9911796707
TMI Blog2022 (1) TMI 1351X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 143(2) was issued - Assessment Proceedings for AY 2018-19 - HELD THAT:- As it was to be held that none of the conditions for invoking jurisdiction u/s 144 was satisfied by Ld. AO which would vitiate the assessment proceedings. Further, the assessee has filed valid return of income and no notice u/s 143(2) has ever been issued before making assessment. The non-issuance of notice u/s 143(2), in non-curable defect and therefore, assumption of jurisdiction and subsequent order passed u/s 144 becomes bad-in-law. The case laws as cited above clearly support the legal ground raised by the assessee. Therefore, we hold that the assessment order passed for this year fails on legal grounds and the consequential additions made therein become unsustainable. We order so. This being so, no further adjudication is required in the appeal for AY 2018-19. The assessee s appeal stand allowed on this ground alone. Addition based on statements recorded by investigation wing during the course of search operations from various persons - HELD THAT:- The pre-existing statements recorded by the Investigation Wing could not form the sole basis of assessment. It could also be seen that Shri G.K. Ren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s / individual - HELD THAT:- As we find that the debit / transfer entries aggregating to Rs.243.19 Crores have been treated to be the assessee s income on the allegation that assessee s unaccounted income has been routed through these accounts for the benefit of group as a whole. However, in para 7.10, we have already taken a position that the credit transfer received by the other family members and group concerns could not be assumed to be assessee s undisclosed income since it is nowhere been established by the lower authorities that the assessee was de-facto owner of either Nagaland based bank accounts or the owner of bank accounts of various recipients. The other family members and group concerns of the assessee were separate Income Tax assessee and subjected to separate assessment. Therefore, the credit received in those accounts could not be held to be the assessee s income. Under these circumstances, the assessee s onus would remain confine to explain the credit received by it in his own bank accounts. Further, the assessment proceedings for AY 2018-19 have already been quashed by us on legal grounds. Therefore, at the outset, the addition, to that extent, could not be sust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per Book No.3A. We have perused the same. We find that all the other credit entries are in the nature of maturity proceeds of LIC, Chit money received by the assessee, directors loan withdrawn, mutual funds proceeds from UTI, refunds etc. These entries are not in the nature of assessee s income. Therefore, the additional amount of Rs.88.50 Lacs as worked out by the assessee is found to be correct and therefore, sustained in the hands of the assessee. The remaining addition stands deleted since the same is not the in nature of income. Credit for income disclosed under IDS 2016 has not been given to the assessee - We find that this credit was not given in the absence of requisite declarations / certificates forthcoming form the assessee. The assessee has now placed all these documents in the paper book which has been detailed in Table 35 of written submissions. Further, the assessee has already considered such declaration while working out additional income which has also been accepted by us. Therefore, the assessee is left with no grievance on this account. Non consideration of additional evidences / documents as filed by the assessee before Ld. CIT(A) on 15.03.2021 and 16. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the payment of majority of taxes thereon in several instalments on 29.11.2019, 18.03.2020 and 19.03.2020. 2b. That the Ld. CIT(A), erred in overlooking the vindictive and malicious approach adopted by the Ld. A.O in waiting for the Appellant to make further payment of taxes towards the settlement application on 18.03.2020 19.03.2020 before informing the Appellant about the passing of the impugned assessment order dated 17.03.2020 on 19.03.2020. 2c. That the Ld. CIT(A) failed to appreciate that the assessment proceedings for the impugned A.Y. were kept open by the Ld. A.O on the e-portal until 19.03.2020 and as such. there was no way in which the Appellant could have found out about the impugned assessment order dated 17.03.2020 unless the closure of the proceedings for the impugned A.Y. was informed by the Ld. A.O. to the Appellant, which was clearly not done until 19.03.2020. 