COMMISSIONER OF INCOME TAX Vs. LEKSHMI TRADERS

JUDGEMENT

(1.) The question raised in these connected appeals filed by the Revenue is whether the Tribunal was justified in cancelling the assessment made on the respondent assessee under s. 158BC r/w s. 158BD for the block period commencing from 1st April, 1988 to 23rd Feb., 1999 for the reason that notice of assessment issued was defective or invalid.

(2.) We have heard Shri P.K.R. Menon, learned senior counsel appearing for the Revenue and Shri P. Balakrishnan learned counsel appearing for the respondent assessee.

(3.) The facts leading to the controversy are as follows : The respondent assessee, a partnership firm, was engaged in liquor business. However, since Abkari licence, with which the business was carried on by the firm, was issued in the name of one of the partners, the firm was assessed as an AOP by virtue of two Full Bench decisions of this Court. Consequently, block assessment made after search was on the respondent assessee. Against assessment as an association of persons (AOP), there is no dispute on the status assigned to the assessee by the AO. However, the assessment was made under s. 158BC r/w s. 158BD based on the evidence gathered during the search conducted in the premises of one Mr. Prasad, a partner of the firm, in other words a member of the AOP. The search in the premises of Mr. Prasad yielded materials about the income of the respondent assessee. which is an AOP, in which the searched person is a member. Therefore, Annex. D notice produced in IT Appeal No. 146 of 2009 was issued to the respondent assessee under s. 158BD of the IT Act. Pursuant to the notice, the assessee filed return declaring an undisclosed income of Rs. 5,30,000. After verifying the return and evidence, the AO issued pre-assessment notice under s. 158BC r/w s. 158BD and completed the assessment in the name of the respondent assessee under the above provisions. The total income assessed was above Rs. 13 crores. The assessee filed appeal before the CIT(A) without challenging the validity of the assessment but by contesting the assessment on merits. The CIT(A) granted a quantum relief by reducing the income assessed by over Rs. 2 crores. The assessee as well as the Department filed separate appeals against the order of the CIT(A). In the ground of appeal filed before the Tribunal also, the assessee did not have a case that the assessment is invalid on account of issue of notice allegedly under a wrong section. However the assessee raised an additional ground in the appeal before the Tribunal contending that Annex. D notice is invalid, and so much so assessment made based on the same is also invalid. The Tribunal, by mainly relying on the Division Bench judgment of this Court in P.N. Sasikumar & Ors. vs. CIT, 1988 170 ITR 80, cancelled the assessment for the reason that Annex. D notice was issued under s. 158BD and not under "s. 158BC r/w s. 158BD", and against this order of the Tribunal, separate appeals were filed by the Revenue raising the question as to whether the Tribunal is right in holding that Annex. D notice is invalid and consequently the assessment also is invalid.