TaxTMI 
TaxTMI 
2022 (2) TMI 1188
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....oduced hereunder: A.Y: 2012-13-ITA No. 971/DEL/2021: 1. "That the order passed by the Ld. Commissioner of Income Tax (Appeals) (herein after referred to as "the Ld. CIT (A)") dated 09.06.2021 is erroneous and bad in law and on facts. 2. That the Ld. Assessing Officer (herein after referred to as "the Ld. AO") as well as Ld. CIT (A) have failed to appreciate the legal position that where the assessee had failed to file any return of income under any of the provisions of section 139 of the Income Tax Act, 1961 (here in after referred to as "the Act") and had also failed even in terms of the notice issued under section 142(1), then the provisions of section 144 are attracted and the Ld. AO has the power to pass an order to the best of his judgment. In such scenario, the assessment order passed under section 143(3) of the Act is illegal and void ab initio. 3. The Ld. CIT (A) has erred in rejecting the retraction filed by the assessee vide affidavit dated 29.10.2013 in respect of the disclosure of Rs. 21.50 crores purportedly made by him without appreciating the fact that, inter alia, the disclosure made was not voluntary; the assessee was not carryin....
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....ame ever since inception and hence the income has been assessed in the hands of an incorrect person. 5. That the Ld. CIT (A) has erred in law and on facts in sustaining the addition of Rs. 35,59,500/- on account of cash found during the course of search. 6. That the Ld. CIT (A) has erred in law and on facts in sustaining the addition of Rs. 56,43,300/- made by the ld. AO on account of investment made in immovable property on the basis of AIR details inspite of the fact that the Form 26AS was filed by the assessee for the impugned assessment year wherein the AIR information column was blank and it did not have any information relating to the alleged immovable property. 7. That the Ld. CIT (A) has erred in law and on facts in sustaining the addition of Rs. 13,17,000/- made by the Ld. AO on account of cash deposited in the saving bank account on the basis of AIR details inspite of the fact that the Form 26AS was filed by the assessee for the impugned assessment year wherein the AIR information column was blank and it did not have any information relating to alleged cash deposited in any saving bank account of the assessee. 8. That the penalty procee....
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....O to make assessment afresh without giving their opinion on any issue and that the disclosure was obtained in contravention of CBDT circular dated 10.03.2003. 5. That the Ld. CIT(A) has erred in law and on facts in sustaining the addition of Rs. 4,92,00,000/- being share capital and share premium invested by Varad Vinayak Properties Private Limited into the Jakhotia Plastics Private Limited, in the hands of the assessee as his unexplained income or cash. 5.1 That the Ld. CIT (A) has failed to appreciate that there was no incriminating material found during the course of search which suggested that Rs. 4.92 crores was unaccounted income of the assessee. He has also failed to appreciate that the statements recorded during search do not themselves constitute incriminating material and no addition can solely be made on the basis of retracted statement unless there is some incriminating material. 6. That the Ld. CIT (A) has erred in law in sustaining the addition of opening credit balance of Rs. 11,96,75,000/- as on 01.04.2011 mentioned in the seized dairy A/OPJ/03 made by the Ld. AO under section 69A of the Act, inspite of the fact that no document or diary w....
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.... That the interest under section 234B of Rs. 6,03,49,480/- levied for short fall in payment of advance tax for 102 months was legally incorrect as under sub section 2A of this section interest is chargeable from 1st day of April of such assessment year and upto the date of making the settlement application. 11. The appellant craves leave to alter, amend or any other grounds of appeal either before or during the course of hearing." A.Y: 2010-11-ITA No. 969/DEL/2021: 1. "That the order passed by the Ld. Commissioner of Income Tax (Appeals) (herein after referred to as "the CIT(A)") dated 09.06.2021 is erroneous and bad in law and on facts. 2. That the search conducted u/s 132 of the Act on the assessee was not a valid search since none of the circumstances provided under clauses (a) to (c) of subsection (1) of section 132 is fulfilled in the case of the assessee. 3. That the ld. CIT(A) has erred in law and on facts in rejecting the ground of the assessee that the notice issued u/s 153A dated 30.04.2013 is defective, incorrect and shows lack of application of mind and since this a jurisdictional defect, the proceedings initiated and the ass....
