TAPAN KUMAR DUTTAversusCOMMISSIONER OF INCOME TAX, WEST BENGAL

338                      [2018]REPORTS
               SUPREME COURT    4 S.C.R. 338               [2018] 4 S.C.R.


A                          TAPAN KUMAR DUTTA
                                        v.
           COMMISSIONER OF INCOME TAX, WEST BENGAL
                         (Civil Appeal No. 2014 of 2007)
B                               APRIL 24, 2018
        [R. K. AGRAWAL AND ABHAY MANOHAR SAPRE, JJ.]
             Income Tax Act, 1961 – ss.158BD – Undisclosed income
      belonging to any person other than the searched person –
      Jurisdiction of assessing officer under s.158BD – Held: Notice
C
      under s.158BD can be issued to a person with respect to whom
      search was not conducted but undisclosed income was found as
      belonging to such person from the material seized from the residence
      or business premises of the person with respect to whom search was
      made under s.132 – s.158BD speaks of the condition that “where
D     the Assessing Officer is satisfied that any undisclosed income belongs
      to any person other than the searched person”, which means that
      the Assessing Officer must have to be satisfied that any undisclosed
      income belongs to any person other than the searched person – In
      the instant case, it is not in dispute that the Assessing Officer, who
      is assessing the Firm as well as the Appellant, is the same person –
E
      In other words, the same Assessing Officer having jurisdiction over
      the searched person can proceed against the present Appellant –
      Therefore, the Assessing Officer had jurisdiction to proceed against
      the present Appellant to make a block assessment under Chapter
      XIV-B of the IT Act, as he was prima facie satisfied that any
F     undisclosed income belongs to the appellant.
            Income Tax Act, 1961 – ss.158BC – Jurisdiction of Assessing
      Officer under s.158BC – Held: Before issuing the notice under
      s.158BC against the searched person, no satisfaction that
      undisclosed income belongs to the searched person is necessary as
G     s.158BC speaks of a condition that where any search had been
      conducted under s.132 or books of accounts or other documents
      or assets or requisition under s.132A in case of any person, then,
      the Assessing Officer shall serve notice to such person requiring
      him to furnish within specified time a return in the prescribed form.
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                                       338
  TAPAN KUMAR DUTTA v. COMMISSIONER OF INCOME                          339
               TAX, WEST BENGAL

      Dismissing the appeal, the Court                                 A
      HELD: 1. Notice under Section 158BD can be issued to a
person with respect to whom search was not conducted but
undisclosed income was found as belonging to such person from
the material seized from the residence or business premises of
the person with respect to whom search was made under Section          B
132. There must be prima facie satisfaction on the part of the
Assessing Officer on the basis of searched books of accounts or
other documents or assets that any undisclosed income belongs
to any person other than the searched person. The jurisdiction
under Section 158BD is based on the satisfaction of the Assessing
Officer that:- (a) there is undisclosed income; (b) such undisclosed   C
income does not belong to the person with respect to whom action
under Section 132 was taken and; (c) such undisclosed income
belongs to some other person. Therefore, mere disclosure made
by the assessee before the authority cannot be the basis for
reaching a satisfaction that any undisclosed income belongs to         D
him unless the seized books of accounts or other documents or
assets are perused, examined or verified by the concerned
Assessing Officer. In the instant case, only after being satisfied
that the appellant fell within the ambit of Section 158BD, a notice
was issued by the Assessing Officer. [Paras 8, 9][343-F-G; 344-
D-F]                                                                   E

       2. A conjoint reading of Sections 158BC and 158BD made
it clear that no satisfaction to the effect that undisclosed income
belongs to the searched person is necessary before issuing the
notice under Section 158BC against the searched person as
Section 158BC speaks of a condition that where any search had          F
been conducted under Section 132 or books of accounts or other
documents or assets or requisition under Section 132A in case
of any person, then, the Assessing Officer shall serve notice to
such person requiring him to furnish within specified time a return
in the prescribed form. [Para 10][344-F-G]                             G
      CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2014
of 2007.
      From the Judgment and Order dated 17.11.2005 of the High Court
of Calcutta in Income Tax Appeal No. 174 of 2005.
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340            SUPREME COURT REPORTS                           [2018] 4 S.C.R.


