TaxTMI 
TaxTMI 
TaxTMI 
2017 (3) TMI 1884
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....here were under the assessee's possession a large number of blank cheques signed by the various holders of the accounts in the UBI, Unique, Park Street Branch, New Bank of India, Burrabazar Branch, Allahabad Bank, Canara Bank, PNB etc. The AO noted that assessee in his deposition u/s. 131 of the Act has admitted that he did not know the drawers of the cheques and was not able to identify them. The assessee further submitted that the cheques were with him so as to enable him to purchase shares or make investments. The AO wondered as to how people who do not know the assessee will leave their signed blank cheques in his custody. The AO after analysing the documents seized and cheques found (blank signed cheques) has recorded the following findings/observations: (i) The AO was of the view that the assessee was not able to enlighten him on this unusual practice said to be carried out by the assessee which led him to the conclusion that the account holders (signatories of the blank cheques) are either non-existent or are his benamidars and the accounts in their names have been opened in the bank by the assessee to suit his own purpose. (ii) The AO makes another finding on the same set....
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....bout the activities of the companies and they were only his employees getting salary from him. The AO after taking note of the fact that during search and seizure signed blank cheques, various company's seal were found in assessee's premises which according to the AO suggests "that the assessee used these cheques drawn by those companies in favour of companies who needed credit entries in their books of account in exchange for cash paid by them." Thus according to the AO, these 117 companies which have been floated by the assessee are being used by him as intermediaries for assisting any companies to introduce in their books of accounts their own concealed money in the guise of loans or of subscribing to their share capital. Thereafter, the AO prepared the names of the 117 companies which have been annexed as Annexure - 1 to the assessment order. (vi) With the aforesaid findings made, the AO now explains the modus operandi of the assessee. The AO notes that the 10 proprietary concerns and 117 companies (annexure 1 to AO's order) all of them maintained their accounts in the same bank viz., Punjab & Sind Bank, Kalakar Street Branch and according to him, the modus operandi of the ass....
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....,04,75,000/- the assessee preferred an appeal before the ld. CIT(A) who was pleased to delete the addition. Aggrieved, the revenue is now in appeal before us. 4. We have heard rival submissions and perused the material available on record. We find that the AO has added the entire paid up capital of the 117 companies he has listed in Annexure 1 of the assessment order for the block period on the ground that the assessee could not state the exact paid up capital nor could he explain the source of the capital in the said companies to his satisfaction. On appeal, the Ld. CIT(A) notes that all the companies referred by the AO have been assessed separately and the companies had in fact, disclosed its paid up capital in their respective Balance Sheets on the closing dates of each financial year. Therefore, according to Ld. CIT(A), it cannot be said that such amounts remained undisclosed during the block period insofar as paid up capital of the companies are concerned. The Ld. CIT(A) took note of the fact that the AO has not found out any documents in support of his finding that the assessee has in fact, invested the amount of Rs. 73,04,75,000/- in the shares of 117 companies. The Ld. CIT....
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....head income from undisclosed source. Brief facts of the case is that the AO notes that from the books of account seized in course of search marked KD-I that there were credits of Rs. 50,000/- in the name of Shri G. K. Verma on 01.01.1995 (AY 1995-96). Further, in AY 1996-97 as on 01.08.1995 and on 01.01.1996 credit balance of Rs. 1,25,000/- from Shri Kalidas Verma, Rs. 1,00,000/- from Shri Motilal Dhanuka and Rs. 50,000/- from Shri Sashi Kant Ruia respectively. According to the AO, the assessee could not offer any explanation as to the identity of person, nature and source of cash credit which remained unexplained so it was added back to the total income of the assessee. On appeal, the Ld. CIT(A) took note of the fact that the aforesaid credit entries and transactions described by the AO was related to the AY 1995-96 to 1996-97 and the same appeared in the books of account which was taken note of by the then AO during regular assessment pertaining to those assessment years and since the income was assessed and taxed under the regular proceedings, the assessee cannot be taxed under the special chapter in pursuance of the notice u/s. 158BC of the Act and the assessee relied on the or....
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....he said ten concerns and obtained blank cheques signed by the persons authorized to operate their bank account and retained such cheques in his possession. The AO observes that the assessee has given a statement that he had given the cash to his employees to deposit in the bank account opened in the name of the said concerns. The AO notes that the cash deposited into the bank account by these concerns taken together during the block period is as follows: "on 31.03.1995 Rs. 85,85,476/- on 31.03.1996 Rs. 51,97,300/- on 31.03.1997 Rs. 4,79,03,025/- on 31.03.1998 Rs. 4,12,59,775/- Thus total amount of Rs. 10,29,45,776/-. 8. The AO noted at page 3 of his order that the assessee in his deposition before the Income-tax Authorities revealed on 03.02.1999 that he earned profit of Rs. 15 to 20 crores in share dealing through share broker Shri Samar Kedia during 1991-92. The AO recorded that Mr. Kedia has stated in his deposition on 23.02.1999 that the assessee must have made around Rs. 1 crore during the periods 1990-91 and 1991-92. The AO noted that from the seized papers relating to share transaction with the said Mr. Kedia it is found that the amount was Rs. 2,55,09,375/- during....
