High Court Of Gujarat
CIT-I vs. Jolly Fantasy World Ltd.
Section : 158BC , 254
Jayant Patel And S.H. Vora, JJ.
Tax Appeal Nos. 1254,1260,1261 & 1263 Of 2014
March 9, 2015
ORDER
Jayant Patel, J. – As in all appeals, common questions and common facts are involved, they are being considered simultaneously.
2. The revenue has preferred all the appeals against common judgment dated 29.4.2014 passed by the Tribunal in respective tax appeals by raising number of questions mentioned at para 2. However, we find that questions (i), (ii) and (iv) can be pressed by the revenue. The same read as under:
“(i)Whether the Hon’ble Appellate Tribunal has committed substantial error of law in accepting the additional ground of the assessee that since, the name of these assessees are not appearing in the authorization/requisition, proceedings initiated u/s 158BC of the Act against them are void initio without appreciating the fact that the order under dispute was passed in pursuance of an order passed by the Tribunal itself?
(ii)Whether the Tribunal was justified in law in accepting the additional grounds of the assessee which were raised after a lapse of 5 years of filing of second round of appeal and 14 years after the search without any justification by the assessee for such delay?
(iv) Whether the Hon’ble Tribunal was justified in law in accepting the contention raised by assessee at a later stage that block assessment failed for want of jurisdiction even though the facts of the case clearly shows that the assessee had responded to notices, filed return, participated in block assessment proceedings and accepted the assessment proceedings and further participated in set-aside assessment proceedings and suffered an assessment as per the direction of Hon’ble Tribunal, without raising such contention.”
3. As such, broad facts show that initially, there were assessment orders by AO for the year 1996. Such assessments were carried in appeal before the Tribunal since they were block assessment and the Tribunal disposed of the appeal by sending back the matter to the AO for fresh block assessment and to compute undisclosed income in accordance with the provisions of Section 158BB. The matter was again considered by the AO and in the year 2005, AO made block assessment order under section 158BC of the Income Tax Act (hereinafter referred to as “the Act”). The matters were again carried in appeal before the Tribunal. Pending the appeal before the Tribunal, additional ground was permitted to be raised by the Tribunal on the point that the order passed under Section 158BC read with Section 254 of the Act is bad in law, invalid or untenable since no warrant authorizing search was issued in the name of the assessee, but on the basis of the warrant issued on the joint name as shown in the Panchnama as that of Arun Choksi, Sanjay Choksi and family and Jolly Tea (India) Ltd. and Jolly group of companies. The Tribunal initially vide order dated 17.8.2010, found that the additional ground being root of the matter could be permitted, hence, the ground was permitted. It appears that thereafter, vide order dated 8.11.2012, the Tribunal modified the reasons recorded and substituted the word “Whether or not the ‘additional grounds’ in respect of the validity of a warrant alleged to be either not issued or issued in joint name and another legal issue of non-issuance of the notice under Section 143(2) can be raised, is the question for which the matter was heard.” The relevant aspect is that the part of the reasons recorded vide order dated 17.8.2010 was modified, but the ultimate additional grounds, which were so permitted, remained unaltered. It further appears that the revenue preferred Special Civil Application No.9044 of 2013 before this Court challenging modification and the reasons recorded by the Tribunal vide order dated 8.11.2012 and this Court in the said petition, vide order dated 13.6.2013, inter alia observed thus:
“Ample opportunity will be given to the petitioner to meet with the additional ground, which the original appellant is permitted to raise. We see no reason to interfere with the impugned interim order/interlocutory order passed by the learned Tribunal at this stage. However, it is observed that in case, any order is adverse to the petitioner, it will always be open to the petitioner to contend and raise the ground, which is raised in the present Special Civil Application at the time of filing of the appeal, which shall be considered in accordance with law and on its own merits.”
