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TMI Blog2010 (4) TMI 874X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the premises which contained accounting and trading data of (Triumph Securities Ltd., Triumph International Finance (India) Ltd., for financial years 1999-2000 and 2000-01. The Assessing Officer on the basis of records of the assessee and after considering the findings of fact as pointed out by the auditors in their report under section 142(2A), determined the undisclosed income at Rs. 4,44,42,22,680 as against the nil income returned by the assessee. Ld. CIT(A) confirmed the Assessing Officer s action. When the matter came up before the Tribunal on 3-7-2009, ld. D.R. stated that on identical facts and on the basis of the same 12 CDs, on which basis the additions had been made in the hands of the assessee, the additions were made in the hands of the group concern also, viz.; Triumph International Finance India Ltd. (TIFIL), which have been sustained by the Tribunal and, therefore, the issue is covered by the decision of the Tribunal and had to be followed. On the other hand, ld. counsel for the assessee had submitted that on identical facts in the case of the assessee itself, while deciding the appeal for the assessment year 1999-2000, similar additions had been deleted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the client code shown in the books of account of the assessee. Thus, the identity of client, who allegedly had undertaken the transaction, became subject-matter of further investigation and, therefore, the matter was also referred for audit under section 142(2A) of the Income-tax Act, 1961. Assessing Officer noted the following observations of the auditors as reproduced in para 12.3 of his order : "As per our analysis of the reconciliation statement provided by the assessee there are discrepancies as to client codes as per the BSE records and their books. On our detailed verification we have come across approximately 50 per cent to 55 per cent of transaction which shows variances vis-a-vis BSE and books. A detailed electronic data specifying in detailed statement contained in a CD is enclosed herewith (refer attachment No. D in the form of CD separately. After preparation of the reconciliation based upon the above said data, we have forwarded a CD containing mismatch under various classifications to the assessee for their clarification vide our letter dated 15-6-2002. In absence of clarifications from the assessee we have not considered any type of differences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the brokers were allowed to alter the client ID. 3.1 The Assessing Officer elaborately considered the provisions of section 158BB, which defines undisclosed income and observed that same includes any income based on any entry in the books of account or other documents or transactions where such entry in the books of account or other documents or transactions represented wholly or partly income or property, which has not been or would not have been disclosed for the purposes of this Act. He pointed out that the statements recorded in the books of account, in the form of transaction, do not alone constitute sufficient evidence to prove that the transactions are disclosed unless the income embedded in the said transaction is also disclosed. 3.2 The Assessing Officer further observed that the word "evidence" is derived from latin word evidens or evidere, which means to show clearly, to make clear to the side, to discover clearly, to make plainly certain, to ascertain, to prove. 3.3 After considering the meaning of term disclosed and evidence in the context of section 158BB, he pointed out that mere entry in the books of account is not sufficient and if in course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to explain as to why their undisclosed income should not be computed on the basis of details available on record regarding mismatch of client ID code. The assessee in its reply, inter alia, accepted in principle that there was client ID mismatch and, therefore, furnished the necessary confirmations. It was pointed out that wherever confirmations were not available, circumstantial evidences in the form of agreement with clients, acknowledgement of contracts, receipt/giving of delivery of shares and receipt/payment of money were furnished to establish that clients were existing and the trades belonged to them. The assessee had also furnished a list of clients in respect of whom confirmations could not be furnished but ledger accounts and other circumstantial evidences were furnished. 3.7 The Assessing Officer examined the modus operandi with reference to various Circulars issued by SEBI and after considering the detailed guidelines concluded that the assessee s explanation that punching of name was not mandatory in the given period, was not correct because it was necessary to have the same name and client ID entered in his sauda book and other primary documents along with con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d out that the burden to prove is on the assessee which he failed to discharge. 