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....he seized diary and therefore, such loans being pure capital receipts not assessable to tax, ought to have been treated as such and should not have been considered as income as per the presumption u/s 132(4A) read with section 292C of the Act. Also the burden lies entirely on the department to rebut that presumption by establishing that it is undisclosed income of the assessee for the impugned assessment year. 5.3 That the ld. AO failed to raise any query or examine the opening credit balances (loans) even though the assessee repeatedly offered to provide the same by way of written submissions. 5.4 That the ld. CIT(A) has also failed to appreciate that the seized diary, A/OPJ/03 did not contain any money, bullion, jewellery or other valuable article or thing therefore the provisions of section 69A of the Act cannot be applied to the impugned addition. 5.5 That the ld. CIT(A) as well as the ld. AO have failed to appreciate the fact that the assessee, Shri Om Prakash Jakhotia was not carrying out any business activity in his individual name and has never shown any business income in his return of income. There was no evidence found during search that the as....
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....red in law and on facts in rejecting the ground of the assessee that the notice issued u/s 153A dated 30.04.2013 is defective, incorrect and shows lack of application of mind and since this a jurisdictional defect, the proceedings initiated and the assessment order passed u/s 153A are invalid and void ab initio. 4. That the ld. CIT(A) has erred in rejecting the retraction filed by the assessee vide his affidavit dated 29.10.2013 in respect of disclosure of Rs. 21.50 crores made by him through his statements recorded u/s 132(4) dated 20.01.2012 and u/s 131(1) of the Act dated 08.05.2012. 4.1 That the ld. CIT(A) has failed to appreciate that disclosure made was not voluntary and was incorrect as it was obtained forcefully under coercion and without referring to the assessee the seized documents and without allowing him to consult his tax consultant. The disclosure was not voluntary and was incorrect, can be evident from the fact that the assessee was not carrying any business activity in his individual name and Rs. 5 crores was surrendered to make up for other irregularities which cannot be termed as income under real income concept. 4.2 That the ld. CIT(A)....
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....o appreciate the fact that the assessee, Shri Om Prakash Jakhotia was not carrying out any business activity in his individual name and has never shown any business income in his return of income. There was no evidence found during search that the assesse had himself in his individual capacity taken any loans or carried out any business activity. 6. That the penalty proceedings initiated by the ld. AO under section 271(1)(c) and 271F of the Act were invalid and bad in law and thus ought to have been dropped. 7. That the total tax demand including interest under section 234A and 234B had been raised amounting to Rs. 557080. The ld. AO did give credit for tax and interest paid on the income disclosed before the Settlement Commission. Interest charged under section 234B was not correct. The same should have been charged only upto the date of filing the settlement application in view of sub section 2A of section 234B of the Act. 8. That the interest under section 234A had been charged at Rs. 201623 stating that no return was filed in response to the notice under section 153A of the Act dated 21.04.2013. It may be mentioned that for filing settlement applicati....
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.... suffer from the vice of jurisdictional incurable defect. 5. The fact of filing of the returned income having not been filed is manifest from the assessment order and therefore, the legal ground sought to be taken is obvious, patent and apparent from record and therefore, may kindly be allowed in view of the judgment of the Hon'ble Supreme Court in the case of NTPC vs Commissioner of Income Tax, 229 ITR 383 (SC). The additional ground sought to be taken are as under: "That the Ld. AO as well as ld. CIT(A) have failed to appreciate the legal position that where the assessee has not filed the return of income under any of the provisions of section 139 and also failed to file the return under section 153A, then the provisions of section 144 are to be invoked and the Assessing Officer has to proceed in accordance with the procedure as per section 144 of the Act and to pass the assessment order to the best of his judgment. In such a case, the assessment order passed under section 153A read with section 143(3) of the Act suffers from incurable jurisdictional infirmity particularly when the Act itself provides for completion of assessment under section 153A read with sec....
