TaxTMI 
TaxTMI 
2010 (4) TMI 874
X X X X Extracts X X X X
X X X X Extracts X X X X
....server were found in the premises which contained accounting and trading data of (Triumph Securities Ltd., Triumph International Finance (India) Ltd., for financial years 1999-2000 and 2000-01. The Assessing Officer on the basis of records of the assessee and after considering the findings of fact as pointed out by the auditors in their report under section 142(2A), determined the undisclosed income at Rs. 4,44,42,22,680 as against the 'nil' income returned by the assessee. Ld. CIT(A) confirmed the Assessing Officer's action. When the matter came up before the Tribunal on 3-7-2009, ld. D.R. stated that on identical facts and on the basis of the same 12 CDs, on which basis the additions had been made in the hands of the assessee, the additions were made in the hands of the group concern also, viz.; Triumph International Finance India Ltd. (TIFIL), which have been sustained by the Tribunal and, therefore, the issue is covered by the decision of the Tribunal and had to be followed. On the other hand, ld. counsel for the assessee had submitted that on identical facts in the case of the assessee itself, while deciding the appeal for the assessment year 1999-2000, similar additions had b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fferent from the client code shown in the books of account of the assessee. Thus, the identity of client, who allegedly had undertaken the transaction, became subject-matter of further investigation and, therefore, the matter was also referred for audit under section 142(2A) of the Income-tax Act, 1961. Assessing Officer noted the following observations of the auditors as reproduced in para 12.3 of his order :- "As per our analysis of the reconciliation statement provided by the assessee there are discrepancies as to client codes as per the BSE records and their books. On our detailed verification we have come across approximately 50 per cent to 55 per cent of transaction which shows variances vis-a-vis BSE and books. A detailed electronic data specifying in detailed statement contained in a CD is enclosed herewith (refer attachment No. 'D' in the form of CD separately. After preparation of the reconciliation based upon the above said data, we have forwarded a CD containing mismatch under various classifications to the assessee for their clarification vide our letter dated 15-6-2002. In absence of clarifications from the assessee we have not considered any type of diffe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....which the brokers were allowed to alter the client ID. 3.1 The Assessing Officer elaborately considered the provisions of section 158BB, which defines undisclosed income and observed that same includes any income based on any entry in the books of account or other documents or transactions where such entry in the books of account or other documents or transactions represented wholly or partly income or property, which has not been or would not have been disclosed for the purposes of this Act. He pointed out that the statements recorded in the books of account, in the form of transaction, do not alone constitute sufficient evidence to prove that the transactions are disclosed unless the income embedded in the said transaction is also disclosed. 3.2 The Assessing Officer further observed that the word "evidence" is derived from latin word evidens or evidere, which means to show clearly, to make clear to the side, to discover clearly, to make plainly certain, to ascertain, to prove. 3.3 After considering the meaning of term 'disclosed' and 'evidence' in the context of section 158BB, he pointed out that mere entry in the books of account is not sufficient and if in course of s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in as to why their undisclosed income should not be computed on the basis of details available on record regarding mismatch of client ID code. The assessee in its reply, inter alia, accepted in principle that there was client ID mismatch and, therefore, furnished the necessary confirmations. It was pointed out that wherever confirmations were not available, circumstantial evidences in the form of agreement with clients, acknowledgement of contracts, receipt/giving of delivery of shares and receipt/payment of money were furnished to establish that clients were existing and the trades belonged to them. The assessee had also furnished a list of clients in respect of whom confirmations could not be furnished but ledger accounts and other circumstantial evidences were furnished. 