TaxTMI 
TaxTMI 
TaxTMI 
2016 (12) TMI 1409
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....to the revenue the said seized exercise book contained noting regarding cash payments in connection with share capital to the tune of Rs. 2 Crores which were shown as share capital received in the books of the Assessee in the month of March, 2000 in the name of the following persons: Date Amount Name of the Company from which received 6.3.2000 20 Lakhs M/S.Medhawi Traders Ltd. 6.3.2000 10 Lakhs -- do- 7.3.2000 25 Lakhs M/S.Suryamukhi Merchants Pvt.Ltd. 7.3.2000 25 Lakhs -- do-- 7.3.2000 20 Lakhs M/S.Medhawi Traders Ltd. 8.3.2000 25 Lakhs M/S.Poly Products Pvt.Ltd. 10.3.2000 50 Lakhs M/S.Esskay Telecom Ltd. 23.3.2000 11 Lakhs M/S.Poly Products Pvt.Ltd. 27.3.2000 14 Lakhs --do-- 4. It is the case of the Revenue that the seized exercise book contained entries evidencing cash belonging to Sri Bhanaram Gupta being given to the auditor of the Assessee company one Sri S.K.Lahoty, who in turn gave the same to persons who for a commission provide entries of share capital in the name of different persons. The receipt of share capital of Rs. 2 Crores by the Assessee from the aforesaid companies was in fact nothing but unaccount....
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....of Rs. 50 lakhs each received from M/S.Poly Products (P) Ltd., and M/S.Suryamukhi Merchants (P) Ltd., and credited in the books of the Assessee as share subscription should be added in the hands of the Assessee and not in the hands of Sri.Bhanaram Gupta for the following reasons: "Consequent upon this finding, a question arises as to whether any addition can be made in the hands of the appellant company on the basis of the evidence brought on record. The question has to be answered in the affirmative because the beneficiary of the fictitious credits is the appellant itself and since it has not been established that the unaccounted cash payments in lieu of the aforesaid cheque receipts totalling Rs. 1 crore were made by Sri B.R.Gupta out of his personal undisclosed income. It has been held by the Hon'ble Calcutta High Court in several decisions given in recent times such as Hindustan Tea Trading Co. Ltd. Vs CIT, 263 ITR 289, Rubi Traders & Exporters Ltd. 263 ITR 300 etc. that it was the responsibility of the assessee to prove the identity of the subscribers to share capital, their creditworthiness and the genuineness of their transactions. In the present case the appellant suc....
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....e also filed before the Assessing Officer. Thus, M/s Esskay Telecom Ltd. and M/s Medhawi Traders Ltd. succeeded in explaining the source of the source of the funds out of Which the application money of Rs. 50. lakhs was paid to M/s PRC Ltd. In the face of such contrary evidence placed on record, the. adverse finding of the Assessing Officer that the payments of Rs. 50 lakhs by M/s. Esskay Telecom Ltd. and M/s Medhawi Traders Ltd. were merely accommodation entries, becomes untenable. Therefore, notwithstanding the jottings in the seized exercise book BG-2 regarding cash payments I am inclined to grant the benefit of doubt to the appellant in respect of the investment of Rs. 50 lakhs each by M/s Esskay Telecom Ltd. and M/s Medhawi Traders Ltd.. As the Assessing Officer has failed to establish beyond doubt that the investment by M/s Esskay Telecom Ltd. and M/s Medhawi Traders Ltd. were also in the nature of accommodation entries. I am unable to uphold the adverse finding of the Assessing Officer that unaccounted cash of Rs. 50 lakhs each was paid by Sri Bhana Ram Gupta for arranging the investments made by the two aforesaid companies. In consonance with the above, I am inclined to hol....
