TMI Blog2016 (6) TMI 585X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Commissioner of Income Tax (Appeals)-36, Mumbai ('CIT(A)') of even date (26.2.2010) dismissing the assessees' appeals contesting his assessments under section 153A r/w s. 143 (3) of the Income Tax Act, 1961 ( the Act ) for assessment years (A.Ys.) 2001-02 to 2006-07 and u/s. 144 for 2007-08. The other set of seven appeals is in relation to the penalty u/s. 271(1)(c) for these years. The appeals raising common issues, were taken up for hearing, and were accordingly heard together. Quantum Assessments 2. The assessments presently under appeal before us (as well as the corresponding penalty appeals) are consequent to a search action u/s. 132(1) of the Act at the assessee s different, as it appears, Short Street and Camac Street premises, at Kolkata on 05.1.2007. The same formed part of a concerted action by the Revenue on Hassan Ali Khan and other related parties at different place across India. The first four grounds of appeal, common for all the years, as under, raise legal/jurisdictional issues, and are accordingly taken up first, i.e., prior to the other grounds agitating to the various additions/disallowances on merits: 1. The learned Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e scope of the assessment u/s. 153A where it follows an unabated assessment, i.e., which has attained finality. 3.2 The assessee in this regard had also assumed another argument before the first appellate authority, i.e., as to non-issue of notice u/s. 143(2), to which passing reference was also made before us and, accordingly, responded to by the ld. special counsel, Sh. Girish Dave, by placing reliance on the decision in the case of Ashok Chaddha vs. ITO [2011] 337 ITR 399 (Del), holding the issue of notice u/s. 143(2) as not mandatory in the case of an assessment u/s. 153A and, besides, on a third member decision in Sumanlata Bansal vs. Asst. CIT (in ITA Nos. 525 to 530/Mum/2008 dated 20.5.2015 - reported at 2015-TIOL-1053-ITAT-Mum-TM), following the same. The factual position is that the assessee did not file any return in response to the notice u/s. 153A. How could then, it is wondered, he claim non-assumption of proper jurisdiction by the Assessing Officer (A.O.) for want of notice u/s. 143(2)? True, the assessee claims to have communicated to the A.O., vide letter dated 31.3.2008, to treat the return/s originally filed u/s. 139 as in response to notice u/s. 153A. So, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estigating economic offences. With regard to the latter aspect, the same only needs to be stated to be rejected, the proceedings under the Act being independent statutory proceedings, which are to be completed in a time bound manner, on the basis of and upon considering the material (brought) on record and the explanation/s furnished in the matter, and which, needless to add, is an aspect that concerns the merits of the assessment/s. Its completion, impending the investigation by Enforcement Directorate (ED), which also does not form part of the Revenue, cannot be faulted with. Reference in this context may also be made to the detailed observations by the tribunal in the matter vide paras 11.2, 12 and 128 of its order in Hassan Ali Khan vs. Dy. CIT (in ITA Nos. 4156-4162/Mum/2010 dated 29.2.2016). 5.2 As regards the plea as to non-allowance of proper opportunity by the A.O., the same we find stands raised before the first appellate authority, and duly dealt with him in his order (as vide Ground 7 and at para 18 for A.Y. 2001-02), stating that no submission in this regard was made before him even as the A.O. had allowed sufficient opportunity to the assessee. The ld. Authorize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.2.2010 to the ld. CIT(A) (APB 1, pgs. 124 to 125). The additional evidence is also qua transactions in or through such foreign bank accounts. Then, again, the assessee could have furnished his explanation/s before the first appellate authority, meeting any deficiency in presenting his case earlier. Ground after ground, we find the ld. CIT(A) to state of either the assessee reiterating his explanation before the A.O. or not making any substantive reply. No wonder, heavy emphasis is laid down before us on admission of additional evidence, placing reliance on the two letters by the assessee (i.e., dated 13.12.2011 at APB 6, pgs. 936, 938) and by his wife, Chandrika Tapuriah (CT) dated 12.9.2013 (at APB 5, pgs. 853- 854), listing eight foreign bank accounts in their names. The second letter, issued in response to a requisition u/s. 142(1) to furnish copies of such accounts (APB pg. 877), is accompanied by eight separate instructions dated 12.9.2013 (one dated 20.9.2013) (APB 5, pgs. 855 870) by the assessee, in the format suggested by the Department, to the respective banks for furnishing all the accounts recorded. Both the letters are much after the completion of the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction of additional evidence before the Tribunal. The parties to the appeal shall not be entitled to produce additional evidence either oral or documentary before the Tribunal, but if the Tribunal requires any documents to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cause, or, if the income-tax authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidence either on points specified by them, or not specified by them, the Tribunal, for reasons to be recorded, may allow such document to be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced. Relying on the decision by the Hon ble Apex Court in the case of K. Venkataramiah vs. A. Seetharama Reddy AIR 1963 SC 1526, 1530, it was submitted that the scope of the words substantial cause occurring in rule 29 stands explained therein to mean that where evidence on record is sufficient to enable the court to pass an order, it may yet admit additional evidence for any other substantial cause. The ld. special counsel for the Revenue would rely on the decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. We may in this regard also profitably refer to the discussion at para 3.3 (pgs. 6- 9) of the order by the tribunal in the case of HAK (supra). This order has in fact, due to the commonality and over-lap of the issues; rather, even to a large extent the evidences as well as the arguments advanced, to be read in conjunction with the said order, to which therefore frequent (and specific) references stand made, the reasons and principles guiding the said decision, being equally applicable, informing the present decision as well. The power of the tribunal to admit additional evidence, it notes with reference to the settled law in the matter, is strictly limited. Rule 29 places a total ban on the parties to the appeal