2014 (12) TMI 840 - HC - Income Tax

Court upholds legality of notice under Income Tax Act for undisclosed income, dismissing writ petitions.

Gyanendra Kumar Jain And Others Versus Assistant Commissioner of Income-tax, Nazibabad

The court upheld the legality of the notice issued under Section 158-BD read with Section 158-BC of the Income Tax Act, as the assessing officer was ... Validity of notice u/s 158BC r.w Section 158BD – Direction made to assessee to file the correct return of the total income including the undisclosed income - Assessee contended that he and his minor children filed declaration under the Voluntary Disclosure of Income Scheme with regard to silver coins, silver utensils, gold sovereign and cash in his individual capacity and paid various sums of money as tax - Held that:- The assertions has been made for the first time at the stage of hearing of the petition - Such assertions has not been made anywhere in the pleadings – assessee has admitted that the search and seizure operation was conducted at the premises of Bishan Chand Mukesh Kumar as well as in the supplementary affidavit dated 28.7.2008. Such assertions can only be considered, if it is brought on record by means of an amendment application, but, the assessee insisted in arguing the matter without bringing such facts on record -The original record indicates the satisfaction of the authority in issuing the notice - during the course of search in the firm M/s Bishan Chand Mukesh Kumar, Delhi it was found that the firm was providing bogus accommodation for purchase of jewellery on commission basis – assessee did not sell the jewellery to M/s Bishan Chand Manoj Kumar has not been disputed - assessee has admitted that he and his minor children had sold silver utensils and gold coins to the firm M/s Bishan Chand Mukesh Kumar – there was no error in the issuance of a notice u/s 158-BD read with Section 158-BC – the order of the Tribunal is upheld – Decided against assessee. Issues:Quashing of notice under Section 158-BC read with Section 158-BD of the Income Tax Act; Validity of reasons to believe dated 12.12.2005; Existence of undisclosed income; Legality of notice issued to the petitioner; Barred by limitation; Satisfaction of assessing officer for initiating proceedings; Search and seizure operations; Compliance with Section 132 of the Act; Allegations against M/s Bishan Chand Mukesh Kumar; Admissibility of assertions made during the hearing; Issuance of notice under Section 158-BD read with Section 158-BC; Correctness of satisfaction recorded by the assessing authority; Interpretation of Section 158-BD in relation to undisclosed income belonging to other persons.Detailed Analysis:The petitioner sought the quashing of a notice issued under Section 158-BC read with Section 158-BD of the Income Tax Act, challenging the reasons to believe dated 12.12.2005. The petitioner contended that the notice was illegal as no search or seizure operation had taken place at their premises, and the reasons for the notice were not based on tangible material. Additionally, it was argued that the notice was time-barred. A supplementary affidavit alleged search operations at specific premises, leading to block assessment orders against certain individuals and entities, questioning the lack of satisfaction recorded against the petitioner for initiating proceedings.During the hearing, the respondent's counsel argued that the notice was based on documents found during assessments of related parties, making the notice illegal. The court noted discrepancies in the petitioner's assertions regarding search operations at specific premises, emphasizing the need for factual clarity in the pleadings. The court directed the Income Tax department to produce records showing the assessing authority's satisfaction for issuing the notice, which was found to be based on the discovery of undisclosed income related to transactions with a specific firm. The petitioner's admission of selling items to the firm in question further supported the authority's satisfaction, leading to the dismissal of the writ petitions.The court upheld the legality of the notice under Section 158-BD read with Section 158-BC, as the assessing officer was satisfied regarding the undisclosed income belonging to the petitioner based on the firm's records. The court highlighted the provisions of Section 158-BD, indicating that proceedings can be initiated against individuals other than those subject to a search if undisclosed income is found. The court concluded that the notice and proceedings were correct, requiring no interference, and subsequently dismissed all writ petitions.