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TMI Blog2016 (12) TMI 1409X X X X Extracts X X X X X X X X Extracts X X X X ..... roup. Sri Bhanaram Gupta is the main person of the group and the Chairman of the Assessee. 3. There was a search and Seizure operation carried out by the Revenue u/s.132 of the Income Tax Act, 1961(Act) at the office premises of the Assessee at 32, Chowringhee Road, Om Towers, Kolkata and 306 407, Ashirbad Building Ahmedabad Street, Mumbai on 14.9.2000. There was also a Search and Seizure operation carried out by the revenue in the residential premises of Sri Bhanaram Gupta. In the course of such search a exercise book marked BG/2 was found and seized. According to the revenue the said seized exercise book contained noting regarding cash payments in connection with share capital to the tune of ₹ 2 Crores which were shown as share capital received in the books of the Assessee in the month of March, 2000 in the name of the following persons: Date Amount Name of the Company from which received 6.3.2000 20 Lakhs M/S.Medhawi Traders Ltd. 6.3.2000 10 Lakhs -- do- 7.3.2000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rue and belongs to Sri Bhanaram Gupta. However, since the receipt of ₹ 2 crores by way of private placement of shares are found not to be genuine transactions and the ultimate beneficiary is this assessee company, the amount of ₹ 2 crores is treated as unexplained credits in the books of the assessee company of the block period. 6. In the assessment of Sri Bhanaram Gupta the AO made addition of ₹ 2 crores as unaccounted cash which was laundered through the books of the Assessee under the garb of private placement of equity shares and another sum of ₹ 4,00,000 was also added in his case as commission paid to agents for providing entries of receipt of share capital. 7. In so far as the addition in the hands of the Assessee of ₹ 2 Crores, the Assessee preferred before CIT(A), who by his order 28.1.2005 held that a sum of ₹ 50 Lakhs each received from M/S.Poly Products (P) Ltd., and M/S.Suryamukhi Merchants (P) Ltd., and credited in the books of the Assessee as share subscription remained unexplained. In coming to this conclusion the CIT(A) mainly placed reliance on the statement of one Sri Raj Deo Roy. The CIT(A) also held that the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Assessee had satisfactorily explained the receipt of share capital. The following were the conclusions of the CIT(A) in this regard: 9. Although the notings contained in BG-2 and the statement of Shri S.K. Lahoty applied to all the four instances of private placement of shares, the Assessing Officer has failed to bring on record adequate evidence to establish that the two other investment companies viz. Esskay Telecom Ltd. and M/s Medhawi Traders Ltd. had also provided accommodation entries to M/s Premier Road Carriers Ltd. On the contrary, the Directors of the two said companies appeared personally in response to the summons issued by the Assessing Officer and confirmed the purchase of shares of M/s PRC Ltd. for a sum of ₹ 50 lakhs each. Moreover, both the companies were able to explain, the sources from which the impugned investments had been made. Thus, in the case of M/s Esskay Telecom Ltd. and M/s Medhawi Traders Ltd., the specific sources from which payments were received by the said companies prior to the impugned investment in shares were identified and the nature of such receipts was also explained. Furthermore, the copy of account of the parties from whom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as deleted by the CIT(A) in appeal being IT(SS) A.No.75/Kol/2005 and IT(SS)A.No.66/Kol/2005 respectively. These appeals and the appeal filed by the Revenue against the order of CIT(A) dated 28.1.2005 were heard together by the Tribunal and a common order dated 24.3.2006 was passed by the Tribunal. 11. The Tribunal upheld the order of the CIT(A) deleting addition of ₹ 1 crores being ₹ 50 lakhs each received as share capital from M/S.Esskay telecom Ltd. And M/S.Medhawi Traders Ltd., and endorsed the CIT(A) s finding that the Assessee had satisfactorily explained the receipt of share capital from the aforesaid two parties. With regard to the receipt of a sum of ₹ 50 Lakhs each received from M/S.Poly Products (P) Ltd., and M/S.Suryamukhi Merchants (P) Ltd., and credited in the books of the Assessee as share subscription which was treated by the CIT(A) as unexplained, the Tribunal held that the same cannot be sustained. The Tribunal firstly held that the said addition was made on the basis of statement of Shri.Raj Deo Roy and that statement could not have been used by the AO for the reason that the statement was recorded by an Officer who did not have authority to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to the block period shall not include the income assessed in any regular