TMI Blog2003 (8) TMI 186X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Alok Aggarwal, being the person search under s. 132 against the appellant, as 'the other person' referred to in that section, hence, the impugned order passed against the appellant, who was subjected neither under s. 132, nor under s. 132A, is illegal and void. (c) That the impugned order is also void being barred by limitation, inasmuch the impugned notice dt. 12th Oct., 2000, under s. 158BC/158BD was issued after the expiry of the period within which satisfaction, as envisaged under s. 158BD, was required to be reached by AO of the person search under s. 132, but within which period no such satisfaction was reached against the appellant as the other person referred to in that section. In fact, no such satisfaction was reached so as to authorize the AO to assume valid jurisdiction under s. 158BD/158BC against the appellant. (d) That the impugned order is also vitiated and unsustainable in law, as it was passed in breach of principles of natural justice and fair play, without giving any opportunity of advance hearing to the appellant before issuing the impugned notice under s. 158BC/158BD to enable the appellant to rebut any material and explaining its case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase. Learned counsel has also filed copies of orders of the Tribunal in the other cases of the group arguing that these decisions squarely support the case of the assessee for deletion of the impugned addition on account of share capital. 3. At the outset, we may briefly set out relevant facts having a bearing on the point in issue arising in the present appeal. 4. The assessee is a closely held public limited company incorporated and registered under the Companies Act, 1956, on 9th Sept., 1992. It has been filing its returns of income from asst. yr. 1993-94 onwards, as per the following particulars: Asst. yr. Date of filing of Return Remarks 1993-94 31-12-1993 Assessed on nil income under s. 143(1)(a) vide intimation dt. 13th June, 1994. 1994-95 24-11-1994 Returned income ₹ 1,87,972 assessed at ₹ 3,94,972 under s. 143(3) vide order dt. 31st Oct., 1996. Addition of ₹ 2 lacs has been made on account of share capital appearing in the name of MKN Portfolio Ltd. 1995-96 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03. Copy of the Tribunal s order has been filed by the learned counsel before us. 6. In the case of the assessee-company, AO proceeded to make the block assessment treating the entire share capital of ₹ 2,27,15,000 as undisclosed income. The share capital has been reflected in the books for various assessment years as under: Asst. yr. Share capital (Rs.) 1993-94 15,500 1994-95 69,22,000 1995-96 45,52,500 1996-97 1,12,25,000 Total 2,27,15,000 While making the impugned addition the AO observed that material seized from the premises of Shri Alok Aggarwal contained books of account, documents and papers which indicate that share capital of the assessee-company was non-genuine. The observations of the AO at p. 3 of the impugned assessment order wherein reference has been made to the seized material are extracted below: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s further confirmed from the fact that blank signed allotment letters have been seized. The alleged shareholders have signed blank allotment letters acknowledging delivery of the shares but the name and address of the shareholder, distinctive numbers of the share certificates, etc., have not been filled up which proves that the share certificates have not been sent to the so-called shareholders. 7. With regard to the contention of the assessee that share capital introduced in the books during the period relevant for asst. yr. 1996-97 amounting to ₹ 1,12,25,000 has already been surrendered in the return of income filed for asst. yr. 1996-97, the AO rejected the contention on the ground that the return of income for asst. yr. 1996-97 has been filed on 30th Nov., 1996, i.e., after the date of the search surrendering the share capital since there were substantial losses incurred by the assessee-company which offset the surrendered amount. 8. Aggrieved, the assessee has come up in appeal before us. 9. Learned counsel, assailing the impugned addition of ₹ 2,27,15,000 made by the AO, did not press ground No. 1 against legality of the impugned assessment. We would acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this connection, he further stated that the Department has been taking conflicting stands from time to time with regard to genuineness of the share capital. In the first instance, the entire share capital of the assessee-company amounted to ₹ 2,27,15,000 was added back as undisclosed income in the block assessment of Shri Alok Aggarwal. The said block assessment was set aside by the Tribunal with the direction that proper opportunity may be provided and fresh assessment may be made. The Revenue proceeded with making a fresh assessment in the case of Shri Alok Aggarwal making the addition of ₹ 2,27,15,000 being the share capital of the assessee-company on protective basis. However, the Tribunal, after elaborate discussion of the facts and circumstances of the case, deleted the addition in Alok Aggarwal s case [IT(SS)A No. 83/Del/2001, dt. 14th Feb., 2003] on the ground that