AI Drafter 
TaxTMI 
TaxTMI 
2023 (1) TMI 1463
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....e as under: - 1. That on the facts and in the circumstances of the case, the Ld. Commissioner of Income-tax (Appeals)-3, Kochi [hereinafter referred to as the CIT(A)], vide order dated 16.03.2022, erred in upholding the jurisdiction assumed and the impugned additions made by the Ld. Assistant Commissioner of Incometax, Central Circle, Kollam (hereinafter referred to as the AO) u/s 153A of the Income-tax Act, 1961 (hereinafter the Act') in the absence of incriminating material being found in course of the search in the Assessee's case. 2a. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in upholding the order passed by the Ld. A.O in violation of principles of natural justice by circuitously preventing the Appellant from filing an Application u/s 245C(1) before the Hon'ble Income-tax Settlement Commission (hereinafter ITSC') by deliberately and capriciously passing the impugned Assessment Order on 17.03.2020 despite the repeated written and oral updates provided by the Appellant to the Ld. A.O about his intention of filing the settlement application on 20.03.2020 and the payment of majority of taxes thereon in several in....
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....y of cross-examination of such persons before making the impugned additions in the hands of the Appellant thus, rendering the assessment order so passed as bad-in-law and a nullity. 4b. That the Ld. CIT(A) further erred in intentionally glazing over and overlooking the results of cross examination of the persons who appeared before the Ld. A.O. and deposed in favour of the Appellant in course of the remand proceedings at the first appellate stage. 4c. That, the Ld. CIT(A) fell in error in holding that cross-examination of the persons whose statements were relied upon by the Ld. A.O for making the impugned additions was not necessary. 5. That the Ld. CIT(A) erred in sustaining the impugned substantive additions to the extent of Rs.35,18,60,144/- made by the Ld. A.O without specifying the relevant sections of the Act invoked by him merely on the basis of surmises, conjectures and borrowed satisfaction, without bringing on record any iota of legally sustainable evidence to dislodge the authenticity of the conclusive documentary evidences and submissions filed by the Appellant in support thereof. 6a. That the Ld. CIT(A) erred in upholding the substan....
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....ring the detailed explanations and documentary evidences furnished by the Appellant duly explaining such entries at the first appellate stage. 8b. That the Ld. CIT(A), while correctly deleting the substantive addition of Rs.3,83,02,587/- made by the Ld. A.O on account of other credit entries appearing in the bank accounts of family members (other than those emanating from 38 bank accounts of persons or entities based in Nagaland), erred in directing the Ld. A.O to consider the same on substantive basis in the hands of the family members, subject to explanations offered by each of them, totally ignoring the detailed explanations and documentary evidences furnished by the Appellant duly explaining such entries at the first appellate stage. 9. That the Ld. CIT(A), while sustaining the impugned substantive additions made by the Ld. A.O erred in not giving credit for additional income declared under the Income Disclosure Scheme, 2016 by the Appellant and his family members although the Appellant had furnished detailed explanations and evidences in support of the disclosures made under IDS, 2016. 10. That the Ld. CIT(A) erred in upholding the addition of Rs.6,4....
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....ts and written submissions containing various computations & tables would have material bearing on adjudication of these appeals and the same has been referred to by us at appropriate places in this order. Having considered rival submissions and after going through relevant material on record, our adjudication would be as under. 3. Assessment Proceedings 3.1 The assessee being resident individual earned 'income from other sources'. The assessee group was subjected to search action u/s 132 on 08.06.2017 which include the assessee, his wife Smt. Valsala Raj and two sons Shri Varun Raj and Shri Arun Raj. The premises of various concerns of M/s Sreevalsam Group (controlled by the assessee's wife and other family members) were also covered in the search. The group runs textile shops, jewellery shops, finance business, hotels, vehicles dealership, fuel outlets, educational institutions etc. 3.2 The assessee group runs various concerns. So far as the assessee is concerned, he is a partner to the extent of 39% in a partnership concern namely M/s Money Muttam Finance and do not have any other business interest in any other concerns of the group except shareholding to the extent of ....
