TaxTMI 
TaxTMI 
TaxTMI 
2010 (3) TMI 772
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....bsp;On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 2,88,000/- made by the AO on account of interest. 3. Assessee has raised following issue in its cross objection vide C.O.No.33(Nag.)/2008 corresponding to IT(SS)A No,124(Nag.)/2008 in case of Shri Panchuram Deshmukh, which are as under; 1. The order of the CIT(A} is erroneous both in law and on fact in s far as he has failed to endorse that the proceedings u/s 153C are invalid ab initio. 2. That in the facts and circumstances of the case, the Ld .CIT(A) has erred in confirming the additions. 4. A search u/s 132 of the IT Act was conducted in the business premises of Shri Trilok Singh Dhillon, Dhillon Complex, Supela, Bhilai on 24-08-2004. On 24-08-2004 Shri Trilok Singh Dhillon was traveling from Mumbai to Raipur by flight. He was investigated by the DDIT (lnv.) Raipur Airport at about 12.30 hrs and his statement was recorded u/s 133A. Thereafter, survey was conducted at his office at Dhillon Complex, Supela, Bhilai at about 6.00 pm (18 hrs). Later on, survey operation was converted into search operation u/s l32 of IT Act. It is the objection of Shr....
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.... reflected earning of any undisclosed income. The satisfaction may be inferred from the fact and circumstances of case. The provisions of sec.l53C was not at par with the erstwhile provisions of sec.l58BD. The provisions of sec. 153 were differently worded and as such no such written satisfaction was required to be recorded at the time of issue of the notice. 7. As per amended provisions of sec 153C, satisfaction has to be arrived with regard to belongingness of a document found during the search and not regarding the undisclosed income. The AO has issued notice, after considering all the related particulars. The seized material was received on 21-10-2005. Prior to this, the AO was having enough evidence to record satisfaction and the same is contained in the order sheet. The satisfaction gives specific particulars of annexures to the seized material and the contents of the seized material, which shows that the AO applied his mind before issuing the notice. In this background, it is not correct to suggest that the notice was issued without proper satisfaction. Regarding issue of subsequent notice, AO has stated that it was issued as a matter of abundant precaution and ....
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....u/s 153C i.e 16-02-2005, Therefore, there was no material available with the Assessing Officer for taking such action. This issue has been taken care by us in preceding para of this order. 9. Alternative stand of assessee that the papers were found from the premises of Shri Manharanlal Verma, who was claimed to be Excise consultant of all benamidar of Shri Trilok Singh Dhillon. His statement was recorded by the Assessing Officer and the DDIT, Shri Manharanlal Verma confirmed this fact and also found offered his Excise consultancy income to tax much before the date of search. All the assessee's of Shri Trilok Singh Dhillon group have been found benamidar of Shri Trilok Singh Dhillon including Manharanlal Verma as discussed in detail in the following para of this order. In view of the same, it goes academic, while we have held that all other person including Manharanlal Verma as benamidar of Shri Trilok Singh Dhillon. 10. Without prejudice to the above, we find that Shri Manharanlal Verma has shown excise consultancy income. We find that Shri Manharanlal Verma was one of the trusted employee of Shri Trilok Singh Dhillon and working with this group for the past several years. Se....
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....e after verification and subject to availability of evidence, if the AO has considered that some item of income is assessable in the hands of some other person than the ostensible person, nothing precludes him in doing so. However, in order to safeguard the interest of revenue, in the event of a different view, by appellate authorities, protective assessment is justified. This manner of assessment has been upheld by the Hon*ble Supreme Court in the case of Lalji Haridas Vs ITO(1961) 53 ITR 387. Accordingly, this contention was rightly rejected by the lower authorities. We uphold the same. All the cross objections filed by different assessee's relate to the issue of validity of sec.l53C which has been taken care of in C.O.No.33(Nag.)/2008 arising out of IT(SS)A No.l24(Nag.)/2008 in AY: 2004-05, in the case of Shri Panchuram Deshmukh, discussed above. Following the same reasoning, the issue of validity u/s 153C in all other the cross objections are decided against the assessees. 12. Coming on merit, as discussed above, during the course of above search, acknowledgements of applications for Excise licenses and copies of Excise licenses in the names of several persons were f....
