TaxTMI 
TaxTMI 
2021 (8) TMI 70
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....e of Rs. 34,59,38,260 on 30.9.2009. According to the assessee, no notice for scrutiny assessment was received within the time permitted under proviso to section 143(2) of the Act and therefore the return filed on 30.9.2009 had attained finality on 7.1.2015. 4. There was a search conducted u/s 132 of the Act in the assessee's Farm House at Tarunhunse Village, Jala Hobli, Next to Stone Hill International School, Bangalore 562-157 on 07-01-2015. Consequent to search a notice u/s 153A was issued on 17-11-2015 to the assessee requiring him to file The Return of Income within 30 days from the Date of receipt of notice. In response to the notice issued u/s 153A, the assessee filed return on 28.12.2015 disclosing same income as originally returned. No incriminating material was found during the course of search. According to learned AR there is no requirement to interfere with the original assessment which had attained finality. Notice u/s. 142(1) and 143(2) was issued from time to time calling for certain particulars. During the assessment proceedings, assessee was asked to produce evidence for the status mentioned as 'Non-resident' in the return of income vide notice dated 20.12.20....
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....sy Group International to operate the Duetsche Bank Account in Singapore. (ii) Minutes of the meeting of the Board of Directors of Romulus Assets Limited dated 10.2.2009, resolving to apply for Life Insurance Policy for US $ 1,00,00,000 on the life of the appellant and the premium was US $ 20,85,000. (iii) Minutes of the meeting of the Directors of Romulus Assets Limited dated 18.2.2009, demanding US $ 1,113,736.36 from Dynasty Business Parks Sdn. Bhd., being the amount advanced together with interest. (iv) In reply, the appellant submitted that he was not the beneficial owner of Romulus Assets Limited and that, they had been confirmed, by a document signed by the Company Managing Romulus Assets Limited, to the AO directly. AO did not receive this document. He rejected the above submission of the appellant. (v) The appellant further submitted that none of the above, mention in Para 13, indicate that the appellant had received any amount from Romulus Assets Limited. (vi) He reiterated that he was not the beneficial owner and, he did not receive any benefit either directly or indirectly from Romulus Assets Limited. (vii) Minutes o....
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.... addition in AY 2015-16 at Rs. 98,61,071 towards farm house maintenance expense incurred by M/s Embassy Property Development Limited and M/s Embassy Services Private Limited as assesse derived benefit as a Director of these companies. For the AY 2015-16, the Assessing Officer made addition on same count at Rs. 2,28,09,281 u/s 28(iv) of the IT Act. 8. In the appeals in ITA Nos.1215 to 1216/Bang/2019, there is no dispute neither relating to resident status of assessee nor framing of assessment u/s. 153A of the Act. 9. For the AYs 2009-10 to 2012-13 the first common ground in these appeals which require adjudication is with regard to framing of assessment u/s. 153A of the Income-tax Act, 1961. 10. In Appeals No.1215 to ITA No.1217/Bang/2019 for AY 2013-14 to AY 2015-16, the assessee challenges only the addition made in the assessments framed u/s. 143(3) of the Act by the AO and sustained by the CIT(Appeals). 11. Now coming to the common ground in ITA Nos.1211 to 1214/Bang/2019 in AYs 2009-10 to 2012-13 with regard to validity of assessment framed u/s. 153A of the Act, the ld. AR submitted as follows. 12. The search u/s 132 of the Act was conducted on 07.01.2015. All the....
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.... in respect of RAL nor the additions in respect of the Housewarming expenses and Guest House Maintenance expenses have been made on the basis of any seized incriminating materials. In this connection it was submitted that in respect of non-pending non-abated assessments, any addition can be made only on the basis of incriminating material in an assessment u/s 153A of the Act relying on the following decisions:- CIT Vs IBC Knowledge Park P. Ltd 385 ITR 346 (Kar) ACIT Vs Cornerstone Properties Pvt Ltd (ITA No. 1714 to l 717/Bang/2013) CIT Vs Kabul Chawla 380 ITR 573( Delhi) 16. The ld. AR further submitted that the decision of the Hon'ble Karnataka High Court in Canara Housing Development Company Vs DCIT 274 CTR 122 (Karn) relied on by the CIT(A) is not directly on the issue. The issue there was whether the Commissioner can revise an order of assessment passed u/s 143(3) of the Act after a search assessment has been made u/s 153A of the Act for the very same assessment year. The Hon'ble High Court held that the original order u/s 143(3) cannot be revised u/s 263 of the Act. The Hon'ble High Court observed that once the assessment is reopened,....
