TaxTMI 
TaxTMI 
2023 (9) TMI 890
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....50, 8052, 8053, 8056, 8057, 8059, 8061, 8064, 8065, 8067, 8068, 8074 & 8080 of 2022 W.P.Nos.20114, 20116, 20119, 20125, 20127 & 20130 of 2020 & WMP.Nos.24820, 24823, 24828, 24830, 24837, 24839, 24844, 24845, 24847, 24848, 24852 & 24853 of 2020 W.P. Nos.27154, 27157, 27168, 27166, 27181, 27160, 27184, 27186 & 27178 of 2021 and W.P. Nos.24407 of 2021 etc. batch WMP.Nos.28643, 28645, 28646, 28648, 28649, 28660, 28662, 28656, 28657, 28674, 28677, 28652, 28653, 28679, 28682, 28686, 28687, 28669 & 28672 of 2021 W.P. Nos.25826, 25830, 25832, 25835, 25840, 25843, 25845 and 27078, 27083, 27085, 27092, 27096 & 27100 of 2021 and WMP.Nos.27303, 27305, 27309, 27310, 27312, 27313, 27314, 27315, 27322, 27323, 27325, 27326, 2327, 27328 and 28543, 28548, 28545, 28553, 28555, 28566, 28567, 28569, 28572, 28560, 28561, 28574 & 28576 of 2021 THE HONOURABLE D R. JUSTICE ANITA SUMANTH For the Petitioners Mr.R.V.Easwar, Senior Counsel for Mr.M.V.Swaroop Mr.P.S.Raman, Senior Counsel for Mr.M.V.Swaroop Mr.AL.Somayaji, Senior Counsel for Mr.M.V.Swaroop For the Respondents : Mr.A.P.Srinivas, Senior Standing Counsel ORDER This common order is passed in the cases of Agni Vishnu Ventures Pvt....
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....n docket sheet noting dated 01.11.2022. Thus, this ground of challenge does not survive. (vii) The satisfaction note produced before the Court reads as follows: 1. There was search in the case of M/s. Agni Estates & Foundation Pvt Ltd, a Chennai based real estate company, on 05.07.2018. The company was incorporated in the year 1992 by Shri.Rajan Jayaprakash Narasimulu, who is a Director and the main person operating Agni group of companies. During the course of search on 05.07.2018, at M/s. Agni Plots, No:30/16, Conron Smith Road, Gopalapuram, Chennal -600086, certain incriminating materials with respect to foreign companies, bank accounts, trusts associated with the Agni Group of companies/ its Managing Director-main person Shri.R.NJayaprakash were found and seized vide annexure ANN/ARS/AGP/LS/S1 to S20. These seized materials pertain to the following entities: (i) M/s.Mine infra Consultants Pte Ltd., Incorporated in Singapore (ii) M/s.Yalova Holding Ltd, incorporated in Seychelles. (iii) M/s.Yarrow Properties Inc., incorporated in British Virgin Islands (iv) M/s Bramerton Investments Pte Ltd., incorporated in Singapore ....
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.... a company In Singapore which has a bank account in Hongkong. It is proposed that the payment to Mr.A will be made by the BVI company to A's company in Singapore as though the payment were for the project executed by X's subsidiary in Dubai/Jordan. Since the BVI company does not have a bank account, the Singapore company would act as its fund manager for the actual purpose of receiving and remitting funds and for this it will charge fund management fees at 5%. Query: 1. What would be the tax implication in Singapore in the case of the Singapore company in respect of the 5% fund management fees. 2. Is there any possibility of deeming the entire Income (not 5%) as income of Singapore company. (ii) Facts of the case The common understanding is that taxation in Singapore is receipt based taxation. Therefore only where an income is received in Singapore, taxation would arise in Singapore. In the case of Hongkong, however, taxation is source based. Therefore, if an Income has its source in Hongkong, no matter where it received, the income would be subjected to tax in Hong Kong." The above makes it clear that ....
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....er, prima facie, concludes that there have been certain remittances made overseas in respect of the services rendered in India. (x) He also refers to the investments made by Soach Global Strategic Investments Ltd. and Astraea Funds Ltd., both based in Mauritius, in the shares of the petitioner company and for this purpose refers to information contained in a pen drive that was seized from the premises of the Auditor on 19.03.2019. (xi) The petitioner points out that the reference to 19.03.2019 relates to a search that had been conducted in another entity forming part of the Vel's group of Institutions. A challenge is laid on the credibility of this information and whether at all it can be invoked to initiate the impugned proceedings, seeing as, in the present case, the proceedings are stated to be based on a search in Agni Foundations which took place in July, 2018. (xii) Finally, they draw attention to the statement of the Assessing Officer at paragraph 5 to the effect that the remittances made are 'suspicious' as there was no credible income-earning activities by the concerns warranting such remittances at all. (xiii) The satisfaction note refe....
