The ACIT, Central Circle-2(1),, Ahmedabad v. M/s. Shree Jyoti Salt Indus., Gandhidham

ITSSA 72/AHD/2006 | misc
Pronouncement Date: 31-01-2011 | Result: Dismissed

Appeal Details

RSA Number 7220516 RSA 2006
Bench Ahmedabad
Appeal Number ITSSA 72/AHD/2006
Duration Of Justice 4 year(s) 9 month(s) 17 day(s)
Appellant The ACIT, Central Circle-2(1),, Ahmedabad
Respondent M/s. Shree Jyoti Salt Indus., Gandhidham
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 31-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 31-01-2011
Date Of Final Hearing 28-12-2010
Next Hearing Date 28-12-2010
Assessment Year misc
Appeal Filed On 13-04-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD B BENCH (BEFORE S/SHRI G.D. AGARWAL VICE-PRESIDENT AND BHAVNESH SAINI JUDICIAL MEMBER) IT(SS)A NO.72/AHD/2006 [BLOCK PERIOD 01-04-1990 TO 08-11-2000] DICTATED ON: 04-1-2011 ACIT CENT.CIR.2(1) AHMEDABAD. VS. M/S.SHREE JYOTI SALT INDUSTRIES C/O. SHRI JOGDISH R. ACHARYA 13 NATIONAL PLAZA OPP: LAL BUNGLOW C.G. ROAD AHMEDABAD. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI K. MADHUSUDAN ASSESSEE BY : SHRI S.N.SOPARKAR O R D E R PER G.D. AGARWAL VICE-PRESIDENT : THIS IS REVENUES APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-III AHMEDABAD DATED 30.01.2006 ARISING OUT OF THE ORDER OF THE ASSESSING OFFICER PASSED UNDER SECTION 158BD R.W.S. 158BC OF THE I.T. ACT 1961. 2. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLO WING GROUNDS: 1) THE LD.CIT(A)HAS ERRED IN LAW AND ON FACTS OF T HE CASE IN ANNULLING THE ASSESSMENT ORDER HOLDING THAT THE AO WRONGLY ACQUIRED JURISDICTION TO PROCEED AGAINST THE APPELL ANT UNDER SECTION 158BD OF THE INCOME TAX ACT 1961. 2) THE LD.CIT(A) HAS ERRED IN LAW AND ON THE FACTS IN HOLDING THAT THE AO HAS ERRED IN INITIATING PENALTY U/S.158 BFA(2) OF THE IT ACT. 3) THE LD.CIT(A) HAS ERRED IN LAW AND ON THE FACTS IN HOLDING THAT THE AO HAS ERRED IN CHARGING INTEREST UNDER SE CTION 158BFA(1) AND LEVING SURCHARGE @ 17%. 3. AT THE TIME OF HEARING BEFORE US IT IS STATED B Y THE LEARNED DR THAT DURING THE COURSE OF SEARCH IN ACHARYA GROUP OF CAS ES IT WAS FOUND THAT SOME IT(SS)A NO.72/AHD/2006 -2- PARTNERS HAVE RETIRED FROM THE ASSESSEE-FIRM AND SO ME PARTNERS JOINED THE FIRM; THAT NEW PARTNERS HAVE MADE THE PAYMENT TO THE RETI RING PARTNERS WHICH WERE UNACCOUNTED FOR; THAT ENTIRE CASH TRANSACTIONS HAD ROOTED THROUGH THE ASSESSEE- FIRM AND MOREOVER THE RETIRING PARTNERS IN THE APPE LLATE PROCEEDINGS HAVE CLAIMED THE AMOUNT RECEIVED BY THEM TO