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TMI Blog2009 (1) TMI 364X X X X Extracts X X X X X X X X Extracts X X X X ..... see as undisclosed income during the course of search proceedings. In order to bring this amount to tax, notice under section 158BD was issued to the assessee on 10-2-2003. The assessee filed return vide which NIL undisclosed income was declared. Before the Assessing Officer, it was submitted that gross receipt is not the taxable income. The vehicle charges were received in respect of two vehicles, which were taken on lease basis. The income from two vehicles will be Rs. 24,000 for the year ending 31-3-2001 as per section 44AE of the Act. Such income was declared in the regular return of income filed for the assessment year 2001-02. Hence, it was submitted that there is no undisclosed income. 2.2 Before the learned CIT(A), a ground of appeal was raised that the Assessing Officer has erred in completing the assessment without furnishing the reason for initiating proceedings under section 158BD of the Act. The above referred ground of appeal has been disposed of by the learned CIT(A) after observing as under:- "In this ground, the appellant objects to the non-supply of furnishing the reason for initiation of proceedings under section 158BD of Income-tax Act. Records were seen. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame of the driver, the party to whom the liquor is supplied and the transport charges as per km. run are mentioned. The assessee explained one of the entries available in this document. Attention of the learned AR was further drawn towards copy of the letter given by the assessee to Dy. Director of Investigation, Mangalore dated 27-3-2001. Copy of this letter has been filed by the learned DR. Vide this letter, the assessee stated as under:- "I have also carried on transport business whose income is not shown for the purpose of income-tax. The seized material A/SJ/6 contains the income earned by me through transport business which comes to Rs. 3,08,789 and I undertake to offer this income in my hands." In view of the above facts being available with the Assessing Officer, who was completing assessment under section 158BC of the Income-tax Act, the learned AR was asked as to whether this will not constitute the desired satisfaction. The learned DR also filed copy of the assessment order under section 158BC in the case of M/s. H.E. Distilleries (P.) Ltd. While passing that order, the Assessing Officer in para 3.2 of the order has referred to the transportation of unaccounted product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er dated 28-11-2007 has held that proceedings initiated under section 158BD are not valid in case there is no satisfaction recorded by the Assessing Officer as required under section 158BD of the Act. The learned AR also relied on the decision of this Bench in the case of Ashok Anand v. Asstt. CIT. The Tribunal in Ashok Anand v. Asstt. CIT [IT (SS) Appeal No. 152 (Bang.) of 1997, dated 30-7-2001] held that recording of satisfaction is a must for assuming jurisdiction under section 158BD of the Act. Since there is no satisfaction, therefore, the Tribunal held that there was no proper assumption of jurisdiction by the Assessing Officer in passing the block assessment order. The learned AR drew our attention to return filed for the assessment year 2001-02 on 28-3-2002. In this return of income, the assessee has disclosed income under section 44AE in respect of two vehicles taken on lease from October, 2000. An income of Rs. 48,000 has been declared. The learned AR submitted that when the assessee is covered by the provisions of section 44AE, then the income is to be accepted as per the provisions of section 44AE and the relevance of the books of account is not there. Hence, the diary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct: "Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or any assets were requisitioned under section 132A, then, the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed [under section 158BC] against such other person and the provisions of this Chapter shall apply accordingly." 2.8 It will be useful to state the following facts before we analyse as to whether the desired satisfaction has been reached by the Assessing Officer before issuing notice under section 158BD of the Income-tax Act:- 1. Question No. 3 and answer to that question in the statement of the assessee recorded under section 132(4) of the Income-tax Act. Q. 3: Please go through the small pocket diary exhibited as A/SJ/6 and explain the contents. "This seized material contains the details in respect of collections made. They are towards transport of liquors from H.E. Distilleries to various dealers. I have wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The relevant seized material is A/SJ/6 which contains the name of the Driver, the party to whom it is delivered and the transport charges, etc. Mr. Subhan Javeed explained the contents of this seized material in the statement recorded on 18-1-2001 and the same is reproduced below: Q. No. 3: Please go through the small pocket diary exhibited as A/5J/3 and explain the content. Ans: This seized material contains the details in respect of collections made by me towards transport of liquor for H.E. Distilleries to various dealers. I have written this book date-wise from 16-7-2000 to 22-12-2000. On every date, the name of the driver, the party to whom the liquor is supplied and the transport charges as per the kilometer run are mentioned. For an example.... I have two lorries which are taken by me from the wholesalers through which I run the above-mentioned transport business. This transport business is done by me only for our group concerns M/s. H.E. Distillery (P.) Ltd." When the same was put across to Mr. H.E. Tajuddin, vide his statement dated 19-1-2001, he stated the following: Q. No. 5: Mr. Javeed S has further stated that he supplies his lorries for the transport of liquor m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; ---------- 