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Vinod Kumar Khatri Versus Deputy Commissioner Of Income Tax

2015 (11) TMI 1140 - DELHI HIGH COURT

Addition of amount shown in revised return under the pressure of the department - Whether the return filed on 30th March 1994 is a valid revised return? - whether the surrender made in that return dated 30th March 1994 can be regarded as a piece of evidence? - Held that:- In the present case, the Assessee has failed to discharge the onus of showing even prima facie that he was compelled to make a statement during the search or to file a revised return in the assessment proceedings. The record of .....

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edings to file the revised return.

In the present case, filing of the return by the Assessee on 19th January 1993 was only by way of rectification of the defects pointed out by the AO in the notice issued under Section 139 (9) of the Act. This rectified return was related back to the original date when the return was filed on 31st August 1992. It cannot, therefore, be said that the original return was itself ‘non-est’ as contended by the Assessee. Consequently, filing of the revised r .....

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AO in the assessment order, was not in fact made by the Assessee or that documents tendered by the Assessee were not considered by the AO. On the contrary, the order of the CIT (A) showed that in the course of appellate proceeding, a remand report was sought from the AO on the additional grounds urged by the Assessee. The remand report of the AO has been set out in para 7.2 of the CIT (A) order. The AO has subsequently denied the contention of the Assessee that no reasonable opportunity was give .....

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of the Revenue - ITA 132/2008 - Dated:- 23-11-2015 - S. Muralidhar And Vibhu Bakhru, JJ For the Petitioner : Mr. K.R. Manjani with Mr. B.K. Manjani, Advocates. For the Respondent : Mr. Dileep Shivpuri, Senior standing counsel with Mr. Sanjay Kumar, Junior Standing counsel. ORDER S. Muralidhar, J. 1. This appeal by the Assessee, Vinod Kumar Khatri, under Section 260A of the Income Tax Act, 1961 ( Act ) is directed against the impugned order dated 28th September 2007 passed by the Income Tax Appe .....

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he Assessee did not respond to intimation sent to him under Section 139 (9) of the Act, this return was lodged. Subsequently, in response to a notice issued under Section 142 (1) of the Act, the Assessee filed his return of income on 19th January 1993 declaring again a total income of ₹ 22,400. This was accompanied by a computation of taxable income and statement of affairs as on 31st March 1992 and an income and expenditure account for the year ended on 31st March 1992. 3. In the assessme .....

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Act along with a questionnaire dated 29th December 1993. However, no response was given by the Assessee to the said notices. 4. In response to another notice issued under Section 143 (2) of the Act, one Mr. Inder Mohan Singh on behalf of the Assessee attended the assessment proceedings on 27th January 1994 before the AO. A final show-cause notice ( SCN ) dated 15th March 1994 was issued to the Assessee by the AO along with notices under Section 142 (1) of the Act setting out the proposals for A .....

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of ₹ 12,91,42,945.72 was shown towards advances received from Russia for exports. On the assets side, the Assessee showed loans and advances in the names of Dr. Gopal (Rs. 61,26,000), Mr. Deepak Jain (Rs. 30 lakhs), Mr. H.R. Shiv (Rs. 1.50 crores) and Mr. P.C. Sharma (Rs. 1 crore). He also showed cash with Income Tax Department (Rs. 8,94,10,873.72) and a further cash with the income tax department in account of Mr. P.C. Sharma (Rs. 55,74,912). 6. Mr. Inder Mohan Singh, AR who attended the .....

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rder that in order to be fair to the Assessee who came forward with a revised return before the completion of the assessment, this revised return is being considered while passing this order. The assessment order 7. In the assessment order, the AO noted that from the bank accounts of the Assessee s two proprietary concerns, viz., M/s. Trinity International Corporation (TIC) and M/s. Daffodil International Corporation (DIC) in the course of the raid, an amounts of ₹ 8,94,10,873.72 was seize .....

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1: Shri Vinod Kumar Khatri - you are proprietor of M/s. Trinity International Corporation, having current account No. 9958 in Bombay Mercantile Cooperative Bank Ltd., Daryaganj, New Delhi. In the account money worth ₹ 12.89 crores have been received out of which at present you have a balance of ₹ 10,17,340. From the statement of account it is understood that large sums of money have been withdrawn in cash as well as by transfer through DDs. In this respect statement of yours was reco .....

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account No. 9958. Being a proprietor of M/s. Trinity International Corporation, I offer this unexplained income for taxation under Section 134 (4) read with explanation 5 of Section 271 (1)(c) which has been duly explained and understood by me. I may be exempted therefore from penalty and prosecution proceedings. The aforesaid amount may be treated as my unexplained income. I am voluntarily willing to pay taxes on the aforesaid unexplained income of ₹ 12.89 crores. 9. The AO noted that the .....

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nt of ₹ 40.00 lakhs was deposited. In this respect statement of yours was recorded on 17th February 1992. What do you have to say in respect of this money which has come to your bank account? Ans.: As already stated in my statement on 17th February 1992 I am not in the knowledge about the details of sources of the money received as aforesaid. I have already stated on 17th February 1992 that I have acted on the instructions of mainly Dr. Gopal. I cannot explain the sources of receipts in th .....