the share capital stood duly recorded in the regular account books on the date of the search and subscribers of the share capitals have duly furnished confirmation certificates which indicate that such shareholders are existing assessees. On the basis of these facts, the Tribunal came to the findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned counsel further submitted that out of the share capital of the company, a sum of ₹ 1,12,25,000 has been subscribed by the shareholders during the period relevant for asst. yr. 1996-97. Particulars of such shareholders along with their complete addresses have been placed in the paper book at pp. 150 to 160. This share capital of ₹ 1,12,25,000 introduced for asst. yr. 1996-97 has been surrendered in the return of income filed for asst. yr. 1996-97 since the assessee was under the impression that confirmations from the shareholders were not available. Learned counsel referred to the letter placed in the paper book at pp. 164 to 169 wherein the assessee has explained the circumstances under which the amount has been surrendered in the return: The next point relates to reasons for surrender of share capital raised during the year. It is submitted that the assessee had its further issue of share capital made during the year subscribed through persons known to the assessee. The assessee in order to verify the creditworthiness of the persons who had subscribed to the share capital during the year asked them to show their records/confirm the source of investment made. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 70 (SC). Concluding his arguments, learned counsel reiterated that since the issue is squarely covered by the earlier decisions of the Tribunal in the case of Alok Aggarwal as well as Makhni Tyagi (P) Ltd., the impugned addition of ₹ 2,27,15,000 deserves to be deleted. 14. Learned Departmental Representative, on the other hand, rested content by placing reliance on the impugned order of the AO and referred to the decision of Delhi High Court in the case of CIT vs. Sophia Investment Finance Ltd. (1993) 113 CTR (Del)(FB) 472 : (1994) 205 ITR 98 (Del)(FB). 15. We have carefully considered the rival submissions made by the learned representatives on both sides and also gone through the compilation of papers filed by the learned counsel as well as string of judicial authorities cited before us. At the very outset, we cannot help observing that impugned block assessment order made by the AO does not reflect application of mind on the part of the AO while proceeding to include the entire share capital of ₹ 2,27,15,000 as undisclosed income of the assessee-company for the block period. Assessee-company is duly incorporated under the Companies Act as a public limited c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings as well as in the block assessment covering the block period. It is relevant to note that additional share capital of ₹ 35,50,000 appearing in asst. yr. 1997-98 and ₹ 2.27 crores appearing in asst. yr. 1998-99 have been accepted as genuine by the AO after scrutiny during regular assessments for these years made after the search operations, as against the entire share capital of s. 2,27,15,000 appearing during the block period has been held to be undisclosed income. 16. The basis for treating the entire share capital as undisclosed income, as cited by the AO in the impugned block assessment, is the seized material containing share application register, shareholding register as well as various other documents like confirmations of shareholding signed by the shareholders of the assessee-company as found at the premises of Shri Alok Aggarwal, a practising chartered accountant. The relevant extract from the impugned assessment order indicating the seizure of the various types of documents from the premises of Shri Alok Aggarwal as per p. 3 of the block assessment order has already been reproduced hereinbefore. This appears to be the sole basis adopted by the AO to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the explanation has been found to be tenable by the Tribunal vide the aforementioned appellate orders in the cases of Alok Aggarwal as well as Makhni Tyagi (P) Ltd. In these circumstances, there is no occasion for treating such share capital as undisclosed income of the assessee-company. 18. We may refer at this stage to the contention of the learned of the learned counsel that a part of the share capital has been assessed by the AO in the regular assessments and the same cannot, therefore, be included in the block assessment by virtue of Explanation appended below s. 158BA(2). The said Explanation inserted by the Finance (No. 2) Act, 1998, w.e.f., 1st July, 1995, reads as under: (b) the total undisclosed income relating to the block period shall not include the income assessed in any regular assessment as income of such block period. Explanation (b), as reproduced above, in explicit and unequivocal terms excludes from the purview of undisclosed income relating to the block period the income assessed in any regular assessment. In the instant case, we find that for asst. yr. 1996-97, the assessee surrendered the accretion of the share capital to the extent of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X
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