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2016 (4) TMI 523 - ITAT CHENNAI

2016 (4) TMI 523 - ITAT CHENNAI - TMI - Satisfaction for initiating proceeding under Section 158BD - Held that:- Penalty proceeding is different than the assessment proceeding. The authorities under Income-tax Act are expected to re-appreciate the material available on record and find out whether penalty can be imposed for concealment of income. This Tribunal is of the considered opinion that when the satisfaction was not recorded by the Assessing Officer for initiating proceeding under Section .....

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come of searched person and the person other than the searched person. The CBDT clarified that even though the Assessing Officer is one and the same for the searched person and the person other than searched person, satisfaction need to be recorded. Similarly, even though the partner and partnership-firm are one and same under common law, they are being assessed separately under Income-tax Act, therefore, recording of satisfaction is mandatory as held by the Apex Court in Manish Maheshwari (2007 .....

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/o:p> For the Respondent: Shri R. Mohan, CIT ORDER Per N. R. S. Ganesan, Judicial Member This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) - I, Chennai, dated 31.08.2011 and pertains to block period 1.4.1989 to 31.03.1998 and 01.04.1998 to 09.03.1999. 2. Shri R. Venkatesh, the Ld. representative for the assessee, submitted that consequent to the search operation under Section 132 of the Income-tax Act .....

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of ₹ 23,45,873/- for the block period. This Tribunal has also confirmed the order of the CIT(Appeals). The Assessing Officer levied penalty under Section 158BFA(2) of the Act by an order dated 28.11.2008 and the CIT(Appeals) has confirmed the penalty. According to the Ld. representative, the addition was made only on the basis of statement said to be recorded from the partner of the assessee-firm and not on the basis of seized material. The assessment being made under Section 158BD of the .....

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e of any evidence of concealment of income, according to the Ld. representative, penalty under Section 158BFA(2) of the Act is not called for. 3. The Ld. representative for the assessee further submitted that the Assessing Officer made the addition in the quantum proceeding only on the basis of presumption. Referring to Section 158BC and 158BD of the Act, the Ld. representative for the assessee submitted that the undisclosed income for the block period has to be computed only on the b .....

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operation. The aggregate sales as per the so-called Daily Summary Transaction Report was less than the gross sales as per the return, therefore, there is no suppression of sales at all. Hence, according to the Ld. representative, it is not a fit case for levy of penalty under Section 158BFA(2) of the Act. 5. On the contrary, Shri R. Mohan, the Ld. Departmental Representative, submitted that during the course of search operation, sales bills for the financial years 1994-95 to 1997-98 .....

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was found during the course of search operation, the Ld. D.R. submitted that creation of asset would only be consequent to the generation of income. According to the Ld. D.R., the assessee might have invested the undisclosed income in any other group concerns or might have spent it. Referring to the Daily Summary Transaction Report, which was seized, the Ld. D.R. submitted that this summary transaction report was found to be unaccounted sales not entered in the books of account. The assessee has .....

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peals) has rightly confirmed the levy of penalty under Section 158BFA(2) of the Act. 6. We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, the block assessment was made under Section 158BD of the Act since the assessee was the person other than the searched person. For framing assessment under Section 158BD of the Act, the Assessing Officer is expected to record a satisfaction that the seized material found during .....

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t was found that the satisfaction was not recorded by the Assessing Officer as required under Section 158BD of the Act. Considering the nature of proceeding under Chapter XIV-B of the Act, the Apex Court found that the provisions contained in Chapter XIV-B is drastic in nature and the consequences are draconian. The Apex Court further found that the proceeding under Section 158BD of the Act can be initiated only if a search was carried on. Ultimately the Supreme Court found that recording of sat .....

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before us, the partner of the assessee-firm was subjected to search. Under the common law, the partner and the partnership-firm enjoy the same relationship. However, under the Income-tax Act, the partner and the partnership-firm are two different and independent assessable units. Therefore, in a proceeding under the Income-tax Act, the partner and partnershipfirm are treated as two different, independent assessable units. Therefore, even though there was a search in the premises of the partner S .....

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