TaxTMI 
TaxTMI 
2014 (11) TMI 14
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....dt. 24th July,2012 had adjudicated the matter. The Revenue carried the matter in appeal before the Hon'ble Delhi High Court in ITA nos. 85/2013 and ITA 100/13, ITA 87/13. Vide judgement dt. 25.2.2013 the Hon'ble High Court had upheld the order of the I.T.A.T. The Assessing Officer followed his order for the earlier AYs and made additions to the income of the assessee. The assessee carried the matter in appeal. The First Appellate Authoirty applied the decision of the ITAT for the Assessment Year 2001-02, 2002-03, 2003-04 and adjudicated the issue in favour of the assessee on the issue of determination of residential status, as well as the other additions to income. Relief was granted and additions deleted. The Ld. Commissioner of Income Tax (Appeals) also rejected certain grounds raised by the assesee. Aggrieved with the relief granted by the Ld.Commissioner of Income Tax (Appelas) the Revenue has filed these appeals. The assessee also filed Cross Objections for the Assessment Year 2004-05 and 2005-06. 3. Both the parties submit that the facts of the case are same as the facts narrated by the ITAT while disposing off the appeals for the Assessment Years 2001-02, 2002-03 and 2003....
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....ation Israel. M/s Transcom Services Ltd. was representing Tadiran in India for the servicing of communication equipment used by Indian armed force. 4.5. Among the papers received from the Delhi Police were page nos. 58 & 59 of Annexure A-10 which allegedly detail the working of commission on arms contracts and the corresponding payments. Other papers include a note on Page wirh page nos. 60 & 61 as its attachments. The contents of page no. 58 & 59 and other pages are reproduced in the assessment order :- 4.6. AO was of the view that these documents were details of the commission payments related to contracts for Radio Sets of the Indian Defence establishment. According to Delhi Police. Dr. M.V. Rao did not furnish any explanation contending that he was not in a position to comment upon the documents due to his critical health condition. The contents and purported meaning of the page documented is reproduced by AO in his order. 4.7. Assessee denied any role or connection with these deals however Assessing Officer held him to be closely involved with the business of Tadiran in the Indian Defence establishment, as reflected by page no. 79 of Annexure A- 10, found and seized o....
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....papers represented that he had been receiving commission on supply of these goods to India, which was deposited in bank accounts situated in tax haven countries like Jersey Islands etc. as stated in the documents. 4.13. On the basis of these observations and material found during the course of search from the premises of the assessee, said M/s Dr. M.V. Rao & Mohan Jagtap, the Assessing Officer drew following inferences:- 3.1 Before year 2003 assessee had small set up in India in the form of small companies namely M/s. Crown Corporation Pvt. Ltd., M/s. Dynatron Services Pvt. Ltd., M/s C-l India Pvt. Ltd. and M/s. Transcom Services India Pvt. Ltd. etc. These companies were mostly engaged in services and spares of defence armaments. Mr. Nanda being a former Navy Man specializes in contracts for services and spares for equipment used by the Indian Navy. 3.2 In year 2003 he started investing heavily in hotel properties and lands in Delhi NCR and Mumbai. His first acquisition in India was the prestigious Hotel Claridges situated in Lutyens Delhi. After acquiring the Claridges he went on to extensively renovate the property and converted it into a boutique five star hotel. Along ....
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....ing after various defense deals involving tedious procedure, documentation, persuasions and liaisoning in clandestine manner. These services were rendered in India by the assessee. The resultant commission income arising from these were received abroad. AO alleged that this income has been brought into India in form of F.D.I, and external commercial borrowings and by floating various entities abroad. Thus, all these incorporated foreign entities and their Indian investments were held to be assessee's front organizations. 4.18. It was held that Dr. M.V. Rao is a close associate of assessee, who operated from the office building of the companies of Nanda group at D-5. Defence Colony, New Delhi. Dr. M.V. Rao was a Director in C1 India Pvt. Ltd. and M/s Transcom Services Pvt. Ltd. Therefore, these companies were held to be benami entities including C 1 India Pvt. Ltd. It was thus held that assessee holds large stake through Mauritius based entity Y2K Systems International Ltd. The main investor in Transcom India Pvt. Ltd. was one Inet Communications Pvt. Ltd., which is controlled by one Sh. Bipin B.Shah. He was also a close associate of Sh. Suresh Nanda and was a Director in almost ....
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....rce of investment in C-l India Pvt. Ltd. through YK2 Systems and controlled its affairs. Hence, the capital received by Cl India Pvt. Ltd. was treated as unexplained investment of the assessee and added to his taxable income. Thus Assessing Officer held thati) Assessee was engaged in the business of arms dealings along with Dr. M.V. Rao & Mohan Jagtap. ii) Y2K was benami company of the assessee. iii) Capital introduced by Y2K in C-l India was assessee's money. 4.25. Assessing Officer also proposed to assessee to show cause, as to why he should not be treated as 'Resident' assessee instead of 'Non-Resident' as held earlier and taxed accordingly in India. The passport entries about assessee's stay over a period in India were found to be as under- A.Y. No. of days in India as computed by the assessee Actual No. of days 2001-02 154 172 2002-03 138 150 2003-04 158 176 2004-05 159 177 2005-06 155 171 2006-07 158 176 4.26. AO has not disputed the days of stay given in above chart. However according to him for determining the status of residence, clause (c) of Sec. 6 was....
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....as harsh on the first category of individuals as an Indian citizen who has become a nonresident for the first time by departure for employment outside would have necessarily stayed for more than one hundred and eighty two days in India in the year previous to the year when he became a non-resident. Thus, in calculating the four years previous to the assessment year within the meaning of clause (c) in the case of an Indian citizen going abroad would include the year or years when he was a resident during which he might have stayed all three hundred and sixty five days in one year in India. In order to set off this disadvantage and mitigate the hardships the legislature has provided in clause (a) the Explanation to section 6(1) that where an Indian citizen goes for employment in any previous year the rigor of clause (c) of sub-section (1) of section 6 is diluted to some extent by providing a relaxation for the year the assessee left for employment outside India, namely he will be treated as 'Non- Resident" if he is in India for less than 182 days in that year. 4.31. Similarly, a citizen of India/person of Indian origin who visits India in the assessment year succeeding the yea....