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....a 395 ITR 526. The Hon'ble Delhi High Court held that power u/s 153A of Income Tax Act 1961 enables the assessing authority to reopen the assessment for six year prior to the year of search u/s 132, if during the course of search u/s 132 incriminating material justifying the reopening of assessment for each of six previous years is found. It was held that assessment u/s 153A can be made for a year only if some incriminating material for that particular assessment year is found. The Delhi High Court was dealing with the case of the assessment u/s 153A in the case of a searched person. It was held therein that for the assessment years 2001 to 2003-04 no additions can be made in an assessment made u/s 153A if there are no incriminating material. This proposition has been accepted by the Supreme Court by dismissing the SLP. 19. The AR also relied on the Co-ordinate Bench decision of the Tribunal in Yunus Zia Vs DCIT, Central Circle 1(1) (ITA No. 126 to 130/Bang/2013) wherein it was held that Canara Housing would apply only if some incriminating materials were found during the search. He drew our attention to the specific observations in paragraph 18 of the Tribunal's order ar....
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....the following decisions wherein it was held that if the time limit for issuing notice had expired on the date of search, assessments are not to be treated as pending assessment:- Chintels India Ltd Vs DCIT 397 ITR 416 (Del) DCIT Vs Sarvana Stores 61 ITR(Trib) 20 22. In this connection, it was further submitted that that the decision of the Hon'ble Karnataka High Court in Canara Housing Development Company Vs DCIT 274 CTR 122 as relied on by the CIT(A) is not directly on the issue. The issue there was whether the Commissioner can revise an order of assessment passed u/s 143(3) of the Act after a search assessment has been made u/s 153A of the Act for the very same assessment year. The Hon'ble High Court held that the original order u/s 143(3) cannot be revised u/s 263 of the Act. In paragraph 10 of the order the Hon'ble High Court observed that once the assessment is reopened, the assessing authority can take note of the income disclosed in the earlier return, any disclosed income found during the search or and also any other income which is not disclosed in the earlier return or which is not unearthed during the search. It was submitted that the abo....
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....ircle 1(1) (ITA No. 126 to 130/Bang/2013) wherein it was held that Canara Housing (supra) would apply only if some incriminating material is found during the search. The Tribunal held as follows:- "In our considered opinion, it may be plausible view that if such incriminating material leading to undisclosed income is seized for at least one year out of relevant six years, such addition may be made to any case where there is no such incriminating material leading to undisclosed income is seized even for one year out of relevant six years, no such addition must be made and the additions must be confined to the return income and additions made by the assessing officer in the original assessment proceedings." 25. The ld. AR thus submitted that the additions made for all the years i.e., from AY 2009- 10 to 204-15 are not based on any incriminating material. The additions in respect of RAL is made on the basis of documents received from Foreign Tax Division and the addition in respect of Housewarming expenditure is based on an un-signed dumb document which is a computer print-out not signed by anybody and the AO should bring on record corroborative evidence to prove the same.....
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....t that the return filed by him has become final and no scrutiny proceedings are to be started in respect of that return." 22. The inevitable conclusion, therefore, in the present case, is that the ITAT was in error in holding that the assessment for AY 2008-09 should be treated as 'pending' whereas in terms of the above CBDT circular it should be treated as final in respect of which no scrutiny are to be started." (b) DCIT Vs Sarvana Stores 61 ITR(Trib) 20 wherein the Tribunal held as follows:- "In the case before us, even though no assessment order was passed, the time limit for issuing notice under Section 143(2) of the Act has expired. Hence, the assessment proceeding initiated on the basis of the return filed before the date of search was terminated by operation of law. In other words, once the time limit for issuing notice under Section 143(2) of the Act expired, on the basis of return filed earlier, the assessment proceeding is terminated and it cannot be said that it was pending on the date of search. In this case, the assessment proceeding was terminated by operation of law since the time limit for issuing notice under Section 143(2) expir....
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....submitted that u/s. 153A of the Act, the AO can take note of the income disclosed in the earlier return, any undisclosed income found during the search and also any other income which is not disclosed in the earlier return or which is not unearthed during the search in order to find out what is the "total income" of each year and then pass assessment order. According to the ld. DR, where search took place u/s. 132 in the case of any assessee, the assessment to be framed u/s. 153A of the Act. In the present case, there was a search u/s. 132 of the Act on 7.1.2015 in the group companies of assessee, Embassy Property Development Pvt. Ltd., consequently notice u/s. 153A was issued on 17.11.2015 to the assessee requiring him to file return of income within 30 days from the date of receipt of notice. The assessee filed a return u/s. 153A on 28.12.2015 relating to these assessment years and the assessments were framed u/s. 153A r.w.s. 143(3) of the Act. The assessments were framed for six assessment years and it is immaterial whether there is incriminating material pertaining to those six assessment years or not in view of the binding decision of the Karnataka High Court in Canara Housing....
