2009 (1) TMI 364 - AT - Income Tax

Block assessment u/s 158BD - Search u/s132 - Incriminating documents found - assessment passed u/s 158BD is bad in law and void ab initio as no ''satisfaction'' has been recorded by AO - assessee has disclosed income u/s 44AE in respect of two vehicles taken on lease - HELD THAT - One has to ascertain the satisfaction from the record of the person whose premises has been searched and in whose case order u/s 158BC has been passed. In the instant case, the record of M/s. H.E. Distilleries Pvt. Ltd. along with assessment order show the requisite satisfaction. The word 'satisfaction' as per the book Advance Law Lexicon by P. Ramanadha Iyer (2005 Edition) has mentioned that the phrase 'satisfaction' occurring in many taxing statutes means simply 'makes up its mind' - Jiten Co. v. Sales Tax Officer 1976 (12) TMI 174 - DELHI HIGH COURT . The phrase 'is satisfied' means, simply 'makes up its mind' . Whenever legislation used the word 'satisfied' it must mean 'reasonably satisfied'. It is clear that the assessee admitted at the time of search that he is having unaccounted income from the transportation of unaccounted production of liquor. In a letter addressed to the revenue, he admitted such income and stated that he will declare such income. While making assessment in the case of M/s. H.E. Distilleries Pvt. Ltd. u/s 158BC, the person managing the affairs of M/s. H.E. Distilleries Pvt. Ltd. admitted that transportation is done by the assessee. Thus, it is clear that the assessee was in receipt of an amount which consists of income liable to tax though such income was not declared in the return of income filed after the search. A device was adopted to show the income u/s 44AE. Such device cannot be accepted in view of the decision of Hon'ble Apex Court in the case of McDowell Co. Ltd. v. CTO 1985 (4) TMI 64 - SUPREME COURT . Therefore, we feel that requisite satisfaction has been recorded by AO who was having jurisdiction over the person, who was raided and such satisfaction can be clearly inferred from the record which includes the assessment order u/s 158BC and other relevant documents. Hence, the order passed by AO is in accordance with section 158BD.

Summary

Issues Involved:
1. Validity of assessment under section 158BD without recorded satisfaction.
2. Determination of undisclosed income from transportation of liquor.

Issue-wise Detailed Analysis:

1. Validity of Assessment under Section 158BD without Recorded Satisfaction:
The appellant contended that the assessment under section 158BD was invalid as there was no recorded satisfaction by the Assessing Officer before issuing the notice. The Assessing Officer's order mentioned a search under section 132 in the case of M/s. H.E. Distilleries Group, where incriminating documents were found showing unaccounted transportation of liquor by the assessee. The assessee admitted to an undisclosed income of Rs. 3,08,989 during the search proceedings. Despite this, the assessee declared NIL undisclosed income in the return filed.

The CIT(A) dismissed the appellant's claim, stating that the appellant never requested a copy of the satisfaction note, and section 158BD does not mandate providing such a copy to the assessee. The CIT(A) observed that the satisfaction of the Assessing Officer is sufficient.

During the tribunal proceedings, the appellant's representative argued that recording of satisfaction is mandatory, citing the Supreme Court's decision in Manish Maheshwari v. Asstt. CIT and the Special Bench's decision in Manoj Aggrawal v. Dy. CIT. The tribunal examined the statement recorded under section 132(4) and the letter from the assessee admitting unaccounted income from transportation. The tribunal noted that the assessment order under section 158BC for M/s. H.E. Distilleries mentioned the unaccounted transportation by the assessee, indicating the Assessing Officer's satisfaction.

The tribunal concluded that the satisfaction required under section 158BD was present in the records and the assessment order, thus validating the proceedings under section 158BD. The tribunal also clarified that section 44AE, which deems income for plying, hiring, or leasing goods carriages, is not applicable to the assessee as he was a lessee, not a lessor. The tribunal emphasized that the satisfaction can be inferred from the records and does not necessarily need to be explicitly documented.

2. Determination of Undisclosed Income from Transportation of Liquor:
The appellant contested the CIT(A)'s determination of undisclosed income from transportation of liquor at Rs. 61,800, arguing that the Assessing Officer had determined it at Rs. 3,08,989. The tribunal found this ground of appeal by the appellant to be non-maintainable as the appellant cannot be aggrieved by a relief granted by the CIT(A) that reduced the undisclosed income.

The tribunal reiterated that the undisclosed income was admitted by the assessee during the search and confirmed by the person managing M/s. H.E. Distilleries Pvt. Ltd. The tribunal dismissed the appeal, upholding the CIT(A)'s determination of undisclosed income.

Conclusion:
The tribunal dismissed the appeal, affirming that the assessment under section 158BD was valid due to the recorded satisfaction inferred from the assessment order and other relevant documents. Additionally, the tribunal upheld the CIT(A)'s determination of undisclosed income, finding the appellant's grievance on this ground non-maintainable.