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....lsam Group. 3.4 Post search operations, notices u/s 153A was issued to the assessee on 03.08.2018. The assessee filed return of income on 01.12.2018 declaring income of Rs.6.17 Lacs. Notices u/s 143(2) and 142(1) were issued on various occasions to the assessee requiring it to file requisite documents including cash flow statement and statement of assets and liabilities. The assessee's case was centralized from Nagaland to Kerala which was challenged without any success before Hon'ble Guwahati High Court vide order dated 25.09.2019. Since the stay was granted by Hon'ble Court against order u/s 127, the time limit for completion of assessment proceedings for AYs 2012-13 to 2017-18 which would have got time barred by 31.12.2019, got extended by 181 days and accordingly, the time limit to pass the assessment orders for these years stood revised to 29.06.2020. The assessee failed to file the requisite documents despite various notices which led Ld. AO to form a belief that the assessee had been non-cooperative. During assessment proceedings, the assessee expressed intention to file settlement applications u/s 245C(1) before Hon'ble Income Tax Settlement Commission (ITSC) and request....
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....se of jewellery etc. The extract from various bank statements has been reproduced by Ld. AO in the assessment order to support the aforesaid conclusion. 3.6 In nutshell, it was alleged by Ld. AO that the credits made in 38 Nagaland based bank accounts from Police department as contract payments were utilized for the benefit of assessee's group. The ultimate sources of all the funds were government payments. All these contractors were Nagaland based residents who merely lent their names and opened bank accounts where the funds from government for contract supply get credited and in turn, these contractors would be paid a commission for name lending. Since these contractors are exempt from paying Income Tax u/s 10(26), no books of accounts would be maintained by them and the bank accounts would be the only proof that a business was being carried out. It was alleged that the assessee had control and coordinated all the matters relating to police vehicles and therefore, all the income would belong to him only. 3.7 The Ld. AO also tried to analyze the credits and debits made in these bank accounts and noted that there were no payments to manufacturer or distributors but majority o....
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....e procurement of material for this concern. On the basis of this, Ld. AO concluded that entire credits from government contracts would be transferred to assessee's account and the cost of purchase is met by the assessee. The payment for such purchase is met by unaccounted sources and therefore, entire credits and not the estimated profits were to be assessed as assessee's income. 3.10 Nagaland Police Petrol Pump (NPPP) This entity was a retail outlet of Indian Oil Corporation meant exclusively to supply fuels to vehicles of Nagaland Police Department. The license of fuel outlet was in the name of IG of Police, Nagaland and it was given on lease to a private party i.e., M/s Excellence Associates under an agreement dated 12/02/2007. However, from 27/04/2011, office of DGP Nagaland issued a notification that NPPP shall henceforth be operated by M/s Avili Service Station which is run by Mr. Avili Sekhose. However, the actual allottee was Mr. Zhori Kire who made application under the name of M/s Avili Service Station so as to fulfill the experience criteria. The statement of Mr. Zhori Kire was recorded u/s 131 on 27.07.2017 who submitted that he was not involved in day-to-day busi....
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....entities which hardly pass the requirement of genuineness as required u/s 68 since creditworthiness of the lenders as well as the genuineness of the loans were not established by the assessee. In reply to question no.134, the assessee submitted that his commission will be percentage of supply say 25% or 30% and the rest would be loan. 3.13 Credits from other accounts Similar pattern of cash deposit was fond in the bank accounts held in the name of Head Master, Chandmarhi Higher Senior Secondary School, Kohima and Shri Babu Kuraikose etc. which were allegedly used for the benefit of assessee group. 3.14 After analyzing debits and credits in all these bank accounts, Ld. AO alleged that the credits in 38 Nagaland based bank accounts were utilized for (i) Purchase of properties for assessee group; (ii) Transfer of funds to bank accounts of various concerns in the Sreevalsam Group; (iii) Making Payments to contractors for civil work undertaken in the showrooms etc. of assessee group; (iv) Transfers to Bank Accounts of family members, friends, relatives etc.; (v) For misc. purposes like charities, payment for religious institutions, payments for foreign tour, purchase of jewelle....
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....0,935,900 104,600,905 17,324,000 22,728,000 Sub Total (B) 3,461,750 273,635,689 III On money paid during acquisition of landed properties/land in family - Valsala Raj, Wife of Assessee - Varun Raj, Son of Assessee - Arun Raj, Son of Assessee - 161,000,000 Sub Total (C) - 161,000,000 IV Other Credits in Self & Family Bank Accounts: -MK Rajendran Pillai , Assessee - Valsala Raj, Wife of Assessee - Varun Raj, Son of Assessee - Arun Raj, Son of Assessee - Pooja Raj, Daughter of Assessee 2,347,600 546,800 11,955,963 17,846,071 37,712,080 66,718,946 59,124,335 50,740,531 11,238,000 Sub Total (D) 32,696,434 225,533,892 TOTAL 36,158,184 3,092,134,720 - The detailed break-up of entity-wise / year-wise additions made for AYs 2012-13 to 2017-18 could further be tabulated as under: - PARTICULARS AY 2012-13 AY 2013-14 AY 2014-15 AY 2015-16 AY 2016-17 AY 2017-18 SUB TOTAL FOR 6 YEARS I Transfer from Nagaland based individuals 265.270,270 287,624,682 273.684.066 489.173.429 590,230.521 525,982,171 2,431,965,139 ....