4. It appears that thereafter, the Tribunal heard all the appeals and passed common judgment and order, which is impugned in all the respective tax appeals. The reasons recorded by the Tribunal at para Nos.6 to 8 for ready reference can be reproduced as under:
‘6. After hearing both the parties in respect of preliminary contentions raised by the revenue, we are of the considered opinion that these objections should have been raised by the revenue at the time of admission of the additional ground by the Hon’bIe Tribunal. Since admission of additional ground has been upheld by the Hon’ble High Court by observing as under:-
“However it is observed that in case any order is adverse to the petitioner, it will always be open to the petitioner to contend and raise the ground which is raised in the present Special Civil Application at the time of filing of the appeal which shall be considered in accordance of law and on its merit.”
We are refraining ourselves from adjudicating these preliminary objections raised by the revenue.
7. Now coming to the merits of the additional ground, after hearing both the parties, perusing the record and case laws relied by both the parties, we find that in the Panchnama (filed along with additional ground) prepared by the revenue at the time of search in the column ‘A’ following narration is mentioned:-
“Warrant in the case of :Arun Choksi, Sanjay Choksi and family and Jolly Tea (India) Ltd., and Jolly group of companies.
It is clear from the above that none of the assessee’s name is appearing in above narration. The issue to be decided by us in these appeals is whether in the absence of names of the assessees on the warrant authorizing search can proceedings u/s 158BC be initiated against them or not. To decide the issue the provisions of Section 292CC of the Income Tax Act inserted w.e.f. 15 April, 1976 are relevant and for the sake of convenience the same are reproduced as under:—
“292CC. Authorisation and assessment in case of search of requisition-
(1) Notwithstanding anything contained in this Act-
(i) it shall not be necessary to issue an authorization under section 132 or make a requisition under section 132A separately in the name of the each person;
(ii) (ii) where as authorization under section 132 has been issued or requisition under section 132A has been made mentioning therein the name of more than one person, the mention of such names, of more than one person on such authorization or requisition shall not be deemed to construe that it was issued in the name of an association of persons or body of individuals consisting of such persons.
(2) Notwithstanding that an authorization under Section 132 has been issued or requisition under Section 132A has been made mentioning therein the name or more than one person, the assessment or reassessment shall be made separately in the name of each of the persons mentioned in such authorization or requisition.”
8. It is clear from the above that for making assessment u/s 158BC of the Act, it is not necessary to issue authorization u/s 132 or make requisition u/s 132A separately in the name of each person. Authorization or requisition in the name of more than one person is permissible. However assessment or re-assessment can be made only if the name of the person is mentioned in such authorization or requisition. Since there is no dispute about the fact that names of these assessees are not appearing in the authorization/requisition, proceedings initiated u/s. 158BC of the Act against them are void ab-initio. In the case CIT v. Ms. Pushpa Rani [2004] 136 Taxman 627 Hon’ble High Court of Delhi has held that where no search warrant is issued in name of assessee proceedings initiated u/s. 158BC are ab-initio void and without jurisdiction. In the case laws relied by the revenue, names of the persons assessed were there in the authorization and therefore in those cases assessment framed by Assessing Officer were held to be valid. In view of the above, additional ground raised by the assessee is allowed.’
5. The aforesaid shows that the Tribunal on verification of the Panchnama prepared by the revenue at the time of search, found that the warrant is in case of Arun Choksi, Sanjay Choksi and family and Jolly Tea (India) Ltd. and Jolly group of companies and it was not on the name of any of the assessees, who were appellant before the Tribunal. The Tribunal found that in absence of the name of the assessees on the warrant authorizing search, the proceedings under Section 158BC cannot be initiated. The Tribunal also recorded that there is no dispute about the fact that the names of the assessees are not appearing in the authorization/requisition. Hence, the Tribunal found that the proceedings under Section 158BC of the Act against the respective assessees, who were appellants before the Tribunal, are void ab initio. Consequently, the Tribunal has allowed the appeals mainly on the additional grounds raised by the assessee.
