TaxTMI 
TaxTMI 
2002 (8) TMI 247
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....e basis of those and after making inquiries, the assessments were completed in the cases of these assessees on 23-9-1997 under section 158BC read with section 158BD of the Act against which the assessees have come in appeals before us. 3. Ground of appeal No. (1) in all the above referred appeals pertain to the validity of assessment framed by the Assessing Officer under section 158BC read with section 158BD of the Act. However, at the time of hearing, the learned AR of the assessees has not pressed for this ground which is accordingly dismissed as having not been pressed. 4. The second effective ground in all these appeals is pertaining to the additions made by the Assessing Officer on account of investments in share capital of the Companies or deposits by certain individuals in the partnership firms. The case-wise details of such additions which have been challenged in appeals before us are as under: -------------------------------------------------------------------------- Sr IT(SS)A No. Name of Nature of A Y in Amoun....
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....sp; 96-97 25,101 5. 206/Ahd./ 1997 M/s. Jaisati Share 91-92 1,94,000 Syntex P. Ltd. Capital -------------------------------------------------------------------------- 5. The assessment in the case of Shri Bhawanisingh J. Champawat, the person controlling these Companies and Firms was completed by the Assessing Officer under section 158BC on 30-9-1996 and the issue pertaining to income disclosed by Shri Bhawanisingh J. Champawat during the course of search has been considered in the Block Assessment Order of Shri Bhawanisingh J. Champawat wherein the following amounts invested in the cases of these five assessees have been disclosed by the said Shri B. Champawat, as his own investments: -----------------------------------------------....
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....bsp; Syntex P. Ltd. -------------------------------------------------------------------------- 6. The Tribunal decided the appeal of Shri Bhawanisingh J. Champawat in ITA No. 4403/Ahd./ 1996 on 15-12-1998 wherein the issues pertaining to share capital of the Companies of the group and deposits in the firms were discussed and the Tribunal in para-15.3, inter alia, held as under: "...Therefore, the additions to the extent of the disclosure made by the assessee are required to be considered as proper within the meaning of undisclosed income. The assessee could not produce any evidences or any valid reasons for retraction of the said disclosure. Coming to the amounts which have been added over and above the disclosures by the assessee in the case of Krishna Polyfils Pvt. Ltd. and Cas Card Finance Ltd., we find no justification in making such additions in the hands of the assessee" The ITAT has further held that: "Further, we have already held that considering the meaning of undisclosed income the disclosure which has been made by the assessee is required to be considered as assessee's undisclosed income." On page 65, the ITAT in ITA No. 4403/Ahd./1996 has fu....
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....T [1998] 234 ITR 733. It was submitted that in all the assessment orders which have been challenged in these appeals, the Assessing Officer has admitted the fact that the books of account pertaining to these assessees were found at the time of search which is evident from the copy of Panchnama dated 5-9-1995 wherein the details of books of account of all the five assessees are noted which were found at the time of search. Accordingly, it was pleaded that since the dispute additions in the block period have been made only on the basis of entries recorded in the books of account, these cannot be sustained in view of the decision of the Hon'ble Gujarat High Court in the case of N.R. Paper & Board. It was further submitted that as far as the additions on account of share capital in the names of different applicants in the eases of two Companies viz. Cas Card Finance Ltd. [IT (SS) Appeal No. 201 (Ahd.) of 1997] and Jaisati Syntex (P.) Ltd. [IT (SS) Appeal No. 206 (Ahd.) of 1997] are concerned, no addition on account of alleged non-genuine share application money by the share holders can be made in view of the decision of the Hon'ble Supreme Court in the case of CITV. Stellar Investment ....
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....ssees submitted that since these deposits were found recorded in the books of account found at the time of search, the genuineness or otherwise of these can be enquired during the course of regular assessment only and these cannot be considered as the undisclosed income of the assessee under Chapter XIV-B in view of the decision of the Hon'ble Gujarat High Court in the case of N.R. Paper & Board. He accordingly submitted that all the additions made by the Assessing Officer are required to be deleted from the Block Assessments framed by the Assessing Officer. 12. The learned DR strongly relied on the orders of the Assessing Officer. It was further submitted that since Shri B.J. Champawat has admitted that part of the share capital introduced in the names of different persons in relation to the Companies and also part of the deposits in the names of various persons in the firms which were being controlled by Shri B.J. Champawat, was his undisclosed income which was introduced in the names of these persons, the Assessing Officer was justified in holding that the remaining share capital as well as deposits in various firms also represented the undisclosed income of firms/companies w....
