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TMI Blog2011 (6) TMI 786X X X X Extracts X X X X X X X X Extracts X X X X ..... idences in the form of confirmations and circumstantial evidences filed before the Assessing Officer. 3 The assessee company is a Member of Bombay Stock Exchange in the relevant assessment year and was engaged in the business of share broking and share trading. A search and seizure action u/s 132 was carried out in Ketan Parekh Group of cases being involved in the security scam during 2001. 3.1 During the course of search, 12 CDs ROM taken from the computer and server were found, which contained accountings and trading data of Triumph Securities Ltd., and the assessee. Consequent to the search and seizure action, the assessee filed return of undisclosed income at Rs.nil on 29.10.2001. On the basis of data in the CDs Rom and on the basis of further evidences gathered by the Assessing Officer, it was found that in some of the transactions, the client code as shown in the Stock Exchange record at the time of striking the trade was different from the client code shown in the books of account of the assessee. Thus, the identity of the client, who allegedly undertaken the transaction through the assessee, became subject matter of further investigation. The matter was referred for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken in the case of the assessee s block assessment. As such, special Bench has been constituted in the case of Triumph Securities Ltd., due to different opinions expressed on same facts. Thus, penalty, u/s 158BFA cannot be levied. He relied on the decision of the Tribunal, in the case of Maersk India P Ltd, in ITA No.1883/Mum/2006 and submitted that the Tribunal has held that concealment penalty cannot be levied on an addition, which is referred for decision of special bench. It was further submitted that the Bombay High Court has admitted the substantial questions of law in the case of the assessee on the additions made in the block assessment. Thus, it was submitted that the order of the Tribunal in upholding the additions in block assessment is not free from doubt and hence, penalty u/s 158BFA cannot be levied. Accordingly, the ld AR has submitted that when the issue of addition made in the block assessment is a debatable issue and not attained the finality then penalty cannot be levied on such an addition, which was a subject matter of the Special Bench. 5 On merit, the ld AR of the assessee has submitted that on the date of search, returns of income for Assessment Year 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the same are relatable to such evidence; such means evidence found during search. Thus, there has to be live link or direct nexus between the details gathered during the course of search i.e. the data in CDs and further evidences gathered post search i.e. data collected from the stock exchange on the basis of evidence found that pointed at client ID mismatch. That is, what is the evidence that prompted instigated the Assessing Officer to call for such information from the stock exchange. The result of accounting data in the CDs are reflected in the audited accounts and the same are subject matter of regular assessment and hence, cannot be considered in block assessment. The fact of mismatch was within the knowledge of the Assessing Officer and the same cannot be said to emanate as a result of search. The AO has brought to tax brokerage earned by the assessee on the said transactions which have been considered as undisclosed income. Thus, the stand of the Assessing Officer is inconsistent in as much as on one hand he brings to tax the transactions for which confirmation is not available as the assessee s own transactions and on the other hand taxes the brokerage on such tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of account found on search. It was submitted that the entire addition has been made only for the reason that the confirmations from clients could not be furnished in respect of transactions carried out by the assessee as a broker or where the conformations received from the clients were considered incomplete by the Assessing Officer as the PAN not mentioned. It was submitted that the Assessing Officer has failed to prove that there was conscious or deliberate concealment of income or furnishing of inaccurate particulars of income. He relied on the decision reported in 106 TTJ 89(Kol) and the decision of the Tribunal reported in 100 ITD 510 (Mum) wherein it has been held that the element of concealment of particulars of income or income is not condition precedent for levy of penalty u/s 158BFA(2) because income for the block period is to be determined on the basis of seized material which is already in the possession of the department. The assessee has to explain as to why it was not able to compute the true undisclosed income from the seized material and why it failed to return the true undisclosed income. 5.6 It was contended that the assessee having filed the confirmation, di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that mere admission of the appeal by the High Court does not amount to expression of view that penalty should not levied. Since the assessee was involved in the circular trading by 23 group companies of the assessee and once the quantum has been decided against the assessee upto the stage of the Tribunal then the penalty is a natural consequence. 5.10 In rebuttal, the ld AR has submitted that security scam has no relevance in the addition of undisclosed income in the case in hand. The JPC is not investigating the case of taxation but for other offences; therefore, the allegation of security scam has no influence on the tax matter. 6 We have considered the rival contentions and relevant material on record. During the course of search, the data and information in the computer and server found in the premises of the assessee were taken in 12 CDs ROM. These data contain accounting and trading of the assessee as well as the assessee s sister concern namely Triumph Security Ltd. On the basis of these data recorded in the CDs Rom and on the basis of further evidences gathered, it was found that in some of the transactions there were differences with regard to the identity of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return under clause (a) of section158BC; ii) the tax payable on the basis of such return has been paid or, if the assets seized consist of money, the assessee offers the money so seized to be adjusted against the tax payable; iii) evidence of tax paid is furnished along with the return; and iv) an appeal is not filed against the assessment of that art of income which is shown in the return. Provided further that the provisions of the preceding proviso shall not apply where the undisclosed income determined by the Assessing Officer is in excess of the income shown in the return and in such cases the penalty shall be imposed on that portion of undisclosed income determined which is in excess of the amount of undisclosed income shown in the return. 6.3 Sub. Section (2) of sec. 158BFA of the I T Act provides that the Assessing Officer or the CIT(A) in the course of proceedings under Chapter XIV-B may direct a person shall pay by way of penalty a sum which shall not be less than the amount of tax leviable but which shall not taxed three times the amount of tax so leviable in respect of the undisclosed income determined by the Assessing Officer . 6.4 The first proviso to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ismatch is assessable as undisclosed income under Chapter XIV-B of the Income Tax Act. 7. The fact that the proceedings were initiated for assessment year 1998- 99 to refer the matter for special audit u/s 142(2A) on the basis of mismatch, does not mean that the true nature of these entries were also disclosed by the assessee. The real nature of these entries i.e. ID mismatch entries were known after the material found during the search and inquires made thereafter. The income implications of the said ID mismatch entries have been rightly assessed as undisclosed income. The first ground of the assesse es appeal is dismissed. 6.7 It is clear from the findings of the Tribunal that the real nature of transaction recorded in the computer of the assessee saw the light of the day on the basis of the material found during the course of search and follow-up enquiry made by the Income Tax Authorities. This fact of real nature of those entries i.e. ID mismatch entries, came in to the knowledge of Income Tax Authorities only after the material found in the search and enquires made thereafter. Therefore, but for the search action, the real nature of the entries would not have come to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be the subject matter of block assessment. 43 Therefore, we conclude that if the material has been found during the course of search from which, it can be concluded that the transactions recorded in the books of account do not disclose the assessee s true income then such transactions are to be considered in the block assessment. 6.9 Further the issue of ID mismatch found during the course of search, constitute material as contemplated u/s 58BB(1) or not has also been considered and decided by the Special Bench of the Tribunal and held that the client ID mismatch found during the course of search and consequent enquiry carried out in that regard would be taken into consideration for block proceedings. 7 On the issue of applicable of provisions of sec. 69, the Special Bench of the Tribunal has held as under: We, accordingly, hold that the provisions of section 69 would be applicable to the extent of the income not disclosed in the transitions recorded in the books of account. It is pertinent to note that in section 69, unexplained investment has been defined with reference to the entre value of the investments not recorded in the books of account which is being ..... X X X X Extracts X X X X X X X X Extracts X X X X
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