6. Mr. Parikh, learned counsel appearing for the revenue contended that in view of the order passed by this Court in Special Civil Application No.9049 of 2013, it was required for the Tribunal to express its view on the permission of the additional ground. He submitted that when in the earlier round of litigation, at the stage of first assessment made by AO before the Tribunal, when appeals were preferred against the first assessment, a contention for non-availability of the block assessment as per Section 158BC was not raised, the Tribunal could not have permitted raising of the additional grounds by the assessee and he further submitted that even if such ground was raised and the Tribunal was to consider the same, the contention raised by the revenue before the Tribunal were required to be dealt with. Since such contentions are not dealt with, the order can be said as perverse. He alternatively submitted that as observed by this court in its order passed in Special Civil Application Nos.9044 of 2013 to 9053 of 2013, the revenue is to raise such ground in the present appeals, substantial questions of law would arise before this court for consideration and hence, this court may examine those questions as raised by the revenue.
7. Whereas, Mr. Soparkar, learned counsel appearing for the assessee, by relying upon two decisions; one of the Apex Court in case of Manish Maheshwari v. Asstt. CIT [2007] 289 ITR 341/159 Taxman 258 and another decision of this Court in case of P.V. Doshi v. CIT [1978] 113 ITR 22, contended that there is no bar operating on the point of law or for challenge to the jurisdiction of the AO and he submitted that for any taxing statute as held by the Apex Court in the abovereferred decision in case of Manish Maheshwari (supra), strict interpretation would be called for. If there is no competence and jurisdiction with the AO to make block assessment, everything would fall to ground and it cannot be said that such a ground, which is purely a question of law, has been wrongly permitted to be raised by the Tribunal. He submitted that as per the revenue, even before the Tribunal, it remained undisputed that the names of the assessee were not there on the authorization/warrant and once the condition precedent was not satisfied for block assessment under section 158BC, the Tribunal was justified in allowing the appeals. He therefore, submitted that when the issues are already covered by the statute itself and the abovereferred decision of the Apex Court and this Court, it cannot be said that any substantial questions of law would arise. Hence, this Court may dismiss the appeals.
8. We may record that the order dated 17.8.2010, copy whereof is produced at Annexure E, whereby additional ground, which was permitted to be raised and admitted, remained unchallenged by the revenue. Special Civil Application Nos.9044 of 2013 to 9053 of 2013 were directed against the order dated 8.11.2012, which was only for rectification of the reasons recorded and that too only first part, but it was not for rectification of any additional ground or the ultimate order for permitting additional ground and the admission of such ground. If a strict view is taken, one may say that the revenue could not agitate such question on the aspects of availability of the additional ground before the Tribunal, which was so permitted vide order dated 17.8.2010. But, as this Court vide order dated 13.6.2013 did make the abovereferred observations and even if lenient view is taken, at the most, it would mean that opportunity would be available to the revenue to meet with the additional ground, but such opportunity has already been availed by the revenue. The Tribunal has considered the Panchnama prepared by the revenue. It was for the revenue to controvert the said material by any contemporaneous record or otherwise. But, it appears that even as per the revenue, the contents of the Panchnama including that of non-appearance of the name in the authorization/requisition of the assessee, remained undisputed. Therefore, it cannot be said that the Tribunal did not give any opportunity to the revenue to meet with the additional ground.
9. Apart from the above, even if, it is considered for the sake of examination that the ground so raised before the Tribunal could also be raised before this Court in the present appeals, then also, we find that it is well settled legal position that there cannot be any estoppel or waiver against statute or law. We may make useful reference to the decision of this Court in case of P.V. Doshi (supra), wherein the question came up before this Court for consideration as to whether any point or contention, which was expressly not pressed, but if it touches to the root of the matter based on the statutory provisions or the law, can be agitated in the further proceedings before the higher forum or not and this Court in the said decision, observed thus:
‘The legal position about waiver of such a mandatory provision created in the wider public interest to operate as fetter on the jurisdiction of the authority is well settled that there could never be waiver, for the simple reason that in such cases jurisdiction could not be conferred on the authority by mere consent, but only on conditions precedent for the exercise of jurisdiction being fulfilled. If the jurisdiction cannot be conferred by consent, there would be no question of waiver, acquiescence or estoppel or the bar of res judicate being attracted because the order in such cases would lack inherent jurisdiction unless the conditions precedent are fulfilled and it would be a void order or a nullity is now well brought out in the decision between invalidity and nullity is now well brought out in the decision in Dhirendra Nath Gorai v. Sudhir Chandra Ghosh, AIR 1964 SC 1300, 1304, where their Lordships had gone into this material question as to whether the act in breach of the mandatory provision is per force a nullity. The passage in Macnamara on Nullities and Irregularities, referred to in Ashutosh Sikdar v. BihariLalKirtania [1907] ILR 35 Cal 61 [FB], at page 72, was in terms relied upon as under :
“….no hard and fast line can be drawn between a nullity and an irregularity; but this much is clear, that an irregularity is a deviation from a rule of law which does not take away the foundation or authority for the proceeding, or apply to its whole operation, whereas a nullity is proceeding that is taken without any foundation for it, or is so essentially defective as to be of no avail or effect whatever, or is void and incapable of being validated.”
