TMI Blog2009 (1) TMI 364X X X X Extracts X X X X X X X X Extracts X X X X ..... ;makes up its mind' . Whenever legislation used the word 'satisfied' it must mean 'reasonably satisfied'. 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. u/s 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 u/s 44AE. Such device cannot be accepted in view of the decision of Hon'ble Apex Court in the case of McDowell Co. Ltd. v. CTO [ 1985 (4) TMI 64 - SUPREME COURT] . Therefore, we feel that requisite satisfaction has been recorded by AO who was having jurisdiction over the person, who was raided and such satisfaction can be clearly inferred from the record wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of proceedings under section 158BD of Income-tax Act. A reading of section 158BD of Income-tax Act also reveals that the Assessing Officer has only to be satisfied that there is undisclosed income, it does not say that a copy of such satisfaction has to be provided to the appellant/assessee. Even the ratio of the Supreme Court decision on GKN Driveshafts (India) Ltd v. ITO [2003] 259 ITR 19 (SC); which is a case law on section 147 of Income-tax Act and not on section 158BD of Income-tax Act; is that the copy of reasons are to be given compulsorily to the assessee by the Assessing Officer if (1) the assessee files the return and (2) after filing the return, asks for a copy of the recorded reasons. Thus, there was no initiative from the assessee in this seeking copy of the reason and, hence, no supply of the same by the Assessing Officer. Therefore, I see no reason to cancel the assessment order as illegal and without jurisdiction. The ground fails and, therefore, dismissed". 2.3 During the course of proceedings before us, the learned AR relied on the decision of the Hon'ble Apex Court in the case of Manish Maheshwari v. Asstt. CIT [2007] 289 ITR 341. It was submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se order was passed under section 158BC has referred to question and answer No. 3 in the statement of the assessee recorded on 18-1-2001 under section 132(4) of the Income-tax Act. This fact was put across to Mr. H.E. Tajuddin and his statement was recorded. Mr. Tajuddin mentioned that the assessee supplies his lorries for the transport of liquor manufactured by M/s. H.E. Distilleries (P.) Ltd. Shri Tajuddin was asked to show the transportation of such liquor in his books of account. At the time of recording of the statement, Shri Tajuddin said that he is not in a position to explain and he wanted more time. Subsequently, Mr. Tajuddin vide a letter admitted that the unaccounted production of liquor made by M/s. H.E. Distilleries is transported through the vehicles operated by Mr. Subhan Javeed. Thus, in the assessment order passed under section 158BC of the Income-tax Act, the Assessing Officer has given a finding that transportation of unaccounted production of liquor is done by the assessee. Such transportation was also admitted by the assessee in his statement recorded under section 132(4) of the Income-tax Act. Hence, the learned AR was asked to explain as to why these facts ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AR argued that the contents in the statement do not show that the assessee was having undisclosed income. The learned AR submitted that facts mentioned by the Assessing Officer while completing assessment under section 158BC in the case of H.E. Distilleries (P.) Ltd. does not show that the assessee has undisclosed income. Submission of facts is different from the recording of satisfaction. The learned AR also submitted that the assessee has taken the vehicles on lease and, therefore, he should be considered as owner. The learned AR relied on the decision of the Hon'ble Apex Court in the case of CIT v. Podar Cement (P) Ltd. [1997] 226 ITR 625. The Hon'ble Apex Court held that 'owner' mentioned in section 22 is a person who is entitled to receive income in his own right. The learned AR, therefore, argued that the assessee has taken the vehicles on lease and, therefore, he should have been considered as owner and the provisions of section 44AE are applicable. In case, the provisions of section 44AE are applicable, then the seized document looses its relevance and when such document looses its relevance then there is no undisclosed income for assuming jurisdiction under section 158BD o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he driver, the party to whom the liquor is supplied and the transport charges as per the kilometer run are mentioned. For an example please go through the page written as on 2-9-2000. The first entry is the name of the driver Shri Nagaraj. The second entry in the name of dealer, i.e., DVG Thrisool 're' means received transport charges. 108 means the total kilometers run 'X' 7 means Es.7 for each kilometer run. So the transport charge is 108 X 7 = 756. Similarly, this transaction certain transport charges of Rs. 1530 (1530 X 10). This page also contain details in respect of dealer B.D.V.T. Jayanna HHN. A sum of Rs. 400 and Rs. 700 is received. The driver is Mr. Kareem. 