TMI Blog2017 (4) TMI 777X X X X Extracts X X X X X X X X Extracts X X X X ..... to substantiate. From a broader angle, whether the search occurred at 08:00 AM or an hour later, is left for verification by affidavits signed by the witnesses much after the event. Their signatures on the panchnamas at the time of the search belie the affidavits. These arguments at best could establish some irregularities, for which the Revenue might have had a perfect or plausible explanation, if made in time. However, even if accepted at face value, such facts cannot undermine the search, the recoveries effected or in any case and the validity of the block assessments. The assessee/Ashok Chawla’s submissions in this regard are therefore, rejected. Did the ITAT fall into error in concluding that there was no infirmity in the framing of the assessment by an officer who was involved in the search and seizure operations? - Held that:- . The assessee has, in addition to relying on the circumstance that the AO was a participant in the raiding party, not placed any other material to substantiate the allegation of bias. No personal bias or malice or past history with the said official was alleged, much less proved. In the circumstances, the ratio in Vipin Kumar Jain (2003 (1) TMI 6 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... footing. The search and seizure had yielded documents pertaining to the London flat. The explanation given by the assessee Ashok Chawla cannot be accepted. The position taken by him was that the property was rented. If so, the question of paying maintenance, and the bills found in his possession, remained unexplained. Furthermore, the documents seized also showed that insurance amounts were being paid. As the assessee did not disclose the true value of this property, the adhoc valuation at ₹ 1.5 crores cannot be faulted. The addition sustained by the ITAT (Rs.7,37,30,266/-) has to undergo substantial change. The additions made on account of re-valuation of various properties (aggregating to ₹ 4,58,70,124/-) except ₹ 1,50,00,00/- have to be deleted. Therefore, the ITAT’s order is modified; the assessee is entitled to further relief to the extent of ₹ 3,08,70,124/- which has to be deleted from the sum of ₹ 7,37,30,266/-. Block assessment appeal by Centaur Helicopter Ltd - Held that:- AO - and later, the ITAT, had carried out an elaborate, year by year analysis of the amounts that the assessee received - reflected in the books and documents seized, bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having secured the valuation report, the AO proceeded in an unprincipled manner, and decided that the true value of the property was ₹ 22 lakhs, bringing the balance ₹ 13 lakhs to tax. This court is of the opinion that the material found was sketchy and insufficient to warrant a fresh valuation. In any case, the AO’s order did not even go by the valuation report, but on an entirely different footing- not based on any principle at all. Therefore, the addition has to be set as and is accordingly set aside. The ITAT had remitted the issue of ₹ 3 lakhs added by the AO for fresh consideration. - ITA 478/2007, C.M. APPL.6708/2007, ITA 1246/2007, ITA 479/2007, C.M. APPL.6717/2007, ITA 495/2007, C.M. APPL.6783/2007, 6784/2007 & 10687/2008, ITA 817/2007, ITA 988/2007, ITA 822/2008, C.M. APPL.9763/2008, - - - Dated:- 11-4-2017 - MR. S. RAVINDRA BHAT MR. R.K. GAUBA JJ. Sh. Ankit Swarup and Ms. Tanya Swarup, Advocates, for applicants, in C.M. Appl.35657/2017. Sh. Ashok. K. Manchanda, Sr. Standing Counsel, for Income Tax Department, in Item Nos. 1 to 10. W.P.(C) 4299/2007. C.M. APPL.8052/2007, 4030/2008, 3249/2009, 11752/2010, 2091/2014, 356-57/2017 49 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht to consider and return findings on them. The ITAT, in its impugned order, held that it lacked competence to examine the validity or legality of search and seizure. Therefore, Ashok Chawla, in a freshly filed writ petition (W.P.(C) 4299/2007) questions the validity and legality of search and seizure proceedings, on diverse grounds, including that it was motivated by legal malice, mala fides, tainted inasmuch as it was premised upon the information of a former partner and his ability to bring about pressure, and technical grounds such as improper search in the absence of proper witnesses and lastly, that the assessment order was made by the officer who searched the premises. Ashok Chawla has also challenged the order of the ITAT, declining his application for rectification of its main order in his appeal (in his application MA 57/Del/2007 before the tribunal) by filing W.P.(C) 3517/2011. 4. The additions that were the subject of Ashok Chawla s appeals were discussed in relation to Ground Nos. 5 to 16. These were on account of various materials seized during the search and seizure operations listed below: (1) A slip of paper which contained the description of an account (No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. The assessee who had written the letter, stated further that: Also, a provision will have to be made to show that the source of funds for these Helicopters which I am claiming that these Helicopters are being brought on lease and therefore quarterly payments have to be repaid to you through the lease charges till the full payment along with interest of 7% has been made. (8) Documents showing Ashok Chawla s possession of a property at 105, Queens Road, Reading, Berkshire, London also showed renewal of insurance in respect of certain assets in that flat; further a letter by Ashok Chawla s wife to HUDA, disclosing that he lived in that flat, were also found and seized. 