High Court Of Punjab &Â Haryana
CIT, Faridabad vs. Om Parkash & Sons
Assessment Year : 2000-01
Section : 68, 158BD
Adarsh Kumar Goel And Ajay Kumar Mittal, JJ.
IT Appeal No. 147 Of 2010
February 14, 2011
JUDGMENT
Adarsh Kumar Goel, J. – This order will dispose of Income Tax Appeals No.147 and 158 of 2010 as both relate to same assessee and questions raised are inter-connected.
2. ITA No.147 of 2010 has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (for short “the Act”) against the order dated 25.5.2009 of the Income Tax Appellate Tribunal, Delhi Bench ‘F’, Delhi in I.T.A. No. 3550/Del/08 for the assessment year 2000-01 raising following substantial questions of law:-
“(i) Whether on the facts and in the circumstances of the case, the findings recorded by the ld. ITAT are perverse and contrary to the evidence available on record as the assessee had failed to discharge the onus to prove the genuineness of transactions of sale of shares shown by him?
(ii) Whether, on the facts and in the circumstances of the case, the findings recorded by the ld. CIT(A) as confirmed by the ld. ITAT are perverse in so far as the assessee was required to furnish evidence of genuineness of sale transactions of shares such as evidence regarding genuineness of rate and sale transactions, market quotations, comparable market rates and evidence but the assessee had not furnished any such evidence except copies of contract notices of brokers?”
3. ITA No. 158 of 2010 has been preferred by the revenue against the order dated 25.5.2009 of the Income Tax Appellate Tribunal, Delhi Bench ‘F’, Delhi in I.T.A. No.92/Del/08 for the block period 1.4.1990 to 3.8.2000 raising following substantial questions of law:-
(i) Whether on the facts and in the circumstances of the case, the findings recorded by the ld. ITAT are perverse and contrary to the evidence available on record in so far as the Assessing Officer had initiated the proceedings u/s 158BD of the Income Tax Act, 1961 after recording requisite satisfaction (Annexure-A) for the purpose of initiating proceedings u/s 158BD of the Income Tax Act, 1961 in the case of the assessee?
(ii) Whether on the facts and in the circumstances of the case, the ld. ITAT was right in law in holding that the notice u/s 158BD of the Income Tax Act, 1961 is bad in law and the order is liable to be annulled as the notice u/s 158BD in the case of the assessee has been issued much after the completion of the assessment in the case of Manoj Aggarwal or M/s Friends Portfolio (P) Ltd., being the person through whom the assessee has dealt purchase and sale of shares?”
4. Re-assessment proceedings were initiated against the assessee on account of information received during block assessment of M/s Friends Portfolio (P) Ltd. on whom search operation had been conducted on 3.8.2000. From the material found during the search, it was noticed that Manoj Aggarwal was the controller of M/s Friends Portfolio (P) Ltd. who was engaged in giving bogus accommodation entries through net-work of mediators spread all over India. It was found that the assessee had received accommodation entries in the form of a cheque for Rs.16 lacs in lieu of cash paid to Manoj Aggarwal. In addition thereto, the assessee had shown receipt of consideration for sale of shares through M/s Aggarwal Stock Broker and M/s JRD Stock Brokers in respect of sale of shares of M/s B.S. Holdings & Credit (P) Ltd. The said receipt was claimed to be income from long term capital gain which was invested in construction of house and declared to be exempt under Section 54F and some amount was declared to have been deposited in ICICI bonds and was claimed to be exempt under Section 54EA. By way of reassessment additions of Rs. 13,82,375/- was made to the declared income as income from undisclosed sources on substantive basis with the following findings:-
“During the course of instant proceedings also, the assessee was required to furnish evidences of genuineness of sale transaction of shares but the assessee has not furnished any such evidence. Only copies of contract notes of brokers have been filed. The assessee has failed to furnish any other independence evidence regarding genuineness of rate and sale transactions, market quotations, comparable market rates and evidences etc. From the facts of law case, it is evident that the transactions of sale of shares shown by the assessee are not genuine and that the assessee has introduced his own money in the name and styles of shares. Therefore, after considering all the facts and figures of the case, it is held that alleged sale proceeding of shares i.e. Rs. 29,44,120/- is chargeable to tax as ‘income of assessee’ from undisclosed sources and the assessee is not entitled for any exemption or deduction u/s 54 of the Income Tax Act in respect of these receipts. Out of Rs. 29,44,120/- an amount of Rs. 15,61,745/- has already been charged to tax as undisclosed income of the assessee for block period. The remaining receipts of Rs. 13,82,375/- is assessed to tax as income of the assessee from undisclosed sources for the year under consideration on substantive basis.”
