Concurrent findings based on seized diary at husband's premises justify Section 158BD assessment against wife

Concurrent findings based on seized diary at husband’s premises justify Section 158BD assessment against wife

Issue

Whether block assessment proceedings under Section 158BD against the assessee are valid when based on incriminating material found during a search at her husband’s premises.

Facts

A search and seizure operation was conducted at the premises of the assessee’s husband.
Incriminating materials including cash books, ledgers, and diaries were seized during the search.
A notice under Section 158BD was issued to the assessee, to which she filed a return declaring ‘Nil’ undisclosed income.
The Assessing Officer made additions regarding unaccounted investment in a school property and rental income based on the seized diary entries.
The Commissioner (Appeals) affirmed the additions relying on the entries and the presumption under Section 132(4A).
The assessee contended that the search was not at her premises and the diary entries did not belong to her.

Decision

The Court noted that the searched premises were substantially under the control of the assessee’s husband.
The educational institution (Society) related to the transactions belonged to the assessee’s family (husband was Secretary, uncle was Chairman).
The seized documents and family nexus clearly linked the undisclosed income to the assessee.
The concurrent findings of fact by the AO and CIT(A) were supported by evidence and warranted no interference.
The appeal was decided in favour of the Revenue, upholding the additions.

Key Takeaways

Scope of Section 158BD: Assessment can be validly initiated against a person based on incriminating material found at a third party’s premises (e.g., spouse) if a clear connection is established.

Presumption of Seized Docs: Documents found in common/family premises can be presumed to belong to the relevant family member under Section 132(4A) if the contents correlate to them.

IN THE ITAT AMRITSAR BENCH

Radhe Shamka Foundation

DCIT/ACIT^*

Udayan Dasgupta, Judicial Member
and Manoj Kumar Aggarwal, Accountant Member

IT Appeal Nos. 344 & 345 (Asr) of 2025

NOVEMBER 14, 2025

Kamakshi Mahajan, CA. for the Appellant. Jivandeep Singh Kahlon, CIT-DR for the Respondent.

ORDER

Udayan Dasgupta, Judicial Memeber.- This appeal is filed by the assessee against the order of the Ld. CIT (E) Chandigarh, dated 12/03/2025, rejecting the application for registration u/s 12(1)(ac)(iii) of the Act 61, filed on 23/09/2024, on the ground of insufficient evidences and in absence of any charitable activity being carried out as found from physical enquiry and verification of the earmarked premises by the departmental authorities.

2. The grounds of appeal preferred by the assessee in the memo of appeal are as follows:

“1. That on the facts, circumstances and legal position of the case, the Worthy CIT(E) in Order No. CIT EXEMPTIONS CHANDIGARII/2024-25/12AA/12544 has erred in passing the order in contravention of the provisions of S. 12A1B of the Income Tax Act, 1961.

2. That on law, facts and circumstances of the case, the Worthy CIT(E) has erred in rejecting the application of the applicant seeking registration u/s 12A even when the single Questionnaire was itself issued as a SCN on 03.01.2025 vide Notice No. ITBA/EXM/F/EXM43/2024-25/1071862594(1) and no separate SCN was issued by the respondent

3. That un law, facts and circumstances of the case, the Worthy CIT(E) has erred in rejecting the application of the appellant seeking registration u/s 124 without considering the submissions made and more-so when the expenses incurred were through tanking channels only and all supporting evidences thereof were fled.

4. That on law, facts and circumstances of the case, the Worthy CIT(E) has erred in rejecting the application of the applicant seeking registration u/s 124 by erroneously rejecting the request letters of donation seekers even when such charitable work had been genuinely done by the appellant.

5. That on law, facts and circumstances of the ease, the Worthy CIT(E) has creed in rejecting the application of the applicant seeking registration u/s 124 by erroneously holding that the appellant failed to produce documentary evidence of expense of Rs. 1,34,160/- incurred on treatment of poor people in Prakruti Ayurveda and Panchkarma Clinic even when the documentary evidences thereof were duly submitted before the Worthy CIT(E)

6. That on law, facts and circumstances of the case, the worthy CIT(E) has erred in rejecting the application of the applicant seeking registration u/s 12A on erroneous holding that salary of Rs. 1,20,000/ being paid to one of the trustees is not mentioned in any clause of the Trust deed even when there is no such requirement of mentioning this in the Trust deed.

7. That on low, facts and circumstances of the ease, the Worthy CIT(E) has erred in rejecting the application of the applicant seeking registration u/s 12A by erroneously making a fictional basis that donations are being received from a single entity Stone Universe Pvt. Ltd.) even when there is no such bar of receiving donation from a single entity/ person.

