TMI Blog2019 (7) TMI 792X X X X Extracts X X X X X X X X Extracts X X X X ..... s no material which suggest that the cheque books belong to the M/s Mittal Consul Co, as appellant has established that such cheque books belong to the clients of M/s Mittal Consul Co. In such circumstances, action of the revenue to bring to tax the deposits made in such accounts in the hands of the appellant is devoid of any merit. Hence, addition made in respect of the deposits in such bank accounts and sustained by the CIT(A) are deleted. In fact, the revenue had not filed any appeal against the order of CIT(A) deleting the additions. The details of such additions have already been tabulated in foregoing para 13 above. In the result, we hold that the additions sustained by CIT(A) of ₹ 1,06,23,044/- in the case of M/s Mittal Consul Co. on substantive basis is deleted. - We further hold that the additions sustained on protective basis in the assessments made in the cases of M/s Tushar Stock Share Brokers Pvt. Ltd. and that of Shri R. K. Mittal are also unsustainable, hence are deleted. Addition in respect of the receipt of the share capital - HELD THAT:- Once the assessee has furnished the adequate evidence/material, the burden of the assessee is discharged in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssues involved in these appeals are inter-connected, therefore same were heard together and are being disposed off by this consolidated 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 ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iefly stated the facts are that on 12.12.1995, a search had been conducted by Enforcement Directorate at 17, Pusa Road, New Delhi at the premises of M/s Tushar Stock Share Brokers Pvt. Ltd. As per Annexure A of Panchnama prepared, reflected details 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 ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 86,07,403/- on protective basis in the hands of the M/s Tushar Stock Share Brokers Pvt. Ltd, since Shri. R.K. Mittal as one of the directors of the company, who has claimed that the cheque books belong to the clients of M/s Mittal Consul Co., wherein he is a partner. 9. In view of the aforesaid claim of Shri. R.K. Mittal, a satisfaction note dated 11/17.02.1999 was forwarded by the AO of the M/s Tushar Stock Share Brokers Pvt. Ltd. by enclosing a list of 20 accounts containing total deposits of ₹ 86,07,403/- and hence, AO issued notices u/s 158BD of the Act to the remaining two assessees, namely M/s Mittal Consul Co. and Shri R. K. Mittal, which notices were received by them on 22.10.1999. In pursuance to the aforesaid notice, the ACIT, Circle 37(1), New Delhi, the AO of M/s Mittal Consul Co. framed an assessment computing undisclosed income of the assessee at ₹ 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es made in the diary of Shri. A.S. Aneja which was seized from his residential premises, and the CIT(A) upheld the addition on the ground Shri. A. S. Aneja is the director of the appellant company and diary was seized from his residential premises. In respect of the second addition being the adhoc disallowance of ₹ 78,335/-, it was held by the CIT(A) element of personal use cannot be ruled out and AO has made disallowance of only 1/10th the expenses as such same was upheld. 12. The last addition was made of ₹ 10,80,000/- being the share application money received and such addition was sustained on the ground that identities of the persons were not fully disclosed and they were not produced for the cross examination. 13. As such, subsequent to the order of the CIT(A), the position of the addition made in the case of the each of the three appellants are as under: Sl. No. Name of the assessee Undisclosed income determined by the AO. Undisclosed income determined by the CIT(A) 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books, it was stated by him that such cheque books pertain to the professional clients for the preparation of their income tax returns. It was submitted that cheque books were not in the name of the assessee but were of the clients of M/s Mittal Consul Co, which is a firm of chartered accountants wherein Shri. R.K. Mittal was one of a partner. It was submitted that such accounts were maintained by such account holders and assessee had no role to play in any of the deposits made in such accounts. It was submitted that such cheque books were also not in the hand writing of the appellant assessee. It was submitted that to substantiate the aforesaid assertion, during the course of the assessment, appellant has also filed the client register maintained by M/s Mittal Consul Co wherein the persons whose cheque books were found, were recorded as professional client of M/s Mittal Consul Co. It was submitted that the allegation of the revenue that M/s Mittal Consul Co was carrying on the activity of entry operator is without any material and is purely on assumption, presumption, surmises and conjectures. It was submitted that account holders were assessed to tax, and the appellant vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 2,50,625/- and thus, if any addition is warranted and even on the allegation, the income as stated to be undisclosed income cannot in any manner exceed the said sum. In support of the working of the peak, he referred to the submission of the assessee dated 12.08.2004. 