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2022 (3) TMI 161 - HC - Income TaxValidity of order passed u/s 144A - Power of Joint Commissioner to issue directions in certain cases - whether the first respondent was bound to necessarily give direction to the second respondent under Section 144A - addition u/s 69 - cash recovered from the premises of Mr.Damodaran and Mrs.Vimala treated as undisclosed income of the petitioner - HELD THAT - As ₹ 11.49 crores in cash was recovered on 01.04.2019 from the house of Mr.Damodaran and Mrs.Vimala Damodaran in packet with markings such as Alangayam, aPallikonda etc. with the marking of the Municipal Wards, falling under the Vellore Parliamentary Constituency from where the petitioner was contesting. The brother of Mrs.Vimala Damodaran namely, Mr.S.Srinivasan came forward and gave a voluntary statement dated 01.04.2019 and stated that the cash belonged to him for distribution to the Voters in the Vellore Parliamentary constituency to secure victory of the petitioner in the parliamentary election and that the amount was earned by him in his real estate business suggesting corrupt practice in the parliamentary election either by the petitioner or his party. The record indicate that Mr.S.Srinivasan has no documents to substantiate that he was a man of sufficient means and that the money was either earned by him from his real estate business or was given to him by the party sponsoring the petitioner to contest the election and that the former had given cash to him to corrupt the voters and indulge in corrupt electoral practice. The presumption under Section 132(4A)(i) and Section 292C of the IT Act, 1961 that the books of account, the documents, money, bullion or other valuable article or thing are or is found in the possession or control any person is a rebuttable presumption. Such a presumption under Section 132 (4A)(i) and Section 292C of the IT Act, 1961 can be drawn against Mr.Damodaran and Mrs.Vimala Damodaran from whose premises seizure of the cash was effected. Since preponderance of probability indicate that the seized cash was an undisclosed income of the petitioner and was kept at the residence of Mr.Damodaran and Mrs.Vimala Damodaran by the petitioner. These facts suggest that Mr.S.Srinivasan, Mr.Damodaran and Mrs.Vimala Damodaran are trusted person of the petitioner. Merely, because Mr.S.Srinivasan came forward and gave a sworn statement claiming ownership over seized money does not mean that the liability which can be fastened on the petitioner under the IT Act, 1961 can to be shifted on Mr.S.Srinivasan. Merely, because Mr.S.Srinivasan has filed application to settle case before the the Settlement Commission, by declaring the seized cash to his cash is of no relevance. The subsequent engineering of an application of settling the dispute before the settlement commission by Mr.S.Srinivasan appears to be a mere ploy, ruse to divert attention. It was filed to detract the assessment proceedings. The application under Section 144A of the IT Act itself appears to be an afterthought. Instead of giving attention to the show cause notice and participating in the adjudication, the petitioner appears to have been illadvised to venture out in filing the above application. Cash was not found under the control and the possession of the said Mr.S.Srinivasan. It was found in the residence of Mr.Damodaran and Mrs.Vimala Damodaran with packet markings as Alangayam, Pallikonda etc. with the marking of the Municipal Wards, falling under the Vellore Parliamentary Constituency from where the petitioner was contesting. The presumption under Sections 132(4A) and 292C of the IT Act though a rebuttable presumption, is to be presumed against the petitioner. Mere voluntary sworn statement on the same day by Mr.S.Srinivasan claiming that the seized cash were his, is not sufficient. Mr.S.Srinivasan has not shown himself to be a man of substantial means. On the other hand, the fact that the documents pertaining to the College/Trust of the Petitioner were found along with the seized cash as indicated above show that cash belonged to the petitioner which was not disclosed by the petitioner in his regular return. The power under Section 144A of the IT Act is to be exercised when such an Officer deems it expedient so to enable the assessing officer to complete assessment. In this case, the rejection was based on the report of the jurisdiction assessing officer which is quite damaging. Therefore, I do not find any reasons to interfere with the order rejecting the request of the petitioner under Section 144A of the IT Act as non speaking or suffering from non application of mind. Instead of defending himself in the Show Cause Notice proceedings, the petitioner attempted to divert the attention to prolong the longevity of the litigation both before the respondents and now before this Court. It was unwarranted. Considering the fact that the petitioner has enjoyed a temporary repreive during the pendency of these writ petitions, the recovery proceedings shall be kept in abeyance for a period of 60 days from the date of receipt of a copy of this order, provided the petitioner files such statutory appeal against the impugned assessment order dated 27.09.2021, within the time stipulated herein and an application under Section 220(6) of the Income Tax Act, 1961 before the second respondent herein. The second respondent shall endeavour to dispose the same preferably within 60 days from the date of receipt of a copy of this order.
