TMI Blog2021 (8) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... en included in the assessment framed under section 153A of the Act. In such circumstances the plea of the assessee cannot be accepted. Accordingly, the action of the AO in issuing notice u/s. 153A in these assessment years 2009-10 to 2012-13 is justified. This ground of the assessee is therefore dismissed. As per clause (a) of sub section (1) of section 153A, at the stage of issue of notice u/s 153A, the only requirement is to ask the assessee to file return of income for relevant six years covered by section 153A and after filing of return of income, the assessment to be made by the AO will be assessment or reassessment has to be determined afterwards and not at the time of issue of notice u/s 153A. In this view of the matter, we find no merit in this technical objection raised by the assessee and the same is rejected. Income accrued in India - Status of Non Resident - number of days of stay in India - Whether the status of assessee is resident or non-resident ? - whether the assessee is to be treated as Non Resident or to hold him as Resident as being interpreted by the AO - test for determining the status as Non Resident - HELD THAT:- Determinative test for the statu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cogent and compelling reasons as to why the corporate veil has to be lifted. It cannot be lifted for an asking. The assessing officer has not discharged the burden cast on him to prove that the appellant is the shareholder/beneficial owner of RAL. 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. S.28(iv) of the Act is not applicable as the appellant is not carrying on any independent business. 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.No seized material to sustain the addition. Addition of house warming expenses - HELD THAT:- 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closing total income of ₹ 34,59,38,260 on 30.9.2009. According 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Director of Embassy Group International to operate the Duetsche Bank Account in Singapore. (ii) Minutes 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 M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s addition in AY 2015-16 at ₹ 98,61,071 towards farm house maintenance expense incurred by M/s Embassy Property Development Limited and M/s Embassy 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 ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear that neither the addition in respect of RAL nor the additions in respect of the Housewarming expenses and Guest House Maintenance expenses have been made on the basis of any seized incriminating 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 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t judgment in PCIT Vs Meeta Gutgutia 395 ITR 526 . The Hon'ble Delhi High Court held that power u/s 153A of Income Tax Act 1961 enables the assessing authority to reopen the assessment for six year prior to the year of search 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding and non-abating. Reliance was placed on the following decisions wherein it was held that if the time limit for issuing notice had expired on the date of search, assessments are not to be treated as pending assessment:- Chintels India Ltd Vs DCIT 397 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision 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 (supra) would apply only if some incriminating material is found during the search. The Tribunal held 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, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act within the period stipulated then such an Assessee can take it that the return filed by him has become final and no scrutiny proceedings are to be started in respect of that return. 22. The inevitable conclusion, therefore, in the present case, is that the ITAT was in error in holding that the assessment for AY 2008-09 should be 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d reliance on the decision of Canara Housing Development Co. (supra) and submitted that u/s. 153A of the Act, the AO can take note of the income disclosed in the earlier return, any undisclosed income found during the search and also any other income which is not disclosed in the earlier return or which is not unearthed during the search in order to find out what is the total 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs and reassess the total income, taking note of the undisclosed income, if any unearthed during the search. For this purpose. the fetters imposed upon the Assessing Officer by the strict procedure to assume Jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which such section (1) of Section 153A opens. The time-limit within which 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout having the need to follow the strict provisions or complying with the strict conditions of Sections 147, 148 and 151 and determine the total income of the assessee. Such determination in the orders passed under Section 153A it would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, according to the ld. AR, assessments for these 4 years were already completed and were not pending on the date of search. According to him, framing assessment u/s. 153A of the Act in the case of completed assessment can be done only on the basis of some incriminating material unearthed during the course of search or requisition