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Bombay High Court Directs JAO to Clarify Reason for Notification under Section 148A(b)

Bombay High Court Directs JAO to Clarify Reason for Notification under Section 148A(b)

Fact and issue of the case

After the Petition was heard for some time, Ms. Nagaraj informs the Court that her instructions are to agree to quashing of the assessment order and the matter be remanded to Jurisdictional Assessing Officer (“JAO”) to the stage of issuance of notice dated 24th May 2023 under Section 142(1) of the Income Tax Act, 1961 (“the Act”). Ms. Nagaraj also states that the JAO shall provide Petitioner within two weeks from today, the documents/specific information received to allege that Petitioner has paid cash of Rs.15,27,000/- to one Bhagwati Developers and its group. Mr. Gajra states that within two weeks of receiving those documents, he would supplement the response submitted to the notice dated 24th May 2023 issued under Section 142(1) of the Act.

Ms. Nagraj also submitted that in view of the F.No.187/3/2020-ITA-1 dated 31st March 2021, Petitioner’s transferred from the Faceless Assessment Unit to JAO. Though Gajra does not agree with Ms. Nagaraj, because according Gajra, the Notification dated 29th March 2022 which is annexed Exhibit ‘M’ to Petition shall prevail, on instructions, agrees matter could be disposed by the JAO.

Observation of the court

In view of the above, we pass the following order:

(a) The assessment order dated 29th May 2023 is quashed and set aside.

(b) Within two weeks from today, the JAO shall provide to Petitioner the specific information as well as documents forming part of the specific information relied upon to issue the notice under Section 148A(b) of the Act to Petitioner.

(c) Within two weeks of receiving the documents, Petitioner shall file a further response to the notice dated 24th May 2023 issued under Section 142(1) of the Act.

(d) Petitioner may raise all grounds that he has even to object the reopening of the assessment.

(e) Final order shall be passed after giving a personal hearing to Petitioner, notice whereof shall be communicated atleast five working days in advance.

(f) The order to be passed shall be a reasoned order dealing with all submissions of Petitioner.

(g) The JAO shall dispose the matter on or before 31st December 2023.

(h) Petition disposed. No order as to costs.

We have not made any observations on the merits of the matter.

In view of the above, all consequential proceedings including demand notice/penalty proceedings are also quashed and set aside.

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ITAT rejects Appeal, saying Limited Scrutiny was not transformed into Complete Scrutiny

ITAT rejects Appeal, saying Limited Scrutiny was not transformed into Complete Scrutiny

Fact and issue of the case

The present appeal is directed at the instance of assessee against the order of ld. Principal Commissioner of Income Tax Guwahati- 1 dated 31st March, 2021 passed for A.Y. 2015-16 under section 263 of the Income Tax Act.

The assessee has taken three grounds of appeal, but the sole grievance of the assessee is that ld. CIT has erred in assuming power under section 263 and thereby setting aside the assessment order dated 18.12.2017 passed under section 143(3) of the Income Tax Act.

Brief facts of the case are that the assessee has filed his return of income electronically on 09.10.2015 declaring total income of Rs.1,04,68,750/-. The case of the assessee was selected for limited scrutiny as discernable from the copy of notice dated 2 1.09.2016 issued under section 143(2). The issues, which have been contemplated in this notice for scrutinisation, are :-

(i) Income from heads of income other than business/profession mismatch;

(ii) Contract receipts/Fees mismatch;

(iii) Sales Turnover mismatch;

(iv) Tax Credit mismatch. The ld. Assessing Officer thereafter passed the scrutiny assessment under section 143(3) of the Income Tax Act on 18.12.2017.

The ld. Principal Commissioner perused the record and formed an opinion that assessment order is erroneous as well as prejudicial to the interest of revenue. He issued a show-cause notice and the reasons for issuance of such show-cause notice are reproduced by him on pages no. 2 & 3 of the impugned order. Apart from the various aspects, the major reason assigned by the ld. Commissioner is confined to two items, which are relevant for the purpose of this appeal:- “And whereas a sum of Rs. 1,46,628/- was debited in your P& L A/c as ‘Loss on shares’ under ‘Other Expenses’ and allowed at the time of assessment in contravention to provisions of section 71(3) of the Income Tax Act, 1961. And whereas an amount of Rs.51,750/- has been claimed as ‘Expenses on let out property’ and an amount of Rs. 79,936/- has been claimed as ‘Expenses against Rental Income’ and allowed at the time of assessment, even though such expenses were not covered under Chapter IV of the Income Tax Act, 1961.

The assessee did not respond to the notice of ld. CIT. In the absence of any explanation at the end of the assessee, the ld. Commissioner set aside the assessment order being erroneous and prejudicial to the interest of revenue and remitted them back to the ld. Assessing Officer. He set aside for fresh enquiry and passing of the fresh assessment order on these two issues.

The ld. Counsel for the assessee while impugning the order of ld. Pr. CIT contended that the case of the assessee was selected for limited scrutiny and it cannot be converted to a complete scrutiny. These items could have not been examined by the ld. CIT. he made a reference to the CBDT Circular No. 20 of 2015 dated 29.12.2015 and also put reliance upon the ITAT, Indore order dated 7th February, 2022 in the case of M/s. Sahita Construction Company –vs.- PCIT in ITA No. 119/Ind./2021. He has placed on record copies of all these documents in the paper book, which contain 12 pages.

