TMI Blog2019 (4) TMI 1468X X X X Extracts X X X X X X X X Extracts X X X X ..... w, it is established and admitted by Shri Awanindra Singh that it was NDMC s tax collection which was siphoned off and kept in his lockers. Thus, it cannot be treated as unexplained cash for the purpose of income tax in his hands. We find that the return for assessment year 1996-97 was filed on 24.09.1996 and for assessment year 1997- 98 on 28.11.1997. Thus, the said company has filed regular returns of income tax with the concerned Assessing Officer. The allegation that the said company did not file the return of income is factually incorrect. If there is any non-compliance under the Companies Act, it is for the Registrar of Companies to take appropriate action but it will have no bearing so far as income tax assessment is concerned. The order of the CIT(A) wherein he set aside the addition of ₹ 1,75,03,500/- for fresh consideration to the Assessing Officer cannot be faulted with. - Revenue s appeal are rejected. Interest on FDRs - FDRs were in the name of the wife and children of the assessee - the books of account of SCPL not produced before the AO for verification - balance sheet of SCPL contained the note that the company s FDRs stood in the name of the directors a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mended provision, the set aside assessment is to be completed within one year from the end of the financial year in which appellate order setting aside the assessment was received. In this case, order of CIT(A) is dated 27th November, 2000 though the exact date of receipt of such order by the CIT is not given before us but it can be reasonably presumed that it was received within the financial year ended on 31st March, 2001, especially when no contrary claim is made by the Revenue. In such circumstances, the set aside assessment was to be completed before 31st March, 2002 while the set aside assessment is completed on 31st March, 2003 which is clearly barred by limitation. In view of the above, we quash the assessment order dated 31st March, 2003. Once the impugned assessment order is quashed, the other grounds raised in the assessee s appeal do not require any adjudication. Reopening of assessment u/s 148 - HELD THAT:- When the Revenue is of the opinion that the cash which assessee claimed to have received from issue of shares never belonged to it, he could not have formed an opinion that there is escapement of income in the hands of the assessee. Considering the totality of ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Farm House at E-8, Pushpanjali Bagh, Bijwasan 11,60,000/- 3. A-2/177, Safdarjung Enclave, New Delhi 50,000/- 4. Locker No.3017, New Delhi Vaults Ltd. D-70, Defence Colony. 75,00,000/- 5. Locker No.1830L, M/s U and I Vaults, South Extention, Part-I, New Delhi 56,00,000/- 6. Locker No.109, Bank of Baroda, Bharat Nagar, New Delhi. 31,93,500/- 7. Premises at no.A-585, Sector 3, R.K. Puram, New Delhi. 6,15,000/- ( B) FDRs : (i) FDRs/TDRs with Bank of Baroda, NIT, Faridabad 67,59,396/- (ii) FDRs with Bank of Baroda, New Friends Colony, New Delhi. 5,00,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in appeal vide ITA No.5615/Del/2004 and the assessee, aggrieved with addition sustained, is in appeal vide ITA No.5449/Del/2004. 4. The company CIL had filed the return for assessment year 1996 and 1997. The details with regard to income returned and income assessed in these two years are as under :- A.Y. Date of filing return Income returned Income assessed 1996-97 24.09.1996 Loss of ₹ 10,457/- 98,39,543/- 1997-98 28.11.1997 20,620/- 78,70,620/- 5. On appeal, learned CIT(A) passed a consolidated order for these two years on 14th October, 2004 wherein he sustained the addition made by the Assessing Officer. The assessee, aggrieved with the order of learned CIT(A), is in appeal before us vide ITA No.5452/Del/2004 and 5453/Del/2004. 6. At the time of hearing before us, both the parties argued at length and also filed written submissions. Now, with this factual background, we take up each appeal separately for adjudication. ITA No.405 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejected. ( iv) That Shri Awanindra Singh has pleaded guilty before the Court of Metropolitan Magistrate and has agreed for the confiscation of the sum of ₹ 3.03 crores seized by the CBI. Thus, the assessee is taking contradictory stand before the ITAT than the plea before the Metropolitan Magistrate. The assessee cannot be permitted to take a different stand before different authorities with regard to ownership of the same money. The assessee s claim before the ITAT that the money belonged to the company SCPL and CIL is gross misrepresentation of facts and deserves to be rejected. 