2001 (1) TMI 32 - HC - Income Tax

Summary

Issues Involved:
1. Validity of notice u/s 158BD.
2. Satisfaction of the Assessing Officer of the raidees.
3. Coverage of assessment years in the notice.
4. Applicability of sections 68 and 69 at the time of notice issuance.
5. Timing of proceedings u/s 158BD relative to proceedings u/s 158BC.
6. Sufficiency of evidence for adverse conclusions.

Summary:

1. Validity of notice u/s 158BD:
The petitioner challenged the notice dated August 29, 2000, issued u/s 158BD of the Income-tax Act, arguing that there were no facts justifying the notice. The court referred to a previous case (Rushil Industries Ltd. v. Harsh Prakash [2001] 251 ITR 608) and held that the Assessing Officer needs only to be satisfied that the books or documents found in the search show undisclosed income of a person other than the one searched. The court concluded that the first contention must fail.

2. Satisfaction of the Assessing Officer of the raidees:
The petitioner argued that the notice was invalid without the satisfaction of the Assessing Officer of the raidees. The court noted that the petition did not contain any averment about the lack of satisfaction and that the Assessing Officer of the raidees was not joined as a party respondent. The court invoked the presumption u/s 114 of the Indian Evidence Act, 1872, that the official act was regularly performed. The court held that the absence of any averment about the satisfaction of the Assessing Officer of the raidees does not vitiate the notice issued u/s 158BD.

3. Coverage of assessment years in the notice:
The petitioner contended that the notice covered assessment years not included in the block period as defined by section 158B(a). The court stated that this issue could be raised during the proceedings u/s 158BD and that the petitioner would have the right to appeal if aggrieved by any final order.

4. Applicability of sections 68 and 69 at the time of notice issuance:
The petitioner argued that sections 68 and 69 could only be applied at the time of computing undisclosed income, not at the time of issuing a notice u/s 158BD. The court referred to Khandubhai Vasanji Desai v. Deputy CIT [1999] 236 ITR 73, which clarified that proceedings u/s 158BD are part of the search operations and subsequent assessment of undisclosed income. The court held that the fourth contention must fail.

5. Timing of proceedings u/s 158BD relative to proceedings u/s 158BC:
The petitioner contended that proceedings u/s 158BD could only be initiated after completing proceedings u/s 158BC. The court, referring to Khandubhai Vasanji Desai's case, held that notice u/s 158BD could be issued at any stage if the Assessing Officer is satisfied that undisclosed income belongs to another person. The fifth contention was also dismissed.

6. Sufficiency of evidence for adverse conclusions:
The petitioner argued that the respondent had not produced sufficient evidence for the adverse conclusions. The court noted that the respondent had provided detailed material in the reply affidavit, indicating that the petitioner had converted unaccounted income into legally accounted funds through bogus sales and loans. The court found no merit in the petitioner's contentions and dismissed the petition with costs.

Conclusion:
The court dismissed the petition, finding no merit in any of the contentions raised by the petitioner. The notice issued u/s 158BD was upheld, and the ad interim relief granted earlier was vacated.