3.11 On the basis of aforementioned discussion, the Assessing Officer computed the undisclosed income of the assessee in para 13 of his order as under : " Assessment year 2000-01 ( a ) Profit from speculation Rs. 77,88,23,123 ( b ) Unexplained investments u/s. 69 Rs. 78,67,98,988 ( c ) Profit on delivery based transactions Rs. 14,02,21,226 Previous year 1-4-2000 to 23-3-2001 ( a ) Unexplained investment u/s. 69 Rs. 2,73,83,79,346 Total undisclosed income Rs. 4,44,42,22,683 Rounded off to Rs. 4,44,42,22,680" 4. Before ld. CIT(A), the first issue raised by the assessee was whether the Assessing Officer s action in bringing the impugned additions within the purview of block assessment under Chapter XIV-B was in accordance with law or not? 5. Ld. CIT(A) concurred with the findings of the Assessing Officer that it is not enough that entries in the books or the expenses as per the boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence to various case laws and observed that it has been held that the definition is inclusive definition so that the meaning is not limited but widens its net. The word "income" is of widest amplitude and it must be given its natural and grammatical meaning. Drawing parity with the definition of income , ld. CIT(A) observed that since the definition of undisclosed income is also inclusive, the concept laid down in various case laws will apply mutatis mutandis. Therefore, the income, which would not have come to the notice of the department but for the search, should be included as undisclosed income of the block period. Ld. CIT(A) examined the ingredients of undisclosed income and observed that in the first category, reference to disclosure is not to the entire transaction/entry but to the income or property which had been embedded therein. He pointed out that the Legislature has not restricted the determination of undisclosed income to the entries but has included the transaction also. Even if any entry is not indicative of undisclosed income, the entire transaction which would complete those entries in a logical manner has to be considered so as to determine the undisclose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trinsically linked to the search operation and would not have seen light of the day but for the same. Consequently I am of the considered opinion that the same has to be taxed under the block assessment. Coming to the quantum aspect of the additions, relating to unexplained purchases and profit on both delivery based and speculative transactions, during the course of appellate proceedings the appellant was asked in specific to furnish the details of turnover (both delivery based and speculative) as also the profit arising out of delivery based as well as speculative transactions. Apart from the same, the appellant was asked to provide client wise confirmation in respect of delivery based transactions and in case of profit in delivery based/speculative transactions and was also asked to produce the confirmations from the respective clients. Excepting for producing some sketchy details on the turnover which it had procured from the stock exchange no further detail or confirmations as asked for could be produced. In fact the turnover could not be reconciled with the book figure. Consequently there is no other option but to sustain the order of the Assessing Officer on the issue. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 001 to 23-3-2001 were made in the block assessment and similar additions were made for assessment year 1999-2000 in the regular assessment. He pointed out that the Assessing Officer has made three types of additions. Firstly, under section 69 as unexplained investment, secondly, profit on speculation and thirdly, profit on delivery based transaction. He pointed out that in the course of search only 12 CD Roms were seized which are mentioned in the regular books of account and details of transaction recorded in the regular course of business. He pointed out that the assessee is a stock broker only. Ld. counsel pointed out that no transactions were undertaken at National Stock Exchange since the assessee was only the broker of Bombay Stock Exchange. Ld. counsel submitted that Assessing Officer in para 12.2 has observed "on the basis of the data and on the basis of further evidence gathered". He submitted that it is not correct because apart from 12 CDs, no further evidence was found at the time of search. He further submitted that there is no dispute regarding mismatch between the client ID as per assessee s book vis-a-vis stock exchange. He submitted that the main issue to be deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year, therefore, it could not be the basis of addition. In this regard, ld. counsel for the assessee referred to para 12.14 of the assessment order and pointed out that the Assessing Officer has observed that the auditors pointed out the mismatches pertaining to name of the client, quantity of shares and rate of shares whereas the mismatch was only with regard to identification of the parties. He referred to page 3 of the assessment order and pointed out that the Assessing Officer has observed that the reconciliation of client ID code could not be made. He further referred to page 21 of the assessment order to point out that it was at the instance of auditors that the confirmations were filed but the Assessing Officer says that the assessee undertook the exercise of filing the confirmation letters based on ledger account of the assessee. He referred to para 12.17 of the assessment order and pointed out that in the stock exchange records, nothing was beyond the books. Ld. counsel submitted that for finding out the real transaction, circumstantial evidence should also have been considered. 