2008 (4) TMI 543 - AT - Income Tax

Summary

Issues involved:
The appeal challenges the addition of Rs. 19,01,475 on account of bogus purchases in a block assessment u/s 158BD of the IT Act, 1961.

Additional Ground Raised:
The appellant contended that the notice u/s 158BD was illegal and invalid, citing legal precedents. The Tribunal admitted the additional ground as it was a purely legal issue.

Validity of Jurisdiction u/s 158BD:
The appellant argued that specific conditions must be met before invoking jurisdiction u/s 158BD, referring to legal judgments. The Department claimed that the Assessing Officer validly assumed jurisdiction. The satisfaction note was provided later.

Legal Precedents:
The Tribunal referred to the Supreme Court's judgment in Manish Maheshwari case, emphasizing the conditions to be satisfied for invoking u/s 158BD. It also cited a Chandigarh Tribunal decision regarding the timing of recording satisfaction.

Assessment of Evidence:
The Tribunal examined a letter detailing the Hawala bill racket involving the appellant. It noted that crucial material indicating undisclosed income was not handed over to the Assessing Officer. The belated recording of satisfaction was also highlighted, deeming the recourse to u/s 158BD illegal.

Judgment:
The Tribunal held that the provisions of u/s 158BD were not invoked lawfully, rendering the block proceedings illegal and without jurisdiction. Consequently, the block proceedings against the appellant were canceled, and the appeal was allowed. Other grounds were not adjudicated due to this decision.