ORDER
I.S. Verma, J.M.
1. In this appeal the assessee has objected to the block assessment allegedly framed under Section 158B r/w Section 158BC of the IT Act, 1961, (hereinafter called the Act) and has listed as many as 20 grounds of appeal. Ground Nos. 1 to 4 is against the validity of proceedings for block assessment and read as under :
1. Because the order dt. 23rd Dec., 1997, as passed by the learned Asstt. GIT, Circle-2, Gorakhpur, ‘under Section 158BD r/w under Section 158BG’ is wholly illegal, as being without jurisdiction.
2. Because in the wake search operation as has commenced on 28th Feb., 1996, under Section 132(1), notice dt. 23rd Dec., 1996, was issued by the Asstt. GIT, Circle-2, Gorakpur, under Section 158BC of the Act and irrespective of the merit of the said notice, the jurisdiction to act upon the said notice had lapsed on 28th Dec., 1997, and no proceedings on the basis of said notice could have been taken up thereafter.
3. Because the learned AO has erred in holding that para 2.2 of the impugned order that the notice dt- 23rd Dec., 1996 (referred to above), was a notice under Section 158BD and therefore, the time-limit to pass an order thereunder, was available till 31st Dec., 1997, under Section 158BE(2) of the IT Act, 1961.
4. Because the nature and scope of proceedings under Section 158BC and under Section 158BD were entirely different from each other and the notice dt. 23rd Dec., 1996, factually issued under Section 158BC could not be equated with or treated to have been issued under Section 158BD, by applying the provisions of Section 292B.
2. We have heard the counsel for the assessee as well as the learned Departmental Representative and before referring to their respective arguments and consideration of the same we are of the opinion that it is necessary to consider the facts, as have been revealed from the records/documents placed before us and admitted by both the parties and therefore, extract the same as under:
2.1. A partnership firm styled as M/s Eastern Molasses Company having its head office at 106A, Shyam Bazar St, Calcutta, was having branches at Deoria in U.P., Indore in MP was being assessed at Calcutta. The present appellant–
HUF was partner of this firm and Sh. Mahabir Prasad Rungta, was looking after the firm’s business at branch office at Deoria. Search action under Section 132(1) of the Act was carried on, admittedly as a result of search warrant in case of partnership firm M/s Eastern Molasses Company, was carried on at the firm’s head office at Calcutta as well as branch offices at Deoria and Indore.
2.2. It has been specifically recorded by the AO in para 2.1 of the block assessment order in this case that “it is a fact that no warrant under Section 132{1) was issued in the case of Sh. M.P. Rungta, HUF partner or other three partners”.
A notice captioned as “Notice under Section 158BC of the IT Act, 1961” addressed to the appellant-HUF was issued by the Asstt. CIT, Circle-2, Gorakhpur, on 23rd Dec., 1996, and was served upon it on 30th Dec., 1996 (certified copy placed at page No. 1 of assessee’s paper book).
2.3. During the course of assessment proceedings the assessee objected to the AO’s jurisdiction to issue notice under Section 158BC in appellant’s case and also raised an objection, as per its letter dt. 27th Sept., 1997, that the proceedings initiated as per notice under Section 158BC, dt. 23rd Dec., 1996, got barred by time with the expiry of one year from the end of February, 1996, but the AO rejected the assessee’s plea by observing as under: Paras 22 and 2.3 from page No. 2 of block assessment order:
“2.2 After appraisal/examination of the relevant seized material, notice under Section 158BD of the IT Act, 1961, for the block period from 1st April, 1985 to 28th Feb., 1996 was issued to all the above four persons on 23rd Dec., 1996, by my predecessor in Office as no warrant was issued in any of the cases. In response to the said notice, return in Form No. 2B was filed by the assessee on 13th Jan., 1997, by mentioning the word “under protest” along with the copy of petition dt. 11th Jan., 1997, addressed to the then CIT, Allahabad. Praying/contending, inter alia that jurisdiction may be transferred back to ITO, Deoria, from Asstt. CIT, Gorakhpur, and he may be directed to vacate the notice requiring him to file the return for block periods of 10 years.
2.3. Both these contentions were not relevant at issue because, the block assessment order was legally to be passed by the Asstt. CIT and not the ITO and the notice under Section 158BD could not be vacated without passing of a block assessment order hence both the requests were baseless and not well founded under the law.”
2.4. The AO, therefore, completed the block assessment on 23rd Dec., 1997, terming the same as under Section 158BD r/w Section 158BC by considering the notice (captioned as mentioned in the earlier part of this order and dt. 23rd Dec., 1996) as a notice under Section 158BD of the Act.
