2019 (4) TMI 1468 - AT - Income Tax

Tribunal dismisses Revenue's appeals, allows assessees' appeals, quashes assessments, deletes additions. Assessment orders barred by limitation.

The Tribunal dismissed the Revenue's appeals and allowed the assessees' appeals, quashing the reopening of assessments, deleting additions related to ... Unexplained cash - assessee company is collecting tax on behalf of NDMC - admitted before MM that cash of NDMC which was siphoned off by him - HELD THAT:- It would not be out of place to mention here that SCPL was appointed as an agent by NDMC to collect the tax on its behalf. In the year 2012, Shri Awanindra Singh pleaded guilty before the Metropolitan Magistrate by admitting that he siphoned off the tax collected on behalf of NDMC. However, this admission is in the year 2012 and cannot be considered as a basis for holding the order of the CIT(A) to be wrong which was passed in the year 2000. Moreover, if this admission by Shri Awanindra Singh before the Metropolitan Magistrate is to be taken into account, then also the cash found from him which was seized by the CBI authorities and has been directed by the Metropolitan Magistrate to be confiscated and deposited with NDMC cannot be considered as unexplained cash of the assessee because SCPL were the collecting agent for the taxes on behalf of NDMC and now, it is established and admitted by Shri Awanindra Singh that it was NDMC’s tax collection which was siphoned off and kept in his lockers. Thus, it cannot be treated as unexplained cash for the purpose of income tax in his hands. We find that the return for assessment year 1996-97 was filed on 24.09.1996 and for assessment year 1997- 98 on 28.11.1997. Thus, the said company has filed regular returns of income tax with the concerned Assessing Officer. The allegation that the said company did not file the return of income is factually incorrect. If there is any non-compliance under the Companies Act, it is for the Registrar of Companies to take appropriate action but it will have no bearing so far as income tax assessment is concerned. The order of the CIT(A) wherein he set aside the addition of ₹ 1,75,03,500/- for fresh consideration to the Assessing Officer cannot be faulted with. - Revenue’s appeal are rejected. Interest on FDRs - FDRs were in the name of the wife and children of the assessee - the books of account of SCPL not produced before the AO for verification - balance sheet of SCPL contained the note that the company’s FDRs stood in the name of the directors and their relatives - HELD THAT:- When SCPL is a separate assessee whose assessments were completed u/s 143(3) and in whose balance sheet, FDRs were duly disclosed, then in our opinion, there would hardly be any justification to treat them as unexplained investment of the assessee merely because books of SCPL were not produced during the assessment proceedings of the assessee. If the Assessing Officer had any doubt, he could have got verified the same through the Assessing Officer of SCPL. Thus, when the FDRs belonged to SCPL, the interest, if any, can be considered in their hands only and not in the case of the assessee. In view of the above, we uphold the order of learned CIT(A) deleting the addition for interest on FDRs Unexplained investment in property - HELD THAT:- CIT(A) has given the year of acquisition of all assets. The agricultural land in Bihar was acquired during the financial year relevant to assessment year 1993-94, agricultural land at Najafgarh was acquired during the financial year relevant to assessment year 1996-97 and flat at Mumbai during the financial year relevant to assessment year 1994-95. When no asset was acquired during the financial year relevant to the assessment year under consideration, there cannot be any question of unexplained investment in acquisition of such asset. Addition being cash belonging to NDMC found by CBI during search at NDMC collection centre - HELD THAT:- Admittedly, SCPL was the collection agent for NDMC in respect of electricity and water charges. All the above sums were found during the course of search by the CBI at the collection centre of NDMC at Nirman Bhawan. Therefore, the entire cash was out of the collection of electricity and water charges made by SCPL. Therefore, the same cannot be considered as unexplained money of the assessee. Accordingly, we do not find any justification for sustaining any addition in this regard. The additions sustained by learned CIT(A) are deleted and assessee’s appeal is allowed while ground No.4 of the Revenue’s appeal is rejected. Assessment u/s 153 - period of limitation - HELD THAT:- After considering the proviso to Section 153(2A) as well as the memorandum explaining the provisions of Finance Act, 2001, we are clearly of the opinion that the amended provisions would be applicable where the appellate order is passed or received after 1st April, 2000. As per amended provision, the set aside assessment is to be completed within one year from the end of the financial year in which appellate order setting aside the assessment was received. In this case, order of CIT(A) is dated 27th November, 2000 though the exact date of receipt of such order by the CIT is not given before us but it can be reasonably presumed that it was received