The Commissioner Of Income Tax, Faridabad v. Ajit Singh

ITA No. 344 of 2010 -|- IN THE HIGH COQURT OF PUNJAB AND HARYANAAT CHANDIGARH Income Tax Appeal No.344 of 2010Date of decision: January 11, 2017 The Commissioner of Income Tax, Faridabad ...Appellant Versus Ajit Singh...Respondent CORAM:HON'BLE MR. JUSTICE AJAY KUMAR MITTALHON'BLE MR. JUSTICE RAMENDRA JAIN Present:Mr. Tajender K. Josni, Advocatefor the appellant-Revenue. Mr. Bri) Monan Monga, Aavocate andMir. Ronit Kaura, Advocatfor the respondent-assessee. AJAY KUMAR MITTAL, J.(Oral) Tnis order shall dispose of two appeals bearing IIANos.344 and 345 of 2010 as learned counsel for the parties state thatthe issue Involved therein Is identical. For brevity, the facts are beingextracted from ITA No.344 of 2010. 2.Tne appellant-Revenue nas approached this Court undersection 260A of tne Income lax Act, 1961 (in snort, ‘the Act) againstthe order dated 05.10.2007 (Annexure A-!|]) passed by the IncomeTax Appellate Tribunal, New Delhi (in short, the Tribunal) in IT(Ss)No.140/Del/2Z005 for the block period ending 18.02.1997, claiminthe following substantial questions of law:- “(CYWhether, on the facts and tn the circumstances ofthe case, the findings recorded by the learned ITAT isperverse and contrary to the evidence available on record ITA No. 344 of 2010 i as the Assessing Officer (In snort AO’) had Initiated theproceedings u/s 158BD of the Income Tax Act, 1961 afterrecording requisite satisfaction for the purpose ot initiatingproceedings u/s 158BD of the Income Tax Act, 1961, inthe case of the assessee? (Il)Whether, on the facts and tn the circumstances ofthe case, the learned ITAT was right In law In holding thatthe satisfaction contemplated under Section 158BD ofthe Act has not been recorded and hence issuance ofnotice under section 158BD dated 74.08.2001 Is bad Inlaw even though the findings recorded by the learnedITAT are perverse in so far the detailed proceedings andreasoning given in the assessment order itself evidencesimplied satisfaction which is also borne our from theaadaitions in the assessment order (iil)Whether, on the facts and tn the circumstances ofthe case, the learned ITAT was right In law In holding thatin absence of the clear period of 15 days for filing thereturn, the notice u/s 158BD dated 24.08.2001 standsvitiated in law, illegal and void and therefore theassessment order passed In consequence of such illegalnotice Is required to be quashed even thougn theassessee had not file return of Income even after morethan two and a half years of the issue of notice u/s 158BD of the Income Tax Act, 1961? (Iv)Without prejudice to the question No.(ili) above,whether tne learned ITAT was right In law In quasning theBlock Assessment made consequent to the notice u/s198BD of the Income Tax Act, 1961, though Section 292Bof the Income Tax Act, 1961 specifically provides that noproceeding under Income lax Act, 1961, shall be Invalidby reason of any mistake, omission or defect in a notice?(v)VVnether on the facts and in the circumstances othe case, the learned ITAI was right In law in notadjudicating the additions deleted by the learned CII (A In nolaing that these are academic In nature and notconfirming the order of the Assessing Officer?” (Iv)Without prejudice to the question No.(ili) above,whether tne learned ITAT was right In law In quasning theBlock Assessment made consequent to the notice u/s198BD of the Income Tax Act, 1961, though Section 292Bof the Income Tax Act, 1961 specifically provides that noproceeding under Income lax Act, 1961, shall be Invalidby reason of any mistake, omission or defect in a notice?(v)VVnether on the facts and in the circumstances othe case, the learned ITAI was right In law in notadjudicating the additions deleted by the learned CII (A In nolaing that these are academic In nature and notconfirming the order of the Assessing Officer?” 