TaxTMI 
TaxTMI 
2019 (4) TMI 956
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....ls disclosed over pricing of bags/sacks of cement sold to the Dalmia Group. The statement regarding loan credits inter alia, is as follows: "No, the loan credits are genuine. However, it is not feasible to me to prove it. The raw materials I sold to various parties to" meet the unexplained expenditure of my business. This amount has not been entered into my books of accounts. These total transactions come to Rs. 16.5 Cr. I am voluntarily offering this amount in my group and in my personal hands. I *will pay the taxes thereon. The detailed break up of Rs. 16.50 Cr will be submitted in due course. (Reply to query 16)" In reply to the query regarding the loan credits which emerged from the books of accounts seized, the statement on oath stated as follows: ... "I have not maintained this type of account books for unaccounted transactions for previous years. I have maintained only for this year. " 3. The first respondent submitted an entity-wise and year wise bifurcation of the surrendered amount aggregating Rs. 21.5 crores on 08.05.2012. Subsequently, an order centralising the assessment made in the case after search was issued under section 127(2) transferring ....
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....der Section 245D(2C). As a consequence, Revenue sought permission from the commission to conduct an enquiry under Section 245D(3) regarding the genuineness of the loan transaction, share capital and share premium. A Report prepared by the Revenue under Rule 9 of the Settlement Commission (Procedure) Rules, 1997, was sought - which was given on 25.04.2014. It was again urged that the disclosure of Rs. 2.65 crores was far too low compared to the voluntary statement and disclosure made during the search to the tune of more than Rs. 2.65 crores. Permission sought was for conduct of inquiry by the AO. However, this was declined and the Settlement Commission asked the parties to remain present before the Joint Director, Income Tax, of the Settlement Commission for verification and enquiry. 7. The JDIT filed a report on 12.09.2014, stating that the claims made by the assessee in the course of the proceedings could not remain unverified. The material part of the report dated 12.09.2014 is retracted below: "5. The DCIT produced the seized register A/OPJ/03 on 26.08.2014. He also produced the original surrender latter dated 08.05.2012. The seized register was perused. The account....
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....t of that amount Rs. 4.92 Crores was invested in the share capital. Rest of the amount was used in the business. As on the date of search the cash available (as per Annexure A2 of Rule 9 report} was Rs. 13.94 Crores. But there was no recovery of cash, nor was any asset found. This happened as the cash was used to repay the outstanding loan accounts. The A.O stated that the stand of the applicant taken now is an afterthought and should not be accepted. He relied on the offer made by the applicant in 132(4) statement and on the letter submitted by the applicant on 08.05.2012. 9. As regards the study of each and every entry, the Annexure A2 of the Rule 9 report was perused and compared with the seized register A/OPJ/03. The A.O stated that the same has been made from the seized register and the CIT relies on the same. The Rule 9 report has been made after considering all the entries in the seized register." 8. After hearing the parties, on 26.11.2014, the Settlement commission passed the impugned order accepting the offer made by the assessee and granting immunity from penalty and prosecution and other sanctions. 9. The Revenue contends that the impugned order is unsust....
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....y showed that unexplained expenditure had to be incurred and consequently that the veracity of the expenditure could not be proved, as was not feasible at that point of time. 12. Learned counsel also highlighted that the Revenue never attempted to verify whether the various entries in the Register, aggregated to Rs. 16.5 crores and each of them related to loans, sale proceeds or other transactions. No attempt was even made to ascertain from the assessee how much of that amount related to which year. It is also urged that the statement could not be relied upon because at the tenure of the question to be clearly showed that undue mental pressure was exerted upon Jakhotia. Learned counsel relied upon Commissioner of Income Tax v Sunil Aggarwal, (2015) 379 ITR 367 (Del), which held that the retracted statement had to be corroborated by some material if the revenue were to rely upon it. It was stated that similar view was expressed by the Gujarat High Court in Kailashben Manhar Lala Choksi v Commissioner of Income Tax, (2008) 174 Taxman 466 (Gujarat), and M. Narayanan and Brothers v Additional Commissioner of Income Tax, (2011) 13 Taxmann.com 49 (Mad). 13. The income declared by t....
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....icant:- (a) CIT v. Indeo Airways Pvt. Ltd. (2012) 349 ITR 85 (Delhi) (b) T. S. Kumaraswamy v. ACIT (1998) 65 ITO 188 (Mad) (c) CIT v. S.M.S. Investment Corporation (1988) 173 ITR 393 (Raj (d) Surendra M. Khandhar v. ACIT (2010) 321 ITR 254 (Born) (e) Fifth Avenue v. CIT(2009) 319 ITR 127 (Karn) - (This judgment of the Karnataka High Court was upheld by the Hon'ble Supreme Court of India in the case of Fifty Avenue v. CIT(2009) 319 ITR 132 (SC). (f) CIT v. D.R. Bansal &Ors (20 1 0) 327 ITR 44 (CHG) (g) CIT v. P.R. Metrani (HUF) (200 1) 251 ITR 244(Karn) As regards investment of Rs. 4.92 crores in the share capital and share premium of M/s Jakhotia Plastics Pvt. Ltd, the same was made out of cash loan of Rs. 13.89 crores. This aspect was examined by the JCIT as mentioned inpara-8 of his report. It has further been stated that as on the date of search, the actual cash available was Rs. 13.94 crores. This cash balance of Rs. 13.94 crores was confirmed by the Assessing Officer who was present at the time of verification/enquiry. The Assessing Officer has further confirmed that the CIT was in agreement t....
