Triumph Securities Ltd., Mumbai V. DCIT Central Circle 40, Mumbai

ITSSA 444/MUM/2004

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 9271 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 07-04-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: misc
• Appeal Filed On: 26-07-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: ARVIND SONDERAJIVE KHANDELWAL
• Keywords: Unexplained investment; Gift; Business income; Depreciation; Search and seizure; Loose papers; Speculation loss; Wrong claim; Block assessment; Onus to prove; Sham transactions; Reason to believe; Unabsorbed depreciation; Capital expenditure; Speculative transactions
• Section: 69C; 143(3); 32; 68; 69; 27; 54; 37; 6; 56; 132; 28; 144; 10; 2; 11; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES H (SPECIAL BENCH), MUMBAI. BEFORE S/SHRI R.V.EASWAR, SR VICE PRESIDENT, R.S.S YAL, ACCOUNTANT MEMBER AND S.V.MEHROTRA, ACCOUNTANT MEMBER I.T(SS)A. NO. 444/MUM/2004 ASSESSMENT YEAR: 2003-04 TRIUMPH SECURITIES LTD., V. THE DCIT, CENTRAL CIR CLE 40, RADHA BHUVAN, 1 ST FLOOR, 121, NAGINDAS MUMBAI. MASTER ROAD, FORT, MUMBAI-23. PA NO.AAACT 2152 P (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI ARVIND SONDE/RAJIVE KHANDELWAL REVENUE BY : DR P.DANIEL (SPL. COUNSEL) SHRI S.K. PAHWA(CIT-DR) O R D E R PER S.V.MEHROTRA(AM) THE PRESENT SPECIAL BENCH HAS BEEN CONSTITUTED U/S. 255 (3) OF THE INCOME TAX ACT, 1961. 2. THE SPECIAL BENCH WAS CONSTITUTED UNDER THE FOL LOWING CIRCUMSTANCES: THE ASSESSEE, A RESIDENT COMPANY, MEMBER OF THE STO CK EXCHANGE, BOMBAY (BSE), IN THE RELEVANT ASSESSMENT YEAR, WAS ENGAGED IN THE BUSINESS OF BROKING IN SHARES AND SECURITIES AND PROPRIETORY TRADING. A SEARCH A ND SEIZURE OPERATION U/S.132 WAS CARRIED OUT ON THE PREMISES VIZ; OXFORD CENTRE, 10, SHROFF LANE, NEXT TO COLABA MARKET, COLABA, MUMBAI, PERTAINING TO KETAN PAREKH GROUP OF CASES ON 23.3.2001. DURING THE COURSE OF SEARCH, 12 CDS ROM FROM THE COMPUTER AND SERVER WERE FOUND ON THE PREMISES ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 2 WHICH CONTAINED ACCOUNTING AND TRADING DATA OF TRIU MPH SECURITIES LTD., TRIUMPH INTERNATIONAL FINANCE (I) LTD., FOR F.YS. 1999-200 0 & 2000-2001. THE AO ON THE BASIS OF RECORDS OF THE ASSESSEE AND AFTER CONSIDERING TH E FINDINGS OF FACT AS POINTED OUT BY THE AUDITORS IN THEIR REPORT U/S.142(2A), DETERMINED TH E UNDISCLOSED INCOME AT RS.4,44,42,22,680/- AS AGAINST THE NIL INCOME RET URNED BY THE ASSESSEE. LD CIT (A) CONFIRMED THE AOS ACTION. WHEN THE MATTER CAME UP BEFORE THE TRIBUNAL ON 3.7.2009, LD D.R. STATED THAT ON IDENTICAL FACTS AND ON THE BASI S OF THE SAME 12 CDS, ON WHICH BASIS THE ADDITIONS HAD BEEN MADE IN THE HANDS OF THE ASS ESSEE, THE ADDITIONS WERE MADE IN THE HANDS OF THE GROUP CONCERN ALSO VIZ; TRIUMPH INTER NATIONAL FINANCE INDIA LTD (TIFIL), WHICH HAVE BEEN SUSTAINED BY THE TRIBUNAL AND, THER EFORE, THE ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL AND HAD TO BE FOLLOWED. O N THE OTHER HAND, LD COUNSEL FOR THE ASSESSEE HAD SUBMITTED THAT ON IDENTICAL FACTS IN T HE CASE OF THE ASSESSEE ITSELF, WHILE DECIDING THE APPEAL FOR THE ASSESSMENT YEAR 1999-20 00, SIMILAR ADDITIONS HAD BEEN DELETED. TAKING NOTE OF THE FACT THAT THE ADDITION S MADE IN THE HANDS OF THE ASSESSEE AND IN THE HANDS OF TIFIL WERE MADE ON THE BASIS OF 12 CDS AND IN ONE CASE I.E. IN THE CASE OF TIFIL, THE DECISION HAD ALREADY BEEN TAKEN BY THE T RIBUNAL AND FURTHER TAKING NOTE OF THE FACT THAT IN ASSESSEES OWN CASE FOR A.Y 1999-2000, THE IDENTICAL ISSUE HAS BEEN CONSIDERED IN REGULAR ASSESSMENT, THE MATTER WAS RE FERRED TO THE HONBLE PRESIDENT OF THE TRIBUNAL WITH A REQUEST TO CONSTITUTE A SPECIAL BEN CH TO DECIDE THE FOLLOWING QUESTIONS: 1) WHETHER THE SCOPE OF UNDISCLOSED INCOME UNDER C HAPTER XIV-B OF THE INCOME TAX ACT (I.E. ACT) INCLUDES SUCH AN ITEM OF INCOME ARISING OUT OF POST SEARCH ENQUIRIES AND INVESTIGATIONS ON THE DIS CLOSED TRANSACTIONS WHEN SUCH TRANSACTIONS SAW THE LIGHT OF THE DAY CON SEQUENT TO THE SEIZED CDS AS A RESULT OF SEARCH ACTION U/S. 132 OF THE AC T. 2) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE ANY ADDITION COULD BE MADE IN RESPECT OF THE TRANSACTIONS RESULTING IN TO CLIENT ID MISMATCH FOR ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 3 NON-FURNISHING OF CONFIRMATION, WHEN THE ASSESSEE H AS FURNISHED MORE THAN 98% OF THE CONFIRMATIONS FROM THE CLIENTS FOR THE TRANSACTION DONE ON THEIR BEHALF AS A STOCK BROKER AND ACCEPTED BY THE DEPARTMENT AS GENUINE AND MORE PARTICULARLY WHEN THE PUNCHING OF CLIENT I D WAS NOT MANDATORY PRIOR TO 1 ST AUGUST, 2001? 3) IF THE ANSWER TO QUESTION NO.2 ABOVE IS IN NEGAT IVE, WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, ANY ADDITION COULD B E MADE AS UNEXPLAINED INVESTMENT APPLYING THE PROVISIONS OF SECTION 69 OF THE ACT WHEN THE TRANSACTIONS ARE RECORDED IN THE REGULAR BOOKS OF ACCOUNT.? AFTER CONSIDERING THE DETAILED REFERENCE U/S.255(3) MADE BY THE TRIBUNAL VIDE ORDER DATED 20.8.2009, THE HONBLE PRESIDENT VIDE HIS ORDER DAT ED 14.10.2009 CONSTITUTED A SPECIAL BENCH FOR DISPOSAL OF ENTIRE APPEAL. WE, ACCORDING LY, PROCEED TO DECIDE THE APPEAL. 3. BRIEF FACTS OF THE CASE ARE THAT DURING THE COUR SE OF SEARCH, 12 CD ROMS FROM THE COMPUTERS AND SERVERS WERE FOUND ON THE PREMISES WH ICH CONTAINED ACCOUNTING AND TRADING DATA OF TRIUMPH SECURITIES. ON THE BASIS O F THE DATA AND ON THE BASIS OF FURTHER EVIDENCE GATHERED BY THE AO, THE AO NOTED THAT IN S OME OF THE TRANSACTIONS, THE CLIENT CODE AS SHOWN IN THE STOCK EXCHANGE RECORD AT THE T IME OF STRIKING THE TRADE WAS DIFFERENT FROM THE CLIENT CODE SHOWN IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THUS, THE IDENTITY OF CLIENT, WHO ALLEGEDLY HAD UNDERTAKEN THE TRANSACTIO N, BECAME SUBJECT MATTER OF FURTHER INVESTIGATION AND, THEREFORE, THE MATTER WAS ALSO R EFERRED FOR AUDIT U/S.142(2A) OF THE I.T.ACT, 1961. AO NOTED THE FOLLOWING OBSERVATIONS OF THE AUDITORS AS REPRODUCED IN PARA 12.3 OF HIS ORDER : AS PER OUR ANALYSIS OF THE RECONCILIATION STATEMEN T PROVIDED BY THE ASSESSEE THERE ARE DISCREPANCIES AS TO CLIENT CODES AS PER THE BSE RECORDS AND THEIR BOOKS. ON OUR DETAILED VERIFICATION WE HAVE COME ACROSS AP PROXIMATELY 50% TO 55% OF TRANSACTION WHICH SHOWS VARIANCES VIS--VIS BSE AND BOOKS. ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 4 A DETAILED ELECTRONIC DATA SPECIFYING IN DETAILED S TATEMENT CONTAINED IN A CD IS ENCLOSED HEREWITH (REFER ATTACHMENT NO.D IN THE FORM OF CD SEPARATELY. AFTER PREPARATION OF THE RECONCILIATION BASED UPON THE ABOVE SAID DATA, WE HAVE FORWARDED A CD CONTAINING MISMATCH UNDER VA RIOUS CLASSIFICATIONS TO THE ASSESSEE FOR THEIR CLARIFICA TION VIDE OUR LETTER DATED 15.6.2002. IN ABSENCE OF CLARIFICATIONS FROM THE A SSESSEE WE HAVE NOT CONSIDERED ANY TYPE OF DIFFERENCES IN CLIENT CODES AS COMPARED TO NSE RECORDS EVEN IF THEY ARE REASONABLE AND SATISFACTOR Y. THE ASSESSEE HAS SHOWN ITS INABILITY FOR IMMEDIATE EXPLANATION FOR D ISCREPANCIES (PLEASE FIND ENCLOSED HEREWITH ATTACHMENT NO.24 PAGE FROM 1 TO 11). HOWEVER, WHEREVER DISCREPANCIES IN THE CLIENT CODE ARE APPEARING TRANSACTIONS WISE CONFIRMATIONS ARE REQUIRED TO SUB STANTIATE THE TRANSACTIONS. THE AO REQUIRED THE ASSESSEE TO FURNISH THE FOLLOWI NG INFORMATION FOR FINANCIAL YEARS 1998-99(AY 1999-2000), F.Y. 1999-2000 (AY 2000-2001 ) AND FOR THE PERIOD 1.4.2000 TO 23.3.2001: I) IDENTIFICATION OF TRANSACTIONS WHERE CLIENT ID MIS-MATCHES CAN BE READILY EXPLAINED. FOR EXAMPLE, IF THE CLIENT ID F OR RELIANCE LTD IS R 01 AND THE STOCK EXCHANGE RECORDS SHOWS EITHER R OR REL OR RELIANCE LTD., WHICH CAN BE RELATED TO THE CLIENT. II) IDENTIFICATION OF TRANSACTIONS WHERE THERE IS A CLIENT ID MIS-MATCH, AND THE TRANSACTIONS HAVE BEEN SQUARED UP DURING TH E SAME SETTLEMENT. III) IDENTIFICATION OF TRANSACTIONS WHERE THERE I S CLIENT ID MIS-MATCH BUT CONFIRMATION FROM THE CLIENTS AS APPEARING IN Y OUR BOOKS ARE AVAILABLE FOR THE SAID TRANSACTIONS. IV) IDENTIFICATION OF TRANSACTION WHERE THERE IS A CLIENT ID MIS-MATCH AND CONFIRMATIONS ARE NOT AVAILABLE BUT DELIVERY OF SHARES TO THE CLIENT OR FROM THE CLIENT AND PAYMENT OF MONEY RECE IVED FROM CLIENT OR MADE TO THE CLIENT CAN BE PROVEN. THE ASSESSEE FILED CONFIRMATIONS OF CERTAIN CLIENTS BUT DID NOT FURNISH ANY OTHER DETAILS. THE AO, THEREFORE, GAVE A SHOW CAUSE NOTICE TO THE ASSESSEE REQUIRING HIM TO EXPLAIN AS TO WHY THE UNDISCLOSED INCOME SHOULD NOT BE COMPUTE D ON THE BASIS OF DETAILS AVAILABLE ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 5 ON RECORD REGARDING MIS-MATCH OF CLIENTS ID CODES. THE ASSESSEE FILED ITS REPLY DATED 22.9.2003, 23.9.2003, 24.9.2003 & 25.9.2003, IN WHI CH, PRIMARILY THE ASSESSEE EXPLAINED THE MODUS OPERANDI OF EXECUTING TRADES ON THE STOCK EXCHANGE, MUMBAI AND THE REASONS FOR MISMATCH OF CLIENT ID. IT WAS, INTER-ALIA, POI NTED OUT THAT AT THAT RELEVANT TIME, IT WAS NOT OBLIGATORY TO PUNCH CLIENT ID FOR EXECUTING TR ADES. FURTHER, IT WAS POINTED OUT THAT THE PUNCHING OF CLIENT ID PRE AUGUST, 2001WAS NOT MANDATORY AND, THEREFORE, IN POST- AUGUST, 2001 WHEN IT BECAME MANDATORY, THE STOCK EX CHANGE HAD STARTED, AFTER TRADE HOURS, A 15 MINUTES SESSION CALLED POST-CLOSING SES SION IN WHICH THE BROKERS WERE ALLOWED TO ALTER THE CLIENT ID. 3.1 THE AO ELABORATELY CONSIDERED THE PROVISIONS OF SECTION 158BB, WHICH DEFINES UNDISCLOSED INCOME AND OBSERVED THAT SAME INCLUDES ANY INCOME BASED ON ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACT IONS WHERE SUCH ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS REPRESEN TED WHOLLY OR PARTLY INCOME OR PROPERTY, WHICH HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSES OF THIS ACT. HE POINTED OUT THAT THE STATEMENTS RECORDE D IN THE BOOKS OF ACCOUNT, IN THE FORM OF TRANSACTION, DO NOT ALONE CONSTITUTE SUFFICIENT EVI DENCE TO PROVE THAT THE TRANSACTIONS ARE DISCLOSED UNLESS THE INCOME EMBEDDED IN THE SAID TR ANSACTION IS ALSO DISCLOSED. 3.2 THE AO FURTHER OBSERVED THAT THE WORD EVIDEN CE IS DERIVED FROM LATIN WORD EVIDENS OR EVIDERE, WHICH MEANS TO SHOW CLEARLY, TO MAKE CLEAR TO THE SIDE, TO DISCOVER CLEARLY, TO MAKE PLAINLY CERTAIN, TO ASCERTAIN, TO PROVE. ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 6 3.3 AFTER CONSIDERING THE MEANING OF TERM DISCLOSE D AND EVIDENCE IN THE CONTEXT OF SECTION 158BB, HE POINTED OUT THAT MERE ENTRY IN TH E BOOKS OF ACCOUNT IS NOT SUFFICIENT AND IF IN COURSE OF SEARCH, EVIDENCE IS FOUND, WHIC H, ON THE BASIS OF ENQUIRIES, ESTABLISHES THE OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO MAKE FULL AND TRUE DISCLOSURE OF INCOME IN SUCH ENTRIES, THEN IT WILL TANTAMOUNT TO LACK OF DISCLOSURE. 3.4 THE AO POINTED OUT THAT THE QUESTION OF BENAMI TRANSACTION, THE NATURE OF TRADING AND LIKE MATTERS MAY NOT APPEAR EVEN FROM THE EVIDE NCES FOUND AT THE TIME OF THE SEARCH BUT IT IS A QUESTION OF INTERPRETATION OF THE EVIDE NCES AND IF THE AO IS ABLE TO FIND OUT WHAT IS EMBEDDED IN THAT EVIDENCE, WHICH ASSESSEE SHOULD HAVE UNCOVERED BUT DOES NOT, WILL, ALSO TANTAMOUNT TO UN-DISCLOSURE. THUS, IN SUM AND SUBSTANCE, THE AO OBSERVED THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS WHEN THE AO, O N THE BASIS OF EVIDENCE FOUND AND ENQUIRIES MADE, FINDS OUT THE REAL NATURE OF TRANSA CTION AND FINDS THAT THE SAME HAD NOT BEEN RECORDED IN BOOKS, THEN IT FALLS WITHIN THE D EFINITION OF UNDISCLOSED INCOME. 3.5 AFTER ELABORATELY CONSIDERING THE VARIOUS PROVI SIONS OF THE ACT, AS NOTED ABOVE, THE AO PROCEEDED TO EXAMINE THE FACTUAL ASPECT OF T HE MATTER IN ORDER TO QUANTIFY THE UNDISCLOSED INCOME. A NOTICE DATED 24.7.2003 FOR THIS PURPOSE WAS ISSUED TO THE ASSESSEE TO FURNISH THE FOLLOWINGS FOR F.YS. 1998-9 9, 1999-2000 AND 1.4.2000 TO 23.3.2001: I) IDENTIFICATION OF TRANSACTIONS WHERE CLIENT ID MIS-MATCHES CAN BE READILY EXPLAINED. FOR EXAMPLE, IF THE CLIENT ID FOR RELIA NCE LTD., IS R 01 AND THE STOCK EXCHANGE RECORDS SHOWS EITHER R OR REL OR REL IANCE LTD, WHICH CAN BE RELATED TO THE CLIENT. II) IDENTIFICATION OF TRANSACTIONS WHERE THERE IS A CLI ENT ID MIS-MATCH, AND THE TRANSACTIONS HAVE BEEN SQUARED UP DURING THE SAME S ETTLEMENT. ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 7 III) IDENTIFICATION OF TRANSACTION WHERE THERE IS CLIENT ID MIS-MATCH BUT CONFIRMATIONS FROM THE CLIENTS AS APPEARING IN YOUR BOOKS ARE AVAILABLE FOR THE SAID TRANSACTIONS. IV) IDENTIFICATION OF TRANSACTION WHERE THERE IS A CLIE NT ID MIS-MATCH AND CONFIRMATIONS ARE NOT AVAILABLE BUT DELIVERY OF SHA RES TO THE CLIENT OR FROM THE CLIENT AND PAYMENT OF MONEY RECEIVED FROM CLIEN T OR MADE TO THE CLIENT CAN BE PROVEN 3.6 AO OBSERVED THAT NO DETAILS WERE FURNISHED AS PER THE DETAILS REQUIRED IN THE AFORESAID NOTICE. THEREFORE, AGAIN NOTICE WAS ISSUE D ON 12.9.2003 AND THE ASSESSEE WAS REQUIRED TO EXPLAIN AS TO WHY THEIR UNDISCLOSED INC OME SHOULD NOT BE COMPUTED ON THE BASIS OF DETAILS AVAILABLE ON RECORD REGARDING MISM ATCH OF CLIENT ID CODE. THE ASSESSEE IN ITS REPLY, INTER-ALIA , ACCEPTED IN PRINCIPLE THAT THERE WAS CLIENT ID MI SMATCH AND, THEREFORE, FURNISHED THE NECESSARY CONFIRMATIONS. IT WAS POINTED OUT THAT WHEREVER CONFIRMATIONS WERE NOT AVAILABLE, CIRCUMSTANTIAL EV IDENCES IN THE FORM OF AGREEMENT WITH CLIENTS, ACKNOWLEDGEMENT OF CONTRACTS, RECEIPT/GIVI NG OF DELIVERY OF SHARES AND RECEIPT/PAYMENT OF MONEY WERE FURNISHED TO ESTABLI SH THAT CLIENTS WERE EXISTING AND THE TRADES BELONG TO THEM. THE ASSESSEE HAD ALSO FURNI SHED A LIST OF CLIENTS IN RESPECT OF WHOM CONFIRMATIONS COULD NOT BE FURNISHED BUT LEDGE R ACCOUNTS AND OTHER CIRCUMSTANTIAL EVIDENCES WERE FURNISHED. 