TMI Blog2017 (3) TMI 1884X X X X Extracts X X X X X X X X Extracts X X X X ..... its balance sheet every year, ought not to have been fastened in the hands of the assessee. AO failed to bring on record that the entire amount of paid up capital as shown by the companies originated from the assessee s coffers and without making any enquiry from the said companies as to their respective paid up capitals and who were the share holders and without bringing any evidence on record to suggest that the paid up capital of those companies were funded only by the assessee, the AO ought not to have made the addition without any basis the addition made cannot be sustained. Therefore, we do not find any infirmity in the order passed by the Ld. CIT(A) and the same is hereby upheld. This ground of appeal of revenue is dismissed. Addition under the head income from undisclosed source - HELD THAT:- As the credit entries in the books were related to AY 1995-96 to 1996-97, which have been assessed in the regular assessment, so assessee cannot be taxed again during the block assessment as held by Hon ble jurisdictional High Court in Caltradeco Steel Sales (P) Ltd. [ 1999 (8) TMI 18 - CALCUTTA HIGH COURT] - DR at the time of hearing before us could not point out any infirmity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is unsustainable and, therefore, we are inclined to delete the addition made on this ground. Assessee has returned huge income pursuant to the notice u/s. 158BC - addition on protective basis - HELD THAT:- we note that the AO himself finds that the assessee is a man of no means and was of the considered opinion that crores of rupees cannot belong to the assessee. Therefore, in the peculiar facts and circumstances of the case, merely became the assessee returned ₹ 7.10 cr. as income in a disturbed mental condition cannot be the bed-rock on which the assessment of income of the assessee can be made. In the peculiar facts and circumstances of the case, we set aside the addition of ₹ 7.10 cr. and in the interest of justice, this issue is restored back to the file of the AO to examine the seized material and then recompute the income of the assessee for the block period. The AO shall correlate the material seized based on which the AO shall arrive at the correct taxable income of the assessee for the block period. Appeal of the assessee is partly allowed for statistical purposes. - I.T(SS)A No. 104/Kol/2008 & 113/Kol/2008 (Assessment Year: B.P. 01.04.1988 to 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rious companies in introducing their own money accumulated out of concealed income through his companies who merely lend their names as creditors. We take note that for coming to this conclusion the AO notes that the assessee has set up a few proprietary concerns where certain persons exists and even non-existing who receives a small amount of salary for acting as his benamidars and are shown as apparent owners and operated the bank account as such. Thereafter, the AO spells the names of ten proprietary concerns at page 3 of his assessment order. (iii) the AO s next finding is that he found that the assessee deposited cash into the bank accounts of the ten proprietary concerns and obtained blank cheques signed by the persons authorized to operate their bank accounts and retained such cheques in his possession and for coming to the said conclusion relied on a statement made by the assessee wherein he has stated that he used to give cash to his employees to deposit into the bank accounts opened in their names of the proprietary concerns. (iv) The AO notes that the assessee has given different depositions in respect of earning income for the period 1991-92. The AO notes that o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own names and required a medium and the assessee plays that very important role against receipt of commission at certain percentage of the amount of credit entry provided by him through any of the 117 companies as per annexure 1 floated by him. Thereafter we note that the AO brings out two illustrations to prove the modus operandi as found out by him at pages 4 and 5 of the assessment order. After giving the two illustrations, the AO makes a finding that the cash deposited by the assessee in the name of the proprietary concerns was provided by the beneficiary company and the assessee has in turn issued loan by cheque to the beneficiary company. (vii) Thereafter, the AO notes that for the block period, the paid up capital of the 117 companies were to the tune of ₹ 73,04,75,450/-. The AO notes that when the assessee was asked to explain the source of aforesaid paid up capital, the assessee took the plea that paid up capital were much less as these companies between themselves subscribed to each other s share capital. However, the AO notes that the assessee neither stated the exact paid up capital nor he could explain the source of capital to his