9911796707
TMI Blog2021 (9) TMI 339X X X X Extracts X X X X X X X X Extracts X X X X ..... which has not happened in this case. So the First AO s action of only making protective assessment is more probable in the overall facts of the case and in all probability therefore, the same was added on a substantive basis in the hands of M/s SWC which fact could not have been disturbed in the facts discussed - Second AO could not have reviewed the order of his predecessor AO which power he does not enjoy. The action of the second AO to hold in the impugned order that no substantive addition was made in the hands of M/s. SWC for ₹ 11.86 cr. is clearly reviewing the order of the First AO and that action AO cannot do, but only the CIT/PCIT u/s 263 of the Act as per the Scheme of the Act is empowered to do; and this finding that no substantive addition of ₹ 11.86 crore was made in the hands of M/s SWC is contradicting as noted supra when in the same breath the Second AO notes that in the Second block re-assessment order of M/s SWC nothing was altered meaning status quo ante i.e. as it is without any change in the case of assessment of M/s SWC is concerned - Second AO did not enjoy the jurisdiction to make the addition substantively in the hands of the assessee Meri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt u/s. 158BC of the Income-tax Act, 1961 ( hereinafter referred to as the Act ) on 27.02.1998 for the block period from FY 1986-87 to 27.08.1996 ( hereinafter referred to as the Original Block Assessment order of 1998 ) wherein the AO added on protective basis ₹ 11.86 cr. on the ground that the assessee had withdrawn cash from two (2) bank accounts of M/s. Pragati Engineering Ltd. ( hereinafter referred to as the Pragati ) and M/s. Kalo Engineering Works Ltd. ( hereinafter referred to as the Kalo ) as undisclosed income of the assessee ( refer pages 44 to 60 of paper book ). 3. This Original Block Assessment order of 1998 was challenged by the assessee before the Tribunal and vide order dated 08.10.1999 ( hereinafter referred to as the First Tribunal Order of 1999) the Tribunal was pleased to set aside the impugned block assessment order i.e. the original block assessment order of 1998 and directed the AO to examine the facts of the case once more after allowing the assessee an opportunity of being heard and also to take into consideration further developments in the block assessment ( of SWC ) and thereafter to come up with a fresh assessment order in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal Order of 2005 ) the assessee preferred an appeal before the Hon ble Calcutta High Court; and the Hon ble High Court admitted the appeal by framing the following substantial question of law by order dated 22.06.2005 (refer pages 217 to 219 of paper book). The substantial questions of law reads as under:- i) Whether in a remand proceedings, the Assessing officer has any jurisdiction and/or authority to raise a dispute on a factual position admitted in the original assessment? ii) Whether in the fresh block assessment order passed pursuant to the order dated October 8, 1999 of the Tribunal, the Assessing officer was competent to make any new addition on a new ground which was not subject matter of controversy in the original block assessment order in respect of which the said order dated October 8, 1999 was passed? iii) whether and in any event, the Tribunal was justified in law in upholding the addition of ₹ 12.41 lakhs in the hands of the appellant and its purported findings in that behalf have been arrived at by ignoring the relevant materials (such as, findings of the Income Tax Department including its Investigation Wing) and/or by taking into consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g and need to be deleted. (iii) That the A.O. was wrong in making addition of ₹ 12,41,00,000/- whereas sources of deposit in two bank A/c. were from SWC and its subsidies, which is clear cut finding of A.O. in the original assessment. Ignoring the findings of ADIT (inv) his predecessor in assessment and document submitted at the time of reassessment proceeding, without any basis, is need to be deleted. (iv) The A.O. one side he made addition and other side he himself gives finding that SWCL, had siphoned off in cash through dubious methods in league with several person. This shows that the money does not belong to the assessee and belongs to SWCL and sources of deposit in two Bank A/cs. Stands well explained. As such, addition need to be deleted. We find also from the impugned order of the tribunal dated 31st March, 2005 that the tribunal has not addressed these issues in the manner that they should have been dealt with in accordance with the earlier