ORDER
Rambaradur, J.M.;
This appeal, by the assessed, arises out of the order of Dy. CIT Circle 12(1), New Delhi dated 28-3-2002, passed under section 254/158BD of the Income Tax Act, 1961, for the block period 1-4-1986 to 2-11-1996.
2. Below reproduced are the grounds of appeal:
'1. That the initiation of proceeding under section 158BD of the Income Tax Act is wholly arbitrary and is without jurisdiction. The precondition for invoking the provisions of section 158BD of the Income Tax Act were since not satisfied, the assumption of jurisdiction was wholly erroneous and as such assessment made is also not tenable.
2. That the learned Dy. CIT has failed to appreciate that, before proceeding to frame the instant assessment, he had to firstly establish, in view of the order of the Tribunal setting aside the assessment which having been modified by the High Courts, that there was a material found as a result of search on the basis of which the assessing officer having jurisdiction on the assessed who had been searched that there was an undisclosed income, which has been found or detected as a result of search and that in support thereof he recorded a note of satisfaction. In the absence of any such valid material and/or note of such satisfaction the assumption of jurisdiction and framing of assessment is wholly arbitrary and is thus unsustainable in law.
3. That the learned Dy. CIT, Circle 11(1), New Delhi, has erred in framing the assessment under section 254/158BC(c) of the Act without giving any independent reason for holding that there was an undisclosed income and further computing the undisclosed income of the assessed at Rs. 1, 14,52,605. The instant assessment made is wholly arbitrary and is without jurisdiction.
4. That in making the instant assessment, he has failed to appreciate that the Hon'ble Tribunal was pleased to set aside the assessment with a direction to reassess the issues involved in the assessment made and as such, before making the assessment, he was obliged in law, to have recorded his independent reasons after examining the evidence furnished and bring material to establish that there was any income which had not been disclosed by the assessed, as such, in absence of any adverse finding recorded or adverse material having brought on record and confronted for the assessed's rebuttal, there was no justification for the learned Dy. CIT to have computed any undisclosed income.
5. That the learned Dy. CIT has failed to appreciate that under Chapter XIV-B of the Act, an assessment has to be made of an undisclosed income and in such the impugned assessment made by merely reassessing the income, lacks jurisdiction to frame the instant assessment.
6. That the learned Dy. CIT has failed to appreciate that no adverse evidence, material or any other account was found at the time when search was conducted and as such, in absence of such a precondition, having been established there was no justification to reassess the income of the assessed by invoking the provisions of section 158BD of the Act by readjusting the heads of income and/or by increasing the income from property by adopting notional basis and that too, in disregard of the provisions of law.
6.1 That in making the aforesaid assessment, the learned Dy. CIT has completely ignored detailed submissions made by assessed and has erred in drawing arbitrary conclusion unsupported by any material on record and holding the sum of Rs. 1, 14,52,605.
7. That the learned Dy. CIT has grossly erred in disallowing the loss of Rs. 1,14,52,605 on sale of 1,84,000 shares of Hindustan Development Corporation Ltd., relating to assessment year 1995-96, treated the same as undisclosed income which was otherwise duly recorded in the books of accounts and could not in any manner be regarded as an undisclosed income. The addition of the aforesaid sum is also on misinterpretation of the facts.
7.1 That there was no justification to hold the aforesaid loss as undisclosed income of the assessed, particularly when the Hon'ble Tribunal in the case of Paramount Enterprises Ltd. and other cases had deleted a similar addition and as such the action of the learned Dy. CIT is without jurisdiction and totally untenable and unsustainable.
7.2 That the finding of the learned Dy. CIT that the order is being passed with a fresh application of mind and pursuant to the directions of the Hon'ble Tribunal and as such, the can one of principles of judicial propriety as set out by the Hon'ble Supreme Court in the case reported in Union of India v. Kamalakshi Finance Corpn. Ltd. 55 ELT 433, have been fully complied with, is based on complete misconception and misreading of the judgment of the apex Court. That once the Hon'ble Tribunal in a similar matter had deleted the addition, there was no justification for the learned Dy. CIT to hold the aforesaid loss as undisclosed income of the assessed.