assessment as income of such block period: . (c) the income assessed in this Chapter shall not be included in the regular assessment of any previous year included in the block period Therefore, the amount of ₹ 1.00 crores appearing in the names of M/s. Poly Products (P) Ltd. and M/s. Suryamukhi Merchants (P) -Ltd in the books of account of the assessee and ₹ 2.00 lakhs added u/s. 69C, even if proved to be unexplained, can be assessed in regular assessment but in no circumstances it can be assessed in block assessment. Reliance is placed on the decision of Co-ordinate Bench in the case of DCIT v. M.L. Dalmia Co. Ltd. (2006 98 ITD 93 (Kol) wherein it was held - It was a block assessment case and any addition was supposed to be made in the hands of the assessee on the basis of evidence/material found as a result of search. The action of the Assessing Officer in treating the amalgamation reserve and share application money, wluch were shown in tile regular return of income as undisclosed' income of the assessee was not justified. Section 158B(b) is a charging provision and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me is reversed and the assessee s appeal is allowed. 13. According to the Revenue the observations in paragraph 33 of the Tribunal s order referred to in the earlier paragraph is nothing but a finding that there was escapement of income to the tune of ₹ 1 crore and that the same should be brought to tax in reassessment proceedings u/s.148 of the Act. Accordingly the AO issued a notice u/s.148 of the Act and passed an order of assessment u/s.148 of the Act dated 26.12.2008 wherein the AO, after referring to paragraph-33 of the Tribunals order, observed as follows: It is evident from the findings given by the Hon ble ITAT that the issue in question is required to be considered as income escaping assessment. Therefore, information available on record clearly shows that the income chargeable to tax to the extent of ₹ 2 crore is cash credit in the books of the assessee as per section 68 of Income tax Act, 1961 which has escaped assessment. Since, all the transactions in respect of the aforesaid cash credit of ₹ 2 crore were made in F.Y. 1999-2000 relevant to A.Y.2000- 01, the sum of ₹ 2 crore is added to total income of assessee on protective basis. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firming the reopening of assessment u/s 147. ii. That on the facts and circumstances of the case ,the issuance of notice u/s 148 after a period of 4 years from the end of the assessment year is time barred when there is no failure on the part of the assessee to disclose fully and truly all material necessary for the assessment nor any allegation thereto in the reasons recorded and thus bad in law is liable to be quashed. iii. That on the facts and circumstances of the case, 'reasons to believe' clearly establish that the notice has been issued only on the basis of the observation of the Hon'ble IT AT and without any independent satisfaction and application of mind by the assessing officer and is thus liable to be quashed. iv. That on the facts and circumstances of the case, the reassessment proceedings to make 'protective' assessment is bad in law and liable to be quashed. Without prejudice, the Ld. AO erred in reopening assessment for making protective assessment without any substantive assessment being pending on the date of issuing notice u/s 148 and as such the reassessment order is bad in law liable to be quashed. v. That on the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Assessee for AY 2001- 02. His submission was that since the additions already stood deleted in the block assessment proceedings, the additions made in the present reassessment proceedings were rightly held by the CIT(A) to be bad in law. His further submission was that the very initiation of reassessment proceedings u/s.147 of the Act was not valid in law. In this regard he submitted that the assessment of the Assessee was originally completed u/s.143(3) of the Act for the relevant AY 2001-02. This was over and above the assessment for the block period u/s.158BC of the Act. The initiation of reassessment proceedings for AY 2001-02 was admittedly beyond the period of 4 years from the end of the relevant Assessment year. As required under the proviso to Sec.147 of the Act, reassessment in such cases can be only for the reason that there was escapement of income due to failure of the Assessee to fully and truly all material facts necessary for the assessment of total income of the Assessee for that year. It was pointed out by him that neither in the reasons recorded by the AO for initiating reassessment proceedings nor in the order of reassessment the AO has held that there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital from M/S.Esskay telecom Ltd. And M/S.Medhawi Traders Ltd., the CIT(A) held that the Assessee