IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE B.P.RAY MONDAY, THE 15TH NOVEMBER 2010 / 24TH KARTHIKA 1932 ITA.No. 451 of 2009() --------------------- AGAINST THE ORDER DATED 09/05/2006 IN IT(S & S) 37/COCH/2004 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/RESPONDENT ---------------------------------------- THE COMMISSIONER OF INCOME TAX, CALICUT. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/APPELLANT ------------------------ SHRI.V.P.AHAMMED KUTTY HAJI, VALLA PEEDIAKKAL HOUSE, P.O.PANTARANGADI, MALAPPURAM DISTRICT. ADV. DR.K.B.MUHAMED KUTTY, SENIOR ADVOCATE FOR R SRI.K.M.FIROZ FOR R THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 15/11/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR & BHABANI PRASAD RAY, JJ. .................................................................... I.T. Appeal No.451 of 2009 .................................................................... Dated this the 15th day of November, 2010. JUDGMENT Ramachandran Nair, J. Question raised is whether the Tribunal was justified in cancelling the assessment made under Section 158BC on the respondent-assessee pursuant to search made in the premises of another assessee by name K.T.Moosa. We have heard Standing Counsel for the appellant and Senior counsel Dr.K.B.Mohammedkutty appearing for the respondent-assessee. 2. After hearing both sides and after going through the Tribunal's order, we notice that the Tribunal has not considered even the facts that led to the issue of notice and assessment against the respondent under Section 158BC of the Income Tax Act. In fact, the matter is considered in detail by the C.I.T.(Appeals) wherein he held that assessment has to be treated as one made under Section 158BC read with Section 158BD. In fact, it is the admitted position that respondent-assessee could be proceeded with for assessment under ITA No.451/2009 2 Section 158BD which authorises assessment of a person about whom materials are seized while searching the premises of another person against whom warrant was issued under Section 132 of the Income Tax Act. In fact, Section 158BD does not provide for issue of separate notice. Of course the proceeding for assessment authorised under Section 158BD is possible only after the Assessing Officer who assess the person searched records his satisfaction and transfers the file to the Assessing Officer of the person to be assessed under Section 158BD. In this case, the peculiar feature of the case is that the Assessing Officer who is the Assistant Commissioner, Central Circle, Kozhikode, happens to be the same for both the assessees namely, Sri.K.T.Moosa and the respondent-assessee. One another matter brought to our notice is the letter addressed by Sri.K.T.Moosa to the Assistant Director, Investigation, Kozhikode, on 30.11.1998 wherein respondent-assessee is described as the power of attorney holder of Sri.K.T.Moosa. In fact, both the assessees were simultaneously searched, though the search in the assessee's premises led to no recovery of materials. However, from the materials gathered from the premises of ITA No.451/2009 3 Sri.K.T.Moosa, the department noticed undisclosed income earned by the respondent-assessee. When notice was issued under Section 158BC against the respondent-assessee, the assessee did not raise any objection about want of jurisdiction on account of non-mentioning of Section 158BD in the notice, but respondent-assessee filed return in Form 2B and even returned an undisclosed income of Rs.3,77,870/-. It is very pertinent to note the finding of the first appellate authority that the notice and the proceeding initiated should be treated as one under Section 158BC read with Section 158BD, more so when the Assessing Officer is one and the same for the assessee searched and the respondent-assessee. We do not want to conclude anything from the facts stated above. However, we feel the Tribunal has just decided the matter following a Larger Bench decision of the Tribunal in Delhi. In fact, there are ever so many judgments rendered even by this court on the validity of block assessment. In the first place, what is to be noted is that Section 158BD adopts the same procedure for block assessment in respect of the assessee other than the searched assessee. Since the Tribunal has not considered the validity of block assessment with ITA No.451/2009 4 reference to the peculiar facts of this case, we feel the Tribunal should reconsider the matter and for the sake of completeness, we direct the Tribunal to decide the jurisdictional question as well as the case on merits after hearing both sides. We specifically make it clear that our observations above should not be treated as findings of this court. Since it is a very old case and since the assessee itself has offered substantial amount of undisclosed income, we feel department can show some leniency and go for settlement, for which the assessee is directed to approach the Commissioner of Income Tax. C.N.RAMACHANDRAN NAIR Judge BHABANI PRASAD RAY Judge pms