2018 (4) TMI 1473

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....ng out of Special Leave Petition (C) Nos. 24963 OF 2013 CIVIL APPEAL No. 4356 OF 2018 (Arising out of Special Leave Petition (C) No. 20754 OF 2017 AND CIVIL APPEAL Nos. 4357 OF 2018 (Arising out of Special Leave Petition (C) Nos. 24250 OF 2017 R. K. Agrawal And Navin Sinha, JJ. JUDGMENT R.K. Agrawal, J. 1) Leave granted. 2) The present appeal has been filed against the impugned judgment and order dated 29.10.2012 passed by the High Court of Judicature at Madras in Tax Case (Appeal) No. 368 of 2005 wherein the Division Bench of the High Court allowed the appeal filed by the respondent by absolving the additional tax liability imposed by the Assessing Officer, vide order dated 25.01.1996. 3) Brief facts:- (a) The Respondent - an individual and the proprietor of M/s Chandrakala and Company, is a stock broker registered with the Madras Stock Exchange. He is stated to be an approved broker of the Indian Bank. The assessment years under consideration herein are 1991-92, 1992-93 and 1993-94 respectively. During all these relevant assessment years the Respondent acted as a broker to the Indian Bank in purchase of the securities from different financial institutions. (b) It is the....

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....he additional amount earned out of the securities transactions and it is a case of application of income after accrual and, hence, the said amount is liable to be assessed as the income of the Respondent. (e) The Respondent, being dissatisfied with the order, preferred an Appeal before the Commissioner for Income Tax (Appeals). Learned Commissioner of Income Tax (Appeals), vide order dated 08.08.1996, set aside the demand for additional tax while deciding the issue in favour of the Respondent and held that the alleged additional interest payable to the PSUs could not be considered as the income of the Respondent. (f) Being aggrieved by the order dated 08.08.1996, the Revenue filed an appeal bearing No. ITA No.2297(Mds)/1996 before the Income Tax Appellate Tribunal (hereinafter referred to as 'the Tribunal'). The Tribunal, vide order dated 05.01.2005, allowed the appeal filed by the Revenue and held that the amount received at the hands of the Respondent which is alleged to be payable to the PSUs is the income of the Respondent and there is no overriding title exists in favour of the PSUs so as to cause diversion of income. (g) It is pertinent to note that in the meanwhile cri....

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....nd circumstances of the present case and requires to be set aside by this Court. 7) Per contra, learned senior counsel appearing for the Respondent submitted that the role of the Respondent was only that of a conduit for taking demand drafts in respect of additional interests payable to the PSUs and the demand draft taken on behalf of the Indian Bank did not form part of the total income of the Respondent and there exists an overriding title in favour of the PSUs with reference to the amount in question i.e., the additional interest payable to the PSUs. 8) Learned senior counsel further submitted that though the assessment proceedings are different in nature from that of criminal proceedings but the same could not be a ground to throw out the legitimate conclusion arrived at by the trial court on the basis of proved evidence. Learned senior counsel finally submitted that the High Court was right in taking note of the developments in the criminal case in coming to the conclusion that the respondent was acting as a broker or agent to the Indian Bank and the order of the High Court was well within the parameters of law and requires no interference. 9) We have heard learned counsel ....

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....of the criminal Court. We do not find any force in the contention of the appellant herein as the High Court has not held that the findings of the criminal court are binding on the Revenue authorities. Rather the High Court was of the view that the findings arrived at by the criminal court can be taken into consideration while deciding the question as to the relationship between the parties to the case. When the findings are arrived by a criminal court on the evidence and the material placed on record then in absence of anything shown to the contrary, there seems to be no reason as to why these duly proved evidence should not be relied upon by the Court. The High Court has specifically appraised the findings given by the CBI Court in this regard. The relationship between the Indian Bank and the Respondent is very much clear by the evidence led during the criminal proceedings. The Executive Director of the Bank has specifically spoken about the role of the Respondent as a broker specifically engaged by the Bank for the purchase of securities and that the Bank has included the interest money too in the consideration paid, for the purpose of taking demand drafts in favour of PSUs. Furt....