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TMI Blog2003 (9) TMI 302X X X X Extracts X X X X X X X X Extracts X X X X ..... an undisclosed income, which has been found or detected as a result of search and that in support thereof he recorded a note of satisfaction. In the absence of any such valid material and/or note of such satisfaction the assumption of jurisdiction and framing of assessment is wholly arbitrary and is thus unsustainable in law. 3. That the learned Dy. CIT, Circle 11(1), New Delhi, has erred in framing the assessment under s. 254/158BC(c) of the Act without giving any independent reason for holding that there was an undisclosed income and further computing the undisclosed income of the assessee at Rs. 1,14,52,605. The instant assessment made is wholly arbitrary and is without jurisdiction. 4. That in making the instant assessment, he has failed to appreciate that the Hon ble Tribunal was pleased to set aside the assessment with a direction to reassess the issues involved in the assessment made and as such, before making the assessment, he was obliged in law, to have recorded his independent reasons after examining the evidence furnished and bring material to establish that there was any income which had not been disclosed by the assessee, as such, in absence of any adverse findin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ete misconception and misreading of the judgment of the apex Court. That once the Hon ble Tribunal in a similar matter had deleted the addition, there was no justification for the learned Dy. CIT to hold the aforesaid loss as undisclosed income of the assessee. 7.3 That the finding that the only motive of the assessee to transfer shares of HDC from one company to another company under some management was to book loss by showing them as transferred at lower rate as there was fall in market rate of those shares, and to adjust the loss so booked against profit on sale of other shares on which assessee would have been liable to pay tax is based on mere suspicion, surmise and conjecture unsupported by any material. In any case, the same could not be regarded a valid consideration in disallowing the loss and treating the same as undisclosed income. 7.4 That further there was no basis and justification for the learned Dy. CIT to have held that scrutiny of the accounts of the appellant-company and M/s Laxmangarh Estate along with various other documents explained that both the companies had preplanned the objective of booking losses particularly having regard to the fact that detailed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere irregularity but is a nullity as it goes to the very jurisdiction of the officer to complete the assessment. 10. That in any case and without prejudice the impugned assessment has been framed without providing to the assessee a fair and proper opportunity of being heard and as such the order passed is contrary to the principles of natural justice. Further, assumption that there has been an undisclosed income is based on wholly irrelevant, arbitrary and unfounded considerations. 11. That the learned Dy. CIT has further erred both in law and on facts in levying surcharge at 15 per cent when as such the same was not leviable at all." 3. At the outset we may mention that the aforesaid appeal had been heard along with ITA No. IT(SS) No. 110/Del/2002 filed by Intercontinental Trading Investment Company Ltd. It was agreed between the parties that the facts pertaining the instant appeal and as pertaining to the said appeal, so far as it relates to the disputed sum of Rs. 1,14,52,610 are similar to the facts of the aforesaid appeal. 4. Before we proceed to take up the grounds raised by the appellant in the memo of appeal, it is, however, necessary to recapitulate few facts, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d duly been found recorded in the books of accounts maintained by the assessee for the financial year 1994-95. No incriminating material was found on the basis whereof it could be held that the transaction could be regarded as undisclosed. 4.7 The return of income, on the date of search (In the case of HDC) had become due till the asst. yr. 1995-96 and the assessee had also duly furnished its return of income for the asst. yr. 1995-96 on 27th Nov., 1995. 5. On the basis of the aforesaid facts the learned counsel for the assessee submitted at the outset that the learned Dy. CIT exceeded in his jurisdiction while computing the undisclosed income, the purported undisclosed income for the asst. yr. 1995-96. It was contended by him that sub-s. (3) of s. 158BA of the IT Act specifically provided that where the assessee proves to the satisfaction of the AO that any part of income referred to in sub-section, return of income under sub-s. (1) of s. 139 for any previous year has not expired and such income or the transactions relating to such income are recorded on or before the date of the search or requisition in the books of account or other documents maintained in the normal course r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at all the transactions are verifiable and it is not that as a result of search it has been found or has been established by any material that such transactions had not been entered into and were either non-genuine or bogus. It was thus contended that there was no income which could be regarded as undisclosed income. 5.2 The learned counsel as noted in para 5 above contended that the learned Dy. CIT has also grossly erred in holding that the loss suffered of Rs. 1,14,52,610 in respect of sale of shares of HDC Ltd. for the asst. yr. 1995-96 represents an undisclosed income. It was submitted that the loss suffered cannot be regarded as the undisclosed income as it is not a case where, the transaction pertaining to either purchase or sale has not been found recorded in the books of accounts. It was also submitted by him that there is no dispute about the genuineness of the transaction. It was also submitted by him that the findings of the learned Dy. CIT that there was a colourable device in the sale of shares is entirely misconceived and is based on surmises and conjectures and is in disregard of the facts of the case. 5.3 Similarly, it was further contended that the learned Dy. