TaxTMI 
TaxTMI 
2026 (7) TMI 427
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....he Act. Correspondingly, the assessee has filed Cross Objections in the respective quantum as well as penalty matters. 2. It is noted that the Ld.CIT(A) passed two separate consolidated orders in the quantum and penalty appeals. For Assessment Years 2008-09 to 2010-11, consolidated orders were passed on 31/10/2025, whereas for Assessment Years 2011-12 to 2013-14, consolidated orders were passed on15/10/2025, in quantum and penalty appeals respectively. 2.1. Further the assessee has raised cross objection is quantum as well as penalty appeals challenging the validity of the notices issued without following the procedure laid down under the Act. 2.2. Since common issues are involved and the facts are identical, all the appeals filed by the revenue and the Cross Objections filed by the assessee were heard together and are being disposed of by way of this consolidated order for the sake of convenience and brevity. Brief Facts leading to the addition in quantum appeal are as under: 3. The assessee is an individual. He was a non-resident during AY 2008-09. The appellant's aggregate stay during FY 2007-08 corresponding to AY 2008-09 was only 181 days which does not exce....
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....the company. It was also contended that the alleged income, if any, was earned by the foreign companies outside India and there was no basis to assess the same as the income of the assessee under the provisions of the Act in India. 4.2. Before the Ld.CIT(A), the assessee submitted that the reassessment order was based merely on presumptions and assumptions, without establishing any nexus between the assessee and the credits appearing in the bank accounts of the two foreign companies. It was contended that although the Ld.AO had access to the Indian and foreign bank accounts, he failed to establish that any funds were transferred by the assessee from India to the foreign companies or that any funds were received by the assessee in India from such companies. 4.3. The assessee submitted that in his statement recorded during the reassessment proceedings, he had clearly explained that the credits reflected in the bank statements of the foreign companies represented transactions between his son and son-in-law, who were non-residents, and that he was not a party to such transactions. It was explained that the funds represented family money held in his name as the head of the family ....
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....account held by the appellant in HSBC Bank, Geneva along with the amount of balance. Further, enquiry was conducted by Investigation Wing of the Income Tax Department, Mumbai, where the appellant was confronted with the said information. The statement of the appellant was recorded u/s 131 of the Act. The appellant had accepted having a bank account in HSBC, Geneva. After analysis of bank statements received from HSBC, Geneva it came to light that Shri Mulchand Lilaram Asnani had opened accounts in the name of M/s New Mark Holding Ltd. and M/s Gracewell Management Ltd in FY 2007-08. The appellant was the majority shareholder as well as the Managing Director of M/s Gracewell Management Limited and was holding the Shares of 97% and other directors viz. Shri Naresh Mulchand Asnani (son of the assessee), Shri Mahesh Mulchand Asnani (son of the assessee) and Shri Ravi Gopaldas Daryanani (son in law of the assessee) holding only 1% each. Similar pattern of shareholding is observed in the case of M/s New Mark Holding Limited. In the case of both companies', there were number of credit entries in various foreign currencies viz. USD, GBP, SGD, EURO etc during the period from FY 2007-08 to AY....
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....pellant, it is observed that the day of departure has not been included in the calculation. For the purpose of calculation of residency period, both, the day of arrival in India and day of departure, is required to be included. If the days of departure are included in the calculation, the residency period exceeds 181 days and therefore the claim of that the appellant was a non-resident is factually incorrect. 8.2. On the issue of the taxability of the investment made, appellant has mainly contended the - * the bank accounts were owned by the companies M/s. New Mark Investments Holdings Ltd. and M/s Gracewell Management Ltd and that the said companies were foreign companies having separate legal status and income earned by it cannot be taxed in the hands of its shareholders. * the money was the family money put in his name as the head of the family for proper distribution to all the children. * the credits reflected in the bank statements of the foreign companies represented transfers between his son and son-in-law, both of whom are non-residents, and that he was not a party to any of the transactions. * AO was not justified in piercing t....
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....ire funds were invested by them and no funds were transferred by the appellant. Considering the overall facts of the case, the appellants contention that the investment in the said concerns was not made by him appears to be convincing. As such there is no finding in the assessment order of any fund being transferred from the appellants bank account in India to the bank account of the said companies. It is informed that the Appellant had resigned as a Director and ceased to hold any shareholding in the aforesaid two foreign companies with effect from AY 2010-11. Further, there is no finding in the assessment order, of any flow of funds, either a remittance from the Appellant's bank account in India to the bank account of the said concerns or a subsequent withdrawal, investment, or receipt of the said amounts in the Appellant's bank account. In light of the above discussion, the addition of Rs 1,20,06,000/- in the hands of the appellant u/s 69A of the Act cannot be sustained. AO is directed to delete the same. 8.5. Appellant has also challenged the additions on the legal grounds. It is contended that the reasons for reopening were not shared and the show cause notice was not....