A           Salman Khurshid, Sr. Adv., K. V. Mohan, Ananda Sen,
      Ms. Sanchita Ali, Zatin Khurshid, Advs. for the Appellant.
            K. Radhakrishna, Sr. Adv., Rupesh Kumar, Tushar Bhakshi,
      Mrs. Anil Katiyar, Advs. for the Respondent.
            The Judgment of the Court was delivered by
B
             R. K. AGRAWAL, J. 1. This appeal has been filed against the
      impugned final judgment and order dated 17.11.2005 passed by the High
      Court at Calcutta in Income Tax Appeal No. 174 of 2005 whereby a
      Division Bench of the High Court dismissed the appeal of the appellant
      herein while upholding the judgment and order dated 29.04.2005 passed
C     by the Income Tax Appellate Tribunal (in short ‘the Tribunal’): ‘D’ Bench,
      Kolkata in IT(SS) A No. 174/Kol/2003.
            2. Brief facts:
            (a) The Appellant is a partner in a Partnership Firm by name
D     “Nityakali Rice Mill” (in short ‘the Firm’). On 06.11.1998, a search was
      conducted at the business premises of the Firm by the Income Tax
      Department and several documents/books including a sum of Rs. 34
      lakhs were seized.
              (b) Thereafter, on 09.09.1999, a notice was issued to the Appellant
      by the Assessing Officer under Section 158BC of the Income Tax Act,
E
      1961(in short ‘the IT Act’) to prepare and file a true and correct return
      of his total income including the undisclosed income in respect of which
      he was assessed for the block period 1989-90 to 1999-2000. On the
      very same day, a separate notice under Section 158BC was issued in
      the name of the said Firm by the very same Assessing Officer. Pursuant
F     to the same, the Appellant filed his block return for the aforesaid period
      on 08.11.1999 declaring his aggregate undisclosed income at Rs 14 lakhs.
              (c) Meanwhile, an application was filed by the Appellant before
      the Additional Commissioner of Income Tax, Asansol, praying for his
      intervention and issue of necessary direction to the Assessing Officer
G     under Section 144A of the IT Act. On 14.08.2000, the Additional
      Commissioner perused the records and directed the Assessing Officer
      to take appropriate steps in order to determine the income of the assessee.
      The Additional Commissioner issued separate directions under Section
      144A of the IT Act in the cases of M/s. Nitya Kali Rice Mill, Kartick
      Dutta, Shambhu Mondal and Tamal Mondal and the Draft Assessment
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   TAPAN KUMAR DUTTA v. COMMISSIONER OF INCOME                                  341
         TAX, WEST BENGAL [R. K. AGRAWAL, J.]

Order under Section 158BC of the IT Act was sent to the Joint                   A
Commissioner of Income Tax, Burdwan, Range-2 for approval which
was returned by the Joint Commissioner on 16.11.2000 stating that no
warrant for authorization was issued in the names of the persons
mentioned in the Draft Assessment Order.
       (d) On 20.11.2000, Block Assessment Order was passed by the              B
Deputy Commissioner of Income Tax stating that the return filed in the
case of the Firm should be accepted as ‘Nil’ income and also directed to
initiate proceedings against the Appellant for the assessment of
undisclosed income for the block period under Section 158BD of the IT
Act. Pursuant to the order dated 20.11.2000, a fresh notice under Section
158BC read with Section 158BD of the IT Act was issued to the Appellant         C
to file the block return for the period 1989-90 to 1999-2000.
Consequently, the Appellant intimated the Assessing Officer through a
letter dated 21.10.2002 that the block return has already been filed for
the aforesaid period on 08.11.1999. Further, the issue of fresh notice
does not extend the time allowed for completion of the assessment under         D
Chapter XIV of the IT Act.
      (e) On 29.11.2002, the Assessing Officer passed the assessment
order while assessing the undisclosed income of the Appellant to the
tune of Rs. 3,48,56,430/-. Being aggrieved, the Appellant preferred an
appeal being No. 133/CIT(A)/Bwn/02-03 before the Commissioner of                E
Income Tax (Appeals). Vide order dated 18.09.2003, the Commissioner
of Income Tax (Appeals) held that the undisclosed income of the block
period in the instant case should be taken in the aggregate sum of
Rs. 66,55,911/- as against Rs. 3,48,56,430/- as assessed by the Assessing
Officer.
                                                                                F
       (f) Being aggrieved, the Appellant preferred an Appeal being
No. IT(SS)/174/Kol/2003 before the Tribunal. At the same time, the
Revenue also went in appeal by filing IT (SS) 178/K/2003 before the
Tribunal. The Tribunal, vide order dated 29.04.2005, dismissed the appeal
filed by the Appellant while partly allowing the appeal filed by the Revenue.
Being aggrieved, the Appellant filed an appeal being No. ITA 174 of             G
2005 before the High Court. Vide judgment and order dated 17.11.2005,
the Division Bench had dismissed the appeal filed by the assessee.
      (g) Being aggrieved by the judgment and order dated 17.11.2005,
the Appellant has preferred this appeal before this Court.
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342             SUPREME COURT REPORTS                            [2018] 4 S.C.R.