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icial discipline and as such the same must be respectfully followed: a.Unionof India Ors. vs. Kaumudini Narayan Dalal Anr. (2001) 168 CTR (SC) 3 : (2001) 249 ITR 219 (SC); b.UnionofIndiavs. Satish Panalal Shah (2001) 168 CTR (SC) 1 : (2001) 249 ITR 221 (SC); c. Government of Andhra Pradesh Ors. vs. A.P. Jaiswal Ors. (2001) SCC 748. 5.5 It was also contended by the assessee s counsel that there was either no "satisfaction" reached by the learned AO having jurisdiction over the assessment of M/s Hindustan Development Corporation or could even have been reached by him, as there was absolutely no material on the basis whereof such a "satisfaction" could have been reached. Further, there is absolutely no material whatsoever warranting a finding that such a "satisfaction" as envisaged under s. 158BD of the IT Act had been reached in the case of the assessee who had been searched by the AO having jurisdiction over that assessee merely forwarding of the books of account of the assessee as had been seized by itself is insufficient for concluding that the learned AO having jurisdiction over that assessee was satisfied that any undisclosed income belongs to any other person. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Narayanyan (HUF) vs. Asstt. CIT (1999) 64 TTJ (Mad)(TM) 883 : (1999) 69 ITD 104 (Mad)(TM); 4. CIT vs. N.R. Papers Boards Ltd. (2000) 162 CTR (Guj) 488 : (2001) 248 ITR 526 (Guj); 5. CIT vs. Vinod Dhanchand Ghodawat (2000) 163 CTR (Bom) 432 : (2001) 247 ITR 448 (Bom); 6. Pradip C. Patel vs. Dy. CIT (1997) 58 TTJ (Ahd) 409 ; 7. Parakh Foods Ltd. vs. Dy. CIT (1998) 64 ITD 396 (Pune); 8. Bhagwati Prasad Kedia vs. CIT (2001) 164 CTR (Cal) 336 : (2001) 248 ITR 562 (Cal); 9. Harakhchand N. Jain vs. Asstt. CIT (1998) 61 TTJ (Mumbai) 223 ; 10. Essem Intraport Services (P) Ltd. vs. Asstt. CIT (2000) 68 TTJ (Hyd) 103 : (2000) 72 ITD 228 (Hyd); 11. Shri Nagindas M. Goradia vs. Dy. CIT in IT(S S)A 99/Mum/1996; 12. P.K. Ganeshwar vs. Dy. CIT (2002) 80 ITD 429 (Chennai). 5.9 The learned counsel further submitted that in all the said decisions it has been held that the provisions of Chapter XIV-B of the IT Act are not meant to reassess the income as envisaged under s. 148 of the IT Act. 5.10 It was vehemently argued by the assessee s counsel that in the instant case the shares of HDC Ltd. (on which loss occurred) had been purchased by the assessee-company even before the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icable and the loss allegedly suffered and claimed as a loss could be held as not representing an undisclosed income. He however, fairly submitted that all the transactions both of purchase and sale had duly been entered by the assessee in the books. It was his submission that merely because it had been so entered would not mean that such loss did not represent its undisclosed income. It was however not denied by him that any incriminating material was found, as a result of search which showed the transactions of purchases and sale were either bogus or were not entered into between the parties or that even the sale of shares were not registered in the name of purchaser on the sale having been made. 7. We have perused the order of assessment and have gone through the paper book filed by the appellant. Since it has been agreed between the parties that the facts of the instant case pertaining to the disputed addition are similar to the connected case heard by us, we similarly hold that the addition made by the learned Dy. CIT in the instant case cannot be sustained which we hereby delete. We have also perused the order of the Tribunal in the case of Paramount Enterprises Ltd. and we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the books of accounts or was meant not to be recorded. In our opinion, as such, the initiation of proceedings on the assessee, on the basis of the books of accounts maintained by it, by itself could not be held to be legal, valid and on proper basis. All what we find is that the learned AO, having jurisdiction over the Mody group of cases has merely forwarded the books of accounts of the assessee, found and seized, to the AO having jurisdiction over the assessment of the assessee. In our considered opinion, mere forwarding of such books of account by itself is insufficient to conclude that the learned AO having jurisdiction over Mody group of cases, was satisfied that any undisclosed income was found or detected as a result of search on the basis of which proceedings under s. 158BD of the IT Act could have been initiated against the assessee. 7.3 Apart from the aforesaid, in our opinion further, the learned Dy. CIT while framing the assessment, was not correct in holding that there was any undisclosed income for asst. yr. 1995-96 particularly because the return of income had duly been filed by the assessee-company on 27th Nov., 1995, i.e., before the due date and before the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of the assessee-company, liable for assessment under Chapter XIV-B of the IT Act. We also hold that the assessee has been able to establish that it has suffered the loss in the course of business and had to be set off against the capital gains which had duly been offered by it in the return of income. 7.6 In view of the voluminous evidence as has been brought on record, we do not find any justification whatsoever to hold that the learned Dy. CIT was justified and correct in law in disallowing the loss of Rs. 1,14,52,610 on the sale of shares of HDC Ltd. for asst. yr. 1995-96 and holding the same to be the undisclosed income of the assessee. In fact, as there had been no rebuttal from the side of the Revenue on the submissions made by the assessee, we hold that the transaction of purchase and sale of shares of HDC Ltd. cannot be regarded to be the colourable device so as to disallow the loss suffered on the sale of shares. It may be stated here that the shares, which has resulted into losses, were purchased by it from the various shareholders and not from the group company and as such, in our opinion there is no justification to treat the loss as a part of colourable devic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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