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....s of Indian origin. It was held that assessee's interpretation of Explanation (b) of Section 6(l)(c) would render Section 6(l)(c) itself redundant as far as its application to citizens of India/persons of Indian origin are concerned, which was not permissible in law. Reliance was placed on the judgment in the case of Hardev Motor Transport v. State of M.P., (2006) 8 see 613(626): "31. The role of an Explanation of a statute is well known. By inserting an Explanation in the Schedule of the Act, the main provisions of the Act cannot be defeated By reason of an Explanation, even otherwise, the scope and effect of a provision cannot be enlarged It was so held in S. Sundaram Pillai v. VR. Pattabiraman in the following terms: 4.34. The AO, however, held that assessee was to be treated as Resident and not as Non-resident in these years on following observations: (a) The Explanation (b) to section 6(l)(c) relaxes the 60 days stay in India to 182 days if the individual is an Indian citizen or a person of Indian origin and if he being outside India visits India during that year. According to the AO, the assessee, though not citizen, for all practical purposes was resident i.e. l....
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....see in M/s Claridges Hotels P.Ltd. 4. On the facts and in the circumstances of the case, the Ld.Commissioner of Income Tax (Appeals) has erred in deleting the addition of Rs. 34,60,000/- made by the Assessing Officer on account of unexplained investments made by assessee in M/s Claridges SEZ P.Ltd. 5. On the facts and in the circumstances of the case, the Ld.Commissioner of Income Tax (Appeals) has erred in deleting the addition of Rs. 4,32,90,000/- made by the Assessing Officer on account of unexplained deposits with Deutsche bank, Singapore. 6. On the facts and in the circumstances of the case, the Ld.Commissioner of Income Tax (Appeals) has erred in deleting the addition of Rs. 23,90,000/- made by the Assessing Officer on account of payment made to assessee's wife Smt.Renu Nanda out of undisclosed sources. 7. On the facts and in the circumstances of the case, the Ld.Commissioner of Income Tax (Appeals) has erred in holding the assessee to be a Non-resident for the year under consideration without appreciating the fact that explanation (b) of Section 6(1)(c ) was not application to assessee. 8. The appellant craves leave to add, amend any/all grounds of appeal befo....
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....t only when it decides a question of law. Even otherwise also the question whether a person is resident or not is a pure question of fact (among others refer Rai Bahadur Seth Teomal 48 ITR 170 Call and hence Delhi High Court would not have got the jurisdiction to decide the issue of residential status of the person. 2.2 Words 'on a visit' as contained in clause (b) of the Explanation go to show that if in a year the assessee pays multiple visits to India he cannot take benefit of the provisions of this clause. Legislature deliberately restricted the application to a single visit stay in India because otherwise it would have lead to evasion of tax statutes as is done by the assessee. 2.3 Tribunal's earlier order relied by CIT(A) does not deal with the argument that the interpretation advocated by the Respondent assessee will render the Explanation qua the Indian citizen or qua the people of Indian origin as redundant. Further, Respondent's interpretation expands the scope of Sec. 6(1) which is not permissible at all. 2.4 While adjudicating the issue the CIT(A) has failed to appreciate that after all the income earned by the assessee has to be brought to tax ....
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....o citizens of India as well as to persons of Indian origin. It also applies to foreigners. Insofar as foreigners are concerned section 6(1)(c) has the stipulation of stay in India for a period or periods amounting in all to 60 days or more in the year in question. However, this is in addition to the condition of total stay in the preceding four years amounting in all to 365 days or more. But, in the case of citizens of India, the length of stay in India in a particular year has been extended to 182 days as compared to 60 days for foreigners. This period of 182 days was earlier 150 days and by virtue of the Finance Act 1994, with effect from 01.04.1995 the word 'fifty' has been substituted by 'eighty-two'. In other words, instead of 150 days stay in India, the period of stay required is 182 days for an individual to be covered under section 6(l)(c) read with explanation (b), in case he is an Indian citizen or a person of Indian origin. 12. In the present case, although, the respondent/assessee has, in the preceding 4 years been in India for a period in excess of 365 days in India, in none of years has he been in India for a period in excess of 182 days. Therefore,....
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.... 10% is paid; (c ) seized documents show that the income was actually accrued and received in the hands of Shri Suresh Nanda. He gave written submissions on the arguments, which we would be dealing with, when each issue adjudicated. 4.4. The Ld.Counsel for the assessee vehemently controverted these arguments of the Ld.D.R. and submitted that (a) Shri Suresh Nanda is not involved in facilitating defence deals in any manner;(b) there is no iota of evidence found by the revenue or any other agency that Shri Suresh Nanda received any commission or any income from such transactions; (c) that no document was seized from the premises of Mr.Suresh Nanda and that he has nothing to do with any of the seized documents found in the premises of Dr.M.V.Rao; (d) A perusal of the seized documents and the statements of Dr.M.V.Rao or Mr. Jagtap demonstrated that they here not even a remote connection whatsoever with the assessee. 4.5. The Ld.Counsel further contended that the Tribunal in the assessee's own case, on the very same set of facts had adjudicated the matter in a particular manner, and that the same has to be followed by the Coordinate Bench of the Tribunal. 5. After hearing rival....
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....eized from the residence of Mr. M. V. Rao. Mr. Rao did not offer any comment on these documents. The Assessing Officer examined page 62 of annexure A-11 and is come to a conclusion that these documents do relate to the Indian defence establishment. Annexure A-10 page no.79 was relied upon for coming to a conclusion to Mr. Suresh Nanda has advised strategies and hence that it can be contended that he was closely involved in the business of M/s Taridan communication Ltd. Th The Assessing Officer at para 5.7 and para 5.8 held as follows: "5.7 Based on the above mentioned documents, the following conclusions are in order: a) Sh. Suresh Nanda is actively involved in facilitating defence deals for foreign companies in India. Tadiran is one of his clients. b) The four contracts mentioned in the page no.58 and 59 of Annexure A-10 are contracts with Indian Defence establishment given to Tadiran of Israel. c) The foot note on page 59 mentions that pages 58 and 59 are reconciliation statement. Page 60 and 61 confirm the receipt of the amount mentioned in page 58 and 59. Thus, the commission income has been actually received in the hands of Sh. Suresh Nanda and his Group. 5.8 It....
