2004 (11) TMI 19 - HC - Income Tax

Notice u/s 148 - officers of the search party with the help of gas cutter cut open the safe and took away the sum of Rs. 2, 19, 000 and pawned articles kept therein on the ground that it belonged to Prem Kumar Jain. In the course of search Prem Chandra Jain gave his statement stating therein that the cash and pawned articles found from the safe of Smt. Shyama Devi did not belong to him it either belong to Smt. Shyama Devi or to her son and he had nothing to do with the same. - it is not clear as to in whose hands the amount in question has to be assessed. Thus the Income-tax Officer was justified in taking proceedings under section 147 of the Act for assessing the aforesaid amounts at the hands of the petitioner according to the claim made by the petitioners

Summary

Issues Involved:
1. Legality and jurisdiction of notices issued under Section 148 of the Income-tax Act, 1961.
2. Validity of the search and seizure conducted by the Income-tax Department.
3. Assessment of income and ownership of seized cash and pawned articles.

Issue-wise Detailed Analysis:

1. Legality and Jurisdiction of Notices Issued Under Section 148 of the Income-tax Act, 1961:
The petitioners challenged the notices dated March 31, 1995, issued under Section 148 of the Income-tax Act, 1961, on the grounds that they were issued on a change of opinion without any basis or justification. The court held that under Section 147, proceedings for assessment can be initiated only if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. The court cited several precedents, including *Ganga Saran and Sons P. Ltd. v. ITO [1981] 130 ITR 1 (SC)*, which emphasized that the belief must be reasonable and based on relevant material. The court concluded that the reasons recorded for initiating proceedings were relevant and had a rational connection to the belief that income had escaped assessment. Therefore, the notices under Section 148 were held to be valid.

2. Validity of the Search and Seizure Conducted by the Income-tax Department:
The petitioners alleged that the search conducted at the residential premises of Suresh Chandra Jain was illegal as it was done without a warrant under Section 132(1) of the Act. The court referred to various cases, including *Smt. Sita Devi v. CIT [1980] 122 ITR 105 (P&H)* and *Dr. Mrs. Anita Sahai v. Director of Income-tax (Investigation) [2004] 266 ITR 597 (All)*, which discussed the conditions precedent for a valid search and seizure. The court observed that the search and seizure were conducted based on relevant material and the belief that the assessee had undisclosed income. Thus, the search and seizure were held to be valid.

3. Assessment of Income and Ownership of Seized Cash and Pawned Articles:
The petitioners claimed that the seized cash amounting to Rs. 2,19,000 and pawned articles valued at Rs. 10,506 belonged to Smt. Shyama Devi, who had bequeathed them to the petitioners. The court noted that the Income-tax Officer had assessed the amount in the hands of Prem Chandra Jain, who denied ownership and stated that the amount belonged to Smt. Shyama Devi. The court referred to several cases, including *Lalji Haridas v. ITO [1961] 43 ITR 387 (SC)* and *S. Gyani Ram and Co. v. ITO [1963] 47 ITR 472 (All)*, which allowed the Income-tax Officer to assess income in the hands of the right person. The court concluded that the Income-tax Officer was justified in initiating proceedings under Section 147 to assess the amount in the hands of the petitioners based on their claim.

Conclusion:
The court dismissed both writ petitions, holding that the notices under Section 148 were valid, the search and seizure were conducted legally, and the Income-tax Officer was justified in initiating reassessment proceedings. The petitions were dismissed without any order as to costs.