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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 ..... 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 of the sum of Rs. 14,75,000 under section 68 of the Act by considering the receipt of the said amount as unexplained in spite of there being ample evidences about the genuineness of the said receipt of money by the appellant. 3.(b) On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in not taking into consideration the fact that the appellant had not been provided with opportunity by the learned Assessing Officer to cross-examine the depositions of four witness ; and, thereafter, in relying on such unverified depositions." Shri S. K. Tulsiyan, the learned authorised representative appearing on behalf of the assessee and Shri Rajat Subhra Biswas, the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, so he initiated proceedings under section 158BD against the assessee after recording the satisfaction note which is reproduced below : "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 these group share scrips worth Rs. 11,63,75,000 issued by different companies by these group were found. Out of these scrips it was found that a large number of shares have been allotted in the name of various companies controlled and managed by outsiders, viz., Shri Rajesh Kumar Jajodia and Shri Sandip Kumar Singhi. In the course of post-search enquiry launched in connection with ascertaining the source of the share capital contributed by these outside companies, it was gathered that a part of the funds of the following shareholding companies had come from four bank accounts, i.e., Account Nos. 4886, 4914, 4934 and 4933 maintained with Federal Bank of India, Burra Bazar Branch, Kolkata and standing in the name of Shri Rajendra Kumar Surana, Shri Sunil Kumar Jain, Shri Shankarlal Godh and Shri Surendra Kumar Hirawat and Shri Shankarlal Godh, respectively. Apart from the abovementioned companies there exist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share capital it was gathered that a part of the fund had come from 4 (four) bank accounts, i.e., account Nos. 4886, 4914, 4933 and 4934 maintained with Federal Bank of India, Burra Bazar Branch, Kolkata and standing in the name of Shri Rajendra Kumar Surana, Shri Sunil Kr. Jain, Surendra Kr. Hirawat and Shri Shankarlal Godh respectively. 2. On further inquiry it was revealed that the aforesaid four persons deposited substantial cash in their respective bank accounts and these four persons were not traceable. Summons under section131 of the Income-tax Act, 1961, could not be served in their given addresses. It establishes that fictitious bank accounts were opened in the name of those four persons. 3. Since huge cash from these four accounts had travelled to your company which was ultimately used to purchase the shares of the UIC group (which were seized) and identity, genuineness as well as creditworthiness of these transactions remained doubtful, I had reasons to believe that disclosed fund of your company had travelled to the UIC group. Accordingly, proceedings under section 158BD were initiated". Besides the above the Assessing Officer also observed that on the day of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovember 14, 2006, and his statement was recorded under section 131 of the Act which is reproduced below : "5. Name the persons who have invested in shares of the companies of which you are director ? Did these four persons, namely, Shankar Lal Godh, Surendra Kr. Hirawat, Sunil Kr. Jain and Rajendra Kr. Surana invest in your company ? A. Various corporates and individuals, etc., have invested in our company. However, we have sold our investments to these four persons and received money against sale of shares which are accounted for in our books of account. Money received from these four persons have been invested in buying the shares of the Rajesh Jajodia group companies and the UIC group companies. 6. Name the companies where your companies have made investment ? A. We have made investment in various companies including Rajesh Jajodia (Nos. 1-7) and the UIC group (Nos. B-11). 1. Target Merchandise (P.) Ltd. 2. Sigma Dealcom (P.) Ltd. 3. Sunshine Consultancy 4. Neelgiri Commercial (P.) Ltd. 5. Orbital Suppliers (P.) Ltd. 6. Sagar Trackon (P.) Ltd. 7. Nikhar Merchandise (P.) Ltd. 8. UIC Wires Ltd. 9. UIC Holdings (P.) Ltd. 10. UIC Industries Ltd. 11. UIC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in bank accounts ? Same answer for all : Sources of deposits in my S. B. account No. at Federal Bank, Burra Bazar branch is the cash received from various persons, viz., Mohan Lal Agarwal and Mahendar Jajodia through Mr. Sandip Singhi with a direction to issue cheques in favour of companies managed by Sandip and Rajesh : I am a person having very low income. (5) How can you justify the source as given in reply to question No.4 ? Same, answer for all : I do not have any evidence to prove that the cash amount deposited in my above bank account has been received from them. However, it can be seen that cheques favouring Sandip or Rajesh companies have been issued and debited on the same dates on which cash deposited. I have not even filled cash deposit slips and cheques, these were prepared by other persons and brought to me for my signature. (7) Why cash deposits in your account should not be treated as your money ? Same answer for all : This is not my money and I am speaking the truth. It can be assessed by my financial status. (8) Why cash deposits should not be treated as unexplained and appropriate action is taken under the Income-tax Act, 1961, to assess the escaped ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 68 of the Act cannot be applied in the instant case as it applies where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to Income-tax as the income of the assessee of that previous year. But, in the instant case, it is an accepted position that the above amount has been received by the assessee-company through account payee cheque against sale of investment and all the disclosure were made in the Income-tax return. 4.1 As per the provisions of section 158BD of the Act the materials found during search should have been handed over to the Assessing Officer having jurisdiction over such other person to initiate the action in terms of the aforesaid section. But, in the instant case, no such procedure has been followed by the authorities. The share certificates found during the search were not handed over to the Assessing Officer having jurisdiction over the assessee. However, the learned Commissioner of Income-tax (Appeals) after considerin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 of the Act of the aforesaid four persons were not made available for the purpose of cross-examination. On the other hand, the learned Departmental representative vehemently supported the orders of the lower authorities. 6. From the aforesaid discussion we find that the Assessing Officer has initiated and completed the assessment proceedings under section 158BD/ 144 of the Act on the basis of the documents found at the time of search from the place of the UIC group of companies where the search was conducted. However, the assessee claimed that there was no undisclosed income of the assessee and the documents which were found at the time of search were duly disclosed in the books of account of the assessee and the income thereon was offered to tax. The assessee before us has challenged the validity of the proceedings under section 158BD of the Act on the ground that in the instant case the satisfaction was to be recorded by the Assessing Officer of the UIC group where the search was conducted but in the case in hand the satisfaction has been recorded by the Assessing Officer having jurisdiction over the assessee. In our considered view, we find a lot of force in the argument made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a block assessment is that a search has been conducted under section 132, or documents or assets have been requisitioned under section 132A. The said provision would apply in the case of any person in respect of whom search has been carried out under section 132A or documents or assets have been requisitioned under section 132A. Section 158BD, however, provides for taking recourse to a block assessment in terms of section158BC, in respect of any other person, the conditions precedent where for are : (i) satisfaction must be recorded by the Assessing Officer that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 of the Act ; (ii) the books of account or other documents or assets seized or requisitioned had been handed over to the Assessing Officer having jurisdiction over such other person ; and (iii) the Assessing Officer has proceeded under section 158BC against such other person. The conditions precedent for invoking the provisions of section158BD, 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 premise ..... X X X X Extracts X X X X X X X X Extracts X X X X
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