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Commissioner of Income Tax-IV Versus DPA Finvest Services Ltd.

2015 (7) TMI 918 - DELHI HIGH COURT

Unexplained credit under Section 68 - Penalty proceedings under Section 158BFA (2) initiated - Held that:- In order to undertake a proper exercise in terms of Section 158BB(1), the AO will have to come to a definite conclusion that what emerges during the enquiry' following the search in the form of information or material is 'relatable to such evidence' as has been unearthed during the search. That exercise will of course vary from case to case. There has to be an application of mind by the AO .....

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the credit entries which according to him were not explained by the Assessee cannot be faulted. - Decided in favour of assessee. - ITA No. 228/2014 - Dated:- 20-7-2015 - S Muralidhar And Vibhu Bakhru,JJ. For the Appellant : Mr Raghvendra Singh, Junior Standing Counsel for Mr Kamal Sawhney, Senior Standing counsel For the Respondent : Mr Piyush Kaushik, Adv. JUDGMENT 1. This appeal under Section 260A of the Income Tax Act, 1961 ('Act) is directed against the order dated 20th September 2013 p .....

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ht to trade on the Stock Exchange to another company and, therefore, no genuine trading for any client was done by FPPL. In the course of the assessment proceedings of FPPL and Manoj Agarwal, it transpired that they were using the name and account of FPPL for the purposes of providing accommodation book entries. One of such persons who benefitted from such accommodation entry was found to be the Respondent Assessee i.e. M/s DPA Finvest Services Ltd. ('DFSL'). It was shown to have receive .....

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ntioned account totaling ₹ 33,75,949 "could not be explained by the assessee company". Accordingly, they were treated as unexplained credit under Section 68 of the Act. Penalty proceedings under Section 15SBFA (2) were also initiated. 4. The aforementioned order was overturned by CIT (Appeals) by the order dated 22nd February 2010 by holding that the additions made were based on transactions "which are not related to any evidence collected during the course of search proceed .....

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"nothing was brought on record to show that some evidence relating to these transactions was seized during search on Shri Manoj Agarwal". 6. It is contended by learned counsel for the Appellant that the interpretation placed by the ITAT on Section 158BB (1) of the Act is too narrow and it overlooks the words "and relatable to such evidence" which follows the words "evidence found as a result of search or requisition of books of accounts or other documents...." In ot .....

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out by learned counsel for the Respondent that in this case the accounts were fully disclosed by the Assessee at the time of filing regular returns. According to him the entries for which explanation was sought had no connection either with Mr. Manoj Agarwal or FPPL and, therefore, could not be said to be relatable to a single accommodation entry that was unearthed during the search. Relying on the decision in CIT v. Blue Chip Construction Co, (P) Ltd. 213 CTR (Del) 530, it is submitted that the .....

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, CIT v. Harkaran Das Ved Pal 336 ITR 8, 8. At the outset, it must be noticed that the ITAT has referred to the decision of the Supreme Court in ACIT v. Hotel Blue Moon (2010) 321 ITR 362. The two questions that the Supreme Court considered in the said case were: (i) whether issuance of notice under Section 143(2) of the Act within the prescribed time limit was mandatory for the purposes of the assessment under Section 143 (3) of the Act?; and (ii) whether certain additions made in that case und .....

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lar assessment made or to be made. Search is the sine qua non for the block assessment. The special provisions are devised to operate in the distinct field of undisclosed income and are clearly in addition to the regular assessments covering the previous years failing in the block period. The special procedure of Chapter XIV-B is intended to provide a mode of assessment of undisclosed income, which has been detected as a result of search. It is not intended to be substitute for regular assessmen .....

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termined as a result of search under S. 132 or requisition under S. 132A of the Act". 9. Although in the above background the Supreme Court observed that the scope and ambit of Chapter XIV-B was limited to "materials unearthed during search," clearly the Court was not saying that the assessment for the block period could not be on the basis of materials and information available with AO and "relatable to such evidence" unearthed during the search. That question, in the f .....

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