5. The assessee/Ashok Chawla's explanation was that the account number with Discount Bank, Switzerland was of M/s. Capitex of which he was only a consultant. The AO and the ITAT rejected this argument by saying that Swiss bank accounts were inherently kept confidential and that a consultant could not be expected to be in possession of details; furthermore, Ashok Chawla's frequent telephonic conversations with the Vice-President of the bank painted another picture. In addition, the bank had be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s tax returns were correctly done. The amounts were deleted by the ITAT on protective basis. The next ground, i.e. No.8 related to an addition of ₹ 51,12,392/- in the bank guarantee of M/s. Centaur Impex on 01.11.1994, a transfer from Centaur Helicopters. This was found to be a foreign remittance by the AO, wrongly credited in the account of Centaur. According to Ashok Chawla, the source was an advance received from Centaur Impex by Thrustom Telecom UK for garment export. The addition of this amount was upheld in the case of Centaur Impex. Therefore, the protective assessment in the case of Ashok Chawla was deleted. Likewise, in respect of ₹ 40,65,086/- which was a credit in the account of Centaur Impex on 20.02.1995, the explanation given was that the source of deposit was an advance from M/s. Aviv Exports Moscow for export of leather jackets worth US$ 130,000 in terms of the contract dated 30.09.1995. The AO held that the explanation was unsatisfactory and added it to the account of Centaur Impex on substantive basis and to the account of Ashok Chawla on protective basis. This was again like in the case of previous accounts, deleted. 8. After analyzing the document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder, a Swiss bank account number was also found in respect of which the assessee had issued a guarantee letter, which can be done by only an owner but the assessee had procured letters from Capitex claiming that the account belonged to them. The assessee is either the owner of the Capitex or the latter had been put up as a front to explain huge unaccounted money earned through different deals. The letters from Capitex cannot therefore, be accepted as reliable evidence. No credible evidence such as copies of bank account/audited accounts has been produced regarding the source of payment for purchase of Sokol Helicopters by anybody else. The explanation of the assessee regarding source of payment has therefore, been rightly rejected by the AO 9. The ITAT further upheld the commission at 15% not disclosed by the assessee from the documents seized, on account of supply of Kraz 260 trucks to Ukraine - ₹ 24,67,50,000/- and a contract for MI platforms for a consideration of US$ 50,40,000/-. The addition made in these two accounts was ₹ 44,21,2500/- and ₹ 2,41,92,000/-. The addition made on account of reimbursement of expenses from Rakesh Gupta was ₹ 29,51,186 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me money was shown as capital in both the companies. However, this does not explain the source of investment made by the assessee. The claim of the assessee that the peak amount was only ₹ 5 lacs, has not been examined by the AO. In our view, this aspect requires fresh examination. We, therefore, consider it appropriate to restore the matter to the file of the AO for passing a fresh order after examining various details given by the assessee and after allowing opportunity of being heard to the assessee. 11. Since these appeals and writ petitions were pending for a long time and had been repeatedly adjourned at the request of one or the other party, and on account of the Court's inability to devote substantial time, questions of law had not been framed. Therefore, with the assistance and consent of the learned counsel, the appeals were taken up. The following questions of law are formulated in ITA 495/2007, W.P.(C) 4299/2007, W.P.(C)7962/2009 and W.P.(C) 3517/2011. (i) Whether there was legal justification for the search and seizure operations; (ii) Did the ITAT fall into error in concluding that there was no infirmity in the framing of the assessment by an o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... njustified use of power to issue search warrant for production of those books of accounts unless information is to the effect that he has been keeping some secret books as well. The judgment in Harnet Singh v. UOI 1993 04 ITR 334 (P H) and CIT v. Davy Ashmore India Ltd. 1982 137 ITR 456 were relied upon. 14. It was furthermore submitted that the post facto justification in the form of findings concluded has been sufficient to justify a search, would be of no avail. Learned senior counsel stressed here that the precondition for exercise of the power