7.3 That the finding that the only motive of the assessed to transfer shares of HDC from one company to another company under some management was to book loss by showing them as transferred at lower rate as there was fall in market rate of those shares, and to adjust the loss so booked against profit on sale of other shares on which assessed would have been liable to pay tax is based on mere suspicion, surmise and conjecture unsupported by any material. In any case, the same could not be regarded a valid consideration in disallowing the loss and treating the same as undisclosed income.
7.4 That further there was no basis and justification for the learned Dy. CIT to have held that scrutiny of the accounts of the appellant-company and M/s Laxmangarh Estate along with various other documents explained that both the companies had preplanned the objective of booking losses particularly having regard to the fact that detailed evidence, Explanationn and information was furnished by the assessed in establish that the transactions had been carried out in the normal course of business.
7.5 That in any case there was absolutely no justification for the learned Dy. CIT to draw adverse inference on the basis of transactions carried out by M/s Laxmangarh Estate Ltd., which is an independent assessed and as such, the same cannot in any manner be used to dispute the genuineness of the claim of the assessed.
7.6 That the learned Dy. CIT ought to have appreciated that the assessed-company sold its hares in order to ward off its future loss and erosion of its net worth and it was wholly immaterial as to whether the shares were sold to a group company or to any other person as the same were genuinely transacted and at the market rate (which fact is undisputed) and would be a sufficient factor to indicate the genuineness of claim made by the assessed- company.
7.7 That the reliance placed by the learned Dy. CIT on the judgment of Hon'ble Supreme Court in the case of McDowell & Co. is wholly misplaced and inapplicable to the facts of the instant case.
7.8 That the learned Dy. CIT had absolutely no justification to have questioned the prudence of the assessed-company to have transferred the shares with falling rate to another company in as much as prudence of the business decision should not have been gone into by him and no transaction which is otherwise lawful can be termed as tax avoidance device.
8. That the various other adverse findings recorded by the learned Dy. CIT in the order of assessment are not well founded and the same are highly arbitrary, whimsical and without any valid material on record and instead are based on mere surmises and conjectures.
9. That, in any case, the order of assessment made under Chapter XIV-B of the Act is untenable, as the learned Dy. CIT completed the assessment without fulfilling the mandatory requirement of law of seeking the due approval of the learned CIT in accordance with law. The learned CIT could grant such an approval not merely mechanically but could do so after only giving an opportunity to the appellant and hearing him after providing a copy of the draft order on which his approval was sought in order to enable the assessed to furnish his objections- Any order, without fulfilling the aforesaid requirement of law cannot be regarded as mere irregularity but is a nullity as it goes to the very jurisdiction of the officer to complete the assessment.
10. That in any case and without prejudice the impugned assessment has been framed without providing to the assessed a fair and proper opportunity of being heard and as such the order passed is contrary to the principles of natural justice. Further, assumption that there has been an undisclosed income is based on wholly irrelevant, arbitrary and unfounded considerations.
11. That the learned Dy. CIT has further erred both in law and on facts in levying surcharge at 15 per cent when as such the same was not livable at all.'
3. At the outset we may mention that the aforesaid appeal had been heard along with ITA No. IT(SS) No. 110/Del/2002 filed by Intercontinental Trading & Investment Company Ltd. It was agreed between the parties that the facts pertaining the instant appeal and as pertaining to the said appeal, so far as it relates to the disputed sum of Rs. 1,14,52,610 are similar to the facts of the aforesaid appeal.
4. Before we proceed to take up the grounds raised by the appellant in the memo of appeal, it is, however, necessary to recapitulate few facts, which, in brief, are as under
4.1 The appellant is a public limited company, engaged in the business of investment and trading in shares, letting out of properties etc. It is being assessed to income-tax regularly since the assessment year 1982-83. There had been no search and seizure conducted under section 132(1) of the Income Tax Act at the assessed's premises nor was any warrant of authorization issued against it.
4.2 The assessed's premises is situated at 7th Floor, Hansalaya, 15 Barakhamba Road, New Delhi and that a search and seizure operation had been conducted on 21-11-1996, under section 132(1) of the Income Tax Act on M/s Hindustan Development Corporation Ltd. (stated to be a flagship company of M/s R.P. Mody Group), where a search had been conducted at Calcutta and also at chief office at 7th Floor, Hansalaya which is also the office premises of the aforesaid company.
