TMI Blog2019 (1) TMI 859X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal affirming the finding of the lower authorities. Unexplained cash credit u/s 68 - Held that:- Having found the list of creditors in the insolvency petition to have no bearing insofar the assessment proceedings under the I.T.Act, we are of the opinion that the remand order is erroneous. The insolvency proceeding eventually was concluded with a composition scheme. We also have found that the Tribunal itself on the basis of the facts found the deletion of the cash credits by the first appellate authority to be bad. In such circumstances, we answer the questions raised herein above both in the appeals of the assessee and the Revenue in favour of the Revenue and against the assessee. We restore the assessment order with respect to the addition of cash credits under Section 68. Interest on gold deposits - Held that:- The books of accounts failed to stand the test of verification, especially with reference to the direct and indirect evidence in the possession of the Revenue in respect of the business/financial transactions of the assessee. The business expenditure whatever there be, stood already claimed and allowed in the regular assessments and hence there could be no furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evity the Act ) was stayed by this Court, the Assessing Officer (for brevity A.O. ) had completed the assessments for assessment years (for brevity AY ) 1995-96 and 1996-97 under Section 143(3); lest the limitation set in. Two appeals each by the Revenue and the assessee arise from such regular assessments also. The appeals of the assessee are numbered as I.T.A.Nos.162/2015 and 163/2015. The appeals of the Revenue are numbered as I.T.A.Nos.6/2012 and 60/2012. Common questions arise in the above appeals, since the individual assessments as also the block assessments have been completed on the basis of the materials recovered on search. 2. On facts, we have to notice that the assessee had filed returns for AY 1995-96 on 31.10.1995 and for AY 1996-97 on 30.10.1996. The return for AY 1995-96 was selected for verification under Section 143(2). The assessee though responded to the notice, dragged the matter on one pretext or the other. A survey under Section 133A of the Act was carried out, at the business premises of the assessee, i.e., at the Head Office at Thiruvananthapuram and Branch Offices at Peroorkada and Vattiyoorkavu; on 19.12.1996. The discrepancies and anomalies in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter was pending before this Court. Subsequently, after securing permission of this Court by order dated 11.01.2002, the assessment was completed afresh at ₹ 1649.55 lakhs, vide order under Section 144 read with Section 158BC(c) dated 26.3.2002. 5. The assessee filed appeals before the Commissioner of Income Tax from the regular assessments of AY 1995-96 and AY 1996-97 with delay of 3292 days and 1643 days respectively. The first appellate authority, after condoning the delay, adjudicated the assessee's appeals. The block assessment was also appealed by the assessee before the Commissioner of Income Tax. In block assessment, the questions arising were the following: ( i)Whether the assessee was liable to be treated as an association of persons as distinguished from a firm ? ( ii) Whether the huge deposits found in the books of accounts without the details of the depositors could be added as unaccounted credits under Section 68 ? ( iii)Whether the addition of 18% interset on gold loans in addition to the 18% disclosed in the books of accounts was proper? 6. On the question of Association of Persons, the Commissioner of Appeals found on the evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r passed by the Civil Court in an Insolvency Petition and the A.O. would have to be convinced of the genuineness of the parties by sufficient evidence adduced before the A.O. The remand order of the C.I.T. (Appeals), though confirmed, specific directions were issued by the Tribunal as to how the preliminary list of creditors and any subsequent list as approved by the Civil Court are to be taken into account. With respect to the addition made of 18% towards the interest received on the gold loans not disclosed in the books of accounts, the Tribunal based on various evidences before the A.O., held that the Revenue's case would stand un-impeached. The dis-allowance of interest on deposits were also found to be monies diverted and withdrawn from the business by the partners, in proof of which substantial evidences, direct as well as corroborative, were found during the search. These evidences, according to the Tribunal, stood un-controverted. Even then, the said issues were restored to the files of the first appellate authority, since there was an absence of a speaking order by the first appellate authority. 8. The following questions, as reframed by us, arise insofar as the blo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted by the assessee, there was no distinction as to the creditors being of one or other of the eight firms of the assessee. The business was run in all the eight premises in the name of Malayil Bankers . There was no partnership deed filed, which was duly registered for at least four entities constituted with effect from 01.04.1996. The A.O. had called for the details of the link between the said four entities and the four others constituted as a partnership. The assessee had failed to produce any such evidence. The registration as a firm, inclusive of all the entities carrying on business in common, being not established by the assessee, the compelling evidence as recovered under the survey and seizure would commend us also to find that the status of the assessee is one of Association of Persons. We do not think any question of law arises from the said aspect, since the lower authorities had found such status on the strength of the evidence recovered and on the basis of facts. We, hence, decline to answer the said question raised in the appeal of the assessee and uphold the order of the Tribunal affirming the finding of the lower authorities. 