Commissioner Of Income Tax,Central Iii, Chennai v. M/S. Archana,70 Usman Road,T.nagar, Chennai – 600 017

IN THE HIGH COURT OF JUDICATURE AT MADRAS THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN Tax Case Appeal Nos. 953 & 954 of 2009 Commissioner of Income Tax,Central III, Chennai. .. Appellant/Respondent in both TCA's Vs. M/s. Archana,70 Usman Road,T.Nagar, Chennai – 600 017 .. Respondent/Appellant in both TCA's Prayer :Tax Case Appeals filed under Section 260-A of theIncome Tax Act, 1961, against the order of the Income TaxAppellate Tribunal Chennai 'A' Bench, Chennai, dated 19.12.2008in I.T.(SS)A.No.9/Mds/2006 and I.T(SS).A.Nos.13/Mds/2006 for theblock assessment periods 01.04.1989 to 09.11.1999. against the Order of the Commissioner of Income Tax(Appeals) – i, Chennai -34 dated 24/11/2005 made in ITA No.54/02-03 for the block assessment year 01.04.89 to 09.11.99against the Order of The Deputy Commissioner of Income TaxDepartment Central Circle IV (i), Chennai dated 30.04.2002 madein P.A.No./G.I.No.AAAIA7310F/301-A for the block period 01.04.89to 09.11.99. COMMON JUDGMENT [Judgment of the Court was delivered by T.S.Sivagnanam, J.] These appeal filed by the revenue under Section 260-A ofthe Income Tax Act, 1961 (hereinafter referred to as ‘the Act’)are directed against the order dated 19.12.2008 passed by the https://hcservices.ecourts.gov.in/hcservices/ Income Tax Appellate Tribunal Chennai 'A' Bench in I.T.(SS)A.Nos.13/Mds/2006 for the Block Assessment period from01.04.1989 to 09.11.1999. 2. The appeals were admitted on 13.10.2009 on thefollowing substantial questions of law: “(i) Whether on the facts and in thecircumstances of the case, the AppellateTribunal was right in cancelling the assessmentas barred by limitation purely on the basis ofdate of issue of notice u/s. 158BC instead ofreckoning the period of limitation on the basisof the date of issue of notice u/s. 158BD? (ii) Whether on the facts and in thecircumstances of the case, the AppellateTribunal was right in holding that no propersatisfaction note was recorded by the AssessingOfficer for the issue of notice u/s. 158BD ofthe Income Tax Act?and (iii) Whether on the facts and in thecircumstances of the case, the AppellateTribunal was right in not goint into the meritsof the grounds of appeal raised by the Revenuein respect of the deletion of the additions madein the assessment order by the Commissioner ofIncome Tax (Appeals)?” 3. The revenue fairly states that substantial question oflaw No.1 does not arise for consideration in this case.Accordingly, the same stands rejected. Thus, we need to decidethe substantial questions of law No.2 and 3 alone. 4. We have heard Ms.R.Hemalatha, learned counsel SeniorStanding Counsel for the appellant/revenue and Mr.A.S.Sriraman,learned counsel appearing for respondent/assessee. 5. The short issue involved in this case is whether asatisfaction note was recorded by the Assessing Officer beforeissuance of notice under Section 158BD of the Act. It cannot bedisputed by the Revenue that the condition precedent forinvoking a Block Assessment is that a search has been conductedunder Section 132 of the Act, or the documents or assets hasbeen requisitioned under Section 132A. The said provision wouldapply in the case of any person, in respect of whom search hasbeen carried out under Section 132A of the Act or documents or assets has been requisitioned under Section 132A. 6. Section 158BD, provides for taking recourse to a BlockAssessment in terms of Section 158BC in respect of any otherperson, the three conditions to be satisfied as pointed by theHon'ble Supreme Court in Manish Maheshwari Vs. AssistantCommissioner of Income Tax reported in [2007] 289 ITR 341 (SC).The three conditions being: “(i) Satisfaction must be recorded by theAssessing Officer that any undisclosed incomebelongs to any person, other than the personwith respect to whom search was made underSection 132; assets has been requisitioned under Section 132A. 6. Section 158BD, provides for taking recourse to a BlockAssessment in terms of Section 158BC in respect of any otherperson, the three conditions to be satisfied as pointed by theHon'ble Supreme Court in Manish Maheshwari Vs. AssistantCommissioner of Income Tax reported in [2007] 289 ITR 341 (SC).The three conditions being: “(i) Satisfaction must be recorded by theAssessing Officer that any undisclosed incomebelongs to any person, other than the personwith respect to whom search was made underSection 132; (ii) The books of account or otherdocuments or assets seized or requisitioned hadbeen handed over to the Assessing Officerhaving jurisdiction over such other person; and (iii) The Assessing Officer has proceededunder Section 158BC against such other person” 7. It was pointed out in Manish Maheshwari case (supra)that conditions precedent for invoking the provisions of Section158BD are required to be satisfied before the the provisions ofthe Chapter XIV-B are applied in relation to any person otherthan the person whose premises has been searched under Section132 or whose documents and other assets has been requisitionedunder Section 132A. It is further pointed out that a taxingstatute, as is well-known must be construed strictly and in theabsence of any satisfaction being recorded on part of theAssessing Officer, notice was held to be not sustainable. 8. In the instant case the assessee preferred an appealagainst the Block Assessment Order dated 30.04.2002 before theCommissioner of Income-tax(Appeals)-I,Chennai (hereinafterreferred to as ‘CIT(A)’) and it is non-recording of thesatisfaction note by the Assessing Officer which was specificallyraised before the CIT(A). The CIT(A) called for remand reportfrom the Assessing Officer and found that there was nosatisfaction note recorded either by the Assessing Officer, whoassessed Mr.C.S.Raju, whose premises was searched, or by theAssessing Officer of the respondent/assessee before issuance ofnotice under Section 158BD. This finding of the CIT(A) wasassailed before the Tribunal by the revenue. The revenuecontended that recording of satisfaction note, as mandated forissuance of notice under Section 158BD of the Act, need not be inthe order sheet and the letter, which he referred to would beconsidered as sufficient compliance. The said letter has beenreferred to in paragraph 19.2 of the order passed by the CIT(A).As rightly pointed out by the Tribunal, the letter does not indicate any recording of satisfaction note and this is only theissuance of notice under Section 158BD of the Act. 9. Thus, in the absence of mandatory procedure having notbeen followed, the Tribunal was right in dismissing the appealfiled by the revenue. 10. In the result, the appeal filed by the revenue isdismissed, substantial question of law No.1 is rejected as itdoes not arise for consideration and substantial question of lawNos.2 and 3 are answered against the revenue. No costs. Sd/- Assistant Registrar (CS-V) //True Copy// mp/skaTO Sub Assistant Registrar 1.The Commissioner of Income Tax, Central III, Chennai. Central III, Chennai. 2.Income Tax Appellate Tribunal, Chennai A Bench, Chennai. 3.The commissioner of Income Tax, (Appeals)-I, Chennai-34. 4.The Deputy Commissioner of Central Circle IV (I), Chennai. +1cc to Mr.S.Sridhar, Advocate, S.R.No. 55362 Tax Case Appeal Nos. 953 & 954 of 2009 VBA(CO)GN(08/08/2019)