to produce additional evidence, oral or documentary, before the tribunal, which though is vested with judicial discretion to allow production of the same under specified circumstances, i.e., either to enable it to pass an order or for any other substantial cause, or where the Revenue authorities had decided the case without affording sufficient opportunity to the assessee to adduce the same. The latter aspect is not in dispute in the present case, which, it would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the law in the matter, is clearly factual, requiring the consideration by the appellate authority if particular evidence shall better serve cause of justice in-so-far as it relates to adjudication of issue/s under reference. There is accordingly no scope for generalized pleadings, as made. The only evidence to which our specific attention was drawn with reference to an issue is the account statements (of bank account no. 835-357-902-3 with Credit Suisse Private Banking, Zurich) for the period 01.7.2001 to 28.12.2006 (APB-5, pgs. 883-913). The same would, however, be of no avail as, as pointed out during hearing by Shri Dave, with reference to the disclaimer qualifying the said statement (at pg. 890), that the said statement is not suitable for tax purposes . Also, as argued by him, the same originating in a foreign territory, is not apostilled and, accordingly, cannot be accepted in evidence. This, then, makes a short shrift of the fore-going discussion on the law in the matter, which was yet preferred by us in view of the lengthy arguments in the matter canvassed before us. No wonder, the ld. AR has chosen not to make a separate and specific prayer for admission of additional e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter being, in substance, factual. We have, it may be added, already found no merit in the assessee s argument of the Revenue to have awaited the conclusion of the proceedings before the ED prior to the completion of the assessment under the Act and, consequently, keeping even the appellate proceedings which are only an extension of the appellate proceedings, in abeyance, on that score. This, then, brings us to the third limb of the discussion in the matter. The assessee, as discussed above, in response to a requisition u/s. 142(1), placed request on the different banks in which he and his wife, CT, have since admitted to have accounts, for furnishing copies of account since inception of the account to its closure. We have already explained that the same cannot by itself be considered as an evidence but only an expression of earnestness on the part of the assessee to come clean. There is also no way to hold the said list of bank accounts as exhaustive . We have, however, admitted the report by UBS AG, Zurich, dated 30.10.2007 to ED in the case of HAK (supra) (refer para 3.3 of the said order), to which reference stands also made by the assessee in support of his case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), to the extent relevant and not inconsistent with the facts as may be found in the present case, would equally apply and hold for instant appeals as well. This, it may be stated, decides the relevant grounds. True, however, in-as-much as the considerations for the same flow from the principle informing the admission of additional evidence/s by us as well as, similarly, in the case of HAK, the same represents our view point in the matter, so that it was considered only proper to state the same while discussing the said aspect of the assessee s appeals. 5.5 The foregoing discussion decides Grounds 3 and 4 of the instant appeals for all the years. A.Y. 2001-02 6. Ground # 5 is in respect of addition for ₹ 447 crores toward unexplained deposit in the assessee s bank account no. 760001 with United Bank of Switzerland (name since changed to UBS AG, Zurich) during the year. The Revenue, on the basis of the information received from ED, found the assessee to be in receipt of the said sum (USD 100 Million) from HAK, on the basis of transfer instruction by HAK, i.e., vide his letter dated 16.7.2000 to the said bank, even as the assessee denied any knowledge of the same or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me cases, stands discussed, as were the other aspects in relation thereto, viz. the background and the surrounding facts and circumstances; the bank particulars, including the names of the bank officials, the abiding and apparent relationship between the assessee and KT, in the said paras. The same would apply in the equal measure in the present case, with rather the existence of the account number 76001 (in the name of the assessee (KT)) being admitted, both by him as well as in the bank report. As regards the reason for the HAK to transfer funds in such huge sums to him, the assessee himself now (vide letter dated 01.7.2009, pgs.914-917/APB-5) explains that to be the sole purpose and the raison de tre of his relationship with HAK, who, claimed to have access to huge funds, promised to invest in the assessee s projects. Whether that by itself was sufficient for the assessee to have, on the contrary, as claimed, incur heavy expenditure or, rather, transfer no insubstantial sums to HAK, i.e., to have continued to be deluded by the said promise for several years, is another matter. There is, however, sufficient evidence on record to show the two sharing a close relationship for sev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be a creditor qua a debt to that extent. That is, the nature of the debt, unexplained, is sufficient to attract the rigor of the provision. 7.2 No improvement in his case stands made by the assessee, i.e., vis-a-vis that before the Revenue, even as indicated above with reference to the arguments in respect of admission of additional evidence by the tribunal. So, however, and even as we say so, we cannot help but observing and, accordingly, state that the tribunal in the case of HAK (supra), decision in which case shall for apparent reasons stand to be adopted in the present case, i.e., a set aside to the file of the assessing authority to enable the assessee to conclusively prove the facts, besides being precisely what the ld. counsel, Shri Chetan Karia, CA, argued and was at pains to bring home. In the present case, the account number specified in the document is admitted and confirmed to be that of the assessee s bank account with UBS AG, Zurich. The decision of the tribunal in HAK (supra) shall, accordingly, apply on all fours, with we finding no reason to take any different view in the matter. As such, for the same reasons as stated in the said order, and for which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sum of ₹ 1,07,700/-. Page 47 of Annexure A-1 to Panchanama dated 06.1.2007 