2013 (4) TMI 41 - AT - Income Tax

Addition on account of construction activities, account of Misc. Receipts , unaccounted cash receipts, unexplained investment in vehicles,cash found and seized in various premises during the course of search, income of six entities taxed substantively in the hands of the assessee - Search conducted at the premises of Patel group (AOP) - It was the contention of the assessee that, since the income added by the AO in the assessment year 1987-88 was due to the construction of projects either on the basis of disclosure of the assessee or on the basis of accretion of wealth for the period 1980- 81 to 1986-87, this amount cannot be added once again in the assessment year 1987-88 - Held that - The contention of the assessee is quite reasonable. If the amount of Rs.1,42,01,312/- forms part of the disclosure of Rs. 4.5 Crores for the period 1980-81 to 1986-87 based on the principle of accretions of wealth then unless there is a fresh accretion of wealth, during the assessment year 1987-88 the same amount cannot be once again added to the income of the assessee in the assessment year 1987-88, which will amount to double taxation. However this aspect requires verification at the AO s level based on the materials on record with the Revenue in hand and therefore remit back the matter for such limited purpose. No income shall be taxed in the hands of the assessee twice without the operation of law and if such circumstance prevails it will lead to miscarriage of justice. Assessee s claim to allow credit of the taxes paid in whose income were clubbed in the assessee rejected - Held that - Assessment in the hands of the AOP is a substituted assessment for all the group entities. In this circumstance, the assessment of all group entities will not survive and obviously taxes if any paid by those entities for the years under appeal has to be given credit while computing the tax liability of the assessee AOP. The learned AO is directed to pass such necessary orders for giving tax credit to the assessee subject to verification and in accordance with law. Inclusion of proportionate income assessed for the AYs 1987-88 and 1988-89 in spite of specific direction of the CIT(A) which was not reversed by the Tribunal - Held that - As the additions made for the assessment year 1987-88 and 1988-89 by invoking the provisions of section 150 of the Act this ground raised by the assessee has become redundant.

Summary

Issues Involved:
1. Refusal to rectify the order while giving effect to the Tribunal's order dated 31.8.2004.
2. Non-adjudication of the assessee's claim to allow credit of the taxes paid in whose income were clubbed in the hands of the assessee.
3. Non-exclusion of the proportionate income also assessed for the AYs 1987-88 and 1988-89 despite specific direction of the CIT (A).

Detailed Analysis:

Issue 1: Refusal to Rectify the Order
The appellant argued that the CIT (A) erred in confirming the AO's refusal to rectify the order while giving effect to the Tribunal's order dated 31.8.2004. The Tribunal's order had directed the assessment to be completed on the basis of the assessee's disclosure of Rs.4.5 crores, derived from the accretion of wealth from 1-4-1979 to 31-3-1986. The AO, while giving effect to this order, revised the total income year-wise and recalculated the tax payable by the assessee. However, the AO did not extend this to AYs 1987-88 and 1988-89, leading to the appellant's grievance.

The Tribunal observed that the AO's interpretation was harsh and not judicious. It was noted that the assessments for AYs 1980-81 to 1988-89 should be completed based on the Rs.4.5 crores disclosure, not just for AYs 1980-81 to 1986-87. The Tribunal directed the AO to verify if the income added for AYs 1987-88 and 1988-89 was part of the Rs.4.5 crores disclosed for the earlier period. If so, this would prevent double taxation.

Issue 2: Non-adjudication of Tax Credit
The appellant claimed that the CIT (A) failed to adjudicate the claim for credit of taxes paid by entities whose income was clubbed with the assessee. The Tribunal agreed that the assessment in the hands of the AOP was a substituted assessment for all group entities. Therefore, taxes paid by these entities should be credited while computing the tax liability of the assessee AOP. The AO was directed to pass necessary orders to give this tax credit, subject to verification and in accordance with the law.

Issue 3: Non-exclusion of Proportionate Income
The appellant contended that the CIT (A) erred in not excluding the proportionate income assessed for AYs 1987-88 and 1988-89, despite specific directions from the CIT (A) that were not reversed by the Tribunal. The Tribunal noted that since directions were given to consider the additions for AYs 1987-88 and 1988-89, invoking the provisions of section 150 of the Act, this ground became redundant. Therefore, this ground was dismissed.

Conclusion:
The appeals were treated as allowed for statistical purposes. The Tribunal provided specific directions for the AO to verify and rectify the assessments to prevent double taxation and ensure that tax credits were appropriately given. The Tribunal emphasized that no income should be taxed twice, as it would lead to a miscarriage of justice.