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.... In this case the search was started on 11 14.09.2000 and continued till 01.11. 2000 as per above provisions of section 132(9A) as it stood at the material time, Investigation Wing is supposed to hand *over the entire seized material or evidence collected in the course of search or after search within a period of 15 days from the date of search. It implies that the 'Investigation Wing' looses its jurisdiction over the case after the end of the period of days. In the present case, the statement was recorded by the Dy.DIT (lnv) on 12.12.2000. Therefore, legally, the statement recorded by DyDIT (lnv) on 12.12.2000 has got no leg sanctity. Further, we find that neither the Assessing Officer nor the Ld. CIT(A) has examined Sri Raj Deo Roy before coming to the adverse conclusion On this ground itself order of the Assessing Officer is not sustainable under the law. After all, the Assessing Officer is a quasi judicial authority and he has to decide the issue himself. He cannot abrogate his power and authority in favour or anybody else whatsoever superior position may be in the hierarchy of Income Tax Act authorities. Thus, the decision taken merely on the basis of statement recorde....
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....e method as to how undisclosed income is to be computed has been given under section 158BB. The computation has to be on the basis of books of account or documents or material found as u result of search. It is settled law that the computation provisions cannot supersede the charging provisions. If some income cannot become undisclosed income within the definition under section 58B(b), it cannot be brought to tax by way of computation under section 158BB The computation provisions are to be applied subsequent to the charging provisions. Chapter XIV-B is an independent Code. Object of the said Chapter is to bring to tax undisclosed Income which the assessee has earned during a block year. As to how this income is to be computed, the method has been given under section 158BB. Thus. every Income which can be regarded to be undisclosed income within the definition given under section 158BB can be brought to tax under that Chapter by computing such undisclosed income on the basis of evidence, material or record found at the time of search. Thus, the income which is not based on the evidence or material found at the time of search, i.e. based merely on hypothesis, surmises, conjectures o....
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....ws: "As regard application of the provisions of section 68 to the instant case, it is observed from the facts discussed above, that the assessee had explained the sources of subscription of Rs. 2,00,00,000/- to its share capital from four corporate entities and, those entities had confirmed to have subscribed to the shares of the assessee company of that amount. All the four subscribers were regularly assessed to Income tax and the amount of share subscription had been duly disclosed both by the recipient as well as the subscribers in their respective books of account and in their final accounts filed with their respective Returns of income for the relevant assessment year. The amount of share subscription was received by the assessee through banking channel. The sources amount of subscription of Rs. 2 crores to the share capital of the assessee were neither disputed nor doubted by the A.O. Thus, the assessee had fulfilled all the three conditions, viz., (a) identity .of the creditors; (b) genuinenesss of the transactions and ( c) creditworthiness of the creditors. Therefore, the A.D. was not justified in applying the provisions of section 68 to the instant case arid adding the a....
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....ped income for making reassessment u/s 147 and thus the reopening is liable to be quashed. vi. That the assessment order passed u/s 147 r.w.s 143(3) is time barred and is liable to be quashed. vii. The appellant craves leave to add to, alter, to delete from or substantiate the aboveground of appeal." 17. On a perusal of the grounds of appeal raised by the Assessee before the CIT(A), we find that in Gr.No.1 raised by the Assessee, there is a specific challenged to the validity of assessment framed u/s.147 of the Act as bad in law. The CIT(A) did not adjudicate the aforesaid ground and hence it can be said to have been decided against the Assessee. The Assessee is therefore entitled to agitate the aforesaid grounds of appeal in terms of rule 27 of the ITAT Rules. 18. The learned DR submitted that as far as the merits of the addition made u/s.68 of the Act is concerned, the decision of the Tribunal rendered in the case of Subhlakshmi Vanijya (P) Ltd. And others Vs. CIT 155 ITD 1 (Kol) would be applicable and following the principles laid down in the aforesaid decision, the addition made by the AO was justified and has to be restored. As far as the validity of initiation of pr....