5. In block assessment proceedings, addition of Rs. 15,61,745/-, was made on the ground that the same was undisclosed income of the assessee for the block period 1.4.1990 to 3.8.2000 shown as sale proceeds of shares through M/s Friends Portfolio (P) Ltd. and was part of total amount of Rs. 29,44,120/-which was the alleged sale proceeding of the shares. Relevant finding in the assessment order from the block assessment is as under:-
“The assessee has failed to prove the genuineness of the share transactions shown to have been entered into during the block period. The assessee has shown receipts of sale proceeds of shares amounting to Rs. 29,44,120/- during the block period. It is stated that 20,000 shares had been sold for consideration of Rs. 15,65,000/- through M/s Friends Portfolio (P) Ltd. against which receipt of Rs. 15,61,745/- were received. After considering the facts of the case, material on record and categorical statement of Shri Manoj Aggarwal, Director of M/s Friends Portfolio (P) Ltd., the amount of credit entries in respect of alleged sale proceeds of shares of M/s B.S. Holdings & Credit Ltd. amounting to Rs. 15,61,745/- is assessed to tax as “Income from undisclosed sources” of the assessee for the block period and is assessed to tax accordingly. Penalty proceedings u/s 158BFA(2) are initiated as the assessee was in possession of undisclosed income which has been detected as a result of search.
The assessee has shown to have sold other 20,000 shares of M/s B.S. Holdings & Credit Ltd. during the block period through other brokers. It is claimed that out of sale proceeds of shares amounting to Rs. 29,44,120/-, the amount of Rs. 15,61,745/- was received from M/s Friends Portfolio (P) Ltd. and the remaining amount of Rs. 13,82,375/- represented the sale of shares through other brokers. On examining the facts of the case, it is found the average rate of share shown to have been sold through M/s Friends Portfolio (P) Ltd. comes to Rs. 78/-per share approx. Similarly, average rate of share claimed to have been sold through other brokers comes to Rs.70/- approximately per share. However, no evidence has been filed to establish the genuineness of rate and supporting evidences of genuineness of sale transactions of shares as well as ownership of shares. Since the alleged sale receipts of shares amounting to Rs. 13,82,375/- are not connected to M/s Friends Portfolio (P) Ltd., Delhi and the block assessment proceedings, these are added to the income of the assessee on protective basis as income from undisclosed sources for the block period and separate proceedings u/s 147/148 of the I.T. Act, 1961 are to be initiated for assessment of these receipts of Rs. 13,82,375/- on substantive basis in respective years.
With these remarks, total undisclosed income of the assessee for the block period is calculated as below:-
1. Unexplained credits (as discussed) Rs.15,61,745/-
2. -do- (on protective basis as discussed) Rs.13,82,375/-
Total undisclosed income for block period Rs.29,44,120/-“
6. On appeal arising from order of re-assessment for the year 2000-2001, the CIT(A) deleted the additions on the ground that in respect of transactions with M/s JRD Stock Brokers, the assessing officer had failed to consider any evidence in support of its finding that transaction was bogus. The assessing officer had only discussed the modus operandi of Manoj Aggarwal which had relevance for the shares sold through M/s Friends Portfolio (P) Ltd. and not through any other party. This finding has been affirmed by the Tribunal as under:-
“We have heard the submissions made by the learned DR and have also perused the order of the learned CIT (A) as also the assessment order. The assessing authority, in the assessment order, has stated that the evidence called for by him had not been produced and even through the assessing authority wanted to tax this amount of Rs. 13,82,375/- representing the alleged undisclosed income of the assessee out of the transaction of the purchases and sales of shares not done with Shri Manoj Aggarwal but through third party, namely, M/s JRD Stock brokers. The AO has primarily discussed the modus operandi of Shri Manoj Aggarwal. It is also noted that the assessing authority has not made any discussion nor had any evidence in his possession in regard to the transaction with M/s JRD Stock Brokers which could even hint that the transaction with M/s JRD Stock Brokers was bogus. A perusal of the order of learned CIT(A) clearly shows that the learned CIT(A) had verified the assessment records and after verification has found that even though the AO had stated that the assessee has not filed any details, the AO in his order-sheet dated 19.11.2007 has admitted the filing of the information. It is further noticed that the learned CIT(A) has considered the fact that the assessee had produced that contract notes of the shares transacted by the assessee and this has also not been shown by the AO to be file, fabricated or wrong. Thus, it is noticed that the learned CIT(A) has in the absence of adverse inference about the share transaction relating to the sale consideration of Rs. 13,82,375/- has deleted the addition. Even before us, the learned DR has not been able to produce any evidence contrary to the finding as recorded by the learned CIT(A). In the circumstances, we are of the view that the learned CIT(A) has taken a correct view and no interference is called for in his order.”