3. In the light of aforesaid admitted facts the counsel for the assessee first of all submitted that the notice captioned as “Notice under Section 158BC of IT Act, 1961″ dt. 23rd Dec., 1996”, which was only the notice issued and served upon the appellant could not be considered as a notice under Section 158BD of IT Act by stretch of any imagination because, under the provisions of Section 158BD of the Act it is the AO having jurisdiction over the case of a person in whose case action under Section 132(1) has been taken, who will, first of all, record his satisfaction thatthe seized books of accounts/documents/valuables/money/jewellery/bullion, etc. disclose the undisclosed income of some third person and then will transfer that material to the AO having jurisdiction over the case of such third person. According to the counsel it is thereafter that the AO having jurisdiction over the case of such third person will, after receipt of relevant material, issue a notice under Section 158BG r/w Section 158BD of the Act.
3.1. Referring to the facts of the present case the counsel submitted that by 23rd Dec., 1996, when the notice under Section 158BG was issued, the AO having jurisdiction over the assessee’s case had not received any communication or satisfaction note or material from the AO at Calcutta who was having the jurisdiction over the case of firm.
3.2. The counsel further submitted that there being no evidence on record to establish the compliance to the requirements of provisions of Section 158BD, the notice under Section 158BC, dt. 23rd Dec., 1996, cannot, under any circumstance, be considered as a notice under Section 158BD or a notice under Section 158BC r/w Section 158BD of the Act and, therefore, the notice dt. 23rd Dec., 1996, was nothing but a notice under Section 158BC having been issued to the assessee in the capacity of a person having been searched under Section 132(1) and that being the position, the block assessment in case of appellant assessee completed on 23rd Dec., 1997, can be said to be only an block assessment under Section 158BC, which is bad in law and void ab initio because of following reasons :
(i) There being no search warrant in the name of the appellant, the appellant cannot be considered as a person as having been searched under Section 132(1} of the Act and consequently, the notice issued under Section 158BC of the Act, dt. 23rd Dec., 1996, is rendered bad in law and without jurisdiction, which automatically renders the subsequent act, i.e., the block assessment as bad in law and void ab initio.
(ii) If the notice issued under Section 158BC of the Act dt. 23rd Dec., 1996, is considered, as valid notice under Section 158BC of the Act, then also the block assessment completed on 23rd Dec., 1997, is void ab initio being barred by time.
(iii) There being no evidence on record to establish the compliance to the requirements of Section 158BD of the Act, the notice issued on 23rd Dec., 1996, cannot be taken as a notice under Section 158BD or under Section 158BC r/w Section 158BD of the Act.
In support of above submissions the assessee’s counsel has relied on the entry dt. 23rd Dec., 1996, on the order sheet maintained by the AO and decision of Tribunal Chandigarh Bench in case of Ved Parkash Sanjay Kumar v. Asstt. CIT (2000) 66 TTJ (Chd) 442 copies placed on record.
4. The learned Departmental Representative on the other hand, though was prayed to admit that there was no search warrant in the name of appellant-HUF and the search had been carried on only in the case of M/s Eastern Molasses Company and that no communication or any document or material was received by the AO Gorakhpur from AO, Calcutta, yet the notice issued under Section 158BC on 23rd Dec., 1996, in appellant’s case was a valid notice under Section 158BC r/w Section 158BD of the Act because :
(i) There is no provision for issuing a notice under Section 158BD of the Act either to the person, who has been searched or the person whose undisclosed income has been found recorded in the books of accounts/documents/assets found and seized during the search. According to him in both the cases the notice has to be issued under Section 158BC of the Act.
(ii) The notice dt. 23rd Dec., 1996, having been issued on the basis of appraisal report received from ADI was a valid notice under Section 158BC of the Act because, the report of the ADI is deemed to be compliance to the requirements of Section 158BD of the Act. He therefore, strongly supported the order of the AO. Referring to the observations of the AO, in the block assessment order that a notice under Section 158BD of the Act was issued on 23rd Dec., 1996, to the appellant, the learned Departmental Representative pleaded that it is possible that two notices might have been issued on 23rd Dec., 1996, and assessee may be relying on only one notice. The other notice may be under Section 158BD of the Act.
5. In rejoinder the counsel for the assessee submitted that the ADI, who has sent appraisal report was not having jurisdiction either over the firm’s case or over the appellant’s case and, therefore, there was no question of compliance to the requirement of Section 158BD of the Act.
Commenting on the plea taken by the learned Departmental Representative that there may be two notices, the counsel made a statement that the appellant had not received any notice under Section 158BC or under Section 158BD of the Act except one notice under Section 158BC of the Act, dt. 23rd Dec., 1996.