11. As regards the quantification of profit, ld. counsel submitted that the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in regular assessment and not in block assessment. In support of his contention, ld. counsel relied on the following decisions : ( a ) CIT v. Shamlal Balram Gurbani [2001] 249 ITR 501 (Bom.); ( b ) CIT v. Jupiter Builders (P.) Ltd. [2006] 287 ITR 287 (Delhi); ( c ) CIT v. Vikram A. Doshi [2002] 256 ITR 129 (Bom.); ( d ) Bhagwati Prasad Kedia v. CIT [2001] 248 ITR 562 (Cal.); ( e ) CIT v. P.K. Ganeshwar [2009] 308 ITR 124 (Mad.); ( f ) CIT v. N.M. Associates [2002] 256 ITR 141 (Mad.); ( g ) CIT v. Ravi Kant Jain [2001] 250 ITR 141 (Delhi); ( h ) Sunder Agencies Ltd. v. Dy. CIT [1997] 63 ITD 245 (Mum.). 15. Ld. counsel for the assessee submitted that the Assessing Officer has not rejected the books of account and the special auditors also say that the accounts reflect the true and fair view. 16. Ld. counsel pointed out that discrepancy may be there but what is the consequence of the same is to be examined. In this regard, he relied on the decisions of ITAT Delhi Bench in the case of Dang Co. (P.) Ltd. v. Dy. CIT [2005] 94 ITD 29 (TM) and Raj Kumar Chawala v. ITO [2005] 94 ITD 1 (SB). 17. Ld. counsel submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation which in the opinion of the Assessing Officer is not satisfactory. . . ." 19. In the final leg of his arguments, ld. counsel submitted that if at all the addition is to be made then the issue would be as to what amount should be added. In this regard, he referred to pages 92 to 98 of PB, wherein, the list of clients whose confirmations have been obtained subsequent to addition made by the Assessing Officer, was contained. He pointed out that these confirmations were filed before the ld. CIT(A) but he has not at all referred to these confirmations. Ld. counsel for the assessee further submitted that collateral evidences were filed before the Assessing Officer. In this regard, he referred to certain examples to demonstrate that names were appearing in the bank statement as that in the books of account. He referred to page 76 of PB, wherein, the list of clients whose confirmations were not available till the assessment and for which addition of Rs. 162.95 crores has been made in the order. He referred to Sl. No. 78 at page No. 78 of PB, wherein, the name of client is Daksha P. Modi. He pointed out that in the bank statement of Global Trust Bank on 9-9-1999, the name of D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale consideration. Case III : Only sales made by client Sr. No. Name of client Bought Sold Specu- lation Total turn- over Deli very profit No.% Bro- ker- age Specu- lation Deli- very To- tal Specu. Del. Total Profit 16. Anil Dharke 446359 446359 275044 275044 0 721403 -171315 0.00 5016 446359 446359 275044 275044 0 721403 -171315 0.00 5016 (1) In the above case, the client has made purchase as well as sale transaction. (2) The assessee has received the amount from the client to purchase and has made the payment to client against his sale. (3) The Assessing Officer has made the following addition : Unexplained investment 446359 Delivery profit -171315 Total: 275044 (4) So what Assessing Officer has made both purchases and sales where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( iv ) Transactions of the clients whose names appear in the bank statement Balance 110 22 0.05 0.00 0.00 0.04 24 0.22 -0.22 -0.18 -0.19 ( v ) Transactions of the clients who have entered client agreement with the appellant Balance 112 1 0.00 0.00 0.03 0.03 23 0.22 -0.22 -0.21 -0.21 ( vi ) Transactions of the clients whose names appear in the bank slips Balance 114 9 0.06 -0.06 -0.04 -0.04 14 0.16 -0.16 -0.17 -0.17 20. Ld. counsel for the assessee submitted that the Assessing Officer s case is that the clients are benamidars of the assessee. But admittedly these are not sham transactions because money is coming and going through bank. Under such circumstances, at best, only peak could be added. Further elaborating his arguments in this regard, ld. counsel for the assessee submitted that peak can be added if peak is emanating from a source which is unidentified. Howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the data found the search was part of the books of account of the assessee but the real nature of the transactions recorded in the computers of the assessee saw the light of the day of the basis of the material found during the search and follow up inquiry made by the income-tax authorities. We are also in agreement with the finding of the CIT(A) that the assessee has filed to explain satisfactorily the real nature of clients ID mismatch. The definition of undisclosed income as laid down in section 158B( b ) is an inclusive definition and as the ingredients of undisclosed income, need not to be limited to what is described in the definition but shall also include items which partake the character of income in terms of any item which was noticed or discovered as a result of search. In our view, the CIT(A) has rightly upheld the view of the Assessing Officer that the income arising out of the said ID mismatch is assessable as undisclosed income under Chapter XIV-B of the Income-tax Act." 24. Ld. counsel for the assessee referred to pages 20 to 31 of PB, wherein, order of approval under section 142(2A), dated 23-3-2001 is contained and pointed out that on the basis of report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the summons given could not lead to any adverse inference against the assessee. Relying on this decision, ld. counsel submitted that substantial compliance has been made by filing confirmations in most of the cases. 