COMMISSIONER OF INCOME TAX, GURGAON Vs. ANUPAM NAGALIA

JUDGEMENT

(1.) This appeal has been filed by the appellant -revenue under Sec. 260A of the Income Tax Act, 1961 (in short, "the Act") against the order dated 11.7.2014, Annexure A.3 passed by the Income Tax Appellate Tribunal, Bench 'A', New Delhi (in short, "the Tribunal") in IT(SS) No. 36/Del/2010 for the block period 1.4.1997 to 8.5.2003, claiming following substantial questions of law: -

(2.) A few facts relevant for the decision of the controversy involved as narrated in the appeal may be noticed. A search and seizure operation was conducted at the residence of the respondent -assessee - Anupam Nagalia, EG -3118, Garden Estate, Gurgaon on 8.5.2003 alongwith Vatika group of companies. The Assessing Officer having jurisdiction over Vatika group of companies recorded satisfaction in the case of the assessee and notice under Sec. 158BD of the Act was issued to the assessee on 31.5.2005. The assessee filed his return under Sec. 158BD of the Act declaring nil income. The copy of the satisfaction note was provided to the assessee. Undisclosed income of Rs. 1,89,53,900/ - was assessed under Sec. 158BD read with Sec. 158BC of the Act on the basis of documents seized from the assessee's residence by the Assessing Officer vide order dated 21.5.2007, Annexure A.1. The assessee filed appeal before the Commissioner of Income Tax(Appeals) [CIT(A)]. It was pleaded by the assessee that his case should have been assessed under Sec. 158BC of the Act and not under Sec. 158BD of the Act as he had been covered under Sec. 132(1) of the Act and proceedings under Sec. 158BC of the Act had become barred by limitation on 31.5.2005. Even the undisclosed income assessed by the Assessing Officer was based on the documents seized from his own residence during the search and seizure operation. Thus, the Assessing Officer was not having jurisdiction to assess his case under Sec. 158BD of the Act. In the remand report before the CIT(A), it was submitted by the Assessing Officer that the assessee had complied with the notice under Sec. 158BD of the Act. The assessee did not raise any objection on the issue of block assessment under Ss. 158BD or 158BC of the Act and had only objected to the initiation of proceedings under Sec. 158BD of the Act on the issue of merit of satisfaction note. The CIT(A) vide order dated 14.6.2010, Annexure A.2 held that proceedings initiated under Sec. 158BD of the Act were not legal as the assessee was covered under Sec. 132(1) of the Act and should have been assessed under Sec. 158BC and not under Sec. 158BD of the Act. Aggrieved by the order, the department filed appeal before the Tribunal. It was pleaded by the department that the name of the assessee was not appearing in the search warrant under Sec. 132(1) of the Act. The search warrant was issued in the name of M/s. Vatika Landbase Pvt. Limited, S/Shri Anil Bhalla, Gaurav Bhalla and Gautam Bhalla. The assessee submitted that once the search team entered his premises, he was covered under Sec. 132(1) of the Act and thus proceedings should have been initiated under Sec. 158BC of the Act. The assessee also questioned the merit of the satisfaction note. The Tribunal vide order dated 11.7.2014, Annexure A.3 dismissed the appeal filed by the department holding that the assessee had objected to the validity of the proceedings before the Assessing Officer. The Tribunal relied upon the observation of the learned CIT(A) that the satisfaction note had been framed on the basis of documents found and seized from the assessee whereas according to the appellant -revenue, to record satisfaction under Sec. 158BD of the Act, these documents could not form the basis. Hence the instant appeal by the revenue.

(3.) We have heard learned counsel for the parties.