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....arch i.e. 20.01.2012 only. The said seized diaries contained various ledger accounts depicting numerous debit and credit entries of cash sales & purchases of raw material and bags, waste sales, loans, commission on sale expenses, sales expenses, advertisement expenses, factory wages, office salary and other cash expenses, investment in property and chit funds etc. On the basis of these seized diaries, various additions were made by the Assessing Officer in the hands of the assessee in the A.Ys 2009-10 to 2012-13 which are discussed in subsequent paras of this order. 8 During the course of search, statement of the assessee was recorded u/s 132(4) of the Act on 20.01.2012 wherein, he made a disclosure of income of Rs. 21.50 crores. He also confirmed the said disclosure in his post search statement recorded u/s 131 of the Act dated 08.05.2012. The break -up of the said disclosure is as under: (Amt. in Rs. lacs) Particulars F.Y. 2010-11 F.Y. 2011-12 Total Cash credits 708.00 700.00 1,408.00 GP earned on sale of raw material, bags & waste - 8.00 8.00 Other income (from plastic business) (balancing figure) - ....
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....of Sh. Om Prakash Jakhotia after CIT(A) Order S.No Particulars/AY 2009-10 2010-11 2011-12 2012-13 Total 1 Cash Receipts from undisclosed sources u/s 69A (Substantive Addition) 800000 11000000 119675000 58060969 189535969 2 Cash Payments from undisclosed sources(Substantive Addition) 0 0 0 3 Substantive Addition of Unexplained Expenses on account of Kick backs paid to Dalmia Cement in Cash 2520000 2520000 5040000 4 Substantive Addition of cash paid in lieu of accommodation entry of Share Capital and Share Premium as unexplained cash 49200000 49200000 5 Unaccounted cash seized during search &....
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....ated that vide order dated 08.12.2020 passed under section 127(2) of the Act, the jurisdiction of the assessee has been transferred to the office of AO, Ward-4(1) Hyderabad from the office of AO, Central Circle-26, New Delhi and, therefore, the appeals should also be heard by the jurisdictional Tribunal i.e. ITAT, Hyderabad. The ld. AR of the assessee strongly objected to the request of transfer of the appeals. He stated that the assessments in respect of all the captioned assessment years have been made by the ACIT, Central Circle-26, New Delhi and the appeals against the assessments were also decided by the CIT (Appeals)-29, New Delhi. He further submitted that in assessments and in appeals before the CIT(A) various decisions of the jurisdictional Hon'ble High Court of Delhi were referred to and relied upon and in fact relief was also given by the CIT(Appeals) following some of the decisions. The assessee further stated that considering that his matter has been adjudicated upon based on various legal issues decided by the jurisdictional Tribunal at Delhi and jurisdictional High Court at Delhi, prejudice will be caused to him if at this stage his matter is transferred. It was furt....
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.... transferred to Hyderabad. We do not find any prejudice is caused when all the material record for adjudicating the issues involved are available and it is also not the case of Ld. CIT DR that assessment records are required which may have been transferred to Jurisdictional Assessing Officer at Hyderabad. Apart from that, as of now, we find that Hon'ble Bombay High Court in the case MSPL Ltd (supra) has questioned as far as the power of the Hon'ble President of the Tribunal to transfer an appeal from one bench to another bench in different State outside its headquarter is concerned, the Hon'ble High Court at paras 36, 37 and 38 of their order has held as under: "36. Sub section (1) of section 255 says that the powers and functions of the Appellate Tribunal may be exercised and discharged by Benches constituted by the President of the Appellate Tribunal from among the members thereof. As per sub section (5), subject to the provisions of the Act, the Appellate Tribunal shall have power to regulate its own procedure and the procedure of Benches in all matters arising out of the powers or of the discharge of its functions, including the places at which the Benches shall hold t....
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.... 19 Further, as far as the power of the bench to transfer the appeal is concerned, the Hon'ble High Court at paras 40 and 41 has held as follows: "The Tribunal Rules have been framed in exercise of the powers conferred by sub section (5) of section 255 of the Act to regulate the procedure of the Appellate Tribunal and the procedure of the Benches of the Tribunal. Since the order dated 20-8-2020 has been passed under rule 4 of the Tribunal Rules, the same is extracted hereunder :- "Power of Bench. 4. (1) A Bench shall hear and determine such appeals and applications made under the Act as the President may by general or special order direct. (2) Where there are two or more Benches of the Tribunal working at any headquarters, the President or, in his absence, the Senior Vice-President/Vice-President of the concerned zone or, in his absence, the senior most member of the station present at the headquarters may transfer an appeal or an application from any one of such Benches to any other." 41. From an analysis of rule 4 as extracted above, we find that as per sub rule (1), a Bench shall hear and determine such appeals and applications made....
