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TMI Blog2022 (2) TMI 1188X X X X Extracts X X X X X X X X Extracts X X X X ..... whereas in an assessment under section 143(3) whatever evidence is being gathered has necessarily to be confronted. Thus, very different consequences flow from an assessment under section 144 of the Act. Mention of nature of the order as section 153A r.w.s. 143(3) was not a technical mistake or an error which can be cured by resorting to the provisions of section 292B of the Act. AO even though recording that no return had been filed and no notice under section 143(2) had been issued, continued to proceed as if he was making an assessment under section 143(3) - Hence, the order made under section 153A/ 143(3) is not legally tenable and ought to have been made under section 144 of the Act. There is a clear distinction between the two forms of orders i.e. section 143(3) and section 144 and therefore, in the present case, the orders ought to have been passed under section 144 of the Act. Hence the orders so passed by the AO u/s 143(3) for the A.Y 2012-13 and under section 153A read with section 143(3) for the A.Ys 2011-12 and 2009-10 suffer from an incurable jurisdictional defect and cannot be upheld. On this count alone the assessment orders in respect of A.Ys 2012-13, 2011-12 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chinnaswami Godown, G Prakash and chit funds as current assets, loans and advances and investment also feature in the said statement of affairs. The CIT(Appeals) besides computing gross profit on undisclosed trading receipts has also computed undisclosed income of ₹ 4,10,58,508/- on account of cash receipts from debtors and other advances, chit funds and cash loans as per the seized diary in the A.Y 2012-13. Then facts are clearly indicatives of business activities of the companies and not the assessee. There is a sum of ₹ 15 lakhs as cash loan given by Om Prakash Jakhotia. This shows that Om Prakash Jakhotia had given a loan of ₹ 15 lakhs which also is indicative of the fact that all the entries contained in the seized diary A/OPJ/03 do not belong to him. Why would Om Prakash Jakhotia give loan to himself and record the same. This is also a reflection that the books do not pertain to Om Prakash Jakhotia but perhaps belong to the companies. Books for the earlier period were not found during the course of search. From the statement of affairs drawn by the assessee on the basis of seized diary A/OPJ/03, it clearly comes out that the money was used for the bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of AIR information which was not confronted to the assessee at the stage of assessment proceedings and also at the first appeal stage. Also, as per the Form 26AS enclosed as Annexure-I to the synopsis, the Form does not contain any such information. Hence, the additions deserve to be deleted. Unexplained investment of share capital - AO has added this amount based on the statement given by the assessee during the course of search u/s 132(4) - HELD THAT:- The assessee has already retracted from the statement made during the course of search giving cogent reasons for the same vide his affidavit dated 29.10.2013. Besides, there is nothing to show that it is the assessee s money which has come in by way of the share capital in M/s Jakhotia Plastics Private Limited which is a separate legal entity and has robust business activities. The share capital was received by M/s Jakhotia Plastics Pvt. Ltd. from M/s Varad Vinayak Properties Pvt. Ltd through account payee cheques and the seized documents do not contain anything that suggest that any cash was given by the assessee in lieu of the share capital. We fail to understand how addition of the share capital and share premium can be mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That the Ld. Assessing Officer (herein after referred to as the Ld. AO ) as well as Ld. CIT (A) have failed to appreciate the legal position that where the assessee had failed to file any return of income under any of the provisions of section 139 of the Income Tax Act, 1961 (here in after referred to as the Act ) and had also failed even in terms of the notice issued under section 142(1), then the provisions of section 144 are attracted and the Ld. AO has the power to pass an order to the best of his judgment. In such scenario, the assessment order passed under section 143(3) of the Act is illegal and void ab initio. 3. The Ld. CIT (A) has erred in rejecting the retraction filed by the assessee vide affidavit dated 29.10.2013 in respect of the disclosure of ₹ 21.50 crores purportedly made by him without appreciating the fact that, inter alia, the disclosure made was not voluntary; the assessee was not carrying out any business activity in his individual name and therefore, the disclosure in his name was not valid; the Hon ble Delhi High Court quashed the settlement order and directed the Ld. AO to make assessment afresh without giving their opinion on any issue a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h found during the course of search. 6. That the Ld. CIT (A) has erred in law and on facts in sustaining the addition of ₹ 56,43,300/- made by the ld. AO on account of investment made in immovable property on the basis of AIR details inspite of the fact that the Form 26AS was filed by the assessee for the impugned assessment year wherein the AIR information column was blank and it did not have any information relating to the alleged immovable property. 