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TMI Blog2024 (12) TMI 1113X X X X Extracts X X X X X X X X Extracts X X X X ..... rector of Capital Power Systems Ltd. [hereafter also referred to as 'the assessee'] and Sh. Mahesh Kumar Gupta was another Director of the assessee - which is one of the companies of the Capital Meter Group. During the post-search proceedings, on 01.09.2006, Sh. Pawan Kumar Bansal had submitted a letter, written on the letterhead of assessee, duly signed by him as the CEO of the assessee, wherein an income of Rs. 7 crores was surrendered and disclosed. This surrender was again reiterated by Sh. Pawan Kumar Bansal and affirmed by him in his statements recorded under Section 132 (4) of the Act on 08.09.2006 and 12.09.2006. In his statement dated 12.09.2006, Sh. Pawan Kumar Bansal also furnished the break-up of the undisclosed income of Rs. 7 crores in two names, i.e., partly in his name and partly in the name of Sh. Mahesh Kumar Gupta. This break-up, given by Sh. Pawan Kumar Bansal, is reproduced hereunder: "Name Undisclosed income 1. Sh. Pawan Kumar Bansal Rs. 3,55,000,00/- 2. Sh. Mahesh Kumar Gupta Rs. 3,45,000,00/- Total Rs. 7,00,000,00/- The above money of Rs. 7 crores, received on account of undisclosed income from unaccounted property dealings have been invested i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered, which did not reveal the income of Rs. 7 crores in the hands of Sh. Pawan Kumar Bansal. The learned ITAT also held that there were some contradictions in the statements given by Sh. Pawan Kumar Bansal which rendered such statements unreliable. The learned ITAT accepted that the assessment was required to be framed with reference to the material which was seized during the search, and restricted the addition made to his income to such seized material only. 6. The Revenue preferred an appeal against the aforesaid decision of the learned ITAT before this Court in ITA 529/2015, captioned Pr. Commissioner of Income Tax v. Pawan Kumar Bansal. The Coordinate Bench of this Court dismissed the said appeal vide order dated 29.07.2015, and upheld the findings of the learned ITAT. The Court concurred with the course adopted by the Commissioner of Income Tax (Appeals), and approved by the learned ITAT, to determine the undisclosed income on the basis of loose papers found during the search. 7. The assessee had filed its Return of Income for AY 2007-08 on 31.10.2007, declaring an income of Rs. 80,53,110/-. The case of the assessee was picked up for scrutiny. However, eventually, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon'ble ITAT. 6. The Hon'ble High Court of Delhi vide its order in ITA No.529 of 2015 while dismissing the appeal has held that no substantial question of law arises for determination. The Hon'ble High Court in para 3 of its order has clearly stated that ".... The ITAT has analysed the aforementioned letter and come to the conclusion, and in view of the court rightly. that it was made explicit from the said letter that the surrender was being made by the company and not by the Respondent assessee in his Individual capacity". With regard to the assessability of undisclosed income in the hands of the company, the Hon'ble High Court has not passed any remarks. 9. The return of income was filed by the assessee on 31.10.2007 declaring an income of Rs. 80,53,110/-. The assessment proceedings were completed on 31.12.2008 accepting the returned income of the assessee. However, post search and seizure operations u/s 132 of the Income-tax Act. 1961, carried out in the case of Capital Meter Group on 26th June 2006 10, the Hon'ble ITAT, in its order in ITA No. 5375/Del/2010 dated 30.09.2014, concluded that the income of Rs. 7 crores was disclosed by Capital Power Systems ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITAT. QUESTION OF LAW 13. The Revenue projected the following questions of law for the consideration of the Court: "2.1 Whether on the facts and circumstances of the case, Ld. ITAT was justified in deleting the addition of Rs. 7,00,00,000/- made on the basis of statement recorded during the search without appreciating the Judgement of jurisdictional High Court in the case of Bhagirath Agarwal Vs CIT (31 taxmann.com 274) wherein Hon'ble Court held that 'an addition in Assessee's - case relying on statement recorded during search cannot be deleted without proving the statement to be incorrect? 2.2 Whether on the facts and circumstances of the case, Ld. ITAT was justified in ignoring the finding of the Tribunal in the case of Sh. Pawan Kumar Bansal wherein Tribunal while deleting the addition made in the hands of Sh. Pawan Kumar Bansal, Director of the Assessee company (ITA No. 3375/Del/2010) held that the disclosure of Rs. 7,00,00,000/- was made by Capital Power Systems Ltd., and not by Sh. Pawan Kumar Bansal in his individual capacity? 2.3 Whether on the facts and circumstances of the case, the order passed by Ld. ITAT is perverse in law as well as on facts in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of Section 150 of the Act were appropriately invoked by the AO for the purpose of reopening the assessment for the AY 2007-08 in respect of the assessee herein; and consequently, whether the learned ITAT erred in holding that the conditions stipulated under Section 150 of the Act were not satisfied? 