2011 (3) TMI 298 - HC - Income Tax

Search and seizure - Block assessment - Unaccounted cash - since they were not received, JCIT proceeded with investigation in respect of twenty seven bank accounts by writing to different banks asking for copies of those accounts, account opening forms, names and addresses of the introducers and copies of cheques issued - Confirmations in respect of shareholders along with their PAN/GIR numbers were furnished, but, in respect of some confirmations, either jurisdiction was not stated properly or it was not stated at all - Merely because the department obtained a copy of the seized diary it could not be said that the material came through a valid and proper requisition, order or warrant as prescribed u/s 132A Whether the Tribunal was correct in law and in merits in holding that the proceedings under Section 158BC were not validly initiated in the present case and as such the block assessment is liable to be quashed - Though the original cheque books were not given by the ED, detailed information with regard to the accounts etc. of those cheque books was furnished - Based on the information available from the records it was concluded that assessee could not give any satisfactory or documentary evidence - Decided against the assessee

Issues Involved:
1. Validity of proceedings under Section 158BC and 158BD of the Income Tax Act.
2. Treatment of undisclosed income based on seized documents and cash.
3. Validity of additions made on account of share capital, application money, and personal expenses.

Detailed Analysis:

1. Validity of Proceedings under Section 158BC and 158BD:

The Tribunal quashed the assessments under Sections 158BC and 158BD, deeming them void ab initio. The Tribunal found that the satisfaction required under Section 158BD was not recorded based on evidence found during the search or requisition of documents. It emphasized that the satisfaction of the Assessing Officer (AO) must be based on evidence found as a result of search or requisition, which was not the case here. The Tribunal held that the requisition was only for cash, and no other documents were requisitioned, making the proceedings invalid.

However, the High Court disagreed, noting that not only cash but also 27 cheque books and a diary were requisitioned. The JCIT conducted inquiries based on the details from these cheque books, leading to the satisfaction that undisclosed income belonged to MCC. The High Court held that the post-search inquiry and information gathered were relevant and justified the proceedings under Sections 158BC and 158BD.

2. Treatment of Undisclosed Income Based on Seized Documents and Cash:

The JCIT treated the aggregate deposits in 27 bank accounts as unaccounted investments, attributing them to MCC on a substantive basis and to Tushar and Mittal on a protective basis. The CIT(A) upheld this view, confirming the addition of Rs. 1,06,23,044/- in the hands of MCC substantively and protectively in the hands of Tushar and Mittal. The Tribunal, however, quashed these additions, citing the invalidity of the proceedings under Sections 158BC and 158BD.

The High Court, upon review, found the Tribunal's decision flawed, as it overlooked the detailed information and inquiries conducted by the JCIT. The High Court held that the information from the cheque books and subsequent inquiries were sufficient to justify the additions and proceedings.

3. Validity of Additions Made on Account of Share Capital, Application Money, and Personal Expenses:

The JCIT added amounts related to share capital and application money, which were not properly confirmed or jurisdictionally stated. The Tribunal deleted these additions, stating they were not based on material found during the search and hence could not be treated as undisclosed income under Chapter XIV-B.

The High Court noted that the Tribunal did not delve into the merits of these additions due to its stance on the invalidity of the proceedings. The High Court remitted these issues back to the Tribunal for a detailed examination, given its finding that the proceedings under Sections 158BC and 158BD were valid.

Conclusion:

The High Court upheld the validity of the proceedings under Sections 158BC and 158BD, reversing the Tribunal's findings. It remitted the cases back to the Tribunal to examine the merits of the additions made for share capital, application money, and personal expenses. The High Court emphasized the importance of evidence and inquiries conducted post-search, which justified the proceedings and the subsequent additions.

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