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. Distilleries Pvt. Ltd." 2. Copy of the letter dated 27-3-2001 addressed by the assessee to DDI, Investigation, Mangalore. "Your Department has conducted a search in our house at Kote Post Office Road, Shimoga on 18-1-2001. During that time, you have seized certain materials from my chamber. Myself and my mother Smt. R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks of account the related goods transported through your nephew? Ans. 5: Presently I am not in a position to explain this, I may be given more time. Subsequently, Mr. H.E. Tajuddin, vide a letter admitted that the unaccounted production of liquor made at HED is transported through the vehicles operated by Mr. Subhan Javeed". 4. Regular return has been filed after the search. Computation of income attached with the return of income. "Income under the Head 'Business/Profession':- Rs. (A) Interest on capital and remuneration accrued in M/s. Diamond Packages, Shimoga (20,588 + 30,000) 50,588.00 (B) 1. Hire charges declared under section 44AE of the Income-tax Act, 1961 from (a) Tata Sumo i.e., 2,000 X 12 = 24,000 (b) Heavy Motor Vehicle taken on lease from October 2000 i.e., 2,000 X 12 = 24,000 48,000.00 98.588.00 ------ ---------- 98,588.00 98,590.00" - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. Thus, this judgment is not applicable while interpreting section 44AE of the Income-tax Act. 2.12 The Hon'ble Apex Court in the case of Mysore Minerals Ltd. held that the provision in section 32 should be so interpreted and the words therein should be assigned such meaning as would be enable the assessee to secure the benefit intended to be given by the Legislature to the assessee. Thus, the word 'owner' is to be interpreted in a way so that the words used in the statute are assigned a meaning which will make the construction of this statute as harmonious. 2.13 Section 44AE is a special provision for computing profits and gains of business of plying, hiring or leasing goods carriages. The income is deemed at Rs. 2,000 per month per vehicle. The basic objective in deeming the income of Rs. 2,000 is that an assessee who is engaged in the business of plying, hiring or leasing its carriages is entitled to depreciation on such vehicles. It is clearly 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 good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, 2000 to September, 2000. The inference, which were drawn from the above discussion, is that the seized document A/SJ/6 is relevant for ascertaining the undisclosed income. 2.16 The Hon'ble Apex Court in the case of Manish Maheshwari held that the proceedings under section 158BD is not valid. While holding so, the Hon'ble Apex Court has taken in to consideration that the notice does not record any satisfaction on the part of the Assessing Officer. Documents and other assets recovered during the search had not been handed over to the Assessing Officer. The Hon'ble Apex Court observed that no proceedings under section 158BC have been initiated. There was a patent non-application of mind. The Hon'ble Apex Court in that case has referred to the decision of the Gujarat High Court in the case of Khandubhai Vasanji Desai v. Dy. CIT [1999] 236 ITR 73. The following para has been mentioned by the Hon'ble Apex Court:- "This provision indicates that where the Assessing 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 requisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. After the said date, it is not possible to invoke section 158BD at all." 2.19 Thus, the Special Bench has held that satisfaction can be found in the order passed under section 158BC. In the instant case, order under section 158BC has been passed on 31-1-2003 while notice under section 158BD has been issued on 10-2-2003. We have already reproduced para 3.2 and para 3.4-3 from the assessment order passed under section 158BC in the case of M/s. H.E. Distilleries Pvt. Ltd. Perusal of these two paras clearly indicate that the Assessing Officer who passed order under section 158BC was satisfied that income arising from the transportation of unaccounted production of liquor belongs to the assessee. There was also a letter from the assessee addressed to Dy. DIT (Investigation) in which he admitted that the undisclosed income on account of transportation of unaccounted production of liquor belongs to him. 2.20 The word 'satisfaction' as defined in Law Lexicon by 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 gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be correct to equate the satisfaction of the Income-tax Officer or Appellate Assistant Commissioner with the actual issue of notice. The issue of notice is a consequence of the satisfaction of the Income-tax Officer or the Appellate Assistant Commissioner and it would. in our opinion, be sufficient compliance with the provisions of the statute if the Income-tax Officer or the Appellate Assistant Commissioner is satisfied about the matters referred to in clauses (a) to (c) of sub-section (1) of section 271 during the course of proceedings under the Act even though notice to the person proceeded against in pursuance of that satisfaction is issued subsequently." 2.26 The Hon'ble Apex Court in the case of CIT v. G.M. Mittal Stainless Steel (P.) Ltd. [2003] 263 ITR 255 observed that section 263 of the Income-tax Act requires that the Commissioner can call for and examine the record of any proceeding under the Income-tax Act and on the basis of his being satisfied, (1) 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 needles ..... X X X X Extracts X X X X X X X X Extracts X X X X
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