BE EXEMPT ON THE GROUND THAT SUCH AMOUNT IS RECEIVED FROM THE ASSESSEE-FIRM. HE HAS STATED THAT THE AO BEFORE ISSUING NOTICE UNDER SECTION 158BD HAS DULY RECORDE D THE SATISFACTION FOR ISSUING THE NOTICE UNDER SECTION 158BD. ON THESE F ACTS THE CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE INITIATION OF PROCEED INGS UNDER SECTION 158BD WAS NOT VALID. HE THEREFORE STATED THAT THE ORDER OF T HE CIT(A) SHOULD BE REVERSED AND THAT OF THE AO MAY BE RESTORED. 4. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTH ER HAND STATED THAT THERE WAS A SEARCH IN ACHARYA GROUP OF CASES ON 8-11-2000 . NOTICE UNDER SECTION 158BC IN THE CASE OF THE ASSESSEE WAS ISSUED ON 124 -8-2003; THAT THE SATISFACTION FOR INITIATING PROCEEDINGS UNDER SECTI ON 158BD WAS RECORDED BY THE AO OF THE ASSESSEE-FIRM AND NOT THE AO OF THE P ERSONS WHO WAS SEARCHED; THAT THE SATISFACTION WAS RECORDED ON 14-8-2003 WHI CH WAS OBVIOUSLY AFTER THE COMPLETION OF ASSESSMENT UNDER SECTION 158BC IN THE CASE OF PERSON SEARCHED. HE THEREFORE STATED THAT THE INITIATION OF PROCEEDI NGS UNDER SECTION 158BD IS INVALID. IN SUPPORT OF THIS CONTENTION HE RELIED UPON THE DECISION OF THE SPECIAL BENCH DECISION IN THE CASE OF MANOJ AGGARWAL VS. DC IT 113 ITD 377 (DELHI)(SB). HE FURTHER POINTED OUT THAT EVEN AS P ER THE REASONS RECORDED BY THE AO FOR INITIATING PROCEEDINGS UNDER SECTION 158 BD THERE WAS SOME UNRECORDED TRANSACTIONS BETWEEN THE RETIRING PARTNE R AND INCOMING PARTNER OF THE FIRM. THEREFORE THE QUESTION OF ANY UNDISCLOS ED INCOME CAN ARISE ONLY IN THE CASE OF OTHER RETIRING PARTNERS WHO MAY BE ASK ED TO PAY TAX ON THE AMOUNT RECEIVED BY THEM AND THE INCOMING PARTNER CAN BE AS KED TO EXPLAIN THE SOURCE OF SUCH PAYMENT. HOWEVER SO FAR AS THE ASSESSEE I S CONCERNED THERE WOULD BE NO CASE FOR INITIATION OF PROCEEDINGS UNDER SECTION 158BD. HE ALSO REFERRED TO IT(SS)A NO.72/AHD/2006 -3- THE RELEVANT PORTIONS OF THE ORDER OF THE CIT(A) WH EREIN HE HAS IN DETAIL RECORDED THE FINDING IN THIS REGARD. 5. WE HAVE CAREFULLY CONSIDERED ARGUMENTS OF BOTH T HE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. AT PAGE NO.20 OF TH E CIT(A)S ORDER THERE IS A REPRODUCTION OF REASONS RECORDED BY THE ACIT ON 14- 8-2003 FOR INITIATION OF PROCEEDINGS UNDER SECTION 158BD. THE SAME READS AS UNDER: ACTION U/S.132 OF THE ACT WAS CARRIED OUT IN THE A CHARYA GROUP CASES ON 8.11.2000. DURING THE SEARCH AT THE PREMISES OF SHRI JAGDISH ACHARYA ONE OF THE PARTNERS OF M/S.JYOTI SALT INDUS . SOME DOCUMENTS WERE FOUND AND