TMI Blog2006 (12) TMI 165X X X X Extracts X X X X X X X X Extracts X X X X ..... d hence proceedings under section 158BD were not in accordance with law. 2. That on the facts and in the circumstances of the case the learned Commissioner of Income-tax (Appeals) failed to appreciate that the search warrant dated 23-12-1998 was in the case of S/Sh. Rakesh Kumar, Ashok Kumar and M/s. R.K. Co. A/30, Sadar Bazar, Jalandhar Cantt., while the premises to be ,searched were that 11/2, Grain Market, Jalandhar Cantt., from where the incriminating material was found and seized and as such proceedings under section 158BD were validly initiated. 3. That on the facts and in the circumstances of the case the learned Commissioner of Income-tax (Appeals) has erred in holding that the search on the premises at 11/2, Grain Market was a different search from the search in the case of S/Sh. Rakesh Kumar, Ashok Kumar and R.K. Co., A/30, Sadar Bazar, Jalandhar Cantt. Because block period were different in both the cases, in so much so the block period ends on the date of commencement of the search. 4. That on the fact and in the circumstances of the case the learned Commissioner of Income-tax (Appeals) failed to appreciate that the Assessing Officer had recorded satisfaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R.K Co. (Builders and Colonisers), 9/30, Sadar Bazar, Jalandhar Cantt. that survey operation being conducted at the said premises was converted into search action by way of issue of consequential search warrant. During the search action incriminating documents relating to Sh. Vinod Goel, were found. After recording satisfaction under section 158BD, a notice under section 158BD was issued. The Assessing Officer observed that since search warrant was not issued in the name of Sh. Vimal Goel, the block assessment was to be completed in his case under section 158BD read with section 158BC and not under section 158BC. He, therefore, rejected the objection raised by the assessee and completed the block assessment on 26-9-2002 determining therein undisclosed income of Rs. 91,13,193 on the basis of documents seized during the aforesaid search. 4. Being aggrieved, the assessee filed an appeal before the CIT(A), where the legality of the action of the Assessing Officer for completing the block assessment in the case of the assessee under section 158BD read with section 158BC was inter alia challenged. It was submitted before the CIT(A) that the assessee had been practicing as Tax Practi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case from Ward 2(6) to Investigation Cir. 2(2), Jalandhar could have been passed. Thus, it was argued that the order for transferring jurisdiction from Ward 2(6) to the Investigation Circle 2(2) was invalid. It was submitted that no such order passed under section 127(1) was communicated to the assessee. It was argued that subsequently the case was transferred from ACIT, Inv. Cir. 2(2), Jalandhar to ACIT, Cir. 4, Jalandhar vide subsequent order dated 31-7-2001 21-8-2001 vide CIT's order under section 127 of the Act. However, he submitted that since transfer of case from Ward 2(6) to ACIT, Inv. Cir. 2(2) was not valid, the subsequent transfer of case from ACIT Inv. Cir. 2(2) to ACIT, Cir. 4 was also invalid. Thus, it was contended that the notice under section 158BD on 10-1-2001 by ACIT, Inv. Cir. 2(2), Jalandhar, who had no jurisdiction over the case was bad in law and all proceedings flowing therefrom were void ab initio. The ld. CIT(A) obtained the comments of the Assessing Officer on the submissions of the assessee. The ld. CIT(A) rejected the submissions of the assessee in regard to jurisdiction of the Assessing Officer who issued notice under section 158BD on the ground tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that no documents or books of account of S/Sh. Rakesh Kumar, Ashok Kumar M/s. R.K Co. (Builders and Colonisers) were found/seized. These were never confronted to the persons searched nor any addition based on such documents was made in their cases. (ii) He referred to the provisions of section 158BD of the Act, as per which the Assessing Officer having jurisdiction over the cases where search action was carried out has to record his satisfaction that the undisclosed income belonged to some other person and thereafter he is required to hand over the documents to the Assessing Officer having jurisdiction over other such person to whom such document belonged who has not been searched. The Assessing Officer will then initiate block assessment proceedings against such person for the same block period as was applicable to the persons searched. Even if the Assessing Officer is common both to the cases where search action has been carried out and such other person to whom documents belonged but no search action was taken against him, the Assessing Officer has to record satisfaction in the case of other assessee who is outside the purview of section 158BC of the Act. Thus, he conclude ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso clear from the fact that satisfaction was recorded only in the case of the assessee. Thus, the Ld. CIT(A) observed that the proceedings initiated in the case of assessee under section 158BD were not in accordance with law and, therefore, the Block assessment flowing therefrom would also become void for want of jurisdiction. For this proposition, the Ld. CIT(A) relied on the judgment of Hon'ble Punjab Haryana High Court in the case of CIT v. Munish Iron Store [2003] 263 ITR 484. Accordingly, the Ld. CIT(A) quashed the Block assessment and did not record any finding with regard to the merits of the addition. The revenue is aggrieved by the order of the CIT(A). Hence this appeal before this Bench. 