had satisfactorily explained the receipt of share capital. In the assessment of Sri Bhanaram Gupta an addition of ₹ 2 crores was made on a substantive basis. Against the said assessment an appeal was filed by Sri Bhanaram Gupta. The CIT(A) in such appeal deleted the addition of ₹ 2 crores made on a substantive basis in the hands of Sri Bhanaram Gupta, since addition of ₹ 1 crores wad confirmed on a substantive basis in the hands of the Assessee and another sum of ₹ 1 crores was held to be duly and satisfactorily explained by the Assessee. The Tribunal upheld the order of the CIT(A) deleting addition of ₹ 1 crores being ₹ 50 lakhs each received as share capital from M/S.Esskay telecom Ltd. And M/S.Medhawi Traders Ltd., and endorsed the CIT(A) s finding that the Assessee had satisfactorily explained the receipt of share capital from the aforesaid two parties. With regard to the receipt of a sum of ₹ 50 Lakhs each received from M/S.Poly Products (P) Ltd., and M/S.Suryamukhi Merchants (P) Ltd., and credited in the books of the Assessee as share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad Carriers Ltd. A.Y.2000-01 13 been made in proceedings u/s.147 of the Act. We find that identical issue had come up for consideration before the Hon ble Bombay High Court in the case of DHFL Venture Capital Fund (supra). The facts of the case before the Hon ble Bombay High Court was that the Assessee, registered with SEBI as a Venture Capital Fund filed a return of income claiming the status of an AOP. For AY 2008-09, the assessee claimed that the contributions by its investors in terms of the trust deed and contribution agreements constituted revocable transfers under the provisions of the Act and hence, the income accruing to the fund was not liable to tax in the hands of the assessee, but in the hands of the investors / contributors in proportion to their respective contributions. A similar note was appended in the notes to the accounts. The AO held that the contributors to the scheme have practically no control over it and hence, the provisions of Sections 61 and 63 were not applicable. In the circumstances, the total income was held to be exigible to tax. In appeal, the Commissioner (Appeals) came to the conclusion that there was a revocable transfer within the meaning of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne place. Sometimes they may be made by different officers as, for example, where an officer assessing A thinks that certain income belongs to him but another officer assessing B is of the opinion that the income is his. Sometimes the same officer may find that an assessee before him is returning a particular income but is of the opinion that it should be assessed in the hands of a firm or a family and not in the hands of the person who returned it. It has been held that the officer may, when in doubt, CIT v. Shri Ramchandraji Maharaj Ka Bada Mandir (1988) 73 CTR (MP) 79 to safeguard the interests of the Revenue assess it in more than one hand., Lalji Haridas v. ITO (1961) 43 ITR 387 (SC) But this procedure can be permitted only at the stage of the assessment as, at higher levels, it is possible for the appellate or revisional authority to give a clear finding as to the assessee who is liable to be so assessed leaving the one who is aggrieved to get redress by appropriate proceedings., See Dayabai v. CIT (1985) 154 ITR 248 (MP). In any event, if , at the stage of the Tribunal or High Court it is found that the same income is assessed in both places, the Department should provide re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use (a) includes a case where no return of income has been furnished by the assessee although his income or the income of any other person in respect of which he is assessable exceeds the maximum amount which is not chargeable to tax. As the reasons which have been disclosed to the assessee would indicate, this is not a case where an assessee has not filed a return of income simplicitor. The whole basis of the reopening is on the hypothesis that if the provisions of Sections 61 to 63 are attracted as has been claimed by the assessee, and the income of ₹ 32.83 Crores which has been claimed by the assessee to be exempt is treated as exempt, in that event an alternate basis for taxing the income in the hands of the AOP of the contributories is sought to be set up. For the reasons already indicated, the entire exercise is only contingent on a future event and a consequence that may enure upon the decision of the Tribunal, that again if the Tribunal were to hold against the Revenue. A reopening of an assessment under Section 148 cannot be justified on such a basis. There has to be a reason to believe that income has escaped assessment. 'Has escaped assessment' indicates an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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