CIT vs. Raj Pal Bhatia (Delhi High Court)

DATE: (Date of pronouncement)
DATE: December 19, 2010 (Date of publication)

Click here to download the judgement (bhatia_158BD_search.pdf)

S. 158BD proceedings without recording written satisfaction void. Statement recorded in search cannot form sole basis for s. 158BD addition

A search u/s 132 (1) was conducted at the premises of Sunil Charla. A statement of Surksha Charla was recorded in which she admitted that she had purchased property from the assessee by paying Rs. 5 – 6 crores in cash. She later retracted the statement. On the basis of the statement, the AO issued a notice u/s 158BD to the assessee and assessed the said sum in the hands of the assessee as undisclosed income. On appeal, this was confirmed by the CIT (A) on the ground that the statement was properly given by the buyer and there was no basis for the retraction. However, the Tribunal deleted the addition on the ground that the s. 158BD proceedings were without jurisdiction. On appeal by the department, HELD dismissing the appeal:

(i) Before invoking s. 158 BD, the AO must record his satisfaction in writing on the basis of material found in the search that the undisclosed income belongs to a person other than the person searched. This is a safeguard to prevent abuse of power. In the absence of written satisfaction the AO has no jurisdiction to assess the other person u/s 158BD. On facts, as the “satisfaction” note was not produced, the s. 158BD proceedings were liable to be quashed;

(ii) The “undisclosed income” should be referable to the assets or books/documents found seized/requisitioned. On facts, the entire foundation of the block assessment u/s 158BD was the statement of the purchaser recorded during the course of search. This statement was not “books of accounts or other documents or assets”. The statement was not a document “found” during search. It came to be created during the search as the statement was recorded at the time of search. Therefore, it cannot be said that the statement was “seized” during the search and thus, would not qualify the expression “document” having been seized during the search. Accordingly, the s. 158BD proceedings were not valid (CIT vs. Mukundray K. Shah 290 ITR 433 (SC) distinguished).

Manoj Aggarwal vs. DCIT 113 ITD 377 (Del) (SB) impliedly approved on this point. For more on search assessments, see Assessment Of Search & Seizure Cases: A Treatise & Consolidated Digest of Imp Case Laws

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