2006 (8) TMI 139 - HC - Income Tax

Notice u/s 148 Search - Instead of initiating the proceedings i/s 158BC Assistant Commissioner initiated proceedings for reassessment u/s 148 - notice u/s 148 is under challenge on various grounds, inter alia, that the proceeding u/s 148 is not meant for a roving and fishing enquiry and the assessing authority had no jurisdiction to reopen the assessment in respect of different firms to iron out the actual alleged suppression of income as he had disclosed its income truly and faithfully at the time of furnishing the return petitioner contend that as the books of account and other documents have been requisitioned u/s 132A from the Central Excise Department, the assessment of undisclosed income can only be made u/s 158BC - held that proceedings initiated u/s 148 cannot be said to be without jurisdiction. However, we make it clear that in the proceedings for reassessment u/s 148, material or evidence which is relatable to the documents for which the requisition has been sent u/s 132A cannot be taken into consideration.

Issues Involved:
1. Validity of notices issued under section 148 of the Income-tax Act, 1961.
2. Applicability of section 158BC versus section 148 for assessment of undisclosed income.
3. Jurisdiction of the Assessing Officer to reopen assessments based on photostat copies of seized materials.

Detailed Analysis:

1. Validity of Notices Issued Under Section 148 of the Income-tax Act, 1961
The petitioners challenged the notices issued under section 148 of the Income-tax Act for reassessment of various assessment years. The notices were issued following a search conducted by the Central Excise Department and subsequent requisition under section 132A by the Income-tax Department. The petitioners contended that the proceedings under section 148 were not meant for a roving and fishing enquiry and that the assessing authority had no jurisdiction to reopen the assessments.

2. Applicability of Section 158BC Versus Section 148 for Assessment of Undisclosed Income
The primary argument presented by the petitioners was that the proceedings should have been initiated under section 158BC of the Act, which deals with the assessment of undisclosed income following a search, rather than under section 148. The petitioners argued that the requisition under section 132A mandates the application of Chapter XIV-B, which includes section 158BC, for assessing undisclosed income. They relied on the decisions of the Gujarat High Court in Rushil Industries Ltd. v. Harsh Prakash and the Madhya Pradesh High Court in Smt. Harbans Kaur Bhatia v. CIT.

The court observed that section 158BA, which starts with a non obstante clause, mandates that the assessment of undisclosed income, where a search has been initiated or requisition made, should be conducted under Chapter XIV-B. The court noted that the requisition under section 132A was not fully executed as the complete set of documents was not delivered to the requisitioning authority. Therefore, the provisions of Chapter XIV-B, including section 158BC, would come into play only when the books of account or other documents are actually received by the Assessing Officer pursuant to the requisition made under section 132A.

3. Jurisdiction of the Assessing Officer to Reopen Assessments Based on Photostat Copies of Seized Materials
The petitioners argued that the Assessing Officer had no jurisdiction to reopen the assessments based on photostat copies of the seized materials, especially when the original documents were not with him. The court held that the proceedings under section 148 could not be said to be without jurisdiction. However, it clarified that in the reassessment proceedings under section 148, material or evidence relatable to the documents for which the requisition had been sent under section 132A could not be taken into consideration.

Conclusion
The court dismissed the petitions, holding that the proceedings initiated under section 148 were valid and within jurisdiction. However, it restricted the use of materials relatable to the documents requisitioned under section 132A in the reassessment proceedings. The court emphasized that the provisions of Chapter XIV-B would apply only when the requisitioned documents are actually received by the Assessing Officer. The petitions were dismissed with the observation that each party would bear its own costs.

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