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....hands of R.N.Jayaprakash are quashed. Thus, and as the demand raised has not pursued as against the petitioner, there is no difficulty faced by the petitioner on this score either. II. Facts and rival contentions in the matter of Vishnu Surya Ltd: 10. W.P. Nos.27154, 27157, 27168, 27166, 27181, 27160, 27184, 27186 & 27178 of 2021 challenge orders of assessment passed by the Assessing Officer under Section 143(3) read with Section 153 C consequent on the search in the case of Agni Estates and Foundations Pvt. Ltd. Orders of assessment state that in the course of search, certain incriminating materials had been found with respect to foreign companies, bank accounts and trusts associated with the Agni Group of companies and its Managing Director R.N.Jayaprakash. Being of the view that such materials related to the petitioner, satisfaction under Section 153C was drawn and notices issued. 11. Though the affidavit filed in support of the Writ Petition states that the conduct of search in the premises of Agni Estates and Foundation Pvt. Ltd. was itself in violation of the proper procedure set out under Rule 112(13) of the Income Tax Rules, 1962, for examination of electronic reco....
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.... Middle East Ltd., UAE and several other companies, including M/s.A.S.Coal Resources Pte Ltd., Singapore, M/s.Bramerton Investments Pte Ltd., incorporated in Singapore. M/s.Yalova Holding Ltd, incorporated in Seychelles, was promoted by Shri.R.N.Jayaprakash and has a bank accounts with Societe Generale Bank & Trust Singapore branch., with Bank J.Safra Sarasin at Singapore. 3. During the course of search at at M/s.Agni Plots,No:30/16, Conron Smith Road, Gopalapuram, Chennai-600086, a set of loose sheets numbering from 1 to 106 were found and seized vide annexure ANN/ARS/AGP/LS/5-9. In the said loose sheets, pages 88 to 95 were Tax consultation advice, provided by M/s.RAFFLES TAX, 120, Lower Delta Road, #10-05, Cendex Centre, Singapore 169208, addressed to Shri.R.Sundararajan, Managing Partner of M/s.Sundararajan Associates, Chartered Accountants, No:7, Vyasarpadi Gangadharan Street, Numgambakkam, Chennai 600034. M/s. Raffles is a Singapore headquartered corporate solutions provider specialising in company formation, corporate secretarial, accounting, payroll, taxation, and expansion advisory services. Shri R.Sundararajan, CA is the auditor of the M/s.Agni group. The said co....
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....undararajan, auditor of the Agni group on 19.03.2019 contained income details of Agni group from FYs:2010-11 to 2017-18 totalling Rs.88,34,30,858/-, which includes Rs 17,39,00,000/- received by the group from AFCONS/OLFS during FY 2015-16, 2016-17 and 2017-18 which were not offered to tax. The sum of Rs.88,34,30,858/-, includes Foreign remittances received by the group during the period FYs: 2010-11 to 2014-15 amounting to Rs.48,34,79,108 (US$ 96,75,000). In the said pendrive it was seen that a sum of US$ 13,43,625, that is Rs.6 Crores was received by the assessee on 03.03.2011 and 05.02.2011 (AY:2011-12). The pendrive also contained an entry dated 07.01.2014 for the receipt of US$ 1,32,250, that is Rs.59,05,666/- (AY:2014-15). These receipts have not been admitted in the returns of income filed by the assessee for these years. 5. There is no credible income earning activities by the overseas concerns associated/floated by the Shri.R.N.Jayaprakash and for the receipt of foreign remittances into his companies promoted in India, including M/s.Vishnu Surya Logistics Pvt Ltd. The remittances into M/s. Vishnu Surya Logistics Pvt Ltd are suspicious in nature. Hence, the seized m....
