TMI Blog2019 (10) TMI 1228X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee company has whether started its commercial production when the payment was made to M/s. Built Quick Construction Co. Disclosure made by Shri Rohibhai Amin whether belong to the assessee or to Shri Rohibhai Amin in individual capacity is to be decided especially when the assessee company did not have any source of income except the capital receipt by way of share contribution or borrowings. These aspects of the matter have not been considered either by the Learned CIT(A) or by the Learned AO which was directed to be considered by the Learned AO by the order dated 13.10.2006 passed by the Hon ble ITAT. Authorities below has not acted in the manner has been specified by the Hon ble Tribunal in order to deal the issue afresh; the directives of the Hon ble Tribunal has not been followed in its letter and spirit and hence, we are of the observation to restore the issue to the file of the Learned AO with a specific direction upon him to deal with the issue afresh in the light of the observations made by the Hon ble Tribunal - Assessee s appeal is allowed. - IT(SS)A No.194/Ahd/2014 (Block Period :01.04.1995 to 22.01.2002) - - - Dated:- 20-9-2019 - SHRI O. P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BC was issued to the assessee and finally the assessment for the block period was assessed on 27.02.2004 determining total undisclosed income at ₹ 9,83,47,750/-u/s 69C of the Act and added to the total income of the assessee which was in appeal confirmed by the learned CIT A against which appeal was preferred before the Hon ble ITAT. While deciding the appeal preferred by the assessee the Hon ble ITAT in IT(SS)A No.127/Ahd/2005 for Block Period 01.04.1995 to 22.01.2002 by and under its order dated 13.10.2006 restored the matter to the file of the Learned AO with the direction upon him to decide the issue afresh in terms of the observation made by the Hon ble Tribunal after giving the proper opportunity of hearing to the assessee The relevant observation made by the Learned ITAT appearing at page 50 of the paper book filed before us by the assessee is reproduced herein below: 9. We have carefully considered the submissions made from both the sides alongwith the finding given by the Tax Authorities as well as the material on record. This is an admitted fact that during the course of the search page No. 27 of Annexure-A-1 dated 22.01.2008 was seized from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n against the said amount is mentioned. It is only in answer to question No. 20, Sh. Rohitbhai Amin stated that they have paid in cash ₹ 84 lacs to M/s. Built Quick Construction Co. from time to time since 01.04.2000 to December, 2000 (Approx) How Much payment are made prior to the commercial production is not brought on record. THIS IS A fact on record that the statement given by Sh. Rohitbhai Amin was made not only on behalf of Board of Directors but also in individual capacity. But there is no authorization on record that the Board of Directors has authorized Sh. Rohitbhai Amin to make declaration on behalf of the company. It is also not clear whether the assessee company has started its commercial production when the payment was made to the Built Quick Construction Co. No finding in this regard is on record. We have gone through the provisions of section 69B of the Income Tax Act and we find that the word used is May' which denotes that it is not necessary that the A.O. must treat the excess investment made by the assessee to be its income in each and every case. If the assessee has not started commercial production whether the assessee would have earned the income w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be treated as income of the assessee, The High Court has agreed with the said view of the Tribunal There was no error in the finding recorded by the Tribunal. Section 69 could not be invoked in respect of the investments of the assessee. We therefore, in the interest of the justice think it appropriate that this ground be set aside and restore to the file of the A.O. with the direction that the AO should decide this issue afresh after giving the proper opportunity to the assessee and after considering our aforesaid observations. Thus, this ground is allowed for statistical purposes. Pursuant to the said direction passed by the Learned ITAT the Learned AO passed an order on 12.12.2007. 3. It appears from the said order that while dealing with the particular aspect of the matter of alleged accounted investment of ₹ 84 lacs in the construction of factory building by the assessee, the Learned AO observed as follows: 1. The contention of the assessee has been perused. In this case during the course of search, a paper seized from the factory premises and inventorized at serial no.-27 of Annexure A-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be looked into whether it would have earned income. The fact whether the excess investment was made by the director in his individual capacity or by the company had also to be looked into. The ITAT further observed that, since the statement made by Shri Rohitbhai Amin was not only on behalf of the company but also on his own behalf, the question whether the disclosure belonged to the assessee or to Shri Rohitbhai Amin in his individual capacity had to be decided specially when the assessee company did not have any source of income except the capital receipt by way of share-subscription or borrowings. Since neither the assessing officer not the CIT(A) had looked in to these aspects, it would be appropriate that this ground be set aside and restored to the file of the assessing officer, the Tribunal concluded and accordingly set aside this issue. 