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TMI Blog2011 (3) TMI 298X X X X Extracts X X X X X X X X Extracts X X X X ..... - Though the original cheque books were not given by the ED, detailed information with regard to the accounts etc. of those cheque books was furnished - Based on the information available from the records it was concluded that assessee could not give any satisfactory or documentary evidence - Decided against the assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... . These persons claimed ownership of the cash. A notice under Section 158BC was issued by the Joint Commissioner Income Tax, Special Range (hereinafter, referred to as ‗JCIT') to Tushar on 8th April, 1997. It may be noted here that in the case of Tushar, the JCIT was the Assessing Officer. In response to this notice, Tushar filed return declaring NIL undisclosed income. The JCIT did not consider the said cash at the hands of Tushar and also did not draw any adverse inference in this regard. With regard to seized thirty cheque books (in fact 27 as there was repetition of three), the Income Tax Department wrote a number of letters to ED for sending copies of seized documents. Even the JCIT wrote a few letters for sending seized documents and since they were not received, JCIT proceeded with investigation in respect of twenty seven bank accounts by writing to different banks asking for copies of those accounts, account opening forms, names and addresses of the introducers and copies of cheques issued. Based on the information received, it was noted that substantial cash deposits made in these bank accounts from time to time were immediately withdrawn. Tushar was asked to explain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this amount of ₹ 13,10,000/- as undisclosed income of Tushar for the block period 1.4.1986 to 20.1.1997. 6. In its return for the block period filed in response to notice under Section 158 BC, Tushar had debited some amounts towards telephone expenses, petrol car expenses or car insurance for the present block year. The JCIT added 1/10th of these expenses as income for the block period, thereby making a total income of ₹ 7,83,351/-. Tushar had also given details of additions in share capital/ application money of some shareholders of the block period as under : Assessment Year 1995-96 Rs.1,02,11,000/- Assessment Year 1996-97 Rs.1,65,02,000/- (i) Confirmations in respect of shareholders along with their PAN/GIR numbers were furnished, but, in respect of some confirmations, either jurisdiction was not stated properly or it was not stated at all. The details of such persons are as under: A.Y. 1995-96 Amount (i) Naewatia Consultants P. Ltd. 1,80,000 (ii) Busy Traders & Finance P. Ltd. 1,00,000 Total 2,80,000 A.Y. 1995-96 Amount (i) (ii) Paramjeet Kumar 18,000 Total 3,18,000 M/s.Aneja & Sons 3,00,000 (ii) Since no confirmation was filed in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the accounts to be of his clients, he could neither produce them in person nor file their confirmations. He, however, produced one client register and the income tax return acknowledgment in respect of some individuals, but since these were not supported by the books of accounts, were not relied upon by the ACIT. ACIT found that in respect of eight account holders, the addresses were shown as 7477, Tel Mill Marg, Ram Nagar and 16226, Nai Wala, Karol Bagh, which were the past and present addresses of the MCC. It was also found that some of these accounts were introduced by the assessee or by a person having address as 7477, Tel Mill Marg. This fact was found substantiated as after the search and seizure, these accounts had not been operated by anyone. Based on all this, it was concluded that these accounts are not genuine but belonged to the assessee firm and were being operated by Mittal and his persons. In respect of 20 bank accounts, ACIT calculated the figure at ₹ 1,06,23,044/-. In addition to this, ACIT also estimated ₹ 5.00 lakh each as deposit in unverified four bank accounts and also further amount of ₹ 5.00 lakh each as deposit in the bank accounts belong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requisitioned u/s 132A is a condition precedent for proceeding against that person u/s 158BD. The expression ‗undisclosed income' is defined in Section 158BB contained in Chapter XIV - B and as per the provisions of sub-section (1) of section 158BB, such undisclosed income for the block period is required to be computed, in accordance with the provisions of the Act, on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the AO and relatable to such evidence. A conjoint reading of these provisions makes it clear that the satisfaction of the AO as regards any undisclosed income belonging to other person as envisaged in Section 158BD has to be on the basis of evidence found as a result of search or requisition of books of account or other documents and such other material or information as are available with the AO and relatable to such evidence and unless it is found on the basis of such evidence that any undisclosed income belongs to the assessee, no proceedings u/s 158BD can be validly initiated against him. 9. In the present case, nothing other than cash was req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ERA authorities u/s 132A. Merely because the department obtained a copy of the seized diary it could not be said that the material came through a valid and proper requisition, order or warrant as prescribed u/s 132A. The matter has been considered in detail in the case of Sukh Ram v. ACIT 99 ITD 417 (Del) wherein it has been held by the Tribunal that any evidence which has not been found as a result of search or such evidence which has been gathered is not relatable to evidence found as a result of search cannot be made the basis of block assessment under Chapter XIV-B of the I.T. Act. 14. Likewise, addition of ₹ 78,335/- on account of personal use of car and telephone expenses was also deleted by the Tribunal with the following reasons:- ―19. …… As observed earlier, no search was conducted in the case of the assessee nor any material was found during the course of survey or search so as to justify the ad hoc addition made on estimate basis. The course adopted by the AO cannot be justified in the block assessment proceedings under Chapter XIV-B because in the block assessment proceedings any addition on account of undisclosed income can be made only on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17. The learned counsel also submitted that in any case, requisition was made under Section 132A on 20th January, 1997 of Rs.2,41,000/- seized by ED, but notice under Section 158BC was issued to the assessees only on 22nd October, 1999 and that being highly belated, the proceedings initiated under Section 158BD of the Act are untenable in law. In this regard he relied upon Khandubhai Vasanji and others v. CIT, 236 ITR 73. 