Thereafter, their Lordships pointed out that whether a provision fell under one category or the other was not easy of discernment, as in the ultimate analysis, it depended upon the nature, scope and object of the particular provision. Their Lordships in terms approved a workable test laid down by Justice Coleridge in Holmes v. Russel [1841] 9 Dowl 487 as under :
“It is difficult sometimes to distinguish between an irregularity and a nullity; but the safest rule to determine what is an irregularity and what is a nullity is to see whether the party can waive the objection; if he can waive it, it amounts to an irregularity; if he cannot, it is a nullity.”
Thereafter it was pointed out that a waiver is an intentional relinquishment of a known right, but obviously an objection to jurisdiction could not be waived, for consent could not give a court jurisdiction where there was none. Even if there was inherent jurisdiction, certain provisions could not be waived. What can be waived would be only those provisions which are for the private benefit and protection of an individual in private capacity, which might be dispensed with without infringing any public right or public policy.
This settled legal position was again reiterated in Superintendent of Taxes v. Onkarmal Nathmal Trust, AIR 1975 SC 2065, where the question had arisen in the context of the Assam Taxation (on Goods Carried by Road and on Inland Waterways) Act, 1961. The assessee had obtained an injunction order against the State in a writ petition challenging the validity of the Act. The assessee had not submitted the return under section 7(1) and under section 7(2) a notice had to be issued only within two years from the end of the return period. The procedure of best judgment assessment was laid down in section 9(4) and the question arose whether, in view of the injunction order obtained by the assessee, ignoring the two years’ limit laid down as a fetter for issuance of the notice under section 7(2), the best judgment assessment procedure was permissible. At page 2070, the learned Chief Justice first held that if a return under section 7(1) was not made, the service of a notice under section 7(2) of the Act was the only method for initiation of a valid assessment proceeding under the Act. The period of two years under section 7(2) was a fetter on the power of the authority and was not just a bar of time. It was the scheme of the Act that the service do notice within two years from the end of the return period was an imperative requirement for initiation of assessment proceeding as also reassessment proceeding under the Act. Further proceeding, at page 2071, their Lordships pointed out the settled legal distinction between the provisions which conferred jurisdiction and provisions which regulated procedure, because jurisdiction could neither to waived nor treated by consent, while a procedural provision could be waived by conduct or agreement. Their Lordships pointed out that in that case the assessee could not be said to have waived the provisions of the stature because there could not be any waiver of a statutory requirement or provision which went to the jurisdiction of assessment. The origin of assessment was either as assessee filing a return as contemplated in the Act or an assessee being called upon to file a return as contemplated in the Act. The respondents challenged the Act. The order of injunction did not amount to a waiver of the statutory provisions. The issue of a notice under the provisions of the Act related to the exercise of jurisdiction under the Act in all cases. The learned Chief Justice in terms pointed out that the revenue statutes are based on public policy. The revenue statutes protect the public on the one hand and confer power on the State on the other. Therefore, even in the context of such a revenue statute like a taxation measure such fetter on the jurisdiction being a fetter laid to protect public, on wider ground of public policy, it was held that such provisions which confer jurisdiction on assessment and reassessment could never be waived for the simple reason that jurisdiction could neither be waived nor created by consent. In the concurring judgment his Lordship, Beg. J., at page 2077, also pointed out that if the notice under section 7(2) was a condition precedent to the exercise of jurisdiction to make the best judgment assessment, the doctrine of waiver could never confer jurisdiction so as to enable the parties to avoid the effect of violating a mandatory provision on a jurisdictional matter even by agreement. This decision completely settles the legal position. It makes a distinction between the provisions which confer jurisdiction and provisions which merely regulate the procedure by holding that such provisions which confer jurisdiction or such mandatory provisions which are enacted in public interest on ground of public policy even in such revenue statutes could not be waived, because of the underlying principle that jurisdiction could neither be waived nor created by consent.’
