NAVIN VERMA v. ASSISTANT COMMISSIONER OF INCOME TAX
[Citation -2006-LL-0228-2]

Citation 2006-LL-0228-2
Appellant Name NAVIN VERMA
Respondent Name ASSISTANT COMMISSIONER OF INCOME TAX
Court ITAT
Relevant Act Income-tax
Date of Order 28/02/2006
Assessment Year BLOCK PERIOD 1ST APRIL, 1988 TO 16TH APRIL, 1999
Judgment View Judgment
Keyword Tags jurisdiction to make assessment • search and seizure operation • time-limit for completion of • undisclosed investment • barred by limitation • competent authority • condition precedent • specific provision • undisclosed income • validity of notice • issuance of notice • service of notice • share application • block assessment • bona fide belief • fresh assessment • registered post • issue of notice • legal provision • void ab initio • illegal notice • special bench • block period • valid notice
Bot Summary: 4.2 As the assessee did not comply the notice, a notice under s. 142(1) on 7th Nov., 2002 and further notice on 12th Dec., 1992 were issued. There is mandatory requirement for providing minimum 15 days period in the notice for filing the return as per provisions of Chapter XIV-B and since, in the instant case, such period was not given in the notice, the notice is invalid and subsequent proceedings in pursuance of such notice are also void ab initio and the block assessment is liable to be quashed on this ground. According to learned counsel for the assessee if the assessee is provided a period of less than 15 days, then such notice is not a valid notice and assessment made pursuant to such notice cannot be legally sustained. No assessment under s. 158BC or 158BD can be made without issuing a statutory notice as provided in s. 158BC. The notice of less than 15 days is equal to no notice. As no assessment can be made under s. 158BC in absence of notice, the assessment made by issuance of notice otherwise than in accordance with the provisions of law, has to be treated on the same footing, i.e., without notice. If the AO cannot cure the irregularity in relation to non-issuance of notice, he equally cannot cure the irregularity in relation to a notice which is not in accordance with the provisions of law, i.e., notice providing a lesser period than the prescribed clear period of 15 days. The provisions of s. 15(3) are as under : A notice in the prescribed form requiring such person to furnish within such period, not being less than thirty days, as may be specified in the notice a return in the prescribed form and verified in the prescribed manner.... 10.5 Since the notice of 30 days was not given, the assessee challenged the assessment order.


P.N. PARASHAR, J.M. ORDER This appeal has been filed by assessee against order of learned CIT(A) passed under s. 158BD/144 relating to block period 1st April, 1988 to 16th April, 1999. 2 . Shri Dinesh Verma, learned advocate appeared for assessee whereas Smt. Sangeeta Gupta, learned CIT, Departmental Representative represented Revenue. 3. assessee has taken following grounds in this appeal : "1. learned CIT(A) erred on facts as well as in law in holding that Asstt. CIT, Range-I, had jurisdiction to assess assessee and consequently, block assessment order in dispute was valid. 2. learned CIT(A) erred on facts as well as in law in holding that mandatory provisions of law were complied with. 3. learned CIT(A) erred on facts as well as in law in holding that investment of Rs. 11,000 in M/s Nasa Systems was undisclosed income of assessee being from unexplained sources. 4. learned CIT(A) erred on facts as well as in law in holding that investment of Rs. 1 lakh in agriculture land measuring 20 KBM was undisclosed income of assessee being from unexplained sources. 5. learned CIT(A) erred on facts as well as in law in holding that investment of Rs. 43,750 in PNB building at Ballabgarh was undisclosed income of assessee being from unexplained sources. 6. learned CIT(A) erred on facts as well as in law in holding that advance of Rs. 10,000 paid for purchase of plot No. 438/3 was undisclosed income of assessee being from unexplained sources. 7. learned CIT(A) erred on facts as well as in law in holding that source of payment of Rs. 34,155 towards booking of plot at Gurgaon was undisclosed income of assessee being from unexplained sources. 8. learned CIT(A) erred on facts as well as in law in holding that income from STD Booth and M/s Spreadcom could not be established and, therefore, same was nil. 9. learned CIT(A) erred on facts as well as in law in not considering incomes earned from M/s Spreadcom and STD Booth and in denying set off of same against alleged undisclosed investment to assessee. 