is the reasonable plea as to the existence of material and the recording thereof in the official file, as a necessary step towards the issuance of the warrant. Learned senior counsel submitted that in the facts of this case, the entire effort of the Revenue was to justify its unlawful search in the premises of the assessee and his relatives and associates by such post facto justification. It was submitted that search and seizure proceedings were in any event motivated by malice on account of the unlawful pressure that was sought to be put upon Ashok Chawla at the behest of one of his associates who was closely related to an Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay ₹ 1.34 crores to Ashok Chawla. This, however, did not materialize and on 06.07.1995, the assessee agreed to pay ₹ 25 lakhs to K.K. Kapila and Rakesh Gupta who were to leave the two companies. As the amounts were to be paid by 30.08.1995, Ashok Chawla could not arrange for the payment but instead subjected to write off his premises on 31.08.1995. Relying upon these allegations, it was urged that the search was dented by mala fides and motivating complaints in the form of information engineered by K.K. Kapila at the behest of Rakesh Gupta. 18. It was submitted that the appellant cannot be left remediless and that there has to be proper adjudication of these facts, i.e. the manner in which warrant was issued and reliance on information that preceded it. Though extensive arguments were made on behalf of the assessee, the ITAT declined to return a finding on account of its special bench ruling in Promam Limited v. DCIT 2005 (95) ITD 489. It was submitted that the search in the present case was used as a claw to damage the assessee's business reputation and goodwill and to wreck vengeance and to destroy him. Furthermore, the search itself was dented on acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sought a return of that money when it was discovered that he was duped. Apparently the two individuals agreed to return the amounts and the sum of ₹ 1.34 crore was initially agreed. Later they expressed their inability to do so and a counter offer was made by Ashok Chawla to buy out their shares from the two companies by acquisition and pay them ₹ 25 lakhs by 30.8.1995. As far as the narration goes, the argument is plausible. The difficulty, however, for this Court to accepting these submissions is that such contentions is entirely unsubstantiated. To compound the matter, there are internal contradictions as well. If in fact, M/s. Mals did not possess the assets declared, i.e the form of aircraft valued at over ₹ 31 crores, Sh. Ashok Chawla was undoubtedly justified in asking for the return of the money. Thus, his argument with respect to the counter offer for ₹ 25 lakhs to acquire the shareholding of the two companies begs an explanation. In other words, if the entire corporate entity is a dud and in fact a shell company (as Mas and United India Airways Ltd. were, allegedly according to the assessee Ashok Chawla) in which he had substantial holding, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... babilizes the search proceedings. Counsel next submitted that the raiding party had taken ingress by forcing the locked premises of Defence Colony Garage open, when the keys were already available with Ms Vijaya Rajagopal, the assessee s manager, who was present at the relevant time at 2, Under Hill Road, Civil Lines, Delhi where the search and seizure operation was being carried out simultaneously. By the time, Ms. Vijaya Rajagopal reached Defence Colony premises, the search party had already bunched-up all the papers and made Vijaya to sign on the dotted lines. These irregularities, said counsel were committed deliberately so as to plant certain documents with impunity without any check and control either by the panchas or by Ashok Chawla s representatives. 24. Rule 112(6) of the Income Tax Rules requires the authorized officer to call upon two or more respectable persons to witness the search. The Panchnama drawn at C-517, Defence Colony, shows two witnesses: Mr. Ravi Kumar and Mr. D.S. Mann. Mr. Ravi Kumar reached at the venue after three hrs of commencing the search. Moreover, D.S. Mann was allowed to go to sleep and was called only in the morning when the search was going ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29. At the outset, this court notices that the primary evidence of taperecorded conversation, i.e., the tapes, were not produced before the ITAT during the hearing. The ITAT concluded therefore that such taped conversation could not be taken as reliable evidence. The planted material contained Swiss bank account particulars and other related documents. The assessee had relied upon an affidavit of Rakesh Gupta and one Sh. Mukul to argue that this material had been handed over later. Significantly these affidavits were of much later vintage. In fact during the course of appellate proceedings, Ashok Chawla had relied upon an affidavit of Sh. Rajiv Gupta dated 06.07.2000 which affirmed the contentions of a previous affidavit dated 10.3.1997. A copy of another affidavit has also been placed on the record, which too is dated 06.07.2007 in which Rakesh Gupta states, I have settled off important disputes/differences with Sh. Ashok Chawla amicably with the help and intervention of common friends. 