26. As regards Ground Nos. 3 to 4, ld. counsel submitted that arguments have already sen made for these grounds. As regards Ground No. 5, ld. counsel fairly conceded that this issue is to be decided against the assessee. As regards Ground No. 6, ld. counsel submitted that the return was filed on 17-8-2001 and, hence, there was no delay. Accordingly, no interest under section 158BFA could be charged. We find that notice under section 158BC was issued on 6-7-2001 and the assessee had filed return on 17-8-2001, i.e., within 45 days of the issue of notice and, therefore, no interest is chargeable under section 58BFA. Accordingly, Ground No. 5 is rejected and Ground No. 6 is allowed. 27. Per contra, Dr. P. Daniel, ld. Special Counsel appearing for the revenue, submitted that there was security scam in 2001 and consequently, assessee s business premises was searched on 23-3-2001. He pointed out that in the security scam, it had been detected that only one person, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in regular course of business found during the course of search constitute evidence as contemplated under section 158BB of the Act or not? ( b )Whether the transactions recorded in the regular books of account can be subject-matter of addition in block assessment or not? ( c )Whether the client ID mismatch, found during the course of search, constitute material as contemplated under section 158BB(1) or not particularly when punching of client ID was not mandatory pre-August 2001? ( d )Whether post-search enquiries and investigations in regard to recorded transactions such as tax audit and enquiries from the Stock Exchange could be resorted to for determining the undisclosed income or not? ( e )Whether any addition could be made in respect of the transactions relating to client ID mismatch for non-furnishing of confirmation, when the assessee had furnished more than 98 per cent of the confirmations from the clients for the transactions done on their behalf as a stock broker and accepted by the department? ( f )Whether any addition could be made as unexplained investment applying the provisions of section 69 of the Act when the transactions are recorded in the regular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the block period." 32. Section 158BB deals with the computation of undisclosed income of the block period and reads as under : "(1) The undisclosed income of the block period shall be the aggregate of the total income of the previous years falling within the block period computed, in accordance with the provisions of Chapter IV, on the basis of evidence found as a result of search or requisition of books of account or documents and such other materials or information as are available with Assessing Officer, as reduced by the aggregate of the total income, or as the case may be, as increased by the aggregate of the losses of such previous years, determined, ( a )Where assessments under section 143 or section 144 or section 147 have been concluded, on the basis of such assessments; ( b )Where returns of income have been filed under section 139 or section 147 but assessments have not been made till the date of search or requisition, on the basis of the income disclosed in such returns; ( c )Where the due date for filing a return of income has expired but no return of income has been filed, as nil; ( d )Where the previous year has not ended or the date of filing the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32 shall not be set off against the undisclosed income determined in the block assessment under this Chapter, but may be carried forward for being set off in the regular assessments." 33. From the bare reading of section 158B( b ), it is evident that the undisclosed income is to be worked out on the basis of ( a ) Discovery of assets; ( b ) Discovery of transactions; ( c ) Discovery of entries in the books of account or outside the books; or ( d ) Discovery of any other material to show that the income was not disclosed. As per the requirements of this section, it is not sufficient that the assessee has disclosed the asset, transaction or entry but it is essential that income attributable to the transaction has also disclosed. If the assessee has not disclosed any income then he will not get any deduction under the provisions of section 158BB(1) in the computation of undisclosed income. It is evident that the definition of undisclosed income is inclusive definition and not exhaustive definition, which includes entry in the books of account or other documents which actually represented the assessee s income but has not been disclosed for the purposes of the Act. Any income ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer s conclusion is not based on conjectures or surmises. If no material