10. Under the circumstances, as on the point of estoppel or waiver, the point is already covered by the decision of this Court, we do not find that a participation by the assessee in the earlier round of litigation either before the AO or before the Tribunal or consequently before the AO can operate as a bar to the assessee to challenge the jurisdictional authority of the AO under Section 158BC of the Act.
11. On the aspects of applicability and the condition precedent for making block assessment under Section 158BC, we can usefully refer to the observations of the Apex Court in case of Manish Maheshwari (supra). The relevant observations are at paras 6 to 13, which read as under:
‘6. Search and seizure is to be made in terms of Rule 112 of the Income Tax Rules, 1962. For the purpose of invoking the said provision, special procedure for assessment is laid down in Chapter XIV-B, the conditions precedent wherefor as laid down must be satisfied. Sections 158BC and 158BD read as under :
“158BC. Procedure for block assessment :
Where any search has been conducted under section 132 or books of account, other documents or assets are requisitioned under section 132A, in the case of any person, then :-
(a) the Assessing Officer shall
(i) in respect of search initiated or books of account or other documents or any assets requisitioned after the 30th day of June, 1995 but before the 1st day of January, 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days;
(ii) in respect of search initiated or books of account or other documents or any assets requisitioned on or after the 1st day of January, 1997 serve a notice to such person requiring him to furnish within such time not being less than fifteen days but not more than forty-five days;
as may be specified in the notice a return in the prescribed form and verified in the same manner as a return under clause (1) of sub-section (1) of section 142, setting forth his total income including the undisclosed income for the block period :
Provided that no notice under section 148 is required to be issued for the purpose of proceeding under this Chapter :
Provided further that a person who has furnished a return under this clause shall not be entitled to file a revised return;
(b) the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of section 143 and section 144 shall, so far as may be, apply;
(c) the Assessing Officer, on determination of the undisclosed income of the block period in accordance with this Chapter, shall pass an order of assessment and determine the tax payable by him on the basis of such assessment;
(d) the assets seized under section 132 or requisitioned under section 132A shall be retained to the extent necessary and the provisions of section 132B shall apply subject to such modifications as may be necessary and the references to “regular assessment” or “reassessment” in section 132B shall be construed as references to “block assessment”.
“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 against such other person and the provisions of this Chapter shall apply accordingly.”
7. Condition precedent for invoking a block assessment is that a search has been conducted under Section 132, or documents or assets have been requisitioned under Section 132A. The said provision would apply in the case of any person in respect of whom search has been carried out under Section 132A or documents or assets have been requisitioned under Section 132A. Section 158BD, however, provides for taking recourse to a block assessment in terms of Section 158BC in respect of any other person, the conditions precedents wherefor are : (i) Satisfaction must be recorded by the Assessing Officer that any undisclosed income belongs to any person, other than the person with respect to whom search was made under Section 132 of the Act; (ii) The books of account or other documents or assets seized or requisitioned had been handed over to the Assessing Officer having jurisdiction over such other person; and (iii) The Assessing Officer has proceeded under Section 158BC against such other person.
8. The conditions precedent for invoking the provisions of Section 158BD, thus, are required to be satisfied before the provisions of the said chapter are applied in relation to any person other than the person whose premises had been searched or whose documents and other assets had been requisitioned under Section 132A of the Act.
9. A taxing statute, as is well-known, must be construed strictly. In Sneh Enterprises v. Commissioner of Customs, New Delhi [(2006) 7 SCC 714], it was held :
“While dealing with a taxing provision, the principle of ‘Strict Interpretation’ should be applied. The Court shall not interpret the statutory provision in such a manner which would create an additional fiscal burden on a person. It would never be done by invoking the provisions of another Act, which are not attracted. It is also trite that while two interpretations are possible, the Court ordinarily would interpret the provisions in favour of a tax-payer and against the Revenue.”
