JCIT (OSD) Vs H B Leasing & Finance Company Ltd. (ITAT Delhi)
A search u/s 132 was conducted on the assessee-company (engaged in share trading) on 07.08.1997. AO completed block assessment u/s 158BC on 03.02.2017, determining undisclosed income of ₹45.03 crore by disallowing losses on sale of shares as “bogus.”
CIT(A) deleted the entire addition holding that all transactions were recorded in regular books & duly disclosed in returns filed prior to the search. Revenue appealed before ITAT, while assessee filed a cross-objection.
Tribunal’s Key Observations
- All share-trading transactions (profit & loss alike) were recorded in audited books & disclosed in returns up to AY 1997-98; none were “undisclosed.”
- AO accepted all profit transactions but disallowed almost all loss transactions with the same parties on identical documentation — an inconsistent approach.
- No seized material indicated unrecorded assets or bogus entries; hence block addition u/s 158BC was beyond scope of Chapter XIV-B.
- Following its own decision in H.B. Stockholding Ltd. (affirmed by Delhi High Court), ITAT held that once transactions are part of regular accounts & returns, no addition can be made in block assessment.
- AO’s reliance on McDowell & Co. for substance-over-form was misplaced since no evidence of tax evasion existed.
ITAT upheld CIT(A)’s order deleting the entire ₹45.03 crore addition & dismissed Revenue’s appeal. Consequently, assessee’s cross-objection was also dismissed as infructuous.
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