TMI Blog2007 (1) TMI 196X X X X Extracts X X X X X X X X Extracts X X X X ..... f the appeal of the director of the company Shri Mohan Mangotra for assessment year 1995-96 against order under section 263/143(3) where the impugned amount was first sought to be assessed and the worthy CIT(A) set aside the assessment laying down the directions and guidelines for enquiries in the hands of the company or the director as the case emerge and the worthy CIT(A) has erred in confirming the action of the Assessing Officer. 4. That the ld. Assessing Officer has erred on facts and in law in not presenting Shri Budhi Parkash Bali for cross examination by the assessee company as per the directions of the worthy CIT(A) in the aforesaid order of the director of the company and the worthy CIT(A) has erred in confirming the action of the Assessing Officer. 5. That the ld. Assessing Officer has erred on facts and in law inasmuch as he has not supplied the copy of the evidence in possession of the department regarding impugned payments and also recording his findings as to which place and as which person, these documents were found and seized and the statement of such person with regard to these documents and the worthy CIT(A) has erred in confirming the action of the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have been ignored by the ld. Assessing Officer for the reasons best known to him and the worthy CIT(A) has erred in confirming the action of the Assessing Officer. 12. That the ld. Assessing Officer has erred on facts and in law in making an addition of Rs. 15,21,697 which needs to be deleted and the worthy CIT(A) has erred in confirming the action of the Assessing Officer. 13. That the appellant craves leave to add, amend or to withdraw any ground or grounds of appeals at or before the hearing of the appeal." 2. An additional ground of appeal has also been sought to be raised, which is as follows:- "That the ld. Assessing Officer has grossly erred in law in invoking section 150(1) of the Income tax Act, for reopening the assessment of the company by misconstruing the observation/finding of the Hon'ble Amritsar Bench in the case of Shri Mohan Mangotra as a direction within the meaning of section 150(1)." 3. Apropos the additional ground, we find that, as contended on behalf of the assessee, it is purely a legal ground, not requiring any further facts to be gone into. The issue involved is necessary to be considered so as to correctly assess the tax liability of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Rs. 17,39,803 and Rs. 17,39,803 has escaped the assessment in the hands of M/s. Good Faith Construction (P) Ltd. and M/s. Healthy Holdings Pvt. Ltd., 20, Church Lane, RR, Jammu respectively." 5. The learned counsel for the assessee submitted that a perusal of the above reasons recorded by the Assessing Officer clearly shows that they contained no mention regarding the facts and the position obtaining in the original assessment order; that even if it is presumed that section 151(1) of the Act is applicable, this section specifically states that the notice under section 148 can be issued by an Assessing Officer not below the rank of ACIT or DCIT, whereas in the present case, the notice (copy at APB 39) was issued by the Income- tax Officer. The learned counsel for the assessee has further submitted that even so, the assessee's statement of income (copy at APB 41) was filed along with the return in response to the notice under section 148 of the Act, for the assessment year 1995-96. It has been pointed out that the assessee's objections are at APB 42 to 43. According to the learned counsel for the assessee, the decision of the Hon'ble Supreme Court in the case of "GKN Driveshaf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ividual capacity, if no receipt of the aforesaid amount was shown then the addition was required to be made in the hands of the companies namely M/s. Goodfaith Construction (P) Ltd. and M/s. Healthy Holdings Pvt. Ltd. and not in the hands of the assessee. So the action of the ld. CIT cannot be said to be correct considering the legal position. From the statement of Shri B.P. Bali which was made the basis for taking the action under section 263, it is clear that the assessee never entered into an agreement in his individual capacity. The agreement was in between the two companies namely M/s. Goodfaith Construction (P) Ltd. and M/s. Healthy Holdings Pvt. Ltd. and Shri B.P. Bali. The assessee executed an agreement in the capacity of the Managing Director and all the acts were on behalf of the aforesaid companies. Considering the totality of the facts as narrated above, it can safely be said that the ld. CIT was not justified in considering a sum of Rs. 34,78,165 in the hands of the assessee. At the time of original assessment, no addition was made in the hands of the assessee because the amount was not related to the assessee. In view of that we are of the opinion that the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of Rs. 34,78,165 received by Shri Mangotra in his individual capacity, as income of the assessee, individual; and that if no receipt of this amount was shown, then addition was required to be made in the hands of the company and not in the hands of the assessee, individual. Evidently, these observations of the Tribunal are "findings" and/or "directions". It was in order to give effect to these findings of the Tribunal that the notice under section 148 of the Act was issued. This notice, in accordance with the provisions of section 150(1), could be issued at any time and, therefore, issuance of such notice was valid. So far as regards the objection that the sanction for issuance of such notice was not proper, since section 150(1) provides that such sanction has to come from an Assessing Officer not below the rank of the ACIT or DCIT, whereas in the present case, the issuance of such notice was sanctioned by the JCIT; section 2(16), upto the end of the financial year 1998, provided that such a notice could be issued with the approval of the JCIT, since "Commissioner" included "JCIT". This objection of the assessee by way of the additional ground of appeal is, therefore, re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on