satisfaction. Therefore, he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dual shareholders but also the contribution made by the companies in the share capital of other companies. So, the Ld. CIT(A) held that the AO s view that the entire amount was contributed by the assessee into the share capital of the companies was not correct and the finding is not based upon cogent materials on record. The Ld. CIT(A) took note of the fact that no enquiries and verifications were made from the concerned share holding companies and from their respective income tax files which were with the department, and that the AO failed to bring out any evidence or material on record that the assessee was the real beneficiary in this case and, therefore, he directed deletion of the addition of ₹ 73,04,75,000/-. We concur with the view of the Ld. CIT(A) for deleting the addition made on this account because all the companies are separate legal entities and have been assessed separately and that the accounts of these companies are statutorily audited and moreover they have disclosed their paid up capital in their respective Balance Sheets every year and, therefore, cannot be termed as undisclosed income. Without bringing any evidence to show that the companies which are leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt and thereafter, came to the conclusion that the addition made by the AO on the basis of the credit entry is not based on any material facts which has not been disclosed by the assessee in the regular assessment and thereafter, ordered deletion of the addition of ₹ 3.25 lacs. Aggrieved, the revenue is now in appeal before us. 6. We have heard rival submissions and gone through the facts and circumstances of the case. The facts stated above pertaining to the issue are not in dispute. The fact remains that the credit entries in the books were related to AY 1995-96 to 1996-97, which have been assessed in the regular assessment, so assessee cannot be taxed again during the block assessment as held by Hon ble jurisdictional High Court in Caltradeco Steel Sales (P) Ltd. (supra). The Ld. DR at the time of hearing before us could not point out any infirmity in the order passed by the ld. CIT(A) so as to warrant our interference and, therefore, we are inclined to uphold the order of the Ld. CIT(A) and dismiss this ground of appeal of the revenue. 7 Next, we will take up the assessee s appeal wherein ground no. 4 the assessee has challenged the confirmation of addition of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was ₹ 2,55,09,375/- during the year 1990-91 and 1991-92. According to the AO, the assessee could not reconcile the contradictions in his own deposition made on 03.02.1999 wherein he stated to have earned ₹ 15 to 20 crores while dealing with the share during 1991-92 and that made on 28.06.1999 wherein he made a statement that he received ₹ 10 crore from the sale of shares during the said period. Thereafter, the AO explains the modus operandi by an illustration at page 4 of his order based on the facts emerging from the seized documents, which are as under. A few instances as found out from the seized books and reproduced below will testify to the modus operandi adopted by the assessee as stated above: On 7.1.97 (i) Turner Tools a proprietory concern set up by the assessee deposited cash ₹ 1,50,000/- in its current account No. 1344 with Punjab Sind Bank, Kalakar Street Branch, Calcutta. On 7.1.97 (ii) Lalbag investment maintaining account No. C1343 in the same bank deposited cash ₹ 1,50,000/-. Each of them issued cheques of ₹ 1,50,000/- in favour of Sukhi Suppliers (Private) ltd., one of the 117 companies floated by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain amounts. This finding of fact also recorded by the AO fortifies the fact that the cash deposited in the proprietary concern does not belong to the assessee but belongs to the beneficiaries listed as annexure II to the assessment order. Therefore, the addition made by the AO is not on the basis of evidence or material to even remotely suggest that cash deposited in bank account belongs to assessee and the impugned addition is totally contradictory to the findings recorded at various places in the assessment order and the Ld. CIT(A) erred in not appreciating the aforesaid findings of the AO and has simply relied on a portion of the statement recorded which has been subsequently retracted by the assessee, cannot be the basis of confirmation of addition which has no legs to stand and, therefore, we are inclined to delete the addition of ₹ 10,29,45,776/-. 