SEIZED WHICH INDICATED THAT TWO OF T HE RETIRING PARTNERS VIZ. RAVIND P. PATEL AND SHRI PRITHVRAJ TALWAR HAD RECEIVED CASH PAYMENTS FROM THIS FIRM. THE DETAILS OF SUCH PAYME NTS ARE AS UNDER: SR. NO. NAME OF THE RECIPIENT RELEVANT DOCUMENTS RECEIVED FROM AMOUNT 01 RAVINDRA P. PATEL ANNEX-A-7 OPG. 58 60 & 61) NEW PARTNERS OF M/S.JYOTI SALT INDUSTRIES RS.31.75 LACS 2 -DO- ANNEX. A-6( PG. 44 & 45) -DO- RS.48.40 LACS 3 PRITIVIRAJ TALWAR ANNEX. A-7 (PG. 58 60 & 61) A -DO- RS.37.45 LACS 4 -DO- ANNEX. A-6 (PG 44 & 45) THE ABOVE AMOUNTS HAD BEEN ASSESSED UNDISCLOSED INC OME OF THESE TWO PERSONS IN THE BLOCK ASSESSMENT. HOWEVER THESE AS SESSEES HAVE CLAIMED CONSISTENTLY THAT THE CASH HAD BEEN RECEIVE D FROM M/S.SHREE JYOTI SALT INDUSTRIES AND THEREFORE ARE CAPITAL RE CEIPTS BY THEM. THE APPELLATE COMMISSIONER HAS UPHELD THIS VIEW OF THE ASSESSEE. M/S.SHREE JYOTI SALT INDUSTRIES HAS ALREADY CONFIRMED THIS PA YMENT AND HAS ALSO ADMITTED THAT THESE PAYMENTS WERE NOT RECORDED IN T HE REGULAR BOOKS OF ACCOUNTS. IN VIEW OF THE ABOVE AND ON THE BASIS OF INFORMATIO N AND DOCUMENTS IN MY POSSESSION I AM SATISFIED THAT THE ABOVE REFERR ED AMOUNTS ARE UNDISCLOSED INCOME OF M/S.SHREE JYOTI SALT INDUSTRI ES GANDHIDHAM WITHIN THE MEANING OF THE 158BD OF THE ACT WHICH IS REQUIRED TO BE BROUGHT TO TAX FOR THE BLOCK PERIOD. IT(SS)A NO.72/AHD/2006 -4- IT WAS CONTENDED BY THE LEARNED COUNSEL THAT THE RE ASONS WERE RECORDED BY THE AO OF THE ASSESSEE AND NOT THE AO OF THE PERSONS SE ARCHED. HE ALSO POINTED OUT THAT THE REASONS RECORDED ON 14-8-2003 WAS AFTE R THE COMPLETION OF BLOCK ASSESSMENT IN THE ACHARYA GROUP OF CASES. THE REVE NUE WAS UNABLE TO CONTROVERT BOTH THESE CONTENTIONS OF THE LEARNED CO UNSEL. IN THE CASE OF MANOJ AGGARWAL (SUPRA) THE SPECIAL BENCH OF THE ITAT HELD AS UNDER: .....SECTION 158BD PROVIDES FOR ASSUMPTION OF JUR ISDICTION TO MAKE A BLOCK ASSESSMENT IN THE CASE OF A PERSON NOT SEAR CHED AND AGAINST WHOM NO PROCEEDINGS HAVE TILL THEN BEEN INITIATED. CAN IT BE SAID THAT SUCH JURISDICTION CAN BE ASSUMED WITHOUT RECORDING SATISFACTION? WE DO NOT THINK SO. IT HAS TO BE NOTED THAT THE PROCEEDIN GS UNDER SECTION 158BC ARE AGAINST THE PERSON SEARCHED AND IF IN THE COURSE OF SUCH PROCEEDING THE ASSESSING OFFICER ASSESSING THE PERS ON SEARCHED COMES ACROSS MATERIAL INDICATING THE PRESENCE OF UNDISCLO SED INCOME IN THE HANDS OF THE PERSON NOT SEARCHED THERE HAS TO BE A PROVISION FOR MAKING A SIMILAR ASSESSMENT IN THE CASE OF THE OTHER PERSO N. AS SECTION 158BC RELATES