100% of disputed tax is payable under DTVSV Act if assessment made on the basis of info. obtained during search of 3rd party
Bhupendra Harilal Mehta
 127 taxmann.com 109 (Bombay)
HIGH COURT OF BOMBAY
Short Overview of the case:
As per section 3 of DTVSV Act where assessment is made on basis of search ,amount payable by assessee would be 125% of disputed tax declared by assessee and where declarant files a declaration in accordance with section 4 in respect of tax arrears , amount payable shall be 100% of disputed tax declared
A search under Section 132 was carried out by the Investigation wing in case of brokers , operators and entry providers who had artificially rigged shares of a company (Lifeline drugs) and assessee had sold shares of said company during year and offered LTCG and AO made addition under section 68 for artificial LTCG .
Thereafter assessee filed declaration under Section 4(1) of the DTVSV Act read with Rule 3(1) of the DTVSV Rules and disputed income was declared with the disputed tax thereon and Designated Authority determined the tax payable by assessee being 125% of the disputed tax declared by Petitioner.
It is held that that according to section 3 , where a declarant files a declaration to the designated authority in accordance with section 4 in respect of tax arrear, then, the amount payable by the declarant under the DTVSV Act shall be amount of the disputed tax where the tax arrear is the aggregate amount of disputed tax, interest and penalty on such disputed tax. In other words in such a case the amount payable would be 100% percent of the disputed tax declared. And in case, where tax arrear includes tax interest or penalty determined in any assessment on the basis of search under section 132 or section 132A of the Income Tax Act, the amount payable would be the aggregate of the amount of disputed tax and 25% of the disputed tax. This means that where the assessment is on the basis of a search the amount payable would be 125% of the disputed tax declared by petitioner.
Assessment order suggests that the case of assessee was selected for scrutiny and notices were issued to it not in pursuant to any search under section 132 or requisition under section 132A and name of assessee nowhere figures in any of the statements under section 132(4) of the searches referred to in the assessment order nor in the statements pursuant to survey action of persons under search or survey.
The statement of assessee nowhere suggests any incriminating material or admission of purported manipulation/rigging of scrips of Lifeline Drugs except saying that he had purchased the shares on advice of his brother .
In the scenario, the allegation that the assessee in collusion with the parties who had rigged the prices of shares artificially by manipulation and thereby introduced the amount received in the guise of LTCG/STCG is rather conjectural.
Nowhere in the statements recorded, referred to in the assessment order is there any allegation that the assessee was one of the parties that had booked any artificial gains.
There is no allegation that any incriminating material belonging to the assessee was obtained in the course of the search.
The assessment therefore does not appear to be on the basis of search initiated under Section 132, or requisitions made under Section 132A .
Since the assessee’s case cannot be regarded as a search case, order passed by Designated Authority would be unsustainable.
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