TMI Blog2016 (6) TMI 480X X X X Extracts X X X X X X X X Extracts X X X X ..... - Decided in favour of asseessee - IT(SS)A No.65/Kol /2013 - - - Dated:- 27-4-2016 - Shri Waseem Ahmed, Accountant Member and Shri S.S.Viswanethra Ravi, Judicial Member For The Appellant : Shri S.K.Tulsiyan, Advocate For The Respondent : Shri Rajat Subhra Biswas, CIT-DR ORDER PER Waseem Ahmed, Accountant Member:- This appeal by the assessee is against the order of Commissioner of Income Tax (Appeals), Central-III, Kolkata dated 21.03.2013. Block assessment was framed by ACIT, CC-XXIV, Kolkata u/s 158BD/144 of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide his order dated 30.11.2006 for the block period from 01.04.1996 to 07.05.2002. Grounds raised by assessee are as under:- 1. The orders passed by the lower authorities are arbitrary, erroneous, without proper reasonings, invalid and bad in law, to the extent to which they are prejudicial to the interests of the appellant. 2. On the facts and in the circumstances of the case, the learned CIT(A) erred in upholding the validity of the proceeding initiated u/s 158BD of the Incometax Act, 1961, in case of the appellant company, in spite of the fact that during the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Surendra Kr. Hirawat 4933 Federal Bank Burra Bazar Branch-Kolkat Rs.29,00,000/. 4. Shri Shankarlal Godh, 4934 Federal Bank Burra Bazar Branch-Kolkata Rs.16,30,000/- Total Rs.63,30,000/-. The aforesaid four persons deposited substantial cash in their respective bank accounts and subsequently transferred the money to various companies including the present assessee. Finally in turn these companies and the assessee transferred the fund to the group of UIC companies. It was also revealed that Mr. Sandip Kr. Singhee, the director of the assessee company acted as introducer in the opening of the aforesaid bank accounts. The aforesaid 4 persons were produced before the DDIT (Inv) (unit III) (4) by Mr. Sandip Kr. Singhee and their depositions were taken, but later these persons could not be traced in spite summons issued under section 131 of the Act and the summons were also not served at the given addresses. Accordingly the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y through these bank accounts. Under the circumstances proceedings u/s. 158BD of the I T. Act, 1961 are required to be initiated in the hands of the above named twenty companies (13 + 7 = 20) for bringing the undisclosed income of those companies into the tax net'. In view of above the AO issued notice u/s 158BD of the Act for filing the income tax return of its total income including undisclosed income for the Block Period from 01.04.96 to 07.05.2002. In response to the notice the assessee challenged that there was no undisclosed income and requested the Department to provide the copies of books of accounts, other documents and detailed information on the basis of which notice under section 158BD of the Act has been issued. Accordingly the AO communicated the reasons for initiating proceedings u/s.158BD of the Act to the assessee vide letter No. ACIT/CC- XXIV/158BD/2006-07i46 dated 04.05.2006 which is reproduced below. 1. A search seizure operation was conducted in the UIC Group of cases on 07/05/02. In course of search in the corporate office of UIC Group, huge share scripts allotted in your name was found and seized. In the course of post search inquiry launched ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the investment by the company in UIC group was made in the year 1999 to 2000 and the same was sold to the aforesaid parties in the year 1999 to 2001 which was duly recorded in the books of account. As such there is no undisclosed income and assessee requested to drop the proceedings under section 158BD of the Act. However the AO requested the assessee to provide the following details : 1. Name of companies of which shares were purchased. 2. No. of shares purchased 3. Rate at which shares were sold. 4. Total consideration. 5. Annual report of the company 6. Copy of bank a/c No. 5274 maintained in Federal Bank, Burrabazar branch for the relevant period. 7. Investment made in UIC groups either directly or through Rajesh Jajodia group companies. 8. Nature of transactions with date, party names and amount specifically to be mentioned. The AO also issued notice u/s 131 of the Act for the personal appearance of the director. However the above required details were not furnished but the director of the company Mr. Sandip Kumar Signhee appeared on dated 13/11/2006 and his statement was recorded under section 131 of the Act which is reproduced below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain investment were made directly with the UIC Group. Deposition of the aforesaid four persons Shri Rajendra Kumar Surana, Shri Sunil Kr. Jain, Surendra Kr. Hirawat and Shri Shankarlal Godh holding the four bank accounts were also taken and they were produced by the Director, Mr. Sandeep Kr. Singhi. Deposition recorded of the aforesaid persons by the D.D.I.T.