TaxTMI 
TaxTMI 
2024 (6) TMI 515
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....ed in holding that AO has legally and validly assumed jurisdiction u/s 153C of the Income Tax Act in absence of any incriminating material found during the search on Mr. K. S. Dhingra and Mr. G. S. Dhingra on 16.09.2011. 4) That the Ld. CIT(A) erred in law and on facts in holding that books of accounts prepared in raw form on outsourcing basis on commercial terms are of incriminating nature for assuming jurisdiction u/s 153C of the Income Tax Act. 5) That the Ld. CIT(A) erred in law and on facts in holding that AO has interpreted and applied the directions of Hon'ble High Court vide its order dated 02.05.2018 in the writ proceedings in correct legal manner in deciding the issue of assumption of jurisdiction u/s 153C of the Income Tax Act. 6) That the Ld. CIT(A) erred and on facts in law in holding the action of the Ld. AO in relying on:- i) Inadmissible statements recorded during survey mainly of Mr. Rajneesh Gupta, Accountant u/s 133A of the Income Tax Act for assuming jurisdiction u/s 153C of the Income Tax Act. ii) Illegally holding that although the documents found per se don't reveal any undisclosed income yet such documents....
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.... 29,70,14,630/- from the audited Balance Sheet by treating the said audited Balance Sheet of the foreign company as incriminating in nature. 15. The Ld. CIT(A) failed to appreciate that all necessary disclosures to RBI, Tax Authorities in the assessments of parent holding company, Statutory Declarations in Statutory Forms 3ECB etc. had been made and no addition could be made as there was no undisclosed income in the documents impounded/seized. 16. That the ld. CIT(A) erred in law and on facts in holding that assessee company is resident in India within the meaning of section 6(3)(ii) of the Income Tax Act ignoring the vital evidences such as Board Meeting held overseas and all business activities carried out in overseas. 17. That the Ld. CIT(A) erred in law and on facts in concluding that the documents indentified in the satisfaction note dated 08.10.2013 convey that management and control of the affairs of assessee foreign company was wholly situated in India during all the year under consideration. 18. That the Ld. CIT(A) erred in law and on facts in not accepting the contention that residential status of an assessee is required to be determine....
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....sed on no evidences and are prayed to be expunged in Para 5.7.3 of CIT(A)'s Order. 25. That Ld. CIT(A) erred in law and on facts in holding that Mr. K. S. Dhingra and Mr. G. S. Dhingra are the Principal Officers within the meaning of section 2(35) of the Income Tax Act. 26. That the Ld. CIT(A) erred in law in not calling for the records from A.O. in respect of direct enquiries made by Tax Department from the corresponding authorities in Jersey to check the residential status of the assessee. 27. That the Ld. CIT(A) failed to appreciate that assessee could not be a party to such enquiries and could not provide any evidence as alleged by the CIT(A). 28. Without prejudice, if assessee is treated as resident in India, the Ld. CIT(A) erred in law and on facts of the assessee's case in not directing the AO to exclude the dividend income received from Indian companies u/s 10(34) / 10(35) of the Income Tax Act on wholly irrelevant considerations." 3. A search & seizure action u/s 132 of the Income Tax Act, 1961 was conducted on Dhingra Group of cases on 16.09.2011. During the course of search operation, the Revenue alleged that certain documen....
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....edings in accordance with the law is open for the Revenue. The above order was passed wherein other cases with similar issues were also tagged, including your case. 4. It is brought to your notice that subsequent to the order of Hon'ble Supreme Court, the Board has issued Instruction No. 1 of 2023 dated 23.08.2023 vide F. No. 279/Misc./M- 54/2023-ITJ. Para 7.2.1 of the instruction is reproduced as under:- "In the lead and all the tagged cases, necessary action u/s 148/147 need to be taken in the situation stated by the Court in the para 14(iv) of the said order in view of section 150 of the Act. The AO will be required to reopen the cases following the currently applicable procedure for reopening i.e. following the procedure prescribed u/s 148A of the Act as inserted by Finance Act, 2021 in accordance with the law laid down by the Hon'ble Supreme Court by its order dated 04.05.2022 in Union of India vs. Ashish Agarwal case (2022 SSC Online SC 543). In view of the specific provisions of section 153(6) of the Act, all the cases reopened u/s 147/148 of the Act will be required to be completed by 30.04.2024." 5. During the course of assessment proceedings....