Issues Involved:
1. Legality of the order dated 25.09.2021 under Section 144A of the Income Tax Act, 1961. 2. Legality of the consequential Assessment Order dated 27.09.2021 under Section 153A of the Income Tax Act, 1961. 3. Presumption of ownership of seized cash under Section 132(4A) and Section 292C of the Income Tax Act, 1961. 4. Double taxation concern. 5. Adequacy of evidence to rebut the presumption of ownership. 6. Availability of alternate remedies. Issue-wise Detailed Analysis: 1. Legality of the Order Dated 25.09.2021 under Section 144A of the Income Tax Act, 1961: The petitioner challenged the order issued by the Additional Commissioner of Income Tax under Section 144A, claiming it was disposed of without proper discussion and independent application of mind. The petitioner argued that the order merely accepted the views of the Investigating Officer without considering the detailed submissions and material evidence provided. The court noted that the first respondent directed the second respondent to complete the assessment in accordance with the law, which is within the scope of Section 144A. The court found no merit in the argument that the order suffered from non-application of mind, as the direction was based on the objective material available and the subjective satisfaction of the officer. 2. Legality of the Consequential Assessment Order Dated 27.09.2021 under Section 153A of the Income Tax Act, 1961: The petitioner also challenged the assessment order, arguing that it was a fait accompli resulting from the flawed order under Section 144A. The court examined the assessment order and found it to be well-reasoned, addressing the objections raised by the petitioner and providing a detailed explanation for the conclusions drawn. The court upheld the assessment order, noting that the petitioner had an alternate remedy by way of appeal before the Appellate Commissioner under Section 246A of the Income Tax Act. 3. Presumption of Ownership of Seized Cash under Section 132(4A) and Section 292C of the Income Tax Act, 1961: The petitioner contended that the cash seized from the residence of Mr. Damodaran and Mrs. Vimala Damodaran did not belong to him and that the presumption under Section 132(4A) and Section 292C could not be applied against him. The court noted that the presumption is rebuttable and can be applied against the persons from whose premises the cash was seized. The court found that the petitioner failed to provide adequate evidence to rebut the presumption and that the evidence gathered during the investigation overwhelmingly indicated that the cash belonged to the petitioner. 4. Double Taxation Concern: The petitioner argued that the impugned proceedings resulted in double taxation, as the same income was being taxed in the hands of Mr. S. Srinivasan, who claimed ownership of the money. The court dismissed this argument, noting that the presumption under the Income Tax Act was against the petitioner and that Mr. Srinivasan's claim did not satisfy the test of preponderance of probability. 5. Adequacy of Evidence to Rebut the Presumption of Ownership: The court found that Mr. Srinivasan's voluntary statement claiming ownership of the cash did not provide sufficient evidence to rebut the presumption. The court highlighted that Mr. Srinivasan did not have the means to own such a large amount of cash and had not filed any income tax returns to substantiate his claim. The court concluded that the preponderance of probability indicated that the cash belonged to the petitioner. 6. Availability of Alternate Remedies: The court emphasized that the petitioner had an alternate remedy by way of appeal against the assessment order under Section 246A of the Income Tax Act. The court provided the petitioner with the liberty to file a statutory appeal before the Appellate Commissioner within 30 days and directed that the recovery proceedings be kept in abeyance for 60 days, provided the petitioner filed the appeal within the stipulated time. Conclusion: The court dismissed both writ petitions (W.P.No.21027 of 2021 and W.P.No.21854 of 2021), upholding the orders under Sections 144A and 153A of the Income Tax Act, 1961. The court granted the petitioner the liberty to file a statutory appeal and directed the Appellate Commissioner to pass orders on merits without being influenced by the observations in the judgment. The court also provided temporary relief by keeping the recovery proceedings in abeyance for 60 days.
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