TMI Blog2005 (8) TMI 589X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of dealing in shares, debentures, bonds, securities, etc. The assessee-company had filed a return declaring loss of Rs. 44,174 on 25-7-1994. As the return was a belated return filed beyond the time-limit prescribed under section 139, a notice under section 148 was issued to regularize the same, in response to which the assessee stated that the return already filed could be treated as the one filed in response to the said notice. The assessment was completed by fixing a total income of Rs. 11,41,75,830 as against a loss of Rs. 44,174 returned by the assessee-company. The assessment was completed after making an addition of Rs.11,44,20,000 on the ground of profit on alleged sale of ACC shares held by the assessee-company. 3. The assessment was taken in appeal before the CIT(A), Central-VIII at Mumbai. The CIT(A) held that no material was brought on record to show that the seized documents imputed in the hands of the assessee-company had any nexus with the reason to believe that any income has escaped assessment for the impugned assessment year. Therefore, on the basis of the decision of the Supreme Court in the case of ITO v. Madnani Engg. Works Ltd. [1979] 118 ITR 1 , the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arried on at the office of the assessee-company, among various other papers seized by the department. Therefore, the assessee-company requested for an opportunity to inspect the seized materials to verify whether the seized materials included these ACC shares purchased to the assessee. It was also stated by the assessee-company that alternatively the shares might be in the possession of the custodian appointed by the Special Court in whose custody so many documents and papers were entrusted. The assessee-company further requested the assessing authority to arrange an inspection of documents in the office of the custodian to verify the position. 9. In short, the assessee-company submitted that the shares were not in the possession of the assessee-company and the shares might have been included in the seized materials and kept either in the office of the Income-tax Department or in the office of the custodian appointed by the Special Court. The assessee submitted that in either case, the inspection and discovery of the shares were beyond the powers of the assessee and, therefore, requested the help of the Assessing Officer to conduct necessary enquiries, inspections and to locate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate on the basis of the prevailing highest and the lowest rates of ACC shares and directed the assessing authority to apply the said rate to 34,202 shares said to be sold by the assessee. As a result of this, the addition of Rs. 11,42,20,000 has been modified to Rs.7,95,19,650. It is against the above that the assessee has come in second appeal before us. 12. The grounds of appeal raised by the assessee-company read as below : "1.The learned CIT(A) has erred in law and in facts in upholding the assessment order passed by the Assessing Officer under section 143(3)/147 of the Act. 2.The learned CIT(A) has erred in law and in facts in upholding the addition made by the Assessing Officer on account of profit earned on alleged sale of 34,202 shares of M/s. ACC Ltd. ( a )The learned CIT(A) has erred in law and in facts in determining the profit on alleged sale of 34,202 shares of M/s. ACC Ltd. at Rs. 7,95,19,650. ( b )The learned CIT(A) has erred in law and in facts in holding that the observations of the Assessing Officer made in assessment order for assessment year 1994-95 were out of the context so far as appeal for assessment year 1991-92 is concerned. ( c )The learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Special Court, as the assessee would not be in a position to initiate any such enquiry and discover the shares. The assessee being a notified entity and connected to Harshad Mehta group of concerns, there were a number of searches and inspections in the business premises of the impugned and connected cases. It is also a fact that the department had seized a number of documents and papers from the business premises of the assessee and associate concerns. It is again true that the Custodian appointed by the Special Court also keeps under his control a number of documents and papers relating to the business carried on by the assessee-company and its associate concerns. It is in the above circumstances that the assessee has stated that the shares were not available in its custody and might have been seized or misplaced elsewhere. The Assessing Officer has not directly addressed this crucial contention advanced by the assessee-company. The Assessing Officer, on the other hand, observed that in spite of the loss of shares for more than a period of 2 years, the assessee-company had not filed any First Information Report with the Police authorities. The assessee could have filed F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t such a negative fact is to assert and affirm such statements in instruments such as affidavits and to state the supporting circumstances in which the negative fact pointed out by the person stand the test of reasonable probability. In the present case, the assessee has done all the above endeavours from its side to assert its stand that the shares were not in its custody when asked for by the assessing authority. 16. Now if the Assessing Officer wanted to proceed further and make out a positive case, that those shares were sold by the assessee-company, the Rule of Prudence calls for some piece of evidence either direct or indirect in the hands of the Assessing Officer to allege that the shares were in fact sold by the assessee-company in the open market for a higher price. Either the buyers of the shares should have been identified or the time of the sale should have been reasonably ascertained or the pattern of sales should have been known or any matter relating to the case of alleged sale should have been known to the Assessing Officer. When we go through the orders passed by the lower authorities in detail, we are constrained to see that no piece of direct or indirect evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tters not in a judicious manner and he was carried away by the logical arguments advanced by the assessing authority. As the logical advances have landed the CIT(A) in so many inferences, which were based only on subjective presumptions and assumptions. There seems to be a great temptation on the part of the lower authorities to presume a case of unaccounted sales because of the particular status of the assessee-company as notified entity involved in the securities scam. But we have to examine a case of assessment dispassionately. 21. In the facts and circumstances of the case we are of the considered view that the addition of Rs. 11,42,20,000 made by the assessing authority on the ground of alleged sale of ACC shares is unsustainable both in facts as well as in law. Therefore, even the modified addition sustained by the CIT(A) is deleted. 22. As the substantial issue raised in this appeal is decided on facts and merits of the issue we find that there is no need of advent upon other legal grounds including the additional ground raised by the assessee-company in this appeal. Therefore, all of them are capped as academic. 23. As the issue on the alleged sale of shares of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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