7. We have heard learned counsel for the parties.
8. Learned counsel for the revenue submitted that the CIT (A) as well as the Tribunal have erred in law in deleting the additions. The findings recorded by the CIT(A) as well as the Tribunal are perverse. The burden of proving genuineness of the transactions of sale of shares through M/s JRD Stock Brokers was on the assessee. Having regard to the fact that the assessee was found having bogus transactions to conceal undisclosed income, the circumstances relied upon by the assessing officer in respect of bogus transactions justify drawing of inference against the assessee. The assessee was required to show genuineness of the sale transactions of shares. Even though reasons for which the transactions through M/s Friends Portfolio (P) Ltd. were held to be bogus may not strictly apply to transactions through M/s JRD Stock Brokers, legal issue remains the same i.e. whether the transactions of the assessee were genuine. Reference has been made to following discussion in the order of the assessing officer:-
“Statement of Sh. O.P. Bhalla, Karta was also recorded during block assessment proceedings.
The salient feature of this statement and of the case are as under:-
(a) The assessee did not have any prior knowledge of share transactions.
(b) The assessee had not done any dealing in shares of any company, in past as well as in futures. As per the statement of Shri O.P. Bhalla, the HUF had done purchase/sale transactions in shares of M/s B.S. Holdings & Credit Ltd only which assessee has shown to have been entered in.
(c) The assessee had no knowledge or background of the company, shares of which have been claimed as traded.
(d) The assessee did not have any knowledge regarding rates of shares of the said company at any point of time.
(e) The assessee did not have any knowledge of the brokers through him purchase and sales of shares has been shown.
(f) The assessee has shown sale of shares worth Rs. 29,44,120/- but the copies of contract notes and evidences of genuineness of transactions have not been filed.
(g) Evidences of ownership of shares, transfer and delivery of shares have not been filed.
(h) Names and addresses of the persons whom shares purchased and to whom shares were sold have not been furnished.
(i) Evidence of payment of purchase consideration of shares have also not been filed.
(j) The sources of various credit entries in the bank account and genuineness of sale consideration of shares remains unexplained.
(k) The facts of the case establish that no actual transaction of shares was done by the assessee but only the purchase and sale bills of accommodation entries were taken as per convenience to justify the transactions entered into bank accounts of the assessee.
Thus, it was proved that the assessee had not done any actual transaction of sale of shares”.
9. Though the above discussion in the order of the assessment was in the context of transactions of shares through M/s Friends Portfolio (P) Ltd., the same was fully applicable to any other transaction of the assessee and it was for the assessee to distinguish its applicability to the other transactions. The assessee was called upon to furnish material in support of genuineness of the transactions but it failed to do so.
10. Learned counsel for the assessee has not been able to show any material which may have been furnished by it to justify genuineness of the transactions and merely submitted that it was for the revenue to lead evidence to show that the transactions were not genuine as held by the CIT(A) as well as the Tribunal. This plea cannot be accepted as the circumstances relied upon in the order of the assessing officer placed the burden on the assessee to explain the genuineness of the transactions. Thus, the questions raised on behalf of the revenue have to be answered in its favour and against the assessee. Though in view of this finding the matter could have been decided against the assessee, with a view to give further opportunity to the assessee, we set aside the impugned orders and remand the matter to the CIT(A) for fresh decision in accordance with law. The assessee may appear before the CIT(A) for further proceedings on 25.4.2011.