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....J. Champawat and additions in relation to which were confirmed by the Tribunal in ITA No. 4403 /Ahd./96 which admittedly included the name of Shri Gunaram B. Chowdhury. It was pleaded however that tho amount received from Shri Gunaram B. Chowdhury was partly acounted for and genuine having been received by the said Shri Gunaram B. Chowdhury from his account in the books of Devi Trading Co. which is a proprietary concern of Shri B.J. Champawat wherein this amount received originally have also been disclosed and added and as such no further addition is required to-be made. He accordingly submitted that since the share capital as well as the deposits by various persons in these assessee companies were duly reflected in the books of account maintained by the assessee companies which were found during the course of search, these are required to be considered only in the course of regular assessments and no addition can be made in respect of these amounts while completing the block assessments which pertain to only undisclosed income under Chapter XIV-B. 14. We have considered the rival submissions and have also gone through the orders passed by the Assessing Officer in all these case....
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....iew of the decision of the Hon'ble Gujarat High Court in the case of N.R. Paper & Board. 16. As regards the question relating to the investments/deposits made by Shri Gunaram B. Chowdhury, there is some confusion with regard to the amount actually invested/deposited by the said Shri Gunaram B. Chowdhury with the assessee. Accordingly, the issue with regard to the investment/deposit made by Shri Gunaram B. Chowdhury in this case is restored to the file of the Assessing Officer for fresh adjudication in accordance with law after giving due opportunity to the assessee after considering the treatment given by the Assessing Officer as well as the Tribunal to the deposit made by Shri Gunaram B. Chowdhury in the case of Shri B.J. Champawat in ITA No. 4403/Ahd./1996. 17. In the result, the appeals are partly allowed. Per Shri S.K. Yadav, Judicial Member--I have gone through the order of my learned brother Shri R.K. Bali--Accountant Member. I have not been able to persuade myself to agree with the order of my learned colleague in relation to the additions made by the Assessing Officer on account of investments in share capital of the Companies and deposits by certain Individuals in....
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....bsp; Finance Ltd. Capital 2. 202/Ahd./ 1997 M/s. Rathore Deposits 96-97 42,14,898 Investments 3. 204/Ahd./ 1997 M/s. Rathore Deposits 96-97 35,88,555 Finance Co. 4. 205/Ahd./ 1997 M/s. Mahi Deposits 94-95 32,764 Trading Co. &n....
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....p; Finance Ltd. 2. 202/Ahd./ 1997 M/s. Rathore Deposits 1,11,971 Investments 3. 204/Ahd./ 1997 M/s. Rathore Deposits 5,05,796 Finance Co. 4. 205/Ahd./ 1997 M/s. Mahi Deposits 69,396  ....
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....ication forms found, he admitted that the share capital to the extent of Rs. 26,28,000 appearing in the books of company were not genuine. However, he offered only Rs. 11,28,000 as his unexplained investment in share capital of the assessee-company, as his undisclosed income, claiming that Rs. 15,00,000 has been invested by various sister concerns of assessee-company in benami names out of their unaccounted funds. Further, survey was carried out at the premises of the assessee-company at 125, Shri Mahavir Cloth Market, Ahmedabad. The Assessing Officer assessing the case of Shri B.J. Champawat the DCIT was satisfied on the basis of the documents found and the statements recorded that the undisclosed income belonged to assessee-company M/s. Cas Card Finance Ltd. and not to Shri B.J. Champawat. Therefore, as per provisions of section 158BD read with section 158BC a notice under section 158BC was issued and served on the assessee requiring it to file return of income for block period starting from 1-4-1985 to 31-3-1986 and/to 1-4-1994 to 31-3-1995 and fractional period 1-4-1995 to 5-9-1995 i.e., upto the date of search. The assessee filed the return of income on 2-9-1997 for the block ....