A           3. Heard Mr. Salman Khurshid, learned senior counsel for the
      appellant and Mr. K. Radhakrishna, learned senior counsel for the
      respondent and perused the records.
            Point(s) for consideration:-
            4. The only point for consideration before this Court is whether in
B     the facts and circumstances of the present case, the issue of Second
      (Fresh) Notice under Section 158BD of the IT Act is valid or not?
            Rival contentions:-
             5. Learned senior counsel for the appellant strenuously contended
C     that the first notice issued under Section 158BC of the IT Act dated
      09.09.1999 is the valid notice and the assessment has to be made in
      pursuance thereof and the AO has no authority to issue the second notice
      under Section 158BD. Learned senior counsel further contended that
      the Firm as well as the Appellant were assessed by the same Assessing
      Officer wherein Section 158BD has no application because it applies
D     only in the case where the Assessing Officer assessing the Firm as well
      as the Appellant is different. The Assessing Officer rightly issued the
      notice under Section 158BC both upon the Firm as well as upon the
      Appellant which resulted in the draft assessment and the proceedings
      on the basis of the notice under Section 158BD are not valid. Learned
E     senior counsel finally contended that the purported proceedings under
      Section 158BD are clearly invalid and without jurisdiction.
              6. On the other hand, learned senior counsel for the respondent
      submitted that the Appellant has identified the seized documents in respect
      of his personal business and the bank accounts in the name of Kartick
F     Dutta and Shambhu Mondal are also in respect of his personal business,
      hence, the undisclosed income earned during the block period belongs to
      the Appellant and not the Firm. Learned senior counsel further submitted
      that the notice under Section 158BD can be issued to a person with
      respect to whom search was not conducted but undisclosed income was
      found as belonging to such person from the material seized from the
G     residence or business premises of the person with respect to whom
      search was made under Section 132. The Assessing Officer, after
      recording satisfaction to the effect, rightly issued the notice under Section
      158BC read with Section 158BD to the Appellant and assessed the income
      to the tune of Rs. 3,48,56,430/-. Learned senior counsel further submitted
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   TAPAN KUMAR DUTTA v. COMMISSIONER OF INCOME                                   343
         TAX, WEST BENGAL [R. K. AGRAWAL, J.]

that in the case at hand the satisfaction of the Assessing Officer is apparent   A
and there is no infirmity in the issue of notice under Section 158BC read
with Section 158BD of the IT Act to the Appellant. Learned senior
counsel finally submitted that the High Court was right in rejecting the
claim of the Appellant and no interference is sought for by this Court in
the matter.
                                                                                 B
       Discussion:-
       7. In the instant case, it is a matter of dispute that second notice
issued on 20.11.2000 is not valid and competent since the first notice
issued by the same Assessing Officer dated 09.09.1999 under Section
158BC was valid and the assessment ought to be made in pursuance of              C
that notice and, therefore, the Assessing Officer has no authority to
issue the second notice.
     8. In this view of the matter, it is pertinent to mention Section
158BD of the IT Act which reads as under:-
       “158BD. Undisclosed income of any other person.- Where                    D
       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         E
       or requisitioned shall be handed over to the Assessing Officer
       having jurisdiction over such other person and that Assessing
       Officer shall proceed under section 158BC against such other
       person and the provisions of this Chapter shall apply accordingly.”
       It can be seen that notice under Section 158BD can be issued to           F
a person with respect to whom search was not conducted but undisclosed
income was found as belonging to such person from the material seized
from the residence or business premises of the person with respect to
whom search was made under Section 132. Section 158BD speaks of
the condition that “where the Assessing Officer is satisfied that any
undisclosed income belongs to any person other than the searched person”,        G
which means that the Assessing Officer must have to be satisfied that
any undisclosed income belongs to any person other than the searched
person. In the present case, it is not in dispute that the Assessing Officer,
who is assessing the Firm as well as the Appellant, is the same person.
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344             SUPREME COURT REPORTS                            [2018] 4 S.C.R.