2d. That the assessment order so passed by the Ld. AO hurriedly on 17.03.2020, solely with the intention of denying the Appellant his once in a lifetime opportunity of approaching the Hon'ble Settlement Commission provided under the law, although the assessment was getting time barred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holding the substantive addition of Rs.26,52,70,270/- made by the Ld. A.O on account of alleged credit transfers from Nagaland based entities and persons in the books of the Appellant, his family members, his family concerns/ group entities and also third parties totally overlooking the detailed documentary evidences and submissions filed by the Assessee duly explaining the impugned entries. 6b. That the Ld. CIT(A) erred in not appreciating that no substantive addition of impugned credits entries found in the books of family members, group entities and third persons, which were separate legal and taxable entities, could be made in the hands of the Appellant. 7a. That the Ld. CIT(A) erred in upholding the addition of Rs. 58,89,874/- made in the hands of the Appellant on account of cash deposits appearing in the bank accounts of the Appellant ignoring the detailed explanations and documentary evidences filed by the Appellant. 7b. That the Ld. CIT(A) erred in upholding the substantive addition of Rs.1,62,00,000/- made in the hands of the Appellant on account of cash deposits appearing in the bank accounts of family members maintained in Nagaland ignoring the detailed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000/- made by the Ld. A.0 on account of alleged cash payments for acquisition of immovable properties overlooking the submissions and details filed by the Appellant. 11. That, without prejudice to the above, the Ld. A.O and the Ld. CIT(A) erred in not having considered in totality all the evidence placed before them by the Appellant which should have been examined by the Ld. A.O. in the course of the remand proceedings at the first appellate stage and should have been acted upon by the Ld. CIT(A) in his appellate order. 12. That, as the order of Ld. CIT(A) upholding the assessment proceedings u/s 153A and addition made therein suffers from illegality and is devoid of any merit, the same should be quashed and your Appellant be given such relief(s) as prayed for. In ground Nos.1 to 4c, the assessee has raised various legal grounds assailing the validity of assessment proceedings. In the remaining grounds, the assessee contest confirmation of quantum additions on merits. For AY 2018-19, the assessee has raised additional legal grounds seeking quashing of assessment order for non-issuance of notice u/s 143(2) as well as in terms of the provisions of Sec.144 / 142(1). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ox. 11% 15% respectively in M/s Mooneymuttathu Nidhi Ltd. M/s Allebasi Builders Developers (P) Ltd. The assessee s wife Smt. Valsala Raj is partner in various partnership firms i.e., M/s Sreevalsam Jewellers, M/s Sreevalsam Residency, M/s Rajvalsam Media Ads M/s Lekshmi Industrial Work. She is proprietor in M/s Rajavalsam Fuels. She is also shareholder / director in corporate entities M/s Sreevalsam Hotels Resorts Pvt. Ltd., M/s Rajavalsam Motors (P) Ltd., M/s Sreevalsam Golds and Diamonds (Pvt.) Ltd., M/s Mooneymuttathu Nidhi Ltd., M/s Smart Residency Hotels India (P.) Ltd., M/s Allebasi Builders Developers (P) Ltd. M/s Vrindavan Builders (P) Ltd. The assessee s son Shri Arun Raj is proprietor of M/s Sreevalsam Residency. He is partner in various partnership firms i.e., M/s Money Muttam Finance, M/s Nenco Gas Service, M/s Sreevalsam Residency, M/s Rajvalsam Media Ads M/s Sreevalsam Health Care. He is also Shareholder / director in corporate entities M/s Sreevalsam Hotels Resorts Pvt. Ltd., M/s Rajavalsam Motors (P) Ltd., M/s Sreevalsam Golds and Diamonds (Pvt.) Ltd., M/s Krishnamoney Chits (P) Ltd., M/s Mooneymuttathu Nidhi Ltd., M/s Smart Residency Hotels ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or release of properties attached by the revenue which was substantially rejected. The assessee paid partial taxes towards impending settlement applications and requested Ld. AO to grant additional time to prefer such applications. As per the submissions made before us, it has been submitted that the assessee was assured time up-to 23.03.2020 which was disregarded and the assessments were framed in a hurried manner on 17.03.2020 thus thwarting assessee's efforts to seek settlement of the issues or to file requisite details / information as sought by Ld. AO in various show cause notices. 