2008 (11) TMI 702 - AT - Income Tax

Summary

Issues Involved:
1. Validity of proceedings initiated u/s 158BD of the IT Act, 1961.
2. Confirmation of addition of Rs. 5,20,568 as commission income.

Summary:

1. Validity of proceedings initiated u/s 158BD of the IT Act, 1961:

The assessee challenged the initiation of proceedings u/s 158BD, arguing that there was a significant delay of 19 months in issuing the notice after the completion of the assessment order in the case of Shri Manoj Aggarwal. The Tribunal referred to the case of Radhey Shyam Bansal vs. Asstt. CIT, where it was held that notice under s. 158BD should be issued within a reasonable time. The Tribunal found that the delay in issuing the notice was unreasonable and thus, the assessment made on the assessee was bad in law. Furthermore, the Tribunal noted that no proper satisfaction was recorded by the AO who passed the assessment u/s 158BC in the case of the person searched, which is a prerequisite for initiating proceedings u/s 158BD. The Tribunal relied on the decision of the Hon'ble Supreme Court in the case of Manish Maheshwari vs. Asstt. CIT, which emphasized the necessity of recording proper satisfaction.

2. Confirmation of addition of Rs. 5,20,568 as commission income:

The AO determined the undisclosed income at Rs. 3,52,25,105, which was later reduced by the CIT(A) to Rs. 5,20,568, representing the commission income earned by the assessee for arranging accommodation entries. The assessee contended that the satisfaction note provided by the AO was inadequate and did not refer to any specific seized material related to the assessee. The Tribunal agreed with the assessee, noting that the satisfaction note was merely an office note and lacked reference to any incriminating material. Consequently, the Tribunal quashed the assessment order and allowed the appeal of the assessee.

Conclusion:

The Tribunal allowed the appeal of the assessee, quashing the assessment order on the grounds of unreasonable delay in issuing the notice u/s 158BD and lack of proper satisfaction recorded by the AO.