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TMI Blog2015 (7) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... the fore going paragraph. Therefore, we do not find any merit in the first fold of submission made by the ld. counsel of the assessee. On examination of the facts, we find that firstly, there is no explanation at the end of assessee, why it has not disclosed these donations in the original return(s)? There is no bona fide in the alleged explanation of the assessee that it had received the money through account payee cheque and, therefore, harbored a belief that donations are genuine. This explanation is wholly for the sake of explanation. The assessee failed to spell out specific facts and circumstances or reason which operated in the minds of its managing director, finance while preparing the return and treating these donations as genuine. Looking to the facts of these five donors, no prudentman would, however, harbor a belief that such companies can give donation. It is pertinent to note that it cannot be a co-incidence or a chance that five companies managed by a common director, having assets of less than ₹ 1 lac, not done any business but would give donations of ₹ 33 crores. These circumstances in itself suggest a well designed scheme at the behest of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee is an institute running medical health care educational centre consisting of medical college, nursing college, nursing school and school of nutrition. It is a registered charitable trust under section 12AA of the Act with effect from 1.4.2004. The registration is granted by the ld. D,I,T, (Exemption) vide order dated 25th February, 2005 whose copy has been placed on page 73 of the Paper Book Volume -1. The assessee had filed its return of income on 29.10.2007, 30th September, 2008 and 31st March, 2010 declaring a loss of ₹ 17,74,325, ₹ 12,59,29,557 and ₹ 21,99,09,834 in AYs 2007-08 to AY 2009-10 respectively. A search action under section 132 of the Act was carried out in the case of one Shri Bhaskar Ghosh on 12th July, 2010. During the search at his residence, a cash of ₹ 35,10,400 was found. When Mr. Ghosh was confronted with regard to the recovery of cash, then, in his statement recorded under section 132(4) of the Act, he disclosed that the cash belonged to the assessee/assessee s group. The search team seized a cash of ₹ 35 lacs out of the cash found at the time of search. Simultaneously a survey under section 133A of the Act was carried out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 153C of the Act. It reads as under :- AY Original return of income Return filed in response to notice u/s 153C 2007-08 (-) 17,74,325/- (-) 17,74,325/- 2008-09 (-)12,59,29,557/- (-) 15,47,21,356/- 2009-10 (-) 21,99,09,834/- Nil It also emerges out that when the limitation for making the assessments orders under 153C was expiring in the month of March, 2013, the assessee in response to certain queries of the AO came forward with another disclosure offering the donations for taxation. This letter was submitted by assessee on 2nd March 2013 whereby an enhanced amount of donation amounting to ₹ 33.21 crores for all the three years has been offered. The ld. first appellate authority has reproduced this disclosure on pages 21 to 22 of the impugned order. According to the AO, assessee had filed self-styled revised returns on 6th February, 2013 offering the donation for taxation. However, in the computation, the depreciation and business losses were set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of tax sought to be evaded by reason of the concealment of particulars of his income or fringe benefit the furnishing of inaccurate particulars of such income or fringe benefits: Explanation 1- Where in respect of any facts material to the computation of the total income of any person under this Act, (A) Such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the CIT to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bonafide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income or such person as a result thereof shall, for the purposes of Clause (c) of this subsection, be deemed to represent the income in respect of which particulars have been concealed. 5. A bare perusal of this section would reveal that for visiting any assessee with the penalty, the Assessing Officer or the Learned CIT(Appeals) during the course of any proceedings before them should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ituations then the related addition or disallowance in computing the total income of the assessee for the purpose of section 271(1)(c) would be deemed to be representing the income in respect of which inaccurate particulars have been furnished. 