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TMI Blog2002 (8) TMI 247X X X X Extracts X X X X X X X X Extracts X X X X ..... uiries, the 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. &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; 96-97 25,101 5. 206/Ahd./ 1997 M/s. Jaisati Share 91-92 1,94,000 Syntex P. Ltd. Capital -------------------------------------------------------------------------- 5. The assessment in the case of Shri Bhawanisingh J. Champawat, the person controlling these Companies and Firms was completed by the Assessing Officer under section 158BC on 30-9-1996 and the issue pertaining to income disclosed by Shri Bhawanisingh J. Champawat during the course of search has been considered in the Block Assessment Order of Shri Bhawanisingh J. Champawat wherein the following amounts invested in the cases of these five assessees have been disclosed by the said Shri B. Champawat, as his own investments: -------------------------------------------------------------------------- Sr. No. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -------------------------------- 6. The Tribunal decided the appeal of Shri Bhawanisingh J. Champawat in ITA No. 4403/Ahd./ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allenged in these appeals, the Assessing Officer has admitted the fact that the books of account pertaining to these 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e time of search, the genuineness or otherwise of these can be enquired during the course of regular assessment 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 fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h admittedly included the name of Shri Gunaram B. Chowdhury. It was pleaded however that tho amount received from Shri Gunaram B. Chowdhury was partly acounted for and genuine having been received by the said Shri Gunaram B. Chowdhury 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 partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion relating to the investments/deposits made by Shri Gunaram B. Chowdhury, there is some confusion with regard to the amount actually invested/deposited by the said Shri Gunaram B. Chowdhury with the assessee. Accordingly, the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce Ltd. Capital 2. 202/Ahd./ 1997 M/s. Rathore Deposits 96-97 42,14,898 Investments 3. 204/Ahd./ 1997 M/s. Rathore Deposits 96-97 35,88,555 Finance Co. 4. 205/Ahd./ 1997 M/s. Mahi Deposits 94-95 32,764 Trading Co. 95-96 3,23,854 & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 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 &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,28,000 as his unexplained investment in share capital of the assessee-company, as his undisclosed income, claiming that Rs. 15,00,000 has been invested by various sister concerns of assessee-company in benami names out of their unaccounted funds. Further, survey was carried out at the premises of the assessee-company at 125, Shri 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s invested by the sister concern after 5-9-1995, the date of search. This has been accepted that the share capital of Rs. 21,28,000 credited in the books of company during the block period is not genuine. But as per books of account of company the total share capitals share application money as on 5-9-1995 was Rs. 45,20,000. The 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ample, it is claimed that Shri Umed Singh G. Gehot, Shri Padamsingh Rathunath Rathore and Shri Suman Kanvar Padamsingh Rathore have made investments in purchase of 8,000,33,000 and 17,000 shares of Cas Card Finance Ltd. These persons in their statements under section 131 denied in clear word on the day, that they have not 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not genuine and the Inquiry Report of ADI, Jodhpur clearly establishes that the alleged shareholders had not invested in the company's share capitals The assessee has not produced any evidence to rebut the findings of the Inquiry Report. The Assessing Officer also observed that the provisions of section 68 are applicable 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... N.R. Paper & Board. It was also submitted that as addition on account of share capital in the names of different applicants in the case of assessee-company and Jaisati Syntex (P.) Ltd's case are concerned, no addition on account of alleged non-genuine share application money by shareholders can be made in view of the decision 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which are being controlled by him, was his undisclosed income which was introduced in the names of these persons. I agree with the contentions of the learned DR that the AO was justified in holding that the remaining share capital as well as deposits in various firms also represented business income of firms/companies which was introduced in fictitious names. I am of the view that the affidavits and confirmations filed by the assessee during the course of assessment proceedings are just an 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 no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Champavat and also in the hands of Elecon Finlease & Industries Ltd. by ITAT vide order in ITA No. 4430/Ahd./1996, dated 18-12-1998 