Observation of the court

With the assistance of ld. Representatives, we have gone through the record carefully. The emphasis of ld. Counsel for the assessee is misplaced that these two items cannot be looked into by the ld. Commissioner because it is a case for limited scrutiny. It is pertinent to observe that we have take note of all the issues on which limited scrutiny was to be carried out. The first item in these issues is ‘income from heads of income other than business/profession mismatch’. The other head of income of the assessee, is ‘house property income’ and apart from the expenditure provided under Chapter (iv) of the Income Tax Act, no other expenditure could be claimed. It is patently erroneous claim at the end of the assessee, which has been accepted by the ld. Assessing Officer, therefore, this CBDT Circular is not attracted in the present case. The scrutiny of the income of the assesee is not being converted from limited scrutiny to complete scrutiny. These items duly fall within the first issue provided in the limited scrutiny itself, therefore, neither the decision of the ITAT Indore Bench applicable nor CBDT Circular. The assessee has not appeared before the ld. Commissioner or filed any explanation qua the proposed errors. Therefore, considering the stand of both the sides as well as perusal of the impugned order of the ld. Pr. Commissioner, we do not find any error in it. The appeal of the assessee is devoid of any merit and accordingly dismissed.

In the result, the appeal of the assessee is dismissed.

Order pronounced in the open Court on 09.10.2023.

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ITAT limits the amount added to cash deposits made in fictitious business activities at 0.05% of the gross total

ITAT limits the amount added to cash deposits made in fictitious business activities at 0.05% of the gross total

Fact and issue of the case

These 2 appeals filed by the assessee are directed against the different order of NFAC pertaining to assessment year 2011-12 and AY. 2012-13. Since, common issue on identical facts are involved in these two appeals, therefore, for the sake of convenience both these appeals are adjudicated together by taking ITA No. 1869/Mum/2023 as a lead case and its finding will be applied mutatis mutandis to the other appeal wherever it is applicable.

ITA No.1869/Mum/2023

Ground No.1

On the facts and circumstances of the case, the learned Commissioner of Income-tax (Appeals) -NFAC, Delhi erred in law in sustaining the addition of Rs. 765,553 made by the assessing officer (being 1% of total credit amount in the bank accounts of the appellant not operated by him) without considering the fact that the appellant had not handled the bank operations for which the addition is made and also without considering the reality, the age, background/status, circumstances and the facts of the case of the appellant and ignoring that the appellant was only handler or conduit of his employer Mr. Hitesh G Shah the operator of the accounts.

As such, your appellant pleads that any income, if any, earned from banking transactions not operated by him should not be taxed in the hands of the appellant and should be taxed only to the actual beneficiary.

Ground No. 2

On the facts and circumstances of the case, the learned Commissioner of Income-tax (Appeals) -NFAC, Delhi erred in law by upholding the decision of learned assessing officer in determining 1% as incentive / net profit of total credits in bank accounts for the accounts not operated by him and making addition to income of the appellant by Rs. 765,553/- as his income for the year under consideration without reducing salary, commission or income declared by him by whatever name called of Rs. 120,000.

Ground No. 3

On the facts and circumstances of the case, the learned Commissioner of Income-tax (Appeals) -NFAC, Delhi erred in law in not allowing any expenditure from the addition wrongly made by the assessing officer for incentive/profit of Rs. 765,553 (being 1% of total credit in bank accounts not operated by the appellant but in the name of the appellant), ignoring the fact that no income can be earned without any expenditure.

Your appellant pleads that atleast 90% of incentive estimated shall be allowed as expenditure or deduction to arrive at taxable income.

Your appellant crave leave to add, delete, substitute, withdraw or modify any of the above grounds of appeal before or at the time of hearing.”

Fact in brief is that assessing officer has received information from the ADIT (Investigation) Unit 5(3), Mumbai that assessee has credited total amount of Rs.765,55,253/- in the bank account in the name of various proprietorship concerns and assessee had also received contracts of Rs.5,75,000/- from two contract awarding parties as per ITD system. Since, assessee has not filed return of income, therefore, considering the facts, the case of the assessment was reopened by issuing of notice u/s 148 of the Act on 31.03.2016. On query, the assessee explained that assessee was acting on behalf of his employer Mr. Hitesh G. Shah, without any actual dealing in goods and services. The assessee submitted that he had neither signed any contract nor signed any bills to the parties who had made payments in the bank account for bogus contracts and sales. The assesse claimed to have one saving bank account in his name with Deva Bank Ghatkopar East Branch and all the other bank account were only operated by Shri Hitesh G. Shah. The assesse further submitted that he was employed as a dummy or a benami person by Shri Hitesh G. Shah and the bank account were though open in the name of assessee but were operated by Hitesh G. Shah. The ADIT, Mumbai had provided information about 12 bank accounts opened for proprietary concerns with Dena Bank and ICICI bank branches in Mumbai. After taking into consideration the submission of the assessee the assessing officer observed that all such transactions made through the proprietary concern of the assessee might be controlled by his employer Shri Hitesh G. Shah. However, the assessing Officer was of the view that assessee was acquainted with the business modal of his employer, therefore he made addition of Rs. 765,553/- on estimated basis as 1% of total gross sale of Rs.765,55,253/-to the total income of the assessee.

The assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee.

Heard both the sides and perused the material on record. Without reiterating the facts as elaborated supra in this order the assessing officer has held that the employer of the assessee Mr. Hitesh Shah was running several proprietary concern through the  connivance of the assesse and all the bank accounts were handled by his employer. However, because of association of the assessee with his employer in the bogus business activity the AO has estimated 1% of the total gross amount to the amount of Rs.76,553/- as incentives in hands of the assessee. During the course of appellate proceedings before us the ld. Counsel contended that assesse has already shown the impugned commission and incentives to the amount of Rs. 1,20,000/- received by the assesse from his employer for associating with his employer in his bogus business. Therefore, he submitted that further addition made on estimation basis in the hands of the assessee is not justified. After considering the above facts and findings of the assessing officer we consider it is appropriate to restrict the addition to the extent of .05% of the gross total of Rs. 76,55,523/- since, actually the business was run and controlled by the employer of the assessee and assessee had already shown the commission income received from the employer in the return filed. Therefore, both ground of appeal 1 & 2 are partly allowed. ITA No .1870/Mum/2023 Ground No. 1 & 2:

Since the facts and the issue involved in these grounds are similar to the facts and issue involved in in ground no. 1 & 2 of the appeal vide ITA No. 1869/Mum/2023 as adjudicated supra in this order, therefore, applying the finding of ITA No. 1869/Mum/2022 as mutatis mutandis the similar addition made in the hands of the assessee is restricted to 0.0 5% of the gross amount. These grounds of appeal of the assesse are also partly allowed.

Ground No. 4:

During the course of assessment the AO noticed that there was a cash deposit of Rs. 15,05,000/- made in the Kotak Mahindra Bank account and Pratap Cooperative Bank Ltd, during the year the year under consideration for two proprietary concern M/s Skand Industries and Ayushi Enterprises. The assesse explained that all these accounts were controlled and operated by his employer and he was just working as a benami person on the direction of his employer. However, assessing officer stated that since the assessee was also related to the running of these concern but not directly, therefore, he estimated 30% of the such cash deposit to the amount of 4,50,000/- in the hands of the assessee as unexplained cash credit u/s 68 of the Act.

The assesse filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee.

Observation of the court

Heard both the sides and perused the material on record. The AO accepted that assessee was not directly and fully involved in the running of two proprietary concern and the assesse was just acting as a benami person of his employer and the proprietary concern and bank accounts were controlled by his employer. Therefore, we consider because of association of the assessse in the bogus business activity of his employer addition of 15% of such cash deposit to the extent of Rs.2,25,000/- would be appropriate. Therefore, this ground of appeal of the assessee is partly allowed.

In the result, both the appeals of the assessee are partly allowed.

Order pronounced in the open court on 23.10.2023.

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Interest received under the Land Acquisition Act (Section 28) is taxable as other types of income

Interest received under the Land Acquisition Act (Section 28) is taxable as other types of income

Fact and issue of the case

This appeal of the Assessee arises out of the order of the Learned Commissioner of Income Tax (Appeals)-1, Gurgaon, [hereinafter referred to as ‘Ld. CIT(A)’] in Appeal No.156/2016-17 dated 26/04/2017 against the order passed by Income Tax Officer, Ward-1(3), Gurgaon (hereinafter referred to as the ‘Ld. AO’) u/s 143(3) of the Income Tax Act (hereinafter referred to as ‘the Act’) on 18/12/2015 for the Assessment Year 2013-14.

None appeared on behalf of the assessee right from the date of first hearing of this appeal starting from 08/02/2021 onwards. Notices has been issued by the Registry on several occasions in the address mentioned in Form No.36 and there is no response from the side of the assessee. Since, sufficient opportunities have been given to the assessee in this appeal and assessee does not seem to be bothered to prosecute this appeal, we proceed to dispose of this appeal on hearing the Ld. DR and based on materials available on record.

Though, the assessee has raised several grounds before us, the only effective issue to be decided in this appeal is as to whether the interest received by the assessee u/s 28 of Land Acquisition Act, 1894 on enhanced compensation would be brought to tax in the facts and circumstances of the case.

