IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "D", MUMBAI
BEFORE SHRI RAJENDRA, ACCOUNTANT MEMBER AND
DR. S.T.M. PAVALAN, JUDICIAL MEMBER
IT(SS) A- 45/Mum/2010
Block Period: 01.04.1996 to 11.04.2002
Rajesh C. Gupta ACIT Cen Cir-35
4-B/1 Sonawala Building, Vs. Mumbai
Tardeo Road,Tardeo
Mumbai 400 007
(Appellant) (Respondent)
Permanent Account No. :-AABPG 8723 D
Assessee by Shri N.M. Porwal & H.S.
:
Sanghavi
Revenue by : Shri Santosh Kumar
Date of hearing : 06.08.2014
Date of Pronouncement : 10.09.2014
ORDER
PER DR. S.T.M. PAVALAN, JM:
This appeal filed by the assessee is directed against the order of the
Ld.CIT(A)-41, Mumbai dated 06.07.2010 for the Block Period from 01.04.1996 to
11.04.2002.
2. In this appeal, the assessee has agitated the decision of the Ld.CIT(A) in
confirming the disallowances on account of the expenses of Rs.3,13,236/- for
purchases of liquor, Rs.6,199/ of telephone expenses and Rs.68,212/- of payment
made to the BMC.
3. Also, the assessee vide, an application, dated 30.04.2013 has filed the
additional grounds of appeal which relates to the validity of the notice issued u/s
148BD of the Income Tax Act. After going through the additional grounds filed by
the assessee, it is noted that the additional grounds are legal grounds which do not
require any new facts to be brought on record. In view of the decision of the Hon'ble
Apex Court in the case of National Thermal Power Companies Ltd. Vs. CIT (1998)
229 ITR 383, the legal grounds are admitted.
IT(SS) A- 45/Mum/2010
2 Rajesh C. Gupta
Block Period: 01.04.1996 to 11.04.2002
4. The relevant facts are that there has been a search action u/s 132 of the Act,
carried out at the presidential premises of Shri Devakinandan Gupta and his family
members at 4/A/B/C/ Sonawala Building Tardeo Road Mumbai-7, on 11.04.2002.
During the course of the investigation, it was found that income/deposit in the bank
account no. 9500 has been held in the name of Shri Rajesh Gupta, the assessee and
the same was not disclosed to the department. Accordingly, the AO issued a notice
u/s 158BD on 24.01.2005 which was served upon the assessee on 27.01.2005
asking the assessee to file his return for the block period from 01.04.1996 to
11.04.2002 in Form No. 2B. In response to the request, after availing the extended
grant of time, the assessee assessee filed his return of income on 24.02.2005
declaring undisclosed income of Rs.1,75,000/- as against the undisclosed bank
credits of Rs.10,15,757/-. According to the assessee, the said undisclosed bank
credits of Rs.10,15,757/- consisted of the unexplained credits including deposits
pertaining to business activity carried outside the books. Out of the total deposits,
the assessee deducted/claimed business expenditure of Rs.7,03,252/- related to
undisclosed business activity carried on by him. The said return submitted by the
assessee was considered by the AO and in the assessment concluded u/s 158BC
read with section 143(3) of the Act, the AO assessed the undisclosed income at
Rs.10,15,757/-. While completing the assessment, the AO had disallowed the claim
of business expenditure out of receipt of the undisclosed business activity carried on
by the assessee. The AO was of the view that the assessee had not brought
anything on record to show that the receipts were business receipts and the
expenses were made out of these business receipts. Accordingly, the AO made the
impugned addition of Rs.10,15,757/-. On appeal, the Ld.CIT(A), while partly allowing
the claim of the assessee in respect of certain expenditure, confirmed the
disallowances made by the AO on account of the expenses of Rs.3,13,236/- for
purchases of liquor, Rs.6,199/ of telephone expenses and Rs.68,212/- of payment
made to the BMC. Aggrieved by the impugned order, the assessee is in appeal
before us.