3.7 THE AO EXAMINED THE MODUS OPERANDI WITH REFEREN CE TO VARIOUS CIRCULARS ISSUED BY SEBI AND AFTER CONSIDERING THE DETAILED GUIDELIN ES CONCLUDED THAT THE ASSESSEES EXPLANATION THAT PUNCHING OF NAME WAS NOT MANDATORY IN THE GIVEN PERIOD, WAS NOT CORRECT BECAUSE IT WAS NECESSARY TO HAVE THE SAME N AME AND CLIENT ID ENTERED IN HIS SAUDA ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 8 BOOK AND OTHER PRIMARY DOCUMENTS ALONGWITH CONTRACT NOTES, WRITTEN CONSENT OF CLIENTS IN RESPECT OF CONTRACTS ENTERED AS PRINCIPAL ETC. 3.8 THE AO ALSO CONSIDERED THE JOINT PARLIAMENTARY COMMITTEES REPORT, WHICH INVESTIGATED THE STOCK MARKET SCAM AND MATTER RELAT ING THERETO, WHICH WAS PUBLISHED ON DECEMBER 12, 2002 I.E. PRIOR TO THE DATE OF SEARCH. HE POINTED OUT THAT IT IS A PUBLIC RECORD AND THE JPC HAD, INTER ALIA, CONCLUDED THAT THERE WERE LARGE SCALE MANIPULATIONS LIKE THE DIVERSIONS OF THE FUNDS, FRAUDULENT USE OF BANK FUNDS, USE OF PUBLIC FUNDS, VIOLATION OF RULES FORMED ON THE STOCK EXCHANGES AN D BANKS AND USE OF FUNDS COMING THROUGH OVERSEAS CORPORATE BODIES TO TRANSFER STOCK HOLDINGS AND STOCK MARKET PROFITS OUT OF THE COUNTRY. THE AO HAS ELABORATELY CONSIDERED THE JPC REPORT FROM WHICH, FOLLOWING POINTS EMERGE:- I) KETAN PAREKH, BY INDULGING IN VARIOUS MANIPULATI ONS, CREATED VARIOUS LAYERS SO THAT IT BECAME DIFFICULT TO LINK THE SOUR CE OF FUNDS WITH THE ACTUAL USERS TO WHICH THESE FUNDS WERE PUT. II) IN THE JPC REPORT, IT WAS POINTED OUT THAT FUND S RECEIVED FROM CORPORATE HOUSES AND BANKS WERE UTILIZED BY KETAN PAREKH ENTI TIES IN CAPITAL MARKET OPERATION. III) KETAN PAREKH HAD ALSO CONCEDED BEFORE THE JPC THAT THE TRADES IN RELATION TO ADANI EXPORTS , WHEREIN, CIRCULAR TRADE HAD BE EN RESORTED BELONGED TO HIS ENTITIES THOUGH HE POINTED OUT THAT CIRCULAR TR ADE HAD NOT BEEN DEFINED BY SEBI OR ANY OTHER MARKET REGULATORS. 3.9 THE AO OBSERVED THAT IN THE COURSE OF ASSESSME NT, IT WAS NOTICED THAT ASSESSEES TRANSACTIONS RECORDED IN BOOKS WERE MAIN LY IN THOSE SCRIPS, WHEREIN, CLIENT ID MISMATCH WAS NOTICED. ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 9 3.10 THE AO FURTHER POINTED OUT THAT THE ASSESSEE H AD NOT FILED CONFIRMATIONS OF PARTIES IN RESPECT OF CLIENTS WHERE CLIENT ID MISMATCH WAS NOTICED. HE FURTHER POINTED OUT THAT SIMILAR DISCREPANCY WAS NOTICED IN THE CASE OF M/S. N.H. SECURITIES LTD., AND M/S. CLASSIC SHARE AND STOCK BROKING SERVICES LTD., WHERE A REQU EST WAS MADE TO ISSUE SUMMONS U/S.131 TO PARTIES, WHO WERE NOT PROVIDING CONFIRMA TIONS BUT NO SUCH REQUEST WAS MADE IN THE CASE OF THE ASSESSEE. HE FURTHER NOTED THAT TH E ASSESSEE WAS ALSO ENGAGED IN THE PROPRIETORY TRADE IN ADDITION TO THE SHARE BROKING ACTIVITIES. THE AO DID NOT ACCEPT THE ASSESSEES CONTENTION THAT THE CIRCUMSTANTIAL EVIDE NCE IS TO BE ACCEPTED. HE POINTED OUT THAT THE BURDEN TO PROVE IS ON THE ASSESSEE WHICH H E FAILED TO DISCHARGE. 3.11 ON THE BASIS AFOREMENTIONED DISCUSSION, THE A O COMPUTED THE UNDISCLOSED INCOME OF THE ASSESSEE IN PARA 13 OF HIS ORDER AS U NDER: A.Y. 2000-2001 A) PROFIT FROM SPECULATION RS.77,88,23,123/- B) UNEXPLAINED INVESTMENTS U/S.69 RS.78,67,98,9 88/- C) PROFIT ON DELIVERY BASED TRANSACTIONS RS.14,0 2,21,226/- PREVIOUS YEAR 1.4.2000 TO 23.3.2001 A) UNEXPLAINED INVESTMENT U/S.69 RS.2,73,83,79,3 46/- TOTAL UNDISCLOSED INCOME RS.4,44,42,22,683/- ROUNDED OFF TO RS.4,44,42,22,680/- 4. BEFORE LD CIT (A), THE FIRST ISSUE RAISED BY THE ASSESSEE WAS WHETHER THE AOS ACTION IN BRINGING THE IMPUGNED ADDITIONS WITHIN T HE PURVIEW OF BLOCK ASSESSMENT UNDER CHAPTER XIV-B WAS IN ACCORDANCE WITH LAW OR NOT? ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 10 5. LD CIT (A) CONCURRED WITH THE FINDINGS OF THE A O THAT IT IS NOT ENOUGH THAT ENTRIES IN THE BOOKS OR THE EXPENSES AS PER THE BOO KS ARE DISCLOSED BUT WHAT IS MATERIAL IS THAT THE TRUE IMPORT OF SUCH ENTRIES OR SUCH EXPENS ES HAVING BEARING ON THE INCOME SHOULD HAVE BEEN DISCLOSED FOR THE PURPOSES OF THE ACT AND IF IT IS NOT SO THEN THE SAME WOULD BE UNDISCLOSED FOR THE PURPOSE OF CHAPTER XIV-B PROVID ED OF COURSE THAT SUCH OCCURRENCE WAS AS A RESULT OF SEARCH. HE ALSO CONCURRED WITH THE FINDINGS OF THE AO THAT IN CASE OF TRANSACTIONS LIKE BENAMI TRANSACTIONS, THE EVIDENCE AND MATERIAL FOUND DURING THE SEARCH MAY NOT APPARENTLY INDICATE ANYTHING IRREGULAR BUT INTERPRETING SUCH MATERIAL AND EVIDENCES IN HARMONIOUS FASHION IN CONJUNCTION WITH THE TOTALITY OF MATERIAL FOUND MAY SHOW ITS TRUE IMPORT THAT INCOME RELATING TO THE SA ME WAS NOT DISCLOSED AND THAT WOULD BE COVERED WITHIN THE AMBIT OF CHAPTER XIV-B. THUS, H E HELD THAT ON THE BASIS OF EVIDENCE AND MATERIAL FOUND DURING THE COURSE OF SEARCH OR T HE FOLLOW UP ENQUIRIES, IF IT IS FOUND THAT REAL NATURE OF TRANSACTION WAS NOT DISCLOSED, EVEN THOUGH ENTRY PER SE HAD BEEN DISCLOSED, THE INCOME IMPLICATION RELATING TO THE S AME WOULD BE PART OF UNDISCLOSED INCOME UNDER CHAPTER XIV-B. 6. LD CIT (A) REFERRED TO CBDT CIRCULAR NO.2002 DAT ED 27.8.2002, WHEREIN, IT IS CLARIFIED AS UNDER:- * THE INTENTION OF THE UNDERLYING PROVISION IS TO T AX ENTIRE UNDISCLOSED INCOME INCLUDING INCOME WHICH HAS BEEN SUPPRESSED W HILE MAKING FALSE CLAIM OF EXPENSES OR DEDUCTION WHICH HAS BEEN DISCO VERED AS A RESULT OF SEARCH OPERATION. ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 11 * UNDISCLOSED INCOME DISCOVERED AS A RESULT OF SEAR CH IS TO BE INCLUDED IN THE BLOCK ASSESSMENT AS LONG AS SUCH INCOME HAS BEE N DETECTED AS A RESULT OF EVIDENCE GATHERED DURING THE SEARCH WHICH NOT ON LY INCLUDES INCOME WHICH IS DIRECTLY EVIDENCED BY MATERIAL FOUND DURIN G THE SEARCH BUT ALSO INCLUDES INCOME WHICH HAS BEEN DISCLOSED ON THE BAS IS OF POST SEARCH INQUIRY, CONNECTED MATERIAL COLLECTED/AVAILABLE WIT H OTHER INVESTIGATING AGENCIES RELATABLE TO SOMETHING DETECTED/GATHERED/C OLLECTED/INFERRED DURING THE SEARCH OPERATIONS. * THE UNDISCLOSED INCOME U/S.158B(B) IS INCLUSIVE O NE, WHOSE AMBIT IS NOT LIMITED EXPLICITLY TO THE MENTIONED ITEMS BUT THE S AME WOULD ENCOMPASS WITHIN IT ALL WHICH IS AKIN TO THE INCOME DISCOVERE D AS A RESULT OF SEARCH AND RELATED MATERIAL GATHERED/COLLECTED/AVAILABLE T O THE AO. 7. LD CIT (A) CONSIDERED THE DEFINITION OF INCOME U /S.2 (24) WITH REFERENCE TO VARIOUS CASE LAWS AND OBSERVED THAT IT HAS BEEN HEL D THAT THE DEFINITION IS INCLUSIVE DEFINITION SO THAT THE MEANING IS NOT LIMITED BUT W IDENS ITS NET. THE WORD INCOME IS OF WIDEST AMPLITUDE AND IT MUST BE GIVEN ITS NATURAL A ND GRAMMATICAL MEANING. DRAWING PARITY WITH THE DEFINITION OF INCOME, LD CIT (A) OBSERVED THAT SINCE THE DEFINITION OF UNDISCLOSED INCOME IS ALSO INCLUSIVE, THE CONCEPT L AID DOWN IN VARIOUS CASE LAWS WILL APPLY MUTATIS-MUTANDIS . THEREFORE, THE INCOME, WHICH WOULD NOT HAVE COME TO THE NOTICE OF THE DEPARTMENT BUT FOR THE SEARCH, SHOULD BE INC LUDED AS UNDISCLOSED INCOME OF THE BLOCK PERIOD. LD CIT (A) EXAMINED THE INGREDIENTS OF UNDISCLOSED INCOME AND OBSERVED THAT IN THE FIRST CATEGORY, REFERENCE TO DISCLOSURE IS NOT TO THE ENTIRE TRANSACTION/ENTRY BUT TO THE INCOME OR PROPERTY WHICH HAD BEEN EMBEDDED T HEREIN. HE POINTED OUT THAT LEGISLATURE HAS NOT RESTRICTED THE DETERMINATION OF UNDISCLOSED INCOME TO THE ENTRIES BUT HAS INCLUDED THE TRANSACTION ALSO. EVEN IF ANY ENT RY IS NOT INDICATIVE OF UNDISCLOSED ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 12 INCOME, THE ENTIRE TRANSACTION WHICH WOULD COMPLETE THOSE ENTRIES IN A LOGICAL MANNER HAS TO BE CONSIDERED SO AS TO DETERMINE THE UNDISCLOSED INCOME. HE POINTED OUT THAT THE UNDISCLOSED INCOME IS NOT LIMITED TO POSITIVE EVIDE NCE GATHERED DURING SEARCH BUT SHALL INCLUDE THE ISSUES EMANATING THEREFROM. HE OBSERVE D THAT ONCE IT WAS ESTABLISHED THAT THE RELEVANT INFORMATION WAS EMANATING AS A RESULT OF S EARCH, WHETHER IT IS RECORDED IN THE REGULAR BOOKS OF ACCOUNT OR OTHERWISE, LEADING TO D ETECTION OF INCOME, IT BECOMES PART AND PARCEL OF THE UNDISCLOSED INCOME. KEEPING IN VIEW THE ABOVE INTERPRETATION, HE OBSERVED THAT THE AO FOUND DURING THE COURSE OF SEA RCH LOT OF CASES WHERE THE CLIENT ID SHOWN BY THE ASSESSEE IN ITS OWN RECORD WAS AT VARI ANCE WITH THOSE SHOWN IN THE STOCK EXCHANGE RECORD. HE FURTHER POINTED OUT THAT THE A SSESSEE GROUP AND CERTAIN OTHER ENTITIES WERE JOINTLY INVESTIGATED/RAIDED BY THE INCOME TAX DEPARTMENT AND MANY OTHER INVESTIGATING AGENCIES LIKE SEBI, CBI, ETC. IN THI S RELATED SEARCH ACTION, IT WAS, INTER ALIA, FOUND THAT THE ASSESSEE IN COLLABORATION AND CONNIV ANCE WITH CERTAIN BANKERS, FINANCIAL INSTITUTIONS AND OTHER FELLOW BROKERS WAS MANIPULAT ING SHARE MARKETS, PARTICULARLY THE SHARE PRICES OF SELECTED GROUP. HE ALSO REFERRED T O JPC REPORT IN THIS REGARD. LD CIT (A), INTER ALIA, FINALLY CONCLUDED AS UNDER: IT MAY ALSO BE NOTED THAT THE MATERIAL FACT IS NOT THE REAL NOTICING OF THE CLIENT MISMATCH BUT THE UNDERSTANDING OF THE IMPLIC ATION OF THE SAME VIEWED IN THE PROSPECTIVE OF TOTALITY OF THE SITUAT ION MEANING THEREBY THE OTHER CIRCUMSTANTIAL RELATABLE FACTS/EVIDENCE AVAIL ABLE TO THE AO IN VIEW OF SOME OF THE FINDINGS OF THE GLOBAL INVESTIGATION /SEARCHES CARRIED OUT BY MULTIPLE INVESTIGATING AGENCIES INCLUDING THE INCOM E TAX DEPARTMENT AS NARRATED EARLIER. IT IS NEEDLESS TO MENTION THAT T HIS UNDERSTANDING OF THE INCOME IMPLICATION RELATING TO THE SAME HAS COME BE CAUSE OF THE SEARCH OPERATION AND THE RELATED FINDINGS AND EVIDENCES AS WAS DISCUSSED EARLIER AND SAME WAS NOT AVAILABLE TO THE AO BEFORE THE SEA RCH OPERATION. IN OTHERWORDS VIEWED IN TOTAL PROSPECTIVE WITH ALL REL ATABLE FACTS AS NARRATED EARLIER BUT FOR THE SEARCH OPERATION THIS IMPLICATI ON RELATING TO CLIENT ID MISMATCH WOULD HAVE NOT SEEN LIGHT OF THE DAY. VIE WED IN THAT PROSPECTIVE IT IS CONCLUDED THAT THE INCOME IMPLICATION ARISING OUT OF THE ABOVE ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 13 RELATING TO THIS UNEXPLAINED INVESTMENT AND THE REL ATED PROFITS IN ABSENCE OF CONFIRMATIONS HAS TO BE INTRINSICALLY LINKED TO THE SEARCH OPERATION AND WOULD NOT HAVE SEEN LIGHT OF THE DAY BUT FOR THE SA ME. CONSEQUENTLY I AM OF THE CONSIDERED OPINION THAT THE SAME HAS TO BE T AXED UNDER THE BLOCK ASSESSMENT. COMING TO THE QUANTUM ASPECT OF THE ADDITIONS, RELA TING TO UNEXPLAINED PURCHASES AND PROFIT ON BOTH DELIVERY BASED AND SPECULATIVE T RANSACTIONS, DURING THE COURSE OF APPELLATE PROCEEDINGS THE APPELLANT WAS ASKED IN SPECIFIC TO FURNISH THE DETAILS OF TURNOVER (BOTH DELIVERY BASED AND SPECULATIVE) A S ALSO THE PROFIT ARISING OUT OF DELIVERY BASED AS WELL AS SPECULATIVE TRANSACTIONS. APART FROM THE SAME, THE APPELLANT WAS ASKED TO PROVIDE CLIENT WISE CONFIRMA TION IN RESPECT OF DELIVERY BASED TRANSACTIONS AND IN CASE OF PROFIT IN DELIVER Y BASED/SPECULATIVE TRANSACTIONS AND WAS ALSO ASKED TO PRODUCE THE CONFIRMATIONS FRO M THE RESPECTIVE CLIENTS. EXCEPTING FOR PRODUCING SOME SKETCHY DETAILS ON THE TURNOVER WHICH IT HAD PROCURED FROM THE STOCK EXCHANGE NO FURTHER DETAIL OR CONFIRMATIONS AS ASKED FOR COULD BE PRODUCED. IN FACT THE TURNOVER COULD NOT BE RECONCILED WITH THE BOOK FIGURE. CONSEQUENTLY THERE IS NO OTHER OPTION BUT TO SUSTAIN THE ORDER OF THE AO ON THE ISSUE. THE APPELLANTS PLEA AS PER GROUNDS OF APPEAL NO.2 & 3 ARE REJECTED. AGGRIEVED, THE ASSESSEE HAS TAKEN THE FOLLOWING GRO UNDS OF APPEAL:- 1. THE CIT (A) ERRED IN UPHOLDING THE VALIDITY OF THE ORDER OF THE DCIT IN FRAMING THE ORDER UNDER SECTION 158BC WITHOUT PROPE R JURISDICTION INASMUCH AS THE NOTICE ISSUED UNDER SECTION 158BC INITIATING TH E PROVISIONS UNDER CHAPTER XIV-B IS VOID AND SUFFERS FROM INCURABLE DEFECTS AN D HENCE, ILLEGAL, THEREBY RENDERING THE ENTIRE PROCEEDINGS UNDER CHAPTER XIV- B OF THE ACT NULL AND VOID. 2. THE CIT (A) ERRED IN UPHOLDING THE ACTION OF THE AO IN INVOKING THE PROVISIONS OF SECTION 142(2A) OF THE ACT. 3. THE CIT (A) ERRED IN UPHOLDING THE ACTION OF THE AO IN CONSIDERING (A) A SUM OF RS.352,51,78,334 BEING PURCHASE VALUE OF TRANSAC TIONS OF CLIENTS BACKED BY DELIVERY IN RESPECT OF WHICH CONFIRMATIONS COULD NO T BE FURNISHED AND (B) A SUM OF RS.14,02,21,226 BEING DIFFERENCE BETWEEN SALES AND PURCHASE VALUE OF TRANSACTIONS BACKED BY DELIVERY IN RESPECT OF WHICH CONFIRMATIONS COULD NOT BE FURNISHED, AS UNDISCLOSED INCOME, ON THE BASIS OF T HE APPELLANTS HAVE FAILED TO EXPLAIN SATISFACTORILY THE REAL NATURE OF SUCH CLIE NT ID MISMATCH ENTRIES. 4. THE CIT (A) ERRED IN UPHOLDING THE ACTION OF THE AO IN CONSIDERING A SUM OF RS,.77,88,23,123 BEING THE DIFFERENCE BETWEEN SALES AND PURCHASES ON SPECULATIVE ACCOUNT OF CLIENTS IN RESPECT OF WHOM CONFIRMATIONS COULD NOT BE FURNISHED, AS UNDISCLOSED INCOME ON THE BASIS THAT THE APPELLANTS HAVE FAILED TO EXPLAIN SATISFACTORILY THE REAL NATURE OF SUCH CLIENT ID MI SMATCH ENTRIES. ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 14 5. THE CIT (A) ERRED IN UPHOLDING THE ACTION OF TH E AO IN LEVYING SURCHARGE OF RS.34,66,49,369/- BEING 13% OF INCOME TAX OF RS.266 ,65,33,609. 6. THE CIT (A) ERRED IN UPHOLDING THE ACTION OF THE AO IN CHARGING INTEREST OF RS.3,76,64,787 UNDER SECTION 158BFA OF THE ACT. 8. SHRI A.V.SONDE, LD COUNSEL FOR THE ASSESSEE, AT THE OUTSET, DID NOT PRESS GROUND NOS.1 & 2, THEREFORE, THE SAME ARE DISMISSED AS NOT PRESSED. 