6. Shri Poddar has apprised us the meaning of expression concealment employed in section 271(1) . He made reference to a large number of cases, more particularly the decision of Hon ble Supreme Court in the case of Dilip N. Shroff vs. JCIT, 291 ITR 519, Ashok Pai vs. CIT 292 ITR page 11. The observation of Hon ble Supreme Court in the case of Ashok Pai read as under :- 16. In Dilip N. Shroff vs. JCIT (civil appeal arising out of SLP No.26831/2004 delivered today , this court observed :- The expression conceal is of great importance. According to Law Lexicon, the word conceal means : to hide or keep secrete. The word conceal is con+celare which implies to bide. It means to hide or withdraw from observation; to cover or keep from sight; to prevent the discovery of; to withhold knowledge of. The offence of concealment is, thus, a direct attempt to hide an item of income or a portion thereof from the k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of notice served upon him under section 153C and if it is established that the conditions enumerated under section 153C are not in existence then, the initiation of the assessment proceedings would be termed as illegal even without specifically declaring the assessment order null and void, because of assessee s non-challenging of that notice in assessment proceedings. But for the purpose of absolving the assessing from visiting the penalty, it is to be tested that penalty proceedings is being initiated from a invalid assessment proceedings. The jurisdiction in the AO would flow from service of a valid notice under section 153C. The jurisdiction in the AO cannot be infused by consent i.e., that assessee has not challenged the service of notice under section 153C in the regular assessment proceedings, therefore, assessee has given a deemed consent for taking up proceedings against him under section 153C and, therefore, assessee is precluded from raising any such plea. For buttressing his contentions on his multiple submissions, he filed six compilations of case laws, whereby he placed on record 106 decisions of the Hon ble Supreme Court, Hon ble High Courts and I.T.A.T. However, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the AO of the other person to acquire jurisdiction. Unless such jurisdictional condition is satisfied there can be no question of making assessment or reassessment of the other person. Shri Poddar in order to buttress his contention took us through the judgement of Hon ble Supreme Court in the case of Manish Maheshwari vs. ACIT 289 ITR 341, in the case of Pepsi Foods Pvt. Ltd. vs. ACIT 367 ITR 112. He also relied upon the judgment in the case of CIT vs. Calcutta Knitwears 362 ITR 673. 8. Shri Poddar, after appraising us to the mandatory conditions for initiating a valid proceedings under section 153C of the Act, contended that required facts are not available on the record which may justify the action against the assessee under section 153C of the Act. In his stride to persuade us that satisfaction note is not based on any cogent material, he drew our attention towards page 74 of the Paper Book volume-1, wherein alleged satisfaction note is available. Impugning this note he contended that the AO has made a reference to the statement of Shri Bhaskar Ghosh and Shri Uttam Chakraborty. In this so-called satisfaction note, on the basis of statement of Shri Bhaskar Ghosh, an infe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other hand contended that the AO of the searched person as well as of the assessee is a common authority. The same AO has jurisdiction over both the assessees. He has recorded the satisfaction for satisfying himself that money belonged to the assessee was found at the premises of the assessee. 12. At this stage, it is pertinent to take note of the satisfaction note recorded by the AO which reads as under :- KPC Medical College Hospital, 1F, Raja F. C . Mullick Road, Jadavpur. 10/10/2011 A search seizure operation u/s 132 of the I.T. Act, 1961 was conducted on Shri Bhaskar Ghosh on 12/07/2010. Cash ₹ 35,10,400/- was found in his residence situated at P-169, Regent Estate, 2nd Floor, Kolkata-92. In the statement under oath, Shri Bhaskar Ghosh stated that the money belonged to the KPC Group of Companies. M/s KPC Medical College Hospital is the main organization of the group. A survey u/s 133A of the I.T. Act, 1961 was also conducted in the premises of M/s KPC Medical College Hospital on the same day i.e. 12/07/2010. In the statement given on that day, Shri Uttam Chakraborty, (Director, Finance) of KPC Medical College Hospital has stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uncement brought to our notice for explaining the meaning and requirement of section 153C are based in relation to construction of section 158BD. Thus it is pertinent to take note of section 158BD which reads as under :- 158BD Undisclosed income of any other person Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or any assets were requisitioned under section 132A, then the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed under section 158BC against such other person and the provisions of this Chapter shall apply accordingly. A bare perusal of these two sections would reveal that where the AO of the searched person is satisfied that any money, bullion, jewellery, books of account or other documents, etc., belong to a person other than the person searched, then, such documents or assets shall be handed over to the AO of other person and the latter AO shall pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that no cogent material was found at the time of search and, therefore, no satisfaction is to be termed. 