Income Tax Appellate Tribunal - Amritsar
Shri Vijay Sehgal (Huf) vs The Asst. C.I.T., Range Ii on 14 October, 2005
Equivalent citations: [2006]100ITD560(ASR), (2006)102TTJ(ASR)904
ORDER
Bhavnesh Saini, Judicial Member
1. This first appeal by the assessee is directed against the order of the Asstt. Commissioner of Income tax, Circle II, Jalandhar dated 28.3.20O2 passed Under Section 158BC(c) read with Section 158BD of the income-tax Act, 1961 for block period 1.4.1985 to 13.12.1995 on the following grounds:
1. That the ld. A.O. has erred in law and facts in making an addition of Rs,16,81,750/- as Capital gain on sale of 990 shares of M/s. Leader Valves Ltd. in this block period without duly considering the fact that the same was not includable within the meaning of Section 158BB(1)(d) on account of which the same had already been included in the necessary return of income filed for relevant AY 1996-97 and assessed by the predecessor in office, as such.
2. That the ld. A.O. has erred in law and facts in making a huge addition of Rs. 74,64,000/- by way of capital gain on the alleged sale of 3732 shares of M/s. Leader Valves Ltd. in this Block period by relying on the alleged Sale Agreement dated 29.4.1995 without giving due consideration on flimsy grounds of the legal position that, if that be so, then the said capita gains would not be includable in the Block period within the meaning of Section 158BB(1)(d).
3. That, apart from the above legal position, the ld. AO has again erred in law and facts in including the alleged gross sale price as capital gains without giving any deduction for the cost of shares involved and then further allowing the required increase thereon by adopting the Index cost merely on presumptions.
That, without prejudice to the aforesaid grounds of appeal, the A.O. has erred in law and facts and in issuing the notice Under Section 158BD dated 29.3.2001 without any legal jurisdiction and about four years after the assessment for Block period in case of Vijay Sehgal individual had been considered/completed on 31.12.1996 by wrongly relying on the general .observations of the Hon'ble IT AT regarding the taxability of capital gain on the sale of shares of M/s. Leader Valves Ltd. as per agreement dated 29.4.1995 only as per the provisions of law which were in no way any directions for including any Capital gain any in the Bock period but were merely recommendatory in nature and do not have any mandatory effect to enable the A.O. in taking any action not in accordance with law, against the express provision of law as applicable to the search cases Under Section 132.
2. The A.O. has recorded the following facts and findings in the assessment order which is under challenge before us.
3. A search and seizure operation was conducted Under Section 132 of the Income Tax Act, 1961 at the residential premises of Shri Vijay Sehgal (Individual), at 211, New Jawahar Nagar, Jalandhar on 13.12.1995 consequent upon warrant of authorisation issued by Director of Income tax, Chandigarh Simultaneously, on 13.12.1995 a search Under Section 132 was conducted at the residential premises of Shri Yash Paul Mittal, 5, Link Road, Jalandhar. As per Annexure 'A' to the relevant Panchnama, drawn at the residence of Shri Yash Paul Mittal, following documents were found and seized:
i) An agreement dated 29th April, 1995 between Mrs. Pumima Beri and Shri Vijay Sehgal, 211, New Jawahar Nagar, Jaiandhar vide which the latter had agreed to sell 5052 equity shares of M/s. Leader Valves Ltd. to Smt. Purnima Beri, for a consideration of Rs. 1,01,04,000/-. The consideration was to be paid by the purchaser Smt.Purnima Beri latest by 31st Dec, 1995. The breakup of 5052 equity shares had been given as follows as per agreement:
a) 1320 equity shares of Rs. 100/- each held by Shri Vijay Sehgal in his name.
b) 3732 equity shares i.e. 1/8th of 29860 equity shares belonging to the deceased father of Shri Vijay Sehgal in which Shri Vijay Seghal had a right under the Hindu Succession Act.
ii) Blank Share Transfer Forms in respect of 3732 shares duly signed by Shri Vijay Sehgal arid the witnesses.
iii) The following receipts in original:
a) Receipt for a sum of Rs. 1,98,000/- dated 6th February, 1995 issued by Shri Vijay Sehgal, Smt. Swam Sehgal, S/Shri Ajay Sehgal and Sanjay Sehgal, sons of Shri Vijay Sehgal in favour of Smt.Purnima Beri, regarding cheque No. QWW061078 dated 6th Febr. 1995, being the full and final consideration of sale of 990 equity shares of M/s. Leader Valves Ltd., Jalanadhar of the face value of Rs. 100/- each.
b) Receipt in respect of cheque No. QWW61079 dated 6th Febr. 1995 for a sum of Rs. 66,000/- being the full and final consideration of sale of 330 equity shares of M/s. Leader Valves Ltd., Jalandhar of face value of Rs. 100/- each @ Rs. 2000/- per share.
c) Receipt issued by Shri Vijay Sehgal for a sum of Rs. 7,46,000/- vide cheque No. RGL 003846 dated 1st May, 1995 being the full and final consideration of sale of 3732 equity shares of Leader Valves Ltd., Jalandhar which are yet to be devolved on Shri Vijay Sehgal as minimum 1/8th share of 29860 shares of the said company standing in the name of his deceased father Sh. D.D. Sehgal.
d) An agreement dated 1st May, 1995 between Mrs. Purnima Beri and Shri Vijay Sehgal (HUF), vide which Sliii Vijay Sehgal had agreed to sell 3732 shares of M/s. Leader Valves Ltd. out of its share in 29860 equity shares belonging to his deceased father Sh. D.D. Sehgal in which Shri Vijay Sehgal (HUF) had a right to inherit as per Hindu Succession Act. This agreement is for a consideration of Rs. 7,46,000/- which has been paid by the purchaser Smt. Purnima Beri vide cheque No. RGL 003846 dated 1st May, 1995.
4. Notice Under Section 158BC of the Income tax Act was issued on 28.2.1996 and 9.5.1996 requiring Shri Vijay Sehgal (Indl.) to file the return. He filed return, in the individual capacity, for the block period 1.4.1985 to 13.12.1995 on 22.10.1996 in form 2B declaring undisclosed income for the block period at Rs. 16,28,450/-. The assessment was framed Under Section 158BC(C) of the Income tax Act and the undisclosed income was determined at Rs. 1,20,37,523/-. The assessee filed appeal before the I.T.A.T. and the I.T.A.T., Amritsar Bench, Amritsar, vide order dated 31.12.1998 passed in I.T. (SS) A. No. 8(ASR)/1997 allowed part relief to the assessee and after giving effect to the order of the Income tax Appellate Tribunal dated 31.12.1998 the undisclosed income for the block period was determined at Rs. 26,48,300/- which was further reduced to Rs. 24,48,300/- vide order dated 25.3.1999 passed Under Section 154 of the Income tax Act.
