ORDER
Y. R. MEENA, J.
By this petition petitioner has challenged the notice dt. 24th Dec., 1997, issued under section 158BC/BD of the Income Tax Act, 1961 (hereinafter referred as Act 1961), and prayed that the said notice be quashed.
2. The petitioner is a private limited company within the meaning of the Companies Act, 1956, and the company was incorporated on l lth March, 1993. The assessee carries on business of trading in shares and securities and commodities and also makes investments from time to time. The petitioner company’s issued and subscribed share capital is Rs. 48,52.000 of which Rs. 13,02,000 was raised by 31st March, 1994, and Rs. 35,50,000 was raised during the financial year 31st March, 1996. Its shareholders are income-tax assessees and subscribed to the share capital by A/c payee cheques and the shares held by them are duly reflected in their accounts filed with their respective A0s.
The assessee has filed the income-tax return for the assessment year 1994-95 disclosing a loss of Rs. 11,630. An intimation under section 143(1)(a) of the Act 1961 has been issued on 27th March, 1997, accepting the returned loss.
For the assessment year 1995-96 assessee has disclosed an income of Rs. 3,16,310. An intimation has again been issued under section 143(1)(a) of the Act 1961. In this year notices under section 142(1) and 143(2) of the Act have been issued to assessee. For the assessment year 1996-97 petitioner has disclosed an income of Rs. 55,240. Intimation has been received in this year also under section 143(1)(a) of the Act 1961.
For all these 3 years assessee has approached to the Settlement Commission for settlement of his income in these years. His application has been admitted and matter regarding income of the assessee, for all these three years is pending before the Settlement Commission and in the application before Settlement Commission assessee has further offered additional income aggregating Rs. 2,80,000 is all these three aforesaid years. For the assessment year 1998-99 assessee filed its return on 26th Oct., 1998, disclosing a loss of Rs. 1,19,970.
On 30th Oct., 1998, a notice has been issued under section 142(1) of the Act 1961, to initiate proceedings under section 158BC in the case of Ws Super Forgings & Steels Limited (hereinafter referred to as the said company”). Proceeding under section 158BD has also been initiated against the petitioner on 24th Dec., 1997.
The search against the said company was conducted on 20th Sept., 1996, and notice was issued under section 158BC. The said company approached to the Settlement Commission. The application of the said company has been admitted by the Settlement Commission and the matter is pending before Settlement Commission in respect of the income of said company.
3. Learned counsel for the petitioner Shri Bajoria has submitted that the respondent No. 2 has no right/power or jurisdiction to issue the said notices dt. 25th Dec., 1997, to the petitioner. The case of the petitioner that when the petition is pending before the Settlement Commission for assessment year 1995-96, 1996-97 and 1997-98 the assessing officer has no authority to issue notices under section 142(1) or 143(2) or no proceedings can be allowed under section 15813C.
He further submits that the assessing officer has no material on the basis of any satisfaction could be arrived that petitioner has any undisclosed income. He further submits that when the income of the said company is to be considered by this Settlement Commission on the basis of material seized at the time of search on the said company how parallel proceedings can be conducted in case of this petitioner for the same income.
On the other hand, learned counsel for the Revenue Shri Mullick submits that in search and seizure operation under section 132(1) of the Act, 1961, search was conducted on 20th Sept., 1996, at the premises of M/s Super Forgings & Steels Ltd. on the basis of some papers and documents found and seized relating to the petitioner. The notice under section 158BC/158BD has been issued to the assessee petitioner on 24th Dec., 1997, for assessing the income for block assessment period. He further submits that the provisions of s. 158BA starts with non obstante clauses that notwithstanding anything contained in any other provisions of this Act. In case of search, the assessing officer shall proceed to assess the undisclosed income in accordance with the provisions of this Chapter.
Chapter XIV-13 provides special provisions for assessment of search cases. The provisions of s. 158B provides the definition of “block period” and “undisclosed income”.’ Provisions of s. 158BA provides that in case of search after 30th day of June, 1995, the assessing officer shall proceed to assess ‘the undisclosed income’ in accordance with the provisions of this Chapter.