revealed figures of interest (Rs.5,96,260/-) and brokerage (Rs.40,831/-) for the period 01.2.1997 to 31.3.2004, with that falling to the share of the previous year under reference, i.e., relevant to A.Y. 2001-02, being at ₹ 1,34,400/- (para 8 of the assessment order). Similarly, there is reference to pages 48, 49, 102 103 of the said Annexure, being in respect of loan in the principal amount of ₹ 2 lacs and ₹ 1.25 lacs, to M/s. Harsh Enterprises and Mr. Ramlal Jain respectively, carrying interest @ 21% p.a., as well as brokerage amounts for the period 01.4.1992 to 31.3.2004 and 2006 respectively. Sums in relation thereto, however, fall for assessment for the subsequent years, as for A.Y. 2005-06. In explanation, the assessee vide letter dated 01.12.2008 stated that these were mere rough calculations and notings with regard to interest calculation, and no transaction had taken place. The same did not find acceptance by the A.O., who added the amount of interest and brokerage, working to the impugned sum of ₹ 1,07,700/-. The assessee could not improve his case before the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,20,000 2002-03 4,20,000 4,20,000 2003-04 4,20,000 4,20,000 2004-05 4,20,000 1,00,000 10,000 5,30,000 2005-06 4,20,000 1,20,000 10,000 + 12,000 5,62,000 2006-07 4,20,000 12,000 4,32,000 2007-08 4,20,000 4,20,000 Total 29,40,000 2,20,000 44,000 The interest charged and received having not been disclosed as income, the A.O. sought to bring the same to tax. The assessee explained the same to be rough notings, and that no interest had in fact been received. Being unsubstantiated, the amount was added in assessment and confirmed in appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... toward unexplained expenditure on credit cards as found to have been incurred for different years, from A.Y. 2001-02 (at ₹ 42,535/-) to A.Y. 2007- 08, tabulated at para 10 of the assessment order, as under: Sr. No. Name of the Bank Assessment Year Amount (in Rs.) 1 American express 2001-02 42,535 2 American express 2002-03 1,87,232 3 American express 2003-04 2,02,699 4 American express 2004-05 87,399 5 American express 2005-06 2,50,604 6 American express 2006-07 8,52,867 7 American express 2007-08 8,06,065 8 City Bank 2007-08 8,62,463 9 ICI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts and circumstances of the case into account, only consider it proper to restore the matter back to the file of the assessing authority with a view to allow a final opportunity to the assessee to discharge the burden of proof, which continues to be un-discharged, and adjudicate afresh per a speaking order in accordance with law. Needless to add, the assessee shall be allowed reasonable opportunity to present its case. We decide accordingly. 14. Grounds # 10 and 11 are toward disallowance of profit and loss expenses as claimed per the profit and loss account (Rs.5,91,650/-) and the add-back of creditors (Rs.21,14,448/-), as appearing in the balance-sheet furnished along with the return of income for the year. The assessee not producing any books of account, bills or vouchers in support of his claims, or confirmations of loans and credits from the creditors, or other supporting evidences in respect thereof, the same were brought to tax as the assessee s income. No improvement whatsoever in his case having been made by the assessee before the first appellate authority, the same stood confirmed in first appeal. Aggrieved, the assessee is in further appeal. 15. We have heard the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there being no dispute with regard to the relevant facts. As regards the issue on merits, i.e., set off of loss against the other income for the current year, we find that the A.O. has merely rejected the loss without determining it. In fact, he has disallowed the entire expenditure which may have itself resulted in the impugned loss . The same would, accordingly, require being determined. Without doubt, only the loss on the basis of the expenditure allowed (in computing income) can be said to result in a loss, so that it would stand to be reduced by the amount of expenditure disallowed. The matter, accordingly, as for Grounds 9 and 10 qua expenditure, is set aside to the file of the A.O. with like directions. We decide accordingly. 17. Ground # 13 is merely a recount of the different Grounds in the form of a prayer, while Ground 14 is towards a leave to add or alter any ground of appeal. The same, therefore, do not arise for adjudication. We decide accordingly. A.Y. 2002-03 18.1 Grounds 1 to 4 stand decided vide paras 2 to 5 of this order. 18.2 We may, however, before we begin to address and adjudicate the other grounds raised by the assessee, clarify that for this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its provisions. The presumption of section 132(4A) is only for the limited purpose of passing an order u/s. 132(5), and was not available for framing a regular assessment . The Hon ble Apex Court found the provisions (forming part of Chapter XIII-C) to have all the trappings of a small code in itself, embodying an integrated scheme (sections 132 to 132B) for a specific purpose, i.e., laying down a complete procedure for search and seizure; the power of the relevant authorities, and confiscation of the assets seized. The material seized though could be used as a piece of evidence in any proceedings under the Act, with section 132(4) itself so providing. That is, the provisions of sections 132 and 132A, save to the extent specifically provided, would not impact or regulate the process of assessment in any manner. An assessment under the Act, i.e., where the A.O. has the power to assess income after making enquiries, by effecting adjustment/s to the returned income, can even otherwise be made only on the basis of material on record, applying the extant law (of-course duly confronting the assessee therewith) and, besides, is impermissible to be reviewed ( CIT vs. Kelvinator of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even as found by the tribunal in the case of HAK (supra), even as it opined that there could have other things/matters on their agenda as well. The assessee therefore stating of having engaged PA on behalf and behest of his NRI friends interested in acquiring real estate properties in Western Europe, authorising him to represent them, is without any basis or material/evidence, either found in search or adduced at any stage and, accordingly, only needs to be rejected. If at all, it only confirms the validity of the documents found, so that negotiations toward purchase of real estate properties was under way; the bill by PA under reference being in respect of one such property Hotel Chateau Gutsah, Luzern, Switzerland. The same was, however, not