Commissioner of Income-tax-Central, Jaipur v. Jugal Kishore Modi Investment Co. Ltd
[Citation -2017-LL-1013-12]

Citation 2017-LL-1013-12
Appellant Name Commissioner of Income-tax-Central, Jaipur
Respondent Name Jugal Kishore Modi Investment Co. Ltd.
Court HIGH COURT OF RAJASTHAN
Relevant Act Income-tax
Date of Order 13/10/2017
Judgment View Judgment
Keyword Tags prejudicial to the interests of revenue • share application money • incriminating document • unexplained investment • genuineness of loan • search and seizure • undisclosed income • unexplained cash
Bot Summary: We have already discussed the legal provisions and concluded on the basis of discussion in this order that there is distinction between regular assessment under section 143(3) or 143(1) of the Income-tax Act and in the block assessments to be made under Chapter XIVB of the I.T. Act. The undisclosed income is taxed by way of block assessment resulting in search and seizure on the basis of evidence found as a result of search and on the basis of such other materials or infomration as are available with AO and relatable to such evidence as per provisions contained in section 158BB(1) of the Income-tax Act and the AO cannot make outside enquiries and investigation which is permissible in the regular assessments. Are applicable in the block assessments only when any incriminating document is found showing introduction of unexplained cash through share applications or the appellant had surrendered additional income on the basis of seized documents in the block assessments or the appellant had admitted introduction of concealed income in the shape of share application money or share capital during the course of statements recorded under section 132(4) of the Income-tax Act and only then the addition under sections 68 and 69 of the Income- tax Act can be made. Such material can be used only in the regular assessments. The Revenue could have resorted to the provisions of section 263 of the I.T. Act, if they were of the opinion that the assessment framed under section 143(3)/143(1) of the Income-tax Act were erroneous and prejudicial to the interests of Revenue but no addition for unexplained share application/share capital can be made after enquiry and investigation in the block assessment. In the said case, the assessee had not filed the return till the date of search and no regular assessment was pending. Obviously, no regular assessment was made whereas in the case before us, the returns had been filed, assessments had been made under section 143(3)/143(1) of the Income-tax Act and the transactions had been disclosed in the returns of income filed.


HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 24 / 2005 Commissioner of Income Tax-Central, New Central Revenue Building, Statue Circle, Jaipur (Raj) ----Appellant Versus M/s Jugal Kishore Modi Investment Co. Ltd., 14, Gopi Nath Marg, Jaipur ----Respondent For Appellant(s) : Mr. Anuroop Singhi For Respondent(s) : Mr. N.L. Agarwal HON'BLE MR. JUSTICE K.S.JHAVERI HON'BLE MR. JUSTICE DINESH CHANDRA SOMANI Order 13/10/2017 1. By way of this appeal, appellant has assailed judgment and order of Tribunal whereby Tribunal has partly allowed appeal of assessee reversing finding of CIT(A) as well as AO. 2. This Court while admitting matter framed following question of law:- Whether on facts and in circumstances of case and in law, ITAT was right and justified in deleting addition of Rs. 34,11,000/- as unexplained investment ignoring fact that money introduced as share application was bogus and was nothing but unexplained investment of assessee company and whether finding of Tribunal on fact is perverse. (2 of 4) [ITA-24/2005] 3. While considering matter, Tribunal has gone into detail and after taking into consideration law prevailing, has observed as under:- 25. We have already discussed legal provisions and concluded on basis of discussion in this order that there is distinction between regular assessment under section 143(3) or 143(1) of Income-tax Act and in block assessments to be made under Chapter XIVB of I.T. Act. This distinction between regular assessment and search assessments had been clearly brought out in Explanation under section 158BA(2) of Income-tax Act, 1961, which reads as under: Explanation, - For removal of doubts, it is hereby declare that- (a) assessment made under this Chapter shall be in addition to regular assessment in respect of each previous year included in block period; (b) total undisclosed income relating to block period shall not included income assessed in any regular assessment as income of such block period; (c) income assessed in this Chapter shall not be included in regular assessment of any previous year included in block period. 26. AO, by dealing with regular assessment, is free to examine veracity of returns as well as claims made by assessee with regard to exemption and/or reduction. However, undisclosed income is taxed by way of block assessment resulting in search and seizure on basis of evidence found as result of search and on basis of such other materials or infomration as are available with AO and relatable to such evidence as per provisions contained in section 158BB(1) of Income-tax Act and AO cannot make outside enquiries and investigation which is permissible in regular assessments. 27. It was rightly held in case of CIT vs. Vikram A. Doshi (supra) that transactions, which were disclosed in returns, were subject-matter of regular assessments, cannot be said to be undisclosed transactions falling under section 158B of Income-tax Act, 1961. (3 of 4) [ITA-24/2005] Similarly, it was also held in case of Bhagwati Prasad Kedia, supra, that AO was not entitled to question genuineness of loan amount which was subject-matter of regular assessment while making block assessment. 28. We hold that provisions of sections 68 and 69 etc. are applicable in block assessments only when any incriminating document is found showing introduction of unexplained cash through share applications or appellant had surrendered additional income on basis of seized documents in block assessments or appellant had admitted introduction of concealed income in shape of share application money or share capital during course of statements recorded under section 132(4) of Income-tax Act and only then addition under sections 68 and 69 of Income- tax Act can be made. 29. In this case, AO has brought some material on record to show that money introduced through share application money/share capital was not genuine after detailed investigation and enquiry and after obtaining pay-in-slips from bank subsequent from date of search. Such material can be used only in regular assessments. Revenue could have resorted to provisions of section 263 of I.T. Act, if they were of opinion that assessment framed under section 143(3)/143(1) of Income-tax Act were erroneous and prejudicial to interests of Revenue but no addition for unexplained share application/share capital can be made after enquiry and investigation in block assessment. 30. facts of case of CIT vs. Elegant Homes Pvt. Ltd. (2003), 259 ITR 232 (Raj.), relied upon by ld. D/R (IT) are distinguishable from facts of case before us. In said case, assessee had not filed return till date of search and no regular assessment was pending. Obviously, no regular assessment was made whereas in case before us, returns had been filed, assessments had been made under section 143(3)/143(1) of Income-tax Act and transactions had been disclosed in returns of income filed. 31. It is also pertinent to observe that AO had made addition for unexplained investment which can be considered under section 69 of Income-tax Act. However, we are of opinion (4 of 4) [ITA-24/2005] that addition, if any, can only be made under section 68 of Income-tax Act, as held by Hon ble Supreme Court in case of CIT vs. Stellar Investment Ltd., 251 ITR 263 (SC) and CIT vs. Sophia Finance Ltd., 205 ITR 98 (Del) (FB). Therefore, addition of Rs.34,11,000/- made by AO for unexplained investment/income received through share application money/share capital and confirmed by ld. CIT(A) is hereby deleted. AO is directed to allow necessary relief. order of ld. CIT(A) is modified in this extent. 4. We are in complete agreement with view taken by Tribunal. 5. Hence, issue is answered in favour of assessee against department. 6. appeal stands dismissed. (DINESH CHANDRA SOMANI)J. (K.S.JHAVERI)J. A.Sharma/40 Commissioner of Income-tax-Central, Jaipur v. Jugal Kishore Modi Investment Co. Ltd
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