TaxTMI 
TaxTMI 
2025 (2) TMI 1913
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....lief in respect of the proceeds of the accounts of Rs. 1122 crores without appreciating the fact that the assessee being Managing Director of M/s. Satyam Computers Services Ltd., (SCSL) having blanket authority to run the affairs of the company and is in knowledge of such amounts failed to submit evidences to the satisfaction of the Assessing Officer. 3. Whether on the facts and circumstances of the case, the Ld.CIT(A) is justified in giving relief to the assessee ignoring the fact that the opening balance seen from the forensic report of Rs. 1122 crores which was put into the suspense account in the re-stated financial statement was not explained by the assessee who is the only Director having knowledge of such transactions." 3. The grounds raised by the Revenue in ITA No. 57/Hyd/2020 read as under : "1. The Ld.CIT(A) erred both in law and on facts of the case in allowing relief to the assessee. 2. The Ld.CIT(A) ought to have taken into consideration the decision in the case of Sri Govindraju vs. ITO of Karnataka High Court (377 ITR 243) wherein it was held that the notice u/s.148(2) is found to be valid then addition can be made on all amounts and is....
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....ards the amount claimed to be irretrievably lost, and Rs. 45,87,20,000/- towards the amount received in the form of ADRs. Accordingly, passed assessment order on 21.07.2010. 4. Aggrieved with such assessment order, assessee filed an appeal before the LD.CIT(A), who granted partial relief to the assessee. 5. Aggrieved with the order of LD.CIT(A), the Revenue is now in appeal before us. 6. At the outset, the CIT-DR has drawn our attention to para 6.1 and 6.2 of the order of Ld.CIT(A) which is to the following effect : "6.1 During the course of appellate proceedings, it was contended that similar addition made in the hands of Mr. Suryanarayana Raju was deleted by CIT(A) in ITA No. 773/2010-11/DCIT-CCB/CIT-VII/H/2014-15, dt.29.09.2014 relying on the Remand Report of the AO, wherein in it was reported that the sources of funds duly verified and the addition is the hands of the appellant is also liable to be deleted. 6.1.1 The operative portion of the order for ready reference is reproduced below: "8.1 FINDINGS on the addition made towards unexplained investment in fixed deposits to the tune of 2.50 crores. 8.1.1 In course of the appeal procee....
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.... and disclosure made by Sri B.Ramalinga Raju in his confessionary statement to his satisfaction and come to a conclusion regarding whether it come from tax suffered money or not, 4.0 I am enclosing the original statement indicating the flow of funds into the FDs and also the spiral books that were filed. All these are part of their original filings in 2002-03 before the ADIT and the AO and may be available with you in the earlier black assessment records. At any rate, I am enclosing the spiral books and the detailed statement which were filed in original and you may return them back after verification along with the remand report. You may also seek another set or any other record/format for your record and necessary verification. 1. A remand report after due verification of issues outlined at para 3.0 may be sent by 30/06/2014. Thanking you, Yours faithfully M. Ravindra Sai, CIT(Appeals), Hyderabad, Encl:- (a) Detailed 4 fold statement showing flow of funds. b) Spiral book filed in March 2002 before the DDIT on the subject: (Investigation-deposits in the banks-regarding. (c) Bank accts of family members-Annexur....
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....ies as declared in the respective returns of income of the eight individuals namely, Sri. B Ramalinga Raju, Smt. B. Nandini Raju, Sri B Rama Raju, Sri B Suryanarayana Smt. B Radha, Smt B Jhansi Rani, Sri. Rama Raju (Ir.) Sri B Pritam Teja alias Teja Raju whose monies were invested. As directed, the spiral books and the detailed statement filed in original are returned her with. 8.1.3 The remand repot was given to the appellant and his comments were called for. The appellant, on this addition, at para 3 on page 3 stated as under: "All the subsequent paragraphs of the remand report elaborately point out the verification by the assessing officer as to the factum of the details of investments and the sources of funds as having flown from the tax suffered monies in his endeavour to carry the directions of the Hon'ble CIT(A) calling for the remand report. It has been brought out by the Assessing Officer in the remand report that his verification revealed that the submissions as to the details of the investments and the sources of such investments were correct. No adverse findings or observations have been brought out. In the last paragraph the Assessing off....
