TMI Blog2004 (12) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... n to him to frame an assessment disregarding the specific directions of the Hon'ble Tribunal. 4. The appellant prays that an assessment framed by the AO disregarding the specific directions given by the Hon'ble Tribunal be held to be ab initio and or otherwise void and bad in law. 5. The appellant further prays that the order passed by the AO be annulled. Ground III : Without prejudice to Grounds I and II : 1. The AO erred in making addition of Rs. 1,48,741 on account of alleged undisclosed income for asst. yr. 1996-97. 2. He failed to appreciate and ought to have held that: (a) The return of income for asst. yr. 1996-97 had been validly under s. 139(4) filed and, therefore, the income cannot be said to be from undisclosed sources as defined. (b) The Hon'ble Tribunal had already considered in its order dt. 18th Aug., 1998, the filing of IT Return after the date of search and had directed the AO to delete the said addition on appellant producing evidence for filing the return of income. (c) The appellant had already filed evidence before the AO and, therefore, the addition ought to have been deleted. (d) No fresh ground or objections could be raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for asst. yr. 1996-97 for which return was not filed till the date of search and alleged cash receipt from Shaw Wallace Co. Ltd. amounting to Rs. 43,15,00,000. A fresh order has been passed by the AO and the above two additions have been repeated. Aggrieved by this order, the assessee is in appeal before the Tribunal with above grounds. 3. Before the learned counsel could start his arguments, the learned Departmental Representative submitted that since the appeal in the main case, viz. Shaw Wallace Co. Ltd. where similar additions have been made, is pending, appeal in the present case should be kept pending till the decision in that case, i.e., Shaw Wallace Co. Ltd., At this point, the learned counsel filed a copy of interim order of the Hon'ble Bombay High Court in Writ Petition No. 2186 of 2003 wherein the Hon'ble Court has observed as below: Both the parties made grievance that the Tribunal has not taken up the appeal bearing Appeal IT (SS) A No. 93/Mum/2001 for hearing on board in spite of the fact that as per the order-sheet dt. 1st Aug., 2003 the appeal was to be taken up for hearing in the last week of December, 2003. The Tribunal is, therefore, directed to take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). The income consisted mostly of salary and some other sources like, interest income, etc. All the sources of income were known to the Department; hence, there was no question of considering the income to be of undisclosed nature as there was no attempt on the part of the assessee to keep these items of income outside the view of the Department. 6. It was further submitted that so far as the salary income is concerned, the same duly suffered tax by way of deduction of tax at source and such deduction of tax was already within the knowledge of the tax Department from the TDS return filed by the employer-company, M/s Prime Distributors Ltd. The other source of income, i.e., interest income mainly bore the nature of regular income, which could not have been hidden or concealed from the Department. The due date for filing the return under s. 139(1) was only 30th June, 1996 whereas the same for filing return under s. 139(4) was much later and the return was actually filed within the latter due date. The learned counsel further submitted that the statute is not specific as to which due date, i.e., whether the due date for filing return under s. 139(1) or the due date for filing retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. On the other hand, the learned Departmental Representative supported the order of the authorities below and submitted that the case of the assessee is hit by the provisions of cl. (c) of s. 158BB(1) which prescribes the manner of computation of undisclosed income. Therefore, the learned Departmental Representative submitted that the AO was justified in treating the amount of Rs. 1,48,741 as undisclosed income of the assessee. 8. We have considered the submissions made from both sides. Here, we have to see whether the charging provisions contained in s. 158B(b) comes into play or not. It is settled law that computational provision will not supersede the charging provisions. If some income cannot become undisclosed income under s. 158B(b), it cannot be brought to tax by way of computational provisions contained in s. 158B(b). Reliance is placed on the decision of Tribunal, Chandigarh, in the case of Smt. Shanti Ram vs. Asstt. CIT 128 Taxman (Mag) (sic). In our considered opinion, the amount of Rs. 1,48,741 cannot be treated as undisclosed income as defined under s. 158B(b). It is not undisclosed income as it is not hidden and not likely to remain undisclosed by its very nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a view to provide assessee proper opportunity of presenting his case and also to make up its mind as to in whose hands the amount has to be substantially assessed. 