9911796707
TMI Blog2021 (8) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee, no notice for scrutiny assessment was received within the time permitted under proviso to section 143(2) of the Act and therefore the return filed on 30.9.2009 had attained finality on 7.1.2015. 4. There was a search conducted u/s 132 of the Act in the assessee's Farm House at Tarunhunse Village, Jala Hobli, Next to Stone Hill International School, Bangalore 562-157 on 07-01-2015. Consequent to search a notice u/s 153A was issued on 17-11-2015 to the assessee requiring him to file The Return of Income within 30 days from the Date of receipt of notice. In response to the notice issued u/s 153A, the assessee filed return on 28.12.2015 disclosing same income as originally returned. No incriminating material was found during the course of search. According to learned AR there is no requirement to interfere with the original assessment which had attained finality. Notice u/s. 142(1) and 143(2) was issued from time to time calling for certain particulars. During the assessment proceedings, assessee was asked to produce evidence for the status mentioned as 'Non-resident' in the return of income vide notice dated 20.12.2016. The assessee made several submissions along wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inutes of the meeting of the Board of Directors of Romulus Assets Limited dated 10.2.2009, resolving to apply for Life Insurance Policy for US $ 1,00,00,000 on the life of the appellant and the premium was US $ 20,85,000. (iii) Minutes of the meeting of the Directors of Romulus Assets Limited dated 18.2.2009, demanding US $ 1,113,736.36 from Dynasty Business Parks Sdn. Bhd., being the amount advanced together with interest. (iv) In reply, the appellant submitted that he was not the beneficial owner of Romulus Assets Limited and that, they had been confirmed, by a document signed by the Company Managing Romulus Assets Limited, to the AO directly. AO did not receive this document. He rejected the above submission of the appellant. (v) The appellant further submitted that none of the above, mention in Para 13, indicate that the appellant had received any amount from Romulus Assets Limited. (vi) He reiterated that he was not the beneficial owner and, he did not receive any benefit either directly or indirectly from Romulus Assets Limited. (vii) Minutes of the Meeting of Romulus Assets Limited dated 31.8.2009, authorizing to pay the second instalment of the insurance premium t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Services Private Limited as assesse derived benefit as a Director of these companies. For the AY 2015-16, the Assessing Officer made addition on same count at Rs. 2,28,09,281 u/s 28(iv) of the IT Act. 8. In the appeals in ITA Nos.1215 to 1216/Bang/2019, there is no dispute neither relating to resident status of assessee nor framing of assessment u/s. 153A of the Act. 9. For the AYs 2009-10 to 2012-13 the first common ground in these appeals which require adjudication is with regard to framing of assessment u/s. 153A of the Income-tax Act, 1961. 10. In Appeals No.1215 to ITA No.1217/Bang/2019 for AY 2013-14 to AY 2015-16, the assessee challenges only the addition made in the assessments framed u/s. 143(3) of the Act by the AO and sustained by the CIT(Appeals). 11. Now coming to the common ground in ITA Nos.1211 to 1214/Bang/2019 in AYs 2009-10 to 2012-13 with regard to validity of assessment framed u/s. 153A of the Act, the ld. AR submitted as follows. 12. The search u/s 132 of the Act was conducted on 07.01.2015. All the returns for the above assessment years were filed before the date of the search. In fact, upto AY 2013-14, even the time limit for issuing the notice u/s 143( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting materials. In this connection it was submitted that in respect of non-pending non-abated assessments, any addition can be made only on the basis of incriminating material in an assessment u/s 153A of the Act relying on the following decisions:- CIT Vs IBC Knowledge Park P. Ltd 385 ITR 346 (Kar) ACIT Vs Cornerstone Properties Pvt Ltd (ITA No. 1714 to l 717/Bang/2013) CIT Vs Kabul Chawla 380 ITR 573( Delhi) 16. The ld. AR further submitted that the decision of the Hon'ble Karnataka High Court in Canara Housing Development Company Vs DCIT 274 CTR 122 (Karn) relied on by the CIT(A) is not directly on the issue. The issue there was whether the Commissioner can revise an order of assessment passed u/s 143(3) of the Act after a search assessment has been made u/s 153A of the Act for the very same assessment year. The Hon'ble High Court held that the original order u/s 143(3) cannot be revised u/s 263 of the Act. The Hon'ble High Court observed that once the assessment is reopened, the assessing authority can take note of the income disclosed in the earlier return, any disclosed income found during the search or and also any other income which is not disclosed in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h u/s 132, if during the course of search u/s 132 incriminating material justifying the reopening of assessment for each of six previous years is found. It was held that assessment u/s 153A can be made for a year only if some incriminating material for that particular assessment year is found. The Delhi High Court was dealing with the case of the assessment u/s 153A in the case of a searched person. It was held therein that for the assessment years 2001 to 2003-04 no additions can be made in an assessment made u/s 153A if there are no incriminating material. This proposition has been accepted by the Supreme Court by dismissing the SLP. 19. The AR also relied on the Co-ordinate Bench decision of the Tribunal in Yunus Zia Vs DCIT, Central Circle 1(1) (ITA No. 126 