basing on decision of Gujarat High Court in N.R. Paper & Board's case holding that this can be added only in regular assessment and not in block assessments. The Department went to High Court against,the ITAT's order of Elecon Finlease & Industries Ltd. The question referred was: "Whether, the Appellate Tribunal is right in law and on facts in deleting 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 disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gain I am of the view that the falsity of deposits as discussed in detail in respective assessment orders, was detected during the course of search and post search investigations. Germs of falsity was exposed on the basis of search in group cases of Shri B.J. Champawat. So the Assessing Officer has rightly held it undisclosed income of the assessee firms mentioned above, and they form part of block assessments under Chapter XIV-B and the findings in N.R. Paper & Board's case do not 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,101 as undisclosed income in respective block assessment are liable to be sustained?" 2. Parties heard and records perused. Though the Learned Members of the Bench have described the facts of this case elaborately in their respective orders, I would like to briefly state the facts to facilitate the appreciation of the issue involved in these appeals. 3. Proceedings in the cases of the present appellants were initiated under section 158BC, read with section 158BD consequent 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 companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of the admission of Shri Bhawanisingh J. Champawat and incriminating documents found in the course of search, enquiry was conducted in respect of certain shareholders/depositors at Jodhpur arid Ahmedabad. None of the persons, who were traced, confirmed having made any investment in the purchase of shares or having made any deposits with the appellants. In certain cases, information was received by the Assessing Officer that the parties did not exist at the given address. In some eases, notices issued were returned unserved with the remarks "party does not exist". In the case of Cas Card Finance Ltd. during the course of block assessment proceedings, it was stated by the company that in respect of some shareholders, affidavits/confirmations were filed in the block assessment proceedings of B.J. Champawat and that all the parties are genuine parties. It may be pertinent to mention that no affidavits or confirmations were not filed in the proceedings of the present appellants. It is also relevant to point out that in the case of B.J. Champawat the Affidavits filed in respect of certain shareholders were found to be unreliable as all the Affidavits were typed on the same typewrit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osing to confirm the aforementioned additions made by the Assessing Officer. 5. After having gone through the orders passed by the respective Learned Members of the Bench and hearing the parties and also on perusal of the records, I proceed to express my views about the issues involved in these appeals. 6. Let me first describe the reasons given by the Learned Accountant Member in proposing the deletion of additions made by the Assessing Officer. The reasons given are that at the time of search, the books of account pertaining to all the appellants were found at the premises of these assessee and the same had been seized as per the Panchanamas prepared by the search party. That Shri Bhawanisingh J. Champawat had admitted certain undisclosed income having been invested in the case of five appellants, but the said amount disclosed has been assessed in his hands. Relying upon the decision of the Supreme Court in the case of Steller Investment Ltd. and 3rd member decision of ITAT in the case of Anima Investment Ltd. the Learned Accountant Member held that the additions on account of deposits/investments are not warranted. It has been stated that though in the case of Sophia Finance L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied with reference to the Full Bench decision of Delhi High Court in the case of Sophia Finance Ltd. The decision of Delhi High Court in Steller Investment Ltd. has been distinguished in the light of the decision of the Gujarat High Court in the case of Gujarat State Co-operative Bank Ltd. It has been pointed out that the decision of the Gujarat High Court in the case of N.R. Paper & Board Ltd. is inapplicable to the facts of this case. The Learned Judicial Member has held that in view of the falsity and non-genuineness of share application money and cash credits exposed as a result of search, the amount was rightly assessable as the undisclosed income in the block assessments it has also been pointed out that the respondents have failed to establish that the investments in the form of share application money and other deposits were genuine. Relying upon the decision of the Delhi High Court in the case of Sophia Finance Ltd., the learned J.M. has held that provisions of section 68 are applicable in regard to the share application money and other deposits. Reference has also been made to the decision of the Hon'ble High Court of Gujarat in the case of Elecon Finlease & Industries