TMI Blog2002 (8) TMI 247X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessments were completed in the cases of these assessees on 23-9-1997 under section 158BC read with section 158BD of the Act against which the assessees have come in appeals before us. 3. Ground of appeal No. (1) in all the above referred appeals pertain to the validity of assessment framed by the Assessing Officer under section 158BC read with section 158BD of the Act. However, at the time of hearing, the learned AR of the assessees has not pressed for this ground which is accordingly dismissed as having not been pressed. 4. The second effective ground in all these appeals is pertaining to the additions made by the Assessing Officer on account of investments in share capital of the Companies or deposits by certain individuals in the partnership firms. The case-wise details of such additions which have been challenged in appeals before us are as under: -------------------------------------------------------------------------- Sr IT(SS)A No. Name of Nature of A Y in Amount No. Assessee addition Block added Period ---------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ./ 1996 on 15-12-1998 wherein the issues pertaining to share capital of the Companies of the group and deposits in the firms were discussed and the Tribunal in para-15.3, inter alia, held as under: "...Therefore, the additions to the extent of the disclosure made by the assessee are required to be considered as proper within the meaning of undisclosed income. The assessee could not produce any evidences or any valid reasons for retraction of the said disclosure. Coming to the amounts which have been added over and above the disclosures by the assessee in the case of Krishna Polyfils Pvt. Ltd. and Cas Card Finance Ltd., we find no justification in making such additions in the hands of the assessee" The ITAT has further held that: "Further, we have already held that considering the meaning of undisclosed income the disclosure which has been made by the assessee is required to be considered as assessee's undisclosed income." On page 65, the ITAT in ITA No. 4403/Ahd./1996 has further held that: We are of the opinion that the same cannot be added in the case of the assessee for the following reasons. It cannot be denied that in the case of the company the impugned addition had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessees were found at the time of search which is evident from the copy of Panchnama dated 5-9-1995 wherein the details of books of account of all the five assessees are noted which were found at the time of search. Accordingly, it was pleaded that since the dispute additions in the block period have been made only on the basis of entries recorded in the books of account, these cannot be sustained in view of the decision of the Hon'ble Gujarat High Court in the case of N.R. Paper Board. It was further submitted that as far as the additions on account of share capital in the names of different applicants in the eases of two Companies viz. Cas Card Finance Ltd. [IT (SS) Appeal No. 201 (Ahd.) of 1997] and Jaisati Syntex (P.) Ltd. [IT (SS) Appeal No. 206 (Ahd.) of 1997] are concerned, no addition on account of alleged non-genuine share application money by the share holders can be made in view of the decision of the Hon'ble Supreme Court in the case of CITV. Stellar Investment Ltd. [2001] 251 ITR 263. 9. As regards the deposits in the three firms IT(SS) Appeal Nos. 202, 204 and 205/Ahd./ 1997 in the cases of Rathore Investments, Rathore Finance Co. and Mahi Trading Co. respecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only and these cannot be considered as the undisclosed income of the assessee under Chapter XIV-B in view of the decision of the Hon'ble Gujarat High Court in the case of N.R. Paper Board. He accordingly submitted that all the additions made by the Assessing Officer are required to be deleted from the Block Assessments framed by the Assessing Officer. 12. The learned DR strongly relied on the orders of the Assessing Officer. It was further submitted that since Shri B.J. Champawat has admitted that part of the share capital introduced in the names of different persons in relation to the Companies and also part of the deposits in the names of various persons in the firms which were being controlled by Shri B.J. Champawat, was his undisclosed income which was introduced in the names of these persons, the Assessing Officer was justified in holding that the remaining share capital as well as deposits in various firms also represented the undisclosed income of firms/companies which were introduced in fictitious names. It was submitted that the affidavits and confirmations filed by the assessees during the course of assessment proceedings were just an afterthought and cannot be -relie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hury from his account in the books of Devi Trading Co. which is a proprietary concern of Shri B.J. Champawat wherein this amount received originally have also been disclosed and added and as such no further addition is required