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....thed during the search. For this purpose. the fetters imposed upon the Assessing Officer by the strict procedure to assume Jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which such section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section I53A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. 34. Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedi....
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....itions of Sections 147, 148 and 151 and determine the total income of the assessee. Such determination in the orders passed under Section 153A it would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the total income. In such a case, to reiterate, there is no question of any abatement of the earlier proceedings for the simple reason that no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders when the search was initiated or the requisition was made. 35. Thus, it is clear that once a search/requisition is made u/s 132 of the IT Act, the Assessing Officer is bound to issue notice u/s 153A to the assessee to furnish the return for each Assessment Years falling within six Assessment Years immediately preceding the Assessment Year relevant to the previous year in which search conducted or requisition was made. Consequently, the Assessing Officer is empowered to assess or reassess the total income of all these six Assessment Years. 36. Before us, now the conte....
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....ed that in the case of pending assessments, the jurisdiction to make original assessment and assessment u/s. 153A merges into one. Only assessment shall be made separately for each assessment year on the basis findings of search and other material existing or brought on record by the AO. 39. In the case of first category, where the assessment is not pending on the date of initiation of search or making requisition, as the case may be, the assessment u/s. 153A would be in the nature of reassessment. Thus, the legislature has carved out the nature of assessment u/s 153A as assessment or reassessment in two different situations. According to the ld. AR, for AYs 2009-10 to 2012-13, wherein already assessment orders were passed u/s. 143(3) or time limit to issue notice u/s 143(2) is lapsed, the assessment u/s. 153A of the Act can be framed only on the basis of seized incriminating material. In these assessment years, initiating proceedings u/s. 153A is valid, however, the AO cannot resort to roving and fishing enquiry to find out whether any income has escaped assessment during the reassessment proceedings when there is no incriminating material found or seized during the course of s....
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....ould stand reopened. In the eye of law there was no order of assessment. It meant that the AO "shall assess or reassess the total income of six assessment years. Once the assessment is reopened, the assessing authority can take note of the income disclosed in the earlier return, any undisclosed income found during search or and also any other income which is not disclosed in the earlier return or which is not unearthed during the search, in order to find out what is the "total income" of each year and then pass the assessment order. 42. It is important to note that Canara Housing (supra) was also a case where some material was unearthed during the search. Further, the High Court was clear that the addition to the income already disclosed would have to be based on some material unearthed during the search. This is clear from the observation in para 9 of the decision to the effect: "The AO is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search." It was further observed that in the facts of that case if the CIT had come across any income that the AO had not taken note of while passing ....
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....sofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under section 153A merges into one. Only one assessment shall be made separately for each assessment year on the basis of the findings of the search and any other material existing or brought on the record of the Assessing Officer. (vii) Completed assessments can be interfered with by the Assessing Officer while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." 44. In the above decisions it was further considered judgement in the case of Filatex India Ltd. v. CIT-IV (49 taxmann.com 465 (Delhi) reference pb 1387 and observed that one of the questions framed was whether the ITAT erred on facts and in law in not holding that re-computation of book profit, de-hors any material found during the course of search, in the order passed under Section 153A of the Act was without jurisdiction, being outside t....
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....d. (supra), paraphrases inter alia, the following line in CIT v. Chetan Das Lachman Das (supra): "This, however, does not mean that the assessment under Section 153A can be arbitrary or made without any relevance or nexus with the seized material". However, the immediately next line in CIT v. Chetan Das Lachman Das (supra)reads: "Obviously an assessment has to be made under this Section only on the basis of seized material....". 47. The decision of the Rajasthan High Court in Jai Steel (India), Jodhpur v. ACIT (2013) 1 ITR-OL 371 (Raj) involved a case where certain books of accounts and other documents that had not been produced in the course of original assessment were found in the course of search. It was held where undisclosed income or undisclosed property has been found as a consequence of the search, the same would also be taken into consideration while computing the total income under Section 153A of the Act. The Court then explained as under:- 22. In the firm opinion of this Court from a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under Sections 132 and ....
