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TMI Blog2020 (7) TMI 722X X X X Extracts X X X X X X X X Extracts X X X X ..... ares prior to the date of search - Disallowance in block assessment proceedings - HELD THAT:- Tribunal has arrived at finding of fact after considering the material evidence on record so as to hold that the assessee is entitled to the claim of the contrived losses suffered by it. The Tribunal has also rightly considered the fact that in the assessment under the block period only the undisclosed income, which is found from the seized material can only be considered for the addition as in the total income of the assessee. In the facts of the case, the assessee has already disclosed the losses by making necessary entries in the books of accounts and therefore, the assessing officer and CIT(A) were not justified in disallowing the contrived losses claimed by the assessee. The Tribunal has also taken into consideration the factual aspect of the matter that the sale bills were issued by the brokers, the payments were made by cheque by the respective buyer of the shares and such transactions are duly reflected in the books of accounts. In such circumstances, it cannot be said that the Tribunal has committed any error in holding that the assessee is entitled to claim the contrived losses i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f associate companies of Nirma Management Services Pvt. Ltd of Nirma Group. The respondent assessee is one of the associate entities of the Nirma Group of cases. 2.3 Notice under Section 158BD read with Section 158BC of the Income Tax Act, 1961 (for short the Act, 1961 ) was issued on 30 th September 2002 for the block period showing undisclosed income of Rs. Nil as under : 2. The return of income for the block period was filed on 28 10 2002. Showing undisclosed income of Rs. Nil as under: Sr.No. Assessment Year Total income including undisclosed income u/s. 158BB Returned/ Assessed as on the date of search/requisition 1. 1996 97 3819390 3819390 2. 1997 98 2661250 2661250 3. 1998 99 Nil Nil 4. 1999 00 Nil Nil 5. 200 01 1485850 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee and after considering the submissions of the assessee, he calculated interest income of ₹ 30,11,500/ as per the seized paper, which was due to five entities including the respondent assessee and thereafter apportioned it on proportionate basis and as per such apportionment, the interest income attributable to the assessee amounting to ₹ 6,07,214/ was considered as not disclosed in any of the returns filed by the respondent assessee during the block period and addition was made for such income in the total income of the assessee. 2.8 The Assessing Officer during the course of the assessment and scrutiny of the loose papers, files and floppies, books of accounts, shares and other documents found during the course of search from the residence of Rahul Devi erstwhile DGM Finance of the Nirma Ltd., found that there was booking of contrived losses due to transactions between associate entities within the Nirma Group which were done as per direction and control of Shri Rahul Devi by buying and selling entities. 2.9 It was found by the Assessing Officer that these losses were booked and claimed in the returns of income filed for the block period; however, no deli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontents. (iii) The reference of ₹ 30,52,400/ of payment made on 6 10 1995 is perhaps not reflected in the other pages because obviously the amount refers to communication of Ashima Syntex Ltd. to Nirma Group and not Shri Rahul Devi who in fact says that interest should computer at ₹ 34,68,499/ instead. (iv) It was for the appellant to explain the contents of the documents found in the CD obtained from an office of the group i.e. DGM Finance residence and pertaining to its transactions, instead of the A. O. having to establish the same. (v) There is no doubt that on verification from Ashima Syntex Ltd., the cross investment of ₹ 3.29,51,999) by Nirma Group is admitted for which a payment of ₹ 30.11,500/ has been made austensibly under the head brokerage which fact stands revealed now that it was hot brokerage. This is proved by the Ashima Syntex Ltd, not having raised any ground of appeal against the disallowance of the alleged brokerage payment to Neo Soaps Detergent P. Ltd. and Niman Associates totalling to ₹ 30,11,500/ . They have admitted as much in their letter dtd. 29 10 2003 to the A. O. 2.6.6 The appellant had made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal delivery of shares. vi) There is also no contemporary evidences of directions by members of the AOP for making such sales which are obviously being done by Rahul Devi who was holdng the post of DGM Finance in Nirma Limited . The detailed explanation given does not change the fact that there is absence of contemporary evidences to witness any directions given for sale of shares. The disallowance made by the AO. is therefore, found to be justified and is accordingly sustained. 2.7.6. This ground of appeal is thus rejected. 2.12 The assessee therefore, being aggrieved by the order passed by the CIT(A) filed Second Appeal before the Tribunal along with other associated concerns. The Tribunal by common order dated 28th February 2006 passed in IT (SS) A Nos.21 to 30/Ahd/2005 and IT(SS) A Nos.64 to 67/Ahd/2005 disposed of all the appeals filed by the assessee. 2.13 With regard to issue of addition in respect of treating interest amount in respect of Ashim Syntex Ltd., as undisclosed income, the Tribunal has held as under : 31. Next Ground raised against upholding following additions in respective appeals as undisclosed income on assumption, presumption an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions with the aforesaid companies. The copy of the account from the hooks of Ashima Syntex Ltd. reflected that the brokerage for atanging NCDS for them, totaling to ₹ 30,11,500 / as per the following details have been paid. 13/07/98 Neo Soaps Detergents Pvt. Ltd. 5,11,500/- 13/07/98 Nirman Soaps Detergents Pvt. Ltd 25,00,000/ A.O. considered the amount of ₹ 30,11,7038 as undisclosed interest income of the assessee in the proportion of investment in shares of Ashima Syntex Ltd by the five entities and the same was confirmed by CIT(A). 