10. Learned counsel for the assessee, on the other hand, relied upon the order of the learned CIT(A). He stated that CIL had filed the return of income before the Assessing Officer much before the order of the learned CIT(A). This fact is evident from the assessment order itself. The CIL had filed the return for assessment year 1996-97 on 24.09.1996 and for assessment year 1997-98 on 28.11.1997. These dates are noted in the respective assessment orders. Therefore, the allegation of the Revenue that the company CIL did not file the return of income is absolutely incorrect and contrary to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion regarding source of acquisition of aforesaid cash found from various premises owned / occupied by the assessee. The assessee has merely stated in his reply dated 15.02.2000 that the cash of ₹ 1,75.03.500 - belongs to M s Computer Land Intergators (I) Ltd. ₹ 3 20.882 - belongs to M s Software Consultants (P) Ltd. and ₹ 3.93,115/- belongs to the NDMC. lnspite of sufficient opportunity allowed in this regard, no documentary evidence such as books of account of the aforesaid concerns or any letter from NDMC in support of his claim, have been produced furnished. Besides above cash amounting to ₹ 6.1 5.000 - was recovered from a close associate of the assessee, namely Sh. P R. Singh, who at the time of search by CBI authorities admitted that the cash belonged to the assessee. Further cash amounting to ₹ 28.000 - was also recovered by the C.B.I. authorities from the Maruti 800 Car no. DL 4C B-7242 which was parked in the assessee s residential premises. In the absence of any satisfactory explanation about the nature and source of acquisition of the aforesaid cash totaling to ₹ 1,88,60,497/- the sum of ₹ 1,88,60,497/- is being added to the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re that SCPL was appointed as an agent by NDMC to collect the tax on its behalf. In the year 2012, Shri Awanindra Singh pleaded guilty before the Metropolitan Magistrate by admitting that he siphoned off the tax collected on behalf of NDMC. However, this admission is in the year 2012 and cannot be considered as a basis for holding the order of the learned CIT(A) to be wrong which was passed in the year 2000. Moreover, if this admission by Shri Awanindra Singh before the Metropolitan Magistrate is to be taken into account, then also the cash found from him which was seized by the CBI authorities and has been directed by the Metropolitan Magistrate to be confiscated and deposited with NDMC cannot be considered as unexplained cash of the assessee because SCPL were the collecting agent for the taxes on behalf of NDMC and now, it is established and admitted by Shri Awanindra Singh that it was NDMC s tax collection which was siphoned off and kept in his lockers. Thus, it cannot be treated as unexplained cash for the purpose of income tax in his hands. 14. The Department has also pleaded that CIL neither filed the return of income nor the relevant forms and documents with the Registrar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ready reference :- The copies of audited balance sheet of the company showed FDRs as well as interest income from FDRs as under:- Value of FDRs as Per balance Sheet Interest Income as per Profit Loss A/c 31.3.90 3,10,023 10,023 31.3.91 3,44,391 34,368 31.3.92 3,78,759 34,368 31.3.93 61,07,652 2,12,693 31.3.94 6,06,652 5,32,561 31.3.95 67,74,727 7,05,320 31.3.96 80,78,605 7,17,378 31.3.97 89,55,580 9,43,841 All the balance sheets also contained note that the company s FDRs stood in the name of directors and their relatives. 19. After considering this fact and submissions of both the sides, learned CIT(A) decided this issue in favour of the assessee by the following finding :- 6.2 I h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justification to interfere with the order of the learned CIT(A). The main contention of the Revenue was that the FDRs were in the name of the wife and children of the assessee and moreover, the books of account of SCPL were never produced before the Assessing Officer for verification. On the contrary, learned counsel for the assessee stated that SCPL is a separate assessee and in its assessment u/s 143(3), the issue of FDRs is duly considered. In the said assessment order also, there is a mention