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.... assessments that had become final in the event no incriminating material was found during search. The Bombay High Court relied on the earlier decision in CIT v. M/s. Murli Agro Products Ltd. (supra) and discussed the scope and ambit of the proceedings for assessment and reassessment of total income under Section 153A (1) of the Act and the provisos thereto. One of the specific pleas taken by the Assessee was that if no incriminating material was found during the course of search in respect of an issue then no addition in respect of any issue can be made to the assessment under Sections 153A and 153C. It was observed that the assessment or reassessment under Section 153A arises only when a search has been initiated and conducted and, therefore, "such an assessment has a vital link with the initiation and conduct of the search." The Court then reproduced and affirmed the decision of the Special Bench of the ITAT in All Cargo Global Logistics Ltd. v. DCIT [2012] 23 taxmann.com 103 (Mumbai) (SB) and answered the question as regards the scope of the assessment of total income as under:- "53. ....We are of the view that for answering this question, guidance will have to be soug....
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....hin the said period as may be mentioned in the notice, the return of income of each assessment Years falling within six assessment years referring to in clause- (b). Sub-clause-(b) of section 153 A, empowers the AO to assess or reassess, the total income of six Assessment Years immediate to preceding assessment year relevant to the previous year in which search is conducted or requisition is made. The proviso provided to section 153A, however made it clear that assessment or reassessment, if any relating to any assessment year falling within the period of six Assessment Years referring to in this subsection pending on the date of initiation of search u/s 132 or making of the requisition u/s 132A as the case may be shall abate. From the reading of above provision, it is very clear that although the legislature specifically not mentioned about unabated assessment, the legislature consciously provided for abetment of assessment as per which any proceedings is pending in respect of any of six assessment years, then the same shall be abate and the AO shall have power to assess or re- assess the total income of those years. As regards to other years which assessment have already been com....
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....squarely covered against the assessee by the judgment of jurisdictional High Court in the case of Canara Housing Development Co. Ltd. (supra) wherein it was held as under:- "Section 153A starts with a non obstante clause. The fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under sections 147 and 148, have been removed by the non obstante clause with which sub-section (1) of section 153A opens. The time-limit within which the notice under section 148 can be issued, as provided in section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer before issue of notice to reopen the assessment under section 148 has also been excluded in a case covered by section 153A. The time-limit prescribed for completion of an assessment or reassessment by section 153 has also been done away with in a case covered by section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A,....
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....t means the Assessing Officer shall assess or reassess the total income of six assessment years. Once the assessment is reopened, the assessing authority can take note of the income disclosed in the earlier return, any undisclosed income found during search and also any other income which is not disclosed in the earlier return or which is not unearthed during the search, in order to find out what is the 'total income' of each year and then pass the assessment order." 53. Hence we are of the view that this contention of the learned counsel for the assessee cannot be accepted. As rightly contended by the DR, there is no requirement for an assessment made under section 153A of the Act being based on any material seized in the course of search. Further under the second proviso to section 153A pending assessment or re-assessment proceedings in relation to any assessment year falling within the period of six assessment years referred to in section 153A(b) of the Act shall abate. Thus the Assessing Officer gets jurisdiction for six years assessment years referred to in section 153A(b) of the Act for making an assessment or re-assessment. It is not the complaint of the ass....
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....on in the assessment order that the appellant had not furnished clear photocopies of the passport is not borne out of the records. The passport copies in page nos. 247 to 324 of the Paper Book would attest to this fact. 58. According to the AO, the assessee was present in India as per the details below:- Financial Year No. of days 2008-09 174 2009-10 180 2010-11 181 2011-12 179 59. As per assessee, he was in India as per the details given below:- Financial Year No. of days 2008-09 145 2009-10 150 2010-11 160 2011-12 154 60. The ld. AR submitted that in page 231 of the Paper Book these details are furnished. The AO has included the dates of arrival in India also as being present in India. In this connection as held by the Co-ordinate Bench in Manoj Kumar Reddy Vs ITO, (International Taxation), 34 SOT 180, the date of arrival should be excluded while calculating the number of days present in India. It was held that the date of arrival should be excluded. The above decision of the Tribunal has been upheld by the Hon'ble Karnataka High Court in DIT Vs Manoj Kumar Reddy Nare, 12 Taxmann.com 326. The assessee worked....