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ed that from the statement of declaration recorded on 26th and 27th February 1992 under Section 132 (4) of the Act, the Assessee had surrendered the deposits in the bank accounts totalling to ₹ 13.314 crores thereby claiming immunity from penalty and prosecution proceedings. By a letter dated 27th February 1992 addressed to the Commissioner of Income Tax, New Delhi [ CIT, New Delhi ], the Assessee requested that the seized amount should be adjusted towards his existing liability on account .....

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said amount of ₹ 12.91 crores, which have been received from Russia through official banking channels represented 100 % advance money for supplying, by way of export, a certain number of nickel and cadmium batteries to a party in the USSR for which TIC had entered into a contract. The AO further noted that the Assessee could not substantiate the above claim and had in fact surrendered the said sum of ₹ 12.91 crores by filing the revised return of income on 30th March 1994 declaring a .....

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he account of DIC. However, the Assessee was unable to produce any confirmation of these facts from Mr. Radha Krishnan. Consequently, the AO added a sum of ₹ 40 lakhs to the Assessee s total income. However, the AO observed that the Assessee was at liberty to approach the CIT if he could prove the above facts within the limitation period under the Act. Since the Assessee failed to include the said sum in his revised return of income, the AO noted that notice was being issued to the Assesse .....

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e was computed by the AO and was rounded off to ₹ 13,73,70,620. Proceedings before the CIT (A) 12. Initially the appeal filed by the Assessee against the aforesaid order was dismissed by the Commissioner of Income Tax (Appeals) [ CIT (A) ] by an order dated 27th July 1995 as being time-barred. However, the ITAT by its order dated 2nd January 2002 passed in the Assessee s appeal, ITA No. 5629/Del/1995 directed the CIT (A) to condone the delay and decide the appeal on merits after allowing a .....

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t took up ITA No. 764/Del/2004 for consideration. Of the five grounds urged in the appeal, the Assessee pressed only the following two: 3. The CIT (A) has erred on facts as well as in law in holding the amount of ₹ 2,91,42,945 as taxable only because the Appellant had shown it in revised return under the pressure of the department. 5. The CIT (A) has erred on facts as well as in law in holding amount of ₹ 40,00,000 received from Shri Radha Krishnan is as unexplained even though the s .....

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s income in the form of unexplained credit. The declaration made by the Assessee was voluntary and he also expressed his willingness to pay the tax on the said undisclosed income. The Assessee was unable to substantiate that the amount received from Russia was a windfall without there being any source. The ITAT also noted the observations of the CIT (A) that once the assessment had been completed under Section 143 (3) of the Act, the Assessee could not be permitted to withdraw the revised return .....

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due date prescribed under Section 139 (1) of the Act. The return subsequently filed on 19th January 1993 was only to rectify the defects pointed out by the AO under Section 139 (9) of the Act. After having rectified the defects, the return would relate back to the date of the original filing, i.e., 31st August 1992. Therefore, the Assessee was competent to file the revised return under Section 139 (5) of the Act and it could have been taken cognizance by the AO. 17. The ITAT also distinguished .....

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mitted to the deposits in the bank accounts of his proprietory concerns. This circumstance corroborated the finding of the AO that the deposits in the bank account were unexplained and therefore, liable to tax. 18. As regards the retraction by the Assessee of the statement made by him under Section 132 (4) of the Act, the ITAT observed that although the statement was not available in the records, its existence was never denied by the Assessee in the course of assessment proceedings. The ITAT dec .....

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at the amount surrendered was not an income rather than the duty of the AO to bring evidence for accepting the admission made. The ITAT noted that till today the Assessee has never supplied any such goods nor refunded the amount. This shows the conduct of the Assessee and also demonstrates that the amount received was never for supply of goods under the so called contract. These are merely an eye wash. 19. Referring to the sequence of events, the ITAT noted that apart from the fact that there wa .....

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lakh, no material was produced before the ITAT to suggest that the amount withdrawn from the bank account was given as short term advance to Mr. Radha Krishnan. There was no confirmation letter from the side of Mr. Radha Krishnan who alleged to have repaid the said sum. The ITAT disposed of ITA No. 764/Del/2004 upholding the order of the AO and CIT (A). 20. As regards the other appeal, ITA No. 2795/Del/2004, against the order of the CIT (A) declining to rectify the order dated 30th January 2004 .....

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ed an application filed by the Assessee under Section 254 (2) of the Act seeking rectification of the purported mistakes. That application had been dismissed on technical grounds. The appeal filed against the said order was dismissed with liberty to file a writ petition. Learned counsel for the Assessee informed the Court that the Assessee was proposing to file a writ petition. By an order dated 31st August 2010 the Division Bench of this Court observed as under: Since the entire case of the App .....