11. Coming to ITA No. 158 of 2010, finding recorded by the assessing officer has already been reproduced above to the effect that transaction through M/s Friends Portfolio (P) Ltd. were bogus. The CIT(A) set aside the additions only on the ground that the requisite satisfaction under Section 158BD has not been recorded during the block assessment of the searched person. Finding recorded by the CIT(A) is as under:-
“12. Keeping in view the above ratio of the Apex Court and the ld. Jurisdictional Tribunal and the Chandigarh Bench Tribunal, therefore, in this case the search operations were conducted on 3.8.2000 at the residential and office premises of Sh. Manoj Aggarwal and his associate concerns, here M/s Friends Portfolio (P) Ltd. and the block assessment of M/s Friends Portfolio (P) Ltd. was framed u/s 158BC of the I.T. Act on 29.8.2002 by the DCIT, Central Circle-3, New Delhi. As per the assessment order of the AO u/s 158BD of the Act, the reasons for proceedings u/s 158BD were recorded on 29.3.2004. From these very facts, it is quite crystal clear that the mandatory satisfaction as per the provisions of section 158BD was not properly and validly recorded, as it was not recorded during the course of assessment proceedings of Sh. Manoj Aggarwal of M/s Friends Portfolio (P) Ltd. and the proceedings were initiated against the appellant u/s 158BD on 29.3.2004 by the AO, Faridabad after getting the intimation for necessary action in the concerned case from the DCIT, Central Circle-3, New Delhi. As per the law laid down by the Apex Court as above, the two conditions have not been met by the present AO in his order u/s 158BD as is evident from its contents i.e. (i) the satisfaction has not been recorded by the AO having jurisdiction over the searched person (here Sh. Manoj Aggarwal of M/s Friends Portfolio (P) Ltd.) that undisclosed income belonged to any other person (here the appellant, Sh. O.P. Bhalla, HUF) than the searched person i.e. Sh. Manoj Aggarwal; (ii) hand over the books of account and other documents and assets seized by the AO having jurisdiction against the other person.
13. The second condition is also not satisfied in the present case as no books of account seized or other documents seems to have been the basis of addition in the case of the appellant except the statement of Sh. Manoj Aggarwal. Had it been there any seized material with the present AO u/s 158BD, he could have confronted it with the appellant during the course of assessment proceedings u/s 150BD or had recorded satisfaction even after the order u/s 158BC had been passed, which is not the position as is clear from the reasons recorded on 23.9.2004. The proceedings u/s 158BD were initiated only on some sketchy information supplied by the AO having assessed M/s Friends Portfolio (P) Ltd. u/s 158BC.
14. In view of the above findings, therefore, the assessment of the appellant has been made without satisfying the mandatory conditions precedent for section 158BD.
15. The next question addressed by the ld. Jurisdictional Tribunal in the above order was whether the notice u/s 158BD was required to be issued within a reasonable time and if it was not so issued, whether the assessment made pursuing to the notice liable to be set aside on that ground.
16. The ld. Tribunal relied upon the Hon’ble Gujarat High Court’s decision in the case of Khandubhai Vasanji Oesai and others v. DCIT & another [1999] 236 ITR 73, where it has been held that the notice should be issued within 15 days from the date of computation of block assessment in the case of the searched person or at any rate within 60 days from that date, the sanctity behind this period being the provisions of section 132(9A). 15 days is a reasonable time to issue notice u/s 158BD of the Act to recognize the position that the AO, once he has reached the requisite satisfaction, is bound to act swiftly to proceed against the other persons as soon as may be.
17. Clearly, from the facts and circumstances of the present case, according to the above ruling, the condition of issuing notice u/s 158BD within 15 days has also not been satisfied with.
18. Since the above two findings in the appellant’s case are sufficiently established to dispose of the appeal in favour of the appellant, it is unnecessary to deal with the merits of the block assessment order and the additions made therein u/s 68 or on protective basis, agitated in ground No.5.”
