2005 (10) TMI 210 - AT - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 16,81,750 as Capital Gain on the sale of 990 shares.
2. Addition of Rs. 74,64,000 as Capital Gain on the sale of 3732 shares.
3. Inclusion of gross sale price as capital gains without deductions.
4. Issuance of notice under section 158BD without legal jurisdiction.

Issue-Wise Detailed Analysis:

1. Addition of Rs. 16,81,750 as Capital Gain on the sale of 990 shares:
The assessee challenged the addition of Rs. 16,81,750 as capital gain on the sale of 990 shares of M/s. Leader Valves Ltd., arguing that it was already included in the return for the assessment year 1996-97. However, the Assessing Officer found that the sale transaction was not adequately recorded and thus included it in the block assessment. The ITAT upheld the Assessing Officer's decision, noting that the sale consideration was not fully disclosed before the search, making it part of the undisclosed income.

2. Addition of Rs. 74,64,000 as Capital Gain on the sale of 3732 shares:
The assessee also contested the addition of Rs. 74,64,000 as capital gain on the sale of 3732 shares based on an agreement dated 29-4-1995. The ITAT directed the Assessing Officer to calculate the capital gain and determine the ownership of the shares. The Assessing Officer included this amount in the block assessment, as the sale transaction was not recorded in the regular returns. The ITAT agreed with this inclusion, emphasizing that the sale consideration was received in cash and not disclosed to the department.

3. Inclusion of gross sale price as capital gains without deductions:
The assessee argued that the gross sale price was included as capital gains without considering the cost of shares and indexation. The Assessing Officer took the cost of acquisition as nil due to the lack of information provided by the assessee. The ITAT restored this issue to the Assessing Officer, directing the assessee to provide details of the cost of acquisition for proper calculation of capital gains, allowing for deductions as per sections 48 and 49 of the Income-tax Act.

4. Issuance of notice under section 158BD without legal jurisdiction:
The assessee contended that the notice under section 158BD was issued without legal jurisdiction and four years after the block assessment of Vijay Sehgal (Individual). The ITAT found that the Assessing Officer was satisfied with the material on record that the undisclosed income belonged to the assessee (HUF). The ITAT held that there is no time limitation for initiating proceedings under section 158BD, and the satisfaction of the Assessing Officer was based on cogent material, thus validating the notice.

Conclusion:
The appeal was partly allowed for statistical purposes, directing the Assessing Officer to consider the cost of acquisition for the shares. The ITAT upheld the additions of Rs. 16,81,750 and Rs. 74,64,000 as capital gains, confirming the inclusion of these amounts in the block assessment due to the lack of proper disclosure by the assessee. The issuance of the notice under section 158BD was also upheld, as the Assessing Officer's satisfaction was based on substantial material found during the search.