Observation of the court

We have heard the Ld. DR and perused the materials available on record. The assessee is an individual deriving income from interest from bank and interest income on enhanced compensation/compensation from DRO Cum LAC, Gurgaon. The return of income for AY 2013-14 was filed by the assessee on 20/08/2014 declaring total income of Rs.14,02,820/-. The Ld. AO on perusal of the bank statement and various details furnished by the assessee observed that assessee had received interest of Rs.1,40,88,470/- during the year from DRO Cum LAC, Gurgaon. The Ld. AO observed that agricultural land belonging to the assessee was acquired by the Govt. and compensation has been paid to the assessee for the same. There was some enhanced compensation also which was paid to the assessee with delay. For the said delay, the assessee was paid interest. The question before us is that whether the interest on enhanced compensation received by the assessee could be brought to tax in the hands of the assessee. The Ld. AO applied the provisions of section 56 (2) (viii), which was introduced by Finance (No.2) Act, 2009 w.e.f 01/04/2010 wherein interest received on enhanced compensation was sought to be treated as income from other sources. The AO, however, very fairly applied the provisions of section 57 (iv) also by granting adhoc deduction to the extent of 50% of income. Accordingly, the Ld. AO added 50% of interest received on enhanced compensation amounting to Rs.70,44,235/- (1,40,88,470/- x 50%) as income from other sources and completed the assessment. The Ld. CIT(A) considered the provisions of the Act ; considering the provisions of section 28 of Land Acquisition Act, 1894 and also the decision of Hon’ble Punjab & Haryana High Court which is the Jurisdictional High Court for the assessee in the case of Manjeet Singh (HUF) Karta Mangeet Singh V/s Union of India reported in 237 Taxmann 116 and held that the said interest received u/s 28 of Land Acquisition Act would be taxable as income from other sources in the hands of the assessee. The Ld. CIT(A) also observed that the Special Leave Petition filed by the assessee before the Hon’ble Supreme Court had been dismissed vide Special Leave to appeal C No.34642 of 2014 dated 18/12/2014. The Ld. CIT(A) also placed reliance on yet another Jurisdictional High Court decision in the case of Jagmal Singh and Ors. vs. State of Haryana & Anr., in CR No.7740/2012 dated 02/02/2016 and in the case of Sunderlal and Anr. vs. Union of India in CWP No.2014 of 2015 dated 21/09/2015 and confirmed the action of the Ld. AO

We find that the Ld. CIT(A) had followed the decisions of Hon’ble Jurisdictional High Court and denied the benefit to the assessee. Moreover, the provisions of the Act in terms of section 56(2)(viii) r.w.s 57(iv) of the Act are also very clear and against the assessee. Hence, we do not find any infirmity in the order passed by the Ld. CIT(A) denying relief to the assessee. Accordingly, the grounds raised by the assessee are dismissed.

In the result, the appeal of the assessee is dismissed.

Order pronounced in the open court on 20th October, 2023.

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Rule 8D prohibits disallowances under section 14A r.w. from exceeding exempt income

Rule 8D prohibits disallowances under section 14A r.w. from exceeding exempt income

Fact and issue of the case

This is an application seeking condonation of 36 days delay in re-filing the appeal. Learned counsel for the respondent-assessee has appeared on advance notice and does not oppose the application.

The application is accordingly allowed. ITA 1260/2018 This appeal by the Revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) in the case of M/s. Caraf Builders & Construction Pvt. Ltd. (‘respondent-assessee’ for short) relates to the Assessment Year 2009-10 (in short “AY“) and arises from order of the Income Tax Appellate Tribunal (in short, ‘the tribunal’) dated 27.02.201 8.

The only issue raised by the Revenue in this appeal relates to the quantum of disallowance under Section 14A of the Act. Hence, we need not refer to any other issue and aspect.

The respondent-assessee in the return for the year had declared income of Rs.6,30,950/- taxable under the head short-term capital gains earned from investment of Rs.38 crores in mutual funds units, which units were also sold/ redeemed during the year.

Respondent-assessee had invested more than Rs.820 cores in equity shares of associated companies. No dividend income was earned on the equity shares. The shares were not sold or transferred.

Observation of the court

The decision of the Delhi High Court in Holcim India Pvt. Ltd (Supra) had referred to the issue whether disallowance of expenditure under Section 14A of the Act would be made even when no exempt income in the form of dividend was earned in the year, and it was observed:

On the issue whether the respondent-assessee could have earned dividend income and even if no dividend income was earned, yet Section 14A can be invoked and disallowance of expenditure can be made, there are three decisions of the different High Courts directly on the issue and against the appellant-Revenue. No contrary decision of a High Court has been shown to us. The Punjab and Haryana High Court in Commissioner of Income Tax, Faridabad Vs. M/s. Lakhani Marketing Incl., ITA No. 970/2008, decided on 02.04.2014, made reference to two earlier decisions of the same Court in CIT Vs. Hero Cycles Limited, [2010] 323 ITR 518 and CIT Vs. Winsome Textile Industries Limited, [2009] 319 ITR 204 to hold that Section 14A cannot be invoked when no exempt income was earned. The second decision is of the Gujarat High Court in Commissioner of Income Tax-I Vs. Corrtech Energy (P.) Ltd. [2014] 223 Taxmann 130 (Guj.). The third decision is of the Allahabad High Court in Income Tax Appeal No. 88 of 2014, Commissioner of Income Tax (Ii) Kanpur, Vs. M/s. Shivam Motors (P) Ltd. decided on 05.05.2014. In the said decision it has been held: “

As regards the second question, Section 14A of the Act provides that for the purposes of computing the total income under the Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. Hence, what Section 14A provides is that if there is any income which does not form part of the income under the Act, the expenditure which is incurred for earning the income is not an allowable deduction. For the year in question, the finding of fact is that the assessee had not earned any tax free income. Hence, in the absence of any tax free income, the corresponding expenditure could not be worked out for disallowance. The view of the CIT(A), which has been affirmed by the Tribunal, hence does not give rise to any substantial question of law. Hence, the deletion of the disallowance of Rs.2,03,752/- made by the Assessing Officer was in order” .