7. That the Ld. CIT (A) has erred in law and on facts in sustaining the addition of ₹ 13,17,000/- made by the Ld. AO on account of cash deposited in the saving bank account on the basis of AIR details inspite of the fact that the Form 26AS was filed by the assessee for the impugned assessment year wherein the AIR information column was blank and it did not have any information relating to alleged cash deposited in any saving bank account of the assessee. 8. That the penalty proceedings initiated by the Ld. AO under section 271AAA and 271F of the Act were invalid and bad in law and thus ought to have been dropped. 9. That the interest under section 234A of ₹ 3,23,41,875/- levied by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and on facts in sustaining the addition of ₹ 4,92,00,000/- being share capital and share premium invested by Varad Vinayak Properties Private Limited into the Jakhotia Plastics Private Limited, in the hands of the assessee as his unexplained income or cash. 5.1 That the Ld. CIT (A) has failed to appreciate that there was no incriminating material found during the course of search which suggested that ₹ 4.92 crores was unaccounted income of the assessee. He has also failed to appreciate that the statements recorded during search do not themselves constitute incriminating material and no addition can solely be made on the basis of retracted statement unless there is some incriminating material. 6. That the Ld. CIT (A) has erred in law in sustaining the addition of opening credit balance of ₹ 11,96,75,000/- as on 01.04.2011 mentioned in the seized dairy A/OPJ/03 made by the Ld. AO under section 69A of the Act, inspite of the fact that no document or diary was seized in respect of the impugned assessment year and merely the opening credit balances as on 01.04.2011 were presumed to be loans received during the impugned year and taxed; the presumption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion interest is chargeable from 1st day of April of such assessment year and upto the date of making the settlement application. 11. The appellant craves leave to alter, amend or any other grounds of appeal either before or during the course of hearing. A.Y: 2010-11-ITA No. 969/DEL/2021: 1. That the order passed by the Ld. Commissioner of Income Tax (Appeals) (herein after referred to as the CIT(A) ) dated 09.06.2021 is erroneous and bad in law and on facts. 2. That the search conducted u/s 132 of the Act on the assessee was not a valid search since none of the circumstances provided under clauses (a) to (c) of subsection (1) of section 132 is fulfilled in the case of the assessee. 3. That the ld. CIT(A) has erred in law and on facts in rejecting the ground of the assessee that the notice issued u/s 153A dated 30.04.2013 is defective, incorrect and shows lack of application of mind and since this a jurisdictional defect, the proceedings initiated and the assessment order passed u/s 153A are invalid and void ab initio. 4. That the ld. CIT(A) has erred in rejecting the retraction filed by the assessee vide his affidavit dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income as per the presumption u/s 132(4A) read with section 292C of the Act. Also the burden lies entirely on the department to rebut that presumption by establishing that it is undisclosed income of the assessee for the impugned assessment year. 5.3 That the ld. AO failed to raise any query or examine the opening credit balances (loans) even though the assessee repeatedly offered to provide the same by way of written submissions. 5.4 That the ld. CIT(A) has also failed to appreciate that the seized diary, A/OPJ/03 did not contain any money, bullion, jewellery or other valuable article or thing therefore the provisions of section 69A of the Act cannot be applied to the impugned addition. 5.5 That the ld. CIT(A) as well as the ld. AO have failed to appreciate the fact that the assessee, Shri Om Prakash Jakhotia was not carrying out any business activity in his individual name and has never shown any business income in his return of income. There was no evidence found during search that the assessee had himself in his individual capacity taken any loans or carried out any business activity. 6. That the ld. CIT(A) has erred in law in sustaining the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of application of mind and since this a jurisdictional defect, the proceedings initiated and the assessment order passed u/s 153A are invalid and void ab initio. 4. That the ld. CIT(A) has erred in rejecting the retraction filed by the assessee vide his affidavit dated 29.10.2013 in respect of disclosure of ₹ 21.50 crores made by him through his statements recorded u/s 132(4) dated 20.01.2012 and u/s 131(1) of the Act dated 08.05.2012. 4.1 That the ld. CIT(A) has failed to appreciate that disclosure made was not voluntary and was incorrect as it was obtained forcefully under coercion and without referring to the assessee the seized documents and without allowing him to consult his tax consultant. The disclosure was not voluntary and was incorrect, can be evident from the fact that the assessee was not carrying any business activity in his individual name and ₹ 5 crores was surrendered to make up for other irregularities which cannot be termed as income under real income concept. 