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....giving accommodation entries to the various beneficiaries whose names have been given in Annexure -II. From a perusal of the illustration given by the AO and from the facts which emerged from the seized books, the AO has clearly made a finding based on the material seized in the said illustration which has been reproduced above that the cash deposited by the assessee in the names of the proprietary concerns was provided by the beneficiary company which fact finding of the AO could not be contradicted by the Ld. DR before us. The AO himself has accepted in the concluding paragraph of his order the fact that the assessee is not a man of means. In the words of the AO, Neither he nor his 107 companies were capable of earning of crores of rupees. Further, he says that it appears to him that he had been utilizing the proprietary concerns stated above and the 117 investment companies listed in annexure-1 of this order of assessment as intermediary through whom the beneficiary companies introduced their own money in their business and in exchange of the services rendered Mr. Kedia earned commission of certain amounts. This finding of fact also recorded by the AO fortifies the fact that the....
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....Magistrate asking for protection u/s. 144 of Cr. P.C. The Ld. AR submits that the assessee being disturbed mentally no weightage can be given to his statements and it reveals that the statements are hollow and assessee being incessantly questioned to avoid stress has made the tall claims to have earned huge income and it can be seen that statements recorded are totally contradicting each other. In one place he says he made Rs. 15 to 20 crores and then he says more than Rs. 10 crore, thus the assessee during the period of recording of statement was not mentally fit and, therefore, the statement recorded cannot be the only ground on which huge addition of Rs. 10 crores can be made against the assessee. We note that the AO himself has clearly made a finding that the assessee is not a man of means and he has also accepted the fact that he is only in the name lending and providing accommodation entry for a small commission. The illustration given by the AO which we have reproduced in para 8, supra is based on the material seized from the search and the modus operandi has been clearly spelled out by the AO, that is the basis on which the AO went ahead to add the income on protective basi....
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...." 14. Moreover, it was pointed out by the Ld. AR that the AO has made the addition on protective basis without prejudice to the respective officers from assessing the beneficiary companies and it has been brought to our knowledge that the beneficiary companies were in fact proceeded against and consequently addition on substantive basis were made against them and one of the parties who was aggrieved by the substantive addition, M/s. Trinetra Commerce & Trade Pvt. Ltd. approached the Hon'ble Calcutta High Court wherein the Hon'ble High Court in ITA No. 619 of 2008 dated 15.09.2016 upheld the action of the AO in making substantive addition against them pursuant to the search action and protective assessment against the assessee. The Ld. AR drew our attention to Article 265 of the Constitution of India and urged that no tax can be levied or collected without authority of law and merely because the assessee in a disturbed mental condition has returned huge amount to the tune of Rs. 7.10 cr. as his income and when the fact remains that due to the distressed mental condition has made several inconsistent statements during the assessment proceedings u/s.158BC of the Act wherein he has de....
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....income pursuant to the notice u/s. 158BC of the Act cannot be the sole reason of making the addition. According to Ld. AR, the AO ought to have taxed the assessee only on the income he earned and not on presumptive basis. The Coordinate Bench in the case of Sushil Kr. Das Vs. ITO reported in (2011) 11 ITR 17 was ceased of the question as to whether the income determined by the AO on the basis of the return filed by the assessee can be a figure lower than the income returned by the assessee. It was held in the said case by the Coordinate bench that it is a well settled principle that for determining the taxable income of assessee under the Act should be within the purview of law in force. If the taxable income determined by the AO is not in accordance with such principles, it is open to the assessee to contend the same before the higher authorities to follow correct application of law to determine the actual taxable income of the assessee. The Coordinate Bench observed as under: "It is a well settled law that no tax can be imposed without the authority of law and that if a tax cannot be imposed the same cannot be collected merely because the assessee has paid the same. It is uncon....
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....rock Estate (P) Ltd. Vs. State of TN 2010 (10) SCC 96 has explained the principle of Rule of Law which is as under: "The expression 'Rule of Law' describes a society in which Government must act in accordance with law. A Society governed by law is the foundation of personal liberty. It is also the foundation of economic development. Since investment will not take place where rights are not respected. It is in that sense that the expression "Rule of Law" constitutes an over arching principle embodied in Article 21, one aspect of which is equality. It is in that context the Hon'ble Supreme Court has used the phrase Article 21 read with Article 14 of the Constitution of India." 20. Therefore, the principle of Rule of Law mandates the Government to act only in accordance to law. The 'Rule of law' is an over-arching principle of law, which is a basic feature of the Constitution. So read together with Article 265 of the Constitution, that "No. tax shall be levied or collected without authority of law", means that AO should assess the income of the assessee only in accordance to law. 21. It should be kept in mind the duty of AO as per the Act, the AO is not only a quasi judicial auth....