Provisions of s. 158BC provides how the undisclosed income shall be computed of the block assessment period. Provisions of s. 158BD provides 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 the assessing officer shall proceed against such other person and the provisions of this Chapter shall apply accordingly.
4. Learned counsel for the Revenue heavily relied on the provisions of s. 158BD. According to him the petitioner’s case is covered by the provisions of s. 158BD. The other sections of this chapter provides time-limit for completion of block assessment, certain interests and penalties not to be levied or imposed, levy of interest and penalty in certain cases, authority competent to make block assessment.
5. In view of these provisions we have to consider whether assessing officer has any justification or jurisdiction to issue notice under section 158BC/BD of the Act 1961?
6. In case of search there is a special provisions under Chapter XIV-B which provides the special procedure for assessment of search cases. Sec. 158BA provides the assessment of ‘undisclosed income’ as a result of search. Therefore, before proceeding to assess the income of any person in case of search in pursuance of notice under section 158BC/BD, the assessing officer should first see whether there is an ‘undisclosed income’ which can be assessed under Chapter XIV-B. Clause (b) of s. 158B provides the definition of undisclosed income which reads as under :
” ‘Undisclosed income’ includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act.”
The case of the assessee is that assessing officer has not pointed out any undisclosed income of the assessee and before notice under section 158BC/BD the assessing officer should have to see that assessee has an ‘undisclosed income’. The case of assessee that assessee has accounted for all his income even in some papers found during search in case of M/s Super Forgings & Steels-Ltd. all that income has been disclosed. Not only that this assessee came into wdstence only on March, 1993, and income for asst. yrs. 1995-96, 1996-97 and 1997-98 the assessee has approached the Settlement Commission regarding its income for these years which should be the income of this assessee in these years that will be settled in the settlement proceedings. For all these three years will be settled by the Settlement Commission.
When neither assessing officer has any information regarding ‘undisclosed income’ of the assessee nor there is any scope for assessing the income of assessee by him, for the asst. yrs. 1995-96 to 1997-98, there is no justification of issue of notice to assessee under section 158BC/BD.
7. Chapter XIX-A deals with the settlement of cases. Sec. 245B provides that the Central Government shall constitute a commission to be called the Incometax Settlement Commission for the settlement of cases under this Chapter. Clause (b) of s. 245A defines the case. “Case” means any proceeding under this Act for the assessment or reassessment of any person in respect of any year or years, or by way of appeal or revision in connection with such assessment or reassessment, which may be pending before an IT authority on the date on which an application under sub-section (1) of s. 245C is made.
Provisions of s. 245F provides the power and procedure of Settlement Commission. Statute has conferred all the powers on Settlement Commission, which are vested in an IT authority under this Act and Settlement Commission subject to the provisions of sub-section (3) of s. 245F has exclusive jurisdiction to exercise the powers and perform the functions of an IT authority under this Act in relation to the case. However, sub-section (4) of s. 245F provides that for the removal of doubt, it is hereby declared that, in the absence of any express direction by the Settlement Commission to the contrary, nothing in this Chapter shall affect the operation of the provisions of this Act insofar as they relate to any matter other than those before the Settlement Commission.
From the above referred provisions it appears that if some matter has been admitted by the settlement Commission then the Settlement Commission will have all the exclusive powers of assessing officer regarding the dispute of income pending before it. No other authority can assess the income which is pending before the Settlement Commission.
8. A notice under section 158BC, Annexure ‘E’ issued on 24th Dec., 1997, to the assessee directing him to file the return in prescribed Form No. 2B and be delivered in his office within 16 days. There was no search in case of this assessee. The search was in case of M/s Super Forgings & Steels Ltd. only on the basis of some papers found during search, impugned notice has been issued to the assessee. M/s Super Forgings & Steels Ltd. has filed the petition for settlement and its application has been admitted. Now the matter is pending before the SettlementCommission. The assessing officer is not proceeding with the assessments in case of M/s Super Forgings & Steels Ltd. as the matter is pending before the Settlement Commission.
