9911796707
TMI Blog2006 (10) TMI 189X X X X Extracts X X X X X X X X Extracts X X X X ..... d No. 3 is against the findings of the learned CIT(A) in which he confirmed an addition of Rs. 1,78,204, made by the Assessing Officer, for commission paid by the assessee for obtaining accommodation entries aggregating to Rs. 1,78,20,411 from M/s. Friends Portfolio Pvt. Ltd. (hereinafter called 'Friends Portfolio'). Ground No. 4 is against confirmation of the findings of the Assessing Officer regarding the charging of interest under section 158BFA. 2. On perusal of the assessment order, it is seen that the genesis of issue of notice under section 158BC read with section 158BD of the Act was search and seizure operation conducted at the premises of Friends Portfolio. In the course of the search, statements of Shri Manoj Aggarwal and other persons were recorded and thereafter assessment was completed in their cases. It was found that all the transactions undertaken by Shri Manoj Aggarwal through Friends Portfolio and his other concerns were bogus transactions, in the nature of merely providing entries without any real physical transactions relatable to those entries. Such entries were taken by a number of persons, namely, S/Shri C.P. Khanna, Puneet Khanna, Rajiv Aggarwal, Dhanraj S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ock period. It was explained that the assessee has dealt in shares through Friends Portfolio, for which he received aggregate amount of Rs. 1,78,20,431. The facts regarding the amount disclosed in the return for assessment year 2000-01 and in the return for the block period were reiterated. It was also explained that the amount of about Rs. 28 lakhs was offered for taxation in the assessment of block period as the assessee could not collect the details subsequently. It was also explained that income of Rs. 1,50,30,137 was declared in the return for assessment year 2000-01 as 'Income from other sources', the details of which were recorded in the books of account. Therefore, it was agitated that the income declared in the return for assessment year 2000-01 could not be brought to tax as the UDI of the block period. It was also explained that the assessee had no connection with either Shri Manoj Aggarwal or Shri Bhushan. The transactions with Friends Portfolio were conducted through the employees of the assessee. No commission was paid either to Shri Manoj Aggarwal, Shri Bhushan or Friends Portfolio. On the basis of the facts and after considering the arguments of the assessee, the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee paid cash plus commission for getting accommodation entries by way of cheques of the total amount of Rs. 1,78,20,431. He also added a sum of Rs. 1,78,204 as estimated commission paid for the services rendered by Shri Manoj Aggarwal and others. In this connection it was represented before him that the impugned amount represented profit on share of shares, the details of which were not traceable. Therefore, a sum of Rs. 1,50,30,137 was shown as income from other sources in the return of assessment year 2000-01, on which tax was paid. Since the details in support of the cheques were not traceable, the assessee bifurcated the amount as aforesaid on the basis of his memory. Therefore, his case was that since the sum of Rs. 1,50,30,137 had been entered into the books of account, declared in the return for assessment year 2000-01 and tax was paid thereon, therefore, the finding of the Assessing Officer that this was done to reduce the rate of tax from 60 per cent to the maximum marginal rate on this amount was at best only a conjecture as there was no evidence in support of the aforesaid finding. In any case, the assessee's case was covered under section 158BB(1)(c)(A), which provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below:- -------------------------------------------------------------- -------------------------------------------------------------- Sl. No. Date Event -------------------------------------------------------------- 1. 15-3-2000 Advance-tax paid 2. 31-3-2000 Previous year ended in which assessee received cheques from Friends Portfolio, deposited in his Bank account and shown in the Books of account. 3. 3-8-2000 Search at the premises of Friends Portfolio 4. 31-8-2000 Due date of filing return under section 139(1) for assessment year 2000-01 5. &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued to the assessee under section 158BD (It should be read as 158BC). -------------------------------------------------------------- 4.1 It was pointed out by the learned counsel that Friends Portfolio or Shri Manoj Aggarwal was not connected with the assessee in any manner and the assessee had no interest in the aforesaid company. However, the assessee received certain amounts by way of cheques from Friends Portfolio, the details of which are furnished on page 7 of the paper book. These cheques were credited in the accounts as "Income from other sources" and the cheques were deposited in the Citi Bank or the Central Bank of India. On perusal of page 7 of the paper book, it is seen that this is an account from the books of the assessee with heading "income from other sources", in which various amounts were credited from 20-9-1999 to 6-3-2000, aggregating to Rs. 1,50,30,156.75. The City Bank or the Central Bank of India, as the case may be, were debited in respect of all the entries in this account. Thereafter, the learned counsel referred to page 14 of the paper book, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) on page 6 of his order. For the sake of ready reference the definition of undisclosed income is reproduced below:- '"Undisclosed income" includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purpose of this Act (or any expenses, deduction or allowance claimed under this Act which is found to be false)'. In the context of the aforesaid definition, it was pointed out that the income had been disclosed in the return of income for assessment year 2000-01, as evidenced by page 2 of the paper book. This income had also. been credited to profit & loss account for the year ended on 31-3-2000 as other income, as evidenced by profit & loss account, placed an page 4 of the paper book. Therefore, it was argued that the income does not fall in the