Commissioner Of Income Tax-Central, New Central Revenue Building, Statue Circle, Jaipur (Raj v. M/S Jugal Kishore Modi Investment Co. Ltd

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR 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 SOMANIOrder 13/10/2017 1.By way of this appeal, the appellant has assailed thejudgment and order of the Tribunal whereby the Tribunal haspartly allowed the appeal of the assessee reversing the finding ofthe CIT(A) as well as AO. 2.This Court while admitting the matter framed the followingquestion of law:- “Whether on the facts and in the circumstancesof the case and in law, the ITAT was right andjustified in deleting the addition of Rs.34,11,000/- as unexplained investment ignoringthe fact that the money introduced as shareapplication was bogus and was nothing butunexplained investment of assessee companyand whether the finding of Tribunal on fact isperverse.” 3.While considering the matter, the Tribunal has gone into detail and after taking into consideration the law prevailing, hasobserved as under:- “25. We have already discussed the legalprovisions and concluded on the basis ofdiscussion in this order that there is distinctionbetween regular assessment under section143(3) or 143(1) of the Income-tax Act and inthe block assessments to be made under ChapterXIVB of the I.T. Act. This distinction betweenregular assessment and search assessments hadbeen clearly brought out in the Explanation undersection 158BA(2) of the Income-tax Act, 1961,which reads as under: Explanation, - For the removal of doubts, it ishereby declare that- (a) the assessment made under this Chaptershall be in addition to the regular assessment inrespect of each previous year included in theblock period; (b) the total undisclosed income relating to theblock period shall not included the incomeassessed in any regular assessment as income ofsuch block period; (c) the income assessed in this Chapter shall notbe included in the regular assessment of anyprevious year included in the block period. 26. The AO, by dealing with regular assessment,is free to examine the veracity of the returns aswell as the claims made by the assessee withregard to exemption and/or reduction. However,the undisclosed income is taxed by way of blockassessment resulting in search and seizure onthe basis of evidence found as a result of searchand on the basis of such other materials orinfomration as are available with AO andrelatable to such evidence as per provisionscontained in section 158BB(1) of the Income-taxAct and the AO cannot make outside enquiriesand investigation which is permissible in theregular assessments. 27. It was rightly held in the case of CIT vs.Vikram A. Doshi (supra) that the transactions,which were disclosed in the returns, were thesubject-matter of regular assessments, cannot besaid to be undisclosed transactions falling undersection 158B of the Income-tax Act, 1961. Similarly, it was also held in the case of BhagwatiPrasad Kedia, supra, that the AO was not entitledto question the genuineness of loan amountwhich was the subject-matter of regularassessment while making block assessment. 27. It was rightly held in the case of CIT vs.Vikram A. Doshi (supra) that the transactions,which were disclosed in the returns, were thesubject-matter of regular assessments, cannot besaid to be undisclosed transactions falling undersection 158B of the Income-tax Act, 1961. Similarly, it was also held in the case of BhagwatiPrasad Kedia, supra, that the AO was not entitledto question the genuineness of loan amountwhich was the subject-matter of regularassessment while making block assessment. 28. We hold that provisions of sections 68 and 69etc. are applicable in the block assessments onlywhen any incriminating document is foundshowing introduction of unexplained cashthrough share applications or the appellant hadsurrendered additional income on the basis ofseized documents in the block assessments orthe appellant had admitted introduction ofconcealed income in the shape of shareapplication money or share capital during thecourse of statements recorded under section132(4) of the Income-tax Act and only then theaddition under sections 68 and 69 of the Income-tax Act can be made. 29. In this case, the AO has brought somematerial on record to show that moneyintroducedthroughshareapplicationmoney/share capital was not genuine afterdetailed investigation and enquiry and afterobtaining pay-in-slips from the bank subsequentfrom the date of search. Such material can beused only in the regular assessments. TheRevenue could have resorted to the provisions ofsection 263 of the I.T. Act, if they were of theopinion that the assessment framed undersection 143(3)/143(1) of the Income-tax Actwere erroneous and prejudicial to the interests ofRevenue but no addition for unexplained shareapplication/share capital can be made afterenquiry and investigation in the blockassessment. 30. The facts of the case of CIT vs. ElegantHomes Pvt. Ltd. (2003), 259 ITR 232 (Raj.),relied upon by the ld. D/R (IT) aredistinguishable from the facts of the case beforeus. In the said case, the assessee had not filedthe return till the date of search and no regularassessment was pending. Obviously, no regularassessment was made whereas in the casebefore us, the returns had been filed,assessments had been made under section143(3)/143(1) of the Income-tax Act and thetransactions had been disclosed in the returns ofincome filed. 31. It is also pertinent to observe that the AOhad made addition for unexplained investmentwhich can be considered under section 69 of theIncome-tax Act. However, we are of the opinion that addition, if any, can only be made undersection 68 of the Income-tax Act, as held by theHon’ble Supreme Court in the case of CIT vs.Stellar Investment Ltd., 251 ITR 263 (SC) andCIT vs. Sophia Finance Ltd., 205 ITR 98 (Del)(FB). Therefore, the addition of Rs.34,11,000/-madebytheAOforunexplainedinvestment/income received through shareapplication money/share capital and confirmedby the ld. CIT(A) is hereby deleted. The AO isdirected to allow the necessary relief. The orderof the ld. CIT(A) is modified in this extent.” 4.We are in complete agreement with the view taken by the Tribunal. 5.Hence, the issue is answered in favour of the assessee against the department. 6.The appeal stands dismissed. (DINESH CHANDRA SOMANI)J. (K.S.JHAVERI)J. A.Sharma/40