11. Ground no. 5 of the assessee s appeal is against the addition of ₹ 10 crore the AO notes that Mr. Kedia in the course of statement made on various dates held that he has earned not less than ₹ 10 crore during the previous year relevant to the assessment year 1992-93 (in his latest deposition on 28.06.1999 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perandi has been clearly spelled out by the AO, that is the basis on which the AO went ahead to add the income on protective basis and took steps to tax the beneficiaries listed out at Annexure-II to the assessment order. It has been brought to our notice that in the case of the beneficiary, that is M/s Trinetra Commerce Trade Pvt. Ltd., the addition on substantive basis was upheld by the Hon ble Calcutta high Court in ITA No. 619 of 2008 dated 15.09.2016. So, therefore, the addition based on statement alone which has been recorded when he was mentally disturbed cannot be sustained. . In the light of the facts and circumstances of the case, the AO s order relying only on the statement of the assessee to fasten the liability on the assessee is unsustainable and, therefore, we are inclined to delete the addition made on this ground. 13. Ground no. 3 is in respect of addition of ₹ 7,10,00,000/-. Brief facts of the case are that pursuant to the notice u/s. 158BC(a)(ii) of the Act served on assessee on 21.07.1999 the assessee had filed return on 28.01.2000 disclosing a total income of ₹ 7.10 cr. and the same was added to the income of the assessee. Aggrieved, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the distressed mental condition has made several inconsistent statements during the assessment proceedings u/s.158BC of the Act wherein he has deposed that he has earned ₹ 15 to 20 cr. etc. speaks volume of the mental conditions of the assessee, therefore, the AO after investigation and going though the seized material came to the right conclusion that the assessee is a man of no means and cannot be the owner of crores of rupees, but added the returned income and made the addition of ₹ 7.10 crore simply because the assessee has returned the figures, which according to him is not sustainable and only the correct/real income earned by the assessee, as an accommodation entry operator can at best be levied against him as per the Constitution of India. 15. On the other hand, the Ld. DR vehemently opposed the plea of the Ld. AR and submitted that once the assessee has voluntarily returned the income pursuant to notice u/s. 158BC of the Act, there is no question of assessing the assessee at a lower income. Therefore, he does not want us to interfere in the order of the lower authorities. 16. We have heard rival submissions and gone through the material available on re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax can be imposed without the authority of law and that if a tax cannot be imposed the same cannot be collected merely because the assessee has paid the same. It is unconstitutional to collect tax without authority of law. As per Article 265 of the Constitution of India states that no tax shall be levied or collected except by authority of law. Merely because the assessee under wrong understanding of law offers amount to tax the same will not be a reason to tax the said amount unless it is lawful to tax the same. For this proposition, the following case laws are relied on: (i) CIT Vs. (1994) 73 Taxman 437 (Cal); (ii) Mainac Poddar (HUF) Vs. WTO 262 ITR 633(Cal) (iii) SAIL DSP VR EMPLOYEES ASSOCIATION 1998 Vs. UOI 262 ITR 638 .in our considered view, the lower authorities are not accepted to say that merely because the assessee has returned income which is higher than the income determined in accordance with legal principles such returned income can be treated as wrongfully assessed. The assessee is liable to pay tax only upon the taxable income. The law empowered by the Constitution of India and the Income Tax Act to the AO to assess the income in ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO should assess the income of the assessee only in accordance to law. 21. It should be kept in mind the duty of AO as per the Act, the AO is not only a quasi judicial authority, he is also an investigator. So actual role need to be discharged by the AO. The AO should not sit with folded hands when the return is filed and accept it without a murmur. A quest for finding the truth should be the motto of every quasi/judicial body and AO should make all endeavors to do so. AO is empowered to find out the veracity of the returned income as per law. The AO should not take advantage of the ignorance of the assessee, and even if the assessee has returned mistakenly a higher income which is based on misconception of law, the AO is duty bound to tax only the right income. 22. Therefore, in the facts and circumstances of the case, we note that the AO himself finds that the assessee is a man of no means and was of the considered opinion that crores of rupees cannot belong to the assessee. Therefore, in the peculiar facts and circumstances of the case, merely became the assessee returned ₹ 7.10 cr. as income in a disturbed mental condition cannot be the bed-rock on which the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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