AI Drafter 
TaxTMI 
TaxTMI 
2015 (12) TMI 117
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....amborghini Car bearing registration no. PB-09G-0052, which had been exclusively used by one Mr Sameer Thapar who is a major shareholder of the Assessee Company in his capacity as a Karta of Sameer Thapar & Sons (HUF). Whilst the Assessee Company has paid the import duty, penalty and fine for the aforesaid motor vehicle and has also capitalized the said asset in its books in a later year, the Assessee has claimed that it has not paid any consideration towards the cost of the car. Neither the AO nor the CIT(A) accepted the explanations offered by the Assessee for being in possession of the vehicle and, in effect, concluded that the Assessee was de facto owner of the vehicle in question. Accordingly, the value of the vehicle was sought to be taxed as unexplained investment under Section 69 of the Act. The Tribunal, however, accepted the contention of the Assessee and held that the Assessee was not the owner of the vehicle in question within the scope of "ownership" as defined under Section 2(30) of the Motor Vehicles Act, 1988; the Assessee was not registered as a owner with the concerned authorities under the said Act. The Tribunal held that there was no material which indicated that....
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.... that the vehicle in question came to be registered in the name of VKTT, which at the material time was a sole proprietorship concern of Mr Sanjay Bhandari. 4.4 On the basis of information received from the Assistant Director of Income Tax regarding the vehicle in question, a show cause notice was issued by the AO to the Assessee on 19th November, 2008 requiring the Assessee to explain the source of the investment of the vehicle in question. In response to the show cause notice, the Assessee filed a letter dated 22nd November, 2008. The Assessee explained that VKTT had approached the Assessee for taking the vehicle on lease and had handed over the possession of the vehicle for trial. While the vehicle was still on trial, the same was seized by the DRI. Subsequently, the vehicle was released to the Assessee on the payment of differential duty, execution of bond and submission of bank guarantee for fine and penalty. Since no consideration was shown to have been paid for the original cost of the vehicle, the AO was not convinced of the explanation offered as to the rights being exercised by the Assessee in respect of the vehicle in question. 4.5 Accordingly, the AO held that the....
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....anwhile, when the vehicle was in possession of the Company, DRI seized the vehicle. It was subsequently informed to the Appellant Company that Vehicle No. PB09G0052 was imported by M/s VK Tour and Transport New Delhi against EPCG Licence No. 13000858 dated 25.01.2005 vide Bill of Entry 0985 dated 08-04-2005. (iii) The vehicle was released by DRI provisionally on its own volition on the condition of payment of differential duty and execution of bond and bank guarantee for fine and penalty to be made by the persons from whom the same was seized. Thus, the Appellant Company was advised to make the payment and also to submit the bank guarantee after which the vehicle was given to it on superdari. (iv) Accordingly, the payment of Rs. 68,58,244/- towards duty was made by the company comprising bankers cheque No. 347142 dated 13.09.2005 for Rs. 65,00,000/- of American Express Bank Ltd and bankers cheque No. 243559 dated. 15.09.2005 of HSBC for Rs. 3,58,244/- which were duly recorded in the books of accounts. Further an amount of Rs. 41,13,971/- was paid on 25.04.2007 vide bankers cheque No. 428331 dated 25.04.2007 as demanded by DRI. (v) A show cause notice was ....
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....reement for the vehicle. However, in the meantime, the vehicle in question was seized by DRI and was subsequently released on the condition of payment of differential duty and execution of bond and bank guarantee for fine and penalty. The Assessee had made payments towards duty and had also submitted a bond and a bank guarantee for the fine. The vehicle was released on superdari by the DRI and thereafter continued to be in possession of the Assessee. 8. Before the CIT(A), the Assessee repeated the above explanation. However, the Assessee produced several documents to indicate that the vehicle had been purchased by M/s History Logistics and was, thereafter, transferred to VKTT (both proprietary concerns of Sanjay Bhandari). The Assessee also produced a letter from Sanjay Bhandari which indicated that Sanjay Bhandari had agreed to transfer the vehicle to the Assessee or its nominee in consideration of the amounts paid by the Assessee to the Authorities for release of the vehicle and without any further consideration. The letter also indicated that the duties had been paid by the Assessee on an understanding that the vehicle would be transferred to the Assessee on the final order b....