12. The above view has been affirmed by the Tribunal.
13. We have heard learned counsel for the parties.
14. Learned counsel for the revenue submitted that the finding recorded by the CIT(A) as well as the Tribunal was perverse as existence of satisfaction of the assessing officer during the block assessment of searched person was patent and the assessee had nexus with the material found during the search. Reference has been made to the following observations in the order of block assessment of the searched person namely M/s Friends Portfolio (P) Ltd.:
“Nature of business Trading in shares and providing accommodation book entries.”
“All the transactions of M/s Friends Portfolio (P) Ltd. are conclusively established to be bogus on account of following reasons:
(a) Sh. Manoj Aggarwal, the Director of the company, in his statement on oath and various written submissions furnished during the course of assessment proceeding has accepted these transactions to be bogus and of the nature of accommodation book entries.
(b) M/s Friends Portfolio (P) Ltd. became a member of Delhi Stock Exchange Association Ltd. and got the permission to trade from 03.3.2000. On 22.3.2000, this company gave the exclusive right to trade on its tickets to M/s Abhipra Capital Ltd. situated at BM-1, Dilkhush Indl. Area, Azadpur, Delhi for a consideration of tax free deposit of Rs. 2,50,000/- and monthly charges of Rs. 30,000/-. The exclusive right to operate the client account and the settlement account of this company was given to the exclusive client M/s Abhipra Capital Ltd. The copy of the agreement has been seized vide pages 1 to 42 of Annexure A-1 seized from BM-I, Dilkhush Indl. Area, Azadpur, Delhi.”
(c) Summons were issued to M/s Abhipra Capital Ltd. and various details were called for. The Director of the company, Sh. Pratap Gupta, categorically stated that no transactions of any other client has been done by M/s Friends Portfolio P Ltd. on the ticket of DSE upto August, 2000 other than the trading done by M/s Abhipra Capital Ltd. M/s Abhipra Capital Ltd. had done the trading on the ticket of M/s Friends Portfolio P Ltd. on DSE for its own client and bills regarding these have been issued by M/s Abhipra Capital Ltd. The cheques issued and collected for and by the client of M/s Abhipra Capital Ltd. have been done from the bank accounts of M/s Abhipra Capital Ltd. Various details to establish this fact have been furnished by him and the client account of M/s Friends Portfolio P. Ltd. has been seen wherein M/s Abhipra Capital Ltd. appears as the sole client. No service tax has been paid by M/s Friends Portfolio P Ltd. The service tax on the transactions on its ticket have been paid by M/s Abhipra Capital Ltd.
(d) Enquiries were also conducted from the Delhi Stock Exchange Association Ltd. and the party wise, volume wise detail of transactions was obtained from them. The total list of the terminals of M/s Friends Portfolio P. Ltd. have been obtained. From these details, it is observed that all the transactions on the ticket of DSE have been done for the clients of M/s Abhipra Capital Ltd. Infact, Sh. Manoj Aggarwal and his company M/S Friends Portfolio P Ltd. did not even have a terminal to trade. The pay-in and pay-out position of each settlement period has been taken from the settlement account and got verified from the DSE. It is observed that the pay-in and pay-out positing of each settlement of M/s Friends Portfolio P Ltd. matches with the books of M/s Abhipra Capital Ltd. These facts establish beyond doubt that all the trading on the ticket of M/s Friend Portfolio P Ltd. was done by M/s Abhipra Capital Ltd. at the Delhi Stock Exchange and no real transactions has been done for the parties who have procured the bogus sales, purchase and difference bills from M/s Friends Portfolio (P) Ltd.
(e) There are various evidences in the seized material which are listed below which further establish that the bills of M/s Friends Portfolio P Ltd. were fabricated and prepared to suit the requirement of the clients.
Annexure A-1 seized from the office of M/s Bemco Jewellers P Ltd. at 7/22, Ansari Road, Daryaganj, Delhji contains sale, purchase and difference bills of M/s Friends Portfolio P Ltd., issued in favour of various parties. Various discrepancies are noticed in these, bills which clearly proves that these bills are bogus. Sh. Manoj has also accepted that these are related to business of accommodation bill entries. The page wise discrepancies are as below:-
(i) Page 6 is bill of Sh. Sandeep Kr. Garg on which the date has been changed from 11.3.2000 to April 2000.
