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2012 (9) TMI 439 - AT - Income TaxUndisclosed income of another person u/s 158BD - validity of assessment proceedings u/s 158BC r.w.s. 158BD, when proceedings was initiated after the completion of the assessment of the person searched - search u/s.132 carried out at the business premise of Ohm Developers on 29.10.1999 and assessment of same completed on 30.11.2001 - notice u/s.158BD r.w.s. 158BC issued to assessee on 22.01.2007 - Held that - Several Co-ordinate Benches have unanimously held that the belated issuance of notice u/s.158BD was barred by limitation. Therefore, CIT(A) rightly deleted the addition on observation that there was an inordinate delay in initiating and completing the proceedings u/s.158BC r.w.s. 158BD. Though, the Act does not lay down any time limit for initiating proceedings u/s.158BD yet, equity demands that proceedings should not be kept pending indefinitely and the Sword of Damocles be kept hanging over the head of the taxpayer for an indefinite period - Decided in favor of assessee
Issues Involved:
1. Validity of proceedings initiated under Section 158BD of the Income Tax Act, 1961. 2. The legality of the addition of Rs. 3,91,385 on account of unaccounted on-money. Issue-Wise Detailed Analysis: 1. Validity of Proceedings Initiated Under Section 158BD: The primary contention raised by the Revenue was the deletion of the addition made by the Assessing Officer (A.O.) of Rs. 3,91,385, which was alleged as unaccounted on-money paid by the assessee for the purchase of a flat. The Revenue argued that the proceedings initiated under Section 158BD were invalid due to an inordinate delay. The facts revealed that a search under Section 132 was conducted at the premises of M/s. Ohm Developers on 29/10/1999. The notice under Section 158BD read with Section 158BC was issued on 22/01/2007 and served on 31/01/2007. The assessee contested the validity of these proceedings on two grounds: - No satisfaction note was recorded by the A.O. in possession of the search material. - The proceedings were initiated after the completion of the assessment of the person searched, making them belated and not lawful. The CIT(A) held the proceedings as invalid primarily because the assessment of M/s. Ohm Developers was completed earlier, and the notices under Section 158BD were issued five years late. The CIT(A) emphasized that although no specific time limit is prescribed for initiating proceedings under Section 158BD, equity demands that proceedings should not be kept pending indefinitely. Consequently, the CIT(A) concluded that the inordinate delay invalidated the proceedings. 2. Legality of the Addition of Rs. 3,91,385 on Account of Unaccounted On-Money: The A.O. observed from the notings on page-66 of Khatavahi marked as BS-4 that the assessee paid Rs. 3,91,385 as on-money for the purchase of a flat at Chandan Park. This was corroborated by the statement of a partner of M/s. Ohm Developers, who confirmed that the Khatavahi BS-4 contained accounts of flat/shop owners, including details of payments received through cheques and cash. The CIT(A) examined the facts and concluded that the delay in initiating and completing the proceedings under Section 158BD was inordinate. The CIT(A) noted that the search on M/s. Ohm Developers was conducted on 29/10/1999, and the block assessment was completed on 30/11/2001. However, the proceedings against the assessee were initiated five years later, on 22/01/2007, and completed on 27/01/2009. The CIT(A) found that the A.O. did not mention the date on which the intimation was received from the A.O. of M/s. Ohm Developers. Given these facts, the CIT(A) held that the proceedings were invalid due to the inordinate delay. Consequently, the addition of Rs. 3,91,385 made by the A.O. was deleted. Conclusion: The Tribunal, after considering the arguments and the precedents cited, concluded that the issue was covered by several decisions of the Tribunal and the High Court. It was noted that the belated issuance of the notice under Section 158BD was barred by limitation. The Tribunal cited various cases, including the decision of the Hon'ble Supreme Court in Manish Maheshwari v. ACIT (2007) 289 ITR 341 (SC), which held that proceedings initiated under Section 158BD after the completion of the assessment of the person searched were invalid. Following these decisions, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order that quashed the proceedings under Section 158BD and deleted the addition of Rs. 3,91,385.
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