order of the tribunal dated 8th October, 1999. For those reasons, we set aside the impugned order of the tribunal dated 31st March, 2005. As fifteen years have elapsed, we direct the tribunal to redetermine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal vide order dated 08.10.1999 ( First Tribunal order of 1999 ). Therefore, according to the assessee, the AO erred on four (4) counts i.e. (i) that the AO erred in ordering addition on a substantive basis whereas in the original block assessment order of 1998, the additions made was only on protective basis because substantive addition was made in the hands of M/s. SWC (ii) that AO erred in making new addition of ₹ 12.41 cr. in reassessment in place of ₹ 11.86 cr. when it was already taxed in the hands of M/s. SWC (iii) that the AO erred in adding the credit entries in two bank accounts in reassessment (M/s. Kalo M/s. Pragati) whereas the AO in the original block assessment of 1998 made addition of cash withdrawal from these two bank accounts and taxed the entire credits in the hands of M/s. SWC (iv) that in any case, the AO erred in making the addition of ₹ 12.41 crores in the hands of assessee when the nature and source of credit entries are proved to be from M/s. SWC or its subsidiaries and consequently addition was substantially made in the hands of M/s. SWC. Therefore, according to the assessee/Ld AR, when the AO in the original block assessment order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Calcutta) ₹ 345 lakhs P. L. Mittal (A/c No. 4915 Syndicate Bank Brabourne Rd., Branch, Calcutta) ₹ 235 lakhs M/s Dunlop India Ltd. ₹ 200 lakhs ii) M/s Kalo Engineering Works N. C. Jain (A/c No. 4882 Syndicate Bank Brabourne Rd., Branch, Calcutta) ₹ 230 lakhs P. L. Mittal (A/c No. 4915 Syndicate Bank Brabourne Rd., Branch, Calcutta) ₹ 422 lakhs M/s Dunlop India Ltd. ₹ 275 lakhs 11. And thereafter, the assessee had withdrawn net amount of ₹ 11.86 cr. which he could not explain properly. Therefore, according to First AO, even though the assessee had filed the return of income pursuant to notice u/s. 158BC of the Act and reflected an amount of ₹ 2,02,52,500/- which was shown as his undisclosed income [ ₹ 170.03 lacs (share capital) + ₹ 18.50 lacs (income from share transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e basis ( refer page 73 of paper book, page 7 of the impugned second block/reassessment order of 2002 ). Thereafter, the second AO taking note of the assessee s objection which has been reproduced by him in the impugned order has noted that no substantive assessment of the amount of ₹ 11.86 cr. as such has been made in the block assessment of M/s. SWC. Therefore, he was of the opinion that the matter requires further examination. Thereafter, he noted that in the two (2) bank accounts of M/s. Kalo and M/s. Pragati there was cheque deposit totaling ₹ 575 lakhs from Shri N. C. Jain and ₹ 657 lakhs from Mr. P. L. Mittal. Thereafter the AO noted that both these persons were mere name lenders of the assessee and the person behind both of them were the assessee himself. Thus, he held that Shri N. C. Jain and Shri P. L. Mittal (share brokers) were benamiders of the assessee and both their bank account nos. 4882 and 4915 in their respective names in Syndicate Bank, Brabourne Road Branch were in fact operated and transacted by the assessee. Thereafter, the AO noted after perusal of the block assessment of M/s. SWC that M/s. SWC had invested ₹ 89.02 cr. through its s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same money was given to the two (2) concerns namely M/s. Kalo and M/s. Pragati . Here, the expressions used by the Second AO to deny the claim of the assessee that money came to the bank accounts of Shri N. C. Jain and Shri P. L. Mittal from M/s. SWC need to be noted. The AO has brought in the same money theory and brushed aside the relevant bank statement, flow-charts and statement recorded by Investigation team immediately after search u/s. 131 of the Act which we will deal in detail (infra). 