3.5 It was noted by Ld. AO that during his engagement with the Nagaland Police Department, the assessee had been looking after the affairs of Police Vehicles including purchase of vehicles, procurement of their spare parts etc. The major issue emerges from the fact that there was huge inflow of funds in as many as 38 different bank accounts held in the name of various individuals and entities which were based in Nagaland. The inflow of funds in these accounts was out of government contract receipts. However, these funds were allegedly utilized for the benefit of assessee group which led Ld. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e payments were transferred to the group concerns in the aforesaid manner only. Most of these banks carried mobile number of the assessee. However, the assessee, in statement recorded u/s 132(4) on 24.10.2017 maintained that he was getting commission and loans from these parties. 3.8 The Nagaland based 38 bank accounts were held in the name of various entities / individuals based in Nagaland. The credits in these accounts were government contract receipts as well as cash deposits. These accounts were held in various names viz. M/s Excellence Associates, Nagaland Police Petrol Pump (NPPP), Rengma, General Automobiles, P.S. Enterprises and Solo Enterprises etc. All of these contractors would be Nagaland residents since government contracts would be given to Nagaland residents in most of the case. These residents would merely be name lender whereas actual business would be carried on by someone from the mainland whose names would not appear anywhere. Since these residents are exempt from paying income tax u/s 10(26), they are not required to maintain any books of accounts and the bank account remain the only proof that the business is being carried out by them. Accordingly, these e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness of the petrol pump but getting monthly commission of Rs.75,000/- per month for name lending. The assessee initially submitted that the funds received from this entity were loan. However, in statement recorded u/s 131 on 24.10.2017, the assessee admitted that the receipts from Nagaland Police Petrol pump were his income, being his share of profit. The summary of credits into this account and amount transferred to accounts linked to assessee has been tabulated on page-37 of the order. The credits from government were Rs.187.55 Crores, cash deposits were for Rs.68.78 Crores, transfer to accounts linked to assessee group was for Rs.33.80 Crores whereas there were cash withdrawals of Rs.82.67 Crores. However, the confirmation received from Indian Oil Corporation revealed that the amount received by India Oil Corporation for supply of fuel to this entity was in the range of 2.6 crores to Rs.4.9 crores per annum. 3.11 Funds Transferred through Rengma Account The real name of this person was stated to be Shri G.K. Rengma who used other names viz. Shri Tep Rengma and Shri G.T. Rengma with different PAN and DINs. He was stated to have worked for Police Department in the past ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of jewellery and textile for the group etc. Accordingly, the credits received in these accounts were to be treated as assessee s income since the same was earned by the assessee in Nagaland. 3.15 The assessee raised various objections to the proposed additions which have been dealt with by Ld. AO on pages 83 to 96 of the assessment order. We have gone through the same. An important fact that could be borne out of the same is that the assessee and his family members offered certain undisclosed income under Income Declaration Scheme (IDS), 2016. The undisclosed income for AYs 2012-13 to 2017-18 was stated to be quantified mainly based on the funds transferred from the banks accounts of Nagaland based individuals / entities to the bank accounts of assessee group. However, Ld. AO alleged that the assessee failed to establish the nexus of undisclosed investment declared under IDS 2016 and the funds transferred from the banks accounts of Nagaland based entities and therefore, the credit of the same could not be granted to the assessee. 3.16 Quantification of Undisclosed income In the said background, Ld. AO proceeded to assess the income of the assessee for all the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Arun Raj, Son of Assessee - Pooja Raj, Daughter of Assessee 2,347,600 546,800 11,955,963 17,846,071 37,712,080 66,718,946 59,124,335 50,740,531 11,238,000 Sub Total (D) 32,696,434 225,533,892 TOTAL 36,158,184 3,092,134,720 - The detailed break-up of entity-wise / year-wise additions made for AYs 2012-13 to 2017-18 could further be tabulated as under: - PARTICULARS AY 2012-13 AY 2013-14 AY 2014-15 AY 2015-16 AY 2016-17 AY 2017-18 SUB TOTAL FOR 6 YEARS I Transfer from Nagaland based individuals 265.270,270 287,624,682 273.684.066 489.173.429 590,230.521 525,982,171 2,431,965,139 Sub Total (A) 265.270.270 287,624,682 273,684,066 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50,00,000 30,000,000 161,000,000 Sub Total (C) 64,500,00016 