all documents or undisclosed income or property discovered in the course of search which are not produced or not already disclosed or made known in the course of original assessment. It is also submitted that in the case of pending assessments, the jurisdiction to make original assessment and assessment u/s. 153A merges into one. Only assessment shall be made separately for each assessment year on the basis findings of search and other material existing or brought on record by the AO. 39. In the case of first category, where the assessment is not pending on the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 153A(1)(a) of the Act. 41. In the High Court the question was whether the CIT could invoke the power under Section 263 of the Act once the proceedings under Section 153A was initiated. The High Court in Canara Housing Development Co. (supra) answered the question in the negative. It referred to the decision of this Court in CIT v. Anil Kumar Bhatia (211Taxman 453 Delhi) and came to the conclusion that once proceedings are initiated under Section 153A of the Act the legal effect was that even where an assessment order is passed, it would stand reopened. In the eye of law there was no order of assessment. It meant that the AO shall assess or reassess the total income of six assessment years. Once the assessment is reopened, the assessing authority can take note of the income disclosed in the earlier return, any undisclosed income found during search or and also any other income which is not disclosed in the earlier return 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 une ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not mean that the assessment 'can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this section only on the basis of seized material.' (v) In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in section 153A is relatable to abated proceedings ( i.e. , those pending on the date of search) and the word 'reassess' to complete assessment proceedings. (vi) Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under section 153A merges into one. Only one assessment shall be made separately for each assessment year on the basis of the findings of the search and any other material existing or brought on the record of the Assessing Officer. (vii) Completed assessments can be interfered with by the Assessing Officer 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d during the course of the search or other post search material or information available with the Assessing Officer, related to the evidence found. Subsequent observation to the effect that the assessment under section 153A should not be arbitrary or made without any relevance or nexus with the seized material, is basically clarificatory that the assessment under Section 153A emanates and starts on the foundation of the search, which is the jurisdictional precondition. The additions cannot and should not be arbitrary.... 46. The above passage in Filatex India Ltd. (supra) , paraphrases inter alia, the following line in CIT v. Chetan Das Lachman Das (supra) : This, however, does not mean that the assessment under Section 153A can be arbitrary or made without any relevance or nexus with the seized material . However, the immediately next line in CIT v. Chetan Das Lachman Das (supra)reads: Obviously an assessment has to be made under this Section only on the basis of seized material.... . 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of requisition of documents. 49. In CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78 (Bombay) the question addressed by the Bombay High Court was whether the scope of assessment under Section 153A encompasses additions, not based on any incriminating material found during the course of search? It was held that no addition could be made in respect of the assessments that had become final in the event no incriminating material was found during search. The Bombay High Court relied on the earlier decision in CIT v. M/s. Murli Agro Products Ltd. (supra) and discussed the scope and ambit of the proceedings for assessment and reassessment of total income under Section 153A (1) of the Act and the provisos thereto. One of the specific pleas taken by the Assessee was that if no incriminating material was found during the course 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e course of original assessment, and (ii) undisclosed income or property discovered in the course of search. 50. Thus provision of section 153A deals with situations where assessment shall be framed in connection with search u/s 132 or requisition u/s 132A. As per the said provision, notwithstanding anything contained in section 139, 147, 148, 149, 151 and 153, in the case of a person where search was initiated u/s 132 or books of account are requisitioned u/s 132A, the AO shall issue notice to such person requiring him to furnish within the said period as may be mentioned in the notice, the return of income of each assessment Years falling within six assessment years referring to in clause- (b). Sub-clause-(b) of section 153 A, empowers the AO to assess or reassess, the total income of six Assessment Years immediate to preceding assessment year relevant to the previous year in which search is conducted or requisition is made. The proviso provided to section 153A, however made it clear that assessment or reassessment, if any relating to any assessment year falling within the period of