8. That on law, facts and circumstances of the case, the Worthy CIT(E) has erred in rejecting the application of the applicant seeking registration u/s 12A on incorrect basis that there are Common trustees vir Mrs. Kavita Arora and Mes. Babita Wahi in M/s Dignity Homes Trust and the appellant trust even when the provisions of the Act do not bar this situation of common trustees in 2 or more trusts,

9. That on law, facts and circumstances of the ease, the Worthy CITIE) has erred in rejecting the application of the applicant seeking registration u/s 12A on incorrect basis that Sign Board was not earlier put up at the Registered office of the appellant trust.

10. That the appellant craves leave for any addition, deletion or amendment in the grounds of appeal on or before the disposal of the same.”

3. In course of hearing the Ld. AR of the assessee filed a short paper book containing copies of trust deed, provisional registration u/s 12AB and 80G of the Act, along with copies of financials, bank statements, and copies of communications and correspondences to various notices issued in course of registration process with the department, which also contains documentary evidences of various services rendered under the head education service, Health care Services, community services, copies of letters of appreciation received from various patients, hospitals, vendors relating to community services, and photographs, of activities carried out.

4. The Ld. AR submitted that the application for registration has been arbitrarily rejected without considering the voluminous documentary evidences produced before the Ld. CIT (E) as contained in the paper book, which are all evidences of various charitable activities carried out by the assessee supported by invoices and all payments routed through bank channel as evident from bank statements. He further submitted that the various request letters from various persons seeking relief are arbitrarily rejected without any verification and the letters of appreciations supported by documentary evidences of work actually carried out has also been rejected without bringing any material on record to disprove the same and completely ignoring the documentary evidences of charitable work carried out at M/s Nirmal Eye Hospital for treatment of so many patients whose full summary of expenses supported by hospital records are filed, donation of medicines made to M/s Prakriti Ayurveda and Pankarma Clinic, and other evidences relating to community services has been overlooked, simply on the basis of a report submitted by the departmental inspector, without allowing an opportunity to the rebut the materials gathered behind the back of the assessee, and he prays for proper and adequate relief.

5. The Ld. DR relied on the order of the Ld. CIT (E), and the departmental inspector report to submit that the sign board of the assessee has been newly put up and the office is located at the residence of the trustee and there are common trustees with M/s Dignity Homes Trust (Ms Babita Wahi being the common person) and the source of funds are emerging from a common business entity ” Stone Universe Private Limited ” which point towards diversion of taxable income of commercial entities under the guise of philanthropy, and prayed for sustaining the rejection order, but could not point out any discrepancy in the documentary evidences submitted in the voluminous paper book by the assessee as proof of charitable work carried out.

6. We have heard the rival submissions and considered the materials contained in the PB filed before us, and we find that the assessee is provisionally registered and the application for registration is properly filed and the activities carried out by the assessee are within the object clause contained in the deed of trust and there is no bar either in receiving donations from any single entity or in the existence of common trustees, as pointed out by the Ld. CIT (E), as long as the activity carried out by the assessee is charitable in nature carried out for the benefit and welfare of the public at large and are as per the purpose of which the same has been established.

7. Moreover, we find that the voluminous documentary evidences filed in the paper book, supported by photographs, as carrying out of various welfare and charitable activities, as envisaged in the trust objectives, has not been proved to be false and the existence of various patient who received the actual medical benefits, has not been found to be bogus and we are of the opinion that the documentary evidences cannot be discarded or rejected without verification and bringing any evidence on record, contrary to the same.

8. As such in the interest of justice we remand the matter back to the Ld. CIT (E) to consider the application for registration afresh in tandem with the documentary evidences produced as proof of carrying out of various charitable activities, supported by bank statement, invoices and ledger accounts and proof of appreciation letters and photographs, all brought on record and to proceed with the registration process as per provisions of law.

9. The assessee will be allowed reasonable opportunity of being heard and the assessee is also directed to file all supporting documentary evidences and to fully cooperate in registration proceedings.

10. In the result, the appeal of the assessee is allowed for statistical purposes.

ITA No. 345/ASR / 2025 for Asst year : 2025-26

11. This appeal is against the rejection order of the Ld. CIT (E) dated 12/03/2025, in respect of an application filed by the assessee in form 10AB, dated 07/10/2024, seeking approval u/s 80G (5) of the Act 61.

12. Since we have remanded the matter to the Ld. CIT (E), Chandigarh, relating to the application for registration of the assessee u/s 12AB of the Act 61, we remand this application for approval u/s 80(5) of the Act, to be considered afresh in tandem with the registration application.

13. Our observations in ITA No. 344/ ASR/2025, applies mutatis mutandis to this appeal also.

14. In the result, the appeal of the assessee is allowed for statistical purposes.