TMI Blog2010 (3) TMI 772X X X X Extracts X X X X X X X X Extracts X X X X ..... al status of these three persons, the source of these cash transaction became significant - In order to circumvent these hurdles posed by the changed procedure, Shri Trilok Singh Dhillon appeared to have devised an innovative modus operandi Regarding relief - In order to hold a person benamidar to be benamidar of another, it is necessary that the fruits of the business must flow back directly or indirectly and exclusively to the person whose funds were invested - The principle is that where the property is acquired in the name of one person but purchase price is paid by another, a presumption arises that transaction was one for benefit of person providing money - Facts and modus operandi being same, so following the same reasoning, we hold that all other assessees are also benamidar of Shri Trilok Singh Dhillon - This issue of estimation of net profit has been raised in all the above assessee's. Regarding application money - held different assessee's benamidar of Shri Trilok Singh Dhillon there is no question of allowing the application money amount in the hand of assessee, because they were merely puppets in the hands of Shri Trilok Singh Dhillon Regarding unexplained inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A} is erroneous both in law and on fact in s far as he has failed to endorse that the proceedings u/s 153C are invalid ab initio. 2. That in the facts and circumstances of the case, the Ld .CIT(A) has erred in confirming the additions. 4. A search u/s 132 of the IT Act was conducted in the business premises of Shri Trilok Singh Dhillon, Dhillon Complex, Supela, Bhilai on 24-08-2004. On 24-08-2004 Shri Trilok Singh Dhillon was traveling from Mumbai to Raipur by flight. He was investigated by the DDIT (lnv.) Raipur Airport at about 12.30 hrs and his statement was recorded u/s 133A. Thereafter, survey was conducted at his office at Dhillon Complex, Supela, Bhilai at about 6.00 pm (18 hrs). Later on, survey operation was converted into search operation u/s l32 of IT Act. It is the objection of Shri Trilok Singh Dhillon that action u/s 133A could be initiated only at the place at which the business or profession was carried on by the assessee and not elsewhere. According to the learned AR, the provisions, the intent and the purposes of these sections are different. Therefore, it was submitted to vacate the assessment. 5. In case of Shri Trilok Singh Dhillon, as per the set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d provisions of sec 153C, satisfaction has to be arrived with regard to belongingness of a document found during the search and not regarding the undisclosed income. The AO has issued notice, after considering all the related particulars. The seized material was received on 21-10-2005. Prior to this, the AO was having enough evidence to record satisfaction and the same is contained in the order sheet. The satisfaction gives specific particulars of annexures to the seized material and the contents of the seized material, which shows that the AO applied his mind before issuing the notice. In this background, it is not correct to suggest that the notice was issued without proper satisfaction. Regarding issue of subsequent notice, AO has stated that it was issued as a matter of abundant precaution and all earlier proceedings were superseded by the fresh notice takes care of all background, which is justified. 8. Prima facie there was sufficient reason for taking action u/s 153A r.w.s. 153C in respect of assessees for years under consideration. As per proviso to sec.l53C for the purposes of this section, date of receipt of material is the date of search. In this case, the material w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent was recorded by the Assessing Officer and the DDIT, Shri Manharanlal Verma confirmed this fact and also found offered his Excise consultancy income to tax much before the date of search. All the assessee's of Shri Trilok Singh Dhillon group have been found benamidar of Shri Trilok Singh Dhillon including Manharanlal Verma as discussed in detail in the following para of this order. In view of the same, it goes academic, while we have held that all other person including Manharanlal Verma as benamidar of Shri Trilok Singh Dhillon. 10. Without prejudice to the above, we find that Shri Manharanlal Verma has shown excise consultancy income. We find that Shri Manharanlal Verma was one of the trusted employee of Shri Trilok Singh Dhillon and working with this group for the past several years. Several materials such as acknowledgements of excise license applications, copies of excise licenses, copies of bank statements, register etc. were found and seized from the so called cabin of Shri Manharanlal Verma given by Shri Trilok Singh Dhillon. Shri Manharanlal Verma was also handling bank accounts of all benamidars of Shri Trilok Singh Dhillon and his family members. In the enquiri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f assessment has been upheld by the Hon*ble Supreme Court in the case of Lalji Haridas Vs ITO(1961) 53 ITR 387. Accordingly, this contention was rightly rejected by the lower authorities. We uphold the same. All the cross objections filed by different assessee's relate to the issue of validity of sec.l53C which has been taken care of in C.O.No.33(Nag.)