that the FDRs were in the name of Smt. Poonam Rani Singh wife of Shri Awanindra Singh. Copy of such assessment order for assessment year 1990-91 and 1993-94 is produced before us. When SCPL is a separate assessee whose assessments were completed u/s 143(3) and in whose balance sheet, FDRs were duly disclosed, then in our opinion, there would hardly be any justification to treat them as unexplained investment of the assessee merely because books of SCPL were not produced during the assessment proceedings of the assessee. If the Assessing Officer had any doubt, he could have got verified the same through the Assessing Officer of SCPL. Thus, when the FDRs belonged to SCPL, the interest, if a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax. It was also claimed that the land at Najafgarh was purchased in F.Y. 95-96. In the absence of documentary evidence and assessment order of the trust the claim was rejected. Similarly Flat No.3 was claimed to have been acquired by lnderjeet Welfare Trust and Flat No.4 by Digvijav Singh Welfare Trust during financial year 93-94. In regard to Flat No.603, Skipper Bhawan. New Delhi, the appellant denied ownership. The AO however rejected the claim and added the investments as estimated by CBI authorities during the year under appeal as above. 8.1 During fine course of hearing the appellant, vide letter dated 15.11.2000 explained that the assets were not acquired during the year under appeal. The agricultural land in Bihar was acquired in AY93-94 by the two trusts and it was being shown in the returns of the trust which have been duly assessed by the department. Similarly agricultural land at Najafgarh, New Delhi, was purchased by the trust in AY96-97 and even a copy of sale deed was filed. In regard to flat at Mumbai the appellant filed payment receipts which showed that the payments were made by the two trusts in AY94-95. I find that the investments did not relate to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PL was remitting less amount to NDMC by resorting to fraud in their collection statement. Based on the above information, a search was conducted by the CBI at NDMC Collection Centre at Nirman Bhawan on 27.09.1996, in which, cash of ₹ 7,41,997/- was found, the details of which is given at page 2 of the assessment order, which are reproduced below for ready reference :- (A) Cash : 1. NDMC Collection Centre, Nirman Bhawan: (i) In Carry Bag 3,45,000/- (ii) In brief case 1,91,785/- (iii) In Office 1,77,212/- (iv) In Car No. DL-4C-B 7242 28,000/- 7,41,997/- 29. After the explanation of the assessee, the Assessing Officer recorded the finding at page 5 of the assessment order as under :- Detail of cash relating to Software Consultants Pvt. Ltd., NDMC is as under:- (a) M/s Software Consultants Pvt. Ltd. In brief case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the course of investigation, on the basis of the figures of day-wise misappropriation on the basis of the actual cash collection statement and cash deposit statements, the month-wise figures as revealed are mentioned herein under:- Month Amount collected from consumers Amount deposited with the NDMC Amount misappropriated March, 96 Rs.1,07,33,772/- Rs.63,94,052/- Rs.43,39,720/- April, 96 Rs.82,52,029 Rs.50,83,238/- Rs.34,95,616/- May, 96 Rs.97,31,001/- Rs.62,35,385/- Rs.42,50,578/- June, 96 Rs.1,12,07,000/- Rs.09,56,422/- Rs.42,50,578/- July, 96 Rs.1,27,79,876/- Rs.75,88,146/- Rs.48,12,623/- Aug, 96 Rs.1,34,83,963/- Rs.81,93,334/- Rs.52,90,629/- Sept., 96 Rs.7,86,90,301/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... custody. They are facing trial for the last 16 years They have already deposited the misappropriated amount with the CBI at initial stage of investigation. Accordingly, they are sentenced to the period already] undergone and further, both the accused persons are sentenced to pay fine o ₹ 7 lacs. An amount of ₹ 3,03,13,951/- (misappropriated amount) attached by the court is confiscated and ordered to be deposited with the NDMC. CBI shall file proof of deposit of the said amount with the NDMC. Fine paid. Receipt issued. As requested, CBI shall handover FDRs of ₹ 67,00,000/- and ₹ 5,00,000/- furnished by the accused Awnindera Singh and FDRs/Indira Vikas Patras of ₹ 2,07,534/-, ₹ 3,06,000/- and UTI bond of ₹ 30,000/- to the accused Priya Ranjan Singh on payment of the principal amount of the FDRs/TDR/Indira Vikas Patras/UTI bond. Bail bond stand discharged. Any condition imposed by this court at the time grant of bail stands cancelled. FDR of ₹ 