(ii) Pages 7 to 9 are bills of Shikha Jain in which the date is 22.1.2000 which has been subsequently changed to June, 2000. It is note worthy that the company was not even registered at that point of time.
(iii) Page 13 is sale bill of shares of S.C. Rai dated 21.3.2000. There are hand written note on this paper like “sale bill to be prepared” ‘two bills to be made”, the total quantity of 280 shares to be split between S.C. Rai 218 and Smt. Rani Rai 62.
(iv) Pages 14 to 42 are bills of a period when M/s Friends Portfolio P Ltd. was not a member of DSE.
(v) Page 42 is a bill of Savita Devi, the address is written subsequently and the mediator Bengani is mentioned.
(vi) Pages 45 and 48 are bills of Mamta Devi on which address is written subsequently and the mediator Bengani is mentioned.
(f) Annexure A-40, A-43, A-44, A-45 & A-51 seized from 5A/12, Ansari Road, Daryaganj, Delhi are sale bills, contract note and statement of accounts of M/s J.N. Anju & Co. add. H-22 G, Saket, N. Delhi. These books have been accepted by Sh. Manoj Aggarwal to be used for the purpose of accommodation entries and have been used for showing back dated acquisition of share for long term share profit. Local enquiries conducted by this office have also proved that this concern never existed at the mentioned premises.
Some of the beneficiaries of accommodation entries of M/s Friends Portfolio P Ltd. namely Sh. C.P. Khanna, Sh. Punit Khanna, Sh. Raghav Bahl, Sh. Rajiv Aggarwal, M/s Vulcan Electro Controls (India), M/s Target Chemical P. Ltd. M/s Instronics Ltd., Dhanraj Singh, Harjoot Singh, Harinder Kaur, have accepted that they had taken accommodation entries from M/s Friends Portfolio P Ltd. 32. All these facts clearly establish that the transactions of M/s Friends Portfolio P Ltd. are accommodation book entries. A total cash, clearing and transfer deposit of Rs. 1,32,32,77,001/- has come in the bank accounts of M/s Friends Portfolio P Ltd.”
“4.2. In reply thereto, the assessee has made written submissions on 26.8.2002 which are reproduced below:-
“This is in reference of your above said show cause notice our submissions are as under:-
As you are aware that immediately after search operation on 3.8.2000 Sh. Manoj Aggarwal submitted a letter to the investigation wing of Income Tax Dept. Unit-2 clarifying that he was in business of providing accommodation entries. He provided details of the beneficiaries to the extent known to him as well as the mediators. (Their code etc.).
On many occasions his statements were recorded at the Investigation Wing, Unit-2, in which he has clearly specified that he has not been transacting any real business but he only used to issue cheques for various bank accounts under his control against the cash received from the persons who used to approach him through various mediators. He did not know as to what treatment they have given to such cheques in their books of accounts. He never entered into real transactions and such transactions were on paper only. In regard to other persons who gave him cheques mainly showing transfer of profit to his associate concerns used to take cash back from him as he has never done any share transactions through them in fact.
He has not been maintaining any books of accounts and the details were being maintained as Kachha records which were used to be destroyed from time to time, out of which some have been seized by the Income Tax Department.
Annexure A-16, A-18, A-19, A-20 & A-21 of party M-5 clearly supports our above said contention. Other seized papers with regard to reconciliation statements of various mediators also clarify the above said actual position.
Your kind honour also has recorded his statements on the various occasions with regard to nature of business being done by him. In which also he has confirmed his earlier statements.
He also provided you details of the Major concerns who have provided his bogus profit entries as well as he provided you his full support with regard to tracing of actual beneficiaries.