4.2 That the ld. CIT(A) has erred in placing reliance on the order of the Hon ble Delhi High Court dated 15.04.2019 without appreciating the facts and the ratio decid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... never shown any business income in his return of income. There was no evidence found during search that the assesse had himself in his individual capacity taken any loans or carried out any business activity. 6. That the penalty proceedings initiated by the ld. AO under section 271(1)(c) and 271F of the Act were invalid and bad in law and thus ought to have been dropped. 7. That the total tax demand including interest under section 234A and 234B had been raised amounting to ₹ 557080. The ld. AO did give credit for tax and interest paid on the income disclosed before the Settlement Commission. Interest charged under section 234B was not correct. The same should have been charged only upto the date of filing the settlement application in view of sub section 2A of section 234B of the Act. 8. That the interest under section 234A had been charged at ₹ 201623 stating that no return was filed in response to the notice under section 153A of the Act dated 21.04.2013. It may be mentioned that for filing settlement application under section 245C 1 of the Act, there was no requirement to file the return of income for A.Y. 2009 10. The settlement applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en filed is manifest from the assessment order and therefore, the legal ground sought to be taken is obvious, patent and apparent from record and therefore, may kindly be allowed in view of the judgment of the Hon ble Supreme Court in the case of NTPC vs Commissioner of Income Tax, 229 ITR 383 (SC). The additional ground sought to be taken are as under: That the Ld. AO as well as ld. CIT(A) have failed to appreciate the legal position that where the assessee has not filed the return of income under any of the provisions of section 139 and also failed to file the return under section 153A, then the provisions of section 144 are to be invoked and the Assessing Officer has to proceed in accordance with the procedure as per section 144 of the Act and to pass the assessment order to the best of his judgment. In such a case, the assessment order passed under section 153A read with section 143(3) of the Act suffers from incurable jurisdictional infirmity particularly when the Act itself provides for completion of assessment under section 153A read with section 144 of the Act. It is humbly prayed that the above-stated additional ground of appeal be admitted and adjudica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t entries of cash sales purchases of raw material and bags, waste sales, loans, commission on sale expenses, sales expenses, advertisement expenses, factory wages, office salary and other cash expenses, investment in property and chit funds etc. On the basis of these seized diaries, various additions were made by the Assessing Officer in the hands of the assessee in the A.Ys 2009-10 to 2012-13 which are discussed in subsequent paras of this order. 8 During the course of search, statement of the assessee was recorded u/s 132(4) of the Act on 20.01.2012 wherein, he made a disclosure of income of ₹ 21.50 crores. He also confirmed the said disclosure in his post search statement recorded u/s 131 of the Act dated 08.05.2012. The break -up of the said disclosure is as under: (Amt. in Rs. lacs) Particulars F.Y. 2010-11 F.Y. 2011-12 Total Cash credits 708.00 700.00 1,408.00 GP earned on sale of raw material, bags waste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on 12.09.2019. 13 The Ld. CIT(Appeals), New Delhi allowed partial relief to the assessee vide his orders passed for the A.Ys 2009-10 to 2012-13 on 09.06.2021 and being aggrieved by his order, the assessee is in appeal before us. 14 For the sake of ready reference and convenience, the ld. AR submitted a chart showing year wise amounts of additions disputed in the captioned appeals of the assessee. The chart is reproduced as under: Addition Chart of Sh. Om Prakash Jakhotia after CIT(A) Order S.No Particulars/AY 2009-10 2010-11 2011-12 2012-13 Total 1 Cash Receipts from undisclosed sources u/s 69A (Substantive Addition) 800000 11000000 119675000 58060969 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No ROI was filed No ROI was filed Total Amount of additions 800000 13520000 171395000 68570769 254285769 Break up of Cash Receipts upheld by CIT(A) 58060969 Capital Receipts: Fresh Loans 15110465 Chit Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble High Court of Delhi were referred to and relied upon and in fact relief was also given by the CIT(Appeals) following some of the decisions. The assessee further stated that considering that his matter has been adjudicated upon based on various legal issues decided by the jurisdictional Tribunal at Delhi and jurisdictional High Court at Delhi, prejudice will be caused to him if at this stage his matter is transferred. It was further stated that the assessee s counsel is based in Delhi who has assisted him both in the assessments and in appeal proceedings before the authorities below and, therefore, any dislocation of the matter will also be prejudicial to his interest. The ld. AR also stated that in this matter there has been adjudication by the Income Tax Settlement Commission which was set-aside by the jurisdictional Hon ble High Court of Delhi