2002 (5) TMI 212 - AT - Income Tax

Summary

Issues Involved:

1. Sustenance of addition of amounts totaling Rs. 35,95,34,493 for financial years 1993-94 to 1996-97.
2. Non-allowance of loss sustained at Rs. 10,30,23,882 claimed in financial year 1996-97.
3. Validity of the assessment under s. 158BC.
4. General grounds and argumentative grounds.
5. Charging of surcharge on the assessed income for the block period.

Detailed Analysis:

1. Sustenance of Addition of Amounts Totaling Rs. 35,95,34,493:

The assessee-company, engaged in the business of sale and purchase of shares and securities, was subject to a search and seizure operation. The AO issued notices under s. 158BC and, after examining the seized documents, concluded that the losses claimed by the assessee in the regular returns were not genuine. The AO prepared a separate list of transactions based on the seized material and disallowed the losses claimed by the assessee, resulting in additions for the financial years 1993-94 to 1996-97.

The Tribunal found that the assessee had been maintaining regular books of accounts and filing regular returns, which were assessed under s. 143(3) or s. 143(1)(a). The Tribunal emphasized that any addition under s. 158BC should be based on material found during the search and not on regular returns. The Tribunal noted that the AO and CIT(A) presumed the losses were not genuine without concrete evidence. The Tribunal held that the AO's disallowance of losses was beyond the scope of s. 158BC, as the transactions were duly recorded in the regular books of accounts.

2. Non-Allowance of Loss Sustained at Rs. 10,30,23,882 Claimed in Financial Year 1996-97:

The AO did not allow the benefit of the loss claimed by the assessee for the financial year 1996-97, completing the assessment at Nil income. The Tribunal observed that the losses were already considered in the regular assessments for the respective years. The Tribunal held that the AO's disallowance of the loss was not justified, as the loss was claimed in the regular returns and assessed accordingly.

3. Validity of the Assessment Under s. 158BC:

The assessee contended that the assessment under s. 158BC was void ab initio. The Tribunal noted that the AO and CIT(A) relied on the regular books of accounts and returns filed by the assessee. The Tribunal reiterated that no addition or disallowance could be made under s. 158BC based on regular returns. The Tribunal held that the assessment under s. 158BC was not valid, as it was based on the regular books of accounts and not on any undisclosed income found during the search.

4. General Grounds and Argumentative Grounds:

Ground Nos. 14, 17, 18, and 19 were general in nature and did not require adjudication. Ground No. 15 was argumentative.

5. Charging of Surcharge on the Assessed Income for the Block Period:

The AO charged a surcharge of 15% on the assessed income for the block period, which was upheld by the CIT(A). The Tribunal referred to the decision of the Calcutta Bench in the case of Principal Officer, Builcon Towers (P) Ltd. vs. Asstt. CIT, which held that no surcharge could be levied on the tax computed under s. 113 for block assessments. The Tribunal noted that the Finance Act, 1995, which introduced s. 113, did not provide for a surcharge. The Tribunal held that the levy of surcharge was not applicable in the case of block assessments and deleted the surcharge.

Conclusion:

The Tribunal allowed the appeal of the assessee, deleting all additions made by the AO in the block period and holding that no surcharge was applicable. The Tribunal emphasized that additions under s. 158BC should be based on material found during the search and not on regular returns.