5. In para 45 of the order of the Income tax Appellate Tribunal dated 31.12.1998, it was held as under:
We are in agreement with the submission of ld. DR so far as the ownership of the sale of shares is concerned, the lengthy discussion took place during the hearing of the case. Ld. counsel of the appellant pleaded that all the shares of M/s. Leader Engg. Works do not. belong to appellant alone. Ld. counsel pleaded that he had no objection for taxing capital gain out of sale of shares. But for that AO has to calculate the capital gain of the ownership of shares held by Shri Vijay Sehsal, which are 330 and vijay Sehsal (HUIF) and rest of the legal heirs of the father of Shri Viiay Sehgal. This issue is, therefore, referred back to the file of the AO who will decide and look into the taxability of capital gain and also proper and legal ownership of the shares held by Shri Vijay Sehgal and his family members as stated above. He will also decided the issue as to when the sale of shares had taken place. The A.O. will calculate the capital gain regarding the shares held by Vijay Sehgal (HUF) and in case sale has taken place during the block period the same will be taxed in the block period. Regarding the capital gain of other share holders he can take legal action as he deems fit under the facts and in the circumstances of the case. So far as the sale price is concerned same will be taken at Rs. 10101000/- i.e. consideration received in cash as well as by cheque.
6. The Additional C.I.T., Special Range, Jalandhar, giving effect to the order of the I.T.A.T. reframed the assessment of Shri Vijay Sehgal (Individual) on 27.3.2001 total undisclosed income of Shri Vijay Sehgal (Individual) for the Block period 14.1.1985 to 31.12.1995 was determined at Rs. 3008866/- which inter alia included capital gains of Rs. 560566/- accruing to Shri Vijay Sehgal (Individual) on the sale of 330 shares, taking sale price of per share of Rs. 2000/-, During the course of above proceedings, the assessee filed letter dated 23.3.2001 wherein he admitted that out of 5052 shares sold to Smt. Purnima Beri 4722 shares belongs to Vijay Sehgal (HUF).
7. The A.O. observed as regards the capital gain arising to Shri Vijay Sehgal (HUF), the I.T.A.T., Amritsar Bench in para 45 of its order (reproduced above) directed the A.O. to calculate the same and further directed that in case sale has taken place during the block period the same will be taxed in the block period. Accordingly, in view of the findings of the I.T.A.T., submission of Shri Vijay Sehgal in the letter dated 23.3.2001 (supra) and on the basis of other relevant documents seized during the course of search Under Section 132, as discussed above, the Addl. C.I.T., Special Range, Jalandhar issued notice Under Section 158BD to Shri Vijay Sehgal (HUF) on 29.3.2001 to file return of income for the block period 1.4.1985 to 31.12.1995 within 16 days of the service of the notice. In reply, the assessee filed a letter dated 17.4.2001. Subsequently, the case was transferred to the A.O. (ACIT) and accordingly assessee was asked to appear before him on 27.12.2001. On that date and on subsequent dates assessee sought various adjournment vide letters dated 27.12.2001, 21.1.2002, 28.2.2002. However, no return was filed. On 4.2.2002, the assessee filed a letter enclosing copy of his letter dated 17.4.2001 filed before the Addl C.I.T., Special Range, Jalandhar. On 8.3.2002 the assessee was requested to file return and case adjourned to 13.3.2002, on which date assessee again sought the adjournment which was granted vide letter dated 14.3.2002 fixing the date of hearing for 19.3.2002 on which date assessee again filed a letter dated 19.3.2002. Therefore, finally on 19.3.2002 the assessee was asked to show cause as to why ex-parte assessment may not be made for his failure to file the return despite so many opportunities granted to him. Statutory notice Under Section 142(1) was also sent requiring the assessee to file the return on or before 21.3.2002. However, on this date neither anyone appeared not any return was Bled. The A.O., therefore, was left with no alternative than to complete the assessment for the block period exparte keeping in view the assessee's reply and other material on record.
8. The assessee has stated that the matter under consideration is required to be considered within the four corners of Chapter XIV-B and further that the notice Under Section 158BD read with Section 158BC lays down the procedure for block period assessment and is mandatory for any such assessment to be made under this chapter. It has been further stated that search Under Section 132 in this case of Shri Vijay Sehgal (Individual) was completed on 13.12.1995 and after considering all the documents and facts of the case final assessment was passed on the time barring date i.e. 31.12.1996 as per provisions of Section 158BE of Income tax Act. Without taking any action Under Section 158BD on any person other than M/s. Sehgal Sanitary Fittings (P) Ltd. which was well within the time i.e. 31.1.1996 which indicates that the AO had no information in respect of Shri Vijay Sehgal (HUF) on the basis of documents and material seized Under Section 132 in the case of Shri Vijay Sehgal (Individual). It has been mentioned by the assessee that notice Under Section 158BD read with 158BC has been issued to Shri Vijay Sehgal (HUF) more than four years after the completion of the assessment proceedings under this chapter on 31.12.1996 and such an action at this stage in the case of other persons is barred by time within the provisions of this chapter.
9. In last para, it has been pleaded to drop proceedings and without Prejudice to this position it was also stated that the assessee may be informed the reasons on the basis of which notice Under Section 158BD was issued. It has also been stated by the assessee that he should be intimated the basis on which this notice was issued. The assessee also referred to the action taken by the Addl. C.I.T., Special Range, Jalandhar to tax the capital gain in respect of 330 shares of M/s. Leader Valves Ltd. in the hands of Vijay Sehgal (Individual) vide order dated 25.3.2001 passed Under Section 254 of the Income tax Act read with Section 158BC of the income tax Act and it was stated that in appeal before the CIT(A), Jalandhar the addition has been deleted from the Block assessment. It was further stated that in respect of 990 shares of the company sold by the assessee (HUF), a separate regular return for the assessment year 1996-97 was filed by the assessee on 22.10.1996 and assessed by the then A.O. because the capital gain, on these shares is not includible in block assessment under the provisions of Section 158BB(1)(d) and this view has been upheld by the CIT(A) vide order dated 16.1.2002 in the case of Vijay Sehgal (Indl.) and likewise the capital gain in respect of 990 shares held by Vijay Sehgal (HUF) is not ineligible in the block assessment.
10. It may be mentioned that Shri Vijay Sehgal (HUF) had filed one income tax return for the assessment year 1996-97 on 22.10.1996 and had shown income of Rs. 18,30,700/-. This return was processed Under Section 143(1)(a) of the Income tax Act on 8.11.1996. A revised return for the assessment year 1996-97 was filed by Shri Vijay Sehgal (HUF) on 24.3.1999 at an income of Rs. 627120/-. Since this return was filed belatedly, therefore, the same was filed.
