Bombay High Court
One-Up Shares & Stock Brokers (P) Ltd. vs R.R. Singh, Cit on 12 March, 2003
Equivalent citations: [2003]129TAXMAN687(BOM)
Author: S.H. Kapadia
Bench: S.H. Kapadia
JUDGMENT S.H. Kapadia, J.
A search and seizure operation, under section 132, was conducted on 3-8-2000 in the case of Shri Manoj Agarwal and his associate concerns. The papers found during the course of search and the investigation done during the assessment proceedings showed that Shri Manoj Agarwal used to give accommodation book entries of various kinds to the beneficiaries of the transactions. These were the allegations contained in the letter of Commissioner (Central-II New Delhi) dated 18-9-2002 addressed to the Commissioner of Income Tax Mumbai-IV. According to this letter, one such beneficiary was the petitioner, having its Office in Mumbai and who was assessed by Commissioner Mumbai-IV. According to the petitioner, it had acted as a sub-broker in five transactions of purchase and sale of shares, which resulted in profits to their clients M/s. Friends Portfolio Private Limited. During the course of search, various contract notes and bills issued by the petitioners in favour of M/s. Friends Portfolio Limited were detected and seized. Shri Manoj Agarwal was one of the Directors in M/s. Friends Portfolio Private Limited. On 19-6-2002, he made a statement before the Income Tax Department, which reads as under :
"I have never done any genuine share transaction of profit, either in my name or in my family member's name or in the name of concerns like M/s. Friends Portfolio Private Limited. The accommodation entries of profits were taken in M/s. Friends Portfolio Private Limited, who never possessed any shares nor demat account. No client agreement was ever signed by me. I have never entered into any contract note. I have not booked any sale or purchase of shares. I have never placed any orders of sale/purchase of shares. The simple modus operandi was that certain mediators had given tome, bogus profit entries. That the mediators used to approach me with cheques, drawn in favour of M/s. Friends Portfolio (P) Ltd. These cheques were deposited in the bank account and cash was handed back to the mediators."
In view of the above statement of Shri Agarwal, the Commissioner Central-II, New Delhi granted concurrence to the proposal made by the Director General of Income Tax (Investigations) for centralization of the cases concerning the above parties, including the petitioner, which is the subject matter of challenge in this petition.
2. In the meantime, on 29-8-2002, block assessment was done by the Income Tax Department under section 158BC of the Act in the case of Shri Manoj Agarwal in which the above quoted statement has been reproduced. It is interesting to note that Shri Manoj Agarwal has further made a written submission in the block assessment proceedings on 25-6-2002 to the effect that accommodation entries were mainly given through M/s. Friends Portfolio (P) Ltd. and M/s. NIT Softech Limited and M/s. Classic Textiles.
Arguments
3. Mr. Pardiwala learned counsel appearing on behalf of the petitioner herein submitted that the petitioner is being assessed in Bombay. That the block assessment proceedings taken against Manoj Agarwal has been duly completed. That, in those Block Assessment proceedings, no notice was ever given to the petitioner. That, the petitioner had acted as a sub-broker for M/s. Friends Portfolio Private Limited in 5 sales/purchase transactions on which profits accrued to the client. He contended that in the Block Assessment proceedings there is no allegation against the petitioner. He further contended that transfer of profits by Shri Manoj Agarwal and his concerns was a step after profits resulted in the case of the abovementioned 5 transactions. He, therefore, contended that there was no reason for transfer of the petitioner's assessments to New Delhi as it would unnecessarily involve expenditure and inconvenience to the petitioner. He has, therefore, challenged the order of centralization under section 127 of the Income Tax Act.
Conclusion
4. At the outset we may point out that in this case, we are not going into the merits of the case. The only narrow issue which we have to decide is whether the court should interfere under article 226 of the Constitution in this case, in which the department has centralized the cases concerning various companies. We are not inclined to interfere. Firstly, the statement given by Manoj Agarwal Director of M/s. Friends Portfolio (P) Ltd. has an evidentiary value. A weightage is required to be given to such statement by the Assessing Authorities in proceedings under the Income Tax Act. The statement incriminates several companies. The statement shows that Shri Manoj Agarwal was an entry operator. That his Company M/s. Friends Portfolio (P) Ltd. was the client of the petitioners. Therefore, we do not wish to interfere under article 226 of the Constitution.
5. Writ Petition is rejected. No order as to costs. However, time to file the returns by the petitioner stands extended to 31-3-2003.