Ita/12/2011 Of The Commissioner Of Income Tax v. Dr.t.m.kuriachan

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR & THE HON'BLE MR. JUSTICE BABU MATHEW P.JOSEPH MONDAY, THE 5TH DAY OF MARCH 2012/15TH PHALGUNA 1933 ITA.No. 12 of 2011 ( ) ----------------------AGAINST ORDER IN IT(S&S)A NO.21/COCH/1998 DATED 01/06/2010 ofI.T.A.TRIBUNAL,COCHIN BENCH APPELLANT/RESPONDENT: --------------------------------- THE COMMISSIONER OF INCOME TAX-II, COCHIN. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S)/APPELLANT: ------------------------ DR.T.M.KURIACHAN, KURIEN'S CLINIC, ADIMALI P.O., ADIMALI. BY ADV. SRI.S.ARUN RAJ THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON05-03-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA NO.12/2011 APPENDIX APPELLANT'S EXHIBITS ANNEXURE-A :COPY OF ASSESSMENT ORDER UNDER SECTION 158 BDDATED 13/03/1998 FOR THE ASSESSMENT YEAR 2005-06. ANNEXURE-B :COPY OF ORDER DATED 23/05/2000 OF THE INCOME TAXAPPELLATE TRIBUNAL. ANNEXURE-C :COPY OF JUDGMENT OF THE HON'BLE HIGH COURTREMANDING BACK THE CASE TO THE INCOME TAX APPELATE TRIBUNAL. ANNEXURE-D :COPY OF ORDER SHEET. ANNEXURE-E :COPY OF ORDER DATED 01/06/2010 OF THE INCOME TAXAPPELLATE TRIBUNAL, COCHIN BENCH IT(SS)A NO.21/COCH/1998. //TRUE COPY// jg PA TO JUDGE. C.R. C.N.RAMACHANDRAN NAIR & BABU MATHEW P.JOSEPH, JJ. .................................................................... I.T.A. No.12 of 2011 .................................................................... Dated this the 5[th] day of March, 2012. J U D G M E N T Ramachandran Nair, J. The short question raised in the appeal filed by the Revenue is whether the Tribunal was justified in holding thatin order to transfer a file by an Assessing Officer to anotherAssessing Officer to assess an assessee based on informationgathered in search conducted on the premises of anotherassessee, the Officer transferring the file should record hissatisfaction about the undisclosed income to be assessed atthe hands of other assessee under Section 158BD of theIncome Tax Act, 1961 (hereinafter referred to as the Act forshort). 2.We have heard learned Senior Standing CounselShri.P.K.R.Menon appearing for the Revenue and Shri.Arun Raj,learned counsel appearing for the respondent assessee. We have heard learned Senior Standing Counsel 3.Facts leading to the controversy are the following:- I.T.A.No.12/2011 The assessee and his wife are running a clinic at Adimali. Inthe course of search conducted in the premises of a Companyby name M/s.Eastern Retreads (P) Ltd., in which the assessee'sson was a Director, the Department found evidence ofundisclosed income of the assessee. The Assessing Officerwho searched the Company did not have jurisdiction to assessthe assessee, and therefore, the file was transferred to theAssessing Officer having jurisdiction over the assessee forassessment under Section 158BD read with Section 158BC forassessing undisclosed income. The first round litigationended up in Annexure C judgment of this Court, wherein thematter was remanded to the Tribunal for reconsideration.Even though in the first round, the assessee had not raised acontention that assessment under Section 158BC read withSection 158BD was made without the transferring officerrecording his satisfaction about the undisclosed income of theassessee, which according to the assessee invalidates theassessment, after the remand the assessee raised such acontention which was accepted by the Tribunal; and I.T.A.No.12/2011 -3- assessment was accordingly cancelled. It is against this order,the Revenue has filed this Appeal. I.T.A.No.12/2011 -3- assessment was accordingly cancelled. It is against this order,the Revenue has filed this Appeal. 4.Since the question to be considered is whether inthe absence of satisfaction recorded by the Assessing Officertransferring the file to another Officer under Section 158BDthe assessment completed under Section 158BC read withSection 158BD is invalid, we have to necessarily consider thescope of Section 158BD, for which the Section is extractedhereunder:- “158BD.Undisclosed income of any other person Where the Assessing Officer is satisfied thatany undisclosed income belongs to any person,other than the person with respect to whom searchwas made under Section 132 or whose books ofaccount or other documents or any assets wererequisitioned under Section 132A, then, the booksof account, other documents or assets seized orrequisitioned shall be handed over to the AssessingOfficer having jurisdiction over such other personand that Assessing Officer shall proceed (underSection 158BC) against such other person and theprovisions of this Chapter shall apply accordingly.” 5.Chapter XIVB provides for special procedure forassessment of search cases. The provision provides for I.T.A.No.12/2011 assessment for block period pursuant to search made underSection 132 or based on requisition of accounts or documentsunder Section 132A of the Act. The provisions for assessmentof undisclosed income of the assessee searched under Section132 or whose books of accounts and other documents arerequisitioned under Section 132A, are contained in Section158BC of the Act. Unlike Section 148(2), there is no provisionin Chapter XIVB requiring the Assessing Officer to recordsatisfaction of undisclosed income for making assessment ofthe searched assessee. However, Chapter XIVB visualises thatin the course of search of an assessee there is possibility ofrecovery of evidence and documents pertaining to undisclosedincome of other persons based on which such persons couldbe assessed by the same Officer if he has jurisdiction or by theAssessing Officer having jurisdiction over such assessees.What is stated in Section 158BD is that if the Assessing Officeron scrutiny of the evidence recovered