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.... liquor licenses, copies of liquor licenses allotted were found along with copies of some bank accounts of some of the persons who have been allotted the liquor shops. One CD was also found which contained details of sales and expenses of various liquor shops and bars. During the course of search, Shri Trilok Singh Dillon was found in possession of three cheque books belonging to (i) Shri Kamlesh Kumar Chandel, IDBI Bank a/c No.048104000022640 (ii) Shri Satish Yadav, IDBI Bank, a/c No.048104000044411 and (iii) Shri Shankar Sharma, IDBI Bank, a/c No.048104000022686, 15. It was noted that all the three persons were employee of Shri Trilok Singh Dhillon, out of whom Shri Shankar Sharma was working as Cook, 16. Examination of the bank account revealed huge cash transactions totaling to lakhs of rupees and in view of the financial status of these three persons, the source of these cash transaction became significant. It was also found that Shri Kamlesh Kumar Chandel was allotted license to liquor shops in the AY: 2001-02 to 2003-04. Shri Satish Yadav and Shri Shankar Sharma were allotted permit for running of bars. Statement of all the three persons were recorded at the time of search....
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....of activity was restricted, 19. In order to circumvent these hurdles posed by the changed procedure, Shri Trilok Singh Dhillon appeared to have devised an innovative modus operandi. This consists of making applications in the names of various employees/group concerns etc. and persons of no means but under his control were made. On a license being made allotted to these persons they were taken as partners in a front firm called M/s Supreme Traders. Examination of the Partnership Deed of said firm revealed that the firm was constituted on 19-09-2002 with various partners. Except Shri Trilok Singh Dhillon, his family members and relatives, the other partners were changed from year to year. The persons in whose name license for liquor shops/bar were available were made partners only upto validity of the liquor license/permit. The firm's major financing partners were Shri Trilok Singh Dhillon, his family members and relatives. Their contribution was the major financial source of the firm as against meagre contribution made by the other partners. The objects of the firm were stated to be for carrying out excise consultancy business. However, the income shown from such business was f....
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....ot found any reflection in the status/living standard of any of these dummy persons. Even though, the proxy persons have independent bank account, it was observed that all those accounts have been opened on the introduction of Shri Trilok Singh Dhillon or his associates. Examination was also carried out from the bank by calling for the deposit slips and withdrawal slips in all the cases and it was found that Shri Manharanlal Verma and Shri Harish Chandra Mishra, who were employees of Shri Trilok Singh Dhillon, have made the deposits and withdrawals. They were also carrying out all such deposits, withdrawals in the case of Shri Trilok Singh Dhillon and his group. 23. In this background, the AO observed that they were merely front persons just acting like puppets on the instruction of Shri Trilok Singh Dhillon. Though they were claimed to be proprietor of business on paper, they were nothing more than trusted employees of Shri Trilok Singh Dhillon, In view of the above discussion, the entire income determined in the case of assessee, excluding salary income, was considered for assessment in the hands of Shri Trilok Singh Dhillon. The AO also observed that the note given by the asses....
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.... taking sales at two times of the license fee paid. The net profit is worked out as under; License fee Rs. 3,73,79,139 Add: F L duty Rs, 88,11,473 Rs.4,61,90,612 x 2 times = 9,23,81,224/- 3% of the above is Rs. 27,71,437/- Sirnilar net profit were worked out in case of other benamidar of said Shri Trilok Singh Dhillon on similar lines. 25. In appeal, in case of said Shri Panchuram Deshmukh, the CIT(A) granted relief to assessee by directing AO to assess him on substantive basis and further, reduced net profit from 3% to 2%. Same has been opposed by revenue before us. Learned DR vehemently supported the order AO. While the learned AR supported the order of CIT(A) and reiterated the submissions made before the authorities below. The assessee's stand is that the Excise license was received and executed b....
