9911796707
TMI Blog2002 (5) TMI 212X X X X Extracts X X X X X X X X Extracts X X X X ..... 14, 17, 18 and 19 are general in nature. 2.4 Ground No. 15 is argumentative. 2.5 Ground No. 16 is an independent ground i.e., against the charging of surcharge on the assessed income for the block period. 3. The brief facts of the case are that the assessee-company is a limited company incorporated on30th July, 1985, having its registered office at 2nd floor,GopalaTower, 25,Rajendra Place,New Delhi. The company is engaged in the business of sale and purchase of shares and securities. A search and seizure operation was carried on the business premises of the assessee-company along with other group concerns and certain documents relating to share and security transactions were found and seized. As per the view of the departmental authorities, these papers and documents indicated that the assessee-company has entered into certain sale and purchase transactions with the group companies and in such transactions substantial amount of loss have been booked. Notice under s. 158BC was issued by the AO on9th April, 1999and again on12th May, 1999. The assessee filed applications on7th May, 1999and then again on17th May, 1999, requesting to supply the copies of seized material, so that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties transacted are listed at stock exchange and the transactions have been conducted at prevailing market price if quoted on stock exchange. It is not mandatory to conduct the transaction in securities by passing through the stock exchange only. (vi) Delivery based transactions have been backed by physical delivery. (vii) That the revised chart of transaction is in agreement with the audited balance sheet. 3.2 Further, in reply regarding transactions with A. Nitin Co. and Cornflower Investments, it was further submitted that both these companies are independent and distinct entities and have no connection with the assessee-company. It was submitted that they are separately registered companies and are assessed to income-tax on regular basis. The confirmation from both of the parties, along with other information as required by the AO, were also filed. 3.3 The AO after considering the reply of the assessee was of the view that true P L has not been deduced by the assessee while filing the regular returns for the years, which falls under block period. Accordingly the AO prepared a separate list of transactions on the basis of seized material and then drew an adverse infere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e when the regular returns were filed. He concluded that loss claimed by assessee while filing regular returns was not genuine one. Therefore, the AO was right in disallowing the same and adding to the undisclosed income while passing the assessment under s. 158BC. 4.1 However, the CIT(A) held that exemptions claimed under s. 47(iv) cannot be disallowed while passing the assessment under s. 158BC. Accordingly the addition of Rs. 3,81,24,167 was deleted and the remaining addition was sustained. 4.2 The ground of the assessee in regard to surcharge was also dismissed by observing that Finance Act, 1999 provides for imposition of surcharge over and above the tax computed under s. 113. Accordingly the levy of surcharge was also sustained. Now the assessee is in appeal here before the Tribunal against the order of the CIT(A) dt.31st March, 2000. 5. Lengthy arguments were put forth by the learned counsel of the assessee. Attention of the Bench was drawn on various pages of the paper book, along with the case laws, copies of which are placed, in the paper book. Attention of the Bench was also drawn on the written synopsis filed during the course of hearing of appeal. The brief facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Rs. 5,77,03,164. Likewise, in earlier years also the loss was discussed while completing the assessment under s. 143(3), means thereby the loss shown by assessee has already been discussed by the AO while completing the assessment under s. 143(3). 8. No doubt, the search took place on the assessee and other group concerns of assessee. Some material was found and seized and if any addition can be made, that can be made only on the basis of that material and not on the basis of any expenditure or income disclosed while filing the regular returns. We have seen the assessment order as well as order of the CIT(A) and found that they have mentioned at so many places in their orders that assessee has booked the ingenuine transactions in the books for claiming a higher loss. Almost each para of the AO says that assessee has booked ingenuine loss in its book of accounts, which clearly shows that all the transactions were entered by assessee in the regular books of accounts maintained in regular course of business. In some paragraph the AO stated that some of the entries made in Annex. A-53, are not in consonance with the entries entered in the regular books of accounts. In reply, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent years have also been completed under s. 143(3), whereby the losses shown by assessee have already been discussed in those orders. 