2008 (11) TMI 733 - AT - Income Tax

Summary

Issues Involved:
1. Legality of assessment u/s 158BC r.w.s. 158BD.
2. Validity of notice issuance u/s 158BD.
3. Recording of satisfaction and forwarding of material.
4. Justification of addition based on statements under pressure.
5. Validity of assumption of jurisdiction by issuance of notice u/s 148.
6. Justification of addition of Rs. 4,50,000 as undisclosed income.

Summary:

1. Legality of assessment u/s 158BC r.w.s. 158BD:
The assessee contended that the assessment framed by the Assessing Officer (AO) u/s 158BC r.w.s. 158BD was unjustified. The Tribunal noted that the addition of Rs. 8,10,000 as undisclosed income was based solely on the statements recorded during the search and not on any material evidence found as a result of the search. The Tribunal referenced several decisions, including those of the Jodhpur Bench and the Cochin Bench, which held that statements alone do not constitute evidence found as a result of search for the purpose of determining undisclosed income under Chapter XIV-B of the Act. Consequently, the addition was deleted.

2. Validity of notice issuance u/s 158BD:
The assessee argued that the issuance of notice u/s 158BD was illegal as no material was found during the search to justify proceedings against him. The Tribunal upheld this view, emphasizing that the addition was based solely on statements and not on any corroborative evidence found during the search.

3. Recording of satisfaction and forwarding of material:
The assessee claimed that no satisfaction was recorded by the AO, nor was any material found or forwarded to the AO having jurisdiction over his case. The Tribunal found that the addition was based on statements without any corroborative evidence, thus supporting the assessee's contention.

4. Justification of addition based on statements under pressure:
The assessee contended that the statements recorded were under pressure and not in a proper state of mind. The Tribunal noted that the statements alone, without corroborative evidence, could not justify the addition of undisclosed income. The Tribunal referenced multiple decisions supporting this view and deleted the addition.

5. Validity of assumption of jurisdiction by issuance of notice u/s 148:
In the appeal for the assessment year 2001-02, the assessee challenged the validity of the assumption of jurisdiction by issuance of notice u/s 148. However, this ground was not pressed by the appellant during the hearing and was dismissed.

6. Justification of addition of Rs. 4,50,000 as undisclosed income:
The AO added Rs. 4,50,000 as undisclosed income based on the sale of a property where the sale document was registered for a lower amount. The assessee argued that he was a co-owner of the property along with his brother. The Tribunal found that this factual aspect required verification and remanded the issue back to the AO for examination and appropriate order.

Conclusion:
The appeal in ITSS 02/Chandi/2007 was allowed, and the appeal in ITA No. 109/Chandi/2007 was partly allowed. The Tribunal emphasized the necessity of corroborative evidence found as a result of search for making additions under Chapter XIV-B of the Act.