2008 (10) TMI 666 - AT - Income Tax

Summary

Issues Involved:
1. Validity of proceedings u/s 158BD.
2. Jurisdiction of the Assessing Officer (A.O.).
3. Barred by limitation.
4. Merits of the additions made by the A.O.

Summary:

1. Validity of proceedings u/s 158BD:
The assessee argued that the proceedings u/s 158BD were not validly initiated as the A.O. did not record his satisfaction that the undisclosed income belonged to the assessee. The Tribunal referred to the Supreme Court judgment in Manish Maheshwari vs. ACIT, which mandates that the A.O. of the searched person must record satisfaction and transmit the material to the A.O. having jurisdiction over the other person. The Tribunal found that the pre-conditions for assuming jurisdiction u/s 158BD were not satisfied, thus rendering the proceedings invalid.

2. Jurisdiction of the Assessing Officer (A.O.):
The jurisdiction over the case was transferred from the Assistant Commissioner of Income-tax, Companies Circle 1(7) to the Deputy Commissioner, Central Circle 17, New Delhi, by an order u/s 127. The Tribunal noted that the first mentioned A.O. had no jurisdiction to issue the notice dated 31.05.2001. The notice issued by the second mentioned A.O. on 15.07.2002 was validly served on the assessee, but the satisfaction note was not recorded by the A.O. of the searched person (Shri S.K. Jain), thus invalidating the proceedings.

3. Barred by limitation:
The assessee contended that the assessment was barred by limitation as the notice u/s 158BD read with section 158BC was issued on 30.05.2001, and the assessment should have been completed by 31.05.2003. However, the assessment was completed on 30.07.2004. The Tribunal did not specifically address this issue as the proceedings were already held invalid on other grounds.

4. Merits of the additions made by the A.O.:
Since the matter was decided in favor of the assessee on the preliminary ground of invalid proceedings, the Tribunal did not examine the merits of the additions made by the A.O. but deleted by the learned CIT (A).

Conclusion:
The appeal of the revenue was dismissed, and the order of the learned CIT (A) was upheld. The Tribunal pronounced the order in the open Court on 04-07-2008.