6. We have considered the rival submissions, facts and circumstances of the case and decision relied upon by the parties.
7. Since, there was a dispute regarding the number of notices issued on 23rd Dec., 1996, the learned Departmental Representative was directed to produce the assessment records, which were produced at the time of hearing on 17th Jan., 2001, and were perused by the Bench. On perusal of the same it was revealed that only one notice captioned as “Notice under Section 158BC of the IT Act, 1961” was issued in appellant’s case on 23rd Dec., 1996, and was served on 26th Dec., 1996. When the learned Departmental Representative was apprised of the factual position, he was fair enough to admit that only one notice was issued to the assessee.
In view of above facts it now stands established and admitted that only one notice captioned (supra), dt. 23rd Dec., 1996, was issued in appellant’s case.
8.1. Coming to the objection raised by the counsel for the assessee regarding non-compliance of requirements of provisions of Section 158BD of the Act, validity of the notice under Section 158BC, dt. 23rd Dec, 1996, jurisdiction of the AO, Gorakhpur, to issue a notice under Section 158BC and the validity of the block assessment framed on 23rd Dec, 1997, we, after having considering of the totality of the circumstances and the fact that there were no search warrant in appellant’s case are of the opinion that the appellant’s case was outside the scope of the term, “a person in whose case action under Section 132(1) has been taken” and therefore. AO, Gorakhpur, had no jurisdiction to issue notice under Section 158BC of the Act in case of the assessee and that being the case the notice in question is rendered bad in law which in turn renders all subsequent proceedings including the block assessment order as bad in law and void ab initio. We hold so.
8.2. Secondly, even if the notice in question is considered to be a valid notice then also the block assessment order, dt. 23rd Dec., 1997, is bad in law and void ab initio being barred by time because, according to the provisions of Section 158BE the assessment could be framed by the end of February, 1997. In other words the action under Section 132(1) having been taken on 28th Feb., 1996, the block assessment could be completed by 28th Feb., 1997, and therefore, the block assessment completed on 23rd Dec., 1997, is barred by time.
8.3. Thirdly, so far as, dispute regarding the compliance to the requirement of the provisions of Section 158BD is concerned since, the Revenue has not been able to produce any material, which may establish that the AO Gorakhpur, had received any communication or satisfaction note or any document/material from AO Calcutta, having jurisdiction over firm’s case by 23rd Dec., 1996, the assessee’s claim that the notice under Section 158BC of the Act, dt. 23rd Dec., 1996, was issued without satisfying the requirements of the provisions of Section 158BD of the Act has to be accepted.
Our aforesaid conclusion gets further fortified from the letter No. F.No. Asstt. CIT/C-I/GRP/1997-98, dt. 15th Oct., 1997, issued by Asstt. CIT, Circle-I, Gorakhpur, to the Asstt. CIT. Investigation Circle 13(2), Calcutta, which came to our notice while perusing the appellant’s record produced by the learned Departmental Representative. The letter reads as under :
"F. No. Asstt, CIT/C-I/GRP/1997-98 . Office of the Asstt. Commissioner of Income-tax Circular-I, Gorakhpur. Dt. : 15th Oct., 1997. To The Asstt. Commissioner of Income-tax, Investigation Circle 13(2), Calcutta. Sir,
Sub : Framing of block assessment in case of partners of M/s Eastern Molasses Co.–Supply of seized papers/documents or its photo copy and any adverse Materials Kedia Group of Cases–Date of search 28th Feb., 1996. There was a search in the Kedia Group of cases MP on 28th Feb., 1996. Besides, search was also conducted in the H.O. and Branch office of M/s Eastern Molasses Co. at Calcutta and Deoria respectively which was a main concern supplying the molasses etc. to the Distilleries of Kedia Group. There are four partners in the firm M/s Eastern Molasses Co. :
1. Shri Mahabir Prasad Rungta (HUF)
2. Shri Santosh Kumar Rungta.
3. Shri Bimal Kumar Tribrewal
4. Smt. Bhanwari Devi
2. However, on the suggestions of Investigation Wing, the learned CIT, Allahabad, had centralised the following cases which were earlier assessed to tax at Deoria with the Circle -H, Gorakpur vide it letter F.No. S&S/Central/Tech/Addl/1996-97, dt. 3rd Dec., 1996.
(a) Shri Dinesh Kumar Kedia, Indl.
(b) Shri Dinesh Kumar Kedia, HUF
(c) Smt. Nilam Kedia, Indl.
(d) Shri Mahabir Pd. Rungta, HUF
(e) Shri Nawal Kishore Rungta, Indl.
(f) Shri Bimal Kumar Tibrewal, Indl.