sold. Liability toward the services of PA could yet arise, being not in any manner dependent on the actual sale of the property and, therefore, validly raised, payment in respect of which could be understandably made. What is intriguing though is that the same hotel was being negotiated for purchase by HAK as well, at the same time, who had expressed his desire to invest in projects in Switzerland to PA in February, 2001 retaining him as h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It contains statement of open outstanding of his account with HAK as on 09.3.2002, reading as under: Position Particulars Quantity Unit In CHF 1.1 Loan to HAK via Mr. Tapuriah (UBP) 1 1,77,000 1,77,000 1.2 Commission promised by Mr. Tapuriah on pos 1.1 1 79,650 79,650 1.5 Mobile telephone bill Mr. Tapuriah 1 5278 5278 1.17 Courier medicine for Mr. Tapuriah 1 180 180 The assessee s submission (dated 01.12.2008) that the said statement did not concern him and, further, that he was not aware of or in any manner connected therewith, did not find favour with the Revenue, resulting in addition for the amount (CHF 2,62,108), noted therein, working to the impugned sum of ₹ 1,23,45,286/- (as corrected by the ld. CIT(A)). Surely, the same, given the background of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be set off, which is stated as made u/s. 143(3) on 31.3.2005 (APB 10, pg. 1785). We, accordingly, modify the impugned order to hold in favour of the loss, as determined, to the extent it relates to the current year, against income assessable for the current year. In other words, it is the income as already assessed u/s. 143(3), as against that returned, that shall be the starting point of the computation of income, followed by the adjustments made thereto per the instant assessment. We decide accordingly. 26. Ground # 13 is merely a recount of the different grounds in the form of a prayer, while Ground 14 is towards a leave to add or alter any ground of appeal. The same, therefore, do not arise for adjudication. We decide accordingly. A.Y. 2003-04 27. Grounds 1 to 4 stand decided vide paras 2 to 5 of this order. 28. Ground # 5 is toward an addition for ₹ 1,07,700/- on account of interest and brokerage. The same stands already decided vide paras 8-9 of this order, adjudicating Ground 7 for A.Y. 2001-02; the respective cases of the parties being the same. 29. Ground # 6 is toward an addition for ₹ 4,20,000/- on account interest income. The same stands alre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for ₹ 6,00,000/- on account of unexplained loans and creditors. The same stands already decided vide paras 14-15 of this order, adjudicating Ground 11 for A.Y. 2001-02; the respective cases of the parties being the same. 35. Ground # 11 is toward an addition for ₹ 7,04,266/- on account of returned loss. The same stands already decided vide paras 16 and 25 of this order, adjudicating Ground 12 for A.Ys. 2001-02 and 2002-03; the respective cases of the parties being the same. 36. Ground # 12 is merely a recount of the different grounds in the form of a prayer, while Ground 13 is towards a leave to add or alter any ground of appeal. The same, therefore, do not arise for adjudication. We decide accordingly. A.Y. 2004-05 37. Grounds 1 to 4 stand decided vide paras 2 to 5 of this order. 38. Ground # 5 is toward an addition for ₹ 1,07,700/- on account interest and brokerage. The same stands already decided vide paras 8-9 of this order, adjudicating Ground 7 for A.Y. 2001-02. 39. Grounds # 6 and 7 stand already decided vide paras 10-11 of this order, adjudicating Ground 8 for A.Y. 2001-02. These grounds impugn additions on account of interest (Rs.4,30,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, do not arise for adjudication. We decide accordingly. A.Y. 2005-06 45. Grounds 1 to 4 stand decided vide paras 2 to 5 of this order. 46. Ground # 5 is toward an addition for ₹ 74,100/- on account interest and brokerage. The same stands already decided vide paras 8-9 of this order, adjudicating Ground 7 for A.Y. 2001-02; the respective cases of both the parties being the same. 47. Grounds # 6 and 7 agitates the addition (Rs.4,42,000/-) in respect of interest and brokerage. This is a subsisting issue, being the subject matter of Ground 8 for A.Y. 2001-02, decided vide paras 10-11 of this order. Further, this may be read in conjunction with para 39 of this order, adjudicating Grounds 6 and 7 for A.Y. 2004- 05, which decision shall, the facts and circumstances as well as the respective cases of the parties being the same, obtain for the current year as well. We decide accordingly. 48. Ground # 8: Pages 3 and 4 of Annexure CIL-1A, found and seized from the assessee s residence at Kolkata in search on 05.1.2007, is the working of cash-in-hand of KT (Assessee) and his wife (Chandrika Tapuriah), for different years, as under: F.Y. 2004-05 is ₹ 4,83,804 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it in the bank, and the mere fact of the cash being withdrawn from bank account may by itself not be conclusive of the explanation as to the source of cash, which only translates into the source of the corresponding bank deposit/s /balance. We decide accordingly. This also decides Grounds 16 and 18 for A.Ys. 2006-07 and 2007-08 respectively; the facts and circumstances of the case as well as the respective cases of the parties being the same. 50. Ground # 9 is toward an addition for ₹ 2,50,604/- on account of unexplained expenditure on credit card payments. The same stands already decided vide paras 12- 13 of this order, adjudicating Ground 9 for A.Y. 2001-02; the respective cases of the parties being the same. 51. Ground # 10 is qua an addition for ₹ 19,000/- toward inadmissible expenses. The same stands already decided vide paras 11 12 of this order, adjudicating Ground 10 for A.Y. 2001-02; the respective cases of the parties being the same. 52. Ground # 11 is toward an addition for ₹ 20,96,661/- on account of unexplained loans and credits. The same stands already decided vide paras 11 12 of this order, adjudicating Ground 11 for A.Y. 2001-02; the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time, i.e., prior to the impugned assessment. True, one could argue, as indeed it was before us, that where no assessment for the year is pending, in-as-much as the time provided for the service of notice u/s. 143(2) under the Act had expired, it did not abate, and it was by implication a concluded assessment, which cannot be interfered with in section 153A proceedings. Both the parties before us relied, in support of their cases, on the decision in the case of Continental Warehousing Corporation (supra). There is, firstly, admittedly no intimation u/s. 143(1) or order u/s. 143(3), so that the stated issue