33. Learned counsel for the assessee contends as under: (i) The note dated 24/01/98, which is alleged to be a letter written by Shri Rahul V. Devi to Ashima Syntex Ltd is a draft and the content of the note self proves the same. The draft does not suggest the entity from whom and where the letter is written. It does not state normal salutation like Dear Sir/Madam etc. nor does it states reference or subject which is common for such correspondence. Even on appellant's inquiry with the officials of Ashima Syntex Ltd., it was stated that as per their record, they do not seem to have received any such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been paid there and if they are different amount then there is no case of income. So in any case, there is no ease of undisclosed income. Examining other seized papers, viz. Annexure B1, B2/1, B2/2, where investment and interest calculations are reflected, it evident that Annexure B1 refers to the specific dates on which investment in shares of Ashima Syntex Ltd., were made and the dates on which investment in shares of Nina were made. Number of days to 22/02/96 has been calculated and the products (Amount of investment X number of days up to 22/02/96) has been calculated. Annexure B2/1 is an interest calculation on product and Ashima's investment where the net interest to be received ₹ 1,84,425/ has been calculated. A.O. has considered interest of ₹ 30,11,703/ as undisclosed income, whereas the interest calculation sheet relied upon by the A.O. only refers to the net interest of ₹ 1,84,425/ and therefore, there is no question of considering ₹ 30,11,703/ as undisclosed income. (iii) Presumption u/s. 132(4A) is not available to Ld. A. O. as the print outs taken from the floppy seized from the residence of Shri Rahul V. Devi and annexed to as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the amount paid as referred to in column 2 of Annexure B1 (Page 29 of the Paper Book) is the same as column 2 3 titled Nirma's investment and Ashima's investment referred in Annexure 321 (Page 30 of the PB) and therefore it is incorrect to state that the calculations as referred to in the said two popes represents the different transactions. 36. We have heard rival submissions and perused material available on record. It emerges from record that the assessees group concern and Ashima Syntex Group concern had interse relationship in terms of financial dealings in shares, NCD, Sharafi interest etc. Floppy in question, in our opinion, gives gross calculation about the amount to be received and paid group as a whole and not of individual concern, more so, when the AO himself has given an observation that transaction in respect of Neo Soaps Detergents Pvt. Ltd, and Nirman Soaps Detergents Pvt. Ltd., have been offered by the respective assesses in their assessment. In view thereof, we hold that alleged floppy contains cross calculation of units assessee group i.e. assessees mentioned above and Ashima Syntex Group. In view thereof, we hold that net different on the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is ground are allowed in all these cases. 3. Mr. M. R. Bhatt, learned senior advocate appearing for the appellant revenue submitted that the Assessing Officer and the CIT(A) have given cogent reasons, which were not considered by the Tribunal. According to Mr. Bhatt, the Tribunal has passed the impugned order in a very perfunctory manner without discussing in detail the submissions made on behalf of the revenue by accepting what is submitted on behalf of the respondent assessee in holding that the assessee having duly incorporated all the transactions in the shares in the capital account and offered capital gain thereof it cannot be held to be undisclosed transactions and resulting losses as contrived losses that too in the block assessment proceedings. 4. Learned senior advocate for the revenue submitted that the Assessing Officer in the assessment order has given detailed analysis of the evidence found during the course of search and thereafter has arrived at findings, which are rightly considered by the CIT(A) in the order by confirming the assessment order. However, the Tribunal without giving any cogent reason to reverse the findings of the Assessing Officer as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vs. CIT 225 ITR 802 (SC) where it is stated that the loss incurred is an expenditure and therefore, the losses from the share transactions would be covered under the amended definition of undisclosed income u/s.158B(b). Ld. D.R. also stated that in alternate, if the transaction is held to be genuine, then the same may be set aside to A.O. for verification of the rate at which the transaction has taken place as the aspect of valuation has not been considered by A.O. during the assessment proceedings. 7. The above submissions made on behalf of the revenue are brushed aside by the Tribunal in para - 42 of the impugned order. It was therefore, submitted that the impugned order of the Tribunal is perverse and liable to be quashed and set aside. 8. The learned senior advocate relied upon the following decisions in support of his submissions. (1) Commissioner of Income Tax Vs. Deepak Nitrite Limited reported in (2001) 247 ITR 362 (GUJ), it was contended that this Court while considering the ambit and scope of the powers under Section 256 of the Act, 1961 after considering the various decision of the Supreme Court has held as under : 31. From the decisions referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence of the affidavit which was on record. 