16. There is built-in fallacy in the arguments of the ld. counsel for the assessee. The fallacy became evident if the argument if tested by envisioning to the facts of the present case. There is no dispute that notice under section 153C was issued by the AO after recording the satisfaction extracted supra. The AO is the same AO who has jurisdiction over the searched person as well as the other person i.e. the assessee. Let us take a situation, the AO was examining the file of Shri Bhaskar Ghosh. On perusal of his statement recorded under section 132(4) coupled with the fact of cash found during the course of search and buttressed by the Managing Director (Finance) of the KPC Group of companies, visualized that cash belonged to the assessee, he immediately took a piece of paper and recorded his satisfaction that the money belongs to the assessee, therefore notice under section 153C is to be issued in the case of assessee. The question is, where this paper was placed by him? Whether in the order sheet entries of Shri Bhaskar Ghosh s assessment proceedings; in a separate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the source of the said cash. Ans.: I have received the cash of ₹ 35,10,400/- from the KPC group of companies for making some forthcoming expenditure. I am holding it as a custodian of the KPC group of companies. 19. In the next question, it was asked when he received this money. His reply was that it was received in last two months. This statement was endorsed by the Finance Director of the assessee Shri Uttam Chakraborty. The challenge of the ld. counsel for the assessee to this evidence was that statement of Shri Bhaskar Ghosh was not supplied to the assessee. Shri Bhaskar Ghosh has ultimately retracted this statement and surrendered this amount for taxation in his hands. Therefore, this evidence is to be excluded from consideration. With regard to Shri Uttam Chakraborty, he drew our attention towards page 171 of the Paper Book, where copy of his statement has been placed on record. It was emphasized that he has nowhere deposed that this amount was withdrawn from the account of KPC Mecial College and Hospital. We do not find any merit in this contention of the ld. counsel for the assessee. Because when AO was recording his satisfaction, he was not supposed to draw f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... city the society KPC Medical College Hospital has paid ₹ 50,00,000/- by cash? Ans: No. He is not an employee, but being the COO of KPC Karma (P) Ltd. the company formed recently with the purpose of coordinating monitoring and supervising of all the construction of the group he has been paid this money, by cash incidently, we are yet to open any bank account in the name of KPC Karma (P) Ltd. What ultimately happened to that ₹ 35 lacs is not the question when proceedings were initiated. There can be so many reasons for assessing in the hands of Shri Bhaskar Ghosh. The assessee also filed so called revised return and offered the sum of ₹ 33.21 crores for taxation, did not challenge issuance of notice u/s 153C. Therefore, in our opinion the AO has the material collected during the course of search exhibiting that money belonging to the assessee was found at the premises of the searched person. Therefore, the material exhibiting the recovery of money along with fact that information about the money and the money was handed over to the AO who has jurisdiction over the assessee. A satisfaction was recorded for initiating proceedings under section 153C of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies and for giving loan to KPC Foundation and then converted the loan into donation. In the absence of providing an opportunity to cross-examine, if this statement is excluded then no evidence would remain with the AO. The assessee has voluntarily disclosed the alleged donation amount as its income and paid the taxes. The AO did not make any addition over and above the disclosed amount. The alleged amount of donation was received through account payee cheque from KPC Foundation. The KPC Foundation also received the cheque from these five companies. The AO has not simply accepted the disclosure made by the assessee rather he continued the enquiry and issued summons to one of the directors happened to be a common director in these five donor companies. Shri Prabir Banerjee son of late Nityananda Banerjee appeared before the AO and his statement was recorded on 15th March, 2013. He has confirmed the donation to the Foundation. Thus the assessee has discharged its onus and the department has failed to bring any evidence on record demonstrating any concealment at the end of assessee. For buttressing his contention that statement of Shri Kamala Shankar Pandey