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2022 Supreme(Online)(KER) 52639
HIGH COURT OF KERALA
S.V. BHATTI, BASANT BALAJI, JJ
LEKSHMI TRADERS – Appellant
Versus
THE COMMISSIONER OF INCOME TAX – Respondent
ITA 2 2018
SRI.M.GOPIKRISHNAN NAMBIAR, SRI.P.BENNY THOMAS, SRI.K.JOHN MATHAI, SRI.JOSON MANAVALAN, SRI.KURYAN THOMAS, SRI.RAJA KANNAN, CHRISTOPHER ABRAHAM
This case establishes that proper recording of an officer's satisfaction is a prerequisite for valid assessments under Section 158BD of the Income Tax Act.
Headnote:
Taxation - Income Tax Act - Sections 132, 158BD - The Court held that recording of satisfaction by the Assessing Officer is essential for proceedings under Section 158BD, ensuring protection of taxpayer rights in block assessments.
Fact of the Case:
The appellant, Lekshmi Traders, faced assessments based on a search that revealed undisclosed income. The key issue was whether the assessment initiated under Section 158BD was valid without the requisite satisfaction being recorded by the Assessing Officer.
Issues: Whether the tribunal was justified in rejecting additional grounds regarding the necessity of recording satisfaction under Section 158BD before initiating assessments against an associated person.
Ratio Decidendi: The requirement for an assessing officer to record satisfaction before initiating proceedings under Section 158BD is a necessary condition, and failure to comply renders the proceedings invalid.
Final Decision: The income tax appeal was allowed, and the assessment order was set aside.
JUDGMENT
S.V. Bhatti, J.
We have heard Mr. Raja Kannan learned counsel for the appellant and Mr. Christopher Abraham learned Standing Counsel for the respondents.
2. Lekshmi Traders/assessee is the appellant. The Commissioner of Income Tax, Ernakulam/Revenue is the respondent. The circumstances and the issues for decision in both the appeals are similar circumstances and the details of orders from which the respective appeals are filed are stated in the following tabular statement:
| Sl. \nNo. | Order of \nassessment | Order of \nCommissione\nr | Order of Income \nTax Appellate \nTribunal | ITA No. |
| 1 | Block period \n01.04.88 to \n23.02.99 dtd \n28.12.2001 | 108Q/2001-02 \ndtd \n25.03.2002 | I.T.(SS) A \nNo.14/Coch/2002 \ndtd 12.02.2015 | ITA \nNo.225/\n2015 |
| 2 | Block period \n01.04.88 to \n23.02.99 dtd \n28.12.2001 | 108Q/2001-02 \ndtd \n25.03.2002 | I.T.(SS) A \nNo.14/Coch/2002 \ndtd 29.07.2016 | ITA \nNo.02/2\n018 |
3. The learned counsel appearing for parties have stated that ITA No.225/2015 can be treated as lead case for convenience and the outcome in the said appeal will have bearing on the other appeal as well.
ITA No.225/2015
4. On 23.02.1999 a search under Section 132 of the Income Tax Act (for short, ‘the Act’) was conducted in the premises of one R. Prasad. The said Prasad, it is not in dispute that, is one of the partners of the assessee which has been treated as an ‘Association of Persons’ for assessment under the Act. The materials found in the search conducted in the premises of R. Prasad resulted in issuance of notice under Section 158BD of the Act to the assessee herein for the block period 01.04.1988 to 23.02.1999. We refrain from referring to orders of assessment, Appellate Authority, etc., for the issue being agitated by the assessee in the present appeal pursuant to the judgment of this Court in ITA No.85/2013 resulting in the impugned order. The operative portion of the judgment dated
02.07.2014 reads as follows:
“11. Learned counsel for the appellant Shri Gopinath Menon further submitted that what is raised as an additional ground by the appellant is a question of law, that too by relying upon the decision of the Apex Court in Manish Maheswhari's case ((2007) 289 ITR 341 SC). It is therefore submitted that the parties are not prevented from raising a question of law and it is upto the Tribunal to consider the acceptability of the same and such a power of the Tribunal is not curtailed by the judgment rendered by the Division Bench as per Annexure F. The learned Senior Counsel for the Revenue reiterated that the decision applicable in this case is Panchajanyam Management Agencies' case ((2011) 333 ITR
281).
We need not resolve the said controversy in this appeal, as it is upto the Tribunal to consider the same. We are definitely of the view that the powers of the Tribunal are not curtailed by the judgment of the Division Bench as Annexure F, merely because the said judgment, in the operative portion "directed the matter to be considered on merits after hearing the parties." It is also not correct to say that the decision of the Division Bench concerning the validity of the notice will prevent the Tribunal to consider any other ground which the appellant has raised for consideration. It cannot therefore be said that when this 'Court sent back the matter for fresh consideration, no other points than those raised in the grounds of appeal can be considered and no additional ground can be allowed to be raised for consideration. We accordingly answer the questions raised, in favour of the assessee and against the Revenue.
In that View of the matter, we allow the appeal and set aside Annexure H order passed by the Tribunal: The Tribunal will consider the matter afresh in the light of the findings rendered by us above and it is upto the Tribunal to consider the additional ground raised by the appellant and take appropriate decision as enjoined by law. No costs.”
5. The Tribunal upon remand through Annexure-J order dated 12.02.2015 rejecte