within the financial year ended on 31st March, 2001, especially when no contrary claim is made by the Revenue. In such circumstances, the set aside assessment was to be completed before 31st March, 2002 while the set aside assessment is completed on 31st March, 2003 which is clearly barred by limitation. In view of the above, we quash the assessment order dated 31st March, 2003. Once the impugned assessment order is quashed, the other grounds raised in the assessee’s appeal do not require any adjudication. Reopening of assessment u/s 148 - HELD THAT:- When the Revenue is of the opinion that the cash which assessee claimed to have received from issue of shares never belonged to it, he could not have formed an opinion that there is escapement of income in the hands of the assessee. Considering the totality of above facts viz., (a) the notice under Section 148 has been issued on wrong premise that the assessee did not file the return of income while, in fact, the returns were actually filed, (b) the proceedings have been initiated for examination of share capital which is not permissible in law and (c) the Assessing Officer never formed an opinion that there was escapement of income in the hands of the assessee, we are of the opinion that reopening of assessment was not valid. Accordingly, the same is quashed and consequently, the impugned assessment orders are also quashed. Issues Involved:1. Validity of reopening of assessment under Section 147.2. Determination of ownership and explanation of cash found during CBI search.3. Deletion of additions related to FDRs and interest income.4. Deletion of additions related to unexplained investments in immovable properties.5. Deletion of additions related to cash found at NDMC Collection Centre.6. Validity of assessment order and its timeliness under Section 153(2A).Issue-wise Analysis:1. Validity of Reopening of Assessment under Section 147:The reopening of assessment was challenged on the grounds that it was based on incorrect facts and was intended for the examination of share subscription money. The reasons recorded for reopening mentioned that no returns were filed, which was factually incorrect as the returns were filed on 24.09.1996 and 28.11.1997 for the assessment years 1996-97 and 1997-98, respectively. The reopening was also based on the directive of higher authorities without the Assessing Officer's satisfaction of escapement of income. The Tribunal found the reopening invalid, as it was based on incorrect facts and for the purpose of examination, which is not permissible. The reopening was quashed, and consequently, the assessment orders were also quashed.2. Determination of Ownership and Explanation of Cash Found During CBI Search:The cash found during the CBI search was claimed by Shri Awanindra Singh to belong to Computerland Integrators (India) Ltd. (CIL). However, Shri Awanindra Singh later pleaded guilty before the Metropolitan Magistrate, admitting that the cash was misappropriated from NDMC collections. The Tribunal found that the cash could not be treated as unexplained in the hands of Shri Awanindra Singh, as it was established to belong to NDMC. The Tribunal upheld the CIT(A)'s direction to re-examine the source of cash in the hands of CIL.3. Deletion of Additions Related to FDRs and Interest Income:The FDRs were claimed to belong to Software Consultants Pvt. Ltd. (SCPL) and were shown in their balance sheet. The Tribunal upheld the CIT(A)'s decision to delete the addition of interest on FDRs in the hands of Shri Awanindra Singh, as the FDRs belonged to SCPL and were disclosed in their balance sheet.4. Deletion of Additions Related to Unexplained Investments in Immovable Properties:The Tribunal found that the investments in immovable properties were made in earlier years and not in the year under appeal. The CIT(A) had recorded the years of acquisition of the properties, and since no asset was acquired during the financial year relevant to the assessment year under consideration, the Tribunal upheld the deletion of the addition.5. Deletion of Additions Related to Cash Found at NDMC Collection Centre:The cash found at the NDMC Collection Centre was part of the collections made by SCPL on behalf of NDMC. The Tribunal found that the entire cash was out of the collection of electricity and water charges and could not be considered as unexplained cash of Shri Awanindra Singh. The additions of Rs. 3,93,115 and Rs. 1,29,097 sustained by the CIT(A) were deleted.6. Validity of Assessment Order and Its Timeliness under Section 153(2A):The Tribunal examined the timeliness of the assessment order under Section 153(2A). The amended provision required the set-aside assessment to be completed within one year from the end of the financial year in which the order of set aside was passed. The CIT(A)'s order was passed on 27.11.2000, and the set-aside assessment was completed on 31.03.2003, which was beyond the permissible period. The Tribunal quashed the assessment order as it was barred by limitation.Conclusion:The Tribunal dismissed the appeals of the Revenue and allowed the appeals of the assessees, quashing the reopening of assessments, deleting the additions related to cash, FDRs, and unexplained investments, and finding the assessment orders barred by limitation.