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 that the diary forming the basis of the notices had already been assessed by the Income-tax Settlement Commission in a related entity's case. As the income from the diary had been dealt with in that assessment, the Court deemed the notices against the petitioners invalid and ordered their vacation, instructing compliance with the 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the income from the diary had been assessed in that case, the notices under section 158BD against the petitioners were no longer valid and should be vacated, with the Assessing Officer instructed to act in accordance with the law.

---