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2016 (6) TMI 480 - ITAT KOLKATA

2016 (6) TMI 480 - ITAT KOLKATA - TMI - Validity of the proceedings initiated under section 158BD - non incriminating material found at the time of search - AO has initiated and completed the assessment proceedings u/s 158BD / 144 of the Act on the basis of documents found at the time of search from the place of UIC group of companies where the search was conducted - Held that:- We find lot of force in the argument made by Ld. AR before us with regard to the satisfaction recorded as per the prov .....

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he case of Champakbhai Mohanbhai Patel (2014 (2) TMI 1168 - GUJARAT HIGH COURT ) we reverse the orders of Authorities Below - 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 .....

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terests 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 the Search proceedings at the premises of the UIC Group, no incriminating materials against the appellant company had been found. 3.(a) On the facts and in the circumstances of the case, the learned CIT(A) erred in upholdi .....

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ter in relying on such unverified depositions. Shri S.K.Tulsiyan, Ld. Authorized Representative appearing on behalf of assessee and Shri Rajat Subhra Biswas, Ld. Departmental Representative appearing on behalf of Revenue. 2. First we take up assessee s ground no. 2 regarding the validity of the proceedings initiated under section 158BD of the Act on the ground that there was no incriminating material found at the time of search. 2.1 Before carving out the specific issue of the appeal let us unde .....

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UIC group. As a result of enquiry it was revealed that the part of the share money was received by the assessee from the following 4 persons as detailed under : S.No. Name of the person A/c No.Bank Name Amount 1. Shri Rajendra Kumar Surana, 4886 Federal Bank Burra Bazar Branch-Kolkata Rs.17,00,000/- 2. Shri Sunil Kr. Jain, 4914 Federal Bank Burra Bazar Branch-Kolkata ₹ 1,00,000/· 3. Surendra Kr. Hirawat 4933 Federal Bank Burra Bazar Branch-Kolkat Rs.29,00,000/. 4. Shri Shankarlal G .....

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resaid 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 AO could not verify identity, genuineness and credit worthiness of the parties in relation to the aforesaid shares transaction, so he initiated proceedings under section .....

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iz. Shri Rajesh. Kumar Jajodia and Shri Sandip Kumar Singhi. In the course of post search enquiry launched in connection. with ascertaining the source of the share capital contributed by these outside companies, it was gathered that a part of the funds of the following share holding companies had come from four bank accounts i.e. Account no. 4886, 4914, 4934 and 4933 maintained with Federal Bank of India, Sura Bazar Branch, Kolkata and standing in the name of Shri Rajendra Kumar Surana, Shri Sur .....

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e aforesaid four persons deposited substantial cash in their four bank accounts and that these four persons are not traceable. Summons u/s. 131 of the IT Act, 1961 could not be served in their given addresses. It establishes that fictitious bank accounts were opened in the name of those name of those four persons. It was further observed that bank accounts were introduced by Shri Sandip Kumar Singhi. Since the cash from these four accounts had traveled to the above named companies of Shri Rajesh .....

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ove 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 .....

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rt of the fund had come from 4 (four) bank accounts i.e. A/ c. No. 4886, 4914, 4933 & 4934 maintained with Federal Bank of India, Burra Bazar Branch, Kolkata and standing in the name of Shri Raiendra Kumar Surana, Shri Sunil Kr. Jain, Surrendra Kr. Hirwawat and Shri Shankarlal Godh respectively. 2. On further inquiry it was revealed that the aforesaid four persons deposited substantial cash in their respective bank accounts and these four persons were not traceable. Summons u/s. 131 of the I .....

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ccordingly, proceedings u/s. 158BD were initiated'. Besides the above the AO also observed that on the day of the search & seizure operation conducted u/s 132 on 07/05/02 at the office premises of M/s UIC Wires Ltd., 227 AJC Bose Road, Anandlok (1st Floor), Kolkata, 2 Lacs share certificates bearing distinctive numbers 490301 to 690300 allotted to assessee company on 12/08/2000 with a face value of ₹ 10/- amounting to a total value of ₹ 20 lacs, were found and seized from its .....