30. Now these documents bespeak of a post-search settlement, between Ashok Chawla and Rakesh Gupta, which appears to have motivated Sh. Rakesh Gupta to have alleged with respect to the pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court in Union of India v Vipin Kumar Jain 260 ITR 1 (SC). In that case, an argument identical with the one advanced by the appellant/assessee here was accepted by the High Court. The Revenue s appeal was allowed by the Supreme Court, which observed, in its judgment as follows: 6. In our view, this appeal must be allowed. The several sections which have been cited by the appellants would show that the Assessing Officer has, either directly or by virtue of his appointment or authorisation by a superior authority under the Act, been given the power of gathering information for the purposes of assessment. The mode of gathering such information may vary from the mere issuance of a notice under Section 142 to the more intrusive method of entry and search envisaged under Section 133A and 133B and seizure under Section 132. The appellants are also correct in their submission that in the absence of any challenge to any of these provisions, it was not open to the High Court to have disabled the Assessing Officer from discharging his statutory functions. What the High Court has done is to read limitations into the Act and to qualify the jurisdiction of the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd adjudicative functions necessarily creates an unconstitutional risk of bias in administrative adjudication has a much more difficult burden of persuasion to carry. It must overcome a presumption of honesty and integrity in those serving as adjudicators; and it must convince that, under a realistic appraisal of psychological tendencies and human weakness, conferring investigative and adjudicative powers on the same individual poses such a risk of actual bias or prejudgment that the practice must be forbidden if the guarantee of due process is to be adequately implemented. 9. It is true that there may be cases where the outcome of the assessment may be influenced by the fact that the raiding Assessing Officer had himself in the course of the raid been witness to any incriminating material against the assessee. The Assessing Officer's decision on the basis of such material is not the final word in the matter. The assessment order is appealable under the provisions of the statute itself and ultimately by way of judicial review. 10. Finally, the courts cannot read in limitations to the jurisdiction conferred by the statutes, in the absence of a challenge to the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew, an incorrect approach. 33. The assessee has, in addition to relying on the circumstance that the AO was a participant in the raiding party, not placed any other material to substantiate the allegation of bias. No personal bias or malice or past history with the said official was alleged, much less proved. In the circumstances, the ratio in Vipin Kumar Jain (supra) applies. The argument that the assessment was void on account of bias, therefore, fails and is rejected. Third question- Whether the appellant, Ashok Chawla was given sufficient opportunity during the assessment proceedings 34. The appellant/assessee alleges that he was denied opportunity to make effective submissions, inasmuch as he was not given copies of documents despite repeated requests in that rega rd. He has placed on the record copies of four such letters written to Commissioners and even to the Minister of Finance, voicing his grievances in this regard. The Revenue argues that this ground was never taken at the earliest point of time, nor even urged before the ITAT. It claims that the submission with respect to denial of inspection and opportunity is an afterthought, because no serious gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iations on its behalf. Learned counsel also relied upon the letter of 14th August 1995 in terms of which Capitex stated that payments were made by it, a stand endorsed by Schweitzer U.S.A. Furthermore senior counsel relied upon a letter of 24th November 1995 by Capitex addressed to the income tax department in this regard. Lastly, learned counsel relied upon a letter of 16th December 1996 written to the Commissioner which clarified all the aspects. 38. Ms. Bansal stressed that the significance of these documents was overlooked and instead the Revenue placed much emphasis on the letters and copy of the telex recovered and seized from the assessee Ashok Chawla from his premises. It was stated that the letters relied on by the Revenue were more than adequately explained and the inference drawn was wholly unjustified. 