L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d matter remanded. (e) The Supreme Court in the case of Steller Investment Ltd. has not overruled the ratio of the decision of the Delhi High Court in the case of Sophia Finance Ltd. where it was held that in respect of the Share capital credited in the books of account, the Assessing Officer has power to enquire the genuineness of the share capital and if shareholders are not established to be genuine, the Assessing Officer can invoke section 68. (f) That the addition on the basis of evidence found during the course of search, like share application forms, the enquiry made by the ADI, justify the addition on account of share application money and unexplained deposits under section 68. (g) That the ratio of the decision in the case of N.R. Paper & Board Ltd. was not applicable to the facts of this case. 9. It was contended by the learned counsel for the assessee that Chapter XIV-B has been incorporated for assessment of undisclosed income on the basis of the material found during the course of search and that there is no scope for assessment of the income under block assessment which could be assessed in regular assessment under section 143(3) or under section 144. It was furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said section provides that the Assessing Officer shall assess the undisclosed income in accordance with the provisions of Chapter-XIV-B and also provides that undisclosed income relating to the block period shall be charged to tax at the rates specified in section 113. Section 158B defines "block period" and 'undisclosed income" as under: "158B. In this Chapter, unless the context otherwise requires,-- (a) 'block period' means the previous years relevant to ten assessment years preceding the previous year in which the search was conducted under section 132 or any requisition was made under section 132A, and includes, in the previous year in which such search was conducted or requisition made, the period up to the date of the commencement of such search or, as the case may be, the date of such requisition. (b) 'undisclosed income' includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or party income or property which has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll relevant material which the Assessing Officer has gathered, shall after giving the assessee an opportunity of being heard, make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee en the basis of such assessments" 14. Section 158BB provides as to how the undisclosed income of the block period is to be worked out. Section reads as under:-- "158BB. (1) The undisclosed income of the block period shall be the aggregate of the total income of the previous years fairing within the block period computed, in accordance with the provisions of Chapter IV, on the basis of evidence found as t result of search or requisition of books of account or documents and such other materials or information as are available with the Assessing Officer, as reduced by the aggregate of the total income, or as the case may be as increased by the aggregate of the losses of such previous years, determined,-- (a) where assessments under section 143 or section 144 or section 147 have been concluded, on the basis of such assessments; (b) where returns of income have been filed under section 139 or section 147 but assessments have not been made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f search or of the requisition, as the case may be, shall be on the assessee. (4) For the purpose of assessment under this Chapter, losses brought forward from the previous year under Chapter VI or unabsorbed depredation under sub-section (2) of section 32 shall not be set off against the undisclosed income determined in the block assessment under this Chapter but may be carried forward for being set off in the regular assessments." 15. Section 158BH reads as under:-- "158BH. Save as otherwise provided in this Chapter, all other provisions of this Act shall apply to assessment made under this Chapter." 16. Perusal of the aforementioned provisions of Chapter XIV-B incorporated in the Income-tax Act, 1961 to make assessment of undisclosed income reveals that the Income-tax Act has provided a complete scheme for assessment of undisclosed income of the block period. As per the scheme, the first condition to be satisfied for assessment of undisclosed income is that the foundation of assessment has to be the material found as a result of search, requisition of books of account and documents and such other material as are available with the ITO. This condition is embedded in section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year." When section 158BB(2), section 158BH and section 68 are read in conjunction with each other, it becomes abundantly clear that the contention advanced on behalf of the assessee that section 68 cannot be invoked in block assessment is bereft of substance. Keeping in mind that the foundation of block assessment has to be the evidence found as a result of search, requisition of books of account and documents and such other material or information as are available with the Assessing Officer, there is hardly scope for any doubt that section 68 can be invoked in block assessment also. Regular