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.... Sl. No. Name of the person in whose name FD Amount (Rs.) Bank Deposit receipt No. 1 A. Bhaskar Raju 63,75,111 SBH, Begumpet 645520-31 2 AVL Kumari 63,73,111 SBH Begumpet 645486-94 and 645508 3 1. Mallapa Raju 71,90,111 SBH Begumpet 645495-507 4 1. Janakirama Raju 66,58,111 SBH Begumpet 645475-85 5 D. Rajeswari Devi 65,82,111 SBH Begumpet 645509-519 6 D. Satyanarayana Raju 1,00,00,000 SBH Begumpet 0214816-827 and 0214834 7 D. Satyavathi 1,00,00,000 SBH Begumpet 0214828-843 and 0214846 a When questioned about the sources of the funds for making the above mentioned deposits, it is submitted that the monies are not really owned by them and in-fact received from the family members of Sri B. Ramalinga Raju, Ex-Chairman of M/s Satyam Computer Services Ltd., The list of the persons claimed to have passed on the monies to the above mentioned persons is as under. 1. B. Rama Linga Raju 2. B. Nandini Raju 3. B. Rama Raju(Senior) 4. B.Radha Raju 5. B. Pritam Teja 6. B. Ramaraju(Junior) It was furthe....
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....rth mentioned persons (8 in number) are required to be reopened. As the assessments proposed to reopened in the case of Sri B.Rama Raju are for the assessment year 2002-03 has lapsed four years, since then, the approval of commissioner of income tax (central) may kindly be accorded so as enable the undersigned to reopen the assessments u/s. 148 of the IT Act, 1961 in respect of Sri B.Rama Raju." From the above, it is seen that the assessment was reopened on account of unexplained investment in FDs. The addition made on the above account is considered and deleted vide decision in Para-6(supra). As the above addition is deleted, the other additions made do not survive in view of the ratio laid down in case of CIT Vs Jet Airways Ltd 331 ITR 236 (Bom) and that of jurisdictional High Court in case of M/s. CIT-III Vs Swarna Andhra IJMII Integrated Township Pvt Limited in ITTA No.165 of 2014, dt. 12.03.2014. Accordingly, the other additions made are deleted. The appellant succeeds on the grounds raised against above addition." 8. The contention of the ld.CIT-DR is that the Ld.CIT(A) may be right on the facts that the addition made by the Assessing Officer in respect to irrevoc....
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.... the consistent decision of these High Courts, we are not in a position to take a different view and the learned Tribunal has followed the consistent view of those High Courts. Even, we find that independent of the decision of those High Courts that the Explanation-3 will be applicable in case where live issue, which was subsisting at the time of original assessment and if such issue has escaped the determination of the Assessing Officer, can be a ground for reopening. Any new issue that has cropped up subsequently on new set of facts, the aforesaid Explanation has no application. We think that the Explanation-3 has not really diluted cardinal object of Section 147 of the Income Tax Act for reopening. The Explanation-3 has been given a retrospective effect with an idea there are so many assessment orders, which were passed earlier without deciding the issue subsisting at the time of original assessment. This Explanation has held to be reopened in those cases. Accordingly, the appeal is dismissed. No order as to closed." 9. Per contra, ld.AR has drawn our attention to the reasons recorded by the Assessing Officer for reopening the assessment which is also available at pa....
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....in CIT v. Atlas Cycle Industries [1989] 180 ITR 3191. The decision in Atlas Cycle Industries' case (supra) held that the Assessing Officer did not have jurisdiction to proceed with the reassessment, once he found that the two grounds mentioned in the notice under section 148 were incorrect or non-existent. The decisions of the Punjab & Haryana High Court in Atlas Cycle Industries' case (supra) and of the Rajasthan High Court in Shri Ram Singh's case (supra) would not be affected by the amendment brought in by the insertion of Explanation 3 to section 147.- 16. Explanation 3 lifts the embargo, which was inserted by judicial interpretation, on the making of an assessment or reassessment on grounds other than those on the basis of which a notice was issued under section 148 setting out the reasons for the belief that income had escaped assessment. Those judicial decisions had held that when the assessment was sought to be reopened on the ground that income had escaped assessment on a certain issue, the Assessing Officer could not make an assessment or reassessment on another issue which came to his notice during the proceedings. This interpretation will no longer ....