39. The letter by Capitex was written to the Commissioner of Income tax, on 16.12.1996; it stated, inter alia that: M/s Capitex Limited Picton House, Wargrage Road, Twyford Berkshire RG1O 9NY, UK is a subsidiary company of M/s Inter Agraria BV Holland which is a Dutch Company of International repute and holds 66.5% of Shares of M/s Capitex Limited. The balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduction unit of our subsidiary leather garment Unit Alderman and regular export shipments are made according to which payment is made in advance and on shipments. The details may be obtained from Mr. Patrick Kerr. Mr. Anuj Chawla, son of Mr. A. Chawla had deposited his earning with us while in USA for transfer to India which was done accordingly. Para. 7 : Consultancy for remittance has been made to Canara Bank, New Delhi and no other remittance has been made anywhere else. You may obtain the details from Canara Bank, New Delhi. 41. Learned counsel for the Revenue on the other hand argued that Para 7.10 of the ITAT's impugned order specifically deals with all these aspects. It was highlighted that the tribunal took note of all the letters relied upon by the assessee, in this appeal. It was submitted that even though Capitex wrote some letters to the Revenue, it did not disclose all the materials or other significant information as to the details of shareholders and the source of funds of the company but withheld them. Details as to whether the assessee was a shareholder or a functionary or an investor in Capitex was largely left unanswered. 42. On the other hand, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore quarterly payments have to be repaid to you through the lease charges till the full payment along with interest of 7% has been made. 43. The ITAT's findings in this regard are detailed and the relevant parts thereof are extracted below: The assessee has explained that the account number 53745eZV with Discount Bank, Switzerland, which was found written on a slip. of paper recovered from the premises of the assessee, belonged to MIs. Capitex of which the assessee was only a consultant. This plea is not supported by the nature of documents seized. The Swiss Bank accounts are highly confidential and no one will give the account number to a consultant. Moreover, the assessee was found in regular touch with the Vice President of the Swiss Bank as was clear from the telephone bills seized. Visiting card of the Vice President was also found from the premises of the assessee. A written instruction signed by the assessee to the bank was also found asking the bank to issue bank guarantee in relation to the said account. A letter asking the bank to transfer funds from the said account to some other accounts was also found. These have been reproduced in paras 7.3 and 7.4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment of ₹ 11572668/- But the documents seized which have been mentioned in paras 7.6 to 7.8 earlier do not support the claim. The seized letter dated 31.8.94 written by Rocky G Peter of Schweizer USA mentioned in para 7.6 clearly shows that the helicopters had been sold to Centaur Helicopter Services, a group concern of the assessee. The letter dated 3.1.1995 from the treasurer of Schweizer Aircraft Corpn. mentioned in para 7.7 earlier also confirms this. In the said letter, it was clearly mentioned that the helicopters had been sold to the assessee. Further the letter dated 30.8. 1994 from the assessee addressed to Paul Schweizer/Rocky Peter of Schweizer Aircraft Corpn. mentioned in para 7.8 clearly mentioned that the payment will be made between 5-9 Sept 1994. Ii was also mentioned that invoice may have to be changed to United Airlines India Pvt. Ltd. The assessee in the said letter further showed his concern as to how transaction of sale should be reflected as a lease to show the source of fund for these helicopters and wanted to show it as quarterly payments to be repaid through the lease charges till the full payment along with interest 7% had been made. The langua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were made by it and that negotiations were carried out by Centaur on its behalf. Significantly, however, in reply to the pointed query whether Capitex paid the amount, the letter stated that should Schweizer Company USA was instructed to provide a certificate of payment received from Capitex limited and they have confirmed issuing such certificate . 45. This guarded clarification in fact begs the question. The pointed query was whether Capitex made the payment and if so the details of such payments. Capitex in its reply was forthright that the two Schweizer helicopters were purchased on its behalf. Yet inexplicably it refused to provide details of bank account statements and audited statements. These gaps in the opinion of the Court justified the Revenue to conclude- on the basis of the other letters which painted a contrary picture - that Capitex was controlled by Ashok Chawla. The other letters were written by Rocky.G. Peters of Schweizer and the treasurer of Schweizer USA stated that the helicopters were ordered or purchased by the assessee, Ashok Chawla. As far as the Sokol helicopter details are concerned, the letter dated 26th October 1995 states that negotiations were c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the facts and circumstances of the case and after going through the copies of documents furnished along with the said reply, I find that these are also relevant to the proceedings in the present Memorandum. 