10. assessee craves leave to add, amend or delete any of grounds of appeal." 4 . Before dealing with specific grounds, as reproduced above, we consider it proper to narrate facts in brief, which are as under. 4.1 search and seizure operation under s. 132 was conducted at residence of Shri Subhash Verma and Smt. Krishna Verma at I-16, Sector 10, Faridabad. search started on 12th March, 1999 and continued upto 16th April, 1999. During search operations, certain incriminating documents were seized. Examination of some of seized documents revealed undisclosed income of assessee also. Accordingly, notice under s. 158BD of IT Act, 1961 was issued on 23rd April, 2001. This notice was served upon assessee on 24th April, 2001. assessee was required to file return within seven days. 4.2 As assessee did not comply notice, notice under s. 142(1) on 7th Nov., 2002 and further notice on 12th Dec., 1992 were issued. assessee did not file return but vide letter dt. 23rd Dec., 2002 raised several objections to challenge validity of notice. assessee was required to appear on 27th Dec., 2002. However, assessee did not appear despite repeated notices. Vide letter dt. 4th March, 2003, assessee again challenged validity of notices issued by AO. As assessee did not file any return, AO completed assessment under s. 158BD r/w s. 158BC(c)/144 on 30th April, 2003. AO, while doing so, also discussed pleas raised by assessee in its letter filed before him relating to jurisdiction to make assessment and rejected same. 4.3 On basis of various documents found during course of search, AO computed total disclosed income at Rs. 1,20,14,405. Various additions made by him in assessment order are as under : (i) Investment by way of share application 10,000 money para 3(i) above. (ii) Investment as share in capital para 3(ii) 1,000 above. (iii) Investment in 20 kanals 8 marlas of land at village Dhatir, Tehsil Palwal, Distt. Faridabad para 3(iii) 2,24,000 above (iv) Investment in 1/4th share in PNB building at 43,750 Ballabgarh para 3(iv) above. (v) Investment in plot No. 438/3, Faridabad para 3,60,000 3(v) above. (vi) Investment in 6 marlas plot at Gurgaon para 34,155 3(vi) above. (vii) Investment in various properties as 1,13,41,500 mentioned in document No. A-I para 3(vii) above. Total undisclosed income 1,20,14,405 4 . 4 assessee challenged assessment order before learned CIT(A). Before him, several grounds were taken. assessee also moved application under r. 46A for admitting evidence. This application was allowed by learned CIT(A) after obtaining comments from AO. 4.5 So far as legal grounds are concerned, learned CIT(A) did not find force and rejected same. learned CIT(A) also considered various additions made by AO and gave some relief. He deleted addition of Rs. 1,13,41,500. 5. Before us, assessee has challenged order of learned CIT(A). 6 . Ground Nos. 1 and 2 challenge validity of assessment proceedings. 7. At time of hearing, learned counsel for assessee, Shri Dinesh Verma raised various legal pleas in support of these grounds, which are as under : (i) That jurisdiction for making assessment in case of assessee was not vested with then Asstt. CIT, Range-I. It was pointed out by him that no order for transferring jurisdiction was passed by competent authority and, therefore, AO, i.e.,. Asstt. CIT Range-I, Faridabad, who made assessment, had no jurisdiction to do so and for want of jurisdiction, assessment order has to be treated as illegal and void ab initio. (ii) There is mandatory requirement for providing minimum 15 days period in notice for filing return as per provisions of Chapter XIV-B and since, in instant case, such period was not given in notice, notice is invalid and subsequent proceedings in pursuance of such notice are also void ab initio and, therefore, block assessment is, therefore, liable to be quashed on this ground. (iii) Sec. 158BD mandatorily requires recording of satisfaction by AO having jurisdiction over persons under s. 132. As no satisfaction has been recorded in this case, block assessment order framed under s. 158BD is invalid. 7.1 In support of above pleas, learned counsel has placed reliance on following decisions : (i) Smt. Simi Davis vs. CIT (2004) 192 CTR (Ker) 186 : (2004) 142 Taxman 337 (Ker); (ii) Gorakhpur Petro Oils Ltd. vs. Addl. CIT (2005) 95 TTJ (All)(TM) 489; (iii) Y. Subbaraju & Co. vs. Asstt. CIT (2004) 85 TTJ (Bang)(SB) 670 : (2004) 270 ITR 174 (Bang)(SB)(AT); and (iv) Microfin Securities (P) Ltd. vs. Addl. CIT (2005) 94 TTJ (Lucknow) 767 : (2005) 3 SOT 302 (Lucknow). 