and, therefore, in all fairness the matters must be heard by the Tribunal based at Delhi. The assessee also brought to our knowledge the decision of the Hon ble Bombay High Court in the case of MSPL Ltd. v. PCIT [2021] 436 ITR 199 [21-05-2021] wherein the Hon ble Court has, inter-alia, held that the Hon ble President of the Tribunal doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late Tribunal may be exercised and discharged by Benches constituted by the President of the Appellate Tribunal from among the members thereof. As per sub section (5), subject to the provisions of the Act, the Appellate Tribunal shall have power to regulate its own procedure and the procedure of Benches in all matters arising out of the powers or of the discharge of its functions, including the places at which the Benches shall hold their sittings. To complete the narrative, we may also refer to sub section (6) of section 255 which clearly says that a proceeding before the Appellate Tribunal shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 and for the purpose of section 196 of the Indian Penal Code. It also says that the Appellate Tribunal shall be deemed to be a civil court for all the purposes of section 195 and Chapter XXXV of the Code of Criminal Procedure, 1898. 37. From a careful analysis of section 255, more particularly sub section (5) thereof, it is not discernible as to how power of the President to transfer a pending appeal from one Bench to another Bench outside the headquarters in a different State can be said to be tracea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dquarters, the President or, in his absence, the Senior Vice-President/Vice-President of the concerned zone or, in his absence, the senior most member of the station present at the headquarters may transfer an appeal or an application from any one of such Benches to any other. 41. From an analysis of rule 4 as extracted above, we find that as per sub rule (1), a Bench shall hear and determine such appeals and applications made under the Act as the President may by general or special order direct. Sub rule (2) says that where there are two or more Benches of the Tribunal working at any headquarters, the President or, in his absence, the senior Vice President or Vice President of the concerned zone or in his absence the senior most member of the station present at the headquarters may transfer an appeal or an application from any one of such Benches to any other. While sub rule (1) empowers the President to direct hearing of appeals by a Bench by a general or special order, sub rule (2) is more specific. It deals with a situation where there are more than two Benches of the Tribunal at any headquarter; when there are multiple Benches in a headquarter, the President or, in h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent did not pertain to him, but to the companies which are mentioned in the seized documents itself. Accordingly, we feel that the cases of the companies needs to be verified if there are any common issues involved. Hearing is thus, adjourned to 10/01/2022, as part-heard. Both parties informed. 23 The ld. counsel of the assessee filed a letter dated 06.01.2022 stating that no appeal has been filed by the department in respect of M/s Jakhotia Plastics Pvt. Ltd. and M/s Jakhotia Polymers Pvt. Ltd. This, he stated, is evident from the portal of the ITAT, Delhi as well as the ITAT, Hyderabad. The appeals that have been filed by the companies are in respect of the AYs 2010-11 to 2012-13 by M/s Jakhotia Plastics Pvt. Ltd. vide ITA nos. 963, 964 and 965/Del/2021 and in respect of the A.Y 2011-12 and A.Y 2012-13 by M/s Jakhotia Polymers Pvt. Ltd. vide ITA nos. 967 and 979/Del/2021. According to the ld. Counsel, vide these appeals only a single ground has been taken up wherein additions of ₹ 10,90,000/- for the A.Y 2011-12 and ₹ 20,50,000/- for the A.Y 2012-13 in the case of M/s Jakhotia Polymers Pvt. Ltd. and additions of ₹ 55,000/- for the A.Y 2010-11, ₹ 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and to avail the consequent relief thereon. 3.4 That the Ld. CIT (A) has wrongly relied upon the decision of the Hon ble Guj. HC in the case of Vikas Shipping Corporation v. UOI, 86 taxmann.com 68 (Gujarat), where the facts and circumstances of the case are inconsistent and are at variance with the facts of the case of the assessee company. 25 It is quite clear that the grounds of appeal are completely different and challenge the ad-hoc amount of income offered before the Settlement Commission to qualify for admission and, therefore, quite clearly this is not a connected issue with any of the issues being challenged by the assessee before us. Therefore, there is no need for consolidation of the appeals particularly since no appeal has been filed by the department in respect of the companies or in respect of the assessee till date. 26 We now proceed to decide the issue on merits in respect of the captioned appeals. The ld. counsel of the assessee after narrating the relevant facts and the background of the case, requested that if the appeal for the Assessment Year 2012-13 is taken into consideration, i.e., ITA No.971/DEL/2021, the same will cover most of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... briefly discussed as under: 30.1 The ld. AR contended that admittedly, no ROI either originally u/s 139(1) or in response to the notice u/s 142(1) was filed for A.Y 