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....FY 2007-08. The appellant was the majority shareholder as well as the Managing Director of M/s Gracewell Management Limited and was holding the Shares of 97% and other directors viz. Shri Naresh Mulchand Asnani (son of the assessee), Shri Mahesh Mulchand Asnani (son of the assessee) and Shri Ravi Gopaldas Daryanani (son in law of the assessee) holding only 1% each. Similar pattern of shareholding is observed in the case of M/s New Mark Holding Limited. In the case of both companies', there were number of credit entries in various foreign currencies viz. USD, GBP, SGD, EURO etc during the period from FY 2007-08 to AY 2012-13. The credits in the bank account were examined during the assessment stage. As seen from the assessment order, the credits are categorized into two parts. One part is held to be the initial investment made in the said two concerns and second part is the profit earned. The sum total of the initial investment and the profit is added in the hands of the appellant for the respective years. For the years FY 2010-11(AY 2011-12), FY 2011-12(AY 2012-13) and FY 2012-13(AY 2013-14), there is no addition of initial investment and only the profit element is considered as th....
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....d or accrued or arisen or deemed to accrued or arisen in India. * the order passed u/s 143(3) r.w.s. 147 of the ITA was passed without any show cause notice or opportunity of being heard. 7.2. I have considered the submission of the appellant. The two entities, M/s. Gracewell Management Ltd and M/s New Mark Investments Holdings Ltd, are independent legal entities duly incorporated and registered outside the territorial jurisdiction of India. Consequently, they are not subject to assessment for tax purposes under the provisions of the Income Tax Act, 1961 in India. It is a well-established and fundamental tenet of corporate taxation that the income and profits generated by a company, being a separate legal persona, are taxable exclusively in the hands of the company itself and not in the hands of its shareholders. Applying this principle, the profit amounting to Rs. 2,76,56,781/- constitutes income attributable and taxable in the hands of respective concerns, and cannot, ipso facto, be imputed to its shareholder. Importantly, the Appellant had resigned as a director and ceased to hold any shareholding in the aforesaid two companies from FY 2009-10 (AY 2010-11) onwa....
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....ns and the appellant has provided the replies for the same. Therefore, it can be safely assumed that the appellant was aware of the reasons for reopening of assessment. In any case, since the main ground of appeal is already decided in favour of the appellant, no decision is given on the legal grounds raised by the appellant." On identical reasoning, the Ld.CIT(A) deleted the addition made by the Ld.AO for assessment years 2011-12 and 2013-14. 4.10. As the Quantum addition was deleted, the penalty levied by the Ld.AO u/s. 271(1)(c) also stood deleted vide two separate consolidated orders dated 30/10/2025 and 15/10/2025 respectively. Aggrieved by the quantum and penalty orders of the Ld.CIT(A), the revenue is in appeal before this Tribunal. 5. The Ld.DR supported the order of the Assessing Officer and submitted that the addition made under section 69A of the Income-tax Act was justified considering the facts and circumstances of the case. 5.1. It was submitted that the assessee was the shareholder and director of the two foreign companies and was also an authorised signatory to their bank accounts. The assessee had effective control and knowledge of the affairs of the....
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....from such companies. 5.8. The Ld.AR submitted that the addition was made merely on the basis that the assessee was a shareholder, director, and authorised signatory of the bank accounts of the companies. It was argued that shareholding or directorship in a company cannot, by itself, lead to attribution of the company's funds or income in the hands of the shareholder or director unless the Revenue establishes that the company was a mere façade or that the funds actually belonged to the assessee. 5.9. The Ld.AR further submitted that during the course of reassessment proceedings, the assessee had explained in his statement that the credits reflected in the bank accounts represented transactions between his son and son-in-law, who were non-residents, and that the assessee was not a party to such transactions. It was explained that the funds represented family funds held in his name as the head of the family for distribution amongst the family members. The assessee's explanation was supported by reference to answers given to Question Nos. 13, 14, 15 and 18 of the statement recorded by the Ld.AO. 5.10 It was further submitted that the assessee's sons and son-in-law had c....
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....the basis of his earlier shareholding, directorship, and authority to operate the bank accounts. 6.1. It is undisputed that M/s. New Mark Investment Holdings Ltd. and M/s. Gracewell Management Ltd. were incorporated outside India and were separate legal entities. The principle of corporate personality cannot be disregarded unless the Revenue establishes, by cogent evidence, that the company is merely a façade or that the funds actually belong to the assessee. Mere shareholding or directorship in a company, by itself, cannot result in attribution of the company's assets or income in the hands of the shareholder/director. 6.2. We note that the Ld.AO had access to the relevant bank account details; however, no material has been brought on record to establish any flow of funds from India by the assessee to the foreign companies or any receipt of funds by the assessee in India from the said accounts. The addition has been made primarily on the basis of the assessee's association with the companies and without establishing any direct nexus between the assessee and the deposits appearing in the bank accounts. 6.3. Further, during the course of reassessment proceedings, the....