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TMI Blog2011 (2) TMI 917X X X X Extracts X X X X X X X X Extracts X X X X ..... the onus to prove the genuineness of transactions of sale of shares shown by him? ii) Whether, on the facts and in the circumstances of the case, the findings recorded by the ld. CIT(A) as confirmed by the ld. ITAT are perverse in so far as the assessee was required to furnish evidence of genuineness of sale transactions of shares such as evidence regarding genuineness of rate and sale transactions, market quotations, comparable market rates and evidence but the assessee had not furnished any such evidence except copies of contract notices of brokers?" 3. ITA No.158 of 2010 has been preferred by the revenue against the order dated 25.5.2009 of the Income Tax Appellate Tribunal, Delhi Bench 'F', Delhi in I.T.A. No.92/Del/08 for the block period 1.4.1990 to 3.8.2000 raising following substantial questions of law:- i) Whether on the facts and in the circumstances of the case, the findings recorded by the ld. ITAT are perverse and contrary to the evidence available on record in so far as the Assessing Officer had initiated the proceedings u/s 158BD of the Income Tax Act, 1961 after recording requisite satisfaction (Annexure-A) for the purpose of initiating proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntroduced his own money in the name and styles of shares. Therefore, after considering all the facts and figures of the case, it is held that alleged sale proceeding of shares i.e. Rs.29,44,120/- is chargeable to tax as 'income of assessee' from undisclosed sources and the assessee is not entitled for any exemption or deduction u/s 54 of the Income Tax Act in respect of these receipts. Out of Rs.29,44,120/- an amount of Rs.15,61,745/- has already been charged to tax as undisclosed income of the assessee for block period. The remaining receipts of Rs.13,82,375/- is assessed to tax as income of the assessee from undisclosed sources for the year under consideration on substantive basis." 5. In block assessment proceedings, addition of Rs.15,61,745/-, was made on the ground that the same was undisclosed income of the assessee for the block period 1.4.1990 to 3.8.2000 shown as sale proceeds of shares through M/s Friends Portfolio (P) Ltd. and was part of total amount of Rs.29,44,120/- which was the alleged sale proceeding of the shares. Relevant finding in the assessment order from the block assessment is as under:- "The assessee has failed to prove the genuineness of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d credits (as discussed) Rs.15,61,745/- 2. -do- (on protective basis as discussed)Rs.13,82,375/- Total undisclosed income for block period Rs.29,44,120/-" 6. On appeal arising from order of re-assessment for the year 2000-2001, the CIT(A) deleted the additions on the ground that in respect of transactions with M/s JRD Stock Brokers, the assessing officer had failed to consider any evidence in support of its finding that transaction was bogus. The assessing officer had only discussed the modus operandi of Manoj Aggarwal which had relevance for the shares sold through M/s Friends Portfolio (P) Ltd. and not through any other party. This finding has been affirmed by the Tribunal as under:- "We have heard the submissions made by the learned DR and have also perused the order of the learned CIT (A) as also the assessment order. The assessing authority, in the assessment order, has stated that the evidence called for by him had not been produced and even through the assessing authority wanted to tax this amount of Rs.13,82,375/- representing the alleged undisclosed income of the assessee out of the transaction of the purchases and sales of shares not done with Shri Manoj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been made to following discussion in the order of the assessing officer:- "Statement of Sh. O.P.Bhalla, Karta was also recorded during block assessment proceedings. The salient feature of this statement and of the case are as under:- a) The assessee did not have any prior knowledge of share transactions. b) The assessee had not done any dealing in shares of any company, in past as well as in futures. As per the statement of Shri O.P.BHalla, the HUF had done purchase/sale transactions in shares of M/s B.S.Holdings & Credit Ltd only which assessee has shown to have been entered in. c) The assessee had no knowledge or background of the company, shares of which have been claimed as traded. d) The assessee did not have any knowledge regarding rates of shares of the said company at any point of time. e) The assessee did not have any knowledge of the brokers through him purchase and sales of shares has been shown. f) The assessee has shown sale of shares worth Rs.29,44,120/- but the copies of contract notes and evidences of genuineness of transactions have not been filed. g) Evidences of ownership of shares, transfer and delivery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quisite satisfaction under Section 158BD has not been recorded during the block assessment of the searched person. Finding recorded by the CIT(A) is as under:- "12. Keeping in view the above ratio of the Apex Court and the ld. Jurisdictional Tribunal and the Chandigarh Bench Tribunal, therefore, in this case the search operations were conducted on 3.8.2000 at the residential and office premises of Sh. Manoj Aggarwal and his associate concerns, here M/s M/s Friends Portfolio (P) Ltd. and the block assessment of M/s Friends Portfolio (P) Ltd. was framed u/s 158BC of the I.T.Act on 29.8.2002 by