4.3 Assessee was given fresh opportunities to explain its case and to submit any other submission. Copy of all the statements recorded either by IT Department or by Enforcement Directorate have been made available to the assessee. Such statements given to the assessee, apart from the copies already given at the time of block assessment, are as follows: (i) Statement of Shri R.P. Rathi, Director Finance, Shiva Marketing dt. 24th Sept., 1997. (ii) Statement of Shri P.R. Pandya recorded on 19th June, 1996. (iii) Statement of assessee recorded by Enforcement Directorate on 5th Dec., 1996. (iv) Statement of Shri Rajeshj Lihala, M.D. Shiva Marketing, recorded by IT Department. (v) Statement of Shri Govindram Babani recorded by Enforcement Directorate on 5th Dec., 1996. (vi) Statement of Shri A. Sadashivam recorded by Enforcement Directorate on 23rd Dec., 1996. As regards statement of Shri R.R. Modi, assessee was asked to obtain the same from Shaw Wallace, Calcutta where statement was recorded. With the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oney from any of those persons. In fact assessee admitted to have received cash initially, though he retracted his statement subsequently. Assessee has also not accepted or evidenced that he was only acting as conduit for shifting money to Dubai. In the absence of any submission or evidence to suggest that money received by the assessee has been passed on to Shri Manu Chhabria, it has to be presumed that assessee kept the cash received from various persons relating to Shaw Wallace Group and was in beneficial enjoyment of the funds received by him. The addition in the case of Shaw Wallace was made on account of expenses incurred for business purpose/claim of bogus expenses. The money has gone out of the bank accounts/books of Shaw Wallace and therefore, even when the expenses were considered not allowable, the taxability of recipient of money will not be affected. Each transaction has two sides. For any expense of a person, the same will be income/revenue for the other side. It is possible that due to certain provisions under IT Act, expense may not be allowed fully or partially, the status of income in the hands of recipient will not change. Therefore, assessee's argument that if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from Amount (Rs. in crores) Balaji Marketing Co. 1.96 Shiva Marketing Ltd. 3.23 Geekay Sales (P) Ltd. 2.50 Priyajee Distributors 2.50 Other receipts (as per Enforcement Directorate) 3.73 R.R. Modi 20.00 Receipts as per documents seized (excluding receipts from Geekay Sales Priyajee Distributors) 9.23 Total 43.15 The learned counsel submitted that the searches were conducted by the Department and also the Enforcement Directorate on Shaw Wallace group on the allegation that they were siphoning off the funds of Shaw Wallace Co. Ltd. by inflation of sales promotion expenses. While completing assessment, the AO referred to the deposition on behalf of some of the concerns before the Enforcement Directorate/the IT Department in respect of following items only: Govindram Bhawani— Govindram Bhawani— Proprietor of Balaji Marketing Co. Reg. Rs. 1.96 crores Rajesh Lihala of Shiva Marketing Co. Reg. Rs. 3.23 crores Earlier Distributor prior to 1990, Viz., G.K. Sales Agency Reg. Rs. 2.50 crores Shri R.P. Mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Co. Ltd. Accordingly, the learned counsel submitted that his statement cannot be utilised in making addition in the hands of the assessee. Coming further, the learned counsel submitted that the Tribunal has clearly directed the AO to allow the appellant proper opportunity to cross-examination of the persons, whose statements were to be utilised. This part of the order of the Tribunal has not been complied with at all. The learned counsel submitted that various judicial authorities have held that if any authority is relying on the testimony of witness, the assessee is required to be afforded an opportunity to cross-examine him failing which the testimony cannot be utilised against the assessee. The learned counsel referred to the following two decisions : (i) CIT vs. Eastern Commercial Enterprises (1995) 123 CTR (Cal) 217 : (1994) 210 ITR 103 (Cal) at p. 111 (ii) P.S. Abdul Majeed vs. Agrl. ITO Ors. (1994) 120 CTR (Ker) 10 : (1994) 209 ITR 821 (Ker) at pp. 823-824. The learned counsel further referred to following decisions, where it has been held that any material collected by the AO behind the back of the assessee cannot be utilised against him unless the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove, the learned counsel submitted that there are no proper evidence regarding the receipt of money and the consideration by the assessee from different sale promoters of Shaw Wallace Co. Ltd. Hence, addition is not proper. 