9. The assessee-company came into existence only in March, 1993, and all the three relevant assessment years that is 1995-96, 1996-97 and 1997-98 assessee’s application has been admitted by the Settlement Commission and now the income of the assessee for asst. yrs. 1995-96, 1996-97 and 1997-98 is the subject-matter of settlement before the Settlement Commission.
10. When the search was conducted in case of M/s Super Forgings & Steels Ltd. and that company has approached the Settlement Commission, the assessing officer is not proceeding for assessments in pursuance of the notice under section 158BC, how the assessing officer can proceed for assessment in pursuance of the notice under section 158BC/BD in case of this assessee, when its income for these years is pending before Settlement Commission. Learned counsel for the Revenue though could not explain the justification how the assessing officer can proceed in case of this assessee for assessment in pursuance of the notice under section 158BC/BD.
11. Mr. Mullick learned counsel for the Revenue submits that the issue regarding income of the assessee for the asst. yrs. 1995-96 to 1997-98 is pending before Settlement Commission but that was a case of regular assessment and no matter regarding search is pending before the Settlement Commission.
12. On an application of the assessee before the Settlement Commission, Settlement Commission has admitted the application of the assessee for settlement of his income vide order dt. 27th May, 1998. For settlement of its total income, income-tax liability for asst. yrs. 1995-96, 1996-97 and 1997-98. How it can be said that income of these years were not subject-matter of the settlement before Settlement Commission. Not only that, but the attention of the applicant was drawn to the provision of s. 245H of the Income Tax Act, 1961, which provides power of Settlement Commission to grant immunity from prosecution and penalty but sub-section (2) of that section further provides that the immunity granted to a person under sub-section (1) may, at any time, be withdrawn by the Settlement Commission, if it is satisfied that such person concealed any particular material to the settlement or had given false evidence.
13. In case assessee gives false information, the immunities granted to it can be withdrawn in view of the provision of s. 245H. Therefore, no assessee submits the false information regarding his income in application for settlement of income before Settlement Commission. When there was an application for settlement of its income for the asst. yrs. 1995-96 to 1997-98 his entire income for these years is subject-matter of settlement, before Settlement Commission.
When assessee’s income is pending before the Settlement Commission how there can be any assessment of such income by other authority in the department. Can one income be estimated or assessed by two different authorities at the same time and if we accept the submission of the learned counsel for the Revenue that though the matter is pending before Settlement Commission even then assessing officer can proceed with the assessment in pursuance of notice under section 158BC/BD, that approach will be absurdity. Obviously when two different authorities will assess the same income for the same period in case of same assessee that both authorities cannot assess the same income for the same period and if both have different views regarding income of the assessee which income should be taxed? Therefore, I do not agree with learned counsel for the Revenue that when the income of the assessee for three assessment years is subject-matter of settlement before Settlement Commission assessing officer can proceed for assessment of income for the same years, in pursuance of notice under section 158BC/BD.
14. The provisions of s. 245F of the Act provides the Settlement Commission will have the powers conferred on it and shall have all the powers which are vested in an IT authority under this Act. In case where the application has been admitted for settlement of income of the assessee, sub-section (2) further provides that until an order is passed under sub-section (4) of s. 245D, subject to the provisions of sub-section (3) of that section, Settlement Commission have exclusive jurisdiction to exercise the powers and perform the functions of an IT authority under this Act in relation to the case.
Sub-s. (3) and sub-section (4) of s. 245D provides that wherein the application is allowed to be proceeded with under sub-section (1) of Settlement Commission may call for the relevant records from the CIT and after examining of such records Settlement Commissioner may also direct the CIT to make or cause to be made such further enquiry or investigation and furnish a report on the matters covered by the application. Sub-s. (4) further provides that after examination of the records and the report of the CIT, received and after giving an opportunity to the applicant and to the CIT to be heard, passed such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application, but referred to in the report of the CIT under sub-section (1) or sub-section (3).