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.... 40,122,587 36,449,671 20,322,209 18,253,280 33,605,500 44,084,211 192,837,458 TOTAL ADDITIONS FOR THE YEAR 399,085,731 387,880,797 360,082,261 606,025,409 668,034,546 634,867,792 3,055,976,536 3.17 The Summarized addition made in assessee's hand for all the years could further be tabulated as under: - No. Particulars Pertaining to Mr.MKR Pillai Pertaining to family Members, Group Concerns and / or Third Parties Total Substantive Additions in the hands of the Appellant 1. Credit Transfers from 38 Bank Accounts of Nagaland based individuals to the account of Assessee, family members, group concerns and third parties (i.e., total debit entries in these 38 Bank Accounts 23,98,77,068 2,19,20,88,071 243.19.65,139 2. Cash Deposits in the bank accounts of Appellant, family members and group concerns 6,26,04,909 21,10,30,780 27,36,35,689 3. Other Credit Entries in Bank accounts of Appellant and his family members 3,77,12,080 18,78,21,812 22,55,33,892 4. Alleged on-money paid in cash or acquisition of land / properties by family members ---- 16,10,00,000 1....
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....ed that the approval u/s 153D was accorded in a mechanical manner. However, considering the detailed assessments framed by Ld. AO, these grounds were also dismissed. 4.3 Another plea was that there was no incriminating material seized during the course of search operations and therefore, no addition could be made in such a case considering various judicial pronouncements. The said plea was rejected by Ld. CIT(A) on the ground that several incriminating materials were seized including blank letter head of Nagaland based persons / entities, blank cheques, notes / diaries containing details of payments received and transferred. The evidence relating to unexplained investment made in cash towards purchase of immoveable properties was also seized. The said plea was also rejected considering the decision of Hon'ble Kerala High Court in E.N. Gopakumar (75 Taxmann.com 215). 4.4 Another legal plea was violation of principle of natural justice since no cross examination of persons whose statement was relied in the assessment order, was not provided by Assessing Officer. The same was rejected by Ld. CIT(A). Further, the additions were based not only on the statements of persons based in....
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.... assessment orders disregarding the assessee's additional evidences and submissions. Consequently, the assessee filed detailed rebuttal to remand report and drew attention to the additional evidences submitted in support of its claim. However, Ld. CIT(A) chose to confirm the stand taken by Ld. AO. 4.7 The additions, on merits, was dealt with by Ld. CIT(A) in an elaborate manner in the impugned order. The same could be enumerated as under: - 4.8 Credits Transferred from Nagaland based entities The assessee contended that the transactions appearing in Nagaland based bank accounts were regular business transactions. The assessee also submitted that the debit transactions in the said bank accounts related to third-parties had no relation to the assessee and his family members. However, Ld. CIT(A) held that Ld. AO had identified 38 bank accounts and analyzed all bank transactions which revealed that the assessee and his family members or their business concerns were beneficiaries. The third parties to whom the payments were made were found to have business relations with the assessee group. Detailed findings were rendered by Ld. AO for each of the group of entities. As against ....
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....roup concerns The assessee submitted that his family members had business income and the cash generated out of such activities was deposited in the bank accounts periodically. The assessee submitted that group entity viz. M/s Vrindavan Builder Pvt. Ltd. (VBPL) was engaged in running a hotel and the cash deposits were sourced out of room and restaurant collections as found from the books of accounts. Further, the family members and all other group concerns were separate assessee under Income Tax act and assessed separately and therefore, the cash deposits made in those accounts could not be treated as assessee's income. This plea was negated on the ground that the family members had no independent sources of business income in Nagaland. The assessee's nexus with cash deposits made in bank accounts maintained in Nagaland by his family members was reasonably established. Accordingly, the additions were upheld. However, Ld. CIT(A) held that Ld. AO made additions of cash deposits in the bank accounts maintained outside Nagaland by assessee's family members. To support the same, Ld. AO did not bring on record any material to show the nexus of such cash deposits in the bank accounts....