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....c directions in consonance with the directions of Hon'ble ITAT as under: "The truth of the matter - (i) whether these amounts represent any commission paid by M/s Tadiran Communication Ltd., (ii) whether the total amount was indeed US $ 27.603 million or Rs. 123.27 crore as held by the revenue on the basis of documents seized by Delhi police; (iii) whether the appellant was indeed the beneficiary of the commissions; (iv) whether the appellant was the sole beneficiary or there were other beneficiaries; (v) what extent, cannot be ascertained on the basis of available documents and are, therefore, a matter of further investigation and verification." "The Hon'ble ITAT, vide para 11 of its common order dt. 24.7.2012 in the case of Shri Suresh Nanda (ITA nos. 1428, 1429 & 1430/Del/2012 for AYs 2001-02, 2002-03 and 2003-04, regarding the same additions also made in the hands of Shri Suresh Nanda, held that "interest of justice will be served if the issues about income from commission/business of dealings in arms are decided afresh by Assessing Officer". Since the directions of the Hon'ble ITAT in the case of Shri Suresh Nanda relate to the same additions of income as in the case of ....
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....appeal, either at his own ought to have taken up the enquiry or ought to have remanded the matter to AO for desired report/enquiry". 6.2. The Ld.Counsel for the assessee submitted as follows. (i) The appellant being a non-resident Indian, his income in India can only be taxed if there is evidence to establish that it accrued in India or was received in India. Kindly refer to Sec.5(2). The appellant claims that his income other than that returned by him accrued or arose or was received outside India. The burden is, therefore, squarely on the department to establish from facts available on record that the income was received in India. (ii) The above addition was made on the basis of documents seized from the residence of one Dr. M. V. Rao. The documents purportedly related to AY 2002- 03 to 2006-07. . The Hon'ble ITAT vide their order dated 24.07.2012 adjudicated the said issue and set aside the same to the AO for the following directions. (Kindly Refer 47 of PB) "Apropos common ground raised in A.Ys. 2002-03 & 2003-04 in respect of alleged income from arms deals made on account of searches in the case of M.V. Rao and Mohan Sambha Ji Jagtap, the relevant statements have n....
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....ssessee. The contentions in respect of the documents found are as follows : Regarding Annexure A-10, P 58 & 59 - (PB/338-339) I. Annexure A10, P58 and 59 are faded and unclear pieces of paper which contain a list of dates and payments made. In respect of the said papers, the assessee wishes to state as under:- (a) The assessee states and affirms that he has never seen these papers and has nothing whatsoever to do with the same. (b) The said papers do not mention any name much less that of the assessee and therefore to whom these papers belong cannot be stated. (c) Merely because some dates and payment particulars have been mentioned without any name of persons to whom they have allegedly been made, it cannot be held that the payments have been made to the assessee. (d) The handwriting on these two documents is not of the assessee or anybody known to him (e) No documentary evidence relating to these documents was found in the possession of the assessee or his family members to even remotely suggest that any such payment was received by the assessee. (f) There is no bank account etc of the assessee to show that any of these payments were made to him. (g) No....
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....sentation material conceived as being addressed to Tadiran". The comments of the assessee in respect of the same are as follows:- (a) The assessee has seen this document for the first time on 12.12.2012, after it was provided by AO on the directions of CIT(A). (b) It is an unnamed, unsigned document and even the author of this paper is not known. (c) Who has written the line making reference to the assessee? Whom does this paper belong? What is the purpose of this paper? All these issues should have been posed to Dr. M.V. Rao before seeking any response of the assessee in the matter. (d) The assessee cannot stop anybody from writing his name. Mere writing of a name without any corroborative evidence means nothing and is not even worth the paper it is written on. (e) The title of the paper itself is not clear. Was this a presentation material addressed to Tadiran or was it being conceived to be addressed to Tadiran? Who was giving the presentation material and to whom? When was this presentation material given and has any person named in the said material been examined. Has anybody named in the document claimed to having even known the assessee? (f) This document n....
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....n a whisper of the appellant. e) The other statement was taken in compliance with the direction of the CIT(A)-II on 05.04.2011. In the said statement also, there is no mention of any connection of Dr. M.V. Rao with the appellant. In the entire statement, Dr. M.V. Rao has nowhere stated that the documents found were belonging to or had any relation with the appellant. As far as the ownership of the document is concerned, Dr. M.V. Rao even denied having ever seen those documents and much less being their owner. He did talk about his connection with one Mr. Pulel Fleishman and M/s Tadiran Communication Ltd but categorically refused having anything to do with the documents allegedly found from his premises. (ii) We would like to pause here and respectfully submit that if the alleged owner of the documents has himself denied having ever seen them or having anything to do with them, how can the said documents be said to be belonging to the appellant. The documents indubitably do not belong to the appellant as they were not found on him and even otherwise do not bear his name or signatures to signify any form of ownership. (iii) The Department has not been able to establish the o....
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....st, i.e. M/s Crown Corporation Pvt. Ltd, M/s Dynatron Services Pvt. Ltd etc have had any dealings with the said company. (iii) It is found from the statement given by Dr. M.V. Rao that he was the Managing Director and then the director of M/s Transcom Services Pvt. Ltd and he has never stated that the said company belongs to the assessee or It is believed that the assessments in the case of M/s Transcom Services Pvt. Ltd were made in the same Circle and nowhere in the order has any finding of assessee's relationship or ownership of the said company exists. (iv) It has been alleged that the share holder of the company is one M/s Inet Communication, Mumbai. The assessee has nothing to do with M/s Inet Communication and the company, admittedly as per the order, is owned and run by one Mr. Bipin B. Shah. (v) Mr. Bipin B. Shah is a professional with an independent and roaring practice and there can be no doubt that he could be running certain companies while carrying on with his profession. To the best of the knowledge and belief of the assessee, no where Mr. Bipin Shah stated that he was holding shares on behalf of the assessee and that M/s Transcom Services Pvt. Ltd belong....
