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TMI Blog2019 (4) TMI 956X X X X Extracts X X X X X X X X Extracts X X X X ..... of book transactions with evidence. Later too, the position did not alter. Furthermore, the other important fact is that the assessee made no attempt to support the claim that the loan credit and other credits were genuine; the parties concerned, their creditworthiness and the reason for the credit was not substantiated in any manner. The second and equally important reason for this Court to hold that the ITSC gravely erred in its approach is an utter disregard to the condition that the assessee always has the duty to come clean and make full disclosure. After noting and brushing aside the Revenue s objections with regard to the complete lack of explanation by the assessee with respect to credits claimed, the ITSC proceeded to compute the amounts offered and observed that the difference in the net asset and the income declared was ₹ 5.55 crores. Jakhotia accepted the difference as their undisclosed income computed in the manner given (in the order) and in the spirit of settlement agreed to offer additional income of ₹ 5.55 crores. The decision of the ITSC was untenable in law. Once the assessee approached it with a certain amount, representing that it consti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 16.50 Cr will be submitted in due course. (Reply to query 16) In reply to the query regarding the loan credits which emerged from the books of accounts seized, the statement on oath stated as follows: I have not maintained this type of account books for unaccounted transactions for previous years. I have maintained only for this year. 3. The first respondent submitted an entity-wise and year wise bifurcation of the surrendered amount aggregating ₹ 21.5 crores on 08.05.2012. Subsequently, an order centralising the assessment made in the case after search was issued under section 127(2) transferring the entire search proceeding to Delhi from Hyderabad. Later, notices were issued under Section 153A to all the Jakhotias requiring them to file returns for AY 2006-2007 to AY 2013-14. The returns were filed for some years by some respondents and for some other years by the other respondents. However, none of the assessees filed returns in respect of all the years. Notice issued under Section 142(1) indicates that the questionnaire to the Jakhotias was in respect of the assessment years for which the returns were furnished. At that stage, the assessees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.65 crores. Permission sought was for conduct of inquiry by the AO. However, this was declined and the Settlement Commission asked the parties to remain present before the Joint Director, Income Tax, of the Settlement Commission for verification and enquiry. 7. The JDIT filed a report on 12.09.2014, stating that the claims made by the assessee in the course of the proceedings could not remain unverified. The material part of the report dated 12.09.2014 is retracted below: 5. The DCIT produced the seized register A/OPJ/03 on 26.08.2014. He also produced the original surrender latter dated 08.05.2012. The seized register was perused. The accounts of the cash loans were seen. The A.R was asked to provide the details of cash Loans stated-that-the applicant feasible to -give-the addresses of the loan-creditors as most of the loans were arranged through brokers who only gave names of the creditors without the addresses. It was stated by the AR that the seized register A/OPJ/03 contains all the details of the loans taken by the applicant and it also shows that interest has been paid on the same, which is reflected in the seized register in the Interest account, which is at pages ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter submitted by the applicant on 08.05.2012. 9. As regards the study of each and every entry, the Annexure A2 of the Rule 9 report was perused and compared with the seized register A/OPJ/03. The A.O stated that the same has been made from the seized register and the CIT relies on the same. The Rule 9 report has been made after considering all the entries in the seized register. 8. After hearing the parties, on 26.11.2014, the Settlement commission passed the impugned order accepting the offer made by the assessee and granting immunity from penalty and prosecution and other sanctions. 