Yet again in J. Srinivasa Rao v. Govt. of A.P. & Another [2006 (13) SCALE 27], it was held :
“In a case of doubt or dispute, it is well-settled, construction has to be made in favour of the taxpayer and against the Revenue.”
In M/s. Ispat Industries Ltd. v. Commissioner of Customs, Mumbai [JT 2006 (12) SC 379 : 2006 (9) SCALE 652], this Court opined:
“In our opinion if there are two possible interpretations of a rule, one which subserves the object of a provision in the parent statute and the other which does not, we have to adopt the former, because adopting the latter will make the rule ultra vires the Act.”
10. Law in this regard is clear and explicit. The only question which arises for our consideration is as to whether the notice dated 06.02.1996 satisfies the requirements of Section 158BD of the Act. The said notice does not record any satisfaction on the part of the Assessing Officer. Documents and other assets recovered during search had not been handed over to the Assessing Officer having jurisdiction in the matter.
11. No proceeding under Section 158BC had been initiated. There is, thus, a patent non-application of mind. A prescribed form had been utilized. Even the status of the assessee had not been specified. It had only been mentioned that the search was conducted in the month of November 1995. No other information had been furnished. The provisions contained in Chapter XIVB are drastic in nature. It has draconian consequences. Such a proceeding can be initiated, it would bear repetition to state, only if a raid is conducted. When the provisions are attracted, legal presumptions are raised against the assessee. The burden shifts on the assessee. Audited accounts for a period of ten years may have to be reopened.
12. A large number of decisions of various High Courts have been cited at the bar. We would, at the outset, refer to a decision of the Gujarat High Court in Khandubhai Vasanji Desai and Others v. Deputy Commissioner of Income-Tax and Another [(1999) 236 ITR 73]. Therein, it was clearly held :
“This provision indicates that where the Assessing Officer who is seized of the matter and has jurisdiction over the person other than the person with respect to whom search was made under s. 132 or whose books of account or other documents or any assets were requisitioned under s. 132A, he shall proceed against such other person as per the provisions of Chapter XIV-B which would mean that on such satisfaction being reached that any undisclosed income belongs to such other person, he must proceed to serve a notice to such other person as per the provisions of s. 158BC of the Act. If the Assessing Officer who is seized of the matter against the raided person reaches such satisfaction that any undisclosed income belongs to such other person over whom he has no jurisdiction, then, in that event, he has to transmit the material to the Assessing Officer having jurisdiction over such other person and in such cases the Assessing Officer who has jurisdiction will proceed against such other person by issuing the requisite notice contemplated by s. 158BC of the Act. “
13. Similar view has been taken by the Gujarat High Court in Rushil Industries Ltd. v. Harsh Prakash [(2001) 251 ITR 608], Priya Blue Industries P. Ltd. v. Joint Commissioner of Income-Tax [(2001) 251 ITR 615], Premjibhai and Sons v. Joint Commissioner of Income-Tax [(2001) 251 ITR 625], and by Kerala High Court in Commissioner of Income-Tax v. Deep Arts [(2005) 274 ITR 571], Commissioner of Income-Tax v. Don Bosco Card Centre [(2006) 205 CTR 500] and by Madhya Pradesh High Court in Commissioner of Income-Tax v. Smt. Maya Chotrani [(2007) 288 ITR 175].’
12. The aforesaid observations go to show that if the condition precedent for block assessment under Section 158BC is not satisfied, such would go to the root of the matter and the jurisdiction, which has not been expressly conferred by the statute, cannot be invested with the AO for the block assessment.
13. On facts, as recorded herein above, admittedly, there was no warrant authorization on the name of the assessee and hence, the Tribunal has found the assessment as ab initio void, which, in our view, calls for no interference, on facts and on law.
14. In view of the above, we do not find that any substantial questions of law would arise for consideration as canvassed in the present group of appeals. Hence, all the appeals are meritless and therefore, dismissed.
[Citation : 373 ITR 530]