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....unts to setting aside the issue. The CIT(A) u/s 250 can annul, enhance or delete and cannot set aside. Since on the facts on record, the documents seized from Dr. M. V. Rao on the statement taken from Dr. Rao has no any reference has been made to the appellant, such reference is unwarranted. The ld. DR has also concerned that the ld. CIT(A) has exceeded his jurisdiction in the matter. Without prejudice: The department has not found any evidence in the form of bank account, cash etc. to show that such huge amounts were received by the assessee. There is no evidence to show that the alleged transaction ever took place. Hence, it is nothing but a figment of imagination of the department and the addition deserves to be deleted." 6.3. After hearing rival contentions, we find that the addition in question cannot be sustained for the following reasons. The A.O. has arrived at the conclusions based on examination of certain documents found during the course of search. Statements of Shri M. V. Rao and Mr. Mohan Jagtap were referred to the assessee, on being given copies of these documents, given his contentions, The Ld. Departmental Representative relied on the order of the Assessi....
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....the name of the assessee. Certain dates and amounts are mentioned. It is a column titled "paid to Hudar US Dollars". We have dealt with the evidenciary value of similar document which as Annexure A-10 For the same reasons as given while dealing with document annexure A-10 page 58 and 59 we hold that no addition can be made in the case of the assessee based on these documents as they do not indicate earning of commission by the assessee. (b) Annexure A-5 is a paper containing some numbers. Dr.MV Rao, in whose possession this paper was found, has not been questioned on this paper. No names are mentioned. Hence for the same reasons given, in the case of other such evidences, we are of the view that no addition can be made in the hands of the assessee based on these papers. (c) Annexure A-11 page 62 is a letter which does not make any reference to the assessee. There is no evidence to connect this paper with that of the assessee. (d) Annexure A-10 at page 79 is a paper titled "presentation material conceived as being addressed to Tadiran". This does not prove that the assessee has received or earned any commission income from defence deal. 6.5. For the same reasons given in....
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.... 25 referred to certain documents found during the search and subsequent investigation, and came to a conclusions that Shri Suresh Nanda was closely involved with the management and functioning of Claridges Hotel as well as three other companies. He examined pages no.4,8, and 15 of Annexure-A-7, which is a document found and seized during the course of search in the residence of the assessee for coming to a conclusion that Mr. Nanda controls affairs of C-1 Indian Pvt. Ltd. The fact that Mr. Nanda purchased land on behalf of the company in Maharastra in the capacity of founder director was also held as a circumstance to show that the assessee is having control over the company. The Assessing Officer examined page no.70 of annexure A-15, which is a document found and seized from the residence of Mr. Suresh Nanda, Which details the debit and credit entries in the account in Deutsche Bank Singapore and came to a conclusion that the entries therein are income of the assessee. At para 9.4 page 34 the Assessing Officer has examined the following documents: a) Annexure A-8 page 17 to 34 party R-1. b) Annexure A-8 page 35 party R-1. c) Annexure A-8 page 36 party R-1 After giving....
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....auritius, as income of the appellant was adjudicated by Hon'ble ITAT in its aforesaid order at paragraph 10, which set aside the matter and restored it to the Assessing Officer to decide afresh and consider whether any addition on this account is called for in any case and if so in which case the addition is to be made. The status of the appellant is held as 'non resident' at para 4.2 above. Accordingly, even if any amount invested in India is found to belong to the appellant, it cannot be brought to tax as income in his hands unless it is proved that the income accrued to him in India, as held by Hon'ble ITAT vide para 8.3 of its order dt. 24.7.2012. It ahs been held by the Hon'ble Supreme Court in UOI vs. Kamlakshi Finance Corp.Ltd. (AIR 1992 SC 711) and Khalid Automobiles vs. UOI (4 SCC (Suppl.) 653) that the decisions of the Jurisdictional High Court and the Tribunal are binding on the income tax authorities without any reservation. Accordingly, the decision of the Hon'ble ITAT is applied to the present Assessment Year, supersedes the earlier decision of CIT(A) on this ground, the earlier order of CIT(A) merges with the subsequent order of ITAT, which ahs become binding on the ....
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.... Court against these directions. Further, CIT(A) instead of adjudicating the appeal, either at his own ought to have taken up the enquiry or ought to have remanded the matter to Assessing Officer for desired report/enquiry." Issue of undisclosed investments made in Claridges SEZ P.Ltd.: (1) In short, the Assessing Officer has dealt with this issue of addition of Rs. 34.60 lakhs on pages 45-31 pointing out that the land was purchased by Claridges sEZ Pvt.Ltd. in the names of Suresh and Sanjeev Nanda. The Ld.Commissioner of Income Tax (Appeals) (para 8.2 and 8.3) found the issue to be not exactly raised/covered in ITA 1428,1429,1430/Del/12 yet deleted the addition solely relying on the ITAT order dt. 24.7.2012 and also observing that even if amount belongs to assessee still it cannot be taxed as his status is Non-resident, but since bank statement from Mauritius was pending holding the addition to be premature has directed Assessing Officer to pursue qua investigation to ascertain truth. (2.1) When this issue was not there before the Tribunal it was incorrect on the part of the CIT(A) to instead of dealing with various arguments given by the Assessing Officer while making addit....
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.... in UBS Mauritius belongs to Paranel Finance SA and Mideast Consortium S.A. owned by Mr. Hamiltan Andrews, a British national. Copies of the confirmation by Mr. Andrews were filed during the course of proceedings. The appellant is a shareholder in the company named Infotec Services Ltd. which has a 20% stake in UBS Mauritius. The appellant claims that all documents found by the department clearly show that the appellant was making good his 20% stake in UBS Mauritius through his company Infotec Services Ltd. 3. Evidence to show that money belongs to M/S UBS, Mauritius and not the Appellant. (i) UBS Ltd., Mauritius is an independent entity and is not a front company of the appellant. a. Incorporation certificate and Memorandum and Articles of UBS Ltd., Mauritius The incorporation certificate along with the Memorandum and Articles of Association were filed before the learned A.O. at the time of assessment by Claridges Hotels P Ltd b. Tax residency certificate It was also submitted that UBS Ltd. is a tax resident of Mauritius and in support the tax residency certificate of the company was also furnished by Claridges Hotels P Ltd c. Shareholding of UBS Ltd., Mauriti....