9. WITH REGARD TO GROUND NO.3, LD COUNSEL FOR THE A SSESSEE NARRATED THE FACTS OF THE CASE AND POINTED OUT THAT THE SEARCH IN THE CASE O F THE ASSESSEE WAS CARRIED OUT ON 23.3.2001. HE SUBMITTED THAT THE ADDITIONS MADE IN THE BLOCK ASSESSMENT FOR A.Y. 2000- 2001 AND PREVIOUS YEAR FROM 1.4.2001 TO 23.3.2001 W ERE MADE IN THE BLOCK ASSESSMENT AND SIMILAR ADDITIONS WERE MADE FOR A.Y. 1999-2000 IN THE REGULAR ASSESSMENT. HE POINTED OUT THAT THE AO HAS MADE THREE TYPES OF ADD ITIONS. FIRSTLY, U/S.69 AS UNEXPLAINED INVESTMENT, SECONDLY, PROFIT ON SPECULATION AND THI RDLY, PROFIT ON DELIVERY BASED TRANSACTION. HE POINTED OUT THAT IN THE COURSE OF SEARCH ONLY 12 CD ROMS WERE SEIZED WHICH ARE MENTIONED IN THE REGULAR BOOKS OF ACCOUNT AND DETAILS OF TRANSACTION RECORDED IN THE REGULAR COURSE OF BUSINESS. HE POINTED OUT THAT THE ASSESSEE IS A STOCK BROKER ONLY. LD COUNSEL POINTED OUT THAT NO TRANSACTIONS WERE UN DERTAKEN AT NATIONAL STOCK EXCHANGE SINCE THE ASSESSEE WAS ONLY THE BROKER OF BOMBAY ST OCK EXCHANGE. LD COUNSEL SUBMITTED THAT AO IN PARA 12.2 HAS OBSERVED ON THE BASIS OF THE DATA AND ON THE BASIS OF FURTHE R EVIDENCE GATHERED. HE SUBMITTED THAT IT IS NOT CORRECT BECAUSE APART FROM 12 CDS, NO FURTHER EVIDENCE WAS FOUND AT THE TIME OF SEARCH. H E FURTHER SUBMITTED THAT THERE IS NO DISPUTE REGARDING MISMATCH BETWEEN THE CLIENT ID AS PER ASSESSEES BOOK VIS--VIS STOCK EXCHANGE. HE SUBMITTED THAT THE MAIN ISSUE TO BE DECIDED IN THE PRESENT APPEAL IS WHAT IS ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 15 THE ACTUAL CONSEQUENCE OF THIS MISMATCH. HE POINTE D OUT THAT THE CLIENT CODE MISMATCH HAD ACTUALLY PROMPTED THE ENQUIRY. LD COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT CONFIRMATIONS WERE REQUIRED BY SPECIAL AUDITORS U/S .142(2A) AND THE ASSESSEE PRODUCED THE CONFIRMATIONS IN ABOUT 98% OF THE CASE. LD CO UNSEL SUBMITTED THAT IN 12 CDS TRADING DATA FOR F.Y. 1999-2000 AND 2000-2001 AND F URTHER FOR F.Y. 1.3.2001 TO 23.3.2001 WAS FOUND THE AO HAS MADE REGULAR ASSESS MENT FOR A.Y. 2000-20001 BUT RESORTED TO THE BLOCK ASSESSMENT FOR A.Y. 2001-02 A ND A.Y. 2002-03 (PART). LD COUNSEL FURTHER POINTED OUT THAT WHEREVER CONFIRMATIONS WER E PRODUCED, NO ADDITIONS WERE MADE. THUS, IN CASE, THERE WAS CLIENT MISMATCH + LACK OF CONFIRMATION THEN ONLY ADDITIONS WERE MADE. HE SUBMITTED THAT IN THOSE CASES WHERE CONFI RMATIONS COULD NOT BE OBTAINED, THE ASSESSEE PRODUCED CIRCUMSTANTIAL EVIDENCE IN THE FO RM OF AGREEMENT, RECEIPT/GIVING OF DELIVERY OF SHARES AND RECEIPT/PAYMENT OF MONEY, BA NK STATEMENT SHOWING CLIENT NAME, WHICH WERE NOT ACCEPTED BY THE AO. 10. LD COUNSEL FOR THE ASSESSEE POINTED OUT THAT TH E AO HAS PROCEEDED ON PRESUMPTION THAT PUNCHING OF CLIENT ID WAS OBLIGATO RY IN THE RELEVANT FINANCIAL YEAR. HOWEVER, PUNCHING OF CLIENT CODE AS PER SEBI HAD BE COME OBLIGATORY ONLY FROM AUGUST 2001 ONWARDS. IN THIS REGARD, HE REFERRED TO PAGE 63 OF PB, WHEREIN, THE MODUS OPERANDI OF SCREEN BASED TRADE SYSTEM OF BSE AND EXPLANATION FOR THE SO CALLED MISMATCH OF THE CLIENT CODES AS PER THE ASSESSEES BOOKS AND THOSE AS PER THE BSES RECORD IS CONTAINED. LD COUNSEL REFERRED TO PAGE 66 OF PB TO POINT OUT T HAT IT WAS ONLY W.E.F. 1.8.2001, THE USE OF UNIQUE CLIENT CODE WAS MADE MANDATORY BY THE SEB I. IN THIS REGARD, LD COUNSEL REFERRED TO SEBI CIRCULAR NO. SMDRP/POLICY/CIR.39/2 001 DATED 18 TH JULY, 2001 AND NSE ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 16 CIRCULAR NO.NSE/CMO/0022/2001 DATED 24 TH JULY, 2001, WHEREIN, IT WAS, INTER ALIA, NOTED THAT THE ABOVE REQUIREMENT SHALL BE APPLICABLE FOR CLIEN TS HAVING ORDER VALUE OF RS.1 LAKH OR MORE AND SHALL BE ENFORCED W.E.F. AUGUST -1 , 2001. HE POINTED OUT THAT AT THE RELEVANT TIME, THE ASSESSEE ASSIGNED PARTICULAR CLI ENT ID AND REPORTED TO BSE BUT MENTIONING OF THE CLIENT ID WAS NOT COMPULSORY DURI NG THE RELEVANT ASSESSMENT YEAR, THEREFORE, IT COULD NOT BE THE BASIS OF ADDITION. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE REFERRED TO PARA 12.14 OF THE ASSESSMENT ORDER AND POINTED OUT THAT THE AO HAS OBSERVED THAT THE AUDITORS POINTED OUT THE MISMATCHES PERTAI NING TO NAME OF THE CLIENT, QUANTITY OF SHARES AND RATE OF SHARES WHEREAS THE MISMATCH WAS ONLY WITH REGARD TO IDENTIFICATION OF THE PARTIES. HE REFERRED TO PAGE 3 OF THE ASSESSME NT ORDER AND POINTED OUT THAT THE AO HAS OBSERVED THAT THE RECONCILIATION OF CLIENT ID CODE COULD NOT BE MADE. HE FURTHER REFERRED TO PAGE 21 OF THE ASSESSMENT ORDER TO POINT OUT THA T IT WAS AT THE INSTANCE OF AUDITORS THAT THE CONFIRMATIONS WERE FILED BUT THE AO SAYS THAT T HE ASSESSEE UNDERTOOK THE EXERCISE OF FILING THE CONFIRMATION LETTERS BASED ON LEDGER ACC OUNT OF THE ASSESSEE. HE REFERRED TO PARA 12.17 OF THE ASSESSMENT ORDER AND POINTED OUT THAT IN THE STOCK EXCHANGE RECORDS, NOTHING WAS BEYOND THE BOOKS. LD COUNSEL SUBMITTED THAT FOR FINDING OUT THE REAL TRANSACTION, CIRCUMSTANTIAL EVIDENCE SHOULD ALSO HA VE BEEN CONSIDERED. 11. AS REGARDS THE QUANTIFICATION OF PROFIT, LD. C OUNSEL SUBMITTED THAT THE AO IGNORED THE SPECULATION LOSS BUT TOOK INTO CONSIDER ATION THE SPECULATION PROFIT FOR WHICH, THERE IS NO BASIS. LD COUNSEL SUBMITTED THAT THE B ASIS OF ADDITION IS CONTAINED FROM PAGES 76 TO 91 OF PB, WHICH PRIMARILY CONTAIN THE FOLLOWI NG LISTS: BALANCE DELIVERY BASED TRANSACTIONS OF THE CLIENTS IN RESPECT OF WHICH ADDITION HAS BEEN MADE. ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 17 A) LIST OF THE CLIENTS WHOSE CONFIRMATIONS WERE NOT AV AILABLE TILL THE ASSESSMENT AND FOR WHICH THE ADDITION OF RS.162.95 CRORES MADE IN THE ORDER.(AY 2000- 01) B) LIST OF THE CLIENTS WHOSE CONFIRMATIONS WERE NOT AV AILABLE TILL THE ASSESSMENT AND FOR WHICH THE ADDITION OF RS.230.84 CRORES MADE IN THE ORDER.(AY 2001- 02) C) LIST OF THE CLIENTS WHOSE CONFIRMATIONS WERE FILED BUT PAN NOT AVAILABLE TILL THE ASSESSMENT AND FOR WHICH THE ADDITION OF RS.7.6 4 CROES MADE IN THE ORDER. D) LIST OF THE CLIENTS WHOSE CONFIRMATIONS WERE FILED BUT PAN NOT AVAILABLE TILL THE ASSESSMENT AND FOR WHICH THE ADDITION OF RS.42. 99 CROES MADE IN THE ORDER. LD COUNSEL POINTED OUT THAT IT IS AN UNDISPUTED FAC T THAT ALL THE TRANSACTIONS HAVE BEEN EXECUTED ON BSE AND THUS, THE AMOUNT HAD BEEN PAID/ RECEIVED FROM BSE AND, THEREFORE, THERE CAN NOT BE ANY QUESTION REGARDING IDENTITY OF THE PARTY FROM WHOM THE AMOUNTS HAVE BEEN RECEIVED. 12. WITH REFERENCE TO ABOVE FACTUAL POSITION, LD CO UNSEL FOR THE ASSESSEE ADVANCED HIS LEGAL PROPOSITION WHICH ARE AS UNDER:- I) THERE WAS SEIZURE OF OFFICIAL BOOKS OF ACCOUNT O NLY IN SEARCH. THE AO SAYS FURTHER MATERIAL BUT NO WHERE THE AO HAS REL IED ON ANY OTHER MATERIAL. IN ORDER TO BUTTRACE HIS ARGUMENTS, LD COUNSEL REF ERRED TO AOS ORDER PARA 12.01, 12.02, 12.16, 12.17 AND 12.19. ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 18 13. LD COUNSEL POINTED OUT THAT THE BASIS OF ADDITI ON IS BOOKS OF ACCOUNT ONLY ON THE GROUND OF MISMATCH OF CLIENT CODE. LD COUNSEL SUBM ITTED THAT UNDER THESE CIRCUMSTANCES, RESORT TO SECTION 158BC IS NOT JUSTI FIED BECAUSE OF THE FOLLOWING REASONS:- THE DEPARTMENT ITSELF IS OF VIEW THAT ADDITION CO ULD BE MADE IN REGULAR ASSESSMENT. 14. IN THIS REGARD, LD COUNSEL REFERRED TO ASSESSME NT ORDER U/S.143 (3) DATED 31.10.2002 (I.E. AFTER THE DATE OF SEARCH) FOR A.Y. 1999-2000 CONTAINED AT PAGE 295 OF PB. HE, THEREFORE, SUBMITTED THAT THE ADDITION SHOULD H AVE BEEN MADE IN REGULAR ASSESSMENT AND NOT IN BLOCK ASSESSMENT. IN SUPPORT OF HIS CON TENTION, LD COUNSEL RELIED ON THE FOLLOWING DECISIONS: A) CIT V. SHAMLAL BALRAM GURBANI, 249 ITR 501 (BOM ) B) CIT V. JUPITER BUILDERS (P)LTD., (2006) 287 ITR 287 (DEL) C) CIT V. VIKRAM A DOSHI AND OTHERS, 256 ITR 129(BO M) D) BHAGWATI PRASAD KEDIA V. CIT, 248 ITR 562 (C AL). E) CIT V. P.K.GANESHWAR, (2009) 308 ITR 124 (MAD) F) CIT V. N.M.ASSOCIATES, 256 ITR 141 (MAD) G) CIT V. RAVI KANT JAIN, 250 ITR 141 (DELHI ) H) SUNDER AGENCIES LTD V. DCIT, 63 ITD 245. 15. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO HAS NOT REJECTED THE BOOKS OF ACCOUNT AND THE SPECIAL AUDITORS ALSO SAY THAT THE ACCOUNTS REFLECT THE TRUE AND FAIR VIEW. ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 19 16. LD. COUNSEL POINTED OUT THAT DISCREPANCY MAY BE THERE BUT WHAT IS THE CONSEQUENCE OF THE SAME IS TO BE EXAMINED. IN THIS REGARD, HE RELIED ON THE DECISION OF ITAT DELHI BENCH IN THE CASE OF DANG & CO. (P) LTD V. DCIT, 94 ITD 29 (THIRD MEMBER) AND REPORTED IN 94 ITD 1. 17. LD. COUNSEL SUBMITTED THAT THE AO HIMSELF SAYS THAT THE ADDITION HAD BEEN MADE ON THE BASIS OF REGULAR BOOKS OF ACCOUNT. 18. THE SECOND PROPOSITION ADVANCED BY LD COUNSEL F OR THE ASSESSEE WAS WITH REFERENCE TO SCOPE OF SECTIONS 68 TO 69C. HE SUBMIT TED THAT NONE OF THE SECTIONS APPLY IN THE PRESENT CASE FOR THE REASON THAT SECTION 69 CAN NOT BE INVOKED IN SUCH CIRCUMSTANCES WHERE INVESTMENTS ARE RECORDED IN THE BOOKS OF ACCO UNT. HE POINTED OUT THAT ALL ARE DE- MAT ACCOUNTS AND, THEREFORE, THERE IS NO QUESTION O F NON-RECORDING OF THESE INVESTMENTS IN THE BOOKS OF ACCOUNT. IN THIS REGARD, LD COUNSEL R EFERRED TO PARA 12 OF THE DECISION DATED 20.6.2007 OF THE MUMBAI TRIBUNAL IN THE CASE OF ACI T V. NABHERAM HARAKCHAND (ITA NO.4286/M/2004) CONTAINED AT PAGES 121 TO 130 OF PB , WHEREIN, AGAINST THE APPEAL FILED BY THE REVENUE, THE TRIBUNAL UPHELD THE DECISION OF LD CIT (A) IN DELETING THE ADDITION MADE U/S.69 ON THE GROUND THAT TRANSACTIONS WERE RE FLECTED IN THE ACCOUNTS AND THE PAYMENTS WERE MADE FROM THE CASH AVAILABLE IN THE A CCOUNTS ITSELF. HE ALSO REFERRED TO PARA 23 OF THE SAID ORDER, WHEREIN, THE TRIBUNAL RE VERSED THE FINDINGS OF LD CIT (A) CONFIRMING THE ADDITION AS UNEXPLAINED INVESTMENTS OF LOAN ACCOUNTS AS THE LOANS WERE RECORDED IN THE BOOKS OF ACCOUNT. LD COUNSEL FOR T HE ASSESSEE THEREAFTER REFERRED TO THE DECISION DATED 18.10.2007 OF THE TRIBUNAL IN ACIT V. M/S. N.H. SECURITIES LTD IN IT(SS) ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 20 A NO.372/MUM/2004 FOR THE BLOCK PERIOD ENDED 23.3.2 001 CONTAINED AT PAGES 131 TO 135 OF PB, WHEREIN, THE TRIBUNAL IN PARA 6 HELD THAT ON CE THE TRANSACTION WAS RECORDED IN THE BOOKS OF ACCOUNT, SECTION 69 COULD NOT BE INVOKED. HE FURTHER REFERRED TO THE DECISION DATED 3.10.2007 OF THE MUMBAI TRIBUNAL IN THE CASE OF N.H. SECURITIES LTD V. DCIT IN ITA NO.3717/MUM/2004 FOR THE ASSESSMENT YEAR 1999-2 000 CONTAINED AT PAGES 147 TO 167 OF PB, WHEREIN, IN PARA 31, THE TRIBUNAL, INTER ALIA, OBSERVED AS UNDER:- BEFORE PARTING WITH THIS ORDER WE MAY MENTION HERE THAN THE AO HAS MADE THE ADDITION UNDER SECTION 69 OF THE INCOME TA X ACT WITHOUT APPRECIATING THE SCOPE OF THAT SECTION WHICH CLEARL Y PROVIDES THAT ADDITIONS CAN BE MADE ONLY IN CASE OF INVESTMENTS M ADE OUTSIDE THE BOOKS OF ACCOUNT WHICH ARE NOT RECORDED IN THE BOOKS OF A CCOUNT AND THE ASSESSEE OFFERS NO EXPLANATION OR OFFERS AN EXPLANA TION WHICH IN THE OPINION OF THE AO IS NOT SATISFACTORY 19. IN THE FINAL LEG OF HIS ARGUMENTS, LD COUNSEL S UBMITTED THAT IF AT ALL THE ADDITION IS TO BE MADE THEN THE ISSUE WOULD BE AS TO WHAT AMOUN T SHOULD BE ADDED. IN THIS REGARD, HE REFERRED TO PAGES 92 TO 98 OF PB, WHEREIN, THE LIST OF CLIENTS WHOSE CONFIRMATIONS HAVE BEEN OBTAINED SUBSEQUENT TO ADDITION MADE BY THE AO , IS CONTAINED. HE POINTED OUT THAT THESE CONFIRMATIONS WERE FILED BEFORE THE LD CIT(A) BUT HE HAS NOT AT ALL REFERRED TO THESE CONFIRMATIONS. LD COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT COLLATERAL EVIDENCES WERE FILED BEFORE THE AO. IN THIS REGARD, HE REFER RED TO CERTAIN EXAMPLES TO DEMONSTRATE THAT NAMES WERE APPEARING IN THE BANK STATEMENT AS THAT IN THE BOOKS OF ACCOUNT. HE REFERRED TO PAGE 76 OF PB, WHEREIN, THE LIST OF CLI ENTS WHOSE CONFIRMATIONS WERE NOT AVAILABLE TILL THE ASSESSMENT AND FOR WHICH ADDITIO N OF RS.162.95 CRORES HAS BEEN MADE IN THE ORDER. HE REFERRED TO SL NO.78 AT PAGE NO.78 O F PB, WHEREIN, THE NAME OF CLIENT IS DAKSHA P. MODI . HE POINTED OUT THAT IN THE BANK S TATEMENT OF GLOBAL TRUST BANK ON ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 21 9.9.1999, THE NAME OF DAKSHA P MODI SHOWING A DEBIT OF RS.2,008.38 IS APPEARING. THEREAFTER, LD COUNSEL FOR THE ASSESSEE REFERRED TO SL NO.15 OF PAGE 76 OF PB, WHEREIN, THE NAME OF CLIENT IS SUSHMA KAPUR AND POINTED OUT THAT THE AGREEMENT WITH THE PARTY ALONGWITH PHOTOGRAPH, PAN AND DECLARATION WAS FILED BEFORE THE AO. LD COUNSEL IN ORDER TO DEMONSTRATE THE FALLACIES IN THE ADDITI ONS MADE REFERRED TO FEW INSTANCES OF ADDITIONS MADE BY THE AO AS UNDER:- CASE. 1 ONLY PURCHASES MADE BY CLIENT SR.NO. NAME OF CLIENT BOUGHT SOLD SPECULATION TOTAL DELIVE RY NO. BROKERAGE SPECULATION DELIVERY TOTAL SPECU. DEL. T OTAL PROFIT TURNOVER PROFIT % 7. MADHU JAIN 1 3977 13977 0 13977 -13977 0.00 230 (1) IN THE ABOVE THE CLIENT HAS ONLY MADE PURCHASE TRANSACTION. (2) THE ASSESSEE HAS RECEIVED THE AMOUNT FROM CLIEN T AND HAS MADE THE PAYMENT TO BSE (3) THE AO HAS MADE THE FOLLOWING ADDITION UNEXPLAINED INVESTMENT 1 3977 DELIVERY PROFIT - 13977 TOT AL: 0 (4) SO THERE IS NO ADDITION MADE IN SUCH CASES. CASE II: ONLY SALES MADE BY CLIENT SR.NO. NAME OF CLIENT BOUGHT SOLD SPECULATION TOTAL DELIVE RY NO. BROKERAGE SPECULATION DELIVERY TOTAL SPECU. DEL. T OTAL PROFIT TURNOVER PROFIT % 15. SUSHMA KAPUR 58303513 58303513 0 58303513 58303513 0.06 87553 (1) IN THE ABOVE THE CLIENT HAS ONLY MADE SALE TRAN SATION (2) THE ASSESSEE HAS RECEIVED THE AMOUNT FROM BSE AND HAS MADE THE PAYMENT TO CLIENT (3) THE AO HAS MADE THE FOLLOWING ADDITION UNEXPLAINED INVESTMENT 0 DELIVERY PROFIT - 58303513 TOT AL: 58303513 (4) SO WHAT AO HAS ADDED IS ENTIRE SALE CONSIDERAT ION ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 22 CASE III ONLY SALES MADE BY CLIENT SR.NO. NAME OF CLIENT BOUGHT SOLD SPECULATION TOTAL DELIVE RY NO. BROKERAGE SPECULATION DELIVERY TOTAL SPECU. DEL. T OTAL PROFIT TURNOVER PROFIT % 16 ANIL DHARKER 446359 446359 275044 275044 0 721403 -171315 0.00 5016 446359 446359 275044 275044 0 721403 -171315 0.00 5016 (1) IN THE ABOVE CASE THE CLIENT HAS MADE PURCHASE AS WELL AS SALE TRANSACTION (2) THE ASSESSEE HAS RECEIVED THE AMOUNT FROM THE C LIENT TO PURCHASE AND HAS MADE THE PAYMENT TO CLIEN T AGAINST HIS SALE. (3) THE AO HAS MADE THE FOLLOWING ADDITION UNEXPLAINED INVESTMENT 446 359 DELIVERY PROFIT - 171315 TOT AL: 275044 (4) SO WHAT AO HAS MADE BOTH PURCHASES AND SALES W 2HERE SALE IS MORE THAN PURCHASES CASE IV: CLIENT HAS MADE BOTH PURCHASES AND SALES W HERE SALE IS MORE THAN PURCHASE SR.NO. NAME OF CLIENT BOUGHT SOLD SPECULATION TOTAL DELIVE RY NO. BROKERAGE SPECULATION DELIVERY TOTAL SPECU. DEL. T OTAL PROFIT TURNOVER PROFIT % 4. INVES.TRUST OF INDIA 14590 0 145900 29128458 29128458 0 2927 4358 28982558 0.03 151259 (1) IN THE ABOVE CASE THE CLIENT HAS MADE PURCHASE AS WELL AS SALE TRANSACTION (2) THE ASSESSEE HAS RECEIVED THE AMOUNT FROM THE C LIENT TO PURCHASE AND HAS MADE THE PAYMENT TO CLIEN T AGAINST HIS SALE. (3) THE AO HAS MADE THE FOLLOWING ADDITION UNEXPLAINED INVESTMENT 1459 00 DELIVERY PROFIT 