2012-13. Similarly, no return of income u/s 139 as well as u/s 153A was filed for the A.Y 2009-10 and A.Y 2011-12. This fact is evident from the very first and last page of the assessment orders. Return of income was filed by the assessee for the A.Y 2010-11 only. 30.2 Since, no ROI was filed by the assessee, consequently no notice u/s 143(2) was issued by the Assessing Officer for the A.Y 2012-13 which was the year of search and for which assessment was to be completed as per the normal provisions u/s 143(3) or 144 of the Act. 30.3 For making an assessment under section 143(3), the filing of a return and issuance of notice u/s 143(2) are mandatory as is manifest in the section 143(3) of the Act. 30.4 The Income Tax Act, 1961 provides a separate section 144, which mandates a best judgement assessment or Ex parte assessment. As per section 144 a best judgment assessment has to be made if no return of income has been filed under section 139(1), 139(4) and 139(5) or no return of income is filed in pursu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion no. 6.1 of the same show cause notice enclosed at page no. 432 of the common PB, the Assessing Officer states that on verification of assessees s return of income it is seen that he has not surrendered cash found during the course of search proceedings. Hence from the aforesaid, it is clear that the assessment proceedings suffer from an inherent lacuna resulting in a jurisdictional defect which is incurable in as much as the assessment order has been passed under section 143(3) through conscious application of mind. 31 The Ld. AR contended that provisions of section 143(3) and 144 are not pari-materia; both the assessments are distinct in nature and have distinct consequences which are briefly discussed below: i. Section 144 results in a best judgment assessment which is distinct from an assessment under section 143(3) which is after perusal of return of income and seeking evidences in respect of the incomes and expenditure disclosed in such return of income. A best judgment assessment is made without the benefit of return of income and the Assessing Officer can resort to a rejection of books of account and estimation of income. ii. In a best judgment asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return in the proper form having been filed, the assessment could not have been made under section 143(3). Reliance was also placed on the following decisions: a. Gulab Badgujar (HUF) v. Income Tax Officer [2019] 179 ITD 807 (Pune - Trib.)[06-09-2019]; b. Prabhat Mills Stores Co. Ltd. [1966] 59 ITR 197 (Calcutta HC)[21-01-1964]; c. CIT v Laxminarain Badridas [1937] 5 ITR 170 (Privy Council) [19-02-1937]; d. S. Kumar Enterprises (Synfabs) Ltd. v. JCIT [2005] 4 SOT 412 (MUM Trib.); e. Des Raj Nagpal [2015] 170 TTJ 37 (Amritsar - Trib.) (UO)[23-03-2015]; f. The Hon ble Agra ITAT in the case of Meenakshi Devi v. Asstt. CIT in ITA Nos. 96/Agra/2004 29/Agra/2005; order dated 28.02.2005; g. The Hon ble Chandigarh ITAT in the case of LAL CHAND CO. [1986] 24 Taxman 228 (Chandigarh) (Mag.)[31-08- 1985]; h. The Hon ble Delhi ITAT in the case of Flovel Energy Pvt. Ltd. v. ACIT Devi v. Asstt. CIT in ITA No 6485/DEL/2019; order dated 29.11.2019. 31.2 The Ld. AR further stated that in respect of the A.Y 2009-10 and the A.Y 2011-12, the assessment orders have been passed u/s 153A read with section 143(3) even though undisputedly no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of the Hon ble Delhi Court in the case of Ashok Chaddha [2011] 337 ITR 399 (Delhi HC) for the legal proposition that issue of notice under section 143(2) is not mandatory for finalization of assessment under section 153A of the Act. Decision 36 We have heard the arguments of both the parties and also considered their written submissions and material placed on record before us which was referred to at the time of hearing. 37 In so far as admission of additional grounds as raised by the assessee for the A.Y 2009-10 and AY 2011-12, are concerned, we find that same are purely legal in nature and are arising out of facts appearing in the impugned assessment orders for the A.Y 2009-10 and AY 2011-12. The Assessing Officer at the very firstand second page of his order has stated that no return of income has been filed by the assessee till the date of the assessment order and has proceeded to assess him under section 143(3) of the Act. Thus, the legal grounds do not require any investigation and the same are being admitted for the purpose of our adjudication. 38 The relevant facts qua this legal and jurisdictional issue raised have already been discussed in deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d based on the return filed by the assessee. In this case, no return of income has been field admittedly and, therefore, no notice under section 143(2) was issued for examining the return. 42 A bare perusal of the section 144 of the Act shows that where no return has been filed under section 139(1) or section 139(4), 139(5) and consequent to notice under section 142(1), the assessment shall be made under section 144 and would be termed as best judgment assessment. 