TaxTMI 
TaxTMI 
2011 (3) TMI 298
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....ned order dated 30th May, 2005, the Tribunal allowed the appeal of the assessee M/s Mittal Consul & Company (hereinafter, referred to as ‗MCC') which is under challenge in ITA No. 1277/2007. Similarly vide separate orders dated 31st October, 2007, the Tribunal also allowed the appeal of the assessee M/s.Tushar Stock and Share Brokers (Pvt.) Ltd. (in short ―Tushar) which is under challenge in ITA No. 572/2008 and the appeal of R.K. Mittal (hereinafter, referred to as ‗Mittal') which is under challenge in ITA No.928/2008. 2. A raid was conducted on assessee Tushar by the Enforcement Directorate (hereinafter, for short ‗ED'), which lead to discovery of cash as well as other documents relating to all the respondents/assessees. Relevant proceedings were initiated by the Department against the respondents. Since the impugned order of the Tribunal dated 30th May, 2005 (in case of MCC) came to be passed prior in time and was also relied upon by the Tribunal in their subsequent impugned orders of 31st October, 2007 with respect to the other respondents/assessees (Tushar and Mittal), we can safely rely upon the facts as noted by the Tribunal in its impugned ....
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....sked to explain the source of deposits. Mittal had claimed that these cheque books belonged to his clients who had given the same to him for completing the accounts and Income Tax Returns. This he had confirmed vide letter dated 15th January, 1999 and also in his statement recorded on 21st February, 1999. He was required to produce the account holders physically as well as furnish confirmation/affidavits along with PAN/GIR number and Income Tax jurisdiction. Mittal produced confirmation in respect of some of the bank accounts, but despite offering he could not produce the bank account holders, except two, namely, Gigo Thomas and Ramesh Chander. It was found that out of twenty seven bank accounts only seven were of existing companies/concerns. The genuineness of these accounts was accepted. Out of the remaining twenty, affidavits of only four individual account holders were produced. Even out of those four, two affidavits of Ramesh Chander were found to be full of inconsistencies from his statement. To the same effect was the statement of Gigo Thomas, who was also found to be unreliable. Hence, the money invested in their accounts was considered as not belonging to them. However, Mi....
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....sp; (ii) Paramjeet Kumar 18,000 Total 3,18,000 M/s.Aneja & Sons 3,00,000 (ii) Since no confirmation was filed in respect of above persons nor they were produced, therefore the aforesaid amounts were treated as undisclosed income of the assessee/Tushar for the block period under Section 68. (iii) Furthermore, confirmations from various persons were furnished in respect share capital/application money of Rs.2,11,000/- for assessment year 1995-96 and Rs.2,71,000/- and for assessment year 1996-97. Thus the total additions which were made were worked out is as under: A.Y. 1995-96 Amount (i) On account of jurisdiction not stated. 2,80,000 (ii) On account of confirmations not filed 2,11,000 A.Y. 1995-96 Amount (i) On account of jurisdiction not stated. 3,18,000 (ii) On account of confirmations not filed 2,71,000 10,80,000 7. The JCIT informed the concerned Income Tax Officer of MCC and Mittal about the search operation and of recovered cash and cheque books. Based on this, ACIT (Assessing Officer of M....
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....ttal and his persons. In respect of 20 bank accounts, ACIT calculated the figure at Rs. 1,06,23,044/-. In addition to this, ACIT also estimated Rs. 5.00 lakh each as deposit in unverified four bank accounts and also further amount of Rs. 5.00 lakh each as deposit in the bank accounts belonging to MCC in which Mittal or his relatives or friends were stated to be the partners or the Directors. This way, ACIT estimated Rs. 40.00 lakhs as undisclosed income on this account and thereby arrived at a total undisclosed income of MCC as Rs. 1,46,23,044/. This was treated as undisclosed income of MCC on substantive basis and in case of Mittal on protective basis. 9. The assessees preferred appeals against the orders of their respective assessments. These were disposed of by a common order of CIT(A). The CIT(A) held as under:- ―a) The proceedings under section 158 BC in the case of M/s.Tushar Stock & Share Brokers P. Ltd. and under Section 158BD in the case of M/s.Mittal Consul & Co., and Shri R.K. Mittal are treated as valid, in order and within the time prescribed under the Act. b) The assessment orders in all three cases have been framed after considering the submissions....
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....er material or information as are available with the AO and relatable to such evidence and unless it is found on the basis of such evidence that any undisclosed income belongs to the assessee, no proceedings u/s 158BD can be validly initiated against him. 9. In the present case, nothing other than cash was requisitioned by the Department u/s 132A made in the case of M/s.Tushar Stock & Share Brokers P. Ltd. and since the said cash did not admittedly belong to the assessee, there was no evidence found as a result of requisition of books of account or other documents for deriving satisfaction that any undisclosed income belonged to the assessee. It is thus clear that the condition precedent for initiating proceedings u/s 158BD against the assessee was not satisfied in the present case and consequently, the proceedings so initiated were bad in law. As such, considering all the facts of the case and keeping in view the relevant provisions of Chapter XIV-B as discussed above, we hold that the assessment made by the Assessing Officer u/s 158BC read with Section 158BD was void ab-initio and the same, therefore, is liable to be quashed... 11. The above findings of the Tribunal wit....