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....3A) 1. Name of the Group searched Shri.Ishari K Ganesh, Smt.Arthi Ganesh, M/s.Vels Educational Trust and M/s. Vel Ganesh Educational Trust and M/s.Vels Institute of Science, Technology and Advanced Studies 2. Name and PAN of the person referred to in section 153A Shri Ishari K Ganesh PAN:AAAPI4538D Smt.Arthi Ganesh; PAN:AANPG0641E M/s.Vels Educational Trust; PAN: AAAAV0064G; M/s.Vel Ganesh Educational Trust; PAN:AAATV9803C M/s.Vels Institute of Science, Technology and Advanced Studies; PAN:AAATV9804F 3. Date of initiation of search in the case of the person referred to in section 153A 19.03.2019 4. Name, address and PAN No. of the person whose case action under section 153C is proposed M/s Vishnu Surya Projects & Infra Pvt Ltd PAN:AADCS0735L 5. Specific details of the seized material on the basis of which under section 153C is proposed: (m) Nature of the seized material (money/bullion/jewellery/other valuable article or thing/books of account/documents) (n)Description of the seized material (o) Address of premise/place from where such material was seized. Incriminating evidences seized vide annexure ANN/SBC/RS/ED/S vide panchanama....
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.... Prasad Narain Deo and Others V. State of Bihar and another AIR 1956 Patna 104. In that case, the Court held that it was well established that where the jurisdiction of administrative authority depends upon a preliminary finding of fact, the High Court is entitled in a proceeding for a Writ of Certiorari to determine whether or not that finding of fact was correct. The Court, quoting Farewell L.J. in R. V. Shoreditch Assessment Committee (1910) 2 KB 859 held as follows: 25. It is well established that where the jurisdiction of an administrative authority depends upon a preliminary finding of fact, the High Court is entitled in a proceeding for a writ of certiorari to determine upon its independent judgment whether or not that finding of fact is correct. The matter has been very well put by Farwell L.J. in - 'R.v. Shroreditch Assessment Committee', (1910) 2 KB 859 at p.879 (A): "The existence of the provisional list is a condition precedent to their jurisdiction to hear and determine, and as the claimant is entitled to require them to hear and determine, they cannot refuse to take the steps necessary to give to such jurisdiction; if they do, their refusal may be ca....
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....s lapses in the procedure, such as notices under Section 143(2) being incomplete. For instance, notice under Section 143(2) dated 22.01.2021 for AY 2019-20 contains the heading 'S.No. Issues', but there are no serial numbers or issues enumerated therein. A notice of this sort is a farce and militates against being the basis for further adjudication proceedings. 26. In the present case, orders of assessment have been passed for A.Ys.2011- 12 to 2013-14 under Section 143(3) read with Section 153C and for AYs.2014-15 to 2019-20 under Section 143(3). 27. Though notices under Section 153C have been issued in all cases, the satisfaction note refers only to two years (AYs. 2011-12 and 2014-15) and show cause notices have been issued only for those two years. Hence, the orders of assessment for the other years must go. 28. Prior to completion of proceedings, the petitioner has also specifically sought an opportunity of cross examination that has not been granted to it. This request is vide submission dated 29.03.2021, which is, admittedly, been received by the officer on 31.03.2021. Despite this request being on record, the officer has proceeded to pass the impugned orders dated 27.0....
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....various dates which totalled to Rs.1,31,75,000/-. These cash payments were not reflected in the Tally books of accounts seized during the course of search. The purposes and the entity on behalf of which the payments were made are not disclosed. 2. Further, it was seen from loose sheet no: 36 of ANN/ARS/AGP/LS/S-6, that, during the period 16.05.2017 to 24.06.2017 a total sum of Rs.2,89,13,103/- was mentioned. The sheet also had a noting "cash deposited" on 22/6, 27/6, 28/6, 29/6 & 30/6 totalling 150.00 meaning Rs.1,50,00,000/-. Further, vide loose sheet no: 35 of ANN/ARS/AGP/LS/S-6, a sum of Rs.4,64,83,103/- was written against various dates starting from 27.06.2017 to 12.07.2017. Vide loose sheet no:37 of ANN/ARS/AGP/LS/S-6 payments totaling Rs.1,86,18,750/- on various dates ranging from 01.07.2017 to 12.07.2017 were written. These cash transactions were not reflected in the Tally books of accounts seized during the course of search. 3. These transactions will have bearing in the determination of the total income of the assessee M/s.Balaji Charitable and Educational Trust (M/s.Agni College of Technology) (PAN: AABTS7300Q) for AY: 2018-19. Hence, I am satisfied tha....
