TaxTMI 
TaxTMI 
1999 (8) TMI 122
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....M/s Digvijay Chemicals Ltd. Being satisfied in the matter the aforesaid Dy. CIT, Amritsar handed over the relevant seized materials under s. 158BD to the AO of M/s. Digvijay Ltd. i.e. the present assessee. 2. On receipt of the seized materials the AO issued notice under s. 158BD r/w s. 158BE(2) of the Act, 1961 requiring the assessee to furnish return of income for the above period. In response the assessee filed the return declaring 'Nil' income. The AO then issued notice under s. 143(2) of the Act. In response to the same the assessee filed written reply challenging the validity of the notice issued under s. 158BD of the Act. It was contended that the search was not conducted in the case of the present assessee and therefore, no action could be taken on the seized documents in the assessee's case. It was further contended that no action could be taken under s. 158BD of the Act because the Dy. CIT, Amritsar had not recorded his satisfaction that the disclosed income as per the seized documents if any, belong to the present assessee. It was argued that since the Dy. CIT, Amritsar had not recorded his satisfaction in the matter as required under s. 158BD of the Act the handing ov....
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.... proceedings had not been stayed by the High Court and as the matter was time-barring the block assessment had to be completed. 6. After detailed discussion about the nature of the transactions noted in the seized document the AO observed that the advances to M/s Mini Exports amounting to Rs. 27 lakhs were not recorded in the books of accounts. He further observed that in the reply filed in course of the regular assessment proceedings for the asst. yr. 1994-95 referred to above also the assessee had failed to satisfactorily explain the advances of Rs. 27 lakhs. He rejected the contention that the said advances related to projection only and were not real. He therefore, held that the advances of Rs. 27 lakhs were unexplained investments under s. 69 of the Act. Accordingly the addition of Rs. 27 lakhs was made. 7. As regards item (ii) above it was submitted before the AO on behalf of the assessee that the advance of Rs. 10 lakhs to M/s Verma Tarafaq Instruments (P) Ltd. was made by cheque which had been recorded in the books of accounts on16th Nov., 1993. It was contended that the advance in question was not made in cash as mentioned in the agreement deeds executed on stamped p....
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....period: (i) Disallowance of loss Rs. 82,253 on sale of car under s. 50 as per para 7 of the assessment order (asst. yr. 1995-96). (ii) Undisclosed lease Rs. 44,200 rent on car as discussed in para 7 of the assessment order (asst. yr. 1995-96) (iii) Loss on account Rs. 80,000 of devaluation of stock of shares disallowed as per para 8 of the assessment order (asst. yr. 1995-96) (iv) Disallowance of Rs. 95,799 bad debts as discussed in para 9 of the assessment order (asst. yr. 1995-96). (v) Loss on account Rs. 3,53,013 of devaluation of stock of shares disallowed as discussed in para 10 of the assessment order (asst. yr. 1996-97) (vi) Undisclosed lease Rs. 5,47,460 rent as discussed in para 11 of the assessment order. (Rs. 70,820 in asst. yr. 1995-96) + (Rs. 4,76,620 in asst. yr.1996-97). As regards the above the AO observed that the assessee had failed to prove the loss on sale....
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....application of s. 158BD of the Act. It was contended that the impugned order was not proper and valid because the conditions prescribed under s. 158BD had not been complied with in the case. The Dy. CIT,Amritsarhad handed over the seized documents relating to the present assessee without recording the satisfaction as required under s. 158BD of the Act. He contended that the AO, Bulandshahr did not assume proper and valid jurisdiction in the case so far as the seized documents were concerned. He added that there was no search under s. 132 in the case of the present assessee. The books of accounts, documents, etc. pertaining to the assessee were seized from the aforesaid premises during the search in the cases of M/s Bhagat Industrial Corporation and Shri R.D. Bhagat relying upon the provisions of s. 132(4A) of the Act. The Dy. CIT, Amritsar vide his order in the case of M/s Bhagat Industrial Corporation did not record his categorical satisfaction that the seized documents in question belonged to the present assessee and the undisclosed income therefrom had to be considered in the case of the present assessee and not in the case of M/s Bhagat Industrial Corporation. Thus the essentia....
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....pugned block assessment. He submitted that the internal correspondences referred to above showed that the Dy. CIT, Amritsar had handed over the seized books and documents relating to the present assessee to the AO, Bulandshahr after being satisfied as required under s. 158BD of the Act that they contained undisclosed income belonging to the present assessee to be considered by the AO, Bulandshahr. In this connection, the learned Senior Departmental Representative also referred to the contents of the appraisal report of the Investigation Wing and the letter of the DDI to the concerned AOs. He pointed out that the fact that the Dy. CIT, Amritsar did not consider the seized books and documents relating to the present assessee in the assessment order passed in the case of M/s Bhagat Industrial Corporation also clearly showed that he was satisfied that those seized books and documents were to be considered in the case of the present assessee and not in the case of M/s Bhagat Industrial Corporation. He added that it was not required on the part of the Dy. CIT,Amritsarto record his satisfaction in the assessment order in the case of M/s Bhagat Industrial Corporation, that the seized books....