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.... was held by Ld. CIT(A) held that the assessee failed to provide the specific bank accounts of the persons / entities based in Nagaland, in respect of each transaction, through which the assessee received such income. The assessee failed to produce the reconciliation of income declared under IDS 2016 with the help of bank statements of those entities and with the help of bank statements of the assessee. Therefore, this plea was also rejected. 4.15 The adjudication of Ld. CIT(A) reduced the overall impugned additions of Rs.309.21 Crores (on overall basis for all the years) to Rs.271.39 Crores which has been tabulated in Table-1D on page no.18 of written submissions containing 140 pages. 4.16 Finally, the appeal was partly allowed against which the assessee is in further appeal before us. Our findings and Adjudication: Findings on Legal Grounds 5. Before us, the assessee has raised various legal grounds which are contained in ground nos.1 to 4c. In Ground No.1, the plea of the assessee is that in the absence of any incriminating material found during the course of search proceedings, no such additions could be made u/s 153A. This ground primarily arises in AYs 2012-13 to ....
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....dingly, the return was held to be invalid return and assessment was framed u/s 144 on 17.03.2020 which was in order. Before us, Ld. AR has submitted that on the date of framing of assessment, the prescribed period of 120 days to e-verify the return of income had not expired and therefore, the return of income could not be held to be invalid prematurely. Accordingly, the jurisdiction as upheld by Ld. CIT(A) was contrary to law. 6.2 From the fact, it emerges that as per extant rules, the assessee could e-verify return of income within 120 days from the date of filing thereof. The return of income was filed by the assessee on 31.01.2020 which could have been verified within 120 days whereas the assessment has been framed as early as on 17.03.2020 i.e., within 45 days from date of filing of return of income, treating the return of income as invalid return. The action of Ld. AO could not be held to be justified on these facts. This is further supported by the fact that CPC has received the manual ITR-V on 01.06.2020 and the return has eventually been treated as a valid return. 6.3 We also find that as per the provisions of Sec.144, it is incumbent on the part of Ld. AO to give ass....
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....otice under section 143(2) of the Act is mandatory if the Assessing Officer seeks not to accept any part of the return as furnished by the assessee or make an assessment order contrary thereto and, even in course of reassessment proceedings, such notice cannot be dispensed with. 10. One of the arguments put forth on behalf of the Revenue is that in course of reassessment proceedings once a notice is issued under section 148 of the Act, the assessee is made aware of what part of the income or on what count the assessee's income is perceived to have escaped attention. It is submitted that in such a scenario, the requirement of a notice under section 143(2) may be somewhat diluted, if not unnecessary. Apart from the fact that such argument cannot be countenanced in the light of the dictum in Hotel Blue Moon (supra), it is evident that an assessment under section 143(3) of the Act is consequent upon a hearing and the production of evidence on such points on which the Assessing Officer may harbour doubts and are indicated in his notice under section 143(2) of the Act. Section 143(3) of the Act contemplates an assessment undertaken by the Assessing Officer upon material bein....
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....to such aspect of the matter. Further, it is evident from the order impugned passed by the Appellate Tribunal that no notice under section 143(2) of the Act had, in fact, been issued in this case. In such a situation, where a notice that is mandatorily required to be issued is found not to have been issued, section 292BB of the Act has no manner of operation. The two substantial questions of law are answered accordingly as follows: (1) If the time for issuance of the notice under section 143(2) of the Act has expired or the time for completing the reassessment proceedings under section 153(2) of the Act has run out, the failure to issue such notice under section 143(2) of the Act would result in the entire proceedings, including any order of assessment, to be quashed. (2) Section 292BB of the Act does not dispense with the issuance of any notice that is mandated to be issued under the Act, but merely cures the defect of service of such notice if an objection in such regard is not taken before the completion of the assessment or reassessment. In addition, it is held that in the light of the Supreme Court dictum in Hotel Blue Moon (supra), the view expresse....
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....fore making assessment. The non-issuance of notice u/s 143(2), in non-curable defect and therefore, assumption of jurisdiction and subsequent order passed u/s 144 becomes bad-in-law. The case laws as cited above clearly support the legal ground raised by the assessee. Therefore, we hold that the assessment order passed for this year fails on legal grounds and the consequential additions made therein become unsustainable. We order so. This being so, no further adjudication is required in the appeal for AY 2018-19. The assessee's appeal stand allowed on this ground alone. 7. Other legal grounds for AYs 2012-13 to 2017-18 7.1 In one of the legal grounds, the assessee has challenged the impugned order for violation of principles of natural justice. It has been submitted that the assessee and his family members were prevented from approaching Hon'ble ITSC and the assessment orders were passed in a hurried manner. The Ld. AR has submitted that notices u/s 153A was issued on 03.08.2018 which was complied with by the assessee and the assessee expressed intention before Ld. AO to make settlement before Hon'ble ITSC. The assessee intimated lower authorities from time to time about the ....
