TaxTMI 
TaxTMI 
TaxTMI 
2015 (3) TMI 1141
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....ction in the name and style of Dhule Construction Company deriving income from contract receipts, interest and remuneration as partner from a partnership firm namely M/s. Hotel Dwarka. He also derives salary income from Radheshyam Stockbrokers Pvt. Ltd. Apart from this he also derives income from house property and income from other sources. The assessee is also the founder and Chairman of a credit cooperative society namely "M/s.Chintamani Nagari Sahakari Patsanstha Maryadit, Dhule. An action u/s.132 of the I.T. Act was carried out against M/s.Chintamani Nagari Sahakari Patsanstha Maryadit, Dhule on 17-09-2002. Order u/s.158BC r.w.s. 143(3) dated 26-10-2004 was passed in the case of M/s.Chintamani Nagari Sahakari Patsanstha Maryadit, Dhule wherein additions u/s.68 of the Act towards unexplained fixed deposits of Rs. 68,80,000/- was made. This addition of Rs. 68,80,000/- was deleted by the CIT(A)-I, Nashik vide his order dated 29-12-2006. In the said order, the CIT(A) directed the AO to initiate re-assessment proceedings in the case of the persons who actually owned the said unexplained fixed deposits. The AO thereafter initiated re-assessment proceedings in the case of the assess....
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.... of the A.O. in the assessment order of M/s.Chintamani Nagari Sahakari Patsanstha Maryadit, Dhule, the A.O. held that the preponderance of human probabilities suggest that these deposits actually belonged to the appellant. viii) that the said amount of Rs. 68,80,000/- belonging to the appellant was parked by the him in different names with the patsanstha in the form of fixed deposits and were utilized as and when needed for unaccounted transactions of businesses of his family and hence would be taxable in his individual hands. 2.3 In view of the above reasons the AO made addition of Rs. 23,50,000/- being the peak of the credit by holding that the assessee Mr. Radhe Shyam Agrawal only has made the investments in the fictitious names of non-existing persons. 3. Before CIT(A) it was submitted that the information required by the A.O. in respect of the alleged unexplained fixed deposits as was available with the patsanstha was filed before him. It was explained that the following information in respect of each fixed deposit was filed : a. The name of the depositor holder alongwith the address present at the time of opening of deposit. b. Date of keeping the deposit. c. Mode of ke....
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....as filed with the A.O. 3.3 As regards fixed deposit in the name of Shri Mukesh Suhagmal Jain is concerned, it was submitted that the deposit was accepted and the loan was given against the said deposit, thereafter the deposit was encashed and loan was repaid. The documentary evidence in respect of the transaction available with the patsanstha was filed with the A.O. However, the A.O. ignored the same and believed the statement given by Shri Mukesh Suhagmal Jain that the deposit did not belong to him. 3.4 The assessee submitted that no opportunity to cross-examine Shri Mukesh Jain, Shri Rupesh Jain, Shri Ramakant Agrawal and Shri Rajendra Sharma was granted by the AO. 3.5 It was pointed out that the staff of the society is appointed by the society as per the norms approved by the Registrar of the Cooperative Societies as per the Act, Rules and Bye-Laws. As regards comment of the A.O. in respect of Shri Anil Agrawal, the assessee submitted that Shri Anil Agrawal was in the Board of Directors during the relevant assessment years. He was the only person in the relevant years who had the complete knowledge regarding procedural aspects of running a credit cooperative society as he had....
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....f the same, it is noticed that the said fixed deposits amounting to Rs. 68,80,000/- were not explained or proved either by the patsanstha or by the appellant to be genuine to the satisfaction of the A.O. It is also noticed that the then C.I.T.(Appeals) in his order dated 29/12/2006 in the case of M/s. Chintamani Nagari Sahakari Patsanstha Maryadit, Dhule, has directed the A.O. to tax the unexplained fixed deposits in the hands of the actual investors. The C.I.T.(Appeals) has not directed to tax the said unexplained deposits appearing in the books of the patsanstha in the hands of the appellant. 7.1 It is also a known fact that the Credit Cooperative societies having substantial transactions as that of M/s.Chintamani Nagari Sahakari Patsanstha Maryadit are governed by the provisions of the Cooperative Societies' Act and managed by the Board of Directors, Advisory Committee and various employees and not by the Chairman himself. It is also known fact that the Chairman and the Board of Directors take policy decisions and the employees and managers implement the same. Further the failure, if any, on the part of the manager, staff and directors looking after the day-to-day affairs o....