7.2 In order to support his plea regarding lack of jurisdiction, learned counsel also placed on record some orders/notifications of IT Department, which include following : (i) Order of Addl. CIT, Range-I, Faridabad, dt. 3rd Aug., 2001 (ii) Order of CIT, Rohtak, dt. 12th June, 1998; and (iii) Order of CIT, Rohtak, dt. 28th May, 1998. Copies of these orders are available at pp. 109 to 119 of paper book. 7 . 3 contention of learned counsel for assessee was that regular jurisdiction was with ITO, Ward-8, Faridabad and, therefore, Asstt. CIT did not have any jurisdiction over assessee in absence of order under s. 127 of IT Act. He further pointed out that in this case, notice under s. 158BD was issued by CIT, Investigation Circle and assessment was made by Asstt. CIT, Range-I, Faridabad. He also pointed out that notification dt. 3rd Aug., 2001 was applicable on date of issuance of notice and on date of passing assessment order and, therefore, neither authority issuing notification under s. 158BD was competent to do so nor officer who passed assessment order was empowered or authorized to pass order. 8 . learned Departmental Representative, on other hand, justified jurisdictional authority and competency of these authorities. He further submitted that plea regarding lack of jurisdiction cannot be raised before Tribunal. 9. We have considered entire material and rival submissions. 9.1 From reply of assessee dt. 7th Dec., 2004 available at p. 87 of paper book, it is found that assessee had contended that said notice was issued without jurisdiction and was bad in law. On perusal of para 2.1 on p. 5 of assessment order, it is evident that AO has taken note of objection of assessee regarding lack of jurisdiction. He has observed as under : "2.1. reply filed by assessee on 25th April, 2003 has been considered. contention of assessee that proceedings are bad in law and void ab initio being barred by limitation, for non-compliance to mandatory provisions of law and for want of jurisdiction is not correct. Vide letter, dt. 20th Dec., 2002, assessee had earlier also raised issue of proceedings being barred by limitation of time and subsequent notice under s. 142(1), dt. 12th Dec., 2002 being illegal and without sanction of all. Vide this office letter, dt. 23rd Dec., 2002, assessee was informed that proceedings under s. 158BD of IT Act, 1961 initiated on 23rd April, 2001 are not barred by limitation of time and, therefore, subsequent notices under s. 142(1) requiring him to file return of income for above block period are valid in law. time-limit for completion of assessment under s. 158BD r/w s. 158BC(c) of IT Act, 1961 is period of two years from end of month in which notice under s. 158BD was issued which in present case is expiring on 30th April, 2003 as provided under s. 158BE(2)(b) of IT Act, 1961, further, mandatory provisions of law have been duly complied with and no notice, etc., shall be invalid or deemed to be invalid because same are in substance and effect in conformity with or according to intent and purpose of IT Act, 1961 as provided under s. 292B. As regards jurisdiction, assessee is residing in territorial jurisdiction of Range-I, Faridabad and is, therefore, within jurisdictional limits of undersigned." 9.2 assessee challenged jurisdiction of AO before CIT(A) by taking specific ground which is as under : "The block assessment order dt. 30th April, 2003 passed under s. 158BD r/w s. 158BC/144 is illegal, bad in law and void ab initio for want of jurisdiction." 9.3 In his letter dt. 20th Nov., 2003 available at p. 90 of paper book, assessee made following specific submissions in support of this ground : "Your Honour, jurisdiction of assessee under IT Act, vested with AO Ward-1(3), Faridabad and not with Asstt. CIT, Range-I, Faridabad and, therefore, assessment having been framed without jurisdiction, is illegal, bad in law and ab initio void, for want of jurisdiction. Not to mention, AO was requested time and again to supply copy of jurisdiction on basis of which he assumed jurisdiction to assess assessee but nothing has been supplied to assessee till today." 