2.9 We have also perused the order passed under section 158BC in the case of H.E. Distilleries. The Assessing Officer while passing the order has observed in para 3.4-3 as under:- "3.4-3 The above fact has been reiterated by Mr. Tajuddin in a letter dated 16-3-2001 addressed to the DDIT, stating as follows: "...While recording statement from Shri H.E. Tajuddin on 19-10-2001 in respect of the unaccounted production and subsequent sale with regard to M/s. H.E. Distillery Pvt. Ltd. on the light of unaccounted sale of corrugated boxes made by M/s. Diamond Packages and unaccounted transport of liquor to wholesalers from M/s. H.E. Distillery Pvt. Ltd. carried on by Shri Subhan Javeed, we would like to clarify that there is an unaccounted production and unaccounted sale in respect of M/s. H.E. Distillery Pvt. Ltd. over a period of time. The unaccounted purchases of corrugated boxes from M/s. Diamond Packages, the unaccounted sale of liquor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly mentioned that it is applicable to an assessee, who is leasing such goods carriages. It is not mentioned in that section that it would be applicable in the case of the lessee. The lessee is not entitled to depreciation on the goods carriages and, therefore, his income cannot be deemed to be only Rs. 2,000 per month per vehicle. Hence, we do not subscribe to the view of learned AR that section 44AE will be applicable in the case of the appellant as he has received the goods carriage on lease. He is not the lessor of the vehicle but is a lessee. Hence, in the case of the assessee, the income is to be computed on the basis of the receipts and expenses. 2.14 As per Explanation to section 44AE, an assessee who is in possession of goods carriage, whether taken on hire purchase or on instalment and for which the whole or part of the amount payable is still due, shall be deemed to be the owner of such goods carriage. Thus, the Explanation as mentioned suggest the circumstances under which an assessee can be considered as a deemed owner. An assessee can be a deemed owner if he has taken a goods carriage on hire purchase or on instalment. In the instant case, the assessee has not taken t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer who is seized of the matter and has jurisdiction over the person other than the person with respect to whom search was made under section 132 or whose books of account or other documents or any assets were requisitioned under section 132A, he shall proceed against such other person as per the provisions of Chapter XIV-B which would mean that on such satisfaction being reached that any undisclosed income belongs to such other person, he must proceed to serve a notice to such other person as per the provisions of section 158BC of the Act. If the Assessing Officer who is seized of the matter against the raided person reaches such satisfaction that any undisclosed income belongs to such other person over whom he has no jurisdiction, then, in that event, he has to transmit the material to the Assessing Officer having jurisdiction over such other person and in such cases the Assessing Officer who has jurisdiction will proceed against such other person by issuing the requisite notice contemplated by section 158BC of the Act." 2.17 From the above referred decision of the Gujarat High Court, it is clear that the Assessing Officer who is seized of the matter against the raid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Venkataramaiya, Second Edition, means as under:- "To be satisfied with a state of things means to be honestly satisfied in your own mind. The phrase 'satisfied' occurs in many taxing statutes and is a familiar one for a great many years (see for example section 271 of the Income-tax Act, 1961 and section 56 of the Delhi Sales-tax Act, 1975). The phrase 'is satisfied' means simply 'makes up its mind' (per Lord Pearson in Blyth v. Blyth, [1966] 1 All ER 524 at p. 541). Dixon, J., defined it as 'actual persuation'. That means a mind not troubled by doubt or to adopt the language of Smith, J., a mind which has reached a clear conclusion-See Angland v. Payne, (1944) NZLR 610 at p. (626); Messrs Jilen & Co. v. Sales Tax Officer (1977) Tax L.R. 1921 at pp. 1923-24." 2.21 The word 'satisfaction' as per the book Advance Law Lexicon by P. Ramanadha Iyer (2005 Edition) has mentioned that the phrase 'satisfaction' occurring in many taxing statutes means simply 'makes up its mind' - Jiten & Co. v. Sales Tax Officer [1977] Tax L.R. 1921 (Delhi). The phrase 'is satisfied' means, simply 'makes up its mind'. Whenever legislation used the word 'satisfied' it must mean 'reasonably satisfied'. 2.22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Assessing Officer was erroneous in passing the assessment orders. and (2) that the decision of the Assessing Officer was prejudicial. to the interest of revenue. The Hon'ble Apex Court observed that needless to say the satisfaction must be one which is objectively justifiable and cannot be the mere ipse dixit of the Commissioner. 2.27 From the above discussion, it is clear that the assessee admitted at the time of search that he is having unaccounted income from the transportation of unaccounted production of liquor. In a letter addressed to the revenue, he admitted such income and stated that he will declare such income. While making assessment in the case of M/s. H.E. Distilleries Pvt. Ltd. under section 158BC, the person managing the affairs of M/s. H.E. Distilleries Pvt. Ltd. admitted that transportation is done by the assessee. Thus, it is clear that the assessee was in receipt of an amount which consists of income liable to tax though such income was not declared in the return of income filed after the search. A device was adopted to show the income under section 44AE of the Income-tax Act. Such device cannot be accepted in view of the decision of Hon'ble Apex Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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