2002 (8) TMI 247 - AT - Income Tax

Appeal Dismissed: Tribunal Upholds Additions in Share Capital & Deposits Cases

Cas Card Finance Limited. Versus Assistant Commissioner Of Income-Tax

The assessees' appeal challenging the additions on account of investments in share capital and deposits made during block assessments under sections 158BC ... Block Assessment,Undisclosed Income Issues Involved:1. Validity of assessment u/s 158BC read with section 158BD.2. Additions on account of investments in share capital and deposits.Summary:1. Validity of Assessment u/s 158BC read with section 158BD:The assessees did not press this ground during the hearing, and it was accordingly dismissed as not pressed.2. Additions on Account of Investments in Share Capital and Deposits:Background: Proceedings were initiated u/s 158BC read with section 158BD following a search and seizure operation on 5-9-1995 at the residential premises of Shri Bhawanisingh J. Champawat. Incriminating documents, including share application forms and other loose papers, were found. Assessments were completed on 23-9-1997, against which the assessees appealed.Case-wise Details of Additions:- M/s. Cas Card Finance Ltd.: Rs. 23,92,000 (Share Capital)- M/s. Rathore Investments: Rs. 42,14,898 (Deposits)- M/s. Rathore Finance Co.: Rs. 35,88,555 (Deposits)- M/s. Mahi Trading Co.: Rs. 32,764 (1994-95), Rs. 3,23,854 (1995-96), Rs. 25,101 (1996-97) (Deposits)- M/s. Jaisati Syntex P. Ltd.: Rs. 1,94,000 (Share Capital)Tribunal's Findings:- The Tribunal in ITA No. 4403/Ahd./1996 held that additions to the extent of the disclosure made by the assessee are proper within the meaning of undisclosed income. The Tribunal found no justification for additions over and above the disclosed amounts.- The Gujarat High Court dismissed the Revenue's appeal, affirming the Tribunal's findings based on the appreciation of the material on record.Arguments by Assessees:- The assessees argued that since the books of account were found during the search, the additions should be considered only in regular assessments and not in block assessments, citing the Gujarat High Court's decision in N.R. Paper & Board v. Dy. CIT [1998] 234 ITR 733.- They also cited the Supreme Court's decision in CIT v. Stellar Investment Ltd. [2001] 251 ITR 263, arguing that no addition on account of alleged non-genuine share application money by shareholders can be made.Arguments by Revenue:- The Revenue argued that since Shri B.J. Champawat admitted part of the share capital and deposits as his undisclosed income, the remaining amounts should also be considered as undisclosed income.- The affidavits and confirmations filed by the assessees were deemed unreliable and an afterthought.Tribunal's Decision:- The Tribunal upheld the additions made by the Assessing Officer, stating that the non-genuineness of the share capital and deposits was detected during the search and post-search investigations.- The Tribunal found that the entries in the books of account were not genuine, and the assessees failed to establish the genuineness of the shareholders and depositors.- The Tribunal relied on the Full Bench decision of the Delhi High Court in CIT v. Sophia Finance Ltd. [1994] 205 ITR 98, which held that section 68 applies to share application money if the explanation is not satisfactory.Third Member's Decision:- The Third Member concurred with the Judicial Member, holding that the additions made by the Assessing Officer were justified based on the material found during the search and the failure of the assessees to prove the genuineness of the entries.- The Third Member distinguished the decision of the Gujarat High Court in N.R. Paper & Board Ltd., stating that it did not bar the assessment of undisclosed income in block assessments.Final Order:- The additions of Rs. 23,92,000 in the case of Cas Card Finance Ltd. and Rs. 1,94,000 in Jaisati Syntex (P.) Ltd. were sustained.- The additions on account of deposits in Rathore Investments, Rathore Finance Co., and Mahi Trading Co. were also sustained.- All five appeals of the assessees were dismissed.