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TMI Blog2019 (7) TMI 792X X X X Extracts X X X X X X X X Extracts X X X X ..... d order. 2. Brief background of these appeals are that, in case of M/s Tushar Stock & Share Brokers Pvt. Ltd., it was held by the Tribunal by its order dated 31.10.2007 that, there was no valid requisition u/s 132A of the Act by Income Tax Department from FERA authorities and hence it was held that the proceedings u/s 158BC initiated could not be held to have been validly initiated. It was further held that, neither any material or evidence was found during the course of search conducted by the Income Tax Department from the possession of the assessee nor any material was requisitioned by the Income Tax Department from the FERA authorities to form the basis of block assessment proceedings u/s 158BC of the Act. Even otherwise also, on merits it was held that sustenance of addition of Rs. 1,06,23,044/- made on substantive basis in the case of M/s Mittal Consul & Co. and on protective basis in the case of M/s Tushar Stock & Share Brokers Pvt. Ltd., the additions cannot be upheld and all the additions were deleted. 3. In the case of M/s Mittal Consul & Co., the Tribunal vide its order dated 30.05.2005 had held that the condition precedent for proceedings against the person, i.e., the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of 30 bank account holders detailing the name and branch of the banks and also the number of cheques and serial numbers thereof. The aforesaid details had been prepared on the basis of cheque books found from the aforesaid premises. At the time of search a sum of Rs. 2,41,000/- in cash was also found which was seized. Thereafter, it appears a statement of Shri Ranjit Kumar Mittal, S/o Shri Laxmi Chand Mittal was also recorded on 12.12.1995 by the authorised officer u/s 40 of Foreign Exchange Regulation Act, 1973. That Shri Ranjit Kumar Mittal was one of the directors of M/s Tushar Stock & Share Brokers Pvt. Ltd. and also one of the partners of the firm M/s Mittal Consul & Co, a firm of Chartered Accountants. In the statement, he was required to give the name, address, account nos. of the persons/firms to whom the cheque book belongs and same was provided by him. He was also asked why the cheque books were found with him, and in reply, it was stated by him that some of the cheque books belongs to him and his professional firms whose names were provided in the statement and in respect of the rest of the cheque books, it was stated by him that such cheque books pertain to the profes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of M/s Mittal Consul & Co. framed an assessment computing undisclosed income of the assessee at Rs. 1,46,23,044/-. In making the aforesaid addition, the AO instead of examining 20 bank accounts as has been forwarded alongwith note of satisfaction, again examined 30 bank accounts when it was found that out of 30, three names were repeated, and in respect of the remaining 27 accounts, he made addition of Rs. 1,46,23,044/- on substantive basis as against the addition made of Rs. 86,07,403/- by the AO of M/s Tushar Stock & Share Brokers Pvt. Ltd. The aforesaid addition was made on the ground that the assessee firm was involved in bogus capital formation and it has tried to launder large sums of its unaccounted money by opening bank accounts in fictitious names and filing bogus income tax returns in the names of non-existing individuals. In the case of Shri R. K. Mittal the same very amount of Rs. 1,46,23,044/- on estimate basis, had been brought to tax as undisclosed income but on protective basis by the AO. 10. Aggrieved against the respective orders of assessment, the aforesaid three assessee's filed appeals before the CIT(A), who vide his consolidated order dated 03.12.2004 had di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the assessee Undisclosed income determined by the AO. Undisclosed income determined by the CIT(A) 1. M/s Tushar Stock & Brokers Pvt. Ltd. Unexplained Deposits in Bank A/c Rs. 86,07,403/- Unexplained Deposits in Bank A/c Rs. 1,06,23,044/- Personal use of Car & Telephone expenses Rs. 78,335/- Personal use of Car & Telephone expenses Rs. 78,335/- IT(SS) No.: 435/Del/2004 Seized dairy Rs. 13,10,000/- Seized dairy Rs. 13,10,000/- Share application/share capital Rs. 10,80,000/- Share application/share capital Rs. 10,80,000/- Total Rs. 1,10,75,738/- Total Rs. 1,30,91,379/- 2. M/s Mittal Consul & Co. IT (SS) No. 434/Del/2004 Rs. 1,46,23,044/- Rs. 1,06,23,044/- 3. Shri R.K. Mittal IT(SS) No. 433/Del/2004 Rs. 1,46,23,044/- Rs. 1,06,23,044/- 14. The learned Counsel for the appellants, Shri. Salil Aggrwal submitted that in this case, a search was conducted by the Enforcement Directorate u/s 37 of the FERA at the premises of M/s Tushar Stock & Brokers Pvt. Ltd., from where 30 Cheque Books as well as cash of Rs. 2,41,000/- was found and 30 Cheque Books were seized by the Directorate under Foreign Exchange Regulation Act. He submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se cheque books were found were outside the scope of XIV-B of the Act. 15. In respect of the allegation that most of the account of the individuals were introduced by MC & Co, it was submitted that MC & Co and Mittal Consul & Co. are not same. To demonstrate the same, it was submitted that on behalf of MC & Co, signature was made by Shri Ved Prakash Sharma who is the proprietor of M/s MC & Co. In support of the same, he referred to the computation of income alongwith balance sheet and Profit & loss A/c for the AY 1991-92 filed by Shri. Ved Prakash Sharma and also the order of the assessment for the same assessment year. 16. In the alternative, it was further submitted that in respect of 20 accounts, the CIT(A) has adopted a figure of Rs, 1,06,23,044/- and out of the aforesaid accounts, an account of M/s Khanna Stencils Pvt. Ltd. was also included which has been found genuine by the AO of M/s Tushar Stock & Brokers Pvt. Ltd, as such, same was not referred by him in the satisfaction note. It was submitted that if the account of M/s Khanna Stencils India Pvt. Ltd. is excluded, then the total undisclosed income determined by the learned CIT(A) would be at Rs. 57,68,426/- (after exclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... longer his clients and it was not possible for him to produce such account holders for verification. It was submitted that assessee has filed the IT returns of the account holders which reflect very meagre income. It was submitted that since the cheque books were found from the assessee as such, onus was on the assessee to prove that deposits made in such accounts did not belong to the assessee. In respect of the explanation of the assessee that MC & Co was not the assessee, and Shri. Ved Prakash Sharma was the proprietor of MC & Co, it was submitted by the learned CIT DR that assessee could not explain as to what was the relation between Mr Sharma and those persons whose cheque books were found. He submitted that surrounding circumstances lead to the conclusion that the said bank accounts were operated by the assessee in the name of those persons for his money laundering activity. 