TO A PERSON SEARCHED THERE HAS TO BE DIFFE RENT PROVISION FOR MAKING A SIMILAR ASSESSMENT IN THE CASE OF THE OTHE R PERSON AND HENCE SECTION 158BD HAS BEEN ENACTED. SO THE SAID SECTIO N STATES THAT IF THE ASSESSING OFFICER IS SATISFIED THAT THE UNDISCLOSED INCOME BELONGS TO THE OTHER PERSON THEN HE SHALL HAND OVER THE SEIZED MA TERIAL SO AS TO ENABLE THE SECOND ASSESSING OFFICER TO MAKE A BLOCK ASSESS MENT IN A SIMILAR MANNER AND THAT IS NOT POSSIBLE IF THE SATISFACTION IS NOT RECORDED. AND THIS CAN BE RECORDED ONLY AND ONLY IN THE COURSE OF THE SECTION 158BC PROCEEDING AND NOWHERE ELSE. IT IS THE ASSESSING OF FICER ASSESSING THE PERSON SEARCHED WHO GOES THROUGH THE SEIZED MATERIA L AND COMES TO A DECISION AS TO WHETHER THERE IS ANY UNDISCLOSED INC OME UNEARTHED AS A RESULT OF SEARCH IF SO ITS NATURE AND TO WHOM IT B ELONGS. IF THE SAID UNDISCLOSED INCOME BELONGS TO THE PERSON SEARCHED T HAT IS THE END OF THE MATTER. IF ON THE OTHER HAND THE MATERIAL EXAMINE D SHOWS THAT THE UNDISCLOSED INCOME PERTAINS TO SOME OTHER PERSON HE HAS TO GIVE A FINDING TO THIS EFFECT AND THEREUPON TRANSMIT THE R ELATED SEIZED MATERIAL TO THE ASSESSING OFFICER HAVING JURISDICTION OVER T HE OTHER PERSON. ALL THESE FINDINGS HAVE TO BE RECORDED AFTER AN HONEST APPRECIATION OF THE SEIZED MATERIAL WITH AN OBJECTIVE MIND AND THERE HA S TO BE A RECORD REFLECTING SUCH FINDINGS ON THE BASIS OF WHICH ALON E THE OTHER ASSESSING OFFICER CAN ASSUME JURISDICTION TO PROCEED AGAINST THE OTHER PERSON AND IT IS THIS RECORD WHICH FORMS THE 'NOTE OF SATISFAC TION' OR THE 'RECORD OF SATISFACTION' AS WE MAY CALL IT. IN SUCH CIRCUMSTA NCE THE RECORDING OF SUCH SATISFACTION IS IMPLIEDLY TO BE DONE IN THE CO URSE OF THE SECTION IT(SS)A NO.72/AHD/2006 -5- 158BC PROCEEDING AS THE SATISFACTION HAS TO BE RECO RDED ONLY BY THE ASSESSING OFFICER MAKING THE BLOCK ASSESSMENT IN TH E CASE OF THE PERSON SEARCHED WHICH IN TURN MEANS THE SECTION 158BC PROC EEDINGS. IN OUR CONSIDERED OPINION SUCH SATISFACTION CANNOT BE REC ORDED BEYOND THE DATE OF THE BLOCK ASSESSMENT IN THE SECTION 158BC P ROCEEDING AND THE DATE OF THE BLOCK ASSESSMENT IS THE OUTER LIMIT FOR RECORDING SUCH SATISFACTION. THIS IS FOR THE REASON THAT THE SATIS FACTION HAS TO BE RECORDED BY THE ASSESSING OFFICER EXAMINING THE MAT ERIAL IN THE CASE OF THE PERSON SEARCHED AND HE WILL HAVE TO FIND OUT WH ETHER THERE IS ANY UNDISCLOSED INCOME AT ALL UNEARTHED WHICH AGAIN CAN BE ONLY IN THE COURSE OF SUCH PROCEEDING. AFTER FINDING THAT THERE IS UNDISCLOSED