The Commissioner of Income-tax v. Bharat Bhushan Jain
[Citation -2015-LL-0108]

Citation 2015-LL-0108
Appellant Name The Commissioner of Income-tax
Respondent Name Bharat Bhushan Jain
Court HIGH COURT OF DELHI AT NEW DELHI
Relevant Act Income-tax
Date of Order 08/01/2015
Judgment View Judgment
Keyword Tags assessment proceeding • search proceedings • satisfaction note • block assessment
Bot Summary: In the result, we hold that for the purpose of Section 158BD of the Act a satisfaction note is sine qua non and must be prepared by the assessing officer before he transmits the records to the other assessing officer who has jurisdiction over such other person. The satisfaction note could be prepared at either of the following stages: at the time of or along with the initiation of proceedings against the searched person under Section 158BC of the Act; along with the assessment proceedings under Section 158BC of the Act; and immediately after the assessment proceedings are completed under Section 158BC of the Act of the searched person 45. We are informed by Shri Santosh Krishan, who is appearing in seven of the appeals that the assessing officer had not recorded the satisfaction note as required under Section 158BD of the Act the Tribunal and the High Court were justified in setting aside the orders of assessment and the orders passed by the first appellate authority. So far as the determination whether the satisfaction recorded was in conformity with the Section 158BD is concerned, there is no controversy in view of the concurrent findings. In ITA No. 279/2010, the satisfaction note was recorded on 26.08.2003 i.e. four days short of a year after completion of assessment of the searched person; in ITA No. 1145/2010 it is recorded on 14.01.2004 i.e. about one year and four months after the searched person s assessment is completed. 29th Aug., 2002 is not to be taken for recording satisfaction required under Section 158BC/158BD. 23. The question is whether the aforesaid letter can be regarded as satisfaction as required under Section 158BD, i.e. satisfaction of the Assessing Officer of Manoj Aggarwal that there is material that the respondent assessee had ITA 582/2008 with connected matters undisclosed income.


$ 46 to 49, 53, 55 to 62 * IN HIGH COURT OF DELHI AT NEW DELHI Decided on: 8th January, 2015 + ITA 648/2009 COMMISSIONER OF INCOME TAX ..... Appellant versus BHARAT BHUSHAN JAIN ..... Respondent + ITA 669/2009 COMMISSIONER OF INCOME TAX ..... Appellant versus ANIL KUMAR BANSAL ..... Respondent + ITA 670/2009 COMMISSIONER OF INCOME TAX ..... Appellant versus ANIL KUMAR BANSAL ..... Respondent + ITA 711/2009 COMMISSIONER OF INCOME TAX ..... Appellant versus ITA 648 /2009,669 /2009,670 /2009,711 /2009,1075 /2009,1318 /2009,196/2010,198/2010, 279/2010,777/2010,1145/2010,1313/2010 and 1326/2010 Page 1 SADHU RAM AGGARWAL ..... Respondent + ITA 1075/2009 COMMISSIONER OF INCOME TAX XIII ..... Appellant versus BHARAT BHUSHAN JAIN ..... Respondent + ITA 1318/2009 COMMISSIONER OF INCOME TAX ..... Appellant versus SUNIL JAIN ..... Respondent + ITA 196/2010 COMMISSIONER OF INCOME TAX ..... Appellant versus ANU AGGARWAL ..... Respondent + ITA 198/2010 COMMISSIONER OF INCOME TAX ..... Appellant versus GAURI SHANKAR AGGARWAL ..... Respondent + ITA 279/2010 COMMISSIONER OF INCOME TAX ..... Appellant ITA 648/2009,669/2009,670/2009,711/2009,1075/2009,1318/2009,196/2010,198/2010, 279/2010,777/2010,1145/2010,1313/2010 and 1326/2010 Page 2 versus SANJAY RAI CHOWDHARY ..... Respondent + ITA 777/2010 COMMISSIONER OF INCOME TAX ..... Appellant versus GALLRI DEVI ..... Respondent + ITA 1145/2010 CIT ..... Appellant versus RASHMI MONGA ..... Respondent + ITA 1313/2010 COMMISSIONER OF INCOME TAX ..... Appellant versus MONIKA SAXENA ..... Respondent + ITA 1326/2010 COMMISSIONER OF INCOME TAX ..... Appellant versus MONIKA SAXENA ..... Respondent ITA 648/2009,669/2009,670/2009,711/2009,1075/2009,1318/2009,196/2010,198/2010, 279/2010,777/2010,1145/2010,1313/2010 and 1326/2010 Page 3 Presence : Mr. Rohit Madan, Mr.Ruchir Bhatia and Mr.Akash Vajpai, Advocates for Revenue in ITA Nos. 648/2009, 669/2009, 670/2009, 711/2009, 1075/2009, 1318/2009, 196/2010, 198/2010 279/2010, 777/2010 1145/2010, 1313/2010 & 1326/2010. Mr. Pranjal Srivastava and Mr. V.M.Chaurasia, Advocates for respondent in ITA Nos. 648/2009, 669/2009, 670/2009 and 1075/2009. Mr. Salil Kapoor & Mr. Vikas Jain, Advocates for respondents in ITA Nos. 711/2009 and 1145/2010. Mr.Piyush Kaushik, Advocate for respondent in ITA No. 1318/2009 Dr. Rakesh Gupta, Ms.Poonam Ahuja, Mr.Mukul Mathur, Advocates for respondent in ITA No. 279/2010. CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE R.K.GAUBA MR. JUSTICE S. RAVINDRA BHAT (OPEN COURT) % 1. These appeals are directed against impugned order of ITAT. Since they involved common questions of law, common order is being made in present cases. 