12. The other two questions re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot produced any such materials at the time of search or when a notice was issued for filing of returns, the assessee cannot later at the appellate stage, rely on a Civil Court proceeding, that too, in an insolvency petition and assert that the creditors shown therein were the real depositors with the assessee. 15. We find that the preliminary list of creditors in the insolvency proceeding does not at all commend to us, as a substantiating material to interfere with the assessment proceedings. We also notice the order of the District Court in appeal, wherein it is specifically indicated that there was a scheme of composition filed and approved by the Civil Court. The order of adjudication of the trial court also stood annulled in terms of Sections 38 and 40 of the Insolvency Act. Hence, what has been done by the assessee is to file a scheme of composition and effect pro-rata distribution of its assets to those respondents included in the scheme of composition. This cannot lead to any interference of the assessment order under the income tax act. The assessee, at the time of search nor later after issuance of notice produced any substantiating materials as to the genuineness of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate authority were itself delayed and now we are considering the block period 1988-89 and 1997-98 in the year 2018. The appeals by the assessee before this Court were also delayed, having been filed and returned; after which representation was made with delay respectively of 1676 and 1683 days. Having found the list of creditors in the insolvency petition to have no bearing insofar the assessment proceedings under the I.T.Act, we are of the opinion that the remand order is erroneous. The insolvency proceeding eventually was concluded with a composition scheme. We also have found that the Tribunal itself on the basis of the facts found the deletion of the cash credits by the first appellate authority to be bad. In such circumstances, we answer the questions raised herein above both in the appeals of the assessee and the Revenue in favour of the Revenue and against the assessee. We restore the assessment order with respect to the addition of cash credits under Section 68. 19. On the question of interest on gold deposits as also the expenditure by way of interest on deposits, we find the Tribunal having affirmed the order of the A.O. on facts and evidences, which were before the A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business, for which there was direct and corroborative evidence. The Tribunal clearly held that the finding of the C.I.T.(Appeals) that the accounts are to be treated as genuine was erroneous. The C.I.T. (Appeals), according to the Tribunal, was labouring under an impression that what was to be examined was only a question of law; while the facts were totally ignored as reflected from the materials available before the A.O. by way of the sworn statements and other documents. The books of accounts failed to stand the test of verification, especially with reference to the direct and indirect evidence in the possession of the Revenue in respect of the business/financial transactions of the assessee. The business expenditure whatever there be, stood already claimed and allowed in the regular assessments and hence there could be no further claim of expenditure by way of interest paid on deposits. True, the Tribunal found that the C.I.T.'s (Appeal) order was not speaking. However, when the Tribunal had gone into the evidences, as revealed from the survey and search, which it was competent to do, as the last fact finding authority, we are of the opinion that there was no warrant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t all. As to the question raised by the Revenue on the sustainability of remand, we have already considered the same in the block assessment and found the remand to be unjustified. We hence restore the orders of the A.O. 25. We also notice that the issue of fixed deposit receipts found in the two banks, in bogus names was also telescoped and the A.O. in the subject assessment years had made addition only to the extent of ₹ 27.22 lakhs. This is not liable to be interfered with. Hence, we restore the regular assessments made against the assessee for the years 1995-96 and 1996-97 finding the deletion of the various additions and the direction to accept the books of accounts as genuine, made by the C.I.T.(Appeals), to be erroneous and the remand order made by the Tribunal, to the A.O. and the C.I.T. (Appeals) to be not justified in the light of the facts having been elaborately gone into by the Tribunal and the assessments found to be valid in law. The appeals of the assessee, I.T.A.Nos.162/2015 and 163/2015 would stand dismissed. The Revenue's appeals, I.T.A.Nos.6/2012 60/2012 would stand allowed. The parties will suffer their respective costs in all the appeals. - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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