As per our earlier reply vide letter dated 16.8.2002 the account mentioned in your show cause notice except the account number 304, 3025, 30231814019, 30021002, 101018 have been used by Manoj Aggarwal our director for his accommodation entry business. So far as identity, credit worthiness and genuineness of credit entries is concerned, we have to clarify that it is not possible to give identity and creditworthiness of the parties who were the beneficiaries and actually the amount has been received from various mediators as is evident from the Annexure A-16, A-18, A-19, A-20 & A-21 of party M-5. These amount were first deposited in various supporting accounts of Manoj Aggarwal and subsequently transferred to company’s bank accounts from where the final cheque has been issued to the actual beneficiaries. Credit entries comprise of transfers from other supporting accounts as well as profit cheques received from various beneficiaries to whom the cash was refunded back by Manoj Aggarwal. Further most of these mediators of Sh. Manoj Aggarwal has also confirmed this positions.
Keeping in view of the above there is no justification for treating the credit entries in our various bank accounts as our unexplained cash credit. It has also come to our knowledge that beneficiaries of Rs.80 crores app. have already been traced by your kind honour.
4.3 The reply given by the assessee has been considered. It is an accepted fact that the name and accounts of this company were used for the purpose of providing accommodation book entries by the Director, Sh. Manoj Aggarwal. All the transactions in the name of this company were only paper transactions of providing bogus accommodation entries and no real activity has been done.”
15. The above shows that the assessing officer of the searched person was fully satisfied that the transactions of sale of shares by the assessee through searched person were bogus and represented undisclosed income of the assessee.
16. Learned counsel for the assessee supported the impugned finding by relying upon the judgment of this Court CIT v. Mridula, Prop. Dhruv Fabrics, [IT Appeal No.591 of 2009, dated 20.7.2010]and submitted that if satisfaction was not recorded during the assessment of the searched person, block assessment could not proceed against the assessee. He submitted that the assessment of the searched person was completed on 29.8.2002 while notice in the present case was issued on 23.9.2004 which was subsequent of the assessment of the searched person. Order of assessment of searched person did not specifically record the requisite satisfaction as held by the CIT (A) and the Tribunal. It was further submitted that as required under the law, laid down in Manish Maheshwari v. Asstt. CIT [2007] 289 ITR 341/ 159 Taxman 258 (SC),block assessment has to be referable to material found during the search. He further submitted that the notice should be issued under Section 15BD immediately after the satisfaction was reached while in the present case notice was issued after two years.
17. After considering the rival submissions, we are satisfied that the questions raised on behalf of the revenue have to be answered in its favour and against the assessee. It is patent from the order of assessment in the case of searched person that during the assessment of the searched person, the assessing officer was satisfied that the assessee had undisclosed income which had nexus to the material found during search. In these circumstances the judgment of this Court in Mridula, Prop. Dhruv Fabrics case (supra) could not come to the rescue of the assessee as what was held therein was that requisite satisfaction must be formed during assessment of searched person. This Court did not hold that law required any particular form in which the same should be recorded. In the present case such satisfaction having been duly formed, learned counsel for the revenue rightly relies upon the judgment of this Court in CIT v. Pearey Lal & Sons (EP) Ltd. [2009] 308 ITR 438 / 177 Taxman 302 to submit that requirement of law was met. As regards delay in issuing notice to the assessee, we find merit in the contention that it was a case which involved a huge fraud of tax evasion where business of searched person was to give accommodation entries resulting in tax evasion to the extent of Rs.132 Crores in total, spread over the cases of various assesses in all over India. The coordination by the assessing officer of the searched person was time consuming affair. In these circumstances, delay cannot be held to be unreasonable and cannot be held to vitiate the assessment. No doubt once satisfaction is formed during block assessment of searched person, action must be promptly taken as submitted on behalf of the assessee and as held by the Gujarat High Court in Khandubhai Vasanji Desai v. Dy. CIT [1999] 236 ITR 73 / 103 Taxman 181. Whether or not action was prompt depends upon circumstances of each case.
18. The CIT(A) as well as the Tribunal are not justified in holding that no requisite satisfaction was recorded and that block assessment proceedings are vitiated. The questions have to be answered in favour of the revenue accordingly. On reaching this conclusion, even though we would have quashed the impugned orders and restored the order of the assessment officer, by way of abundant caution, we consider it appropriate to give further opportunity to the assessee and for this purpose, we remand the matter to the CIT(A) for fresh decision in accordance with law. The assessee may appear before the learned CIT (A) on 25.4.2011.
19. Both the appeals are disposed of.
[Citation : 347 ITR 500]