3.3 It is inter-alia submitted that the noticees have been framed by conspiracy by the Income Tax Deptt. through one Mr. Rakesh Gupta, a front man; that the statements of the notice recorded by the Enforcement Directorate were forcibly taken by the Department under duress, threat and intimidation which were withdrawn through an application, moved within 3 days . With regard to allegations in the Memorandum, that two Schweizaer Helicopters were allegedly bought by Sh. Ashok Chawla, the noticee for USD 401596, it is contended that the said payment was made by M/s Capitex Ltd. for leasing to United India Airways Ltd.; that the helicopters never came to India and at no time payment was made by the notice, who had negotiated on behalf of M/s Capitex Ltd., for the two helicopters; that the notice had been acting as a consultant to M/s Capitex Ltd., UK and was authorized to carry out all the negotiations on behalf of M/s Capitex Ltd. for purchase of the said two Helicopters whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hawla or his company, the noticees in the present Memorandum. 4.3 In the light of the above facts, the allegations in the Memorandum that payment for purchase of the said choppers was made by M/s Capitex, UK on behalf of the noticees and that the noticees otherwise transferred foreign exchange to wit US$ 4,01,985.90 to M/s Schweizer Air Craft Corporation, USA against the said purchases in contravention of section 8 (1) 9 (1) (c) of FERA, 1973 (46) of 1973 is not established. 4.4 Accordingly, I drop the charges against both the noticees. Learned counsel argued that the above order had the effect of exonerating Centaur and Ashok Chawla of any wrongdoing in respect of the helicopter deal. The order, said counsel is premised on the finding that Centaur had not indulged in unauthorized foreign exchange transactions. 47. A careful reading of the Enforcement Directorate's order would show that the notice was premised on violation of Section 49. That provision preserved the authority of the competent officers to initiate action under the provisions of the old and repealed law, i.e the Foreign Exchange Regulation Act, 1974. Facially, the order of the Jt. Director do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... past transactions. If indeed Capitex had entered into independent contracts for purchase or sale of Schweitzer helicopters or the Sokol helicopters, nothing prevented that concern i.e. Capitex from furnishing copies of such contracts; nothing prevented it also from furnishing some details as to the remittances or payments made to the concerned banks, in order to purchase such equipment or in the case where such contracts were not actually performed, show how contracts were rescinded at and if any amounts were paid to the vendors etc. Besides the fact that the letters shown are post-search, the lack of any primary evidence, renders these clarifications suspect. They do not inspire confidence-at least, not enough to dispel the inference drawn by the Revenue, based primarily upon the material seized during the course of the search and seizure proceedings. 51. What is significant is that Shri Ashok Chawla knew the Discount Bank particulars; he even had several telephonic conversations with the Vice President of that Swiss bank. If indeed the assessee Ashok Chawla were only a consultant - not even an agent, the question as to his knowledge about his principal's accounts and his f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mrs. ANU CHAWLA to continue, which have been totally paid up by me. These properties are namely : a) House -198 Sector 2-A, Faridabad b) Flat No.4316, Pocket B4, Vasant Kunj, New Delhi c) Farmland in NOIDA She may at her own discretion pass anything she likes to our daughter ANISHA CHAWLA From the cash assets the following distribution to be made: A .Miss VIJAYA RAJ GOPAL - ₹ 10,00,000/- (Rupees Ten Lakhs) 2 MRS. BHAGYATI SIBBAL- ₹ 700,000/- (Rupees Seven Lakhs) . . 3. MISS PRAJANA KAPOOR ₹ 5,00,000/ (Rupees Five Lakhs) All the Male Staff to be given ₹ 25000 (Rupees Twenty Five Thousand) each, which are as under: 2 Drivers 5 Servants in the Office E-6, Anand Niketan, New Delhi.. 1 Servant at Faridabad house 2 Servants at B-9, Saket New Delhi. Any Fixed/Movable assets abroad should automatically be passed on to my son ANU CHAWLA, the list of which is known only to my son. Any enquiry/objection from any member of my family shall be sorted out by the Executor of my will, MR. ARUN ARORA and his decision would be final. sd/ ASHOK CHAWLA Witness: . 1. Vasant Kunj property to be given to M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, cannot be taken as reliable considering the common practice of large scale underinvestment in immovable properties. As for the name in which the excess investment found on valuation of immovable properties should be assessed, we have already held earlier that on the facts of the case such excess investment has been rightly considered in the name of the assessee. Further, we are not sustaining the above addition merely on the basis of valuation of V.. There are other circumstances discussed herein to justify the assessment of amount of commission earned by the assessee and invested in various properties. 