Summary
The Supreme Court upheld a fresh notice under the historical block-assessment provision, section 158BD. The officer could assess both the searched firm and its partner, but first had to examine the seized material and be satisfied that undisclosed income belonged to the partner. The initial section 158BC notice did not satisfy that requirement. The subsequent notice followed the necessary satisfaction; the partner’s appeal was dismissed.
Issues
- Whether a fresh section 158BD notice was valid after the initial section 158BC notice.
- Whether the same officer could assess the searched firm and the other person.
- What satisfaction the seized material had to support.
Provisions considered
- Section 158BD, as applied to the block assessment, Income-tax Act, 1961Required satisfaction that undisclosed income found through the search belonged to a person other than the searched person. A common assessing officer did not eliminate the requirement or preclude jurisdiction. (¶¶ 8, 9, 10, 11)
Held
- The same officer’s jurisdiction over the searched firm and its partner did not exclude section 158BD. Proceedings against the other person required prima facie satisfaction, founded on the seized books, documents or assets, that undisclosed income belonged to that person. (¶¶ 8, 9)
- An assessee’s disclosure alone could not substitute for examination and verification of the seized material. The required satisfaction concerned existence of undisclosed income, its not belonging to the searched person and its belonging to the other person. (¶ 9)
- The initial notice to the partner, issued on the same day as the notice to the searched firm, failed to meet the necessary section 158BD requirement. The officer validly issued the fresh notice after recording the requisite satisfaction, acting on that satisfaction rather than merely on a superior’s direction. (¶ 10)
- Although section 158BD did not use section 148’s language of recording reasons, the satisfaction had to disclose the officer’s considered thought process and reasons for initiating proceedings, given their monetary implications. (¶ 11)
- The Additional Commissioner’s section 144A direction fixing the partner’s undisclosed income at Rs.17 lakh was held legally unsustainable. That observation did not invalidate the subsequent section 158BD notice or result in allowing the assessee’s appeal. (¶¶ 12, 13)
Result
Assessee’s appeal dismissed without costs; High Court judgment sustained and fresh section 158BD notice upheld.