11. The learned counsel also argued the case from a different angle, i.e., from the angle of the provisions of the IT Act enabling the AO to treat any amount as income of the assessee. The learned counsel referred to the provisions of s. 2(24) which defines "income". It is submitted that s. 2(24) enumerates different types of income. Sec. 2(45) was also referred to by the learned counsel, which says that "total income" means the total amount of income referred to in s. 5 and computed in the manner laid down in the Act. He also referred to s. 4 of IT Act, which lays down the charging provisions and s. 5 provides that all the income accruing or arising to an assessee or received by him shall form the "total income" for the purpose of income-tax assessment. It is submitted by the learned counsel that in the present case, there is no undisclosed income falling within the scope of and ambit of these directions which can be subjected to tax. 12. The learned co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Enforcement Directorate was even moving on the assumption that this amount was being sent back to Dubai (on Shri M.R. Chhabria's account) through hawala method. The learned counsel submitted that so far as the assessee is concerned, he was never having any substantial shareholding in any of the companies belonging to the Shaw Wallace group. The learned counsel submitted that the Department had accepted that he was not even a salaried person of the group. Of course, being a close relative of Shri M.R. Chhabria, he might have enjoyed the confidence of Shri M.R. Chhabria and, therefore, in all likelihood, he might have acted merely as a conduit. 14. Lastly, it was contended by the learned counsel that the same amount has already been held as undisclosed income of M/s Shaw Wallace Co. Ltd. The learned counsel referred to the arguments of the AO in this connection to the effect that the addition was made in the case of Shaw Wallace Co. on the ground of bogus expenditure having been claimed in its account and submitted that the main ground for holding the expenditure to be bogus is that of money covered by the expenditure was routed back to the company, through plain clandesti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. Considering the submission of the learned Departmental Representative, in the light of above observation we do not find it a fit case to set aside once again. Therefore, this request of the learned Departmental Representative is not acceded to. 16. Coming to the decision of the Hon'ble Bombay High Court relied on by the learned Departmental Representative in the case of Bharat Kumar Modi, we have carefully considered the decision. The facts of the case of the assessee are totally different from the facts of the case of Bharat Kumar Modi. In that case the bare facts were that on appeal by the assessee, the learned CIT(A) had set aside the order and aggrieved by that order, the assessee filed appeal before Tribunal. The Hon'ble Tribunal has annulled the assessment order. On these facts, the Hon'ble High Court reversed the order of the Tribunal. As against this, the present case was already set aside by the Tribunal with clear, certain and definite directions which have not been complied with and, therefore, request for setting side of the case for a second time is considered not acceptable. 17. Coming to the merit, the learned Departmental Representative extensively refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal order of the AO "4.1 The AO discussed the issues in detail while framing the block assessment order dt. 26th Sept., 1997. A gist of discussion made by AO while making addition is mentioned below: (i) Searches were conducted by IT Department and Enforcement Directorate on Shaw Wallace Group on the allegation that they were siphoning out funds by inflation of sales promotion expenses. (ii) Shaw Wallace was paying Rs. 50 per case to sales promoters namely Shiva Marketing Ltd. and Balaji Marketing Company. The evidences were found that the payment was made for sales promotion activities carried out by these entities but no such activities were actually carried out by them. These were admitted by Shri A. Sadashivam, Vice President, Finance, of Shaw Wallace Group. (iii) Shri Govindram Babani, Prop. of Balaji Marketing Co. stated on oath before Enforcement Directorate that he had received about Rs. 2.13 crores from Shaw Wallace Co. and out of which a sum of Rs. 1.96 crores have been returned in cash to Shri Niranjan Thakur under the advice and instruction of Shri A. Sadashivam. (iv) Shri Rajesh Lihala of Shiva Marketing Ltd. also accepted having paid the cash to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Balaji Marketing