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....nor any material was found during the course of survey or search so as to justify the ad hoc addition made on estimate basis. The course adopted by the AO cannot be justified in the block assessment proceedings under Chapter XIV-B because in the block assessment proceedings any addition on account of undisclosed income can be made only on the basis of material found during the course of search or on the basis of any other material in the possession of the AO relatable to such material or evidence found during the course of search. In the present case no such material is found during the course of search or on the basis of any survey u/s 132A. Therefore, the provisions of Chapter XIVB cannot be invoked for justifying such addition. In view of the above this addition is also not justified. 15. The present appeals have been preferred by the respondents/assesses against the aforesaid impugned orders of the Tribunal. The appeals are admitted on the following substantial questions of law:- ITA No. 572/2008 Whether the Tribunal was correct in law and in merits in holding that the proceedings under Section 158BC were not validly initiated in the present case and as such the block....
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....ble in the absence of any evidence found as a result of search or requisition of books of accounts or other documents deriving satisfaction. 19. On the other hand, learned counsel for the Revenue submitted that in the process of search of Tushar, ED not only recovered cash of Rs.2.41 lakhs but also 30 cheque books (in fact 27 as there is repetition of three accounts) and also a diary which were seized by the ED. A requisition was made under Section 132A of the Act. Details of the cheque books accounts were furnished by the ED. The copy of diary was also received by the investigating wing of the Income Tax Department. It was based on the contents of the cheque books that the investigation was conducted from the banks and from the assessees. He submitted that in the post-search inquiry also, Mr.Mittal stated that some of the cheque books related to his clients and some to his companies/concerns in which his relatives/friends were interested. He submitted that the post-search inquiry was based on the documents seized and the information received was relatable to the assessees and that being so, was a relevant piece of evidence/information. He relied upon CIT v. Mukundray K. ....
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....earch initiated or books of account or other documents or any assets requisitioned on or after the 1st day of January, 1997 serve a notice to such person requiring him to furnish within such time not being less than fifteen days but not more than forty-five days, as may be specified in the notice a return in the prescribed form and verified in the same manner as a return under clause (i) of sub-section (1) of section 142, setting forth his total income including the undisclosed income for the block period : Provided that no notice under section 148 is required to be issued for the purpose of proceeding under this Chapter : Provided further that a person who has furnished a return under this clause shall not be entitled to file a revised return; (b) The Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of section 143 and section 144 shall, so far as may be, apply; 158BD Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose b....
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....r than the person with respect to whom search was made under Section 132 or whose books of account or other documents or any assets were requisitioned under Section 132A, he shall proceed against such other person as per the provisions of Chapter XIV-B which would mean that on such satisfaction being reached that any undisclosed income belongs to such other person, he must proceed to serve a notice to such other person as per the provisions of Section 158BC of the Act. If the Assessing Officer who is seized of the matter against the raided person reaches such satisfaction that any undisclosed income belongs to such other person over whom he has no jurisdiction, then, in that event, he has to transmit the material to the Assessing Officer having jurisdiction over such other person and in such cases the Assessing Officer who has jurisdiction will proceed against such other person by issuing the requisite notice contemplated by Section 158BC of the Act. 24. In the present case the Tribunal had recorded that no material other than cash was requisitioned and hence there was no material before the Assessing Officer to confirm the information or to record satisfaction as contemp....
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....llected during the search relating the assessee and that the Revenue cannot proceed on the basis of such material which is not related to the assessee invoking Section 158BD read with Sections 158BC and 143(3) of the Act for assessing the undisclosed income during the block period of 1988-89 to 1997-98 and 1.4.1998 to 5.11.1998. 26. In the case of CIT v. G.K. Senniappan [2006] 284 ITR 220 (Mad) also Section 158 BB was under consideration and it was held as:- Section 158BB occurs in Chapter XIV-B, which provides for special procedure for assessment of search cases. The computation of undisclosed income of the block period is contemplated under Section 158BB. As per the section, the undisclosed income of the block period should be the aggregate of the total income of the previous years falling within the block period computed in accordance with the provisions of this Act, on the basis of the evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the Assessing Officer and relatable to such evidence, as reduced by the aggregate of the total income, or as the case may be, as incre....
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.... was during the course of assessment of Tushar that detailed information regarding those cheque books accounts etc. came to be known. Mittal was who not only Director of Tushar but also a partner of MCC, a Chartered Accountant firm, had claimed some of those cheque books to be of his clients and some of his friends and relations. He, however, could not give any satisfactory or documentary evidence. He also failed to produce account details except that of two, who were also found not reliable being inconsistent in their statements with the bank records. 29. From our above discussion, we are of the considered view that the proceedings, as initiated under Section 158 BD and also under Section 158 BC against the respondents/assessees were legally valid. That being so, we answer all the questions in favour of the Revenue and against the respondents/assessees. 30. As noted above, the Tribunal in the case of MCC vide order dated 30th May, 2005 arrived at a conclusion that the proceedings under Section 158BC read with Section 158BD were void ab initio since the condition precedent for quashing the proceedings thereunder against the assessee were not satisfied. It was ba....