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.... April-2016 to March-2018 were found. The total for April-2016 to March-2017 was Rs. 1,44,37,837/--and for the period April-2017 to March-2018 was Rs.5,22,28,923/-. 4. It was seen from the ITR of M/s.Fourth Force Surveillance, Indo Pvt Ltd. the total sales reported, for AY:2018-19 was Rs.4,66,23,794/-. Hence, there is a shortfall of Rs.56,05,129/- for AY:2018-19 in the admission of total income. 5. These details of entries will have a bearing in the determination of the total income of the assessee for AY: 2018-19. Hence, I am satisfied that this is a fit case for assessment/reassessment u/s.153C of I.T. Act, 1961 for AYs: 2013-14 to 2018-19. Issue Notice u/s 153C of the Income Tax Act, 1961 for AYs:2013- 14 to 2018-19. Date: 17.09.2020 (M.Vivekanandan) Deputy Commissioner of Income tax, Central Circle 2(1), Chennai 35. Both satisfaction notes reveal the existence of seized material relatable to Assessment Year (AY) 2018-19 alone. This forms the crux of the petitioners' challenge to the orders of assessment that were subsequently framed for the block period 2013-14 to 2018-19. 36. The Trust and Fourth Force would point out....
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....s returns of income only on 20.03.2021 leaving the Assessing Officer very little time to take the matters up for hearing and complete the same. 42. However, and despite this, all efforts have been made by the officers to ensure adherence to principles of natural justice and legal principles involved. There is thus, no legal flaw in the assessments made. Moreover, the assessments are only protective and the substantive assessments have been made in the case of R.N.Jayaprakash and it is for the petitioners to challenge the same by way of statutory appeals. 43. The common legal submissions made relate to the validity of the notices under Section 153 of the Act. The petitioners would argue that the statutory prescription of Section 153C itself calls for the existence of incriminating material specifically relatable to each assessment year. 44. In the satisfaction note relating to the some of the years, the satisfaction notes do not reveal any incriminating material found relatable to the petitioners and hence, in such instance, the notices and all proceedings thereafter are liable to be quashed. For this purpose, they rely upon the judgment of the Hon'ble Supreme Court in the ....
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.... such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A .......... 52. It was amended in 2014 to read thus: Assessment of income of any other person. 153C.[(1)] Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person [and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such ot....
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....ates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person] [and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person [for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and] for the relevant assessment year or years referred to in sub-section (1) of section 153A. ......... 52. What is relevant to the present case is Section 153C as it stood post the amendment in 2017. The interpretation of the revenue is that upon recording of satisfaction by the Assessing Officer that the books of accounts/documents/assets, seized or requisitioned have a bearing on the determination of to....
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....arch. Both the provisions commence with a non-obstante clause, notwithstanding the provisions of Sections 139, 147, 148, 149, 151 and 153 and relate to a period of 6 assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted or requisition made and operates simultaneously with both Sections 153A and 153C. 59. In addition, in the case of such other person, since satisfaction has to be recorded by two Assessing Officers (of the searched entity as well as third party) and there may be some elapse in time for the transfer of records from the first officer to the second, Section 153C(2) provides for the framing of the assessment for an additional year, ie., the year of search as well, in certain demarcated situations. Since that situation does not arise in the present case, I desist from elaborating further in this regard. 60. With the amendment of the provisions in 2017 by Finance Act, 2017, with effect from 01.04.2017, the Department was also entitled to extend the block period for a further period of 4 years in addition to the 6 years originally provided, though for the 4 years brought within the ambit of the block....
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....search. 66. My attention has also been drawn specifically to the use of the word 'if' that figures prior to the recording of satisfaction. The word 'if' is a conjunction and is understood to introduce a condition. The Advanced Law Lexicon of P.Ramanatha Aiyar's 5th Edition (volume 2 D-I) defines the word 'if' to say that 'the word 'if' in a stipulation generally creates a condition precedent.' 67. Thus the petitioners argue that the condition precedent for issuance of notice is the recording of satisfaction that the seized material must relate to specific years comprised in the block, whereas the counter of the Department is that, though a condition precedent, it would suffice that the materials relate to one year which would then open up the avenue of assessment for the entirety of the block period. 68. The search in the case of Sinhgad was in 2005 when Section 153 C as it stood then, did not specifically make reference to 'recording of satisfaction' in the context of the 'period' for which notices will be issued. Despite this, the Hon'ble Supreme Court has understood the scheme of block assessment under Section 153 C to mean that notice under Section 153C....
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....lace under Section 132 of the Act, notice under Section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYS immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYS will have to be computed by the AOS as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words, there will be only one assessment order in respect of each of the six AYS "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessmen....
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....iod, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b ) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: 153C. [Notwithstanding anything contained in Section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied , that - (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, re....