six Assessment Years referring to in this subsection pending on the date of initiation of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to furnish a return for each of these assessment years. Being so, the assessment u/s. 153A could not be quashed merely because there was no incriminating material found during the search action u/s. 132 of the Act to show that the assessee has concealed any part of his income. Once search is conducted u/s. 132 of the Act, the AO is bound to issue notice u/s. 153A and then has to frame assessment order thereafter. Therefore, the AO is justified in issuing notice u/s. 153A of the Act to the assessee in these assessment years. Further, the issue is squarely covered against the assessee by the judgment of jurisdictional High Court in the case of Canara Housing Development Co. Ltd. (supra) wherein it was held as under:- Section 153A starts with a non obstante clause. The fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under sections 147 and 148, have been removed by the non obstante clause with which sub-section (1) of section 153A opens. The time-limit within which 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an assessee whose case is covered by section 153A, by even making reassessments without any fetters. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax. When once the proceedings are initiated under section 153A, the legal effect is even in case where the assessment order is passed it stands reopened. In the eye of law there is no order of assessment. Re opened means to deal with or begin with again. It means the Assessing Officer shall assess or reassess the total income of six assessment years. Once the assessment is reopened, the assessing authority can take note of the income disclosed in the earlier return, any undisclosed income found during search and also any other income which is not disclosed in the earlier return 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. 53. Hence we are of the view that this contention of the learned counsel for the assessee cannot be accepted. As rightly contended by the DR, there is no requirement for an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an intention to leave India permanently and settle abroad. The appellant has been visiting Dubai from Singapore and therefore, the appellant did not leave India for the purpose of employment in Singapore. 57. At the outset the ld. AR submitted the findings of the AO that the assessee had not furnished readable photocopy of the passport are not borne out of the facts. The assessee vide his letter dated 23.12.2016 had enclosed colour xerox of passport copies and working of stay based on the number of days. Therefore, the allegation in the assessment order that the appellant had not furnished clear photocopies of the passport is not borne out of the records. The passport copies in page nos. 247 to 324 of the Paper Book would attest to this fact. 58. According to the AO, the assessee was present in India as per the details below:- Financial Year No. of days 2008-09 174 2009-10 180 2010-11 181 2011-12 179 59. As per assessee, he was in India as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se (a) of Explanation below S.6(l)(c) has not been defined. All it means is that the assessee has to leave India to take up an employment outside India The fact that an assessee continues to be employed in India in some other companies or he has some other economic interest in India does not detract from the fact that he has left India for taking up employment outside India. 63. The AO has relied on the decision of the ITAT in Shri KY. Patil 33 ITD 714 . It is submitted that the reliance on this decision is misplaced. The assessee therein left India on account of the work in relation to his Indian employment. His employer in India sent him abroad for short visits on work. The assessee made a claim that his visits abroad was to take up employment outside India and therefore, clause (a) of the Explanation would apply. This was negatived by the Tribunal and it was held that his visits abroad will not fall within the scope of for the purpose of employment outside India . The facts of the present case are totally different. The assessee herein did not leave India on account of the work of any of the Indian companies in which he is employed. He left India in September 2008 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at he is a non-resident and he has to be assessed accordingly. Hence, this contention of the learned assessing officer is to be rejected. In view of the above submissions, it is prayed that the Hon'ble Tribunal be please to hold that the appellant is a non-resident for the AYs 2009-10 to 2012-13. 66. The ld. DR submitted that the AO was justified in changing the status from non-resident to resident. He submitted that looking at the business affairs of the assessee in India and the number of visits to foreign countries and India, it is apparent that assessee was not visiting India, but he was an Indian resident and for all practical purposes he was visiting abroad in relation to his business affairs. Explanation (b) to section 6(1) provides stay of less than 182 days in case of a person of Indian origin who leaves outside and visits India to look after his investments. In this case, the assessee living in India carried out various business activities and visits outside India. Therefore, the benefit of Explanation (b) to section 6(1) has been righty denied. The assessee has been claiming status of non-resident without disclosing the proper facts. The ld. AR furnished de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther interpretation is required. 