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Sakthivel Bankers v. Rana Investments
Factual and Procedural Background
A search was conducted at the premises of one Lakshmanan and documents were recovered, including papers relating to eight firms in which Lakshmanan and his wife were partners and certain documents concerning his wife. Lakshmanan gave a statement offering a sum of Rs. 125 lakhs as undisclosed income and stated he was unable to furnish the names of persons in whose favour credits had been entered in the books of those firms and of his wife. Notices were issued simultaneously to Lakshmanan, to his wife and to the eight firms. Returns were filed in response to those notices.
The Tribunal directed that the matter be remanded to the Assessing Officer. The assessee appealed against the Tribunal's remand direction. The court heard counsel for the assessee and declined to interfere with the Tribunal's order, dismissing the appeal.
Legal Issues Presented
- Whether the Tribunal's order directing remand of the matter to the Assessing Officer called for interference by this Court.
- Whether issuance of notices to the eight firms and to Lakshmanan's wife (although the search warrant was not issued against them) was valid, having regard to section 158BD.
- Whether absence of mention of a particular provision in the notice vitiated the ultimate order.
- Whether remanding the case to the Assessing Officer effectively and impermissibly extended the period of limitation prescribed under section 158BE.
- Whether, under section 158BG, the Commissioner was under a duty to issue notice to the assessee before approving the order proposed to be made by the Assessing Officer.
Arguments of the Parties
Appellant's Arguments
- The Tribunal's remand order should be interfered with (the appeal sought such interference).
- The remand has the effect of stretching or enlarging the period of limitation prescribed under section 158BE and that such enlargement is impermissible.
- Under section 158BG, the Commissioner is under a duty to issue notice to the assessee before approving the order proposed to be made by the Assessing Officer.
- Implicitly, that absence of mention of the provision in the notice may vitiate the resulting order.
Respondent's Arguments
This opinion does not contain a detailed account of the respondent's legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Lakshmi Jewellary v. Deputy Commissioner Of Income-Tax, [2001] 252 ITR 712 (Mad) (T.C No. 408 of 2000) | Held that the limitation prescribed under section 158BE is for making the initial order and does not fetter the appellate authority from remanding the matter to the original authority to redo the matter if defects are found in the appellate order; section 158BE does not restrict the appellate authority's power to remand. | The court relied on this precedent to reject the contention that remand impermissibly extended the period of limitation under section 158BE and to reject a similar contention regarding the requirement of a prior notice under section 158BG. |
Court's Reasoning and Analysis
The court reviewed the factual matrix: documents recovered at the search at Lakshmanan's premises included material concerning eight firms and his wife; Lakshmanan admitted undisclosed income and could not furnish certain names; notices were issued to Lakshmanan, his wife and the eight firms; returns were filed in response.
On the validity of notices to persons other than the searched person, the court relied on section 158BD (quoted in the opinion) which provides that where the Assessing Officer is satisfied that undisclosed income belongs to a person other than the person searched, seized or requisitioned, the seized books or documents shall be handed over to the Assessing Officer having jurisdiction over that other person, and that Assessing Officer shall proceed and the provisions of the Chapter shall apply accordingly. Applying section 158BD, the court found the notices issued to the eight firms and to Lakshmanan's wife were valid when the records had been transferred to the Assessing Officer having jurisdiction over them.
The court held that absence of mention of a specific provision in the notice did not vitiate the ultimate order where returns had been filed by the recipients of the notices.
Regarding limitation under section 158BE, the court relied on its earlier decision in Lakshmi Jewellary, which held that the limitation is for making the initial order and does not prevent an appellate authority from remanding the matter to the original authority to correct defects. Thus, remand does not amount to an impermissible extension of the statutory limitation period.
On the contention under section 158BG, the court observed that the section requires the Assessing Officer to secure the approval of the Commissioner before making the assessment order; it does not require the Commissioner to issue a notice to the assessee before granting such approval. As approval had been obtained, there was no defect of such gravity as to render the initial order void ab initio.
