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2012 (8) TMI 31 - AT - Income TaxAddition on account of unaccounted on-money paid for purchase of Shop - 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 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.
Issues Involved:
1. Validity of proceedings initiated under Section 158BD of the Income Tax Act, 1961. 2. Deletion of addition of Rs. 3,25,000 on account of unaccounted on-money paid by the assessee. Issue-wise Detailed Analysis: 1. Validity of proceedings initiated under Section 158BD of the Income Tax Act, 1961: The primary issue raised by the Revenue was the validity of the proceedings initiated under Section 158BD of the Income Tax Act, 1961. The Assessing Officer (AO) noted that a search under Section 132 was carried out at the business premises of M/s. Ohm Developers on 29/10/1999, and it was alleged that the assessee had paid "on-money" for the purchase of a shop. The notice under Section 158BD read with Section 158BC was issued on 22/01/2007 and served on 23/01/2007, which was significantly delayed. The assessee contended that there was no satisfaction note recorded by the AO in possession of the search material having jurisdiction over the builder, and the proceedings were initiated after the completion of the assessment of the person searched, making the proceedings under Section 158BD invalid. The assessee relied on the legal propositions established in Manish Maheshwari 289 ITR 341 (SC) and Khandubhai Vasanji Desai & Ors. Vs. Dy. CIT 236 ITR 73 (Guj.). The CIT(A) held the proceedings as invalid primarily due to the inordinate delay of five years in issuing the notices under Section 158BD after the completion of the assessment of M/s. Ohm Developers. The CIT(A) emphasized that while there is no specific time limit prescribed for initiating proceedings under Section 158BD, equity demands that proceedings should not be kept pending indefinitely. 2. Deletion of addition of Rs. 3,25,000 on account of unaccounted on-money paid by the assessee: The AO observed from the notings on page-20 & 21 of Khatavahi marked as BS-4 that the assessee had paid a sum of Rs. 3,25,000 as on-money towards the purchase of the shop at Yogi Complex. However, the CIT(A) quashed the proceedings initiated under Section 158BD due to the inordinate delay, leading to the deletion of the addition of Rs. 3,25,000 made by the AO. Tribunal's Decision: The Tribunal reviewed several precedents, including the orders in IT(SS)A No.10 & 28/Ahd/2008, IT(SS)A No.65/Ahd/2007, and others, which consistently held that the belated issuance of notice under Section 158BD was barred by limitation. The Tribunal cited the decision in DCIT vs. Shri Shailesh M. Desai, where it was held that without satisfaction recorded prior to the completion of the assessment of the person searched, proceedings initiated under Section 158BD are invalid. Furthermore, the Tribunal referenced the decision of the Hon'ble Punjab & Haryana High Court in ITA No. 379 of 2010, which upheld that the recording of satisfaction for taking action under Section 158BD must be between the initiation of proceedings under Section 158BC and before the completion of the block assessment under Section 158BC of the person searched. Based on these precedents, the Tribunal concluded that the initiation of block assessment proceedings under Section 158BD against the assessee after a long gap was unjustified. Consequently, the Tribunal dismissed the Revenue's appeal and upheld the deletion of the addition of Rs. 3,25,000. Conclusion: The appeal by the Revenue was dismissed, and the proceedings initiated under Section 158BD were held invalid due to inordinate delay, leading to the deletion of the addition of Rs. 3,25,000. The Tribunal emphasized the necessity of timely action in such proceedings to ensure fairness and avoid indefinite uncertainty for the taxpayer.
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