10,000/- furnished by the accused Awnindera Singh as a condition to travel abroad be returned to him. Original documents furnished by the surety, if any, be returne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as passed. He submitted that in the amended provision itself and on the notes of clauses, it is clarified by the Government that the period of two years would continue to be applicable for the orders passed before 1st day of April, 2000 and, in such cases, order of fresh assessment may be made at any time up to 31st March, 2002. Thus, the intention of the legislature is very clear that where the order of set aside is after the 1st day of April, 2000, the new provision would be applicable and assessment is to be completed within one year from the end of the financial year in which order of set aside was passed. He stated that the order of set aside was passed on 27th November, 2000 i.e., within the financial year ending on 31st March, 2001, so the one year from the end of the financial year would expire on 31st March, 2002 while the assessment order is passed on 31st March, 2003, which is clearly barred by limitation by one year. He, therefore, submitted that the fresh assessment order should be declared as barred by limitation. In support of this contention, he relied upon the Circular No.14 of 2001 dated 27th November, 2001 issued by the CBDT and the decision of Hon'ble Jurisd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d/received by CCIT or CIT. 42. Section 153(2A) was amended by the Finance Act, 2001 with effect from 1st June, 2001 and the amended Section reads as under :- [( 2A) Notwithstanding anything contained in subsections (1) and (2), in relation to the assessment year commencing on the 1st day of April, 1971, and any subsequent assessment year, an order of fresh assessment in pursuance of an order under section 250 or section 254 or section 263 or section 264, setting aside or cancelling an assessment, may be made at any time before the expiry of one year from the end of the financial year in which the order under section 250 or section 254 is received by the Chief Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the Chief Commissioner or Commissioner. Provided that where the order under section 250 or section 254 is received by the Chief Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the Chief Commissioner or Commissioner, on or after the 1st day of April, 1999 but before the 1st day of April, 2000, such an order of fresh assessment may be made at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the order of set aside is received by the Chief Commissioner or Commissioner after 1st June, 2001 i.e., the date from which the amended provision of Finance Act, 2001 would be effective. While the claim of the learned counsel is that the amended provision would be applicable to all the orders of set aside received by the Chief Commissioner or Commissioner after the 1st day of April, 2000 as provided in proviso to Section 153(2A). We would like to reproduce the proviso to Section 153(2A) again at the cost of repetition :- Provided that where the order under section 250 or section 254 is received by the Chief Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the Chief Commissioner or Commissioner, on or after the 1st day of April, 1999 but before the 1st day of April, 2000, such an order of fresh assessment may be made at any time up to the 31st day of March, 2002. 45. In the above proviso, the legislature has provided that where the order under Section 250 is received by the Chief Commissioner or the Commissioner on or before the 1st day of April, 1999 but before 1st day of April, 2000, in those cases, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no doubt that where the order of set aside is passed by the CIT(A) under Section 250 after 1st day of April, 2000, the new provision of Section 153(2A) providing the time limit of one year would be applicable. 