2024 (11) TMI 1034 - HC - Income Tax

Computation of undisclosed income of the block period - Scope of section 158-BB of the Income Tax Act for assessment of undisclosed income in search cases - HELD THAT - We find that the words which have been added are rightly interpreted by the Tribunal to include two types of material which may be considered by the assessing officer. First, the material found during search and relatable to such evidence and the second part is such other materials or information as are available with the AO. Thus, apart from the evidence which may be collected and noticed during search, if the assessing officer has any other information and such other material with him, which is relatable to such evidence, the same can also be looked into for the purpose. Therefore, an assessment u/s 158-BC of the Act is required to be made both on the basis of result of search as well as post search enquiry and other proceedings which are in the nature of consequences of the evidence found as a result of search. Affidavit of the employees have not been considered - It is argued that the assessee was not provided sufficient opportunity and fair hearing has not been provided to him - Large number of documents relating to correspondence with Excise Department, police cases, court cases relating to the firms carrying out liquor business, which were not in the name of the assessee, have also been found from his premises. Copies of number of maps of godowns and vends, which were operated by various companies were also recovered from his premises. There were 7 9 7 truck loads recovered from three different places. Stock position of various liquor vends was also found. During the courses of search, statements of number of persons were also recorded, who stated that they were salesmen working in those vends. The assessee was their employer and real owner of the vends. Merely because the license was issued by the Excise Department for various liquor vends, income from which the learned assessing officer has found to be undisclosed income of the assessee cannot absolve the concerned assessee. We agree with the Tribunal that the assessing officer is not flattered by the technical rule of evidence and if he reaches to the conclusion that the vends are all being owned and managed by the concerned person singularly through employees, merely because the licenses are not in the name of the concerned assessee, it would not make any difference to reach to the conclusion that there is undisclosed income. There is cross-examination of almost all persons, whose statements were relied upon, was afforded to the assessee and after the cross-examination was conducted when nothing contrary to the earlier statements was emerged and in some cases the assessee did not even come forward to cross-examine, the inference could be drawn. There was also a document of rent agreement for premises taken on record in the name of one M/s Chander Bhan Om Parkarsh and Company, which was signed by the assessee as a contractor. Thus, the Tribunal has found that there was undisclosed income of the assessee which he was earning through ghost and benami companies, which were running on the properties taken on rent by him. The assessment order was found to have been correctly re-assessed by the three Judges Bench of the Tribunal. Decided against assessee.

Issues:
1. Interpretation of Section 158-BB of the Income Tax Act for assessment of undisclosed income in search cases.
2. Consideration of additional evidence and materials beyond what was found during the search operation.
3. Fair hearing and opportunity provided to the assessee during the assessment process.
4. Assessment of undisclosed income based on evidence of ownership and control of businesses through ghost and benami companies.
5. Constitution of a special bench of three Judges by the President of ITAT.

Detailed Analysis:
1. The judgment involves the interpretation of Section 158-BB of the Income Tax Act regarding the assessment of undisclosed income in search cases. The appellant contended that the assessment should be limited to evidence found during the search operation only. The Tribunal interpreted the section to include both evidence found during the search and other materials available to the Assessing Officer related to such evidence. The Tribunal emphasized that the assessment should consider post-search inquiries and proceedings resulting from the evidence found during the search.

2. The judgment addressed the consideration of additional evidence and materials beyond those discovered during the search operation. Various documents, partnership deeds, correspondence, and other materials were found during the search at the assessee's premises. The Tribunal found that the assessing officer could consider such materials if they were relatable to the evidence found during the search. The Tribunal concluded that undisclosed income could be assessed based on ownership and control of businesses through ghost and benami companies, even if licenses were not in the assessee's name.

3. The judgment discussed the fair hearing and opportunity provided to the assessee during the assessment process. The appellant argued that the affidavit of employees was not considered, and fair hearing was not provided. However, the Tribunal noted that cross-examination of relevant persons was allowed, and the assessee had the opportunity to challenge the evidence presented. The Tribunal found that the assessment order was correctly reassessed by the three Judges Bench.

4. The judgment analyzed the assessment of undisclosed income based on evidence of ownership and control of businesses through ghost and benami companies. The Tribunal considered various documents, statements of individuals, and agreements to conclude that the assessee had undisclosed income earned through such entities. The Tribunal rejected technical arguments regarding ownership of licenses and emphasized the substance of control and earnings.

5. Lastly, the judgment briefly mentioned the issue of the constitution of a special bench of three Judges by the President of ITAT. The appellant did not press this issue during the arguments. The judgment dismissed both appeals, stating that the special bench had examined the case on facts, and no substantial question of law arose from the Tribunal's order. The dismissal was in line with the Supreme Court's ruling that pure findings of fact are not challengeable in appeals under the Income Tax Act.

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