68. In our considered opinion the controversy in question stands answered by Hon'ble Kerala High court in the case of Abdul Razaq 337 ITR 350 (Ker.), in similar facts and circumstances by following observations: There is no controversy on facts inasmuch as the assessee was in India for only 177 days in the previous year relevant for the assessment year 1989-90, and unless it is established that Explanation (a ) to sub-clause (c ) of section 6(l) of the Act is not available to the assessee, he cannot be treated as a resident in India for the purpose of assessing his global income including the business income earned abroad during the previous year. Obviously Explanation (a ) is an exception to section 6(l)(c) of the Act, under which 60 days residence referred to in clause (c) is substituted to 182 days if the assessee went abroad in the previous year for the purpose of employment Admittedly, the assessee went abroad on 24- 9-1988 only to take up business there. If the business undertaken and carried on by the assessee in the previous year abroad amounts to employment within the meaning of Explanation (a ) to section 6(1)(c) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocation as referred to in the Circular, which takes in self-employment like business or profession. So much so, in our view, taking up own business by the assessee abroad satisfies the condition of going abroad for the purpose of employment covered by Explanation (a) to section 6(l)(c) of the Act. For the purpose of the Explanation, employment includes self-employment like business or profession taken up by the assessee abroad. 73. The Hon'ble High Court in the case of CIT v. Abdul Razak [337 ITR 267 (Ker)] has considered the plain meaning of section 6(l)(c), the Board Circulars and held that the purpose of going abroad includes the purpose of seeking business in foreign countries also. The going abroad for business purposes will include self employment, business or profession taken up by the assessee. In our considered view, these facts cannot be construed in a manner to project that it implies carrying business activities from India. 74. In view of facts, circumstances, case laws and CBDT circular we reach to following conclusions:- (a) Residential status is always determined for the Previous Year because the assessee has to determine the total income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes is to look at the number of days stayed in India. 76. Similar view has been adopted by the Authority of Advance Rulings in the case of Dr. Virendra Kumar (308 ITR 28) and Canoro Resources (313 ITR 2). Departmental authorities, except for interpreting the words in their own manner, have not relied on any case law on the issue of section 6(l)(c) and expln. (b) specifically. Thus no judgment contrary to Hon'ble Kerala High Court has been cited by the Revenue. It is a trite law that in Income tax proceedings the words shall be given plain and ordinary meaning and interpretation should be resorted only when the meaning is ambiguous. We are unable to see any ambiguity in these provisions. Hon'ble Kerala High Court has held that for determining the status as Non Resident is to be decided in terms of no. of days of stay in India. This being the only judgment available on this issue, is binding and is to be respectfully followed by us. The AAR judgment have a persuasive value and the decisions in the case of Dr. Virendra Kumar and Canoro Resources also AAR has adopted the ratio of Hon'ble Kerala High Court judgment. Thus, the test of residence will be determin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pages 538 to 1038 of PB. The AO also found that RAL had pledged its assets in respect of certain loans taken by the appellant. The AO also found that there was a Notes to Accounts regarding contingent liability in respect of this pledge as follows:- The Company has entered into the pledge agreements with EFB, Singapore Branch to pledge its assets maintained with the Bank to secure the payment and satisfaction of all outstanding and liabilities whether future or present actual or contingent incurred by Jitendra Mohandas Virwani, the ultimate beneficiary owner of the Company. 80. Based on these documents the AO came to a finding that the appellant is a beneficial owner of RAL. He found that the bank accounts statement of RAL are not available on record and the Board resolutions are the only documents which reveal the amount paid to several persons. Thereafter, he concludes that all the payments made by RAL to various persons is for the benefit of the appellant and therefore, the above sums have to be added u/s 28(iv) of the Act or u/s 69C of the Act. 81. It is submitted that the appellant had consistently denied before the AO that he is in any way connected with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is bound under law to act reasonably and justly while forming any satisfactory opinion surrounding the explanation offered by the taxpayer. He cannot act unreasonably and capriciously. It is well established that the burden of proof regarding existence of a fact is on the person alleging such fact. 84. The ld. AR further submitted that in PCIT vs Kulwinder Singh 415 ITR 49 the Hon'ble High Court approved the finding of the Tribunal that the burden was on the department to prove understatement of sale consideration which was not discharged and therefore, the addition of S.69B is not justified. 