28982558 TOT AL: 29128458 (4) SO WHAT AO HAS ACTUALLY ADDED IS ENTIRE SALE C ONSIDERATION. LD COUNSEL SUBMITTED THAT IF ALL THESE ASPECTS ARE CONSIDERED, THEN THE POSITION OF ADDITION WOULD BE AS UNDER: SR. NO . PARTICULARS PAGE NO. NO. OF CLIENTS DELIVERY PURCHASE S PROFIT/LOSS ON DELIVERY BASED TRAN. SPECUL ATION PROFIT TOTAL ADDITION S I) BALANCE DELIVERY BASED TRANSACTIONS OF ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 23 THE CLIENTS IN RESPECT OF WHICH ADDITION HAS BEEN MADE (A-B) CONFIRMATION NOT FILED CONFIRMED FILED WITHOUT PAN 81 88 235 65 300 66.98 11.7 78.68 18.90 -4.88 14.02 77.07 0.81 77.88 162.95 7.63 170.58 II TRANSACTIONS COVERED BY CONFIRMATIONS OBTAINED SUBSEQUENTLY BALANCE 98 252 48 66.63 12.05 9.60 4.42 75.47 2.41 151.71 18.87 III . TRANSACTIONS COVERED BY THE CLIENTS IN A LITIGATION BEFORE THE COURT/ARBITRATION AWARD (BALANCE) 108 2 46 11.78 0.28 4.65 -0.23 2.59 -0.19 19.02 -0.14 IV TRANSACTIONS OF THE CLIENTS WHOSE NAMES APPEAR IN THE BANK STATEMENT BALANCE 110 22 24 0.05 0.22 0.00 -0.22 0.00 -.0.18 0.04 -0.19 V TRANSACTIONS OF THE CLIENTS WHO HAVE ENTERED CLIENT AGREEMENT WITH THE APPELLANT BALANCE 112 1 23 0.00 0.22 0.00 -0.22 0.03 -0.21 0.03 -.0.21 VI TRANSACTIONS OF THE CLIENTS WHOSE NAMES APPEAR IN THE BANK SLIPS BALANCE 114 9 14 0.06 0.16 -0.06 -0.16 -.0.04 -0.17 -0.04 --0.17 20. LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AOS CASE IS THAT THE CLIENTS ARE BENAMIDARS OF THE ASSESSEE. BUT ADMITTEDLY THESE AR E NOT SHAM TRANSACTIONS BECAUSE MONEY IS COMING AND GOING THROUGH BANK. UNDER SUCH CIRCUMSTANCES, AT BEST, ONLY PEAK COULD BE ADDED. FURTHER ELABORATING HIS ARGUMENTS IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT PEAK CAN BE ADDED IF PEAK I S EMANATING FROM A SOURCE WHICH IS ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 24 UN-IDENTIFIED. HOWEVER, IN THE PRESENT CASE, ADMITT EDLY AMOUNTS ARE COMING FROM BSE AND, THEREFORE, THESE CANNOT BE ADDED. HE SUBMITTE D THAT IF PEAK IS TO BE ADDED, FIRST INVESTMENT AMOUNT + HIGHER BALANCE AT ANY GIVEN POI NT OF TIME CAN BE ADDED. THE NEXT ASPECT IN THIS REGARD IS IN REGARD TO SPECULATION P ROFIT ADDED BY THE AO. LD COUNSEL POINTED OUT THAT SPECULATION PROFIT AND DELIVERY PR OFIT IS AMALGAM OF PLUS AND MINUS FIGURES BUT THE AO IGNORED THE NEGATIVE FIGURE IN 2 000-2001. IN THIS REGARD, HE REFERRED TO PAGE 326 OF PB, WHEREIN, SUMMARY OF ADDITIONS MA DE BY THE AO IS CONTAINED WHICH IS REPRODUCED HEREUNDER:- PAGE NO. CONFIRMATION NOT FILED (A) PAGE NO. CONFIRMATION FILED WITHOUT PAN (A) TOTAL (A) + (B) A.Y.2000-01 SPECULATION PROFIT DELIVERY PURCHASE (UNEXPLAINED INVESTMENT) DELIVERY PROFIT 81 81 81 77.07 66.98 18.9 88 88 88 0.81 11.7 -4.88 77.88 78.68 14.02 TOTAL(I) 162.95 7.63 170.58 A.Y. 2001-02 DELIVERY PURCHASE DELIVERY PROFIT SPECULATION PROFIT 86 86 86 230.85 -171.92 6.03 91 91 91 42.99 27.04 -16.54 273.84 -144.88 -10.51 TOTAL (II) TOTAL (I) & (II) 230.85 393.80 42.99 50.62 273.84 444.42 21. LD COUNSEL FOR THE ASSESSEE POINTED OUT THAT BL OCK AS A WHOLE IS TO BE CONSIDERED AND LOSS SHOULD HAVE BEEN SET OFF. ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 25 22. LD COUNSEL FURTHER SUBMITTED THAT THE AO HAS AD DED THE BROKERAGE WHICH COULD NOT BE ADDED IF IT IS OF ASSESSEES MONEY. 23. LD COUNSEL THEREAFTER PROCEEDED TO POINT OUT THE REASONS FOR REFERENCE MADE TO SPECIAL BENCH. HE REFERRED TO PAGE 276 OF PB, WHER EIN, THE TRIBUNALS ORDER DATED 7TH JULY, 2005 IN THE CASE OF TRIUMPH INTERNATIONAL FIN ANCE INDIA LTD V. DCIT IN IT(SS) NO.330/M/2004 FOR THE BLOCK PERIOD 1.4.90 TO 23.3. 2001 IS CONTAINED, WHEREIN, THE TRIBUNAL DISMISSED THE ASSESSEES APPEAL OBSERVING AS UNDER:- WE HAVE HEARD THE RIVAL SUBMISSIONS AND ARE OF THE VIEW THAT EVEN IT IS ASSUMED THAT THE DATA FOUND THE SEARCH WAS PART OF THE BOOKS OF ACCOUNT OF THE ASSESSEE BUT THE REAL NATURE OF THE TRANSACTION S RECORDED IN THE COMPUTERS OF THE ASSESSEE SAW THE LIGHT OF THE DAY OF THE BASIS OF THE MATERIAL FOUND DURING THE SEARCH AND FOLLOW UP INQU IRY MADE BY THE INCOME TAX AUTHORITIES. WE ARE ALSO IN AGREEMENT W ITH THE FINDING OF THE CIT (A) THAT THE ASSESSEE HAS FILED TO EXPLAIN SATI SFACTORILY THE REAL NATURE OF CLIENTS ID MISMATCH. THE DEFINITION OF UNDISCLO SED INCOME AS LAID DOWN IN SECTION 158B(B) IS AN INCLUSIVE DEFINITION AND A S THE INGREDIENTS OF UNDISCLOSED INCOME, NEED NOT TO BE LIMITED TO WHAT IS DESCRIBED IN THE DEFINITION BUT SHALL ALSO INCLUDE ITEMS WHICH PARTA KE THE CHARACTER OF INCOME IN TERMS OF ANY ITEM WHICH WAS NOTICED OR DI SCOVERED AS A RESULT OF SEARCH. IN OUR VIEW, THE CIT (A) HAS RIGHTLY UPHEL D THE VIEW OF THE AO THAT THE INCOME ARISING OUT OF THE SAID ID MISMATCH IS A SSESSABLE AS UNDISCLOSED INCOME UNDER CHAPTER XIV-B OF THE I.T.A CT. 24. LD COUNSEL FOR THE ASSESSEE REFERRED TO PAGES 2 0 TO 31 OF PB, WHEREIN, ORDER OF APPROVAL UNDER SECTION 142(2A) DATED 23.3.2001 IS C ONTAINED AND POINTED OUT THAT ON THE BASIS OF REPORT OF DEPUTY COMMISSIONER OF INCOME TA X, CIRCLE 5(2), MUMBAI (AO) DATED 7.3.2001, MISMATCHES IN REGARD TO CLIENT ID WAS NOT ICED AS IS EVIDENT FROM THE FOLLOWING:- WHEREAS THE DEPUTY COMMISSIONER OF INCOME TAX, CIRC LE 5(2), MUMBAI (AO, FOR SHORT) SUBMITTED THE REPORT DATED 7.3.2001 GIVING THEREIN THE FINDING THAT IN COURSE OF THE ASSESSMENT PROCEEDING S FOR THE A.Y. 1998-99 IN THE CASE OF M/S. TRIUMPH INTERNATIONAL FINANCE L IMITED (HEREINAFTER, THE ASSESSEE COMPANY), HE FOUND FROM THE INFORMATIO N FURNISHED BY THE ASSESSEE COMPANY THAT THE SAID COMPANY DURING THE P REVIOUS YEAR ENDED ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 26 ON 31.3.1998 HAD CARRIED OUT TRANSACTIONS ON THE NA TIONAL STOCK EXCHANGE (NSE, FOR SHORT) AND THAT THE IDENTITIES OF THE CLI ENTS (CLIENT IDS, FOR SHORT) AS FURNISHED BY THE SAID COMPANY WERE DIFFERENT FRO M THE CLIENT IDS AS WERE MADE AVAILABLE TO THE AO BY THE NSE. HE SUBMITTED THAT THE DATE OF SEARCH IS 23.3.2001 A ND THUS, THE AO KNEW ABOUT THIS MISMATCH. LD COUNSEL SUMMING UP HIS ARGUMENTS SUBM ITTED THAT IMPLICATION AND INFERENCE CAN NEVER BE A BASIS OF ADDITION IN THE B LOCK ASSESSMENT. THIS CAN BE RESORTED TO ONLY IF IT IS COUPLED WITH SOME MATERIAL. HE PO INTED OUT THAT IT IS A FACT THAT NO MATERIAL HAS BEEN FOUND BUT AS PER THE AO, IT IS THE IMPLICA TION OF THE ENTRY WHICH IS MATERIAL IN THIS CASE. HE SUBMITTED THAT INFERENCE CAN BE DRAW N ON THE BASIS OF SOME OTHER MATERIAL FOUND. LD COUNSEL IN THIS REGARD REFERRED TO THE D ECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. BANSAL HIGH CARBONS (P)LTD., (2009) 223 CTR (DEL) 179, WHEREIN, IT WAS HELD THAT STATEMENT RECORDED SUBSEQUENT TO T HE SEARCH AND ALSO RETRACTED SUBSEQUENTLY FROM EARLIER STATEMENT OF VP WITH A VI EW TO CORRECTNESS OF THE BOOKS WITHOUT THERE BEING ANY INCREMENTING MATERIAL COULD NOT BE USED IN THE PROCEEDINGS UNDER CHAPTER XIV-B. LD COUNSEL SUBMITTED THAT THE KNOWL EDGE OF THE TRANSACTION IS ONE THING AND IMPLICATION IS OTHER THING. HE POINTED OUT THA T THOUGH DETAILED SUBMISSIONS WERE MADE EXPLAINING CLIENT ID MISMATCH, THE SAME HAVE N OT AT ALL BEEN REFERRED. 25. LD COUNSEL FOR THE ASSESSEE LASTLY RELIED ON TH E DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ANIS AHMAD AND SONS V. CIT,(20 08) 297 ITR 441 (SC), WHEREIN, IT HAS BEEN HELD THAT MERELY BECAUSE FIVE TRADERS APPE ARED IN PURSUANCE TO THE SUMMONS GIVEN COULD NOT LEAD TO ANY ADVERSE INFERENCE AGAIN ST THE ASSESSEE. RELYING ON THIS DECISION, LD COUNSEL SUBMITTED THAT SUBSTANTIAL COM PLIANCE HAS BEEN MADE BY FILING CONFIRMATIONS IN MOST OF THE CASES. ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 27 26. AS REGARDS GROUND NOS. 3 TO 4, LD COUNSEL SUBMI TTED THAT ARGUMENTS HAVE ALREADY BEEN MADE FOR THESE GROUNDS. AS REGARDS GROUND NO. 5, LD COUNSEL FAIRLY CONCEDED THAT THIS ISSUE IS TO BE DECIDED AGAINST THE ASSESSEE. AS REGARDS GROUND NO.6, LD COUNSEL SUBMITTED THAT THE RETURN WAS FILED ON 17.8.2001 AN D HENCE, THERE WAS NO DELAY. ACCORDINGLY, NO INTEREST UNDER SECTION 158BFA COULD BE CHARGED. WE FIND THAT NOTICE U/S.158BC WAS ISSUED ON 6.7.2001 AND THE ASSESSEE H AD FILED RETURN ON 17.8.2001 I.E. WITHIN 45 DAYS OF THE ISSUE OF NOTICE AND, THEREFOR E, NO INTEREST IS CHARGEABLE U/S.158BFA. ACCORDINGLY, GROUND NO.5 IS REJECTED AND GROUND NO. 6 IS ALLOWED. 27. PER CONTRA, DR. P. DANIEL, LD. SPECIAL COUNSEL APPEARING FOR THE REVENUE SUBMITTED THAT THERE WAS SECURITY SCAM IN 2001 AND CONSEQUENTLY, ASSESSEES BUSINESS WAS SEARCHED ON 23.3.2001. HE POINTED OUT THAT IN THE SECURITY SCAM, IT HAD BEEN DETECTED THAT ONLY ONE PERSON, SHRI KETAN PAREKH, WAS INDULGING I N LARGE SCALE MANIPULATION OF STOCK EXCHANGE BY UTILIZING FINANCIAL INSTITUTIONS AND BA NK, ETC. THEREFORE, JOINT PARLIAMENTARY COMMITTEE WAS APPOINTED AND THE STATEMENT OF SHRI K ETAN PAREKH WAS RECORDED BY THE JPC. THE ASSESSEE WAS CARRYING ON THE PROPRIETORY BUSINESS ALONGWITH SHARE BROKING. HE ACTED MORE AS AN OPERATOR THAN BROKER. THE ASSESSE E UTILIZED THE SETTLEMENT PERIOD OF TWO WEEKS IN ORDER TO MANIPULATE THE TRANSACTIONS. DR. DANIEL POINTED OUT THAT CLIENT CODE MISMATCH WAS FOUND PARTICULARLY IN THOSE SHARES IN WHICH STOCK EXCHANGE SCAM TOOK PLACE. HE POINTED OUT THAT EARLIER A SCAM POPULARL Y KNOWN AS HARSHAD MEHTA SCAM WAS THERE IN 1992 AND, CONSEQUENTLY, SEBI HAD ISSUE D CIRCULAR IN 1993. HE REFERRED TO PAGES 9 TO 13 OF THE ASSESSMENT ORDER, WHEREIN, THE CODE OF CONDUCT OF STOCK BROKER HAS BEEN GIVEN. HE POINTED OUT THAT THIS CIRCULAR IS D ATED 18.11.1993. DR. DANIEL POINTED OUT ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 28 THAT IT WAS IN CONSULTATION WITH THE ASSESSEE THAT THE AO AGREED THAT WHEREVER CONFIRMATIONS WERE AVAILABLE, NO ADDITION WAS CALLE D FOR. OTHERWISE, HE TREATED THE TRANSACTIONS AS ASSESSEES OWN TRANSACTION. 28. IN REPLY TO ASSESSEES SUBMISSION REGARDING FIL ING OF THE CONFIRMATIONS BEFORE LD CIT (A), DR. DANIEL SUBMITTED THAT THERE IS NO SUCH MENTION IN THE LD. CIT (A)S ORDER. HOWEVER, SINCE THE ASSESSEE FILED AFFIDAVIT TO THIS EFFECT, HE DID NOT DISPUTE THE SAME. IN REGARD TO CIRCUMSTANTIAL EVIDENCE RELIED UPON BY TH E ASSESSEE, DR. DANIEL POINTED OUT THAT MERELY FILING AN ACCOUNT OPENING FORM DOES NOT MEA N THAT SUSHMA KAPUR ACTUALLY DEALT IN THE SHARE TRANSACTION. IN REGARD TO SUNIL TANEJA, IN WHOSE CASE, COPY OF ARBITRATION AWARD HAS BEEN FILED, DR. DANIEL SUBMIT TED THAT IT DOES NOT AMOUNT TO CONFIRMATION OF PARTICULAR TRANSACTION. THE MEMORA NDUM OF UNDERSTANDING FILED IN THE CASE OF ASHOK MITTAL AND CO. WAS NOT PRODUCED BEFOR E THE AO AND LD CIT(A). HOWEVER, IN ANY CASE, IT DOES NOT REFER TO ANY SPECIAL DEALI NGS. DR. DANIEL FURTHER POINTED OUT THAT REFERENCE TO CASE OF DAKSHA P. MODI DOES NOT PROVE THAT IT IS THE SAME TRANSACTION WHICH WAS DOUBTED BY AO. 29. WE HAVE CONSIDERED THE DETAILED SUBMISSIONS ADV ANCED BY BOTH THE SIDES AND HAVE GIVEN OUR CAREFUL THOUGHT TO THE SAME. THE MAIN ISS UES TO BE DECIDED IN THE PRESENT APPEAL ARE AS UNDER:- A) WHETHER BOOKS OF ACCOUNT MAINTAINED IN REGULAR C OURSE OF BUSINESS FOUND DURING THE COURSE OF SEARCH CONSTITUTE EVIDENCE A S CONTEMPLATED U/S.158BB OF THE ACT OR NOT? ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 29 B) WHETHER THE TRANSACTIONS RECORDED IN THE REGULAR BOOKS OF ACCOUNT CAN BE SUBJECT MATTER OF ADDITION IN BLOCK ASSESSMENT OR N OT? C) WHETHER THE CLIENT ID MISMATCH, FOUND DURING THE COURSE OF SEARCH, CONSTITUTE MATERIAL AS CONTEMPLATED U/S.158BB(1) OR NOT PARTICULARLY WHEN PUNCHING OF CLIENT ID WAS NOT MANDATORY PRE-AU GUST 2001? D) WHETHER POST SEARCH ENQUIRIES AND INVESTIGATIONS IN REGARD TO RECORDED TRANSACTIONS SUCH AS TAX AUDIT AND ENQUIRIES FROM T HE STOCK EXCHANGE COULD BE RESORTED TO FOR DETERMINING THE UNDISCLOSE D INCOME OR NOT? E) WHETHER ANY ADDITION COULD BE MADE IN RESPECT OF THE TRANSACTIONS RELATING TO CLIENT ID MISMATCH FOR NON-FURNISHING OF CONFIRM ATION, WHEN THE ASSESSEE HAD FURNISHED MORE THAN 98% OF THE CONFIRM ATIONS FROM THE CLIENTS FOR THE TRANSACTIONS DONE ON THEIR BEHALF A S A STOCK BROKER AND ACCEPTED BY THE DEPARTMENT? F) WHETHER ANY ADDITION COULD BE MADE AS UNEXPLAINE D INVESTMENT APPLYING THE PROVISIONS OF SECTION 69 OF THE ACT WHEN THE TR ANSACTIONS ARE RECORDED IN THE REGULAR BOOKS OF ACCOUNT? 30. IN ORDER TO DECIDE THESE ISSUES, IT IS NECESSAR Y TO FIRST REFER TO THE SCHEME OF ACT REGARDING BLOCK ASSESSMENT. CHAPTER XIV-B LAYS DOW N SPECIAL PROCEDURE FOR ASSESSMENT OF SEARCH CASES. SECTION 158B(B) DEALS WITH DEFINI TION OF UNDISCLOSED INCOME WHICH READS AS UNDER:- 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, BULLIO N, JEWELLERY, VALUABLE ARTICLE, THING, ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUM ENT OR TRANSACTION REPRESENTS WHOLLY OR PARTLY INCOME OR PROPERTY WHICH HAS NO T BEEN OR WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSES OF THIS ACT. 31. SECTION 158BA DEALS WITH THE ASSESSMENT OF UNDI SCLOSED INCOME AS A RESULT OF SEARCH AND SUB-SECTIONS (2) & (3) OF THE SAID SECTI ON READS AS UNDER: (2) THE TOTAL UNDISCLOSED INCOME RELATING TO THE B LOCK PERIOD SHALL BE CHARGED TO TAX, AT THE RATE SPECIFIED IN SECTION 113, AS INCOM E OF THE BLOCK PERIOD IRRESPECTIVE OF THE PREVIOUS YEAR OR YEARS TO WHICH SUCH INCOME RELATES AND IRRESPECTIVE OF THE ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 30 FACT WHETHER REGULAR ASSESSMENT FOR ANY ONE OR MORE OF THE RELEVANT ASSESSMENT YEARS IS PENDING OR NOT. EXPLANATION. . FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED TH AT ( A ) THE ASSESSMENT MADE UNDER THIS CHAPTER SHALL BE I N ADDITION TO THE REGULAR ASSESSMENT IN RESPECT OF EACH PREVIOUS YEAR INCLUDE D IN THE BLOCK PERIOD; ( B ) THE TOTAL UNDISCLOSED INCOME RELATING TO THE BLOC K PERIOD SHALL NOT INCLUDE THE INCOME ASSESSED IN ANY REGULAR ASSESSMENT AS INCOME OF SUCH BLOCK PERIOD; ( C ) THE INCOME ASSESSED IN THIS CHAPTER SHALL NOT BE INCLUDED IN THE REGULAR ASSESSMENT OF ANY PREVIOUS YEAR INCLUDED IN THE BLO CK PERIOD.] (3) WHERE THE ASSESSEE PROVES TO THE SATISFACTION O F THE ASSESSING OFFICER THAT ANY PART OF INCOME REFERRED TO IN SUB-SECTION (1) RELAT ES TO AN ASSESSMENT YEAR FOR WHICH THE PREVIOUS YEAR HAS NOT ENDED OR THE DATE O F FILING THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139 FOR ANY PREVIO US YEAR HAS NOT EXPIRED, AND SUCH INCOME OR THE TRANSACTIONS RELATING TO SUCH IN COME ARE RECORDED ON OR BEFORE THE DATE OF THE SEARCH OR REQUISITION IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO SUCH PR EVIOUS YEARS, THE SAID INCOME SHALL NOT BE INCLUDED IN THE BLOCK PERIOD. 