3.7 The Assessing Officer examined the modus operandi with reference to various Circulars issued by SEBI and after considering the detailed guidelines concluded that the assessee's explanation that punching of name was not mandatory in the given period, was not correct because it was necessary to have the same name and client ID entered in his sauda book and other primary documents along with contract notes, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o prove is on the assessee which he failed to discharge. 3.11 On the basis of aforementioned discussion, the Assessing Officer computed the undisclosed income of the assessee in para 13 of his order as under :- " Assessment year 2000-01 (a) Profit from speculation Rs. 77,88,23,123 (b) Unexplained investments u/s. 69 Rs. 78,67,98,988 (c) Profit on delivery based transactions Rs. 14,02,21,226 Previous year 1-4-2000 to 23-3-2001 (a) Unexplained investment u/s. 69 Rs. 2,73,83,79,346 Total undisclosed income Rs. 4,44,42,22,683 Rounded off to Rs. 4,44,42,22,680" 4. Before ld. CIT(A), the first issue raised by the assessee was whether the Assessing Officer's action in bringing the impugned additions within the purview of block assessment under Chapter XIV-B was in accordance with law or not? 5. Ld. CIT(A) concurred with the findings of the Assessing Officer that it is not enough that entries in the books or the expenses as per the books are disclosed but what is material is that the true import of such entries or such expenses having bearing on the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ning is not limited but widens its net. The word "income" is of widest amplitude and it must be given its natural and grammatical meaning. Drawing parity with the definition of 'income', ld. CIT(A) observed that since the definition of 'undisclosed income' is also inclusive, the concept laid down in various case laws will apply mutatis mutandis. Therefore, the income, which would not have come to the notice of the department but for the search, should be included as undisclosed income of the block period. Ld. CIT(A) examined the ingredients of undisclosed income and observed that in the first category, reference to disclosure is not to the entire transaction/entry but to the income or property which had been embedded therein. He pointed out that the Legislature has not restricted the determination of undisclosed income to the entries but has included the transaction also. Even if any entry is not indicative of undisclosed income, the entire transaction which would complete those entries in a logical manner has to be considered so as to determine the undisclosed income. He pointed out that the undisclosed income is not limited to positive evidence gathered during search but shall in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....considered opinion that the same has to be taxed under the block assessment. Coming to the quantum aspect of the additions, relating to unexplained purchases and profit on both delivery based and speculative transactions, during the course of appellate proceedings the appellant was asked in specific to furnish the details of turnover (both delivery based and speculative) as also the profit arising out of delivery based as well as speculative transactions. Apart from the same, the appellant was asked to provide client wise confirmation in respect of delivery based transactions and in case of profit in delivery based/speculative transactions and was also asked to produce the confirmations from the respective clients. Excepting for producing some sketchy details on the turnover which it had procured from the stock exchange no further detail or confirmations as asked for could be produced. In fact the turnover could not be reconciled with the book figure. Consequently there is no other option but to sustain the order of the Assessing Officer on the issue. The appellant's plea as per ground of appeal Nos. 2 and 3 are rejected." Aggrieved, the assessee has taken the following groun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessment. He pointed out that the Assessing Officer has made three types of additions. Firstly, under section 69 as unexplained investment, secondly, profit on speculation and thirdly, profit on delivery based transaction. He pointed out that in the course of search only 12 CD Roms were seized which are mentioned in the regular books of account and details of transaction recorded in the