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....ed by various sister concerns. It was later clarified during the assessment proceedings that the amount of Rs. 26,28,000 disclosed on 16-10-1995 in the statement included Rs. 5 lacs invested by the sister concern after 5-9-1995, the date of search. This has been accepted that the share capital of Rs. 21,28,000 credited in the books of company during the block period is not genuine. But as per books of account of company the total share capitals share application money as on 5-9-1995 was Rs. 45,20,000. The assessee was asked to prove the genuineness of its share capital and share application money as also to establish identity and capacity of the shareholders and share applicants, so as to satisfy the requirements of section 68 of the Act. The assessee company did not furnish its reply on 10-9-1997 as required but asked for further time to prepare the details. Finally, the reply was furnished on 179-1997. However, in this reply also it was mentioned that- "details duly confirmed by the shareholders are under preparation and same shall be submitted within a week. We beg to submit that many investors are not having their taxable income and hence not filing their income-tax return. ....
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....dhpur and Ahmedabad which reveals that these persons have not made any investment in Cas Card Finance Ltd. These persons were marginally farmers having not explained source of income. For example, it is claimed that Shri Umed Singh G. Gehot, Shri Padamsingh Rathunath Rathore and Shri Suman Kanvar Padamsingh Rathore have made investments in purchase of 8,000,33,000 and 17,000 shares of Cas Card Finance Ltd. These persons in their statements under section 131 denied in clear word on the day, that they have not made such investments in acquisition of shares of company. Similar inquiries were made in respect of more than two persons and in none of the cases it was proved that they have made any investments in the acquisition of shares of company. It is a matter of record that the representative of the assessee has not disproved the findings of enquiries made at Jodhpur which was duly communicated to him alongwith a copy of statements of alleged shareholders, but has filed copies of affidavits of some of the persons which are placed on records. It is proved from the above discussion that out of total investment of Rs. 51 lacs in Cas Card Finance Ltd. the assessee has accepted investment....
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....reater in this case since Managing Director Shri B.J. Champawat had admitted that the share capital credited in books of account of company to the extent of Rs. 21,28,000 in various names was not genuine and the Inquiry Report of ADI, Jodhpur clearly establishes that the alleged shareholders had not invested in the company's share capitals The assessee has not produced any evidence to rebut the findings of the Inquiry Report. The Assessing Officer also observed that the provisions of section 68 are applicable to the credit entries on account of share capital of company. The Assessing Officer supported his view by the decision of the Delhi High Court in the case in Sophia Finance Ltd's case wherein it has been held that under section 68, the ITO has jurisdiction to make inquiry with regard to nature and source of sums credited in books of account of the assessee as to whether the amount so credited is given colour of a loan or a sum representing sale proceeds or even receipt of share application money. The use of words any sum found credited in the books of account in section 68 indicates that section is very widely worded and ITO is not precluded from making any inquiry as to true ....
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....uted additions in the block period have been made on the basis of entries recorded in books of account, these cannot be sustained in view of the decision of the Gujarat High Court in the case of N.R. Paper & Board. It was also submitted that as addition on account of share capital in the names of different applicants in the case of assessee-company and Jaisati Syntex (P.) Ltd's case are concerned, no addition on account of alleged non-genuine share application money by shareholders can be made in view of the decision of the Supreme Court in the case of Stellar Investment Ltd. (supra). 13. On the other hand, the learned DR strongly relied on the order of the Assessing Officer. It was further submitted that since Shri B.J. Champawat has admitted part of share capital introduced in the names of different persons in relation to companies and also part of deposits in the names of various persons in firms which are being controlled by Shri B.J. Champwat, was his undisclosed income which was introduced in the names of these persons, the Assessing Officer was justified in holding that the remaining share capital as well as deposits in various firms also represented undisclosed income of....
