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D. Srinivas Vyas, Durga Das Vyas Versus Income Tax Officer

Addition to commission receipts assessable in the hands of the appellant on a substantive basis - rectification of mistake to delete protective assessment - application filed by father-assessee M/s. Siemens Ltd. before the Settlement Commission admitting the unsubstantiated commission payments as its own income and the Settlement Commission had accepted such disclosure - Held that:- In a Circular issued by the Central Board of Direct Taxes, bearing No.71, dated 20.12.1971, the Board has indicate .....

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ie do not appear to be genuine. The cases on hand will not be covered by the Circular for one more reason namely that the assessee do not stop with the mere receipt of money. He withdrew it and claimed to have paid to different third parties, but those payments were disallowed. Therefore, if his submission that he had paid money to third parties is true, the money received by him could be only his income. Therefore, the appellant cannot contend that the order of the Settlement Commission clinche .....

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the treatment of the payment made by M/s. Siemens Limited at the hands of the appellant herein, after it was treated differently at the hands of M/s. Siemens Limited can, given some allowance, be treated as an error apparent, the moment it is shown to have been rejected in the order of Assessment, it would become at the most a mistake correctable on an appeal but not an error apparent. Hence, the second substantial question of law is also to be answered against the appellant/assessee. - Tax Cas .....

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sed by the Income Tax Appellate Tribunal Bench 'A' Chennai. 2. On 18.6.2012, all the appeals were admitted by this Court, but separate questions of law were framed in the first two cases and in the next six cases. 3. The substantial questions of law framed in T.C.A.Nos. 167 and 168 of 2012 are as follows:- "1. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the alleged commission receipts from M/s. Siemens Ltd. w .....

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Income Tax Appellate Tribunal was right in holding that the alleged commission receipts from M/s. Balaha Chemicals and M/s. Gem Enterprises were assessable in the hands of the appellant even though the said amounts had been assessed in their respective hands and the appeals filed by those concerns had been dismissed?" 4. The substantial questions of law framed in T.C.A.Nos. 169 to 174 of 2012 are as follows:- "1. Whether on the facts and in the circumstances of the case, the Income Tax .....

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had been recomputed on that basis? 2. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the issue involved was debatable the Assessing was right in rejecting the appellant's petition under Section 154 for the assessment years 1998-99 to 2003-04 even though the Assessing Officer had not passed any speaking order setting forth the reasons for the rejection 5. Heard Mr.K.Subramaniam, learned counsel appearing for the appellant .....

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e father accepted that he had received commission to the tune of ₹ 1,18,56,346/- from M/s. Seimens Limited, Mumbai, a sum of ₹ 30,00,000/- from M/s. Shree Balaha Chemical Agencies, Chennai, ₹ 7,50,000/- from M/s. Gem Enterprises, Chennai and ₹ 1,34,075/- from M/s. Cable Corporation of India, Mumbai. The total commission so received was ₹ 1,57,40,421/-. 8. The father-assessee also claimed that he had paid commissions to six different entities to the total tune of  .....

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parties and completed the assessment. 11. Similarly, independent Assessment Orders were passed for the Assessment Years 1998-99, 1999-2000, 2000-01, 2002-03 and 2003-04, on 6.3.2006, disallowing the commission claimed by the father-assessee to have been paid to third parties. 12. Without challenging the Orders of Assessment by way of appeal, the father-assessee filed independent applications under Section 154 for rectification. It is pertinent to note that these applications for rectification we .....

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9 by the Assessing Officer. But by a speaking order, the Commissioner of Income Tax (Appeals) allowed the appeals on 29.05.2009, holding that there was an error apparent which could have been corrected by the Assessing Officer. 14. The Revenue filed Second Appeals before the Income Tax Appellate Tribunal. These appeals were allowed by the Tribunal, by a common order dated 14.11.2011, holding that when the issue raised in Application under Section 154 is a debatable issue, it would not fall under .....

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s order. The Tribunal pointed out that the specific case of Siemens Limited before the Settlement Commission was that in some cases, the monies paid to individuals like the assessees herein, were received back. Therefore, the Tribunal held that there were two different categories of cases and hence the Settlement Commission's Order cannot be taken advantage by the father-assessee. 17. Assailing the order of the Tribunal, it is contended by Mr.K.Subramaniam, learned counsel for the assessee t .....

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of the father-assessee is that he received payments from M/s Siemens Limited. These payments running to more than ₹ 1 Crore was made by M/s. Siemens in the form of cheques. According to Siemens Limited, before the Settlement Commission, they were unable to substantiate the nature of the services rendered by the father-assessee, so as to entitle him to receive such a huge amount. Even according to the father-assessee, he did not have any technical expertise, he did not have any agreement wi .....

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Therefore, two things would follow. They are (1) either these cash withdrawals were for payment to the persons to whom they were actually intended or (2) they were paid back to M/s. Siemens Limited. These two things that follow as a corollary, will not amount to categorisation of payment. Therefore, we are unable to accept the contention that the Tribunal made a categorisation not found by two lower authorities. 21. It is true that by an order passed on 7.1.2008, the Settlement Commission, Mumba .....

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ctive assessment needs to be cancelled after the relevant assessments have become final and conclusive. The Circular also indicates that the only method of doing this is by invoking Section 154, irrespective of the time prescription contained in Sub-Section (7) of Section 154. 23. We do not think that the above Circular can be made use of by persons whose transactions prima facie do not appear to be genuine. There may be a genuine transaction where one assessee is unable to substantiate a paymen .....

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Limited. The father-assessee attempted to show these withdrawals as payments to six different parties. That claim was rejected by the Assessing Officer and that rejection attained finality, as the father-assessee failed to challenge the Assessment Orders. 25. In other words, the cases on hand will not be covered by the Circular for one more reason namely that the assessee do not stop with the mere receipt of money. He withdrew it and claimed to have paid to different third parties, but those pay .....

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application under Section 154. The Assessing Officer rejected the application under Section 154 by a one line order. It was set aside by the Commissioner of Income Tax (Appeals). The Tribunal held that the issue raised by the assessee will fall under the category of a "debatable issue" and not "error apparent". We think that is a correct view taken by the Tribunal. 28. While the treatment of the payment made by M/s. Siemens Limited at the hands of the appellant herein, after .....

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he first substantial question of law is just the same. Therefore, for the reasons that we have indicated in the case of the father, the first substantial question of law in T.C.A.Nos. 167 and 168 of 2012 is also to be answered against the appellant/assessee. 30. The second substantial question of law arising in T.C.A.Nos. 167 and 168 of 2012, is on a weaker wicket them even the first substantial question of law. At least in so far as the first substantial question of law is concerned, the appell .....

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antial question of law that he wanted us to frame reads as follows:- "Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in not observing that the notice under Section 143(2) for the Assessment Year 2002-03 was issued after the expiry of the period prescribed for the issue of notice under Section 143(2) under the proviso (ii) of the said sanction and therefore, in not holding that the re-assessment made was illegal and void?" 32. Thou .....

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