2025 (2) TMI 119 - AT - Income Tax

Addition u/s 68 - unexplained cash deposits in the bank accounts of several companies controlled by the assessee - double additions in the hands of the assessee and the respective companies - HELD THAT - Hon ble Supreme Court held in the case of Laxmipat Singhania 1968 (8) TMI 8 - SUPREME COURT that it is fundamental rule of law of taxation that unless otherwise expressly provided income cannot be taxed twice - No addition can be made in the hands of assessee as there is no any applicability of sec. 68 of the Act in his case because u/s 68 it must be proved that when any sum is found credited in the books of assessee maintained for any previous year but here no any sum found to be credited in the books of assessee so assessee / appellant not supposed to offer any explanation regarding nature and source thereof. CIT(A) rightly held that an addition deserves to be deleted as same has been added back in the case of Friends Telecom Pvt. Ltd. Modular International Pvt. Ltd. and M/s Gracious Overseas Pvt. Ltd. and double addition is not permissible in law. As established legal position that there has to be credit of amounts in the books maintained by assessee. Decided in favour of assessee.

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment were:

1. Whether the initiation of assessment proceedings and the issuance/service of notices were in accordance with the law, impacting the validity of the assessment order.

2. Whether the assessment order was passed without jurisdiction and barred by limitation.

3. The validity of the additions made under Section 68 of the Income Tax Act, 1961, regarding unexplained cash deposits in various companies' bank accounts.

4. Whether the additions made by the Assessing Officer were contrary to CBDT instructions and Section 153D of the Income Tax Act, 1961.

5. The legality of potential double additions in the hands of the assessee and the respective companies.

ISSUE-WISE DETAILED ANALYSIS

1. Validity of Assessment Proceedings and Notices

The assessee challenged the initiation of assessment proceedings and the issuance of notices, arguing they were not in accordance with the law. The legal framework involved Sections 153A and 143(2) of the Income Tax Act, which govern the issuance of notices post-search and seizure operations. The Court examined whether the notices were duly served and whether the proceedings were initiated within the statutory time limits. The Tribunal found that the notices were issued and served as per legal requirements, and the proceedings were initiated within the permissible timeframe.

2. Jurisdiction and Limitation of the Assessment Order

The assessee claimed that the assessment order was passed without jurisdiction and was time-barred. The Tribunal analyzed the jurisdictional transfer order and the timelines for assessment completion. It concluded that the jurisdiction was correctly transferred, and the assessment order was passed within the statutory period, thereby rejecting the assessee's claim.

3. Additions under Section 68 of the Income Tax Act

The primary issue was the addition of Rs. 119,28,87,000/- under Section 68, attributed to unexplained cash deposits in the bank accounts of several companies allegedly controlled by the assessee. The Tribunal considered the legal framework of Section 68, which requires any sum credited in the books of an assessee to be explained satisfactorily. The Tribunal found that the cash deposits were in the bank accounts of separate legal entities (the companies), and not directly in the books of the assessee, Ashish Garg.

The Tribunal referred to precedents, including the Supreme Court's ruling in CIT v. P. Mohankala, which emphasized that Section 68 applies to credits in the assessee's own books. It also cited the Punjab and Haryana High Court's decision in Smt. Shanta Devi v. CIT, which clarified that Section 68 applies to the books of the assessee and not any other entity. Thus, the Tribunal held that the additions could not be sustained in the hands of Ashish Garg as the deposits were not in his personal accounts.

4. Double Additions and CBDT Instructions

The Tribunal addressed the issue of potential double additions, as the amounts were already assessed in the hands of the respective companies. The CIT(A) had deleted the additions in the assessee's case to prevent double taxation, which is impermissible under law. The Tribunal upheld this decision, emphasizing that taxing the same income twice is against the principles of taxation.

The Tribunal also considered whether the additions were contrary to CBDT instructions and Section 153D. It found no specific contravention of CBDT instructions or Section 153D in the assessment process.

SIGNIFICANT HOLDINGS

The Tribunal's significant holdings included:

- The initiation of assessment proceedings and the issuance of notices were in accordance with the law.

- The assessment order was neither without jurisdiction nor barred by limitation.

- Additions under Section 68 could not be made in the hands of Ashish Garg, as the cash deposits were in the bank accounts of separate companies, not in his personal accounts.

- Double additions are impermissible, and the Tribunal upheld the CIT(A)'s decision to delete additions already assessed in the companies' cases.

- The Tribunal dismissed the Revenue's appeal, affirming that the CIT(A) correctly applied the law and facts.

In conclusion, the Tribunal allowed the assessee's appeal, deleting the additions made under Section 68, and dismissed the Revenue's appeal, thereby preventing double taxation of the same income. The Tribunal reinforced the principle that Section 68 applies only to credits in the books of the assessee, not other entities. The judgment emphasizes the importance of adhering to statutory provisions and judicial precedents in tax assessments.

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