15. In view of this provision when the assessee has approached the Settlement Commission for assessment of his income for asst. yrs. 1995-96, 1996-97 and 1997-98, 1 do not find any justification in the notice under section 158BC/BD. How the assessing officer can assess the same income which is subject-matter before the Settlement Commission.
16. Chapter W-B provides for block assessment years which means previous years are relevant to ten assessment years proceeding the previous year in which the search was conducted. Search has been conducted in case of M/s Super Forgings & Steels Ltd. on 20th Sept., 1996. Assessee-company came into existence only in March, 1993. Block period will go even downwards to 1993, when assessee-company was not in existence at all. When the assessee was not in existence before March, 1993, there is no question of tax any income before March, 1993.
17. It is pertinent to note that there was a search at the premises of M/s Super Forgings & Steels Ltd. and that assessee has gone for the Settlement Commission. Settlement Commission has admitted its application for assessing the concealed income. As the entire material was seized Settlement Commission will consider to assess the concealed income of M/s Super Forgings & Steels Ltd. and if the income is taxed in the hands of M/s Super Forgings & Steels Ltd. how that income can be assessed once again in the hands of this assessee. Therefore, unless it is found that some income out of the seized document does not belong to M/s Super Forgings & Steels Ltd. only thereafter it can be considered that that income whether belong to the assessee at all. Therefore, unless the loss in case of M/s Super Forgings & Steels Ltd. is settled by the Settlement Commission (sic). On this ground also there is no justification to issue the notice under section 158BC/BD to the assessee.
18. Admitted facts are that notice under section 158BC/BD has been issued to assessee consequent to search in case of M/s Super Forgings & Steels Ltd. Similar notice was issued to M/s Super Forgings & Steels Ltd. That assessee filed application before Settlement Commission, its application is admitted by Settlement Commission, therefore, the assessing officer is not proceeding to assess the income of Ws Super Forgings & Steels Ltd. in pursuance of notice under section 158BC.
How the assessing officer can proceed to assess the income of assessee, when the dispute regarding assessable income for asst. yrs. 1995-96 to 1997-98 is also pending before Settlement Commission.
19. To sum up :
No. 1 : Income Tax Officer has no material to justify that assessee had undisclosed income which can be assessed under Chapter XIV-B of the Act.
No. 2 : Search was in case of M/s Super Forgings & Steels Limited and not in the case of this assessee, while the assessing officer has not proceeded to assess the income of M/s Super Forgings & Steels Ltd. in pursuance of notice, under section 168BC, on the basis that the dispute regarding income of M/s Super Forgings & Steels Ltd. is pending before Settlement Commission. How the assessing officer can proceed to assess the income of the assessee for asst. yrs. 1995-96 to 1997-98 in pursuance of notice under section 158BC/BD, while the matter regarding the total income for those years also pending before Settlement Commission ?
No. 3 : Any income which is assessable on the basis of seized papers, the matter to assess that income is pending on application of M/s Super Forgings & Steels Ltd. If that income is taxed in the hands of M/s Super Forgings & Steels Ltd. how that can be again assessed in the hands of this assessee ?
No. 4 : Assessee came into existence in March, 1993, and till the date of search the relevant assessment years ate 1995-96 to 1997-98 and for all these years whatever be the income of assessee ? The matter is pending before Settlement Commission. Therefore, the total income from whatever source that can be considered by the Settlement Commission.
No. 5: When the application of the assessee for settlement of income has been admitted by the Settlement Commission as in case of Mrs. Super Forgings & Steels Ltd. for the income of those years no parallel proceedings should be continued even the proceedings in pursuance of notice under section 158BC/BD of the Act.
In the result notice dt. 24th Dec., 1998, issued under section 158BC/BD is quashed, petition is allowed.