54. Counsel for the appellant argued that the additions made and sustained by the tribunal cannot be upheld utterly without legal foundation. It was argued that the owners of the properties were different. In at least 3 cases the owners were not family members. Two of them, i.e. Zal Akhtar and Asha Jain had sent written confirmations about ownership; they were also nonresidents living in the USA. Additions made on account of these three properties were therefore conjectural and entirely based upon the report of the DVO. Learned Senior counsel argued next that as far as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies logic and is manifestly erroneous. Notices were separately issued to Ms. Anu Chawla, Mr. Anuj Chawla and the other owners of the properties which were subjected to fresh valuation. Returns were filed by those parties. These returns disclosed the value (which in some cases, like in the case of Anuj Chawla and Anu Chawla) were over and above the cost disclosed in the returns. The AO partly accepted the additional value declared by these third parties/ relatives, but also at the same time - entirely based on the DVO's valuation, added some more. This approach is erroneous, because on the one hand, the higher value of the owner is accepted, only to be loaded with a further amount. The entire additional value (i.e the extra value disclosed in the block returns by the owner plus the further additional value, determined by the DVO) was brought to tax in Ashok Chawla's hands. This approach can be demonstrated by illustration. D1/24, Vasant Vihar, New Delhi was valued by the DVO as ₹ 42,90,590/-. The property stood in the name of Anuj Chawla, the son of the assessee who had declared ₹ 18.83 lakhs as the total investment in his return of undisclosed income. The excess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60. The court notices that the ITAT had also given relief to the extent of restoring the addition to the extent of ₹ 25 lakhs to the AO for further inquiry and findings. Also, it deleted an addition made by the AO to the tune of ₹ 4 lakhs. No fault can be found with these. 61. After the ITAT made the impugned order, the assessee, Ashok Chawla, moved an application for rectification. This was partly allowed and limited relief was given by the order dated 17th September 1996 to the extent of ₹ 13 lakhs which was directed to be deleted. Though this order has been challenged in W.P.(C) 3517/2011 no separate arguments were addressed why it is erroneous. In any case, the court has dealt with the merits of the main appeal. So no relief can be granted in this writ petition. 62. As a result of the above findings, the addition sustained by the ITAT (Rs.7,37,30,266/-) has to undergo substantial change. The additions made on account of re-valuation of various properties (aggregating to ₹ 4,58,70,124/-) except ₹ 1,50,00,00/- have to be deleted. Therefore, the ITAT s order is modified; the assessee is entitled to further relief to the extent of ₹ 3,08,7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of ₹ 27.31 lakhs and ₹ 57.60 lakhs made by the AO on account of upfront money for pursuing the defense deal to the extent of UK 120,000. Counsel for the Revenue argued that these amounts should be sustained, and that the reasons given by the ITAT are without basis. 66. This court is of opinion that the main reason that impelled the ITAT to direct deletion of the substantial amount of ₹ 4.42 crores is found in Para 20.7.7. It cannot be said that these reasons are untenable. The amount was in fact on account of 15% commission, which the according to the AO was received by him. Likewise, the deletion of the two other amounts cannot be said to be unreasonable. For these reasons the court holds that the Revenue s appeal, ITA 817/2007 is without merit. It is accordingly dismissed. 67. In IA 356/2017, the applicants, Lakhan Singh and Bhagat Singh, seek impleadment in W.P.(C) 4299/2007, filed by Ashok Chawla, contending that the attachment of properties, i.e farmlands should be vacated. They claim to be decree holders entitled to the said property and seek directions for release of the property in issue i.e. property No.7 being Farm Land at Village Gawal Pahar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim to have any interest, they have to approach the concerned income tax authorities. IA 356/2017 and connected applications (IA 449/2017) are consequently dismissed. 69. In the light of the conclusions recorded above, ITA 495/2007 succeeds in part; ITA 817/2007, along with W.P.(C) 4299/2007, W.P.(C) 7962/2009 and W.P.