Income exempt under Section 10 in a particular assessment year, may not have been exempt earlier and can become taxable in future years. Further, whether income earned in a subsequent year would or would not be taxable, may depend upon the nature of transaction entered into in the subsequent assessment year. For example, long term capital gain on sale of shares is presently not taxable where security transaction tax has been paid, but a private sale of shares in an off market transaction attracts capital gains tax. It is an undisputed position that respondent assessee is an investment company and had invested by purchasing a substantial number of shares and thereby securing right to management. Possibility of sale of shares by private placement etc. cannot be ruled out and is not an improbability. Dividend may or may not be declared. Dividend is declared by the company and strictly in legal sense, a shareholder has no control and cannot insist on payment of dividend. When declared, it is subjected to dividend distribution tax.”

Decision in Holcim India Pvt. Ltd (Supra) was followed and elaborated in Cheminvest Ltd. (Supra).

There is another error made by the Assessing Officer in computing the disallowance under clauses (ii) of Rule 8D (2) with reference to the formula prescribed. Numerical B in clause (ii) refers to average value of the investment, income from which does not form part or shall not form part of the total income. The Assessing Officer for numerical B in clause (ii) had taken the total value of the investment and not the investment that had yielded exempt income. The Delhi High Court in ITA No. 615/2014, ACB India Ltd. vs. Asstt. Commissioner of Income Tax decided on 24th March, 2015 has held that only average value of the entire investment that does not form part of the total income is the factor which could be covered by the numerical B for computing disallowance under clause (ii) of Rule 8D(2) of the Rules.

The appeal is accordingly dismissed without any order as to costs.

Read the full order from here

Pr.-CIT-Vs-Caraf-Builders-Constructions-Pvt.-Ltd.-Delhi-High-Court2

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The prosecution may continue even if an Income Tax adjudication action is pending

The prosecution may continue even if an Income Tax adjudication action is pending

Fact and issue of the case

This petition has been filed to quash the compliant lodged by the respondent in E.O.C.C.No.505 of 2017 on the file of the learned Additional Chief Metropolitan Magistrate (Economic offences-II), Egmore, Chennai, as against the petitioner.

The respondent lodged complaint as against the petitioner for the offences punishable under Sections 276C(1) & 277 of the Income Tax Act for the assessment year 2012-2013. The petitioner is an income tax assessee. As per Section 132 of the Income Tax Act, a search and seizure operations were conducted in Saravana Store group of cases on 18.08.2011. The residence of the petitioner was also covered in the said operation and during the search operation, gold ornaments and jewellery were found valued at Rs.47,37,496/-. Thereafter, she was issued notice under Section 153C of the Income Tax Act, for the assessment years 2006-07 to 2011-12.

In response, the petitioner had filed her return of income for the assessment year 2012-13 on 11.03.2013, admitting a total income of 24,09,170/-. During the assessment proceedings, the petitioner filed a revised memo of taxable income admitting Rs. 48,39,044/- as investment made in gold and offered the same for tax. Accordingly, under Section 143(3) of the Act, order was passed on 25.03.20 14 thereby determining the total income at Rs.72,75,218/- towards undisclosed investment. The Assessing Officer simultaneously initiated penalty proceedings and passed assessment order, thereby levying penalty of Rs. 14,51,713/- under Section 271(1)(c) of the Income Tax Act. It was challenged by the accused in ITA No.268/14-15 and the same was allowed. Aggrieved by the same, the Assessment Officer filed appeal before the Tribunal and same was allowed sustaining the order of penalty. Accordingly, the assessment order was passed levying penalty with interest. Therefore, the respondent lodged complaint.

Mr. Aravind Pandian, learned Senior Counsel appearing for the petitioner submitted that the petitioner approached this Court in T.C.A. Nos. 954 of 2018 and 82 of 2019 on the quantum of jewellery. This Court remanded the matter back to the Assessing Officer to carryout the reconciling of the quantum of jewellery of the petitioner to determine that the jewellery found during search in the year 2011, was part of the jewellery declared by the petitioner. Thereafter, by an order dated 15.11.2019, the entire penalty was deleted by allowing the reconciliation quantum of jewellery. The prosecution has been initiated as per the original order of penalty. The order passed by this Court in TCA.No.954 of 2018 & 82 of 2019 set aside the entire penalty. Therefore, the entire case of the prosecution cannot be sustained.

Observation of the court

Heard the learned counsel appearing on either side and perused the material placed before this Court.