/2008 arising out of IT(SS)A No.l24(Nag.)/2008 in AY: 2004-05, in the case of Shri Panchuram Deshmukh, discussed above. Following the same reasoning, the issue of validity u/s 153C in all other the cross objections are decided against the assessees. 12. Coming on merit, as discussed above, during the course of above search, acknowledgements of applications for Excise licenses and copies of Excise licenses in the names of several persons were found and seized from said Dhillon Complex belonging to Shri Trilok Singh Dhillon. Accordingly, notice u/s 153C read with sec.l53A of the IT Act was issued to assessee on 16-02-2005. 13. Subsequently, in case of Shri Panchuram Deshmukh, filed return of income under protest on 23-03-2006 showing a total income of ₹ 4,84,173/- which was the income originally returned by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) Shri Kamlesh Kumar Chandel, IDBI Bank a/c No.048104000022640 (ii) Shri Satish Yadav, IDBI Bank, a/c No.048104000044411 and (iii) Shri Shankar Sharma, IDBI Bank, a/c No.048104000022686, 15. It was noted that all the three persons were employee of Shri Trilok Singh Dhillon, out of whom Shri Shankar Sharma was working as Cook, 16. Examination of the bank account revealed huge cash transactions totaling to lakhs of rupees and in view of the financial status of these three persons, the source of these cash transaction became significant. It was also found that Shri Kamlesh Kumar Chandel was allotted license to liquor shops in the AY: 2001-02 to 2003-04. Shri Satish Yadav and Shri Shankar Sharma were allotted permit for running of bars. Statement of all the three persons were recorded at the time of search. In these statements, it has been categorically stated by them that they had only income from salary received from Shri Trilok Singh Dhillon group concerns. 17.1 However, in the return filed u/s 153C except the assessee others have shown income from sale of snacks etc. misc. interest from hand loans. Material on record suggest that this was done to facilitate explaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsons they were taken as partners in a front firm called M/s Supreme Traders. Examination of the Partnership Deed of said firm revealed that the firm was constituted on 19-09-2002 with various partners. Except Shri Trilok Singh Dhillon, his family members and relatives, the other partners were changed from year to year. The persons in whose name license for liquor shops/bar were available were made partners only upto validity of the liquor license/permit. The firm's major financing partners were Shri Trilok Singh Dhillon, his family members and relatives. Their contribution was the major financial source of the firm as against meagre contribution made by the other partners. The objects of the firm were stated to be for carrying out excise consultancy business. However, the income shown from such business was found only very nominal. 20. The AO in AY: 2002-03 also noticed that the said firms inspite of such cash transaction had no bank balance and this firm has given finance to all such partners of no means who are either employees or otherwise persons amenable to control by Shri Trilok Singh Dhillon. Such finance was in lakhs and did not commensurate with any security that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in all the cases and it was found that Shri Manharanlal Verma and Shri Harish Chandra Mishra, who were employees of Shri Trilok Singh Dhillon, have made the deposits and withdrawals. They were also carrying out all such deposits, withdrawals in the case of Shri Trilok Singh Dhillon and his group. 23. In this background, the AO observed that they were merely front persons just acting like puppets on the instruction of Shri Trilok Singh Dhillon. Though they were claimed to be proprietor of business on paper, they were nothing more than trusted employees of Shri Trilok Singh Dhillon, In view of the above discussion, the entire income determined in the case of assessee, excluding salary income, was considered for assessment in the hands of Shri Trilok Singh Dhillon. The AO also observed that the note given by the assessee in the computation of total income showing alleged accumulated savings of ₹ 70,000/- is only to explain the future investments and the note has been intentionally given. In view of the above no cognizance is given to the above note and the total income was assessed at Rs.Nil. 24. In AY : 2004-05 which is lead case, wherein the assessee Shri Panchuram Des ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of other benamidar of said Shri Trilok Singh Dhillon on similar lines. 