Co. 1.96 Shiva Marketing Ltd. 3.23 Geekay Sales (P) Ltd. 2.50 Priyajee Distributors 2.50 Other receipts (as per Enforcement Directorate) 3.73 R.R. Modi 20.00 Receipts as per documents seized (excluding receipts from Geekay Sales Priyajee Distributors) 9.23 43.15" Relevant portion of the order of the Tribunal setting aside the order "21. We are of the view that we have to set aside the assessment on the issue of the addition of Rs. 43.15 crores and restore the matter to the file of the AO for further enquiry. The Department has firstly to make up its mind as to in whose hands, the amount of Rs. 43.15 crores can be brought to tax. If the assessee is only a conduit for passing the money of Shri M.R. Chhabria, it cannot be assessed as his income even if it is initially received by him. If on the other hand, the case of the Department is that the assessee was in beneficial enjoyment of the funds received by him, it has to make a case to that effect. As already mentioned, the assessee had denied even the initial receipt of money let alone its beneficial enjoym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r has simply stated that "the Department's stand in this case is clear from the first hearing that the addition in the case of the assessee is being made on account of sale of unaccounted money based on statement of various persons. Thus, there should not be any confusion over the stand of the Department and the treatment given in Shaw Wallace's assessment is also not relevant in deciding the issue here". This plea of the AO has already been considered by the Tribunal and only after considering this type of submission, the Tribunal has come to a conclusion that it has to be assessed either in the hands of the assessee or in the hands of the company and, therefore, the direction was given by Tribunal that Department has to make up its mind in which hand, this amount has to be brought to tax. Thus, the very first direction of the Tribunal has not been complied with. 21. Coming to second direction of the Tribunal, simple answer is that AO has not treated the assessee as a conduit for passing on money to Shri M.R. Chhabria. No reason has been assigned to come to this conclusion, whereas we find from the facts of the case that the AO has clearly referred to the admission of Shri Sada ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by him, then the Department has to make out a case. Here again, we find that the AO has failed miserably to prove that the assessee was in beneficial enjoyment of such a huge fund of Rs. 43.15 crores. The search result does not support the case that the assessee was in beneficial enjoyment of the funds. In our considered view, the weight of entire evidences available on the record is much heavier against the company, M/s Shaw Wallace Co. Ltd. than the assessee. 24. Coming to the fourth direction of the Tribunal that the AO has to furnish copy of the statement, we find that this direction has also not been fully complied with. The AO has, of course, supplied some of the statements of some of the parties and the major addition of Rs. 20 crores was made on the basis of a statement of Shri R.R. Modi and his statement was not supplied by the AO to the assessee. In this regard, the AO has simply stated in his order "as regards statement of Shri R.R. Modi, the assessee, was asked to obtain the same through Shaw Wallace, Calcutta where the statement is recorded".It looks very strange that the AO should depend on the assessee to procure the evidence which has been or which has to be ut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the assessee and sufficient opportunity should be allowed to the assessee to cross-examination if he so desires. Thus, these clear, certain and definite directions of the Tribunal have not been complied with by the AO while doing reassessment consequent to setting aside the original order. Therefore, we are unable to uphold the decision by the AO. 27. There is also lot of force in the argument of the learned counsel that it would be difficult in the present case to invoke the charging provisions of s. 5 and provisions of s. 4 of the IT Act and also the deeming provisions contained in ss. 68, 69A, 69B, 69C. 28. After analysing the entire facts on record including the order in the case of the company, M/s Shaw Wallace Co. Ltd., we find that both the income-tax and the Enforcement Directorate admit that the money generated was actually routed back to the authorities of the said company through Shri M.R. Chhabria, and that the appellant was merely a conduit in such process. The entire search operations were initiated by the Department on the basis of suspicion or information that M/s Shaw Wallace Co. had fixed some sale promoters like Shiva Marketing Co. and Balaji Trading ..... X X X X Extracts X X X X X X X X Extracts X X X X
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