REPORTABLE IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 2014 OF 2007 Tapan Kumar Dutta .... Appellant(s) Versus Commissioner of Income Tax, West Bengal .... Respondent(s) JUDGMENT R.K. Agrawal, J. 1) This appeal has been filed against impugned final judgment and order dated 17.11.2005 passed by High Court at Calcutta in Income Tax Appeal No. 174 of 2005 whereby Division Bench of High Court dismissed appeal of appellant herein while upholding judgment and order dated 29.04.2005 passed by Income Tax Appellate Tribunal (in short Tribunal ): D Bench, Kolkata in IT(SS) No. 174/Kol/2003. Signature Not Verified Digitally signed by ASHA SUNDRIYAL Date: 2018.04.24 17:40:44 IST Reason: 1 2) Brief facts: (a) Appellant is partner in Partnership Firm by name Nityakali Rice Mill (in short Firm ). On 06.11.1998, search was conducted at business premises of Firm by Income Tax Department and several documents/books including sum of Rs. 34 lakhs were seized. (b) Thereafter, on 09.09.1999, notice was issued to Appellant by Assessing Officer under Section 158BC of Income Tax Act, 1961(in short IT Act ) to prepare and file true and correct return of his total income including undisclosed income in respect of which he was assessed for block period 1989-90 to 1999-2000. On very same day, separate notice under Section 158BC was issued in name of said Firm by very same Assessing Officer. Pursuant to same, Appellant filed his block return for aforesaid period on 08.11.1999 declaring his aggregate undisclosed income at Rs 14 lakhs. (c) Meanwhile, application was filed by Appellant before Additional Commissioner of Income Tax, Asansol, praying for his intervention and issue of necessary direction to 2 Assessing Officer under Section 144A of IT Act. On 14.08.2000, Additional Commissioner perused records and directed Assessing Officer to take appropriate steps in order to determine income of assessee. Additional Commissioner issued separate directions under Section 144A of IT Act in cases of M/s. Nitya Kali Rice Mill, Kartick Dutta, Shambhu Mondal and Tamal Mondal and Draft Assessment Order under Section 158BC of IT Act was sent to Joint Commissioner of Income Tax, Burdwan, Range-2 for approval which was returned by Joint Commissioner on 16.11.2000 stating that no warrant for authorization was issued in names of persons mentioned in Draft Assessment Order. (d) On 20.11.2000, Block Assessment Order was passed by Deputy Commissioner of Income Tax stating that return filed in case of Firm should be accepted as Nil income and also directed to initiate proceedings against Appellant for assessment of undisclosed income for block period under Section 158BD of IT Act. Pursuant to order dated 20.11.2000, fresh notice under Section 3 158BC read with Section 158BD of IT Act was issued to Appellant to file block return for period 1989-90 to 1999-2000. Consequently, Appellant intimated Assessing Officer through letter dated 21.10.2002 that block return has already been filed for aforesaid period on 08.11.1999. Further, issue of fresh notice does not extend time allowed for completion of assessment under Chapter XIV of IT Act. (e) On 29.11.2002, Assessing Officer passed assessment order while assessing undisclosed income of Appellant to tune of Rs. 3,48,56,430/-. Being aggrieved, Appellant preferred appeal being No. 133/CIT(A)/Bwn/02-03 before Commissioner of Income Tax (Appeals). Vide order dated 18.09.2003, Commissioner of Income Tax (Appeals) held that undisclosed income of block period in instant case should be taken in aggregate sum of Rs. 66,55,911/- as against Rs. 3,48,56,430/- as assessed by Assessing Officer. (f) Being aggrieved, Appellant preferred Appeal being No. IT(SS)/174/Kol/2003 before Tribunal. At same 4 time, Revenue also went in appeal by filing IT (SS) 178/K/2003 before Tribunal. Tribunal, vide order dated 29.04.2005, dismissed appeal filed by Appellant while partly allowing appeal filed by Revenue. Being aggrieved, Appellant filed appeal being No. ITA 174 of 2005 before High Court. Vide judgment and order dated 17.11.2005, Division Bench had dismissed appeal filed by assessee. (g) Being aggrieved by judgment and order dated 17.11.2005, Appellant has preferred this appeal before this Court. 