11. The various contentions put forth by the assessee in his letters dated 17.4.2001, 4.2.2002 and 19.3.2002 have been examined and are discussed by AO as under:
11.1 As per para 3 of the assessee's letter dated 17.4.2001 the block assessment was completed on 31.12.1996 in the case of Shri Vijay Sehgal (Individual) without taking any action on other persons other than M/s. Sehgal Sanitary Fittings (P.) Ltd. which indicates that the A.O. had no information in respect of Vijay Sehgal (HUF) on the basis of documents and material seized Under Section 132 of Income tax Act. In this regard assessee's contention to the effect that the assessment for the block period was completed on 31.12.1996 and with this all the proceedings relating to other persons, within the meaning of Section 158BD also came to an end is totally misconceived and is not supported by any provisions of the Income tax Act, 1961. Clearly, notice Under Section 158BD was issued on 29.3.2001 and in view of the clear provisions of Section 158BE(2) limitation to complete the assessment in this case expires on 31.3.2002. There is no time limitation for initiation of proceedings Under Section 158BD of the Income tax Act. It may be mentioned that the total shares were sold for Rs. 101.04 lacs. Out of this only Rs. 10.10 lacs were received by cheque and the balance were cash transactions. The Assessing Officer had considered that income from these transactions accruing to Shri Vijay Sehgal (Individual). However, the I.T.A.T. directed that action should be taken in case of other respective owners including Vijay Sehgal (HUF). Shri Vijay Sehgal in letter dated 23.3.2001 had accepted that out of 5052 shares sold to Smt. Purnima Bed, 4722 shares belonged to Shri Vijay Sehgal (HUF). A.O., therefore, held that the action was justified in the case of Shri Vijay Sehgal (HUF) after the receipt of the order of the I.T.A.T. and after the clarification given by Shri Vijay Sehgal.
11.2 As regards the intimation of reasons/basis for issue of notice Under Section 158BD of the Income tax Act, it is relevant to reproduce Section 158BD of the Income tax Act as under:
Where Assessing Officer is satisfied that any undisclosed income belongs to any person other than the person with respect to whom search was made under Section 132 or whose books of ale or other documents or any assets were requisitioned Under Section 132A then the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other persons and that Assessing Officer shall proceed against such other person and the provisions of this chapter shall apply accordingly.
The A.O., therefore, observed that clearly, Section 158BD postulates the initiation of proceedings in respect of any person other than the person with respect to whom search was made Under Section 132, the limitation for completing the block assessment is provided in Section 158BE(2)(a). There is no legal requirement to intimate the basis for initiating action under Section 158BD of the, Income tax Act. All that is required under this section is the satisfaction of the Assessing Officer, a satisfaction which is not a subjective one but based on the cogent material on record which entitles him to assume the jurisdiction to issue notice Under Section 158BD of the Income tax Act. Since there was substantial material on record based on documents seized during the search operations, the notice Under Section 158BD of the Income tax Act was rightly issued to the assessee.
11.3 As regards the order of the CIT(A) dated 16.1.2002 in respect of the assessment made by the Addl. C.I.T., Special Range, Jalandhar in the case of Shri Vijay Sehgal (Individual), for this very block period A.O. stated that the said order does not lays down any general principle of law and more so has not achieved finality and the second appeal has been authorised to be filed in this case. Further, para 45 of the order of the I.T.A.T., Amritsar Bench, Amritsar reproduced above explicitly justified the action to be taken in the case of Shri Vijay Sehgal (HUF).
12. In a letter dated 19.3.2002 the assessee also stated that even on merits no such capital gains are assessable in this block period within clear cut provisions of Section 158BA(3) because the capital gain has been worked out on the basis of the sale agreement dated 29.4.1995 for which the previous year has not ended and, therefore, the same is not includible therein, in view of the Section 158BB(d). In this connection, A.O. stated that in order to come within the purview of Section 158BA(3), heavy onus lay on the assessee, to satisfy the Assessing Officer that any part of income referred to in Sub-section (1) of Section 158BA relate to the assessment year for which the previous year has not ended or the date of filing of return of income under Sub-section (1) of Section 139 for any previous year has not expired and that such income or transactions relating to such income are recorded on or before the date of search or requisition in the books of account maintained in the normal course relating to such previous year. Only in such eventuality, the said income shall not be included in the block period. A.O. observed that it is undisputed that assessee's case is a no account case and on this very ground assessee's case does not fall under the provisions of Section 158BA(3). Further, the assessee has failed to discharge the onus and has not even filed the return in response to notice Under Section 158BD of the Income tax Act. Further, only small part of the sale consideration was paid by purchaser by cheque whereas the major part was paid in cash. This shows that major part of sale consideration was not meant to be recorded anywhere and was not meant to be disclosed to the Department in the normal course. Further, the agreement dated 1.5.1995 shows that 3732 shares out of total 5052 shares sold by Shri Vijay Sehgal) were sold on behalf of Shri Vijay Sehgal (HUF) and consideration was also received on or before 1.5.1995 (cheque transactions took place vide cheque dated 1.5.1995). The blank Transfer Form for these 3732 shares was also executed on behalf of Vijay Sehgal (HUF) and was found during search at the residence of Shri Yash Paul Mittal. However, the capital gain with reference to these 3732 shares was not even disclosed in income tax return filed by the HUF for the assessment year 1996-97, so, it cannot be held that the capital gain on sale transaction of 3732 shares would have been disclosed to the Department or that the transaction was recorded any where in the normal course. In view of these facts and. legal position the A.O. held that the transactions relating to the sale of shares as, per agreement dated 29.4.1995 and 1.5.1995 is includible in the block assessment. Moreso, the sale has taken place before the date of search i.e. 13.12.1995, as discussed in the subsequent paras.
13. The I.T.A.T., Amritsar Bench, while setting aside the order of the block assessment in the case of Vijay Sehgal (Individual) dated 31.12.1998 has directed the Assessing Officer to decide the following issues:
(I) To decide the issue as to when the sale of shares has taken place and in case the sale has taken place during the block period the same shall be taxed in the block period.
(II) The taxability of the capital gain and proper and legal ownership of the shares held by Shri Vijay Sehgal and his family members.
As regards the sale consideration, the I.T.A.T. has given its finding that the assessee has received a sum of Rs. 1,01,04,000/- from the purchaser of the shares i.e. Mrs. Purnima Beri and to this extent the matter has achieved finality. The I.T.A.T. has also deleted the separate addition in respect of the unexplained cash found during search and unexplained investment in assets as FDRs etc. because it was held that these could be considered to have been acquired out of cash component received from the sale of 5052 shares. With regard to the issues under consideration, as enumerated above, the contents of para 3 of the agreement dated 29.4.1995, which is Annexure 'A' of the Panchnama, merits attention and are reproduced below:
The seller hereby has executed and signed all documents viz. transfer deed required for the transfer of shares above said in favour of the purchaser in order to smoothly transfer the title of the shares in favour of the purchasers. However, if the seller is called upon 10 sign fresh documents i.e. Transfer deeds etc. at a later date on account of invalidity of existing signed transfer deeds as per provisions of Companies Act, 1956 or as per provisions of other Acts as may be applicable, the purchaser hereby undertakes to sign all the documents or transfer deeds at a later date as may be required by the purchaser.
