Tapan Kumar Dutta vs Commnr. Of Income Tax, West Bengal

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 the impugned final

judgment and order dated 17.11.2005 passed by the High

Court at Calcutta in Income Tax Appeal No. 174 of 2005

whereby a Division Bench of the High Court dismissed the

appeal of the appellant herein while upholding the judgment

and order dated 29.04.2005 passed by the Income Tax

Appellate Tribunal (in short ‘the Tribunal’): ‘D’ Bench, Kolkata

in IT(SS) A 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) The Appellant is a partner in a Partnership Firm by name

“Nityakali Rice Mill” (in short ‘the Firm’). On 06.11.1998, a

search was conducted at the business premises of the Firm by

the Income Tax Department and several documents/books

including a sum of Rs. 34 lakhs were seized.

(b) Thereafter, on 09.09.1999, a notice was issued to the

Appellant by the Assessing Officer under Section 158BC of the

Income Tax Act, 1961(in short ‘the IT Act’) to prepare and file a

true and correct return of his total income including the

undisclosed income in respect of which he was assessed for

the block period 1989-90 to 1999-2000. On the very same day,

a separate notice under Section 158BC was issued in the

name of the said Firm by the very same Assessing Officer.

Pursuant to the same, the Appellant filed his block return for

the aforesaid period on 08.11.1999 declaring his aggregate

undisclosed income at Rs 14 lakhs.

(c) Meanwhile, an application was filed by the Appellant

before the Additional Commissioner of Income Tax, Asansol,

praying for his intervention and issue of necessary direction to

2 the Assessing Officer under Section 144A of the IT Act. On

14.08.2000, the Additional Commissioner perused the records

and directed the Assessing Officer to take appropriate steps in

order to determine the income of the assessee. The Additional

Commissioner issued separate directions under Section 144A

of the IT Act in the cases of M/s. Nitya Kali Rice Mill, Kartick

Dutta, Shambhu Mondal and Tamal Mondal and the Draft

Assessment Order under Section 158BC of the IT Act was sent

to the Joint Commissioner of Income Tax, Burdwan, Range-2

for approval which was returned by the Joint Commissioner

on 16.11.2000 stating that no warrant for authorization was

issued in the names of the persons mentioned in the Draft

Assessment Order.

(d) On 20.11.2000, Block Assessment Order was passed by

the Deputy Commissioner of Income Tax stating that the

return filed in the case of the Firm should be accepted as ‘Nil’

income and also directed to initiate proceedings against the

Appellant for the assessment of undisclosed income for the

block period under Section 158BD of the IT Act. Pursuant to

the order dated 20.11.2000, a fresh notice under Section

3 158BC read with Section 158BD of the IT Act was issued to

the Appellant to file the block return for the period 1989-90 to

1999-2000. Consequently, the Appellant intimated the

Assessing Officer through a letter dated 21.10.2002 that the

block return has already been filed for the aforesaid period on

08.11.1999. Further, the issue of fresh notice does not extend

the time allowed for completion of the assessment under

Chapter XIV of the IT Act.

(e) On 29.11.2002, the Assessing Officer passed the

assessment order while assessing the undisclosed income of

the Appellant to the tune of Rs. 3,48,56,430/-. Being

aggrieved, the Appellant preferred an appeal being No.

133/CIT(A)/Bwn/02-03 before the Commissioner of Income

Tax (Appeals). Vide order dated 18.09.2003, the Commissioner

of Income Tax (Appeals) held that the undisclosed income of

the block period in the instant case should be taken in the

aggregate sum of Rs. 66,55,911/- as against Rs.

3,48,56,430/- as assessed by the Assessing Officer.

(f) Being aggrieved, the Appellant preferred an Appeal being

No. IT(SS)/174/Kol/2003 before the Tribunal. At the same

4 time, the Revenue also went in appeal by filing IT (SS)

178/K/2003 before the Tribunal. The Tribunal, vide order

dated 29.04.2005, dismissed the appeal filed by the Appellant

while partly allowing the appeal filed by the Revenue. Being

aggrieved, the Appellant filed an appeal being No. ITA 174 of

2005 before the High Court. Vide judgment and order dated

17.11.2005, the Division Bench had dismissed the appeal filed

by the assessee.