14. Without prejudice to this observation, continuing further we note that, according to the Second AO, the assessee has not been able to prove that the credits in the two bank accounts of Shri N. C. Jain and Shri P. L. Mittal are from M/s. SWC. And since both these persons are benamiders of the assessee, therefore, according to AO, the cheque deposited in two bank accounts of M/s. Kalo and M/s. Pragati cannot be said to be from M/s. SWC and therefore, the amount credited in M/s. Kalo and M/s. Pragati to the tune of ₹ 12.41 cr. needs to be treated as unexplained and so he treated it as undisclosed income of the assessee. And it is interesting to note that the AO observes at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n we adjudicate this legal issue, first we have to see carefully the direction of the Tribunal in the First Tribunal order dated 08.10.1999 wherein the Tribunal vide para 3 of its order has held as under: 3. It has been learnt that the Tribunal has set aside the block assessment order in the case of SWC and has directed the AO to reassess the same in the light of an order passed by the Calcutta High Court in the writ petition filed by SWC in WP No. 11982/7/1999 relating to the block assessment and also regular assessments for the relevant period. Since the assessment in which the addition of ₹ 11.86 lakhs has been made in a substantive manner, itself stands set aside for reframing purpose, in fitness of things, the addition of the amount in the hands of the present assessee also on a protective basis should require a fresh examination. We therefore, set aside the impugned block assessment and direct the AO to examine the facts of the case once more after allowing the assessee an opportunity of being heard and also to take into consideration the further developments in the block assessment and thereafter to come up with a fresh assessment order in the case of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30.03.2000 and the findings in the original block assessment in respect of the above matter as discussed above remains unaltered . The AO found that pursuant to the Tribunal remand in the case of M/s SWC, the second AO has framed the reassessment in the case of M/s SWC on 30.03.2000 and the finding in the original block assessment of M/s. SWC remains unaltered meaning thereby no addition or deduction/deletion has been made in the addition made in the hands of M/s. SWC and the order passed in the original assessment in the case of M/s. SWC has been followed/reiterated in the second block assessment order dated 30.03.2000. Therefore, it is clear that not even one rupee addition or one rupee deletion has been made by the AO in reassessment of block period of M/s. SWC. In such a scenario, the Tribunal s direction to the AO need to be carefully appreciated i.e. to take into consideration the further developments in the block assessment (it is implied that it is of M/s. SWC) and thereafter to come up with the fresh assessment order in the case of the assessee . Thus when we appreciate the direction of the Tribunal in the first order of 1999 we note that AO was directed while fram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directed the AO to reassess the same in the light of an order passed by the Calcutta High Court in the writ petition filed by SWC in WP No. 11982/7/1999 relating to the block assessment and also regular assessments for the relevant period. Since the assessment in which the addition of ₹ 11.86 lakhs has been made in a substantive manner itself stands set aside for re-framing purpose, in fitness of things, the addition of the amount in the hands of the present assessee also on protective basis should require a fresh examination. We therefore, set aside the impugned block assessment and direct the AO to examine the facts of the case once fore after allowing the assessee an opportunity of being heard, and also to take into consideration the further developments in the block assessment and thereafter to come up with a fresh assessment order in the case of the assessee . This finding of fact as found by the First Tribunal order of 1999 that substantive assessment of ₹ 11.86 cr. has been made in the hands of M/s. SWC and protective assessment of it is made in the hand of assessee has not been challenged by the Revenue/AO before the Hon ble High Court or any application/Misce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 89.02 crores for acquiring six(6) Gauhati based companies and this amount (₹ 89.02 cr.) was from was from ICDS of ₹ 219.77 cr. and therefore the AO in the case of M/s SWC disallowed the interest expenditure to the tune of ₹ 67.65 crores on the reason that amount of ₹ 89.02 crores was utilized for non-business purpose and we note that for these precise reasons that no substantial addition was made in the hands of the assessee because the entire money which has come to the kitty of assessee either as credit entry or withdrawal are from/for M/s SWC. For this reason only the First AO made addition on the assessee only on protective basis. Another reason to say that the amount credited/withdrawn by the assessee from M/s Kalo and M/s Pragati was added substantially in the hands of M/s SWC is that AO s order (First/Original Block Assessment of 1998) of making protective assessment in the hands of assessee has not been questioned by the CIT/PCIT by exercising power u/s 263 of