does not arise for consideration, save for A.Y. 2002-03, for which, as afore-discussed, concluded assessment u/s. 143(3) stands made. Further, this issue will also not arise for A.Y. 2007-08 for which no return has admittedly been filed u/s. 139 and the impugned assessment (u/s. 144) for which year is the original assessment. As, however, processing of each return, validly furnished, is an established procedure, we consider this issue, without prejudice , moving on the premise that the same may have been subject to processing u/s. 143(1), and which issue would therefore sur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be said to be concluded by the decision by the Hon ble Apex Court in CIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. [2007] 291 ITR 500 (SC). Tracing the legislative history of the provision, for which it makes reference to its earlier decision in Apogee International Ltd. vs. Union of India [1996] 220 ITR 248 (SC), it explained that the legislative intent is very clear from the use of the word intimation as substituted for assessment , which denote different concepts. While in assessment, the A.O. is free to make any addition after grant of opportunity to the assessee, no such addition/adjustment is permissible u/s. 143(1), where-under he cannot go beyond the return, accounts or documents accompanying the return, and for the reason that no opportunity is granted to the assessee. Substantial changes, it notes, have been further made w.e.f. 01.6.1999, restricting the power to make adjustment to removal of arithmetic errors or that otherwise apparent on the basis of the return itself or the documents accompanying the same. The processing of the return, leading to an Intimation u/s. 143(1), may not be done by the AO himself and, further, is without prejudice to the provision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicable. By such application only recovery indicated to be payable in the intimation became permissible. And nothing more can be inferred from the deeming provision. Therefore, there being no assessment under section 143(1)(a), the question of change of opinion, as contended, does not arise . Finally, we may, for the sake of completeness of the discussion in the matter, which we have though found as completely covered by the decisions by the Hon ble jurisdictional and the Hon ble Apex court cited supra, consider the argument of the processing of a return u/s. 143(1) as leading to an assessment, i.e., after the expiry of the time prescribed for the service of notice u/s. 143(2), in the context of section 153A proceedings or a s. 153A assessment. There is no concept of deemed assessment, i.e., by lapse of time, under the Act, which is a positive act of determination of income by the assessing authority. The law does not contemplate two assessments, i.e., one by issue of notice u/s. 143(2) and the other, otherwise, i.e., without the issue of the said notice. As explained by the Hon ble Court per its afore-referred decisions, what section 153A contemplates, quite simply, is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as explained by the Hon ble Courts of law. 55. Grounds 15 16 are in respect of disallowance of deduction for ₹ 1 lac and ₹ 1,18,406/- claimed u/s. 80G and 80D of the Act, made and sustained in the absence of its substantiation by the assessee (refer paras 12.3 and 15 of the assessment and impugned order respectively). Clearly, in the absence of any evidence, the assessee has failed to support its claim, much less prove it. No such proof/material has also been led, exhibiting the genuineness of the claim or toward making out a case for admission of additional evidence in this regard. We, accordingly, find no reason for interference, and decline the same. We decide accordingly. 56. Ground # 17 is merely a recount of the different grounds in the form of a prayer, while Ground 18 is towards a leave to add or alter any ground of appeal. The same, therefore, do not arise for adjudication. We decide accordingly. A.Y. 2006-07 57. Grounds 1 to 4 stand decided vide paras 2 to 5 of this order. 58. Ground # 5 is toward an addition in the sum of ₹ 52,45,215/- on account of unexplained expenditure on the renovation of his residence at 10A, Prithviraj Road, N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by one, Sanjiv Talwar, toward different works planned to be carried out, summarised at pg. 1037 (APB 6), as under: Summary Amount (Rs.) Dismantling work 3,04,050 Civil electrical work 23,87,085 Plumbing work 2,50,000 Window door chaukhat 7,96,995 total 37,38,120 We find no separate estimation for miscellaneous work (taken at ₹ 15,87,085/- by the A.O.) or description thereof, or even reference thereto, in the said papers. This figure is in fact of the cost of the civil work (as per the revised estimate at pg. 1035), with electrical work being estimated thereat at ₹ 8,80,000/- (i.e., both aggregating to ₹ 23,87,085/-). This, in fact, summarises the revised cost estimate (dated 07.2.2006), appearing at pgs. 1029 to 1036, being thus in supercession of the provisional estimate (dated 24.8.2005), appearing at pgs. 1023 to 1028, estimating the civil and electrical cost at ₹ 14,66,005/- and the dismantling cost ₹ 1,7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and ostensible owner of the flats, would be interested in the renovation, and was interacting with the contractor, specifying and discussing the works to be carried out, and would be called upon to pay, and whose names appears on the records of the resident s association/society inso- far as the communication there from is concerned in other words, has, in any case, the beneficial interest in the flats, which he holds out to the world as belonging to him. Income-tax law recognises beneficial ownership as against legal or titular ownership ( CIT vs. Podar Cement (Pvt.) Ltd. [1997] 226 ITR 625 (SC)), even as the issue before is qua the payment for the renovation of assessee s residence. No case of he being required to reside in these flats for the purpose of the business of the stated companies, even assuming them to be the owner, has been made out, or of the negotiations with the contractor being carried out by the assessee (and his wife) for and on behalf of these companies. Under the circumstances, we have no hesitation in confirming the addition in principle. However, as observed earlier, there is clearly a double addition of ₹ 15.07 lacs, even as pointed out by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received from KT (assessee) at ₹ 84 lacs (during f.y. 2005-06) and at ₹ 19 lacs (during f.y. 2006-07, in April, 2006), i.e., at a total of ₹ 103 lacs. Accordingly, it was inferred that out of ₹ 107 lacs received by SN from the assessee, ₹ 103 lacs were given