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....ty in accordance with the procedure stipulated under Section 153A. 78. In my considered view, there is a vital distinction between the object, intention as well as the express language of Sections 153A and 153C. Section 153A addresses the searched entity and the procedure set out is evidently a notch higher for this reason. There is no discretion or condition precedent under Section 153A to the issuance of notice save the conduct of a search under Section 132 or making of a requisition under Section 132A. Upon the occurrence of one of the aforesaid events, it is incumbent upon the officer to issue notice under Section 153A to the searched entity in line with the procedure stipulated. 79. Section 153C however requires the satisfaction of two conditions prior to issuance of notice: i) Recording of satisfaction by the Assessing Officer of the searched entities that some of the incriminating materials relate to a third party. ii) Recording of satisfaction by the Assessing Officer of the third party that the incriminating materials have a bearing on the determination of the total income of that third party. 80. Notice under Section 153C would have to be issued....
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....ure of the issue itself might need more, and in-depth probing before such year-wise determination is possible. In such cases, the officer would be well within his right to state the nature of the issue and detail the difficulties that present themselves in precise bifurcation at that stage. This would reflect application of mind and, in my considered view, would serve as sufficient compliance with the statutory condition. 86. If the argument of the petitioners is to be accepted, the assessments for the years 2016-17 and 2017-18 would also have to go, since the satisfaction note does not contain a reference to the small note book that have admittedly been seized and are part of the records, though omitted to be mentioned in the satisfaction note. 87. As on date, when the matters are being heard, the assessments have been allowed to be proceeded with till completion of assessment, which gives the Court the benefit of not just the satisfaction note but the show cause notices as well as the orders of assessment. These records reveal the variation between the satisfaction note and the assessment order in terms of the records seized, making it evident that there has been an omissio....
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....gni Plots, No:30/16, Conron Smith Road, Gopalapuram, Chennai - 86. 6. 2018-19 ANN/ARS/AGP/LS/S M/s.Agni Plots, No:30/16, Conron Smith Road, Gopalapuram, Chennai - 86. 7. 2019-20 ANN/ARS/AP/B&D/S M/s.Agni Plots, No:30/16, Conron Smith Road, Gopalapuram, Chennai - 86. Fourth Force: S.No. Assessment Year Seized Material based on which addition made in Assessment order Premises from which the material was seized 1. 2013-14 - T.G.Balaji, No.22/10, Balaji Nagar, 4^th Street, Royapettah, Chennai-600014 2. 2014-15 - T.G.Balaji, No.22/10, Balaji Nagar, 4th Street, Royapettah, Chennai-600 014 3. 2015-16 - T.G.Balaji, No.22/10, Balaji Nagar, 4th Street, Royapettah, Chennai-600 014 4 2016-17 - T.G.Balaji, No.22/10, Balaji Nagar, 4th Street, Royapettah, Chennai-600 014 5. 2017-18 - T.G.Balaji, No.22/10, Balaji Nagar, 4th Street, Royapettah, Chennai-600 014 6. 2018-19 ANN/SC/LS/S ....
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....tes to 8 entities incorporated in Singapore, Seychelles, British Virgin Islands and Mauritius. 95. The information of R.Sundararajan, Chartered Accountant referred to in the satisfaction notes extracted in the cases of Agni Vishnu Ventures Pvt. Ltd., and Vishnu Surya Project and Infra Pvt. Ltd. above has been extracted in the present satisfaction note as well. The conclusion is also apposite that there were no services of the nature that would justify the payments made to the overseas concerns. 96. Based on a prima facie application of tax evasion, the remittances made have been brought to tax in this petitioner's hands. In addition, there are cash transactions reflected in small pocket sized note books, seized in the course of searches in other premises, which are alleged to be unaccounted. 97. The petitioner has filed returns in response to notices under Section 153C and has received show cause notices as well. One of the points raised is that the satisfaction note concludes with the officer stating 'this is a fit case for assessment/re-assessment under Section 153C of the Income Tax Act, 1961'. 98. It is argued that there could be no ambiguity in the satisfaction not....
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....n raised in the 144A application have been duly considered by him even while granting approval under Section 153D of the Act. 104. The impugned orders of assessment have come to be passed on the last day of limitation, admittedly, without granting an opportunity of cross examination as sought for by the petitioner. 105. Per contra, it is the case of the respondents that additions made did not hinge entirely on those statements, and that there have been other incriminating materials that have been found based on which the additions/disallowances have been made. That may well be the case. 106. However, it is a settled position that once a sworn statement is recorded from an individual which is relied upon in arriving at a decision in the case of an assessee, the assessee be given a copy of the sworn statements and thereafter, an opportunity to cross examine the persons concerned, if sought. 107. In the present case, despite admittedly, there having been requests made for cross-examination, no opportunity has been granted and the impugned orders of assessment have come to be passed denying such an opportunity to the petitioner. 108. Thus, while reiterating the conclusio....