18. With regard to the additions of Rs.10,80,000/- on account of share capital in the case of Tushar, he submitted that the same was duly recorded in the books of accounts and the addition was rightly held as untenable by the Tribunal. He also submitted that addition of Rs.1,06,23,044/- in the hands of MCC on substantive basis and in the hands of Tushar and Mittal on protective basis was untenable in the absence of any evidence found as a result of search or requisition of books of accounts or other documents deriving satisfaction. 19. On the other hand, learned counsel for the Revenue submitted that in the process of search of Tushar, ED not only recovered cash of Rs.2.41 lakhs but also 30 cheque books (in fact 27 as there is repetition of three accounts) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same in his or its custody. 158BB (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… 158BC Where any search has been conducted under section 132 or books of account, other documents or assets are requisitioned under section 132A, in the case of any person, then, - (a) The Assessing Officer shall, (ii) In respect of search initiated or books of account or other documents or any assets requisitioned on or after the 1st day of January, 1997 serve a notice to such person requiring him to furnish within such time not being less than fifteen days but not more than forty-five days, as may be specified in the notice a return in the prescribed form and verified in the same manner as a return under claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her person. 11. The conditions precedent for invoking the provisions of Section 158BD, thus, are required to be satisfied before the provisions of the said chapter are applied in relation to any person other than the person whose premises had been searched or whose documents and other assets had been requisitioned under Section 132A of the Act. 23. In the case of Manesh Maheshwari (supra) the Apex Court also referred to various judgments of different High Courts and particularly that of Gujarat High Court in Khandubhai Vasanji Desai and Ors. v. Deputy Commissioner of Income-Tax and [1999]236ITR73, wherein it was held as under: ―This provision indicates that where the Assessing Officer who is seized of the matter and has jurisdiction over the person other than the person with respect to whom search was made under Section 132 or whose books of account or other documents or any assets were requisitioned under Section 132A, he shall proceed against such other person as per the provisions of Chapter XIV-B which would mean that on such satisfaction being reached that any undisclosed income belongs to such other person, he must proceed to serve a notice to such other person as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclosed income shall be computed only in accordance with the provisions of the Act on the basis of evidence found as a result of search and such other material or information which are relating to such material. If the material seized do not, in any way, connects the assessee indicating that the assessee had any undisclosed income, it may not be proper to proceed against the assessee under Section 158BD read with Sections 158BC and143(3) of the Act without any basis whatsoever, especially in the absence of any material indicating any suppression of sales or suppression of income by the assessee. 4. If that be so, we do not have any hesitation to hold that the undisclosed income cannot be assessed in the absence of any material collected during the search relating the assessee and that the Revenue cannot proceed on the basis of such material which is not related to the assessee invoking Section 158BD read with Sections 158BC and 143(3) of the Act for assessing the undisclosed income during the block period of 1988-89 to 1997-98 and 1.4.1998 to 5.11.1998. 26. In the case of CIT v. G.K. Senniappan [2006] 284 ITR 220 (Mad) also Section 158 BB was under consideration and it was he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premises which was not only that of Tushar but also of MCC and Mittal. During the search, not only cash of Rs.2.41 lakhs was recovered, but as many as 30 cheque books (in fact only twenty seven because of repetition of three names) were also recovered. A diary was also seized from the residence of the Director, A.S. Aneja. The seized cash and documents were requisitioned under Section 132A of the Act by the Income Tax Department. Though the original cheque books were not given by the ED, detailed information with regard to the accounts etc. of those cheque books was furnished. It was based on the details of these accounts that the AO of Tushar proceeded to issue notice under Section 158BC to Tushar. It was during the course of assessment of Tushar that detailed information regarding those cheque books accounts etc. came to be known. Mittal was who not only Director of Tushar but also a partner of MCC, a Chartered Accountant firm, had claimed some of those cheque books to be of his clients and some of his friends and relations. He, however, could not give any satisfactory or documentary evidence. He also failed to produce account details except that of two, who were also found not r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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