21. In rejoinder, Shri Aggarwal submitted that statement referred by the learned CIT DR dated 25.10.2001 was recorded almost after six years of search which was conducted on 12.12.1995, as such, merely because after six years, most of the persons were not the clients of the assessee, that does not req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer. Evidence found as a result of search is clearly relatable to sections 132 and 132A." 23. In the instant case, it is seen that no search was conducted u/s 132(1) of the Act but a requisition was made u/s 132A of the Act in respect of the cheque books seized by the Enforcement directorate in a search and seizure operation under section 37 of the Foreign Exchange Regulation Act. On the date of search, statement of Shri Ranjit Kumar Mittal was recorded, who was one of the directors of M/s Tushar Stock & Share Brokers Pvt. Ltd. and also one of the partner of the firm M/s Mittal Consul & Co, a firm of Chartered Accountants. In the statement, he has provided the name, address, account nos. of the persons/firms to whom the cheque book belongs. He also specifically stated that such cheque books pertain to the professional clients for the preparation of their income tax returns. In the course of the assessment proceedings, the assessee also furnished the clients register maintained by it to substantiate that aforesaid cheque book were of its clients. The assessee also filed PAN and ITR of such account holders which contain the complete details of the account holders. Shri. R. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the presumption is that the contents of the such documents are true. In this case, cheque books found however were not in the name of the appellant assessee, which cheque books had been identified to belong to account holders, who were the clients of the firm M/s Mittal Consul & Co. Further, the appellant had laid evidences to rebut such presumption and hence the burden shifts upon the revenue to establish that accounts belongs to the assessee which burden has not been discharged by the revenue. It is settled law that the apparent is real unless proved to the contrary. The assumption that M/s Mittal Consul & Co is introducing their unaccounted money and were engaged in laundering unaccounted money is unsubstantiated by any material fact found or brought on record. In fact, all the cheque books pertain to the different persons and such persons were income tax assessees and there is no presumption in law that all the accountholders had opened their accounts to accommodate the assessee as such a proposition is against the principles of common sense and human probabilities. 24. In such circumstances, after looking to the facts and circumstances of the case, documents and material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordinary course of business, the entries therein shall not alone be sufficient evidence to charge any person with liability. It is incumbent upon the person relying upon those entries to prove that they are in accordance with facts. In such circumstances, addition made solely on the basis of the diary found from the premises of Shri. A. S. Aneja without any corroborative material is unsustainable in law and hence is deleted. ii) Similarly, other two additions, i.e., one of Rs. 10,80,000/-, on account of an amount reflected in the balance sheet as share capital/application money and another of adhoc disallowances of Rs. 78,335/- being 1/10th the expenditure debited by the assessee M/s Tushar Stock & Share Brokers Pvt. Ltd. in its profit and loss account, on the ground that personal element in such expenses, is based on no incriminating material found as a result of search and were duly found recorded in the books of accounts. It is well settled law that scope of additions in Chapter XIV-B is not meant for making an assessment or reassessment of the income of the assessee, since the provisions of chapter XIVB of the Act can be invoked only for determining an undisclosed income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reholder, and hence addition made by the AO and sustained by the CIT(A) without rebutting such material or without bringing any adverse material is unsustainable in law. It is not a case, wherein the shareholders have denied the investment made in the assessee company nor any enquiry has been made from such shareholders to prove that share capital received by the assessee is not genuine. Therefore, addition made in respect of the receipt of the share capital is deleted. In our opinion further as stated above, such an addition was otherwise unsustainable as it did not represent any undisclosed income within the meaning of section 158B(b) of the Act. 29. In respect of disallowance of 1/10th of the expenses i.e. of Rs. 78,335/- on account of the purported personal user of Telephone & Cars, it is seen that AO has disallowed the expenditure on the ground that there could some element of personal use and such disallowance has been sustained. Appellant has submitted that it is a corporate entity and in respect of the corporate entity there is element of personal use. The aforesaid issue is covered by the judgment of the High Court of the Gujarat in the case of Sayali Iron & Engineering ..... X X X X Extracts X X X X X X X X Extracts X X X X
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