It is seen that the Principal Commissioner of Income Tax on suomuto re-opened the proceedings by an order dated 23.02.2021, on the basis that no reconciliation was carried out. Though the said proceeding was challenged by the petitioner before this Court in W.P. No. 15854 of 2021, it was rejected by this Court. That apart, the petitioner already filed petition to discharge and the same was also dismissed by the trial Court. Now the re-assessment proceedings are pending with the Assessment Therefore, the proceedings cannot be said that it attained finality. Hence, there is no exoneration of the petitioner from all the charges. Further the quantum of jewellery found during the search was not brought in the the earlier returns filed by the petitioner. Therefore, the reconciliation of jewellery has not attained finality, in view of the pendency of the proceeding under Section 263 of the Income Tax Act.

The adjudication proceedings and the criminal prosecution are independent to each other and the pendency of any adjudication proceeding is not bar to proceed with the prosecution. The dictum lay down by the Hon’ble Supreme Court of India in the judgment reported in (2011) 3 SCC 437 in the case of Radheshyam Kejriwal Vs. State of West Bengal & anr is read as follows :-

(i) Adjudication proceeding and criminal prosecution can be launched simultaneously;

(ii) Decision in adjudication proceeding is not necessary before initiating criminal prosecution;

(iii) Adjudication proceeding and criminal proceeding are independent in nature to each other;

(iv) The finding against the person facing prosecution in the adjudication proceeding is not binding on the proceeding for criminal prosecution;

(v) Adjudication proceeding by the Enforcement Directorate is not prosecution by a competent court of law to attract the provisions of Article 20 (2) of the Constitution or Section 300 of the Code of Criminal Procedure;

(vi) The finding in the adjudication proceeding in favour of the person facing trial for identical violation will depend upon the nature of finding. If the exoneration in adjudication proceeding is on technical ground and not on merit, prosecution may continue; and

(vii) In case of exoneration, however, on merits where allegation is found to be not sustainable at all and person held innocent, criminal prosecution on the same set of facts and circumstances can not be allowed to continue underlying principle being the higher standard of proof in criminal cases.

(viii) In our opinion, therefore, the yardstick would be to judge as to whether allegation in the adjudication proceeding as well as proceeding for prosecution is identical and the exoneration of the person concerned in the adjudication proceeding is on merits.”

Therefore, this Court finds no ground to quash the proceeding and the present petition cannot be sustained and liable to be dismissed.

Accordingly, this Criminal Original Petition stands dismissed. Consequently, connected miscellaneous petition is closed.

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UK Output Grows; Inflation Stronger

UK Output Grows; Inflation Stronger

British firms reported an unexpected increase in output in November and evidence of stronger inflation, signs of strength in the economy that may concern the Bank of England. The pound rose.

S&P Globals said its purchasing managers’ index edged up to 50.1, the highest reading in four months and above the threshold level of 50 dividing growth and contraction. It was up from 48.7 in October, a figure economists had expected would be repeated. The data indicate resilience in the economy that may ward off the risk of a recession in the coming months. It also may focus attention at the central bank on the risk that the strength of demand will feed in wage-price spiral, something policy makers have worked for two years to choke off.

The pound extended gains after the release, jumping as much as 0.6% to $1.2564, the highest since Sept. 6. Gilt yields also rose with the 10-year yield up six basis points to 4.21%. Sterling is on track to post its best monthly gain against the greenback in a year, boosted by a broadly weaker dollar.

S & P’s report released on Thursday found “renewed signs of sticky inflation in November.” Cost pressures rose for the first time in four months. This was “overwhelmingly linked to higher staff costs,” the research group said. “The UK economy found its feet again,” said Tim Moore, economics director at S&P Global Market Intelligence.

“Overall input cost pressures picked up for the first time in four months. Service-sector inflation was a key area of concern as businesses once again reported the need to pass on higher staff costs to customers.” AFP

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ITAT Removes Share Capital and Premium Addition; AO Is Unable to Cite Investments Made Outside of Books

ITAT Removes Share Capital and Premium Addition; AO Is Unable to Cite Investments Made Outside of Books

Fact and issue of the case

This appeal by the revenue is preferred against the order of the CIT(A)-3, Delhi dated 05.05.20 17 pertaining to A.Y.2012-13.

The solitary grievance of the revenue is that the CIT(A) erred in deleting the addition of Rs.2,30,22,000/- made by the AO on account of unexplained share capital and share premium and 2,30,00,000/- on account of unexplained investment.

Briefly stated the facts of the case are that the assessee filed its original return of income on 22.09.2012 declaring income of  Rs.414170/- which was subsequently revised on 11.01.2013 with the same income.

The return was selected for scrutiny assessment and accordingly statutory notices were issued and served upon the assessee.

During the course of the scrutiny assessment proceedings the AO noticed that the assessee has received share premium of 2,03,40,000/-. The assessee was asked to justify the share premium received by it. In its reply the assessee claimed that issue of shares at a premium is a prerogative of the directors of the company who decide the premium and it is the wisdom of the share holder whether he want to subscribe the shares at a premium or not. The AO found that the following persons have paid share premium to the assessee :-

a) M/s Saras Developers Pvt. Ltd.

b) M/s Domain Enterprises Pvt. Ltd.

c) M/s Ram Rahim Trading Co. Pvt. Ltd.

d) M/s Raj Trading Co. Pvt. Ltd.

e) M/s Legacy Mercantile Co. Pvt.

f) M/s Kabir Enterprises Pvt. Ltd.

g) M/s Nachiketa Agrotech Pvt.

h) M/s Rockhard Infrastructures Pvt. Ltd.

i)M/s Satkar Finlease Pvt. Ltd.

