AO Can Consider Info Relatable to Evidence Found During Search for Making Block Assessment | HC

Case Details: Mange Ram Mittal vs. Commissioner of Income-tax - [2024] 168 taxmann.com 306 (Punjab & Haryana)

Judiciary and Counsel Details

• Sanjeev Prakash Sharma & Sanjay Vashisth, JJ.
• Akshay Bhan, Sr. Adv., Shantanu Bansal, Dr. Deepak Jindal & Yugank Goyal, Advs. for the Appellant.
• Sanjay Bansal, Sr. Adv. & Ms Gauri Neo Rampal, Senior Standing counsel for the Respondent.

Facts of the Case

A search was conducted at the assessee’s residential premises, and certain incriminating materials were found with respect to the liquor business. After making elaborate enquiries, the Assessing Officer (AO) concluded that the assessee owned a liquor business and accordingly passed an assessment order determining the undisclosed of the assessee based on the seized document.

On appeal, the Tribunal held that ample evidence, including partnership deeds of various liquor firms, was found in the course of the search itself regarding the assessee’s undisclosed income from the liquor business he carried on. Thus, it could not be said that the assessment of undisclosed income in that regard was outside the purview of section 158BC.

Aggrieved by the order, an appeal was filed to the Punjab & Haryana High Court.

High Court Held

The High Court held that the Parliament had enacted a separate Chapter-XIV-B of the Act laying down the special procedure for assessing search cases, a self-contained code. The amount to be taxed under the said chapter should have a direct nexus with the material discovered during such search operations alone. The assessment should be restricted only to the evidence found during the search. The words are relatable to such evidence, added with retrospective effect to Section 158BB from 01-07-1995, and re-enforced with the legal position that was not relatable to the evidence found as a result of search ought not to be included in the computation of undisclosed income. The Tribunal has, therefore, examined the meaning and scope of phraseology

“such other materials or information as are available with the Assessing Officer and relatable to such evidence”.

The words that have been added are rightly interpreted by the Tribunal to include two types of material that the AO may consider. First, the material found during the search and relatable to such evidence and the second part is such other materials or information as are available with the AO. Thus, apart from the evidence that may be collected and noticed during the search, if the AO has any other information and such other material with him that is relatable to such evidence, the same can also be looked into for the purpose.

Therefore, an assessment under section 158BC is required to be made both on the basis of the result of the search as well as post-search enquiry and other proceedings which are in the nature of consequences of the evidence found as a result of the search.

List of Cases Reviewed

• Order of ITAT in Mange Ram Mittal v. ACIT [2006] 103 ITD 389 (Delhi) (SB)/[2006] 9 SOT 371 (Delhi) [para 10] affirmed.

List of Cases Referred to

• Mangalore Ganesh Beedi Works v. CIT [2015] 62 taxmann.com 400/378 ITR 640 (SC) (para 14).