4.3 During the course of search, regular books of accounts, maintained by the assessed- company i.e., ledger, cash book for the three financial years, i.e., 1994-95, 1995-96 and 1996-97 (up to 21-11-1996) were found and seized. As per assessed's stand these books of accounts had duly incorporated all transactions on the basis of which the return of income had been furnished by the assessed.
4.4 In the instant case an assessment completed by an order dated 31-3-1998, at an undisclosed income of Rs. 1,14,52,610, which order had been set aside by the Tribunal vide its order dated 29-2-2000, and on further appeal by the assessed under section 260A of the Income Tax Act, the Hon'ble High Court was though not pleased to admit the appeal but held that any finding/observation, made by the Tribunal would not be taken into consideration while making the fresh assessment.
4.5 The present assessment which had been impugned before us has again repeated the addition made originally in the order dated 31-3-1998, and the Dy. CIT has completed the assessment adopting the same sum as an undisclosed income, as had been held as an undisclosed income by an order dt. 31-3-1998.
4.6 While computing the undisclosed income the learned Dy. CIT has held that the loss suffered of Rs. 1, 14,52,610 by the assessed on the sale of certain shares in the assessment year 1996-96 represented the undisclosed income. The entire transaction pertaining to purchase and sale of such shares, in respect of which the loss had occurred, had duly been found recorded in the books of accounts maintained by the assessed for the financial year 1994-95. No incriminating material was found on the basis whereof it could be held that the transaction could be regarded as undisclosed.
4.7 The return of income, on the date of search (In the case of HDC) had become due till the assessment year 1995-96 and the assessed had also duly furnished its return of income for the assessment year 1995-96 on 27-11-1995.
5. On the basis of the aforesaid facts the learned counsel for the assessed submitted at the outset that the learned Dy. CIT exceeded in his jurisdiction while computing the undisclosed income, the purported undisclosed income for the assessment year 1995-96. It was contended by him that sub-section (3) of section 158BA of the Income Tax Act specifically provided that where the assessed proves to the satisfaction of the assessing officer that any part of income referred to in sub-section, return of income under sub-section (1) 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. It was submitted by him that the search on 'Mody group of cases' was conducted on 21-11-1996, and the return of income for the assessment year 1995-96 had already been filed on 27-11-1995, and all entries relating to all the transaction had duly been entered by the assessed, in its books of account (which has been held to be the undisclosed income of the assessed) and were duly found recorded in the books of the accounts, there was no justification for holding that there was any undisclosed income for the assessment year 1995-96. The assessed's counsel specifically submitted that for assessment year 1995-96 no addition had been made of any undisclosed income on the basis of any document found as a result of search or on the basis of any entry not found recorded in the books of accounts of the assessed. It was thus submitted by him, that the order of assessment made shows complete non-application of mind and the addition has been made merely for the sake of making addition and in doing so, the learned Dy. CIT exceeded in his jurisdiction in repeating the addition which had been made in the original order of assessment dated 31-3-1998, which were totally unwarranted both on facts and in law.
5.1 The appellant's learned counsel further contended that the only addition made pertaining to the assessment year 1995-96 of Rs. 1,14,52,610 is entirely erroneous both on facts and in law. Explaining the nature of the aforesaid addition it was submitted by him that the aforesaid sum, which has been held to be undisclosed income, represents loss suffered by the assessed genuinely on the sale of shares owned and held by it of Hindustan Development Corporation Ltd. It was contended by him that no material whatsoever was found as a result of search on the basis of which it could be held that the entries resulting into loss is bogus or manipulated but on the contrary represents the loss suffered in the course of its business. It was specifically contended by him that all the transactions of purchase and sale are duly entered in the books of accounts which are also supported by relevant material i.e., contract of purchase and sale and the payments for purchase and sale have duly been reflected in the books of account which have duly been cleared through account payee cheques. It was submitted that all the transactions are verifiable and it is not that as a result of search it has been found or has been established by any material that such transactions had not been entered into and were either non-genuine or bogus. It was thus contended that there was no income which could be regarded as undisclosed income.
5.2 The learned counsel as noted in para 6 above contended that the learned Dy. CIT has also grossly erred in holding that the loss suffered of Rs. 1,14,52,610 in respect of sale of shares of HDC Ltd. for the assessment year 1995-96 represents an undisclosed income. It was submitted that the loss suffered cannot be regarded as the undisclosed income as it is not a case where, the transaction pertaining to either purchase or sale has not been found recorded in the books of accounts. It was also submitted by him that there is no dispute about the genuineness of the transaction. It was also submitted by him that the findings of the learned Dy. CIT that there was a colourable device in the sale of shares is entirely misconceived and is based on surmises and conjectures and is in disregard of the facts of the case.
