9911796707
TMI Blog2003 (8) TMI 186X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfaction having been reached by AO of Shri Alok Aggarwal, being the person search under s. 132 against the appellant, as 'the other person' referred to in that section, hence, the impugned order passed against the appellant, who was subjected neither under s. 132, nor under s. 132A, is illegal and void. (c) That the impugned order is also void being barred by limitation, inasmuch the impugned notice dt. 12th Oct., 2000, under s. 158BC/158BD was issued after the expiry of the period within which satisfaction, as envisaged under s. 158BD, was required to be reached by AO of the person search under s. 132, but within which period no such satisfaction was reached against the appellant as "the other person" referred to in that section. In fact, no such satisfaction was reached so as to authorize the AO to assume valid jurisdiction under s. 158BD/158BC against the appellant. (d) That the impugned order is also vitiated and unsustainable in law, as it was passed in breach of principles of natural justice and fair play, without giving any opportunity of advance hearing to the appellant before issuing the impugned notice under s. 158BC/158BD to enable the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies cited in support of the assessee's case. Learned counsel has also filed copies of orders of the Tribunal in the other cases of the group arguing that these decisions squarely support the case of the assessee for deletion of the impugned addition on account of share capital. 3. At the outset, we may briefly set out relevant facts having a bearing on the point in issue arising in the present appeal. 4. The assessee is a closely-held public limited company incorporated and registered under the Companies Act, 1956, on 9th Sept., 1992. It has been filing its returns of income from asst. yr. 1993-94 onwards, as per the following particulars: Asst. yr. Date of filing of Return Remarks 1993-94 31-12-1993 Assessed on nil income under s. 143(1)(a) vide intimation dt. 13th June, 1994. 1994-95 24-11-1994 Returned income ₹ 1,87,972 assessed at ₹ 3,94,972 under s. 143(3) vide order dt. 31st Oct., 1996. Addition of ₹ 2 lacs has been made on account of share capital appearing in the name of MKN Portfolio Ltd. 1995-96 30-11-1995 Assessed under s. 143(3) vide order dt. 23rd Jan., 1998, accepting the return income of ₹ 4,00,753 introduced in the books, for wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under: Asst. yr. Share capital (Rs.) 1993-94 15,500 1994-95 69,22,000 1995-96 45,52,500 1996-97 1,12,25,000 Total 2,27,15,000 While making the impugned addition the AO observed that material seized from the premises of Shri Alok Aggarwal contained books of account, documents and papers which indicate that share capital of the assessee-company was non-genuine. The observations of the AO at p. 3 of the impugned assessment order wherein reference has been made to the seized material are extracted below: "Scrutiny of the seized material which contained bundles of loose papers and certain registers like share application and allotment register, register of director shareholding, etc., revealed that in the case of every alleged shareholder, a set of document has been kept. Each set contained the following documents: 1. Copy of the cheque by which the share application money has been received. 2. Share application form duly filled and signed. 3. Signed blank receipt for sale of the allotted shares. All the details like the amount, name of the purchaser, the rate at which the shares are to be sold, the distinctive numbers and the details of mode of payment, etc., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntention on the ground that the return of income for asst. yr. 1996-97 has been filed on 30th Nov., 1996, i.e., after the date of the search surrendering the share capital since there were substantial losses incurred by the assessee-company which offset the surrendered amount. 8. Aggrieved, the assessee has come up in appeal before us. 9. Learned counsel, assailing the impugned addition of ₹ 2,27,15,000 made by the AO, did not press ground No. 1 against legality of the impugned assessment. We would accordingly dismiss ground No. 1. 10. Learned counsel focussed his arguments against the merits, legal and factual, of the impugned addition of ₹ 2,27,15,000 made on account of share capital of the assessee-company and argued that the share capital raised by the assessee-company in various years has been duly recorded in the regular books of account which have been audited and audit reports along with the statement of accounts have been duly submitted before the IT authorities while filing the returns of income. Learned counsel referred to the list of shareholders with complete addresses placed in the paper book Vol. 2, at pp. 141 to 149 and argued that shareholders are id ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve basis. However, the Tribunal, after elaborate discussion of the facts and circumstances of the case, deleted the addition in Alok Aggarwal's case [IT(SS)A No. 83/Del/2001, dt. 14th Feb., 2003] on the ground that the share capital stood duly recorded in the regular account books on the date of the search and subscribers of the share capitals have duly furnished confirmation certificates which indicate that such shareholders are existing assessees. On the basis of these facts, the Tribunal came to the finding that provisions of Chapter XIV-B would not be applicable. Relying upon the aforesaid order of the Tribunal in IT(SS)A No. 