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....t is open to Parliament, having regard to the plenitude of its legislative powers to do so, the provisions of section 147(1) as they stood after the amendment of 1-4-1989 continue to hold the field. 11. The ld.AR had further submitted that since the issue is covered in favour of the assessee by many High Court's judgments, therefore, the decision in the case of Govinda Raju (supra) will not have any application and therefore, the order passed by the Ld.CIT(A) is correct. Furthermore, the ld.AR has also drawn our attention to the decision of the co-ordinate Bench of the Tribunal in the case of ACIT Vs. B. Ram in W.T.A No.1/2020 and 01/2012 wherein the Tribunal has the occasion to examine the identical issue and the Tribunal after going into issues, has decided the same against the Revenue. 12. It was further contended by the ld.AR that these two issues of irrevocable loss and ADRs were not available at the time of reopening of assessment and it was submitted that the reopening was made by the Assessing Officer vide reasons to be reopened dated 24.03.2009 and however, the issue of irrevocable loss and ADR were only cropped up on the basis of statement given during the course of....
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....nnels and also unexplained sources of income were clubbed and utilized. During the year, instead of debiting the personal expenditures spent for expenditure purposes they showed that amounts as irretrievably lost. This is nothing but a camouflaged attempt of the assessee, to link up his undisclosed assets acquired from undisclosed sources of income, with the money that was actually spent for some other purposes but cleverly shown as irretrievably lost. This is done with a motive that, even if Department finds the undisclosed assets in future, the same can be linked up with declared irretrievably lost amounts. In fact, because of this reason only, the assessee, Shri B.Ramalinga Raju when called for, did not furnish details such as how the money was claimed to be lost, who gained out of this transaction, was there any accrued income on this amount etc. Hence, an amount of Rs. 2,36,84,000/- is added to the income of the assessee Shri B.Ramalinga Raju treating the same as unexplained investment made from undisclosed sources of income but tried to link the amount that was spent for personal purposes and utilized otherwise. 7.5 Without prejudice to the above conclusion, the asse....
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....L and it never appeared in the Financial Statements of the Company. Sri B. Ramalinga Raju was confronted with the above issue and was asked to explain clearly the above transactions and final destination of the ADR amounts. However, Sri B. Ramalinga Raju has furnished reply by tappal, for the specific query as follows: "a) To the best of my remembrance there was no ADR issue by M/s Satyam Computer Services Ltd in the financial year 2006-07. As to the amount of ADR raised during the financial year 2001-02, 1 request you to obtain the details from M/s Satyam Computer Services Ltd., as individually I shall not be having any information with me, as the then Chairman of the company. b) As regards clarification on utilization of ADR funds, it is submitted that in all fairness the assessing officer should appreciate that M/s Satyam Computer Services Ltd., will be in a position to explain as the ADR issue is by the corporate entity and equally the details of utilization will thus be available with the corporate entity and in no event will be available with the Chairman of Company. It is therefore not fair on the part of the assessing officer to ask me about the utilizatio....
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....to explain as to how it does not constitute income and much less my income. (ii) The basis for assessing an amount as undisclosed Income cannot be on presumption much less the wealth tax assessment as mentioned in the letter of the assessing officer. In this connection it is further submitted that an appeal was preferred against the mentioned wealth tax assessment before the Commissioner of Appeals(I). For completeness of records, the copy of the statement of facts and grounds of appeal submitted is enclosed to be read as part of reply to the query. On the basis of the said submissions since Income can never be assessed on presumption and equally much less without any evidence being brought on record and put to me for my explanation your proposal to assess the said amount as my income is against all cannons of law. Accordingly, I object to the proposition to treat it as my undisclosed income for the assessment year 2002-03." 8.2 From the above facts, it is clear that a total amount of $9.76 Million (with an average exchange then prevailing rate of Rs. 47/-) equalling to Rs. 45,87,20,000/- was unaccounted receipt in the hands of Sri B. Ramalinga Raju durin....