43 The reliance on the judgment of the Hon ble Supreme Court in the case of CIT v Segu Buchiah Setty [1970] 77 ITR 539 [23-04- 1970] is very pertinent. And the relevant portion is reproduced as under: The clear import of section 23(4) is that on committing any one of the defaults mentioned therein the Income-tax Officer is bound to make the assessment to the best of his judgment. In other words, if a person fails to make the return required by a notice under section 22(2) and he has further not made a return or a revised return under sub-section (3) of the same section, the Income-tax Officer must make an assessment under this provision. 44 The same view has been expressed by the various High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... error which can be cured by resorting to the provisions of section 292B of the Act. The Assessing Officer even though recording that no return had been filed and no notice under section 143(2) had been issued, continued to proceed as if he was making an assessment under section 143(3) of the Act. Hence, the order made under section 153A/ 143(3) is not legally tenable and ought to have been made under section 144 of the Act. There is a clear distinction between the two forms of orders i.e. section 143(3) and section 144 and therefore, in the present case, the orders ought to have been passed under section 144 of the Act. Hence the orders so passed by the Assessing Officer u/s 143(3) for the A.Y 2012-13 and under section 153A read with section 143(3) for the A.Ys 2011-12 and 2009-10 suffer from an incurable jurisdictional defect and cannot be upheld. On this count alone the assessment orders in respect of A.Ys 2012-13, 2011-12 and 2009-10 do not survive and are liable to be quashed. 47 Though we are of the opinion that the assessment orders for the AY s 2009-10, 2011-12 and 2012-13 are invalid and we are not required to go into the merits of the case. However, in respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und and seized which is enclosed at page 1-347 of the common paper book. The said seized diary contained various ledger accounts depicting numerous debit and credit entries of cash sales purchases of raw material and bags, waste sales, loans, commission on sale expenses, sales expenses, advertisement expenses, factory wages, office salary and other cash expenses, investment in property and chit funds etc. It has been contended that the ledger accounts pertained to the above group companies and contained transactions for the financial year 2011-12 (A.Y 2012-13) only, relating to their business and since, the said seized diary was found from the business premises of M/s Jakhotia Plastics Private Limited and M/s Jakhotia Polymers Private Limited, therefore it can be said to be belonging to the these group companies and 6 other group companies operating out of the registered offices located in the same building and not to the assessee. 52 Ld. AR took us through various pages of the seized diary A/OPJ/03 which is enclosed at 1-347 pages of the common PB in order to establish that the income appearing in the seized diaries i.e. A/OPJ/03 and A/OPJ/01, if at all belonged to the vari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15/-respectively for the year ending 31st March, 2012. There is no turnover of any such item in the hands of the assessee. vii. At page 185 of the common PB seized ledger of Bags Sales is enclosed which shows that bags have been sold to the tune of ₹ 12,82,050/-. The names of the companies Jakhotia Plastics and Jakhotia Polymers are clearly mentioned which shows that Bags sales do not relate to the assessee. Similarly, from the prima-facie reading of the ledger of sales made to Ramu reflected at page 147 to 149 of the common PB, the names of Jakhotia Plastics, Jakhotia Polymers, Jakhotia Polysacks and Raghuram Synthetics clearly come out. Similarly, in the seized ledger of Shri Krishna Plastic, the amount mentioned is ₹ 1,17,26,616/- which is enclosed at page 287 of the common PB and it refers to bill numbers 321,323,325,326, 344, 345, 346 etc. These bills were raised by the companies M/s Jakhotia Plastics Private Limited, in respect of which cash was received. These are purchase bills booked in the company against which cash was received. viii. Seized Ledger of Servo enclosed at page no. 173 to 174 of the common PB: ₹ 1,05,60,000/- is a raw material add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efers to factory. Quite clearly, factory and office belonged to the group companies because the assessee, Shri Om Prakash Jakhotia does not have any individual office. xvii. Ld. AR also submitted that the handwriting of the entries contained in the seized diary, A/OPJ/03, is not of assesse which also shows that the assessee was not maintaining these accounts. xviii. He also submitted that the expenditure etc. in the seized diary was fuelled out of the receipts, loans etc. He stated that the loans reflected in the seized diaries had been used for the purpose of business which also clearly shows that these related to the group companies and not to the assessee individually. 