3) Heard Mr. Salman Khurshid, learned senior counsel for appellant and Mr. K. Radhakrishna, learned senior counsel for respondent and perused records. Point(s) for consideration:- 4) only point for consideration before this Court is whether in facts and circumstances of present case, issue of Second (Fresh) Notice under Section 158BD of IT Act is valid or not? 5 Rival contentions:- 5) Learned senior counsel for appellant strenuously contended that first notice issued under Section 158BC of IT Act dated 09.09.1999 is valid notice and assessment has to be made in pursuance thereof and AO has no authority to issue second notice under Section 158BD. Learned senior counsel further contended that Firm as well as Appellant were assessed by same Assessing Officer wherein Section 158BD has no application because it applies only in case where Assessing Officer assessing Firm as well as Appellant is different. Assessing Officer rightly issued notice under Section 158BC both upon Firm as well as upon Appellant which resulted in draft assessment and proceedings on basis of notice under Section 158BD are not valid. Learned senior counsel finally contended that purported proceedings under Section 158BD are clearly invalid and without jurisdiction. 6) On other hand, learned senior counsel for respondent submitted that Appellant has identified 6 seized documents in respect of his personal business and bank accounts in name of Kartick Dutta and Shambhu Mondal are also in respect of his personal business, hence, undisclosed income earned during block period belongs to Appellant and not Firm. Learned senior counsel further submitted that notice under Section 158BD can be issued to person with respect to whom search was not conducted but undisclosed income was found as belonging to such person from material seized from residence or business premises of person with respect to whom search was made under Section 132. Assessing Officer, after recording satisfaction to effect, rightly issued notice under Section 158BC read with Section 158BD to Appellant and assessed income to tune of Rs. 3,48,56,430/-. Learned senior counsel further submitted that in case at hand satisfaction of Assessing Officer is apparent and there is no infirmity in issue of notice under Section 158BC read with Section 158BD of IT Act to Appellant. Learned senior counsel finally submitted that 7 High Court was right in rejecting claim of Appellant and no interference is sought for by this Court in matter. Discussion:- 7) In instant case, it is matter of dispute that second notice issued on 20.11.2000 is not valid and competent since first notice issued by same Assessing Officer dated 09.09.1999 under Section 158BC was valid and assessment ought to be made in pursuance of that notice and, therefore, Assessing Officer has no authority to issue second notice. 8) In this view of matter, it is pertinent to mention Section 158BD of IT Act which reads as under:- 158BD. Undisclosed income of any other person.- Where Assessing Officer is satisfied that any undisclosed income belongs to any person, other than person with respect to whom search was made under section 132 or whose books of account or other documents or any assets were requisitioned under section 132A then, books of account, other documents or assets seized or requisitioned shall be handed over to Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed under section 158BC against such other person and provisions of this Chapter shall apply accordingly. It can be seen that notice under Section 158BD can be issued to person with respect to whom search was not conducted 8 but undisclosed income was found as belonging to such person from material seized from residence or business premises of person with respect to whom search was made under Section 132. Section 158BD speaks of condition that where Assessing Officer is satisfied that any undisclosed income belongs to any person other than searched person , which means that Assessing Officer must have to be satisfied that any undisclosed income belongs to any person other than searched person. In present case, it is not in dispute that Assessing Officer, who is assessing Firm as well as Appellant, is same person. In other words, same Assessing Officer having jurisdiction over searched person can proceed against present Appellant. Therefore, present Assessing Officer had jurisdiction to proceed against present Appellant to make block assessment under Chapter XIV-B of IT Act, in case Assessing Officer is prima facie satisfied that any undisclosed income belongs to present Appellant. 