(g) Being aggrieved by the judgment and order dated

17.11.2005, the Appellant has preferred this appeal before this

Court.

3) Heard Mr. Salman Khurshid, learned senior counsel for

the appellant and Mr. K. Radhakrishna, learned senior

counsel for the respondent and perused the records.

Point(s) for consideration:-

4) The only point for consideration before this Court is

whether in the facts and circumstances of the present case,

the issue of Second (Fresh) Notice under Section 158BD of the

IT Act is valid or not?

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Rival contentions:-

5) Learned senior counsel for the appellant strenuously

contended that the first notice issued under Section 158BC of

the IT Act dated 09.09.1999 is the valid notice and the

assessment has to be made in pursuance thereof and the AO

has no authority to issue the second notice under Section

158BD. Learned senior counsel further contended that the

Firm as well as the Appellant were assessed by the same

Assessing Officer wherein Section 158BD has no application

because it applies only in the case where the Assessing Officer

assessing the Firm as well as the Appellant is different. The

Assessing Officer rightly issued the notice under Section

158BC both upon the Firm as well as upon the Appellant

which resulted in the draft assessment and the proceedings on

the basis of the notice under Section 158BD are not valid.

Learned senior counsel finally contended that the purported

proceedings under Section 158BD are clearly invalid and

without jurisdiction.

6) On the other hand, learned senior counsel for the

respondent submitted that the Appellant has identified the

6 seized documents in respect of his personal business and the

bank accounts in the name of Kartick Dutta and Shambhu

Mondal are also in respect of his personal business, hence, the

undisclosed income earned during the block period belongs to

the Appellant and not the Firm. Learned senior counsel

further submitted that the notice under Section 158BD can be

issued to a person with respect to whom search was not

conducted but undisclosed income was found as belonging to

such person from the material seized from the residence or

business premises of the person with respect to whom search

was made under Section 132. The Assessing Officer, after

recording satisfaction to the effect, rightly issued the notice

under Section 158BC read with Section 158BD to the

Appellant and assessed the income to the tune of Rs.

3,48,56,430/-. Learned senior counsel further submitted that

in the case at hand the satisfaction of the Assessing Officer is

apparent and there is no infirmity in the issue of notice under

Section 158BC read with Section 158BD of the IT Act to the

Appellant. Learned senior counsel finally submitted that the

7 High Court was right in rejecting the claim of the Appellant

and no interference is sought for by this Court in the matter.

Discussion:-

7) In the instant case, it is a matter of dispute that second

notice issued on 20.11.2000 is not valid and competent since

the first notice issued by the same Assessing Officer dated

09.09.1999 under Section 158BC was valid and the

assessment ought to be made in pursuance of that notice and,

therefore, the Assessing Officer has no authority to issue the

second notice.

8) In this view of the matter, it is pertinent to mention

Section 158BD of the IT Act which reads as under:-

“158BD. Undisclosed income of any other person.- Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the 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, the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed under section 158BC against such other person and the provisions of this Chapter shall apply accordingly.”

It can be seen that notice under Section 158BD can be issued

to a person with respect to whom search was not conducted

8 but undisclosed income was found as belonging to such

person from the material seized from the residence or business

premises of the person with respect to whom search was made

under Section 132. Section 158BD speaks of the condition

that “where the Assessing Officer is satisfied that any

undisclosed income belongs to any person other than the

searched person”, which means that the Assessing Officer

must have to be satisfied that any undisclosed income belongs

to any person other than the searched person. In the present

case, it is not in dispute that the Assessing Officer, who is

assessing the Firm as well as the Appellant, is the same

person. In other words, the same Assessing Officer having

jurisdiction over the searched person can proceed against the

present Appellant. Therefore, the present Assessing Officer

had jurisdiction to proceed against the present Appellant to

make a block assessment under Chapter XIV-B of the IT Act,

in case the Assessing Officer is prima facie satisfied that any

undisclosed income belongs to the present Appellant.

