SANJAY SINGAHL vs. DCIT CENTRAL CIRLCEL I JAIPUR

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ITA/921/2008HC RajasthanRJHC02039559200826 May 20172 pages
AI SummaryAllowed

What did the High Court hold?

The High Court allowed the appeal, holding that the issues are required to be answered in favour of the assessee and against the department. The reasoning appears to be based on the precedent set by the Delhi High Court in Ajit Jain Vs. Union of India, which was affirmed by the Supreme Court. This precedent suggests that a survey operation revealing a cash balance in books, without further incriminating material, may not be sufficient to treat the amount as unexplained income or to validate an assessment under Section 158BC. The court found substance in the assessee's reliance on this authority. The operative direction is that the appeal stands allowed, implying relief for the assessee. No issues were expressly left undecided.

What were the facts?

The assessee, Sanjay Singhal, filed an appeal before the Rajasthan High Court challenging a judgment of the Income Tax Appellate Tribunal (ITAT). The ITAT had dismissed the assessee's appeal. The case originated from a survey operation conducted by the department, which revealed a cash balance of Rs. 3,00,000 in the assessee's books of accounts. The assessment year(s) are not explicitly stated. The core of the dispute revolves around whether this cash balance could be treated as unexplained income and the validity of the assessment framed under Section 158BC.

What were the issues?

1. Whether the cash balance of Rs. 3,00,000 found in the books of accounts during a survey operation can be treated as unexplained without any supporting evidence or material on hand? (Question of law) 2. Whether, under the given facts and circumstances, the Income Tax Appellate Tribunal was justified in holding the assessment framed under Section 158BC as valid in law? (Question of mixed law and fact, turning on Section 158BC) Assessee's contentions: The assessee argued that a search and seizure cannot be initiated merely on information received from the police. Reliance was placed on the Delhi High Court's decision in Ajit Jain Vs. Union of India (2000) 242 ITR 302 (Del), which was later confirmed by the Supreme Court in (2003) 260 ITR 80. This judgment held that the mere possession of an amount not reflected in books of account, especially by regular assessees, does not constitute sufficient information for the department to infer undisclosed income, and the condition precedent for exercise of power under Section 132 was lacking. Revenue's contentions: The judgment records no specific arguments made by the revenue.

Which sections of the Income-tax Act were involved?

Section 158BC,Section 132

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 921 / 2008 Sanjay Singahl ----Appellant Versus Dcit Central Cirlcel I Jaipur ----Respondent _____________________________________________________ For Appellant(s) : Mr. Gunjan Pathak with Mr. Aditya Bohara. For Respondent(s) : Mr. R.B. Mathur. _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE DR. JUSTICE VIRENDRA KUMAR MATHUR

Order 26/05/2017

1.

By way of this appeal, the appellant has challenged the judgment of the Tribunal whereby the Tribunal has dismissed the appeal filed by the assessee.

2.

While admitting the appeal, this Court framed the following substantial question of law: “(1) Whether the cash balance of Rs.3,00,000/-, which is there in the books of accounts as revealed by the survey operation of the department, be treated as unexplained without having any evidence or material on hand. (2) Whether under the facts and circumstances of the case the Ld. Income Tax Appellate Tribunal was justified in holding the assessment framed under section 158BC as valid in law?” 3 Heard learned counsel for the parties.

3.

1 Counsel for the appellant has submitted that merely on information which has been received from the police search and seizure cannot be initiated. He relied on the decision of Delhi High

(2 of 2) [ITA-921/2008] wherein it has been held as under: “Even assuming that the said amount was not reflected in the books of account of the company, as claimed by the petitioner, the mere possession of the said amount by the petitioner could hardly be said to constitute information which could be treated as sufficient by a reasonable person, leading to an inference that it was income which had not been or would not have been disclosed by him for the purposes of the Act, particularly when the petitioner as well as the company, of which he was claiming to be the managing director, were regular assessees with the Income tax department. We do not find any substance in the argument of learned counsel for the respondents that if the said money had not been seized, the department would not have ever realised it. We are afraid, this is not the object and purpose of section 132 of the Act. We, Therefore, hold that the condition precedent for the exercise of power under section 132 was utterly lacking in the present case and authorisation issued by respondent No. 4 and the consequent action of the search and seizure of the said amount was without jurisdiction.”

3.

2 The aforesaid judgment has been confirmed by the Supreme Court in (2003) 260 ITR 80. 4. In view of the decision of the Delhi High Court, issues are required to be answered in favour of assessee and against the department.

The appeal stands allowed. (VIRENDRA KUMAR MATHUR),J. (K.S. JHAVERI),J. Mohit Grover Sr. No42.

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