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....terconnected and, therefore, all the appeals including those of the companies should be consolidated and heard together. 22 After hearing the ld. CIT-DR, we directed the ld. counsel of the assessee to give details of the appeals filed by these companies and ordered vide order-sheet dated 07.12.2021 as under: "After the arguments made by the Ld. Counsel of the assessee, today during the course of hearing, Ld. CIT DR submitted that the cases of the concerned companies, where assessee is director, are pending before this Tribunal in 'C' Bench, which are not yet fixed . However, Ld. counsel has made his submissions mainly on legal issues and on merits. His case is that additions cannot be made in the hands of the assessee as document did not pertain to him, but to the companies which are mentioned in the seized documents itself. Accordingly, we feel that the cases of the companies needs to be verified if there are any common issues involved. Hearing is thus, adjourned to 10/01/2022, as part-heard. Both parties informed." 23 The ld. counsel of the assessee filed a letter dated 06.01.2022 stating that no appeal has been filed by the department in respect of M/s Jakhotia Pl....
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....as the Ld. CIT (A) did not consider that there was no incriminating material found during the course of search that suggested that the assessee company had earned the said additional income during the impugned assessment year. 3.2 That the Ld. AO as well as the Ld. CIT (A) failed to provide any corroborative evidence to establish the fact that the said income was earned by the assessee company during the impugned year and hence is the additional income of the assessee company. 3.3 That the Ld. AO as well as the Ld. CIT (A) did not appreciate the fact that this amount was offered by the assessee company before the Hon'ble ITSC in order to be eligible for going through the option of tax settlement and to avail the consequent relief thereon. 3.4 That the Ld. CIT (A) has wrongly relied upon the decision of the Hon'ble Guj. HC in the case of Vikas Shipping Corporation v. UOI, 86 taxmann.com 68 (Gujarat), where the facts and circumstances of the case are inconsistent and are at variance with the facts of the case of the assessee company." 25 It is quite clear that the grounds of appeal are completely different and challenge the ad-hoc amount of income offere....
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....nd apparent from record and therefore, may kindly be allowed in view of the judgment of the Hon'ble Supreme Court in the case of NTPC vs Commissioner of Income Tax, 229 ITR 383 (SC). 29 The ld. CIT-DR, on the other hand, strongly objected to the admission of the additional ground by stating that the ld. AR has never raised this legal issue before the Assessing Officer and also before the CIT(Appeals). This issued was raised before the CIT(Appeals) only in the A.Y 2012-13 who adjudicated this ground at para 9.1 of his order. 30 On this legal jurisdictional issue, the ld. AR filed before us a separate synopsis and case law paper book-II on 06.12.2021 and also made his oral arguments which are briefly discussed as under: 30.1 The ld. AR contended that admittedly, no ROI either originally u/s 139(1) or in response to the notice u/s 142(1) was filed for A.Y 2012-13. Similarly, no return of income u/s 139 as well as u/s 153A was filed for the A.Y 2009-10 and A.Y 2011-12. This fact is evident from the very first and last page of the assessment orders. Return of income was filed by the assessee for the A.Y 2010-11 only. 30.2 Since, no ROI was filed by the assessee, consequently....
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....Assessing Officer on the various documents found during the course of search. Nowhere does the Assessing Officer mention making of a best judgment assessment; v. At page no. 56, specific additions are made and there is again no whisper of a best judgment assessment; vi. An important fact is that the show cause notice dated 23.08.2019 issued by the ld. Assessing Officer before making the assessment in respect of the all the assessment years, states that the return of income has been perused and that from the same the various explanations are required. The relevant page no. of the said show cause notice dated 23.08.2019 is enclosed at page no. 425 of the common PB; vii. Similarly, in question no. 6.1 of the same show cause notice enclosed at page no. 432 of the common PB, the Assessing Officer states that on verification of assessees's return of income it is seen that he has not surrendered cash found during the course of search proceedings. Hence from the aforesaid, it is clear that the assessment proceedings suffer from an inherent lacuna resulting in a jurisdictional defect which is incurable in as much as the assessment order has been passed under se....
