TMI Blog2006 (5) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... ed CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. 4. The brief facts of both the grounds are that Shri Mahesh Joshi was searched under s. 132 at his residential premises on 16th Nov., 1999. During the course of search, certain papers relating to assessee, Mahesh Joshi HUF were found and seized which according to AO indicate existence of undisclosed income in the hands of the assessee. The AO accordingly issued notice under s. 158BC r/w s. 158BD to the assessee and the assessee filed the block return declaring nil undisclosed income. In this ground, the assessee challenges the issuance of notice under s. 158BD and the validity of the assessment order. The assessee before the learned CIT(A) vide pp. 2 to 12 at para 3.1 had submitted as under: "That search and seizure operation under s. 132 of the IT Act, 1961, were carried out against Shri Mahesh Joshi on 16th Nov., 1999. The learned AO has mentioned in his assessment order as under: 'During the course of search, certain papers relating to the assessee, Shri Mahesh Joshi HUF were found and seized which, indicate acceptance of undisclosed income in the hands of the assessee.' The reasons recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 158(b) which is reproduced hereunder for ready reference: 'Undisclosed income' includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act or any expenses, deduction or allowance claimed under this Act which is found to be false." From the above definition, it is absolutely clear that the undisclosed income is one which has not been or would not have been disclosed by the assessee for the purposes of levy of tax under the provisions of the IT Act, 1961. The reason for issuing the notice under s. 158BC r/w s. 158BD was the indicative unexplained investment in purchase of shop by the assessee from M/s Balaji Super Buildwell. Since the shop from M/s Balaji Buildwell as well as the entire transaction in bank account No. 427 of Central Bank of India are reflected in the regular return of income filed by the assessee for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count and falling within the meaning of undisclosed income as defined in s. 158B(b). By no stretch of imagination, the learned AO's scope under s. 158BD can be extended to form view on issues/transactions recorded in regular books. In view of the above facts, there was no material available with the learned AO to come to a prima facie satisfaction that there existed undisclosed income of the appellant. In view of this, the very basis of issuing notice under s. 158 fails and the entire assessment order, without legal foundation, fails and deserves to be quashed. We place reliance on the Tribunal, Bangalore Special Bench decision in the case of Y. Subbaraju Co. Ors. vs. Asstt. CIT (2004) 85 TTJ (Bang)(SB) 670. We reproduce below the operative portion of the above order of Special Bench: '9. In the light of the above discussions, we are of the view that satisfaction of the AO that undisclosed income belongs to other person is justiciable and when called in question, the authorities cannot escape to demonstrate the material that led to the satisfaction that undisclosed income of other person has been detected by the Department as a result of search. If the Department for an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny satisfaction to be recorded in writing. The only requirement under s. 263 was that upon examination of the records of any proceedings by the AO is erroneous insofar as it is prejudicial to the interests of the Revenue, he might revise the assessment. 10. On the facts and circumstances and in the light of the foregoing discussions, we are of the view that issuance of notice under s. 158BD of the Act is not justified. It is not justified merely on the ground that there was no material at all indicating any undisclosed income. The learned standing counsel who appeared on behalf of the Revenue has fairly agreed that there is no material found as a result of search which could pinpoint the existence of undisclosed income of a person who is not subject to search. The basic ingredient of s. 158BD is the existence of some material. If there is no material the question of AO's satisfaction does not simply arise. If there is a material then of course, it would be better if the AO demonstrates that he satisfied about there being some undisclosed income belonging to a person who was not searched. In all these cases, the assessments are not based on a search action or supported by any mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder s. 158BD of the Act. If the above requirement is fulfilled in a given case, then omission to record satisfaction may not, in the facts and circumstances of the case, vitiate the proceedings. 12. Thus, in the present case, the examination of the records does not show the existence of any material for the satisfaction and consequently issuance of notice under s. 158BD is not justified. The assessment orders passed in pursuance thereof are vacated and the question referred to us is answered in the light of the above discussions.' We place further reliance on Gorakhpur Petro Oils Ltd. vs. Addl. CIT (2005) 95 TTJ (All)(TM) 489 wherein it is held that it is settled proposition of law that whatever has been disclosed, cannot be treated as undisclosed. In view of the above submissions, we most humbly request that the order being illegal may please be quashed." 5. The learned CIT(A) observed that the assessee had filed the balance sheet with regular return of income but there was no mention of the bank account number in the bank account shown in the balance sheet and it was difficult to believe that the assessee could have made the cash deposit in the bank account. Therefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f search and the same cannot be assessed under Chapter XIV-B of the Act again. If the Department for any reason has no material whatsoever, the proceedings under s. 158BD itself will have to go because the very foundation for the assumption of jurisdiction becomes non-existent. In the present case, there is no iota of material from the proceedings of the search which could represent the undisclosed income. When such is the case, the satisfaction that undisclosed income belongs to other person is wanting and therefore, the entire proceedings framed with the issuance of notice under s. 158BD will have to go. Though under s. 158BD, the AO is not required to record the reasons for his satisfaction but he has to demonstrate that he is satisfied about there being some undisclosed income belonging to a person who was not searched and if there is no material with the AO then AO's satisfaction does not arise. 8. The main thing to be kept in mind is that proceedings under s. 158BD cannot be a fancy or ipse dixit of the AO but it should be based upon some material evidence found in the course of search. It must be appreciated that by invoking the provisions of s. 158BD, a stranger to the se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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