Whether when Revenue finds incriminating materials during Survey Operation and also a Search & Seizure, the Survey materials have to be dealth with independently - YES: HC

THE issue before the Bench is - Whether when the Revenue finds incriminating materials during Survey Operation and also a Search & Seizure, the Survey materials have to be dealth with independently. And the answer goes against the assessee.

Facts of the case

The assessee is a partnership firm. The Revenue conducted a search & seizure in the premises of one of the partners Mr. P. Mohammed Sherief. So far as the assessment pertaining to Mr.Mohammed Sherief, the matter was remanded back to the file of the Assessing Officer as substantive additions were made. When the assessment of the present assessee came up on protective basis, according to the counsel for the appellant, similar exercise was adopted which was uncalled in the light of Section 133A having no presumptive value.

The Tribunal after referring to Section 158BB(1) analysed that undisclosed income had to be computed only on the basis of material found during the course of search operation or the information which was relatable to the material found during the course of search operation. This provision if read along with Section 132(4) of the Act, then the question of presumptive value came into play.

According to the assessee, the material against the assessee was not relatable to search and seizure under Section 132(4), but it was under Section 133A. What the tribunal had considered was, proper exercise that had to be adopted by the assessing authority with reference to the materials seized during the search, if any, related to the firm independently and nothing to do with the material recovered during the survey under Section 133A.

Having heard the parties, the HC held that,

++ the Tribunal was justified in saying that the material found during the course of survey operations is independent and has nothing to do with the material found during the course of such operation. Therefore, ultimately what one could understand from the orders of the Tribunal is that if there is any material found during the course of survey operation though it does not form basis for proceedings so far as protective assessment under Section 132 proceedings read with Section 158, but it has to be independently dealt with in accordance with the procedure. Again it does not mean that if any material is pointing out against the firm, still on account of survey under Section 133A, no action could be taken against the firm;

++ in other words, if any material is disclosed against the assessee during the search and seizure proceedings conducted in the premises of Mohammed Sherif the authorities have to proceed against the assesseee in accordance with the procedure contemplated so far as protective basis. So far as material recovered during the course of survey, it has to be in accordance with the procedure contemplated under Section 133A. Such material could be considered for relevant action as provided under the Act but not for any course of action so far as Section 132A search and seizure. This is what the Tribunal has done and the Tribunal's opinion is justified because so far as the additions made in the hands of the partner, that is Mohammed Sherif, was remitted back to the authorities for fresh assessment and if in the exercise of powers by the assessing officer to make fresh orders they are at liberty to consider the case of the assessee also only in accordance with the procedure under Section 132(4) read with provisions under Section 158 of the Act. This shall not come in the way of the authorities taking independent course of action if any under that provision on account of material collected by them during the survey.