Block assessment : If in course of search of husband, any material incriminating his wife (assessee) had been found, proper course for AO was to issue notice u/s.158BD — he could not bypass prescribed procedure and issue notice u/s.158BC on assessee who w

Smt. Nasreen Yusuf Dhanani v.
ACIT

A.Y. : 1-4-1986 to 18-12-1996.

Dated : 5-10-2007

 

Search and seizure action u/s.132 was conducted at
residential premises where the assessee was staying with her husband — Search
warrant was issued in the name of the assessee’s husband — consequent to
search action, notice u/s.158BC was issued to the assessee, in response to
which she filed her return of income for block period declaring ‘nil’
undisclosed income — subsequently intimated to the AO that since warrant of
authorisation u/s.132 was not issued and served in her name, special procedure
for assessment of search cases was not applicable to her case — AO without
dealing with the objection, made huge additions of undisclosed income — The
CIT(A) upheld the block assessment.

On appeal before the Tribunal, it was held :

(1) That a reading of S. 132 makes it clear that the
Section is person-specific and not premise-specific as argued by the
Revenue. The primary target for the search action is the person in
possession of any undisclosed income. Thus, the arguments of the Revenue
that the premises where the search action was carried out belonged to the
assessee, and therefore, the block assessment u/s.158BC was validly passed
did not hold good.

(2) Another argument of the Revenue was that in the
course of search action, evidence was found showing undisclosed income in
the name of the assessee and thus, provisions of S. 158BC could be invoked.
In this case, it is provision of S. 158BD which is to be applied in a case
where there is no search warrant and evidence is found showing undisclosed
income in the course of search conducted in respect of any other person. The
proper course of action would therefore be to issue a notice u/s.158BD.

(3) In view of the above factual and legal position, the
entire proceedings undertaken by the AO were bad in law, and hence the
assessment was to be quashed.