2010 (4) TMI 639 - HC - Income Tax

Court invalidates notices under section 158BD, directs Assessing Officer to review, orders vacation

The Court directed the Assessing Officer to review the petitioners' submissions challenging notices under section 158BD of the Income-tax Act. It noted ... Search and seizure under section 132(1) - diary was seized - enquiry being made, Sri Tariq Jamal stated that the said diary was related to Empire Estate Building as was being jointly developed by AOP constituted by me and M/s Super House Overseas Ltd. wherein both of them had a share in the ratio of 60 per cent. and 40 per cent - In the block assessment, the diary was held to be belonging to Tariq Jamal and on that basis an income was treated as undisclosed income of Sri Tariq Jamal - on the basis of the material found at the time of search, a notice under section 158BD was issued - Held that: - diary which is the basis for the issue of the notices under section 158BD have been considered in the case of Empire Estate AOP and the income arising from the entries of the diary has been assessed in the case of Empire Estate AOP, the notices under section 158BD do not survive and liable to be vacated and pass the appropriate order in accordance to law Issues:Challenging notices under section 158BD of the Income-tax Act, 1961 based on a search and seizure operation.Analysis:The petitioners in this case challenged the notices issued under section 158BD of the Income-tax Act, 1961. The matter arose from a search and seizure operation conducted at the residence of an individual, during which a diary was seized. Subsequently, proceedings were initiated under section 158BC in the individual's case. The diary was claimed to be related to a jointly developed project. A block assessment order was passed, treating the diary as belonging to the individual and assessing undisclosed income. Notices under section 158BD were then issued to other entities based on the material found during the search, which the petitioners contested.The petitioners argued that the material forming the basis of the section 158BD notices had already been considered by the Income-tax Settlement Commission in the case of another entity related to the project. The Commission had spread the income over different years and the entity had paid the assessed tax amount. They contended that since the diary had been assessed by the Commission, no further action should be taken against them under section 158BD. The standing counsel suggested sending the matter back to the Assessing Officer for consideration.The Court disposed of the writ petitions by directing the Assessing Officer to review the petitioners' submissions. It was instructed to take into account that the diary, which was the foundation for the section 158BD notices, had already been examined by the Income-tax Settlement Commission in the related entity's case. The Court ruled that since the income from the diary had been assessed in that case, the notices under section 158BD against the petitioners were no longer valid and should be vacated, with the Assessing Officer instructed to act in accordance with the law.