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....may lead certain credence to the arguments of Ld. AR that the assessments were framed in a hurried manner, however, it is a fact that the assessments have been framed by Ld. AO in accordance with law after obtaining due approvals. The Ld. AO, in our considered opinion, was not required to wait till the last date as prescribed for framing the assessment particularly in the light of the fact that sufficient opportunities of hearing were granted to the assessee during the course of assessment proceedings but the assessee mostly sought adjournments, though for valid reasons and failed to file requisite details as called for by Ld. AO. Further, nothing prevented assessee to make application before Hon'ble ITSC during the pendency of assessment proceedings. It is further noted that the assessee was subjected to remand proceedings during the course of appellate proceedings to defend its case and therefore, no infirmities could be found in the impugned orders, on these grounds. The only conclusion that could be culled out of these facts is that due consideration could be given to the computation of voluntary income intended to be disclosed by the assessee and his family members in their se....
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....at such cross-examination was not necessary since the additions were not completely based on the statements but Ld. AO had analyzed the transaction patterns in Nagaland bank accounts and after due consideration of documentary evidences such as account opening forms, mobile numbers linked to accounts, details of cash withdrawals made from bank accounts etc. before making the impugned additions. Further, the Appellant had been confronted with the statements of Shri Rolly Thenucho Tunyl, Shri Zhori Kire & Shri G.K Rengma on 24.10.2017 in course of recording his statement u/s 132(4) on 24.10.2017 but he did not make any request for crossexamination of the above persons during the course of the search proceedings or during the assessment proceedings. Further, insofar as the retraction of Shri G.K. Rengma was concerned, no evidence has been filed to show that Ld. AO was informed of such retraction. Shri G.K. Rengma claimed in his retraction statement that the turnover figures in the original statement dated 08.06.2017 were incorrect. However, such retraction was not supported by evidence to prove the sources for the claim of business turnover made by Shri G.K. Rengma. Further, the retrac....
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....ould also be seen that Shri G.K. Rengma retracted the statement vide affidavit dated 01.04.2019 wherein he clarified that the statement was recorded incorrectly. The said retraction was supported by the audited financial statements of Shri G.K. Rengma as placed on record. The total turnover of Shri G.K. Rengma as reflected in these financial statements is much higher than the figures recorded in the statement. Under these circumstances, the third-party statements recorded from Shri G.K. Rengma as well as from other persons would lose evidentiary value. The statements of remaining persons i.e., land owners / various other contractors have never been independently examined by Ld. AO. The copies of statement were never confronted to the assessee and no opportunity of cross-examination was ever provided to the assessee. Accordingly, the ratio of decision of Hon'ble Apex Court in Andaman Timber Industries vs. CCE (62 Taxmann.com 3) would apply to the facts of the case and support the case of the assessee. Considering the same, no much weightage could be given to such statements and the same, on standalone basis, would not be sufficient to support the impugned additions. 7.8 In the la....
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....Bank Accounts belonging to 21 Nagaland based entities / individuals) or the bank accounts of the recipients (other than the assessee) viz. assessee's family members, various group concerns of the Sreevalsam Group or various other third persons, such as contractors, land owners and/or other persons having no linkage with the Sreevalsam Group etc. Under these circumstances, the debit entries in the bank accounts of the payers (i.e., loans advances/payments/investments made by Nagaland based parties) or the credit entries in the bank accounts of the recipients (i.e., loans and/or other receipts, whether or not in the nature of income) cannot be treated as unaccounted income of the assessee. In the light of these facts, Ld. AR submitted that the assessee's onus u/s 68 remain confined to explain the credit entries appearing in his own bank account and the assessee has discharged this onus successfully. The onus u/s 68 to explain the credit entries in the bank accounts of other family members, group concerns, third parties etc. lies on those respective persons / entities who are all separately assessed to tax and have no linkage to the assessee. Similar is the case with the additions mad....