Para 5 of the same agreement dated 29.4.1995, which is Annexure 'A' of the Panchnama also require a close focus and is reproduced below:
That from the date of this agreement any rights, dividends or bonuses declared in respect of such shares shall be the property of the purchaser and the seller shall not have any right in the same. Further in case any benefit above said if comes into the hands of seller, he will immediately transfer/pass these benefits and will execute all the transfer deeds which may be required in favour of the purchasers.
14. From paras 3 and 4 of the agreement dated 29.4.1995 as reproduced above and as per the findings of the I.T.A.T. in the case of Vijay Sehgal (Individual)(supra), it is abundantly clear that Shri Vijay Sehgal has received the total consideration in respect of the sale of shares upto the date of the agreement and has, therefore, relinquished all his rights in respect of these shares. Even otherwise no prudent person will give all his rights until he has received full and final payment in respect of the transaction. Further, in view of the discussion made above the A.O. held that sale transaction is clearly includible in the block period 1.4.1985 to 13.12.1995.
15. As regards the legal ownership of the shares, the assessee vide his letter dated 23.3.2001 filed before the Addl. C.I.T. Special Range, Jalandhar, during the proceedings of the block period in Individual capacity has admitted that 4722 shares belong to HUF and since the assessee has not filed the return for this block period, the A.O. held that the capital gain arising out of 4722 shares is liable to be taxed in the block period as undisclosed income.
16. The A.O. further held that undisputedly, 3732 shares out of the total 4722 shares have been inherited by the assessee, a fact which has been borne out of the seized documents as also admitted in the letter dated 23.3.2001 (which is attached herewith as Annexure 'A' and forms part of the assessment order) and the balance 990 shares have been purchased by Shri Vijay Sehgal (HUF). As per provisions of Section 49 of the Income tax Act the cost of acquisition of shares which have been inherited is deemed to be the cost for which the previous owner had acquired it, as increased by the cost of any improvement of the assets incurred or borne by the previous owner or the assessee, as the case may be. However, as the assessee has not filed the return nor any information with regard to the cost of these shares has been filed and the assessment is being framed exparte, therefore, the cost of acquisition of these, shares is taken to be nil. In respect of 990 shares purchased by Shri Vijay Sehgal (HUF) the cost of acquisition is adopted at Rs.116.86 per share, disclosed in the return filed by HUF for the assessment year 1996-97 and as in the case of Shri Vijay Sehgal (Indl.) for the block period 1.4.1985 to 13.12.1995 adopted by the Addl. C.I.T., Special Range, Jalandhar vide order dated 27.3.2001.
17. In view of the above discussion, the total undisclosed income of the assessee was computed by the A.O. as under:
Sale price of 990 shares @ Rs. 2000/- per share.
Rs. 1980000/-
Less: Indexed cost price of 990 shares.
990x116.86x281divided by 109. Rs. 298250/-
____________
Capitalgain. Rs. 1681750/-
As no block return has been filed, undisclosed
capital gain. Rs. 1681750/-
Sale for 3732 shares @ Rs. 2000/- per share Rs. 7464000/-
Less: ii) Cost of acquisition taken as NIL
in the absence of any details filed
by the assessee. NIL
_____________
Capital gain Rs. 7464000/-
Undisclosed capital gain as no block return
has been filed Rs. 7464000/-
____________
Undisclosed income of the block period. Rs. 9145750/-
18. The assessee is in appeal before us on the grounds mentioned above challenging the additions.
19. The learned Counsel for the assessee argued that the search took place in the case of Shri Vijay Sehgal (Indl.) on 13.2.95 and the block assessment order was passed in his case on 31.2.996. He has submitted that the assessment order was passed by the Dy. C.I.T., Special Range, Jalandhar though initially it was taken by the Additional C.I.T., Special Range, Jalandhar. The learned Counsel for the assessee submitted that the matter was carried to the I.T.A.T., Amritsar Bench in the case of Shri Vijay Sehgal (Indl.) in I.T.(SS) A. No. 8(ASR)/1997 decided the appeal ot the assessee vide order dated 31.12.1998. The learned Counsel for the assessee further submitted that the A.O. after the decision in the case of Shri Vijay Sehgal (Indl.) issued a notice Under Section 158BD on 27.3.2001 without satisfying himself that any undisclosed income belongs to any person other than person with respect to whom search was made Under Section 132 of the Income tax Act. The learned Counsel for the assessee argued that the A.O. without going through the directions of the I.T.A.T., Amritsar Bench in para 45 (supra) has wrongly assumed jurisdiction Under Section 158BD of the Income tax Act as there was no 'direction of the Appellate Tribunal to proceed against HUF (assessee). The learned Counsel for the assessee further argued that the A.O. has wrongly added the word 'HUF' while incorporating the direction of the Appellate Tribunal in para 45 above. The learned Counsel for the assessee further argued that the A.O. of the person searched Under Section 132 of the Income tax Act as such could not have been satisfied that any undisclosed income belongs to any person other than persons searched. He has further argued that under the Scheme of Chapter XIV-B reconsideration is not allowed. He has further argued that the A.O. of the person searched should have been satisfied before completion of the assessment in his case. He has further submitted that in the present case the A.O. initiated proceedings Under Section 158BD of the Income tax Act after completion of the assessment in the case of the person searched Under Section 132 of the Income tax Act, i.e. Shri Vijay Sehgal (Indl.). He has further submitted that the block assessment order Under Section 158BD is, therefore, liable to be set-aside. He has relied upon the order of the I.T.A.T., Delhi 'C' Bench in the case of B.L. Leather Pvt. Ltd., New Delhi in I.T. (S.S.) A. No. 13(Del)/1999 dated 28.12.2004. He has further submitted that there is no provision under Chapter XIV-B for satisfaction on re-appreciation. The learned Counsel for the assessee further submitted that since the search was conducted on 13.12.1995, therefore, the period for filing of the return for the assessment year 1996-97 did not expire. He has further submitted that the assessee filed return of income for the assessment year 1996-97 on 22.10.1996 showing the capital gains on sale of 990 shares and paid the taxes. However, as regards the remaining shares of 3732 held by late Shri D.D. Sehgal are concerned and sold to Smt. Purnima Ikri. the assessee has filed the details in the computation of income and it was explained that since there was a dispute between the legal heirs of late Shri D.D. Sehgal, the shares could not be transferred in the name of the assessee, however, the assessee is legally entitled to get the shares as a result of Court Order. Therefore, the assessee entered into an agreement to sale of 3732 shares with Smt. Purnima Beri when shares have not yet been allotted to him. Therefore, the capital gains would not arise on those sales. The learned Counsel for the assessee submitted that since the previous year is not ended or date of filing of the return for the assessment year 1996-97 is not expired and the details of the transactions were recorded in the agreement to sell dated 29.4.1995 and 1.5.1995 which was seized during the course of search, therefore, it would not fall within the definition of 'undisclosed income'. He has further submitted that since there was no search in the case of the assessee, therefore, no adverse inference could be drawn. The learned Counsel for the assessee further submitted that unless the assessee is the owner of the shares (which is in dispute) there is no question of transfer of shares. Therefore, the assessee has rightly not shown the capital gains on the same shares which was subject-matter of the agreement to sell. He has referred to the agreement to sell and argued that it is mentioned in the agreement itself that the shares are still in the name of deceased Shri D.D. Sehgal, therefore, Section 45 of the Income tax Act will not apply in this case as capital gains would arise only on the sale of shares. Since the assessee is not owner, therefore, there was no question of selling share would arise. It is submitted that the matter regarding shares is pending before the Hon'ble Punjab and Haryana High Court as regards shares held by late Shri D.D. Sehgal.