regular course of business. He pointed out that the assessee is a stock broker only. Ld. counsel pointed out that no transactions were undertaken at National Stock Exchange since the assessee was only the broker of Bombay Stock Exchange. Ld. counsel submitted that Assessing Officer in para 12.2 has observed "on the basis of the data and on the basis of further evidence gathered". He submitted that it is not correct because apart from 12 CDs, no further evidence was found at the time of search. He further submitted that there is no dispute regarding mismatch between the client ID as per assessee's book vis-a-vis stock exchange. He submitted that the main issue to be decided in the present appeal is what is the actual consequence of this mismatch. He pointed out that the client code mismatch had actu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the assessment order and pointed out that the Assessing Officer has observed that the auditors pointed out the mismatches pertaining to name of the client, quantity of shares and rate of shares whereas the mismatch was only with regard to identification of the parties. He referred to page 3 of the assessment order and pointed out that the Assessing Officer has observed that the reconciliation of client ID code could not be made. He further referred to page 21 of the assessment order to point out that it was at the instance of auditors that the confirmations were filed but the Assessing Officer says that the assessee undertook the exercise of filing the confirmation letters based on ledger account of the assessee. He referred to para 12.17 of the assessment order and pointed out that in the stock exchange records, nothing was beyond the books. Ld. counsel submitted that for finding out the real transaction, circumstantial evidence should also have been considered. 11. As regards the quantification of profit, ld. counsel submitted that the Assessing Officer ignored the speculation loss but took into consideration the speculation profit for which, there is no basis. Ld. counsel sub....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mlal Balram Gurbani [2001] 249 ITR 501 (Bom.); (b) CIT v. Jupiter Builders (P.) Ltd. [2006] 287 ITR 287 (Delhi); (c) CIT v. Vikram A. Doshi [2002] 256 ITR 129 (Bom.); (d) Bhagwati Prasad Kedia v. CIT [2001] 248 ITR 562 (Cal.); (e) CIT v. P.K. Ganeshwar [2009] 308 ITR 124 (Mad.); (f) CIT v. N.M. Associates [2002] 256 ITR 141 (Mad.); (g) CIT v. Ravi Kant Jain [2001] 250 ITR 141 (Delhi); (h) Sunder Agencies Ltd. v. Dy. CIT [1997] 63 ITD 245 (Mum.). 15. Ld. counsel for the assessee submitted that the Assessing Officer has not rejected the books of account and the special auditors also say that the accounts reflect the true and fair view. 16. Ld. counsel pointed out that discrepancy may be there but what is the consequence of the same is to be examined. In this regard, he relied on the decisions of ITAT Delhi Bench in the case of Dang & Co. (P.) Ltd. v. Dy. CIT [2005] 94 ITD 29 (TM) and Raj Kumar Chawala v. ITO [2005] 94 ITD 1 (SB). 17. Ld. counsel submitted that the Assessing Officer himself says that the addition had been made on the basis of regular books of account. 18. The second proposition advanced by ld. counsel for the assessee was with referenc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e as to what amount should be added. In this regard, he referred to pages 92 to 98 of PB, wherein, the list of clients whose confirmations have been obtained subsequent to addition made by the Assessing Officer, was contained. He pointed out that these confirmations were filed before the ld. CIT(A) but he has not at all referred to these confirmations. Ld. counsel for the assessee further submitted that collateral evidences were filed before the Assessing Officer. In this regard, he referred to certain examples to demonstrate that names were appearing in the bank statement as that in the books of account. He referred to page 76 of PB, wherein, the list of clients whose confirmations were not available till the assessment and for which addition of Rs. 162.95 crores has been made in the order. He referred to Sl. No. 78 at page No. 78 of PB, wherein, the name of client is Daksha P. Modi. He pointed out that in the bank statement of Global Trust Bank on 9-9-1999, the name of Daksha P. Modi showing a debit of Rs. 2,008.38 is appearing. Thereafter, ld. counsel for the assessee referred to Sl. No. 15 of page 76 of PB, wherein, the name of client is Sushma Kapur and pointed out that the ag....