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....ng Director of the assessee firm had admitted part of share capita] introduced in the names of different persons in relation to companies and also part of deposits in the names of various persons in firms which are being controlled by him, was his undisclosed income which was introduced in the names of these persons. I agree with the contentions of the learned DR that the AO was justified in holding that the remaining share capital as well as deposits in various firms also represented business income of firms/companies which was introduced in fictitious names. I am of the view that the affidavits and confirmations filed by the assessee during the course of assessment proceedings are just an afterthought and it cannot be relied upon. The decision of the Delhi High Court in the case of Sophia Finance Ltd. was not brought to the notice of the Supreme Court and as such it cannot be held that the ratio of the Full Bench decision stood overruled by aforesaid decision of the Supreme Court. The Hon'ble Gujarat High Court in the case of Gujarat State Co-operative Bank Ltd. v. CIT [2001] 250 ITR 229 has held as under: To be law under article 141 of the Constitution of India, decision of t....
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....td. [Tax Appeal No. 151 of 1999] a similar issue came up before the Hon'ble High Court wherein addition of Rs. 73,54,000 share capital of Elecon Finlease & Industries Ltd. was made in the hands of Shri Umedsingh Champavat and also in the hands of Elecon Finlease & Industries Ltd. by ITAT vide order in ITA No. 4430/Ahd./1996, dated 18-12-1998 basing on decision of Gujarat High Court in N.R. Paper & Board's case holding that this can be added only in regular assessment and not in block assessments. The Department went to High Court against,the ITAT's order of Elecon Finlease & Industries Ltd. The question referred was: "Whether, the Appellate Tribunal is right in law and on facts in deleting the unexplained credit against alleged share capital of Rs. 73,54,000." The Hon'ble High Court allowed this appeat of Department on issue of Rs. 73,54,000 of unexplained share capita] and i-emanded the matter for the limited purpose of re-assessing the companv by the Assessing Officer. In view of the above discussions, I confirm the addition of Rs. 23,92,000 as unexplained cash credit under section 68 and representing undisclosed income of the assessee for block period. It is imperative to ....
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....Ahd./ 1997 which are registered firms. The dispute is with regard to deposits received by these assessees from various persons and same were found as non-genuine in course of search and post search investigations. So, again I am of the view that the falsity of deposits as discussed in detail in respective assessment orders, was detected during the course of search and post search investigations. Germs of falsity was exposed on the basis of search in group cases of Shri B.J. Champawat. So the Assessing Officer has rightly held it undisclosed income of the assessee firms mentioned above, and they form part of block assessments under Chapter XIV-B and the findings in N.R. Paper & Board's case do not rescue the non-genuine cash credits detected during the course of search. In the interest of justice, I uphold the respective orders of the Assessing Officer who has made addition of Rs. 42,14,898 in the case of Rathore Investments; addition of Rs. 35,88,555 in the case of Rathore Finance Co. and additions of Rs. 32,764, Rs. 3,23,854 and Rs. 25,101 for assessment years 1994-95,199596 and 1996-97 respectively in the case of Mahi Trading Co. Thus, I uphold the above said additions as unexpla....
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....ther additions on account of Deposits Rs. 42,14,898 in the case of M/s. Rathore Investments, Rs. 35,88,555 in the case of Rathore Finance Co. and the three amounts in the case of M/s. Mahi Trading Co. being Rs. 32,764, Rs. 3,23,854 and Rs. 25,101 as undisclosed income in respective block assessment are liable to be sustained?" 2. Parties heard and records perused. Though the Learned Members of the Bench have described the facts of this case elaborately in their respective orders, I would like to briefly state the facts to facilitate the appreciation of the issue involved in these appeals. 3. Proceedings in the cases of the present appellants were initiated under section 158BC, read with section 158BD consequent to the search and seizure operations carried on 5-9-1995 at the residential premises of Sri Bhawanisingh J. Champawat--Managing Director of one of the companies, viz., M/s. Cas Card Finance Ltd. and the main person controlling the affairs of other concerns. During the course of search operations, certain incriminating documents, such as, share application forms filled in the hand writing of two employees of the group and other loose papers were found on the basis of wh....
