2006 (7) TMI 145 - HC - Income Tax

Validity of Income-tax Notice Upheld Despite Technical Defects

Shirish Madhukar Dalvi Versus Assistant Commissioner of Income-Tax And Others.

Shirish Madhukar Dalvi Versus Assistant Commissioner of Income-Tax And Others. - [2006] 287 ITR 242, 203 CTR 621, 156 TAXMANN 79 Issues involved:1. Validity of the notice dated July 6, 1998, under section 158BC of the Income-tax Act, 1961.2. Applicability of section 292B of the Income-tax Act to cure defects in the notice.3. Disallowance of deduction under section 37 of Rs. 3,85,196 due to undated vouchers.Issue-wise Detailed Analysis:1. Validity of the notice dated July 6, 1998, under section 158BC of the Income-tax Act, 1961:The appellant contended that the notice dated July 6, 1998, was never served and suffered from several defects, including incorrect block period, premature issuance before the conclusion of the search, and not being in the prescribed format. The Tribunal upheld the notice's validity under section 292B, finding it was served on the appellant. The court examined the statutory provisions and concluded that the notice dated July 6, 1998, despite its defects, did not cause prejudice to the appellant. The appellant received a subsequent notice on September 17, 1998, which corrected the earlier notice's defects, and the appellant filed the return accordingly. The court held that the defects in the notice were technical and protected under section 292B, thus validating the notice.2. Applicability of section 292B of the Income-tax Act to cure defects in the notice:The appellant argued that the defects in the notice dated July 6, 1998, were substantial and could not be cured by section 292B. The court, however, found that the defects were technical and did not cause prejudice to the appellant. The subsequent valid notice dated September 17, 1998, cured any potential issues with the earlier notice. The court referred to various judgments, including those from the Supreme Court, indicating that procedural defects could be waived if they did not cause substantial prejudice. The court concluded that section 292B could cure the technical defects in the notice dated July 6, 1998.3. Disallowance of deduction under section 37 of Rs. 3,85,196 due to undated vouchers:The appellant challenged the disallowance of Rs. 3,85,196 under section 37, arguing that the expenditure related to transactions concluded earlier, despite the vouchers being undated. The Tribunal confirmed the addition, and the court found that the appellant failed to establish the expenditure as business expenditure with cogent evidence. The court noted that the Tribunal's findings were based on material evidence and were concurrent with the Commissioner of Income-tax (Appeals). The court held that the issue did not raise a substantial question of law, as it revolved around the appreciation of evidence, and upheld the disallowance.Conclusion:The court dismissed the appeal, holding that the notice dated July 6, 1998, was valid under section 292B, the subsequent notice cured any defects, and the disallowance of Rs. 3,85,196 was justified based on the lack of evidence to prove it as business expenditure. The appeal was dismissed with no order as to costs.