X X X X Extracts X X X X
X X X X Extracts X X X X
....4 0 721403 -171315 0.00 5016 (1) In the above case, the client has made purchase as well as sale transaction. (2) The assessee has received the amount from the client to purchase and has made the payment to client against his sale. (3) The Assessing Officer has made the following addition : Unexplained investment 446359 Delivery profit -171315 Total: 275044 (4) So what Assessing Officer has made both purchases and sales where sale is more than purchases. Case IV : Client has made both purchases and sales where sale is more than purchase Sr. No. Name of client Bought Sold Specu- lation Total turn- over Deli very profit No. % Bro- ker- age Specu- lation Deli- very To- tal Specu. Del. Total Profit 4. Inves.. Trust of India 145900 145900 29128458 29128458 0 29274358 28982558 0.03 151259 (1) In the above case, the client has made purchase as well as sale transaction. (2) The assessee has received the amount from the client to purchase and has made the paym....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nts are coming from BSE and, therefore, these cannot be added. He submitted that if peak is to be added, first investment amount + higher balance at any given point of time can be added. The next aspect in this regard is in regard to speculation profit added by the Assessing Officer. Ld. counsel pointed out that speculation profit and delivery profit is amalgam of plus and minus figures but the Assessing Officer ignored the negative figure in 2000-01. In this regard, he referred to page 326 of PB, wherein, summary of additions made by the Assessing Officer is contained which is reproduced hereunder :- Page No. Confirmation not filed Page No. Confirmation filed without PAN Total (a) + (b) (a) (a) A.Y. 2000-01 Speculation profit Delivery purchase (unexplained investment) 81 77.07 88 0.81 77.88 81 66.98 88 11.7 78.68 Delivery profit 81 18.9 88 -4.88 14.02 Total (i) 162.95 7.63 170.58 A.Y. 2001-02 Delivery purchase Delivery profit Speculation profit 86 86 86 230.85 -171.92 6.03 91 91 91 42.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent ID was noticed as is evident from the following :- "WHEREAS the Deputy commissioner of Income-tax, Circle 5(2), Mumbai ('Assessing Officer', for short) submitted the report dated 7-3-2001 giving therein the finding that in course of the assessment proceedings for the assessment year 1998-99 in the case of M/s. Triumph International Finance Limited (hereinafter, the assessee-company), he found from the information furnished by the assessee-company that the said company during the previous year ended on 31-3-1998 had carried out transactions on the National Stock Exchange ('NSE', for short) and that the identities of the clients ('client IDs', for short) as furnished by the said company were different from the client IDs as were made available to the Assessing Officer by the NSE." He submitted that the date of search is 23-3-2001 and, thus, the Assessing Officer knew about this mismatch. Ld. counsel summing up his arguments submitted that implication and inference can never be a basis of addition in the block assessment. This can be resorted to only if it is coupled with some material. He pointed out that it is a fact that no material has been found but as per the Assessing....
X X X X Extracts X X X X
X X X X Extracts X X X X
....efore, Joint Parliamentary Committee was appointed and the statement of Shri Ketan Parekh was recorded by the JPC. The assessee was carrying on the proprietary business along with share broking. He acted more as an operator than broker. The assessee utilized the settlement period of two weeks in order to manipulate the transactions. Dr. Daniel pointed out that client code mismatch was found particularly in those shares in which stock exchange scam took place. He pointed out that earlier a scam popularly known as 'Harshad Mehta Scam' was there in 1992 and, consequently, SEBI had issued Circular in 1993. He referred to pages 9 to 13 of the assessment order, wherein, the code of conduct of Stock broker has been given. He pointed out that this Circular is dated 18-11-1993. Dr. Daniel pointed out that it was in consultation with the assessee that the Assessing Officer agreed that wherever confirmations were available, no addition was called for. Otherwise, he treated the transactions as assessee's own transaction. 28. In reply to assessee's submission regarding filing of the confirmations before ld. CIT(A), Dr. Daniel submitted that there is no such mention in the ld. CIT(A)'s order.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er XIV-B lays down special procedure for assessment of search cases. Section 158B(b) deals with definition of 'undisclosed income' which reads as under :- "(b)"Undisclosed income" includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act." 31. Section 158BA deals with the assessment of undisclosed income as a result of search and sub-sections (2) and (3) of the said section reads as under : "(2) The total undisclosed income relating to the block period shall be charged to tax, at the rate specified in section 113, as income of the block period irrespective of the previous year or years to which such income relates and irrespective of the fact whether regular assessment for any one or more of the relevant assessment years is pending or not. [Explanation.-For the removal of doubts, it is hereby declared that : (a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of account and other documents maintained in the normal course on or before the date of the search or requisition relating to such previous years; (e)Where any order of settlement has been made under sub-section (4) of section 245D, on the basis of such order; (f)Where an assessment of undisclosed income had been made earlier under clause (c) of section 158BC, on the basis of such assessment. Explanation.