5. The Ld. CIT (DR), Sh. Kuldeep Singh, drew our attention to page 1 of the paper book which is a copy of Panchnama in Departmental Paper Book (In short 'the DPB') prepared at the premises of S/Sh. Rakesh Kumar, Ashok Kumar M/s. R.K. Co. (Builders and Colonisers), 9/30, Sadar Bazar, premises at 11/2, Grain Market, Jalandhar, on 23-12-1998. During the course of search action certain documents relating to the assessee and two other companies were found and seized. He submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re issuing a notice under section 158BD. Thus, he submitted that the Ld. CIT(A) was not justified in annulling the Block assessment, completed by the Assessing Officer. He submitted that the order of the CIT(A) may be set aside and the appeal restored to his file for deciding the various grounds relating to merits of the additions made by the Assessing Officer in the block assessment. 6. The Ld. counsel for the assessee, on the other hand, relied on the order of the CIT(A) and reiterated the submissions which were made before him. He submitted that survey action under section 133A had been carried out at the premises of S/Sh. Rakesh Kumar, Ashok Kumar M/s. R.K. Co. (Builders and Colonisers) at 11/2, Grain Market, Jalandhar Cantt. on 8-12-1998. Later on such action was converted into search action under section 132(1) of the Act by issue of consequential search warrants by the Addl. DIT (Inv.), Jalandhar on 23-12-1998. He referred to page 1 of the APB which is a copy of the Panchnama. The search was concluded on 23-12-1998. Page 8 of the said paper book refers to inventory of Bank account drawn during the course of search belonging to the various persons including M/s. Trimurt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer vide letter dated 17-9-2002. Thus, it was noted that the notice under section 158BD was illegal and bad in law. He also reiterated the submissions which were made before the CIT(A) in regard to jurisdiction of the ACIT, Inv. Cir.2(2), Jalandhar on the ground that the documents and books seized during the search relating to the assessee were required to be forwarded to the Assessing Officer having jurisdiction over the person searched under section 132(1). He submitted that DCIT, Range-IV, Jalandhar, vide his letter dated 16-11-2004 submitted that the same Assessing Officer had jurisdiction over the cases of the assessee, who also had jurisdiction over the cases of the persons searched under section 132(1) of the Act. He submitted that subsequently the case was transferred by CIT, Jalandhar under section 127 from ACIT, Inv. Cir. 2(2) to Range IV vide order dated 31-7-2001/21-8-2001. But he submitted that there was no order passed under section 127 for transferring the case from Ward 2(6) to ACIT, Inv. Cir. 2(2), Jalandhar. Thus, the notice under section 158BD was without jurisdiction. Drawing our attention to page 87 of the paper book which is a copy of block assessment or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2000 has held that search action was valid. The Ld. counsel for the assessee has heavily relied on the order of the High Court upholding the validity of search action and contended that the Block assessment in this case should have been completed under section 158BC and not under section 158BD of the Act. We do not find any force in such submission of the Ld. counsel. Admittedly, search warrant was not in the name of assessee and his two associate companies. Section 132(1) of the Income-tax Act empowers the Income-tax Authorities specified therein to carry out search and seizure action in the circumstances mentioned in clauses (a), (b) (c) of sub-section (1) of section 132. The authorities mentioned therein can authorize the Officer or Officers of the Department to enter and search any building, place, vessel, vehicle or aircraft, where on the basis of information he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable articles or things are kept. When a search warrant is issued in the name of persons, the places to be searched are also mentioned therein. It is not necessary that such place or building must belong to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 documents or assets seized or requisitioned shall be handed over to Assessing Officer having jurisdiction over such other person and that the Assessing Officer shall proceed under section 158BC against such other person and the provisions of this Chapter shall apply accordingly. Now in the present case, since the search warrant was not issued in the name of the assessee but the books of account and documents belonging to the assessee were found during the course of search carried out in other cases, the correct course for the Assessing Officer was to issue notice under section 158BD which the Assessing Officer had done. We are, therefore, of the opinion that the action under section 158BD was correctly taken against the assessee and his two business companies. Since the Assessing Officer having jurisdiction over the cases of persons searched and the assessee was the same, he was justified in issuing notice under section 158BD after recording satisfaction. 