A     In other words, the same Assessing Officer having jurisdiction over the
      searched person can proceed against the present Appellant. Therefore,
      the present Assessing Officer had jurisdiction to proceed against the
      present Appellant to make a block assessment under Chapter XIV-B of
      the IT Act, in case the Assessing Officer is prima facie satisfied that
      any undisclosed income belongs to the present Appellant.
B
            9. It is well settled that there must be prima facie satisfaction on
      the part of the Assessing Officer on the basis of searched books of
      accounts or other documents or assets that any undisclosed income
      belongs to any person other than the searched person. In support of the
      contention that there was prima facie satisfaction of the Assessing
C     Officer, his order was based upon the material on record that undisclosed
      income belonged to the present Appellant, when he issued the notice
      under Section 158BC on 09.09.1999. The jurisdiction under Section
      158BD is based on the satisfaction of the Assessing Officer that:-
             (a) there is undisclosed income;
D
            (b) such undisclosed income does not belong to the person with
      respect to whom action under Section 132 was taken and;
             (c) such undisclosed income belongs to some other person.
             Therefore, mere disclosure made by the present assessee before
E     the authority cannot be the basis for reaching a satisfaction that any
      undisclosed income belongs to him unless the seized books of accounts
      or other documents or assets are perused, examined or verified by the
      concerned Assessing Officer. We are of the opinion that in the present
      case, only after being satisfied that the Appellant fell within the ambit of
F     Section 158BD, a notice was issued by the Assessing Officer.
               10. Further, on a conjoint reading of Sections 158BC and 158BD,
      it is clear that no satisfaction to the effect that undisclosed income belongs
      to the searched person is necessary before issuing the notice under
      Section 158BC against the searched person as Section 158BC speaks
      of a condition that where any search had been conducted under Section
G
      132 or books of accounts or other documents or assets or requisition
      under Section 132A in case of any person, then, the Assessing Officer
      shall serve notice to such person requiring him to furnish within specified
      time a return in the prescribed form. Therefore, at the time when notice
      under Section 158BC was issued by the Assessing Officer to M/s Nitya
H
   TAPAN KUMAR DUTTA v. COMMISSIONER OF INCOME                                  345
         TAX, WEST BENGAL [R. K. AGRAWAL, J.]

Kali Rice Mill, it was not necessary for the Assessing Officer to arrive        A
at a satisfaction that any undisclosed income belongs to M/s Nitya Kali
Rice Mill. A search was conducted against M/s Nitya Kali Rice Mill
under Section 132 of the IT Act. Since the notice under Section 158BC
issued to M/s Nitya Kali Rice Mill and the notice under Section 158BC
issued to the Appellant were on the same day i.e., on 09.09.1999, the
                                                                                B
question of coming to a satisfaction that any undisclosed income based
on seized books of accounts or documents or assets belonged to the
present Appellant did or could not arise inasmuch as no reasonable or
prudent man can come to such satisfaction unless the seized books of
accounts or documents or assets are perused, examined and verified.
Therefore, the Assessing Officer was right in arriving at a decision that       C
the notice under Section 158BC issued to the present Appellant on
09.09.1999 did not satisfy the requirement of Section 158BD of the IT
Act. He, therefore, rightly proceeded to issue fresh notice (Second
Notice) under Section 158BD on 20.11.2000 after recording a satisfaction
that any undisclosed income based on seized books of account or
                                                                                D
document or assets or other materials may belong to the Appellant. In
fact, in the present case, the AO has himself come to a conclusion that
the notice issued under Section 158BC on 09.09.1999 to the assessee
was not in conformity with the requirement of Section 158BD of the IT
Act. The Assessing Officer proceeded under Section 158BD of the IT
Act not in pursuance of any direction by the Joint Commissioner but             E
after being satisfied that the case squarely fell within the ambit of Section
158BD of the IT Act.
       11. A perusal of Section 158BD of the IT Act makes it clear that
the Assessing Officer needs to satisfy himself that the undisclosed income
belongs to any person other than the person with respect to whom the            F
search was made under Section 132 or whose books of accounts or
other documents or assets were requisitioned under Section 132A. The
very object of the Section 158BD is to give jurisdiction to the Assessing
Officer to proceed against any person other than the person against
whom a search warrant is issued. Although Section 158BD does not
speak of ‘recording of reasons’ as postulated in Section 148, but since         G
proceedings under Section 158BD may have monetary implications, such
satisfaction must reveal mental and dispassionate thought process of the
Assessing Officer in arriving at a conclusion and must contain reasons
which should be the basis of initiating the proceedings under Section
158BD.                                                                          H
346              SUPREME COURT REPORTS                        [2018] 4 S.C.R.


A            12. Pursuant to the above, we are of the opinion that the order
      dated 14.08.2000, passed by the Additional Commissioner of Income
      Tax (Appeals), under Section 144A of the IT Act whereby he, inter-alia,
      directed the Assessing Officer to take the undisclosed income of the
      Appellant including from the benami business in the name of two other
      persons at an aggregate sum of Rs 17 lakhs as against Rs 14 lakhs
B
      declared by the Appellant in his block return was passed in contravention
      of law and is not sustainable in the eyes of law.
            13. In view of the foregoing discussion, we are of the considered
      opinion that the High Court was right in passing the judgment and order
      dated 17.11.2005 and no interference is sought for by this Court. Hence,
C     the appeal is dismissed with no order as to costs.


      Devika Gujral                                             Appeal dismissed.


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