(lnv.) are reproduced below, 2) What are your source of Income? Surender Kr. Hirawat:- My source of income is doing small job works and share dealings. My office was at 29A, Rabindar Sarani, 4th floor Room Ni. 10 and shifted to 91, N.S. Road, Kolkaia-1, Rajendra Kr.Surana;- My source of income are dealing in shares and commission on arranging finance. My source of income is not established Shankar Lal Godh :- My source of income is dealing in shares and securities. Sunil Kr. Join:- My source of income is dealing in finance security from my office at 91, N.S. Road, 3rd floor, Kolkata-1 3) Details of Bank acount maintained by you? Surender Kr. Hirawat :- I have S.B. A/c No. 4933 with Federal Bank of India, Burra Bazar, Kolkata. Rajendra Kr.Surana :- I have S.B. A/c No. 4886 with Federal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve basis in the hands of the UIC Group. Hence, this amount is taxed on a protective basis in the hands of the assessee company. 4. Aggrieved assessee preferred an appeal to Ld.CIT(A) where it was submitted that as under : The investments of the assessee was sold to the to the above-mentioned four persons for sale consideration of ₹ 63.30 lakhs which was duly received by the assessee through account payee cheques. The sale transaction was duly recorded in the books of accounts and income tax return was filed after incorporating the above details. On the date of search the share certificates were not the property of the assessee and the right of the assessee was duly relinquished thereon by way of sale much before the date of search. Accordingly, the assessee challenged the validity of the proceedings initiated u/s158BD of the Act on the ground that no incriminating material was found by the assessee during search against the assessee. The assessee paid tax on capital gain on the sale of investment in the shares of UIC group of companies. The A.O. has put reliance on the statement given by the four persons but these statements have never been made available to the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 158BD requires for initiation of block-assessment proceedings in case of person other than the searched person is that the A.O. should be satisfied that any undisclosed income belongs to such other person. In the instant case, evidence was found as a result of search that during the blockperiod under appeal the appellant-company had invested in a part of the share capital of certain companies of the UIC Group, about the sources of which the A.O. was not satisfied. Since, the A.O. was not satisfied about the sources of the money invested by the appellant in the shares of the companies of the UIC Group, he recorded his satisfaction that such money was undisclosed income of the appellant. The A.O. initiated proceedings u/s 158BD after being satisfied that the amount of money invested by the appellant in the share capital of companies of the UIC Group was the unexplained income of the appellant therefore, it is held that proceedings u/s. 158BD of the Act had rightly and validly been initiated against the appellant. The case-laws relied upon by the AIR in his submissions and the rejoinder are not applicable to this case since, the facts of those cases are distinct and distinguis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, 1995, to December 19 2001, as bad in law since no satisfaction was recorded by the Assessing Officer having jurisdiction over the non-searched person. It is to be noted that in the case of Lalitkumar Patel (supra), as also in the case of the present assessee-respondent, common reasons were recorded by the Assessing Officer for issuance of notice under section 158BD of the Act. In the case of Lalitkumar Patel, when the matter had reached this court challenging the order of the Tribunal, the same was sustained by this court, extensively dealing with the various provisions as also taking into consideration the case laws on the subject particularly relying on case of Manish Maheshwari v. Asst.CIT [2007] 289 ITR 341 (SC) It was held that for taking recourse to the block assessment under section 158BC in relation to the person not searched, whenever search has been conducted under section 132 or the documents have been requisitioned under section 132A, the Assessing Officer of the searched person needs to record is satisfaction that undisclosed income belongs to the person other than the person with respect to whom search was carried out under section 132 of the Act. He is also req ..... X X X X Extracts X X X X X X X X Extracts X X X X
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