20. On the other hand, the learned D.R. relied upon the order of the authority below. The learned D.R. pointed out that initially the asstt. in the case of Shri Vijay Sehgal (Indl.) was taken up by the Additional C.I.T., Special Range, Jalandhar and thereafter matter in his charge was referred to the Dy. C.I.T., Special Range for assessment. He has further submitted that in the case of the assessee-HUF the matter was taken up initially by the same Additional C.I.T., Special Range and later on for the purpose of passing assessment order, it was given to the Asstt. C.I.T., Circle II, Jalandhar under his charge. The learned D.R. accordingly submitted that the A.O. was, therefore, the same and as such he was satisfied from the material on record and that the search material belongs to the person other than the person searched. The learned D.R. further submitted that the assessee has taken a contrary plea before the I.T.A.T., Amritsar Bench in the case of Shri Vijay Sehgal (Indl.) and it was claimed that some of the shares belonged to the HUF, other legal heirs or the family members of the deceased Shri D.D. Sehgal. Therefore, the I.T.A.T., Amritsar Bench vide order dated 31.12.1998 restored the matter to the file of the A.O. with the direction to look into the matter and decide the same. The learned D.R. further submitted that the I.T.A.T., Amritsar Bench has clearly given a direction to the A.O. to proceed in the matter against HUF and other share holders regarding capital gain. The learned D.R. further submitted that the assessee also filed a letter dated 23.3.2001 before the Additional C.I.T. Special Range claiming therein that out of 5052 shares, 4722 shares belonged to the HUF i.e. 99043732. The learned D.R. accordingly submitted that the A.O. was, therefore, satisfied as per seized material available on record as well as on the submissions of the assessee before the I.T.A.T. and submissions made vide letter dated 23.3.2001 that 4722 shares belonged to the HUF is undisclosed income, therefore, the A.O. on such material was satisfied that it is a fit case to proceed Under Section 158BD of the Income tax Act. The learned D.R. submitted that there is no requirement of recording satisfaction in writing as is required in other provisions of the Income tax Act. The learned D.R., therefore, argued that the A.O. has validly assumed jurisdiction Under Section 158BD of the Income tax Act. The learned D.R. submitted that there is no time limit for issuing notice Under Section 158BD of the Income tax Act and the assessment is framed within the time limit as provided Under Section 158BE(2) of the Income tax Act. The learned D.R. further submitted that the order of the I.T.A.T., Delhi Bench in the case of B.L. Leather Pvt. Ltd. is distinguishable on facts. The learned D.R. further submitted that the assessee has not disclosed the sale consideration of transfer of these shares in the regular return prior to the search, therefore, it was rightly taken as undisclosed income. The learned D.R. further submitted that the assessee was not maintaining any books of accounts, therefore, the assessee would not have disclosed the entire sale consideration for transfer of these shares to the Revenue Department, had the search not taken place in the matter. The learned D.R. further submitted that cash was received on the sale of shares and as such the same is undisclosed income. The learned D.R. referred to Section 2(14) of the Income tax Act and submitted that "capital asset" means property of any kind held by an assessee and there is no dispute of sale of shares to Smt. Purnima Beri, therefore, the assessee has transferred capital assets for consideration. Therefore, capital gains arises in the matter. The learned D.R. further submitted that the assessee had legal right, title and interest over the shares in 1/6th as held by late Shri D.D. Sehgal. According to above section, therefore, it becornes property in the hands of the assessee. The learned D.R. further submitted that since the assessee had a right in that property, therefore, on transfer of the same to Smt. Purnima Beri, the assessee has to account for the capital gains. The learned D.R. relied upon findings in the order of the authority below and submitted that the appeal of the assessee is liable to be dismissed.
21. We have considered the rival submissions and material available on record. The issues arise for consideration will be taken up separately for the purpose of disposal of the appeal.
(1) Whether the A.O. was satisfied that any undisclosed income belongs to any person other than persons searched Under Section 132 of the Income tax Act:
Section 158BD provides:
Undisclosed income of any other person.
158BD. Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made Under Section 132 or whose books of account or other documents or any assets were requisitioned Under Section 132A, then, the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against such other person and the provisions of this Chapter shall apply accordingly.
