2015 (2) TMI 860 - HC - Income Tax

Satisfaction Note preceded notice under Section 158BD dated 03.06.2002 - validity of notice rejected by Tribunal - Held that - There is no dispute about the fact that the receipt was signed by the assessee which indicated that the total consideration was ₹ 33 lakhs. Even though it alluded to an agreement to sell dated 08.06.1999, the fact remains that no written agreement apparently was executed; what is a matter of fact, however, is that possession of the property was with the searched party, i.e. Batra brothers and their firm. Furthermore, the searched party had disclosed the consideration received at ₹ 4 lakh only. It is also not in dispute that the amount was in fact received by the assessee. Given these circumstances, that the Satisfaction Note, prima facie, recorded that the owner of the property was B.L.Goel (assessee s father) and that the amount was received by the assessee on the father s behalf cannot be determinative in the facts of this case. Since the amount was received, as a matter of fact, and the books of the purchaser showed that a fraction of that sum was disclosed as sale consideration, the Revenue was entitled to issue notice to the respondent, ascertaining whether such amount was actually received by him and, if so, on whose behalf, and proceed further. Thus the ITAT s order narrowly confirming the invalidity of the notice of the assessment, that the entire amount was received by the assessee on behalf of his father cannot be upheld. The property did not belong to Mr.B.L.Goel and the impugned order is not sustainable, it is accordingly set aside. The matter is remitted back to the ITAT to decide the assessee s appeal in accordance with law. - Decided in favour of revenue for statistical purposes.

Summary

Issues:
Validity of Satisfaction Note and notice under Section 158BD.

Analysis:
The Revenue challenged the ITAT order stating that the Satisfaction Note preceding the notice under Section 158BD was invalid. The case involved a search and seizure operation in which certain documents led to the recording of a Satisfaction Note on 30.05.2002, followed by a notice on 03.06.2002. The documents included a receipt from 1999 indicating a deal for a property transfer. The assessee argued that the amount received belonged to his father and not him, making the Satisfaction Note invalid. The AO disagreed and taxed the amount as undisclosed income. The CIT (Appeals) and ITAT had differing opinions on the matter.

The ITAT accepted the assessee's contention, emphasizing that the AO did not specify that the undisclosed income belonged to the assessee and that the Satisfaction Note was recorded after the time limit for assessment completion. The ITAT quashed the block assessment order, leading to the Revenue's appeal.

The Revenue argued that since the receipt did not mention the amount was received on behalf of the father, the Satisfaction Note was valid. They contended that the Revenue was not required to conduct a detailed investigation before issuing the Notice. The assessee maintained that once it was known the property belonged to the father and the amount was received on his behalf, the notice under Section 158BD was improper.

The High Court deliberated on whether the Satisfaction Note and notice were valid. It noted that the receipt indicated the amount was received by the assessee, even though the property belonged to the father. Given these circumstances, the Court held that the ITAT's decision confirming the notice's invalidity solely based on the amount being received on the father's behalf could not be sustained. The Court set aside the ITAT's order and remitted the matter back for further consideration.

In conclusion, the High Court ruled that the ITAT's decision on the invalidity of the notice was not upheld as the property did not belong to the father. The matter was sent back to the ITAT for a decision in line with the law.