16,500,000 50,00,000 30,000,000 161,000,000 IV Other Credits in Self Family Bank Accounts: -MK Rajendran Pillai, Assessee 1,820,000 9,131,200 1,800,000 3,203,280 940,000 18,470,000 35,364.480 - Valsala Raj, Wife of Assessee 20,346,587 14,678,842 8,226,966 4,100,000 7,750,000 11,069,751 66,172,146 - Varun Raj, Son of Assessee 17,456,000 12,639,629 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16,10,00,000 Total Addition 34,01,94,057 2,75,19,40,663 3,09,21,34,720 3.18 Finally, the assessments were framed in similar fashion for all the years u/s 143(3) r.w.s. 153A except for AYs 2018-19 wherein the assessment was framed on best judgment basis u/s 144 of the Act since the assessee failed to make submissions and file requisite details. 3.19 From the above tabulation, it could be seen that the entire credit entries and cash deposits appearing in the bank accounts of the family members and various group concerns, which were separate legal and taxable entities, was also added on substantive basis in the hands of the assessee. This is despite the fact that all these entities were independently assessed to tax and assessed as such for several years, much before the Income Tax Search took place on the Sreevalsam group. 3.20 The assessments so framed were subjected to further challenge before learned first appellate authority and a common order was passed, the outcome of which is as under. 4. Appellate Proceedings 4.1 The assessee assailed the validity o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Ld. CIT(A). Further, the additions were based not only on the statements of persons based in Nagaland but after considering various documentary evidences and bank statements. During the course of assessment proceedings, the recorded statements were shown and confronted to the assessee. No specific request for cross-examination was ever made by the assessee. The statement made by Shri G.K. Rengma was retracted after inordinate delay of about 21 months and retraction was not supported by any evidences. Therefore, the plea of violation of natural justice was also dismissed by Ld. CIT(A). 4.5 During appellate proceedings, remand report was sought by Ld. CIT(A) on various submissions made by the assessee. These submissions include Personal financial statements of family members, Income declared under IDS Scheme, 2016 along with supporting documents, Audited financial statements, Government work order copies and other supporting document of Shri. G.K. Rengma, M/s Excellence Associates, M/s Nagaland Police Petrol Pump and M/s General Automobiles. The assessee submitted that financial statements of the family members were prepared after incorporating the additional income intended t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up. Detailed findings were rendered by Ld. AO for each of the group of entities. As against this, the assessee did not offer and specific explanation to the above transactions routed through these bank accounts. The assessee failed to prove the claims regarding the true nature of each of the transactions of which he or his family members and other business concerns were beneficiaries. The assessee also failed to explain as to why there was no loan agreement and why there was no security against huge loans, no interest was ever paid and there was no repayment of principal amounts and the lenders were not aware of the quantum of alleged loans so advanced. All these facts would negate the claim that the said receipts were loans. The assessee himself admitted receipts from NPPP as his income. Therefore, the additions made by Ld. AO on this count were confirmed. The totality of the circumstances and the evidences gathered would show that the assessee routed his unaccounted money through the said 38 bank accounts to himself and family members and group concerns. Therefore, the substantive assessments of receipts in the bank accounts were upheld. 4.9 Cash deposit in the bank accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not bring on record any material to show the nexus of such cash deposits in the bank accounts maintained outside Nagaland by family members and group concerns. The family members and group concerns had independent sources of income outside Nagaland. Therefore, Ld. AO was directed to delete the additions of cash deposits made outside Nagaland in the bank accounts of family members and M/s VBPL and partly allowed the ground raised by the assessee. The Ld. AO was directed to consider the same on substantive basis in assessment framed on family members and M/s VBPL. 4.11 Cash Payments for purchase of immovable properties. The assessee submitted that cash payments for acquisition of immovable properties were made out of family cash pool and therefore, the same stood explained. The Ld. CIT(A) noted that the