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....: Please state the procedure after daily book keeping is done by you with respect to accounts of UK Paints (Overseas) Ltd.? Ans: Towards the year end the account books are closed and final balance sheet and Profit & Loss account are submitted to higher authorities including Sh. Naveen Choudhary, CFO of UK Paints (India) Pvt. Ltd. For finalization. Q: How do you prepare the accounts pertaining to UK Paints Overseas Ltd. Ans: I Prepare the accounts including general entries based on bank statements of the bank accounts maintained in the name of UK Paints (Overseas Ltd.) The above fact was further confirmed by Mr. Naveen Choudhary, CFO, in his statement recorded on oath under section 132(4) on 16.09.2011. The relevant excerpts are reproduced below for ready reference: Q. No. 24: Please explain who prepare the accounts of all the overseas company? Ans: The bank accounts of all the overseas company are received by us and on the basis of that accounts we prepare the accounts of the overseas company in India. Further the Director of the company in India, Sh. G.S. Dhingra, in his statement recorded on 17.09.2011 during the cour....
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....ere are no employees in Jersey and this is only an investment company therefore books of accounts are prepared in office and the audit is conducted by the CA firm Clive Tomes & Co. and they only file the return in Jersey after due diligence. There is an extremely important admission in the above statement of Sh. K. S. Dhingra. In his answer to Q. No. 13, Sh. K. S. Dhingra, who is the main and controlling director in UKPO, has categorically admitted two things: • that the "owners and ultimate beneficiaries" of UKPO are located in India, and • that is why the CFO & accountant in India "must oversee, advise, supervise if necessary, if required the operating people of overseas entities whose task it is mainly to maintain accounts of these companies." This shows that complete control over UKPO is exercised from India. 5.2.2. All Strategic/investment decisions of UKPO are taken by Sh. K. S. Dhingra in India: Strategic investment decisions of the company are taken by the Chairperson of UKPO, Sh. K.S. Dhingra. In this context, it will not be out of place to mention that BJN Holdings Ltd. is a 100% subsidiary of M/S UKPO. However the fina....
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.... are not acceptable to the Chairinan Mr. K. S. Dhingra, he has decided to shift to another service provider namely - Jane A. Hurley........" This once again comes as an instance showing that the control and management of the company UKPO lies exclusively in the hands of Sh. K.S. Dhingra in India. It is pertinent to mention that UKPO has no employees in Jersey (admitted by K.S. Dhingra in Q.13) (supra), and that service provider is hired in Jersey to carry out various responsibilities related to the company. Hence dismissing and hiring such service provider is an important and strategic decision which appears to be taken by Sh. K. S. Dhinpra singlehandedly, showing the extent of control over UKPO. 5.2.3. Board meeting and Resolutions of M/s UKPO: The seized/impounded documents clearly suggest that meetings of Board of Directors are held in India. This is evidenced from document extracted from the hard disc i.e. Annexure A35/British Paints/Vasanta Mail. This document is an email sent by Mr. Vinod Kaushik to Rajnish Gupta, Deputy Manager of Accounts of UK Paints India Pvt. Ltd. and is reproduced below: "Subject : FW: Ukpo (draft) Bd. Reso. (grouped)....
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.... formality and paper evidence, the resolutions are adopted by them in accordance with the decisions taken by Mr. K.S. Dhingra in India. 5.2.4 Accordingly, the Assessment order for the A.Y. 2007-08 was passed and addition of Rs. 26,88,20,083/- was made in your income on 19.03.2014 u/s 153C r.w.s. 143(3) of the Act, 1961. However, the above addition was not specifically based on any incriminating material found during the course of search proceedings, hence the same did not sustain. Therefore, the income earned by you in India to the tune of Rs. 26,88,20,083/- has escaped assessment as the earlier assessment has been set aside by the Apex Court vide order dated 25.04.2023 in the case of DCIT vs. UK Paints (Overseas) Ltd and other tagged cases. 6. As per the para 4, reproduced above, the procedure for reopening is to be followed as prescribed u/s 148A of the Act as inserted by Finance Act, 2021 in accordance with the law laid down by the Hon'ble Supreme Court by its order dated 04.05.2022 in Union of India vs. Ashish Agarwal case (2022 SSC Online SC 543). 7. Keeping in view the above facts and circumstances of the case and in compliance to the order of Hon'b....