TaxTMI 
TaxTMI 
2019 (8) TMI 1071
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....ge ('DSE'), carrying on business in the name and style of M/s. Jain and Company. He is also stated to be an empanelled broker of financial institutions and funds like Unit Trust of India ('UTI'), Indian Bank Mutual Fund, Can Bank Mutual Fund, etc. 4. For the AY in question, the Assessee filed a return declaring his income as Rs. 3,96,960/-. The return was picked up for scrutiny. The Assessing Officer ('AO') noticed that the Assessee had disclosed a bank account with Corporation Bank at Bombay in the Balance Sheet for the year ending on 31st March, 1993. This was, however, not disclosed in the Balance Sheet for the earlier year and the year ending on 31st March, 1992. In his statement on 13th February 1995, the Assessee claimed that this bank account had been inadvertently left out. 5. The AO further noticed that the balance in the said bank account as per the books of accounts of the Assessee was nil, whereas the bank statement showed it to be Rs. 32,105/-. It was also noticed that as on 4th March, 1992, in the said account, there was a credit balance of Rs. 1,03,31,250/-. Against this account, 24 cheques in different names had been issued between 11th and 17th March, 1992. The e....
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....stance of the Assessee i.e. M/s Jain & Company. It was concluded that this amount had been obtained by the Assessee from SCB by utilizing his own funds. 9. The AO found that there were in all 15 drafts/pay orders ('PO') issued by Mr. Jaideep Pathak on behalf of SCB totalling to Rs. 5,68,75,958/-. Out of these 15 POs, 13 were received by the Assessee, aggregating to Rs. 5,17,45,958/-. The first of such POs of Rs. 1,02,95,000/- was utilised for the purchase of 7,25,000 units from SBH. Remaining 12 POs were utilised for the purchase of shares of different companies by the Assessee on his own account which were later sold to Mr. Chaturvedi. Since the first PO of Rs. 1,02,95,000/- was held to have emanated from the funds of Assessee, the AO held that for the remaining 12 POs, the same belonged to the Assessee on the parity of reasoning given with respect to the first PO of Rs. 1,02,95,000/-. The AO noticed that the remaining 12 POs were not deposited in the Assessee's bank account with the Corporation Bank but were paid directly for the purchase of securities to the vendors. 10. The Assessee volunteered that this purchase was also done on behalf of Mr. Chaturvedi and that the diff....
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.... was an inadvertent omission, no addition could be made. 15. The ITAT further held that the loss of Rs. 24,29,739/- was rightly characterised as loss in speculation. The only question was how much of the loss had been suffered by the Assessee and how much by the Assessee's clients. Despite ample opportunities the Assessee failed to furnish the particulars. Thus the Assessing Officer (AO) was compelled to resort to an estimate. The AO attributed 50% loss to the Assessee which was reduced by the CIT (A) to 25%. Consequently, the ITAT saw no reason to interfere. 16. Thus, the Revenue's appeal was dismissed and the appeal filed by the Assessee was partly allowed by the ITAT. The addition of Rs. 1,34,450/- on account of failure to enter transactions into Chopris and Rs. 3,43,450/- by way of disallowance under Section 40A (3) of the Act were deleted. 17. As already noticed hereinabove the present appeal has been admitted confined to only one question regarding deletion by the ITAT of the addition made by the AO of Rs. 5,17,45,958/- to the income of the Assessee under Section 69A of the Act. 18. Mr. Ajit Sharma, learned counsel appearing for the Revenue submitted that the ITAT failed ....
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....ions and on his behalf. He denied that the Assessee was connected with the clients of Mr. Chaturvedi to whom the 24 cheques were issued. Even in the course of cross-examination by the AO, Mr. Chaturvedi confirmed these transactions. 22. Mr. Vohra referred to the statement of Mr. Jaideep Pathak recorded by the AO on 24th March, 1995. In reply to questions 3,4 & 5 Mr. Pathak stated that he had received instructions from Mr. Hiten P. Dalal, who was a stock and share broker from Kanpur, for issuing pay orders totalling Rs. 5,68,74,958/-. He referred to the charge-sheet filed by the CBI on 20th June, 1992 where it was alleged that the pay orders of SCB were issued by Mr. Pathak from the funds of Mr. Hiten P. Dalal which were then given to Mr. Chaturvedi as part of criminal conspiracy to derive pecuniary benefit. He pointed out that in the assessment order dated 31st July, 1995 of Mr. Pathak for AY 1992-1993 Rs. 5,68,75,958/- was added to his income and this included a sum of Rs. 5,17,45,958/- added by the AO in the hands of the Assessee. He pointed out that Mr. Pathak had also written a letter on 6th February, 1992 to SBH stating that he had not received any instructions from the Asses....