5.3 Similarly, it was further contended that the learned Dy. CIT has held in the impugned order that the shares remained with the group company. In making the aforesaid observation it was contended by him that the Dy. CIT has completely ignored the fact that the shares were purchased by the so called group company in the open market at the prevailing market price by paying necessary sale consideration through independent broker and the amount so received as the sale consideration by the assessed company was duly utilized by, it in its business as well as in advancing the money which resulted into substantial income having been taxed. The learned counsel further contended that if such shares were not sold resulting into loss, then the income earned from the sale proceeds could not have been separately assessed to tax. In fact, as stated above, having accepted that the assessed had earned income on making investment from the sale proceeds, it was not correct, justified to contend that no sale of shares were made. It was submitted that there is thus an apparent contradiction in the stand by the revenue. He contended that there were no adverse observations made in respect of the purchase of shares. There is no finding that the assessed has not genuinely purchased the shares and if that be so, obviously, the shares as had been purchased were either remained then unsold and as such remained in closing stock at the end of the year.
5.4 It was contended that even if for a moment and without prejudice it is assumed that such shares remained in the stock at the end of the year and not sold, the assessed could have valued the same at market price, which was comparatively less as on 31-3-1995, as compared to the rate at which it was sold which would have further resulted into fall of the income, than disclosed. It was argued that the value of shares never went higher even till date than the rates at which those shares had been sold at the rate of 36.60 per share. In such circumstances, it was submitted the observations made are based on misconception of facts. In any case it was submitted, all these points had duly been considered by the Tribunal in the three orders cited above, which are absolutely on identical facts and are thus being read in detail to demonstrate that the issue in the instant appeal stand fully covered. The Hon'ble Supreme Court in the following cases have held that the consistency in approach is the bedrock of judicial discipline and as such the same must be respectfully followed :
a. Union of India & Ors. v. Kaumudini Narayan Dalal & Anr. : [2001]249ITR219(SC) ;
b. Union of India v. Satish Panalal Shah : [2001]249ITR221(SC) ;
c. Government of Andhra Pradesh & Ors. v. A.P. Jaiswal & Ors. (2001) SCC 748.
5.5 It was also contended by the assessed's counsel that there was either no 'satisfaction' reached by the learned assessing officer having jurisdiction over the assessment of M/s Hindustan Development Corporation or could even have been reached by him, as there was absolutely no material on the basis whereof such a 'satisfaction' could have been reached. Further, there is absolutely no material whatsoever warranting a finding that such a 'satisfaction' as envisaged under section 158BD of the Income Tax Act had been reached in the case of the assessed who had been searched by the assessing officer having jurisdiction over that assessed merely forwarding of the books of account of the assessed as had been seized by itself is insufficient for concluding that the learned assessing officer having jurisdiction over that assessed was satisfied that any undisclosed income belongs to any other person.
5.6 It was also argued by the assessed's counsel that from the mere fact of forwarding or sending the books of accounts, which had been seized, as maintained in the normal course of business activities, by no stretch of imagination it could be inferred that he was satisfied that there is an undisclosed income, which is hidden in the books of accounts. It was further submitted that what else the learned assessing officer could have done, as he had necessarily to return the books of the assessed and from the mere fact those books were forwarded to the learned assessing officer having jurisdiction over the assessed, could by itself be not a trade or basis to assume that a satisfaction was reached that there was an undisclosed income, which belongs to the assessed and in respect of which the learned assessing officer was so satisfied. The assessed, in support has relied upon the following judgments.
1. Ved Prakash Sanjay Kumar v. Asstt. CIT (2001) 76 ITD 10 7 (Chd);
2. Suman Dhanji Zalte v. Asstt. CIT ;
3. Dr. Ajay Kumar Agarwal v. Asstt. CIT ,
4. Chhabria Marketing Ltd. v. Dy. CIT .
5.7 The assessed's counsel also contended that on the correct interpretation of section 158BD of the Income Tax Act it cannot be held that as if the proceedings under section 158BD can be initiated without there being any material found as a result of search and on a mere fact that the disclosed books of account are when forwarded, it should be hold that the learned assessing officer was satisfied that there is an undisclosed income. It was submitted in such circumstances, it cannot be held that a satisfaction has been reached on merely forwarding the books of account, which had been maintained in the regular course of business on the basis whereof, return of income had also been furnished.