46. We find that Hon'ble Jurisdictional High Court has also considered the applicability of limitation under Section 153(2A) in the case of Bhan Textile P.Ltd. (supra). The facts of the said case are that the assessment in respect of the assessee was completed under Section 144 on 31st March, 1999. The assessee, aggrieved by the assessment order, preferred an appeal before the CIT(A) who passed an order dated 12th May, 2000 wherein the CIT(A) passed the following order :- It was also the case of learned counsel that the additions were made without any basis and there was no history of case which could justify such an assessment. I have considered this argument also. It is true that there is no history of case in respect of the additions made in the assessment order. At least nothing is mentioned in the order in this respect. It is also felt that the learned Assessing Officer could have specifically granted one more opportunity to the appellant to state his case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice under Section 143(2) issued on 24th February, 2003 which was held to be barred by limitation. Thus, this decision also supports the case of the assessee. In any case, after considering the proviso to Section 153(2A) as well as the memorandum explaining the provisions of Finance Act, 2001, we are clearly of the opinion that the amended provisions would be applicable where the appellate order is passed or received after 1st April, 2000. As per amended provision, the set aside assessment is to be completed within one year from the end of the financial year in which appellate order setting aside the assessment was received. In this case, order of learned CIT(A) is dated 27th November, 2000 though the exact date of receipt of such order by the CIT is not given before us but it can be reasonably presumed that it was received within the financial year ended on 31st March, 2001, especially when no contrary claim is made by the Revenue. In such circumstances, the set aside assessment was to be completed before 31st March, 2002 while the set aside assessment is completed on 31st March, 2003 which is clearly barred by limitation. In view of the above, we quash the assessment order dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment, the above sum was added as unexplained cash. In the first round of appeal, CIT(A), vide his order dated 27th November, 2000 set aside the matter to the file of the Assessing Officer. The Assessing Officer, in the order of reassessment, repeated the addition. In the second round, the CIT(A), vide order dated 18th October, 2004, accepted the assessee s claim that the cash belonged to CIL i.e., the assessee. However, the Revenue did not accept the order of the learned CIT(A) and challenged the deletion of the addition by the CIT(A) before the ITAT vide ITA No.405/Del/2001. 52. That after the order of the CIT(A) dated 27th November, 2000, the Assessing Officer issued notice u/s 148 on 31st July, 2002 to the assessee and the assessment for both the assessment years under consideration was completed u/s 143(3)/148 on 29th March, 2004 wherein the amount of share subscription has been added on protective basis. The CIT(A) upheld the reopening of assessment u/s 147 and he further held that the amount of share subscription is to be added on substantive basis in the hands of the assessee. The assessee, aggrieved with the order of the learned CIT(A), is in appeal before us. 53 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the CBI in the search of Shri Awanindra Singh at his residence and his bank lockers. With regard to such cash, the contention of Shri Awanindra Singh was that it belonged to CIL while, as per Revenue, it is the unexplained money of Shri Awanindra Singh. Thus, when the Revenue never accepted that this money belonged to CIL, where is the question of holding it to be unexplained money of CIL and resultantly, escapement of income in the hands of CIL. He, therefore, submitted that the reopening of assessment is bad in law because (a) it is based upon wrong facts, (b) it is only for examination of share subscription money, (c) it is at the directive of other authorities and (d) there is no satisfaction of the Assessing Officer of escapement of income. In support of his contention, he relied upon the following decisions :- ( i) Sheo Narain Jaiswal and others Vs. ITO and others [1989] 176 ITR 352 (Patna). ( ii) Chhugamal Rajpal Vs. S.P. Chaliha and others [1971] 79 ITR 603 (SC). ( iii) Madhya Pradesh Industries Ltd. Vs. ITO [1965] 56 ITR 637 (SC). ( iv) CIT Vs. Kelvinator of India Ltd. [2010] 320 ITR 561 (SC). ( v) Nivi Trading Ltd. Vs. Union of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the share application money in detail and has rejected the same with adequate reasons. She heavily relied upon the same. She further stated that it is the assessee who was claiming that it was the share subscription money claimed to have been received from large number of persons in cash. The Assessing Officer examined those persons and found the claim of the assessee to be wrong. Therefore, in these circumstances, the addition for share subscription money being unexplained is fully justified. She further stated that proper reasons have been recorded for reopening of assessment and the assessment has been validly reopened after obtaining the approval of the competent authority. She, therefore, stated that the order of learned CIT(A) should be sustained and assessee s appeals should be dismissed. 