-For the purposes of determination of undisclosed income,- (a)the total income or loss of each previous year shall, for the purpose of aggregation, be taken as the total income or loss computed in accordance with the provisions of Chapter IV without giving effect to set off of brought forward losses under Chapter VI or unabsorbed depreciation under sub-section (2) of section 32; (b)Of a firm, returned income and total income assessed for each of the previous years falling within the block period shall be the income determined before allowing deduction of salary, interest, commission, bonus or remuneration by whatever name called to any partner not being a working partner : Provided that undisclosed income of the firm so determined shall not be chargeable to tax i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... transaction is already in the books of account but the true nature of entry is detected on the basis of material found during the course of search, then it will come within the purview of undisclosed income. If the fact of ownership of the transaction has come to the notice of the department for the first time as a result of search and seizure operation then it will come within the ambit of undisclosed income. In the case of benami transactions, the ownership of the transaction is always represented in the name of other person and not in the name of the person to whom, the transaction actually belongs. If some material is found during the course of search from which, it can be inferred that the recording of transaction has been done in the name of other person then, it will come within the purview of undisclosed income. The term 'undisclosed income' has primarily been used in section 132(1)(c). It is pertinent to note at this juncture that section 132(1)(c) does not refer to a transaction in the books of account and, therefore, to cover the income which is embedded in the transaction, the definition of 'undisclosed income' includes the transaction recorded in the books of account ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing or not. It has been clarified in the Explanation that the assessment made under this Chapter shall be in addition to the regular assessment in respect of each previous year included in the block period and necessary adjustments have to be made while computing the undisclosed income. Thus, it is clear that only undisclosed income can be the subject-matter of assessment under Chapter XIV-B and not the income which has to be assessed under the regular assessment. Now the question arises as to how to determine which income will come within the ambit of undisclosed income. For that purpose, we have to refer to the provisions contained under section 158BB, which deals with the computation of undisclosed income of the block period. The first part of section 158BB(1) makes it clear that the total income of the block period has to be determined afresh and from that items contemplated from clause (a) to clause (f) have to be excluded. As per clause (a), if the assessment has already been made under section 143, 144 or 147, then the undisclosed income is to be reduced by aggregate of the total income and increased by the aggregate of the losses as determined on the basis of assessment mad....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssee in proceedings under Chapter XIV-B. It was held that in respect of block assessment, undisclosed income is required to be computed on the basis of evidence found during the course of search or being directly relatable to evidence found during the course of search. Subsequent enquiries in order to verify the correctness of books of account, cannot form the basis for computing the undisclosed income. This decision is clearly distinguishable on facts inasmuch as the statement of VP was recorded after the date of search and retracted subsequently. Thus, the vary basis of addition was disputed. However, in the present case, admittedly client ID mismatch was there. (b) Shamlal Balram Gurbani's case (supra) In this case also, the Hon'ble Bombay High Court upheld the findings of the Tribunal, where the Tribunal had recorded a finding that since assessee's income from interest, salary and rent was reflected in the audited balance sheet of the respective assessment years of the firm, therefore, no addition was called for in block assessment. Thus, income had already been recorded in the books, therefore, there was no question of any undisclosed income. (c) Jupiter Builders (P.)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....der section 139 and the Assessing Officer considers it necessary or expedient under section 143(2) to ensure that the assessee had not understated the income or has not computed excessive loss or has not underpaid tax in any manner. The proceedings under the regular assessment and the assessment for the block period stand to operate on different fields. Therefore, the considerations which would be attracted while making the assessment in exercise of the powers under section 143(2) and (3) for the regular assessment would stand on a different footing and will be governed by different provisions of the Act whereas the assessment for the block period as a result of the search and seizure would be governed by different provisions of the Act and would be made by the Assessing Officer in accordance therewith." Thus, in sum and substance, it was held that if no incriminating material was found during the course of search, then impugned amounts could not