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.... 6,01,470 P. Ltd. -------------------------------------------------------------------------- On the basis of the admission of Shri Bhawanisingh J. Champawat and incriminating documents found in the course of search, enquiry was conducted in respect of certain shareholders/depositors at Jodhpur arid Ahmedabad. None of the persons, who were traced, confirmed having made any investment in the purchase of shares or having made any deposits with the appellants. In certain cases, information was received by the Assessing Officer that the parties did not exist at the given address. In some eases, notices issued were returned unserved with the remarks "party does not exist". In the case of Cas Card Finance Ltd. during the course of block assessment proceedings, it was stated by the company that in respect of some shareholders, affidavits/confirmations were filed in the block assessment proceedings of B.J. Champawat and that all the parties are genuine parties. It may be pertinent to mention that no affidavits or confirmations were ....
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....arned Accountant Member. In respect of addition on account of Gunaram B. Chowdhury, the Learned Accountant Member has proposed setting aside of the issue for fresh decision in accordance with law. 4. The Learned Judicial Member has passed dissenting order proposing to confirm the aforementioned additions made by the Assessing Officer. 5. After having gone through the orders passed by the respective Learned Members of the Bench and hearing the parties and also on perusal of the records, I proceed to express my views about the issues involved in these appeals. 6. Let me first describe the reasons given by the Learned Accountant Member in proposing the deletion of additions made by the Assessing Officer. The reasons given are that at the time of search, the books of account pertaining to all the appellants were found at the premises of these assessee and the same had been seized as per the Panchanamas prepared by the search party. That Shri Bhawanisingh J. Champawat had admitted certain undisclosed income having been invested in the case of five appellants, but the said amount disclosed has been assessed in his hands. Relying upon the decision of the Supreme Court in the case....
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....me deposits having been introduced in benami names. It has also been pointed out that affidavits and confirmations filed in the assessment proceedings of Shri B.J. Champawat in respect of some shareholders/depositors are unreliable and afterthought, Additions have been justified with reference to the Full Bench decision of Delhi High Court in the case of Sophia Finance Ltd. The decision of Delhi High Court in Steller Investment Ltd. has been distinguished in the light of the decision of the Gujarat High Court in the case of Gujarat State Co-operative Bank Ltd. It has been pointed out that the decision of the Gujarat High Court in the case of N.R. Paper & Board Ltd. is inapplicable to the facts of this case. The Learned Judicial Member has held that in view of the falsity and non-genuineness of share application money and cash credits exposed as a result of search, the amount was rightly assessable as the undisclosed income in the block assessments it has also been pointed out that the respondents have failed to establish that the investments in the form of share application money and other deposits were genuine. Relying upon the decision of the Delhi High Court in the case of Sophi....
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....e order dated 18-12-1998 relying upon the decision of the Gujarat High Court in the case of N.R. Paper & Board Ltd. held that the addition could be made only in regular assessment and not in block assessment, yet the decision of the Tribunal has been set aside by Hon'ble High Court and matter remanded. (e) The Supreme Court in the case of Steller Investment Ltd. has not overruled the ratio of the decision of the Delhi High Court in the case of Sophia Finance Ltd. where it was held that in respect of the Share capital credited in the books of account, the Assessing Officer has power to enquire the genuineness of the share capital and if shareholders are not established to be genuine, the Assessing Officer can invoke section 68. (f) That the addition on the basis of evidence found during the course of search, like share application forms, the enquiry made by the ADI, justify the addition on account of share application money and unexplained deposits under section 68. (g) That the ratio of the decision in the case of N.R. Paper & Board Ltd. was not applicable to the facts of this case. 9. It was contended by the learned counsel for the assessee that Chapter XIV-B has been ....
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.... this case, it would be useful to refer to the relevant provisions of the Act involved in the disputer There is a special procedure for assessment of search eases provided under Chapter-XIV-B of the Income-tax Act, 1961. Section 158BA provides for assessment of undisclosed income as a result of search. The said section provides that the Assessing Officer shall assess the undisclosed income in accordance with the provisions of Chapter-XIV-B and also provides that undisclosed income relating to the block period shall be charged to tax at the rates specified in section 113. Section 158B defines "block period" and 'undisclosed income" as under: "158B. In this Chapter, unless the context otherwise requires,-- (a) 'block period' means the previous years relevant to ten assessment years preceding the previous year in which the search was conducted under section 132 or any requisition was made under section 132A, and includes, in the previous year in which such search was conducted or requisition made, the period up to the date of the commencement of such search or, as the case may be, the date of such requisition. (b) 'undisclosed income' includes any money, bullion, jewellery or....
