ITAT, BENCH ‘B’, CHENNAI A case of undisclosed income must survive in light of material found out in course of search or requisition.

A case of undisclosed income must survive in light of material found out in course of search or requisition.

It is not possible to attribute a case of undisclosed income in respect of those transactions which have already been recorded in the regular books of accounts; therefore, the transactions already reflected in books of accounts does not come under the purview of section 158B(b) of IT Act, 1961.

ITAT, BENCH ‘B’, CHENNAI

DCIT

v.

Shri Suresh Chand Bafna

IT (SS) A. No. 65, 89, 111, 141, 145/Mds/2007

October 15, 2008

RELEVANT EXTRACTS:

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35 When the satisfaction is so necessary for initiating action under section 158BD, the satisfaction must be based on the materials which related to inference of existence of undisclosed income What is the inference relating to a case of undisclosed income? The statutory prescription is that the income which has not been disclosed to the Department or would not have been disclosed but for the search In all these four cases, we have already seen that the transactions alleged to be representing the undisclosed income of the assessees have already been reflected in the books of the respective assessees even before the search action and those transactions have already been reflected in the financial statements accompanied the returns filed by the assessees from time to time. So, it is not possible to attribute a case of undisclosed income in respect of those transactions which have already been recorded in the regular books of accounts Therefore, when a case of undisclosed income is not made out, there is no substratum for forming a satisfaction that these assessees are answerable to a case of undisclosed income. The satisfaction is without any basis and substance.

36 It is to be seen that the transactions allegedly imputable to the undisclosed income of these assessees have already been recorded in their books of accounts and search conducted in the premises of Shn Suresh Chand Bafna had no role in bringing this factum to the light before the Income Tax Department Even without the involvement of the search in the case of Shn Suresh Chand Bafna, these transactions were very much in the books of accounts of the assessee and therefore, it is not proper to say that materials have been collected in the course of search that would implicate these assessees in a case of undisclosed income computable under section 158BD.



37 The factual frame work that must exist for the purpose of invoking provisions of sections 158BC and 158BD is the same. In both cases, undisclosed income must be imputable on the basis of the materials collected in the course of search or requisition Section 158BC is used to proceed on the person who is searched or requisitioned Section 158BD is used to proceed against the person other than the person who was searched or requisitioned. But, for the above procedural difference, the pith and substance of the condition necessary for making a block assessment is the same under section 158BC and section 158BD. A case of undisclosed income must survive in the light of material found out in the course of search or requisition The law has statutorily defined what is "undisclosed income" to mean that the income not disclosed to the Department or would not have been disclosed but for the search or requisition. Therefore, the case of undisclosed income is parimatena the same both in section 158BC and in section 158BD

38. In these cases, we have already seen that the transactions alleged to be leading to undisclosed income have already been reflected in the books of accounts of the assessees before the search was taken place Therefore, it does not come under the purview of section 158B(b). Therefore, it is needless to say that the additions of undisclosed income made by the Assessing Officer in all these four cases are not sustainable in law

39. Accordingly, we accept the common legal contention raised by the assessees through their Cross Objections and hold that the impugned block assessments completed under section 158BD are bad in law. Therefore, the appeals filed by the Revenue have become infructuous The other grounds raised by the assessees in their respective Cross Objections have also become infructuous, for the reasons that the assessments themselves have been held to be bad on the basis of the legal contention raised by the assesses.



40. Therefore, we hold that the appeals filed by the Revenue in respect of these four assessees are liable to be dismissed. Naturally, the Cross Objections are to be allowed.



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