83/Del/2001, dt. 14th Feb., 2003 (copy of which was duly furnished before us), learned counsel argued that the issue stands fully covered against the Revenue by the finding and reasoning adopted by the Tribunal in the said order. Further, reliance is placed on the decision of the Tribunal in the case of Makhni & Tyagi (P) Ltd. in IT(SS)A No. 204/Del/2002, dt. 21st July, 2003, wherein the Tribunal, after discussing the facts and circumstances of the case, deleted identical addition on account of share capital. It is stated that Makhni & Tyagi (P) Ltd. is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the circumstances under which the amount has been surrendered in the return: "The next point relates to reasons for surrender of share capital raised during the year. It is submitted that the assessee had its further issue of share capital made during the year subscribed through persons known to the assessee. The assessee in order to verify the creditworthiness of the persons who had subscribed to the share capital during the year asked them to show their records/confirm the source of investment made. It appeared that the source of investment made by them was dubious and not straight and clear as these persons did not appear to co-operate and give evidence of the genuine and confirmed source of their investments. The assessee therefore, thought it to be prudent to offer the amount of such share capital for taxation under s. 68 suo moto to buy peace even before it could be asked to prove the same and the assessee failed to do so for want of co-operation from these shareholders. Thus, the surrender was for reasons beyond the control of the assessee and in good faith." Copy of the assessment order for asst. yr. 1996-97 is placed in the paper book at p. 66 which indicates t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one through the compilation of papers filed by the learned counsel as well as string of judicial authorities cited before us. At the very outset, we cannot help observing that impugned block assessment order made by the AO does not reflect application of mind on the part of the AO while proceeding to include the entire share capital of ₹ 2,27,15,000 as undisclosed income of the assessee-company for the block period. Assessee-company is duly incorporated under the Companies Act as a public limited company and existence of corporate entity and genuineness of the company is not disputed by the Revenue. The company is closely held and obviously promoters of the company and its directors have subscribed share capital in addition to the subscription made by the public at large. Complete list of the shareholders with their addresses has been filed before us at pp. 141 to 149 of the paper book. From this list, we find that shareholders include limited companies, namely, M/s Akarti Media (P) Ltd. 20,000 shares assessed with Co. Ward I(1), New Delhi and Vardhman Leasing & Services Ltd. 1,50,000 shares assessed with Special Range 16, New Delhi. Such shareholdings subscribed by the limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng register as well as various other documents like confirmations of shareholding signed by the shareholders of the assessee-company as found at the premises of Shri Alok Aggarwal, a practising chartered accountant. The relevant extract from the impugned assessment order indicating the seizure of the various types of documents from the premises of Shri Alok Aggarwal as per p. 3 of the block assessment order has already been reproduced hereinbefore. This appears to be the sole basis adopted by the AO to treat the entire share capital of ₹ 2,27,15,000 as undisclosed income. Obviously, the AO has been shifting his stand with regard to the addition on account of share capital. Firstly, the share capital was added in the block assessment order in the case of Shri Alok Aggarwal. This assessment was made on substantive basis. The Tribunal, however, set aside the said assessment with the direction that fresh assessment be made after allowing proper opportunity to the assessee and the facts and material collected during the search operations as well as the block assessment proceedings should be confronted to the assessee. AO, however, made a fresh assessment merely repeating the addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : "(b) the total undisclosed income relating to the block period shall not include the income assessed in any regular assessment as income of such block period." Explanation (b), as reproduced above, in explicit and unequivocal terms excludes from the purview of undisclosed income relating to the block period the income assessed in any regular assessment. In the instant case, we find that for asst. yr. 1996-97, the assessee surrendered the accretion of the share capital to the extent of ₹ 1,12,25,000 in the return of income filed on 30th Nov., 1996, i.e., after the search period. The said amount has been included in the regular assessment made by the AO under s. 143(3) on 29th May, 1998. Similarly, for asst. yr. 1994-95, we find that a sum of ₹ 2 lacs has been assessed by the AO on account of contribution of share capital in the name of MKN Portfolio (P) Ltd. This assessment has been made under s. 143(3) on 30th Oct., 1996, as per the assessment order placed in the paper book at pp. 90 to 96. We are inclined to accept the contention of the learned counsel that by virtue of Explanation to s. 158BA(2), the action of the AO in making double addition is in any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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