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....by any evidence. The probability suspected by the A.O. that the appellant has parked unaccounted income of the family businesses in the said alleged fixed deposits with the patsanstha and the same were utilized as and when required for unaccounted transactions, is also not supported by any evidence. It is a well-established law that no addition can be made on the basis of surmises, suspicion and conjectures without any supporting evidence. This proposition is supported by various decisions like Dhkeshwari Cotton Mills Ltd. vs. CIT 26 ITR 775 (SC), Omcar Salay Mohamed Sait vs. CIT 37 ITR 151 (SC) and Lalchand Bhagat Ambika Ram vs. CIT 37 ITR 288 (SC). 7.4 The A.O. has also not brought on record any evidence that the said amount was found with the appellant in the form of unexplained investment or asset. The A.O. was specifically asked vide this Office letter dated 30/09/2008 as under: "2. It has been mainly contended by the appellant that the addition in respect of the deposits has already been made U/S.158BC of the Act in the case of M/s.Chintamani Nagari Patsanstha Maryadit, Dhule. The addition was deleted by the C.I.T.(Appeals) and the Department has filed appeal before the Ho....
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....its either directly or through any other entity. In pursuance of the order of the Ld.CIT(A) the AO made addition of Rs. 23,50,000/- during A.Y. 2000-01 and Rs. 45,30,000/- during A.Y. 2001-02. 5.1 The Ld. Counsel for the assessee submitted that during the course of search no document whatsoever was found to show that the assessee has made the fixed deposits. Therefore, under the facts and circumstances of the case, the AO could have taken recourse to the provisions of section 158BD and not the provisions of section 147. Referring to pages 71 to 84 of the paper book he submitted that the AO has passed the order u/s.158BC(c) of the I.T. Act on 29-09-2004 in case of the assessee. Referring to page 84 of the paper book he submitted that the AO has completed the assessment determining the total undisclosed income at Rs. 3,25,270/-. Referring to pages 82 of 90 of the paper book he submitted that the Ld.CIT(A) has confirmed the addition made by the AO in the hands of the assessee. Referring to page 25 of the paper book the Ld. Counsel for the assessee submitted that the AO has passed the order u/s.158BC(c) in case of Chintamani Nagari Pat Pedi Maryadit, Dhule on 26-10-2004. Referring to ....
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....xistent persons or in names of persons whose identity is not known, could not have been done without the knowledge or express instructions of Shri Radheshyam B. Agrawal. Thus, the income now brought to tax in the hands of Pat Pedhi appears actually to belong to Shri Radheshyam B. Agrawal, Chairman of the Pat Pedhi in his individual capacity. However, as the search was restricted to the office premises of the Pat Pedhi and as the unexplained cash credits representing deposits in benami names or names of non existent persons are found to be credited in the books of the Pat Pedhi and other disallowables are emanating from the books of the Pat Pedhi, the income is taxed in the hands of the Pat Pedhi itself. If, however, at a later date during course of any proceedings under the I.T. Act either by way of appeal, reference or revision or by court in any proceedings under any other law if such authority is satisfied that the income now taxed in the hands of the Path Pedhi is taxable in the hands of any person other than the Pat Pedhi and if such authority gives a finding to tax said income in hands of such other person other than the Pat Pedhi and if such authority gives a finding to tax ....
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....he hands of Mr. Radhe Shyam B. Agrawal. However, the CIT(A) has not given any such specific direction, therefore, giving such general directions u/s.153 does not come to the rescue of the Department. 5.4 In his second plank of argument, the Ld. Counsel for the assessee submitted that the AO should have issued notice u/s.158BD in the instant case if he wanted to tax the same in the hands of the assessee and issuing notice u/s.147 is not the proper recourse. Referring to provisions of section 158BD he submitted the said provisions speak about the undisclosed income of any other person other than the person with respect to whom search was made u/s.132 or books of account or other documents or any assets requisitioned u/s.132A. Therefore, under the facts and circumstances of the case, the assessment should have been completed either u/s.158BD or 158BC but definitely not u/s.147. He submitted that the AO is same in case of the Pat Sanstha as well as the assessee and Mr.Anil Agarwal. Therefore, when he has made protective assessment in the case of Anil Agarwal he could have very well made protective assessment in the case of the assessee also. However, since the AO has missed the bus by....