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....rpose of employment outside India". The facts of the present case are totally different. The assessee herein did not leave India on account of the work of any of the Indian companies in which he is employed. He left India in September 2008 to take up employment with Embassy Group International, Singapore. Hence, it is submitted that the assessee left India only for taking up an employment outside India and clause of the Explanation would squarely apply. For this purpose, reliance was placed on the following decisions for the proposition that the expression "employment outside India" does not mean that an assessee cannot continue to be an employee of some other enti1y in India during that period:- i) Abdul Razak 337 ITR 350 ii) British Gas India Pvt Ltd 287 ITR 462 iii) Zialluall Sheriff Vs ACIT (International Taxation) 316 ITR (AT) 92, 116 TTJ 76 64. It is submitted that the AO has also rejected the appellant's case on the ground that the assessee did not intend to stay permanently outside India and he refers to the fact that the assessee was visiting India very often. It is submitted that the only criteria for deciding the residential status is....
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....arious business activities and visits outside India. Therefore, the benefit of Explanation (b) to section 6(1) has been righty denied. The assessee has been claiming status of non-resident without disclosing the proper facts. The ld. AR furnished details of his stay outside India before this Bench which was produced before the AO however not at all legible. Inspite of repeated requests by the AO, assessee has filed illegible copies of his passport details so as to show his visit particulars to India and abroad. He submitted that the material obtained during the search action which shows that assessee has been carrying on business activities in India by acquiring various properties. By looking at the business activities carried on by the assessee, it cannot be said to be a person who being outside India comes on a visit to India in the previous year in terms of Explanation (b) to section 6(1) of the Act. According to the ld. DR, the assessee's portfolio suggests that he is one amongst the 50 richest persons in India and he is on Board of Directors of so many companies in India and Chairman & MD of Embassy Group. In India he is a leading property developer and being a promoter, he....
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.... Admittedly, the assessee went abroad on 24- 9-1988 only to take up business there. If the business undertaken and carried on by the assessee in the previous year abroad amounts to employment within the meaning of Explanation (a ) to section 6(1)(c) of the Act, then the assessee is entitled to the status of non-resident declared by the CIT (Appeals), which is confirmed by the Tribunal." 69. The contention of the learned DR is that employment necessarily involves employer-employee relationship with terms of employment and only under an employer a person can be employed. Learned counsel appearing for the assessee, on the other hand, contended that employment in the context of Explanation (a) includes self-employment, and taking up and continue business is also employment for the purpose of the above Explanation. 70. During hearing, learned DR has relied on the Memorandum explaining the provisions of the Finance Bill introducing the Explanation, contained in 134 ITR 137 (St.) [Para 35 of the Finance Bill], which reads as follow:'-- "(iii) lt is proposed to provide that where an individual who is a citizen of India leaves India in any year for the purposes o....
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....tivities from India. 74. In view of facts, circumstances, case laws and CBDT circular we reach to following conclusions:- (a) Residential status is always determined for the Previous Year because the assessee has to determine the total income of the Previous Year only. In other words, as the tax is on the income of a particular Previous Year, the enquiry and determination of the residence qualification must confine to the facts obtaining in that Previous Year. (b) If a person is resident in India in a Previous Year in respect of any source of income, he shall be deemed to be resident in India in the Previous Year relevant to the Assessment Year in respect of each of his other sources of Income. (c) Relevant Previous Year means, the Previous Year for which residential status is to be determined (d) It is not necessary that the stay should be for a continuous period. (e) It is not necessary that the stay should be at one place in India. (f) A person may be resident of more than one country for any Previous Year. (g) Citizenship of a country and residential status of that country are two separate concepts. A person may ....
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....is issue, is binding and is to be respectfully followed by us. The AAR judgment have a persuasive value and the decisions in the case of Dr. Virendra Kumar and Canoro Resources also AAR has adopted the ratio of Hon'ble Kerala High Court judgment. Thus, the test of residence will be determined on the basis of number of days of stay in India and not by the interpretation adopted by the lower authorities in this case. It has not been disputed by the revenue that the number of days of the stay of assessee in India are less than 182 days as seen from the chart appearing in para 58 or 59 of this order. In these facts and circumstances the assessee's arguments on this issue deserve to be upheld and the issue need not be set aside to AO for re-examination. 77. In view of the facts, circumstances and case laws cited and referred above on behalf of the assessee we hold that the determinative test for the status of Non Resident being number of days of stay in India and in assessee's case in these four years, the days of stay being less than 182 days; even after considering the days as recorded by the AO in his order; the status to be applied in this case is to be held as Non....