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....t order, which is to the following effect : "3.2 The assessee's main objection against re-opening the assessments completed earlier u/s.143(3), 143(3) r.w.sec.158BC and 143(3) r.w.s. 158BD r.w.sec. 158BC of I.T.Act was that, all the issues were examined during the completed proceedings, assessee disclosed all facts before the department at that time and there are no fresh facts in the possession of the Revenue to reopen these assessments now. However, this objection is untenable, in light of the fact that the assessee, Shri B.Ramalinga Raju, Ex-Chairman of M/s. Satyam Computer Services Ltd., himself made a confessional statement on 7-1-2009 stating that the accounts of the company were fudged and false results were shown over a period of time". Even he admitted that "fictitious bank deposits were shown for this purposes and bogus bank statements were generated". Further, it is also clear that the fudging of the company's accounts resulted into transfer of huge amounts in the form of dividend distribution, issue of bonus shares, issue of rights and off-loading of shares held by the management related persons at a premium and other money transfers. On verification of....
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....sue of reopening is not related to the remaining issues of irrevocable loss and the amount received on account of ADR. In fact, these two issues are entirely independent and are not linked with the first issue, i.e., the addition on account of FDRs in the name of seven family members. 17. Once the very basis for initiating proceedings, i.e., the reasons recorded for income escaping assessment concerning the issue of 'addition on the basis of FDRs,' has been accepted by the Revenue and no additions have been made on that issue, but instead, additions were made with respect to the other two issues, namely, irrevocable loss and the amount received on account of ADR, then, admittedly, these subsequent issues are not related to the first issue. In our considered opinion, no addition under section 148 can be made against the assessee for these issues. In this regard, we may fruitfully rely upon the decisions of the Hon'ble Bombay High Court and Delhi High Court, as referred to by the ld. CIT(A). In the case of Ranbaxy (supra), the facts of that case are similar to the present case, and the Hon'ble Delhi High Court in the said case, has held as under:" "18. We are in c....
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....on these accounts. 20. The very basis of initiation of proceedings for which reasons to believe were recorded were income escaping assessment in respect of items of club fees, gifts and presents, etc., but the same having not been done, the Assessing Officer proceeded to reduce the claim of deduction under sections 80HH and 80-I which as per our discussion was not permissible. Had the Assessing Officer proceeded not to make disallowance in respect of the items of club fees, gifts and presents, etc., then in view of our discussion as above, he would have been justified as per Explanation 3 to reduce the claim of deduction under sections 80HH and 80-I as well." 18. With regard to the Revenue's reliance on the judgment in the case of Govindaraju (supra), since it is a decision of a non-jurisdictional High Court, it is not binding on this Tribunal, especially when various other High Court decisions relied upon by the ld. CIT(A) are in favor of the assessee. Needless to say, the Hon'ble Supreme Court, in the case of Vegetable Products Ltd. [1973] 88 ITR 192 (SC), had the occasion to consider the conflict arising from decisions of non-jurisdictional High Courts and held t....
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....f the jurisdictional High Court in the case of CIT vs. M/s. Swarna Andhra IJMII Integrated Township Development Private Limited (supra), in fact, this judgment was sought to be distinguished by the ld. DR. However, we do not agree with the reasoning given by the ld. DR, as the jurisdictional High Court has approved the ratio laid down by the Hon'ble Bombay High Court in the case of Jet Airways (supra) and the Hon'ble Delhi High Court in the case of Ranbaxy (supra). 20. In light of the above, and respectfully following the decision in the case of M/s. Swarna Andhra IJMII Integrated Township Development Private Limited (supra), the Hon'ble Bombay High Court in the case of Jet Airways (supra), and the Hon'ble Delhi High Court in the case of Ranbaxy (supra), and also considering the fact that the new issues were not linked with the addition on account of FDRs in the name of seven persons, we dismiss the appeal of the Revenue. 20.1 In the result, the appeal of Revenue in ITA No. 57/Hyd/2020 is dismissed. ITA No. 55/Hyd/2020 21. The brief facts of the case are that assessee filed his return of income for A.Y. 2002-03 on 09.08.2002, declaring an income of Rs. 2,51,11,160/- fro....