5.8 The learned counsel for the assessed, in support further relied upon the following decisions wherein it has been held that the provisions of Chapter XIV-B of the Income Tax Act cannot be invoked to assess any income duly disclosed, but are the provisions to bring to tax an 'undisclosed income', where the transaction has not been recorded in the books of accounts :
1. Sunder Agencies v. Dy. CIT (1998) 63 ITD 245 (Mum);
2. J.K. Narayanan (HUF) v. Asstt. CIT (sic);
3. J.K. Narayanan (HUF) v. Asstt. CIT (1999) 69 ITD 104 (Mad);
4. CIT v. N.R. Papers & Boards Ltd. (2001) 248 ITR 526 (Gui);
5. CIT v. Vinod Dhanchand Ghodawat : [2001]247ITR448(Bom) ;
6. Pradip C Patel v. Dy CIT
7. Parakh Foods Ltd. v. Dy. CIT
8. Bhagwati Prasad Kedia v. CIT : [2001]248ITR562(Cal)
9. Harakhchand N. Jain v. Asstt. CIT (1998) 61 TTJ (Mum) 223
10. Essem Intraport Services (P) Ltd. v. Asstt. CIT
11. Shri Nagindas M Goradia v. Dy. CIT in IT (S&S;)A 99/Mum/1996
12. P.K. Ganeshwar v. Dy. CIT (2002) 80 ITD 429 (Che).
5.9 The learned counsel further submitted that in all the said decisions it has been held that the provisions of Chapter XIV-B of the Income Tax Act are not meant to reassess the income as envisaged under section 148 of the Income Tax Act.
5.10 It was vehemently argued by the assessed's counsel that in the instant case the shares of HDC Ltd. (on which loss occurred) had been purchased by the assessed- company even before the sale of shares of ABB Ltd. and Ingersoll Rand on which the assessed had made handsome gains. thereforee, the revenue's plea that assessed-company had entered into the transactions of purchase/sale of shares of HDC Ltd. with a view to set off the loss from the gain, is based on mere conjecture and surmises and without any material. He further submitted that no income had been earned or accrued till the date the share of HDC Ltd. were purchased by the assessed-company in the open market and as such there could be no question of making any attempt to set off the loss which could only have arisen when before entering into the transaction of the purchase, the assessed had earned any income. It was submitted that when no such income had been earned and the shares had been purchased earlier to the sale on which income arose, the question of concluding that, the transaction was entered with a motive to set off the loss, it was submitted, simply did not arise. In support, the assessed's counsel relied on the judgment of the Hon'ble Gujarat High Court in the case of Banyan & Berry v. CIT : [1996]222ITR831(Guj) .
5.11 The learned counsel for the assessed also repeated almost all the arguments which were addressed by him in the appeal of M/s Intercontinental Trading & Investments Co. Ltd. In IT(SS) No. 110/Del/2002 which has been heard along with this appeal, including the submission that the loss suffered by the assessed is a genuine loss, stands concluded by the order of Tribunal in the case of Paramount Enterprises Ltd. (IT(SS)A No. 324/Del/1997) and in the case of Orient Bonds & Stock Ltd. (ITA No. 5326/Del/1998) wherein on identical facts and circumstances the loss suffered has been held to be genuine loss and allowable as such.
6. The learned senior Departmental Representative however simply contended that the proceedings had validly been initiated and the sum held as an undisclosed income by the learned Dy. CIT has correctly and validly been held as an undisclosed income. It was submitted by him that had there been no search conducted, the department could not have known that it is a case of device to set off the gains from the loss claimed and as such merely because all the transactions had duly been recorded by the assessed in the books of accounts by itself is insufficient to hold that the provisions of Chapter XIV-B are not applicable and the loss allegedly suffered and claimed as a loss could be held as not representing an undisclosed income. He however, fairly submitted that all the transactions both of purchase and sale had duly been entered by the assessed in the books. It was his submission that merely because it had been so entered would not mean that such loss did not represent its undisclosed income. It was however not denied by him that any incriminating material was found, as a result of search which showed the transactions of purchases and sale were either bogus or were not entered into between the parties or that even the sale of shares were not registered in the name of purchaser on the sale having been made.