85. In CIT Vs M. Swamy 241 ITR 363 the Hon'ble Madras High Court held that the burden of showing that the assessee has undisclosed income is on the revenue. That burden cannot be said to be discharged by merely referring to the statement given by the assessee to the third party in connection with the transaction which was not directly related to the assessment. It is important to note that the Hon'ble High court held that a statement made by an assessee himself to a third party cannot be the basis for any addition in his lax assessment. In the present case, the AO h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the real owner or not and on what basis they have disclosed the appellant as the owner. The AO did not make any such enquiries. Merely on the basis of this suspicion he has come to a conclusion that the appellant is the owner. It is submitted that the AO has merely acted on suspension. It is completely contrary to the principles laid down by the Hon'ble Supreme Court in M.M. Mathew(4 SCC 65) and Delhi High Court in Krishna Devi (431 ITR 361) and Madras High court in M.Swamy (241 ITR 360) . 91. The ld. AR further stated that it is also important to note that the Director of the company M/s RAL had written a letter directly to the AO stating that Mrs. Lina Virwani is the shareholder of RAL (page 83 PB). The AO has simply rejected this letter on the ground that the letter does not give the history of the shareholding and therefore, it cannot be accepted. The AO has simply rejected this letter merely on some suspicion. If the AO had wanted further information, he could have sent a letter to M/s. Greenland Ltd the sole director of RAL to furnish those details and come to a proper conclusion. The AO has utterly failed to do so. In this connection he relied on the decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s failed to do so. The Hon'ble Supreme Court in Mathew's case has clearly held that suspension cannot take the place of legal evidence. The AO has not brought on record any acceptable material or whatsoever to prove that the appellant is a shareholder of RAL. This is apart from the fact that the AO has wrongly rejected the confirmation furnished by the Director of the company that Mrs. Lina Virwani is the shareholder of RAL. Therefore, the material relied on by the AO are at best pointer to make further enquiry and it cannot be held conclusive. Any conclusion drawn on the basis of such documents would be perverse and is liable to be rejected. 94. The ld. AR further submitted that the AO has failed to discharge the burden cast on him to prove that the appellant is the shareholder of RAL. The AO has utterly failed to bring on record any tangible and acceptable material to hold that the appellant is the shareholder of RAL or is the beneficial owner of RAL. The AO also unjustly rejected the letter furnished by the Director of RAL that the appellant is not a shareholder. The AO having failed to make further enquires to establish that the appellant is the shareholder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the assessment order do not lead to a conclusion that the corporate veil should be lifted. 97. 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 authorization by the Board to the person managing RAL to incur the expenditure/payments The AO has not even given a finding that these payments have been made subsequently. It is submitted that this finding that the entire payments made by RAL is for the benefit of the appellant is totally perverse without any logic or reasoning. It is submitted that it is beyond belief that a reasonable person would come to a conclusion that all the payments made by the company in the course of carrying on its business is for the benefit of another individual without a shred of evidence. Therefore, the reliance by the AO only on the Board resolution to quantify the alleged benefit received by the appellant is liable to be quashed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer has not discharged the burden cast on him to prove that the appellant is the shareholder/beneficial owner of RAL. (b) The learned assessing officer has merely acted on a suspicion and has not brought on record any legal evidence to prove that the appellant is the beneficial owner/shareholder of RAL. (c) The assessing officer has failed to carry out the necessary enquiries and investigation to prove the allegation made by him in the assessment order. (d) The quantification of the addition based solely on the amounts mentioned in the Board resolution defies logic and is totally perverse. (e) S.28(iv) of the Act is not applicable as the appellant is not carrying on any independent business. (f) 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. 102. Hence, it is submitted that the additions made under this head for all the years may be deleted. 