is found during the course of search operation, either in the form of undisclosed asset or unaccounted entries or transactions, no undisclosed income can be assessed because there may not be any edifice for the structure. However, if some material has been found during the course of search, the Assessing Officer would not be prevented from making enquiries on the basis of such material or information under the provisions of section 143(2A) or 143(2). Thus, all the provisions ensure that subjective information of the Assessing Officer is substituted by material and information gathered either during the course of search or post search enquiry. In order to arrive at whether a particular item constitutes assessee s undisclosed income or not, the intention of the assessee assumes importance and it has to be gathered from the conduct and has to be inferred from the material found during the course of search, which will depend on facts and circumstances of each case. 34. Section 158BA which is a charging section, makes it clear that the Assessing Officer is to assess the undisclosed income in accordance wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material or information available with the Assessing Officer and relatable to such evidence. 35. Now, we will consider the case laws relied upon by both the sides. ( a ) Bansal High Carbons (P.) Ltd. s case ( supra ) In this case, search was conducted on 11-9-2001 at various residential and business premises of a group of assessees, including the assessee, collectively called the Bansal Group. Nothing incriminating was found during the course of search except the books of account of the assessee and in order to verify the correctness of the books of account on 25-9-2001, the Dy. Director of Income-tax recorded the statement of one V.P. Jain, in which, he stated that purchases of Rs. 25 crores were made from Bansal Group out of which, delivery was made only to the extent of about Rs. 2 or Rs. 3 crores. In respect of balance of Rs. 22 or Rs. 23 crores, no material or steel wires were purchased and only bills were issued. The assessee on its part showed sales having been made in cash. The department s allegation was that V.P. Jain received a commission for giving these bills. However, subsequently, V.P. Jain retracted his statement. In the backdrop of these facts, it was hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide that income assessed in regular assessment shall not be included in the block period and income assessed in the block period shall not be included in the regular assessment. The clarificatory amendment is proposed to be inserted retrospectively from the 1st day of July, 1995." The Hon ble Delhi High Court also noted the following observations of the Hon ble Gauhati High Court in the case of Dr. (Mrs.) Alaka Goswami v. CIT [2004] 268 ITR 178 : "Chapter XIV-B of the Act lays down the special procedure for assessment of search cases and provides for assessment of undisclosed income as a result of search. Under section 158BB(1), read with section 158BC of the Act, what is assessed is the undisclosed income of the block period and not the total income or loss of the previous year required to be assessed in the normal regular assessment under section 143(3) of the Act. The exercise under section 143(2) and (3) for regular assessment stands on a different footing than the exercise undertaken by the Assessing Officer under section 158BB, read with section 158BC(B), where the Assessing Officer has to assess only the undisclosed income of the block period on the basis of the evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... included in the undisclosed income of the block period because they were not detected as a result of the search but by the investigation which followed the search. After taking note of the decision of the Hon ble Delhi High Court in the case of Ravi Kant Jain s case ( supra ), wherein, it was held that block assessment is not intended to be a substitute for regular assessment and its scope and ambit is limited in that sense to materials unearthed during search and it is in addition to the regular assessment already done or to be done, the Hon ble Madras High Court held that since the information relating to the fixed deposits in fictitious names was not found during the course of search, it could not be used to arrive at the undisclosed income under the block assessment under section 158BB. Here also no incriminating material was found to question the genuineness of fixed deposits. ( g ) Ravi Kant Jain s case ( supra ) In this case, a search was conducted on 30-11-1996. The assessee in its return filed in pursuance to notice under section 158BC stated that there was no undisclosed income for the block period. However, since the seized material and the books of account were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndisclosed income. The said disallowance was disputed by the assessee on the ground that no material was found in the search which could lead to an inference that assessee s claim for depreciation was disallowed. The learned Third Member, inter alia, held as under : ". . . The core thing to be seen is the evidence found which will be the basis for making the assessment. If there is no evidence or the evidence has already come on record or has been disclosed by the