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....s paid interest on these loans. This fact of interest payment is reflected at pages 208 and 21 0 to 214 of the seized diary. However it is to be noted that the applicants have not provided names or addresses of the creditors, in-spite of ample opportunities provided to them. Further, they have not been able to fully explain the repayment of loans. In such circumstances we are left with no alternative but to settle the matter on the basis of the net assets of the applicant. The statement of affairs of the applicant as on 13.01.2012 is as under:- STATEMENT OF AFFAIRS AS AT 13.01.2012 Liabilities Amount Amount Assets Amount Amount Capital Account 1713982 Fixed Assets 29052145 Profit 17002461 Land 17040000 Estimated @ 15% on Turnover of Rs. 1133449737/- New Building 8987145 Constructions new property 3025000 Add: Other Income offered 27900.00 Investment Investment in share capital 49200000 49200000 Advertisement recoveries 11250.00 Current Assets, loan and advances (circul....
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....rent assets of Rs. 7.75 Crores are ignored (as no such assets could shown by the applicant, nor any cash was recovered during the search) and if the creditors/loans of Rs. 13.868 Crores are also ignored, for the reasons stated above then the net assets of the applicants is Rs. 7.82 crores only. The applicants have declared income as under:- (i) Mr. Om Prakash Jakhotia 1.93 crore (ii) Jakhotia Polymers Pvt. Ltd. 0.34 crore (available funds as per Settlement application) Total 2.27 crore Taking the total disclosure of Rs. 2.27 crores the difference in the net asset and the income declared is of Rs. 5.55 crores. The applicant accepted the difference as their undisclosed income computed in the above manner and in the spirit of settlement agreed to offer additional income of Rs. 5.55 crores. A letter was filed on 10.11.2014 offering additional income of Rs. 5.55 crores, which is placed on record. 9. As discussed in the foregoing paras, we have considered the submissions of the applicant and the Department. All the issues were discussed one by one during the course of hearing. After carefully considering the submissions of the department and the app....
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.... creditor/subscriber; (2) the genuineness of the transaction, namely, whether it has been transmitted through banking or other indisputable channels; (3) the creditworthiness or financial strength of the creditor/subscriber. (4) If relevant details of the address or PAN identity of the creditor/subscriber are furnished to the Department along with copies of the Shareholders Register, Share Application Forms, Share Transfer Register etc. it would constitute acceptable proof or acceptable Explanation by the assessed. (5) The Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices; (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessed nor should the AO take such repudiation at face value and construe it, without more, against the assessed. (7) The Assessing Officer is duty-bound to investigate the creditworthiness of the creditor/subscriber the genuineness of the transaction and the veracity of the repudiation." 18. Long ago, in A. Govindarajulu Mudaliar v CIT, Hyderabad (1958) 34 ITR 807, an argument similar to what was....
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....portant. 20. In the light of the above discussion, the ITSC should have not lightly brushed aside the Revenue's concerns about the genuineness of the retraction given the inability of the assessees to support by any reasonable material that such credit entries were plausible, even genuine. 21. The second and equally important reason for this Court to hold that the ITSC gravely erred in its approach is an utter disregard to the condition that the assessee always has the duty to come clean and make full disclosure. 22. In Ajmera Housing Corporation and another v Commissioner of Income Tax (2010) 326 ITR 642, the Supreme Court had emphasized the mandatory nature of the duty to fully disclose all income, which the assessee claims it is liable to report, failing which the settlement application cannot be maintained. It was observed that: "21. Proceedings under the said Chapter commence on the filing of an application by an assessee under Section 245C (1) of the Act, which reads as follows:- "245-C. Application for settlement of cases.--(1) An assessee may, at any stage of a case relating to him, make an application in such form and in such manner as may be pre....
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....terial contained in the said report and having regard to the facts and circumstances of the case and/or complexity of the investigation involved therein may by an order, allow the application to be proceeded with or reject the application. After an order under Section 245D (1) is made, by the Settlement Commission, Rule 8 of the 1987 Rules mandates that a copy of the annexure to the application, together with a copy of each of the statements and other documents accompanying such annexure shall be forwarded to the Commissioner and further report shall be called from the Commissioner. The Settlement Commission can also direct the Commissioner to make further enquiry and investigations in the matter and furnish his report. Thereafter, after examining the record, Commissioner's report and such further evidence that may be laid before it or obtained by it, the Settlement Commission is required to pass an order as it thinks fit on the matter covered by the application and in every matter relating to the case not covered by the application and referred to in the report of the Commissioner under sub-section (1) or sub-section (3) of the said Section. It bears repetition that as per the....
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....which prohibits the withdrawal of an application once made under subsection (1) of the said Section is instructive in as much as it manifests that an assessee cannot be permitted to resile from his stand at any stage during the proceedings. Therefore, by revising the application, the applicant would be achieving something indirectly what he cannot otherwise achieve directly and in the process rendering the provision of sub-section (3) of 245C of the Act otiose and meaningless. In our opinion, the scheme of said Chapter is clear and admits no ambiguity. 27. It is trite law that a taxing statute is to be construed strictly. In a taxing Act one has to look merely at what is said in the relevant provision. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. There is no room for any intendment. There is no equity about a tax. (See: Cape Brandy Syndicate Vs. Inland Revenue Commissioners7 and Federation of A.P. Chambers of Commerce & Industry &Ors. Vs. State of A.P. & Ors.8). In interpreting a taxing statute, the Court must look squarely at the words of the statute and interpret them. Considerations of hardship, injustice and equity are entire....