9. The Revenue contends that the impugned order is unsustainable because the disclosure made was not true and full which is sine-qua-non for maintainability of application before ITSC. It was submitted that the Settlement Commission s acceptance of the assessees explanation with respect to the statement, is unreasonable. Learned counsel highlighted that the alleged retraction was made nearly two years after the statement itself was recorded in January 2012. Furthermore, given that the statement was under Section 132 in the course of search proceedings, there was probative and eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the statement could not be relied upon because at the tenure of the question to be clearly showed that undue mental pressure was exerted upon Jakhotia. Learned counsel relied upon Commissioner of Income Tax v Sunil Aggarwal, (2015) 379 ITR 367 (Del), which held that the retracted statement had to be corroborated by some material if the revenue were to rely upon it. It was stated that similar view was expressed by the Gujarat High Court in Kailashben Manhar Lala Choksi v Commissioner of Income Tax, (2008) 174 Taxman 466 (Gujarat), and M. Narayanan and Brothers v Additional Commissioner of Income Tax, (2011) 13 Taxmann.com 49 (Mad). 13. The income declared by three Jakhotia entities after search, is retracted in a tabular statement, which is as under: - Asstt. Year Om Prakash Jakhotia Jakhotia Plastics Pvt. Ltd. Jakhotia Polymers Pvt. Ltd. Returned Income Additional Income disclosed Returned Income Additional Income disclosed Returned Income Additional Income disclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 210 to 214 of the seized diary. Both the JCIT and the Assessing Officer have verified the loan creditors and interest payments reflected in the seized diary and found them to be genuine. As regard furnishing of confirmation from the loan creditors, it may be submitted that the loans were arranged through broker who only provided names of the creditors without their addresses. Further the provisions of section 132(4A) and 292C of the Act raise presumption that entries recorded in the seized diary are correct and the loans cannot be treated as non-genuine and cannot, therefore, be treated as undisclosed income of the applicant:- (a) CIT v. Indeo Airways Pvt. Ltd. (2012) 349 ITR 85 (Delhi) (b) T. S. Kumaraswamy v. ACIT (1998) 65 ITO 188 (Mad) (c) CIT v. S.M.S. Investment Corporation (1988) 173 ITR 393 (Raj (d) Surendra M. Khandhar v. ACIT (2010) 321 ITR 254 (Born) (e) Fifth Avenue v. CIT(2009) 319 ITR 127 (Karn) - (This judgment of the Karnataka High Court was upheld by the Hon'ble Supreme Court of India in the case of Fifty Avenue v. CIT(2009) 319 ITR 132 (SC). (f) CIT v. D.R. Bansal Ors (20 1 0) 327 ITR 44 (CHG) (g) CIT v. P.R. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that as per seized diary there was cash available to the applicant and from the same cash the outstanding loans were repaid by the applicant. The entries were recorded only when the part time accountant was available, therefore, the diary was not updated after 13.01.2012. The date of search was 20.01.2012, the repayments must have been done in the period between 13.01.2012 and 20.01.2012. We have considered the Rule 9, 9A and verification report submitted by the DIT (Inv.) and the reply filed by the applicant. It is seen that all the loans are reflected in the seized diary and that the applicant has paid interest on these loans. This fact of interest payment is reflected at pages 208 and 21 0 to 214 of the seized diary. However it is to be noted that the applicants have not provided names or addresses of the creditors, in-spite of ample opportunities provided to them. Further, they have not been able to fully explain the repayment of loans. In such circumstances we are left with no alternative but to settle the matter on the basis of the net assets of the applicant. The statement of affairs of the applicant as on 13.01.2012 is as under:- STATEMENT OF AFFAIRS AS AT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Balaramji 625000 Chanda Bai 2000000 Baheti 800000 Damodar Heda 486000 D.P. Agarwal 50000000 Givubd Gilda 4000000 Hari Prasad 1000000 Infusion 11300000 KCJ 4400000 Kejriwalji 500000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) Mr. Om Prakash Jakhotia 1.93 crore (ii) Jakhotia Polymers Pvt. Ltd. 0.34 crore (available funds as per Settlement application) Total 2.27 crore Taking the total disclosure of ₹ 2.27 crores the difference in the net asset and the income declared is of ₹ 5.55 crores. The applicant accepted the difference as their undisclosed income computed in the above manner and in the spirit of settlement agreed to offer additional income of ₹ 5.55 crores. A letter was filed on 10.11.2014 offering additional income of ₹ 5.55 crores, which is placed on record. 