32. SECTION 158 BB DEALS WITH THE COMPUTATION OF UN DISCLOSED INCOME OF THE BLOCK PERIOD AND READS AS UNDER: (1) THE UNDISCLOSED INCOME OF THE BLOCK PERIOD SHA LL BE THE AGGREGATE OF THE TOTAL INCOME OF THE PREVIOUS YEARS FALLING WITHIN THE BLOCK PERIOD COMP UTED, IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER IV, ON THE BASIS OF EVIDENCE FOUND AS A RES ULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNT OR DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATIO N AS ARE AVAILABLE WITH 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 S ECTION 139 OR SECTION 147 BUT ASSESSMENTS HAVE NOT BEEN MADE TILL THE DATE OF SEARCH OR REQUI SITION, ON THE BASIS OF THE INCOME DISCLOSED IN SUCH RETURNS; (C) WHERE THE DUE DATE FOR FILING A RETURN OF INCOM E HAS EXPIRED BUT NO RETURN OF INCOME HAS BEEN FILED, AS NIL; (D) WHERE THE PREVIOUS YEAR HAS NOT ENDED OR THE DA TE OF FILING THE RETURN OF INCOME UNDER SUB- SECTION (1) OF SECTION 139 HAS NOT EXPIRED, ON THE BASIS OF ENTRIES RELATING TO SUCH INCOME OR TRANSACTIONS AS RECORDED IN THE BOOKS OF ACCOUNT AN D OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE ON OR BEFORE THE DATE OF THE SEARCH OR REQUI SITION RELATING TO SUCH PREVIOUS YEARS; (E) WHERE ANY ORDER OF SETTLEMENT HAS BEEN MADE UND ER SUB-SECTION (4) OF SECTION 245D, ON THE BASIS OF SUCH ORDER; ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 31 (F) WHERE AN ASSESSMENT OF UNDISCLOSED INCOME HAD B EEN MADE EARLIER UNDER CLAUSE (C) OF SECTION 158BC, ON THE BASIS OF SUCH ASSESSMENT. EXPLANATION : FOR THE PURPOSES OF DETERMINATION OF UNDISCLOSED INCOME, - (A) THE TOTAL INCOME OR LOSS OF EACH PREVIOUS YEAR SHALL, FOR THE PURPOSE O F AGGREGATION, BE TAKEN AS THE TOTAL INCOME OR LOSS COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER IV WITHOUT GIVING EFFECT TO SET OFF OF BROUGHT FORWARD LOSSES UNDER CHAPTER VI OR UNABSORB ED DEPRECIATION UNDER SUB-SECTION (2) OF SECTION 32; (B) OF A FIRM, RETURNED INCOME AND TOTAL INCOME ASS ESSED FOR EACH OF THE PREVIOUS YEARS FALLING WITHIN THE BLOCK PERIOD SHALL BE THE INCOME DETERMI NED BEFORE ALLOWING DEDUCTION OF SALARY, INTEREST, COMMISSION, BONUS OR REMUNERATION BY WHAT EVER NAME CALLED TO ANY PARTNER NOT BEING A WORKING PARTNER: PROVIDED THAT UNDISCLOSED INCOME OF THE FIRM SO DET ERMINED SHALL NOT BE CHARGEABLE TO TAX IN THE HANDS OF THE PARTNERS, WHETHER ON ALLOCATION OR ON ACCOUNT OF ENHANCEMENT; (C) ASSESSMENT UNDER SECTION 143 INCLUDES DETERMINA TION OF INCOME UNDER SUB-SECTION (1) OR SUB- SECTION (1B) OF SECTION143. (2) IN COMPUTING THE UNDISCLOSED INCOME OF THE BLOC K PERIOD, THE PROVISIONS OF SECTIONS 68, 69, 69A, 69B AND 69C SHALL, SO FAR AS MAY BE, APPLY AND REFERENCES TO 'FINANCIAL YEAR' IN THOSE SECTIONS SHALL BE CONSTRUED AS REFERENCES TO THE RE LEVANT PREVIOUS YEAR FALLING IN THE BLOCK PERIOD INCLUDING THE PREVIOUS YEAR ENDING WITH THE DATE OF SEARCH OR OF THE REQUISITION. (3) THE BURDEN OF PROVING TO THE SATISFACTION OF TH E ASSESSING OFFICER THAT ANY UNDISCLOSED INCOME HAD ALREADY BEEN DISCLOSED IN ANY RETURN OF INCOME FILED BY THE ASSESSEE BEFORE THE COMMENCEMENT OF SEARCH OR OF THE REQUISITION, AS TH E CASE MAY BE, SHALL BE ON THE ASSESSEE. (4) FOR THE PURPOSE OF ASSESSMENT UNDER THIS CHAPTE R, LOSSES BROUGHT FORWARD FROM THE PREVIOUS YEAR UNDER CHAPTER VI OR UNABSORBED DEPRECIATION UN DER SUB-SECTION (2) OF SECTION 32 SHALL NOT BE SET OFF AGAINST THE UNDISCLOSED INCOME DETERMINED I N THE BLOCK ASSESSMENT UNDER THIS CHAPTER, BUT MAY BE CARRIED FORWARD FOR BEING SET OFF IN THE REG ULAR ASSESSMENTS 33. FROM THE BARE READING OF SECTION 158B(B) IT IS EVIDENT THAT THE UNDISCLOSED INCOME IS TO BE WORKED OUT ON THE BASIS OF (A) DISC OVERY OF ASSETS; (B) DISCOVERY OF TRANSACTIONS; (C) DISCOVERY OF ENTRIES IN THE BOOKS OF ACCOUNT OR OUTSIDE THE BOOKS; OR (D) DISCOVERY OF ANY OTHER MATERIAL TO SHOW THAT THE IN COME WAS NOT DISCLOSED. AS PER THE REQUIREMENTS OF THIS SECTION, IT IS NOT SUFFICIENT THAT THE ASSESSEE HAS DISCLOSED THE ASSET, TRANSACTION OR ENTRY BUT IT IS ESSENTIAL THAT INCOM E ATTRIBUTABLE TO THE TRANSACTION HAS ALSO DISCLOSED. IF THE ASSESSEE HAS NOT DISCLOSED ANY I NCOME THEN HE WILL NOT GET ANY DEDUCTION UNDER THE PROVISIONS OF SECTION 158BB(1) IN THE COMPUTATION OF UNDISCLOSED INCOME. IT IS EVIDENT THAT THE DEFINITION OF UNDIS CLOSED INCOME IS INCLUSIVE DEFINITION AND ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 32 NOT EXHAUSTIVE DEFINITION, WHICH INCLUDES ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS WHICH ACTUALLY REPRESENTED THE ASSESSEES INCOME BUT HAS NOT BEEN DISCLOSED FOR THE PURPOSES OF THE ACT. ANY INCOME BASED ON A NY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS, WHICH REPRESENT WHOLLY OR PARTLY C ONCEALED INCOME OR PROPERTY, WOULD ALSO BE INCLUDED IN UNDISCLOSED INCOME. IF A TRANS ACTION IS ALREADY IN THE BOOKS OF ACCOUNT BUT THE TRUE NATURE OF ENTRY IS DETECTED ON THE BASIS OF MATERIAL FOUND DURING THE COURSE OF SEARCH, THEN IT WILL COME WITHIN THE PURV IEW OF UNDISCLOSED INCOME. IF THE FACT OF OWNERSHIP OF THE TRANSACTION HAS COME TO THE NOT ICE OF THE DEPARTMENT FOR THE FIRST TIME AS A RESULT OF SEARCH AND SEIZURE OPERATION THEN IT WILL COME WITHIN THE AMBIT OF UNDISCLOSED INCOME. IN THE CASE OF BENAMI TRANSACT IONS, THE OWNERSHIP OF THE TRANSACTION IS ALWAYS REPRESENTED IN THE NAME OF OTHER PERSON A ND NOT IN THE NAME OF THE PERSON TO WHOM, THE TRANSACTION ACTUALLY BELONGS. IF SOME MA TERIAL IS FOUND DURING THE COURSE OF SEARCH FROM WHICH, IT CAN BE INFERRED THAT THE RECO RDING OF TRANSACTION HAS BEEN DONE IN THE NAME OF OTHER PERSON THEN, IT WILL COME WITHIN THE PURVIEW OF UNDISCLOSED INCOME. THE TERM UNDISCLOSED INCOME HAS PRIMARILY BEEN US ED IN SECTION 132(1)(C). IT IS PERTINENT TO NOTE AT THIS JUNCTURE THAT SECTION 132 (1) (C) DOES NOT REFER TO A TRANSACTION IN THE BOOKS OF ACCOUNT AND, THEREFORE, TO COVER THE I NCOME WHICH IS EMBEDDED IN THE TRANSACTION, THE DEFINITION OF UNDISCLOSED INCOME I NCLUDES THE TRANSACTION RECORDED IN THE BOOKS OF ACCOUNT ALSO. THE EXTENT OF INCOME EMBEDD ED IN THE TRANSACTION HAS TO BE DETERMINED ON BASIS OF MATERIAL FOUND DURING THE CO URSE OF SEARCH DEPENDING UPON THE FACTS AND CIRCUMSTANCES OF EACH CASE. THE EXPRESSI ON USED IN SECTION 158B(B) IS HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED. IT IMPLIES THAT AS FAR AS THE INCOME WHICH HAS NOT BEEN DISCLOSED BY THE ASSESSEE, THERE WOULD BE NO D IFFICULTY IN FINDING OUT THE SAME. ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 33 HOWEVER, WHERE THE ISSUE COMES REGARDING WOULD NOT HAVE BEEN DISCLOSED, THE SUBJECTIVE SATISFACTION OF THE AO CREEPS IN. IN ORD ER TO OBVIATE THE SUBJECTIVE CONCLUSION BEING CREEPING INTO THE ASSESSMENT OF INCOME UNDER BLOCK ASSESSMENT, IT BECOMES ESSENTIAL THAT THE MATERIAL HAS BEEN FOUND DURING T HE COURSE OF SEARCH RELATABLE TO EVIDENCE ON THE BASIS OF WHICH, THE AO REACHES THE CONCLUSION THAT INCOME WOULD NOT HAVE BEEN DISCLOSED. THE MATERIAL FOUND DURING THE COURSE OF SEARCH BRINGS OBJECTIVITY TO THE AOS SATISFACTION AND ENSURES THAT THE AOS CON CLUSION IS NOT BASED ON CONJECTURES OR SURMISES. IF NO MATERIAL IS FOUND DURING THE COURS E OF SEARCH OPERATION, EITHER IN THE FORM OF UNDISCLOSED ASSET OR UNACCOUNTED ENTRIES OR TRAN SACTIONS, NO UNDISCLOSED INCOME CAN BE ASSESSED BECAUSE THERE MAY NOT BE ANY EDIFICE FOR T HE STRUCTURE. HOWEVER, IF SOME MATERIAL HAS BEEN FOUND DURING THE COURSE OF SEARCH , THE AO WOULD NOT BE PREVENTED FROM MAKING ENQUIRIES ON THE BASIS OF SUCH MATERIAL OR I NFORMATION UNDER THE PROVISIONS OF SECTION 1432(2A) OR 143(2). THUS, ALL THE PROVISIO NS ENSURE THAT SUBJECTIVE INFORMATION OF THE AO IS SUBSTITUTED BY MATERIAL AND INFORMATIO N GATHERED EITHER DURING THE COURSE OF SEARCH OR POST SEARCH ENQUIRY. IN ORDER TO ARRIVE AT WHETHER A PARTICULAR ITEM CONSTITUTES ASSESSEES UNDISCLOSED INCOME OR NOT, THE INTENTION OF THE ASSESSEE ASSUMES IMPORTANCE AND IT HAS TO BE GATHERED FROM THE CONDUCT AND HAS TO BE INFERRED FROM THE MATERIAL FOUND DURING THE COURSE OF SEARCH, WHICH WILL DEPEND ON F ACTS AND CIRCUMSTANCES OF EACH CASE. 34. SECTION 158BA WHICH IS A CHARGING SECTION, MAKE S IT CLEAR THAT THE AO IS TO ASSESS THE UNDISCLOSED INCOME IN ACCORDANCE WITH THE PROVI SIONS OF CHAPTER XIV-B AND THE UNDISCLOSED INCOME IS TO BE COMPUTED IRRESPECTIVE O F THE FACT WHETHER THE REGULAR ASSESSMENT FOR ALL THE RELEVANT ASSESSMENT YEARS IS PENDING OR NOT. IT HAS BEEN CLARIFIED IN THE EXPLANATION THAT THE ASSESSMENT MADE UNDER THIS CHAPTER SHALL BE IN ADD ITION TO ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 34 THE REGULAR ASSESSMENT IN RESPECT OF EACH PREVIOUS YEAR INCLUDED IN THE BLOCK PERIOD AND NECESSARY ADJUSTMENTS HAVE TO BE MADE WHILE COM PUTING THE UNDISCLOSED INCOME. THUS, IT IS CLEAR THAT ONLY UNDISCLOSED INCOME CAN BE THE SUBJECT MATTER OF ASSESSMENT UNDER CHAPTER XIV-B AND NOT THE INCOME WHICH HAS TO BE ASSESSED UNDER THE REGULAR ASSESSMENT. NOW THE QUESTION ARISES AS TO HOW TO D ETERMINE WHICH INCOME WILL COME WITHIN THE AMBIT OF UNDISCLOSED INCOME. FOR THAT PU RPOSE WE HAVE TO REFER TO THE PROVISIONS CONTAINED UNDER SECTION 158BB, WHICH DEA LS WITH THE COMPUTATION OF UNDISCLOSED INCOME OF THE BLOCK PERIOD. THE FIRST P ART OF SECTION 158BB(1) MAKES IT CLEAR THAT THE TOTAL INCOME OF THE BLOCK PERIOD HAS TO BE DETERMINED AFRESH AND FROM THAT ITEMS CONTEMPLATED FROM CLAUSE (A) TO CLAUSE (F) HAVE TO BE EXCLUDED. AS PER CLAUSE (A), IF THE ASSESSMENT HAS ALREADY BEEN MADE U/S.143, 144 OR 14 7, THEN THE UNDISCLOSED INCOME IS TO BE REDUCED BY AGGREGATE OF THE TOTAL INCOME AND INC REASED BY THE AGGREGATE OF THE LOSSES AS DETERMINED ON THE BASIS OF ASSESSMENT MADE UNDER THOSE SECTIONS. AS PER CLAUSE (B), IF THE ASSESSMENTS ARE PENDING IN RESPECT OF RETURNS F ILED U/S.139 AND 147, THE SAME IS TO BE DETERMINED ON THE BASIS OF SUCH RETURNS. THE TERM DETERMINED MAKES IT CLEAR THAT THE REGULAR ASSESSMENT HAS TO BE MADE SIMULTANEOUSLY WI TH BLOCK ASSESSMENT ON THE BASIS OF THE INCOME DISCLOSED IN SUCH RETURNS. THIS WILL EN SURE A CLEAR DEMARCATION BETWEEN UNDISCLOSED INCOME TO BE ASSESSED IN THE BLOCK ASSE SSMENT AND THE INCOME WHICH IS TO BE ASSESSED IN REGULAR ASSESSMENT. THIS IS ALSO CLEAR FROM THE OPENING PHRASE OF SUB- SECTION(1) OF SECTION 158BB, WHICH REQUIRES THAT T HE TOTAL INCOME OF THE BLOCK PERIOD IS TO BE DETERMINED INCLUDING THE UNDISCLOSED INCOME A ND THEN IN ORDER TO FIND OUT THE UNDISCLOSED INCOME, VARIOUS DEDUCTIONS ARE CONTEMPL ATED FROM CLAUSES (A) TO (F).THIS COMPUTATION MODE HAS SPECIFICALLY BEEN LAID DOWN BE CAUSE UNDISCLOSED INCOME IS TO BE ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 35 DETERMINED ON THE BASIS OF EVIDENCE FOUND DURING TH E COURSE OF SEARCH AND SUCH OTHER MATERIAL OR INFORMATION AVAILABLE WITH THE AO AND R ELATABLE TO SUCH EVIDENCE. 35. NOW, WE WILL CONSIDER THE CASE LAWS RELIED UPON BY BOTH THE SIDES. A) CIT V. BANSAL HIGH CARBONS (P)LTD., (2009) 223 CTR (DEL) 179 IN THIS CASE, SEARCH WAS CONDUCTED ON 11.9.2001 AT VARIOUS RESIDENTIAL AND BUSINESS PREMISES OF A GROUP OF ASSESSES, INCLUDING THE ASSESSEE, COLLECTIVELY CALLED THE BANSAL GROUP. NOTHING INCR IMINATING WAS FOUND DURING THE COURSE OF SEARCH EXCEPT THE BOOKS OF AC COUNT OF THE ASSESSEE AND IN ORDER TO VERIFY THE CORRECTNESS OF THE BOOKS OF ACCOUNT ON 25.9.2001, THE DY. DIRECTOR OF INCOME TAX RECORDED THE STATEMENT OF ONE V.P.JAIN, IN WHICH, HE STATED THAT PURCHASES OF RS. 25 CRORES WERE MADE FROM BANSAL GROUP OUT OF WHICH, DELIVERY WAS MADE O NLY TO THE EXTENT OF ABOUT RS.2 OR RS.3 CRORES. IN RESPECT OF BALANCE O F RS.22 OR RS.23 CRORES, NO MATERIAL OR STEEL WIRES WERE PURCHASED AND ONLY BILLS WERE ISSUED. THE ASSESSEE ON ITS PART SHOWED SALES HAVING BEEN MADE IN CASH. THE DEPARTMENTS ALLEGATION WAS THAT V.P.JAIN RECEIVED A COMMISSION FOR GIVING THESE BILLS. HOWEVER, SUBSEQUENTLY, V.P. JA IN RETRACTED HIS STATEMENT. IN THE BACKDROP OF THESE FACTS, IT WAS HELD THAT IN THE ABSENCE OF RECOVERY OF ANY INCRIMINATING MATERIAL FOUND DU RING THE SEARCH CONDUCTED IN THE PREMISES OF THE ASSESSEE GROUP, TH E STATEMENT OF THIRD PARTY COULD NOT BE USED AGAINST THE ASSESSEE IN PRO CEEDINGS UNDER CHAPTER XIV-B. IT WAS HELD THAT IN RESPECT OF BLOCK ASSESS MENT, UNDISCLOSED INCOME IS REQUIRED TO BE COMPUTED ON THE BASIS OF E VIDENCE FOUND DURING THE COURSE OF SEARCH OR BEING DIRECTLY RELATABLE TO EVIDENCE FOUND DURING THE COURSE OF SEARCH. SUBSEQUENT ENQUIRIES IN ORDE R TO VERIFY THE CORRECTNESS OF BOOKS OF ACCOUNT, CANNOT FORM THE BA SIS FOR COMPUTING THE UNDISCLOSED INCOME. THIS DECISION IS CLEARLY DISTIN GUISHABLE ON FACTS INASMUCH AS THE STATEMENT OF VP WAS RECORDED AFTER THE DATE OF SEARCH AND ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 36 RETRACTED SUBSEQUENTLY. THUS, THE VARY BASIS OF ADD ITION WAS DISPUTED. HOWEVER, IN THE PRESENT CASE, ADMITTEDLY CLIENT ID MISMATCH WAS THERE. B) CIT V SHAMLAL BALRAM GURBANI[2000) 249 ITR 501 (BOM ) IN THIS CASE ALSO, THE HONBLE BOMBAY HIGH COURT UP HELD THE FINDINGS OF THE TRIBUNAL, WHERE THE TRIBUNAL HAD RECORDED A FIN DING THAT SINCE ASSESSEES INCOME FROM INTEREST, SALARY AND RENT WA S REFLECTED IN THE AUDITED BALANCE SHEET OF THE RESPECTIVE ASSESSMENT YEARS OF THE FIRM, THEREFORE, NO ADDITION WAS CALLED FOR IN BLOCK ASSE SSMENT. THUS, INCOME HAD ALREADY BEEN RECORDED IN THE BOOKS, THEREFORE, THERE WAS NO QUESTION OF ANY UNDISCLOSED INCOME. C) CIT V. JUPITER BUILDERS P.LTD [2006) 287 ITR 287 (D ELHI) IN THIS CASE, A SEARCH WAS CONDUCTED AT THE RESIDEN TIAL AND BUSINESS PREMISES OF THE ASSESSEE ON FEBRUARY 21, 1997. THE ASSESSEE WAS IN THE BUSINESS OF DEALING IN REAL ESTATE. DIFFERENT ADDI TIONS WERE MADE, WHICH WERE DELETED ON THE GROUND THAT SEARCH DID NOT REVE AL ANY UNEXPLAINED INVESTMENT. IT WAS HELD THAT WITHOUT ANY MATERIAL OR BASIS, NO ESTIMATES COULD BE MADE PARTICULARLY SINCE THE ASSESSING OFFI CER WAS NOT AN EXPERT. THESE FINDINGS OF THE TRIBUNAL WERE UPHELD BY THE H ONBLE DELHI HIGH COURT AFTER TAKING NOTE OF CLARIFICATION IN THE MEM ORANDUM EXPLAINING THE PROVISIONS OF THE FINANCE (NO.2) BILL, 1998, WHICH STATES AS UNDER:- ( [1998] 231 (ST) 228, 256). TO SET AT REST THE CONTROVERSY AS TO WHETHER BLOCK ASSESSM ENT SUBSUMES THE REGULAR ASSESSMENTS OR INDEPENDENT OF THE LATTER, THE BILL PROPOSES TO CLARIFY THAT BLOCK ASSESSMENT SHAL L BE MADE IN ADDITION TO THE REGULAR ASSESSMENT OF PREVIOUS YEAR S INCLUDED IN THE BLOCK PERIOD. FURTHER, IT PROPOSES TO PROVIDE THAT INCOME ASSESSED IN REGULAR ASSESSMENT SHALL NOT BE INCLUDE D IN THE BLOCK PERIOD AND INCOME ASSESSED IN THE BLOCK PERIOD SHAL L NOT BE INCLUDED IN THE REGULAR ASSESSMENT. THE CLARIFICAT ORY AMENDMENT IS PROPOSED TO BE INSERTED RETROSPECTIVELY FROM THE 1 ST DAY OF JULY, 1995. ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 37 THE HONBLE DELHI HIGH COURT ALSO NOTED THE FOLLOWI NG OBSERVATIONS OF THE HONBLE GAUHATI HIGH COURT IN THE CASE OF DR MRS AL AKA GOSWAMI AND DR ANIL KUMAR GOSWAMI V CIT [2004] 268 ITR 178: CHAPTER XIV-B OF THE ACT LAYS DOWN THE SPECIAL PRO CEDURE FOR ASSESSMENT OF SEARCH CASES AND PROVIDES FOR ASSESSM ENT OF UNDISCLOSED INCOME AS A RESULT OF SEARCH. UNDER SEC TION 158BB(1) READ WITH SECTION 158BC OF THE ACT, WHAT IS ASSESSE D IS THE UNDISCLOSED INCOME OF THE BLOCK PERIOD AND NOT THE TOTAL INCOME OR LOSS OF THE PREVIOUS YEAR REQUIRED TO BE ASSED IN T HE NORMAL REGULAR ASSESSMENT UNDER SECTION 143(3)OF THE ACT. THE EXERCISE UNDER SECTION 143(2) AND (3) FOR REGULAR ASSESSMENT STANDS ON A DIFFERENT FOOTING THAN THE EXERCISE UNDERTAKEN BY T HE AO UNDER SECTION 158BB READ WITH SECTION 158BC(B),WHERE THE ASSESSING OFFICER HAS TO ASSESS ONLY THE UNDISCLOSED INCOME O F THE BLOCK PERIOD ON THE BASIS OF THE EVIDENCE FOUND AND MATER IAL AVAILABLE AS A RESULT OF THE SEARCH CONDUCTED UNDER SECTION 132 OF THE ACT. THE REGULAR ASSESSMENT IS TO ASSESS THE TOTAL INCOME OR LOSS OF THE PREVIOUS YEAR WHERE A RETURN IS FILED UNDER SECTION 139 AND THE AO CONSIDERS IT NECESSARY OR EXPEDIENT UNDER SECTION 1 43(2) TO ENSURE THAT THE ASSESSEE HAD NOT UNDERSTATED THE INCOME OR HAS NOT COMPUTED EXCESSIVE LOSS OR HAS NOT UNDERPAID TAX IN ANY MANNER. THE PROCEEDINGS UNDER THE REGULAR ASSESSMENT AND TH E ASSESSMENT FOR THE BLOCK PERIOD STAND TO OPERATE ON DIFFERENT FIELDS. THEREFORE, THE CONSIDERATIONS WHICH WOULD BE ATTRACTED WHILE M AKING THE ASSESSMENT IN EXERCISE OF THE POWERS UNDER SECTION 143(2) AND (3) FOR THE REGULAR ASSESSMENT WOULD STAND ON A DIFFERE NT FOOTING AND WILL BE GOVERNED BY DIFFERENT PROVISIONS OF THE ACT WHEREAS THE ASSESSMENT FOR THE BLOCK PERIOD AS A RESULT OF THE SEARCH AND SEIZURE WOULD BE GOVERNED BY DIFFERENT PROVISIONS O F THE ACT AND WOULD BE MADE BY THE ASSESSING OFFICER IN ACCORDANC E THEREWITH. THUS, IN SUM AND SUBSTANCE, IT WAS HELD THAT IF NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH, THEN IMPUGNE D AMOUNTS COULD NOT BE SUBJECT MATTER OF BLOCK ASSESSMENT. D) CIT V. VIKRAM A DOSHI[2002) 256 ITR 129(BOM) IN THIS CASE, IT WAS HELD THAT THE TRANSACTIONS WHI CH WERE ALREADY DISCLOSED IN THE RETURNS COULD NOT BE THE SUBJECT MATTER OF B LOCK ASSESSMENT. HOWEVER, EFFECT OF AMENDED DEFINITION OF UNDISCLOSE D INCOME UNDER ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 38 SECTION 158B(B) BY FINANCE ACT, 2001, W.E.F.1-6-200 1 WAS NOT UNDER CONSIDERATION. E) BHAGAWATI PRASAD KEDIA V CIT, [2001) 248 ITR 562 (B OM) IN THIS CASE THE ISSUE WAS WHETHER THE GENUINENESS OF THE LOAN IN QUESTION COULD BE CONSIDERED UNDER THE BLOCK ASSESSMENT WHEN THE LOAN IN QUESTION HAD DULY BEEN ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOUNT FOUND DURING THE COURSE OF SEARCH. IT WAS HELD THAT THE AO WAS NOT ENTITLED TO QUESTION IN BLOCK ASSESSMENT THE LOAN WHICH WAS A SUBJECT MA TER OF THE REGULAR ASSESSMENT. IN THIS CASE NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH TO QUESTION THE GENUINESS OF LOAN. F) CIT V. P.K.GANESHWAR, [2009] 308 ITR 124 (MAD) IN THIS CASE, A SEARCH TOOK PLACE ON 10 TH SEPTEMBER, 1997. THEREAFTER, IN AN INVESTIGATION AFTER THE SEARCH, IT WAS FOUND THA T THE ASSESSEE HAD MADE FIXED DEPOSITS IN FICTITIOUS NAMES. IT WAS HELD TH AT THE FIXED DEPOSIT AMOUNTS COULD NOT BE INCLUDED IN THE UNDISCLOSED IN COME OF THE BLOCK PERIOD BECAUSE THEY WERE NOT DETECTED AS A RESULT OF THE SEARCH BUT BY THE INVESTIGATION WHICH FOLLOWED THE SEARCH. AFTER TAKI NG NOTE OF THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V RAVI KANT JAIN[2006) 250 ITR 141 (DELHI), WHEREIN, IT WAS HEL D THAT BLOCK ASSESSMENT IS NOT INTENDED TO BE A SUBSTITUTE FOR R EGULAR ASSESSMENT AND ITS SCOPE AND AMBIT IS LIMITED IN THAT SENSE TO MATERIA LS UNEARTHED DURING SEARCH AND IT IS IN ADDITION TO THE REGULAR ASSESSM ENT ALREADY DONE OR TO BE DONE, THE HONBLE MADRAS HIGH COURT HELD THAT SINCE THE INFORMATION RELATING TO THE FIXED DEPOSITS IN FICTITIOUS NAMES WAS NOT FOUND DURING THE COURSE OF SEARCH, IT COULD NOT BE USED TO ARRIVE AT THE UNDISCLOSED INCOME UNDER THE BLOCK ASSESSMENT UNDER SECTION 158BB. HER E ALSO NO INCRIMINATING MATERIAL WAS FOUND TO QUESTION THE GE NUINESS OF FIXED DEPOSITS. ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 39 G) CIT V. RAVI KANT JAIN, 250 ITR 141 (DELHI) IN THIS CASE, A SEARCH WAS CONDUCTED ON 30 TH NOVEMBER, 1996. THE ASSESSEE IN ITS RETURN FILED IN PURSUANCE TO NOTICE U/S.158BC STATED THAT THERE WAS NO UNDISCLOSED INCOME FOR THE BLOCK PERIO D. HOWEVER, SINCE THE SEIZED MATERIAL AND THE BOOKS OF ACCOUNT WERE OF CO MPLEX NATURE IN THE BLOCK ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER , WITH THE APPROVAL OF THE COMMISSIONER OF INCOME TAX, APPOINTED SPECIAL A UDITORS. ON THE BASIS OF THE REPORT OF THE SPECIAL AUDITORS AND THE SEIZE D MATERIAL, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE INCOME WAS TO BE T AXED AS BUSINESS INCOME AND NOT AS CAPITAL GAINS AND, ACCORDINGLY, MADE A B LOCK ASSESSMENT. IT WAS HELD THAT SINCE UNDISCLOSED INCOME WAS NOT DETERMIN ED ON THE BASIS OF ANY SEARCH MATERIAL, IT WAS FOUND DURING THE COURSE OF SEARCH, SECTION 158BA HAD NO APPLICATION TO THE FACTS OF THE CASE. HERE A LSO NO MATERIAL WAS FOUND DURING THE COURSE OF SEARCH TO SUGGEST THAT A SSESSEE HAD NOT DISCLOSED ITS INCOME. H) DANG & CO. (P)LTD V DCIT, [2005) 94 ITD 29 (DELHI)(TM) IN THIS CASE, THE ASSESSEE WAS AN ESTATE AGENT. AN AMOUNT OF RS.55 LAKHS WAS STANDING AS BALANCE TO THE CREDIT OF ONE C AND IT WAS SHOWN IN THE BALANCE SHEET FILED BY THE ASSESSEE ALONGWITH THE REGULAR RETURNS OF INCOME FOR THE ASSESSMENT YEAR 1994-95. THE LEARNED THIRD MEMBER HELD THAT T HE GENUINENESS OF THE AMOUNT COULD HAVE BEEN GONE INTO ONLY IN THE CASE O F REGULAR ASSESSMENT WHEN THE ASSESSEE HAD DULY DISCLOSED THE AMOUNT IN ITS BALAN CE SHEET. THE ASSESSEE HAD DISCHARGED ITS PART OF THE OBLIGATION BY DISCLOSING THE AMOUNT IN THE BALANCE SHEET AND BY FILING THE RETURN. IT WAS NOT THE ASSESSEE S FAULT THAT NO ASSESSMENT WAS MADE. THUS, IT WAS HELD THAT THE ASSESSEE COULD NO T RESORT TO BLOCK ASSESSMENT PROCEEDING TO GO INTO THE GENUINENESS OF THE LOAN. HERE ALSO NO MATERIAL WAS FOUND DURING THE COURSE OF SEARCH TO QUESTION THE G ENUINESS OF LOAN. ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 40 I) MORARJEE GOCULDAS SPG & W VG. CO. LTD V. DCIT[2005] 95 ITD 1(MUM) (TM). IN THIS CASE, A SEARCH WAS CONDUCTED U/S.132 AS A S EQUEL TO ALL INDIA INVESTIGATIONS IN RESPECT OF THE LEASE TRANSACTIONS ENTERED INTO BY A LARGE NUMBER OF ASSESSES WHO CLAIMED 100 PER CENT DEPRECI ATION ON LEASED ASSETS. CONSEQUENT TO RETURN FILED U/S.158BC, AN A SSESSMENT WAS MADE BY THE ASSESSING OFFICER UNDER SECTION 158BC(C) DISALL OWING THE ASSESSEES CLAIM FOR 100 PER CENT DEPRECIATION ON LEASED ASSETS ON THE GROUND THAT T HE LEASE TRANSACTIONS CLAIMED BY THE ASSESSEE WERE ONL Y ON PAPER AND THE ASSESSEE HAD FALSELY CLAIMED 100 PER CENT DEPRECIAT ION ALLOWANCE AND THAT THE AMOUNT OF DEPRECIATION ALLOWANCE CLAIMED BY THE ASSESSEE REPRESENTED ASSESSEES UNDISCLOSED INCOME. THE SAID DISALLOWAN CE WAS DISPUTED BY THE ASSESSEE ON THE GROUND THAT NO MATERIAL WAS FOU ND IN THE SEARCH WHICH COULD LEAD TO AN INFERENCE THAT ASSESSEES CLAIM FO R DEPRECIATION WAS DISALLOWED. THE LEARNED THIRD MEMBER, INTER ALIA, HELD AS UNDER: . THE CORE THING TO BE SEEN IS THE EVIDENCE FOUND WHICH WILL BE THE BASIS FOR MAKING THE ASSESSMENT. IF THERE IS NO EVIDENCE OR THE EVIDENCE HAS ALREADY COME ON RECORD OR HAS BEEN DIS CLOSED BY THE ASSESSEE IN THE ASSESSMENT PROCEEDINGS, THEN THAT E VIDENCE CANNOT BE SAID TO BE HAVE BEEN FOUND AS A RESULT OF SEARCH AND IN THAT CASE, THE MATERIAL OR INFORMATION AVAILABLE WITH THE ASSESSING OFFICER AND RELATABLE TO SUCH EVIDENCE CANNOT ALSO HELP IN COMPUTING UNDISCLOSED INCOME. THUS, THE INFORMATION WHICH THE DEPARTMENT WAS IN P OSSESSION OF PRIOR TO SEARCH WAS NOT VINDICATED BY ANY MATERIAL FOUND DURING THE SEARCH. THE AO MERELY DRAWN CONCLUSION BASED ON PRE-SEARCH ENQUIRIES THAT ASSES SEE HAD INCORRECTLY CLAIMED DEPRECIATION. NO MATERIAL WAS FOUND TO SUGGEST THE SAME DURING SEARCH OPERATIONS. J) SUNDER AGENCIES V DCIT, 63 ITD 245(MUMBAI) IN THIS CASE, SEARCH AND SEIZURE ACTION WAS CONDUCT ED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 16.11.1995. AMONG OTHER THINGS, A GIFT ITEM REGISTER WAS FOUND. THE REGISTER CONTAINED SOME ENTRIES FOR THE PERIOD 1994-95. IT WAS NOT ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 41 COMPLETE. CERTAIN PRESUMPTIONS WERE DRAWN BY THE A O ON THE BASIS OF THAT REGISTER AND ADDITIONS WERE MADE IN THE BLOCK ASSES SMENT FOR ALL THE YEARS. IT WAS HELD THAT UNDER THE PROVISIONS OF THIS CHAPTER XIV-B THE UNDISCLOSED INCOME DETECTED AS A RESULT OF SEARCH INITIATED OR REQUISITION MADE AFTER 30.6.1995 BE ASSESSED SEPARATELY AS INCOME OF THAT BLOCK OF TEN PREVIOUS YEARS. THE PROVISION WAS INTRODUCED TO STREAMLINE THE PROCEDURE CONCERNING THE SEARCH MATTES. IT IS ABUNDANTLY CLEAR FROM THE PERUSAL OF THE PRESCRIPTION OF SECTION 158BA THAT WITHIN PALE OF CHAPTER XIV-B ASSESSMENT COULD BE MADE ONLY IN RESPECT OF THE UNDISCLOSED INCOME AND SUCH UNDISCLOSED INCOME MUST COME AS A RESULT OF SEARCH. SECTION 158BA DOES NOT PROVIDE A LICENSE TO REVENUE FOR MAKING ROVING ENQUIRIES CONNECTED WITH COMPLETED ASSESSMENTS AND IT IS BEYOND POWER OF THE ASSESSING OFFICER TO REVIEW THE ASSESSMENT COMPLETED UNLESS SOME DIRECT EVIDENCE COMES TO THE KNOWLEDGE OF THE DEPARTMENT AS A RESULT OF SEARCH WHICH INDICATES CL EARLY THE FACTUM OF UNDISCLOSED INCOME. WITHOUT SUCH EVIDENCE OR MATER IAL THE ASSESSING OFFICER IS NOT EMPOWERED TO DRAW ANY PRESUMPTION AS TO THE EXISTENCE OF UNDISCLOSED INCOME. A PRESUMPTION IS AN INFERENCE OF FACT DRAW N FROM OTHER KNOWN OR PROVED FACTS. IT IS RULE OF LAW UNDER WHICH COURTS ARE AUTHORIZED TO DRAW A PARTICULAR INFERENCE FROM A PARTICULAR FACT, UNTIL AND UNLESS THE TRUTH OF SUCH INFERENCE IS DISPROVED BY OTHER EVIDENCE. THE SCHE ME OF CHAPTER XIV-B DOES NOT GIVE POWER TO THE REVENUE TO DRAW THE PRESUMPTI ONS IN REGARD TO THE UNDISCLOSED INCOME. THE AO COULD PROCEED ON THE BAS IS OF MATERIAL DETECTED AT THE TIME OF SEARCH AND THE EVIDENCE GATHERED. I N THIS DECISION IT WAS HELD THAT THERE IS NO SCOPE OF PRESUMPTIONS IN BLOCK ASS ESSMENT. THERE CANNOT BE ANY QUARREL WITH THIS PROPOSITION. 36. NOW WE WILL CONSIDER THE RELIANCE PLACED BY LD D.R. I) CIT V AJAY KUMAR SHARMA [2002) 259 ITR 240(RAJ) IN THIS CASE, IT WAS HELD THAT MERELY BECAUSE SOME ENTRIES WERE SHOWN IN THE BOOKS OF ACCOUNT THAT DID NOT PROHIBIT THE ASSE SSING OFFICER FROM ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 42 TAXING THAT AMOUNT IN THE BLOCK PERIOD, IF THAT AMO UNT HAD NOT BEEN TAXED IN THE REGULAR ASSESSMENT. IT WAS HELD THAT IF THE CASH CREDITS WERE NOT TAXED IN THE RELEVANT ASSESSMENT YEARS, THEY CAN BE TREATED AS UNDISCLOSED INCOME AND CAN BE TAXED AFTER SEARCH IN BLOCK PERIO D. THUS, IT WAS HELD THAT ON THE BASIS OF SEARCH, ENQUIRIES CAN BE CONDU CTED IN ORDER TO FIND OUT THE GENUINENESS OF THE CASH CREDITS. AT THIS JUNCT URE, WE MAY POINT OUT THAT LD COUNSEL FOR THE ASSESSEE HAS DISTINGUISHED THIS DECISION BY POINTING OUT THAT IN THIS CASE ALSO DURING THE COURSE OF SEA RCH , INCRIMINATING AND LOOSE PAPERS PERTAINING TO THE ASSESSEE WERE FOUND. THE HONBLE HIGH COURT REVERSED THE DECISION OF THE TRIBUNAL, WHEREI N, IT WAS HELD THAT ONCE THE CASH DEPOSITS HAVE BEEN SHOWN IN THE BOOKS OF A CCOUNT MAINTAINED BY THE ASSESSEE IN THE REGULAR COURSE OF BUSINESS, THE N ADDITION IS NOT WARRANTED IN BLOCK ASSESSMENT. THE HONBLE RAJASTH AN HIGH COURT HAS, INTER ALIA, OBSERVED AS UNDER:- HOWEVER, WE AGREE WITH MR SINGH THAT MERELY BECAUSE SOME ENTRIES IN THE BOOKS OF ACCOUNT IF SHOWN, THAT DOES NOT PROHIBIT THE ASSESSING OFFICER TO TAX THAT AMOUNT IN THE BLOCK P ERIOD, IF THAT AMOUNT HAS NOT BEEN TAXED IN THE REGULAR ASSESSMENT . WHEN THE CASH CREDITS ARE NOT TAXED IN THE RELEVANT ASSESSME NT YEARS, THAT CAN BE TREATED AS UNDISCLOSED INCOME AND CAN BE TAX ED AFTER SEARCH IN THE BLOCK PERIOD. II) TRIUMPH INTERNATIONAL FINANCE INDIA LTD V. DCIT (IT (SS)330/2004 FOR THE BLOCK PERIOD 1.4.90 TO 23.3.2001. IN THIS CASE, THE TRIBUNAL UNDER IDENTICAL CIRCUMST ANCES HAS HELD AS UNDER: 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ARE OF T HE VIEW THAT EVEN IT IS ASSUMED THAT THE DATA FOUND DURING THE SEARCH WAS P ART OF THE BOOKS OF ACCOUNT OF THE ASSESSEE BUT THE REAL NATURE OF THE TRANSACTIONS RECORDED IN THE COMPUTERS OF THE ASSESSEE SAW THE LIGHT OF THE DAY ON THE BASIS OF THE MATERIAL FOUND DURING THE SEARCH AND FOLLOW UP INQU IRY MADE BY THE INCOME TAX AUTHORITIES. WE ARE ALSO IN AGREEMENT W ITH THE FINDING OF THE CIT (A) THAT THE ASSESSEE HAS FAILED TO EXPLAIN SAT ISFACTORILY THE REAL NATURE OF CLIENTS ID MISMATCH. THE DEFINITION OF UNDISCLO SED INCOME AS LAID DOWN IN SECTION 158B(B) IS AN INCLUSIVE DEFINITION AND AS SUCH, THE INGREDIENTS OF UNDISCLOSED INCOME, NEED NOT TO BE L IMITED TO WHAT IS DESCRIBED IN THE DEFINITION BUT SHALL ALSO INCLUDE ITEMS WHICH PARTAKE THE CHARACTER OF INCOME IN TERMS OF ANY ITEM WHICH WAS NOTICED OR DISCOVERED ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 43 AS A RESULT OF SEARCH. IN OUR VIEW, THE CIT (A) HA S RIGHTLY UPHELD THE VIEW OF THE ASSESSING OFFICER THAT THE INCOME ARISING OU T OF THE SAID ID MISMATCH IS ASSESSABLE AS UNDISCLOSED INCOME UNDER CHAPTER XIV-B OF THE INCOME TAX ACT. 7. THE FACT THAT THE PROCEEDINGS WERE INITIATED FOR ASSESSMENT YEAR 1998-99 TO REFER THE MATTER FOR SPECIAL AUDIT U/S.142(2A) O N THE BASIS OF MISMATCH, DOES NOT MEAN THAT THE TRUE NATURE OF THESE ENTRIES WERE ALSO DISCLOSED BY THE ASSESSEE. THE REAL NATURE OF THESE ENTRIES I.E ID MISMATCH ENTRIES WERE KNOWN AFTER THE MATERIAL FOUND DURING THE SEARCH AN D INQUIRIES MADE THEREAFTER. THE INCOME IMPLICATIONS OF THE SAID ID MISMATCH ENTRIES HAVE BEEN RIGHTLY ASSESSED AS UNDISCLOSED INCOME. THE F IRST GROUND OF THE ASSESSEES APPEAL IS DISMISSED. 