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ACIT, Central Circle 14, New Delhi Versus Sh. Ashwani Minda and Vice-Versa

2016 (7) TMI 373 - ITAT DELHI

Levy of surcharge - block assessments - Held that:- Levy of surcharge is squarely covered by the judgment of the Hon’ble Apex Court in the case of Vatika Township (P) Ltd.(2014 (9) TMI 576 - SUPREME COURT ), wherein the Hon’ble Apex Court has held that though the provision for surcharge under the Finance Acts has been in existence since 1995, the charge of surcharge with respect to block assessments, having been created for the first time by the insertion of the proviso to section 113 of the Inc .....

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avour of assessee - Addition on account of undisclosed investment in purchase of farm land - addition made on substantive basis - Held that:- The investment made in Farm land has already been declared by M/s JPM Farms P. Ltd. and duly accepted by the AO in its block assessment. As find no reason to add the same again in the hands of the appellant. Therefore, the AO was not justified in making the impugned addition .- Decided in favour of assessee - Addition made on account of benami inve .....

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Tools P. Ltd. and also in the case of M/s Jay Yushin Ltd. on substantive basis. This fact has also been admitted by the AO in his assessment order. Therefore, no further addition of the same amount can be made in the hands of the appellant, which has already been taxed, on substantive basis, in the hands of the M/s MEW Tools P. Ltd. and M/s Jay Yushin Ltd. Thus there is no justification for making addition in the hands of the appellant. - Decided in favour of assessee - IT (SS) A No. 530/Del/20 .....

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158BC of the Income Tax Act, 1961. IT (SS) A No. 538/Del/2003 is cross-appeal by the Department. Both the appeals were heard together and are being disposed of by this common order. 2. Brief facts of the case, as evident from the records, are that Minda Group was engaged in the business of manufacturing of various automobile components e.g. locks, panels, speedometers, heater assembly, door latches, panel switches, handle bar switches, combination switches, instrument clusters etc. and supplyin .....

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inda. 2.1 As per the AO, to conduct the entire business, the group was having thirteen companies. Some of them were under the direct control of the Minda family as they were the major shareholder in these companies. The remaining companies were controlled by some alleged benamidar shareholders. The companies which were controlled by the Minda group were as under: a) M/s Jay Yuhshin Ltd. b) M/s Anu Auto Industries P. Ltd. c) M/s Mew Tools P. Ltd. d ) M/s JPM Auto Mobile P. Ltd. e) M/s J.A. Builde .....

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ablished in early 1980s in collaboration with M/s Yuhshin Ltd. of Japan. This company manufactured mainly auto components. 2.3 As per the AO, during the search operation it was revealed that the group was earning huge unaccounted profits by way of unaccounted sales of automobile components in the open market and by debiting bogus bills for job work & bogus purchases. The modus operandi as explained by the AO is that the manufactured components were removed from M/s Jay Yuhshin Ltd. and M/s A .....

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the form of benami share capital of the group companies, bogus loans, payment of cash for unaccounted consideration for purchase of properties, bogus sale of jewellery and household expenses. In manipulating these transactions, the family was allegedly helped by Shri Vinod Garg, their employee and accountant, Shri Rajinder Aggarwal, CA and Director of M/s Jay Yuhshin Ltd. In addition to this, the group was allegedly having three trusted employees, who were the Directors in their benami companies .....

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Minda Family. It is also alleged that on the date of search Sh. J.P. Minda admitted that these companies belonged to his group. However, in post search inquiry he retracted from his earlier statement. Following companies are allegedly the nine benami concerns of the Minda group: 1. M/s Mew Tools P. Ltd. 2. M/s JPM Auto Mobile P. Ltd. 3. M/s J.A. Builders P. Ltd. 4. M/s JPM Auto Industries P. Ltd. 5. M/s Shree Vinayak Trading Company P. Ltd. 6. M/s Dwarka Electro P. Ltd. 7. M/s Brilliant Jeweller .....