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....as no choice but to make an assessment under section 144 of the Act. 31.1 The ld. AR further placed reliance on the judgement of the Hon'ble Supreme Court in the case CIT v Segu Buchiah Setty [1970] 77 ITR 539 (SC)[23-04-1970] which places an obligation on the Assessing officer to pass a best judgment assessment order u/s 23(4) of the Income Tax Act, 1922 in case of failure of the assessee to file the return of income. He also relied on the decision of the Hon'ble Calcutta High Court in the case of Maya Debi Bansal v. CIT [1979] 117 ITR 125 which held that the provisions of sections 143 and 144 cannot be said to be in pari materia and the provisions for filing the return in the proper form are statutory and mandatory in nature. If no return in the proper form having been filed, the assessment could not have been made under section 143(3). Reliance was also placed on the following decisions: a. Gulab Badgujar (HUF) v. Income Tax Officer [2019] 179 ITD 807 (Pune - Trib.)[06-09-2019]; b. Prabhat Mills Stores Co. Ltd. [1966] 59 ITR 197 (Calcutta HC)[21-01-1964]; c. CIT v Laxminarain Badridas [1937] 5 ITR 170 (Privy Council) [19-02-1937]; d. S. Kum....
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....d in the Gazette dated 9-5-1973 for Bill No. 34 of 1973, it is stated at clause 80 that section 292Bseeks to provide against purely 'technical objections', without substance, coming in the way of the validity of assessment proceedings, etc. 34 The ld. CIT-DR on the other hand vehemently objected to the contention raised by the ld. AR. She relied upon the reasoning given by the CIT(Appeals) at para 9.1, page no. 81 of his order whereby he dismissed the legal issue raised by the assessee by holding that since no return of income was filed for the A.Y 2012-13, therefore, there was no requirement to issue notice under section 143(2) and therefore the assessment has been validly made under section 143(3). 35 The ld. CIT-DR also relied upon the decision of the Hon'ble Delhi Court in the case of Ashok Chaddha [2011] 337 ITR 399 (Delhi HC) for the legal proposition that issue of notice under section 143(2) is not mandatory for finalization of assessment under section 153A of the Act. Decision 36 We have heard the arguments of both the parties and also considered their written submissions and material placed on record before us which was referred to at the time of hearin....
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....the belief that the returns of income have been filed and proceeded to examine the income based on that presumption. He sought information on many occasions based on the seized documents and did not refer to the provisions of section 144 anywhere in the order. He even mentioned in his order that the assessee co-operated in the assessment proceedings and furnished the replies to every notice issued by him. It is trite that the provisions of section 144 are distinct from section 143(3) of the Act and have separate consequences as highlighted in the submissions of the Ld. Counsel in foregoing para 31. These are two separate independent forms of assessments. Assessment under section 143(3) is made consequent to notice under section 143(2) issued based on the return filed by the assessee. In this case, no return of income has been field admittedly and, therefore, no notice under section 143(2) was issued for examining the return. 42 A bare perusal of the section 144 of the Act shows that where no return has been filed under section 139(1) or section 139(4), 139(5) and consequent to notice under section 142(1), the assessment shall be made under section 144 and would be termed as best....
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.... section 143(3), the terminal date of calculating interest is the date of filing of return. Under section 246A of the Act, separate appeal is provided for the assessment made under section 144 of the Act. In the case of a best judgment assessment, as per the provision of section 142(3), there is no requirement of any opportunity of being heard to the assessee in respect of the material gathered by the Assessing Officer whereas in an assessment under section 143(3) whatever evidence is being gathered has necessarily to be confronted. Thus, very different consequences flow from an assessment under section 144 of the Act. 46 It quite clearly comes out that the mention of nature of the order as section 153A r.w.s. 143(3) was not a technical mistake or an error which can be cured by resorting to the provisions of section 292B of the Act. The Assessing Officer even though recording that no return had been filed and no notice under section 143(2) had been issued, continued to proceed as if he was making an assessment under section 143(3) of the Act. Hence, the order made under section 153A/ 143(3) is not legally tenable and ought to have been made under section 144 of the Act. There is....
