REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

                  CIVIL APPEAL NO. 2014 OF 2007

Tapan Kumar Dutta  .... Appellant(s)

Versus

Commissioner of Income Tax, West Bengal     .... Respondent(s)

                  J U D G M E N T

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  by  the  Income  Tax

Appellate Tribunal (in short ‘the Tribunal’): ‘D’ Bench, Kolkata

in IT(SS) A No. 174/Kol/2003.

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2) Brief facts:

(a) The Appellant is a partner in a Partnership Firm by name

“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, 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 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

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the Assessing Officer 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 Order under Section 158BC of the IT Act was sent

to the Joint 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  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

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158BC read with Section 158BD of the IT Act was issued to

the Appellant 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

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  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) Being aggrieved, the Appellant preferred an Appeal being

No.  IT(SS)/174/Kol/2003  before  the  Tribunal.  At  the  same

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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

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.  

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 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?

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Rival contentions:-

5) Learned  senior  counsel  for  the  appellant  strenuously

contended 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 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 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

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seized documents in respect of his personal business and the

bank accounts in the name of Kartick 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 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 that

in the case at hand the satisfaction of the Assessing Officer is

apparent 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

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High Court was right in rejecting the claim of the Appellant

and no interference is sought for by this Court in the matter.  

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 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 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  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 a person with respect to whom search was not conducted

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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”,  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.  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.  

9) It  is  well  settled  that  there  must  be  prima  facie

satisfaction on the part of the Assessing Officer on the basis of

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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 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;  

(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  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

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case, only after being satisfied that the Appellant fell within

the  ambit  of  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 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 Kali  Rice Mill,  it  was not  necessary for  the Assessing

Officer to arrive 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

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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

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 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  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

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under Section 158BD of the IT Act not in pursuance of any

direction by the Joint Commissioner but 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  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 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.

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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 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, the appeal is dismissed

with no order as to costs.

...…………………………………J.             (R.K. AGRAWAL)

…………….………………………J.            (ABHAY MANOHAR SAPRE)

NEW DELHI; APRIL 24, 2018.  

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