(g) Smt. Ginni Devi Rungta, Indl.
3. After centralisation, my predecessor issued notice under Section 158BC in case of O.K. Kedia, Indl. on 23rd Dec., 1996, and notice under Section 158BD in the cases at S. No. 2(b) to 2(g) on 23rd Dec., 1996, and proceedings under Section 158BD are pending before me which have to be finalised on or before limitation date i.e. 31st Dec., 1997.
4. Relevant portion of appraisal report in case of O.K. Kedia and some seized material in this case is also with me which is under close scrutiny for framing block assessments in case of S. Nos. 2 & 3 of Para 1.
5. As regards cases mentioned at S- No. (d) to (g) of para 2 and cases at S. No. . 2 & 4 of para 1, no seized material, papers and documents or any adverse material other than appraisal report are with me because the entire seized materials were handed over to you as the jurisdiction over the main firm M/s Eastern Molasses Co. lay with you and you had already completed the block assessment of the said firm on 28th Feb., 1997, after through examination scrutiny of the same.
6. I have not received any intimation from you whether any seized papers and documents or any adverse material or entries representing undisclosed income in the cases specifically mentioned in para 5 r/w para 1 S. No. 2 and para 2 Sl. Nos. (d) to (g) are in your custody or not. It is, therefore, requested that all the entries representing undisclosed income or expenditure relating to the said persons other than firm may kindly be communicated to us in order to enable us to consider the same in block assessment under Section 158BD reference with Section 158BC before 15th Nov., 1997, in appropriate cases namely :
(a)Mahabir Pd. Rungta (HUF) Partner of captioned firm,
(b)Smt. Ginni Devi Rungta
(c) Smt. Bhanwari Devi
(d) Sh. Santosh Kumar Rungta
(e) Sh. Nawal Kishore Rungta (f) Sh. Bimal Kumar Tibrewal.
7. On the basis of details of in accounted receipts/credits cash repayment and expenditure mention on pp. 8 to 10 of appraisal report of Asstt, DIT, GRP, a detailed notice dt. 8th Sept., 1997, covering the said points and amounts mentioned in appropriate report was given to the assessee copy of which is being sent to you for scrutiny/verification with the request to identify whether all the said unaccounted transactions have been added to the firm’s undisclosed income/total income and to advise me as to which unaccounted deposits/credits receipts, payments and expenditure are to be further added in the hands of managing partner namely Sh. M.P. Rungta, HUF, or any other persons noted in para 6 above.
In case, any further entries representing undisclosed income relate to above persons which have been written in second set/undisclosed set, may also please be intimated to me so as to enable us to determine undisclosed income in appropriate hands.
8. Notices under Section 158BD r/w Section 18BC were issued to S/Sh. M.P. Rungta, HUP. Nawal Kishore Rungta, Bimal Kumar Tibrewal and Smt. Ginni Devi Rungta on 23rd Dec., 1996, and hence limitation for block assessment orders would expire on 31st Dec.. 1996. I, therefore, request you to kindly send a reply on above points at the earliest and before 15th Nov., 1997, positively.
Yours faithfully,
(S.R. Bharti)
Asstt. Commissioner of Income-tax,
Circle-I, Gorakhpur”.
9. In view of above facts and circumstances we have no hesitation in holding that the notice issued under Section 158BC of the Act, on 23rd Dec., 1996, was issued without compliance/satisfaction of the requirements of the provisions of Section 158BD of the Act and consequently, declare the notice in question and bad in law and non est. That being the conclusion the subsequent proceedings as well as, the block assessment order dt. 23rd Dec., 1997, are rendered bad in law and non est. We hold so.
10. So far as the learned Departmental Representative plea that the notice dt. 23rd Dec., 1996, having been issued on the basis of appraisal report of the ADI, Allahabad, the notice in question was a valid notice, we are careful consideration of the fact and circumstances, jurisdiction of AO Gorakhpur, jurisdiction of ADI, Allahabad and the jurisdiction of AO Calcutta, as well as, the provisions of Section 158BD and under Section 158BD of the Act are of the opinion that there is . no merit in the plea, advance by the learned Departmental Representative because, AO, Gorakhpur, could issue notice under Section 158BC r/w under Section 158BD only after having received a communication/satisfaction/ documents from AO Calcutta, having jurisdiction over the firm’s case only: The ADI’s report can never be equated to the compliance to the provisions of Section 158BD of the Act. The plea taken by the learned Departmental Representative therefore, fails.
11. In view of above facts and circumstances of the case the block assessment order dt. 23rd Dec., 1997, is quashed being illegal, bad in law, without jurisdiction, barred by time, and void ab initio.
12. In the result the appellant’s appeal is allowed.