2012 (8) TMI 30 - AT - Income Tax

Addition on account of unaccounted on-money paid for purchase of flat - assessee contested against inordinate delay in inflation of action u/s.158BD and proceedings u/s.158BD - Held that - The search u/s.132 was conducted on 29.10.1999 at developers business premises which means that the investment in the properties was made earlier to the said date - proceedings u/s.158BD in the case of the Assessee was initiated 5 (five) years later thus there has been an inordinate delay in initiating and completing the proceedings u/s.158BC r.w.s. 158BD - Explanation regarding the investment in the said properties was furnished by the Assessee and if the Authorities failed to utilize and communicate such information on time, then the Assessee could not be penalized and kept in the loop of the Authorities for such a long period of 7 (seven) years - against revenue.

Summary

Issues Involved:
1. Validity of proceedings initiated under Section 158BD.
2. Recording of satisfaction by the Assessing Officer.
3. Consideration of statements as 'seized material'.

Detailed Analysis:

1. Validity of Proceedings Initiated Under Section 158BD:
The primary issue raised by the Revenue was the deletion of an addition of Rs. 4,40,000 made by the Assessing Officer (A.O.) on account of unaccounted on-money paid by the assessee for the purchase of a flat. The contention was that there was an inordinate delay in initiating action under Section 158BD, rendering the proceedings invalid. The assessee argued that the proceedings were initiated after the completion of the assessment of the searched party, making them legally untenable. The CIT(A) supported this view, noting that the proceedings were initiated five years after the completion of the assessment of M/s. Ohm Developers, which was considered excessively delayed.

2. Recording of Satisfaction by the Assessing Officer:
The assessee contended that the A.O. failed to record a satisfaction note as required under Section 158BD, referencing the legal precedent set in Manish Maheshwari (289 ITR 341 SC). The CIT(A) agreed, emphasizing that the absence of a recorded satisfaction note and the delay in initiating proceedings invalidated the assessment. The Tribunal upheld this view, citing multiple precedents where similar delays and procedural lapses led to the quashing of proceedings under Section 158BD.

3. Consideration of Statements as 'Seized Material':
The assessee also argued that the statement of a partner from M/s. Ohm Developers, recorded under Section 132(4), did not qualify as 'seized material,' and thus, could not be used to justify proceedings under Section 158BD. The CIT(A) and the Tribunal did not explicitly address this issue, as the proceedings were already deemed invalid due to the delay and lack of recorded satisfaction.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision that the proceedings under Section 158BD were invalid due to an inordinate delay and the absence of a recorded satisfaction note. The Tribunal relied on various precedents, including decisions from the Gujarat High Court and the ITAT Ahmedabad, which consistently held that such procedural lapses render the proceedings legally untenable. Consequently, the addition of Rs. 4,40,000 was deleted, and the assessee's cross-objection was deemed redundant and dismissed.