9) It is well settled that there must be prima facie

satisfaction on the part of the Assessing Officer on the basis of

9 searched books of accounts or other documents or assets that

any undisclosed income belongs to any person other than the

searched person. In support of the contention that there was

prima facie satisfaction of the Assessing Officer, his order was

based upon the material on record that undisclosed income

belonged to the present Appellant, when he issued the notice

under Section 158BC on 09.09.1999. The jurisdiction under

Section 158BD is based on the satisfaction of the Assessing

Officer that:-

(a) there is undisclosed income;

(b) such undisclosed income does not belong to the 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 the present assessee

before the authority cannot be the basis for reaching a

satisfaction that any undisclosed income belongs to him

unless the seized books of accounts or other documents or

assets are perused, examined or verified by the concerned

Assessing Officer. We are of the opinion that in the present

10 case, only after being satisfied that the Appellant fell within

the ambit of Section 158BD, a notice was issued by the

Assessing Officer.

10) Further, on a conjoint reading of Sections 158BC and

158BD, it is clear that no satisfaction to the effect that

undisclosed income belongs to the searched person is

necessary before issuing the notice under Section 158BC

against the searched person as Section 158BC speaks of a

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,

the Assessing Officer shall serve notice to such person

requiring him to furnish within specified time a return in the

prescribed form. Therefore, at the time when notice under

Section 158BC was issued by the Assessing Officer to M/s

Nitya Kali Rice Mill, it was not necessary for the Assessing

Officer to arrive at a satisfaction that any undisclosed income

belongs to M/s Nitya Kali Rice Mill. A search was conducted

against M/s Nitya Kali Rice Mill under Section 132 of the IT

Act. Since the notice under Section 158BC issued to M/s Nitya

11 Kali Rice Mill and the notice under Section 158BC issued to

the Appellant were on the same day i.e., on 09.09.1999, the

question of coming to a satisfaction that any undisclosed

income based on seized books of accounts or documents or

assets belonged to the present Appellant did or could not arise

inasmuch as no reasonable or prudent man can come to such

satisfaction unless the seized books of accounts or documents

or assets are perused, examined and verified. Therefore, the

Assessing Officer was right in arriving at a decision that the

notice under Section 158BC issued to the present Appellant

on 09.09.1999 did not satisfy the requirement of Section

158BD of the IT Act. He, therefore, rightly proceeded to issue

fresh notice (Second Notice) under Section 158BD on

20.11.2000 after recording a satisfaction that any undisclosed

income based on seized books of account or document or

assets or other materials may belong to the Appellant. In fact,

in the present case, the AO has himself come to a conclusion

that the notice issued under Section 158BC on 09.09.1999 to

the assessee was not in conformity with the requirement of

Section 158BD of the IT Act. The Assessing Officer proceeded

12 under Section 158BD of the IT Act not in pursuance of any

direction by the Joint Commissioner but after being satisfied

that the case squarely fell within the ambit of Section 158BD

of the IT Act.

11) A perusal of Section 158BD of the IT Act makes it clear

that the Assessing Officer needs to satisfy himself that the

undisclosed income belongs to any person other than the

person with respect to whom the search was made under

Section 132 or whose books of accounts or other documents or

assets were requisitioned under Section 132A. The very object

of the Section 158BD is to give jurisdiction to the Assessing

Officer to proceed against any person other than the person

against whom a 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 the

Assessing Officer in arriving at a conclusion and must contain

reasons which should be the basis of initiating the proceedings

under Section 158BD.

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12) Pursuant to the above, we are of the opinion that the

order dated 14.08.2000, passed by the Additional

Commissioner of Income Tax (Appeals), under Section 144A of

the IT Act whereby he, inter-alia, directed the Assessing Officer

to take the undisclosed income of the Appellant including from

the benami business in the name of two other persons at an

aggregate sum of Rs 17 lakhs as against Rs 14 lakhs declared

by the Appellant in his block return was passed in

contravention of law and is not sustainable in the eyes of law.

13) In view of the foregoing discussion, we are of the

considered opinion that the High Court was right in passing

the judgment and order dated 17.11.2005 and no interference

is sought for by this Court. Hence, the appeal is dismissed

with no order as to costs.

...…………………………………J. (R.K. AGRAWAL)

…………….………………………J. (ABHAY MANOHAR SAPRE)

NEW DELHI;

APRIL 24, 2018.

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