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before transfer. 2.2 As the aforesaid four persons were not traceable, so the genuineness of the transactions remained doubtful. Accordingly the AO issued notice to the assessee to justify the source of the above cash in the account of above said four persons. In compliance to notice the assessee 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 .....

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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 : 5. Name the persons who ha .....

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Rajesh Jajodia group companies and the UlC Group Companies. 6. Name the companies where your companies have made investment? A. We have made investment in various companies including Rajesh. Jajodia (Nos. 1-7) and the UIC group (Nos. B-11). 1. Target Merchandise (P) Ltd. 2. Sigma Dealcom. (P) Ltd. 3. Sunshine Consultancy 4. Neelqiri Commercial (P) Ltd. 5. Orbital Suppliers (P) Ltd. 6. Sagar Trackon (P) Ltd. 7. Nikhar Merchandise (P) Ltd. 8. UIC Wires Ltd 9. UIC Holdings (P) Ltd. 10. UIC Industr .....

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esaid four persons was invested partly in the companies controlled and managed by Rajesh Jajodia and partly as direct investment in the UIC group of companies? A. Yes, it was invested partly in the companies controlled and managed by Rajesh Jajodia and partly as direct investment in the UIC group of companies. 13. Did the companies managed and controlled by you also invest in the UIC group directly? Yes, certain investment were made directly with the UIC Group. Deposition of the aforesaid four p .....

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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, .....

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and Mahendar Jajodia through Mr. Sandip Singhi with a direction to issue cheques in favour of companies managed by Sandip and Rajesh: 1 am a person having very low income. 5) How can you justify the source as given in reply to Q. No. 4? Same, answer for all:- I do not have any evidence to prove that the cash amount deposited in my above bank account has been received from them However it can be seen that cheques favouring Sandip or Rajesh companies have been issued and debited on the same dates .....

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for all :- As stated earlier this is not my money and it is true". However after deposition, the aforesaid four persons were not traceable in spite of the summons issued u/s 131 of the act. The AO after considering the all the facts of the case held that the purpose of the sale and purchase of shares was to convert the unaccounted money of the UIC group in accounting form and for this purpose the services of Mr. Sandip Kr. Singhee were availed. Accordingly the amount of ₹ 63.30 lakhs .....

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s 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 shar .....

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the statement given by the four persons but these statements have never been made available to the assessee for cross examination. It is submitted that in absence of such cross examination by the assessee what significance can be attributed to the same. 5. Similarly the provisions of the Section 68 of the Act cannot be applied in the instant case as it applies Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation abou .....

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the materials found during search should have been handed over to the AO having jurisdiction over such other person to initiate the action in terms of the aforesaid section. But in the instant case no such procedure has been followed by the authorities. The share certificates found during the search were not handed over to the AO having jurisdiction over the assessee. However the ld. CIT(A) after considering all the facts of the case disregarded the plea of the assessee by observing as under : .....

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to whom search was made under section 132 or whose books of account or other documents or any assets were requisitioned under section 132A, then, the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed under section 158BC against such other person and the provisions of this Chapter shall apply accordingly. What section 158BD requires for initiation of .....

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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 ca .....

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t. He further submitted that in the instant case there is no undisclosed income of the assessee. All the transaction for the sale of shares to the aforesaid 4 persons were duly accounted for in the books of accounts and offered to tax. The proceeding under section 158BD doesn t apply as the assessee has no undisclosed income. The AO has made the addition on the basis of the statements recorded under section 132 of the Act of the aforesaid 4 persons were not made available for the purpose of cros .....

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duly disclosed in the books of accounts of the assessee and the income thereon was offered to tax. The assessee before us has challenged the validity of the proceedings under section 158BD of the Act on the ground that the in the instant case the satisfaction was to be recorded by the AO of the UIC group where the search was conducted but in the case in hand the satisfaction has been recorded by the AO having jurisdiction over the assessee. In our considered view, we find lot of force in the arg .....

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158BC for the block period from April 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 challen .....

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2A, 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 required to hand as per the books of account or other documents or assets seized to the Assessing Officer having jurisdiction over such non-searched person and, thereafter, the Assessing Officer who has jurisdiction would proceed under section 1588C, against the per .....

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