9) It is well settled that there must be prima facie satisfaction on part of Assessing Officer on basis of 9 searched books of accounts or other documents or assets that any undisclosed income belongs to any person other than searched person. In support of contention that there was prima facie satisfaction of Assessing Officer, his order was based upon material on record that undisclosed income belonged to present Appellant, when he issued notice under Section 158BC on 09.09.1999. jurisdiction under Section 158BD is based on satisfaction of Assessing Officer that:- (a) there is undisclosed income; (b) such undisclosed income does not belong to person with respect to whom action under Section 132 was taken and; (c) such undisclosed income belongs to some other person. Therefore, mere disclosure made by present assessee before authority cannot be basis for reaching satisfaction that any undisclosed income belongs to him unless seized books of accounts or other documents or assets are perused, examined or verified by concerned Assessing Officer. We are of opinion that in present 10 case, only after being satisfied that Appellant fell within ambit of Section 158BD, notice was issued by Assessing Officer. 10) Further, on conjoint reading of Sections 158BC and 158BD, it is clear that no satisfaction to effect that undisclosed income belongs to searched person is necessary before issuing notice under Section 158BC against searched person as Section 158BC speaks of condition that where any search had been conducted under Section 132 or books of accounts or other documents or assets or requisition under Section 132A in case of any person, then, Assessing Officer shall serve notice to such person requiring him to furnish within specified time return in prescribed form. Therefore, at time when notice under Section 158BC was issued by Assessing Officer to M/s Nitya Kali Rice Mill, it was not necessary for Assessing Officer to arrive at satisfaction that any undisclosed income belongs to M/s Nitya Kali Rice Mill. search was conducted against M/s Nitya Kali Rice Mill under Section 132 of IT Act. Since notice under Section 158BC issued to M/s Nitya 11 Kali Rice Mill and notice under Section 158BC issued to Appellant were on same day i.e., on 09.09.1999, question of coming to satisfaction that any undisclosed income based on seized books of accounts or documents or assets belonged to present Appellant did or could not arise inasmuch as no reasonable or prudent man can come to such satisfaction unless seized books of accounts or documents or assets are perused, examined and verified. Therefore, Assessing Officer was right in arriving at decision that notice under Section 158BC issued to present Appellant on 09.09.1999 did not satisfy requirement of Section 158BD of IT Act. He, therefore, rightly proceeded to issue fresh notice (Second Notice) under Section 158BD on 20.11.2000 after recording satisfaction that any undisclosed income based on seized books of account or document or assets or other materials may belong to Appellant. In fact, in present case, AO has himself come to conclusion that notice issued under Section 158BC on 09.09.1999 to assessee was not in conformity with requirement of Section 158BD of IT Act. Assessing Officer proceeded 12 under Section 158BD of IT Act not in pursuance of any direction by Joint Commissioner but after being satisfied that case squarely fell within ambit of Section 158BD of IT Act. 11) perusal of Section 158BD of IT Act makes it clear that Assessing Officer needs to satisfy himself that undisclosed income belongs to any person other than person with respect to whom search was made under Section 132 or whose books of accounts or other documents or assets were requisitioned under Section 132A. very object of Section 158BD is to give jurisdiction to Assessing Officer to proceed against any person other than person against whom search warrant is issued. Although Section 158BD does not speak of recording of reasons as postulated in Section 148, but since proceedings under Section 158BD may have monetary implications, such satisfaction must reveal mental and dispassionate thought process of Assessing Officer in arriving at conclusion and must contain reasons which should be basis of initiating proceedings under Section 158BD. 13 12) Pursuant to above, we are of opinion that order dated 14.08.2000, passed by Additional Commissioner of Income Tax (Appeals), under Section 144A of IT Act whereby he, inter-alia, directed Assessing Officer to take undisclosed income of Appellant including from benami business in name of two other persons at aggregate sum of Rs 17 lakhs as against Rs 14 lakhs declared by Appellant in his block return was passed in contravention of law and is not sustainable in eyes of law. 13) In view of foregoing discussion, we are of considered opinion that High Court was right in passing judgment and order dated 17.11.2005 and no interference is sought for by this Court. Hence, appeal is dismissed with no order as to costs. ... J. (R.K. AGRAWAL) . J. (ABHAY MANOHAR SAPRE) NEW DELHI; APRIL 24, 2018. 14 Tapan Kumar Dutta v. Commissioner of Income-tax, West Bengal