the DCIT, Central Circle-3, New Delhi. As per the assessment order of the AO u/s 158BD of the Act, the reasons for proceedings u/s 158BD were recorded on 29.3.2004. From these very facts, it is quite crystal clear that the mandatory satisfaction as per the provisions of section 158BD was not properly and validly recorded, as it was not recorded during the course of assessment proceedings of Sh. Manoj Aggarwal of M/s Friends Portfolio (P) Ltd. and the proceedings were initiated against the appellant u/s 158BD on 29.3.2004 by the AO, Faridabad after getting the intimation for necessary ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO, once he has reached the requisite satisfaction, is bound to act swiftly to proceed against the other persons as soon as may be. 17. Clearly, from the facts and circumstances of the present case, according to the above ruling, the condition of issuing notice u/s 158BD within 15 days has also not been satisfied with. 18. Since the above two findings in the appellant's case are sufficiently established to dispose of the appeal in favour of the appellant, it is unnecessary to deal with the merits of the block assessment order and the additions made therein u/s 68 or on protective basis, agitated in ground No.5." 12. The above view has been affirmed by the Tribunal. 13. We have heard learned counsel for the parties. 14. Learned counsel for the revenue submitted that the finding recorded by the CIT(A) as well as the Tribunal was perverse as existence of satisfaction of the assessing officer during the block assessment of searched person was patent and the assessee had nexus with the material found during the search. Reference has been made to the following observations in the order of block assessment of the searched person namely M/s Friends Portfol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... btained from them. The total list of the terminals of M/s Friends Portfolio P. Ltd. have been obtained. From these details, it is observed that all the transactions on the ticket of DSE have been done for the clients of M/s Abhipra Capital Ltd. Infact, Sh. Manoj Aggarwal and his company M/S Friends Portfolio P Ltd. did not even have a terminal to trade. The pay-in and pay-out position of each settlement period has been taken from the settlement account and got verified from the DSE. It is observed that the pay-in and pay-out positing of each settlement of M/s Friends Portfolio P Ltd. matches with the books of M/s Abhipra Capital Ltd. These facts establish beyond doubt that all the trading on the ticket of M/s Friend Portfolio P Ltd. was done by M/s Abhipra Capital Ltd. at the Delhi Stock Exchange and no real transactions has been done for the parties who have procured the bogus sales, purchase and difference bills from M/s Friends Portfolio (P) Ltd. e) There are various evidences in the seized material which are listed below which further establish that the bills of M/s Friends Portfolio P Ltd. were fabricated and prepared to suit the requirement of the clients. Annexure A-1 seize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation book entries. A total cash, clearing and transfer deposit of Rs.1,32,32,77,001/- has come in the bank accounts of M/s Friends Portfolio P Ltd." xxx xxx xxx "4.2. In reply thereto, the assessee has made written submissions on 26.8.2002 which are reproduced below:- "This is in reference of your above said show cause notice our submissions are as under:- As you are aware that immediately after search operation on 3.8.2000 Sh. Manoj Aggarwal submitted a letter to the investigation wing of Income Tax Dept. Unit-2 clarifying that he was in business of providing accommodation entries. He provided details of the beneficiaries to the extent known to him as well as the mediators. (Their code etc.). On many occasions his statements were recorded at the Investigation Wing, Unit-2, in which he has clearly specified that he has not been transacting any real business but he only used to issue cheques for various bank accounts under his control against the cash received from the persons who used to approach him through various mediators. He did not know as to what treatment they have given to such cheques in their books of accounts. He never entered into real ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have already been traced by your kind honour. 4.3 The reply given by the assessee has been considered. It is an accepted fact that the name and accounts of this company were used for the purpose of providing accommodation book entries by the Director, Sh. Manoj Aggarwal. All the transactions in the name of this company were only paper transactions of providing bogus accommodation entries and no real activity has been done." 15. The above shows that the assessing officer of the searched person was fully satisfied that the transactions of sale of shares by the assessee through searched person were bogus and represented undisclosed income of the assessee. 16. Learned counsel for the assessee supported the impugned finding by relying upon the judgment of this Court dated 20.7.2010 in ITA No.591 of 2009 (Commissioner of Income-Tax-I, Ludhiana Vs. Mridula, Prop. M/s Dhruv Fabrics, Ludhiana) and submitted that if satisfaction was not recorded during the assessment of the searched person, block assessment could not proceed against the assessee. He submitted that the assessment of the searched person was completed on 29.8.2002 while notice in the present case was iss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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