TaxTMI 
TaxTMI 
TaxTMI 
2015 (5) TMI 711
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....ion is concerned, for all the assessment year before us are common, we will take up the facts of the case for the assessment year 1993-94 to set out the backdrop developments leading to these appeals before us. 4. It is a case of reopened assessment and even the reassessment proceedings were dropped by the Assessing Officer in the first instance but then learned Commissioner subjected this order, dropping the reassessment proceedings, to revision under section 263. It was in this backdrop that the fresh reassessment was done. The reasons for reopening the assessment, as set out at page 2 of the assessment order, are as follows: "Enquiries were conducted by the DDIT (Inv). Unit 2(3) Ahmedabad in the case of Vam Airtex Pvt. 4/5 Vasupujya Chambers, Ashram Road, Ahmedabad and its associate concerns. It was found by the investigation unit that the employees/close associates of Vam Airtex Pvt. Ltd. were running a number of concerns for the purposes of accommodating Vam Airex Pvt. Ltd. so that the company might bogus purchases in their names and its books. Most of the employees/associates were found to have not filed returns of income for all the years. These concerns were created to sh....
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....facts of the case of H K Enterprise are analysed in great detail and clinching evidences collected to prove beyond doubt that no sales were made by H K Enterprise to Vam Airex Pvt. Ltd. This action will ensure that the bogus purchases indulged in by Vam Airtex Pvt. Ltd. suffer tax. And Vam Airtex Pvt. Ltd. is taxed correctly on its correct total income. Conclusion: In view of the above facts I have reason to believe that the case of the assessee is squarely covered by the provision of section 147 of the I T Act and am satisfied that this is a fit case for invoking the provisions of section 147 of the I T Act for Assessment Year 1993-94. The conditions laid down in section 149(1)(b) are satisfied and the provisions of section 151(2) are squarely applicable to the facts on the case." 5. In the assessment order, the Assessing Officer has also set out the brief case history which is reproduced below for ready reference:- "During inquiry proceedings in the case of VAM Air ex Pvt. Ltd., the DDIT (Inv.) Unit II(3) Ahmedabad recorded the statements of Shri Sunil Shah, Director of VAM and different employees of the company including that of Shri Ketan B. Thakkar from 1.5.2001 to 8.5.200....
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....e bogus and it was opened for specific purposes of inflating the purchases. 2. There was no claim of embezzlement in the original return filed by VAM that means issue of embezzlement has been brought in corresponding to the bogus purchases in reassessment proceedings which cannot be entertained. CIT vs. Sun Engineering works 1998 ITR 297 (SC). However the honourable ITAT Ahmedabad bench - C Ahmedabad vide order dated 25.01.2005 setaside the order of the Vam Airtex Pvt. Ltd. to the file of the assessing officer holding that it is sine quo of the principal of Natural justice that assessee should be given opportunity of being heard and defend his case which includes supply of material which is purposed to be used against him, as without such material, assessee will not be in a position to defend its case in proper manner, this is cardinal principal of maxini audialtem partem." 6. In the course of the assessment proceedings, it was submitted by the assessee that bank account number 2202 with General Cooperative Bank Limited "was opened at the instance of Shri Sunil Shah, Director of Vam Airtex Pvt Ltd to accommodate its bogus purchases" and that the assessee has nothing to do with t....
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....ement by Ketan B. Thakkar amounting to Rs. 751000/- was rejected and addition of this amount is made substantively in the hands of VAM Airtex Private Ltd. which had been upheld by the CIT(A). In order dtd. 31.5.2004. However the Honourable ITAT setaside the assessment of Vam Airtex Pvt. Ltd. to the file of the Assessing Officer with a specific direction to supply copy of statement of Ketan B. Thakkar, recorded by the DDIT (Inv) Unit-III, Ahmedabad to Vam Airtex Pvt. Ltd. to defend its case as a principal of natural justice. Since however looking to the nature of business activities entered in to between Shri Ketan B. Thakkar HUF and VAM Airex Private Ltd. and the complexities involved in the case as mentioned in Para-8 and also as a substantive addition of Rs. 751000/- is already made in the case of VAM Airtex Private Limited, a protective addition of Rs. 751000/- is made in the case of the assessee for A.Y. 1993-94 to safeguard that the interest of revenue." 7. Aggrieved by the addition so made by the Assessing Officer, assessee carried the matter in appeal before the CIT(A) who deleted the addition by observing, inter alia, as follows: "3.3 I have gone through the assessment or....
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....pts constitute income. By applying the Theory of Balancing of Assets, there have been no assets acquired corresponding to the alleged embezzlement by the Assessing Officer during the course of assessment proceedings. The assessment appears to have been made purely on the basis of surmises and conjectures without any corroborative evidence in respect of the alleged embezzlement by the appellant. (iv) For the reasons given above, I have already deleted the additions made on protective basis in the case of assessee for A.Y. 1997-98 to 1999-2000. (v) It would be pertinent to refer to the legal maxim ex majorie cautela (out of abundant caution) which has been applied by Hon'ble Apex Court in CIT v/s. Simon Carves Ltd. (1976) 105 ITR 212 (SC) 1, a judgement rendered by a Bench of 3 judges. In this regard Justice H.R. Khanna on pp 218 admonishes .... "the taxing authorities exercise quasi judicial powers and in doing so they must act in a fair and not a partisan manner. Although it is part of the duty to ensure that no tax which is legitimately due from an assessee should remain un-recovered, they must also at the same time not act, in a manner that might indicate scales are weighed aga....
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....first address is as to what is the nature of 'protective additions' under the scheme of the law and whether it was indeed a fit case for making of the addition on protective basis. As for the concept of 'protective assessment', we find that in the case of Lalji Haridas Vs ITO [(1961) 43 ITR 387 (SC)], Hon'ble Supreme Court had an occasion to deal with this aspect of the matter. While dealing this issue, Their Lordships have observed as follows: ......... In cases where it appears to the IT authorities that certain income has been received during the relevant assessment year but it is not clear who has received that income and prima facie it appears that the income may have been received either by A or B or by both together, it would be open to the relevant IT authorities to determine the said question by taking appropriate proceedings both against A and B. 11. In the case of Banyan & Berry Vs CIT [(1996) 222 ITR 831 (Guj)], Hon'ble jurisdictional High Court had an occasion to deal with the question "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that even after the income is taxed protectively or with remarks to that eff....
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....assessee form his employer, even if that be so, would constitute his income notwithstanding the fact that, in such a situation, the fact of unlawful gains are coupled with corresponding obligation to return the same to its rightful owner. 13. When we put this proposition to the learned Departmental Representative, he submitted that since the Assessing Officer has not accepted that any embezzlement has actually taken place in the case of Vam Airtex, he has disallowed the same. However, in the event of this disallowance being deleted in appeal and the appellate authorities coming to the conclusion that the deduction in respect of the loss is admissible, as a corollary to that finding, it has to be inferred that someone has benefited from the embezzlement and since the embezzlement allegation is against this assessee, the protective addition has been made in this case. It is on this basis that the learned DR justified the stand of the Assessing Officer. 14. We do not think such a course of action is permissible in law. As we have noted above, the question of income being brought to tax in the hands of an assessee, whether on protective basis or on substantive basis, can only arise w....