TaxTMI 
TaxTMI 
2014 (7) TMI 161
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (b) The learned Commissioner of Income tax (Appeals) ought to have considered the observation of the learned Assessing Officer in para 40 of the assessment order, that according to the Assessing officer the addition mad in the income is much more and therefore, no separate addition is mad for deposits by wife in bank account, of Rs. 40,000/- on 30-10-1998 and ought to have considered that the income assessed by the Assessing Officer is excessive and ought to have accepted the income declared by the appellant. 3. The learned Commissioner of Income-tax erred in confirming the following disallowances of expenses claimed, while determining the total income for the period 16-8-1999 to 13-12-2000 at Rs. 16.23.560/- : a) Disallowance out of Miscellaneous expenses Rs. 1,01,836/- b) Disallowance out of Commission to b r maids Rs. 8,02,690/- c) Disallowance on account of Utensils & Crokeries Rs. 1,84,870/- d) Disallowance out of Repairs Rs. 95,980/- Total Rs. 11,85,376/- 4. The learned Commissioner of Income-tax (Appeals) ought to have appreciated that 'Barmaid' Smt. Pushpa Patil was produced before the Assessing Officer, together with o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on 14.12.2000 in the case of Shri R. Ravindra Patil and his family members. The warrant of authorization was issued in the name of Smt. Ila. R. Patil to search the Hotel Relax. The block assessment in the case of searched person i.e. Smt. Ila R. Patil was completed on 31st December 2002, thereafter a notice u/s 158BD was issued to the assessee on 10.01.2003. The Ld. Authorized Representative has submitted that there is no satisfaction recorded by the Assessing Officer that any indisclosed income belonging to the assessee was detected from the Books of Accounts and other documents or asset requisitioned or seized during the course of search. He has referred the order sheet dated 10.01.2003, wherein the Assessing Officer has recorded the satisfaction as well as completed block assessment in case of Smt. Ila R. Patil and submitted that the Assessing Officer was not sure that undisclosed income belonging to the assessee was detected from the Books of Accounts and other seized material. The Ld. Authorized Representative has pointed out that the Assessing Officer has stated in the satisfaction note that "I am satisfied that undisclosed income is likely to be detected in the case of the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Supreme Court in the case of CIT Vs. Knitwears (362 ITR 673). He has also relied upon the order of this Tribunal in the case of Jayant S Jain (HUF) Vs. CIT 10 ITR (Trib) 68 (Mumbai). Thus the Ld. Authorized Representative has submitted that the initiation of proceedings u/s 158BD are bad in law, therefore, the block assessment in the case of assessee be quashed. 6. On the other hand, the Ld. DR has submitted that the hotel business belonging to the assessee was searched which was also run by the assessee from 15.7.1998 onwards, therefore, the satisfaction recorded by the Assessing Officer should be read in conjecture with the assessment order of the searched person because, the Assessing Officer of the searched person as well as the assessee is same. He has referred the block assessment u/s 158BC in the case of searched person Smt. Ila R. Patil and submitted that in para 9, the Assessing Officer has mentioned that the hotel premises was let out by Smt. Ila R. Patil to Shri Gopal Shetty (assessee in this case) for running the hotel M/s Hotel Relax against the royalty of Rs. 15,000/- per month, therefore, the said part of the assessment order in the case of searched person is a sa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....decision of Hon'ble Punjab & Haryana High Court has held in para 41 as under:- "41. We would certainly say that before initiating proceedings under Section 158BD of the Act, the assessing officer who has initiated proceedings for completion of the assessments under Section 158BC of the Act should be satisfied that there is an undisclosed income which has been traced out when a person was searched under Section 132 or the books of accounts were requisitioned under Section 132A of the Act. This is in contrast to the provisions of Section 148 of the Act where recording of reasons in writing are a sine qua non. Under Section 158BD the existence of cogent and demonstrative material is germane to the assessing officers' satisfaction in concluding that the seized documents belong to a person other than the searched person is necessary for initiation of action under Section 158BD. The bare reading of the provision indicates that the satisfaction note could be prepared by the assessing officer either at the time of initiating proceedings for completion of assessment of a searched person under Section 158BC of the Act or during the stage of the assessment proceedings. It does not mean....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... likely to be detected in the case of shri Gopal Shetty on the basis of seized books of a/c.'s & papers. Therefore please issue Notice u/s 158BD for the block period 1.04.1990 to 14.12.2000." 9. It is clear from the satisfaction recorded that there is no mention of any particular document or material or any particular item of undisclosed income which was detected during the course of search in question or from the Books of Accounts or seized material. Even the Assessing Officer has stated in the satisfaction note that "I am satisfied that undisclosed income is likely to be detected in the case of shri Gopal Shetty on the basis of seized books of a/c.'s & papers". The above sentence of satisfaction does not indicate a definite undisclosed income detected from the seized Books of Accounts and other papers but the Assessing Officer only predicted that undisclosed income is likely to be detected. When this aspect was pointed out to the Ld. CIT (DR) he has strongly argued that the satisfaction must be considered in conjunction with the assessment order u/s 158BC in case of Smt. Ila R. Patil. We found some substance in the argument of the Ld. DR that if the satisfaction is rec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....has stated that the monthly conducting charges received from Shri Gopal Shetty are only Rs. 15,000 m and Rs. 40,000 as contemplated by the department. The assessee has offered the rental income received by her in the block return filed." 10. The reference in paragraph 12.1 is made in respect of the business conducting charges received from Shri Gopal K. Shetty at the rate of Rs. 40,000 per month and not Rs. 15,000/- per month. Other than the business conducting charges or rental charges nothing more has been commented in the said assessment order. We find that the Assessing Officer in the case of assessee before us has not made any addition of undisclosed income on account of such business conducting charge/rental income on the ground that the assessee has claimed expenses of only Rs. 15,000/- PM. It is pertinent to note that when the Assessing Officer has concluded in the assessment order that since the assessee has claimed only Rs. 15,000 PM on account of payment of rent and excess payment is not allowed, therefore, other than the rental charges neither the assessment order passed u/s 158BC nor the satisfaction recorded on 10.01.2003 disclosed any other undisclosed income dete....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... party. The Assessing Officer must reach a clear conclusion that good ground exists for the Assessing Officer of the third person to initiate proceedings as material before him shows or would establish 'undisclosed income' of a third person. At this stage, as the proceedings are at the very initial state, the 'satisfaction' neither is required to be firm nor conclusive. The 'satisfaction' required is to decide whether or not block assessment proceedings are required to be initiated. But 'satisfaction' has to be founded on reasonableness. It cannot be capricious satisfaction. Though it is a subjective satisfaction, it must be capable of being tested on objective parameters. The opinion, though tentative, however, cannot be a product of imagination or speculation. It cannot be spacious or mercurial. It should not be a mere pretence and should be made in good faith rather than suspicion. Reliability, credibility or for that matter what weight has to be attached to the material, depends upon the subjective satisfaction of the Assessing Officer, but definitely it is subject to scrutiny whether the satisfaction has a rational nexus or a relevant bearing to....