25. In appeal, in case of said Shri Panchuram Deshmukh, the CIT(A) granted relief to assessee by directing AO to assess him on substantive basis and further, reduced net profit from 3% to 2%. Same has been opposed by revenue before us. Learned DR vehemently supported the order AO. While the learned AR supported the order of CIT(A) and reiterated the submissions made before the authorities below. The assessee's stand is that the Excise license was received and executed by the assessee. He was responsible for different provisions of the Excise laws. The certificate to this effect received from the Excise Department was filed before the AO and it was submitted that the assessee cannot be treated as benamidar. It was also stated there was no perceptible nexus between the assessee and Shri Trilok Singh Dhillon. The assessee was a partner in the firm M/s Supreme Traders. The funds withdrawn from the firm were used for his liquor business, Shri Trilok Singh Dhillon and few other persons were also partners in the said firm. Interest as paid on the credit balance of the firm. The firm was assessed to tax separat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r financing partners were Shri Trilok Singh Dhillon, his family members and relatives. Their contribution was the major financial source of the firm as against meagre contribution made by the other partners. These contributions were also eye wash, because majority of them were not man of means. g) The objects of the firm were stated to be for carrying out excise consultancy business. However, the income shown from such business was found only very nominal. h) In AY: 2002-03 it was noticed that the said firms inspite of such cash transaction had no bank balance and this firm has given finance to all such partners of no means who are either employees or otherwise persons amenable to control by Shri Trilok Singh Dhillon. Such finance was in lakhs and did not commensurate with any security that could be offered by the persons taking finance. i) It was found that whenever cash was required by these persons, it was withdrawn from the firm and either deposited in the bank account of these persons or utilized for the business of running liquor shops/bar. This modus operandi was adopted because once a person has been granted liquor license, he had to execute the contract himself wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s orders. 27. In order to treat a person as benamidar of other person, the transaction has to be only an ostensible one without any intention to part with the beneficial interest. The first test is the source from which the consideration has come and the second test is who actually had enjoyed the benefits. In the instant case, the money was given by the firm and the benefits were retained have gone to firm which is controlled by Shri Trilok Singh Dhillon and his close associates. The firm has been used for the same. All bank transactions were controlled by Shri Trilok Singh Dhillon and his close associates. These circumstances, shows that the assessee is benamidar of Shri Trilok Singh Dhillon. The certificate from the Excise Department and use thereof does not help assessee because Shri Trilok Singh Dhillon is running the show and the excise department has also not looked into the matter with Income-tax angle. 28. The provisions of Benami Transactions (Prohibition) Act, 1988 deals with the definition of Benamidar. By applying the tests of weighing the probability for gathering relevant indicia and seeing the source from which the purchase money came and also the nature and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wner of the business and third party ordinarily the real owner will not have an occasion to make any assertion about the title. The Hon'ble Supreme Court in case of M/s Meenakshi Mils Ltd., Vs CIT (957) (SC) 49 observed that benami transaction may be synonym to fraudulent transactions. Sometimes, they may become synonymous to nominal transactions or lending of name of somebody although, real owner is different. The question whether particular transaction is benami or not is a matter of fact and for determining this question, no absolute formula or acid test uniformly applicable in all situation, can be laid down, yet in weighing the probabilities and gathering relevant indicia Courts are usually guided by these circumstances; 1) Sources from which purchase/procure money come 2) The nature and possession property/business after procurement 3) Motive if any, for giving transaction a benami colour 4) The position of parties and the relationship, if any between claimant and alleged benamidar, 5) Custody of title deed/license after sale/transaction and 6) Conduct of parties concerned in dealing with property or business after sale/transaction. 31. In ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital. The ratio of Shri Gopinath Aggarwal (Supra) is not applicable to the facts of Shri Trilok Singh Dhillon group, because it is not only the money which was mainly contributed through M/s Supreme Traders, wherein major share belongs to Shri Trilok Singh Dhillon and his family members and the fruits of business have also gone back to Shri Trilok Singh Dhillon. 33. In view of the factual and legal discussion, we hold that the money was indirectly invested by Shri Trilok Singh Dhillon and fruit of business has gone back to him as well. Therefore, the income computed in the Panchuram case was rightly held assessable only in the hands of the said Shri Trilok Singh Dhillon on substantive basis. Similar issue has been raised by the revenue on the point of benamidar of Shri Trilok Singh Dhillon, in case of In case of different assessees. Facts and modes operandi being same, so following the same reasoning, we hold that all other assessees are also benamidar of Shri Trilok Singh Dhillon. According, these liquor busines income is also directed to be assessed on substantive basis, in hands of Shri Trilok Singh Dhillon. The AO is directed accordingly. 