9.4 However, learned CIT(A) also failed to properly examine issue. He has simply reproduced reply of AO and has observed in para 5.1, as under : "5.1 issue has been examined and stand of appellant is rejected in view of fact that appellant was not existing assessee and it was only Asstt. CIT, who was officer competent to issue notice under s. 158BD of IT Act." 9.5 On going through material on record, it is found that validity of assessment made by AO cannot be challenged on ground that AO did not have valid authority to make assessment. It is to be pointed out that assessee was not assessed to tax and he did not file return in earlier years. Hence, question of transfer of jurisdiction did not arise. Secondly, (Asstt.) CIT concerned had territorial jurisdiction over assessee and thus assessment so made by him is justified. Otherwise also, validity of assessment so made cannot be challenged before us on ground that Jt. CIT did not have jurisdiction to assess assessee. It is administrative matter and, therefore, if assessee had any grievance in this regard, he could have approached Departmental authorities for transferring case from present AO to AO, who, according to assessee, was empowered to make assessment. In view of above, this ground is found to be without any force and is rejected accordingly. 9.6 In case of Wallace Bros. & Co. Ltd. vs. CIT (1945) 13 ITR 39 (FC), Federal Court held that objection to place of assessment could not be raised under 1922 Act on appeal against assessment. matter was concluded by Teomal vs. CIT (1959) 36 ITR 9 (SC) in which Supreme Court held that objection to place of assessment could not be raised under 1922 Act in appeal before AAC or Tribunal, or on reference to High Court. decision in Teomal s case (supra) holds good under this Act. Although observation of Federal Court in Wallace Bros. & Co. Ltd. that matter is more one of administrative convenience than of jurisdiction would not apply under this Act, where statute itself refers to this matter as one of jurisdiction, question as to AO s jurisdiction is still left to be decided, as under 1922 Act, by Director General or CIT or by board and not by appellate authorities or by Court on reference. However, if assessee obtains decision on question under this section and that decision is vitiated by error apparent on face of record, it can be corrected by High Court by appropriate writ, direction or order under Art. 226 of Constitution. 9.7 In case of Mahaliram Ramniranjan Das vs. CIT (1985) 47 CTR (Pat) 65 : (1985) 156 ITR 885 (Pat) Hon ble Patna High Court has observed as under : "Held, that this was not case of total lack of jurisdiction. In present case, irregularity had occurred at stage after petition was filed objecting to jurisdiction of ITO, C Ward, to proceed with case and ITO without referring matter to CIT for deciding matter, himself completed assessment. Thus, irregularity was at that stage and so case had to be restored to that stage. AAC was justified in setting aside assessment order for making fresh assessment according to law and Tribunal was justified in upholding order of AAC." 9.8 In view of above, plea regarding validity of jurisdiction cannot be entertained and, therefore, ground is rejected. 9.9 next legal plea taken by assessee is that AO has not recorded satisfaction for making assessment. assessee has not taken specific plea by raising specific ground in appeal before us. Neither assessee nor Department has filed assessment in case of person searched. satisfaction can be recorded in case of person searched or even otherwise, i.e., separately and thus it is not necessary to record satisfaction in assessment order made under s. 158BD. In view of above, we do not find force in this plea of assessee, which is rejected. 10. last plea taken by assessee for challenging validity of assessment order is that under s. 158BC/158BD notice is to be issued by AO requiring assessee to file return after 15 days. According to learned counsel for assessee if assessee is provided period of less than 15 days, then such notice is not valid notice and assessment made pursuant to such notice cannot be legally sustained. In support of this argument, learned counsel placed reliance on various authorities including decision of Agra Bench of Tribunal in Kishore Agrawal vs. Dy. CIT [IT(SS)A No. 7/Agra/2001, dt. 11th May, 2005] [reported at (2005) 98 TTJ (Agra) 800 Ed.]. He also placed reliance on order of Tribunal, Delhi Bench E in case of Smt. Neera Agarwal and Anil Kumar Agarwal vs. Dy. CIT [IT(SS)A Nos. 142 and 143/Del/2003, dt. 9th Feb., 2005]. 