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2010 (12) TMI 1241 - AT - Income TaxUndisclosed income of another person u/s 158BD - validity of assessment proceedings u/s 158BC r.w.s. 158BD, when proceedings was initiated after the completion of the assessment of the person searched - In this case, search u/s 132 was carried out in the business premises of M/s. Ohm Organizers, on 29.10.1999. Certain books of accounts and documents relating to the assessee were also seized. The AO having jurisdiction over the case of M/s. Ohm Organizers found that certain investment in purchase of flats/ shops were made by the assessee and payment of on-money was made by him to the builder. Thereafter certain inquiries were carried out from the assessee u/s 133(6) by way of notice issued on u/s.133(6). Further letters were also issued. However, notice u/s 158BD was issued to the assessee on 10.06.2004. In the impugned order, the ld. CIT(A) upheld the legality of action u/s 158BD. HELD THAT - We following the decision of Tribunal in the case of Vimal Vadilal Shah, 2010 (5) TMI 889 - ITAT AHMEDABAD quash the block assessment framed on the ground that notice u/s158BD, which was issued long after completion of assessment in the case of person searched i.e. Ohm Developers.
Issues Involved:
1. Validity of assuming jurisdiction under section 158BD of the Income Tax Act. 2. Legality of making an addition of undisclosed investment in immovable property. 3. Timeliness of issuing notice under section 158BD. Analysis: Issue 1: Validity of Jurisdiction under Section 158BD: The appeal challenged the jurisdiction assumed under section 158BD for the block assessment period 1990-91 to 1999-2000. The assessee contended that section 158BD can only be invoked if undisclosed income belongs to a person other than the one searched. Additionally, it was argued that the notice under section 158BD was issued after a significant delay of four years and nine months from the date of search. The appellant relied on precedents such as the decision of the ITAT, Hyderabad Bench and the Gujarat High Court to support their argument. However, the Commissioner of Income Tax (Appeals) held that the delay in issuing the notice was reasonable as it allowed for necessary inquiries to be conducted, and thus, validated the proceedings initiated under section 158BD. Issue 2: Addition of Undisclosed Investment in Immovable Property: The Assessing Officer had assessed undisclosed income of Rs. 2,25,000 as the payment made for acquiring a flat, based on documents found during a search. The appellant challenged this addition, arguing that no material directly linked the assessee to the payment, and the addition was solely based on loose papers found at a third party's premises. Citing a decision of the ITAT, Ahmedabad Bench, it was contended that additions cannot be made solely on loose papers found at a third party's location. However, the Commissioner of Income Tax (Appeals) upheld the addition, providing detailed reasons in support. Issue 3: Timeliness of Issuing Notice under Section 158BD: During the hearing, the appellant's counsel argued that the notice under section 158BD was issued after the completion of block assessment proceedings in the case of the person searched, rendering it invalid. The counsel relied on a decision of the ITAT, Ahmedabad, which quashed a block assessment on similar grounds. The Revenue representative did not counter this argument. The Tribunal, after reviewing the facts and legal precedents, quashed the block assessment, aligning with the decision in the Vimal Vadilal Shah case. In conclusion, the Tribunal allowed the appeal, emphasizing the importance of adhering to procedural requirements and timelines in invoking jurisdiction under section 158BD of the Income Tax Act. The judgment highlighted the significance of validly issuing notices and conducting assessments within the statutory framework to ensure the legality and validity of tax assessments.
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