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....re actions of his would have been unnecessary and cause of harassment to the present assessee and wastage of long time because it was ultimately and effectively the AO, Bulandshahr who had to examine the seized books and account and determine the undisclosed income if any, in the case of the present assessee. The result of investigation by the Dy. CIT,Amritsarwould not have been binding on the AO, Bulandshahr as under the law the findings of the concerned AO were required and not those of any other AO. 19. The learned Senior Departmental Representative further submitted that the provisions of s. 158BD were reasonable, fair and just inasmuch as it helps in the avoidance of too many searches and seizures. In the absence of s. 158BD there would have been need for searches in all other cases whose books of accounts, documents, etc. were found during the course of search in particular cases. 20. The learned Senior Departmental Representative further submitted that the purpose of Chapter XIV-B was to expedite assessment in search cases. Sec. 132 continued to be on the Statute. Sec. 132(9A) also remained there. He added that Chapter XIV-B is procedure of assessment in search cases. ....
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....ion of the Dy. CIT, Amritsar is further made clear by the order he passed in the case of M/s. Bhagat Industrial Corporation in which he held that there was 'Nil' undisclosed income in the case. It was thus clear that the Dy. CIT, Amritsar was satisfied that the said seized books and documents had to be examined by the AO, Bulandshahr to determine undisclosed income, if any, in the case of the present assessee i.e. M/s Digvijay Chemicals Ltd. The facts of the case therefore amply showed not only implicit but explicit satisfaction of the Dy. CIT,Amritsaras required under s. 158BD of the Act. 23. There is nothing in s. 158BD to indicate that it requires recording of satisfaction by the Dy. CIT, Amritsar that any undisclosed income belonged to the present assessee before handing over the seized books and documents to the AO of the present assessee. We are convinced with the submissions and contentions of the learned Senior Departmental Representative in this regard as mentioned above. We are of the view that the CIT,Amritsarwas not required to give opportunity of hearing to the present assessee and determine that there was such and such undisclosed income to be considered in the han....
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....hr was proper and valid under s. 158BD of the Act. 25. We also do not find force in the arguments of the learned counsel that the word 'satisfaction' mentioned in s. 158BD is pari materia to the word 'satisfaction' mentioned in s. 271(1) of the Act. In the former case there was no immediate consequence of levy of tax or penalty but in the latter case there was immediate consequence of levy of penalty on the assessee. Therefore, in the latter case, the AO must give opportunity of hearing to the assessee before arriving at the satisfaction for levy of penalty under s. 271(1) of the Act. In the former case the levy of tax or penalty did not directly and immediately arise from the satisfaction of the transferring AO i.e. Dy. CIT,Amritsar. The determination of undisclosed income and the consequences of levy of tax, penalty, etc. had arisen by the action of the AO, Bulandshahr who had given the opportunity of hearing to the assessee before passing the impugned order. Thus the word 'satisfaction' mentioned in s. 158BD is not pari materia to that of s. 271(1) of the Act. 26. We are also of the view that the impugned block assessment cannot be quashed as invalid because no substant....
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...., no advance was made. An affidavit of Shri Jagat Singh Chadha proprietor of M/s Mini Exports was filed in this regard and he was even presented before the AO for cross-examination but the AO chose not to do so. 29. As regards the payment of Rs. 10 lakhs in cash to M/s. Verma Trafaqa Instruments (P) Ltd. on16th Nov., 1993as mentioned in the seized stamped agreements referred to above, he submitted that the payment was actually made by cheque on17th Nov., 1993which was duly recorded in the books. He added that there was no cash payment on16th Nov., 1993and the discrepancies with regard to the cash and cheque and dates of16th Nov., 1993and17th Nov., 1993were inadvertent and should not be treated as reasons for considering the said cash payment different from the said payment by cheque. He further added that the affidavit of the debtor through its managing director and senior manager (finance & accounts) were submitted and they also appeared before the AO to corroborate the fact. The affirmations made in the affidavit had not been contradicted. 30. As regards the addition of Rs. 6,48,000 on account of undisclosed interest on advance of Rs. 27 lakhs, the learned counsel submit....
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....the reasons given by him for the additions in the impugned block assessment. He submitted that the explanation furnished were not satisfactory and convincing and therefore, the AO was justified in making the impugned additions. He added that the AO had given convincing reasons and reasonable basis for the additions as set out in the impugned block assessment. He further submitted that the assessee had failed to produce necessary evidences in support of its denial of the aforesaid transactions and income. The impugned additions had been made by the AO on the basis of the seized materials and not on conjecture and surmises. 37. We have given careful consideration to the materials on the file and submissions and contentions of the rival parties. We are of the view that the addition of Rs. 27 lakhs on account of unexplained advance to M/s. Mini Exports found entered in the seized loose sheets, addition of Rs. 10 lakhs on account of unexplained payment of Rs. 10 lakhs in cash to M/s Verma Tarafaq Instruments (P) Ltd. and the addition of Rs. 6,48,000 on account of estimated interest on the undisclosed advance of Rs. 27 lakhs were proper and justified. The advance of Rs. 27 lakhs detec....
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....ll. 40. As regards other additions we do not find convincing and satisfactory reasons for the same. The additions of Rs. 3,53,013 and Rs. 20,000 were made by the AO by rejecting the valuation of the stock of shares. Admittedly the assessee had been holding its stock of shares as trading stock and had been making the valuation of shares at market price on the basis of Stock Exchange rates. The AO was not justified in rejecting the valuation of the stock of shares merely on the suspicion that the Stock Exchange rates adopted by the assessee were not genuine. No specific materials had been brought on record to support this belief to the AO. It can therefore be held to be merely on suspicion and not genuine belief. Further additions based on suspicion and surmises are not covered under s. 158B(b) of the Act. In this view of the matter we hold that these additions in the impugned block assessment were not proper and justified. 41. Again the addition of Rs. 5,47,460 on account of undisclosed lease rent had been made by the AO without giving reasonable opportunity to the assessee to explain the issue and without going into the method of accounting followed by the assessee with regar....