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TMI Blog2013 (1) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... premises, leading to the assessment under Chapter XIVB. It is no doubt true that the search in the assessee's premises was a result of the search in the case of M/s.Tamil Nadu Textile Corporation Limited. This, however, does not mean that there was no search warrant issued in the assessee's case under Section 132 - no hesitation in rejecting the said plea of the assessee. Issue regarding the assessment made in Coimbatore - Held that:- File referring to the Notification of the CIT in the letter dated 07.08.1996, AO Chennai, addressed a letter to the ACIT, Coimbatore, forwarding the files of the assessee and R.Venkatakrishnan relating to the assessment year 1996-97 who called upon the assessee to file the return of income in the prescribed form within ten days from the date of service of notice dated 01.08.1996. Admittedly, the assessee addressed a letter dated 07.10.1996 seeking time to file the return & prayed for transfer of file to Madras, since the business activities were based at Madras. With reference to the request of the assessee for retransfer to Chennai the ACIT Coimbatore directed him to approach the CIT Central-I, Madras-34 and called upon the assessee to file the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lace his objection on this value. Even though the Officer has a right to refer the document for valuation by a Valuation officer, yet, when he seeks to make use of this piece of evidence to arrive at the undisclosed income, in fairness to the claim of the assessee, a copy of the valuation report should have been given to the assessee, so as to enable him to place his objection, by following the principles of natural justice. In the absence of any material shown that this requirement had been complied with, no hesitation in accepting the plea of the assessee that this portion of the order merits to be set aside and the matter be remitted back to the AO so as to furnish a copy of the valuation report to the assessee. In the absence of any material to show that the entirety of the shares of M/s. Anchor Breweries Limited were to be taken in as the shares proved by the assessee, the liability that could be fastened on the assessee has to be only with reference to the 1320 shares, which stood in the name of the assessee and his wife - remand the assessment back to files of the AO. - Tax Case (Appeal) No.353 of 2006 - - - Dated:- 29-8-2012 - MRS. CHITRA VENKATARAMAN AND MR. K. RAVI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lent Steel Industries Pvt. Ltd. and M/s. Anchor Breweries Ltd., as undisclosed income; The transfer certificates stood in the name of the assessee as well as the in the name of the assessee's family members. Apart from that, the investment in house property was also a subject matter of consideration by the Tribunal. 5. While the Tribunal granted the relief in respect of the value of the old building and debris at Rs.1,00,000/- instead of Rs.50,000/-, as regards the cash flow balance of Rs.2,00,000/- as on 01.04.1986, the Income Tax Officer treated a sum of Rs.1,90,000/- as undisclosed income. Giving the benefit of past savings and the gift received for Rs.10,000/-, the Tribunal refixed the cash treated as undisclosed income at Rs.25,000/-. As regards the gifts received, the Tribunal confirmed the Assessing Officer's view, fixing the undisclosed income at Rs.2,50,000/- and Rs.1,24,374/-. As regards the investment in shares, it confirmed the assessment in respect of the investment made in the shares of the companies, where the share certificates stood in the name of the assessee and the other family members. 6. The questions raised before this Court are principally on the jur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted with any money for the purpose of allotment of shares, could not be accepted and that the only conclusion that could be taken on this issue was that the assessee had invested his undisclosed income for the purposes of having the shares allotted to him and his family members. The Officer further pointed out that the receipts and payments account filed with the return did not show any investment made by the assessee or any other member of his family. Thus, based on the materials available, the Officer concluded that the entire share investment had to be assessed at the hands of the assessee. 10. The Tribunal pointed out that the shares were found in the records maintained by the assessee and the total investment made was to the tune of Rs.17,50,000/- and Rs.9,00,000/- in the assessee's name and his family members. The sources of investment were not explained by the assessee properly. The relatives were not assessed. The investments were reflected in the books of accounts of the companies. In the light of the above, the Tribunal upheld the assessment at the hands of the assessee in respect of the shares not only standing in the name of the assessee, but equally in the name of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out that the seized materials contained share transfer forms (Form No.7B), signed by the transferors in favour of the assessee and his family members. The memorandum of transfer on the back side of the share certificates showed that the shares were transferred to the assessee. The seized material also contained a letter written by V.R.Venkatachalam, Director of M/s.Anchor Breweries Limited, addressed to the assessee, stating that the Board of Directors of the company approved the transfer of shares in favour of the assessee. Going by these details, the Officer held that the company had, in fact, transferred the shares to the assessee and his other family members. The family members had no source of income and they were not assessed to tax. Thus the Tribunal confirmed the view of the Tribunal that the shares actually belonged to the assessee and the family members were all benamidars. 12. As regards the valuation of shares, the Officer pointed out that though the total issued and subscribed shares of the company is only 3000 shares of Rs.100/- each, the company owned properties in Arcot Road, Chennai. The market value of the land as on the date of transfer was taken. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t standing in the name of the assessee. In the face of the above-said fact, the assessment under Section 158BC is illegal and void. As far as this contention is concerned, we directed the Revenue to produce the records pertaining to the issuance of search warrant. The records relating to the assessment under Chapter XIVB were produced before this Court. The search warrant reads under Caption A, "the warrant in the case of M/s.Tamil Nadu Textile Corporation". Under Column B, "warrant to search (Details and ownership of place of search)", the name of the assessee is shown. The operative portion of the search warrant also pointed out that the warrant of authorisation dated 30.1.1996, issued in the case of M/s.Tamil Nadu Textile Corporation Limited, was shown to the assessee to search the place of the assessee mentioned at Column 'B', who was present in the said place at the time of search. The details as stated above are available in the search warrant as well as in the Panchnama. Rightly, on the basis of these documents, the Tribunal came to the conclusion that the search was conducted in the assessee's premises, leading to the assessment under Chapter XIVB. 15. It is no doubt tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stood, the assessment was completed by the Officer and we do not find any justifiable ground to accept the plea of the assessee herein that the assessment done by the Commissioner suffered from want of jurisdiction. Thus, on the aspect of validity of the search and on the assessment under Article XIVB, we agree with the Tribunal's view and we have no hesitation in rejecting the appeals. 18. As far as the assessment of shares at the hands of the assessee is concerned, the fact is that the assessment in the name of the assessee as well as the family members were done based on the materials seized from the bank locker. The shares related to M/s.Talent Steel Industries Pvt. Ltd., M/s. Talent Alloys (P) Ltd. and M/s. Anchor Breweries Limited. 19. As far as M/s. Talent Alloys Pvt. Ltd. and M/s. Talent Steel Industries Pvt. Ltd. are concerned, learned senior counsel pointed out that at no point of time, the assessee parted with any money for investment in shares. The assessee's relatives, namely, mother and sister-in-law, provided collateral security for these concerns for the purpose of availing of credit facilities from the bank and in consideration of the same alone, the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility of the assessee giving the properties of his mother and sister-in-law by way of collateral security for the purpose of allotment of shares in the manner in which he wanted to have them allotted, could not be ruled out herein. Thus, in the absence of any substantial material from the assessee's side, it is too difficult to accept the case of the assessee that there was no consideration passed on, on the allotment of shares. But then, as already pointed out, there being no further enquiry made on the aspect of allotment, we have no other option except to accept the plea of the assessee that the assessment could be sustained only to the extent of shares, which stand in the name of the assessee and his wife alone and that the value of the shares standing in the name of his other relatives could not be included as unexplained investment, for the purpose of assessment under Chapter XIVB. In the circumstances, the extent to which the investment income has to be assessed in respect of these two companies, has to be worked out by the Assessing Officer pro-rata. 21. It is seen from the order that the total investment made in the two companies was taken at Rs.17,50,000/- and Rs.9,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et and Karanai Village, as per the guidelines and the Valuation Officer debited the said value, leading to the addition. The Tribunal viewed that the Assessing Officer arbitrarily made the addition on the basis of the valuation report, which was not a seized material, nor in any way connected with the seized material. Thus the Tribunal deleted the addition. Even though learned senior counsel placed much emphasis on this to support his contention as regards the valuation of the shares of M/s.Anchor Breweries Ltd., wherein the property of the said company was valued based on the valuation report, yet, we do not think that the reasoning of the Tribunal in respect of the property at Anusuya Street and at Karanai village would, in any manner, assist the assessee's case, as far as the value of the shares of M/s.Anchor Breweries Ltd. is concerned. 24. It is seen from the order of the Tribunal that as far as the properties at Anusuya Street and at Karanai Village are concerned, the assessee paid the enhanced stamp duty based on the guideline value, which prompted the Officer to go in for the differential amount treated as an undisclosed income. However, as far as the shares allotted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 58BC, nevertheless, has to go through the procedure as contained under the Act and that the source for the investment in shares remained unexplained and hence, the investment being of an undisclosed nature unearthed during the search, the only option available to arrive at the extent of the suppressed income on investment is through valuation of the shares by the valuation of the assets of the company. Thus, we do not find any justifiable ground to accept the plea of the assessee herein that it is not open to the Assessing Officer to refer the valuation to a Valuation Officer for the purpose of arriving at the undisclosed income. We do not subscribe to the view that in making a block assessment, the Officer cannot take any assistance of a Valuation Officer to arrive at the value of the property. In the circumstances, we reject the reliance placed on the decisions reported in [2011] 337 ITR 187 (Guj) (Commissioner of Income-tax Vs. Kantilal B. Kansara (HUF)) and [2010] 329 ITR 342 (Commissioner of Income-tax Vs. Sri Krishna Saraf). 26. This, however, does not conclude the issue as far as the Revenue is concerned, before this Court. It is seen from the order of assessment as well ..... X X X X Extracts X X X X X X X X Extracts X X X X
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