to-be made. He accordingly submitted that since the share capital as well as the deposits by various persons in these assessee companies were duly reflected in the books of account maintained by the assessee companies which were found during the course of search, these are required to be considered only in the course of regular assessments and no addition can be made in respect of these amounts while completing the block assessments which pertain to only undisclosed income under Chapter XIV-B. 14. We have considered the rival submissions and have also gone through the orders passed by the Assessing Officer in all these cases. It is undisputed that at the time of search on 5-9-1905 the books of account pertaining to all these parties were found at the premises of these assessees and these were seized as per the Panchnama prepared by the Search Party. It is no doubt true that a part of the share application money in the names of some persons and part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue with regard to the investment/deposit made by Shri Gunaram B. Chowdhury in this case is restored to the file of the Assessing Officer for fresh adjudication in accordance with law after giving due opportunity to the assessee after considering the treatment given by the Assessing Officer as well as the Tribunal to the deposit made by Shri Gunaram B. Chowdhury in the case of Shri B.J. Champawat in ITA No. 4403/Ahd./1996. 17. In the result, the appeals are partly allowed. Per Shri S.K. Yadav, Judicial Member--I have gone through the order of my learned brother Shri R.K. Bali--Accountant Member. I have not been able to persuade myself to agree with the order of my learned colleague in relation to the additions made by the Assessing Officer on account of investments in share capital of the Companies and deposits by certain Individuals in the partnership firms detailed in para-4 the order of Hon'ble brother. 2. Proceedings in these eases were initiated under section 158BC read with section 158BD of the IT Act, 1961 consequent to the search and seizure operations carried out on 5-9-1995 at the residential premises of Shri Bhawanisingh J. Champawat who is the Managing Direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Bhawanisingh J. Champawat wherein the following amounts invested in the cases of these five assessees have been disclosed by the said Shri B.J. Champawat, as his own investments: -------------------------------------------------------------------------- Sr. No. IT(SS)A No. Name of Nature of Amount Assessee disclosure disclosed -------------------------------------------------------------------------- 1. 201/Ahd./ 1997 M/s. Cas Card Share Capital 11,28,000 Finance Ltd. 2. 202/Ahd./ 1997 M/s. Rathore Deposits 1,11,971 Investments 3. 204/Ahd./ 1997 M/s. Rathore Deposits 5,05,796 Finance Co. 4. 205/Ahd./ 1997 M/s. Mahi Deposits 69,396 Trading Co. 5. 206/Ahd./ 1997 M/s. Jaisati Share Capital 6,01,470 Syntex P. Ltd. -------------------------------------------------------------------------- 5. The Tribunal decided the appeal of Shri Bhawanisingh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mahavir Cloth Market, Ahmedabad. The Assessing Officer assessing the case of Shri B.J. Champawat the DCIT was satisfied on the basis of the documents found and the statements recorded that the undisclosed income belonged to assessee-company M/s. Cas Card Finance Ltd. and not to Shri B.J. Champawat. Therefore, as per provisions of section 158BD read with section 158BC a notice under section 158BC was issued and served on the assessee requiring it to file return of income for block period starting from 1-4-1985 to 31-3-1986 and/to 1-4-1994 to 31-3-1995 and fractional period 1-4-1995 to 5-9-1995 i.e., upto the date of search. The assessee filed the return of income on 2-9-1997 for the block period 13-2-1995 to 5-9-1995 declaring total undisclosed income for block period as NIL. The Assessing Officer observed that the assessee-company was incorporated on 13-2-1995. The assessee-company is engaged in the business of financing of various types of vehicles on hire purchase with leasing. 8. As required unexplained share capital in books of assessee-company are concerned, during the course of search and seizure operations at the residential premises of Shri B.J. Champawat and survey opera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee was asked to prove the genuineness of its share capital and share application money as also to establish identity and capacity of the shareholders and share applicants, so as to satisfy the requirements of section 68 of the Act. The assessee company did not furnish its reply on 10-9-1997 as required but asked for further time to prepare the details. Finally, the reply was furnished on 179-1997. However, in this reply also it was mentioned that- "details duly confirmed by the shareholders are under preparation and same shall be submitted within a week. We beg to submit that many investors are not having their taxable income and hence not filing their income-tax return. We are approaching those shareholders for