to SJ. The same, to the extent pertaining to the current year (Rs.53 lacs), was proposed to be added for A.Y. 2006-07, and the balance ₹ 54 lacs for the following year (A.Y. 2007-08). The assessee denied the transactions, stating that all that SN had requested of him was assistance by way of finance, and though the possibility of diamond exports was discussed with him, the same did not materialise, also disclaiming the transactions listed in the seized papers (vide statement u/s. 132(4) dated 11.1.2007). SN, on being confronted with the assessee s statement, would, in rebuttal, allude to the dishonour of cheque/s issued by CT in favour of SJ (pgs. 27, 28 of Annexure A2, seized from the assessee s residence) vide his statement dated 21.3.2007. The A.O. found the assessee s denial unacceptable, and made the addition for the proposed amounts, which are the subject matter of Grounds 6 and 7 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents seized in search. It is the assessee who, therefore, would be required to produce SN who has merely affirmed the truthfulness of the documents found in search, even otherwise mandated by law (section 292-C of the Act). In our view, it is, on the contrary, the assessee who needs to explain the documents found from his residence in relation to this addition, as well as to how was SN in the know of the same, i.e., the dishonoured cheque and the lawyer s notice. We are conscious that the date/s of the payment as recorded in the books of SJ do no match with that in the seized material. It is the letter, which though forms the principal document and the basis of the addition. Two, it is clear that the assessee, HAK and SN maintain open accounts with each other, giving payments to one another, or one another s behalf, from time to time, to be adjusted/settled subsequently. This also explains the different between ₹ 107 lacs paid to SN (as per pgs. 3, 3A) and the amount reflected as received from the assessee (Rs.103 lacs) in the accounts of SJ. The matter is purely factual, decided by us on the basis of the various materials found in search, to which the presumption of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Mr. Sayed, are confirmatory, and in agreement with the seized material, which is to be regarded as true by law (section 292-C). The assessee, while admitting to the circumstance of his, on account of his medical problems, having sought funds at London, contacting SN for the purpose, states that money was returned then and there . Now, it is nobody s case that the assessee owes either SN or Mr. Sayed any sum on that account. The question, therefore, is whether it was accepted in the first place or not. The obligation to explain the source (of repayment) shall arise only in case of the former, resulting in an addition (to the returned income) where not satisfactorily explained. The assessee s explanation obviates that need by stating that the money, though offered, was in fact not accepted in-as-much as he was not required to be hospitalised. The explanation is contrary to the clear evidence of the assessee being given UK Pounds 20,000 at London in late 2005. Why, one may ask, would it be recorded if no money had in fact exchanged hands ? That is, the assessee s explanation challenges the very basis of recording the transaction, by denying it, while at the same time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Annexure A1 (pg. 109/Gd. # 8) and Ann. A2 (pgs. 40, 41 46 qua Gds. 9-11) to the Panchanama dated 06.1.2007. The same stand discussed at paras 8(iii), 9(i) to 9(iii) of the assessment order. In each case, the payments stand admitted, the evidence being in the form of passenger tickets in the assessee s name and/or payments made to the travel agents and, thus, irrebutable. The assessee s plea of the payment/s being made only for self, and not for HAK - in case of common tickets, is understandable and merits acceptance unless of-course the payment/s qua the same is also recorded in the accounts of the travel agent in the assessee s name. The payments are for most part admitted, stated to be recorded in the books of the assessee s (HUF) or his wife, Chandrika Tapuriah (CT) or R. M. Investment Trading Co. P. Ltd. (RMI), either directly or through personal expenses/withdrawals. The same stood not accepted by the Revenue in the absence of the assessee leading evidence toward the same. Surely, personal withdrawals cannot be on an omnibus account to explain any expenditure. These are specific payments, occasioned by specific evidence/s. No case for sufficiency of withdrawals, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asioned by a requirement for the same. Payment of the same could not thus be explained out of regular withdrawals (which have not shown to be in excess over preceding year to that extent) and, in fact, to the extent of ₹ 55,000/- are detailed in the bill itself. Also, there is nothing to exhibit of the balance being in dispute or not paid, the repair work in fact continuing upto 30.11.2005, over 2 month after the last payment of ₹ 10,000/- was made on 28.9.2000. As regards the telephone expenses, the same are in the nature of regular expenses. However, the bills found are for a part of the year (commencing from 15.1.2006 up to 01.2.2008), working to an average of ₹ 26,000/- p.m. The expenditure for f.y. 2006-07, corresponding to A.Y. 2007-08, is at ₹ 3.41 lacs, which yields an average of ₹ 28,000/- pm. To state therefore that ₹ 50,000/- (out of the withdrawal of ₹ 3 lacs for the year) and ₹ 2,80,000/- (without specifying the total withdrawal for the year) from HUF account, be appropriated toward telephone expenses, is obfuscating, rather than addressing the issue, by issuing a gross statement. We could understand where the assessee sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal. The assessee s case before us remains the same, i.e., of the same being accounted, besides also resulting in double addition in-as-much as the part of the expenditure is also included while making the addition for travel expenditure (Grounds 8-11). We also observe that the booking dates of same journeys do not fall during the relevant previous year. We, accordingly, only consider it proper to restore this matter back to the file of the A.O. to allow the assessee one final opportunity to satisfactory explain the source of the expenditure, as well as to remove the apparent anomalies. The A.O. shall decide in accordance with the law, issuing defining findings of fact. We decide accordingly. 72. Ground # 19 is in respect of an addition for ₹ 6,48,665/- toward purchase of foreign exchange. The case of the parties is the same as qua Ground 18, so that we have no reason to take a different view, and decide likewise (also refer paras 31-32). 