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2010 (11) TMI 1010 - HC - Income TaxAddition in block assessment proceedings in the hands of other person - According to the Department, the actual price received was ₹ 6.5 crores, the consideration shown in the sale deed was only ₹ 1.40 crores - Held that - before invoking the provisions of Section 158 BD of the Act, the Assessing Officer of the person searched u/s 132 (1) must satisfy himself that some undisclosed income belongs to a person other than the persons with respect to whom search was made under Section 132 (1) of the Act. Such satisfaction must be based on the material found in the course of search. In the absence of any such satisfaction (which is to be recorded in writing) the concerned Assessing Officer does not get any jurisdiction to assess that other person by invoking the section 158 BD of the Act. During the search carried out at the premises of Mr. & Mrs. Charla, no books of accounts or other documents or other assets pertaining to the assessees herein was found or seized. The entire foundation of the block assessment under Section 158 BD of the Act, in so far assessees are concerned, was the statement of Smt. Suraksha Charla recorded during the course of search. Revenue appeals dismissed in view of Manish Maheshwari Vs. ACIT, (2007 -TMI - 2889 - SUPREME COURT), Amity Hotels (P) Ltd. (2004 -TMI - 10034 - DELHI High Court) and CIT Vs. Karan Engg. P. Ltd. and Janki Exports International Vs. UOI, (2004 -TMI - 10668 - DELHI High Court)
Issues Involved:
1. Legality of Block Assessment proceedings under Section 158 BD of the Income Tax Act. 2. Validity of the statement of Smt. Surksha Charla as evidence. 3. Requirement of satisfaction note by the Assessing Officer. 4. Opportunity for cross-examination of the witness. Detailed Analysis: 1. Legality of Block Assessment proceedings under Section 158 BD of the Income Tax Act: The Tribunal concluded that the entire assessment proceedings were without jurisdiction as the provisions of Section 158 BD were not properly invoked. The Tribunal noted that no books of accounts, documents, or assets pertaining to the assessees were found or seized during the search at the premises of Mr. & Mrs. Charla. The only material considered was the statement of Smt. Surksha Charla, which does not qualify as "books of accounts or other documents or assets" under Section 158 BD. Therefore, the Tribunal held that the Assessing Officer could not have validly initiated proceedings under Section 158 BD, rendering the entire assessment proceedings illegal. 2. Validity of the statement of Smt. Surksha Charla as evidence: The Tribunal observed that the statement of Smt. Surksha Charla, recorded during the search, could not be treated as "books of accounts or other documents or assets" under Section 158 BD. The statement was recorded during the search and not found or seized as a document. Hence, it could not be the basis for invoking Section 158 BD. The Tribunal also noted that Smt. Surksha Charla retracted her statement, and her subsequent statement clarified the retraction. Moreover, the Tribunal emphasized that the statement alone, without corroborating evidence, could not justify the block assessment. 3. Requirement of satisfaction note by the Assessing Officer: The Tribunal and the High Court highlighted the necessity for the Assessing Officer to record satisfaction that undisclosed income belongs to a person other than the one searched. This satisfaction must be based on material found during the search and must be recorded in writing. In this case, no such satisfaction note was produced, which is a mandatory requirement under Section 158 BD. The absence of this note rendered the proceedings invalid. The High Court referenced the Supreme Court's decision in Manish Maheshwari Vs. ACIT, which underscored the importance of recording satisfaction before invoking Section 158 BD. 4. Opportunity for cross-examination of the witness: The Tribunal noted that the assessees requested an opportunity to cross-examine Smt. Surksha Charla, whose statement was relied upon by the Assessing Officer. However, this opportunity was not provided. The Tribunal held that without affording the assessees the chance to cross-examine the witness, the statement could not be admitted as evidence. This procedural lapse further weakened the case against the assessees. Conclusion: The High Court upheld the Tribunal's decision to quash the block assessment proceedings, emphasizing the improper invocation of Section 158 BD, the invalidity of relying solely on the statement of Smt. Surksha Charla, the necessity of a satisfaction note by the Assessing Officer, and the requirement to provide an opportunity for cross-examination. Consequently, the appeals were dismissed, and no substantial question of law was found to arise.
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