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....given a direction to tax the unaccounted deposits in the hands of the concerned persons and the revenue has challenged such order of the CIT(A) before the ITAT. Therefore, before finality of the order it was not possible on the part of the AO to issue notice u/s.147. Referring to the decision of the Hon'ble Bombay High court in the case of DHFL Venture Capital Fund Vs. ITO and others reported in 358 ITR 471 he submitted that the Hon'ble High Court in the said decision has held that recourse to section 148 of the I.T. Act cannot be founded in law on a hypothesis of what would be the position in future should an appeal before the appellate authority, being the Tribunal or the High Court, result in a particular outcome. The statute does not contemplate the reopening of an assessment under section 148 on such a hypothesis or a contingency which may emerge in the future. He accordingly submitted that the order of the CIT(A) should be upheld and the grounds raised by the revenue should be dismissed. 6. The Ld. Departmental Representative on the other hand strongly supported the order of the AO. He submitted that search was carried out u/s.132 of the I.T. Act in the case of the Pat Sanst....
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....revenue be dismissed. 8. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find in the instant case action u/s.132 of the I.T. Act was carried out in the case of M/s. Chintamani Nagari Pat Sanstha Maryadit, Dhule as well as that of the assessee on 17-09-2002. During the course of said search certain fixed deposits amounting to Rs. 68,80,000/- could not be explained properly, therefore, the AO in the assessment order of the Pat Sanstha passed u/s.158BC(c) dated 26-10-2004 made addition of Rs. 23,50,000/- for A.Y. 2000-01 and Rs. 45,30,000/- for A.Y. 2001-02 as unaccounted investment. On appeal filed by the said Pat Sanstha, the CIT(A) in his order dated 29-12-2006 deleted the addition from the hands of the Patsanstha and directed the AO to tax the unexplained fixed deposits in the hands of the actual investors. However, he has not directed to tax the said unexplained deposits appearing in the books of the Pat Sanstha in the hands of the present assessee. We find on the basis of such direction th....
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....ns, we find the Ld.CIT(A) has not given any specific direction to tax the same in the hands of the assessee Mr. Radhe Shyam B. Agrawal. It is also an admitted fact that the Patsanstha as well as the revenue have challenged the order of the CIT(A) before the Tribunal and the Tribunal vide order dated 31-12- 2012 has allowed the appeal of the assessee and dismissed the appeal of the revenue. We therefore find merit in the argument of the Ld. Counsel for the assessee that the AO could not have issued notice u/s.147 of the I.T. Act before the order attained finality. 8.3 The Hon'ble Bombay High court in the case of DHFL Venture Capital Fund (Supra) has held that recourse to section 148 of the I.T. Act, 1961 cannot be founded in law on a hypothesis or what would be the position in future should an appeal before the appellate authority being the Tribunal or the High Court result in a particular outcome. The statute does not contemplate the reopening of an assessment u/s.148 on such a hypothesis or a contingency which may emerge in the future. The Hon'ble High Court at placitum 15 of the order has observed as under : "The jurisdictional requirement for reopening an assessment order unde....
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....block period there is a conflict between the provisions which becomes apparent on a plain reading. In the circumstances, as per the established rules of interpretation, unless and until a plain reading of the two streams of assessment procedure does not result in the procedures being independently workable, only then the question of resolving the conflict would arise. But to the contrary, in the present case, in the light of the provisions of section 158BH of the Act, once there is a conflict between the two streams of procedure, as laid down by the apex court, the provisions of Chapter XIV-B of the Act shall prevail and have primacy. Thus, viewed from any angle, the stand of the Revenue does not merit acceptance. Once assessment has been framed under section 158BA of the Act in relation to undisclosed income for the block period as a result of search there is no question of the Assessing Officer issuing notice under section 148 of the Act for reopening such assessment as the said concept is abhorrent to the special scheme of assessment of undisclosed income for block period. At the cost of repetition it is required to be stated and emphasised that the first proviso under section 1....
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....ch of the Tribunal in the case of Snowcem vs. CIT, Central Circle-3, Mumbai reported in 12 SOT 333 and the decision of the Hon'ble Gujarat High Court in the case of Cargo Clearing Agency (Gujarat) vs. Jt.CIT reported in 218 CTR 541. Various other decisions were also brought to the notice of the CIT(A) to the proposition that once assessment has been made u/s.158BA in relation to undisclosed income of the block period as a result of search, the A.O. cannot issue notice u/s.148 for re-opening of such assessment. The assessee further claimed that the A.O. has assessed the assessee u/s.158BC vide order dated 29/09/2004 and the alleged unexplained fixed deposits were assessed by the A.O. in the hands of M/s.Chintamani Nagari Sahakari Patsanstha Maryadit and were not added in the case of the assessee. 10. Based on the arguments advanced by the assessee the Ld.CIT(A) held that income which was assessable u/s.158BC r.w.s. 158BD as per the special provisions of Chapter XIVB cannot be assessed under the general provisions of the Act u/s.143(3) r.w.s. 147 of Chapter XIV. He accordingly held that the assessment order is bad in law. The relevant observations of the CIT(A) reads as under : ....