On going through the order of the I.T.A.T., Amritsar Bench in the case of Shri Vijay Sehgal (Indl.)(supra), we find that the issue as regards above shares was considered by the Appellate Tribunal alongwith the unexplained investment in various properties like FDRs etc. In para 7 of that order, the Tribunal has recorded alternative submission of the learned Counsel for the assessee regarding receipt of consideration on account of sale of shares by Shri Vijay Sehgal for and on behalf of other co-owners of the shares owned by Sehgal Family in M/s. Leader Valves Ltd. The learned Counsel for the assessee took alternative plea that the unexplained income, if any, should be treated as having been invested out of the money received in cash from Smt. Purnima Beri. This fact was mentioned at page 211 of the paper book filed before the Tribunal in case of Individual whereby the assessee has taken the plea that alternatively the investments in FDRs are out of sale proceeds received from Smt. Purnima Beri as per. statements of two witnesses. In para 8 of that order, the Tribunal also recorded the submission of the learned Counsel for the assessee, i.e. Individual and recorded that "The learned Counsel for the appellant finally took the stand before the Bench that he is authorised by the appellant to state before the Bench that he has, in fact, received the consideration of Rs. 1,01,04,000/- as consideration for sale of shares held by the Sehgal family from Smt. Purnima Beri." The Appellate Tribunal not only considered the alternative submission of the learned Counsel for the assessee, Shri. Vijay Sehgal (Indl.), but also considered various other investment in FDRs etc. and came to the finding that, in fact, the parties acted upon the agreement dated 29.4.1995 (which was recovered during the search) through which consideration of Rs. 1,01,04,000/- was indicated. The Appellate Tribunal in view of the facts and the circumstances and the submissions of the assessee passed the order in para 45, which is reproduced above. The Appellate Tribunal in para 45 recorded the statement of the learned Counsel for the assessee who pleaded that all the shares did not belong to the appellant alone. The learned Counsel for the assessee pleaded that he has no objection for taxing capital gain out of sale of shares but for that the A.O. has to calculate the capital gain of the ownership of the share held by Shri Vijay Sehgal, which are 330, of Shri Vijay Sehgal (HUF) and Rest of the legal heirs of late father of Shri Vijay Sehgal, The Appellate Tribunal on the basis of the above facts restored the matter to the file of the A.O. with direction to decide and look into the taxability of the" capital gain and so proper and legal ownership of the shares held by Shri Vijay Sehgal and his family members. The Appellate Tribunal already directed the Assessing Officer to calculate capital gam regarding shares held by Shri Vijay Sehgal and in case sale is taken place during the block period, the same will be taxed in the block period. Regarding capital gains of other share-holders, the Appellate "Tribunal directed that the A.O. can take legal action as he deems fit under the facts and in the circumstances of the case. It was also directed that so far as the issue of sale price is concerned, the same will be taken at Rs. 1,01,04,000/-, i.e. consideration received in cash as well as by cheque.
21.2 The above direction of the Appellate Tribunal clearly prove that 330 shares were held by Shri Vijay Sehgal Individual and rest of the shares were held by the HUF. The directions of the Appellate Tribunal are, therefore, very specific to proceed against the remaining persons as regards capital gains is concerned. The issue of the sale consideration was confirmed as was admitted before the Appellate Tribunal by the learned Counsel for the assessee, Shri Vijay Sehgal (Indl.). We may remind here that the cases of Individual and HUF are represented by Shri Vijay Sehgal in his Individual as well as in the capacity representing the HUF, therefore, by the submission of the learned Counsel for the assessee are binding in case of the Individual as well as the HUF. The assessee also admitted before the Additional C.I.T., Special Range vide letter dated 23.3.2001 that out of 5052 share sold to Smt. Purnima Beri, 4722 shares belonged to Shri Vijay Kumar (HUF), the present assessee. We may mention here that though the word 'HUF' is not used in para 45 of the order of the I.T.A.T. dated 31.12.1998 (reproduced in para 5 of this order in 15th line) but the totality of the findings in para 45 and the letter dated 23.3.2001 shows very clearly that 4722 shares were held by Shri Vijay Sehgal, HUF and as such the A.O. was bound by the directions of the I.T.A.T., Amritsar Bench to proceed in accordance with law against the remaining persons/share holders for charging of capital gains. The A.O. in case of person searched, therefore, in accordance with the directions of the Appellate Tribunal in the case of Shri Vijay Sehgal, and on the basis of searched material, considering his submissions before the Tribunal and letter filed before him i.e. the Additional C.I.T. dated 23.3.2001, was satisfied that an undisclosed income belongs to any person, other than persons with respect to whom search was made Under Section 132 of the Income tax Act. According to the learned representatives of parties, the proceedings were initially taken up by the Additional C.I.T., Special Range, Jalandhar in case of Shri Vijay Sehgal (Individual). Therefore, the A.O. was the same in both cases as such his satisfaction was based upon the material available before him which was recovered during the course of search, therefore, A.O. rightly proceeded in Section 158BD in accordance with the directions of the Appellate Tribunal and in accordance with law. The I.T.A.T., Bangalore (Special Bench) in the case of Y. Subbaraju & Co. v. A.C.I.T., reported in 91 ITD 118 (SB) held that the following are the essential ingredients of Section 158BD of the Income tax Act:
(i) the Assessing Officer of a person searched should be satisfied.
(ii) that undisclosed income belongs to person other than the person in respect of whom search was conducted,
(iii) the books of account or other documents or assets seized shall be handed over to the Assessing Officer having jurisdiction over that other person,
(iv) the Assessing Officer shall proceed against such other person under the provisions of this chapter.
It is further held that:
In other words, in a given case, where there is sufficient material to take action Under Section 15SBD, and the Assessing Officer has not specifically recorded satisfaction, it is not a lapse which would vitiate the proceedings. The main thing to be kept in mind is that proceedings Under Section 158BD cannot be a fancy or ipse dixit of the Assessing Officer but it should be based upon some material evidence found in the course of search. It must be appreciated that by invoking the provisions of Section 158BD, a stranger to the search proceedings is being implicated for a liability higher than normal rates of tax. Therefore, it would be in the fitness of things that the Assessing Officer demonstrates in some way his satisfaction about there being undisclosed income hidden in the search material, which as per the provision, has to be handed over to the Assessing Officer having jurisdiction over that other person. To put it straight existence of material is a sine qua non for taking action Under Section 158BD. If the above requirement is fulfilled in a given case, then omission to record satisfaction may not vitiate the proceedings.
21.3 Considering the above decision and the provisions of Section 158BD, we are of the view that there is no requirement to record the satisfaction in writing. The satisfaction of the Assessing Officer should, however, be discernible from the material on record. In the present case and on consideration of the facts, it is clear that the A.O. was rightly satisfied to proceed in accordance with Section 158BD against the HUF-assessee. No time limit is provided Under Section 158BD in issuing notice Under Section 158BD. The time limit is however provided for completion of the assessment Under Section 158BE(2)(a) of the Income tax Act which provides that the period of limitation for completion of block assessment in the case of other persons referred to in Section 158BD shall be one year from the end of the month in which the notice under this Chapter was served on such other person in respect of search initiated or books of accounts or other documents or any assets are requisitioned after 30th June, 1995 but before the 1st January, 1997. In this case, notice Under Section 158BD was issued on 29.3.2001and the assessment was framed on 28.3.2002, therefore, it was passed within the period of limitation. The order of the I.T.A.T., Delhi Bench in the case of B.L. leather Pvt. Ltd. is clearly distinguishable on facts. In this case, though there was observation of the Tribunal that the satisfaction of A.O. must come before the completion of the assessment in the case of the searched person but in the finding portion, the Tribunal further observed at the end of para 8 that though invoking of jurisdiction is specifically not barred by limitation but by doctrine of latches. It further considered that the A.O. did not have any incriminating evidence recovered during the course of search, was of the view that the satisfaction of the A.O. was not proper and as such the A.O. has not properly assumed the jurisdiction Under Section 158BD. However, in the present appeal before us the A.O. proceeded on the basis of the direction of the I.T.A.T., Amritsar Bench in the case of Shri Vijay Sehgal (Indl.), seized material, as well as on the submissions of the assessee made before the Tribunal and subsequent letter dated 23.3.2001. The A.O. in this case took up the matter without latches. Considering above facts and order of the Special Bench of I.T.A.T., Bangalore Bench (supra), the decision relied upon by the learned Counsel for the assessee is not applicable. According to the learned D.R., the Additional C.I.T., Special Range took up the matter initially in both the cases of Individual and HUF, Therefore, the cases of Individual and HUF fall in the Range of Additional C.I.T., Special Range and as per the new Scheme of asstt., he could have handed over further matter to his subordinates of the same Range. Therefore, for all practical purposes, the A.O. was the same in the cases of Individual and HUF. During the search, the material in the form of agreements dated 29.4.1994 and 1.5.1994, the receipts of the amount, transfer deed etc. were found, which, prima facie, shows that the assessee had undisclosed income. The individual assessee and the HUF are represented by the same person, Shri Vijay Sehgal. Some of the shares disclosing undisclosed income were explained to be of HUF. Therefore, the assessee cannot take the benefit of such plea in order to frustrate the provisions of law. The above facts are, therefore, sufficient to hold that the A.O. in the case of the searched person was satisfied from the material collected during the course of search that same material pertains to the present assessee and as such being the same Officer of the same Range rightly proceeded Under Section 158BD of the Income tax Act. The A.O., therefore, validly assumed jurisdiction Under Section 158BD.