3.At the outset, learned counsel for the respondent-assessee submitted that similar issue had arisen in the case oT theorotner of the assessee titled as ‘Commissioner of Income Tax,Faridabad vs. Shri Ajay Singh“1n|ITA No.58 of 2009decided on01.09.2015 wherein it was held that the service of notice for recordingthe requisite satisfaction precedent under Section 158BD of the Actwas mandatory and the same had not been complied with by theAssessing Officer (in snort AO’) of the person who had been put tosearcn before transmitting the records to the other AO who hadjurisdiction over sucn other person. Ihe substantial questions of lawas Claimed herein had already been answered in the said judgment.Further reference was also made to a Circular No.24/2015 dated*/[St]December, 2015 Issued by the Central Board of Direct Taxes tosubstantiate that the Board has issued appropriate directions that therevenue should either withdraw the appeals or they should bedismissed as not pressed In view of the juagment passed by thesupreme Court in the case titled as ©Commissioner of [ncome lTaxil vs.M/s Calcutta Knitwears, Ludhiana6In.Civil Appeal No.3958of 2014decided on 12.03.2014 wherein it was held that the recordingof satisfaction note is a prerequisite and the satisfaction note must beexecuted/prepared by the AO before he transmits the record to theother AO, who has jurisdiction over such other person under Section158BD of the Act. The Circular reads thus:- “Subject: Recording of satisfaction note underSection 158BD/153C of the Act-2 ITA No. 344 of 2010 -4- Tne issue of recording of satisfaction for thepurposes of section 158BD/153C has been subject matterof litigation, 2DThe Hon'ble Supreme Court in the case of.=&Calcutta Knitwearsin its detailed judgment in CivilAppeal No.39598 of 2014 dated 12.03.2014 (avaliable INJRS at 2014-LL-0312-51) had laid down that for thepurpose of Section 158BD of the Act, recording of asatisfaction note is a prerequisite and the satisfactionnote must be prepared by the AO before he transmits therecord to the other AO who has jurisdiction over suchother person u/s 198BD. The Honbie Court held that4the satisfaction note could be prepared at any of thefollowing stages" (a)at the time of or along with the initiation ofproceedings against the searched person underSection 158BC of the Act; orproceedings against the searched person underSection 158BC of the Act; or (Ddin the course of the assessment proceedingsunder Section 158BC of the Act: or (C)immeatiatelattentheassessmentproceedings are completed under Section 158BCof the Act of the searched person.” 3.several High Courts have held that theprovisions of section 153C of the Act are substantiallysimilar/pari-materia to the provisions of Section 158BD ofthe Act and therefore, the above guidelines of the Hon bieSC, apply to proceedings u/s 153C of the IT Act, for thepurposes of assessment of Income of other than thesearched person. Inis view has been accepted by CBDT. 4The guidelines of the Hon'ble Supreme Courtas referred to In Para 2 above, witn regara to recording ofsatisfaction note, may be brought to the notice of all forstrict compliance. It is furtner clarified that even if the AOof the searched person and the “other person’ is one and ITA No. 344 of 2010 -5- the same, then aiso ne Is requireaq to record hisatisfaction as has been held by the Courts, 3.several High Courts have held that theprovisions of section 153C of the Act are substantiallysimilar/pari-materia to the provisions of Section 158BD ofthe Act and therefore, the above guidelines of the Hon bieSC, apply to proceedings u/s 153C of the IT Act, for thepurposes of assessment of Income of other than thesearched person. Inis view has been accepted by CBDT. 4The guidelines of the Hon'ble Supreme Courtas referred to In Para 2 above, witn regara to recording ofsatisfaction note, may be brought to the notice of all forstrict compliance. It is furtner clarified that even if the AOof the searched person and the “other person’ is one and ITA No. 344 of 2010 -5- the same, then aiso ne Is requireaq to record hisatisfaction as has been held by the Courts, 5.in view of the above, Tiling of appeals on theissue of recording of satisfaction note should also bedecided in the light of the above judgement. Accordingly,the Board hnereby directs that pending litigation witnregard to recording of satisfaction note under Section158BD/153C should be withdrawn/not pressed if it doesnot meet the guidelines laid down by the Apex Court.” 4In view of the above, learned counsel for the appellant- Revenue could not dispute that questions No.1 and 2 are to beanswered in favour of the assessee in view of decision inM/s Calcutta Knitwears’ case3Supra) and also _ thabove-mentioned Circular. Accordingly, questions No.1 and 2 areanswered in favour of the assessee. It was also submitted that on thebasis of answers to questions No.1 and 2, the issues involved inQuestion Nos.3 to 5 have become infructuous. 5.In view of the above, both the appeals are accordingly, dismissed. (AJAY KUMAR MITTAL)JUDGE! January 11, 2017sonia gugnanl (RAMENDRA JAIN)JUDGE Whether speaking/reasoned? Yes/No Whether reportable’ Yes/No