TMI Blog2000 (8) TMI 249X X X X Extracts X X X X X X X X Extracts X X X X ..... rs 2. Shri Madhu Sudan Agarwal Rs. 10,12,200 3. Employees Rs. 300 4. Three companies Rs. 20,50,000 ------------- Rs. 40,12,700 ------------- 4. The assessee-company purchased a plot of land measuring 32 canals 18 marlas situated at Village K her Ki Daula, Teh. Sohna, Distt. Gurgaon, Haryana. This land was purchased from S/shri Om Prakash Sachdeva, Ashwani Kumar Sachdeva and Dharmender Kumar Sachdeva, all residents of Gurgaon. The consideration said to have been paid for the purchase of the said land was stated to be Rs. 50,00,000. A certificate under section 269UL(3) of the Act was also obtained from the appropriate authority. 5. A search under section 132(1) was carried out on9-8-1994at the business premises of companies belonging to Haldi Ram Group as well as at the residential premises of their Directors, S/shri Manohar Lal Agarwal and Shri Madhu Sudan Agarwal. During the course of search at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at Rs. 50,00,000 only and there was no mention of payment received in cash. It was also stated. by Mr.. Sachdeva that he, signed blank Form 37-1. Rest of the work was done by the property dealer. It was within his knowledge that the sale consideration would be shown at Rs. 50,00,000 only. 9. Shri Manohar Lal Agarwal, Director of the company was called by the Addl. Director of Income-tax, investigation Unit-IV,New Delhi, on24-8-1994to explain further about the acquisition of land in question. Shri Manohar Lal Agarwal had admitted that he had purchased the property measuring about 4.5 acres on behalf of Haldi Ram Foods Ltd. from Shri Ashwani Kumar Sachdeva and Shri Om Prakash Sachdeva for a total consideration of Rs. 50,00,000 as evidenced from the sale deed. However, when the provisions of section 132(4) read with explanation (5) to section 271(1)(c) of the Act were explained to Shri Manohar Lal Aggarwal, he voluntarily surrendered Rs. 25,00,000. It was contended that extra consideration of Rs. 22,00,000 may be considered as investment in the land by Shri Manohar Lal Aggarwal out of surrender of Rs. 25,00,000 made on24-8-1994. 10. The Assessing Officer did not accept the surr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 271(1)(c) of the Act. 13. Shri Anand Prakash further submitted that section 69B is extension of section 69. Section 69B comes into operation where the Assessing Officer finds that the value of the acquisition of bullion, jewellery etc. is not fully, but is partially recorded. If the omission is not explained the income is treated as assessee's own for the financial year concerned. He placed reliance on the decision of theApex Courtrendered in the case of CIT v. Smt P.K. Noorjahan [1999] 237 ITR 570 (SC)'. In this case theApex Courthas held that the phraseology of section 69, in creating the legal fiction, employstheword "may" and not "shall". Thus, the unsatisfactoriness of the explanation does not, and need not, automatically result in deeming the value of the investment to be the income of the assessee. That is still a matter within the discretion of the officer and, therefore, of the Tribunal. In other words, a discretion has been conferred on the Income-tax Officer under section 69 to treat the source of investment as the income of the assessee if the explanation offered by the assessee is not found satisfactory and the said discretion has to be exercised keeping in view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Sun Engineering Works (P.) Ltd. [1992] 198 ITR 297 (SC)' wherein the Hon'ble Supreme Court has held as under : ". . . It is neither desirable nor permissible to pick out a word or a sentence from the judgment of the Supreme Court diversed from the context of the question under consideration and treat it to be the complete 'law' declared by the Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before the court. A decision of the Supreme Court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, courts must carefully try to ascertain the true principle laid down by the decision." 15. Shri Rajnish Kumar, learned Departmental Representative, who appeared before us invited our attention on clause (A) - 3 of the Memorandum of Association dealing with the main objects of the company. This reads as under: 'To carry out on the business of commission agents, brokers, consultants, representatives and middlemen of all types of food products and food grains as mentioned in sub-clauses (1) and (2) above.' It was su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the property. As such disclosure ought to have been made by the company only. Director in his personal capacity cannot make disclosure on behalf of the company. Had the disclosure been made in the name of company, the other provisions of the Companies Act would also have been attracted. There was less payment of the Stamp Duty on the registration of the documents, It is not open for the Director to make disclosure on behalf of the company to cover up the deficiencies. 18. Coming to the aspect of double taxation our attention was invited in the case of Jamnaprasad Kanhaiyalal wherein theApex Courthas held as under: "The last question that remains is whether the same income cannot be taxed twice, once in the hands of the creditors and again in the hands of the assessee. in a case of this description, there is no question of double taxation. The situation is of the assessee's own making in getting false declaration filed in the names of the creditors with a view to avoid a higher slab of taxation. Once it was found that the income declared by the creditors did not belong to them, there was nothing to prevent the same being taxed in the hands of the assessee to which it actually ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny is separate and distinct from its shareholders. In the eye of law company is its own master and is answerable like any other person. It is to be noted that a share in a company is the expression of a proprietary relationship. The shareholder is the proportionate owner of the company. His liability is limited to the extent of his shareholding. He can be construed to be the proportionate owner of the company, but he does not own the company's assets which belong to the company as a separate and independent entity. As such, the Director cannot be construed to be the legal owner of the company. It follows that he cannot make disclosure for the benefit of the company. Therefore, the Assessing Officer was correct in holding that the investment made for acquiring the asset of the company was to be examined in the hands of company and not in the hands of the Director of the company, who was simply an agent and not the owner of the asset. We have also noted that Shri M.L. Aggarwal, did not make investment towards the purchase of the said property. The investment as disclosed by Shri M.L. Aggarwal to the tune of Rs. 22,00,000 was not reflected in the balance sheet of the company. What pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred on the Assessing Officer will always go in favour of the assessee. 26. In the present case, the vendor in clear and unequivocal terms admitted the receipt of "on money' to the extent of Rs. 22,00,000. As the assessee did not have any explanation to offer, Director made the disclosure. The possibility of earning made by the company cannot be rooted out altogether. In view of clause (A) - 3 of the memorandum of Association, it was possible for the assessee to carry on business of commission agents, brokers, consultants, representatives and middlemen of all types of food products and food-grains...... Besides, the decision in the case of Smt. P.K. Noorjahan was rendered in the context of section 69 whereas in the present case the addition was made under section 69B. In our opinion, the decision in the case of Smt. P.K. Noorjahan is not applicable in the facts and circumstances of the present case. Similarly, the ratio laid down in the case of Bharat Engineering Construction Co. is not applicable as because possibility of earning profit was found to be there in the facts of the present case. 27. The correctness of the declared value of the property cannot be ascertained ..... X X X X Extracts X X X X X X X X Extracts X X X X
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