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TMI Blog2016 (6) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of the Commissioner of Income-tax (Appeals), Central- III, Kolkata, dated March 25, 2013. Block assessment was framed by the Assistant Commissioner of Income-tax, CC-XXIV, Kolkata, under section 158BD/144 of the Income-tax Act, 1961 (hereinafter referred to as the Act ), vide his order dated November 30, 2006, for the block period from April 1, 1996, to May 7, 2002. Grounds raised by assessee are as under : 1. The orders passed by the lower authorities are arbitrary, erroneous, without proper reasoning s, invalid and bad in law, to the extent to which they are prejudicial to the interests of the appellant. 2. On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in upholding the validity of the proceeding initiated under section 158BD of the Income-tax Act, 1961, in the case of the appellant-company, in spite of the fact that during the course of the search proceedings at the premises of the UIC group, no incriminating materials against the appellant- company had been found. 3.(a) On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in upholding the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,00,000 4. Shri Shankar Lal Godh 4934 Federal Bank Burra Bazar Branch-Kolkata 7,75,000 Total 14,75,000 The aforesaid four persons deposited substantial cash in their respective bank accounts and subsequently transferred the money to various companies including the present assessee. Finally, in turn, these companies and the assessee transferred the fund to the group of UIC companies. It was also revealed that Mr. Sandip Kr. Singhee, the director of the assessee- company, acted as introducer in the opening of the aforesaid bank accounts. The aforesaid four persons were produced before the Deputy Director of Income-tax (Inv) (unit III) (4) by Mr. Sandip Kr. Singhee and their depositions were taken but later these persons could not be traced in spite summons issued under section 131 of the Act and the summons were also not served at the given addresses. Accordingly, the Assessing Officer could not verify identity, genuineness and creditworthiness of the parties in relation to the aforesaid shares t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re required to be initiated in the hands of the above named twenty companies (13 + 7 = 20) for bringing the undisclosed income of those companies into the tax net. In view of the above, the Assessing Officer issued notice under section158BD of the Act for filing the Income-tax return of its total income including undisclosed income for the block period from April 1, 1996, to May 7, 2002. In response to the notice the assessee challenged that there was no undisclosed income and requested the Department to provide the copies of books of account, other documents and detailed information on the basis of which notice under section 158BD of the Act has been issued. Accordingly, the Assessing Officer communicated the reasons for initiating proceedings under section 158BD of the Act to the assessee, vide letter No. ACIT/CC-XXIV/158BD/2006-07i46, dated May 4, 2006, which is reproduced below : 1. A search and seizure operation was conducted in the UIC group of cases on May 7, 2002. In the course of search in the corporate office of the UIC group, huge share scrips allotted in your name was found and seized. In the course of the post-search inquiry launched in connection with ascert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the account of abovesaid four persons. In compliance with the notice the assessee submitted that the investment by the company in the UIC group was made in the years 1999 and 2000 and the same was sold to the afore said parties in the years 1999 to 2001 which was duly recorded in the books of account. As such there is no undisclosed income and the assessee requested to drop the proceedings under section 158BD of the Act. However, the Assessing Officer requested the assessee to provide the following details : 1. Name of companies of which shares were purchased. 2. No. of shares purchased. 3. Rate at which shares were sold. 4. Total consideration. 5. Annual report of the company. 6. Copy of bank account No. 5274 maintained in Federal Bank, Burra Bazar branch for the relevant period. 7. Investment made in the UIC groups either directly or through Rajesh Jajodia group companies. 8. Nature of transactions with date, party names and amount specifically to be mentioned. The Assessing Officer also issued notice under section 131 of the Act for the personal appearance of the director. However, the above required details were not furnished but the director of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Hirawat and Shri Shankarlal Godh holding the four bank accounts were also taken and they were produced by the director, Mr. Sandeep Kr. Singhi. Deposition recorded of the aforesaid persons by the Deputy Director of Income- tax (Inv.) are reproduced below : (2) What are your source of income ? Surender Kr. Hirawat : My source of income is doing small job works and share dealings. My office was at 29A, Rabindar Sarani, 4th floor Room No. 10 and shifted to 91, N. S. Road, Kolkata-1. Rajendra Kr. Surana : My source of income are dealing in shares and commission on arranging finance. My source of income is not established. Shankar Lal Godh : My source of income is dealing in shares and securities. Sunil Kr. Jain : My source of income is dealing in finance security from my office at 91, N. S. Road, 3rd floor, Kolkata-1. (3) Details of bank account maintained by you ? Surender Kr. Hirawat : I have S. B. account No. 4933 with Federal Bank of India, Burra Bazar, Kolkata. Rajendra Kr. Surana : I have S. B. account No. 4886 with Federal Bank of India, Burra Bazar, Kolkata. Shankar Lal Godh : I have S. B. account No. 4934 with Federal Bank of Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s taxed on a protective basis in the hands of the assessee-company. 3. Aggrieved the assessee preferred an appeal to the learned Commissioner of Income-tax (Appeals) where it was submitted as under : The investments of the assessee was sold to the abovementioned four persons for sale consideration of ₹ 14.75 lakhs which was duly received by the assessee through account payee cheques. The sale transaction was duly recorded in the books of account and Income-tax return was filed after incorporating the above details. On the date of search the share certificates were not the property of the assessee and the right of the assessee was duly relinquished thereon by way of sale much before the date of search. Accordingly, the assessee challenged the validity of the proceedings initiated under section 158BD of the Act on the ground that no incriminating material was found by the assessee during search against the assessee. The assessee paid tax on capital gain on the sale of investment in the shares of the UIC group of companies. The Assessing Officer has put reliance on the statement given by the four persons but these statements have never been made available to the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors of the appellant-company, during the assessment proceedings the Assessing Officer tried to trace those persons and serve summons under section 131 of the Act to them but those persons were not traceable, therefore, the Assessing Officer required the appellant to produce those four persons before him but the appellant failed to do so. Under the circumstances it was not possible for the Assessing Officer to provide cross-examination of those persons to the appellant. Further, the Assessing Officer has reported in the remand report that he had supplied copies of the depositions of those persons to the appellant. Hence, this objection of the appellant is dismissed. Being aggrieved by this order of the learned Commissioner of Income- tax (Appeals) the assessee came in second appeal before us. 5. Before us the learned authorised representative has taken the stand that the Assessing Officer has not recorded his satisfaction as required under section 158BD of the Act. He further submitted that in the instant case there is no undisclosed income of the assessee. All the transactions for the sale of shares to the aforesaid four persons were duly accounted for in the books of accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 158BD of the Act. In the case of Lalitkumar Patel, when the matter had reached this court challenging the order of the Tribunal, the same was sustained by this court, extensively dealing with the various provisions as also taking into consideration the case laws on the subject particularly relying on case of Manish Maheshwari v. Asst. CIT [2007] 289 ITR 341 (SC). It was held that for taking recourse to the block assessment under section 158BC in relation to the person not searched, whenever search has been conducted under section 132 or the documents have been requisitioned under section 132A, the Assessing Officer of the searched person needs to record his satisfaction that undisclosed income belongs to the person other than the person with respect to whom search was carried out under section 132 of the Act. He is also required to hand over the books of account or other documents or assets seized to the Assessing Officer having jurisdiction over such non-searched person and, thereafter, the Assessing Officer who has jurisdiction would proceed under section 158BC, against the person who has not been searched. Further, we are also relying on the judgment of the hon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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