10.1 We have carefully considered facts and circumstances relating to this matter and rival submissions. On going through relevant material, including written submissions and letters of assessee as well as assessment order, following facts are found to be undisputed : (a) AO issued notice under s. 158BD on 23rd April, 2001. Through this notice, assessee was required to file return within 8 days. Again vide notice, dt. 4th Feb., 2003 assessee was required to file return within 7 days. Vide another notice dt. 27th Jan., 2003 also assessee was required to file return on 22nd April, 2003, i.e., within 8 days. Thus, through above notices assessee was not given time to file return beyond 15 days. (b) assessee did not file return in compliance to above notice or otherwise. assessment has been made under s. 158BD r/w s. 158BC/144 of Act. 10.2 Coming to legal provision regarding issuance of notice for making assessment under s. 158BD, notice is to be issued as provided under s. 158BC. provisions of s. 158BC are as under : "158BC. Where any search has been conducted under s. 132 or books of account, other documents or assets are requisitioned under s. 132A, in case of any person, then, (i) in respect of search initiated or books of account or other documents or any assets requisitioned after 30th day of June, 1995, but before 1st day of January, 1997, serve notice to such person requiring him to furnish within such time not being less than fifteen days; (ii) in respect of search initiated or books of account or other documents or any assets requisitioned on or after 1st day of January, 1997, serve notice to such person requiring him to furnish within such time not being less than fifteen days but not more than forty-five days, as may be specified in notice return in prescribed form and verified in same manner as return under cl. (i) of sub-s. (1) of s. 142, setting forth his total income including undisclosed income for block period." 10.2.1 In view of above provisions contained under s. 158BC(a), notice is to be served upon assessee, requiring him to furnish return within such time not being less than 15 days. provision is unambiguous and clear. intention of legislature in using words "not less than 15 days", is clear. rule of literal construction has to be followed for ascertaining plain meaning of terms used. There being no ambiguity in language adopted, no other construction except that clear notice of more than 15 days is to be given, is possible. 10.3 contention of learned Departmental Representative that if notice does not provide period of clear 15 days, that is merely irregularity, which is curable is not acceptable in view of specific provision of law referred to above which casts specific obligation upon AO. When law requires particular act to be done in particular manner and within particular time, then no addition, subtraction or modification of such requirement is permissible. If requirement of law is clear, authorities cannot be allowed to subvert provision by curing such irregularity. requirement of giving notice under s. 158BC is precondition for making assessment. No assessment under s. 158BC or 158BD can be made without issuing statutory notice as provided in s. 158BC. notice of less than 15 days is equal to no notice. As no assessment can be made under s. 158BC in absence of notice, assessment made by issuance of notice otherwise than in accordance with provisions of law, has to be treated on same footing, i.e., without notice. If AO cannot cure irregularity in relation to non-issuance of notice, he equally cannot cure irregularity in relation to notice which is not in accordance with provisions of law, i.e., notice providing lesser period than prescribed clear period of 15 days. Thus, argument of learned Departmental Representative fails on this count also. 10.4 issue has been examined by various Courts. In case of Mir Iqbal Husain vs. State of U.P. (1964) 52 ITR 625 (All), Hon ble Allahabad High Court examined provisions of s. 34 of IT Act, 1922. assessing authority directed assessee to appear on next date and to submit return. As per s. 15(3), notice of 30 days was required to be given. provisions of s. 15(3) are as under : "A notice in prescribed form requiring such person to furnish within such period, not being less than thirty days, as may be specified in notice return in prescribed form and verified in prescribed manner...." 10.5 Since notice of 30 days was not given, assessee challenged assessment order. issue involved was as to whether assessment was illegal on account of defect in notice. Before Hon ble Allahabad High Court for justifying notice it was urged that specification of period for furnishing return was not requirement which was to be included in notice. According to learned Departmental Representative, law only required that notice for filing of return must be issued and if notice specifies that condition, then it is valid in law. Hon ble Court did not accept this contention and observed as under : "We are unable to accept contention advanced on behalf of State. notice under s. 25 must contain requirements which may be included in notice under s. 15(3). notice