18. At the outset, Section 150 of the Act is set out below for reference: "150. Provision for cases where assessment is in pursuance of an order on appeal, etc. (1) Notwithstanding anything contained in section 149, the notice under section 148 may be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision or by a Court in any proceeding under any other law. (2) The provisions of sub-section (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the time the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Court held that a 'finding' must pertain to the particular assessee and assessment year under consideration, and it must be indispensable for resolving the issue before the authority or court. A finding cannot be incidental or ancillary; it must form a necessary step in the reasoning process to determine the liability of the assessee or the assessment year in question. The Hon'ble Supreme Court illustrated this with an example: if the facts indicate that income can belong either to A or B and to no one else, a finding that it belongs to B or does not belong to B is crucial to determining whether it can be taxed as A's income. Such a finding about B is directly linked to resolving A's liability. However, if A's liability can be decided without addressing B's status, any finding about B would be incidental and not necessary for the disposal of A's case. As to 'direction', the Court emphasized that it must be an express, specific mandate that is statutorily empowered and directly necessary for the disposal of the case. 23. From the above-noted judicial precedents, it is evident that the terms 'finding' and 'direction' have a confined and precise meaning under the Act. A 'findin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is not recorded in the regular book of a/cs. Do you want to offer any explanation regarding these documents and the transactions enumerated therein?. Ans. I have already filed a letter dated 1-9-06 vide, which I on behalf of the Capital Group of companies has voluntarily offered an additional income of Rs. 7 (seven) crores. As the search proceedings in our group of cases are yet to be concluded as a number of restraints are yet to be lifted and this statement being recorded u/s 132 (4) of the I.T. Act 1961, I would like to take the benefit of explanation 5 to section 271C and I once again reiterate my earlier statement made vide letter dated 1-9-06 and voluntarily offered an additional income of Rs. 7 crore (seven crores) to avoid litigation and buy peace of mind subject to non initiation of penalty or prosecution or other coercive actions as per provision of law, on behalf of the company, its directors, senior executives, their spouse, family members and relatives including other companies, firm in which such persons are partners, directors or interested. Q-3: Kindly give the assessee wise details of this disclosure? Ans: The same will be provided after go through the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00,.00,000/- (Rs. Seven crores). Q-3: Give the details of these additional income of Rs. 7,00,00,000/- (Rs. Seven crores), ,i:e. the details of the source of this money and the details of its investment? Ans: This additional income of Rs. 7 crores was generated in different years during the block period from undisclosed/or unaccounted dealings in various property transactions and the said income of Rs. 7 crores has been earned by me and Sh. Mahesh Kumar Gupta (Director-Capital Power Systems Ltd.). The bifurcation is as under:- * * * Q--4: Do you. want to say anything else?' Ans: This statement given by me is final and l understand that no penalty or prosecution proceedings against me and the group will be initiated in relation to the aforestated voluntary disclosure of additional income of Rs. 7 crores. The above statement has been given by me voluntarily out of my free will without any pressure, force, coercion, undue influence. I have read over the above statement and found that it is correctly recorded and I stand by the above statement." 11. ......When we see the cumulative effect of all the facts as well as the statements, following position emerges:- 12. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he income of Rs. 7 crores in the hands of the assessee and Shri Mahesh Kumar Gupta is found. In the above circumstances, after considering the cumulative effect of the letter dated 1st September, 2006 and both the statements, the proper course would be to determine the undisclosed income on the basis of loose papers found and seized at the time of search. The CIT(A) did the same." (Emphasis added) 26. A perusal of the aforesaid reveals that the learned ITAT had examined the letter dated 01.09.2006 written by Sh. Pawan Kumar Bansal, as well as his subsequent statements dated 08.09.2006 and 12.09.2006. Regarding the letter dated 01.09.2006, the learned ITAT observed that it was written on the letterhead of the assessee i.e. Capital Power Systems Ltd., which had clearly mentioned: "We Capital Power Systems Limited hereby agree to voluntarily surrender Additional Income of Rs. 7,00,00,000.00". The letter was signed by Sh. Pawan Kumar Bansal in the capacity of being CEO of the assessee. Consequently, the learned ITAT observed that the disclosure of Rs. 7 crores was made by Capital Power Systems Ltd. and not by Sh. Pawan Kumar Bansal in his individual capacity. 