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2021 (8) TMI 70 - AT - Income TaxValidity of assessment u/s 153A - According to the assessee, no notice for scrutiny assessment was received within the time permitted under proviso to section 143(2) - HELD THAT:- As rightly contended by the DR, there is no requirement for an assessment made under section 153A of the Act being based on any material seized in the course of search. Further under the second proviso to section 153A pending assessment or re-assessment proceedings in relation to any assessment year falling within the period of six assessment years referred to in section 153A(b) of the Act shall abate.Assessing Officer gets jurisdiction for six years assessment years referred to in section 153A(b) of the Act for making an assessment or re-assessment. It is not the complaint of the assessee that any income, which is already subjected to assessment under section 143(3) or under section 148 of the Act completed prior to the search in respect of six assessment years referred to in section 153A(b) of the Act and in the second proviso to section 153A, has also been included in the assessment framed under section 153A of the Act. In such circumstances the plea of the assessee cannot be accepted. Accordingly, the action of the AO in issuing notice u/s. 153A in these assessment years 2009-10 to 2012-13 is justified. This ground of the assessee is therefore dismissed. As per clause (a) of sub section (1) of section 153A, at the stage of issue of notice u/s 153A, the only requirement is to ask the assessee to file return of income for relevant six years covered by section 153A and after filing of return of income, the assessment to be made by the AO will be assessment or reassessment has to be determined afterwards and not at the time of issue of notice u/s 153A. In this view of the matter, we find no merit in this technical objection raised by the assessee and the same is rejected. Income accrued in India - Status of Non Resident - number of days of stay in India - Whether the status of assessee is resident or non-resident ? - whether the assessee is to be treated as Non Resident or to hold him as Resident as being interpreted by the AO - test for determining the status as Non Resident - HELD THAT:- Determinative test for the status of Non Resident being number of days of stay in India and in assessee's case in these four years, the days of stay being less than 182 days; even after considering the days as recorded by the AO in his order; the status to be applied in this case is to be held as Non Resident as claimed by assessee. Thus, the assessee will be liable to tax on income accrued in India only. The assessee's grounds in this behalf are allowed. Additions u/s. 69C / 28(iv) - Whether payments made by RAL to various persons is for the benefit of the appellant and therefore, the above sums have to be added u/s 28(iv) of the Act or u/s 69C? - HELD THAT:- AO has failed to discharge the burden cast on him to prove that the appellant is the shareholder of RAL. AO has utterly failed to bring on record any tangible and acceptable material to hold that the appellant is the shareholder of RAL or is the beneficial owner of RAL. The AO also unjustly rejected the letter furnished by the Director of RAL that the appellant is not a shareholder. AO having failed to make further enquires to establish that the appellant is the shareholder or beneficial owner of RAL, could not have held so in the assessment order. Further, in our opinion the Appellant and M/s. RAL are Distinct Persons and it cannot be said that the business carried on by RAL is the business carried on by the appellant. There is no doubt that RAL is a separate legal entity, and the appellant is also a separate legal person. The Hon'ble Supreme Court in Bacha F. Guzdar [1954 (10) TMI 2 - SUPREME COURT] has held that the shareholder and the company are two separate legal entities and the business carried on by the company cannot said to be a business carried on by the shareholder. Hence, the finding of the AO that the appellant will be taxed in respect of the activities carried out by M/s. RAL is totally untenable in law. While discussing the applicability of S.28(iv) of the Act the AO has held that the business of RAL is nothing but the conduct of the business of Shri. Jitendra Virwani. This finding is contrary to the decision of the Hon'ble Supreme Court in Bacha F. Guzdar's case. The observations indirectly suggest that the AO has lifted the corporate veil in coming to the above conclusion. It is submitted that the corporate veil cannot be lifted at the whims and fancies of the AO. There has to be cogent and compelling reasons as to why the corporate veil has to be lifted. It cannot be lifted for an asking. The assessing officer has not discharged the burden cast on him to prove that the appellant is the shareholder/beneficial owner of RAL. The quantification of the addition based solely on the amounts mentioned in the Board resolution defies logic and is totally perverse. It is also not known whether the amount mentioned in the Board Resolution has been spent for the purpose mentioned therein. S.28(iv) of the Act is not applicable as the appellant is not carrying on any independent business. S.69C of the Act is not applicable for the very simple reason that the appellant has not incurred the expenditure and the source for various payments is the funds of RAL.No seized material to sustain the addition. Addition of house warming expenses - HELD THAT:- Once the farmhouse is owned by the above mentioned company, the relevant expenditure relating to that farm house to be relating to that company only. Just because the name of the assesse mentioned in the invitation as his house or he’s staying in that premises that cannot be reason to treat the expenditure incurred by said company in hands of assesse. The assesse being Chairman and Managing Director got allotted that farmhouse for his stay in India and that cannot be reason to treat the housewarming expenses as deemed income of the assessee and being a Chairman of the company he invited the various dignitaries and customers of the company which is nothing but a sales promotion expenses in the hands of Embassy Knowledge Infrastructure Private Limited and at any stretch of imagination it could be considered as income for assessee u/s 28(iv) of the IT Act. Accordingly the addition is deleted. Farm maintenance charges disallowance - HELD THAT:- The fact that separate disclosure has not been made regarding the existence of farmhouse as an assets is also not relevant. The AO has failed to note that there is no requirement in law to make a separate disclosure. Statutory auditor of the company has not made any adverse comment on that. The guesthouse is disclosed as a fixed asset in the balance sheet of the company. The AO has failed to note the fundamental point that it is the company which owns the asset and therefore, it is its primary responsibility to maintain the asset i.e., the guesthouse. Just because the appellant is staying in the guesthouse it cannot be said that the guesthouse maintenance expenses are for the benefit of the appellant. Therefore the provisions of S.28(iv) of the Act are not applicable.
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