INCOME HE WILL HAVE TO GIVE A FINDING AS TO WHETHE R SUCH INCOME BELONGS TO THE PERSON SEARCHED AND THIS TOO HAS TO BE IN THE COURSE OF THE SAID PROCEEDING ONLY. IF HE FINDS THAT ANY OR A LL OF SUCH INCOME BELONGS TO A PERSON NOT SEARCHED THEN HE HAS TO RE CORD SUCH FINDING IN THIS BEHALF AND TAKE FOLLOW UP ACTION AS ENVISAGED IN SECTION 158BD WHICH AGAIN HAS TO BE ONLY IN THE COURSE OF THE SEC TION 158BC PROCEEDING AND HENCE IF NO SUCH SATISFACTION IS REC ORDED IN THE COURSE OF THE SECTION 158BC PROCEEDING THEN ASSUMPTION OF JU RISDICTION UNDER SECTION 158BD IS NOT POSSIBLE. IN THE CIRCUMSTANCE WE ARE OF THE FIRM VIEW THAT THE ABSENCE OF THE WORDS ''IN THE COURSE OF THE PROCEEDING'' IN THE SECTION IS NOT MATERIAL TO THE ISSUE IN THE CON TEXT OF THE SAID SECTION ITSELF.... FROM THE ABOVE IT IS EVIDENT THAT THE SATISFACTION FOR ISSUE OF NOTICE UNDER SECTION 158BD IS TO BE RECORDED BY THE AO OF THE PE RSONS SEARCHED DURING THE COURSE OF PROCEEDINGS UNDER SECTION 158BC. IN THE CASE OF THE ASSESSEE THE REVENUE WAS UNABLE TO PRODUCE ANY SUCH SATISFACTION RECORDED BY THE AO OF THE PERSONS SEARCHED. THE SATISFACTION RECORDED BY THE AO WHICH IS REPRODUCED IN THE ORDER OF THE CIT(A) APPEARS TO HA VE BEEN RECORDED BY THE AO OF THE ASSESSEE IN WHOSE CASE NOTICE UNDER SECTION 158BD WAS ISSUED AND NOT BY THE AO WHO COMPLETED THE ASSESSMENT OF PERSON SE ARCHED. MOREOVER THE ABOVE SATISFACTION FOR ISSUE OF NOTICE UNDER SECTIO N 158BD WAS RECORDED ON 14- 8-2003. SEARCH UNDER SECTION 132 HAD TAKEN PLACE I N ACHRAYA GROUP OF CASES ON 8-11-2000. THE REVENUE HAS NOT FILED COPY OF AS SESSMENT ORDER OF PERSON SEARCHED BUT IT MUST HAVE BEEN COMPLETED ON OR BEF ORE 8-11-2002 (BECAUSE THERE IS TIME LIMIT FOR COMPLETION OF BLOCK ASSESSM ENT WITHIN THE PERIOD OF TWO YEARS). THUS THE SATISFACTION FOR ISSUE OF NOTIC E UNDER SECTION 158BD WAS IT(SS)A NO.72/AHD/2006 -6- NEITHER RECORDED BY THE AO OF PERSON SEARCHED NOR I T IS RECORDED PRIOR TO COMPLETION OF ASSESSMENT UNDER SECTION 158BC OF PER SON SEARCHED. ON THESE FACTS DECISION OF SPECIAL BENCH OF THE ITAT IN THE CASE OF MAJOJ AGRAWAL (SUPRA) WOULD BE SQUARELY APPLICABLE. RESPECTFULLY FOLLOWING THE SAME WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPE AL FILED BY THE REVENUE. 7. IN RESULT REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 31 ST JANUARY 2011 SD/- SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 31-01-2011 COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR ITAT. BY ORDER DR/AR ITAT AHMEDABAD