27. At this juncture, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the additional surrendered income of Rs. 7 crores did not belong to Sh. Pawan Kumar Bansal, which was the issue in question before the learned ITAT in the said case. However, the other incidental observations in the order dated 30.09.2014, pertaining to the income being surrendered either on behalf of the Capital Power Systems Ltd. or Capital Group of Companies - as inferred from letters and statements made by Sh. Pawan Kumar Bansal - would not fall within the scope of the term 'findings' under Section 150 of the Act. 30. In light of the above, we are of the considered opinion that the observations made by the learned ITAT cannot be construed as findings or directions which are required to be given effect to by reopening the concluded assessments of the assessee. The learned ITAT has, at no point, rendered any finding in its order that the amount of Rs. 7 crores is required to be assessed in the hands of Capital Power Systems Ltd. 31. Similarly, in the order dated 29.07.2015 of the Coordinate Bench of this Court in ITA 529/2015, there was no categorical finding or direction that the assessee had declared income of Rs. 7 crores so as to invoke Section 150 of the Act by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents made subsequently. Further, the statement made by the Respondent Assessee on 12th September 2006 in response to Question No.3 which required him to give the details of the additional income of Rs. 7 crores was to the effect the said additional income was generated during the block period from undisclosed/or unaccounted dealings in various property transactions and that "the said income of Rs. 7 crores has been earned by me and Shri Mahesh Kumar Gupta (Director-Capital Power Systems Ltd.)." The Respondent Assessee then proceeded to give the bifurcation of said income as under: * * * 7. The above statement cannot be said to be a categorical admission by the Respondent Assessee that the above income had been earned by him in his individual capacity. The cumulative effect of the letter dated 1st September, 2006 and both the statements rendered them unreliable. There was no other corroborative material. In the circumstances, the course adopted by the CIT (A), and concurred with by the ITAT, to determine the undisclosed income on the basis of loose papers found during the search does not appear to be erroneous. 8. It requires to be also noted that in response to a query by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Coordinate Bench in its order dated 29.07.2015, the order of the AO suffers from inherent error, as it holds that there was a finding by the Coordinate Bench of this Court in the said order which bestowed jurisdiction on him, to issue notice under Section 148 read with Section 150 of the Act. 34. Further, the learned ITAT, in the order impugned before us, has rightly noted that in the letter dated 01.09.2006, Sh. Pawan Kumar Bansal had mentioned that: "we Capital Power Systems limited hereby agree to voluntarily surrender Additional Income of Rs. 7,00,00,000.00 ......... on behalf of the company, its Directors, Senior Executives, their spouse, family members and relatives including other companies, firms in which such persons are partners, directors or interested" (Emphasis added) 35. We note that even in the letter dated 01.09.2006 which was the first letter written by Sh. Pawan Kumar Bansal, it was mentioned by him that the additional income of Rs. 7 crores was being declared and surrendered by Capital Power Systems Ltd. "on behalf of the company, its directors, senior executives, their spouse, family members and relatives including other companies, firms in which suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act is applicable only where a notice under Section 148 of the Act is required to give effect to any finding or direction contained in any order passed by any authority in any proceedings under the Act. It is clear that the nature of the findings or directions contemplated are such that a notice under Section 148 of the Act is warranted for the purposes of giving effect to the findings. In this view, the findings are required to be dispositive of the issue concerned and only the procedure is required to be involved to give effect to the same. 41. We are unable to accept that any of the orders passed in the case of Sh. Pawan Kumar Bansal and Sh. Mahesh Kumar Bansal are dispositive of the assessee's liability to pay tax and therefore, no notice under Section 148 of the Act was warranted for giving effect to any such finding. 42. To sum up, we hold that it is clear from the perusal of the order of the Coordinate Bench of this Court dated 29.07.2015 as well as the order of the learned ITAT, CIT(A) that in none of the orders, there was any finding or direction that the undisclosed income of Rs. 7 crores was required to be assessed to tax in the hands of the assessee, which warran ..... X X X X Extracts X X X X X X X X Extracts X X X X
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