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....s Infotec Services Ltd. The appellant have already submitted that he is a majority share holder in M/s Infotec Services Ltd and therefore, the credit agreement had necessarily to be signed by the appellant. The other credit facility agreements between Paranal Finance and Mideast Consortium and Universal Business Ltd Mauritius, nowhere state that those are appellant's companies or the appellant have to sign any of the said agreement. This document in fact clearly establishes that the appellant's interest in Universal Business Solutions Ltd is only through M/s Infotec Services Ltd and the other two share holders are independent companies. The appellant reiterates that the confirmation from the owner of the two shareholding companies is also conclusive proof of ownership by Mr. Hamilton Andrews and the said fact has remains un-rebutted till date. (b) Annexure No. A-8, page-35 Party R-1 This document also conclusively establishes the fact that the appellant have a stake in Universal Business Solutions Mauritius only through holding majority shares in M/s Infotec Services Ltd, Jersey, Channel Island. The appellant was a resident of UAE Dubai during the entire block period. During ....
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....r is self explanatory as it states that the investment In Universal Business Solutions to the extent of 20% would be made by ISL only. This is again in consonance with the appellant's assertion that his interest in Hotel Claridges is only through Infotec Services Ltd which owns 20% Share of Universal Business Solutions of Mauritius. (e) Annexure A-8, pages - 39-71 Party R-1 - This is a credit facility agreement between Infotec Services Ltd and Universal Business Solution Ltd. The funds contributed by Infotec Services Ltd are the ones which were remitted by UBS Trading Sharjah FZC and the said funds were in turn provided by Infotec Services Ltd to Universal Business Solution Ltd Mauritius as a term loan. The AO had mentioned that the name of the signatories on the draft included Mr. Suresh Nanda, Director, M/s Infotec Services Services Ltd. This establishes the fact that the appellant's stake in Universal Business Solutions Mauritius is only through M/s Infotec Services Services Ltd, as submitted elsewhere in this reply. (f) Annexure A-8 Page-13 The AO's interpretation of this document is absolutely correct. The document shows that there are three shareholders of Univ....
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....and Mid East Consortium are not owned by him and his interest in Claridges Hotel is only through M/s Infotec Services Ltd. As already submitted above, after examining the financials, the appellant decided not to acquire Paranal Finance and this fact is evident from the confirmation filed by Mr Hamilton Andrews. (i) Annexure A-26, pages 11-13, party R-1 The AO's interpretation of the said documents appears to be correct. The datasheet of M/s Infotec Services Ltd shows investment in Universal Business Solutions Mauritius and this further establishes the appellant's claim that his stake in Universal Business Solutions Mauritius is only through M/s Infotec Services Ltd. From all the aforesaid documents relied upon by the AO, it is abundantly clear that Paranal Finance and Mid East Consortium are owned by Mr. Hamilton Andrews as these companies together owned about 80% shares in Universal Business Solutions Mauritius. It is also clear that M/s Infotec Services Ltd, a company in which the appellant own majority stake, owns only 20% shares in Universal Business Solutions Mauritius. Therefore, the AO's contention that the appellant own Universal Business Solutions Mauritius is gro....
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....ers of the company in UBS Ltd. The share capital is shown at USD 2 millions and the borrowings at USD 22 millions in the audited Balance Sheet of UBS Ltd.,Mauritius. It is apposite to mention here that during the course of search, document which was found contains a detailed statement showing the share capital subscribed by three share holders, namely, Paranal Finance S.A., Mideast Consortium S.A. and Infotec Services Ltd. in UBS Ltd. It also shows that borrowings by these companies have also been shown as investments in UBS Ltd. (Kindly refer P37 of assessment order) A perusal of this statement will clearly show that UBS Ltd., Mauritius is an independent foreign company having three independent share holders. It may be further submitted that though not strictly required in law the appellant has taken pains to even establish the identity of shareholder of Paranal Finance S.A. and Mideast Consortium S.A.and Infotec Services Ltd. (b) On perusal of Balance Sheet of UBS Ltd, which the AO has produced in his assessment order, it may further be seen that the investment made in its subsidiary i.e. M/s Shantideep Food P Ltd. has also been clearly reflected as assets. The Balance Shee....
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.... from INSEAD and was unanimously appointed by Board of UBS Ltd as the Managing Director of Claridges Hotel Pvt. Ltd. The appellant further submitted that the Claridges Hotel is being professionally managed by the General Manager who is a , foreigner having worked in Hotel industry for a long period of time. Mr. Dieter Jansson was brought in as General Manager and was personally interviewed and selected by Mr. Hamilton Andrews. It was therefore submitted that the Claridges Hotel is being managed by independent professionals who are drawing salaries from the same. 8. Order of CIT(A) CIT(A) vide order dated 07.02.2013 while adjudicating the appeal of Claridges Hotel Pvt. Ltd. has held that the money belongs to UBS Mauritius and deleted the addition made in the hands of the appellant, 9. In view of the assessee being a non-resident, there is evidence of dividend having been received by him outside India from a company incorporated outside India which is the source of investment in UBS Mauritius to the extent of 20%. Hence that income cannot be subjected to tax. There is also finding of fact that the remaining 80% of the shareholding belong to Mr. Hamilton Andrews and the sa....
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....act. The essence of Benami is the intention of parties concerned and not unoften shrouded in a thick veil which cannot be pierced through. But such difficulties do not relieve the person asserting the transaction to be Benami of any part of the serious onus that rests on him nor justify the acceptance of mere explanations, conjectures and surmises as a substitute for proof. b) Applying this ratio of Hon'ble Supreme Court it may be seen that very clearly Claridges Hotels Pvt. Ltd. is owned by M/s Shantideep Hotels P Ltd, M/s Shantideep foods P Ltd and M/s Paradigm Hotels P Ltd. M/s Shantideep Hotels P Ltd, M/s Shantideep foods P Ltd and M/s Paradigm Hotels P Ltd is in turn owned by UBS Ltd., Mauritius which is a corporate entity. This fact stands established from the documents seized during the course of search. Confirmation from the major shareholder of two out of the three companies of M/s UBS Ltd, Mauritius has been filed during the course of assessment. Appellant has himself admitted that he is the major shareholder of the third corporate entity i.e. Infotec Services Ltd which owns 20% share capital of UBS Ltd. Needless to add that Balance Sheet of UBS Ltd. and its share h....