to 130/Bang/2013) wherein it was held that Canara Housing would apply only if some incriminating materials were found during the search. He drew our attention to the specific observations in paragraph 18 of the Tribunal's order are as follows:- "In our considered opinion, it may be plausible view that if such incriminating material leading to undisclosed income is seized for at least one year out of relevant six years, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 97 ITR 416 (Del) DCIT Vs Sarvana Stores 61 ITR(Trib) 20 22. In this connection, it was further submitted that that the decision of the Hon'ble Karnataka High Court in Canara Housing Development Company Vs DCIT 274 CTR 122 as relied on by the CIT(A) is not directly on the issue. The issue there was whether the Commissioner can revise an order of assessment passed u/s 143(3) of the Act after a search assessment has been made u/s 153A of the Act for the very same assessment year. The Hon'ble High Court held that the original order u/s 143(3) cannot be revised u/s 263 of the Act. In paragraph 10 of the order the Hon'ble High Court observed that once the assessment is reopened, the assessing authority can take note of the income disclosed in the earlier return, any disclosed income found during the search or and also any other income which is not disclosed in the earlier return or which is not unearthed during the search. It was submitted that the above observations cannot be applied bereft of context. The Hon'ble High Court was not dealing with the issue whether while framing an assessment u/s 153A of the Act, an addition not supported by any incriminating material c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lausible view that if such incriminating material leading to undisclosed income is seized for at least one year out of relevant six years, such addition may be made to any case where there is no such incriminating material leading to undisclosed income is seized even for one year out of relevant six years, no such addition must be made and the additions must be confined to the return income and additions made by the assessing officer in the original assessment proceedings." 25. The ld. AR thus submitted that the additions made for all the years i.e., from AY 2009- 10 to 204-15 are not based on any incriminating material. The additions in respect of RAL is made on the basis of documents received from Foreign Tax Division and the addition in respect of Housewarming expenditure is based on an un-signed dumb document which is a computer print-out not signed by anybody and the AO should bring on record corroborative evidence to prove the same. It is clear from the assessment order that the addition has been made on the basis of the information obtained from the financial statements of M/s. Embassy Knowledge Infrastructure Pvt Ltd. [EKIPL]. The amount of addition as income for the AY 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated as 'pending' whereas in terms of the above CBDT circular it should be treated as final in respect of which no scrutiny are to be started." (b) DCIT Vs Sarvana Stores 61 ITR(Trib) 20 wherein the Tribunal held as follows:- "In the case before us, even though no assessment order was passed, the time limit for issuing notice under Section 143(2) of the Act has expired. Hence, the assessment proceeding initiated on the basis of the return filed before the date of search was terminated by operation of law. In other words, once the time limit for issuing notice under Section 143(2) of the Act expired, on the basis of return filed earlier, the assessment proceeding is terminated and it cannot be said that it was pending on the date of search. In this case, the assessment proceeding was terminated by operation of law since the time limit for issuing notice under Section 143(2) expired. Therefore, the concluded assessment by operation of law on expiry of time limit for issuing notice under Section 143(2), cannot be reopened. Hence, this Tribunal is of the considered opinion that in the absence of any material found during the course of search operation, there cannot be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal income" of each year and then pass assessment order. According to the ld. DR, where search took place u/s. 132 in the case of any assessee, the assessment to be framed u/s. 153A of the Act. In the present case, there was a search u/s. 132 of the Act on 7.1.2015 in the group companies of assessee, Embassy Property Development Pvt. Ltd., consequently notice u/s. 153A was issued on 17.11.2015 to the assessee requiring him to file return of income within 30 days from the date of receipt of notice. The assessee filed a return u/s. 153A on 28.12.2015 relating to these assessment years and the assessments were framed u/s. 153A r.w.s. 143(3) of the Act. The assessments were framed for six assessment years and it is immaterial whether there is incriminating material pertaining to those six assessment years or not in view of the binding decision of the Karnataka High Court in Canara Housing Development Co. (supra). According to the ld. DR, section 153A can be invoked where there is search, though there was no incriminating material found during the search. 31. We have heard both the parties and perused the material on record. The issue before us is relating to the reassessment proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the notice under Section 148 can be issued as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section I53A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. 34. Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub-section (1) of Section I53A says that such proceedings "shall abate". The reason is not far to seek. Under Section 153A there is no room for multipl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e clubbed together and assessed as the total income. In such a case, to reiterate, there is no question of any abatement of the earlier proceedings for the simple reason that no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders when the search was initiated or the requisition was made. 35. Thus, it is clear that once a search/requisition is made u/s 132 of the IT Act, the Assessing Officer is bound to issue notice u/s 153A to the assessee to furnish the return for each Assessment Years falling within six Assessment Years immediately preceding the Assessment Year relevant to the previous year in which search conducted or requisition was made. Consequently, the Assessing Officer is empowered to assess or reassess the total income of all these six Assessment Years. 36. Before us, now the contention of the assessee for assessment years 2009-10 to 2012-13 is with regard to initiation of proceedings u/s. 153A of the Act, though there was no incriminating material found during the course of search and seizure action conducted 7.1.2015. The AO has simply referred to the documents seized and inventorised as A/JV ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date of initiation of search or making requisition, as the case may be, the assessment u/s. 153A would be in the nature of reassessment. Thus, the legislature has carved out the nature of assessment u/s 153A as assessment or reassessment in two different situations. According to the ld. AR, for AYs 2009-10 to 2012-13, wherein already assessment orders were passed u/s. 143(3) or time limit to issue notice u/s 143(2) is lapsed, the assessment u/s. 153A of the Act can be framed only on the basis of seized incriminating material. In these assessment years, initiating proceedings u/s. 153A is valid, however, the AO cannot resort to roving and fishing enquiry to find out whether any income has escaped assessment during the reassessment proceedings when there is no incriminating material found or seized during the course of search action u/s. 132 of the Act. In other words, we are of the opinion that AO was correct in law to issue notices u/s 153A for the years under consideration, as he was bound to pass Assessment orders in respect of all these concerned Assessment Years. However, addition in these Reassessment Years u/s 132 of the Act. 40. The ld. DR strongly relied on the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn or which is not unearthed during the search, in order to find out what is the "total income" of each year and then pass the assessment order. 42. It is important to note that Canara Housing (supra) was also a case where some material was unearthed during the search. Further, the High Court was clear that the addition to the income already disclosed would have to be based on some material unearthed during the search. This is clear from the observation in para 9 of the decision to the effect: "The AO is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search." It was further observed that in the facts of that case if the CIT had come across any income that the AO had not taken note of while passing the earlier order, "the said material can be furnished to the assessing authority" who will take note of it while determining total income. 43. In CIT Vs. Kabul Chawala 380 ITR 573 ( Delhi H.C) it was held that in the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The relevant extract is reproduced below:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." 44. In the above decisions it was further considered judgement in the case of Filatex India Ltd. v. CIT-IV (49 taxmann.com 465 (Delhi) reference pb 1387 and observed that one of the questions framed was whether the ITAT erred on facts and in law in not holding that re-computation of book profit, de-hors any material found during the course of search, in the order passed under Section 153A of the Act was without jurisdiction, being outside the scope of proceedings under that Section? The facts of the case were that there was incriminating material found during the course of search conducted in the premises of the Assessee on 18th January, 2006 and subsequent dates. This included a statement of the General Manager (Marketing). On the basis of the said material and statement additions were made to the disclosed income under Section 115 JB although no mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l....". 47. The decision of the Rajasthan High Court in Jai Steel (India), Jodhpur v. ACIT (2013) 1 ITR-OL 371 (Raj) involved a case where certain books of accounts and other documents that had not been produced in the course of original assessment were found in the course of search. It was held where undisclosed income or undisclosed property has been found as a consequence of the search, the same would also be taken into consideration while computing the total income under Section 153A of the Act. The Court then explained as under:- 22. In the firm opinion of this Court from a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that: (a) the assessments or reassessments, which stand abated in terms of II proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made; (b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material and (c) in absence of any incriminating material, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of search in respect of an issue then no addition in respect of any issue can be made to the assessment under Sections 153A and 153C. It was observed that the assessment or reassessment under Section 153A arises only when a search has been initiated and conducted and, therefore, "such an assessment has a vital link with the initiation and conduct of the search." The Court then reproduced and