2016 (10) TMI 105 - HC - Income Tax

Justification to issue the impugned notice under Section 158BC - undisclosed income - Held that - As no incriminating documents were found during the course of search nor was it found that he was in any manner involved in the bank account with his name in the said Bank. Thus it appears that the Respondentsrevenue took search and seizure proceedings in respect of the Petitioner on account of mistaken identity. In any case the appraisal report would indicate that no notice under Section 158BC of the Act could be issued to the Petitioner as the condition precedent to issue notice under Section 158BC of the Act, viz. undisclosed income found during the search proceedings, is not satisfied. In fact, at the very outset, after a preliminary hearing, we had asked the learned Counsel for the Respondents-Revenue whether the Revenue would still want to persist with the impugned notice under Section 158BC of the Act. On instructions, Mr. Suresh Kumar, learned Counsel for the Respondents-revenue informed us that the Respondents-revenue seeks to press the impugned notice and seek dismissal of the present Petition. In the above view, this is the fit case where costs should be awarded to the Petitioner. The Respondents-revenue i.e the jurisdictional Chief Commissioner of Income Tax (Respondent No.1) is directed to pay the costs of ₹ 20,000/to the Petitioner within four weeks from today.

Summary

Issues:
Challenge to notice under Section 158BC of the Income Tax Act, 1961 based on search and seizure proceedings under Section 132 of the Act.

Analysis:
The petitioner challenged a notice dated 16 May 2000 issued by the Assessing Officer under Section 158BC of the Income Tax Act, 1961, requiring the petitioner to file a return of income within 15 days of service of the notice. The notice was issued following search and seizure proceedings under Section 132 of the Act on the petitioner. The petitioner also sought an apology from the Revenue for the search operation. The petition was admitted concerning the initiation of proceedings under Chapter XIVB of the Act, staying the notice. The challenge to the search and seizure proceedings and the apology sought by the petitioner were not examined further. The genesis of the proceedings was a search and seizure operation on a group of companies belonging to Mr. Nirmal Suchanti, during which a bank account in the name of Pioneer Publicity was found with the petitioner's name and telephone numbers. However, the petitioner clarified that he had no connection to the account and was only socially acquainted with Mr. Nirmal Suchanti. An affidavit from Mr. Suchanti confirmed the petitioner's lack of involvement in the account. Despite no incriminating evidence found during the search, the impugned notice under Section 158BC was issued to the petitioner for the block period covered by the search.

The Revenue filed an affidavit-in-reply but did not challenge the petitioner's claim of no incriminating material found during the search linking him to any undisclosed income. The affidavit did not mention the recording of a satisfaction note before the search, which would have indicated a reasonable belief for the search operation. An appraisal report produced by the Revenue showed that no incriminating documents were found during the search, and the petitioner was not involved in the bank account with his name. It appeared that the search and seizure proceedings were based on mistaken identity. As the condition precedent for issuing a notice under Section 158BC was not satisfied, the impugned notice was quashed and set aside. The court criticized the Revenue for ignoring the appraisal report and emphasized the need for officers to act in accordance with statutory provisions to prevent harassment of citizens. The court awarded costs to the petitioner due to the Revenue's persistence with the impugned notice.

In conclusion, the court quashed the impugned notice under Section 158BC of the Income Tax Act, 1961, based on search and seizure proceedings that did not reveal any undisclosed income linked to the petitioner. The court highlighted the importance of following statutory provisions to prevent harassment of citizens and awarded costs to the petitioner due to the Revenue's unwarranted persistence with the notice.