9. As discussed in the foregoing paras, we have considered the submissions of the applicant and the Department. All the issues were discussed one by one during the course of hearing. After carefully considering the submissions of the department and the applicant and the facts of the case, we are of the view that the offer made by the applicant in the SOF and the additional offer of ₹ 5.55 crores made during the course of proceedings u/s2450(4) before this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e creditor/subscriber. (4) If relevant details of the address or PAN identity of the creditor/subscriber are furnished to the Department along with copies of the Shareholders Register, Share Application Forms, Share Transfer Register etc. it would constitute acceptable proof or acceptable Explanation by the assessed. (5) The Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices; (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessed nor should the AO take such repudiation at face value and construe it, without more, against the assessed. (7) The Assessing Officer is duty-bound to investigate the creditworthiness of the creditor/subscriber the genuineness of the transaction and the veracity of the repudiation. 18. Long ago, in A. Govindarajulu Mudaliar v CIT, Hyderabad (1958) 34 ITR 807, an argument similar to what was advanced by the assessee was rejected by the Supreme Court. The court held that- Now the contention of the appellant is that assuming that he had failed to establish the case put forward by hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessees to support by any reasonable material that such credit entries were plausible, even genuine. 21. The second and equally important reason for this Court to hold that the ITSC gravely erred in its approach is an utter disregard to the condition that the assessee always has the duty to come clean and make full disclosure. 22. In Ajmera Housing Corporation and another v Commissioner of Income Tax (2010) 326 ITR 642, the Supreme Court had emphasized the mandatory nature of the duty to fully disclose all income, which the assessee claims it is liable to report, failing which the settlement application cannot be maintained. It was observed that: 21. Proceedings under the said Chapter commence on the filing of an application by an assessee under Section 245C (1) of the Act, which reads as follows:- 245-C. Application for settlement of cases.--(1) An assessee may, at any stage of a case relating to him, make an application in such form and in such manner as may be prescribed, and containing a full and true disclosure of his income which has not been disclosed before the Assessing Officer, the manner in which such income has been derived, the additional amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, allow the application to be proceeded with or reject the application. After an order under Section 245D (1) is made, by the Settlement Commission, Rule 8 of the 1987 Rules mandates that a copy of the annexure to the application, together with a copy of each of the statements and other documents accompanying such annexure shall be forwarded to the Commissioner and further report shall be called from the Commissioner. The Settlement Commission can also direct the Commissioner to make further enquiry and investigations in the matter and furnish his report. Thereafter, after examining the record, Commissioner's report and such further evidence that may be laid before it or obtained by it, the Settlement Commission is required to pass an order as it thinks fit on the matter covered by the application and in every matter relating to the case not covered by the application and referred to in the report of the Commissioner under sub-section (1) or sub-section (3) of the said Section. It bears repetition that as per the scheme of the Chapter, in the first instance, the report of the Commissioner is based on the bare information furnished by the assessee against item No. 10 of the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e permitted to resile from his stand at any stage during the proceedings. Therefore, by revising the application, the applicant would be achieving something indirectly what he cannot otherwise achieve directly and in the process rendering the provision of sub-section (3) of 245C of the Act otiose and meaningless. In our opinion, the scheme of said Chapter is clear and admits no ambiguity. 27. It is trite law that a taxing statute is to be construed strictly. In a taxing Act one has to look merely at what is said in the relevant provision. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. There is no room for any intendment. There is no equity about a tax. (See: Cape Brandy Syndicate Vs. Inland Revenue Commissioners7 and Federation of A.P. Chambers of Commerce Industry Ors. Vs. State of A.P. Ors.8). In interpreting a taxing statute, the Court must look squarely at the words of the statute and interpret them. Considerations of hardship, injustice and equity are entirely out of place in interpreting a taxing statute. (Also see: Commissioner of Sales Tax, Uttar Pradesh Vs. The Modi Sugar Mills Ltd.)9. 28. As afore-stated, in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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