Desai And Ors v. Deputy Commissioner Of Incometax], The Tribunalheld, Vide Impugned Order At

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON TUESDAY ,THE 23RD DAY OF OCTOBER 2018 / 1ST KARTHIKA, 1940 ITA.No. 206 of 2012 AGAINST THE ORDER/JUDGMENT IN IT(SS)A NO.30/COCH/2007(C.O.NO.41/COCH/2007) of I.T.A.TRIBUNAL,COCHIN BENCH DATED6.1.2012 APPELLANT/S:/RESPONDENT/REVENUE THE COMMISSIONER OF INCOME TAXTHIRUVANANTHAPURAM. BY ADV. SRI.PKR MENON, SR. COUNSEL, GOI (TAXES)SRI.JOSE JOSEPH, SC, FOR INCOME TAX DEPT. RESPONDENT/S:/APPELLANT/ASSESSEE : SHRI. R. SUNIL DAS PRA-129, POONTHURA P.O., PAZHANCHIRA, THIRUVANANTHAPURAM-16. BY ADVS.SRI.T.M.SREEDHARAN (SR.)SMT.BOBY M.SEKHARSMT.DIVYA RAVINDRANSRI.V.P.NARAYANAN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 23.10.2018, ALONG WITH ITA.223/2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA NOS.206&223/2012 -2- IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON TUESDAY ,THE 23RD DAY OF OCTOBER 2018 / 1ST KARTHIKA, 1940 ITA.No. 223 of 2012 AGAINST THE ORDER/JUDGMENT IN IT(SS)A NO.33/COCH/2007(C.O.NO.59/COCH/2007) I.T.A.TRIBUNAL,COCHIN BENCH DATED 06-01-2012 APPELLANT/S:/RESPONDENT/REVENUE : THE COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM BY ADV.SRI.PKR MENON, SR. COUNSEL, GOI (TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX DEPT. RESPONDENT/S:/APPELLANT/ASSESSEE : R.ANIL DASPRA-129, POONTHURA P.O., PAZHANCHIRA, TRIVANDRUM -695016. BY ADVS.SRI.T.M.SREEDHARAN (SR.) SMT.BOBY M.SEKHAR SMT.DIVYA RAVINDRAN SRI.V.P.NARAYANAN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 23.10.2018, ALONG WITH ITA.206/2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA NOS.206&223/2012 ITA Nos.206 and 223/2012 JUDGMENT Ashok Menon, J. The Revenue is in appeal challenging the commonorder of the Income Tax Appellate Tribunal, CochinBenchinIT(SS)ANo.30/COCH/2007,CONo.41/COCH/2007, IT(SS)A No.33/COCH/2007 and CONo.59/COCH/2007. The assessment pertains to two assesses for the block period from 1.4.1989 to27.7.1993. 2.The facts in brief are thus: Consequent to a search on 27.7.1999 at the residential and business premises of an assesseenamed M.Raghunathan and a block assessment madepursuant to the search on 31.7.2001, notices wereissued under Section 158BD of the Income Tax Act,1961 (‘Act’ for brevity) to the present assesses,who are sons of the aforesaid Raghunathan. Theblock assessment was completed on 2.2.2007, and assessment order at Annexure-A was made against M.Raghunathan @ Raghupanicker, who is the father ofthe present assesses, namely R.Sunil Das and R.AnilDas. 3.Aggrieved by the assessment order,Sri.Raghunathan filed an appeal before CIT(Appeals). The AO was directed by the CIT (Appeals)to re-examine the issue of assessability of the partof income at the hands of Sunil Das, as there was anissue regarding unexplained investment by Sunil Das.CIT (Appeals) had deleted the assessment at thehands of Raghunathan, on the issue of segregation ofincome of Raghunathan from that of Sunil Das.Another direction was to re-examine the issue ofaddition on account of credit in the bank account.Order is produced at Annexure-B. Assessment wascompleted afresh after the proceedings wereinitiated against Sunil Das, on 28.9.2006 as perAnnexure-C. 4. The assessees were aggrieved and filed ITA NOS.206&223/2012 appeals before the CIT (Appeals) raising acontention that the AO was not justified in issuingnotice under Section 158BC after a period of morethan five years, which is not at all a reasonableperiod, and beyond the scope of Section 158BE(2).Vide Annexure-D order, the CIT (Appeals) held thatthe order of the AO was void ab initio and cancelledthe same. 5.The Department filed appeal before the Tribunal, and relying on the decision of the Gujarat 4. The assessees were aggrieved and filed ITA NOS.206&223/2012 appeals before the CIT (Appeals) raising acontention that the AO was not justified in issuingnotice under Section 158BC after a period of morethan five years, which is not at all a reasonableperiod, and beyond the scope of Section 158BE(2).Vide Annexure-D order, the CIT (Appeals) held thatthe order of the AO was void ab initio and cancelledthe same. 5.The Department filed appeal before the Tribunal, and relying on the decision of the Gujarat High Court in (1999) 236 ITR 73 [Khandubhai Vasanji Desai and Ors. V. Deputy Commissioner Of IncomeTax], the Tribunalheld, vide impugned order at Annexure-E, that block assessments passed againstthe assessees were barred by limitation. 