under s. 15(3) requires assessee to furnish return. requisition does not stop there. It proceeds further, and, indeed, must proceed further. It requires assessee to furnish return within certain period. It appears to us that unless period for furnishing return is specified in notice, it is incomplete notice. very object of Act, which is fiscal statute, indicates that assessment should be completed within definite period and, therefore, it is necessary that assessee should be required to file return within specified period. assessee who fails without reasonable cause or excuse to furnish return in due time is liable to penalty under s. 37. enactment of s. 37 testifies to intention of legislature that return is required to be filed within definite period, and accordingly duty is cast upon assessing authority to specify such period in notice calling for return. notice must not merely require assessee to furnish return. It must require assessee to furnish return within specified period, that period being not less than thirty days. It is only then notice containing requirements of s. 15(3)." 10.6 Hon ble Court also followed decision in case of CIT vs. Ramsukh Motilal (1955) 27 ITR 54 (Bom) and held that issue of notice is condition precedent to assumption of jurisdiction for assessing such income. It was also held that without issue of valid notice under s. 25 assessment in consequence to invalid notice must be held to be bad in law. 10.7 It is to be pointed out that in that case assessee had filed return in compliance to notice but Hon ble Court held that objection to validity of notice cannot be waived even if assessee had filed return. Placing reliance on ratio of decision in case of Manek Lal vs. Dr. Prem Chand (1937) SCR 575, it was held that waiver can be inferred only if and after it is shown that party knew about relevant facts and was aware of his right to take objection in question. Reliance was also placed in case of A.C. Dutta vs. Mst. Bibi Akmedi Begum 1954 ALJ 622, wherein it was held that waiver of privilege or right to be effective must be based upon full knowledge of privilege or right to which person waiving them is entitled. It is to be mentioned here that in present case assessee had not waived this right, mentioned here that in present case assessee had not waived this right, rather assessee repeatedly challenged validity of notice and did not file any return in compliance to such illegal or defective notice. 10.8 In case of CIT vs. Braithwaite & Co. Ltd. (1993) 110 CTR (SC) 290 : (1993) 201 ITR 343 (SC), Hon ble Supreme Court of India considered issue which arose regarding requirement of period not less than seven years , appearing in proviso to r. 1(v) of Sch. II to Companies (Profits) Surtax Act, 1964. After making reference to decision of Hon ble Bombay High Court in case of CIT vs. Ramsukh Motilal (supra), Hon ble Court held that only interpretation which could be given to expression during period of not less than seven years for proviso is that period should go beyond seven years. 10.9 In case of CIT vs. Ekbal & Co. (1945) 13 ITR 154 (Bom), question for consideration before Hon ble High Court was, as to whether notice under s. 22(2) of Act, requiring assessee to furnish return of income (within thirty days of receipt of notice), as against required period of not less being less than 30 days , was valid notice. assessee had challenged validity of notice in that case, but Tribunal upheld plea of assessee though assessee had filed return. It was observed that fact that assessee submitted return later on or that it was accepted for purpose of making assessment, does not cure defect that initially lay in notice. observations of then Chief Justice Sir Leonard Stone, in this regard are as under : "I agree with that statement in judgment of Tribunal. Computation of periods of time has given rise to great many cases, both in this country and in England. Time can be infinitely divided. There is no fraction of second, which is so short in duration that it cannot be divided into something smaller. In my judgment expressions within thirty days and not less than thirty days are two quite different things. Within thirty days is within two points of time one at which period begins and other at which it expires. On other hand, not less than thirty days is outside these two points of time. There must be interval of not less than thirty days and that means thirty days clear. [See In re, Railway Sleepers Supply Company (1885) 29 Ch. D. 204]. period must continue beyond expiration of stated time. Whereas within stated period must mean what it says, something less than moment of expiration. In my opinion, therefore, notice is invalid and question referred to must be answered in negative. CIT must pay costs of reference." 