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Ltd. 1,35,97,741/- ₹ 3,48,85,259/- 3.1 On appeal, the ld. CIT (A) confirmed the addition of ₹ 3,00,000/- on account of unexplained cash. The addition on account of sale of jewellery was deleted. The addition on account of conversion charges on the sale of jewellery was also deleted. The ld. CIT (A) also deleted the addition on account of purchase of farm land. Addition made on account of Benami Share Capital was also deleted. The ld. CIT (A) also deleted addition on account of job wo .....

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ed income of the assessee on the allegation of unexplained cash found during the course of search. That the cash so found in the premises of the assessee was fully disclosed and that the addition as made and sustained by the CIT (Appeals) is wrong and untenable in law. 2. That the ld. CIT(Appeals) has erred both in law as well as in facts of the case in upholding the levy of surcharge on the tax determined u/s 163 of the Act even though the same has been impugned only with effect from 01.06.2002 .....

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ategorical finding that this addition has been made on substantive basis in the case of the assessee, implying thereby that the same is being made on protective basis in the case of M/s JPM Farms P. Ltd. 2. On the facts and in the circumstances of the case the ld. CIT (A) erred in deleting the addition of ₹ 1,21,15,114/- made on account of benami investment in Share Capital of different companies on the ground that substantive addition in the hands of these companies has been made whereas .....

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eceived against the billed amount to Sh. J.P. Minda and his sons. 6. The ld. AR submitted that as far as ground no. 1 of assessee s appeal is concerned, the same is not being pressed. Hence, the same is dismissed as not pressed. On the issue of levy of surcharge, the ld. AR placed reliance on the judgment of the Hon ble Apex Court in the case of CIT vs. Vatika Township (P) Ltd. 367 ITR 466 (SC) for the preposition that the levy of surcharge was not to apply to block assessments pertaining to per .....

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se of M/s.JPM Farms, whereas AO has given a categorical finding that this addition has been made on substantive basis in the case of the assessee, implying thereby that same is being made on protective basis in the case of M/s. JPM Farms (P) Ltd. It was submitted that it was on the basis of information gathered during the course of search and post search enquiries that the AO in the order at page 17 had given a finding that company M/s.JPM Farms (P) Ltd. was not pursuing any business activity ex .....

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come for the company and also on the basis of the statement of Sh. Raghunath Singh, seller of the land wherein he had stated that money in cash was paid by Sh.Vinod Garg Manager of the Minda group before the execution of the registration. The Ld. DR further submitted that in view of above facts and findings in the case of company l/3rd of the undisclosed income declared and assessed in the case of company was treated as undisclosed income of Sh.Ashwani Minda (the assessee) who had actually contr .....

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mitted that in view of these facts, the finding of the Ld. CIT(A) ought to be reversed. 8. On ground no. 2 of the Department s appeal, the Ld. DR submitted that the Ld. CIT(A) has erred in deleting the addition of ₹ 1,21,15,114/- made on account of benami investment in share capital of different companies on the ground that substantive addition in the hands of these companies has been made whereas in essence the AO has made addition by implication on protective basis in the hands of these .....

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Faridabad and also opportunity of cross examine was given to the assessee on at 11:00 A.M. However, the assessee did not avail this opportunity. It was submitted that Page 79 of Paper Book - Page 7/A-18 seized on 3.4.2001 from office of Minda at 204/38 Surya Deep Building is conclusive evidence that transactions are arranged only and not real. Secondly, Large number of blank share certificates of different the Minda group companies seized from the office of Rajinder Agrawal at 103/37-38 Surya de .....

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₹ 300,08,300/- out of which an amount of ₹ 2,68,00,000/- has been invested in the Minda Group of Companies. Premises of the company were covered u/s 132 of the I.T.Act on 19.3.2001. It was submitted that in view of the copious evidences against the assessee, the relief allowed by the Ld. CIT (A) deserves to be reversed. 9. On ground No. 3 of the department s appeal, the Ld. DR submitted that the Ld.CIT(A) had erred in deleting addition of ₹ 1,35,97,741/- made on account of bog .....