the Act after the original assessment order was passed by First AO as early as on 27.02.1998. And it is common knowledge that after search u/s. 132 of the Act take place, the ADIT (Inv) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion ( substantially ) of ₹ 12.41 crores of the credit entries in two bank accounts i.e. M/s Kalo M/s Pragati. According to Second AO, in these two bank accounts of the assessee, the cheques are deposited from the bank accounts of Shri N. C. Jain Shri P. L. Mittal who are benamidars of the assessee. But according to Second AO, the credit entries to bank account of Shri N. C. Jain and Shri P. L. Mittal has not been able to be proved by the assessee, even though the assessee had filed bank statement/chart/statement recorded u/s 131 of the Act in 1998 evidencing transfer of money from M/s SWC its subsidiaries to bank account of Shri N. C. Jain Shri P. L. Mittal and then from these two accounts to the bank account of M/s Kalo M/s Pragati. This finding the AO held in his own words at page 77 of paper book/page 11 of the impugned second reassessment order of 2002, the assessee has referred to the statement of the assessee recorded u/s. 131 on 18.02.1998 and assessee has given a chart in support of the contention that the money came to the bank account of M/s. Kalo and M/s. Pragati from M/s. SWC and its subsidiaries. But the same does not show whether the money came from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we would like to point out that the same money concept the second AO has reasoned out to justify his non-acceptance of the chart and bank statement is preposterous which is erroneous in the legal sense and cannot be accepted. Here, the AO doubts whether the same money deposited in bank accounts of Shri N. C. Jain and Shri P. L. Mittal was given to two concerns bank accounts of M/s. Kalo M/s. Pragati. It is therefore, necessary to examine first the nature of property which a depositor has in the deposit. In common language it is usual to speak that a depositor owns money in deposit and this may be substantially true in the economic sense, but in strict legal sense such a statement is wholly untrue. Here we would like to point out that currency of sovereign when is in possession of a person, that person is the owner of it against the whole world or Right in Rem in respect of the property in the currency/money, however, the moment it (currency/money) is deposited in bank account, the property in the money passes to the depositee/bank in this case and what the depositor owns thereafter is debt, which is also known as obligation, chose-in-action or actionable claim. The right i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . ( subsidiary of M/s. SWC ) albeit while framing a question wherein the AO has noted the following facts as under: i) M/s Pragati Engineering Company N. C. Jain (A/c No. 4882 Syndicate Bank Brabourne Rd., Branch, Calcutta) ₹ 345 lakhs P. L. Mittal (A/c No. 4915 Syndicate Bank Brabourne Rd., Branch, Calcutta) ₹ 235 lakhs M/s Dunlop India Ltd. ₹ 200 lakhs ii) M/s Kalo Engineering Works N. C. Jain (A/c No. 4882 Syndicate Bank Brabourne Rd., Branch, Calcutta) ₹ 230 lakhs P. L. Mittal (A/c No. 4915 Syndicate Bank Brabourne Rd., Branch, Calcutta) ₹ 422 lakhs M/s Dunlop India Ltd. ₹ 275 lakhs 20. After taking note of the above the AO states in his own words This money coming through Shri N. C. Jain and Shri P. L. Mittal has come from Shaw Wallace Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Pvt. Ltd., (iii) M/s. Kamala Kal Limited, (iv) M/s. Vibhavari Finance Investment Co. Pvt. Ltd., (v) M/s. Alknanda Manufacturing Trading Co. P. Ltd. and (vi) M/s. Malleswara Finance Investment Co. P. Ltd. Now we have to examine whether these creditors/entities are group companies/subsidiary companies of M/s SWC. For that Ld. A.R. drew our attention to page 176 of PB which is the cover page of M/s Shaw Wallace Company Ltd. s Report Accounts of subsidiaries 1995-96, 1996-97 1997-98. Further our attention was drawn to page 177 to 182 of PB which are the list of shareholder companies of M/s SWC. And from a perusal of the same, we find that all the creditors who has deposited money by cheque in Shri N. C. Jain and Shri P. L. Mittal s in the aforesaid bank accounts are from M/s SWC and its subsidiaries. Therefore, the assessee has satisfactorily explained that the money has come from the coffers/bank accounts of M/s. SWC and its subsidiaries. And M/s SWC has funded it from ₹ 89.02 crores from ICDs of ₹ 219.77 crores, therefore AO in the block assessment of M/s SWC has disallowed interest expenditure of ₹ 67.65 crores alleging it to be for non-business purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