in search conductedunder Section 132 or based on documents requisitioned underSection 132A is satisfied that the same contains details of I.T.A.No.12/2011 undisclosed income of any other assessee over whom suchAssessing Officer has no jurisdiction, he has to transfer therecovered materials and evidence and documents to suchother Officer having jurisdiction to proceed for assessment ofsuch assessees under Section 158BC. The Department's caseis that for transferring the file from one Assessing Officer toanother what is required is only primafacie satisfaction aboutjurisdiction of the Officer to whom file is transferred and thereis no requirement to record it in writing. The case of theassessee is that in the absence of satisfaction recorded underSection 158BD by the Assessing Officer transferring the file tothe other Assessing Officer, the assessment is invalid. 6.The Revenue has brought to our notice the decisionof this Court in Commissioner of Income Taxv.Panchajanyam Management Agencies & Services, reported in239 CTR (Ker) 424, wherein the Division Bench of this Court ofwhich one of us (CNR(J)) is a member, has taken the view thatthe satisfaction under Section 158BD is only about evidence ofundisclosed income of a person other than the assessee I.T.A.No.12/2011 6.The Revenue has brought to our notice the decisionof this Court in Commissioner of Income Taxv.Panchajanyam Management Agencies & Services, reported in239 CTR (Ker) 424, wherein the Division Bench of this Court ofwhich one of us (CNR(J)) is a member, has taken the view thatthe satisfaction under Section 158BD is only about evidence ofundisclosed income of a person other than the assessee I.T.A.No.12/2011 searched and there is no requirement to record the same; andsuch satisfaction being only for transferring the file from oneOfficer to another, there is no requirement for the Officertransferring the file to record the reason for transfer.Wherever satisfaction is required to be recorded before issuingnotice of assessment, the Act specifically provides for it.Reference may be made to Section 148(2) of the Act, whichmandates that before issuing reassessment notice for makingincome escaping assessment, the Officer has to record hisreasons for doing so. On the other hand, in case where searchis made under Section 132 or documents or accounts arerequisitioned under Section 132A, Chapter XIVB in Section158BC provides for initiation of assessment of undisclosedincome of block period, which is by calling for a return in FormNo.2B. In fact, Section 158BC does not require the AssessingOfficer to record his satisfaction for issuing notice forassessment of undisclosed income for the block period forassessing the assessee searched or whose accounts werecalled for under Section 132A of the Act. In fact, Section I.T.A.No.12/2011 158BD is only an enabling provision to assess any otherassessee other than the searched assessee if in the course ofsearch of another assessee evidence of undisclosed income isreceived in respect of the assessee who is not searched.However, the assessment pursuant to the enabling provisioni.e. under Section 158BD also is an assessment under Section158BC and the procedure contemplated is also one and thesame. In fact, what Section 158BD says is that when theevidence collected in search of an assessee revealedundisclosed income of another assessee, who is not searched,the material or evidence so received can be the basis formaking assessment under Section 158BC of the assessee whois not searched. The satisfaction required under Section158BD for the Officer to transfer the material and evidencegathered during search or after requisition of accounts is onlyto justify transfer of the file to the Assessing Officer, who hasjurisdiction to assess the assessee who is not searched but inrespect of whose undisclosed income evidence is gathered. Infact, it is absolutely left to the Officer to whom the file is I.T.A.No.12/2011 transferred under Section 158BD to consider the transferredevidence and materials and to decide whether to proceed withassessment against that assessee under Section 158BC or not.So much so, the satisfaction for transferring a file by oneOfficer to another is only prima facie satisfaction onjurisdiction and on identifying the Assessing Officer, who hasthe jurisdiction over the other assessee, the materials andevidence collected in search or requisition are transferred.The satisfaction for initiation and completion of assessmentunder Section 158BD is obviously that of the Assessing Officerto whom transfer is made by the Officer who conductedsearch. Even though the above is our view and we have taken such a view in the decision above referred, the learned counselfor the respondent assessee has referred to the decision of theSupreme Court in Manish Maheshwari v. Asst. Commissionerof Income Tax & Another, reported in 289 ITR 341, whereinthe Supreme Court has taken the view that if satisfaction is notrecorded by the Assessing Officer for transferring the file I.T.A.No.12/2011 -9- Even though the above is our view and we have taken such a view in the decision above referred, the learned counselfor the respondent assessee has referred to the decision of theSupreme Court in Manish Maheshwari v. Asst. Commissionerof Income Tax & Another, reported in 289 ITR 341, whereinthe Supreme Court has taken the view that if satisfaction is notrecorded by the Assessing Officer for transferring the file I.T.A.No.12/2011 -9- under Section 158BD, the assessment made under Section158BC is invalid. Since the decision of the Supreme Courtabove referred is binding on us, we have to only dismiss theDepartmental Appeal. We, accordingly, dismiss the appealfiled by the Revenue. (C.N.RAMACHANDRAN NAIR, JUDGE) (BABU MATHEW P.JOSEPH, JUDGE) jg