2015 (8) TMI 1089 - AT - Income Tax

Tribunal Invalidates Section 158BD Proceedings, Dismisses Revenue Appeals

The Tribunal dismissed both appeals of the Revenue, upholding the decision that the proceedings under section 158BD were invalid due to the lack of ... Validity of proceedings initiated under section 158BD - addition on undisclosed income of the assessee - CIT(A) deleted addition - Held that:- Admittedly, in this case the AO of the searched person had not recorded any satisfaction about any undisclosed income of the assessee which had escaped assessment. The AO of the searched person had simply forwarded the documents to the AO of the assessee for examination. The AO, in the assessment order, has reproduced the satisfaction note which relates to the alleged satisfaction recorded by the AO of the assessee and not by the AO of the searched person and hence the notice issued under section 158BD did not fulfill the requirement of said section and hence is liable to be treated as bad in law and consequently the assessment proceedings under section 158BD are thus liable to be held as null and void. Neither the name of the assessee has been mentioned on the said document nor the description of the flat in question has been mentioned on the said document. The said document was a dumb document. Even the concerned person, from whom the said document was recovered, had stated that he was not aware of the correctness of the contents of the document. Merely based on the said loose paper, the addition in the case of the assessee without any corroborative evidence in this respect was not warranted and no evidentiary value can be attached to such a document in the absence of any circumstantial or corroborative evidence. We, therefore, do not find any infirmity in the well reasoned order of the Ld. CIT(A) in this respect - Decided against revenue. Issues Involved:1. Legality of proceedings initiated under section 158BD.2. Validity of the addition of Rs. 10,72,500/- as undisclosed income.Issue-wise Detailed Analysis:1. Legality of Proceedings Initiated Under Section 158BD:The Revenue challenged the decision of the Ld. CIT(A) which held that the proceedings initiated under section 158BD against the assessee were bad in law. The case facts reveal that a search under section 132 was conducted at the premises of M/s. Keystone Realtors Pvt. Ltd. (KRPL) where a loose paper indicating a transaction related to the sale of a flat was seized. The AO of KRPL transferred the seized material to the AO of the assessee, who then issued a notice under section 158BD. The assessee contended that no satisfaction was recorded by the AO of the searched person, making the proceedings invalid. The Ld. CIT(A) agreed, stating that the AO of the searched person (DCIT CC-10) merely forwarded the documents without recording any satisfaction that the income had escaped assessment. The Tribunal upheld this view, noting that the AO of the searched person must record satisfaction based on materials disclosing undisclosed income, which was not done in this case. Thus, the proceedings under section 158BD were deemed null and void.2. Validity of the Addition of Rs. 10,72,500/- as Undisclosed Income:The addition of Rs. 10,72,500/- was made by the AO based on a loose paper seized during the search, which allegedly indicated that the assessee and his wife paid Rs. 21,45,000/- in cash for a flat. The Ld. CIT(A) found that there was no corroborative evidence to support the claim that the assessee paid any amount in cash beyond the Rs. 18 lakhs paid by cheque. The loose paper did not mention the flat's particulars, the seller's name, or the assessee's name. It was neither signed by the parties involved nor dated. The Ld. CIT(A) concluded that the document was not sufficient to prove the alleged cash payment, especially since the primary onus to explain the entries was on KRPL, which disowned the paper. The Tribunal agreed, noting that the document was a 'dumb document' with no evidentiary value in the absence of corroborative evidence. Consequently, the addition of Rs. 10,72,500/- was not justified, and the appeal of the Revenue was dismissed.Conclusion:The Tribunal dismissed both appeals of the Revenue, upholding the Ld. CIT(A)'s decision that the proceedings under section 158BD were invalid and that the addition of Rs. 10,72,500/- as undisclosed income was not warranted. The judgment emphasized the necessity of recording satisfaction by the AO of the searched person and the insufficiency of uncorroborated loose papers as evidence for undisclosed income.