103. The ld. DR submitted that assesse has not given any convincing answer as to why he should not be held to be a beneficiary and expenses/outflow of funds of the said company, to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation form at page no 14 it was mentioned that Shri Jitendra Mohandas Virwani was mentioned as his life insured against the owner of the policy, Karadi Trust against the Beneficial Owner of the owner of the policy i.e., RAL. Further it was mentioned in page no 15 of the application form that Shri Jitendra Mohandas Virwani against Life Insured; RAL being held by Karadi Trust against Owner of the policy; Jitendra Mohandas Virwani against Grantor of said trust, Jitendra Mohandas Virwani against the individual who directly or indirectly owns 25% or more of the corporation which owns the contract (i.e Life Insurance Policy). In page no 17 of the form he also signed in person for applying for the Life Insurance Policy. The minutes of meeting dated 12-02-2009 also confirmed the fact as in resolution dated 10-02-2009. It also mentioned that RAL agreed to pay premium in the following manner:- 1. First year USD 1,85,000 2. Second year USD 1,00,000 3. Third year USD 18,00,000 105. The Board resolution of RAL dated 18-02-2009 wherein it was noted that RAL had lent M/s Dynasty Business Parks SDN Bhd (DBPSB) a sum of USD 10,00,000 ( USD 2,00,000 on 30-10-2007 and USD 8,00,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ultimate beneficial owner of the company. 108. On the basis of above documents the assessing officer came to the conclusion that the assesse is the beneficiary owner of RAL. However it was recorded by AO that RAL bank account statements were not available on record and only the Board Resolutions which reveal the amount paid to various persons. According to Assessing officer various payments made by RAL to various persons is for benefit of the assesse as such all such payments considered as income of assesse u/s 28(iv)\69C of the Act. The assessing officer confronted all above mentioned evidence to the assesse during the statement recorded u/s 131(1) on 31-10-2016, 01-11-2016, 02- 01-2016 and 14-12-2016. The assesse consistently denied the facts before the AO that he is nowhere connected with RAL. It was submission of assesse that RAL belongs to his estranged wife Mrs. Lina Virwani. M/s RAL is company registered in Bahamas with two shareholder. Those mentioned shareholders are Serangoon Ltd and Seletar Ltd. His ex-wife Mrs. Lina Virwani became the sole owner of this company after sometime. The company is managed by a board from Singapore. It was also explained by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to by the AO can at worst create a suspicion in his mind that the appellant might be the owner. Therefore, he is required to make further enquiry by examining the officials of RAL and find out whether the appellant is the real owner or not and on what basis they have disclosed the appellant as the owner. The AO did not make any such enquiries. Merely on the basis of this suspicion he has come to a conclusion that the appellant is the owner. It is completely contrary to the principles laid down by the Hon'ble Supreme Court in M.M. Mathew and Delhi High Court in Krishna Devi and Madras High court in M.Swamy (cited supra) . 110. It is also important to note that the Director of the company M/s RAL had written a letter directly to the AO stating that Mrs. Lina Virwani is the shareholder of RAL (page 83 PB). The AO has simply rejected this letter on the ground that the letter does not give the history of the shareholding and therefore, it cannot be accepted. The AO has simply rejected this letter merely on some suspicion. If the AO had wanted further information, he could have sent a letter to M/s. Greenland Ltd the sole director of RAL to furnish those details and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cceptable material or whatsoever to prove that the appellant is a shareholder of RAL. This is apart from the fact that the AO has wrongly rejected the confirmation furnished by the Director of the company that Mrs. Lina Virwani is the shareholder of RAL. Therefore, the material relied on by the AO are at best pointer to make further enquiry and it cannot be held conclusive. Any conclusion drawn on the basis of such documents is liable to be rejected. 112. In our opinion , the AO has failed to discharge the burden cast on him to prove that the appellant is the shareholder of RAL. The AO has utterly failed to bring on record any tangible and acceptable material to hold that the appellant is the shareholder of RAL or is the beneficial owner of RAL. The AO also unjustly rejected the letter furnished by the Director of RAL that the appellant is not a shareholder. The AO having failed to make further enquires to establish that the appellant is the shareholder or beneficial owner of RAL, could not have held so in the assessment order. Further, in our opinion the Appellant and M/s. RAL are Distinct Persons and it cannot be said that the business carried on by RAL is the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person managing RAL to incur the expenditure/payments The AO has not even given a finding that these payments have been made subsequently. In our opinion, this finding that the entire payments made by RAL is for the benefit of the appellant is totally perverse without any logic or reasoning. It is beyond belief that a reasonable person would come to a conclusion that all the payments made by the company in the course of carrying on its business is for the benefit of another individual without a shred of evidence. Therefore, the reliance by the AO only on the Board resolution to quantify the alleged benefit received by the appellant is liable to be quashed. 