TaxTMI 
TaxTMI 
2011 (7) TMI 76
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....141.075 MTs of HTS wire from M/s. D. K. Hardware Stores at the cost of Rs.39,78,315/-. Payment in respect of the said purchase was made by account payee cheques partly during the previous year ended March 31, 1993 and partly during the subsequent year. The entire quantity of 141.075 MTs was allegedly sold during the previous year ended March 31, 1993 to M/s. Sahuwala Cylinders Limited for a total price of Rs.42,67,518.75p. giving rise to a profit of Rs.2,89,203.75p. The entire sale-price was allegedly received by the assessee during the previous year ended March 31, 1993 itself by account payee cheque deposited into the bank on 31st March, 1993. b) The said transactions relating to purchase and sale of HTS wire were duly accounted in the regular books of account for the previous year ended March 31, 1993, relevant to the Assessment Year 1993-94 and those were reflected in the assessee's audited profit and loss account for the previous year ended March 31, 1993. c) The income-tax return for the Assessment Year 1993-94 showing an income of Rs.3,41,570/- was filed on June 16, 1994 along with, inter alia, audited balance sheet and profit and loss account for the previous y....
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....5 before the close of the Financial Year 1995-96 and the assessee's return for the Assessment Year 1996-97 relevant to the Financial Year 1995-96 was due to be filed much later. g) The Assessing Officer asked the assessee to explain as to why the payments in the names of the parties should not be treated as fictitious. According to the Assessing Officer, the payments were shown as against old dues but the two parties were not shown as Sundry Creditors as on March 31, 1995. One Sri Umesh Narayan Jha, an employee of a proprietary concern of the Managing Director of the assessee was shown as the proprietor of M/s. Sakti Construction Company, trade license relating to which was found in the assessee's office. It was duly explained to the Assessing Officer that the cheques issued in the names of the said parties were "Account Payee" but the endorsement in this behalf was cancelled and cash was drawn against the cheques by the assessee's cashier which was thereafter sent to Budge Budge site for payment of wages to the contractors and labourers where its receipts and subsequently disbursements were duly recorded which was duly verified by the Assessing Officer. The Assessing Off....
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....f search and seizure. Mr. Poddar submits that it appears from the materials on record that in course of search and seizure, no incriminating papers were recovered from the office of the assessee and as such, the findings in respect of the aforesaid two items, are not based on any documents seized in course of search and seizure. In support of such contention, Mr. Poddar relies upon the following decisions: 1. ACIT Vs. Hotel Blue Moon, reported in (2010) 321 ITR 362, 368 (SC); 2. CIT Vs. Bimal Auto Agency, reported in (2009) 314 ITR 191 (Gau); 3. CIT Vs. P. K. Ganeshwar, reported in (2009) 308 ITR 124 (Mad); 4. CIT Vs. Balaji Wire P. Ltd., reported in (2008) 304 ITR 393 (Del); 5. CIT Vs. Jupiter Builders P. Ltd., reported in (2006) 287 ITR 287 (Del); 6. CIT Vs. Vishal Aggarwal, reported in (2006) 283 ITR 326 (Del); 7. CIT Vs. Khushlal Chand Nirmal Kumar, reported in (2003) 263 ITR 77 (MP); 8. CIT Vs. Ravi Kant Jain, reported in (2001) 250 ITR 141, 145 (Del); 9. Bhagwati Prasad Kedia Vs. CIT, reported in (2001) 248 ITR 562 (Cal); 10. CIT Vs. N. r. Papers and Boards Ltd., reported in (2....
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....d that in course of search and seizure, a certificate of license showing that Shri Umesh Narayan Jha as proprietor of Sakti Construction who was found to be an employee of the propriety concern of D. K. Goyal was recovered. The Photostat certified copy of the cheque which was encashed after deleting the account payee mark in favour of Sakti Construction and making it a self drawn one has been placed before us by Mr. Poddar showing that the same was not seized at the time of search and seizure. Moreover, the payment by the said cheque was not made to Sakti construction and it was a self paid bearer cheque encashed by the drawer himself. Thus, merely because a license in the name of Sakti Construction was recovered from the office of the Assessee, such fact has nothing to do with the said encashment in favour of the drawer. Thus, the addition of Rs. 20 lakh which is shown in the regular books of account as payment made to M/S Faissan Construction and M/s. Sakti Construction as cash payment of Rs. 10 lakh each on August 24, 1995 and August 25, 1995 respectively as fictitious entry in block assessment was patently illegal as it had no connection with the search and seizure. W....
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....lt with the provisions contained in Section 68 of the Act. We do not for a moment dispute the principles laid down therein but we fail to appreciate how the said decision can have any application for resolving the question as to whether block assessment is applicable even if the finding is not based on any material unearthed in search and seizure. We thus hold that those decisions are irrelevant for our purpose. Similarly, the principle laid down in the case of Mc Dowel and Co. Ltd. (supra), has no application in deciding the dispute involved herein. It is absurd to suggest that even though the finding of fictitious claim is not based on any material discovered during search and seizure, by taking aid of the decision in the case of Mc Dowel and Co. Ltd. (supra), the special rate of tax specified in Section 113 of the Act would be applicable to such assessment instead of the rate fixed for regular assessment. We, therefore, find that the decisions cited by Mr. Dutt do not help his client in any way. As regards the last point formulated by the Division Bench, we find that the said question has already been answered by the Supreme Court, in the case of CIT vs. Sure....