2018 (10) TMI 1021 - AT - Income Tax

Jurisdictional fact for invoking jurisdiction u/s. 158BD - lack of necessary satisfaction - undisclosed income in issue belongs to an assessee other than the searched assessee - Held that - AO lacks jurisdiction to initiate and pass orders in consequence to sec. 158BD of the Act, therefore, the impugned orders passed by the AO are null in the eyes of law and are, therefore, quashed - Additional ground challenging validity of the impugned sec. 158BD assessment proceedings framed in the instant case Sec. 158BD proceedings under challenge are quashed accordingly. See M/s S.K.S. Mercantile Pvt. Ltd. vs. ACIT 2018 (7) TMI 1088 - ITAT KOLKATA - Decided in favour of assessee.

Summary

Issues:
Validity of sec. 158BD proceedings, Addition under sec. 68, Protective assessment, Jurisdictional facts for invoking sec. 158BD.

Validity of sec. 158BD proceedings:
The appeal raised concerns about the jurisdiction of the proceedings under section 158BD, citing that no undisclosed items were found related to the appellant during the search. The CIT(A) upheld the addition of ?3,00,000 under section 68 but deleted the ?3,000 commission. The decision was based on a similar case involving M/s S.K.S. Mercantile (P) Ltd. The appellant argued that the proceedings were initiated without proper jurisdictional facts, as the shares seized did not belong to them at the time of the search. The Tribunal agreed, stating that the AO lacked jurisdiction under section 158BD, leading to the quashing of the assessment proceedings.

Addition under sec. 68:
The AO made an addition of ?3,00,000 under section 68, which was confirmed by the CIT(A) but later challenged by the appellant. The Tribunal dismissed the legal grounds raised by the appellant, except for one, and allowed the appeal based on the lack of jurisdiction for invoking section 158BD. The decision highlighted the importance of jurisdictional facts for initiating such proceedings.

Protective Assessment:
The AO conducted a protective assessment of ?1,21,65,000 and added a commission of ?12,165 in the case of the appellant. However, the Tribunal found that the AO erred in invoking section 158BD proceedings against the appellant as the necessary jurisdictional facts were absent. The Tribunal emphasized that the jurisdictional fact for assuming jurisdiction under section 158BD was crucial, and since it was lacking, the invocation and framing of the assessment were deemed null and void.

Jurisdictional facts for invoking sec. 158BD:
The Tribunal analyzed the legal issue of whether the AO correctly initiated block assessment proceedings under section 158BD. It was established that the jurisdictional fact required for invoking section 158BD was absent in the case of the appellant. The Tribunal concluded that the AO's invocation of section 158BD proceedings against the appellant was erroneous, leading to the quashing of the assessment. The decision emphasized the necessity of jurisdictional facts before initiating proceedings under section 158BD.