obtaining their affidavits for genuineness etc. of their share investments in our company and same shall be filed before your good-self very soon as and when the same is received by us." 10. The Assessing Officer observed that the assessee was merely trying to prolong the assessment proceedings. In fact, this issue being obvious from the day of search itself that part of share capital was admitted to be bogus; the assessee should have obtained all necessary det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made such investments in acquisition of shares of company. Similar inquiries were made in respect of more than two persons and in none of the cases it was proved that they have made any investments in the acquisition of shares of company. It is a matter of record that the representative of the assessee has not disproved the findings of enquiries made at Jodhpur which was duly communicated to him alongwith a copy of statements of alleged shareholders, but has filed copies of affidavits of some of the persons which are placed on records. It is proved from the above discussion that out of total investment of Rs. 51 lacs in Cas Card Finance Ltd. the assessee has accepted investment of unaccounted income of Rs. 11,28,000 and the balance amount of Rs. 24,72,000 has been invested in benami names as evident from the enquiries made by the Department. This clearly proves that the assessee has made investment of Rs. 36 lacs in benami names out, of total investments in promoters equity amounting to Rs. 51 lacs. The balance amount of investment of Rs. 15 lacs is claimed to have been made by giving advances to aforesaid benami persons amounting to Rs. 6 lacs and Rs. 9 lacs by M/s. Rathore inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the credit entries on account of share capital of company. The Assessing Officer supported his view by the decision of the Delhi High Court in the case in Sophia Finance Ltd's case wherein it has been held that under section 68, the ITO has jurisdiction to make inquiry with regard to nature and source of sums credited in books of account of the assessee as to whether the amount so credited is given colour of a loan or a sum representing sale proceeds or even receipt of share application money. The use of words any sum found credited in the books of account in section 68 indicates that section is very widely worded and ITO is not precluded from making any inquiry as to true nature and source of sum credited in books of account even if it is credited as receipt of share application money. Mere fact that the assessee company chooses to show the receipt of money as capital does not preclude ITO from going into the question whether it is actually so. Where therefore the assessee-company represents that it had issued shares on receipt of share application money, then the amount so received would be credited in books of account of company. Thus the provisions of section 68 are applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of the Supreme Court in the case of Stellar Investment Ltd. (supra). 13. On the other hand, the learned DR strongly relied on the order of the Assessing Officer. It was further submitted that since Shri B.J. Champawat has admitted part of share capital introduced in the names of different persons in relation to companies and also part of deposits in the names of various persons in firms which are being controlled by Shri B.J. Champwat, was his undisclosed income which was introduced in the names of these persons, the Assessing Officer was justified in holding that the remaining share capital as well as deposits in various firms also represented undisclosed income of firms/companies which were introduced in fictitious names. It was also submitted that the affidavits and confirmations filed by the assessee during the course of assessment proceedings were just an afterthought and it cannot be relied upon. It was submitted that the decision of the Hon'ble Supreme Court in the case of Steller Investment Ltd. was given on the peculiar facts of that case wherein it was held that since the Tribunal has cancelled the CIT's order under section 263 whereby the assessment was set asi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n afterthought and it cannot be relied upon. The decision of the Delhi High Court in the case of Sophia Finance Ltd. was not brought to the notice of the Supreme Court and as such it cannot be held that the ratio of the Full Bench decision stood overruled by aforesaid decision of the Supreme Court. The Hon'ble Gujarat High Court in the case of Gujarat State Co-operative Bank Ltd. v. CIT [2001] 250 ITR 229 has held as under: To be law under article 141 of the Constitution of India, decision of the Supreme Court must not be a mere conclusion by which the case is disposed of. Because, a conclusion may be on facts; it may not and does not necessarily involve consideration of law. Article 141 will not be attracted if law is not declared or stated vocally to support the conclusion reached for deciding the lis. A mute declaration of the mere conclusion is not contemplated under article 141." 