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....erandi. b) This consists of making applications in the names of various employees/group concerns etc, and persons of no means but under his control were made. c) On a license being made allotted to these persons they were taken as partners in a front firm called M/s Supreme Traders which was constituted on 19-09-2002 with various partners, d)Except Shri Trilok Singh Dhillon, his family members and relatives, the other partners were changed from year to year. e) The persons in whose name license for liquor shops/bar were available were made partners only upto validity of the liquor license/permit. f) The firm's major financing partners were Shri Trilok Singh Dhillon, his family members and relatives. Their contribution was the major financial source of the firm as against meagre contribution made by the other partners. These contributions were also eye wash, because majority of them were not man of means. g) The objects of the firm were stated to be for carrying out excise consultancy business. However, the income shown from such business was found only very nominal. h) In AY: 2002-03 it was noticed that the said firms inspite of such cash transaction had ....
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....nk account, it was found that all those accounts have been opened on the introduction of Shri Trilok Singh Dhillon or his associates. o) Examination was also carried out from the bank by calling for the deposit slips and withdrawal slips in all the cases and it was found that Shri Manharanlal Verma and Shri Harish Chandra Mishra, who were employees of Shri Trilok Singh Dhillon, have made the deposits and withdrawals. They were also carrying out all such deposits, withdrawals in the case of Shri Trilok Singh Dhillon and his group. All the above conclusions have not been judiciously controverted by the CIT(A) in its orders. 27. In order to treat a person as benamidar of other person, the transaction has to be only an ostensible one without any intention to part with the beneficial interest. The first test is the source from which the consideration has come and the second test is who actually had enjoyed the benefits. In the instant case, the money was given by the firm and the benefits were retained have gone to firm which is controlled by Shri Trilok Singh Dhillon and his close associates. The firm has been used for the same. All bank transactions were controlled by Shri Trilok Si....
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.... in India, where cbenami> transactions are recognized. 30. In general, the benamidar fully represents the ownership of property in dealings with the third persons. In fact, i.e. very object of benami transactions, the property stands in the name of benamidar and the third party would not be able to challenge his title so long as the real owner does not come in the picture. In case before us, i.e. Shri Trilok Singh Dhillon group, the excise department is the third party and there is no occasion for them to dispute the validity of license and liquor business at their end. As to the position between the real owner of the business and third party ordinarily the real owner will not have an occasion to make any assertion about the title. The Hon'ble Supreme Court in case of M/s Meenakshi Mils Ltd., Vs CIT (957) (SC) 49 observed that benami transaction may be synonym to fraudulent transactions. Sometimes, they may become synonymous to nominal transactions or lending of name of somebody although, real owner is different. The question whether particular transaction is benami or not is a matter of fact and for determining this question, no absolute formula or acid test uniformly ap....
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....(supra) issue was of tax liability out of contract. Benamidar is liable for same. Issue of clubbing of income of being similar in hand of real owner was not the subject matter before the Hon*ble High Court. 32. Hon'ble Allahabad High Court in the case of Shri Gopinath Aggarwal (1955) Vs CIT held that the fact that business was carried on out of the money belonging to third party could not be sufficient to prove that business was benami of such third person, unless it is proved beyond reasonable doubt that money contributed possessed the character of capital contribution and person retained interest in the business as contributor of capital. The ratio of Shri Gopinath Aggarwal (Supra) is not applicable to the facts of Shri Trilok Singh Dhillon group, because it is not only the money which was mainly contributed through M/s Supreme Traders, wherein major share belongs to Shri Trilok Singh Dhillon and his family members and the fruits of business have also gone back to Shri Trilok Singh Dhillon. 33. In view of the factual and legal discussion, we hold that the money was indirectly invested by Shri Trilok Singh Dhillon and fruit of business has gone back to him as well. Therefore, th....