56. We have carefully considered the arguments of both the sides and perused the material placed before us. First, we shall take up the issue of validity of reopening of assessment. The reasons recorded for reopening of assessment read as under :- During the course of search and seizure operations conducted by the CBI on 26.9.96, 27.9.96 28.9.96 at various residential/busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see filed return of income on 24.09.1996 declaring total loss of ₹ 10,457/- . Similarly, in assessment year 1997-98, in the first page first paragraph, the Assessing Officer has recorded The assessee filed return of income on 28.11.1997 declaring total income of ₹ 20,620/- . Thus, the assessee had filed the returns for assessment year 1996-97 and 1997-98 much before the recording of reasons for reopening of assessment. The reasons for reopening of assessment were recorded on 31st July, 2002 while the return for assessment year 1996-97 was filed on 24th September, 1996 and for assessment year 1997-98 on 28th November, 1997. Therefore, the main premise on the basis of which the Assessing Officer sought the approval of the competent authority for issue of notice u/s 148 is found to be incorrect. 58. From a perusal of other paragraphs of the reasons recorded for reopening of assessment, we find that it is mainly for the purpose of examination of share subscription money. In the third paragraph, the Assessing Officer has mentioned it is noticed that such share application money worth ₹ 98.50 lacs and ₹ 76.50 lacs were received from various persons during AY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held :- We are of the opinion that in view of the decisions that we have mentioned above, for the purposes of initiating reassessment proceedings, the Assessing Officer could not have made up his mind that the income of the assessee has escaped assessment while a valid return was still pending before him. If the Assessing Officer had allowed the time to elapse for taking action under section 143(2) of the Act, it was entirely his own doing. What the Assessing Officer is now trying to do in an indirect (and incorrect) manner is what he could not have done directly. 60. That the above decision would be squarely applicable to the facts of the assessee s case, as, in this case also, the time limit for issuing notice u/s 143(2) has elapsed and therefore, for examination of share capital, the notice under Section 148 was issued. Therefore, the above decision of Hon'ble Jurisdictional High Court would be squarely applicable to the facts of the assessee s case. 61. In the case of Nivi Trading Ltd. (supra), the Assessing Officer invoked the provisions of Section 147 for verification. It would be evident from the reasons recorded in the said case for reopening of asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the above decision would also be squarely applicable to the assessee s case because in the case of the assessee also, the assessment is purported to be reopened for verification of share capital. 64. That even after reopening, the Assessing Officer was of the opinion that the sum of ₹ 1,75,03,500/- actually belonged to Shri Awanindra Singh and not the assessee, therefore, the addition for the same was made on substantive basis in the case of Shri Awanindra Singh and in the case of the assessee only, protective addition was made. Therefore, when the Revenue is of the opinion that the cash which assessee claimed to have received from issue of shares never belonged to it, he could not have formed an opinion that there is escapement of income in the hands of the assessee. Considering the totality of above facts viz., (a) the notice under Section 148 has been issued on wrong premise that the assessee did not file the return of income while, in fact, the returns were actually filed, (b) the proceedings have been initiated for examination of share capital which is not permissible in law and (c) the Assessing Officer never formed an opinion that there was escapement of income i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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