be subject-matter of block assessment. (d) Vikram A. Doshi's case ( supra) In this case, it was held that the transactions which were already disclosed in the returns could not be the subject-matter of block assessment. However, e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rial, the Assessing Officer was of the view that the income was to be taxed as business income and not as capital gains and, accordingly, made a block assessment. It was held that since undisclosed income was not determined on the basis of any search material, it was found during the course of search, section 158BA had no application to the facts of the case. Here also no material was found during the course of search to suggest that assessee had not disclosed its income. (h) Dang & Co. (P.) Ltd.'s case (supra) In this case, the assessee was an Estate Agent. An amount of Rs. 55 lakhs was standing as balance to the credit of one 'C' and it was shown in the balance sheet filed by the assessee along with the regular returns of income for the assessment year 1994-95. The learned Third Member held that the genuineness of the amount could have been gone into only in the case of regular assessment when the assessee had duly disclosed the amount in its balance sheet. The assessee had discharged its part of the obligation by disclosing the amount in the balance sheet and by filing the return. It was not the assessee's fault that no assessment was made. Thus, it was held that the asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e basis of that register and additions were made in the block assessment for all the years. It was held that under the provisions of this Chapter XIV-B, the undisclosed income detected as a result of search initiated or requisition made after 30-6-1995 be assessed separately as income of that block of ten previous years. The provision was introduced to streamline the procedure concerning the search matters. It is abundantly clear from the perusal of the prescription of section 158BA that within pale of Chapter XIV-B assessment could be made only in respect of the undisclosed income and such undisclosed income must come as a result of search. Section 158BA does not provide a licence to revenue for making roving enquiries connected with completed assessments and it is beyond power of the Assessing Officer to review the assessment completed unless some direct evidence comes to the knowledge of the department as a result of search which indicates clearly the factum of undisclosed income. Without such evidence or material the Assessing Officer is not empowered to draw any presumption as to the existence of undisclosed income. A presumption is an inference of fact drawn from other known ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ave heard the rival submissions and are of the view that even it is assumed that the data found during the search was part of the books of account of the assessee but the real nature of the transactions recorded in the computers of the assessee saw the light of the day on the basis of the material found during the search and follow up inquiry made by the income-tax authorities. We are also in agreement with the finding of the CIT(A) that the assessee has failed to explain satisfactorily the real nature of clients ID mismatch. The definition of 'undisclosed income' as laid down in section 158B(b) is an inclusive definition and as such, the ingredients of undisclosed income, need not to be limited to what is described in the definition but shall also include items which partake the character of income in terms of any item which was noticed or discovered as a result of search. In our view, the CIT(A) has rightly upheld the view of the Assessing Officer that the income arising out of the said ID mismatch is assessable as undisclosed income under Chapter XIV-B of the Income-tax Act. 7. The fact that the proceedings were initiated for assessment year 1998-99 to refer the matter for sp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ven in section 3, there are certain objects arranged in a certain order in a certain place, is a fact. The term "document" as defined in section 3 means any matter, expressed or described, upon any substance, by means of letter, figures or marks, or by more than one of those means, intended to be used, or which may be used, for the purpose of recording that matter. The meaning of evidence, inter alia, includes documents including writing pad produced for the inspection of the Court. The term "relevant" has been defined, as under :- ""Relevant" - One fact is said to be relevant to another when the one is connected with the other in any of the ways referred to in the provisions of this Act relating to the relevancy of facts." Section 34 of the Evidence Act reads as under :- Entries in books of account when relevant - Entries in books of account, regularly kept in the course of business, are relevant whenever they refer to a matter into which the Court has to inquire, but such statements shall not alone by sufficient evidence to charge any person with liability. 40. The term "Document" has been defined in Black's Law Dictionary as under : "An instrument on which i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e transaction, for determination of undisclosed income in block assessment. The material found during the course of search leads to a contrary inference than as contemplated under section 132(4A) regarding the correctness of the entry in the books of account. However, if no material is found during the course of search then transactions in regular books cannot be the subject-matter of block assessment. 