2. In all these cases, assessee/respondents were third parties, who were issued notice under Section 158BD pursuant to search proceedings in respect of other persons. In all these cases, search proceedings were conducted on 03.08.2000. Thereafter notice was issued to them for block assessment for filing of relevant returns for previous years. assessment proceedings were completed on 29.08.2002. Thereafter, present ITA 648/2009,669/2009,670/2009,711/2009,1075/2009,1318/2009,196/2010,198/2010, 279/2010,777/2010,1145/2010,1313/2010 and 1326/2010 Page 4 assesses-third parties were issued notices under Section 158BD . relevant dates of recording of satisfaction note by A.O., issue of notices to present assesses and completion of assessments are recorded in tabular statement in following manner:- ITA No. Date of Search Date of Date of Date of notice Date of on Manoj assessment of Satisfaction u/S 158BD completion of Aggarwal searched Note for other assessment u/s group person under person 158BD Section 158 BC 648/2009 03.08.2000 29.08.2002 15.07.2003 31.03.2004 31.03.2006 669/2009 03.08.2000 29.08.2002 15.07.2003 31.03.2004 31.03.2006 670/2009 03.08.2000 29.08.2002 15.07.2003 31.03.2004 31.03.2006 771/2009 03.08.2000 29.08.2002 21.07.2003 31.03.2004 31.08.2006 1075/2009 03.08.2000 29.08.2002 15.07.2003 17.08.2004 31.03.2006 1318/2009 03.08.2000 29.08.2002 15.07.2003 31.03.2004 31.03.2006 196/2010 03.08.2000 29.08.2002 13.01.2004 09.02.2004 30.12.2005 198/2010 03.08.2000 29.08.2002 14.01.2004 05.02.2004 17.02.2006 279/2010 03.08.2000 29.08.2002 26.08.2003 27.08.2003 30.08.2005 777/2010 03.08.2000 29.08.2002 13.01.2004 09.02.2004 15.02.2006 1145/2010 03.08.2000 29.08.2002 14.01.2004 06.05.2005 29.05.2007 1313/2010 03.08.2000 29.08.2002 04.06.2003 18.06.2003 27.06.2005 1326/2010 03.08.2000 29.08.2002 04.06.2003 18.06.2003 27.06.2005 ITA 648/2009,669/2009,670/2009,711/2009,1075/2009,1318/2009,196/2010,198/2010, 279/2010,777/2010,1145/2010,1313/2010 and 1326/2010 Page 5 3. These appeals were originally disposed of by common judgment of this Court reported as CIT vs. Radhey Shyam Bansal 2011 337 ITR 217 (DLI). In that judgment it was held that satisfaction note in all cases was recorded and notices were issued beyond period of limitation. It was held, inter alia, that satisfaction note recorded in these cases did not accord with requirements of Section 158BD, applying decision in CIT vs. Manish Maheshwari (2007) 289 ITR 341 (SC). In this batch of judgments, along with another batch of cases, appeal was preferred before Supreme Court, which decided in its judgment reported as CIT vs. Calcutta Knitwears, Ludhina 362 ITR 673 (SC), inter alia, that: 44. In result, we hold that for purpose of Section 158BD of Act satisfaction note is sine qua non and must be prepared by assessing officer before he transmits records to other assessing officer who has jurisdiction over such other person. satisfaction note could be prepared at either of following stages: (a) at time of or along with initiation of proceedings against searched person under Section 158BC of Act; (b) along with assessment proceedings under Section 158BC of Act; and (c) immediately after assessment proceedings are completed under Section 158BC of Act of searched person 45. We are informed by Shri Santosh Krishan, who is appearing in seven of appeals that assessing officer had not recorded satisfaction note as required under Section 158BD of Act, therefore, Tribunal and High Court were justified in setting aside orders of assessment and orders passed by first appellate authority. We do not intend to examine aforesaid contention canvassed by learned counsel since we are remanding matters to High Court ITA 648/2009,669/2009,670/2009,711/2009,1075/2009,1318/2009,196/2010,198/2010, 279/2010,777/2010,1145/2010,1313/2010 and 1326/2010 Page 6 for consideration of individual cases herein in light of observations made by us on scope and possible interpretation of Section 158BD of Act. 4. So far as determination whether satisfaction recorded was in conformity with Section 158BD is concerned, there is no controversy in view of concurrent findings. Having regard to order of this Court in CIT vs. Radhey Shyam Bansal (supra) bone of contention is whether period when satisfaction note was recorded, was contemporaneous with period in which assessment proceedings of searched person were carried out, as held by judgment of Supreme Court in CIT vs. Calcutta Knitwears (supra). In each of cases it is evident that satisfaction note was recorded almost or just short of or more than year after completion of assessment of searched person. In ITA No. 279/2010, satisfaction note was recorded on 26.08.2003 i.e. four days short of year after completion of assessment of searched person; in ITA No. 1145/2010 it is recorded on 14.01.2004 i.e. about one year and four months after searched person s assessment is completed. In ITA No. 1313/2010 and 1326/2010, satisfaction notes were recorded on 04.06.2003 i.e. about nearly 10 months after completion of assessment of searched person. 