assessee did not disprove the facts of cash payments as noted in the assessment order. The cash flow statements of assessee and his family members was not supported by any specific explanation for each of the cash receipts. The assessee thus could not furnish evidence in support of nature of source of cash receipts. No evidence was furnished to explain the availability o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of search proceedings, no such additions could be made u/s 153A. This ground primarily arises in AYs 2012-13 to 2014- 15 since these assessments are stated to be unabated assessment years. The Ld. AR submitted that in the absence of any incriminating material on record, no such additions could have been made by Ld. AO. However, this plea could not be accepted since this is not a case wherein no incriminating material has been found. Rather, it is the finding of Ld. CIT(A) that several incriminating materials were seized which include blank letter head of Nagaland based persons / entities, blank cheques, notes / diaries containing details of payments received and transferred. The evidence relating to unexplained investment made in cash towards purchase of immoveable properties was also seized. Thus, this is a case where sufficient incriminating material has been found by investigation team which indicates undisclosed income of the assessee. The aforesaid plea is also to be rejected in terms of decision of Hon ble Kerala High Court in E.N. Gopakumar (75 Taxmann.com 215) wherein it has been held that there is no such requirement of incriminating material to assess or reassess the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d return. 6.3 We also find that as per the provisions of Sec.144, it is incumbent on the part of Ld. AO to give assessee an opportunity of being heard before proceeding with the assessment on best judgment basis. However, no such opportunity is shown to have been given and no notice u/s 143(2) has ever been issued to the assessee. Beside initial notice u/s 142(1) dated 19.11.2019, no further show-cause notice has been issued to the assessee which runs contrary to statutory provisions of Sec.144. Therefore, for this year, no valid jurisdiction could be said to have been assumed by Ld. AO. The Ld. AO has acted in violation of the provisions of Section 144 which obligate Ld. AO to issue show-cause notice before proceeding with the assessment. Secondly, mandatory statutory notice u/s 143(2) has not been issued by Ld. AO which would invalidate assessment proceedings as per settled legal position including the decision of Hon ble Karnataka High Court in CIT vs. Gouthamchand (17 Taxmann.com 46) besides various other decisions of Tribunal. In this decision, Hon ble Court held that it is pre-condition to issue notice u/s 143(2) irrespective of fact whether the assessment has been framed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 143(3) of the Act contemplates an assessment undertaken by the Assessing Officer upon material being produced by the assessee on grounds which are indicated by the Assessing Officer in his notice under section 143(2) of the Act in respect whereof the Assessing Officer may have misgivings or may disagree with the return filed by the assessee. Implicit in the wording of Section 143(3) of the Act is the indispensability of a notice under section 143(2) thereof. 11. Apropos the second question framed above, it is necessary that Section 292BB of the Act be noticed in its entirety: 292BB Notice deemed to be valid in certain circumstances Where an assessee has appeared in any proceeding or cooperated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was- (a) not served upon him; or (b) not served upon him in time; or (c) ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court dictum in Hotel Blue Moon (supra), the view expressed in Humboldt Wedag India (P.) Ltd. (supra) is per incuriam and, as such, not good law. 13. Similarly, the Hon'ble Supreme Court in the case of CIT v. Laxman Das Khandelwal [2019] 108 taxmann.com 183/266 Taxman 171/417 ITR 325 (SC), held as follows: 7. A closer look at Section 292BB shows that if the assessee has participated in the proceedings it shall be deemed that any notice which is required to be served upon was duly served and the assessee would be precluded from taking any objections that the notice was (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner. According to Mr. Mahabir Singh, learned Senior Advocate, since the Respondent had participated in the proceedings, the provisions of Section 292BB would be a complete answer. On the other hand, Mr. Ankit Vijaywargia, learned Advocate, appearing for the Respondent submitted that the notice under section 143(2) of the Act was never issued which was evident from the orders passed on