10. We further noted that main thrust of the AO to disallow the claim of loss was in regard to transactions entered with A. Nitin Co. We find that the cheque of Rs. 6.25 crore was not paid by the assessee, but the same was received by assessee from A. Nitin Co. Confirmation of A. Nitin Co. was filed, whereby it was confirmed that they have made a payment of Rs. 6.25 crore to the assessee. On the contrary, the AO has observed in his order that assessee has made the payment of Rs. 6.25 crore to A. Nitin Co., which in fact, is incorrect. Therefore, in our considered view, doubting the transaction, was not justified at the end of the AO. Again we find that the CIT(A) also confirmed the action of the AO by merely saying that assessee has booked the ingenuine loss for lowering its profitability. But not a single instance has been brought on record that how the profits were converted into losses, neither any material was found which shows that any money paid by assessee through cheques has been received by assessee underhand; nor any transaction was fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been reduced. The details of such loss claimed and reduced we have already discussed in foregoing paragraphs earlier. 12. Various Benches of the Tribunal in the country and various High Courts have held that once the transactions have been shown in regular books of accounts and the returns on the basis of regular books of accounts have been filed, then on that basis no income or loss can be added or disallowed while making the assessment under Chapter XIV-B of the IT Act. 13. In the case of Parakh Foods Ltd. vs. Dy. CIT (1998) 64 ITD 396 (Pune), the Pune Bench of the Tribunal has discussed the issue at great length, wherein it has been discussed in detail that what is undisclosed income and what can be added while assessing the income under s. 158BC. They have distinguished both the Chapter XIV-B and Chapter XIV. Chapter XIV is in regard to regular assessments completed under s. 143(3) or s. 148 and Chapter XIV-B is in regard to undisclosed income of block period which contains 10 years. Under Chapter XIV-B the charging of tax is computed under the provisions of s. 113 of the IT Act, which is 60 per cent of the total undisclosed income and under Chapter XIV, the tax is charged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and it is beyond power of the AO to review the assessments completed unless some direct evidence comes to the knowledge of the Department as a result of search which indicates clearly the factum of undisclosed income. Without such evidence or material the AO is not empowered to draw any presumption as to the existence of undisclosed income. A presumption is an inference of fact drawn from other known or proved facts. It is rule of law under which Courts are authorised to draw a particular inference from a particular fact, until and unless the truth of such inference is disproved by other evidence. The scheme of Chapter XIV-B does not give power to the Revenue to draw the presumption in regard to the undisclosed income. The AO could proceed on the basis of material detected at the time of search and the evidence gathered. Under s. 132(4), the authorised officer may, during the course of search or seizure, examine on oath any person who is found to be in possession or control of any books of accounts, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed by the Hon ble Delhi High Court that if the Department became aware that those receipts, not shown by assessee, are taxable in character, then Department can invoke the provisions of s. 148, but no action can be taken under s. 132(1)(c). 20. Here in the instant case there may be that some of the entries have not been made by assessee in regular books of accounts, but those entries can be held that they may not partake the character of taxable income. And the meaning of undisclosed income was given with reference to s. 132(1)(c), therefore, we are of the view that same can be applied with reference to Chapter XIV-B. Accordingly we are of the view that the view of ours find fortified by the aforesaid decision of the Hon ble Delhi High Court, because the assessee has submitted in his reply before the AO that some of the entries are not made because a consolidated entry has been made after adjusting both of the entries i.e., purchase of shares and sale of shares, but that do not have the charter of any taxable income. 21. Further as we have already discussed in detail that neither the AO, nor CIT(A) has brought any material on record that which part of the income was not d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st the sustenance of charging of surcharge on the assessed income for the block period. 26. The AO while computing the income-tax has also levied surcharge at 15 per cent. The CIT(A) also confirmed the order of the AO. 27. After hearing the learned authorised representative and considering the material on record, we find that assessee deserves to succeed in this ground also. The identical issue has been discussed by the Calcutta Bench in the case of Principal Officer, Builcon Towers (P) Ltd. vs. Asstt. CIT (2000) 113 Taxman 74 (Cal)(Mag), wherein it has been held that "Chapter XIV-B consisting of ss. 158B to 158BH, was inserted by the Finance Act, 1995 w.e.f. 1st July, 1995 and s. 113 was also simultaneously introduced by the Finance Act, 1995 w.e.f. 1st July, 1995. Since the tax is specified in sub-s. (2) of s. 158BA r/w s. 113, viz., at the rate of 60 per cent, there was no question of increasing the same by surcharge as per the Finance Act, 1996. In the Finance Act, 1995, in so far as s. 113 is concerned, there is no provision for charging surcharge on income-tax as per Part-I of the First Schedule. Another reason is that para "E" of Part-I of the First Schedule to the Finan ..... 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