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....ng, make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessments." "Best judgment assessments. 144. (1) If any person (a) .......... (b) .......... (C) .......... the Assessing Officer, after taking into account all relevant material which the Assessing Officer has gathered, shall after giving the assessee an opportunity of being heard, make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee en the basis of such assessments" 14. Section 158BB provides as to how the undisclosed income of the block period is to be worked out. Section reads as under:-- "158BB. (1) The undisclosed income of the block period shall be the aggregate of the total income of the previous years fairing within the block period computed, in accordance with the provisions of Chapter IV, on the basis of evidence found as t result of search or requisition of books of account or documents and such other materials or information as are available with the Assessing Officer, as reduced by the aggregate of the total income, ....
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.... be construed as references to the relevant previous year falling in the block period including the previous year ending with the date of search or of the requisition. (3) The burden of proving to the satisfaction of the Assessing Officer that any undisclosed income had already been disclosed in any return of income filed by the assessee before the commencement of search or of the requisition, as the case may be, shall be on the assessee. (4) For the purpose of assessment under this Chapter, losses brought forward from the previous year under Chapter VI or unabsorbed depredation under sub-section (2) of section 32 shall not be set off against the undisclosed income determined in the block assessment under this Chapter but may be carried forward for being set off in the regular assessments." 15. Section 158BH reads as under:-- "158BH. Save as otherwise provided in this Chapter, all other provisions of this Act shall apply to assessment made under this Chapter." 16. Perusal of the aforementioned provisions of Chapter XIV-B incorporated in the Income-tax Act, 1961 to make assessment of undisclosed income reveals that the Income-tax Act has provided a complete scheme for....
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.... the Act but for those provided in the Chapter shall apply to the assessment made under Chapter XIV-B. Section 158BB(2) provides that provisions of sections 68, 69, 69A, 69B and 69C are applicable in computation of the undisclosed income. It will be useful to quote section 68 of the Income-tax Act, 1961, which reads as under: "68. 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." When section 158BB(2), section 158BH and section 68 are read in conjunction with each other, it becomes abundantly clear that the contention advanced on behalf of the assessee that section 68 cannot be invoked in block assessment is bereft of substance. Keeping in mind that the foundation of block assessment has to be the evidence found as a result of search, requisition of books of account and documents and such other material or information as are available with the Assessing Officer, the....
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....r material or information as are available with the Assessing Officer with the assessment made of the undisclosed income in block assessment. The view that the Assessing Officer cannot estimate the quantum of the undisclosed income on the basis of the material found during the course of the search is also untenable. It would be relevant to refer to section 158BC(b) which has been quoted in para 13 of this order. This section mandates that 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-section (2) and sub-section (3) of section 143 and section 144 shall so far as may be applied. Section 143(3) provides for making an assessment on the basis of the material produced by the assessee and on the basis of the material gathered by the Assessing Officer. Section 144 empowers the Assessing Officer to make an assessment to the best of his judgment in the event of assessee not complying with the requirements for purposes of assessments Section 68 places a burden upon the assessee to establish the genuineness of the entries made in the books of account. When share applica....
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.... decision of the Gujarat High Court in the case of Gujarat State Cooperative Bank Ltd. is also relevant. In this case it was held as under:-- "A decision is an authority for what it actually decides and not necessarily for what logically follows from it. Equally well settled is the principle that a decision to be law under Article 141 must not be a mere conclusion by which the case is disposed of. Because, a conclusion, mere conclusion, may be on facts, it may not and does not necessarily involve consideration of law. It is well settled that Article 141 will not, be attracted if law is not declared or stated vocally to support the conclusion reached for deciding the lis. A mute declaration of the mere conclusion is not contemplated under Article 141. Manager, Panjarapole, Deodar v. CM Nat. 1997 (2) GLR 1321 followed." 21. Keeping the aforementioned principles in view, let me refer to the decision of the Gujarat High Court in the case of N.R. Paper & Board Ltd. In this case, the controversy raised was as to whether after completion of the block assessment under Chapter XIV-B, the Assessing Officer could proceed to make a regular assessment under section 143(3). The assessee ha....
