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TMI Blog2012 (9) TMI 484X X X X Extracts X X X X X X X X Extracts X X X X ..... found depicting serious defects in the books of accounts. Shri Ravindra Kumar Agrawal-the Director of the company had created large number of fictitious concerns, which were not doing any business. In the circumstances the AO completed the assessment on protective basis - As the Director of the company appeared and filed reply to the notice and clearly stated before the AO that his company was assessed to tax with Company Circle-1 (2) at Agra. The petitioner thus acquiesced to the jurisdiction which the AO at Agra already possessed and allowed him to complete the assessment proceedings for the assessment year 2001-02 in the circumstances no error in exercise of jurisdiction by the Asstt. Commissioner of Income Tax, Circle-IV (1) Agra is found - against assessee. - Civil Misc. Writ Petition Nos. 719 & 1490 of 2005 - - - Dated:- 13-9-2012 - Sunil Ambwani and Aditya Nath Mittal, JJ. JUDGMENT 1. The petitioner is a private limited company incorporated on 25.9.1995 in the State of U.P. under the Companies Act, 1956. The company was initially incorporated in the name of 'Cosmos Financial Services Private Limited'. The name of the company was changed as 'Aayushi Stock Broke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le in as much as entire proceedings of assessment by the Asstt. Commissioner, Income Tax-4 (1), Agra are without jurisdiction. The petitioner company has its registered office and the principal place of business at Delhi. The company was assessed at Delhi throughout, after the year 2002-03. The concerned income tax authority at Delhi alone has jurisdiction for making assessments. The petitioner raised objections regarding the jurisdiction, which was not decided and thereafter made request to transfer his case files to Delhi, on which no orders were passed. The respondent no.1 was under duty to decide the issue of jurisdiction under Section 124 of the Act. The petitioner had participated in the proceedings and objected to the jurisdiction. During the pendency of the proceedings the income tax return of the petitioner was transferred from Delhi to Agra in an illegal manner, without applying the mandatory provisions of Section 127 of the Act and following the principles of natural justice. 6. In the alternative Shri R.P. Agrawal submits that once the books of accounts were rejected, it was incumbent upon the Assessing Officer to make the best judgment assessment only in the manner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return was transferred from Delhi to Agra. 9. In a survey under Section 133A conducted on 24.4.2001 it was found that Shri Ravindra Kumar Agrawal, the Director of the assessee company is the main person, looking after and having control over all the affairs of the company. A large number of pay-in-slips, in proof of deposits of cheques/cash in different accounts, draft purchase vouchers and large number of blank cheques and cheque books, signed by the issuers were found. A large number of concerns/companies were created and their accounts were opened with the active assistance of Shri Ravindra Kumar Agrawal, who is directly and closely associated with all these concerned, and he is having control over all the concerns and accounts. The notices under Section 143(2) and 142(1) along with questionires dated 27.11.2003 and 19.10.2004 were sent to the assessee calling for details. During the course of assessment proceedings information was called from Shri Ravindra Kumar Agrawal, the Director of the assessee company. He attended the proceedings and filed some details. He did not file complete details/information regarding the shares of various companies like GKCL and Suma Finance Gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounted cash deposits made in some other accounts by the same set of persons. ( c ) Such circular transactions are done to make the transaction appear genuine and so as to make the enquiries, in normal course, an extremely complicated exercise. ( d ) Such persons also provide the beneficiaries with supporting documents like gift affidavits, confirmations, bogus contract notes etc., to make the transaction appear genuine. Some of such concerns are also acting as share stock brokers but in such disguise, they are basically carrying out the activities of Money laundering and all such evidences are fabricated and arranged and all such transactions are sham. ( ii ) That though the assessee is claiming to be doing business of share broker, but in fact it was not doing business of share broker rather in the garb of share broker business, it was utilized as a tool of Shri RK Agarwal for providing entries of Long term capital gain and short term capital gains, loans share application money to the needy persons and for the purpose of providing entries Shri RK Agarwal had created various concerns/companies and opened various account in the name of such concerns/companies, in the