assessee in the assessment proceedings, then that evidence cannot be said to be have been found as a result of search and in that case, the material or information available with the Assessing Officer and relatable to such evidence cannot also help in computing undisclosed income." Thus, the information which the department was in possession of prior to search was not vindicated by any material found during the search. The Assessing Officer merely drawn conclusion based on pre-search enquiries that assessee had incorrectly claimed depreciation. No material was found to suggest the same during search operations. ( j ) Sunder Agencies case ( supra ) In this case, search and seizure action was conducted at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was held that if the cash credits were not taxed in the relevant assessment years, they can be treated as undisclosed income and can be taxed after search in block period. Thus, it was held that on the basis of search, enquiries can be conducted in order to find out the genuineness of the cash credits. At this juncture, we may point out that ld. counsel for the assessee has distinguished this decision by pointing out that in this case also during the course of search, incriminating and loose papers pertaining to the assessee were found. The Hon ble High Court reversed the decision of the Tribunal, wherein, it was held that once the cash deposits have been shown in the books of account maintained by the assessee in the regular course of business, then addition is not warranted in block assessment. The Hon ble Rajasthan High Court has, inter alia , observed as under : "However, we agree with Mr. Singh that merely because some entries in the books of account if shown, that does not prohibit the Assessing Officer to tax that amount in the block period, if that amount has not been taxed in the regular assessment. When the cash credits are not taxed in the relevant assessment years, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be subjected to block assessment and have to be assessed under the regular assessment. ( iii )Post search enquiries can be carried out in order to find the undisclosed income embedded in the evidence during the course of search. In the backdrop of above discussion, let us now examine the specific issues, as noted earlier. ( a )Whether books of account maintained in regular course of business found during the course of search constitute evidence as contemplated under section158BB of the Act or not? 38. Section 132 deals with the provisions relating to search and seizure and if the authorities mentioned in the said section have reason to believe that any person to whom summons has been issued to produce any books of account or other documents omitted or failed to produce the same or the authority has reason to believe that the person to whom summons or notice has been issued but the said person would not produce the books of account or documents, then search can be carried out. Section 158BB clearly states that undisclosed income is to be computed, inter alia , on the basis of books of account or requisition of such books. 39. Section 3 of the Evidence Act define ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty which has not been or would not have been disclosed then same comes within the purview of undisclosed income. The term Entry has been defined in Black s Law Dictionary as under : "The act of making or entering a record, a setting down in writing of particulars, or that which is entered, an item generally synonymous with recording." The term "transaction" has been defined in Black s Law Dictionary as under : "Act of transacting or conducting any business, negotiation; management proceedings; that which is done; an affair. It may involve selling, leasing, borrowing, mortgaging or lending. Some action has arisen. It must, therefore, consist of an act or agreement, or several acts or agreements having some connection with each other, in which more than one person is concerned, and by which the legal relations of such persons between themselves are altered. It is a broader term than "contact"." It is pertinent to note that definition uses both the terms, viz., Entry and Transaction . The object is to cover all facts stated in the books of account. Mere recording of transaction in the books of account is of no consequence unless the true income has been disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ode shown in the stock exchange record at the time of striking the trade is different from client code shown in the books of account of the assessee. The matter was examined further during the course of assessment proceedings. The statutory auditor appointed under section 142(2A) was also asked to examine the matter on behalf of the Assessing Officer in greater details. It was found on examination that in large number of cases client ID code as appearing on the record of stock exchange did not match with the records of the assessee. The Assessing Officer examined the data relating to such mismatch for several of the years of the block assessments. The Assessing Officer was also of the view that this finding was the result of the search and its follow up enquiry and the Assessing Officer was further view but for search operation such finding could not have been there. . . ." From the