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.... ii. Jakhotia Enterprises- Partnership Concern-AAGFJ3074R iii. Jakhotia Polyfibre Pvt. Ltd -AABCJ7246D iv. Jakhotia Polysacks Pvt. Ltd -AABCJ9725F v. Jakhotia Spinning Mills Pvt. Ltd-AACCJ6417B vi. Revathi Synthetics Pvt. Ltd-AAACR9639P He submitted that all these companies had their registered offices in the same building of Jakhotia House but at different floors which were not covered in the search. He further stated that all the group companies were engaged in the manufacturing of PPE woven sacks bags except Jakhotia Enterprises which was engaged in manufacturing of ready mix concrete. 51 It is matter of record that from the searched premises, a seized diary/book namely A/OPJ/03 containing pages 1-317 was found and seized which is enclosed at page 1-347 of the common paper book. The said seized diary contained various ledger accounts depicting numerous debit and credit entries of cash sales & purchases of raw material and bags, waste sales, loans, commission on sale expenses, sales expenses, advertisement expenses, factory wages, office salary and other cash expenses, investment in property and chit funds etc. It has been contend....
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....ary income, rental income and income from other sources. This fact is also mentioned at page no. 3 of the assessment order. v. The Raw Material Sales ledger is enclosed at page no. 177 to 181 of the common PB and the ledger clearly shows sales of PPE bags. At Page 179 of the common PB, the names of the companies i.e. Jakhotia Plastics and Jakhotia Polymers, clearly appear. The codes mentioned in Raw Material sales ledger like 12N, 30SG, AM120N, ADL are all PPE Granules raw materials grades. PPE Granules are major part of the raw material being used by the group companies for manufacturing of PPE bags. vi. The turnover of the companies i.e. Jakhotia Plastics, Pvt. Ltd and Jakhotia Polymers Pvt. Ltd. as per their audited books of account is Rs. 47,45,80,079/- and Rs. 13,97,74,815/-respectively for the year ending 31st March, 2012. There is no turnover of any such item in the hands of the assessee. vii. At page 185 of the common PB seized ledger of Bags Sales is enclosed which shows that bags have been sold to the tune of Rs. 12,82,050/-. The names of the companies Jakhotia Plastics and Jakhotia Polymers are clearly mentioned which shows that Bags sales do n....
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.... shows the name of Jakhotia Plastics and Jakhotia Polymers. xiv. Page 328 of the common PB refers to land purchase ledger which is pertaining to Jakhotia Spinning Mills Private Limited. xv. Then the ledgers of the companies; Jakhotia Polysacks Private Limited at page no. 75 to 77, Jakhotia Polyfibre Private Limited at page no. 82-85, Ragughram Synthetics Private Limited at page no. 90-92, Jakhotia Enterprises, a partnership firm at page no. 313 and Jakhotia Spinning Mills Private Limited at page 335 of the common PB, found in the seized diary, A/OPJ/03 which show large amounts relating to the companies/firm itself. xvi. On perusal of the ledgers contained in the seized diary, A/OPJ/03, it may be seen that before every entry there is a notation of 'o' and 'f' where 'o' refers to office and 'f' refers to factory. Quite clearly, factory and office belonged to the group companies because the assessee, Shri Om Prakash Jakhotia does not have any individual office. xvii. Ld. AR also submitted that the handwriting of the entries contained in the seized diary, A/OPJ/03, is not of assesse which also shows that the assessee was not maintaining these account....
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....rabad ITAT in the case of JCIT v Narayana Reddy Vakati [2021] 88 ITR (T) 23 dated 21.04.2021 which is on very similar facts. The ld. AR argued that in this case also the assessee being the Managing Director of the company disclosed income in his statement recorded under section 132(4) in his individual name. The Hon'ble Tribunal held that the income was that of the company and the director was not carrying out any business individually. Therefore, the addition made in the hands of the individual assessee was deleted following the judgment of the Hon'ble Supreme Court in the case of ITO v. CH. Atchaiah (supra). Following other cases are also relied on by the ld. AR for the proposition that income must be taxed in the hands of the person who has earned it: i. The Hon'ble Special Bench of Delhi ITAT in the case of Pradeep Agencies v. ITO [2007] 18 SOT 12 (DELHI)(SB); ii. The Hon'ble Mumbai ITAT in the case of Ashwin C Jariwala Pradeep v. ITO [2017] 164 ITD 255 (Mumbai) dated 02.09.2015; iii. The Hon'ble Madras High Court in the case of Murugesa Naicker Mansion [1999] 104 Taxman 563 (Madras HC); iv. The Hon'ble Mumbai High Court in the case of CIT....