10.10 In case of Commr. of Agrl. IT vs. Ramkuvar & Ors. (1983) 141 ITR 85 (Bom), Hon ble High Court has also considered issue. In that case under s. 41 of Maharashtra Agriculture Act, 1962, clear notice of 30 days was required to be given. It was held that defect in notice is not procedural defect but failure to comply with condition precedent to assumption of jurisdiction. It was further held that irregularity in notice under s. 41 cannot be waived by assessee. 10.11 In view of above authorities and also in accordance with view taken by Agra Bench of Tribunal in case of Kishore Agrawal (supra) and order of Delhi Bench of Tribunal in case of Smt. Neera Agarwal (supra), it is clear that this requirement of law has to be satisfied for making assessment under s. 158BC/158BD. As in present case, assessing authority did not provide clear period of 15 days for filing return, in our considered opinion, basic and pre-requisite condition of law or mandatory requirement of legal provision was not satisfied. Such notice is illegal and void and neither Departmental authorities are capable to cure defect nor assessee can waive such pre-requisite requirement of law. In view of above, notice is held to be illegal, void and assessment order passed in consequence of such illegal notice is void ab initio and such assessment is to be quashed. Ground No. 2 taken by assessee is therefore allowed. 10.12 We may mention here that in case of Smt. Mahesh Kumari Batra vs. Jt. CIT (2005) 95 TTJ (Asr)(SB) 461 : (2005) 95 ITD 152 (Asr)(SB), Special Bench of Tribunal was considering issue relating to irregularity of notice under s. 158BC. However, statutory provision as contained under s. 158BC(1) requiring notice providing time of not less than 15 days, was not issue before that Bench and, therefore, same was not considered. In that case, defect in notice as pointed out, was that notice was served upon one lawyer Shri R.K. Dhawan who was assessee s advocate and who was appearing on behalf of assessee. plea of Department was that under bona fide belief, AO handed over notice to Shri Dhawan and even assessee had filed return in compliance to such notice. On these facts, it was held that defect in notice, if any, was curable under s. 292B. Thus, issue which is involved in this appeal, was not directly involved before Special Bench. 10.13 Delhi Bench "B" of Tribunal in case of N.K. Parwanda vs. Dy. CIT vide order dt. 16th Jan., 2004 rendered in IT(SS)A No. 129/Del/2003 [reported at (2004) 89 TTJ (Del) 95 Ed.] has considered issue relating to requirement of issuance and service of notice under s. 158BC. In that case, plea of assessee was that notice was sent at old address of assessee and, therefore, it was not served. On enquiry, it was found that notice was sent through registered post on old address of assessee. assessee had participated in proceedings. After placing reliance on ratio of decision in case of Swaran Yash vs. CIT (1982) 138 ITR 73 4 (Del), it was observed that it was not possible for party to confer jurisdiction by consent. It was further held that mere issuance of notice under s. 158BC does not confer jurisdiction on AO to make assessment inasmuch as service of such notice is condition precedent to proceed to make assessment of undisclosed income. Bench has also observed that s. 292B has no application to facts of case. This decision of Tribunal was challenged by Revenue before Hon ble Delhi High Court. Hon ble Court has upheld view taken by Tribunal by observing as under : "On appreciation of facts, which have been discussed in detail, Tribunal has arrived at conclusion that no notice under s. 158BC of IT Act, 1961 was served upon assessee. Hence, no interference is called for." 10.14 It is to be pointed out that this decision of Hon ble Delhi High Court was not brought to notice of Special Bench (supra), of Tribunal. 10.15 In case of Janki Exports International Through S.P. Gupta vs. Union of India (2005) 193 CTR (Del) 73: (2005) 278 ITR 296 (Del), Hon ble Delhi High Court has held that s. 158BC is somewhat analogous to s. 147 insofar as procedure that is required to be followed. This decision of Hon ble Delhi High Court was also not brought to notice of Special Bench. 10.16 Hon ble jurisdictional High Court has considered issue relating to recording of satisfaction in case of Amity Hotels (P) Ltd. vs. CIT (2004) 192 CTR (Del) 607 : (2005) 272 ITR 75 (Del). Hon ble Court has observed, in categorical terms, as under : "Thus, it is very clear that satisfaction is required and it cannot be said that proceedings can be initiated without such satisfaction." 