7. We have perused the order of assessment and have gone through the paper book filed by the appellant. Since it has been agreed between the parties that the facts of the instant case pertaining to the disputed addition are similar to the connected case heard by us, we similarly hold that the addition made by the learned Dy. CIT in the instant case cannot be sustained which we hereby delete. We have also perused the order of the Tribunal in the case of Paramount Enterprises Ltd. and we find that the facts are identical, however, for the sake of convenience, we consider appropriate to record the facts of the case of the assessed, which are as under
7.1 The assessed had purchased 2,15,900 shares of M/s HDC Ltd., for Rs. 2,11,33,310. It has not been disputed that such shares, which have been purchases were purchased at the market rate. Out of these 2,15,900 shares, 1,84,000 shares were however, sold by the assessed on 8-3-1995 for Rs. 65,50,400. The assessed's counsel has placed a chart at p. 285 of the paper book showing complete details of purchase and sale. It was stated by the learned counsel for the assessed that in order to make payment for the purchases made, it sold the shares of M/s Ingersoll Rand India Ltd. and M/s ABB Ltd. on which, it had made handsome gain. The revenue, it was submitted, has not disputed that these shares were purchased at the market rate and before the sale were made, it had made handsome gain. It has also not been disputed that the sales were made through the broker M/s Rajendra Kumar Agarwal and was made at the market rate. In fact, the assessed's learned counsel for the assessed has vehemently contended that the market value of the shares never went higher than the rates on which the shares were sold by it on 8-3-1995. We also find that the shares purchased by it, yielded dividend, before the sale was made by it on 8-3-1995 to M/s Rajendra Kumar Agarwal, which had duly been assessed to tax in its hands. The income by way of dividend thereafter had duly been assessed in the hands of M/s Lakshmangarh Estate & Trading Co. Ltd., who had purchased the shares for the assessed- company, of course, though the broker and at the market State. It is also not a case of the revenue that the dividend income earned by the assessed from the shares held by it before its sale to M/s Lakshmangarh Estate & Trading Co. Ltd. was not its income or it continued to remain its income after the sale of the shares were made.
7.2 Indeed hereto, we observe as it has not been disputed, that all the transactions entered by the assessed, in the course of business, had been found duly recorded in its books of accounts maintained in the regular course of business and no incriminating material was found as a result of search establishing that any transaction entered into by the assessed had either been not recorded by it in the books of accounts or was meant not to be recorded. In our opinion, as such, the initiation of proceedings on the assessed, on the basis of the books of accounts maintained by it, by itself could not be held to be legal, valid and on proper basis. All what we find is that the learned assessing officer, having jurisdiction over the Mody group of cases has merely forwarded the books of accounts of the assessed, found and seized, to the assessing officer having jurisdiction over the assessment of the assessed. In our considered opinion, mere forwarding of such books of account by itself is insufficient to conclude that the learned assessing officer having jurisdiction over Mody group of cases, was satisfied that any undisclosed income was found or detected as a result of search on the basis of which proceedings under section 158BD of the Income Tax Act could have been initiated against the assessed.
7.3 Apart from the aforesaid, in our opinion further, the learned Dy. CIT while framing the assessment, was not correct in holding that there was any undisclosed income for assessment year 1995-96 particularly because the return of income had duly been filed by the assessed-company on 27-11-1995, i.e., before the due date and before the search and as such in our opinion there could be no computation of undisclosed income, unless any material is found establishing detection of an undisclosed income. In the instant case no such material has been brought on record nor our attention was drawn to any such material., In view thereof in our opinion there could have been no computation of any such alleged income. It is thus a case wherein, the learned assessing officer has proceeded to frame the instant assessment as a result of making merely reassessment of income, which, in our considered opinion, is not permissible and is beyond the pale of Chapter XIV-B of the Income Tax Act.