(C) 3517/2011 have to fail. IA 356 449 of 2017 are also dismissed. Appeals in relation to Centaur Impex: ITA 479/2007 (assessee) ITA 1246/2007 (revenue) 70. In relation to Centaur Impex, the assessee, pursuant to notice under Section 158BC, the AO made additions to the extent of ₹ 92,50,878/- as undisclosed income. This was based on the AO s determination of undisclosed income assessed on substantive basis due to unexplained credit in bank account for AY 1995-96 (Rs.40,65,086/-) and unexplained credit entry in the Discount Bank Trust Co, Zurich, assessed on substantive basis for AY 1995-95 @ ₹ 51,12,392/-. Upon the assessee s appeal, the ITAT gave substantial relief, by deleting ₹ 40,65,086/-. The assessee is in appeal, complaining that the balance amount should have been deleted; the Revenue s appeal is that the amount of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal, therefore, has to fail. 74. As a result of the above discussion, both appeals, ITA 479/2007 and ITA 1246/2007 have to fail. ITA 988/2007: Block assessment appeal by Centaur Helicopter Ltd 75. Centaur Helicopter is aggrieved by the order of ITAT dated 31.05.2007, which substantially upheld the AO s order in the block assessment pursuant to Section 158BC of the Act. The AO had made additions under Section 158BC to the extent of ₹ 27,35,831/- for the block period added further sums of ₹ 12,00,000 (as undisclosed payments to BK Menon); additions towards commission and consultancy income not disclosed during the period to the extent of ₹ 1,71,05,675 and added unexplained expenditure under Section 69C to the tune of ₹ 23,73,590/-. The total amount thus brought to tax was ₹ 2,34,15,096/-. The assessee s appeal to ITAT was partly allowed; the last amount of ₹ 23,73,590/- towards unexplained expenditure was deleted. 76. The assessee argues in its appeal, under Section 260A that the tribunal failed to consider important evidence, which pointed to the fact that it had not received any amounts apart from what, was given as a quarterly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of deposit of money in the bank account of the assessee in India in AY 1993-94 and 1994-95 were upheld. These amounts were alleged to have been transferred from Discount Bank Trust Co. Switzerland. The assessee explained that the money transferred was out of the income earned by him in USA as flight and ground instructor. He also said that the money had been transferred through Shri Allen Saltmer, a family friend to whom the payment had been made in the form of traveler s cheque/cash from time to time. Mr. Saltmer s confirmation was obtained and placed on the record. The assessee also relied on certificates from his clients in USA regarding receipt of money for training obtained from him as instructor. The A.O. did not accept the genuineness of the assessee s income earned in USA as there were no corresponding deposits in bank accounts did not support the receipts nor any evidence was produced for payment of any tax in USA. The ITAT also noticed that the assessee was only about 18 when he left India for USA in early 1990. Certificates dated 01.05.1990 and 01.10.1990 regarding successful completion of commercial ground school course and Instrument Ground School course by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ords and considered the matter carefully. The addition under dispute is on account of undisclosed investments in the two properties under reference which stand in the name of the assessee. The investment in these properties came to light only from the documents found during search and, therefore, addition on account of under investment in these properties is justified in the block assessment because the addition was being made only on the basis of material found during search. Though these properties are registered in the name of the assessee, the investment in these properties had been owned by Shri Ashok Chawla, the father of the assessee. During his examination u/s 131 by the Investigation Wing on 11.10.1995, Shri Ashok Chawla had been asked to give details of all the immovable properties owned by him in India or abroad either himself or in the name of wife, son or otherwise financed or in other capacity, money invested by him for purchase of land and/or construction/renovation etc. In response to the said question, he gave details of the several properties owned by him which also included B-9, Saket, and D-1/24, Vasant Vihar which stand in the name of the assessee. In view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferent value of ₹ 22 lakhs. The Revenue, on the other hand, justifies the addition on the ground that it is primarily based on the materials recovered. 86. This court has considered the submissions and the relevant materials. The document seized and relevant for this purpose is a loose sheet of paper, containing figures. Against E-6 , the figure 22 is shown. Next to it N-8 against which the figure 5 has been scribbled. Three other figures too have been shown. Ipso facto these mean nothing. The AO deduced that these reflected the true value of the property and went ahead to refer the matter to the valuation officer. The latter, in his report, after considering the then prevailing prices and looking at a transaction of 1996, felt that the value of the property was ₹ 18.36 lakhs. In the absence of any credible material pointing at undervaluation, the exercise was unwarranted. Worse, after having secured the valuation report, the AO proceeded in an unprincipled manner, and decided that the true value of the property was ₹ 22 lakhs, bringing the balance ₹ 13 lakhs to tax. This court is of the opinion that the material found was sketchy and insufficient ..... X X X X Extracts X X X X X X X X Extracts X X X X
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