Income Tax Appellate Tribunal - Pune
Suman Dhanji Zalte vs Assistant Commissioner Of Income Tax. ... on 17 February, 1999
Equivalent citations: [2000]72ITD132(PUNE)
ORDER
K.C. Singhal, J.M.
1. These appeals are against the block assessment made by Asstt. CIT, Circle 2(2), Jalgaon, Since common legal issue is involved in all these appeals, the same are being disposed of by the common order for the sake of convenience.
2. Search action under s. 132 was carried out at the premises of Shri D. R. Zalte and his son Shri Rajesh Zalte on 21st August, 1995. The assessees in these appeals are members of the family of Shri D. R. Zalte being wife and sons. There was no search warrant in the names of these assessees before us. After examining the seized material found from the premises of Shri D. R. Zalte and Shri Rajesh Zalte, the AO invoked the provisions of s. 158BD and issued notices under s. 158BC. Subsequently, the assessments have been completed in respect of the assessees before us on 24th August, 1996. Smt. Suman Zalte has been assessed on the total undisclosed income of Rs. 3,64,000 while Vilas Zalte has been assessed on the total income of Rs. 10,38,280 and Shri Gautam Zalte on the total income of Rs. 7,30,400.
3. The learned counsel for the assessee Mr. Sathe has challenged the jurisdiction of the AO to assess these assessees by invoking the provisions of s. 158BD. His contention is that before invoking the provisions of s. 158BD, the AO must satisfy himself that some undisclosed income belongs to person other than the persons with respect to whom search was made under s. 132. Such satisfaction must be based on the material found in the course of search. In the absence of any such finding, the AO does not get any jurisdiction to assess any other person by invoking the s. 158BD. He drew our attention to the assessment orders in respect of the three assessees to show that the AO himself has assessed the income on protective basis. According to the AO, the income really belongs to Shri D. R. Zalte in whose hands the substantive assessment has been made. Therefore, the AO was not justified in invoking the provisions of s. 158BD. On the other hand, the learned Departmental Representative has relied on the order of the AO.
4. After considering the rival submissions of the parties and the assessment orders, we are of the view that the impugned assessments are illegal and void ab initio. Admittedly, the search warrants were in the names of Shri D. R. Zalte and Shri Rajesh Zalte only. This is also pertinent from the assessment orders since the assessments have been made by invoking the provisions of s. 158BD. In our opinion, it will be useful to reproduce the provisions of s. 158BD which has set out as under :
"158BD. Where the AO is satisfied that any undisclosed income belongs to any person other than the person with respect to whom search was made under s. 132 or whose books of account or other documents or any assets were requisitioned under s. 132A, then, the books of account, other documents or assets seized or requisitions shall be handed over to the AO having jurisdiction over such other person and that AO shall proceed against such other person and the provisions this Chapter shall apply accordingly."
5. The bare reading of this section clearly shows that the search provisions can be invoked only if AO is satisfied that any undisclosed income belongs to some person other than the one with respect to whom search was made under s. 132. Such satisfaction must be arrived at by the AO before invoking the provisions of s. 158BD on the basis of material found in the course of search of other person. Any material coming into the possession of the AO after invoking the s. 158BD cannot be considered for exercising such jurisdiction. In the absence of such satisfaction, the assessment made on any other person would in our opinion, be illegal and void ab initio since jurisdiction to assess other person can be exercised validly only in accordance with provisions of s. 158BD.
6. After going through the impugned assessment orders passed by the AO in all the three cases, we do not find anything on the basis of which it can be said that AO was satisfied that any undisclosed income belong to these assessees. No such satisfaction has been recorded in either of the cases. On the contrary, the AO himself has given a finding that the undisclosed income assessed in the hands of these assessees actually belongs to Shri D. R. Zalte and the assessments are being made in these cases on protective basis. At this stage, it would be useful to refer to such finding in the assessment orders :
Shri Vilas Zalte has been assessed on protective basis on the undisclosed income of Rs. 10,38,280 as is apparent from p. 11 of the assessment order. The last para after computing such income is set out as under :
"On the whole the undisclosed income of Rs. 10,38,280 under the heads 'income from other sources' (Rs. 8,26,114) and 'income from property' (Rs. 2,12,166) is assessed in the hands of the assessee on protective basis and the same is assessed on substantive basis in the hands of the father of the assessee Shri D. R. Zalte."
7. Shri Gautam Zalte has been assessed on the total undisclosed income of Rs. 7,30,400 on protective basis as is apparent from p. 9 of the assessment order. The last para of this page is set out as under :
"On the whole, the undisclosed income of Rs. 7,30,400 is assessed in the hands of the father of the assessee Shri D. R. Zalte on substantive basis and since the assessee has claimed in the return for the block assessment that the investments are made by him, the same is assessed in the hands of the assessee on protective basis."
8. Similarly, Smt. Suman Zalte has been assessed on the total undisclosed income of Rs. 3,64,000 as is apparent from p. 10 of the assessment order. Out of this amount, Rs. 3,40,000 has been assessed on protective basis. The relevant portion of the order at p. 10 is being reproduced as under :
"On the whole, out of the total undisclosed income of Rs. 3,64,000 as computed above, the income of Rs. 3,17,500 under the head 'Income from other sources' and Rs. 22,500 under the head 'Property income' totalling to Rs. 3,40,000 is assessed on protective basis in the hands of the assessee and the same is assessed on substantive basis in the case of the assessee's husband Shri D. R. Zalte, Advocate."
9. In view of the above clear finding of the AO to the effect that income assessed in the hands of these assessees actually belongs to Shri D. R. Zalte, it cannot be said that AO had the satisfaction as laid down by the provisions of s. 158BD. In our considered opinion, the impugned assessment cannot be sustained firstly because there was no material before the AO to come to the conclusion that any undisclosed income belongs to these assessees; secondly because, no such satisfaction has been recorded by the AO and thirdly because, there is a finding of the AO himself that such undisclosed income belongs to Shri D. R. Zalte. In view of the above, it is held that the impugned assessments were illegal and void ab initio. Accordingly, the impugned assessments are hereby cancelled.
10. Before parting with our order, we would like to mention that in the case of Smt. Suman Zalte, the AO has assessed the sum of Rs. 24,000 being income from Beauty Parlour pertaining to asst. yrs. 1990-91 to 1995-96 on substantive basis. Yearwise details are as under :
Asst. yr. Rs.
1990-91 9,000
1991-92 9,000
1992-93 8,000
1993-94 7,000
1994-95 5,000
1995-96 4,000
11. As far as assessment for asst. yrs. 1992-93 to 1995-96 are concerned, the assessee had not filed any income-tax return since the income was below taxable limit. In view of the decision of the Tribunal, Indore Bench in the case of Smt. Sitadevi Daga vs. Asstt. CIT (1998) 63 TTJ (Ind) 72 : (1998) 67 ITD 151 (Ind), the income relating to these years cannot be considered as undisclosed income. As far as the other two years are concerned, there is no material on the record to indicate that assessee had any undisclosed income. The income assessed by the AO is on pure estimate basis without any nexus to any relevant material. Therefore, even the aforesaid income of Rs. 24,000 cannot be considered as undisclosed income belonging to her.
12. In the result, all the appeals are allowed.