7.4 We also hold that the loss suffered by the assessed of Rs. 1,14,52,610 and set off from the long-term capital gain on the sale of shares, in our opinion, is also unjustified for more than one reasons. Firstly, in our opinion, this addition does not fall within the pale of Chapter XIV-B of the Income Tax Act. In any case, we have examined the transaction at length and we find that the assessed had genuinely entered into the purchase of shares, which have been sold by it. It is a matter of record that the dividend earned from the sale of shares, has duly been assessed in respect of the income earned from the sale proceeds received which amount had been invested by it in its business as well as in advancing the money which has resulted into substantial income which income has been taxed. We find that the issue has been dealt with by the various Benches of the Tribunal and while relying upon the said finding of the Tribunal in such cases, we are of the considered opinion that the loss suffered and set off against the capital gains, has to be allowed as had rightly been claimed by it,
7.5 We also hold that as the facts of the instant case are identical to the facts in the case of Paramount Enterprises Ltd. and that of Orient Bonds & Stock Ltd., which have been decided by the Tribunal vide its orders dated 17-1-2001 and 19-1-2001 respectively, as also Intercontinental Trading & Investment Co. Ltd., which has been decided along with this case, in our opinion, the loss suffered cannot be said to be not a genuine loss. Thus, relying upon the findings recorded by the Tribunal in ITA No. IT(SS) 324/Del/1997 and ITA No. 5326/Del/1998, we hold that the learned Dy. CIT was not justified either on facts or in law to hold that the said sum is the undisclosed income of the assessed-company, liable for assessment under Chapter XIV-B of the Income Tax Act. We also hold that the assessed has been able to establish that it has suffered the loss in the course of business and had to be set off against the capital gains which had duly been offered by it in the return of income.
7.6 In view of the voluminous evidence as has been brought on record, we do not find any justification whatsoever to hold that the learned Dy. CIT was justified and correct in law in disallowing the loss of Rs. 1,14,52,610 on the sale of shares of HDC Ltd. for assessment year 1995-96 and holding the same to be the undisclosed income of the assessed. In fact, as there had been no rebuttal from the side of the revenue on the submissions made by the assessed, we hold that the transaction of purchase and sale of shares of HDC Ltd. cannot be regarded to be the colourable device so as to disallow the loss suffered on the sale of shares. It may be stated here that the shares, which has resulted into losses, were purchased by it from the various shareholders and not from the group company and as such, in our opinion there is no justification to treat the loss as a part of colourable device.
8. Further, we also find that as a result of search conducted on Mody group of cases, as no incriminating material has been found and the proceedings had been initiated by invoking the provisions of section 158BD of the Income Tax Act, the present assessment made is entirely unsustainable. In fact no adverse material whatsoever, has been brought to our notice, on the basis of which it could be held that as a result of search conducted on Mody group of cases, any undisclosed income of the assessed was detected or found. It is seen from the record that all, what had been seized as a result of search conducted on Mody group of cases, is the regular books of accounts of the assessed-company for the financial years 1994-95, 1995-96 and 1996-97 (up to 21-11-1996) and no more such material was either found or gathered before either initiating the proceedings or framing the assessments, on the basis of which it could be held there was an undisclosed income.
9. In respect of the contention of the appellant about the levy of surcharge at the rate of 15 per cent we find that the subject-matter is fully covered by the order of the Tribunal in the case of Microland Ltd. v. Asstt. CIT p. 503 wherein in para 39 it has been held as under:
'The learned counsel for the assessed also objects to levy of surcharge separately in addition to tax at the rate of 60 per cent on the undisclosed income. We agree with him that as per the provisions of section 113, separate surcharge cannot be levied in respect of search and seizure assessment made under Chapter XIV-B of the Income Tax Act. However, in view of the fact that we have held the entire assessment to be liable to cancellation, this particular ground becomes academic in nature.'
9.1 We fully agree with the aforesaid observation of Bangalore Bench of the Tribunal and hold that no surcharge is leviable. In any case since the addition stands deleted as a whole, otherwise too, there would remain no justification to levy any surcharge.
10. Before we conclude, we do record one of the contentions raised by the learned counsel for the assessed that the proceedings initiated were without any basis or material and was against the provisions of section 158BD of the Income Tax Act. However, we do not think necessary to record any finding in respect of such a contention as on merits of the additions made itself, we have held that the present assessment has no legs to stand. There being no undisclosed income, the present assessment is totally untenable and the addition made deserves to be deleted altogether.
11. In the result, appeal is allowed and it is held that there is no undisclosed income, which is liable to be held as an undisclosed income.