name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessment in respect of additions on account of entry charges of Rs. 72,08,504/-, on account of entry charges receivable from Shri Ashok Gupta amounting to Rs. 10,96,901/-, on account of unexplained liability of Rs. 2,03,39,485/- shown in the name of customers and on account of unexplained cash deposits from customers amounting to Rs. 19,53,695/- will be made in the hands of Shri RK Agarwal on substantive basis and in the hands of assessee company on protective basis. Besides, since it has also been held that the assessee has merely provided entries of LTCG/Short term capital gains, Investment in shares, loans etc. after receiving cash from the clients, so the assessment in respect of amount of Rs. 26,35,20,792/- being the amount of entries given to different persons will be made in the hands of Shri RK Agarwal on protective basis and in the hands of beneficiaries who had taken entries from the assessee, assessment will be made on substantive basis in respect of amount of entries taken by each such beneficiary." 11. Shri R.P. Agrawal has relied upon Devi Das v. Union of India, 1993 (200) ITR 701 (Bom.) to submit that ITO, Agra exceeded jurisdiction to make reassessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse of investigation and enquiries. It was found that there were serious defects in the books of accounts. The Director Shri Ravindra Kumar Agrawal had created large number of fictitious concerns, which were not doing any business. Most of the concerns were in the name of dummy persons of which Shri Ravindra Kumar Agrawal, the Director is the main/real beneficiary. The assessing authority, thus, completed the assessment of the firms on protective basis. 13. Shri Ashok Kumar submits that the petitioner has alternative remedy of filing appeal under Section 246A of the Act before the Commissioner of Income Tax (Appeals), Agra. Since there are no transfer orders under Section 127 of the Act and the petitioner could not have unilaterally changed the place and jurisdiction of filing returns at Delhi. The company itself had applied by filing application for obtaining PAN number at Agra and was given PAN No.AADCA0925F issued by the Income Tax Department at Agra on 11.6.2001. In the bank accounts opened by the petitioner companies at Delhi the address was given that of Agra office. At the time of survey all the relevant books of accounts were found at Agra. 14. Shri Ashok Kumar subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate particulars of income in respect of above amount of income without any reasonable cause and therefore, provision of section 271(1)(c) read with Explanation 1 are clearly attracted in this case. However, it is hereby clarified that since the assessment in the case of the assessee has been made on protective basis, the penalty u/s 271(1)(c) is also being imposed on protective basis with a view to safeguard the interest of revenue. Minimum and maximum penalty works out to Rs. 10,50,00,620/- and Rs. 31,50,01,860/- respectively. Taking a fair and reasonable view, a penalty of Rs. 10,50,00,620/- is hereby imposed on the assessee on protective basis. Notice of demand and challan are enclosed herewith. This order is being passed with prior approval of the Addl. Commissioner of Income-tax, Range-4, Agra. (Sampoornanand) Asstt. Commissioner of Incometax-4 (1), Agra" 17. Section 124 provides for jurisdiction of Assessing Officer. Sub-section (1) applies where an AO has been directed to perform his functions in respect of specified areas under Section 120 (1) or (2) of the Act. When a question arise as to whether the Assessing Officer has jurisdiction to assess any person, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it would be open to the AO having jurisdiction over the branch office to assess income received by the branch office subject to the rule that two assessments cannot be made at different places upon the same person in respect of the same income. 20. The A.O. having jurisdiction at the assessee's principle place of business, would have the power to call for return of the assessee's total income, which includes income of all the branches of the business. He may call for the records pertaining to any branch office even if independent enquiries have been made and the accounts have been examined by the A.O. having jurisdiction at the branch office. It is open to the A.O. having jurisdiction at the branch office to frame an estimate of the profits of that branch and to send that estimate to the A.O. at the tax payer's principal place of business. The effect of sub-section (1) and (5) of Section 124, read together is that where two or more A.O. have territorial jurisdiction in respect of same income, they exercise concurrent jurisdiction in the matter of issuing notice to the assessee and where notices have been issued by any one officer, it is unnecessary for the other office to issu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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