record as well as the stand taken by the Appellant in the memo of appeal. It was further submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee intimated lower authorities from time to time about the progress of the same and paid installment of taxes as per settlement application. To make tax payments, the assessee filed petition before Ld. Pr.CIT on 22.05.2019 for release of the properties which was rejected on 26.07.2019 thus preventing the assessee to settle the issues before Hon ble ITSC. Nevertheless, the assessee and his family members paid first installment of taxes aggregating to Rs.6.29 Crores towards impending settlement applications. The aforesaid facts were communicated by the assessee in response to statutory notices issued by Ld. AO u/s 143(2) for AYs 2012-13 to 2017-18 as well as subsequent notices issued u/s 142(1) for these years. The assessee was expected to file response to show-cause notices running into more than 140 pages within a short span of time which was against the principle of natural justice. In the meantime, Ld. AO, vide letters dated 25.02.2020, issued orders for conditional release of 3 properties from attachment u/s 281B. The assessee filed partial reply to show-cause notice dated 31.01.2020 and sought further time to file voluminous details as called for in short span of time. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be disclosed by the assessee and his family members in their settlement applications. 7.4 In yet another legal plea, the assessee has submitted that Ld. AO erred in passing the assessment orders so as to circumvent the decision of Hon ble Guwahati High Court on the writ petition filed by the assessee challenging the transfer of assessee s case. The assessee challenged transfer of jurisdiction to ACIT, Kollam on 18.07.2018 which was challenged before Kohima Bench of Hon ble Guwahati High Court. The writ petition was dismissed on 25.09.2019. In response, the assessee filed another petition before division bench of Hon ble Guwahati High Court on 27.02.2020 which was pending for hearing on the date of framing of the assessments. Since the challenge to transfer of jurisdiction was sub-judice at the time of framing of assessment, the assessments are liable to be quashed. 7.5 This plea of Ld. AR could not be accepted since at the time of framing of assessments, no stay was in operation and Ld. AO was under no obligation to keep the assessments in abeyance. Accordingly, this ground stand dismissed. 7.6 In yet another legal ground, the assessee has assailed impugned addition on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business turnover made by Shri G.K. Rengma. Further, the retraction was made after long delay and stood nullified by the Turnover Certificates produced by him during the course of post search proceedings. So far as the retraction of statements of Shri G.M. Nair, Shri Babu Kuriakose and Shri Sabu Komban Francis were concerned, those persons failed to substantiate and justify the long delay in retraction. Further the additions were not solely based on statements. Having received funds from those accounts, the burden was on assessee to prove the true nature of the receipts which assessee failed to discharge. Accordingly, cross-examination was inconsequential in nature. 7.7 Upon perusal of case records, it could be seen that certain statements were recorded by investigation wing during the course of search operations from various persons viz. Shri G.K. Rengma, Shri Zhori Kire, Shri G.M Nair, Shri Babu Kuriakose, Shri Sabu K. Francis and various land owners/contractors purportedly linked to the Sreevalsam Group who had allegedly received certain payments from various Nagaland based parties. These statements were used to support the impugned additions. However, no independent investi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sufficient to support the impugned additions. 7.8 In the last legal ground, the assessee has contested the impugned additions on the ground that the additions have been made merely on the basis of surmises, conjectures and on borrowed satisfaction without specifying the relevant sections under which additions have been made. The Ld. AR has submitted that exorbitant additions have been made on substantive basis in the hands of the assessee without specifying the relevant sections in the body of assessment order. Referring to demand notices for various years, the Ld. AR has further submitted that tax rate as specified u/s 115BBE has been applied which would show that Ld. AO has invoked the provisions of Sec.68 or 69 or 69A to 69D to make impugned additions. 