34. Regarding second limb of issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s Supreme Traders. The assessee claimed interest payment of ₹ 2,88,000/- to M/s Supreme Traders on the withdrawals made from the above said firm. Since this firm is only an instrument to finance the money of Shri Trilok Singh Dhillon and his concerns etc and the assessee was made partner for the obvious reasons known to Shri Trilok Singh Dhillon. The claim of interest is not allowed as the entire funds are held as that of Shri Trilok Singh Dhillon. Since we have held that the assessee is benamidar of Shri Trilok Singh Dhillon. The issue of interest is taken care in the light of the same. The Assessing Officer is directed accordingly. Similar issue regarding the claim of interest payment to M/s Supreme Traders arose in cases of different assessees. As stated above, we have held that the firm is only an instrument to finance the money of Shri Trilok Singh Dhillon and his concern etc. All assessee's are made partner to circumvent the new liquor policy formulated by the State Government which can not be approved. Since we have held that these assessee's are benamidars of Shri Trilok Singh Dhillon for reasons stated above, there is no question of allowing interest. This i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with cogent reasoning to establish that whole or part of such deposits/ investment are independent of liquor business then the addition on account should be deleted. This issue of unexplained investment/ unexplained deposit in all appeals are disposed of in all appeals as indicated above. The Assessing Officer is directed accordingly, 38. The next issue is with regards to addition on account of FDR interest. Our finding assessee being benamidar of Shri Trilok Singh Dhillon has bearing on this issue. The Assessing Officer added this interest, in case of Shri Trilok Singh Dhillon, by observing that the assessee's are benamidar of him. However, in appeal the CIT(A), directed the Assessing Officer to assess the FDR interest on substantive basis in assessee's case, because the CIT(A) has held that the assessee's in question were not benamidar of Shri Trilok Singh Dhillon. We vide para-26 of this order, have held the assessees being benamidar of Shri Trilok Singh Dhillon. So this income has to be clubbed in case of Shri Trilok Singh Dhillon on substantive basis. Facts being similar, so following the same reasoning, this issue in above all the relevant appeals are decided a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the assessee Shri Kulbhushan Sharma is running restaurant as benamidar of Shri trilok Singh Dhillon, then the same has to be assessed in the hands of Shri Trilok Singh Dhillon. So, this issue is restored to AO with direction to decide the same as per facts and law after providing due opportunity of hearing to the assessee. 43. The revenue in its appeal in IT(SS)A No.08(Nag.)/2009 in case of Shri Trilok Singh Dhillon has raised the issue of benamidar. This issue has been discussed and decided by us vide para- 26 of this order, whereby we have held that Shri Trilok Singh Dhillon benamidar of different assessees. So this issue is already taken care. The AO is directed accordingly. 44. The next issue raised in revenue's appeal is with regards to addition of ₹ 24,85,000/- as undisclosed income in case of Shri Trilok Singh Dhillon in AY: 2005-06. As discussed above, the assessee was carrying cash of ₹ 24,85,000/-, while travelling from Mumbai to Raipur on 24-08-2004 On receipt of information, his statement was recorded at the airport and survey u/s 133A was conducted in the business premises of the assessee and converted into search action u/s 132 of IT Act. Subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Trilok Singh Dhillon. The AO made addition by way of disallowance on account of depreciation on car. The AO made addition by way of disallowance on account of depreciation on car. In appeal, the CIT(A) observed that the assessee is one of the working partner and received remuneration. There is no averment made by the Assessing Officer that the assessee did not use the vehicles for business of the firm. Therefore, the CITA) observed that the depreciation is allowable to the assessee. The AO was directed to allow depreciation after disallowing l/5th towards personal and non-business use as per provisions of sec.38 of the IT Act, This reason finding of CIT(A) needs no interference from our side. We uphold the same. This issue raised by revenue in case of Shri Trilok Singh Dhillon in other year also disposed of on similar line. Assessing Officer is directed accordingly. 46. The next issue raised by revenue is with regards to agricultural income of ₹ 50,000/-in AY: 2004-05, The Assessing Officer made addition of ₹ 50,000/- as undisclosed income shown a agricultural income. In appeal, the CIT(A) observed that certificate obtained from the Tahsildar, Babakala, Punjab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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