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.... in bank accounts of other parties could be deemed to be the income of the assessee. The assessee's onus u/s 68 in respect of entries in books / bank accounts of other persons is only secondary i.e., consequential upon the successful discharge of the primary onus by the A.O of establishing the assessee to be the actual owner of the books of account / bank accounts held in the names of other persons. This position has been held by Hon'ble Supreme Court in the case of CIT Vs. Daulat Ram Rawatmull (87 ITR 349). Therefore, the credits appearing in the other bank accounts could not be held to be income of the assessee. In the above background, we proceed to deal with the quantum additions on merits in succeeding paragraphs. Adjudication on Merits Credit Entries Received from Nagaland bases entities / individual 8.1 The addition made on this account aggregates to Rs.243.19 Crores for all the years. Out of this, the amount of Rs.23.98 Crores has been received by the assessee whereas the remaining amount of Rs.219.20 Crores represent transfer to other family members / group concerns and third parties. These 38 bank accounts are held by 21 Nagaland based individual / entities and t....
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....ation to the assessee and his family members. However, Ld. CIT(A) upheld the action of Ld. AO on the ground that the assessee and his family members or their business concerns were beneficiaries from these accounts. The third parties to whom the payments were made were found to have business relations with the assessee group. Per contra, the assessee did not offer and specific explanation to the above transactions routed through these bank accounts and the assessee failed to prove the claims regarding the true nature of each of the transactions. The totality of the circumstances and the evidences gathered would show that the assessee routed his unaccounted money through the said 38 bank accounts to himself and his family members and group concerns. Therefore, the substantive assessments of receipts in the bank accounts were upheld. Aggrieved, the assessee is in further appeal before us. 8.4 From the perusal of assessment order, the undisputed position that emerges is that the assessee group has received credit entries from 21 Nagaland based individuals / entities who happen to be the government contractors and suppliers. The substantial credit in all these 38 accounts represents....
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.... course of such activity, he earned a substantial amount by way of his remuneration for providing liaisoning and consultancy services apart from some petty contract jobs. The Ld. AR further submitted that assessee's wife also started assisting various Nagaland contractors in respect of their book keeping, tender documentation, bank payments etc. against remuneration. For smooth discharge of her duties relating to the financial transactions, she was given power of attorney by these Nagaland contractors to operate their bank accounts also. The income thus generated by her was used for investment in her proprietary and partnership business in Kerala and also in acquiring landed properties. She also actively involved herself in the business of various group concerns of the Sreevalsam Group as partner/director/proprietor along with her two sons. Similarly, both the sons were well qualified and they actively involved themselves in establishing and expanding various business concerns/entities of the Sreevalsam Group alongwith their mother. They also actively involved themselves in various contract liaisoning works for various Nagaland tribal contractors in their individual capacities. The....
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....78.22 34,01,82,648.62 21,11,13,813.98 6,78,14,843.65 2013-14 24,12,65,239.45 32,58,56,265.08 15,05,28,555.36 7,03,58,331.86 2014-15 48,87,76,534.00 34,20,48,086.14 11,04,08,182.00 7,07,84,654.00 2015-16 51,40,58,792.34 73,48,34,649.16 37,26,70,975.86 6,86,35,730.00 2016-17 49,78,03,974.40 30,75,07,184.66 12,96,75,720.89 8,05,24,579.64 2017-18 - - 15,02,54,370.24 Total 2,72,88,89,918.67 2,53,14,98,870.02 1,34,08,48,380.67 47,95,32,538.39 8.7 In support of above submissions, Ld. AR placed on record several documentary evidences viz. net worth and turnover certificates of the Nagaland parties issued by their respective auditors. These documents are stated to be issued for the purpose of submissions along with Government tenders. The Ld. AR also placed on record copy of certificate issued by the Ld. Addl. CIT, Dimapur in regard to the identity and financial worth of Shri G.K. Rengma, copies of government work orders received by the abovenamed Nagaland parties, certificates in support of ownership of immovable properties by such Nagaland parties, audited financi....
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....d and therefore, the same were declared in IDS, 2016. Post search proceedings, the remaining undisclosed income was worked out which was intended to be settled before Hon'ble ITSC. 8.8 The additional income proposed to be disclosed by the Appellant and his family members vide their respective settlement applications u/s 245C(1) of the Act has been tabulated by the Ld. AR in his written submissions as under (Table 10 of page no.73 of written submissions containing 140 pages) : The details of taxes paid towards impending settlement applications has been tabulated as under (Table 15 on page no.78 of paper-book containing 140 pages): - The Ld. AR thus submitted that the assessee intended to make further disclosure of Rs.11.92 Crores before Hon'ble ITSC, the further breakup of the same has been extracted in Table-11A of written submissions. The copies of the proposed settlement applications of the Appellant and his family members have also been filed before us. 8.9 The Ld. AR further submitted that the entire workings of additional income were filed before the Ld. CIT(A) vide submissions dated 15.03.2021 and 16.09.2021 and the same have also been enclosed in the written s....