73. Ground 20 relates to an addition qua unexplained expenditure incurred during the relevant previous year in foreign exchange (GBP 2488), i.e., at ₹ 25,765/-, being toward booking of two rooms in a hotel, paid for in cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a prayer, while Ground 27 is towards a leave to add or alter any ground of appeal. The same, therefore, do not arise for adjudication. We decide accordingly. A.Y. 2007-08 78. Ground 1: The assessment for this year is distinguishable from that for the preceding years in-as-much as no return was admittedly filed u/s. 139 of the Act and, two, is framed u/s. 144 of the Act. The search conducted, being prior to the close of the relevant previous year, the search year, there is no question of the assessee having filed the return by that date or of the assessment proceedings having commenced. The A.O. accordingly retains original jurisdiction, and the assessment, in our view, is u/s. 153A r/w s. 144 of the Act. The same would thus not stand restricted to the material found in search. Abundant opportunities to represent his case were provided to the assessee, which commenced with the issue of a questionnaire on 29.01.2008, continuing with the issue of questionnaires and notices up to 19.12.2008. Copies of the documents seized from the residence of the assessee, as well as of HAK and SN, were supplied to his representative, Shri Pradeep Shah, CA, on 05.9.2008, 17.11.2008 and 21.11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therwise) the source thereof, the same are liable to be added as unexplained expenditure u/s. 69C of the Act. Whether the same have been made, admitted to be in part, from the sale proceeds of the shares (in Redico and GHCL), also listed alongside (on the same page), valued at ₹ 11.50 lacs (out of a total four shares valued at ₹ 20.50 lacs), is a question of fact, not proved; the assessee as much as not producing his books of account, stated to bear the said shares, some of which are further stated to be sold, and which (sale) also stands reflected therein. That is, the said sale is the assessee s explanation toward the source to whatever extent, of the said expenditure. Admittedly, only some of the shares have been sold later, so that the listing of the shares on the said page can at best be stated as of the holding, stated toward the intent of being sold. It could well be that the other shares were not sold (or required to be), or even that the same, though belonging to the assessee, are not disclosed. There is no indication of the expenditure being kept in abeyance and not made on a regular basis, being even otherwise of a recurring nature, and not discharging whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransactions, but only rough notings, it questions the addition/s qua interest transactions (Rs.1.95 lacs) on the ground that these are by cheque, implying that these are actual transactions of (receipt of) interest. Could it be that a part of the transactions noted are actual, and the balance not ? Further, the interest part, which is admitted, itself confirms the transactions to be financial transactions, pursuant to loan transactions. Again, where by cheque, as the interest amounts are indicated to be in the document recovered the narration to the interest amounts reading: Int. Chq , it is only ostensibly so, and would require being shown as accounted and, further, disclosed as income. The matter would therefore merit being adjudicated afresh. We understand that assessment is a best judgment assessment, so that the AO is bound to act only on the materials, as well as explanation furnished, before him, and that the assessee had failed to discharge the burden of proof on him, only denying the transaction/s. The interest of justice, however, dictates our decision as to restoration; the interest amount indicated to be by cheque/s. Again, if the interest is accounted, could it be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatement of account (including the amount shown as balance outstanding or carry forward); which we consider to be a distinct possibility, particularly in the absence of any explanation/ correlation in the assessment proceedings. Needless to add, the assessee shall regard it as one, final opportunity in the matter, allowed in the interest of justice. We decide accordingly. Reference is also made to Ground 9 for A.Y. 2006-07 (decided along with Gds. 8, 10 and 11 for that year, vide para 64 of this order). Here it may be pertinent to mention that though the AO states of making the addition for ₹ 3,52,486/-, he actually includes only ₹ 1,73,950/- (a component of the former amount) in assessment (refer para 20(5) of the assessment order). In-as-much the addition is to be made at the correct amount only, the AO, subject to hearing the assessee, shall be at liberty to bring the correct amount to tax. This decides the Grounds tabulated above, save Gd. # 10. 85.2 Ground 10 is in respect of unexplained expenses on viz. travel, mobile, AMC, personal expenditure (as on medicine), etc. (APB-6, pg. 1140). The statement is in the handwriting of, as it appears, the assessee. No expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rce of the admitted expenditure remains unexplained. The second argument, i.e., of double addition, is taken before us for the first time. Further, there are other aspects of the matter as well. The names of the five persons, to whom salary is paid (for the month of June, 2006) are clearly spelt out. Are they the assessee s personal staff, or of any of his companies? If they are of RMC or some other company, how, we wonder, could the same, i.e., the said expenditure, be added in the assessee s hands? Again, if the companies are defunct, with no business, what, and for whom, the services were being rendered by them. No such inquiry stands made, the question in which respect may arise only where not accounted for in the books of the company/s, in which case the same could be considered as paid by the assessee in his capacity as the principal person of the employer-company. The issue, we may clarify, is not with regard to the employer, de facto or de jure , on whose behalf the payment/s may have been made, but the source of payment the provider of funds therefor. The matter accordingly is restored back to the file of the AO for addressing this aspect, allowing the assessee a reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his businesses, income from which is assessable in his hands. The matter, accordingly, is restored to the file of the AO for fresh determination after hearing the assessee. We decide accordingly. 