14.1 The ratio of decision in the case of N.R. Paper Board does not help the assessee because the facts of the present case show that the entire share capital is not genuine and this non-genuineness of the share capital/share application money was detected daring the course of search and post se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the unexplained credit against alleged share capital of Rs. 73,54,000." The Hon'ble High Court allowed this appeat of Department on issue of Rs. 73,54,000 of unexplained share capita] and i-emanded the matter for the limited purpose of re-assessing the companv by the Assessing Officer. In view of the above discussions, I confirm the addition of Rs. 23,92,000 as unexplained cash credit under section 68 and representing undisclosed income of the assessee for block period. It is imperative to mention that in case of Cas Card Finance, the addition includes investment in the name of Gunaram B. Chowdhury of Rs. 1 lac whereas the balance amount of Rs. 2 lacs appears in total of Rs. 11,28,000 as amount disclosed by Shri B.J. Champawat. Since this investment of Gunaram B. Chowdhury has been accepted as bogus in respect of part of amount included in Rs. 11,28,000 disclosed by Shri B. J. Champawat, the same is held considcred as bogus in relation to share application money included in Rs. 23,92,000. 14.3 With regard to the two decisions of Hon'ble Delhi High Court in the case of Sophia Finance Ltd. and Stellar Investment Ltd.'s case, I may point out that the basic proposition enunciated b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rescue the non-genuine cash credits detected during the course of search. In the interest of justice, I uphold the respective orders of the Assessing Officer who has made addition of Rs. 42,14,898 in the case of Rathore Investments; addition of Rs. 35,88,555 in the case of Rathore Finance Co. and additions of Rs. 32,764, Rs. 3,23,854 and Rs. 25,101 for assessment years 1994-95,199596 and 1996-97 respectively in the case of Mahi Trading Co. Thus, I uphold the above said additions as unexplained cash credits under section 68 and representing undisclosed income of respective assessees for Block period. Per Shri T.N. Chopra, A.M.-- Pursuant to difference of opinion among Members of the Division Bench, while disposing of the batch of five appeals, the following points of difference are referred to the Hon'ble President, ITAT for appropriate action under section 255(4) of the Income-tax Act: 1. Whether additions on account of share capital Rs. 23,92,000 in the case of Cas Card Finance Ltd. and Rs. 1,94,000 in Jaisati Syntex (P.) Ltd. as undisclosed income in the respective block assessments are liable to be sustained? 2. Whether additions on account of deposits Rs. 42,14,898 in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsequent to the search and seizure operations carried on 5-9-1995 at the residential premises of Sri Bhawanisingh J. Champawat--Managing Director of one of the companies, viz., M/s. Cas Card Finance Ltd. and the main person controlling the affairs of other concerns. During the course of search operations, certain incriminating documents, such as, share application forms filled in the hand writing of two employees of the group and other loose papers were found on the basis of which it transpired that the group has substantial undisclosed income. When confronted with the material found in the course of the search, Sri Bhawanisingh J. Champawat admitted having made investments from undisclosed sources in various companies and firms of the group in benami names. In respect of the present appellants, fallowing amounts were accepted to have been invested out of undisclosed sources:-- -------------------------------------------------------------------------- Sl. I.T. (SS) Name of Assessee Nature of Amount No. A. No. disclosure disclosed -------------------------------------------------------------------------- 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the time of search and enquiry made in respect of the shareholders and deposits, came to the conclusion that the entries in the form of share application money and other deposits were not genuine. The Assessing Officer had made additions in the hands of Sri Bhawanisingh J. Champwat as also in the hands of the appellants. In the case of Sri Bhawanisingh J. Champawat, the investment admitted by him out of the undisclosed income in benami names has been confirmed by the ITAT. However, in respect of the investments/deposits not admitted by Sri Bhawanisingh J. Champawat, the Tribunal in I.T.A No. 4403/Ahd./96 held that the additions in his case are not justified as investments were note stablished to relate to him and that the companies/firms are separately assessed to tax and separate block assessments have been made/initiated in their hands. The matter in regard to the five appellants was heard by "A" Bench of Ahmedabad Tribunal. The Learned Accountant Member proposed to delete the additions made by the Assessing Officer in respect of the share application money aggregating to Rs. 23,92,000 in the case of Cas Card Finance Ltd. and Rs. 1,94,000 in the case of Jaisati Syntex (P.) Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, proposed to delete the additions. The findings of the learned Accountant Member may thus be analysed as under: (a) That on the date of search, books of account containing the entries relating to share application money in the case of the first two appellants and deposits in the case of the last three appellants were found and seized and, accordingly, the additions in respect of such entries could be considered only in regular assessment and not in block assessments The decision of the Gujarat High Court in the case of N.R. Paper Board Ltd. relied upon. (b) That the share application money in respect of the first two appellants cannot be treated as income from undisclosed sources either in regular assessment or in block assessments. The decision of the Supreme Court in the case of Steller Investment Ltd and the 3rd Member decision of the ITAT in the case of Anima Investment Ltd relied upon. (c) That the Delhi High Court Full Bench decision in the case of Sophia Finance Ltd. holding that in case explanation given by the assessee in regard to share application money is not found satisfactory, the same can be treated as income of the company from undisclosed sources is appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the Assessing Officer. That Sri B.J. Champawat (Mg. Director of M/s. Cas Card Finance Ltd. and the main person controlling the affairs of other concerns) had admitted that some shareholders and some depositors were not genuine and were the benamidars. That enquiry was made by the A.D.I. and some shareholders and depositors denied of having invested any money with any of the appellants. (b) That since the non-genuineness of the share capital/deposits was detected during the course of search and post search investigation; the unexplained share capital/deposits was permissible to be assessed as part of the undisclosed income in block assessments (c) That the assessee has failed to establish that the share capital/deposits are genuine and that the onus upon the appellants was higher in view of the fact that Sri Bhawanisingh J. Champawat had admitted that part of the share capital was introduced in the books of account in benami names and that the enquiry report of ADI, Jodhpur clearly established that the parties were not genuine and that they had not deposited any money with the appellants and that section 68 was applicable even in regard to the share application money, as he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that the assessment made by the Assessing Officer is in accordance with law and that there is no infirmity in it. Some part of the share application money was admitted by the parties to be bogus, some part was found to be bogus on enquiry, and for the remaining appellants failed to prove genuineness. It was contended that appellants having failed to establish the genuineness of shareholders/depositors, the additions are warranted under section 68. The proposed order of the Learned Judicial Member was sought to be supported. 11. On perusal of the orders of the learned Members of the bench and the contention advanced on behalf of the parties, following issues emerge for consideration: (i) Whether any income which can be assessed in regular assessment under section 143(3) is excluded from the purview of block assessments (ii) Whether section 68 is applicable in block assessment and if so, under what circumstances the said section 68 gets attracted in respect of deposits and share application money entered in the books of account found at the time of search? (iii) Whether the assessment of income in regard to share application money and deposits has been made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of any person, then,-- (a).......... (b) the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of section 143 and section 144 shall, so far as may be, apply;" Sections 143(2), 143(3) and relevant portion of section 144 being relevant are reproduced hereunder: "143(2) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer shall, if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his office or to produce, or cause to be produced there, any evidence on which the assessee may rely in support of the return: Provided that no notice under this sub-section shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is furnished." "143(3) On the day specified in the notice issued under su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relating to such previous years; (e) where any order of settlement has been made under sub-section (4) of section 245D, on the basis of such order; (f) where an assessment of undisclosed income had been made earlier under clause (c) of section 158BC, on the basis of such assessments Explanation.