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...., and the material on record, the Assessing Officer observed that the assessee, along with Shri Vadlamani Srinivas, was responsible for overseeing the collection, utilization, and accounting of funds raised through the ADR issue and that they failed to provide details regarding the utilization of these funds. The company's bank records falsely reflect a transfer of Rs. 397.03 crores to its Indian accounts from Citibank, New York. The Assessing Officer further noted that, on 07.01.2009, the assessee admitted in a letter to the Board of Directors (and SEBI) that Satyam Computer Services Ltd. (SCSL) had falsified accounts over several years. He confessed that revenues and profits had been manipulated by altering financial records. He also claimed that neither the Board members nor senior executives were aware of these manipulations. 21.3 On 21.02.2009, the Assessing Officer recorded the assessee's sworn statement in Chanchalguda Central Prison, where he confirmed the details mentioned in his letter. Investigations conducted by the SFIO and CBI revealed that the assessee had the authority to open and operate SCSL's bank accounts, indicating his direct involvement in falsifyi....
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....malinga Raju regarding the affairs of M/s. SCSL as to manipulation/misreporting of the income/liabilities etc. Consequent to his statement, forensic Audit was got conducted by M/s KPMG, enquiries were conducted by SFIO and charge sheet has been filed and the CBI has also conducted enquiries and filed charge sheet in criminal cases. The basis for the addition made is that the appellant was at the helm of the affairs at the relevant period, the report of the forensic Auditors bringing out the discrepancies in the accounts, the appellant alone was in knowledge of the manipulation/discrepancies in the accounts and owned up the responsibility for the same and he is under obligation to disclose full and correct affairs of the company, which he has not disclosed. The appellant being the sole person in knowledge of the correct state of affairs of the company is under obligation to offer explanation with production of evidences, in absence of the above, would against the appellant. 7.2.2 The AO made the addition basically on the basis of forensic audit report. Basically, the re-statement of accounts consequent to the confessional statement made by Sri Ramalinga Raju in his capacity....
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.... us, the Ld.DR submitted that LD.CIT(A) had deleted the addition on the basis of a non-existing order passed by the Addl.Chief Metropolitan Session Judge - XXI, Hyderabad. Furthermore, the LD.CIT(A) had failed to consider the forensic report conducted by the auditor. Since the order passed by the authorities was without any basis, the order of LD.CIT(A) should be set aside. 25. Per contra, ld.AR submitted that this issue was already examined by the Coordinate Bench of the Tribunal in WTA No.1/Hyd/2020 vide its order dated 11-10-2021 [Sic. WTA No. 01/Hyd/2012 ITA No. 746/Hyd/2012 vide its order dated 9-3-2020], wherein similar additions were considered and subsequently, deleted by the Tribunal. Our attention was specifically drawn to Paras 5 to 10 of the order passed by the Tribunal, which is to the following effect : "5. However, on perusing the facts and circumstances of the case and the submissions of the assessee before the Ld. Revenue Authorities, the Ld. CIT passed order U/s. 263 of the Act on 08.03.2012 wherein he observed as under: (i) As per the reports submitted by the Ld. Revenue Authorities (Ld. AO and the Addl. CIT) and on verification of the r....
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...., since the issues raised by the Ld. CIT is of grave consequence, it is necessary to examine those issues in detail. Accordingly, the ld. CIT has only directed the Ld. AO to examine those issues in detail and to pass appropriate order in accordance with law and merit which is appropriate. In this situation, we do not find much strength in the arguments advanced by the Ld. AR and we further find merit in the order of the Ld. CIT for invoking his powers U/s. 263 of the Act and directing the Ld. AO to examine the issues pointed out by him in detail and thereafter to pass appropriate order in accordance with law and merit. For the afore said reasons, we do not find it necessary to interfere with the order of the Ld. CIT. Hence, the appeal of the assessee is devoid of merits. 9. As regards, as the order passed by the Ld. CWT U/s. 25 of the Wealth Tax Act for setting aside the order of the Ld. WTO and directing him to frame fresh assessment order after verifying the issues pointed out in the order passed U/s. 25 of the Act, the Ld. AR submitted that the Hyderabad Bench of the Tribunal had quashed the revised wealth tax assessment order passed U/s. 16(3)d r.w.s 17 of the Act date....