affirmed the decision of the Special Bench of the ITAT in All Cargo Global Logistics Ltd. v. DCIT [2012] 23 taxmann.com 103 (Mumbai) (SB) and answered the question as regards the scope of the assessment of total income as under:- "53. ....We are of the view that for answering this question, guidance will have to be sought from section 132(1). If any books of account or other documents relevant to the assessment had not been produced in the course of original assessment and found in the course of search in our humble opinion such books of account or other documents have to be taken into account while making assessment or reassessment of total income under the aforesaid provision. Similar position will obtain in a case where undisclosed income or undisclosed property has been found as a consequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year falling within the period of six Assessment Years referring to in this subsection pending on the date of initiation of search u/s 132 or making of the requisition u/s 132A as the case may be shall abate. From the reading of above provision, it is very clear that although the legislature specifically not mentioned about unabated assessment, the legislature consciously provided for abetment of assessment as per which any proceedings is pending in respect of any of six assessment years, then the same shall be abate and the AO shall have power to assess or re- assess the total income of those years. As regards to other years which assessment have already been completed and the assessment orders determining the total income are subsisting at the time of search or requisition are made the scope of assessment u/s 153 A is limited to reassess the income of the assessee on the basis of incriminating material found as a result of search. However, it won't disentitle the AO in issuing the notice u/s. 153A of the Act consequent to search action u/s. 132 of the Act. 51. The sole reason for conducting search in the case of the assessee is information received from prior to search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be issued, as provided in section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer before issue of notice to reopen the assessment under section 148 has also been excluded in a case covered by section 153A. The time-limit prescribed for completion of an assessment or reassessment by section 153 has also been done away with in a case covered by section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. Therefore, it is clear even if an assessment order is passed under section 143(1) or 143(3), the Assessing Officer is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, unearthed during the search. After such reopening of the assessment, the Assessing Officer is empowered to assess or reassess the total income of the aforesaid years. The condition precedent for application of section 153A is there should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d counsel for the assessee cannot be accepted. As rightly contended by the DR, there is no requirement for an assessment made under section 153A of the Act being based on any material seized in the course of search. Further under the second proviso to section 153A pending assessment or re-assessment proceedings in relation to any assessment year falling within the period of six assessment years referred to in section 153A(b) of the Act shall abate. Thus the Assessing Officer gets jurisdiction for six years assessment years referred to in section 153A(b) of the Act for making an assessment or re-assessment. It is not the complaint of the assessee that any income, which is already subjected to assessment under section 143(3) or under section 148 of the Act completed prior to the search in respect of six assessment years referred to in section 153A(b) of the Act and in the second proviso to section 153A, has also been included in the assessment framed under section 153A of the Act. In such circumstances the plea of the assessee cannot be accepted. 54. In our considered opinion, as per clause (a) of sub section (1) of section 153A, at the stage of issue of notice u/s 153A, the only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that in page 231 of the Paper Book these details are furnished. The AO has included the dates of arrival in India also as being present in India. In this connection as held by the Co-ordinate Bench in Manoj Kumar Reddy Vs ITO, (International Taxation), 34 SOT 180, the date of arrival should be excluded while calculating the number of days present in India. It was held that the date of arrival should be excluded. The above decision of the Tribunal has been upheld by the Hon'ble Karnataka High Court in DIT Vs Manoj Kumar Reddy Nare, 12 Taxmann.com 326. The assessee worked out his presence in India during the FY 2008-09 to 2011- 12 and furnished the details in page nos. 238 to 245 of the Paper Book. The assessee had not stayed in India for any year for a period of more than 182 days. 61. It was further submitted that a perusal of the section 6 of the Act would show that normally a person would not be a resident in India if his presence in India during the previous year is less than 182 days. But Sec.6(l)(c) states that a person shall be deemed be a resident in India if he is present in India for a period of 60 days during the previous year and also present in India for a pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot continue to be an employee of some other enti1y in India during that period:- i) Abdul Razak 337 ITR 350 ii) British Gas India Pvt Ltd 287 ITR 462 iii) Zialluall Sheriff Vs ACIT (International Taxation) 316 ITR (AT) 92, 116 TTJ 76 64. It is submitted that the AO has also rejected the appellant's case on the ground that the assessee did not intend