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..... It is clear from the above that the payment of duties as well as the treatment accorded by the Assessee to such payments in its books militates against the Assessee's explanation that it was only a hirer of the car in question and was not the owner. There is also no explanation as to why the Assessee had to make the payments of duty, if the Assessee did not own the asset seized. 10. At this stage, it would also be relevant to refer to the relevant portions of the order passed by the Settlement Commission, which were extracted by the CIT(A) in its order dated 31st March, 2010. The said extracts are reproduced as under:- "18.9. Shri H.S. Wig, Sr. VP, JCT Ltd. represented Shri Sameer Thapar (With regard to two vehicles BMW X5 DL2CAC 0002 and Lamborghini Gelardo PBO9G 0052) during the hearing on 27.07.07.2007 and stated and also vide submission dated 30.07.2007, submitted that the co- applicant had taken the said vehicles on Hire Agreement dated 03.09.2002 from Shri Sanjay Bhandari for 3 years. DRI seized the vehicle vide Panchnama dated 10.09.2005. It was prayed that the co-applicant be granted waiver from penalty, redemption fine, interest and prosecution. He also praye....
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....ri wherein deceitful contrivances and tricks were adopted to evade payment of due customs duty, yet maintain the façade of observance at the conditions of EPCG scheme and thereby make undue profit at the cost of exchequer. Further the duty evaded was paid as differential duty only after the DRI was able to unearth the racket and seize 55 vehicles. Therefore duties were paid belatedly and to that extent the main applicants have enjoyed financial accommodation at the cost of Government Exchequer....." "25 ..... Bench finds that it is quite obvious that they were complicit in improper transfer of the vehicles in question the imports of which are tainted by evasion of customs duty. All the, vehicles were of foreign origin and were, relatively speaking, of high value. There is evidence in case of a number of vehicles that prior arrangements were made between the main applicants and the transferees and amounts were received from the persons to whom the said vehicles were claimed to have been leased out. It can not be believed that they had taken over these vehicles without checking up the import documents. As such, the Bench holds them liable to penalty. ...Simil....
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....age it is necessary to refer to Section 69 of the Act, which reads as under:- "69. Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year." 15. It is apparent from the plain language of Section 69 of the Act that in order for any addition to be made under Section 69 of the Act, the following conditions must be met: (a) it is established as a fact that the Assessee has made an investment; (b) that the investment made is not recorded in the books of the Accounts, if so maintained; and (c) the Assessee offers no explanation as to the nature and source of investment made or the explanation offered by the Assessee is, in the opinion of the AO, not satisfactory. 16. Thus, first and foremost, AO must come to a conclusion tha....
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....to V.K. Tours and Transport vide their Invoice No. HL002/04-05 dated31/03/2005 for Rs. 72,05,5211- vide High Sea Sale Agreement and Contract between both the parties was executed on 04/04/2005.Please note that V.K. Tour and Transport is also a proprietary concern and proprietor being the undersigned.(Copy of Invoice enclosed). The High Sea Sales Agreement was executed as the EPCG license for the B5/ 110, 2nd floor, Safdarjung Enclave, New Delhi- 110029 import of the said car could not granted to History Logistics, but was granted to V.K. Tour and Transport instead. 6. All custom formalities were then completed by V.K. Tours and Transport and amount of Rs. 4,89,968/- was paid to Custom authority towards Import duty. Apart from the above payment of Rs. 42,978/- was made as clearing agency charges and Rs. 88,945/- as other incidental expenses (Copy of Bill of entry as well as the bills are enclosed). 7. The said vehicle was imported under EPCG scheme under import License No. 1330000858 dated 25/01/2005 issued by DGFT, Jaipur, Rajasthan. 8. After clearing all the custom formalities the delivery of the vehicle was taken by V.K. Tours and Transport and the vehi....
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.... challenged the Final Order after depositing over Rs. 5.24Crores before the Bombay High Court, the case is awaiting final disposal. The DRI has also challenged the immunity granted to me and my co-applicants by the Settlement Commission, before the Hon'ble Delhi High Court, the proceeding are awaiting final disposal. The car cannot be transferred pending these litigations." 18. It is apparent from the above that the Assessee had produced sufficient material to establish that the vehicle had been imported by the Sanjay Bhandari (in the name of VKTT) and evidence was also produced to show payment of the cost of the vehicle. The AO on the other hand, has discovered no evidence or material on the basis of which it could be concluded that the cost of the vehicle and the initial duty had not been paid by Sanjay Bhandari. The assertion that the Letter of Credit had been issued by Oriental Bank of Commerce on 21st December, 2004 and subsequently, the Bank Account of M/s History Logistics had been debited by a sum of Rs. 70,77,773/- towards cost of the vehicle has not been contested by the AO or the CIT(A). Neither the AO nor the CIT(A) has any material to dispute these assertions. ....