ambit of "undisclosed income", as defined in section 158B(b). When it was pointed out that while the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel was that in any case, machinery section relating to the computation of the UDI fails in respect of the impugned income, as provided in section 158BB(1)(d) and, therefore, it could not have been included in the assessment of the block period. It may be pointed out that sub-section (1) of section 158BB provides for the machinery regarding computation of the UDI. According to this sub-section, aggregate of the total income of the previous year falling within the block period has to be computed in accordance with the provisions of this Act and on the basis of evidence found as a result of search and such other materials or information as are available with the Assessing Officer and relating to such evidence. Thereafter, the amounts, mentioned in clauses (a) to (f) have to be reduced if such amounts are incomes and added in case such amounts are losses from or to the total income computed earlier. Clause (d) provides that where the due date of filing of the return of income under sub-section (1) of section 139 has not expired on the date of search, then, the income on the basis of entries relating to such income or transactions as recorded in the books of account and other docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y over a number of years, there was no material on the basis of which it could be said that the assessee would not have filed the return of income if the search had not taken place. It may be added that the facts of our case are different from the facts of that case. The reason is that question here is whether the assessee would have disclosed the impugned income in the return of income for the relevant previous year if search had not been conducted, particularly in a situation where the impugned income was not a part of regular income. It may also be added that the impugned income was entered in the books of account and the material question before us is whether such income was recorded in the books prior to the date of search or after the date of search. 5.1 The learned counsel also relied on the decision of Hon'ble ITAT, Jodhpur Bench in the case of Dy. CIT v. M.L. Jain [2005] 96 TTJ 362. In that case, the assessee was found in possession of certain shares in the course of search and seizure operation. It was explained that all the shares were recorded in the books of account of the respective persons. However, the assessee made a surrender of Rs. 2.50 lakhs on this account and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned income was roughly the same amount as the self-assessment tax paid by him at the time of filing belated return. Therefore, on a rational consideration of the facts, it will have to be held that advance-tax was not paid in respect of the impugned income. 5.3 A mention was also made of the decision of Hon'ble ITAT, Delhi Bench "E" in the case of M.S. Aggarwal v. Dy. CIT [2004] 90 ITD 80. The facts of that case were that during the course of search on 25-11-1999 at the residential as well as business premises, some documents and records were seized. Prior to commencement of the search, the assessee admitted in a statement that gifts received by him and his HUF, aggregating to Rs. 60 lakhs, were bogus as they were arranged through a chartered accountant against payment of cash. This statement was affirmed again on 6-1-2000. The assessee filed the return for the block period in which aforesaid gifts were not included. The Assessing Officer added the aforesaid gifts in the UDI. Hon'ble Tribunal pointed out that assessment under Chapter XIV-B was not in substitution of regular assessment. The assessment was limited to material unearthed during the course of search. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Friends Portfolio was merely furnishing accommodation entries and he was not conducting any business whatsoever. In this connection, he referred to the detailed discussion in the assessment order regarding the background of the case, in which it was pointed out that Shri Manoj Aggarwal clearly deposed to the effect that he was carrying on the business of providing accommodation book entries regarding bogus long-term capital gain, short-term capital gain, profit, loans and advances, gifts, purchase bills, and sale and purchase bills of jewellery. Such entries are obviously taken with a view to evade income-tax. This was the key reason for holding that the income would not have been disclosed to the revenue. It was further pointed out that there is a peculiar position in this case, namely, that the assessee had taken entries aggregating to about Rs. 1.70 crores, out of which entries aggregating to Rs. 1.50 crores were entered in books of account and disclosed in the return of income, but entries aggregating to Rs. 20 lakhs were declared in the black period return. In spite of repeated questioning about the aforesaid bifurcation and the basis thereof, no explanation was given. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Therefore, his conclusion was that unaccounted income was being shown in the guise of gold ornaments inherited by the assessee. This conclusion was confirmed by the AAC and the Tribunal. The Hon'ble High Court held that the two amounts represented assessee's income from undisclosed sources in absence of any proof that the amounts related to any earlier previous year. In this connection, it was pointed out that the assessee cannot be heard to say that it is for the revenue to bring some material or evidence on record to suggest affirmatively that the cash amount was the equivalent of some goods or gold and must be attributable to a particular year in question. If a sum is found to have been received by the assessee, the onus of proving the source is on him. Further if the disputes the liability to tax, it is for him to show that the receipt was not income or that it was exempt from tax under some provision of the Act. We find that the ratio of that case is not applicable to the facts of this case. In this case, the source of money is Friends Portfolio and the assessee is not disputing that the receipts are in the nature of income, although there is no evidence about nature of tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was no intention to declare the income and, therefore, the Assessing Officer rightly added the amount in the UDI. The learned CIT(A) also passed a very well reasoned order upholding the decision of the Assessing Officer. Therefore, it was agitated that the decision of the learned CIT(A) ought to be upheld on the facts and in the circumstances of the case. 7. In the rejoinder, the learned counsel referred to page 1 of the paper book, being the belated return filed for assessment year 2000-01 on 30-11-2000. Thereafter, he referred to paragraph 1.2 of the order of the Assessing Officer, in which it was mentioned that proceedings of block assessment were completed in the case of Friends Portfolio on 29-8-2002, in which it was established that they were merely giving accommodation book entries to various parties. His case was that the return filed by the assessee was prior to completion of assessment in the case of Friends Portfolio as well as issue of notice under section 158BC to the assessee. The assessee had made entries in the books of account much earlier. There could be no presumption that the assessee came to know about the search in case of Friends Portfolio on or about the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led on 30-11-2000. However, the learned counsel did not clarify whether all these accounts were old accounts or the accounts in which the aforesaid cheques deposited were operated for the first time in the relevant previous year. It is also seen that there were other cheques received from Friends Portfolio, which were credited in ICICI bank and ANZ Grindlays bank between 19-6-1999 to 10-8-1999, which were not disclosed to the department as these names do not appear on page 14 of the paper book. The entries in ledger account showing income from other sources starts from 20-9-1999, roughly 10 days after the last entry of credit of Rs. 2,55,834 in the account of ANZ Grindlays bank. The learned counsel has not thrown any light about the distinction between the entries relatable to the period from 19-6-1999 to 10-8-1999 on one hand and from the period 20-9-1999 to 6-3-2000 on the other. It is also seen that the assessee did not pay advance-tax on income credited under the head "Income from other sources" while such income was received periodically between 20-9-1999 to 6-3-2000. On the other hand, the burden of the argument of the learned DR is that all attendant circumstances lead to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee in the course of business through the employees, where a presumption could be that he was not in the knowledge of such receipts or expenditure. First of all, the transactions were not in the normal course of business as clearly pointed out by Shri Manoj Aggarwal. The transactions were obviously undertaken either for laundering of money by making false entries in the books of account or for suppression of income. Such transactions could have been done only on the express directions of the assessee and after discussing the matter with Shri Manoj Aggarwal. Therefore, there was a clear design in undertaking these transactions, the purpose of which could only be concealment of income or laundering of income. It is clear that the income or transactions had not been disclosed to the revenue on or before the date of search. It is also clear that the income or transactions would not have been disclosed but for the search. Thus, the case of the assessee is clearly covered in the definition of "undisclosed income". It may be added that the whole situation has to be viewed as on the date of search and subsequent discussion, dealing with other provision will highlight the imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d been satisfied and thereby excluded the impugned income from the UDI. Thus, we are of the view that the provisions of the aforesaid sub-section do not come to the aid of the assessee. 9.2 It was also argued that the case of the assessee is saved by the provision contained in clause (d) of sub-section (1) of section 158BB. This clause, inter alia, deals with a situation where the date of filing of the return under sub-section (1) of section 139 has not expired on the date of search. It is provided that the income on the basis of entries relating to such income or transactions, as recorded in books of account or other documents maintained in the normal course on or before the date of search, shall be deducted from the aggregate of total income computed under main sub-section (1) of section 158BB. The contents of this section are somewhat analogous to sub-section (3) of section 158BA. The pre-requisites for deducting the income from the total income are that the transactions are recorded in the books of account and other documents maintained in the normal course on or before the date of search. We have seen that overwhelming evidence regarding the recording of these transactions in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not have been assessed in the regular assessment. However, that does not lead to an inference that the impugned income should not be assessed under Chapter XIV-B, as it has been assessed in the regular assessment. The proper course in such a case would be to exclude the UDI from the regular assessment. Therefore, even these provisions do not advance the case of the assessee. 9.4 Having considered the rival arguments and the case laws on the issue, we are of the view that the Assessing Officer had rightly assessed the impugned income as the undisclosed income of the assessee. Consequently, the learned CIT(A) had also rightly upheld the order of the Assessing Officer on this issue. Therefore, Ground Nos. 1 and 2 of the appeal are dismissed. At the same time, we are also of the view that this income should not have been assessed in the regular assessment notwithstanding the fact that the assessee had disclosed the income voluntarily in the return for assessment year 2000-01. The ld. CIT(A) has given a finding that tax paid on this income in this assessment year should be considered as tax paid on the UDI. However, we are of the view that this income cannot be assessed in a regular a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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