4. Heard the respective parties, perused the relevant materials available on record. In appeal, while confirming the order passed by the Learned AO the Learned CIT(A) observed as follows: 4.3.1. In this case, it is an admitted fact that unexplained investment of ₹ 84 lacs have been made in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in cash for purchase of land. In the statement recorded u/s 132(4), the director of the company voluntarily surrendered amount of ₹ 25 lakhs out of which he claimed to have paid ₹ 22 lacs to the vendor for this on money'. The AO rejected the director's contention on grounds that ownership of land was vesting with assessee. Hence, the director should have been shown as creditor in books of accounts of the company. Accordingly, the sum of ₹ 22 lakhs was held to assessee company's income from undisclosed sources u/s 69B. The addition was upheld by CIT(A). Further, in appeal the ITAT held as follows after discussing decision in the case of Smt. PK Noorjahan (supra) and Bharat Engineering Construction (Supra). A company is, under the general law, a juristic person eligible to own property and to sue or be sued, in its name. A company is separate and distinct from its shareholders. In the eye of law company is its own master and is answerable like any other person. As such, the director cannot be construed to be the legal owner of the company. It follows that he cannot make disclosure for the benefit of the company. Therefore, the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred that the sums credited in the books of the assessees constituted income of the previous year, must receive the consideration of the authorities, provided that the assessees rebut the evidence and the inference drawn to reject the explanation offered as unsatisfactory. Section 68 itself provides that where any sum is found credited in the books of the assessees for any previous year, the same may be charged to income tax as the income of assessees of the previous year, if the explanation offered bythe assessees, about the nature and source of such sums found credited in the books of the assessees, is in the opinion of the Assessing Officer not satisfactory. Such opinion found itself constitutes a prima facie evidence against the assessees, viz., the receipt of money, and if the assessees fail to rebut the said evidence, the same can be used against the assessees by holding that it was a receipt of an income nature. In the instant case, the authorities, concurrently found the explanation offered by the assessees unacceptable. The authorities upheld the opinion formed by the Assessing Officer that the explanation offered was not satisfactory. The assessees did not take the plea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax Officer who made an addition of ₹ 32,628 as income from other sources in the assessment year 1968-69 and an addition of ₹ 25,902 in the assessment year 1969-70. The said orders were affirmed in appeal by the Appellate Assistant Commissioner. The Income-tax Appellate Tribunal, however, held that even though the explanation about the nature and sources of the purchase money was not satisfactory but in the facts and circumstances of the case it was not possible for the assessee to earn the amount invested in the properties and that by no stretch of imagination could the assessee be credited with having earned this income in the course of the assessment year or was even in a position to earn it for a decade or more. The Tribunal took the view that although the explanation of the assessee was liable to be rejected, section 69 of the Act conferred only a discretion on the Income.-tax Officer to deal with the investment as income of the assessee and that it did not make it mandatory on his part to deal with the investment as income of the assessee as soon as the tatter's explanation happened to be rejected. On that view, the Tribunal allowed the appeals of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... production from 22.11.2001 and the slip which was found on 22.01.2002 i.e. within the 3 months from the date of commencement of commercial production does not contain any date when the payment was made by the assessee. Neither any description against the amount in question is mentioned in the particular slip. It is only in the answer to question no.20 Shri Rohitbhai Amin stated that he paid in cash ₹ 84 lacs to M/s. Built Quick Construction Co. from time to time since 01.04.2000 to December, 2000 (Approx). How much payment were made prior to the commercial production was also not brought on record. Though the said Shri Rohibhai Amin deposed not only by the Board of Directors but also in the individual capacity. It was neither on record that whether he was having authorization on behalf of Directors. There is no such specific details as regards the assessee company has whether started its commercial production when the payment was made to M/s. Built Quick Construction Co. It was further mentioned by the Hon ble Tribunal that the disclosure made by Shri Rohibhai Amin whether belong to the assessee or to Shri Rohibhai Amin in individual capacity is to be decided especially when ..... X X X X Extracts X X X X X X X X Extracts X X X X
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