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....he statement recorded on various dates notes that the appellant has been claiming that RAL belongs to his wife. He also notes that the appellant has categorically stated that he does not own RAL. The AO asked the appellant about certain transactions of RAL. The appellant had consistently told the AO that he is not connected with RAL and he is not aware of such transactions and he will not be able to explain these transactions. However, the AO comes to a conclusion that the appellant has been stonewalling and not cooperated with the department in furnishing the information. 82. The ld. AR submitted that there are certain fundamental principles governing the role of evidences, enquiry and investigation by the AO while framing an assessment under the Income tax Act. AO cannot act on suspicion. He has to establish a fact with legal and acceptable evidence. No addition can be made on the basis of surmises and conjectures. In this connection, he relied on the decision of the Hon'ble Supreme Court in State of Kerala Vs M.M. Mathew and Another (1978) 4 SCC 65 wherein it was held that a strong suspicion from very strange coincidences and grave doubts cannot take the place of legal ev....
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....arty to hold that the appellant is the owner of RAL without brining any concrete and tangible material to prove the same. This is not permissible in law. 86. In CIT Vs Subrata Roy 375 ITR 207 it was held that the primary burden to bring to tax the amounts on the ground the transaction is a deemed dividend (when it is not so otherwise) is on revenue. To discharge that burden, the revenue cannot rest content on surmises and assumptions; it should prove them on facts and materials on record. 87. In Baldev Singh & Co Vs CIT 384 ITR 91, at page 101, the Hon'ble court observed that the onus is to prove a fact is on the person alleging such fact. 88. In Sudipta Gosh Vs DCIT 64 ITR(Trib) 294 it was held that the burden of proof lies on the department to prove that a person holds the property as benamidar for the assessee. 89. The Hon'ble Rajasthan High Court in CIT Vs Smt. Sunitha Dhadda 406 ITR 220 held that when the department alleges the receipt of "on-money" the burden of proof is on it to prove the fact with acceptable evidence. 90. The ld. AR briefly rebutting each of the adverse presumptions drawn by the AO, firstly submitted, the AO refers to the proposal for....
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....04. It is submitted that the AO has precisely done what the Tribunal in 76 ITR (Trib) 504 says he should not do. 92. Further, the ld. AR submitted that another evidence relied on by the AO is the limited authority given to the appellant by RAL to operate the bank account (pages no. 600 to 602 of the PB). This is a limited authority given by the company to the appellant to carry out investment matters only with no powers to withdraw funds from the accounts. This is clear from the Board resolution placed at page 600 of the Paper Book. The AO comes to conclusion that the appellant is the owner of RAL because an authority to make investment is given to him. This is a strange conclusion. If the appellant is the owner, he does not need authority to make investments. Secondly, even the limited power is to make investment and not to withdraw funds. This also inconsistent that the appellant being the owner of M/s. RAL. Therefore, the reliance on these documents by the AO to come to a conclusion that the appellant is the owner of RAL is totally mis- placed and these documents do not show anywhere that the appellant is the owner of RAL. 93. The AO referred to a Board resolution of RAL d....
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...., it is prayed that this finding of the AO be quashed as perverse. 95. Further, it was submitted that the Appellant and M/s. RAL are Distinct Persons Even Assuming but Without Admitting that the Appellant is the Beneficial Owner of RAL. Assuming but without admitting that the finding of the AO that the appellant is the beneficial owner/shareholder of RAL, it cannot be said that the business carried on by RAL is the business carried on by the appellant. There is no doubt that RAL is a separate legal entity, and the appellant is also a separate legal person. The Hon'ble Supreme Court in Bacha F. Guzdar Vs CIT 27 ITR 1 has held that the shareholder and the company are two separate legal entities and the business carried on by the company cannot said to be a business carried on by the shareholder. Hence, the finding of the AO that the appellant will be taxed in respect of the activities carried out by M/s. RAL is totally untenable in law. 96. While discussing the applicability of S.28(iv) of the Act the AO has held that the business of RAL is nothing but the conduct of the business of Shri. Jitendra Virwani. This finding is contrary to the decision of the Hon'ble Supre....
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....nothing but the conduct of business of Shri. Jitendra Virwani and this finding has already been assailed in the preceding paragraphs. It is submitted that S.28(iv) of the Act which deals with perquisite received by an assessee to be income from profits and gains of business and profession pre-supposes the carrying on of business by an assessee. A perusal of the statement of total income for various years placed at pages 98 to 130 of the Paper Book would show that the appellant has disclosed income from business. But even a cursory glance at the nature of income disclosed would show that it is remuneration and interest on capital from partnership firms only. There is no independent business carried on by the appellant. It is not the case of AO that the alleged perquisites have been provided by RAL on behalf of these firms for the benefit of the appellant. Therefore, the fundamental requirement for invoking S.28(iv) of the Act is not satisfied as the appellant is not carrying on any business at all to which S.28(iv) would apply. Hence, invoking of S.28(iv) to tax the payments made by RAL to third parties is clearly untenable in law. 99. On the applicability of S.69C of the Act,....