above observations, it is clear that during the course of search, different client ID mismatch was noticed. Now the question arises whether this client ID mismatch constitutes material in terms of section 158BB or not particularly when punching of client ID was not mandatory pre-August 2001? Ld. cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authorized Officers were in possession of various informations in the form of JPC report also but in the course of search when client ID mismatch was found then the same could be considered for block assessment purposes. Before JPC, Shri Ketan Parekh had admitted that he was carrying on the transactions in the name of other persons and the client ID mismatch found during the course of search vindicated the said information. In our opinion, whether the punching of client ID was mandatory or not cannot be overemphasized in the backdrop of admission made by assessee before JPC and findings of Special Auditors. We, therefore, hold that client ID mismatch found during the course of search and subsequent enquiries carried out in that regard could be taken into consideration for block assessment proceedings. ( d )Whether post search enquiries and investigations in regard to recorded transactions such as tax audit and enquiries from the Stock Exchange could be resorted to for determining the undisclosed income or not? 46. The undisclosed income is to be computed on the basis of evidence found as a result of search and such other material or information as are available with the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the bare reading of provisions of section 158BB that subsequent information which is relatable to the evidence gathered can be taken into consideration. ( e )Whether any addition could be made in respect of the transactions resulting into client ID mismatch for non-furnishing of confirmation, when the assessee had furnished more than 98 per cent of the confirmations from the clients for the transactions done on their behalf as a stock broker and accepted by the department? 48. We have noted that in Chapter XIV-B, the undisclosed income has to be separately computed in accordance with the provisions of section 258BB. In the present case, the assessee had offered explanation regarding client ID mismatch and when auditors required the assessee to furnish the confirmations from the parties, the assessee was not able to furnish the confirmations in respect of all the transactions. The Assessing Officer accepted the ownership of the transactions being belonging to the third parties on the basis of confirmations filed. However, the fact remains that the client ID mismatch was there and to the extent the onus, which lay completely on the assessee, remains unrebutted, the adverse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o financial year in those sections shall be construed as references to the relevant previous year falling in the block period including the previous year ending with the date of search or of the requisition. Sub-section (3) puts the burden on the assessee to establish that any undisclosed income had already been disclosed in any return of income filed by the assessee before the commencement of search or of the requisition, as the case may be. These sections make it clear that the assessee has to establish that when and how the disclosure was made and whether or not a particular asset, entry or transaction constituted income or how the asset was acquired or what the nature of entry or transaction. Therefore, to the extent income has not been disclosed by the assessee, which is embedded wholly or partly in the asset found during the course of search or in the transaction noticed in the books of account, to that extent the provision of sections 68 to 69C will be applicable. Once these sections have specifically been made applicable to the provisions of block assessment, therefore, Chapter XIV-B being a specific code, the provisions have to be considered in the context of the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f search and seizure operation, then same is to be treated as undisclosed income of the assessee. ( v )The client information regarding ID mismatch was available with the department in the assessee s sister concern but once the client ID mismatch was found during the course of search operation then that information stands vindicated and partakes the character of material contemplated under section 158BB and gives a pointer towards the intention of the assessee. ( vi )After the search, the enquiries which were going on under Chapter XIV will get merge with proceedings under Chapter XIV-B. ( vii )It is necessary that some material is found during the course of search to establish that there is element of undisclosed income embedded in the transaction. ( viii )Merely on the basis of search and post search enquiries, without finding any material during the course of search, it cannot be said there is some undisclosed income in the transaction. That would definitely come within the ambit of regular assessment and not block assessment. 51. In the light of above discussion, we conclude that undisclosed income embedded in various transactions recorded in books of account found ..... X X X X Extracts X X X X X X X X Extracts X X X X
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