43. Therefore, we conclude that if the material has been found during the course of search from which, it can be concluded that the transactions recorded in the books of account do not disclose the assessee's true income then such transactions are to be considered in the block assessment. (c)Whether the client ID mismatch found during the course of search constitute 'material' as contemplated under section 158BB(1) or not particularly when punching of client ID was not mandatory pre-August 2001? 44. In para 12.2 of the assessment order, the Assessing Officer observed that on the basis of data and on the basis of further evidences gathered, it has been observed that in some of the transactions there are difference as regards the identity of the party/client on whose behalf th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ot mandatory, therefore, it cannot a basis for addition. We find it difficult to accept this proposition. Search and Seizure action is carried out to unearth the concealed income. Search action is a serious encroachment on right to privacy of an individual. Therefore, this action is to be taken with due care and precaution. To ensure this, Income-tax Department has a separate wing called Investigation Wing which gathers information from various sources, e.g., Banks, Finance Companies, Bullion Market, Stock Exchange, etc. There can be innumerable channels for collection of information. But, unless there is reasonable certainty of concealed income being found, the department does not proceed. This is evident from the opening phrase in section 132 as per which the Authorised Officer should have reason to believe regarding concealed income in the form of money, bullion, asset or any income not disclosed in the books of account. All the informations gathered prior to search culminate information of belief regarding concealment. Therefore, these informations primarily constitute the edifice on which the entire search operation is based. As a matter of fact, search operation only facilita....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment is a complete procedure of assessment as contemplated for regular assessment and he has to comply with all the conditions which are there in the regular assessment. He has to scrutinize in detail the evidence and material found during the course of search and also to take into consideration the information available with him to find out whether the income which should have been disclosed in the books of account has actually been disclosed or not. The Assessing Officer has to examine the material found during the course of search in order to find out the real element of undisclosed income embedded in the material found and for that purposes inferences have to be drawn from the material found. A complete scrutiny of the material found during the course of search has to be carried out. However, if after complete scrutiny of all the materials found during the course of search, he reaches a conclusion that no part of the undisclosed income is embedded in the transaction recorded in the books of account, then no addition is called for and whatever has been disclosed in the regular return of income is to be taken into consideration while aggregating the total income. 47. Section 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a commission agent and this was accepted for the assessment year 1983-84. However, for assessment year 1984-85, the Assessing Officer assessed the assessee as a trader and not as commission agent. The ITAT had remanded the matter to the Assessing Officer for providing the assessee an opportunity to file evidence in support of its claim. The Assessing Officer summoned 10 traders under section 131(1), out of which, 5 traders appeared and gave evidence in favour of the assessee and other five who were outside the State, did not appear as the summons could not be served on them. In the backdrop of these facts, it was held that the assessee could not be held responsible for the non-appearance of five traders who were outside the State and from their non-appearance, no adverse inference could be drawn by the authorities against the assessee. However, this case is of little help to the assessee inasmuch as in the present case, the client ID mismatch was found in respect of specific transactions which were put to scrutiny. This fact is to be taken into consideration in the backdrop of proceedings which were taken up by JPC. Therefore, merely by filing confirmation in respect of 98 per cent....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t extent the provisions of section 68 would be applicable and merely because the entire transactions have been recorded in the books of account, the applicability of section 69 cannot be ruled out. We, accordingly, hold that the provisions of section 69 would be applicable to the extent of the income not disclosed in the transactions recorded in the books of account. It is pertinent to note that in section 69, unexplained investment has been defined with reference to the entire value of the investments not recorded in the books of account which is being treated as the income of the assessee of such financial year. Thus, it is primarily the income which has not been corded in the books of account is of real consideration and the same, as noted earlier, has to be considered in the light of the provisions of block assessment. 50. From the above discussion, the following aspects can be summarized as under : (i)As per section 158B(b), the definition of 'undisclosed income' refers to transaction which represents wholly or partly income or property. If the entire transaction represents wholly the assessee's income then it has to be included as such but if the entire transaction does....