10.17 On basis of above preposition, it is observed that foundation for assumption of jurisdiction is satisfaction to proceed under s. 158BD against person not searched. issuance of notice, after record of such satisfaction, is another requirement, which entitles AO to assume jurisdiction to assess undisclosed income of such person. Thus, if necessary satisfaction has not been recorded prior to making of assessment under s. 158BD, such assessment cannot be legally justified. Thus, on this basis assumption of jurisdiction to assess under s. 158BD is on different footing than assumption of jurisdiction under s. 158BC. It can, therefore, be concluded that if AO does not record satisfaction prior to making of assessment under s. 158BD, such assessment has to be quashed, as was done in case of Amity Hotels (P) Ltd. (supra). 10.18 In case of Sakun International vs. Jt. CIT (2005) 96 TTJ (Del) 496 : (2005) 94 ITD 138 (Del) also, since no satisfaction was recorded by AO, before issuing notice, proceedings initiated under s. 158BD were quashed. Bench has observed as under : "As per provisions of s. 158BD, for assessing undisclosed income of any other person, i.e., other than person with respect to whom search was made under s. 132, AO must be satisfied that undisclosed income belongs to such person, i.e., person other than searched person. Thus, AO cannot proceed against such other person , without having required satisfaction. requirement of satisfaction is, therefore, pre-requisite condition for initiating assessment proceedings against any other person under s. 158BD. word satisfaction appearing in s. 158BD clearly denotes that it should be based upon material before AO and such satisfaction should be brought on record." 10.18.1 Bench has also observed as under : "In view of above it could be concluded that jurisdiction under s. 158BD was not properly assumed and exercised by AO inasmuch as before assuming such jurisdiction he had not indicated any incriminating material belonging to assessee upon basis of which he had any satisfaction that undisclosed income of assessee required assessment under s. 158BD. Thus, jurisdiction under s. 158BD had not been invoked validly, and assessment made consequent thereto deserved to be annulled and quashed." 10.19 It may be pointed out that assumption of jurisdiction for making assessment is based upon different legal requirements. foundation for assessment may be on different basis, but where for making assessment some mandatory requirements are prescribed, for example, issuance of notice, etc., then jurisdiction to make assessment can be assumed only after satisfying such legal requirements. 10.20 In case of R.K. Upadhyaya vs. Shanabhai P. Patel (1987) 62 CTR (SC) 17 : (1987) 166 ITR 163 (SC), Hon ble Supreme Court has held that there is clear distinction between issuance of notice and service of notice. It was observed in that case that service under new Act is not condition precedent to confirmation of jurisdiction on ITO but it is condition precedent for making order of assessment. Thus, service of valid and legal notice requiring assessee to furnish return after fifteen days is necessary condition and mandatory requirement for assuming jurisdiction for making assessment under s. 158BD and if such condition is not satisfied then assumption of jurisdiction for making assessment under s. 158BD cannot be legally justified. 10.21 In view of above, we allow plea of assessee for challenging assessment order on basis of defective notice, which is to be treated as no notice in eye of law. It is to be repeated here that assessee has not acquiesced in exercise of jurisdiction by AO in present case nor did he filed any return in pursuance or in compliance to notice issued to him, rather he challenged very validity of notice and also jurisdiction of AO. 1 0 . 2 2 In view of above legal position and on facts and circumstances of this matter, assessment made in this case is liable to be quashed on ground mentioned above. Hence, assessment is quashed on this ground itself. 10.23 Consequently, ground No. 1 as taken by assessee stands allowed. 1 1 . As we have quashed assessment order on ground as mentioned above, we are not required to dispose of other grounds of appeal on merit. 12. In result, assessee s appeal stands allowed accordingly. *** NAVIN VERMA v. ASSISTANT COMMISSIONER OF INCOME TAX
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