93. We may consider Grounds # 23 and 24, being related, together, beginning by tabulating the relevant data, as under: Ground Amount (in Rs.) Annexure CIL (pg.) APB (pg.) 23 26,67,914 17-19 1212-1213 24 4,57,048 21 - The assessee explains the amount, which is a subject matter of Ground 23, as working of the gratuity of staff, for making payments on different dates, which does not, however, bear reference to any year. The second page (# 21) was explained to be, again, mere rough notings. The same did not find favour with the Revenue for being unsubstantiated. 94. We have heard the parties, and perused the material on record. The page corresponds to page 18 (toward an addition for ₹ 4,40,080/-). The handwriting on these pages is the same as that qua the preceding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em for personal purposes or for some other group concern. Even if finally recorded in the books of the company which is legally liable for the same, the question (of fact) before us is as to source of payment, i.e., at the time it is made. There is in fact no contention toward this at any stage . Then, there are some amounts which are clearly noted to be for/toward KT, the assessee (refer page 19). Finally, both the year/s as well as the amount of payment/s, as adopted, may undergo change, as for example, working qua page 17 is found in excess by ₹ 1,93,000/-. The matter, accordingly, shall warrant being restored to the file of the AO for fresh adjudication, who shall decide in accordance with law, issuing definite findings of fact upon hearing the assessee, who shall also be supplied page 21 (of Annexure CIL-1), for ₹ 4,57,048/-, stated by him as not available. We having - for like considerations, similarly restored the matter for other years also, guided by the interest of justice, do likewise for the current year as well. The AO in the set-aside proceedings, we may clarify, would be at liberty; rather obliged to bring the correct amount to tax in the assessee s ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have heard the parties, and perused the material on record. This being the search year, the assessee s stand of the addition as not liable to be made in assessment in the absence of seized material, is not valid in law. Though the assessee claims to have paid for the credit card expenses per cheque/s, he has not supported his contention in any manner, making no improvement in his case even before the first appellate authority, i.e., even considering him as constrained for time before the assessing authority. The assessee s claim of the relevant expenditure being booked as personal expenses, thus, remains no more than a bald plea. His further statement of having not claimed the said expenditure in his income tax accounts, is, again, without merit in-as-much as the assessment is not based thereon - the assessee in fact not filing any return for the year. There is as such no material on record, except for the information received from the different credit card agencies - duly confronted to the assessee, with reference to which the addition could be examined for being consistent there-with. No doubt, it was incumbent on the assessee to specify the relevant bank accounts and lead ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28.7.2006 Medical INS 2300 24.11.2006 Swis Visa Med. Ins 5110 The same came to be added as income by way of unexplained expenditure, and confirmed in appeal in the absence of the assessee exhibiting it to be reflected in his accounts, as claimed. Similar additions have been made for the current year, being subject matter of Grounds 9, 10-14, and which stands restored to the file of the AO for fresh determination. We decide like-wise for this Ground as well. This shall also meet the assessee s objection of there being double addition/s, i.e., qua the same expenditure. The onus though, we may clarify, is strictly on the assessee, and set aside is only toward the limited purpose of explaining the source of the payment of the admitted expenditure. We decide accordingly. 99. Ground # 28 is in respect of addition for ₹ 5,41,000/- in respect of cash found from the assessee s Kolkata residence at the time of search on 5.1.2007. As the assessee did not furnish any evidence in support of his claim of cash being accounted, the same came ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losed to the Revenue per wealth-tax returns of self, his wife (CT) and his HUF (as karta), also enclosing the wealth-tax returns for A.Y. 1999-2000. The assessee reiterated his stand in first appeal, emphasizing that they are old assessees, assessed to wealth tax, drawing attention to the returns , as afore-stated, for A.Y.1999-2000. Also, that the difference between the value of the jewellery (and utensils) shown in accounts, and that adopted for assessment, is on account of valuation, which had witnessed a manifold increase in the recent years - the market value as on the date of search being adopted for the purpose of assessment. The addition being confirmed in appeal, the assessee is in second appeal. 102. We have heard the parties, and perused the material on record. The total valuables found during search, valued at the obtaining rate as on the search date which is not disputed, is admittedly for ₹ 96,46,267/-. The amount reflected in the balance-sheet of CT (the assessee s wife) being at ₹ 9,77,574/-, the difference came to be added in the assessee s hands. Why should the credit be allowed only in respect of that reflected in CT s books/returns, when the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judication. We decide accordingly. 105. In the result, all the quantum appeals are partly allowed. Penalty Appeals 106. We next consider the penalty appeals, i.e., the levy of penalty for all the years under reference u/s. 271(1)(c) of the Act. The assessee s case in the quantum proceedings, as shall be apparent from a reading of the tribunal s order on quantum, has been largely one of denial. The tribunal, however, considering the totality of the facts and circumstances of the case, considered it proper to in the main, restore the matter back to the file of the assessing authority, either by way of an open set aside or for a limited purpose, for fresh determination after examining the assessee s case, per a speaking order. The additions/disallowances made in the first round may thus not survive or stand modified in whole or in part, in the set aside proceedings. It would, in our view, be therefore improper to proceed to examine the correctness of the levy of penalty at this stage. The explanation/s that may now stand to be offered by the assessee, i.e., even qua the additions/disallowances that stand confirmed by us or may obtain in the second round, which are su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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