Requisition under section 132A and Association of Persons status fail where cash ownership is separately explained and no common venture is proved.

Requisition under section 132A requires objective material showing a bona fide belief that the assets represent undisclosed income, and mere possession of cash by identifiable persons was insufficient where they promptly claimed ownership and explained the source. On those facts, the authorisation was held invalid. The three individuals also did not constitute an Association of Persons because there was no reliable evidence of a common design, joint venture, or conscious agreement; joint possession of cash alone did not establish that status. The same cash, already assessed in the hands of the individuals, could not be taxed again in the hands of an AOP without a separate legal basis. The block assessment in AOP status was quashed, and the interest levy did not survive.

---

---

Issues: (i) Whether the requisition under section 132A of the Income-tax Act, 1961 was valid on the material available to the authorising authority; (ii) whether the three individuals constituted an Association of Persons so as to justify block assessment in that status; (iii) whether the same cash, already assessed in the hands of the individuals, could again be assessed in the hands of the Association of Persons.

Issue (i): Whether the requisition under section 132A of the Income-tax Act, 1961 was valid on the material available to the authorising authority.

Analysis: The requisitioning power under section 132A can be exercised only when the authority, on the basis of information in possession, has reason to believe that the assets represent undisclosed income or property not likely to be disclosed. On the facts, the cash was found in the possession of three identifiable persons, each of whom accepted ownership and explained the source in statements recorded soon after the interception. The material available did not furnish a reasonable basis to infer that the cash was undisclosed income. The authorisation was therefore not supported by the requisite statutory satisfaction.

Conclusion: The requisition under section 132A was invalid and could not sustain the impugned assessment.

Issue (ii): Whether the three individuals constituted an Association of Persons so as to justify block assessment in that status.

Analysis: An Association of Persons requires a common design or joint action to earn income or carry on a common venture. The record showed possession of separate amounts by the three individuals, their separate ownership claims, and no reliable evidence of a common business enterprise or joint activity. The loose paper relied upon by the Revenue did not establish a conscious agreement to form an Association of Persons. The stated purpose of carrying cash for purchase of property also did not, by itself, show an AOP.

Conclusion: The three individuals did not constitute an Association of Persons, and assessment in that status was not justified.

Issue (iii): Whether the same cash, already assessed in the hands of the individuals, could again be assessed in the hands of the Association of Persons.

Analysis: Once the cash had been brought to tax in the hands of the individuals, the same amount could not be assessed again in the hands of a different taxable unit in the absence of a statutory basis for such repeated taxation. The principle against taxing the same income twice in the hands of the same income-earning unit, and the absence of proof of a separate assessable AOP, barred the second assessment.

Conclusion: The second assessment on the same cash in the hands of the Association of Persons was not sustainable.

Final Conclusion: The block assessment framed in the status of Association of Persons was quashed, and the levy of interest did not survive once the assessment itself was set aside.

Ratio Decidendi: Requisition under section 132A requires objective material leading to a bona fide belief that the assets are undisclosed, and in the absence of evidence of a common venture an Association of Persons cannot be inferred merely from joint possession of cash.

---