Holding and Implications
APPEAL DISMISSED.
Direct effect on the parties:
- The Tribunal's direction to remand the matter to the Assessing Officer stands and is not interfered with.
- The notices issued to the eight firms and to Lakshmanan's wife were held to be valid under section 158BD.
- The contention that remand impermissibly extended the period under section 158BE was rejected.
- The contention that section 158BG required the Commissioner to issue notice to the assessee before approving the Assessing Officer's proposed order was rejected; approval was obtained and no voiding defect was found.
Broader implications:
The court applied existing statutory interpretation and precedent (Lakshmi Jewellary) rather than announcing a new legal principle; no new precedent was set beyond the application of the cited authority and statutory provisions.
No costs.
R. Jayasimha Babu, J.:— We have heard learned counsel for the assessee at considerable length. But we are not persuaded to hold that the order made by the Tribunal, directing remand of the matter to the Assessing Officer calls for any interference.
2. Admittedly, the search was conducted in the premises of one Lakshmanan and certain documents were recovered during that search, which included documents pertaining to eight firms in which Lakshmanan and his wife were partners and also certain documents concerning his wife. Lakshmanan gave a statement, offering a sum of Rs. 125 lakhs as undisclosed income and pleaded inability to furnish the names of persons in whose favour credits have been entered in the books of account of those firms and of his wife. Notices were issued simultaneously to Lakshmanan, to his wife and to the eight firms. Lakshmanan had no doubt whatsoever as to the purpose for which the notice was issued and he being the person, who apparently was in control of the affairs of the firm of which he was a partner, the firms as also his wife were not in doubt as to the purpose for which the notice was issued or the source of the authority of the officer issuing the notice.
3. In fact, in response to the notices returns were filed by all of them. Absence of mention of the provision in the notice was, therefore, not a circumstance which could be said to vitiate the ultimate order.
4. The fact that notice was issued to the eight firms and to the wife of Laksh-manan, even though the search warrant was not issued against them, is of no consequence, having regard to section 158BD, which reads as follows:
“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 against such other person and the provisions of this Chapter shall apply accordingly.”
5. It has been rightly found by the Tribunal that the notices issued by the Assessing Officer, to whom the records of the persons against whom notices had been issued, had been transferred, were perfectly valid and the application of the provisions of Chapter XIV-B was equally valid in their cases as well.
6. Learned counsel next contended that the ultimate order of the Tribunal remanding the case to the Assessing Officer has the effect of stretching the period of limitation prescribed under section 158BE and that such enlargement of the period of limitation is wholly impermissible. We have, in the case of Lakshmi Jewellary v. Deputy Commissioner Of Income-Tax, [2001] 252 ITR 712 (Mad) (T.C No. 408 of 2000), wherein a similar argument was advanced before us, held that the limitation prescribed under section 158BE is only for the purpose of making the initial order and that it does not impose any fetters on the appellate authority to direct the original authority to redo the matter by reason of defects having been found in the original order made by the appellate authority. Section 158BE does not also impose any fetters on the power of the appellate authority to remand the matter and to require the original authority to make a fresh order.
7. It was last contended that under section 158BG, the Commissioner is under a duty to issue notice to the assessee before approving the order proposed to be made by the Assessing Officer. We have already rejected a similar argument advanced before us at the instance of another assessee in Lakshmi Jewellary v. Deputy Commissioner Of Income-Tax, [2001] 252 ITR 712 (Mad) (T.C No. 408 of 2000). Section 158BG nowhere provides for the issuance of such a notice to the assessee by the Commissioner. That section only requires the Assessing Officer to secure the approval of the Commissioner before making the order of assessment. Admittedly, such approval has been obtained. There was, therefore, no defect of such gravity as to render the initial order void ab initio. There is no merit in this appeal and the same is accordingly dismissed. No costs.
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