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on the impugned order of the Tribunal also needs revision, if would be open to the Assessee to seek revival of this appeal. 22. Subsequently on 3rd September 2012 an order was passed by the Court noting that after dismissal of the writ petition challenging the order of the ITAT, the Assessee s fresh application under Section 254 (2) of the Act was dismissed on technical grounds. The said second rectification application was dismissed on 16th March 2012. The Court noted that the Assessee s appell .....

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dated 30th March 1994 can be regarded as a piece of evidence? 3. Whether the Income Tax Appellate Tribunal could have relied on a purported statement made by the Assessee under Section 132 (4) when the Tribunal specifically noted that the statement was not available on the record? The Assessee fails to prove coercion 24. Since one of the issues concerns the statement made by the Assessee, which was not available in the file, this Court by its order dated 9th September 2015 directed the learned S .....

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l filed before the CIT (A), was it urged by the Assessee that he had not made any statement of declaration under Section 132 (4) of the Act in the course of the search. This was too crucial an issue for the Assessee to have omitted mentioning. As rightly pointed out by the ITAT, if as is sought to be contended by the Assessee, no statement was given by him in the first place, then the question of having to retract such statement would not arise. The Assessee is, therefore, not consistent in his .....

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elled the Assessee to file a revised return. Such an allegation ought not to be permitted to be casually made. An Assessee who makes such allegation will have to take the risk of stating it on affidavit at the earliest point in time. If it is done belatedly at the appellate stage, the Assessee will have to satisfy the appellate forum that there were good and genuine reasons that prevented the Assessee from making such allegation earlier. The rationale behind Rule 10 of the ITAT Rules will have t .....

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by the Assessee. Apart from the fact that he was represented in the assessment proceedings by a CA or an AR, he also had sufficient time and opportunity to reflect on what had been stated by him during the search proceedings. The Court accordingly rejects the plea that the Assessee did not voluntarily make the statement attributed to him in the course of search or that he was coerced during the assessment proceedings to file the revised return. Neither the original nor the revised return was no .....

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vision of this Act shall apply as if the Assessee had failed to furnish the return. The first proviso to Section 139 (9) of the Act permits the AO to condone the delay where the Assessee rectifies the defect even after the period stipulated thereunder or such further period allowed by the AO as long as the rectified return was filed before the assessment was finalised. 27. It was urged by Mr. Manjani, learned counsel for the Assessee that if the revised rectified return was filed beyond the time .....

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terial, reliance was placed on the decision in CIT vs. S. Khader Khan Son (2013) 352 ITR 480 (SC). 28. In the present case, filing of the return by the Assessee on 19th January 1993 was only by way of rectification of the defects pointed out by the AO in the notice issued under Section 139 (9) of the Act. This rectified return was related back to the original date when the return was filed on 31st August 1992. It cannot, therefore, be said that the original return was itself non-est as contended .....

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pies of the contract and receipts which purportedly substantiated the advance to Mr. Radha Krishnan of ₹ 40 lakhs. As regards receipt of advance from the Russian party for the export, he relied on certain copies of bank documents. However, as noted by the ITAT these were only photocopies and not originals. 30. A further aspect that requires to be noted is that even before the CIT (A) the Assessee did not urge that documents produced by him were not considered. A perusal of the order of CIT .....

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iness at ₹ 1,00,000 against ₹ 22,400 declared by the Assessee. (3) Learned Assessing Officer has erred on facts as well as in law in making the addition of ₹ 40,95,120 as notional interest, which is neither permissible under the Act nor has this income accrued or been received by the Appellant. 31. On 7th December 1994 the following additional grounds were raised: (1) That the assessment order made is liable to be set aside for a fresh assessment as no fresh notice were issued .....

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uld have been completed within one year thereof that is 31st March 1995. (4) That amount of ₹ 12,91,42,946 was a receipt which is claimed as non-taxable being advance which could not partake the character of income and that there has been no evidence that the same stands remitted to fall in the net of taxable income. (5) Without prejudice it is submitted that the amount received from Russia was a windfall without there being any source and is casual receipt not liable to be taxed under the .....

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he AO has been set out in para 7.2 of the CIT (A) order. The AO has subsequently denied the contention of the Assessee that no reasonable opportunity was given to the Assessee or that the assessment was completed in a hurry. Was notice under Section 143 (2) required? 33. Mr. Manjani urged that it was incumbent on the AO to issue a fresh notice under Section 143 (2) before finalising the assessment made pursuant to the revised return filed by the Assessee and that the failure to do so invalidated .....

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78 Taxman 377 (Cal) have held that the revised return substitutes the original return. On the other hand, the decisions in Deepnarain Nagu & Co. v. CIT (1986) 157 ITR 37 (MP), CIT v. Girish Chandraharidas (1992) 196 ITR 833 (Ker) and Pyramid Saimira Theatre Limited v. CIT (2009) 316 ITR 75 (Mad) emphasise that a revised return can be filed only if an omission or wrong statement in the original return is discovered by the Assessee. 35. There is merit in the contention that the revised return .....

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