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....e of tax. This process did not disturb the assessments already made, of the previous years, and was only intended to sniff out what had remained hidden and would not have been disclosed by the assessee. There would, therefore, be no overlapping in the nature of the assessment made under this chapter of undisclosed income and the regular assessment made under section 143(3). If the pending regular assessment proceedings were to be frozen and got substituted by the assessment of the undisclosed income of the block period, the Legislature would have been specific on that aspect and would have made it clear that the pending regular assessment proceedings should be dropped. The provisions of this chapter do not either expressly or by necessary implication even remotely indicate that the regular assessment proceedings of a previous year covered in the block period, were required to be stayed or dropped or substituted by the proceedings of this chapter. Under sub-section (3) of section 158BA, where the date of filing the return of income under section 139(1) for any previous year has not expired, and the income of that previous year or the transactions relating to such income are duly rec....
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....n the aforesaid case refused to interfere with the decision of the Tribunal. Their Lordships also observed that if the share application money in the case of the company was not genuine, assessment could be made in the hands of those persons who had invested the money in the company. 24. The decision of the Delhi High Court was challenged by the Revenue in the Supreme Court and in the mean time the issue of share capital relating to applicability of section 68 came for consideration of the Delhi High Court (Full Bench) in the case of Sophia Finance Ltd. Their Lordships on facts of the case held as under:-- "It is clear that under section 68 the ITO has jurisdiction to make enquiries with regard to the nature and source of a sum credited in the books of account of an assessee and it would be immaterial as to whether the amount so credited is given the colour of a loan or a sum representing the sale proceeds or even receipt of share application money. The use of the words 'any sum found credited in the books' in section 68 indicates that the said section is very widely worded and an ITO is not precluded from making an enquiry as to the true nature and source thereof even if the....
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....Delhi) distinguished and explained." 25. Subsequently, their Lordships of the Supreme Court decided the reference of the Revenue in the case of Steller Investment Ltd. Their Lordships of the Supreme Court were pleased to dismiss the reference application of the Revenue by the following order:-- "We have read the question which the High Court answered against the Revenue, We are in agreement with the High Court. Plainly, the Tribunal came to a conclusion on facts and no interference is called for. The appeal is dismissed. No order as to costs." 26. On the above facts, a question arises a to whether Full Bench decision of the Delhi High Court in the case of Sophia Finance Ltd has been over-ruled by the Supreme Court in the case of Steller Investment Ltd. I have referred to the decision of the Supreme Court in the case of Sun Engg. Works (P.) Ltd. and also the decision of the Gujarat High Court in the case of Gujarat State Co-operative Bank Ltd. in para Nos. 19 and 20 of this order in support of the finding that the decision of the Court is to be read in the context in which it has been rendered. Keeping that principle in view, it becomes abundantly clear that Hon'ble Supreme....
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....t in Steller Investment Ltd's case, following position emerges:-- (1) If A.O. does not enquire about the genuineness of the share application money, the share capital has got to be accepted as capital receipt. (2) If, on the other hand, enquiry is made by the ITO regarding share application money and he is not satisfied that the true nature of share application money is of capital receipt, he can invoke section 68 thereof. In view of the above principles of law, I proceed to consider the issue on the facts of the present appellants. 28. In these cases, incriminating documents were found and seized as a result of search. When confronted, part of the share capital/deposits was admitted to be bogus by Sri B.J. Champawat. The A.D.I. on enquiry had also found part of the share capital/deposits shown in the books of account as not genuine notwithstanding with the fact that the appellants had filed affidavits/confirmations in respect of some of the shareholders/depositors. Thus, in the case of the present appellants, the condition for applicability of section 68 in respect of share application money laid down by the Hon'ble High Court in the case of Sophia Finance Ltd. are sat....