37. FROM THE ABOVE DECISIONS, FOLLOWING PRINCIPLES CAN BE DISCERNED: I) THE BLOCK ASSESSMENT IS IN ADDITION TO REGULAR ASSE SSMENT AND NOT IN SUBSTITUTION TO THE REGULAR ASSESSMENT. II) IN THE BLOCK ASSESSMENT, UNDISCLOSED INCOME IS TO B E DETERMINED ON THE BASIS OF EVIDENCE FOUND DURING THE COURSE OF SEARCH AND SUCH OTHER MATERIAL OR INFORMATION RELATABLE TO SUCH INFORMATION. IF NO I NCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH, THEN THE IMPUGNE D AMOUNT CANNOT BE SUBJECTED TO BLOCK ASSESSMENT AND HAVE TO BE ASSESS ED UNDER THE REGULAR ASSESSMENT. III) POST SEARCH ENQUIRIES CAN BE CARRIED OUT IN ORDER T O FIND THE UNDISCLOSED INCOME EMBEDDED IN THE EVIDENCE DURING THE COURSE O F SEARCH. IN THE BACKDROP OF ABOVE DISCUSSION, LET US NOW EX AMINE THE SPECIFIC ISSUES, AS NOTED EARLIER. A) WHETHER BOOKS OF ACCOUNT MAINTAINED IN REGULAR COUR SE OF BUSINESS FOUND DURING THE COURSE OF SEARCH CONSTITUTE EVIDENCE A S CONTEMPLATED U/S.158BB OF THE ACT OR NOT? ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 44 38. SECTION 132 DEALS WITH THE PROVISIONS RELATING TO SEARCH AND SEIZURE AND IF THE AUTHORITIES MENTIONED IN THE SAID SECTION HAVE REAS ON TO BELIEVE THAT ANY PERSON TO WHOM SUMMON HAS BEEN ISSUED TO PRODUCE ANY BOOKS OF ACCO UNT OR OTHER DOCUMENTS OMITTED OR FAILED TO PRODUCE THE SAME OR THE AUTHORITY HAS REA SON TO BELIEVE THAT THE PERSON TO WHOM SUMMON OR NOTICE HAS BEEN ISSUED BUT THE SAID PERSO N WOULD NOT PRODUCE THE BOOKS OF ACCOUNT OR DOCUMENTS, THEN SEARCH CAN BE CARRIED OU T. SECTION 158 BB CLEARLY STATES THAT UNDISCLOSED INCOME IS TO BE COMPUTED, INTER ALIA, O N THE BASIS OF BOOKS OF ACCOUNT OR REQUISITION OF SUCH BOOKS. 39. SECTION 3 OF THE EVIDENCE ACT DEFINES FOLLOWING WORDS AS UNDER: 'FACT' - 'FACT' MEANS AND INCLUDES - 1. ANYTHING, STATE OF THINGS, OR RELATION OF THINGS , CAPABLE OF BEING PERCEIVED BY THE SENSES; 2. ANY MENTAL CONDITION OF WHICH ANY PERSON IS CONS CIOUS. AS PER THE FIRST ILLUSTRATION GIVEN IN SECTION 3, THERE ARE CERTAIN OBJECTS ARRANGED IN A CERTAIN ORD ER IN A CERTAIN PLACE, IS A FACT. THE TERM DOCUMENT AS DEFINED IN SECTION 3 MEANS ANY MATTER, EXPRESS ED OR DESCRIBED, UPON ANY SUBSTANCE, BY MEANS OF LETTER, FIGURES OR MARKS, OR BY MORE THAN ONE OF THOSE MEANS, INTENDED TO BE US ED, OR WHICH MAY BE USED, FOR THE PURPOSE OF RECORDING THA T MATTER. THE MEANING OF EVIDENCE, INTER ALIA, INC LUDES DOCUMENTS INCLUDING WRITING PAD PRODUCED FOR THE IN SPECTION OF THE COURT. THE TERM RELEVANT HAS BEEN DEFINED, AS UNDER:- 'RELEVANT' - ONE FACT IS SAID TO BE RELEVANT TO ANOTHER WHEN THE ONE IS CONNECTED WITH THE OTHER IN ANY OF THE WAYS REFERRED TO IN THE PROVISIONS OF TH IS ACT RELATING TO THE RELEVANCY OF FACTS. SECTION 34 OF THE EVIDENCE ACT READS AS UNDER:- ENTRIES IN BOOKS OF ACCOUNT WHEN RELEVANT- ENTRIES IN BOOKS OF ACCOUNT, REGULARLY KEPT IN THE COURSE OF BUSINESS , ARE RELEVANT WHENE VER THEY REFER TO A MATTER INTO WHICH THE ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 45 COURT HAS TO INQUIRE, BUT SUCH STATEMENTS SHALL NOT ALONE BY SUFFICIENT EVIDENCE TO CHARGE ANY PERSON WITH LIABILITY. 40. THE TERM 'DOCUMENT' HAS BEEN DEFINED IN BLACKS LAW DICTIONARY AS UNDER: AN INSTRUMENT ON WHICH IS RECORDED, BY MEANS OF LET TERS, FIGURES OR MARKS, THE ORIGINAL, OFFICIAL, OR LEGAL FORM OF SOMETHING, WHICH MAY BE EVIDENTIAL LY USED. IN THIS SENSE, THE TERM DOCUMENT APPLIES TO WRITINGS, TO WORDS PRINTED LITHOGRAPHED OR PHOTOGRAPHED; TO MAPS OR PLANS; TO SEALS, PLATES, OR EVEN STONES ON WHICH INSCRIPTIONS ARE CU T OR ENGRAVED. IN THE PLURAL, THE DEEDS, AGREEMENTS, TITLE PAPER, LETTERS, RECEIPTS AND OTHE R WRITTEN INSTRUMENTS USED TO PROVE A FACT. USED AS A VERB, TO SUPPORT WITH DOCUMENTARY EVIDENCE OR AUTHORITIES. 41. THEREFORE, THE REGULAR BOOKS OF ACCOUNT WHICH R ECORD THE RELEVANT FACTS IN DOCUMENTARY FORM HAVE TO BE TREATED AS EVIDENCE IN TERMS OF SECTION 158BB. B) WHETHER THE TRANSACTIONS RECORDED IN THE REGULAR BOOKS OF ACCOUNT CAN BE SUBJECT MATTER OF ADDITION IN BLOCK ASSESSME NT OR NOT? 42 . AS PER SECTION 158B(B), IF AN ENTRY OR TRANSACTION IN THE BOOKS OF ACCOUNT REPRESENTS WHOLLY OR PARTLY INCOME OR PROPERTY WHIC H HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED THEN SAME COMES WITHIN THE PURVIEW O F UNDISCLOSED INCOME. THE TERM ENTRY HAS BEEN DEFINED IN BLACKS LAW DICTIONARY AS UNDER: THE ACT OF MAKING OR ENTERING A RECORD, A SETTING D OWN IN WRITING OF PARTICULARS, OR THAT WHICH IS ENTERED, AN ITEM GENERALLY SYNONYMOUS WITH RECORDIN G. THE TERM TRANSACTION HAS BEEN DEFINED IN BLACKS LAW DICTIONARY AS UNDER :- ACT OF TRANSACTING OR CONDUCTING ANY BUSINESS, NEGO TIATION; MANAGEMENT PROCEEDINGS; THAT WHICH IS DONE; AN AFFAIR. IT MAY INVOLVE SELLING, LEASIN G, BORROWING, MORTGAGING OR LENDING. SOME ACTION HAS ARISEN. IT MUST THEREFORE CONSIST OF AN ACT OR AGREEMENT, OR SEVERAL ACTS OR AGREEMENTS HAVING SOME CONNECTION WITH EACH OTHER, IN WHICH MORE THAN ONE PERSON IS CONCERNED, AND BY WHICH THE LEGAL RELATIONS OF SUCH PERSONS BETWEEN THEMSELVES ARE ALTERED. IT IS A BROADER TERM THAN CONTACT. IT IS PERTINENT TO NOTE THAT DEFINITION USES BOTH T HE TERMS VIZ. ENTRY AND TRASACTION. THE OBJECT IS TO COVER ALL FACTS STATED IN THE BOOKS OF ACCOUNT. MERE RECORDING OF TRANSACTION ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 46 IN THE BOOKS OF ACCOUNT IS OF NO CONSEQUENCE UNLESS THE TRUE INCOME HAS BEEN DISCLOSED. IF IN THE COURSE OF SEARCH ANY MATERIAL IS FOUND, W HICH, PRIMA-FACIE SHOWS THAT THE TRANSACTION RECORDED IN THE BOOKS OF ACCOUNT DOES NOT DISCLOSE THE ASSESSEES INCOME THEN ON THE BASIS OF MATERIAL FOUND, INFERENCE IS T O BE DRAWN ABOUT THE TRUE NATURE OF THE TRANSACTION, FOR DETERMINATION OF UNDISCLOSED INCO ME IN BLOCK ASSESSMENT. THE MATERIAL FOUND DURING THE COURSE OF SEARCH LEADS TO A CONTR ARY INFERENCE THAN AS CONTEMPLATED U/S.132(4A) REGARDING THE CORRECTNESS OF THE ENTRY IN THE BOOKS OF ACCOUNT. HOWEVER, IF NO MATERIAL IS FOUND DURING THE COURSE OF SEARCH TH EN TRANSACTIONS IN REGULAR BOOKS CANNOT BE THE SUBJECT MATTER OF BLOCK ASSESSMENT. 43. THEREFORE, WE CONCLUDE THAT IF THE MATERIAL HAS BEEN FOUND DURING THE COURSE OF SEARCH FROM WHICH, IT CAN BE CONCLUDED THAT THE TRA NSACTIONS RECORDED IN THE BOOKS OF ACCOUNT DO NOT DISCLOSE THE ASSESSEES TRUE INCOME THEN SUCH TRANSACTIONS ARE TO BE CONSIDERED IN THE BLOCK ASSESSMENT. C) WHETHER THE CLIENT ID MISMATCH FOUND DURING THE COURSE OF SEARCH CONSTITUTE MATERIAL AS CONTEMPLATED U/S.158BB(1) OR NOT PARTICULARLY WHEN PUNCHING OF CLIENT ID WAS NOT MANDATORY PRE-AU GUST 2001? 44 . IN PARA 12.2 OF THE ASSESSMENT ORDER, THE AO OBSERV ED THAT ON THE BASIS OF DATA AND ON THE BASIS OF FURTHER EVIDENCES GATHERED, IT HAS BEEN OBSERVED THAT IN SOME OF THE TRANSACTIONS THERE ARE DIFFERENCE AS REGARDS THE ID ENTITY OF THE PARTY/CLIENT ON WHOSE BEHALF THE TRANSACTION IS UNDERTAKEN AS FOUND IN TH E BOOKS OF THE ASSESSEE AND WHAT IS RECORDED IN THE RECORDS OF STOCK EXCHANGE. THUS, I T HAD BEEN OBSERVED THAT THERE ARE CERTAIN DISCREPANCIES AS TO THE CLIENT CODE AS PER THE STOCK EXCHANGE RECORD VIS-A-VIS REGULARLY MAINTAINED BOOKS OF ACCOUNT OF THE ASSESS EE. 45. LD CIT (A) IN PARA 4.6 OF HIS ORDER HAS, INTER ALIA, OBSERVED AS UNDER:- ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 47 IN CASE OF THE ASSESSEE, DURING THE COURSE OF SEARC H FROM THE MATERIAL AND OTHER EVIDENCES GATHERED, IT WAS OBSERVED THAT IN S OME OF THE TRANSACTIONS THERE WAS DIFFERENCES IN IDENTITY OF THE PARTY/CLI ENT BETWEEN ASSESSEES RECORD AND THOSE OF STOCK EXCHANGE. IN OTHER WORDS , THE CLIENTS IN RESPECT OF WHOM THE TRANSACTIONS WERE BEING CARRIED OUT BY THE ASSESSEE SHOWED DIFFERENT IDENTITIES IN THE ASSESSEES RECORD WHEN COMPARED WITH THE RECORD OF THE STOCK EXCHANGE. TO BE PRECISE IT WAS NOTED THAT IN SOME OF THE TRANSACTIONS CLIENT CODE SHOWN IN THE STOCK EXC HANGE RECORD AT THE TIME OF STRIKING THE TRADE IS DIFFERENT FROM CLIENT CODE SHOWN IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE MATTER WAS EXAMINE D FURTHER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE STATUTORY AU DITOR APPOINTED UNDER SECTION 142(2A) WAS ALSO ASKED TO EXAMINE THE MATTE R ON BEHALF OF THE AO IN GREATER DETAILS. IT WAS FOUND ON EXAMINATION TH AT IN LARGE NUMBER OF CASES CLIENT ID CODE AS APPEARING ON THE RECORD OF STOCK EXCHANGE DID NOT MATCH WITH THE RECORDS OF THE ASSESSEE. THE AO EXA MINED THE DATA RELATING TO SUCH MISMATCH FOR SEVERAL OF THE YEARS OF THE BLOCK ASSESSMENTS. THE AO WAS ALSO OF THE VIEW THAT THIS FINDING WAS THE RESULT OF THE SEARCH AND ITS FOLLOW UP ENQUIRY AND THE AO WAS FURTHER VIEW BUT FOR SEARCH OPERATION SUCH FINDING COULD NOT HAVE BE EN THERE.. FROM THE ABOVE OBSERVATIONS, IT IS CLEAR THAT DURIN G THE COURSE OF SEARCH, DIFFERENT CLIENT ID MISMATCH WAS NOTICED. NOW THE QUESTION ARISES WH ETHER THIS CLIENT ID MISMATCH CONSTITUTES MATERIAL IN TERMS OF SECTION 158BB OR NOT PARTICULARLY WHEN PUNCHING OF CLIENT ID WAS NOT MANDATORY PRE-AUGUST 2001? LD. CO UNSEL FOR THE ASSESSEES CONTENTION IS THAT SINCE THIS ASPECT WAS WITHIN THE KNOWLEDGE OF THE DEPARTMENT PRIOR TO THE DATE OF SEARCH, THEREFORE, IT CANNOT CONSTITUTE MATERIAL FO UND DURING THE COURSE OF SEARCH. HIS FURTHER SUBMISSION IS THAT SINCE PUNCHING OF CLIENT ID WAS NOT MANDATORY, THEREFORE, IT CANNOT A BASIS FOR ADDITION. WE FIND IT DIFFICULT T O ACCEPT THIS PROPOSITION. SEARCH AND SEIZURE ACTION IS CARRIED OUT TO UNEARTH THE CONCEA LED INCOME. SEARCH ACTION IS A SERIOUS ENCROACHMENT ON RIGHT TO PRIVACY OF AN INDIVIDUAL. THEREFORE, THIS ACTION IS TO BE TAKEN WITH DUE CARE AND PRECAUTION. TO ENSURE THIS, INCOM E-TAX DEPARTMENT HAS A SEPARATE WING CALLED INVESTIGATION WING WHICH GATHERS INFORMATION FROM VARIOUS SOURCES E.G. BANKS, FINANCE COMPANIES, BULLION MARKET, STOCK EXCHANGE, ETC. THERE CAN BE IN-NUMERABLE ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 48 CHANNELS FOR COLLECTION OF INFORMATION. BUT, UNLESS THERE IS REASONABLE CERTAINTY OF CONCEALED INCOME BEING FOUND, THE DEPARTMENT DOES N OT PROCEED. THIS IS EVIDENT FROM THE OPENING PHRASE IN SECTION 132 AS PER WHICH THE AUTHORISED OFFICER SHOULD HAVE REASON TO BELIEVE REGARDING CONCEALED INCOME IN THE FORM O F MONEY, BULLION , ASSET OR ANY INCOME NOT DISCLOSED IN THE BOOKS OF ACCOUNT. ALL T HE INFORMATIONS GATHERED PRIOR TO SEARCH CULMINATE IN FORMATION OF BELIEF REGARDING C ONCEALMENT. THEREFORE, THESE INFORMATIONS PRIMARILY CONSTITUTE THE EDIFICE ON WH ICH THE ENTIRE SEARCH OPERATION IS BASED. AS A MATTER OF FACT SEARCH OPERATION ONLY FA CILITATES IN CONFIRMING SUCH INFORMATIONS. IN THE PRESENT CASE FIRSTLY, THOUGH T HIS FACT WAS IN THE KNOWLEDGE OF THE DEPARTMENT PRIOR TO THE SEARCH ITSELF BUT THAT WAS IN THE CASE OF TRIUMPH INTERNATIONAL FINANCE (I) LTD AND NOT IN ASSESSEES CASE AS IS EV IDENT FROM PAGE 20 OF PB, WHICH IS THE ORDER OF APPROVAL U/S.142(2A) DATED 23.3.2001 IN TH E CASE OF TRIUMPH INTERNATIONAL FINANCE (I) LTD WHICH INCIDENTALLY WAS THE DATE OF SEARCH IN CASE OF ASSEESSEE ALSO. SECONDLY, AT BEST IT CAN BE SAID THAT THE DEPARTMEN T HAD INFORMATION ONLY REGARDING MISMATCH IN CASE OF KETAN PAREKH GROUP BUT WHEN IN THE COURSE OF SEARCH, CLIENT ID MISMATCH WAS ACTUALLY FOUND THAT INFORMATION GOT V INDICATED AND CONSTITUTES MATERIAL RELATABLE TO EVIDENCE BEING REGULAR BOOKS OF ACCOUN T FOUND DURING THE COURSE OF SEARCH IN TERMS OF SECTION 158BB AND, THEREFORE, CAN BE TAKEN INTO CONSIDERATION FOR THE PURPOSES OF BLOCK ASSESSMENT. THE AUTHORIZED OFFICERS WERE IN POSSESSION OF VARIOUS INFORMATIONS IN THE FORM OF JPC REPORT ALSO BUT IN THE COURSE OF SE ARCH WHEN CLIENT ID MISMATCH WAS FOUND THEN THE SAME COULD BE CONSIDERED FOR BLOCK A SSESSMENT PURPOSES. BEFORE JPC, SHRI KETAN PAREKH HAD ADMITTED THAT HE WAS CARRYING ON THE TRANSACTIONS IN THE NAME OF OTHER PERSONS AND THE CLIENT ID MISMATCH FOUND DURI NG THE COURSE OF SEARCH VINDICATED THE ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 49 SAID INFORMATION. IN OUR OPINION, WHETHER THE PUNC HING OF CLIENT ID WAS MANDATORY OR NOT CANNOT BE OVEREMPHASIZED IN THE BACKDROP OF ADM ISSION MADE BY ASSESSEE BEFORE JPC AND FINDINGS OF SPECIAL AUDITORS. WE, THEREFORE, HO LD THAT CLIENT ID MISMATCH FOUND DURING THE COURSE OF SEARCH AND SUBSEQUENT ENQUIRIE S CARRIED OUT IN THAT REGARD COULD BE TAKEN INTO CONSIDERATION FOR BLOCK ASSESSMENT PROCE EDINGS. D) WHETHER POST SEARCH ENQUIRIES AND INVESTIGATIONS IN REGARD TO RECORDED TRANSACTIONS SUCH AS TAX AUDIT AND ENQUIRI ES FROM THE STOCK EXCHANGE COULD BE RESORTED TO FOR DETERMINING THE U NDISCLOSED INCOME OR NOT? 46. THE UNDISCLOSED INCOME IS TO BE COMPUTED ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH AND SUCH OTHER MATERIAL OR INFORMA TION AS ARE AVAILABLE WITH THE AO AND RELATABLE TO SUCH EVIDENCE. THUS, ON THE DATE OF P ASSING THE BLOCK ASSESSMENT ORDER, THE AO HAS TO TAKE INTO CONSIDERATION THE INFORMATION R ELATABLE TO THE EVIDENCE FOUND DURING THE COURSE OF SEARCH, WHICH IS AVAILABLE WITH HIM. THE BLOCK ASSESSMENT IS A COMPLETE PROCEDURE OF ASSESSMENT AS CONTEMPLATED FOR REGULAR ASSESSMENT AND HE HAS TO COMPLY WITH ALL THE CONDITIONS WHICH ARE THERE IN THE REGU LAR ASSESSMENT. HE HAS TO SCRUTINIZE IN DETAIL THE EVIDENCE AND MATERIAL FOUND DURING THE C OURSE OF SEARCH AND ALSO TO TAKE INTO CONSIDERATION THE INFORMATION AVAILABLE WITH HIM TO FIND OUT WHETHER THE INCOME WHICH SHOULD HAVE BEEN DISCLOSED IN THE BOOKS OF ACCOUNT HAS ACTUALLY BEEN DISCLOSED OR NOT. THE AO HAS TO EXAMINE THE MATERIAL FOUND DURING THE COURSE OF SEARCH IN ORDER TO FIND OUT THE REAL ELEMENT OF UNDISCLOSED INCOME EMBEDDED IN THE MATERIAL FOUND AND FOR THAT PURPOSES INFERENCES HAVE TO BE DRAWN FROM THE MATER IAL FOUND. A COMPLETE SCRUTINY OF THE MATERIAL FOUND DURING THE COURSE OF SEARCH HAS TO BE CARRIED OUT. HOWEVER, IF AFTER ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 50 COMPLETE SCRUTINY OF ALL THE MATERIALS FOUND DURING THE COURSE OF SEARCH, HE REACHES A CONCLUSION THAT NO PART OF THE UNDISCLOSED INCOME I S EMBEDDED IN THE TRANSACTION RECORDED IN THE BOOKS OF ACCOUNT, THEN NO ADDITION IS CALLED FOR AND WHATEVER HAS BEEN DISCLOSED IN THE REGULAR RETURN OF INCOME IS TO BE TAKEN INTO CONSIDERATION WHILE AGGREGATING THE TOTAL INCOME. 