21.4 Considering the above discussion, we do not find any infirmity in the order of the A.O. We accordingly reject the contentions of the learned Counsel for the assessee in this regard and dismiss the appeal of the assessee on this issue.
22. ISSUE NO. 2:- Whether the assessee has undisclosed income liable to be taxed in the Block Assessment under Chapter XIV-B of the Income tax Act:
Section 158B(b) provides definition of "Undisclosed Income":
(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 accounts or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act [, or any expense, deduction or allowance claimed under this Act which is found to be false].
Section 158BA(3) of the Income tax Act, 1961 provides:
Where the assessee proves to the satisfaction of the Assessing Officer that any part of income referred to in Sub-section (1) relates to an assessment year for which the previous year has not ended or the date of filing the return of income under Sub-section (I) of Section 139 for any previous year has not expired and such income or the transactions relating to such income 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 previous years, the said income shall not be included in the block period.
The A.O. observed that it is undisputed that the assessee's case is of no account case and on this particular ground, the assessee's case does not fall Under Section 158BA(3) of the Income tax Act. The assessee also did not file any return for block period. Further only small part of sale consideration was paid by purchaser by cheque whereas the major part was paid in cash. The A.O., therefore, found that major part of sale consideration was not meant to be recorded anywhere and may not mean to be disclosed to the department in the normal course. We do not find any infirmity in the observations of the A.O. because Shri Vijay Sehgal in the individual case disputed/agitated this issue before the I.T.A.T., Amritsar Bench in I.T.(SS) A. No. 8(ASR)/1997. The counsel for the assessee Shri Vijay Sehgal (Individual) also took alternative plea before the Appellate Tribunal. However, finally he took the stand before the Bench of the Appellate Tribunal that he is authorised by the appellant, Shri Vijay Sehgal (Indl.) to state before the Bench that he has, in fact, received consideration for sale of shares held by Sehgal family from Smt. Purnima Ben. Had there not been a search, the agreement dated 29.4.1995 disclosing full value of sale consideration would not have been disclosed to the department because original receipts for sale consideration were not of full value of sale of shares through entire sale consideration was received. Further, the agreement dated 1.5.1995 recovered show that 3732 shares were sold on behalf of Shri Vijay Sehgal (HUF) and consideration was also received on or before 1.5.1995. Cheque of sale consideration was not of full amount. The blank transfer forms for 3732 shares were also executed on behalf of Shri Vijay Sehgal (HUF) and was found from the premises of Shri Yash Paul Mittal. Still even subsequently capital gains with regard to sale of 3732 shares were not disclosed in the regular return of income filed for the assessment year 1996-97 on dated 22.10.1996, therefore, the A.O. was justified in observing that capital gains on 3732 shares would not have been disclosed to the department.
22.1 The assessee is, therefore, failed to satisfy the A.O. that such transactions are recorded in the books of accounts or other documents maintained in the normal course relating to such previous year even though the date of filing of the return of income Under Section 139(1) for which previous year has not expired. The onus was on assessee to satisfy the A.O. that conditions/requirements of Section 158BA(3) are fulfilled by him but no material whatsoever is produced before the A.O. in order to discharge the onus. Therefore, provisions of Section 158B A(3) would not be applicable to the facts and the circumstances of the present case, even same is position as regards 990 shares on whom capital gains declared in reeular return subsequent to scarch. The order of I.T.A.T. in the case of Shri Vijay Sehgal (Indl.) in para 45 (supra) clearly decided the finality of the matter as regards receipt of Rs. 1,01,04,000/- from Smt. Purnima Beri for sale of shares. Counsel has also given no objection to tax capital gains on such amount. Paras 3 and 5 of the agreement to sell dated 29.4.1995 read as under :
3. The Seller hereby has executed and signed of the documents viz. transfer deed required for the transfer of the shares above said in favour of the purchaser, in order to smoothly transfer the title of shares in favour of the purchaser. However, if the Seller be called upon to sign fresh documents i.e. Transfer Deed etc. at a later date on account of invalidate of existing signed Transfer Deed as per provisions under the Companies Act, 1956 or as per provisions under Acts as may be applicable, the Purchaser hereby undertakes to sign all the documents or transfer deed at a later date as may be required by the purchaser.
5. That from the date of this agreement, any rights, dividends or bonuses declared in respect of such shares shall be the property of the purchaser and the seller shall not have any right in the case. Further, in case any benefit above said if comes into the hands of the seller, he will immediately transfer/pass these benefits and will execute all the Transfer Deeds which may be required in favour of the purchaser.
