2014 (4) TMI 217 - HC - Income Tax

Jurisdiction u/s 158BD of the Act - Whether the Tribunal fall into error in not holding that the addition made to the assessee s income was in a proceeding without jurisdiction on account of no satisfaction (and consequent notice) under Section 158BD of the Act Held that - The search conducted previously in respect of her husband formed the material which ultimately resulted in the addition and the assessment - the addition cannot be considered unauthorized for not fulfilling the conditions prescribed u/s 158BD the case cannot be considered as one in which no incriminating material was found pursuant to the search u/s 132 - the search of the locker in the assessee s case is closely linked to the search in the husband s case where incriminating materials pertaining to the assessee were found - The close proximity of both the searches and the continuous course of events in the case rule out the acceptance of the argument that no incriminating material was found in the search of the locker thus, the additions were invalid. Relying upon Friends Overseas (P) Ltd v. CIT 2003 (11) TMI 27 - DELHI High Court - The findings of the lower authorities are based on a proper appreciation of the facts - The documents, in the form of the (unsigned) agreement to sell do disclose that the real and undisclosed consideration for sale of the property was far in excess of what was in fact reported in the assessment - the CIT (A) and Tribunal was of the opinion that since only a portion of the property had been gifted by the assessee s husband to her, the entire addition could not be made in her hands this was purely a question of fact, the Court cannot interfere in it Decided against Assessee.

Issues Involved:
1. Jurisdictional Error in Assessment Proceedings under Section 158BD of the Income Tax Act.
2. Deletion of Part of the Amount Added as Undisclosed Income by the Assessing Officer (AO).

Issue-wise Detailed Analysis:

1. Jurisdictional Error in Assessment Proceedings under Section 158BD of the Income Tax Act:

The primary contention of the appellant was that the assessment proceedings were without jurisdiction and nullity due to the absence of a search warrant or panchnama in her name. The appellant argued that no material was found in her locker, and no subsequent notice was issued to her, making the addition of income based on material seized from her husband's search illegal. The appellant emphasized that the AO did not issue a notice under Section 158BD nor recorded any satisfaction for initiating proceedings against her.

The Court, however, noted that a separate search warrant was indeed issued for the appellant, bringing her within the ambit of Section 158BC. The appellant was present during the search of her husband's premises and had signed the panchnama recording the seizure of documents used in her assessment. The Court distinguished this case from others cited by the appellant, noting that in those cases, no separate warrant was issued for the assessee. The Court concluded that the search of the appellant's locker was closely linked to the search of her husband's premises, and the continuous course of events justified the addition based on materials found during the search.

The Court referenced the case of Friends Overseas (P) Ltd v. CIT, emphasizing that Section 158BC applies where a search is conducted under Section 132, and Section 158BD is for assessing undisclosed income of any other person. The Court affirmed that the appellant did not conform to the description of "other than the person with respect to whom search was made under section 132," thus, a separate notice under Section 158BD was not required. The Court held that the assessment was valid and the jurisdictional argument was negated.

2. Deletion of Part of the Amount Added as Undisclosed Income by the AO:

On the merits of the addition, the appellant contended that the AO and CIT (Appeals) drew wrong inferences regarding the balance sale consideration of Rs. 49,25,000, allegedly received in cash. The AO had directed the addition of the entire amount, but the CIT (Appeals) assessed only half of it in the appellant's hands.

The Court found that the lower authorities' findings were based on a proper appreciation of the facts. The documents, including an unsigned agreement to sell, indicated that the real consideration for the property sale was higher than reported. The AO's inferences were justified. However, the CIT (Appeals) reasoned that since only a portion of the property was gifted by the appellant's husband to her, the entire addition could not be made in her hands. This finding was affirmed by the ITAT and deemed a question of fact, which the Court did not interfere with.

Conclusion:

Both questions were answered in the negative, with the first question against the assessee and the second against the revenue. The appeals were dismissed along with pending applications, without any order as to costs.

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