to stay permanently outside India and he refers to the fact that the assessee was visiting India very often. It is submitted that the only criteria for deciding the residential status is the number of days present in India and whether a person left India for taking up employment outside India. Whether the appellant had an intention to stay permanently or otherwise is not a criterion to be followed in deciding the residential status as held in the following decisions:- i) Addl. Director of Income Tax Vs Sudhir Choudhrie 55 ITR (Trib) 681 ii) CIT Vs Suresh Nanda, 375 ITR 172 65. As per AO, the assessee had been visiting Dubai from Singapore quite often and therefore, he has not gone to Singapore to take up employment. It is submitted that assessee went to Dubai on his official work only. Even otherwise, once the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing various properties. By looking at the business activities carried on by the assessee, it cannot be said to be a person who being outside India comes on a visit to India in the previous year in terms of Explanation (b) to section 6(1) of the Act. According to the ld. DR, the assessee's portfolio suggests that he is one amongst the 50 richest persons in India and he is on Board of Directors of so many companies in India and Chairman & MD of Embassy Group. In India he is a leading property developer and being a promoter, he has developed over 55 million sq.ft. of commercial, residential, industrial and hospitality spaces in India and overseas. His business operations has been spread over Bangalore, Mumbai, Delhi NCR, Chennai, Kolkata, Hyderabad, Pune, Trivandrum, Hosur and international levels at Serbia, Malaysia, etc. Therefore, he is a resident of India and goes abroad for business purposes and his case is not covered by clause (b) but the same falls under clause (c) of section 6(1) of the Act. Therefore, the status of assessee has been rightly held as 'resident' which should be upheld. Without prejudice to the above, the ld. DR submitted that the document what he has produced i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation (a) includes self-employment, and taking up and continue business is also employment for the purpose of the above Explanation. 70. During hearing, learned DR has relied on the Memorandum explaining the provisions of the Finance Bill introducing the Explanation, contained in 134 ITR 137 (St.) [Para 35 of the Finance Bill], which reads as follow:'-- "(iii) lt is proposed to provide that where an individual who is a citizen of India leaves India in any year for the purposes of employment outside India, he will not be treated as resident in India in that year unless he has been in India in that year for 182 days or more. The effect of this amendment will be that the 'test' of residence in (c) above will stand modified to this extent in such cases." 71. Similarly the Central Board of Direct Taxes issued Circular No. 346, dated 30-6-1982, which reads as follows-' "7.3 With a view to avoiding hardship in the case of Indian citizens, who are employed or engaged in other avocations outside India, the Finance Act has made the following modifications in the tests of residence in India:'- (i)& (ii) "Where an individual who is a citizen of India leaves Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evious Year means, the Previous Year for which residential status is to be determined (d) It is not necessary that the stay should be for a continuous period. (e) It is not necessary that the stay should be at one place in India. (f) A person may be resident of more than one country for any Previous Year. (g) Citizenship of a country and residential status of that country are two separate concepts. A person may be an Indian national/Citizen but may not be a resident in India and vice versa. (h) No. of days of stay in India determines the status. (i) Assessee can take any vocation in any of the countries. (j) During these years assessee had for more greater business engagements abroad as compared to India. Therefore it cannot be assumed that he did not come from outside of India. (k) The explanation (b) to sec. 6, the explanatory notes for this amendment as clarified by CBDT in this behalf also make the no. of days provision very clear and unambiguous and leaves no room for interpretation. (l) Even for the sake of arguments we accept the AOs interpretation it leads to absurd result by making practically every non-resident as a resident in India. This does not seem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laws cited and referred above on behalf of the assessee we hold that the determinative test for the status of Non Resident being number of days of stay in India and in assessee's case in these four years, the days of stay being less than 182 days; even after considering the days as recorded by the AO in his order; the status to be applied in this case is to be held as Non Resident as claimed by assessee. Thus, the assessee will be liable to tax on income accrued in India only. The assessee's grounds in this behalf are allowed. 78. The next ground in the appeals for the assessment years 2009-10 to 2014-15 is with regard to the following additions u/s. 69C / 28(iv) of the Act:- Assessment year Amount-Rs. 2009-10 30,87,99,113 2010-11 22,65,95,837 2011-12 9,11,51,660 2012-13 5,77,24,891 2013-14 1,66,64,009 2014-15 15,32,71,818 2015-16 NIL 79. The ld. AR submitted that RAL is a company registered in Bahamas with two shareholders. Those shareholders were Serangoon Ltd and Seletar Ltd. It appears that sometime later the wife of the appellant, Mrs. Lina Virwani became the sole shareholder of this company. The company is managed by a Board from Singapore. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. No addition can be made on the basis of surmises and conjectures. In this connection, he relied on the decision of the Hon'ble Supreme Court in State of Kerala Vs M.M. Mathew and Another (1978) 4 SCC 65 wherein it was held that a strong suspicion from very strange coincidences and grave doubts cannot take the place of legal evidence. Suspicion can only be a starting point of enquiry, no conclusion can be drawn on the basis of a mere suspicion. Reliance was also placed on the decision of the Hon'ble Gujarat High Court in CIT Vs Bhanwarlal Sharma 214 Taxmann 132 wherein it was held that," Yet, this question do not cross the realm of suspicion to enter the sphere of proof, let alone the arena of convincing evidence". 83. In PCIT Vs Krishnadevi 431 ITR 361 the Hon'ble Delhi High Court held that the reliance of any material without further corroborative on the basis of cogent material cannot justify the conclusion the transaction is bogus, sham etc. It was held that the AO must dig deep into the issue. It was held that the court has to decide an issue on the basis of evidence and proof and not on suspicion alone. The AO cannot reject explanation offered by an assessee ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in CIT Vs Smt. Sunitha Dhadda 406 ITR 220 held that when the department alleges the receipt of "on-money" the burden of proof is on it to prove the fact with acceptable evidence. 90. The ld. AR briefly rebutting each of the adverse presumptions drawn by the AO, firstly submitted, the AO refers to the proposal for the insurance on the life of the appellant by M/s. RAL. RAL is a private company owned by the appellant's wife and it is well within the company's rights to insure the life of any person it wants. The proposal for the insurance is placed at pages 642 to 658 of the Paper Book. Inviting attention to page 642 of PB, wherein the appellant has been shown as the insured. In page 655 in column 3 the beneficial owner is given as Karadi Trust and the beneficial ownership is shown as 100%. Strangely in page 656, the appellant is shown as the beneficial owner having 100% interest. This is apparently contradictory. Merely relying on this statement that the appellant has been declared as 100% beneficial owner of RAL, the AO has come to a conclusion that the RAL is owned by the appellant. In this connection it is submitted that when the appellant denies that he is the owner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant being the owner of M/s. RAL. Therefore, the reliance on these documents by the AO to come to a conclusion that the appellant is the owner of RAL is totally mis- placed and these documents do not show anywhere that the appellant is the owner of RAL. 93. The AO referred to a Board resolution of RAL dated 19.01.2010 wherein it was noted that RAL has hypothecated its assets in favour of EFG bank Singapore Branch in respect of credit facilities extended to the appellant. He also notes that the appellant has been disclosed as the ultimate beneficial owner of the company "Borrower". The Board note is placed at page 52 of the assessment order as Annexure - 4. Based on these documents he comes to a conclusion that the appellant is the owner of RAL. The appellant reiterates hat he has consistently denied that he is the owner of RAL or he holds any share in RAL. It is the submission of the appellant that RAL has wrongly described him as the owner. It was submitted that as stated earlier, when the appellant had denied that he is the shareholder of RAL, it is incumbent on the part of the AO to make further enquiries and find out whether the statement made by RAL is correct or not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tivities carried out by M/s. RAL is totally untenable in law. 96. While discussing the applicability of S.28(iv) of the Act the AO has held that the business of RAL is nothing but the conduct of the business of Shri. Jitendra Virwani. This finding is contrary to the decision of the Hon'ble Supreme Court in Bacha F. Guzdar's case. The observations indirectly suggest that the AO has lifted the corporate veil in coming to the above conclusion. It is submitted that the corporate veil cannot be lifted at the whims and fancies of the AO. There has to be cogent and compelling reasons as to why the corporate veil has to be lifted. It cannot be lifted for an asking. In this connection he relied on the decision of the Hon'ble Allahabad High Court in CIT Vs Sahu Investment Mutual Benefit Co Ltd 396 ITR 595. The Hon'ble court observed that the doctrine of "lifting of corporate veil" is not to be applied as a matter of course unless the relevant facts, circumstances and conditions exist. It is adopted exceptionally whenever and wherever, the situation warrants. It means a detailed investigation into the facts and affairs of the company to find out whether the veil of corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for invoking S.28(iv) of the Act is not satisfied as the appellant is not carrying on any business at all to which S.28(iv) would apply. Hence, invoking of S.28(iv) to tax the payments made by RAL to third parties is clearly untenable in law. 99. On the applicability of S.69C of the Act, it was submitted that the AO has jumped to a conclusion and not given any reasons as to how S. 69C is attracted. S. 69C is attracted when the following conditions are satisfied:- (a) The assessee has to incur an expenditure; (b) for which he offered no explanation for the source of explanation or the explanation offered by him is unsatisfactory. 