53 The ld. AR also drew our attention to an important observation at page 38 of the common PB. In the said ledger, there is an entry of ₹ 15 lakhs which represents cash loan given by Om Prakash Jakhotia. This shows that Mr. Om Prakash Jakhotia had given a loan of ₹ 15 lakhs. Ld. AR argued that if these were the personal books of Shri Om Prakash Jakhotia, how could he give loan to himself and then charge interest. The loan account of Om Prakash Jakhotia is at page 38 of the common paperbo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agencies v. ITO [2007] 18 SOT 12 (DELHI)(SB); ii. The Hon ble Mumbai ITAT in the case of Ashwin C Jariwala Pradeep v. ITO [2017] 164 ITD 255 (Mumbai) dated 02.09.2015; iii. The Hon ble Madras High Court in the case of Murugesa Naicker Mansion [1999] 104 Taxman 563 (Madras HC); iv. The Hon ble Mumbai High Court in the case of CIT v SMSL-UANRCL (JV) [2015] 372 ITR 429 (Bombay HC); v. The Hon ble Madras High Court in the case of CIT v. Abdul Rasheed [1999] 240 ITR 402 (Madras HC); vi. The Hon ble Kerala High Court in the case of Neela Productions [1997] 223 ITR 504 (Kerala HC); vii. The Hon ble Delhi ITAT in the case of B.D. Gupta Sons v. ITO [2015] 70 SOT 16 (DELHI Trib.); 56 The ld. CIT-DR objected to the contentions raised by the ld. AR by stating that this legal issue i.e. the seized documents do not belong to the assessee, has not been raised by him before the lower authorities nor did he raise it before the Hon ble Settlement Commission. 57 The ld. CIT-DR also submitted that the assessee in his statement u/s 132(4) of the Act dated 20.01.2012 and also in his post search statement u/s 131 of the Act dated 08.05.2012 made a vo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied on the total income of every person who is liable to pay tax on the same. Reliance was placed on the judgment of the Hon ble Supreme Court in the case of Ch. Atchaiah [1996] 218 ITR 239 wherein it has, inter-alia, been held that there is no discretion vested in the Assessing Officer to tax the income in the hands of a wrong person merely because such course is more beneficial to the revenue. In other words, the correct person who is liable to pay income-tax on the income has to be assessed and if for any reason a wrong person has been taxed, it does not preclude the Assessing Officer from taxing the right person. This judgment is the guiding force for the principle that the Assessing Officer has to tax the right person and the right person alone who is liable to pay income tax in accordance with law and has no option to tax in accordance with his belief or notion or discretion. The relevant paras of the decision of the Hon ble Apex Court are reproduced as under: 7. In our opinion, the contention urged by Dr. Gauri Shanker merits acceptance. We are of the opinion that under the present Act, the ITO has no option like the one he had under the 1922 Act. He can, and he must, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct to the provisions of, this Act in respect of the total income of the previous year or previous years, as the case may be, of every person: Provided that where by virtue of any provision of this Act income-tax is to be charged in respect of the income of a period other than the previous year, income-tax shall be charged accordingly. (2) In respect of income chargeable under sub-section (1), income-tax shall be deducted at the source or paid in advance, where it is so deductible or payable under any provision of this Act. [Emphasis supplied] (The Amendments made by the aforesaid Amendment Act of 1987 do not make any difference so far as the present controversy is concerned). The expression 'person' is defined in clause (31) of section 2 in the following words : 'Person' includes- (i) an individual, (ii) a Hindu undivided family, (iii) (in) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not, (vi) a local authority, and ( vii) every artificial juridical person, not falling within any of the preceding sub-clauses. 10. A compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent wanted to provide an option, a discretion to the ITO, it has provided so expressly. 62 In view of the aforesaid judgment of the Hon ble Supreme Court, we are of the opinion that the issue, whether the income belongs to the assessee or not, is a jurisdictional/ foundational issue which can be adjudicated upon at any stage of the proceedings based on the facts available on record. The Assessing Officer cannot assess any person simply because it is more convenient to do so or it is in the interest of revenue. Similarly, just because the assessee claims that income may be taxed in his hands which he retracts later, he can t be assessed in respect of the said income if the overwhelming facts establish that the income does not belong to him. 63 It is an udisputed fact that the search was conducted at the premises 3-6-323, Jakhotia House, Basheerbagh Hyderabad-500029 on 20.01.2012 where the registered office of M/s Jakhotia Plastics Private Limited and M/s Jakhotia Polymers Private Limited was situated and the assessee also resided at the same premises. There were six other companies/entities namely Raghuram Synthetics Pvt. Ltd , Jakhotia Enterprises, Jakhotia Polyfibre P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the transactions pertain to the companies for the said assessment year or not. The CIT (Appeals) has computed the undisclosed income of the assessee based on the seized diary A/OPJ/03 at ₹ 5,80,60,969/-. He has computed the total undisclosed cash receipts emanating from the said seized diary at ₹ 15,37,92,608/- based on the cash book summary given by the assessee at page 85 and its reconciliation on the subsequent pages of his order. He has provided the break- up of the said total undisclosed cash receipts at page 93 of his order. Out of the total undisclosed cash receipts, he computed the undisclosed revenue income at ₹ 1,70,02,461/- by applying the gross profit rate of 15% on the undisclosed trading receipts of ₹ 11,21,83,571/-. For