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....he department challenged the order of the Settlement Commission in Writ and the Hon'ble High Court of Delhi quashed the same vide their order dated 15.04.2019 and directed the Assessing Officer to assess the income of the assessee afresh. 60 Before the CIT (Appeals) the assessee, inter-alia, contended that the income assessed by the Assessing Officer in its hand, did not belong to him. This was an issue taken for the first time before the CIT (Appeals). The CIT (Appeals) did not consider the same and proceeded to assess the income albeit at a reduced amount in the hands of the assessee. 61 It is trite that income has necessarily to be assessed in the hands of the correct person i.e. person who has earned it. This is manifest from the section 4(1) of the Income-tax Act which states that the income tax is to be levied on the total income of every person who is liable to pay tax on the same. Reliance was placed on the judgment of the Hon'ble Supreme Court in the case of Ch. Atchaiah [1996] 218 ITR 239 wherein it has, inter-alia, been held that there is no discretion vested in the Assessing Officer to tax the income in the hands of a wrong person merely because such course is mor....
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....s year of every individual, Hindu undivided family, company and local authority, and of every firm and other association of persons or the partners of the firm or the members of the association individually." [Emphasis supplied] The expression 'person' was defined in clause (9) of section 2 in the following words: "9. 'Person' includes a Hindu undivided family and a local authority." 9. As against the above provisions, section 4 of the present Act [before it was amended by the Direct Tax Laws (Amendment) Act, 1987, with effect from 1-4-1989] read thus : "Charge of Income-tax.-(1) Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income tax at that rate or those rates shall be charged for that year in accordance with and subject to the provisions of, this Act in respect of the total income of the previous year or previous years, as the case may be, of every person: Provided that where by virtue of any provision of this Act income-tax is to be charged in respect of the income of a period other than the previous year, income-tax shall be charged accordingly. ....
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....income of every person, it necessarily means the person who is liable to pay income-tax in respect of that total income according to law. The tax has to be levied on that person, whether an individual, Hindu Undivided Family, Company, Firm, AOP/BOP, a local authority or an artificial juridical person. From this, it follows that if income of B is taxed in the hands of A, A may be legitimately aggrieved but that does not mean that B is exonerated of his liability on that account. B cannot say, when he is sought to be taxed in respect of the total income which is lawfully taxable in his hands, that since the ITO has taxed very same income in the hands of A, he himself cannot be taxed with respect to the said total income. This is not only logical but is consistent with the provisions of the Act. In this connection, it may be pointed out that where the Parliament wanted to provide an option, a discretion to the ITO, it has provided so expressly." 62 In view of the aforesaid judgment of the Hon'ble Supreme Court, we are of the opinion that the issue, whether the income belongs to the assessee or not, is a jurisdictional/ foundational issue which can be adjudicated upon at any stage o....
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....f incriminating documents found during the course of search. Those documents must belong to the assessee and must contain evidence of income having escaped assessment. 65 According to the ld. AR, the seized diary no. A/OPJ/03 is the only evidence found during the course of search on the basis of which disclosure was made by the assessee and the income has been assessed by the Assessing Officer. It would be, therefore, apposite to analyze the diary seized to see whether the entries referred to belong to the assessee or to the companies. 66 Since the diary found is in respect of the F.Y 2011-12 up to the date of search on 20.01.2012 i.e. AY 2012-13 which is taken to be a representative year, we will have to examine the entries contained therein and the consequent additions to income confirmed by the Ld. CIT (Appeals) to check whether the transactions pertain to the companies for the said assessment year or not. The CIT (Appeals) has computed the undisclosed income of the assessee based on the seized diary A/OPJ/03 at Rs. 5,80,60,969/-. He has computed the total undisclosed cash receipts emanating from the said seized diary at Rs. 15,37,92,608/- based on the cash book summary gi....
