TaxTMI 
TaxTMI 
2013 (3) TMI 248
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....e assessee? (ii) Whether on the facts and circumstances of the case, the Tribunal was right in remanding the matter back to the assessing officer on the issue of receipt of commission, when the entity which is supposed to have received the commission was formed only after the survey was conducted?" 1.1. The details of each of the appeals filed are as follows:- Tax Case Appeal No. Assessment year ITA order No.Challenged Appellant Respondent 48/07 1996-97 2089/M/2005 Commissioner of Income Tax, Chennai C.S.Srivatsan 49/07 1997-98 2090/M/2005 50/07 1998-99 2091/M/2005 51/07 1999-00 2092/M/2005 52/07 2000-01 2093/M/2005 53/08 2001-02 2094/M/2005 54/07 1996-97 2095/M/2005 Commissioner of Income Tax, Chennai C.S.Seshadri 55/07 1997-98 2096/M/2005 56/07 1998-99 2097/M/2005 57/07 1999-00 2098/M/2005 58/07 2000-01 2099/M/2005 59/07 2001-02 2100/M/2005 60/07 1996-97 2101/M/2005 Commissioner of Income Tax, Chennai C.S.Varadhan 61/07 ....
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....by the company as the income of the Directors, by invoking the provisions of Section 2(24)(iv) of the Act. The Commissions received from SSVC were also brought to tax in their hands for the assessment years 2000-2001 and 2001-2002. 2.5. Aggrieved over the assessments, the assessees filed appeals before the Commissioner of Income Tax (Appeals). The CIT (A) held that since the company had not claimed the amounts paid for personal expenses of the assessees, the same cannot be treated as income in the hands of its Directors. So far as commission from SSVC is concerned, it was held that although the assessees admitted the same by way of a letter, yet later on it was retracted, the commissions could not be assessed in the hands of the Directors (as there was no other evidence excepting the retracted letter). 2.6. The Revenue took up the matters in appeals to the Income Tax Appellate Tribunal. The Tribunal held that the personal expenses met out of the company's money cannot be treated as income in the hands of the assessees under Section 2(24)(iv) of the Act, as the money had not been paid directly to them, but to the franchisees, which their HUF owned. 2.7. So far as the receip....
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....ions, the income tax authorities are entitled to pierce the veil of the corporate personality and look at the reality of the transaction. (II) 129 ITR 597 (Commissioner of Income Tax, Madras Vs. S.S.M.Lingappan (And Other cases):- "Held, (i) that even if a benefit had been conferred on the director unilaterally without the aid of any agreement between the parties, the benefit could be taxed as a perquisite under s. 17 (iii) and (iv); (ii) that in view of the difference in approach between the disallowance in the hands of the company and the assessment in the hands of the recipient of the benefit, it would be necessary for the Tribunal to look at the question whether there was any benefit obtained by the assessee from the proper standpoint and to consider the matter afresh in the light of the decision in CIT v. P.R. Ramakrishnan (1980) 124 ITR 545 (Mad). III. (2007) 295 ITR 33 (Mad) (1. Ravi Prakash Khemka, 2. Raj Kumar Khemka, 3. Thirupathy Kumar Khemka Vs. Commissioner of Income Tax):- "Income Company Perquisite to Director Personal Expenses on Credit card of Director Payment by Company LIC Premium paid by Company Assessable as income of Director Income Tax Act, 196....
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....d that the corporate veil of a company can be lifted for the purpose of ascertaining the real character of a transaction, if that transaction was a fraudulent one or was intended to evade payment of tax. While legitimate tax avoidance is always permissible, devices adopted to evade payment of tax, however, are not permissible though the dividing line is not always easy to draw, such a line does exist. The true character of the transaction here clearly was one of an advance of Rs.10 lakhs by the assessee to the Bombay company for whose benefit that sum was obviously intended and had only been channelled through Ace Investments Private Limited. The Tribunal has failed to notice the facts which had been set out in the draft assessment order in annexure B, and has also erred in adopting the wrong approach for the purpose of deciding as to whether the amount disallowed was a sum which could properly fall within the ambit of section 36 (1)(iii) of the Act. The amount disallowed was the amount paid on amounts borrowed, but not used for the purpose of business or profession of the assessee. Rupees 10 lakhs invested in Ace Investments Limited being in substance and reality an amount advance....
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....ight that the Directors of the company had received certain benefits from the company and the value of such benefits is assessable to tax in the hands of Directors, as per Section 2(24)(iv) of the Act. 3.4. During the course of survey under Section 133-A of the Act, it was noted that certain personal expenses, such as, tuition fees of children, travel expenses of wife and children of the Directors were paid by the company. With regard to these payments, the contention of the assessees was that it was claimed by the company only as franchisee commission and that the amount treated by the Assessing Officer, as personal expenses of the Directors, have not been claimed by the company in its profit and loss account. It was pointed out that the amounts paid were debited to the account of respective franchisees. Under those circumstances, it was contended that additions made by the Assessing Officer invoking the provisions of Section 2(24)(iv) of the Act have to be deleted. 3.5. Section 2(24) (iv) of the Act reads as follows:- "2. Definitions.... (24). "income" includes - (iv) the value of any benefit or perquisite, whether convertible into money or not, obtained from a com....
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....(SSVC) and failed to see that CRS Holdings, which is supposed to have received the commissions, was formed only after the survey. 4.1. Learned counsel for the assessees / respondents contended that the Assessing Officer has made addition of income (from undisclosed sources) only on the basis of statement alleged to have been recorded during survey under Section 133A of the Act and that any admission made during such statement cannot be made the basis for such addition. In support of the contention, the following decisions are relied upon:- (i) [2008] 300 ITR 157 (Mad.) (CIT vs. S.Khader Khan Son). In this decision, it has been held as follows:- "... (iv) the material or information found in the course of survey proceeding could not be a basis for making any addition in the block assessment; and (v) the word "may" used in section 133A(3) (iii) of the Act, viz., "record the statement of any person which may be useful for, or relevant to, any proceeding under this Act" makes it clear that the materials collected and the statement recorded during the survey under Section 133A are not conclusive piece of evidence by itself." The very same decision also detail the circular re....
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....147 of the Act. 4.3. A perusal of the records reveals that the assessees have various avathars in various establishments, as pointed out already. The assesses are Directors in the company called 'M/s.C.R.S.Sons & Co. Ltd.,'. They are the partners, representing the Hindu Undivided Family, so far as 'CRS Holdings' are concerned. Two out of the four assesses represent the HUF in 'M/s.Sri Sundaravalli Collections', which is the purchasing arm for the M/s.CRS Sons & Co. Ltd., Apart from that, they also represent as franchisees (owned by the HUF, of which they are the co-parceners and karthas). 4.4. Each of the unit has different composition. Each unit has varied number of members. Under such circumstances, the acceptability of the following finding given by the Income Tax Appellate Tribunal has to be considered. 4.5. So far as the commission from SSVC is concerned, the Income Tax Appellate Tribunal, ordered remand of the issue on the ground that the commission by SSVC was not received by the assessees, but by the HUF of the assessees. The reasoning given by the Tribunal was that when the assessees claimed that the commission payments were made to the CRS Holdings, which is an i....