100. It is clear from the assessment order that the appellant has not incurred the expenditure. It is RAL which had incurred the expenditure. This is an undisputed fact. The fundamental requirement of S.69C that an assessee should have incurred an expenditure is not satisfied at all. Even assuming that all the authorisations for the payments in the Board resolution have been paid by the person managing RAL, it is clear the source of such expenditure is the funds of RAL. Therefore, the source is fully explained and S. 69C is not attracted at all. 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant is also one among those many against the likes of whom the Supreme Court wants action to be taken. The conclusion arrived by the AO is only a natural corollary to his findings and evidence available on record and the inference that one draws from the conduct and cooperation of the assessee in the said matter. Therefore, addition made in the hands of assessee is in order. 104. We have heard both the parties and perused material on record and case law cited by the parties. The AO on the basis of minutes of meeting of the Directors of RAL, dated 17-07-2008 wherein limited Power of Attorney was granted to assesse Shri Jitendra Virwani and Mrs. Polly Byrne to operate the Deutsche Bank bearing account no 8014326 of RAL held at Singapore Branch. The assessee's signature also appears in Limited letter of Authorisation sent by RAL to said bank. Further, minutes of meeting of Director of RAL Limited held on 10-02-2009 wherein resolution has been passed to apply for Insurance policy in favour of the present assesse Shri Jitendra Virwani for an amount of USD 1,00,00,000 is the basic sum assured and USD 20,85,000 is the premium and the Manufacturers Life Insurance Company is the insur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o M/s Pet Properties & Constructions Private Limited which in turn the same amount of Rs. 4 crores to M/s Embassy Properties Development Limited on the same day. Therefore the assessing officer is of the opinion that there is a direct link between RAL and Embassy group. 106. Further the Assessing Officer found that there was a resolution dated 19-01-2010 wherein RAL executed pledge of assets as security in favour of EFG Bank, Singapore branch in respect of credit facilities extending by the bank to the present assesse Mr. Jitendra Virwani. In this said resolution it was mentioned that RAL is entering into pledge agreements with EFG Bank AG, in substantially to secure the payment and satisfaction of all the outstandings and liabilities whether future or present, actual or contingent, incurred by Jitendra Mohandas Virwani, the ultimate beneficial owner of the company. 107. Further the Assessing officer found that there was a Notes to account regarding contingent liability in respect of this pledge. The company has entered into the pledge agreements with EFB, Singapore Branch to pledge its assets maintained with the Bank to secure the payments and satisfaction of all outstanding an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that your wife Mrs. Lina Virwani and not you is the ultimate beneficial owner of M/s Romulus Assets Limited? Answer: As per my information, a document from the company managing Romulus Assets Limited, has been dispatched to you directly, addressing the issue. I am not sure of the contents of the document." 109. Adverting to the facts of the issue, it is the allegation of the AO that the insurance on the life of the appellant by M/s. RAL. RAL is a private company owned by the appellant's Ex-wife and it is well within the company's rights to insure the life of any person it wants. In the application for insurance, the assesse has been shown as the insured. However, in Corporate and Trust certification placed at in Paper Book page no. 655 in column 3 the beneficial owner is mentioned as Karadi Trust and the beneficial ownership is shown as 100%. Strangely in next Paper Book page no. 656, the assessee is shown as the beneficial owner having 100% interest. This is apparently contradictory. Merely relying on this statement that the appellant has been declared as 100% beneficial owner of RAL, the AO has come to a conclusion that the RAL is owned by the appellant. The assessee c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2010 wherein it was noted that RAL has hypothecated its assets in favour of EFG bank Singapore Branch in respect of credit facilities extended to the appellant. He also notes that the appellant has been disclosed as the ultimate beneficial owner of the company "Borrower". The Board note is placed at page 52 of the assessment order as Annexure - 4. Based on these documents he comes to a conclusion that the appellant is the owner of RAL. The appellant has consistently denied that he is the owner of RAL or he holds any share in RAL. It is the submission of the appellant that RAL has wrongly described him as the owner. In our opinion when the appellant had denied that he is the shareholder of RAL, it is duty on the part of the AO to make further enquiries and find out whether the statement made by RAL is correct or not. He should have obtained the relevant information from various statutory authorities under the powers available to the Government of India to solicit the information from foreign government and foreign government departments. The AO has failed to do so. The Hon'ble Supreme Court in Mathew's case cited supra has clearly held that suspicion cannot take the place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this connection he relied on the decision of the Hon'ble Allahabad High Court in CIT Vs Sahu Investment Mutual Benefit Co Ltd 396 ITR 595. The Hon'ble court observed that the doctrine of "lifting of corporate veil" is not to be applied as a matter of course unless the relevant facts, circumstances and conditions exist. It is adopted exceptionally whenever and wherever, the situation warrants. It means a detailed investigation into the facts and affairs of the company to find out whether the veil of corporate personality needs to be lifted in a particular case. In our opinion the assessing officer has not carried out the required investigation to justify lifting of corporate veil. The circumstances mentioned in the assessment order do not lead to a conclusion that the corporate veil should be lifted. 