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expenses which M/s.Mew Tools had to incur for getting this work done were also nominal in nature. Thus the actual profit of Mew Tools became very high. To reduce this profit, funds were siphoned off from Mew Tools by debiting bogus job work Bills. The total funds withdrawn this way by the Minda family ran into crores of rupees. This modus operandi had been adopted because Japanese were one of the major share holders of M/s.Jay Yushin Ltd. By withdrawing money this way, the Minda family did not h .....

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Kaushal Industries, Metal Devices, Perfect Spares. Sh.Mathur stated that he used to hand over blank cheques to Sh.Ashwin Minda. The inquiries conducted about the bogus job work by the DDIT, Faridabad, are discussed from page 130 to 145 of the P.B. which proves that these companies were used for taking bogus bills. The owners of these companies have stated that they have not done any job work for the Minda group of companies and that they have issued only bogus bills for the job work. They used .....

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In response the ld. AR submitted that Ground No. 1 relates to addition of ₹ 30,28,697/- on a/c of undisclosed investment in purchase of farm land by M/s JPM Farms (P) Ltd. He submitted that this farm was purchased by M/s JPM Farms (P) Ltd. at ₹ 23,39,500/- shown in the books and the amount paid over and above the registered price i.e. ₹ 85,19,875/- and ₹ 4,66,216/- being development fee (aggregating to ₹ 90,86,091) was offered to tax by M/s JPM Farms (P) Ltd. and wh .....

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e one hand and on the other hand presumed/held that the difference must have been paid equally by Mr. J.P.Minda and his two sons namely Mr. Anil Minda and Mr. Ashwani Minda- assessee here. He submitted that the addition could not be made in the hands of the assessee due to the following reasons - 1) Land was owned / belonged to the said company and was shown in its books of accounts. Thus, when land belonged to the company, there was no question of assuming that the purchase consideration was pa .....

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that any payment was made by the assessee as can be seen from bare reading of Paper Book pages 20-29. 5) When AO himself says that the said company belonged to Mr. J.P.Minda and other family members, there was no basis to assume that assessee must have paid one third of the difference. 6) Double addition cannot be made- one in the hands of the said company and other in the hand of the assessee, more so when there could be no motive as company and individual both were to pay 60% as tax. Rather i .....

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ssessment order of the assessee would show that there was no independent discussion and vague observations have been made by the AO. The AO has not even referred as to which were the evidences for the impugned addition and as to whether the assessee was ever confronted with these evidences. He further submitted that the Ld. CIT (A) has held that there was no evidence found as a result of the search or brought on record by the AO and this finding has not been displaced with evidence. In fact, add .....

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is case that bogus job work was done by M/s Mew Tools P Ltd. and disallowance of ₹ 4,07,93,224/- was made in the assessment of M/s Mew Tools P Ltd., one third of which comes to ₹ 13597741/-(i.e. equally between Mr. J.P. Minda and his two sons).He submitted that Job charges paid by M/s Jay Ushin to M/s Mew Tools Pvt. Ltd. was ₹ 8,75,55,623/- regarding which there is no dispute in the present assessment order. However, when it was in dispute in the hands of M/s Jay Yushin Ltd., t .....

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very amount was made in the hands of M/s Mew Tools Pvt. Ltd. on the ground that no job work expenses were incurred by M/s Mew Tools Pvt. Ltd. He drew our attention to pages 531- 537A of the paper book which is copy of the order of the Tribunal is the case of M/s. Mew Tools (P) Ltd. which shows that revenue accepted the order of Ld. CIT (A) in that case holding the job work charges as genuine. That being there was no question of making the addition in the hands of the assessee. He submitted that .....

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r surcharge under the Finance Acts has been in existence since 1995, the charge of surcharge with respect to block assessments, having been created for the first time by the insertion of the proviso to section 113 of the Income Tax Act, 1961, by the Finance Act, 2002, is clearly a substantive provision and is to be construed as prospective in operation. The amendment neither purports to be merely clarificatory nor is there any material to suggest that it was intended so by Parliament. The Hon bl .....