47. SECTION 158BC(D) MAKES THE PROVISIONS OF SECTI ONS 142, 143(2), 143(3) AND 144 ALSO ARE APPLICABLE TO THE ASSESSMENT TO BE MADE UN DER THIS CHAPTER. THEREFORE, THE AO WILL BE ENTITLED TO MAKE THE ENQUIRIES U/S.143(2) D URING THE PROCEEDINGS U/S.158BC AS WELL AND THE WORDS SUCH OTHER MATERIAL OR INFORMAT ION AS ARE AVAILABLE WITH THE AO AND RELATABLE TO SUCH EVIDENCE SHALL BE CONSTRUED, INT ER ALIA, TO INCLUDE ALL SUCH INFORMATION WHICH IS COLLECTED IN POST SEARCH ENQUIRIES, IF THE Y ARE RELATABLE TO THE EVIDENCE COLLECTED. SINCE ALL THE PROVISIONS OF SECTION 142 ARE APPLICA BLE TO ASSESSMENT UNDER THIS CHAPTER, IT IS ALWAYS OPEN TO THE AO TO RESORT TO THE PROVISION S OF SECTION 142(2A) WHICH DEALS WITH THE COMPULSORY AUDIT AND THE FINDINGS OF COMPULSORY AUDIT HAVE TO BE TAKEN INTO CONSIDERATION WHILE DETERMINING THE UNDISCLOSED INC OME. THUS, IT IS CLEAR FROM THE BARE READING OF PROVISIONS OF SECTION 158BB THAT SUBSEQU ENT INFORMATION WHICH IS RELATABLE TO THE EVIDENCE GATHERED CAN BE TAKEN INTO CONSIDERATI ON. E) WHETHER ANY ADDITION COULD BE MADE IN RESPECT OF THE TRANSACTIONS RESULTING INTO CLIENT ID MISMATCH FOR NON- FURNISHING OF CONFIRMATION, WHEN THE ASSESSEE HAD F URNISHED MORE THAN 98% OF THE CONFIRMATIONS FROM THE CLIENTS FOR THE ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 51 TRANSACTIONS DONE ON THEIR BEHALF AS A STOCK BROKER AND ACCEPTED BY THE DEPARTMENT? 48. WE HAVE NOTED THAT IN CHAPTER XIV-B, THE UNDISC LOSED INCOME HAS TO BE SEPARATELY COMPUTED IN ACCORDANCE WITH THE PROVISIO NS OF SECTION 258BB. IN THE PRESENT CASE, THE ASSESSEE HAD OFFERED EXPLANATION REGARDIN G CLIENT ID MISMATCH AND WHEN AUDITORS REQUIRED THE ASSESSEE TO FURNISH THE CONFI RMATIONS FROM THE PARTIES, THE ASSESSEE WAS NOT ABLE TO FURNISH THE CONFIRMATIONS IN RESPEC T OF ALL THE TRANSACTIONS. THE AO ACCEPTED THE OWNERSHIP OF THE TRANSACTIONS BEING BE LONGING TO THE THIRD PARTIES ON THE BASIS OF CONFIRMATIONS FILED. HOWEVER, THE FACT REM AINS THAT THE CLIENT ID MISMATCH WAS THERE AND TO THE EXTENT THE ONUS, WHICH LAY COMPLET ELY ON THE ASSESSEE, REMAINS UN- REBUTTED, THE ADVERSE CONCLUSION HAD TO BE DRAWN FR OM THE SAID MISMATCH. THE ASSESSEE HAS RELIED ON THE DECISION OF THE HONBLE SUPREME C OURT IN THE CASE OF ANIS AHMAD AND SONS V CITG, [2008]297 ITR 441(SC). IN THIS CASE, THE DISPUTE WAS WHETHER THE ASSESSEE WAS A TRADER OR COMMISSION AGENT. THE ASSESSEES CL AIM WAS THAT HE WAS A COMMISSION AGENT AND THIS WAS ACCEPTED FOR THE ASSESSMENT YEAR 1983-84. HOWEVER, FOR A.Y. 1984- 85, THE AO ASSESSED THE ASSESSEE AS A TRADER AND NO T AS COMMISSION AGENT. THE ITAT HAD REMANDED THE MATTER TO THE AO FOR PROVIDING THE ASS ESSEE AN OPPORTUNITY TO FILE EVIDENCE IN SUPPORT OF ITS CLAIM. THE AO SUMMONED 10 TRADER S U/S.131(1), OUT OF WHICH, 5 TRADERS APPEARED AND GAVE EVIDENCE IN FAVOUR OF THE ASSESSE E AND OTHER FIVE WHO WERE OUTSIDE THE STATE, DID NOT APPEAR AS THE SUMMONS COULD NOT BE SERVED ON THEM. IN THE BACKDROP OF THESE FACTS, IT WAS HELD THAT THE ASSESSEE COULD NO T BE HELD RESPONSIBLE FOR THE NON APPEARANCE OF FIVE TRADERS WHO WERE OUTSIDE THE STA TE AND FROM THEIR NON-APPEARANCE, NO ADVERSE INFERENCE COULD BE DRAWN BY THE AUTHORITIES AGAINST THE ASSESSEE. HOWEVER, THIS ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 52 CASE IS OF LITTLE HELP TO THE ASSESSEE INASMUCH AS IN THE PRESENT CASE, THE CLIENT ID MISMATCH WAS FOUND IN RESPECT OF SPECIFIC TRANSACTI ONS WHICH WERE PUT TO SCRUTINY. THIS FACT IS TO BE TAKEN INTO CONSIDERATION IN THE BACKD ROP OF PROCEEDINGS WHICH WERE TAKEN UP BY JPC. THEREFORE, MERELY BY FILING CONFIRMATION I N RESPECT OF 98% OF ITS CLIENTS, IT CANNOT BE SAID THAT THE ASSESSEE HAD DISCHARGED IT S BURDEN IN RESPECT OF THE TRANSACTIONS. FURTHER, WHEREVER THE TRANSACTIONS HAVE BEEN CONFIR MED, THE SAME COULD NOT BE TAKEN AS BENAMI TRANSATIONS BELONGING TO THE ASSESSEE. THUS , WE CONCLUDE THAT MERELY BY FURNISHING 98% CONFIRMATIONS , IT CANNOT BE HELD TH AT THE ASSESSEE HAD FULLY DISCHARGED ITS BURDEN THAT THE TRANSACTIONS DID NOT BELONG TO HIM. THE BALANCE TRANSACTIONS, IF NOT DULY CONFIRMED, HAVE TO BE CONSIDERED AS UNDISCLOSED INC OME OF THE ASSESSEE. F) WHETHER ANY ADDITION COULD BE MADE AS UNEXPLAINED I NVESTMENT APPLYING THE PROVISIONS OF SECTION 69 OF THE ACT WH EN THE TRANSACTIONS ARE RECORDED IN THE REGULAR BOOKS OF ACCOUNT ? 49. AS PER SECTION 158BB(2) IN COMPUTING THE UNDIS CLOSED INCOME OF THE BLOCK PERIOD, THE PROVISIONS OF SECTIONS 68, 69, 69A, 69B AND 69C SHALL, SO FAR AS MAY BE, APPLY AND REFERENCES TO FINANCIAL YEAR IN THOSE SECTION S SHALL BE CONSTRUED AS REFERENCES TO THE RELEVANT PREVIOUS YEAR FALLING IN THE BLOCK PERIOD INCLUDING THE PREVIOUS YEAR ENDING WITH THE DATE OF SEARCH OR OF THE REQUISITION. SUB-SECT ION(3) PUTS THE BURDEN ON THE ASSESSEE TO ESTABLISH THAT ANY UNDISCLOSED INCOME HAD ALREADY B EEN DISCLOSED IN ANY RETURN OF INCOME FILED BY THE ASSESSEE BEFORE THE COMMENCEMENT OF SE ARCH OR OF THE REQUISITION, AS THE CASE MAY BE. THESE SECTIONS MAKE IT CLEAR THAT THE ASSESSEE HAS TO ESTABLISH THAT WHEN AND HOW THE DISCLOSURE WAS MADE AND WHETHER OR NOT A PA RTICULAR ASSET, ENTRY OR TRANSACTION ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 53 CONSTITUTED INCOME OR HOW THE ASSET WAS ACQUIRED OR WHAT THE NATURE OF ENTRY OR TRANSACTION. THEREFORE, TO THE EXTENT INCOME HAS N OT BEEN DISCLOSED BY THE ASSESSEE, WHICH IS EMBEDDED WHOLLY OR PARTLY IN THE ASSET FOU ND DURING THE COURSE OF SEARCH OR IN THE TRANSACTION NOTICED IN THE BOOKS OF ACCOUNT, TO THAT EXTENT THE PROVISION OF SECTIONS 68 TO 69 C WILL BE APPLICABLE. ONCE THESE SECTIONS HAVE SPECIFICALLY BEEN MADE APPLICABLE TO THE PROVISIONS OF BLOCK ASSESSMENT, T HEREFORE, CHAPTER XIV-B BEING A SPECIFIC CODE, THE PROVISIONS HAVE TO BE CONSIDERED IN THE CONTEXT OF THE PROVISIONS OF THIS CHAPTER. IT IS IN THE CONTEXT OF UNDISCLOSED INCOM E THAT THESE SECTIONS HAVE SPECIFICALLY BEEN INCORPORATED IN SUB-SECTION(2) OF SECTION 158B B. THEREFORE, ONCE IT IS ESTABLISHED THAT THERE IS CONCEALED UNDISCLOSED INCOME IN THE E NTRIES RECORDED IN THE BOOKS OF ACCOUNT, TO THAT EXTENT THE PROVISIONS OF SECTION 6 8 WOULD BE APPLICABLE AND MERELY BECAUSE THE ENTIRE TRANSACTIONS HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNT, THE APPLICABILITY OF SECTION 69 CANNOT BE RULED OUT. W E, ACCORDINGLY, HOLD THAT THE PROVISIONS OF SECTION 69 WOULD BE APPLICABLE TO THE EXTENT OF THE INCOME NOT DISCLOSED IN THE TRANSACTIONS RECORDED IN THE BOOKS OF ACCOUNT. IT IS PERTINENT TO NOTE THAT IN SECTION 69, UNEXPLAINED INVESTMENT HAS BEEN DEFINED WITH REFERE NCE TO THE ENTIRE VALUE OF THE INVESTMENTS NOT RECORDED IN THE BOOKS OF ACCOUNT WH ICH IS BEING TREATED AS THE INCOME OF THE ASSESSEE OF SUCH FINANCIAL YEAR. THUS, IT IS P RIMARILY THE INCOME WHICH HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNT IS OF REAL CONSIDE RATION AND THE SAME, AS NOTED EARLIER, HAS TO BE CONSIDERED IN THE LIGHT OF THE PROVISIONS OF BLOCK ASSESSMENT. 50. FROM THE ABOVE DISCUSSION, THE FOLLOWING ASPECT S CAN BE SUMMARIZED AS UNDER: ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 54 I) AS PER SECTION 158B(B), THE DEFINITION OF UNDISC LOSED INCOME REFERS TO TRANSACTION WHICH REPRESENTS WHOLLY OR PARTLY INCOM E OR PROPERTY. IF THE ENTIRE TRANSACTION REPRESENTS WHOLLY THE ASSESSEES INCOME THEN IT HAS TO BE INCLUDED AS SUCH BUT IF THE ENTIRE TRANSACTION DOES NOT REPRESE NT THE ASSESSEES TOTAL INCOME THEN ONLY THAT PART OF THE TRANSACTION WHICH REPRES ENTS THE ASSESSEES INCOME IS TO BE INCLUDED UNDER THE HEAD UNDISCLOSED INCOME. II) THE WORD TRANSACTION IS OF VERY WIDE IMPORT. IT MAY RELATE TO PURCHASE , SALE, REVENUE OR CAPITAL EXPENDITURE, LOANS, ADVANC ES, DEPOSITS, INVESTMENTS, ETC. AND IF IT IS FOUND THAT IN THESE TRANSACTIONS, SOME INCOME IS EMBEDDED, WHICH HAS NOT BEEN DISCLOSED BY THE AS SESSEE, THEN IT WILL COME WITHIN THE PURVIEW OF UNDISCLOSED INCOME. III) MERELY BECAUSE INFORMATION WAS AVAILABLE WIT H THE DEPARTMENT, IT CANNOT BE A BASIS FOR TREATING A PARTICULAR ASSET AS UNDIS CLOSED INCOME UNLESS SOME INCRIMINATING MATERIAL IS FOUND DURING THE COURSE O F SEARCH, WHICH VINDICATES THE SAID INFORMATION. IV) WHERE THE FACT OF OWNERSHIP OF THE TRANSACTION HAS COME TO THE NOTICE OF THE DEPARTMENT FOR THE FIRST TIME AS A RESULT OF SE ARCH AND SEIZURE OPERATION, THEN SAME IS TO BE TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE. V) THE CLIENT INFORMATION REGARDING ID MISMATCH WAS AV AILABLE WITH THE DEPARTMENT IN THE ASSESSEES SISTER CONCERN BUT ONC E THE CLIENT ID MISMATCH WAS FOUND DURING THE COURSE OF SEARCH OPER ATION THEN THAT ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 55 INFORMATION STANDS VINDICATED AND PARTAKES THE CHAR ACTER OF MATERIAL CONTEMPLATED U/S.158BB AND GIVES A POINTER TOWARDS THE INTENTION OF THE ASSESSEE. VI) AFTER THE SEARCH, THE ENQUIRIES WHICH WERE GOING ON UNDER CHAPTER XIV WILL GET MERGE WITH PROCEEDINGS UNDER CHAPTER XIV-B . VII) IT IS NECESSARY THAT SOME MATERIAL IS FOUND DURING THE COURSE OF SEARCH TO ESTABLISH THAT THERE IS ELEMENT OF UNDISCLOSED INCO ME EMBEDDED IN THE TRANSACTION. VIII) MERELY ON THE BASIS OF SEARCH AND POST SEARCH ENQUI RIES, WITHOUT FINDING ANY MATERIAL DURING THE COURSE OF SEARCH, IT CANNOT BE SAID THERE IS SOME UNDISCLOSED INCOME IN THE TRANSACTION. THAT WOULD DEFINITELY COME WITHIN THE AMBIT OF REGULAR ASSESSMENT AND NOT BLOCK ASSES SMENT. 51. IN THE LIGHT OF ABOVE DISCUSSION, WE CONCLUDE T HAT UNDISCLOSED INCOME EMBEDDED IN VARIOUS TRANSACTIONS RECORDED IN BOOKS OF ACCOUN T FOUND ON THE BASIS OF CLIENT ID MISMATCH CONSTITUTED SUBJECT MATTER OF BLOCK ASSESS MENT. THIS ISSUE IS, THEREFORE, DECIDED AGAINST THE ASSESSEE. 52. NOW COMING TO THE MERITS OF ADDITIONS, WE FIND THAT THE DEPARTMENT ITSELF HAS NOT TREATED THOSE TRANSACTIONS AS BENAMI, WHEREIN, THE ASSESSEE HAS FILED CONFIRMATIONS. LD COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT BEFORE LD CIT (A) CONFIRMATIONS WERE FILED, WHICH COULD NOT BE OBTAINED TILL THE CONCLUSION OF BLOCK ASSESSMENT, THEREFORE, IN THE INTEREST OF JUSTICE, MATTER BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE CONFIRMATIONS WHICH WERE FILED BEFORE LD CIT (A ) AND TO DECIDE THE ISSUE IN ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 56 CONFORMITY WITH THE FINDINGS OF THOSE CASES WHERE C ONFIRMATIONS HAVE BEEN ACCEPTED. LD COUNSEL FOR THE ASSESSEE HAS POINTED OUT THE FALLAC IES IN THE ADDITIONS MADE BY THE AO, WHICH WE HAVE NOTED IN HIS ARGUMENTS, THEREFORE, TH E SAME HAVE TO BE TAKEN INTO CONSIDERATION BY THE AO BEFORE ARRIVING AT ANY CONC LUSION. 53. THE NEXT POINT WHICH LD COUNSEL FOR THE ASSESSE E EMPHASIZED IS THAT IN CASE THE ADDITION IS BEING MADE ON THE BASIS OF TRANSACTIONS RECORDED IN THE BOOKS OF ACCOUNT THEN NO ADDITION IS TO BE MADE FOR THE BROKERAGE AMOUNT. WE FIND CONSIDERABLE FORCE IN THIS CONTENTION OF THE ASSESSEE BECAUSE IF BROKERAGE IS NOT REDUCED THEN IT WILL LEAD TO DOUBLE TAXATION. WITH THESE OBSERVATIONS, WE RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER. 54. WHILE PARTING WITH, WE MAY PLACE ON RECORD OUR DEEP APPRECIATION FOR THE EXTENSIVE ARGUMENTS ADVANCED BY BOTH THE SIDES, WHI CH HELPED US TO DECIDE THIS ISSUE. 55. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ON 7 TH APRIL , 2010 SD/- SD/- SD/- (R.V.EASWAR) ( R.S.SY AL) (S.V.MEHROTRA) SR.VICE PRESIDENT ACCOUNTANT MEMBER ACCO UNTANT MEMBER DATED, 7 TH APRIL , 2010 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, H BENCH, I .T.A.T., MUMBAI. PARIDA BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. ITA NO.444/MUM/2004 M/S. TRIUMPH SECURITIES LTD 57 DATE INITIALS SR.P.S DRAFT DICTATED ON 22/3.10 & 6.4.2010 DRAFT PLACED BEFORE AUTHOR 6.4.2010 DRAFT PROPOSED & PLACED BEFORE THE JM/AM SECOND MEMBER DR DRAFT DISCUSSED/APPROVE D BY JM/AM SECOND MEMBER APPROVED DRAFT COMES TO THE SR.PS SR.P S KEPT FOR PRONOUNCEMENT ON SR.PS FILE SENT TO THE BENCH CLERK SR. PS DATE ON WHICH FILE GOES TO THE H.C. DATE OF DISPATCH OF ORDER