--For the purpose of determination of undisclosed income,-- (a) the total income or loss of each previous year shall, for the purpose of aggregation, be taken as the total income or loss computed in accordance with the provisions of Chapter IV without giving effect to set off of brought forward losses under Chapter VI or unabsorbed depredation under sub-section (2) of section 32; (b) of a firm, returned income and total income assessed for each of the previous years falling within the block period shall be the income determined before allowing deduction of salary, interest commission, bonus or remuneration by whatever name called to any partner not being a working partner: Provided that undisclosed income of the firm so determined shall not be chargeable to tax in the hands of the partners, whether on allocation or on account of enhancements (c) assessment under section 143 inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... V-B. The aforementioned contention advanced on behalf of appellants ignores the scheme for determination of undisclosed income. Undisclosed income is defined under the Act and the scheme provides for assessment of the same. For better appreciation of position of law, it would be useful to refer to section 158BB which has been reproduced elsewhere in this order. 17. A bare reading of section 158BB reveals that the first step to be taken by the Assessing Officer in determination of the undisclosed income for the purposes of taxation at 60 per cent is to determine the aggregate income of the previous year falling within the block period to be computed in accordance with provisions of Chapter-IV of the Income-tax Act, 1961. It has, however, to be borne in mind that the assessment so made under Chapter XIV-B is to be based on the evidence (a) found as a result of search; or (b) requisition of books of account or documents; and (c) such other material or information as are available with the Assessing Officer. The second step to be taken by the Assessing Officer is to reduce the aggregate of the total income or to increase the losses of such previous year determined as per clauses (a), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... try coupled with unsatisfactory explanation of its source by the assessee empowers the Assessing Officer to deem the entry as income of the assessee from undisclosed sources. However, in the block assessments mere entry in the books of account may not empower the Assessing Officer to invoke section 68. In block assessments section 68 can be invoked if material found as a result of search or on material found on enquiry suggests that the entries made in the books of account are not genuine, the Assessing Officer, in such circumstances, in my view, would be justified in invoking section 68. Otherwise provisions of section 158BB(2) would become redundant if under no circumstance section 68 could be invoked in proceedings for block assessment. All the provisions of the Act are to be read in coherence and in conjunction with each other and reasonably interpreted in accordance with the legislative intention. I am, therefore, of the considered view that any undisclosed income including items of income covered under section 68 etc. are assessable under block assessment notwithstanding the fact that such income could also be assessed under section 143(3) in regular assessments As per the sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Gujarat High Court in the case of N.R. Paper Board Ltd. has got be understood in the context in which it has been rendered. It would be relevant to refer to the decision of the Supreme Court in the case of CIT v. Sun Engg. Works (P.) Ltd. [1992] 198 ITR 297 where their Lordships held as under:-- "It is neither desirable nor permissible to pick out a work or a sentence from the judgment of this Court, divorced from the context of the question under consideration and treat it to be the complete 'law' declared by this Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this Court. A decision of this Court takes its colour from the questions which were before this Court. A decision of this Court takes its later case, the Courts must carefully try to ascertain the true principle laid down by the decision of this Court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by this Court, to support their reasoning. In Madhav Rao Jivaii Rao Scindia Bahadur v. Union of India [1971] 3 SCR 9: AIR 1971 SC 530, this Court c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts or transactions where such asset, entry, or other document or transaction representing wholly or partly income or property which has not been or would not have been disclosed for the purposes of the Act. It therefore, follows that what the assessee had already disclosed or would have disclosed is not to be treated as undisclosed income. The total undisclosed income relating to the block period is to be charged to tax at the higher rate of 60 per cent presently specified in section 113 after such undisclosed income is assessed in accordance with the provisions of this Chapter by the Assessing Officer as income of the 'block period' as defined in section 158B(a). This has to be done 'irrespective of the previous year or years to which such income relates and irrespective of the fact whether regular assessment for any