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....ible. The department cannot reject good evidence without any basis and without giving the reason for rejection. d) A finding regarding Benami is a finding of fact. The said finding cannot be questioned unless it is without evidence in support of it. When the finding is based on material partly relevant and partly irrelevant then such a finding is vitiated in law. It is submitted that the department has not placed any evidence to suggest that there is a finding that the appellant is owner of Claridges Hotel Pvt.Ltd. The department has merely alleged on the basis of irrelevant considerations that Claridges Hotel Pvt.Ltd. is being run by Directors close to the appellant that the appellant was non-executive Chairman. The appellant has brought in valuable foreign exchange into the country and has also got investments of a friend, Mr. Hamilton Andrews who is a British citizen. The mere fact that the appellant is on the board of directors does not mean that he owns the Claridges Hotel Pvt.Ltd. It is pertinent to mention that the Claridges Hotel is being managed by General Manager who is a professional and is a foreigner. e) Further reliance is placed on the Hon'ble Supreme Cou....
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.... b) Reliance is placed on the judgement of the Patna High Court in the case of Hanuman Agarwal 151 ITR 150, wherein it was held that once the assessee filed the confirmatory letter with correct name and address, he has discharged the onus of proving the genuineness of the credit in his accounts. The relevant portion of the judgement is reproduced as under for care of reference: "Held that the confession made by the creditor was not made available to the assessee or the Tribunal. The assessee having furnished the correct name and address of the creditor, having given the GIR number and having filed the confirmatory letter from the creditor, did all that it could do and these three genuineness of the transaction and also the capacity of the creditor and, as such, the assessee completely discharged its initial onus under Section 68 of the I.T. Act, 1961. The Revenue, on its part, did not summon the creditor under Section 131 of the Act. It took no steps to verify the statement of the assessee. Thus, after the assessee filed the confirmatory letter with the correct name and address of the creditor and the GIR number as well, the onus immediately shifted on the Department which....
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....n was deposited by the person in whose name the deposit stands. It can not be assumed that the amount belonged to the assessee (husband). (iv) Source of the source not required to be established a) In the case of appellant, it is on record that money has come from UBS Ltd., Mauritius. In the absence of proof as to the source it cannot be said that the money belongs to the appellant. b) It is further submitted that the assessee does not require to prove the source of the source of the deposit which he has in any case done. Reliance is placed on the judgement of Rajasthan High Court in the case of Aravali Trading 220 CTR 622. It was held as under:- "Neither the provisions of Section 68 nor on general principle, it can be said that once the existence of persons in whose name credits are found in the books of the assessee is proved and such persons own such credits with the assessee still the assessee is to further prove the source from which the creditors could have acquired money to be deposited with him. The fact that the depositors' explanation about the sources where from they acquired the money is not acceptable to the A.O., it cannot be presumed that the deposits mad....
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....nt to submit documentation for bringing funds in Mauritius suggest that Suresh Nanda is bringing his unaccounted money after creating layer to inter-mediatries including M/s Palm Technologies Ltd., Mauritius. The Assessing Officer has further analyzed the Balance Sheet of M/s Palm Technologies Ltd., Mauritius and according to him; the money in M/s Palm Technologies has been sourced as loan from M/s UBS Trading FZC and Y2K SIL with the appellant. The AO has concluded that Palm Technologies is merely a conduit for the appellant to source his undisclosed income. b.In response to the allegation of the Assessing Officer, it is humbly submitted as under (ii) Submission made during assessment proceedings During the course of assessment proceedings, vide letter dated 02.12.2009 in response to a query relating to Claridges SEZ, the assessee submitted as under:- "I have no interest in terms of share holding or ownership in Claridges SEZ (P) Ltd. Claridges SEZ (P) Ltd is owned by Palm Technologies Ltd which is a foreign company incorporated in Mauritius. As far as I am aware, Palm Technologies is owned by an UK citizen Mr. E.A. Hoffland who is a friend and was introduced to me by ....
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....Mauritius has confirmed that the equity structure of Palm Technologies is as per the Balance Sheet. The sources of funds enabling the investment are from loan and share holders loan and therefore, the Balance Sheet so submitted and equity structure given is true and correct. It is further submitted that as per the ruling of the Authority of Advance Ruling in the case of E-Trade Mauritius, it has been held that there is no need to go into the beneficial ownership of the company as treaty benefit are to be accorded on the basis of the fact that the company is a tax resident of Mauritius. The balance sheet/audited accounts of Palm Technologies are with the Department along with the equity structure. The sources of funds are from share holder who is Mr. E.A. Hoffland. The appellant fails to understand as to what more is required to establish the genuineness of the transaction relating to the infusion of funds by Palm Technologies into its wholly owned subsidiary M/s Claridges SEZ. The judgements and legal position on benami etc., cited in the case of addition relating to Claridges Hotels P Ltd would apply to the impugned addition as well. It is further submitted that there ....
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....s carried out in those countries. The AO has not lead any evidence to show that assesses explanation is incorrect or the credits in the bank account are as a result of any income which accrued in India. Admittedly the assessee being a non-resident claims to have activities and bank accounts in these countries. In these circumstances the burden to prove that assessee's explanation if false or the receipts outside India were as a result of any income which accrued in India was on the Department. AO has failed to discharge the burden and no adverse material has been brought on record. Besides the ITAT in the case of the assessee has held that these are remittances from the assessee's own account outside India to Indian bank accounts cannot be taxed u/s 68 of the Act. The decision of the Tribunal has been accepted by the Department and no appeal has been preferred to the High Court. Hence, we delete this addition, this ground of the assessee is allowed and the addition of Rs. 10,51,20,000/- is deleted." 7.4.2. Applying the propositions laid down by the Hon'ble High Court we uphold the order of the Ld.Commissioner of Income Tax (Appeals) we hold that the addition in question is bad i....