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....69C of the Act. The appellant has not given the date of his marriage to Lina Virwani, nor has he approved that she was all along the owner of RAL and did not become the owner only after becoming married to him and become one by virtue of her getting married to him. The appellant has refused to cooperate in the matter and has desisted from providing the information sought for by the AO for fear of standing exposed in the matter. If he had nothing to hide and if his claims are indeed true, there is no reason why he should not be furnishing the required information. It is not a known and established fact that many rich and influential business men are stashing money abroad in tax havens and after intervention of the Hon'ble Supreme Court in the matter, action has been taken by investigating agencies to bring them to book. The fact that this appellant has been a beneficiary, as brought out by the AO in the assessment order, as early as AY 2009-10 shows that the appellant is also one among those many against the likes of whom the Supreme Court wants action to be taken. The conclusion arrived by the AO is only a natural corollary to his findings and evidence available on record and the i....
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....B as principal and interest outstanding. Annexure of the minutes of the meeting contains a letter dated 18-02-2009 addressed by RAL to DBPSB demanding USD 11,13,736.36. Minutes of the meeting of the Directors of RAL dated 31.08.2009 wherein it was noted that the second instalment of the Manulife Policy taken for Jitendra Mohandas Virwani of USD 16,35,000 is dure for payment and is being paid out for RAL's EFG Bank Account. Minutes of the meeting of RAL dated 19.01.2010 wherein it was noted that USD 10,00,000 is to be paid to Mrs. Barkha Mahatani to her Indian Bank Account, Overseas Branch, Bangalore. The same is reflecting as credit of Rs. 4,58,18,973 ( which is the United States Dollar 10,00,000 converted in Indian Rupees) in the Indian Account of Mrs. Barkha Mahtani on 20.01.2010. Further Assessing Officer observed that out of Rs. 4.58 crores by RAL to Mrs. Barkha Mahatni, she transferred a sum of Rs. 50,00,000 directly to M/s Embassy Property Development Limited and Rs. 4 crores to M/s Pet Properties & Constructions Private Limited which in turn the same amount of Rs. 4 crores to M/s Embassy Properties Development Limited on the same day. Therefore the assessing officer is of....
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....ions. According to assessing officer assesse has to produce his ex-wife Mrs. Lina Virwani for enquiry and examination. The assesse categorically said no to the question of AO to produce his exwife before AO for enquiry or examination as she is not under his control. However assessing officer require the assesse on 02-11-2016, to discharge the primary burden that he is not the beneficial owner of RAL by producing the documentary evidence on or before 08-11-2016. The assesse has asked for 30 days time to do the same. As there was no communication from assesse, the assesse statement was recorded by AO on 14-12-2016 asking for his response. The AO's question and the assesse's response is as follows: Q. ".... In response to the question no 87, you have mentioned that you are willing to discharge your onus and substantiate your claim for which you have sought time of atleast 30 days. More than 40 days have lapsed since that date. Do you have any documentary evidence to substantiate your claim that your wife Mrs. Lina Virwani and not you is the ultimate beneficial owner of M/s Romulus Assets Limited? Answer: As per my information, a document from the company managi....
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....y the AO is the limited authority given to the appellant by RAL to operate the bank account placed at paper book pages no. 600 to 602. This is a limited authority given by the company to the appellant to carry out investment matters only with no powers to withdraw funds from the accounts. This is clear from the Board resolution placed at Paper Book page 600. The AO comes to conclusion that the appellant is the owner of RAL because an authority to make investment is given to him. This is a strange conclusion. If the appellant is the owner, he does not need authority to make investments. Secondly, even the limited power is to make investment and not to withdraw funds. This also inconsistent that the appellant being the owner of M/s. RAL. Therefore, the reliance on these documents by the AO to come to a conclusion that the appellant is the owner of RAL is totally mis- placed and these documents do not show anywhere that the appellant is the owner of RAL. 111. The AO referred to a Board resolution of RAL dated 19.01.2010 wherein it was noted that RAL has hypothecated its assets in favour of EFG bank Singapore Branch in respect of credit facilities extended to the appellant. He also ....