one or more of the relevant assessment years is pending or not' as provided in sub-section (2) of section 158BA. This expression clearly indicates that the block assessment of undisclosed income and its being charged to a higher rate of tax prescribed, was, independent of the pending regular assessments and it operated in a different filed of the assessment of undiscl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make a fair assessment of the income on the basis of return. The mere fact that Assessing Officer is also empowered to assess the concealed income in regular assessment does not suggest, that what the ITO can assess in regular assessment cannot be assessed in block assessment. I am, therefore, unable to persuade myself to agree with the conclusion of the Learned Accountant Member that what can be assessed under section 143(3) in regular assessment cannot form the subject-matter of block assessment. I also concur with the view expressed by the Learned Judicial Member that section 68 is applicable as far as may be in the block assessment in respect of the deposits. 23. The next question that arises for consideration is as to whether section 68 is applicable in respect of share application money an under what circumstances section 68 gets attracted in block assessment in respect of the same. The Delhi High Court in the case of Steller Investment Ltd had the occasion to consider as to whether the CIT was justified in invoking section 263 for bringing to tax the share application money appearing in the balance sheet of the assessee-company on the ground that the Assessing Officer had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ean that there is no valid issuance of share capital. Shares cannot be issued in the name of non-existing persons. The use of the words 'may be charged' in section 68 clearly indicates that the ITO would then have the jurisdiction, if the facts so warrant, to treat such a credit to be the income of the assessee. Section 68 clearly permits an ITO to make enquiries with regard to the nature and source of any or all the sums credited in the books of account of the company irrespective of the nomenclature or the source indicated by the assessee. In other words, the truthfulness of the assertion of the assessee regarding the nature and the source of the credit in its books of account can be gone into by the ITO. If shareholders are identified and it is established that they have invested money in the purchase of shares then the amount received by the company would be regarded as capital receipt and to that extent the observations in the case of Steller Investment are correct but if, on the other hand the assessee offers no explanation at all or the explanation offered is not satisfactory, then, the provisions of section 68 may be invoked. In the latter case section 68, being a substan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Ltd. having been confirmed by the Supreme Court, the said decision of the Delhi High Court has got to be read along with the Full Bench decision of the same Court explaining that decision. In my considered view, in both situations it cannot be disputed that the Full Bench decision of the Delhi High Court in the case of Sophia Finance Ltd. has not been overruled by the Supreme Court. The decision in the case of Steller Investment Ltd. having been distinguished and explained by their Lordships of the Delhi High Court in the case of Sophia Finance Ltd., the said decision has not lost its force with the affirmation of the decision in the case of Steller Investment Ltd. by the Supreme Court. 27. In Sophia Finance Ltd. their Lordships of Delhi High Court held that the Assessing Officer is not precluded from making an enquiry as to the true nature and source of entries in books of account even if the same is credited as receipt of share application money. It was further held that "if the amount credited is capital receipt, then it cannot be taxed, but it is for the ITO to be satisfied that the true nature of the receipt is that of the capital. Merely because the company chooses to sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Gunaram B. Chowdhury, Shri B.J. Champawat admitted investment of Rs. 36,000 in benami name notwithstanding the fact that affidavits/ confirmations were filed before the Revenue Authorities. The ADI also had made an investigations in respect of some depositors and shareholders. It is not disputed that the result of the enquiry was that these persons had either denied of having made any investments or were not found to exist at the given address. The result of enquiry in respect of certain shareholders/depositors is quoted hereunder for the sake of reference:-- 1. Muksani, Tal: Bilara, Distt. Jodhpur, A - Sh. Jasaram Punaram Chaudhary B - Joginder Punaram Chaudhary C - Punaram Kaliram Chaudhary 2. Post: SOWANIA, Tal-Bilara, Distt.-Jodhpur. A - Sh. Purjan Singh Sumersingh Naruka 3. Post - SILANI, Tal-Bilara, Distt.-Jodhpur. A - Harisingh Devisingh Chauhan. 4. 13/7, Durgadas Nagar, Paota, 'B' Road, Jodhpur. A - Tansari Jaisingh Rathore. 