SURAJ PRAKASH SONI v. ASSISTANT COMMISSIONER OF INCOME TAX
[Citation -2006-LL-0721-3]

Citation 2006-LL-0721-3
Appellant Name SURAJ PRAKASH SONI
Respondent Name ASSISTANT COMMISSIONER OF INCOME TAX
Court ITAT
Relevant Act Income-tax
Date of Order 21/07/2006
Assessment Year BLOCK PERIOD 1987-88, 1997-98
Judgment View Judgment
Keyword Tags undisclosed income • business premises • search warrant • block period • sale of gold • job-work
Bot Summary: One such ground was that the provisions of s. 158BFA(2) were not applicable in the case of the assessee because this provision came into effect on 1st Jan., 1997 and does not relate to a case where search was initiated before 1st Jan., 1997 and does not relate to a case where search was initiated before 1st Jan., 1997. According to the learned Authorised Representative Shri U.C. Jain, the search under s. 132(1) was authorised by Director of Investigation, Jaipur, on 30th Dec., 1996 and was executed on 3rd Jan., 1997 and therefore, the provisions of s. 158BFA(2) with regard to levy of penalty and interest is not leviable because under s. 132, the search was initiated on 30th Dec., 1996. The sum total of the submission of the learned Authorised Representative is that the provisions of s. 158BFA are applicable to those cases in which search was initiated under s. 132, on or after first day of January, 1997 and it does not apply to cases where search is initiated before the first day of January, 1997. Let us mention that there is no dispute with regard to above stated legal position that in case the search was initiated prior to 1st Jan., 1997 when the provisions of s. 158BFA(2) was not in the IT Act, a penalty under the section is not leviable. According to the learned Authorised Representative, the search in this case was initiated on 30th Dec., 1996, the date on which the Director of the Investigation so authorised and this search was executed on 3rd Jan., 1997 Investigation so authorised and this search was executed on 3rd Jan., 1997 when the search was actually commenced at the residential and business premises of the assessee. On the contrary, the Department s view is that it is the date of commencement of search, i.e., 3rd Jan., 1997, on which the search was initiated. What the section requires is search is initiated or the assets taken.


HARI OM MARATHA, J.M.: ORDER This is appeal of assessee pertaining to block period consisting of asst. yrs. 1987-88 to 1997-98 and arises out of order dt. 20th Dec., 2005 of learned CIT(A), Jodhpur. 2. Briefly stated, facts of case are that assessee was carrying on business of job-work of manufacturing of gold and silver ornaments and also derived income from interest on moneylending and income from sale of gold and silver ornaments, utensils etc., manufactured by him with assistance of other artisans. search was carried out under s. 132(1) of IT Act, 1961 (hereinafter referred to as Act for short) at residential and business premises of assessee on 3rd Jan., 1997. Numerous incriminating documents were found during course of search. Consequently, notice under s. 158BC of Act was issued to assessee and in compliance thereof he filed return, for block period 1st April, 1986 to 3rd Jan., 1997, declaring undisclosed income of Rs. 6,43,820. AO passed assessment order under s. 158BC(c) of Act on 28th Jan., 1999 by computing undisclosed income at Rs. 70,74,170 as against shown at Rs. 6,43,820 on basis of accretion of assets. In first appeal, on merits, assessee got relief of Rs. 54,99,513. Against order of learned CIT(A), both parties filed respective appeals, before Tribunal. appeal of Revenue was dismissed and appeal of assessee was partly allowed. AO gave effect to Tribunal order but assessee filed petition under s. 154 of Act stating therein that AO has not acted according to direction of Tribunal but same was dismissed, vide order dt. 24th Dec., 2002. Thereafter, notice under s. 158BFA(2) of Act was issued to assessee for imposing penalty and consequently penalty of Rs. 4,35,103 was imposed on assessee under s. 158BFA(2) vide order dt. 26th Dec., 2002. 3. assessee filed appeal before learned CIT(A) by taking many grounds. One such ground was that provisions of s. 158BFA(2) were not applicable in case of assessee because this provision came into effect on 1st Jan., 1997 and does not relate to case where search was initiated before 1st Jan., 1997 and does not relate to case where search was initiated before 1st Jan., 1997. But learned CIT(A) confirmed penalty order by not accepting legal plea raised by assessee. Again, assessee has taken various grounds before this Bench in its second appeal, but concentrated on legal ground, which goes to very root matter. Therefore, we heard both parties on above legal issue at length, and came to conclusion that impugned penalty is not sustainable and thus there was no need to decide other ancillary grounds taken by assessee. Both parties also agreed to above proposition. 4 . claim of assessee is that search was initiated in this case before 1st Jan., 1997, date on which s. 158BFA came into effect and thus penalty cannot be levied under this section. According to learned Authorised Representative Shri U.C. Jain, search under s. 132(1) was authorised by Director of Investigation, Jaipur, on 30th Dec., 1996 and was executed on 3rd Jan., 1997 and therefore, provisions of s. 158BFA(2) with regard to levy of penalty and interest is not leviable because under s. 132, search was initiated on 30th Dec., 1996. sum total of submission of learned Authorised Representative is that provisions of s. 158BFA are applicable to those cases in which search was initiated under s. 132, on or after first day of January, 1997 and it does not apply to cases where search is initiated before first day of January, 1997. 