Observation of the court

A careful perusal of the aforesaid findings show that the assessee has explained the investment duly reflected in its bank statement and such reflection in the bank statements have not been doubted by the AO, therefore, it cannot be said that the investments have been made outside the books of accounts. We find that the AO has not mentioned any investment which is outside the books of accounts, therefore, we do not find any reason to interfere with the findings of the CIT(A). The addition of Rs.2.30 crores also stands deleted.

In the result, the appeal of the revenue is dismissed.

Order pronounced in the open court on 08.11.2023

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ITO-Vs-Direct-Trading-Co.-P.-Ld.-ITAT-Delhi2

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Any documents discovered during a search that are in the custody of someone are assumed to belong to that person

Any documents discovered during a search that are in the custody of someone are assumed to belong to that person

Fact and issue of the case

The appeals in ITA Nos.1362, 1363 & 1367/B/13 are by the assessee against the common order dated 16.8.2013 of the CIT(Appeals)-VI, Bengaluru relating to assessment year 2004-05, 2005-06 & 2007-08.

The assessee is a partnership firm. There was a search and seizure operation carried out by the authorities u/s. 132 of the Income-tax Act, 1961 [hereinafter referred to as “the Act”] in the case of the assessee on 20.11.2009. Simultaneous search proceedings u/s. 132 of the Act were also carried out in the case of M/s. Gold Finch Hotels Group. Mr. K. Prakash Shetty [hereinafter referred to as “K.P. Shetty] was one of the partners of the assessee and was also a partner in other group entity companies. One Mr. Vijay Bhat, Manager of K.P. Shetty, was also searched on 20.11.2009. In his residential premises, a bunch of diaries were found and seized. Those were marked as A/UB/2 of the seized material. The diaries contained recording of receipts and payments from and to various persons. The transactions so recorded were mostly cash transactions, besides some cheque transactions.

In post search proceedings, Mr. Vijay Kumar, Manager of the assessee was examined. In his statement, he admitted that the writing in the diaries was written by him and one Ms. Indira, Office Assistant. The writings in the diaries were made as told by Mr. K.P. Shetty and Smt. Asha P. Shetty, another partner of the assessee and other seniors of Trishul Developers (the assessee).

Observation of the court

We have considered the above submission of the ld. counsel for the assessee and we are of the view that the same is without any merit. It is not in dispute that the assessee was subjected to a search u/s. 132 of the Act on 20.11.2009. As per the provisions of section 153A of the Act, the AO was duty bound to make an assessment for the six assessment years as referred to in section 153A of the Act. A.Ys. 2004-05, 2005-06 and 2007-08 are assessment years failing within the period contemplated u/s. 153A of the Act. The assessment to be done u/s. 153A is not dependent on any incriminating material being found during the course of search. There is no such requirement u/s. 153A. While concluding assessment u/s. 153A, the AO can take cognizance of any material relating to the assessee. As we have already seen, it is not in dispute that the diaries were written under his instructions and contains recordings of transactions. In fact, K.P. Shetty took copies of seized diary and admitted undisclosed income based on entries therein. In such circumstances, the plea taken by the assessee that the proceeding u/s. 153A are invalid and that the proper course would be to proceed u/s. 153C of the Act and therefore the impugned assessment order has to be held to invalid is a contention, which cannot be accepted and has no force or merit.

The next submission made by the ld. counsel for the assessee was that in the course of assessment proceedings, K.P. Shetty wrote a letter disowning the entries in the diary. According to the ld. counsel for assessee, in the light of this letter of assessee, the contents of the diary ought not to have been imputed to the assessee. In this regard, the ld. counsel for the assessee placed reliance on the decision of Hon’ble Supreme Court in the case of CBI v. V.C. Shukla & Ors. (1998) 3 SCC 410. In the aforesaid decision, the Hon’ble Supreme Court held that entries in the books of accounts cannot without independent evidence of their trust-worthiness, fix a liability upon a person

We have considered the above submission and are of the view that the same is without any merit. As we have already seen, in a statement K.P. Shetty recorded in the post search proceedings, K.P. Shetty clearly admitted that the entries in the seized diaries were made on his instructions. It is for him to explain the entries in the seized diaries. In fact, in respect of some of the entries in the seized diaries, the assessee declared undisclosed income for various assessment years. In these circumstances, the assessee cannot disown the entries in the diary. It is another matter, if the assessee explains the entries and establishes that the entries do not give rise to income. In the absence of such an explanation by the assessee, the entries have to be presumed as representing income. In this regard, we are also of the view that u/s. 292C of the Act, there is a presumption that the documents found in the possession or control of any person in the course of search, belongs to such person and contents of such document are true. In the light of the fact that the assessee owned the entries in the seized diary, the contents should be presumed to be true and it is for the assessee to show that all the entries in the seized diary does not represent income. The assessee having miserably failed to point out with reference to each of the entries in the seized diary as to how it does not give rise to income, the assessee cannot take a valid plea that he disowned the diary and therefore no reliance can be placed on the diary to make addition in the hands of assessee.