ought not to be relie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alleged 5 donor companies who placed on record the death certificate of Shri Kamala Shankar Pandey. The assessment order has been passed on 31st March, 2013. The penalty proceeding has also been initiated on this date. It is pertinent that assessee has filed alleged revised return on 6th of March, 2013, by that time Shri Kamala Shankar Pandey was no more. Therefore, there cannot be any question to cross-examine this person. His disclosure made in an independent enquiry by the DDIT is to be appreciated with this limitation that he was not subjected to cross-examination. As observed earlier, there is no dispute that if, deposer was not put to cross examination then his deposition cannot be used against the interest of any one, except the deposer. But in the present case ld. AO had issued notice u/s 142(1) on 3/10/2012 and called for details of donation with confirmation, PAN, and nature of donation. Now the assessee had offered the donation for taxation. The question of cross-examining Shri Kamala Shankar Pandey would have arisen, had assessee justified genuineness of its donations. Probably opportunity to cross examine could have been granted. But, when the penalty proceeding was i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire share capital to the assessee. During the course of hearing we have directed the ld. counsel for the assessee to give us the details of common persons who are managing the affairs of KPC Foundation as well as the KPC Medical College Hospital but no such details were submitted by the assessee. The facts on the record do speak themselves, the alleged argument of the ld. counsel for the assessee that money was received through account payee cheques. The assessee has filed confirmation from those companies and also produced their directors, therefore, it discharged its onus of proving the identity, genuineness of the transaction and creditworthiness of the donors, in our opinion, on papers, the assessee might have fulfilled the proforma but on reality check, all these companies are apparently bogus. We could appreciate the contention of the ld. counsel that some donation was flowing to the assessee from a very renouned Medical College or a big industrial house. The unknown private limited companies not doing any business, do not have asset of more than 1 lakcs, all of a sudden gave a donation of ₹ 33 crores is quite unbelievable. These are the hard facts flowing from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in certain situation, even without there being anything to indicate so, statutory deeming fiction for concealment of income comes into play. This deeming fiction, by way of Explanation I to section 271(1)(c) postulates two situations; (a) first whether in respect of any facts material to the computation of the total income under the provisions of the Act, the assessee fails to offer an explanation or the explanation offered by the assessee is found to be false by the Assessing Officer or Learned CIT( Appeal); and, (b) where in respect of any fact, material to the computation of total income under the provisions of the Act, the assessee is not able to substantiate the explanation and the assessee fails, to prove that such explanation is bona fide and that the assessee had disclosed all the facts relating to the same and material to the computation of the total income. Under first situation, the deeming fiction would come to play if the assessee failed to give any explanation with respect to any fact material to the computation of total income or by action of the Assessing Officer or the Learned CIT(Appeals) by giving a categorical finding to the effect that explanation given by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see has contended that CIT(A) has issued directions to the AO for exploring to make addition of these unexplained donations under section 115BBC of the I.T. Act. Section 115BBC provides that if an assessee being educational institution, hospital, or any trust or institution referred to in section 11 receives unanimous donation and fail to produce evidence exhibiting the maintenance of record of the identity including name and address of the donor then, such unanimous donation will be taxed according to the procedure provided in sub-section (1) of section 115BBC. 28. The ld. counsel for the assessee while pointing out, what aspects the ld. Commissioner could take in an appeal ? drew our attention towards section 251 of the I.T. Act. Sub-section (1) provides that in disposing of an appeal the Commissioner shall have the following powers. Sub-clause (b) of section 251(1) is relevant for our purpose which reads as under :- (b) in an appeal against an order imposing a penalty he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty. A perusal of the above would indicate that powers of the Commissioner while dealing with penalty appeal are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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