2014 (8) TMI 489 - HC - Income Tax

Initiation of block assessment u/s 158BD r.w. section 158BC Benami transactions - Held that - The group concerns of Shri Rajendra Goayl i.e. Goyal Industries Ltd., Goyal Synthetics Pvt. Ltd. and Foremost Finvest Pvt. Ltd. made fictitious sales to the concerns namely (i) Raju Fabrics (ii) Gunjan Exports,and (iii) Aditya Yarn Pvt. Ltd. were received from benami concerns of Goyal Industries Group - the source of credit either by cheque or cash in the benami accounts to the extent of ₹ 92,01,74,261/- remains unexplained - The accounts have been detected by virtue of inquiry in the cheques found from the locker of Shri Pursottam Mundra, employee of Shri Surajnath Sidh, who is involved in the business of cheques discounting - it cannot be said that the AO has committed any error and/or any illegality in initiating the block assessment proceedings u/s 158BD. When the subjective satisfaction has been arrived at by the AO for initiation of the proceedings u/s 158BD of the Act on the basis of the material collected during the course of search/inquiry, it cannot be said that satisfaction arrived at by the Assessing Officer while initiating proceedings under section 158BC of the Act has been vitiated in any manner - There is ample material on record in the satisfaction note against the respective petitioners and Goyal Industries Ltd and another - even the Rajendra Goyal is the Director of Goyal Industries Ltd. and the Company i.e. Goyal Industries Ltd. is run through its Director/Manager/employees etc. - no error or illegality has been committed in issuing notice u/s 158BD Decided against the assessee.

Summary

Issues Involved:
1. Legality of the notice issued under Section 158BD of the Income-tax Act.
2. Satisfaction of the Assessing Officer regarding undisclosed income belonging to the petitioners.
3. Material evidence supporting the initiation of block assessment proceedings.

Detailed Analysis:

Legality of the Notice Issued Under Section 158BD of the Income-tax Act:
The petitioners challenged the notices issued under Section 158BD of the Income-tax Act, seeking to quash them on the grounds of illegality and non-compliance with statutory requirements. The court noted that the notices were issued based on a satisfaction note which detailed the findings from a search conducted under Section 132 in the case of Malpani Groups. The court found that the notices were issued following the discovery of significant incriminating evidence, including dishonored cheques and bank account transactions, which indicated undisclosed income.

Satisfaction of the Assessing Officer Regarding Undisclosed Income Belonging to the Petitioners:
The petitioners argued that the satisfaction required under Section 158BD was not met, as the undisclosed income was allegedly linked to Rajendra Goyal individually and not the respective petitioners. The court examined the satisfaction note and found that the Assessing Officer had indeed arrived at a subjective satisfaction based on statements and material collected during the search. Statements from individuals like Dilip Makwana and Satyanarayan Sharma, who were linked to Goyal Industries Ltd., provided substantial evidence that the undisclosed income was connected to the petitioners.

Material Evidence Supporting the Initiation of Block Assessment Proceedings:
The court reviewed the evidence presented in the satisfaction note, which included detailed transactions in various bank accounts, statements from employees, and the operations of benami accounts. The court noted that the accounts in question were found to be operated by employees of Goyal Industries Ltd. under the instructions of Rajendra Goyal. The evidence indicated that the cash deposited and transactions conducted through these accounts were part of a larger scheme involving Goyal Industries Ltd. and its associated entities. The court concluded that the material evidence justified the initiation of block assessment proceedings under Section 158BD.

Conclusion:
The court dismissed the petitions, ruling that the initiation of block assessment proceedings under Section 158BD was legally justified. The court found no error or illegality in the satisfaction arrived at by the Assessing Officer, and the notices issued were based on substantial material evidence collected during the search. The interim relief granted earlier was vacated, and the petitions were dismissed with no costs.