assessments it hardly needs to be mentioned, is basically for assessment of income on the basis of the return. However, even in regular assessments the Assessing Officer is empowered to assess any income which is not disclosed by the assessee. Merely because the Assessing Officer can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quoted in para 13 of this order. This section mandates that 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-section (2) and sub-section (3) of section 143 and section 144 shall so far as may be applied. Section 143(3) provides for making an assessment on the basis of the material produced by the assessee and on the basis of the material gathered by the Assessing Officer. Section 144 empowers the Assessing Officer to make an assessment to the best of his judgment in the event of assessee not complying with the requirements for purposes of assessments Section 68 places a burden upon the assessee to establish the genuineness of the entries made in the books of account. When share application forms were found by the search party to have been filled in by the two of the employees of the appellants and that the Mg. Director of the company and head of the other concerns had admitted having introduced money purported to be share application money and deposits in benami names, the Assessing Officer, in my view, was justified in asking the appellant to establish the ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isposed of. Because, a conclusion, mere conclusion, may be on facts, it may not and does not necessarily involve consideration of law. It is well settled that 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. Manager, Panjarapole, Deodar v. CM Nat. 1997 (2) GLR 1321 followed." 21. Keeping the aforementioned principles in view, let me refer to the decision of the Gujarat High Court in the case of N.R. Paper & Board Ltd. In this case, the controversy raised was as to whether after completion of the block assessment under Chapter XIV-B, the Assessing Officer could proceed to make a regular assessment under section 143(3). The assessee had challenged the power of the Assessing Officer to make regular assessment under section 143(3) once block assessment is completed under Chapter XIV-B. Their Lordships of the Gujarat High Court rejected the contention on behalf of the assessee that after completion of block assessment, regular assessment cannot be made. Their Lordships held that the scheme of the Act does not debar the frami ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar assessment proceedings were to be frozen and got substituted by the assessment of the undisclosed income of the block period, the Legislature would have been specific on that aspect and would have made it clear that the pending regular assessment proceedings should be dropped. The provisions of this chapter do not either expressly or by necessary implication even remotely indicate that the regular assessment proceedings of a previous year covered in the block period, were required to be stayed or dropped or substituted by the proceedings of this chapter. Under sub-section (3) of section 158BA, where the date of filing the return of income under section 139(1) for any previous year has not expired, and the income of that previous year or the transactions relating to such income are duly recorded, then such income is not required to be included in the block period. This obviously means that the regular assessment of that previous year which has remained pending, will proceed notwithstanding that it was falling in the block period. Same would be the case where the block period includes only a part of the previous year of which the return is filed for regular assessment, and the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue of share capital relating to applicability of section 68 came for consideration of the Delhi High Court (Full Bench) in the case of Sophia Finance Ltd. Their Lordships on facts of the case held as under:-- "It is clear that under section 68 the ITO has jurisdiction to make enquiries with regard to the nature and source of a sum credited in the books of account of an assessee and it would be immaterial as to whether the amount so credited is given the colour of a loan or a sum representing the sale proceeds or even receipt of share application money. The use of the words 'any sum found credited in the books' in section 68 indicates that the said section is very widely worded and an ITO is not precluded from making an enquiry as to the true nature and source thereof even if the same is credited as receipt of share application money. If the amount credited is a 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 capital. Merely because the company chooses to show the receipt of the money as capital does not preclude the ITO from going into the question whether this is actually so. Section 68 would clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court. Plainly, the Tribunal came to a conclusion on facts and no interference is called for. The appeal is dismissed. No order as to costs." 