SHRI.NIGAM MATHEW vs. THE COMMISSIONER OF INCOME TAX

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ITA/65/2014HC KeralaKLHC01026631201420 March 2019Author: HONOURABLE MR.JUSTICE C.K.ABDUL REHIM,HONOURABLE MR. JUSTICE R. NARAYANA PISHARADI10 pages
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What did the High Court hold?

The High Court held that it is mandatory for the Assessing Officer to record his satisfaction regarding the undisclosed income of a person other than the one searched, as a prerequisite for proceeding under Section 158BD of the Income Tax Act, 1961. The preparation of a satisfaction note by the Assessing Officer is sine qua non before transmission of records to the Assessing Officer having jurisdiction over such other person. The Court found that the Tribunal's view that a prima facie satisfaction was sufficient and that recording of satisfaction was an empty formality, especially when the appellant admitted to the incriminating material belonging to him, was contrary to the law laid down by the Supreme Court in Manish Maheshwari and Calcutta Knitwears. Therefore, the substantial question of law was answered in favour of the assessee. The assessment order and the impugned order of the Tribunal were set aside. No other factual or legal issues were examined.

What were the facts?

During a search conducted on April 18, 2002, at a jewellery in Ernakulam, copies of two agreements for the purchase of shop rooms by the appellant, Shri Nigam Mathew, were seized. Endorsements on the reverse indicated payments made by the appellant. The appellant's statement recorded on the same day revealed a total payment of Rs. 12,25,000/- for these purchases. A report was forwarded to the Assessing Officer, who then issued a notice to the appellant under Section 158BD read with Section 158BC of the Income Tax Act, 1961. An assessment under Section 158BD was completed for the block period April 1, 1996, to April 18, 2002, determining a total income of Rs. 11,58,800/-. The Commissioner of Income Tax (Appeals) allowed the appellant's appeal, but the Income Tax Appellate Tribunal (Tribunal) reversed this decision, allowing the revenue's appeal. The assessee has appealed this Tribunal order.

What were the issues?

1. Whether it is mandatory for the Assessing Officer, proceeding under Section 158BD of the Income Tax Act, 1961, to record his satisfaction that undisclosed income belongs to a person other than the one searched, before initiating action against such other person? (Question of law) Assessee's contention: The assessee argued that it is mandatory for the Assessing Officer to prepare a satisfaction note before handing over seized documents to the Assessing Officer having jurisdiction over the other person. Since no such satisfaction note was prepared in this case, the entire proceedings are vitiated. The assessee relied on the Supreme Court decisions in Manish Maheshwari v. Assistant Commissioner of Income Tax and Commissioner of Income Tax v. Calcutta Knitwears. Revenue's contention: The judgment does not record any specific contentions made by the revenue. However, the Tribunal's finding, which was challenged by the assessee, was that only a prima facie satisfaction was sufficient and that the recording of satisfaction was an empty formality given the appellant's admission.

Which sections of the Income-tax Act were involved?

Section 158BD,Section 132,Section 158BC,Section 132A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, COCHIN

DATED 30.08.2006 ISSUED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2(1), RANGE-2, THRISSUR. ANNEXURE-C -OF THE APPELLATE ORDER NO.I.T.A.NO.20/R-II/TCR/(CIR(A)/V/06-07

DATED 26.05.2009 ISSUED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-V, KOCHI. ANNEXURE-D –OF THE ORDER NO.IT(SS) A NO.09/Coch/2009 DATED 30.08.2013 OF ITAT COCHIN BENCH, COCHIN. RESPONDENT'S ANNEXURES NILPS TO JUDGE

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