5. Additionally, we may note in ITA No.1318/2009 that main judgment of this Court in Radhey Shyam Bansal (supra) itself recorded that letter/communication note of 12.07.2003 did not accord with Section 158BD. findings in said judgment are as follows: ITA 648/2009,669/2009,670/2009,711/2009,1075/2009,1318/2009,196/2010,198/2010, 279/2010,777/2010,1145/2010,1313/2010 and 1326/2010 Page 7 17. In view of above, it is clear that on or before 29th Aug., 2002, AO of M/s Friends Portfolio (P) Limited and that of Shri Manoj Aggarwal did not record any satisfaction. note dt. 29th Aug., 2002 is, therefore, not to be taken for recording satisfaction required under Section 158BC/158BD. 23. In view of aforesaid legal position we can now examine letterdated 15th July, 2003 which was communicated by Assessing Officer of searched assessee to assessing officer of respondent. question is whether aforesaid letter can be regarded as satisfaction as required under Section 158BD, i.e. satisfaction of Assessing Officer of Manoj Aggarwal that there is material that respondent assessee had ITA 582/2008 with connected matters undisclosed income. first paragraph of aforesaid letter states that diary seized from possession of Manoj Aggarwal establishes that respondent assessee had acted as mediator for providing accommodation book entries by Manoj Aggarwal. second sentence in first paragraph states that quantum of transactions as shown in documents were enclosed as Annexure-A and photocopies of papers were enclosed as Annexure-B. second paragraph states that there was evidence that cash was received by Manoj Aggarwal from respondent and summary of amounts received as per seized documents was given in Annexure C and photocopies of documents were annexed as Annexure-D. It is accepted that Annexures A, B, C & D, referred to in this letter were not filed before tribunal and have not been produced before us. It is conceded by learned counsel for revenue that they are also not available on file of Assessing Officer of respondent. There is no explanation forthcoming with regard to aforesaid annexures. It is well nigh impossible to know their content. first ITA 648/2009,669/2009,670/2009,711/2009,1075/2009,1318/2009,196/2010,198/2010, 279/2010,777/2010,1145/2010,1313/2010 and 1326/2010 Page 8 paragraph of letter dated 15th July, 2003 states that respondent-assessee had acted as mediator i.e. they had introduced Manoj Aggarwal with other persons toITA 582/2008 with connected matters whom accommodation book entries were provided by Manoj Aggarwal. There is no allegation in first paragraph that respondent assessee was provided with accommodation book entries or amounts belong to respondent assessee. Book entries were provided to third parties. It is not stated in this satisfaction note that Manoj Aggarwal or third parties had paid any amount towards commission for acting as mediator. There is no such allegation or statement in satisfaction note . second paragraph does create some doubt but what is relevant and important is fact that in first paragraph, it is accepted by Assessing Officer of Manoj Aggarwal that respondent assessee was merely acting as mediator and nothing more. second paragraph of letter states that there was evidence that cash was received by Manoj Aggarwal from respondent assessees. What was evidence and material was not brought on record before tribunal or even before us. said material is not mentioned in assessment order. It cannot be ipse dixit without material or evidence to satisfy concept of requirement as engrafted under Section 158BD. What was material was neither highlighted before tribunal nor before us. Thus, appellant-revenue has not discharged onus that there was ITA 582/2008 with connected matters valid satisfaction as required under Section 158 BD. Therefore, irresistible conclusion is pre- requisite of satisfaction as engrafted under Section 158B for purpose of initiation of block assessment proceeding is non-existent or absent. 6. Having regard to intent of Supreme Court in Para 44 of Calcutta Knitwears (supra), where it was indicated that Revenue has to ITA 648/2009,669/2009,670/2009,711/2009,1075/2009,1318/2009,196/2010,198/2010, 279/2010,777/2010,1145/2010,1313/2010 and 1326/2010 Page 9 be vigilant in issuing notice to third party under Section 158 BD, immediately after completion of assessment of searched person, this Court is of opinion that delay ranging between 10 months of 1 years cannot be considered contemporaneous to assessment proceedings. We are of opinion that notices were not issued in conformity with requirements of Section 158BD, and were unduly delayed. appeals of Revenue accordingly fail and are dismissed. S. RAVINDRA BHAT (JUDGE) R.K.GAUBA (JUDGE) JANUARY 08, 2015 mr ITA 648/2009,669/2009,670/2009,711/2009,1075/2009,1318/2009,196/2010,198/2010, 279/2010,777/2010,1145/2010,1313/2010 and 1326/2010 Page 10 Commissioner of Income-tax v. Bharat Bhushan Jain
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