The above paras in the agreement read with the findings of the Appellate Tribunal in the case of Shri Vijay Sehgal (Indl.), it is clear that Shri Vijay Sehgal has received the total, consideration in respect of sale of shares upto the date of agreement and has, therefore, relinquished all his rights in respect of these shares. The A.O. is, therefore, right in observing that even otherwise no prudent person will give all his rights untill he has received full and final consideration in respect of the transaction. Even it is mentioned in the agreement dated 1.5.1995 that Shri Vijay Sehgal (HUF) has a right to inherit shares as per Hindu Succession Act, as is observed by the A.O. The learned Counsel for the assessee filed order of the High Court dated 2.2.1996 in the paper book in the name of Shri Narinder Kumar Sehgal and copy of case filed by Shri Vijay Kumar Sehgal in the court of Civil Judge, Jalandhar to show that there was dispute in legal heirs of late Shri D.D. Sehgal as regards inheritance of shares, in question, and that the assessee have not been allotted shares, therefore, there is no question of transfer of shares and arising capital gain. We do not find any serious dispute between the legal heirs of Shri D.D. Sehgal as regards inheritance of shares. From the order dated 2.2.1996 (supra), it appears that the shares of Company were held by Shri D.D. Sehgal appears to have been settled in compromise and resultant compromise decree was passed. On the basis of consent decree, it was requested to the company to register the share in the name of legal heirs of Shri D.D. Sehgal but company refused because of dispute on transfer of flat of Bombay. Therefore, the High Court in Company Application No. 11/1993 did not entertain the request of legal heirs and it was made clear that if proper application is filed by the legal heirs of Shri D.D. Sehgal for transfer of shares then such application will be disposed of in accordance with law.
22.2 Therefore, it is clear that there is no dispute pending as regards inheritance of shares by the assessee. Even according to the Hindu Succession Act, the assessee will be entitled to right, title and interest, in shares held by late Shri D.D. Sehgal. The assessee vide letter dated 23.3.2001 admitted before the Addl. C.I.T. that shares belong to HUF for which sale is not shown in the regular return.
22.3 The definition of "Capital Asset" in Section 2(14) of the Income tax Act means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include-
(i) any stock in trade.
(ii) personal effects -
(iii) agricultural land, not being land situated -
Section 2(47) of the Income tax Act, 1961 provides the definition of "Transfer" in relation to capital asset, includes:
(i) the sale, exchange or relinquishment of the asset; or,
(ii) the extinguishment of any rights therein; or
(iii) the compulsory acquisition thereof under any law; or
(iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment; or
(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in Section 53A of the Transfer of Property Act, 1882 (4 of 1882); or
(vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property.
23. The I.T.A.T., Madras Bench 'C' in the case of Beardsell Ltd. v. Jt. C.I.T., reported in 80 ITD 224 held:
It is well known that any right or interest in a property is as much a property. Because this property had been held under lease from 1971, it would be a capital asset within the meaning of Section 2(14) of the Act, The term "transfer" is defined in Section 2(47) of the Act as relating to capital asset and it includes sale, exchange, or relinquishment of the asset or extinguishment of any rights therein. The right, title etc. in the instant case was assigned in favour of the third tenant for a consideration and, therefore, it involved exchange. Consequent to such assignment in favour of the third tenant, the assessee gave away its right, title etc. in favour of the third tenant resulting in extinguishment of any right therein. Therefore, the transaction as could be seen from our discussion above is a case of transfer of a capital asset. Because the capital asset was held by the assessee for a long period of more than 36 months, gains from such transfer would result in long-term capital gains.
24. The I.T.A.T., Mumbai Bench in the case of Hiralal Maganlal & Co. v. Dy. C.I.T., reported in 96 ITD 113 taking into consideration the Rule of Estopple as provided in Section 115 of the Evidence Act held: "Assessee, having made a voluntary declaration on oath and induced departmental authorities to act upon same at time of search, cannot be permitted to turn around later and deny truth of said declaration or representations made therein."
25. The assessee, Shri Vijay Sehgal (Indl.) made submissions through his counsel before the I.T.A.T. in individual case as regards sale consideration received on the transfer of shares in question. Shri Vijay Sehgal is also representing the present assessee HUF. The submissions made before the Appellate Tribunal in individual case read with the statement contained in the agreement recovered during the course of search would show that the assessee declared himself to be owner of the shares, in question, with all rights, titles and interest in shares in the individual as well as the capacity of representing HUF. There is, therefore, no dispute as regards title of the shares held by the assessee. Therefore, the shares, in question, were held by the assessee with full right, title and interest. Therefore, the assessee clearly held capital asset within the meaning of Section 2(14) of the Income tax Act. The sale, exchange or relinquishment of assets or extinguishment or any right therein amounts to transfer in relation to capital asset under the Income tax Act. Therefore, the assessee has clearly transferred the shares (capital asset), which is, therefore, liable to tax on capital gain.
26. The assessee has not paid any tax in respect of 3732 shares. Mere declaration of narration in the computation of income or in the return is not enough to conclude that it is not undisclosed income. No details as regards receipt of full consideration was filed in the return. It is, therefore, a clear case of transfer of capital asset of 990 plus 3732 shares which transactions were not recorded in books of account and other documents in normal course before search and therefore same is undisclosed income of the assessee. This point is, therefore, decided against the assessee and in favour of the Revenue.
27. ISSUE No. 3:- Whether in the facts and the circumstances of the case, the assessee earned capital gain in the transaction entered through agreement to sell:- We have held above that the assessee held the shares with full right, title and interest and, therefore, the same was capital assets, which were transferred/sold for consideration. Even before the I.T.A.T., Amritsar Bench in the case of Shri Vijay Sehgal (Indl.) in para 45 and other paras assessee did not dispute these facts. The counsel also stated that he has no objection of taxing the same sale for capital gain. Therefore, the A.O. rightlyjield that capital gain arises. This point is, therefore, decided against the assessee.
28. ISSUE NO. 4:- Last question remains as to whether the assessee is entitled for deduction being cost of the shares involved in this case as per ground No. 3 :- The A.O. in para 9.3 has mentioned that the provisions of Section 49 of the Income tax Act as regards cost of the acquisition of the shares. However, according to the A.O., the assessee has not filed any return nor the information with regard to the cost of these 3732 shares. Therefore, the A.O. has taken the cost of acquisition of 3732 shares, to be 'nil'. However, we find that the assessee is entitled for deduction of the cost of acquisition of the shares as per Sections 48 and 49 of the Income tax Act and by applying indexation as shares in question shall not be without any cost of acquisition. Since the assessee disputed the transfer, sale and acquisition of the shares initially, therefore, might not have filed the required detail. It is first appeal before us, therefore, considering the facts and the circumstances of the case, we are of the view that in all fairness and in the interest of justice, the assessee be given one opportunity to file details of cost of acquisition etc. of all the shares, in question, before the A.O. We accordingly restore this issue to the file of the A.O. with the direction to the assessee to file the required details of cost of acquisition of all the shares in confirmity with the provisions of law. The A.O. shall, by giving reasonable sufficient opportunity of being heard to the assessee, determine this issue and allow the deduction to the assessee, if any, in accordance with law as regards cost of acquisition of shares on the basis of indexation etc. as may be available to the assessee under the law. Ground No. 3 of appeal of the assessee is accordingly allowed for statistical purposes.
29. No other point/issue is argued or pressed.
30. In view of the above discussion, the appeal of the assessee is on merits is dismissed, however, ground No. 3 of the appeal is allowed for statistical purposes as directed above.
31. As a result, the appeal of the assessee is partly allowed for statistical purposes.