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2017 (3) TMI 1388 - DELHI HIGH COURTValidity of block assessment notice u/s 158BD - open to the assessing officer to include the income of the assessee, which is not disclosed for assessment for the block period though the transaction relating to such income is reflected in the account books of the respective years - Held that:- Given the nature of the material seized in the facts of this case, the ITAT’s findings that block assessment notice under Section 158BD of the Act was unwarranted, cannot be sustained. Undoubtedly, the A38 and A97 of the panchnama were fresh materials unearthed during the course of search, albeit in a third party premises, but they clearly related to the assessee. In these circumstances, the notice issued under Section 158BD of the Act and the consequential block assessment proceedings were warranted. Although this Court has answered the question framed, at the same time the facts are that such answer does not dispose of the appeal or the matter. For an addition under Section 68 of the Act, it is now well settled [CIT vs Lovely Exports (P) Ltd. (2008 (1) TMI 575 - SUPREME COURT OF INDIA) ] that the AO has to be satisfied about the identity of the share application, the genuineness of the transaction, and the credit worthiness of the investor. Whilst the inquiry in this case – i.e. the seizure of materials from the searched party, were entirely justified, a notice of final assessment with the additions that were ultimately made, could have been justified only after a proper finding in that regard. Here, the AO’s actions were lacking inasmuch as he did not diligently perform the task required of him. It was quite possible for the AO to have inquired from the assessee and also found for himself, on the basis of inquiries into the bank accounts of the share applicants, as to whether the transactions were in fact as suspect as he concluded. The addition under Section 68 of the Act can be justified only if the AO also discharges the onus which is cast on him after the initial material is disclosed. The order nowhere reveals that the AO ever bothered to make such inquiry. Although the question of law is answered in favour of the Revenue, the appeal has to fail.
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