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....third-party transfers aggregating to Rs.111.93 Crores have also been submitted in paper book no.6 as placed before us. The assessee also filed pointwise rebuttal to the allegations of Ld. AO as made in the assessment orders. Our findings and Adjudication 9. The subject matter of dispute in the instant case is the debit / transfer entries aggregating to Rs.243.19 Crores from 38 bank accounts of 21 Nagaland based parties to the accounts of the assessee, his family members, concerns/entities belonging to the Sreevalsam group and various other persons allegedly linked to the Sreevalsam Group. As per the Ld. A.O, the entire debit entries of Rs.243.19 Crores as appearing in the impugned bank accounts of the Nagaland parties are in the nature of the assessee's own unaccounted funds which have been brought back in the books of the Appellant, his family members and group concerns in the garb of loan. Relying on statements of various persons (discussed supra), the Ld. AO has opined that the assessee is the actual owner of the business / bank accounts of the Nagaland based contractors (namely Mr. G.K. Rengma & Mr. Rolly Thenucho Tunyl) who are merely name lenders of the business owned b....
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....ent payments / investments / cash withdrawals etc. made by Nagaland parties on their own account for the purposes of their own businesses which are not relatable to the income of the Sreevalsam group. Pertinently, the said transfers have neither originated nor culminated into the bank accounts of the assessee or any of his family members or any of the concerns / entities of the Sreevalsam Group. Therefore, these entries could not be held to be undisclosed income of the assessee. 12. Out of credit entries aggregating to Rs.131.26 Crores. The assessee group made IDS, 2016 disclosure for Rs.21.13 Crores which include assessee's disclosure of Rs.6.81 Crores and other family members' disclosure of Rs.14.31 Crores. The requisite forms, declarations including Form 3 has been placed in the paper-book which would dispel the concern raised by Ld. CIT(A) in the impugned order. The other family members made payment of Rs.4.58 Crores for subsequent transfers which have no connection with the present assessee. The unsecured loans received from these parties aggregated to Rs.88.41 Crores out of which loans of Rs.11.72 Crores has been received by the assessee (Rs.3.22 Crores from Shri G.K. Reng....
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....see in all the years stands partly allowed. 14. The quantum of addition as sustained by us for various years would be as under - No. AY Amount (Rs.) 1. 2012-13 81.40 Lacs 2. 2013-14 69.50 Lacs 3. 2014-15 -- 4. 2015-16 180 Lacs 5. 2016-17 149 Lacs 6. 2017-18 65 Lacs Total 544.90 Lacs 15. Cash deposit in the bank accounts of the assessee 15.1 The Ld. AO made addition of Rs.27.36 Crores against cash deposits found deposited in the bank accounts of assessee, family members and other group concerns on the allegation that no details were furnished by the assessee. The Ld. CIT(A) rejected assessee's plea that the assessee family uses the cash as family pool and the cash deposits could be added to income after considering the entire family cash balance after eliminating inter-family cash transfers. The assessee also submitted that the cash deposits were sourced partially out of income disclosed in the IDS 2016. Further, part of cash deposits was disclosed as contract income in the returns of income. However, all these pleas were rejected by lower authorities on the ground that specific explanation f....
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....1,460,000 22,728,000 Total 29,192,874 47,306,444 66,075,986 48,598,700 44,198,525 34,801,410 3,461,750 273,635,689 15.3 The adjudication of Ld. CIT(A) has sustained the additions to the extent of Rs.6.26 Crores being cash deposited in the assessee's own bank account and the cash deposit of Rs.5.83 Crores in Nagaland Bank accounts maintained by family members / group concerns. The Ld. AR has submitted that the assessee has filed sufficient proof of declaration under IDS 2016 and the benefit of declaration so made, on this count, ought to have been granted to the assessee. It has been submitted that the assessee group has declared cash income of Rs.11.90 Crores under IDS, 2016 as tabulated in Table 34A of the written submission out of which amount of Rs.3.68 Crores pertain to the assessee. Further, part of cash deposit was sourced out of contact income disclosed in the respective returns of income filed by the assessee group. The balance cash deficit was worked out by the assessee with a view to make settlement before Hon'ble ITSC and therefore, the additions to that extent may be sustained. 15.4 The Ld. AR submitted that such income inte....