the purpose of computing the trading receipts, he has relied upon the profit-loss account drawn by the assessee from the seized diary A/OPJ/03 which features at page 91 of the Ld. CIT (A) order. The trading receipts clearly show raw-material sales, bags sales, waste sales and sales to certain other parties etc. The expenses in the profit-loss account are on account of sales expenses, commission on sales, purchase for waste sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia Plastics and Jakhotia Polymers. Similarly on page 221 of the common PB is an advertisement ledger which shows the name of the Raghuram, Polyfibre and Jakhotia Polysacks. Seized Ledger of consultancy charges at page no. 227 of the common PB also shows names of Raghuram, Polyfibre and Polysacks. Ledger of Rates Taxes at page 245 shows the names of RSPL (i.e. Raghuram Synthetics Private Limited) and Jakhotia Plastics and Jakhotia Polymers. Suspense account at page 247 also shows the names of Jakhotia Plastics and Jakhotia Polymers. The loan ledger at page 280-281 shows receipts and payments pertaining to Jakhotia Spinning Mills Private Limited and Jakhotia Enterprises. Similarly at page 309 of the common paper book is the account of Subham Plast which reflects the name of Jakhotia Plastics, Jakhotia Fibre and Jakhotia Polysacks. Page 324 is the ledger of Balkrishna Contractor which shows the name of Jakhotia Plastics and Jakhotia Polymers. Page 328 refers to land purchase ledger which is pertaining to Jakhotia Spinning Mills Private Limited. Ledger accounts of Jakhotia Enterprises, a partnership firm at page no. 313 and Jakhotia Spinning Mills Private Limited at page 335 of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income at showing very large taxable sums from business year after year. Their accounts are audited and they have other directors and large number of managers and personnel to run their business. 70 The Hon ble Supreme Court in the case of Union of India and Anr Vs. Azadi Bachao Andolan(2003) 263 ITR 706 have held that even a single share-holder company is to be held an independent company from its share-holder. The Companies Act, 2013 also recognizes a single share-holder company under section 2(62) of the Act. There is also nothing to show that the income of the companies has been appropriated by the assessee. In fact what comes out is that he has given a loan to the companies for running their business activities. We have already stated the legal principle propounded by the Hon ble Supreme Court in the case of CH. Atchaiah (supra) and also the provision of section 4(1) of the Income-tax Act which says that the person who has earned the income and is liable to incometax, can only be assessed. 71 We are also bound by the settled law laid down by the Hon ble Delhi High Court in the case of Kabul Chawla [2016] 380 ITR 573 that the income can be accessed only in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court. The assessee also retracted the statement. We have already held that the seized diary A/OPJ/03 belong to the companies and not the assessee in his individual capacity. There are numerous cash transactions that appear in the seized diary. There is no evidence that the cash belongs to the assessee in his individual capacity since he only derives passive income. The conclusion therefore, is inescapable, that the cash belongs to the companies and hence, cannot be assessed in the hands of the assessee. Thus, the addition amounting to ₹ 35,49,500/- stands deleted. 75 Ground nos. 6 and 7 relate to the additions of unexplained investment of ₹ 56,43,300/- in immovable property and cash deposit in saving bank account of ₹ 13,17,000/- made on the basis of AIR details respectively. 76 The ld. AR submitted that the sole basis of these additions was some AIR Report which was never confronted to the assessee at any stage. This fact is evident from the assessment order and CIT(A) s order also. The ld. AR further stated that the Assessing Officer in fact, did not even mention the name of saving bank account in which alleged cash deposit of ₹ 13,17,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivate Limited where this amount was also substantively added by the Assessing Officer. The additional evidences included confirmation, ITR, Computation of Income, Ledger accounts, Bank statement and Audited financial statements from Varad Vinayak Properties Private Limited in order to discharge onus u/s 68 of the Act in the hands of Jakhotia Plastics Private Limited. However, the CIT(A) deleted the addition in the case of Jakhotia Plastics Private Limited and instead confirmed the addition in the hands of the assessee. 84 The ld. AR also stated that the Assessing Officer did not make any independent enquiry or verification of the impugned transaction by issuing summons u/s 131 of the Act to M/s Varad Vinayak Properties Pvt. Ltd, a separate legal entity and the actual investor, before adding this huge sum in the hands of the assessee. 85 The ld. CIT-DR, on the contrary, stated that the assessee himself admitted in his statement recorded under section 132(4) that the share capital and share premium paid by Varad Vinayak Properties Ltd. into M/s Jakhotia Plastics Pvt. Ltd. is his unaccounted money generated over a period of time. She also relied upon the findings of the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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