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....r section 131 was issued and in response to the same, written reply was received wherein he has also denied to have purchased any share of the above both the companies. A notice under section 131 was issued in the case of Nathuji Bhabhutaji Rajput R/o Neemla, Tal-Ahore, Distt. Jalore, which has been received back with the ream of that "No person of this name resides here." Similarly, notice under section 131 was issued to Sh. Malu Singh Sugansingh R/o Bali Banka, Distt. Bali, which has been returned with the remark that "the person is not traceable." Thus, on the basis of above enquiries, it is clearly established that no such investment have been made the above persons and the investment shown in their names really represent the concealed income of Champawat group itself and the same required to be taxed in their hands. In continuation to my earlier letter No. 242 dated 11-9-1996, further enquiries in some cases have been conducted and the facts come out are as under:-- 1. Umed Bhawan, Post-Bali, Opposite Collector's office, St. Falan, Distt. Pall (Raj.) Sh. Ummed Singhji Balot 2. Village-Post Ganthiya, Tal-Nerea, Distt. Nagore (Raj.) 1. Padamsingh Ragunath....
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....p; Harisingh Devisingh Chouhan 55,000 28 Jogsingh Khetsingh Rathore 25,000 30 Malusingh Sugansingh 60,000 36 Minor Tanushri Jaisingh Rathore 39,000 38 Mohanji Motiji Prajapati 29,000 41 Nathuji Bhabhutaji Rajput 34,000 45 Padamsingh Raghunath Rathore 2,33,000 49 Raghuveersingh Lalsingh ....
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....her been discarded in cross-examination or has failed to produce other supporting evidence when called upon to do so. In the present cases, firstly the affidavits have not been filed in the course of the proceedings relating to the appellants. Secondly, the affidavits filed in respect of some of the shareholders in the proceedings in the case of Sri B.J. Champawat were found to be unreliable. Thirdly, as demonstrated above, some of the affidavits were found to be false. In Mehta Parikh & Co.'s case, their Lordships of the Supreme Court held "that the presence of the deponents of the three affidavits was riot considered necessary by either party, the cash book of the assessee had been accepted and entries therein not challenged." It was in the light of these facts their Lordships held that the A.A.C. was not justified in ignoring the affidavits. In the present cases, the Assessing Officer had specifically asked the assessee to produce the shareholders/depositors was also evidence on record to establish that at least some of the affidavits filed were not authentic. In these circumstances, the affidavits filed by the assessee in respect of sonic shareholders/depositors in the block as....
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....where certain amount was found credited in his books of account. On the basis of this decision also no addition can be made in the hands of the appellant under section 68 for the amounts which have been found credited in the books of account of the companies/firms, which were subjected to separate block assessments in view of the judgment of the Delhi High Court in the case of Sophia Finance Ltd. 205 ITR 98. We also accept the counter argument of the ld. Counsel for the assessee that on the facts of the present case the judgment of the Allahabad High Court in 183 ITR 388 does not apply. Thus additions to the extent of disclosure made by the assessee are confirmed and the balance is hereby directed to be deleted." It is evident from the decision quoted above that the main reason for deletion of the addition in the case of B.J. Champawat was that the amount could be assessed in the hands of the appellants separately. Therefore, the decision of the Tribunal does not advance the case of the appellants. 34. The decision of the Tribunal in the case of Anima Investment Ltd. relied upon by the ld. Accountant Member is also distinguishable on facts. In that case there was no enquiry b....
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.... Ltd. v. Dy. CIT [1997] 61 ITD 528 (Delhi), the Tribunal found that no incriminating documents were found during the course of search, that the assessee had in any manner inflated the expenditure in question. It was on these facts that the Tribunal held that the addition on the basis of the entries in the books of account maintained in the regular course was not permissible in block assessment. This decision is distinguishable on facts. 39. In the case of Smt. Sheela Aggarwal v. Dy. CIT [1999] 106 Taxman 227 (Delhi) it was found by the Tribunal that there was no supporting material found during the course of search to justify the additions as undisclosed income of the assessee. The said decision is distinguishable on facts and inapplicable to the present appellants. 40. Taking the totality of the facts and circumstances of the case into consideration and for the aforesaid reasons, I am of the view that the additions made by the Assessing Officer in block assessments in respect of the five appellants are justified in respect of which I concur with the view expressed by the Learned Judicial Member. 41. To sum up, I hold as under:-- (1) That on the facts and in the circums....