7.1 During the course of proceedings before the authorities below, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reasons for issue of Notice under section 158BD read with section 158BC of the Income-tax Act, 1961 in the case of Sh. Vinod Goel S/o Sh. Siri Ram, R/o House No. 15, Mohalla No. 7, Jalandhar Cantt. A Warrant of Authorisation was issued in the name of S/Sh. Rakesh Kumar, Ashok Kumar M/s. R.K. Co. (Builders and Colonisers), 9/30, Sadar Bazar, Jalandhar Cantt. to search the premises at 11/2, Grain Market, Jalandhar Cantt. Annexures A-1 to A-35 were found and seized from these premises on 23-12-1988. A perusal of the search material found during the search shows that Sh. Vinod Goel has been engaged in the business of real estate. Following documents were seized, which do not pertain to S/Sh. Rakesh Kumar, Ashok Kumar M/s. R.K. Co. (Builders and Colonisers): 1. Annexure A-9/page Nos. 21 25 2. Reverse side of page 107 of Annexure A-9 3. Page 27 of Annexure A-9 4. Annexure A-9, page 77 5. Annexure A-9/Pages 3, 5 and 32 and Annexure A-2/pages 2 7 6. Annexure A-9/Page 26 7. Annexure A-10/Page 4 8. Annexure A-9/Page 85 9. Annexure A-2/Page 70 10. Annexure A-2/Page-1. 11. Annexure A-2/Pages 2 7 12. Annexure A-11 13. Annexure A-13/pages 5 to 11 14. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of section 158BD read as under: "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 documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person that Assessing Officer shall proceed under section 158BC against such other person and the provisions of this Chapter shall apply accordingly." A bare reading of the above section shows that in order to confer jurisdiction on the Assessing Officer to complete Block assessment under section 158BD in the case of other person, the following requirements need to be met: (i) The search action must have been taken place at the premises of some person under section 132(1) of the Act. (ii) Such search action must result in seizure of books of account, documents, other valuables pertaining to some other person for whom no search warrant has been issued or requisition has been made. (iii) There must be an evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact, the Hon'ble High Court took notice of the reasons for issue of authorisation under section 132 that Shri Vinod Goel who was found present could not explain the transactions in the seized documents. Therefore, we do not find any infirmity in the action of the Assessing Officer. 7.4 The Ld. CIT(A) has erroneously relied on the decision of the ITAT, Chandigarh Bench in the case of Ved Parkash Sanjay Kumar. The facts of the case before the ITAT, Chandigarh Bench were that survey action under section 133A was carried out at the business premises of the firm. At the same time search and seizure operations under section 132 were carried out at the residential premises of the partners of the firm which resulted in detection and seizure of documents. Thereafter, the Assessing Officer issued notice under section 158BC to the assessee where no search action under section 132(1) was carried out. Besides, it was found that the Assessing Officer had not recorded satisfaction before proceedings against the assessee under section 158BC. Thus, the issue of notice by the Assessing Officer under section 158BC without recording satisfaction and in the absence of any search warrant in the name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or with regard to its issue, render block assessment proceedings to be null and void The Bench observed that though Chapter XIV-B refers to the special procedure for completion of block assessments. However, these machinery provisions contained in the Chapter give rise to certain rights and responsibilities and such provisions could be considered to be substantive in nature. The Bench observed that the provisions of section 158B, section 158BA and section 158BB were substantive in nature. The Bench observed that it is from these provisions that the Assessing Officer derived power to assess undisclosed income of a person who has been subjected to search under section 132 or in whose case there is a requisition under section 132A. The Tribunal observed that the Assessing Officer acquires powers to assess undisclosed income of a person at the time of initiation of search, but the actual exercise of that power commences only after the search is over by serving notice under section 158BC. Section 158BA(1) empowers the Assessing Officer to assess the undisclosed income. Section 158BA(2) creates a taxability against the assessee in respect of his total undisclosed income. Section 158BB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Iron Stores case is misplaced because in that case matter related to the Jurisdiction of Assessing Officer to impose penalty under section 271(1)(c) of the Act. The Hon'ble Punjab Haryana High Court has held that failure on the part of Assessing Officer to record satisfaction in the Asstt. Order in terms of section 271(1)(c) was jurisdictional defect which cannot be cured. But in the present case, issue of notice under section 158BD is not a jurisdictional defect and any defect in the same cannot render block assessment proceedings to be null and void In the present case, we have not found any defect on the part of Assessing Officer for issuing notice under section 158BD of the Act. 7.7 Having regard to these facts and circumstances of the case and the legal position discussed above, we are of the considered opinion that the Ld. CIT(A) was not justified in quashing the block assessment completed by the Assessing Officer. Accordingly, we set aside the order of the CIT(A) and allow the grounds of appeal of the revenue. Since the ld. CIT(A) has not decided the other grounds relating to merits of the additions, the appeal is restored to his file for deciding the grounds relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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