INCOME TAX ACT, 1961

Section 158BD

Search and seizure - Assessment under section 158BD - No incriminating material found during search in case of third party handed over to AO of assessee -

AO based on search conducted in case of certain group, assumed jurisdiction over assessee under section 158BD and made addition on account of bogus long-term capital gain on sale of shares. Assessee challenged validity of assessment framed under section 158BD, contending that there was never any material in possession of AO of the searched person relating to assessee and in the absence of same, there could not have been any satisfaction by AO of the searched person vis-a-vis any undisclosed income of assessee unearthed during search and no incriminating material was passed to AO of the assessee. Held: For assuming jurisdiction under section 158BD all incriminating material relating to undisclosed income of third person has to be handed to AO of concerned assessee by AO of the searched person. In the instant case, all material on record established incriminating material relating to assessee was never handed to his AO. Communication of AO of the searched person, Dy. CIT (Central), Ludhiana, dated 31-5-2001, addressed to the Asstt. CIT, Ludhiana, only contained information collected during search conducted mentioning the fact of search having been conducted and certain documents, diaries, share certificates and books of account having been found from which it was concluded that person searched was indulging in the activity of providing 'Hawala entries' of long-term capital gains. The communication outlined modus operandi of providing entry and subsequently listed persons under jurisdiction of Asstt. CIT who had also benefited or also availed of these 'Hawala entries'. Thus, entire communication from Dy. CIT, Central Circle, Ludhiana, i.e., AO of the searched person to Asstt. CIT, Ludhiana contained only general information relating to information collected during search and opinion of AO of the searched person based on that information. There was no mention of any seized material, relating to persons listed in the communication having allegedly availed of 'Hawala entries' of long-term capital gains, being handed over along with said communication. Accordingly, assumption of jurisdiction by AO in assessee's case under section 158BD was not as per law.

Relied:Manish Maheshwari v. Asst. CIT (2007) 289 ITR 341 (SC) : 2007 TaxPub(DT) 1020 (SC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. :

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