5. Having heard both the sides and perused the material on record, it is relevant
to state that the assessee, vide additional grounds, has challenged the validity of the
IT(SS) A- 45/Mum/2010
3 Rajesh C. Gupta
Block Period: 01.04.1996 to 11.04.2002
notice issued by the AO u/s 148BD of the Act. According to the assessee, the notice
issued u/s 158BD does not satisfy the requirement of section 158BD for the reason
that the said notice does not record any satisfaction that any undisclosed income
belongs to the assessee. Therefore, according to the assessee, the assessment
made by the AO u/s 158BC r.w.s. 143(3) of the Act ought to have been held as
invalid by the Ld.CIT(A). In support of the said contention, the assessee has relied
on the decision of the Hon'ble Apex Court in the case of Manish Mageshwari Vs.
ACIT 289 ITR 341 (SC) and the decisions of the Tribunal, in the cases of Mr. Abdul
Rehman Damda Vs. ACIT in [IT(SS) No. 1/M/2007], Mr. Zia Ur Rehman Vs. ACIT
[IT(SS) No. 3/m/2007] and Shri Mohammad Zubair Aliakbar Vs. ACIT [IT (SS) No.
2/M/2007]. In this regard, a query was raised by the Bench as to whether any
finding is given by the Ld.CIT(A) on this aspect regarding satisfaction recorded by
the AO, and in reply, it was submitted by the learned AR of the assessee that no
such finding was given by the Ld.CIT(A). We also find that no such specific ground
was raised before the Ld.CIT(A), although this ground was raised before him that
order passed by the AO is bad in law and should be quashed. On the other hand, it
is the contention of the Ld.AR that since the main cases in this group have been
already centralized in the jurisdiction of the AO upon a request to the CIT Central-3,
Mumbai vide his letter no. DCIT, CC-35/GF/2003-04 dated 09.05.2003, the same AO
need not record any satisfaction u/s 158BD of the Act to the effect that there is any
undisclosed income belongs to the assessee. After considering the rival submissions,
it is relevant to state that there are plethora of decisions to the effect that the
precondition to invoke section 158BD is that the AO must record satisfaction that
there is income belongs to the other person and in the absence of such finding,
section 158BD cannot be invoked. Also, it is a well settled position of law that the
satisfaction must be objective and not subjective. This objective satisfaction cannot
be waived merely because the same AO proceeds with the assessment. After
considering the factual and legal position on this issue, we are of the view that it is
just and proper to set aside the entire matter to the file of the Ld.CIT(A) for deciding
this issue as to whether requisite satisfaction was recorded by the AO in order to
assume jurisdiction by the AO over the assessee under Section 158BD. Accordingly,
IT(SS) A- 45/Mum/2010
4 Rajesh C. Gupta
Block Period: 01.04.1996 to 11.04.2002
we set aside the order of the Ld.CIT(A) and restore the entire matter back to his file
for fresh decision. He should first decide the technical aspect as to whether requisite
satisfaction was recorded by the AO or not in order to decide as to whether the AO
has properly assumed jurisdictional under Section 158BD of the Act or not. If it is
found that the AO has not assumed proper jurisdiction under Section 158BD of the
Act, then the assessment order deserves to be quashed. In case, it is found that
proper satisfaction was recorded and assumption of jurisdictional under Section
158BD of the Act by the AO is proper, then various other issues including technical
and issues on merits should be decided by the Ld.CIT(A) afresh. Needless to say,
the Ld.CIT(A) should pass a speaking order after providing reasonable opportunity of
hearing to both the sides. This additional ground of the assessee is allowed for
statistical purpose. In view of our decision in respect of additional grounds, other
issues raised by the assessee by way of original grounds as per the memo of appeal
do not call for any adjudication at this stage, because after deciding the technical
aspect, the Ld.CIT(A) has to decide the entire issues again.
6. In the result, the appeal filed by the Assessee is allowed for statistical
purpose.
Order pronounced in the open court on this 10th day of September, 2014.
Sd/- Sd/-
(RAJENDRA) (Dr. S.T.M. PAVALAN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 10.09.2014.
*Srivastava
Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
The CIT(A) Concerned, Mumbai
The DR "D" Bench
//True Copy//
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.
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