companies through Shri Mangotra and the owner, Shri Bali. It could be for this reason that the alleged amounts were received by Shri Mangotra to compensate him for the unrecorded cost of construction. However, to arrive at such a conclusion, more material has to be brought on record. Such a proposition would further require some deduction for the unrecorded cost and only the profit element could be assessed in the hands of the recipient. As mentioned above, the construction was to be completed by the two companies, cost of construction was also their responsibility. If the companies were bearing the cost, it is hard to believe that the amounts received by the appellant were not passed on to the companies. The only inference which could be drawn from the facts, referred to by the Assessing Officer, is that the appellant received the money on behalf of the two companies. I would like to clarify that this inference is warranted on the basis of the available material. If the Assessing Officer is able to bring some thing more on the record to substantiate his/her findings that the amounts referred to in the seized papers were actually retained by the appellant, then the addition in h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said order of the CIT was against the order of the Assessing Officer passed under section 143(3), under section 263 of the Act; that the order passed by the CIT under section 263 of the Act had been quashed by the ITAT vide order dated 24-10-2001. It has further been contended that as per the original agreement dated 15-12-1991 between Shri Bali and M/s. Good Faith Construction (P.) Ltd. and M/s. Healthy Holdings (P.) Ltd., it had been agreed that the said two companies would construct the property and would receive amounts of Rs. 45 lakhs and Rs. 35 lakhs, respectively from Shri Bali and in the event of non-payment thereof, these companies would be entitled to sell 40 per cent of the constructed premises. Therefore, as per the department, it cannot be said that these two companies did not have any right to execute the sale deeds regarding the properties. The department also contended that the agreement dated 29-11-1999 relied on by the assessee was much later than the search which was carried out on 7-4-1995, whereas the seized material related to a point much earlier in time and that, therefore, the said agreement dated 29-11-1999 was not at all relevant. Moreover, the departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for a consideration of Rs. 45 lakhs, whereas M/s. Healthy Holdings (P.) Ltd. was to construct the ground floor and the first floor of the said property for a total consideration of Rs. 35 lakhs. These companies were to deposit a sum of Rs. 45 lakhs and Rs. 35 lakhs respectively as a security amount with Shri Bali, who was the owner of the premises. The amounts of Rs. 35 lakhs and Rs. 45 lakhs were to be recovered by the said two companies from Shri Bali on completion of construction. As per clause 13(1) of the said agreement, if Shri Bali failed to make the payment of the above amounts, the companies were to be entitled to ownership of 40 per cent of the constructed area. The companies completed the construction of 110 shops out of which, 22 shops/offices were sold by Shri Mangotra, and as per seized documents, Annexure A-30 and Annexure A-3/ A-I, Shri Mangotra received a sum of Rs. 54,78,165 for the sale of these shops. As per the statement of Shri Bali, Shri Mangotra recovered a total amount of Rs. 54,78,165, out of which, Rs. 20 lakhs was paid to Shri Bali who, in turn, paid 40 per cent of Rs. 20 lakhs to the two companies. The balance of Rs. 34,78,105 was received by Shri Man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he observations of the Tribunal in this regard, are unequivocal. Further, it is clear from the agreement dated 15-12-1991, that the assessee and M/s. Good Faith Construction (P.) Ltd. undertook to carry out the construction of the property of Shri Bali at New Delhi. Shri Bali agreed to pay Rs. 45 lakhs and Rs. 35 lakhs respectively to these two companies for the said construction. The agreement also provided that in the event of Shri Bali failed to make payment within seven days from the raising of the bill, the contractor company had a right to remain in occupation and in possession or to sell 40 per cent of the constructed area or of the total maximum sale value of the constructed building, whichever was higher, to compensate for the default in such payment. It cannot, therefore, be said at all that neither of the two companies had any legal right to sell. No evidence whatsoever had been brought by the assessee to prove that any payment was received by the assessee-company from Shri Bali for the construction of the said property. No on-money had been shown as income of the companies, nor Shri Bali showed it I as an individual income. The agreement dated 13-11-1999, in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation from the customers. Out of the sale proceeds, only a part was given to Shri Bali, the remaining amount having been retained by Shri Mohan Lal Mangotra which was shown neither in the hands of the companies, nor in the hands of Shri Mohan Lal Mangotra, Individual. This clearly goes to belie the claim that Shri Mangotra had no right, either in his Individual capacity or as director of the two companies, to sell the properties or to receive the sale consideration thereon. In fact, Shri Mangotra received a sum of Rs. 34,78,165 as on-money/unaccounted money in respect of the sale of shops etc. The assessee miserably failed to prove otherwise. 17. The Assessing Officer, it is seen, merely carried out the directions issued by the ITAT by apportioning the amount of Rs. 34,78,165 in the hands of the two companies, on account of money received on sale of shops/offices etc., at Rs. 19,56,468 and Rs. 15,21,697, respectively. Pertinently, before the ITAT, Shri Mangotra had filed an application, objecting to the observations of the Tribunal to the effect that unaccounted money received was required to be assessed in the hands of the two companies. This application was dismissed by the T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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