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....es for deposit in their bank accounts for subsequent bank transfers from them; (vii) Donation to friends and relatives; (viii) Payment of Chit Fund Installments (ix) Payment of Advance Tax / Self-Assessment Tax (x) Loans to Friends and Staff members. 15.5 The Ld. AR thus submitted that the additions with respect to the assessee could be restricted to the cash gap / deficit of Rs.5.75 Crores as worked out by the assessee in the cash flow statements whereas the cash deposited in the Nagaland based bank accounts belonging to family members / group concerns may be deleted since those entities were separate legal and taxable entities and therefore, the cash thus deposited in their accounts could not be held to be undisclosed income of the assessee. The family members / group concerns had independent source of income and cash generated by them was deposited in their bank accounts periodically. Our findings and Adjudication 16. After going through the cash flow statement of the assessee group, we find that cash flow statements prepared by the assessee give a complete narration of all the accounted and unaccounted cash entries of the assessee group for the impugned years. The cash....
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.... 2017-18 1,28,05,000 Total 5,35,15,000 19. Since the assessee group has incorporated the alleged cash payment of Rs.16.10 Crores for purchase of immoveable properties in these cash flow statements, the separate addition made to that extent would also not be sustainable. Even otherwise, the properties have not been purchased by the assessee rather this addition is subject matter of consideration in other family members / entities which are separate taxable entities and therefore, the addition for those entities would not be sustainable in the hands of the assessee. 20. In the result, the corresponding grounds raised on these issues stand disposed-off accordingly. 21. Other Credit Entries in Bank Account of the assessee and other family members / entities 21.1 The Ld. AO has made addition of Rs.22.55 Crores under this head. However, Ld. CIT(A) held that other credit entries in the bank accounts of family members / group entities for Rs.18.78 Crores would not be sustainable since these entities were separate taxable entities. The balance credit entries of Rs.3.77 Crores as appearing in assessee's bank accounts were restored back to the file of Ld. AO to find out....
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....extent are otherwise not sustainable. The remaining credit entries for Rs.353.64 Lacs pertain to AYs 2012-13 & 2017-18. Out of this amount, the assessee has identified amount of Rs.88.50 Lacs being the entries which are lacking complete details / supporting evidences. The remaining entries are either not in the nature of income and a part of these entries has already been disclosed under IDS 2016. Few of the entries have already been disclosed in the Income Tax Returns of the assessee. The complete details of these entries have been placed by the assessee on page numbers 58 and 59 of Paper Book No.3A. We have perused the same. We find that all the other credit entries are in the nature of maturity proceeds of LIC, Chit money received by the assessee, directors loan withdrawn, mutual funds proceeds from UTI, refunds etc. These entries are not in the nature of assessee's income. Therefore, the additional amount of Rs.88.50 Lacs as worked out by the assessee is found to be correct and therefore, sustained in the hands of the assessee. The remaining addition stands deleted since the same is not the in nature of income. The additions as sustained by us for various years would be as unde....
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....5,594 2,250,000 2,361,000 3102,500 5,683,057 67,179,913 158,346,658 144,195,875 143,562,680 15,599,500 69,780,230 109,543,142 89,536,756 146,087,637 125,470,336 260,036,025 90,918,441 9,467,873 21,602,760 11,712,856 90,751,682 29,500,114 27,033,495 258.172.945 21.343,557 682,992,488 333,932,252 823,734,600 162.885,493 56.533.609 No category indentified by Dept 31,194,798 27,614,735 500,000 Total 265,270,270 287,124,682 274,184,066 6,984,196 489,175,429 13,572,000 11,503,466 91.369,195 590,230,521 525,82,171 2431,965,139 Document 2 SUMMARY OF DECLARATION BEFORE ITSC FY AY 2011-12 2012-13 2012-13 2013-14 2013-14 2014-15 2014-15 2015-16 2015-16 2016-17 2016-17 2017-18 2017-18 TOTAL 2018-19 MKR PILLAI VALSALA RAJ 5,901,404 32,184,393 756,067 33,307,612 25,009,559 18,512,511 3,556,800 119,228,346 73,722,390 23,476,376 1,971,124 18,859,710 17,518,975 VARUN RAJ 10,017,206 2,801,463 12,693,978 7,179,271 15,227,166 4,915,195 7,653,796 140,463,771 55,572,880 ARUN RAJ 72,569,348 16,069,879 0 6,301,566 ....