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....separate legal person. The Hon'ble Supreme Court in Bacha F. Guzdar Vs CIT 27 ITR 1 has held that the shareholder and the company are two separate legal entities and the business carried on by the company cannot said to be a business carried on by the shareholder. Hence, the finding of the AO that the appellant will be taxed in respect of the activities carried out by M/s. RAL is totally untenable in law. 113. Further, while discussing the applicability of S.28(iv) of the Act the AO has held that the business of RAL is nothing but the conduct of the business of Shri. Jitendra Virwani. This finding is contrary to the decision of the Hon'ble Supreme Court in Bacha F. Guzdar's case. The observations indirectly suggest that the AO has lifted the corporate veil in coming to the above conclusion. It is submitted that the corporate veil cannot be lifted at the whims and fancies of the AO. There has to be cogent and compelling reasons as to why the corporate veil has to be lifted. It cannot be lifted for an asking. In this connection he relied on the decision of the Hon'ble Allahabad High Court in CIT Vs Sahu Investment Mutual Benefit Co Ltd 396 ITR 595. The Hon'b....
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....disclosed would show that it is remuneration and interest on capital from partnership firms only. There is no independent business carried on by the appellant. It is not the case of AO that the alleged perquisites have been provided by RAL on behalf of these firms for the benefit of the appellant. Therefore, the fundamental requirement for invoking S.28(iv) of the Act is not satisfied as the appellant is not carrying on any business at all to which S.28(iv) would apply. Hence, invoking of S.28(iv) to tax the payments made by RAL to third parties is clearly untenable in law. 116. On the applicability of S.69C of the Act, in our opinion, the AO has jumped to a conclusion and not given any reasons as to how S. 69C is attracted. S. 69C is attracted when the following conditions are satisfied:- (c) The assessee has to incur an expenditure; (d) for which he offered no explanation for the source of explanation or the explanation offered by him is unsatisfactory. 117. It is clear from the assessment order that the appellant has not incurred the expenditure. It is RAL which had incurred the expenditure. This is an undisputed fact. The fundamental requirement of S.....
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....icial owner of bank account of RAL, the revenue must prove that assessee is owner of asset or value articles. Unless, the Revenue proves with necessary material that the asset belongs to the assessee or assessee is beneficial owner of such asset, then the provisions of section cannot be applied against the assessee. This clear proposition is further supported by the judgment of the Supreme Court in CWT v. Ellis Bridge Gymkhana, [1998] 1 SCC 384. Further, the onus to prove fully lies on the department. The department cannot be asking the assessee to prove the negative. The department cannot force impossible burden of proving negative on the assessee. This legal proposition is reiterated in the case of K.P. Varghese v. ITO, [1981] 4 SCC 137 wherein it was held that moreover to throw the burden of showing that there is no understatement of the consideration on the respondent would be attached and almost impossible burden upon him to establish the negative, namely, that he did not receive any consideration beyond that declared by him. Therefore, the addition made by the AO u/s. 69C of the Act is only on suspicion and surmise manner, without there being any material to prove that assess....
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....at the explanation regarding the source of money furnished by A, in whose name the money is lying in deposit, has been found to be false, it would be a remote and far-fetched conclusion to hold that the money belongs to B. There would be in such a case no direct nexus between the facts found and the conclusion drawn therefrom." 125. In our opinion, the additions made by the AO on the basis of Board resolutions of RAL is not justified for the following reasons:- (a) The assessing officer has not discharged the burden cast on him to prove that the appellant is the shareholder/beneficial owner of RAL. (b) The assessing officer has merely acted on a suspicion and has not brought on record any legal evidence to prove that the appellant is the beneficial owner/shareholder of RAL. (c) RAL is duly incorporated in respective legal jurisdiction and assessee has discharged his burden by furnishing proper explanation with documents. (d) The assessing officer has failed to carry out the necessary enquiries and investigation to prove the allegation made by him in the assessment order. (e) The quantification of the addition based solely on the amoun....
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.... expenses have been legitimately incurred by the company for its own purpose and not for the benefit of the appellant. It is reiterated that just because the appellant stays in the premises, housewarming expenses cannot be said to be for his personal benefit. Therefore, the provisions of section 28(iv) of the Act are not attracted. 128. The ld. DR relied on the order of the CIT(Appeals) and submitted that the addition was made on the ground that the company Embassy knowledge Infrastructure Projects (P) Ltd. in which assessee is a director was holding 90% stake in the company incurred a sum of Rs. 6,93,63,441 as house warming expenses on a farm house property owned by it which was shown as guest house in its books. It is an admitted fact that the company did not claim these expenditure in its return and disallowed the same. The AO relied on the Hon'ble Delhi High Court decision and concluded that there is no bar in law to add a sum as income when the same has already been disallowed in the hands of the company. The AO rightly concluded that expenditure is purely personal in nature. House warming is done by individuals when they build a new home and use it for residential purposes....