26. On the above facts, a question arises a to whether Full Bench decision of the Delhi High Court in the case of Sophia Finance Ltd has been over-ruled by the Supreme Court in the case of Steller Investment Ltd. I have referred to the decision of the Supreme Court in the case of Sun Engg. Works (P.) Ltd. and also the decision of the Gujarat High Court in the case of Gujarat State Co-operative Bank Ltd. in para Nos. 19 and 20 of this order in support of the finding that the decision of the Court is to be read in the context in which it has been rendered. Keeping that principle in view, it becomes abundantly clear that Hon'ble Supreme Court did not over-rule the decision of the Delhi High Court (Full Bench) of Sophia Finance Ltd. in the case of Steller Investment Ltd. It is noted from the decision of the Supreme Court quoted above that the reference of the revenue was rejected mainly on the ground that the Tribunal had come to a conclusion on facts in respect of which no interference was called for. The decision of the Delhi High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 68 thereof. In view of the above principles of law, I proceed to consider the issue on the facts of the present appellants. 28. In these cases, incriminating documents were found and seized as a result of search. When confronted, part of the share capital/deposits was admitted to be bogus by Sri B.J. Champawat. The A.D.I. on enquiry had also found part of the share capital/deposits shown in the books of account as not genuine notwithstanding with the fact that the appellants had filed affidavits/confirmations in respect of some of the shareholders/depositors. Thus, in the case of the present appellants, the condition for applicability of section 68 in respect of share application money laid down by the Hon'ble High Court in the case of Sophia Finance Ltd. are satisfied. 29. The next issue that arises is whether the assessment made by the Assessing Officer is based on material found in the course of the search or requisition of the books of account or other material available with the Assessing Officer. At the cost of repetition it is stated that in this case, a search and seizure operation had taken place in the case of the group. Survey operations had also taken place. Certa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h R/o Bali Banka, Distt. Bali, which has been returned with the remark that "the person is not traceable." Thus, on the basis of above enquiries, it is clearly established that no such investment have been made the above persons and the investment shown in their names really represent the concealed income of Champawat group itself and the same required to be taxed in their hands. In continuation to my earlier letter No. 242 dated 11-9-1996, further enquiries in some cases have been conducted and the facts come out are as under:-- 1. Umed Bhawan, Post-Bali, Opposite Collector's office, St. Falan, Distt. Pall (Raj.) Sh. Ummed Singhji Balot 2. Village-Post Ganthiya, Tal-Nerea, Distt. Nagore (Raj.) 1. Padamsingh Ragunath Rathod 2. Sumankanwar Padamsingh Rathod In the above cases, summon under section 131 of I.T. Act were issued and in response, written replies received wherein they have denied in clear words to have made any such investment in acquisition of shares of Champawat group. Further, a summon under section 131 of I.T. Act was issued to Shivkumar Viransingh R/o Post-Sowania, Tal-Bilara, Distt. Jodhpur. Presently, she resides with her family at Plot No. 161, Ajeet Colo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; Minor Tanushri Jaisingh Rathore 39,000 38 Mohanji Motiji Prajapati 29,000 41 Nathuji Bhabhutaji Rajput 34,000 45 Padamsingh Raghunath Rathore 2,33,000 49 Raghuveersingh Lalsingh 64,000 52 Shivkumar (Shivpriya) Viramsingh 16,000 54 Sumankumar Padamsingh Rathore 17,000 58 Umedsingh Balot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. I, therefore, hold that Assessing Officer was justified in invoking section 68 even in such cases where confirmations/affidavits were filed but not supported by evidence called for. In this background, it cannot be said that the Assessing Officer was wrong in not giving credence to the affidavits of persons purported to be genuine shareholders/depositors? 33. It would also be relevant to mention that the Learned Accountant M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the cases of present appellants. 35. I would also like to refer to other decisions placed on record on behalf of the appellants. In the case of CIT v. Orissa Corpn. (P.) Ltd, [1986] 159 ITR 78, their Lordships of the Supreme Court found that the assessee had given the names and addresses of the alleged creditors. The creditors were assessed to tax and their Index Nos. were available on record. Since the Assessing Officer had not p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 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. and Rs. 1,94,000 in M/s. Jaisati Syntex Pvt. Ltd. as undisclosed income in the respective block assessments are sustainable. (2) That the additions on account of deposits of Rs. 42,14,898 in the case of M/s. Rathore Investments, Rs. 35,88,555 in the case of Rathore Finance Co. and the three amounts in the case of M/s. Mahi Trading Co. being Rs. 32,764, Rs. 3,23,854 and Rs. 25,101 as undisclosed income in respective block assessment are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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