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undisclosed income can be taxed and the procedure for taxing that income. Specific provision in the form of section 158BA (2) is inserted making it the charging section and the rate at which such income is to be taxed is mentioned in section 113 of the Act. It remains static at 60 per cent of the undisclosed income which is the categorical stipulation in section 113 of the Act. The rates of tax chargeable in the case of a block assessment are not provided in the Finance Act. The character and n .....

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the authority of law. If it is not very clear from the provisions of the Act as to whether or not the particular tax is to be levied on a particular class of persons, the subject should not be fastened with any liability to pay tax. As per the Hon ble Apex Court, the proviso added to section 113 of the Act is not beneficial to the assessee. On the contrary, it is a provision which is onerous to the assessee. Therefore, the normal rule of presumption against retrospective operation would apply. T .....

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roviso was added, whether surcharge was payable in respect of block assessment or not, was totally ambiguous and unclear. Some Assessing Officers did not levy surcharge and others adopted different dates for the application of a particular Finance Act, which resulted in different rates of surcharge in the assessment orders. Chief Commissioners accepted the position, in no uncertain terms, that as per the language of section 113, as it existed prior to the introduction of the proviso, it was diff .....

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the Legislature, even when the Legislature knew the implication thereof and took note of the reasons which led to the insertion of the proviso, that the amendment was to operate prospectively. The Apex Court also observed that the CBDT itself in Circular No. 8 of 2002, dated August 27, 2002, states that the amendment to section 113 of the Act, along with the amendments in section 158BE, would be prospective, i.e., take effect from June 1, 2002. The Finance Act, 2003, by addition of a further pr .....

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t also held that an amendment made to a taxing statute can be said to be intended to remove hardships only of the assessee, not of the Department. Imposing a retrospective levy on the asesee would have caused undue hardship and for that reason Parliament specifically chose to make the proviso effective from June 1, 2002. Where a benefit is conferred by a legislation, the rule against a retrospective construction is different. If a legislation confers a benefit on some persons but without inflict .....

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e held to be retrospective in nature. 13. Respectfully following the ratio of the judgment of the Hon ble Apex Court in the case of Vatika Township P. Ltd. (supra), ground no. 2 of assessee s appeal is allowed. 14. In the result, the appeal of the assessee is partly allowed. 15. As far as ground no. 1 in the Department s appeal is concerned, it is seen from a perusal of the impugned order that the issue has been discussed in Paras 14.1 to 14.4 of the impugned order in detail as under: 14.1 This .....

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been made by the appellant, his father Sh. J.P. Minda and his brother Sh. Anil Minda. The AO has misread the facts and, therefore, reached the erroneous conclusion. It was further pointed out that M/s JPM Farms P. Ltd. has admittedly offered this undisclosed investment as its undisclosed income in the block return filed u/s 158BA, consequent to the search u/s 132. This declaration stands accepted by the AO himself and that too on substantive basis. He further argued that no material was found d .....

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aid company has separately offered undisclosed income on account of investment in purchase of land while filing its block return in response to notice u/s 158BC and such return stands accepted by the AO. It is well settled principle of law that some income/investment cannot be taxed twice. As decided by Rajasthan Court in 130 Taxman 585 which is to the effect that once income shown in the name of the appellant firm was finally assessed and taxed in hands of one of its partners, there was no ques .....

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uted by the ld. DR before us also and, therefore, we find no reason to interfere with the findings of the ld. CIT (A) on this issue. Ground no. 1 of Department s appeal is accordingly dismissed. 17. As far as ground no. 2 of the Department s appeal is concerned, the issue is found to be discussed in Paras 15.1 to 15.7 of the impugned order. The relevant findings of the ld. CIT (A) are in Paras 15.6 and 15.7 and they are being reproduced herein under for a ready reference: 15.6 I have gone throug .....

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ed as undisclosed income of such companies that too on substantive basis, no further addition, thereof, in the hands of the appellant can be made. Moreover, there is no material either found during the course of search operation or has been brought on record by the AO thereafter, to justify that the appellant infact had made such investments. 15.7 Keeping in view the fact that the addition has already been made in the case of respective companies on substantive basis, the AO was not justified in .....

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