2010 (2) TMI 16 - HC - Income Tax

Search and Seizure block assessment Jurisdiction of make block assessment - In the block assessment made in the case of the assessee, the Assessing Officer determined the undisclosed income of Rs 1,44,9413/- on account of investment in the property No.HS-11, Kailash Colony Market, New Delhi. The assessee challenged the order of the Assessing Officer, both on the ground of jurisdiction as well as on the merit of the addition. held that - it is a settled legal position that, recording of satisfaction by the Assessing Officer, having jurisdiction of the searched person, that some undisclosed income belongs to a person other than a searched person, is mandatory before proceedings under Section 158 BD can be initiated against such other person. - In this case, after going through the records the Tribunal came to the conclusion that the letter dated 14th August, 2002 predicated on which the proceedings under Section 158 BD of the said Act had been initiated by the Assessing Officer of the assessee did not show that he was satisfied that the investment had been made by the assessee - , the proceedings under Section 158 BD/158 BC, insofar as the respondent assessee was concerned, were without jurisdiction

Summary

Issues:
Jurisdiction of Assessing Officer under Section 158 BC read with Section 158 BD of the Income Tax Act, 1961 for block assessment during a specific period.

Analysis:
The case involves an appeal by the Revenue against the order of the Income Tax Appellate Tribunal concerning a block assessment for the period from 1st April, 1989 to 27th July, 1999. A search under Section 132 of the Income Tax Act was conducted at the residential premises of certain individuals and their company. The Assessing Officer initiated proceedings against the assessee based on information regarding investments and payments made to a construction company. The Assessing Officer determined undisclosed income on account of an investment in a property, which the assessee challenged on jurisdictional and merit grounds.

The Commissioner of Income Tax (Appeals) held that the Assessing Officer had jurisdiction under Section 158 BC read with Section 158 BD of the Act but deleted the addition made on account of the investment. The Tribunal, however, allowed the appeal filed by the assessee, stating that the satisfaction required under Section 158 BD was not recorded by the Assessing Officer having jurisdiction over the searched person. The Tribunal emphasized the mandatory nature of recording satisfaction before initiating proceedings under Section 158 BD against another person. It was noted that the Assessing Officer of the construction company had already added the investment amount to their assessment, indicating satisfaction that the investment did not belong to another person. Consequently, the Tribunal concluded that the proceedings against the assessee were without jurisdiction.

The High Court upheld the Tribunal's decision, finding no error in its findings that would warrant interference. The Court stated that the appeal did not raise any substantial question of law and thus dismissed it.