5. On other hand, learned Departmental Representative Shri N.S. Jangpangi has vehemently contended that provisions of s. 158BFA(2) are very much applicable to case of assessee, because search was actually initiated on 3rd Jan., 1997. Let us mention that there is no dispute with regard to above stated legal position that in case search was initiated prior to 1st Jan., 1997 when provisions of s. 158BFA(2) was not in IT Act, penalty under section is not leviable. Now limited controversy, which we are required to adjudicate upon, is with regard to date of "initiation" of search. According to learned Authorised Representative, search in this case was initiated on 30th Dec., 1996, date on which Director of Investigation so authorised and this search was executed on 3rd Jan., 1997 Investigation so authorised and this search was executed on 3rd Jan., 1997 when search was actually commenced at residential and business premises of assessee. On contrary, Department s view is that it is date of commencement of search, i.e., 3rd Jan., 1997, on which search was initiated . Now controversy hinges on answer to question as to when search was actually "initiated". 6. After considering relevant material, we are of considered opinion that initiation means very beginning of process or to take first step. very first act, in series of acts is initiation of main action. warrant of authorisation is such initiation of taking proceedings under s. 132 of Act. Whether, warrant is actually executed or not, and date on which possession of asset was taken by Revenue under section, is entirety immaterial. terms "initiation" and "execution" are two different words having different meanings and are not synonymous. word "execution" means starting or commencing order or direction or intention by putting into action. Therefore, initiation is something different from commencement of search. Kolkata Bench of Tribunal in case of Nirmal Gosh Bag vs. Dy. CIT (2002) 77 TTJ (Kol) 869 : (2002) 82 ITD 788 (Kol) has observed that : "In this case admittedly warrant of authorisation under s. 132A was signed on 4th Dec., 1991 and this was action for initiating proceedings under s. 132A with meaning of provision of s. 158BFA. Whether warrant is actually executed or not and date on which possession of asset is taken by Revenue under this section, is immaterial. What section requires is search is initiated or assets taken. It is not end result of action taken thereunder... what was material for invoking special provision was initiation of search or requisition of books of accounts or other assets and it would be immaterial whether it was executed, or dropped or not executed for whatever reason." 7 . Dealing with similar issue, Bangalore Bench of Tribunal in IT(SS)A No. 183/Bang/2002 for block asst. yrs. 1991-92 to 1996-97, while deciding case of Wipro Finance Ltd. vs. Dy. CIT (2003) 80 TTJ (Bang) 571 : (2003) 133 Taxman 158 (Bang)(Mag), wherein one of us (JM) was party to that order, held that "initiation" of search commences with issue of authorization by DIT. This view finds support from decision of Hon ble Madras High Court given in case of Artisian Press Ltd. vs. ITAT & Anr. (1958) 33 ITR 670 (Mad) wherein it has been held that "to initiate" means "to originate" or "to take first step". Likewise, Hon ble Calcutta High Court while dealing with similar situation in case of Nilesh Hemani vs. CIT & Ors. (1999) 155 CTR (Cal) 283 : (1999) 239 ITR 517 (Cal) at p. 522 gave finding that "search proceedings was initiated when search warrant was signed". In yet another case, Hon ble Kerala High Court observed, in cases of T.O. Abraham & Co. & Anr. vs. Asstt. Director of IT (Inv.) (1998) 149 CTR (Ker) 207 : (1999) 238 ITR 501 (Ker) at p. 504, that "execution" means completion, conclusion or implementation of authorization and not date of issue of authorization. 8. All above decisions cumulatively support view canvassed by learned counsel Shri U.C. Jain that "initiation" commences with issue of authorization by Director of Investigation. learned Departmental Representative could not bring to our notice, any contradictory decision to support contention of Department. Resultantly, we come to conclusion that "initiation of search" commences with issue of authorization by authorities. Having come to above conclusion, now it is for certain that search in this case was initiated on 30th Dec., 1996. Further, it is well- recognized fact that penal provision 158BFA(2) came into operation only on 1st Jan., 1997, meaning thereby that on day when search was initiated in given case, above said penal provision was not in vogue. Now, let us examine as to what is position of law with regard to penal provisions of enactment. trite position of law in this regard is that provision dealing with penalty must be strictly construed. These provisions have to be interpreted in its natural meaning and in case of doubt view favourable to taxpayer has to be adopted. 9 . In view of above, very assumption of jurisdiction under s. 158BFA(2) is void ab initio. Hence, in given facts and circumstances of this case no penalty can be levied in this case under s. 158BFA(2). Since, we have decided legal issue in favour of assessee, there is no need to decide other grounds of appeal. 10. In result, impugned penalty is hereby cancelled and appeal of assessee is allowed. *** SURAJ PRAKASH SONI v. ASSISTANT COMMISSIONER OF INCOME TAX
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