114. On the quantification of income, the AO candidly admits that the bank statements of RAL are not available and the Board resolutions are the only documents which reveal the quantum of payments made to several persons. He has wrongly placed the burden on the appellant. Thereafter, he comes to a conclusion that amounts mentioned in the Board resolutions which are authoriza ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncurred the expenditure. It is RAL which had incurred the expenditure. This is an undisputed fact. The fundamental requirement of S.69C that an assessee should have incurred an expenditure is not satisfied at all. Even assuming that all the authorisations for the payments in the Board resolution have been paid by the person managing RAL, it is clear the source of such expenditure is the funds of RAL. Therefore, the source is fully explained and S. 69C is not attracted at all. 118. Further, it is noticed from the record that the assessee has denied that he is the beneficial owner of RAL. It was explained by the assessee that RAL is an independent company and its bank account is operated by the Director of that company only. According to the AO, the explanation offered by the assessee is not satisfactory. On a perusal of the facts, we find that the evidence gathered by the AO is not sufficient to indicate that the assessee is the beneficial owner of RAL and its bank account maintained by RAL. The AO was of the opinion that the assessee's ex-wife, Ms. Leena Veerwani being the Director of the company was not produced by the assessee for enquiry before the AO; the assessee has to own u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO u/s. 69C of the Act is only on suspicion and surmise manner, without there being any material to prove that assessee is the beneficial owner of RAL or having financial interest in that bank account. 121. Further the Hon'ble Supreme Court judgment in the case of Vodafone (341 ITR 43) lays down a clear proposition that the companies being incorporated entities under the respective law possess independent and distinct status than their share holder or contributories. In case of structured investment transactions should not be disturbed on suspicions or casual considerations. In assessee's case, the company RAL is duly incorporated in respective legal jurisdictions. All of these transactions are being disturbed on surmises and conjectures, assessee having furnished proper explanation supported with documents has discharged his burden. In the interest of justice, the additions have to be deleted. 122. Further, at no point of time, the AO brought on record or referred any seized material which can be said to be either incriminating or found during the course of search indicating undisclosed income of the assessee. On the contrary, the AO has based his conclusion only on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder. (e) The quantification of the addition based solely on the amounts mentioned in the Board resolution defies logic and is totally perverse. It is also not known whether the amount mentioned in the Board Resolution has been spent for the purpose mentioned therein. (f) S.28(iv) of the Act is not applicable as the appellant is not carrying on any independent business. (g) S.69C of the Act is not applicable for the very simple reason that the appellant has not incurred the expenditure and the source for various payments is the funds of RAL. (h) No seized material to sustain the addition. 126. Accordingly, the additions made under this head for all the Assessment years is deleted. 127. The next ground in ITA No.1216/B/19 for AY 2014-15 is regarding house warming expenses. The ld. AR submitted that the only ground on which the AO held that the housewarming expenses debited in the books of Embassy Knowledge Infrastructure Pvt Ltd should be added in the hands of the appellant is that it is a perquisite u/s 28(iv) of the Act. As stated earlier, the seized material NJVO1 (page 78) is a dumb document, and it is a mere computer print-out and it cannot be relied on. Apart from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... new home and use it for residential purposes. The invitation card printed for the said purpose also supports the conclusion that the same is for the benefit of the director, the assessee. 129. We have heard both the parties and perused the material on record. In this case Housewarming expenses which was recorded in the books of Embassy Knowledge Infrastructure Private Limited is treated as perquisites u/s 28(iv) of the Act in the hands of the assesse. The reason for treating it as perquisites in hands of assesse was that the invitation sent by assesse and his family members refer to houses as "my house". However, it is to be noted that the farmhouse solely owned by above Embassy Knowledge Infrastructure Private Limited and it was appearing in its Books of Accounts. Once the farmhouse is owned by the above mentioned company, the relevant expenditure relating to that farm house to be relating to that company only. Just because the name of the assesse mentioned in the invitation as his house or he's staying in that premises that cannot be reason to treat the expenditure incurred by said company in hands of assesse. The assesse being Chairman and Managing Director got allotted that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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