Another submission made by the ld. counsel for the assessee was that on the entries in the seized diary showing total receipts to the extent of Rs.56,00,51,300 and payments totaling Rs.88,24,82,425, the Revenue authorities have proceeded to tax the difference between the receipts and payments made. According to him, such a method of determination of undisclosed income was not proper. In our view, the above submission of the ld. counsel for the assessee cannot be accepted. The assessee, amongst other things, was a property developer. The payments made by the assessee are not reflected in the regular books of account. They were held to be in addition to and over and above the business transactions of the assessee. The assessee has not explained the source as to how this expenditure (payments) were made. Therefore, addition u/s. 69C of the Act is called for. As far as the receipts are concerned, the AO has taxed the excess of expenditure over the receipts. We fail to see as to how such an approach adopted by the AO can be found fault with. We do not find any merits in the aforesaid submission made by the ld. counsel for the assessee.

We find no merits in these appeals by the assessee and accordingly the same are dismissed. SPs 178 & 179/B/14 33. In view of the dismissal of the appeals, the stay petitions are also dismissed.

Pronounced in the open court on this 20th day of February, 2015.

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Trishul-Buildtech-Infrastructure-P-Ltd.-Vs-JCIT-ITAT-Bangalore2-1

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The Bombay High Court Orders Quick Action on the Development of the MSTT Website

The Bombay High Court Orders Quick Action on the Development of the MSTT Website

Fact and issue of the case

In our order dated 24th August 2023, referring to our order dated 6th June 2023, we recorded a statement of Ms. Vyas, “B” Panel Counsel for Respondent No.1/State of Maharashtra, made on instructions of the President, Incharge of the Maharashtra Sales Tax Tribunal, Mumbai (for short ‘MSTT’). A compliance report on behalf of Respondent No.4 (Maharashtra Sales Tax Tribunal, Pune) is placed on record. On perusal of the report, we observed that the National Informatics Centre (NIC) had agreed to develop the MSTT’s Website. The arrangements in that regard, as set out in the report, were also noted by us. As also further steps which would be taken by the Tribunal also came to be recorded. We also observed that the Secretary, Department of Finance, needs to consider the said report for the purpose of budgetary approval, as the issue concerned access to justice, as observed by the Court in the previous order. We, accordingly, adjourned the proceedings, directing that an affidavit be placed on record of a responsible officer from the Finance Department addressing the issues as set out in the orders passed on the present proceedings and, more particularly, in respect of compliance report dated 4th August 2023, which was taken on record.

In pursuance of our order dated 24th August 2023, on behalf of the Finance Department of the State of Maharashtra, Shri Mandar Ashok Kelkar, Deputy Secretary, Finance, has placed on record an affidavit dated 18th September 2023. In such affidavit, setting out the background, it is inter alia stated that as soon as the proposal for the development of website from the President, MSTT is received to the Finance Department it would expedite the process of approval at the earliest. The relevant contents of the said affidavit in para 3 and 4 reads thus:

I say that, vide communication dated 06.09.2023, addressed to the office of the Government Pleader, it is inter alia informed that no proposal for Financial approval related to Development of MSTT website has been received yet from the president of the MSTT to the Finance Department. As soon as the proposal is received, the Finance Department will expedite the process to get it approved at the earliest. A copy of communication dated 06.09.2023, is annexed hereto and marked as Exhibit A.

It is submitted that, as stated in the letter dated 6th September 2023, as soon as the proposal relating to development of Website for MSTT is received from the president of the MSTT to the Finance Department, it will expedite the process of approval at the earliest.”

Today, Ms. Vyas has placed on record compliance report dated 11th October 2023 as received from the President MSTT, Mumbai, which inter alia records the further development on such issues and the proposed steps, which would be taken by the MSTT for procuring technical manpower and cloud infrastructure, for creation of the website.

Observation of the court

We may also observe that several Tribunals as constituted by the Central Government are already video conferencing (VC) compliant. The State Tribunals also need to provide such facilities, as ordered by the Supreme Court, which would also be an essential facet of access to justice.

At this stage, Ms. Vyas, has submitted that the NIC is likely to take longer time. It needs to be appreciated that there is nothing so herculean and / or impossible in creation of a Website and that too with the expertise and experience of the NIC has in dealing/creating of several websites of different courts, including of the High Courts in the country. It is therefore, difficult to accept the contention of Ms. Vyas that it may not be possible for the NIC to create the MSTT website by 31st December 2023, also more particularly, when these issues are already in the pipeline for quite some time.

We, accordingly, adjourn the present proceedings at the first instance to 28th November 2023 so that the further progress on all these aspects can be informed to us by the President, MSTT as also by the State Government.

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Ascendas-IT-Park-Pune-Pvt.-Ltd.-Vs-State-of-Maharashtra-And-Ors-Bombay-High-Court-2

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