2001 (1) TMI 33 - HC - Income Tax

Summary

Issues Involved:
1. Validity of notice u/s 158BD.
2. Satisfaction of undisclosed income.
3. Genuineness of transactions.
4. Applicability of sections 68 and 69.
5. Completion of proceedings u/s 158BC.
6. Evidence supporting adverse conclusions.

Summary:

1. Validity of notice u/s 158BD:
The petitioner challenged the notice dated August 29, 2000, issued u/s 158BD of the Income-tax Act, 1961, by the Joint Commissioner of Income-tax, Special Range-2, Rajkot. The petitioner contended that there were no facts justifying the issuance of the notice as the condition precedent for satisfaction of undisclosed income belonging to any person other than the raided person was not met.

2. Satisfaction of undisclosed income:
The petitioner argued that the authorities did not find any books of account, documents, or assets indicating undisclosed income. The respondent, however, stated that during the search and consequent enquiry, it was revealed that the petitioner was involved in converting unaccounted funds into legally accounted funds through bogus sales and loans, corroborated by the statement of Mr. Mahendra H. Shah u/s 132(4).

3. Genuineness of transactions:
The petitioner claimed that all transactions were recorded in the books of account and were genuine. The respondent countered that the petitioner had made bogus sales to entities like Rajiv Sales Corporation, Sheetal Marketing, and Hiren Enterprise, which were found to be non-existent or small-time traders, thus indicating unaccounted income.

4. Applicability of sections 68 and 69:
The petitioner contended that sections 68 and 69 could not be applied at the time of issuing notice u/s 158BD but only during the computation of undisclosed income for the block period. The court rejected this contention, stating that the notice was based on sufficient material indicating undisclosed income.

5. Completion of proceedings u/s 158BC:
The petitioner argued that proceedings u/s 158BD could only be initiated after the completion of proceedings u/s 158BC against the raidees. The court dismissed this contention, referencing a similar case (Special Civil Application No. 10731 of 2000) where identical contentions were rejected.

6. Evidence supporting adverse conclusions:
The petitioner asserted that the respondent failed to produce evidence supporting the adverse conclusions. The court found that the respondent had disclosed sufficient material in the reply affidavit, indicating that the petitioner had converted unaccounted money into accounted money through bogus sales and loans.

Conclusion:
The court found no merit in the contentions raised by the petitioner and dismissed the petition with costs. The notice issued u/s 158BD was upheld, and the ad interim relief granted earlier was vacated.