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.... decisions. We will make a reference to only one such decision which is identical to the facts of the present case viz., Vishwanath Prasad Ashok Kumar Sarraf Vs. CIT 327 ITR 190 (All). 20. His next submission was that in an assessment u/s.147 of the Act there cannot be a protective assessment and such protective assessment by itself will be sufficient to hold that the proceedings u/s.147 of the Act are not validly initiated. In this regard he drew our attention to several decisions the main decision in this regard being the decision of the Hon'ble Bombay high Court in the case of DHFL Venture Capital Fund Vs. ITO 358 ITR 471 (Bom). Apart from the above he relied on the findings of the Tribunal in the appeal against block assessment u/s.158BC of the Act and that of the CIT(A) in so far as the addition on account of unexplained share capital is concerned. 21. We have given a very careful consideration to the rival submissions. The justification for initiation of proceedings u/s.147 of the Act is only on the basis of the observations of the Tribunal contained in paragraph 32 of its order, which we have extracted in the earlier part of this order. As we have already seen the case of ....
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....r the reason that the statement was recorded by an Officer who did not have authority to record such statement. Thereafter the tribunal held in paragraph 32 of its order that the addition in any event cannot be made in proceedings u/s.158BC of the Act where only undisclosed income detected as a result can be brought to tax and since the receipt of share capital by the Assessee is already disclosed in the regular books of accounts of the Assessee, the same cannot be subject matter of addition in proceedings u/s.158BC of the Act. The observations of the Tribunal in paragraph-32 of its order in our view cannot be construed as a direction to make a reassessment u/s.147 of the Act in respect of the sum of Rs. 1 crore comprising of receipt of share capital of Rs. 50 lakhs each from M/S.Poly products (P) Ltd. And M/s.Suryamukhi Merchants (P) Ltd. The findings of the Tribunal in paragraph 31.4 is that the addition of Rs. 1 crore as above is based purely on the statement of Sri Raj Deo Roy which was recorded by an officer not having authority in law to record such statement and therefore there can be no evidentiary value attached to such statement. Since the reasons for initiating reassessm....
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....butors and was offered to tax by the contributors, it was not open to the department to proceed to tax the same income again in the hands of the fund. Against the order of the CIT (A), the Revenue was in appeal before the Tribunal. At that point of time, a notice had been issued by the AO u/s 148 to "the AOP of the contributors of M/s. DHFL Venture Capital Fund" at the address of the Assessee for reopening the assessment. The notice u/s.148 of the Act was challenged as one issued without belief that Contributor's income has escaped assessment because the Trust Assessent was still being pursued by the Revenue in an appeal before the Tribunal. The Hon'ble Bombay High Court held that the entire exercise was only contingent on a future event and a consequence that may ensure upon the decision of the Tribunal, that again if the Tribunal were to hold against the Revenue. A reopening of an assessment u/s 148 cannot be justified on such a basis. There has to be a reason to believe that income has escaped assessment. 'Has escaped assessment' indicates an event which has taken place. Tax legislation cannot be rewritten by the Revenue or the Court by substituting the words 'may es....
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....hdi (1987) 165 ITR 685 (AP)." 18. A protective assessment as the learned author indicates5 is regarded as being protective because it is an assessment which is made ex abundanti cautela where the department has a "doubt as to the person who is or will be deemed to be in receipt of the income". A departmental practice, which has gained judicial recognition, has emerged where it appears to the Assessing Officer that income has been received during the relevant Assessment Year, but where it is not clear or unambiguous as to who has received the income. Such a protective assessment is carried out in order to ensure that income may not escape taxation altogether particularly in cases where the Revenue has to be protected against the bar of limitation. But equally while a protective assessment is permissible a protective recovery is not allowed. However, such an exercise which is permissible in the case of a regular assessment must necessarily yield to the discipline of the statute where recourse is sought to be taken to the provisions of Section 148. Protective assessments have emerged as a matter of departmental practice which has found judicial recognition. Any practice has to nece....