AI Drafter 
TaxTMI 
TaxTMI 
2016 (6) TMI 49
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....tances of the case, the learned Commissioner of Income-tax (Appeals) erred in upholding the validity of the proceeding initiated under section 158BD of the Income-tax Act, 1961, in the case of the appellant-company, in spite of the fact that during the course of the search proceedings at the premises of the UIC group, no incriminating materials against the appellant- company had been found. 3.(a) On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in upholding the addition of the sum of Rs. 14,75,000 under section 68 of the Act by considering the receipt of the said amount as unexplained in spite of there being ample evidences about the genuineness of the said receipt of money by the appellant. 3.(b) On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in not taking into consideration the fact that the appellant had not been provided with opportunity by the learned Assessing Officer to cross-examine the depositions of four witness ; and, thereafter, in relying on such unverified depositions." Shri S. K. Tulsiyan, the learned authorised representative appea....
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....Assessing Officer could not verify identity, genuineness and creditworthiness of the parties in relation to the aforesaid shares transaction, so he initiated proceedings under section 158BD against the assessee after recording the satisfaction note which is reproduced below : "A search and seizure operation was conducted in the UIC group of cases on May 7, 2002. In the course of search in the corporate office of these group share scrips worth Rs. 11,63,75,000 issued by different companies by these group were found. Out of these scrips it was found that a large number of shares have been allotted in the name of various companies controlled and managed by outsiders, viz., Shri Rajesh Kumar Jajodia and Shri Sandip Kumar Singhi. In the course of post-search enquiry launched in connection with ascertaining the source of the share capital contributed by these outside companies, it was gathered that a part of the funds of the following shareholding companies had come from four bank accounts, i.e., Account Nos. 4886, 4914, 4934 and 4933 maintained with Federal Bank of India, Burra Bazar Branch, Kolkata and standing in the name of Shri Rajendra Kumar Surana, Shri Sunil Kumar Jain, ....
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....roup, huge share scrips allotted in your name was found and seized. In the course of the post-search inquiry launched in connection with ascertaining the source of the share capital it was gathered that a part of the fund had come from 4 (four) bank accounts, i.e., account Nos. 4886, 4914, 4933 and 4934 maintained with Federal Bank of India, Burra Bazar Branch, Kolkata and standing in the name of Shri Rajendra Kumar Surana, Shri Sunil Kr. Jain, Surendra Kr. Hirawat and Shri Shankarlal Godh respectively. 2. On further inquiry it was revealed that the aforesaid four persons deposited substantial cash in their respective bank accounts and these four persons were not traceable. Summons under section131 of the Income-tax Act, 1961, could not be served in their given addresses. It establishes that fictitious bank accounts were opened in the name of those four persons. 3. Since huge cash from these four accounts had travelled to your company which was ultimately used to purchase the shares of the UIC group (which were seized) and identity, genuineness as well as creditworthiness of these transactions remained doubtful, I had reasons to believe that disclosed fund of your....
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.... Assessing Officer also issued notice under section 131 of the Act for the personal appearance of the director. However, the above required details were not furnished but the director of the company Mr. Sandip Kumar Singhee appeared on dated November 14, 2006, and his statement was recorded under section 131 of the Act which is reproduced below : "5. Name the persons who have invested in shares of the companies of which you are director ? Did these four persons, namely, Shankar Lal Godh, Surendra Kr. Hirawat, Sunil Kr. Jain and Rajendra Kr. Surana invest in your company ? A. Various corporates and individuals, etc., have invested in our company. However, we have sold our investments to these four persons and received money against sale of shares which are accounted for in our books of account. Money received from these four persons have been invested in buying the shares of the Rajesh Jajodia group companies and the UIC group companies. 6. Name the companies where your companies have made investment ? A. We have made investment in various companies including Rajesh Jajodia (Nos. 1-7) and the UIC group (Nos. B-11). 1. Target Merchandise (....
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....ed by you ? Surender Kr. Hirawat : I have S. B. account No. 4933 with Federal Bank of India, Burra Bazar, Kolkata. Rajendra Kr. Surana : I have S. B. account No. 4886 with Federal Bank of India, Burra Bazar, Kolkata. Shankar Lal Godh : I have S. B. account No. 4934 with Federal Bank of India, Burra Bazar, Kolkata. Sunil Kr. Jain : I have S. B. account No. 4914 with Federal Bank of India, Burra Bazar, Kolkata. (4) Sources of deposits in bank accounts ? Same answer for all : Sources of deposits in my S. B. account No. at Federal Bank, Burra Bazar branch is the cash received from various persons, viz., Mohan Lal Agarwal and Mahendar Jajodia through Mr. Sandip Singhi with a direction to issue cheques in favour of companies managed by Sandip and Rajesh : I am a person having very low income. (5) How can you justify the source as given in reply to question No.4 ? Same, answer for all : I do not have any evidence to prove that the cash amount deposited in my above bank account has been received from them. However, it can be seen that cheques favouring Sandip or Rajesh companies have been issued and debited on the same....
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....round that no incriminating material was found by the assessee during search against the assessee. The assessee paid tax on capital gain on the sale of investment in the shares of the UIC group of companies. The Assessing Officer has put reliance on the statement given by the four persons but these statements have never been made available to the assessee for cross-examination. It is submitted that in the absence of such cross-examination by the assessee what significance can be attributed to the same. 4. Similarly, the provisions of section 68 of the Act cannot be applied in the instant case as it applies where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to Income-tax as the income of the assessee of that previous year. But, in the instant case, it is an accepted position that the above amount has been received by the assessee-company through account payee cheque against sale of investment and all the disclosure were made in the In....
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....ed representative has taken the stand that the Assessing Officer has not recorded his satisfaction as required under section 158BD of the Act. He further submitted that in the instant case there is no undisclosed income of the assessee. All the transactions for the sale of shares to the aforesaid four persons were duly accounted for in the books of account and offered to tax. The proceeding under section 158BD does not apply as the assessee has no undisclosed income. The Assessing Officer has made the addition on the basis of the statements recorded under section 132 of the Act of the aforesaid four persons were not made available for the purpose of cross-examination. On the other hand, the learned Departmental representative vehemently supported the orders of the lower authorities. 6. From the aforesaid discussion we find that the Assessing Officer has initiated and completed the assessment proceedings under section 158BD/ 144 of the Act on the basis of the documents found at the time of search from the place of the UIC group of companies where the search was conducted. However, the assessee claimed that there was no undisclosed income of the assessee and the documents which we....
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....so required to hand over the books of account or other documents or assets seized to the Assessing Officer having jurisdiction over such non-searched person and, thereafter, the Assessing Officer who has jurisdiction would proceed under section 158BC, against the person who has not been searched." Further, we are also relying on the judgment of the hon'ble Supreme Court in the case of Manish Maheshwari v. Asst. CIT and Indore Construction P. Ltd. v. CIT [2007] 289 ITR 341 (SC) where the hon'ble court has held that (page 348) : "The condition precedent for invoking a block assessment is that a search has been conducted under section 132, or documents or assets have been requisitioned under section 132A. The said provision would apply in the case of any person in respect of whom search has been carried out under section 132A or documents or assets have been requisitioned under section 132A. Section 158BD, however, provides for taking recourse to a block assessment in terms of section158BC, in respect of any other person, the conditions precedent where for are : (i) satisfaction must be recorded by the Assessing Officer that any undisclosed income belongs ....