18. In respect of the addition made on account of receipt of share capital in the case of M/s Tushar Stock Brokers Pvt. Ltd, it was firstly submitted that same was not based on any incriminating material found as a result of search, as such, same is outside the scope of chapter XIV-B of the Act. Further to the aforesaid, he also referred the relevant pages of the written synopsis to submit that appellant has furnished complete documentary evidences and hence addition made without bringing any adverse material is unsustainable in law. Similarly, in respect of the addition made of ₹ 13,10,000/- on account of page-16 of the Diary found from the residence of Shri. A.S. Aneja, Ld. Counsel submitted with respect to the said diary that it was not found from the premises of the assessee and hence the statutory presumption u/s 132(4A) cannot be raised against assessee. He submitted that, if the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not explain as to what was the relation between Mr Sharma and the account holders, he submitted that it was not for the assessee to explain such a relationship as assessee has categorically stated that it has not dealt with MC Co and it was for the revenue to rebut the material filed by the assessee. 22. We have considered rival submissions and perused the relevant material on record. In these three appeals, the assessments were made under Chapter XIV-B of the Act. Under the aforesaid chapter, a block assessment is to be carried out on the basis of the material found during the course of search and not as a result of other documents or material, which come to the possession of the AO subsequent to the conclusion of the search operation unless and until such material has a relationship or connection with certain material or evidence found during the course of search. It was highlighted in CIT v. Ravi Kant Jain [2001] 250 ITR 141(Delhi) how the 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. The scope and ambit of a block assessment is limited to materials unearthed d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were maintained by respective account holders and cheque books were found at the time of search in its professional capacity, as it was to prepare their tax return. During the course of the assessment, on 25.10.2001 statement of Shri. R.K. Mittal was again recorded wherein he again submitted that such account belongs to their professional clients, however at that time, such persons were no more his clients. The appellant therefore vide it s replies dated 16.10.2001 and 18.02.2002 had requested the revenue to issue summons to such account holders. That despite the request of the appellant, no enquiry was made by the revenue from such account holders to establish that deposits made in such accounts belong to the appellant. In such circumstances, we are of the considered opinion that where an assessee adduces evidence in support of the claim that the accounts do not belong to the assessee and the assessee makes a request to examine such account holders, the minimum requirement from the revenue is to examine such material and summon any of the accountholders to rebut the submissions of the appellant or whether assessee s explanation is correct or not. AO cannot brush asi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co, as appellant has established that such cheque books belong to the clients of M/s Mittal Consul Co. In such circumstances, action of the revenue to bring to tax the deposits made in such accounts in the hands of the appellant is devoid of any merit. Hence, addition made in respect of the deposits in such bank accounts and sustained by the CIT(A) are deleted. In fact, the revenue had not filed any appeal against the order of CIT(A) deleting the additions. The details of such additions have already been tabulated in foregoing para 13 above. In the result, we hold that the additions sustained by CIT(A) of ₹ 1,06,23,044/- in the case of M/s Mittal Consul Co. on substantive basis is deleted. 25. We further hold that the additions sustained on protective basis in the assessments made in the cases of M/s Tushar Stock Share Brokers Pvt. Ltd. and that of Shri R. K. Mittal are also unsustainable, hence are deleted. 26. The other issues involved are in the case of M/s Tushar Stock Share Brokers Pvt. Ltd. and are dealt as below: i) One of the additions made is of ₹ 13,10,000/-. The said addition was made on the basis of a page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the case of N.R. Paper and Board Ltd. Ors. vs. CIT reported in 234 ITR 733, the Hon ble High Court of Gujarat has held that: - The block assessment targets the area of undisclosed income that was not disclosed and would not be disclosed, while the regular assessment is to assess the total income or loss of the previous year where a return is filed under section 139 and the Assessing Officer considers it necessary or expedient under section 143(2) to ensure that the assessee had not understated the income or has not computed excessive loss or has not underpaid tax in any manner. Both these areas are different and there is no warrant to prevent the statutory power of regular assessment from being exercised where the block assessment is undertaken or completed for assessing the undisclosed income. 27. Even on the merits of the additions, it is seen that in the instant case, assessee had received share capital of ₹ 1,02,11,000/- in AY 1995-96 and a sum of ₹ 62,91,000/- in AY 1996-97. The AO disputed the share capital of ₹ 4,91,000/- in AY 1995-96 and of ₹ 5,89,000/- in AY 1996-97. The reason for not accepting the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 Co. Vs. CIT., reported in 253 ITR 749, wherein it has been held that in the case of a company, which is a corporate entity there cannot be any personal element involved no disallowance of any expenditure can be made for possible personal use. Further as has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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