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....m Synthetic Private Limited where similar transactions including issuance of cheques from the third company against which cash has been received for expenses has been reflected. The bags sales ledger at page 185 of the common paper book contains names of Jakhotia Plastics and Jakhotia Polymers and pages 147 to 149 of the common paper book reflecting sales made to Ramu also contains names of Jakhotia Plastics, Jakhotia Polymers, Jakhotia Polyfibre and Jakhotia Polysacks. The ledger account of Servo at page 172 to 174 reflects raw-material for PPE Granules for making PPE bags. Waste sales ledger enclosed at page no. 190 of the common PB shows the names of Jakhotia Plastics and Jakhotia Polymers. Factory wages, Office salary and Donation at page 207 of the common paper book show that the payment was made by Jakhotia Plastics and Jakhotia Polymers. Similarly on page 221 of the common PB is an advertisement ledger which shows the name of the Raghuram, Polyfibre and Jakhotia Polysacks. Seized Ledger of consultancy charges at page no. 227 of the common PB also shows names of Raghuram, Polyfibre and Polysacks. Ledger of Rates & Taxes at page 245 shows the names of RSPL (i.e. Raghuram Synth....
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....t business of manufacturing of PPE woven sacks. 69 The ld. CIT-DR vehemently contended that the corporate veil ought to be lifted and the assessee be assessed in respect of the incomes of the companies, if any. We would not agree with this proposition considering the overwhelming evidence found during the course of search. As is quite apparent from the aforesaid facts, the seized diary A/OPJ/03 does not belong to the assessee. It has not even been written by him. In fact, he is only one of the person who has given a cash loan out of his sources to the companies. Even otherwise a director acts under a fiduciary capacity on behalf of the company. Merely because he acts on behalf of the company, it cannot be said to income of the company belongs to him. The companies have been filing their return of income at showing very large taxable sums from business year after year. Their accounts are audited and they have other directors and large number of managers and personnel to run their business. 70 The Hon'ble Supreme Court in the case of Union of India and Anr Vs. Azadi Bachao Andolan(2003) 263 ITR 706 have held that even a single share-holder company is to be held an independent c....
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....le as per the cash book prepared on the basis of seized diary A/OPJ/O3. He, therefore, stated that this cash cannot be treated as undisclosed income of the assessee. It was further stated there was cash in hand available in the hands of the companies which were operating from the premises no. 3- 6-323, Jakhotia House, Basheerbagh Hyderabad-500029and were searched during the course of search. The Ld. CIT-DR stated that the assessee had surrendered this amount before the Settlement Commission and had also offered this amount for tax during the course of recording of statement under section 132(4) of the Act on 20.01.2012. 74 We have heard the contentions of both the parties. The order of the Settlement Commission has been quashed by the Hon'ble Delhi High Court. The assessee also retracted the statement. We have already held that the seized diary A/OPJ/03 belong to the companies and not the assessee in his individual capacity. There are numerous cash transactions that appear in the seized diary. There is no evidence that the cash belongs to the assessee in his individual capacity since he only derives passive income. The conclusion therefore, is inescapable, that the cash belongs ....
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....hould not be added in the hands of assessee who is an individual. 82 He further stated that the seized books of accounts do not belong to the assessee but to his group companies. Therefore, Rs. 4.92 crores cannot be added in the hands of the assessee in view of the fact that money in the form of share capital and share premium was received by Jakhotia Plastics Private Limited from Varad Vinayak Properties Private Limited which are separate legal entities and are separately assessable to Income Tax. 83 He also submitted that during the first appeal proceedings, the additional evidences under Rule 46A of the Income Tax Rules, 1962 were also filed in the case of Jakhotia Plastics Private Limited where this amount was also substantively added by the Assessing Officer. The additional evidences included confirmation, ITR, Computation of Income, Ledger accounts, Bank statement and Audited financial statements from Varad Vinayak Properties Private Limited in order to discharge onus u/s 68 of the Act in the hands of Jakhotia Plastics Private Limited. However, the CIT(A) deleted the addition in the case of Jakhotia Plastics Private Limited and instead confirmed the addition in the hand....