6.The Revenue is aggrieved by the impugnedorder of the Tribunal on the ground that the AO hadpassed the order pursuant to the direction of CIT(Appeals) and hence, there was no time limit, andthat the reasonableness of the time should have been -6- calculated from the date of the order of CIT (Appeals). 7.We have heard the learned Standing Counsel for the appellant-Revenue as well as the learnedSenior Counsel appearing for the assessees. 8.The question that arises for considerationis whether the order passed by the Assessing Officer(AO) under Section 158BC read with Section 158BD pursuant to the direction of the Commissioner ofIncome Tax (Appeals) is barred by limitation, andwhether the time for completion of assessment shouldhave been calculated from the date of the directionof the appellate authority as alleged? 9.What has to be borne in mind is that the search under Section 132 of the Act was conducted inthe residential and business premises of theassessees on 27.7.1999 and block assessment was on31.7.2001. Notice under Section 158BC of the Actwas issued to the assessees on 24.1.2000 and theassessees filed return of income on 16.2.2001 returning an undisclosed income of Rs.18,52,611/-for the block period. On challenging the order atAnnexure-A dated 31.7.2001 before the CIT (Appeals),vide Annexure-B dated 27.2.2004, there was a remand,consequent to which notice was issued under Section158BD on 27.9.2004 and block assessment completed on2.2.2007. 10. The contention of the assessees is thatthere was a delay of more than three years afterissuance of notice under Section 158BD and for completion of block assessment, there was a delay ofseven years from the date of search. The argumentof the learned Senior Counsel for the assessees isthat since notices were issued after three years,they are barred by limitation. 11. In defence, the learned Standing Counsel for the Revenue submits that no time limit isprescribed for notice under Section 158BD in respectof a person other than searched person. The blockassessment in respect of M.Raghunathan, under Section 158BC was completed on 31.7.2001, who wasthe father of the present assessees, who had filedappeal at the first instance, which resulted in thematter being re-considered. 12.It is true that there is no time limitfixed for issuance of notice under Section 158BD ofthe Act in respect of persons other than searched.But, the Tribunal was right in observing that itwould not mean that the proceedings could be delayedunreasonably. Involvement of the sons ofRaghunathan was already found by the AO, as isevident from Annexure-A order and it is on thatbasis that the first appellate authority had, at thefirst instance, vide Annexure-B order cancelled theassessment with a direction. It was, therefore,essential that the AO should have taken theproceedings under Section 158BD within a reasonabletime, and a period of three years for issuance ofnotice and seven years for completing blockassessment is definitely not a reasonable time. We find, absolutely, no illegality in the order of the find, absolutely, no illegality in the order of the Tribunal. The question of law is answered in favourof the assessees, and the appeals, accordingly, are dismissed. No order as to costs. Sd/- K.VINOD CHANDRAN JUDGE jg Sd/- ASHOK MENONJUDGE APPENDIX OF ITA 206/2012 PETITIONER'S/S EXHIBITS: ANNEXURE-A COPY OF THE ASSESSMENT ORDER U/S 158 BC OF THE INCOME TAX ACT, 1961 DATED 31.7.2001. ANNEXURE-BCOPY OF THE ORDER OF THE COMMISSIONER OFINCOME TAX (APPEALS) DATED 27.2.2004. ANNEXURE-CCOPY OF ASSESSMENT ORDER U/S. 158BC R.W.S.158BD OF THE INCOME TAX ACT, 1961 DATED 28.9.2006. ANNEXURE-DCOPY OF THE ORDER OF THE COMMISSIONER OFINCOME TAX (APPEALS) DATED 8.2.2007 ANNEXURE-E COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL DATED 6.1.2012. [True Copy] ITA NOS.206&223/2012 APPENDIX OF ITA 223/2012 PETITIONER'S/S EXHIBITS: ANNEXURE-ACOPY OF ASSESSMENT ORDER U/S.158BC OF THE INCOME TAX ACT, 1961 DATED 31.7.2001.INCOME TAX ACT, 1961 DATED 31.7.2001. ANNEXURE-BCOPY OF ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 27.2.2004.TAX (APPEALS) DATED 27.2.2004. ANNEXURE-CCOPY OF ASSESSMENT ORDER U/S.158BC R.W.S.158BD OF THE INCOME TAX ACT, 1961 DATED28.9.2006.R.W.S.158BD OF THE INCOME TAX ACT, 1961 DATED28.9.2006. ANNEXURE-DCOPY OF ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 8.2.2007TAX (APPEALS) DATED 8.2.2007 ANNEXURE-ECOPY OF ORDER OF THE INCOME TAX APPELLATE TRIBUNAL DATED 6.1.2012.[True Copy]TRIBUNAL DATED 6.1.2012.[True Copy] jg