115. Regarding the Applicability of S. 28(iv), the AO has simply held that the business of RAL is nothing but the conduct of business of Shri. Jitendra Virwani and this finding has already been assailed in the preceding paragraphs. In our opinion, S.28(iv) of the Act which deals with perquisite received by an assessee to be income from profits and gains of business and profession pre-supposes the carrying on of business by an assessee. A perusal of the statement of total income for various years placed at pages 98 to 130 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up the bank account of RAL as belonging to him. As discussed earlier, the AO has to bring on record that the assessee is the real owner of the said bank account, which the AO failed to do so. 119. Further the Hon ble Supreme Court in the case of R.B. Jodha Mal Kuthiala v. CIT, 1971 SCC 369, had explained the term Owner which is as follows:- The question is who is the owner referred to in this section? Is it the person in, whom the property vests or is it he who is entitled to some beneficial interest in the property It must be remembered that S. 9 brings to tax the income from property and not the interest of a person in the property. A property cannot he owned by two persons, each one having independent and exclusive right over it. Hence for the purpose of s. 9, the owner must he that person who can exercise the rights of the owner, not on behalf of the owner but in his own right. 17. ... It is not necessary for our present purpose to examine what the word owner means in different contexts. The meaning that we give to the word owner in s. 9 must not be such as to make that provision capable of being made an instrument of oppression, must be in consonance wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onclusion only on the basis of material collected after the search action. Further, the assessment in the AYs 2009- 10 to 2012-13 has already been completed and the time period to issue notice u/s. 143(2) of the Act has been lapsed and there has been no incriminating material found during the course of search to sustain the addition made by the AO. 123. As discussed earlier, the completed assessment can be disturbed by the AO while making assessment u/s. 153A of the Act only on the basis of incriminating material unearthed during the course of search or requisition of document or undisclosed income or property discovered in the course of search which are not produced or not made known in the course of original assessment. In the present cases relating to AYs 2009-10 to 2012-13, there is no incriminating material found during the course of search action u/s. 132 of the Act. On this count also, the assessment framed for AYs 2009-10 to 2012-13 cannot be sustained, though notice issued u/s. 153A of the Act is valid. 124. Further, the Hon ble Supreme Court in the case of Daulat Ram Rawatmull (87 ITR 349(SC) has held as follows:- A person can still be held to be the own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and it is a mere computer print-out and it cannot be relied on. Apart from this, the AO noted that the housewarming expenses are to be treated as a personal expense of the appellant on the ground that invitation sent by the appellant and his family members refers to houses as my house . Just because the appellant uses the expression my house it does not mean that the housewarming expenses are for the benefit of the appellant. It is an undisputed fact acknowledged by the AO also that the farmhouse belongs to the company Embassy Knowledge Infrastructure Pvt Ltd and the expenses have been accounted in the company's books. Incidentally, to avoid any controversy, the company has also disallowed such expenditure while computing its total income. It is submitted that since the ownership of the farmhouse is with the company, it is but natural that the expenses will be incurred by the company and it is the company's own expense incurred by it. Just because the appellant is staying in that house it does not mean that the housewarming expense are deemed to be the expenses incurred on behalf of the appellant thereby attracting S.28(iv) of the Act. The various guests who have been i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany in hands of assesse. The assesse being Chairman and Managing Director got allotted that farmhouse for his stay in India and that cannot be reason to treat the housewarming expenses as deemed income of the assesse and being a Chairman of the company he invited the various dignitaries and customers of the company which is nothing but a sales promotion expenses in the hands of Embassy Knowledge Infrastructure Private Limited and at any stretch of imagination it could be considered as income for assesse u/s 28(iv) of the IT Act. Accordingly the addition is deleted. 130. The next issue is regarding farm maintenance charges for the AYs 2014-15 2015-16. The AO held that that the guesthouse maintenance charges have to be added in the hands of the appellant for the following reasons:- (a) Notes to accounts to the financials of the company states that the going concern is justified because the appellant has the ability and willingness to provide the necessary level of financial support to enable the company to operate as a going concern. (b) The company has not made any disclosure regarding the major assets i.e., the farmhouse in its financial statements. 131 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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