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....r of Infotech Services, which in turn holds only 20% of shareholding of UBS Ltd., Mauritius. The Balance 80% of the share holding of UBS Ltd. is hold by the parties who are not related, much less controlled by the assessee. (iii) Annexure A 8 also supports the claim of the assessee that Infotech Services Ltd. holds 20% of UBS Ltd. Mauritius. The claim of the assessee that the letter in question refers to second round of financial requirements of UBS Ltd., Mauritius and that Info Services Ltd. was required to contribute 20% of share of finance of UBS Ltd. Mauritius and that this was met through interim dividend declared by M/s UBS Trading FZC, where the assessee is a majority shareholder is proved by this document. (iv) Annexure A 8 at page 36 is a letter written by M/s UBS Trading FZC declare interim dividend referred to above. This letter does not demonstrate that the assessee has any relationship with M/s Mid East, S.A. (v) Annexure A 8 page 38, 39 to 71 support the contentions of the assessee that Info Services Ltd. provide funds to UBS Ltd., Mauritius. (vi) Annexure A 8 page 13 also corroborates the claim of the assessee regarding funding of M/s UBS, Mauritius. T....
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....d) that soruces of source need not be established. 7.5. In the result ground nos.3 and 4 of the Revenue are dismissed. 8. Ground no.5 is regarding unexplained deposits in Deutsche Bank, Singapore. The Ld.Commissioner of Income Tax (Appeals) has dealt with the issue at para 5.2 at page 16 of his order. 8.0 The Assessing Officer, as always stated relied upon the hand written page found and seized as page no.70, Annexure A -15 party R-1, during the course of search proceedings in the assessee's residence, the contents of this page have been extracted at page 28-29 of the assessment order, on the ground that the assessee has not furnished the source of deposit into the Singapore Bank, rupees equivalent of the transaction in this account. 8.1. The Ld.D.R. submitted as follows. "(F) Unexplained deposits in the Deutsche Bank: 1. Assessing Officer in para 8 of his order has, taking note of Annexure A-15 (page 70) which showed in and out of money in assessee's a/c with Deutsche bank, Singapore to his NRE a/c with Deutsche Bank, New Delhi, which document was called by the assessee as having mere rough scribbling, made addition because assessee did not give details of his....
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....is squarely covered since it is the same bank account which has already been considered and adjudicated upon by the Honorable High Court. " 8.3. In our considered view para 13 of the judgement of Hon'ble Delhi High Court covers the issue. Respectfully following the same we uphold the order of the Ld.Commissioner of Income Tax (Appeals) and dismiss this ground of the Revenue. In the result ground no.5 of the Revenue is dismissed. 9. Ground no.6 is on the addition made for payments made to the assessee's wife Smt.Renu Nanda. The Assessing Officer dealt with the issue in the Assessment Year 2004-05 at para 9 of his order. The assessee's case is that, he filed a suit on his wife for legal separation, after the expiry of the deed of settlement on 4.4.1998 and that though there was no further settlement or agreement between the assessee and Mrs. Renu Nanda after the suit for legal separation which was decided on 24.3.2004, as a moral duty, he continued to support her financially. At para 9.2 the Assessing Officer lists out the payments made from Deutsche bank, Singapore, to his wife. The Assessing Officer at para 9.6 and 9.7 held as follows. "9.6. Based on the above, it is evide....
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....ng on the income tax authorities without any reservation. Accordingly, the decision of the Hon'ble ITAT is applied to the present Assessment Year, supersedes the earlier decision of CIT(A) on this ground, the earlier order of CIT(A) merges with the subsequent order of ITAT, which has become binding on the appellate authority. Consequently, this ground of appeal is allowed and the addition is deleted. Appellant gets relief of Rs. 23,90,000/-." 9.2. The Ld.D.R. submitted as follows. "(A) Unrecorded payments made to Renu Nanda: 1. This issue is discussed by the Assessing Officer in para 9 of the order for the Assessment Year 2004-05. The CIT(A) (e.g. para 6.2) has deleted additions solely relying on ITAT order dt. 24.7.2012 (ITA 1428, 1429 & 1430/Del/12) without going through the applicable portion which reads as under: "...In our considered view the basis of addition being only on presumptions, there being no material whatsoever, the addition is deleted. We find merit in the argument of the Ld.Counsel that with estranged relations on record such presumption is baseless". 2. Additions are not presumptions made but are made on the basis of specific evidences found in sea....
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....pugned assessment year is also identical and the appellant's contention in respect of the same are as follows : Ld AO made addition of Rs. 23,90,000/- paid by the appellant to his wife from his NRE / NRO bank accounts, as income from undisclosed means. The appellant has an estranged relationship with his wife Mrs. Renu Nanda. Vide Deed of Settlement dated 04.04.1998, expiring in 2000; the appellant was required to support her financially during the currency of legal separation. The appellant for the F.Y. 2003- 04 paid Mrs. Renu Nanda a sum of Rs. 8,10,000/- towards the maintenance i.e. day to day expenses. The expenses on account of guards, servants, driver and other capital expenditure were met by the appellant from his account by way of account payee cheques. The Assessing Officer has estimated that the expenditure should have been a total sum of Rs. 32 lacs for the year under consideration. The basis of his estimation is as follows:- (a) That the appellant paid Rs. 31 lacs as annual maintenance to his wife in the year 1997-98 and therefore, why would he not pay more at least the same amount 10 years later. (b) The estimation of the payment that would have been mad....
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.... of the order dated 24.07.2012 cited at para 12 is being reproduced below for the convenience of your honour: "Apropos the addition in respect of the estranged wife Smt. Renu Nanda, we are unable to uphold this addition inasmuch as both were separated by way of deed of settlement dated 4-4-1998 and the payments based thereon on were already made. The addition has been made not based on any evidence or incriminating material, indicating that any payment was made out of books. The sole basis of addition is an assumption that there was some unwritten understanding between the assessee and his estranged wife Smt. Renu Nanda. Therefore, it has been assumed that lesser amount for support was paid by the assessee as compared to earlier years. In our considered view the basis of addition being only on presumptions, there being no material what so ever, the addition is deleted. We find merit in the argument of ld. Counsel that with estranged relations on record such presumption is baseless. This ground of assessee raised in A.Y. 2003-04 is deleted." Similar basis has been adopted by the AO while making the addition on the issue in AY 2004-05. In view of the facts and the decision of t....
