survey (i.e. 11-10-1996) or even financial year was not ended. Therefore, the income assessed under the above heads is not includible in the block assessment as they are not the undisclosed income within the meaning section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 158BA(3) of the Income-tax Act. The information regarding the loan creditors and financiers was obtained from the assessee during the course of survey proceedings from impounded regular books of account and hence it cannot be part of the block assessment. In para 5 of the assessment order, the allegation that similar credits has been added in the income for the assessment year 1994-95 and 1995-96 and when survey was conducted during the November, 1995. It is submitted that the past assessment records and the survey cannot be the basis of block assessment/undisclosed income within the meaning of section 158B(b). 1.3. Shri Rao further submitted that the Assessing Officer has levied interest under section 158BFA amounting to Rs. 11,95,200. The provision of section 158BFA is not at all applicable as the said provision is in force only with effect from 1-1-1997. Hence the same is not applicable for a search made prior to that date i.e., in the instant case the search was on 11-10-1996. Hence, the levy is without any legal authority and is liable to be cancelled. The assessment order further states that the tax has been paid to the tune of Rs. 14,50,000. It is submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed search. (xi) As the income assessed is deemed to be covered by the advance tax payment - hence part of regular assessment. (xii) As the assessment order has not been approved by the prescribed competent authority prescribed under section 158BG as undisclosed income assessment which is taxed at the highest rate requires the approval/consent of an experience and materials of the authority of a Commissioner. 2. Learned DR Ms. H. Vijayalakshmi raised the preliminary objection to entertaining the appeal. She submitted that the assessee has filed return declaring income of Rs. 83 lakhs. The assessee has not paid self-assessment tax on such income returned. In view of the provisions of section 249(4), no appeal under this Chapter shall be admitted, unless at the time of filing of the appeal the, amount of tax due on the income returned, has been paid. The provision refers to the appeal under this Chapter i.e., Chapter XX as a whole and not sub-chapters within Chapter XX. Secondly, the appeal is delayed. Since the assessment pertains to search conducted prior to 1-1-1997, the appeal should have been filed against the assessment order directly to the Tribunal. The assessee filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur of assessee by the decision of Special Bench of Tribunal in the case of Anil Sanghi (supra) wherein the Special Bench of Tribunal held as under: The various parts of Chapter XX are independent by themselves as they operate in different spheres. There cannot be any overlapping of one into the other since these deal with appeals at different forums i.e., the CIT(A), the Tribunal, the High Court and thereafter the Supreme Court and lastly, there is the part pertaining to the revisions before the CIT. Consequent to the insertion of Chapter XIV-B with effect from 1-7-1995, there was a conscious consequential amendment in section 2253(3) whereby a proviso was inserted to the effect that the first appeal to the Tribunal in respect of the block assessment would have to be filed within a period of 30 days of the date on which the order was communicated to the assessee and it must be stated in contra-distinction that other appeals to the Tribunal contain a time-limit of 60 days. In case the Legislature so desired it could have brought the provisions of section 249(4) to Part B of Chapter XX in respect of such first appeals, but this was not done. A distinction was to be kept between th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment and which is found, to have escaped assessment, as a result of search are brought to tax under section 158BC(c). However, the procedure for assessment starts with the issue of notice under section 158BC(a). Therefore it can be concluded that just as for assessment of income which has escaped assessment, assessment can be made under section 147 by issue of notice under section 148, similarly for completing assessment under section 158BC(c) in respect of undisclosed income found as a result of search the assessment is made under section 158BC(c) by issue of notice under section 158BC(a). Both these sections, 158BC(a) and 148(1) are reproduced simultaneously to have easy comparison thereof. Section 158BC(a)(ii) Section 148(1) (Prior to amendment by Finance (No. 2) Act, 1996 w.e.f. 1-4-1989) Where any search has been conducted under section or books of account, other documents or assets are requisitioned under section 132A, in the case of any person, then,' Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned notice Annexure E dated 29-11-1990 shall stand quashed. However, this order does not come in the way of the authority if it is open to him to initiate fresh proceedings. Hon'ble Supreme Court in the case of CIT v. Kurban Hussain Ibrahimji Mithiborwala [1971] 82 ITR 821 held as under: It is well-settled that the Income-tax Officer's jurisdiction to reopen an assessment under section 34 of the Income-tax Act, 1922, depends upon the issuance of a valid notice. If the notice issued by him is invalid for any reason the entire proceedings taken by him would become void for want of jurisdiction. We accordingly hold that any assessment made pursuant to an invalid notice is required to be annulled. Other decisions relied by Shri Parthasarathi also supports our above view. Similar view has been adopted by this Tribunal in the case of Shri M. Pratap Chittiappa v. Dy. CIT in IT(SS) A No. 31/Bang/04, dated 25-10-2004. We accordingly confirm the order of Learned CIT(A) annulling the assessment. It is the contention of learned D.R. that the assessee has filed the return much later and he is not aggrieved. In our opinion this argument is not tenable in law. It is sett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the person with respect to whom search was made under section 132, the books of accounts, other documents or assets seized are to be handed over to the Assessing Officer having jurisdiction over such other person and the Assessing Officer shall proceed against such other person as per provision of Chapter XIV-B. Thus, in both the cases, no order under section 158BC can be passed unless a search is conducted under section 132 in respect of the assessee or the material is found relating to assessee during the course of search in the case of any other person. When the material was found during survey under section 133A in the case of assessee himself and such material is to be used against the assessee to compute undisclosed income, in our opinion, the Assessing Officer cannot resort to provision of section 158BC but should have taken recourse to regular assessment. A survey under section 133A cannot be equated with search under section 132. Reading the assessment order as well as the argument on behalf of the appellant, it is seen that no material was found during the search at the premises of K. R. Prabhu which relates to the assessee, which can form basis for assessment of undisclo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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