8. As laid down by the Supreme Court in the case of Mehta, Parikh Co. (Supra) none of the authorities considered it necessary to cross examine the deponent with reference to the statement made in the affidavit, and hence, under these circumstances it was not open to the revenue to challenge the correctness of the statement made by the deponent in the affidavit. In other words, consequently, the assessee was entitled to assume that the authorities were satisfied with the affidavit as sufficient proof on this point. In the present case, we find that C.I.T. (Appeals) while dealing with the affidavit has conveniently chosen to accept only one part of the statement which was in favour of the revenue and against the assessee while ignoring the rest of the portion wherein specific averments were made in relation to the balance items of expenditure. 9. In view of the settled legal position, it was not open to either C.I.T. (Appeals) or Tribunal to ignore a part of the contents of the affidavit. We are conscious of the fact that the findings recorded by the C.I.T.(Appeals) and the Tribunal are concurrent as regards the facts and evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances of the case the Tribunal was not justified in law in holding that expenditure, except as regards the item of depreciation was not part of actual cost of the plant. In the result, the question referred to us is answered in the negative, subject to our direction in relation to item of depreciation I.e. in favour of the assessee and against the revenue with no order as to costs. (3) Nirman Textiles Pvt. Ltd., Vs. Assistant Commissioner of Income Tax, reported in (2006) 284 ITR 325 (GUJ). 11. The legal position is well established and bears no repetition. It was necessary for the Tribunal to bear in mind that the assessment order had merged with the order of the C.I.T. (Appeals) and in case the Tribunal was inclined to reverse the order of C.I.T. (Appeals) it was necessary for the Tribunal to record, howsoever briefly, the reasons for the same. The impugned order of the Tribunal nowhere reflects as to what were the facts and evidence placed before the C.I.T. (Appeals) by the assessee and on the basis of which the C.I.T. (Appeals) accepted the explanation of the assessee. In the view that the Court is inclined to take it is not necessary to enter into discussion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... restored to the file of the Tribunal for the purposes of adjudication afresh in light of the well-established legal principles enunciated by the Apex Court and this Court. 13. Accordingly, the appeal is allowed to the aforesaid extent. The question is answered in light of what is stated hereinbefore. The Reference stands disposed of accordingly. There shall be no order as to costs. 9. Relying upon the aforesaid decision, it was submitted that when the Tribunal has reversed the order of CIT(A), it was necessary for the Tribunal to record reasons for the same. On perusal of the impugned order passed by the Tribunal, more particularly para 42 thereof, does not reflect as to what were the facts and evidence before the CIT(A) by the assessee nor the submissions made by the revenue including the cases relied before the Tribunal are at all considered or discussed by the Tribunal. In such circumstances, it was prayed that the impugned order of the Tribunal is required to be quashed and set aside and to restore the matter to the file of the Tribunal for the purpose of adjudication afresh in light of the well established legal principles enunciated by the Apex Court and this Court. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quantum of loss is not disputed by the Assessing Officer or CIT(A). The only ground for disallowing such loss was that there was no proof of delivery of shares prior to the date of search. 13. Learned senior advocate further submitted that it was also contended before the Tribunal that when the transaction is viewed as tax planning, though it is not, assessee was entitled to plan his transaction so that his taxes are minimized. Moreover, the respondent assessee has disclosed the loss in the return of income supported by the evidence of payment is considered by the Tribunal is a finding of fact. Copies of sale bill received from the brokers and payments made through cheque and delivery of shares were given to the buyers are not in dispute. It was therefore, submitted that there is extinguishment of right of the assessee in the shares resulting in the transfer and therefore, the Tribunal has rightly held that the transactions which are duly incorporated in the books of the assessee in addition to the evidences furnished before the assessing officer including the confirmation of purchasing of the shares by the seller and the buyer and subsequently transferring such shares and in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it cannot be said that the Tribunal has committed any error in holding that the assessee is entitled to claim the contrived losses in the total income for the respective year by the respective assessee. 18. We are in agreement with the ratio of the decisions cited at bar by the learned advocate for the revenue, but in view of the findings of fact recorded by the Tribunal in the present case, we are of the opinion that there is no need to restore the matter back to the Tribunal to give any further reasons in support of findings of fact arrived at on the basis of material on the record by the Tribunal. 19. In view of the above, it cannot be stated that the impugned order of the Tribunal is without any reason whatsoever so as to remand the matter back to the Tribunal. Even if the matter is remanded back to the Tribunal, the ultimate result arrived at by the Tribunal in the impugned order relying upon the facts emerging from the records the same would not be different in any view of the matter. In such circumstances, we do not find any merit in the appeal. The questions of law are answered in favour of the assessee and against the revenue. The appeal stands dismissed accordingl ..... 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