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....rred in deleting the addition of Rs. 21,81,00,000/- made by the Assessing Officer on account of interim dividend declared by UBS Trading FZC, Dubai accrued to the assessee. 8. On the facts and in the circumstances of the case, the Ld.Commissioner of Income Tax (Appeals) has erred in holding the assessee to be a Non-resident for the year under consideration without appreciating the fact that explanation (b) of S. 6(1)(c ) was not application to assessee. 9. The appellant craves leave to add, amend any/all the grounds of appeal before or during the course of hearing of the appeal." 11. For the Assessment Year 2005-06 ground nos. 1 and 9 are general in nature. 12. Ground no.2 is on the addition made on account of investments made by the assessee in the renovation of Sonali Farms from his overseas bank account pertaining to Assessment Year 2005-06 and 2006-07. 12.1. The Ld.D.R. referred to para 13 of the order of the Assessing Officer for the Assessment Year 2005-06 and based is arguments on document in Annexure A-10, which listed out at para 13.1 of Assessing Officer's order. The Assessing Officer arrived at total payments of US Dollars 48934. The Ld.DR submitted that i....
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....rt and the Tribunal are binding on the income tax authorities without any reservation. Accordingly, the decision of the Hon'ble ITAT is applied to the present Assessment Year, supersedes the earlier decision of CIT(A) on this ground, the earlier order of CIT(A) merges with the subsequent order of ITAT, which has become binding on the appellate authority. Consequently, the ground of appeal is allowed. Appellant gets relief of Rs. 21,34,501/-". 12.3. The Ld.Counsel supported the order of Ld.CIT(A) and submitted that the Assessing Officer made the addition on the sole ground that the assessee is a resident. He pointed out that all the credits in the Singapore bank account have already been added as unexplained income u/s 68 of the Act and once again the debits by way of expenditure on Sonali farms, is also added thus making it a case of double addition. 12.4. After hearing rival contentions, we are of the considered opinion that the order of the Ld.Commissioner of Income Tax (Appeals) has to be upheld in view of the observations at para 13 of the Hon'ble High Court's order in the assessee's own case dt. 25.2.2013. We have already held while disposing off ground no.7 for the Asse....
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....try abroad, does not fall within the scope of section 5 of the Act. 17. After hearing rival contentions, in consequence to our finding that the assessee is a non-resident and as it is undisputed that UBS Trading FZC Dubai is a foreign company and the assessee earned dividend from the same outside India, the dividend in question cannot be brought to tax in India as held by the Hon'ble High Court vide para 13 of the order dt. 25.2.2013. In the result this ground of the Revenue is dismissed. Ground no.8 is on the issue of residential status of the assessee. We have adjudicated this issue in the A. Y. 2004-05. Respectfully following the judgment of the Hon'ble Delhi High Court on this issue we dismiss this finding of revenue. 18. In the result this appeal of the Revenue for A. Y. 2005-06 is dismissed. 19. ITA No.2601/Del/2013 in revenue appeal for the assessment year 2006-07, the grounds are as follows: "1. The order of the Ld. CIT (A) is not correct in law and facts. 2. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in restricting the addition to Rs. 2,66,31,299/- and allowing a relief of Rs. 2,82,34,008/- on account of undisclosed inves....
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....nvestments made by the assessee in Sonali Farms. This issue was partly considered by us by adjudicating ground no.2 for the assessment year 2005-06 as the facts are the same, for the reasons given at para 12.4 of these order we uphold the order of the first appellate authority. At this juncture, we observe that the assessee has filed a cross appeals on the very same issue. We would be dealing with the same in the latter part of this order. In the result, ground no.2 and 3 are dismissed. Ground no.4 is an addition made on the ground that the assessee has earned commission income. The very same issue, based on the very same facts and evidences was considered by us at para 6.3 to para 6.8 of this order, while disposing off ground no.2 of the revenue appeal for the assessment year-2004-05. Consistent with the view taken therein, we uphold the order of the Ld. CIT (A) and dismissed the ground no.4 of the assessee. Ground no.5 and 6 relate to an addition made on the ground that the assessee has made certain unexplained investments in M/s Claridges Hotel Pvt. Ltd. This issue is similar on facts to the addition made in the assessment year 2004-05. We have dealt with this issue as ....
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....unt bills issued by Jayant K Furnishers, for work done at Sonali Farms which reflects the payment made of Rs. 37224056/- and whereas a second set of running account bills having the same date and the same number, reflected payments of Rs. 1,24,20,071/-. The difference between these two sets of running account bills wherein the date and number are identical, was added on the ground that these are unexplained investments made in cash. The Assessing Officer further held that as per the documents retained. The total value of contract with M/s Jayant K Furnishers was stated to be a sum of Rs. 105765307/- and whereas the assessee claims the value of the contract is Rs. 5,09,00,000/-. The difference in value to the tune of 5,48,65,037/- was added. On appeal the First Appellate Authority considered the contentions of the assessee and granted part relief. He took the total contract value with M/s Jayant K Furnishers at Rs. 105765307/- and after deducting the total payments made to the tune of Rs. 7934008/- had sustained an addition to the tune of Rs. 26631299/-. Both the assessee and the Revenue are in appeal. The Ld.D.R. relied on the order of the Assessing Officer and pointed out that the....
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....is allowed for statistical purposes. 22 We now take up assessee's Cross Objections. Cross Objection No. 165/Del/2013(In ITA No.2605/Del/2013), A. Y. 2005-06 And Cross Objection No.166/del/2013 ( In ITa No.2606/Del/2013) A. Y. 2005-06 22.1 The assessee filed Co No. 165/De/2013 in ITA 2605/Del/2013 for the A. Y. 2005-06 and also Co.No.166/Del/2013 in ITa 2606/Del/2013 for the A. Y. 2006-07 taking the following grounds. "1 That on the facts and in the circumstances of the case, the Ld. CIT (A) has erred in holding the proceeding u/s 153A/ 143(3) of the Income Tax Act, 1961 cannot be held to be vitiated specially when no material much less incriminating material was found or seized during the course of search conducted on 28.02.2007 and no assessment or reassessment was pending as son the date of initiation of search which could have abated in terms of second proviso to section 153(1) of the Income Tax Act,1961. 2. Without prejudice to the above, the search u/s 132 having been concluded on 28.02.2007, the assessment made on 30.12.2009 is barred by limitation and hence, the Ld. CIT (A) ought to have cancelled the assessmsent in view of the above of the judgment of H....