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....ccordingly, for the purpose of estimation the issue is restored to Assessing Officer to estimate liquor business in the hands of Shri Trilok Singh Dhillon, after providing due opportunity of hearing to him. The issue of benamidar and estimation of income is disposed of as indicated above. This issue of estimation of net profit has been raised in all the above assessee's. Facts and circumstances, being similar, following the same reasoning this issue is restore in all the cases to Assessing Officer with similar direction. The Assessing Officer is directed accordingly. 35. The next issue is with regard to interest paid to M/s Supreme Traders. The assessee claimed interest payment of Rs. 2,88,000/- to M/s Supreme Traders on the withdrawals made from the above said firm. Since this firm is only an instrument to finance the money of Shri Trilok Singh Dhillon and his concerns etc and the assessee was made partner for the obvious reasons known to Shri Trilok Singh Dhillon. The claim of interest is not allowed as the entire funds are held as that of Shri Trilok Singh Dhillon. Since we have held that the assessee is benamidar of Shri Trilok Singh Dhillon. The issue of interest is taken....
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....'s current account. So the addition was not called for and the CIT(A) granted relief to that extent. We up hold the same. Similar issue has arose in various other appeals on behalf of the revenue. The facts are almost similar, so following the same reasoning this issue in all appeals are restored to Assessing Officer with a direction to decide this addition in different case after verification of nexus of deposits with liquor business. In case it is found to have nexus with liquor business, it should be decided in the light of the assessee being benamidar of Shri Trilok Singh Dhillon. In case, assessee comes out with cogent reasoning to establish that whole or part of such deposits/ investment are independent of liquor business then the addition on account should be deleted. This issue of unexplained investment/ unexplained deposit in all appeals are disposed of in all appeals as indicated above. The Assessing Officer is directed accordingly, 38. The next issue is with regards to addition on account of FDR interest. Our finding assessee being benamidar of Shri Trilok Singh Dhillon has bearing on this issue. The Assessing Officer added this interest, in case of Shri Trilok Sing....
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....Mishra needs no interference from our side, wherein the CIT(A) has granted relief to the assessee in this regard. We uphold the same. 41. The next issue is with regards to addition on account of application for liquor licence fees. This issue has bearing of issue of assessee being benamidar of Shri Trilok Singh Dhillon. So following the same reasoning this income has to be clubbed in case of Shri Trilok Singh Dhillon on substantive basis. The AO is directed accordingly, 42. The next issue is with regard to income from restaurant, This issue has been raised in case of Shri Kulbhushan Sharma. In case, if the assessee Shri Kulbhushan Sharma is running restaurant as benamidar of Shri trilok Singh Dhillon, then the same has to be assessed in the hands of Shri Trilok Singh Dhillon. So, this issue is restored to AO with direction to decide the same as per facts and law after providing due opportunity of hearing to the assessee. 43. The revenue in its appeal in IT(SS)A No.08(Nag.)/2009 in case of Shri Trilok Singh Dhillon has raised the issue of benamidar. This issue has been discussed and decided by us vide para- 26 of this order, whereby we have held that Shri Trilok Singh ....
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.... the time of survey with regards to money in question. The assessee should have been confronted before rejecting of deposition made in affidavit. The contention of the assessee is that the amount in question come from M/s Carol Barter Pvt.Ltd., has not been looked into properly, at any stage so this issue need further probe. So, in the interest of justice, we set aside the order of CIT(A) and restore the matter to AO to decide the same after providing due opportunity of hearing to the assessee. 45. The issue raised by revenue is with regards to disallowance of depreciation on vehicles of Shri Trilok Singh Dhillon. The AO made addition by way of disallowance on account of depreciation on car. The AO made addition by way of disallowance on account of depreciation on car. In appeal, the CIT(A) observed that the assessee is one of the working partner and received remuneration. There is no averment made by the Assessing Officer that the assessee did not use the vehicles for business of the firm. Therefore, the CITA) observed that the depreciation is allowable to the assessee. The AO was directed to allow depreciation after disallowing l/5th towards personal and non-business use as per ....