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.... explained that the word 'income' in Section 69A had a wide meaning. 27.1 In CIT v. K. Chinnathamban (supra) relied upon by learned counsel for the Revenue, the Respondent/Assessee was connected with the firm by name of V.V. Enterprises. On search of its premises by the police officers Rs. 1.18 crores of cash was seized. The firm was managed by one K. Palaniasamy who had filed its returns and gave statements in the course of the assessment proceedings. 27.2 Mr. K. Palaniasamy was not in a position to explain the source of deposit of Rs. 1.18 crores. The AO therefore treated the said amount as undisclosed income of the persons in whose names the deposit appeared. As far as the Respondent/Assessee was concerned, Rs. 5.16 lakhs was determined to be his income on the basis that Rs. 16,148/- as his salary and Rs. 5 lacs as undisclosed income. It was found by the AO that although M/s V.V. Enterprises was stated to be a registered firm but there were in fact no bank accounts in the name of such firm. Also there were no accounts in the name of any of the partners alleged therein. There were no deposits either in the name of the firm or of any of the partners. 27.3 In view of the stateme....
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.... majority of the opinion of the Settlement Commission the Supreme Court explained that once there was prima facie evidence against the Assessee, the burden shifted to the Assessee to rebut the inference that the unexplained money constituted income in the Assessee's hands. The legal position was explained in para 4 as under: "4. It is no doubt true that in all cases in which a receipt is sought to be taxed as income, the burden lies on the Department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within exemption provided by the Act lies upon the assessee. (See: Parimisetti Seetharamamma (supra) at P. 536). But, in view of Section 68 of the Act, where any sum is found credited in the books of the assessee for any previous year the same may be charged to income tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. In such case there is, prima facie, evidence against the assessee, viz., the receipt of money, and if he fails to rebut, ....
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....e fraud perpetrated in 1992 by certain brokers in collusion with certain ex-employees of the SCB to siphon out funds from the bank. It was also informed that SCB had filed an FIR with CBI in which Mr. Jaideep Pathak, an ex-employee was named as one of the accused and all the above referred 13 POs were part of total 15 POs fraudulently issued by Sh. Pathak. 31. It must be noticed here that even during the course of the assessment proceedings the AO required the Assessee to show cause as to why the said sum of Rs. 1,02,95,000/- should not be added to his total income under Section 69A of the Act. The Assessee filed a petition before the CIT under Section 144A of the Act challenging the above proposal. This application was disposed of by the Additional CIT by an order dated 22/25th September, 1995. 32. The direction sought by the Assessee from the Additional CIT was that the AO should put to the Assessee, the material gathered by him on the basis of which the addition was proposed to be made. In the said order dated 22/25th September, 1995 the Additional CIT noted the fact that the AO of Mr. Jaideep Pathak had held that there was an apparent case of financial quid pro quo against Mr....
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....the remaining 12 POs should also be added to the income of the Assessee. 36. Thus it is seen that the very basis for making the additions is the inference drawn by the AO that the Assessee had received the above POs and spent the monies for purchase of shares and units as a result of some 'financial quid pro quo'. 37. This Court has again examined the evidence in some detail. There are certain facts that stand out which showed that the aforementioned amounts received by the Assessee as POs did not belong to him. The Assessee was only a conduit through whom the amounts were floated. One of the essential conditions in Section 69A of the Act is that the Assessee should be the "owner of the money" and it should not be recorded in his books of accounts. This was a pre-condition to the next step of the Assessee offering no explanation about the nature and source of the acquisition of such money. 38. In the present case the evidence placed before the AO clearly indicated that Mr. Chaturvedi confirmed that the draft of Rs. 1,02,95,000/- was given by him to the Assessee and that the transactions of purchase of units were done by the Assessee on his behalf. Books of accounts maintained by....
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.... had utilised his unaccounted money to obtain the white money by way of a draft from the bank. If that is so, there was no need for him to attempt to conceal his bank account in the corporation bank, Bombay as is claimed by the department. Secondly, the draft would have been utilised by the assessee for his own benefit and it has not been shown by the A.O. whether it was so. On the contrary, the amount of Rs. 1,02,95,000/- has been utilised for issuing 24 drafts in favour of certain parties on the instruction of Mr. DDC which fact is confirmed by DDC. Thus, the subsequent conduct of the assessee does not support the case of the department that the money was given by the assessee to Mr. Jaideep Pathak to obtain the drafts and is rather disproved by the facts stated above including the chargesheet filed by the CBI where the facts and modus operandi adopted have been discussed in details. 37. The theory of the A.O. is also not sustainable on another consideration. If the money belonged to the assessee and the purpose was to launder the same as is made out, then it has to be explained as to why Mr. DDC is supporting the contention of the assessee that the money was supplied by him whi....