5. Village - Ransi, Tal-Bilara, Distt.-Jodhpur. A - Girdhar Keshav Lal Soni. The above persons have been examined on oath and statement were recorded under section 131 of I.T. Act, 1961 wherein they have denied in clear te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Jogsingh Rathore wherein it is stated that Sh. Jogsingh and his family members are in Jail custody from 2-1/2 years and he request to give time one month for proper reply. Summon under section 131 of I.T. Act was also issued to Sh. Raghuveer Singh Lal Singh R/o Pali Marwar. The letter received back without service. From the above enquiries it has come out that the above mentioned persons have not made any such investment in share applications money in Champawat Group." In the following cases on enquiry the entries in the books of account of the assessee were found to be bogus notwithstanding the fact that affidavits/confirmations were filed in respect of the said parties:-- -------------------------------------------------------------------------- Sl No. Name Amount (Rs.) -------------------------------------------------------------------------- 09 Chhelkanwar Jogsingh Rathore 25,000 15 Girdharilal Keshavlal Soni 50,000 19 Harisingh Devisingh Chouhan 55,000 28 Jogsingh Khetsingh Rathore 25,000 30 Malusingh Sugansingh 60, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rting evidence when called upon to do so. In the present cases, firstly the affidavits have not been filed in the course of the proceedings relating to the appellants. Secondly, the affidavits filed in respect of some of the shareholders in the proceedings in the case of Sri B.J. Champawat were found to be unreliable. Thirdly, as demonstrated above, some of the affidavits were found to be false. In Mehta Parikh Co.'s case, their Lordships of the Supreme Court held "that the presence of the deponents of the three affidavits was riot considered necessary by either party, the cash book of the assessee had been accepted and entries therein not challenged." It was in the light of these facts their Lordships held that the A.A.C. was not justified in ignoring the affidavits. In the present cases, the Assessing Officer had specifically asked the assessee to produce the shareholders/depositors was also evidence on record to establish that at least some of the affidavits filed were not authentic. In these circumstances, the affidavits filed by the assessee in respect of sonic shareholders/depositors in the block assessment proceedings of B.J. Champawat did not carry any evidentiary value. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this decision also no addition can be made in the hands of the appellant under section 68 for the amounts which have been found credited in the books of account of the companies/firms, which were subjected to separate block assessments in view of the judgment of the Delhi High Court in the case of Sophia Finance Ltd. 205 ITR 98. We also accept the counter argument of the ld. Counsel for the assessee that on the facts of the present case the judgment of the Allahabad High Court in 183 ITR 388 does not apply. Thus additions to the extent of disclosure made by the assessee are confirmed and the balance is hereby directed to be deleted." It is evident from the decision quoted above that the main reason for deletion of the addition in the case of B.J. Champawat was that the amount could be assessed in the hands of the appellants separately. Therefore, the decision of the Tribunal does not advance the case of the appellants. 34. The decision of the Tribunal in the case of Anima Investment Ltd. relied upon by the ld. Accountant Member is also distinguishable on facts. In that case there was no enquiry by the Assessing Officer as against that Assessing Officer has made enquiry in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents were found during the course of search, that the assessee had in any manner inflated the expenditure in question. It was on these facts that the Tribunal held that the addition on the basis of the entries in the books of account maintained in the regular course was not permissible in block assessment. This decision is distinguishable on facts. 39. In the case of Smt. Sheela Aggarwal v. Dy. CIT [1999] 106 Taxman 227 (Delhi) it was found by the Tribunal that there was no supporting material found during the course of search to justify the additions as undisclosed income of the assessee. The said decision is distinguishable on facts and inapplicable to the present appellants. 40. Taking the totality of the facts and circumstances of the case into consideration and for the aforesaid reasons, I am of the view that the additions made by the Assessing Officer in block assessments in respect of the five appellants are justified in respect of which I concur with the view expressed by the Learned Judicial Member. 41. To sum up, I hold as under:-- (1) That on the facts and in the circumstances of the case, the additions of Rs. 23,92,000 in the case of Cas Card Finance Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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