7.9 Referring to table as extracted by us in preceding para-3.17, Ld. AR pointed out that out of total credit transfers of Rs.243.19 crores from the impugned bank accounts of Nagaland based parties, only Rs.23.99 crores pertain to the present assessee. The remaining credit of Rs.219.21 Crores pertain to transfers made to the accounts of other persons viz. family members, group concerns and various third parties not related ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kage to the assessee. Similar is the case with the additions made on account of cash deposits and other credit entries in the bank accounts of family members group concerns and the alleged on-money paid by them. Therefore, these credits could not be added in the hands of the assessee unless the assessee is proved to be the actual owner of all these bank accounts. To summarize, Ld. AR contended that out of total substantive additions of Rs.309.21 crores made in the hands of the present assessee, only Rs.34.02 Crores could be linked to the assessee or his bank accounts, a large part of which already stands disclosed under IDS, 2016. The Ld. AR has further contended that the AO, apart from relying on surmises and conjectures, has brought nothing on record to prove that the sums credited in bank accounts of family members, group entities and third parties represent the undisclosed income of the assessee. Per Contra, the family members and group entities, vide their respective affidavits, have solemnly affirmed that the above entries belong to them only and that the assessee has nothing to do with the entries in their respective bank statements. The Ld. Sr. DR, on the other hand, reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 38 bank accounts are held by 21 Nagaland based individual / entities and the additions made on this count could be tabulated as under (Table-9, Page No.68 of written submissions containing 140 pages): - No. Name of Nagaland Party Amount 1 G.K. Rengma/ Tep Rengma 751,151,040 2 Excellence Associates (Rolly Thenucho Tunyl) 876,159,246 3 Nagaland Police Petrol Pump 332,547,690 4 General Auto 68,431,089 5 Mezhunuo Solo 53,500,000 6 Ken Chishi 160,851,774 7 A Daili 5,000,000 8 Auto Spares 4,000,000 9 Babu Kuriakose 3,550,000 10 Bokali K Chishi 45,000,000 11 Fresh Bakery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee and his family members or their business concerns were beneficiaries from these accounts. The third parties to whom the payments were made were found to have business relations with the assessee group. Per contra, the assessee did not offer and specific explanation to the above transactions routed through these bank accounts and the assessee failed to prove the claims regarding the true nature of each of the transactions. The totality of the circumstances and the evidences gathered would show that the assessee routed his unaccounted money through the said 38 bank accounts to himself and his family members and group concerns. Therefore, the substantive assessments of receipts in the bank accounts were upheld. Aggrieved, the assessee is in further appeal before us. 8.4 From the perusal of assessment order, the undisputed position that emerges is that the assessee group has received credit entries from 21 Nagaland based individuals / entities who happen to be the government contractors and suppliers. The substantial credit in all these 38 accounts represents government contract receipts which have been sourced to transfer the funds to the assessee group. All these bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd consultancy services apart from some petty contract jobs. The Ld. AR further submitted that assessee s wife also started assisting various Nagaland contractors in respect of their book keeping, tender documentation, bank payments etc. against remuneration. For smooth discharge of her duties relating to the financial transactions, she was given power of attorney by these Nagaland contractors to operate their bank accounts also. The income thus generated by her was used for investment in her proprietary and partnership business in Kerala and also in acquiring landed properties. She also actively involved herself in the business of various group concerns of the Sreevalsam Group as partner/director/proprietor along with her two sons. Similarly, both the sons were well qualified and they actively involved themselves in establishing and expanding various business concerns/entities of the Sreevalsam Group alongwith their mother. They also actively involved themselves in various contract liaisoning works for various Nagaland tribal contractors in their individual capacities. The liaisoning work generally included negotiating with sub-contractors, procurement of materials etc. The income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,23,48,300.00 5,09,09,836.59 2011-12 42,79,72,754.67 37,87,21,736.36 16,13,36,156.34 7,05,04,562.65 2012-13 35,57,63,678.22 34,01,82,648.62 21,11,13,813.98 6,78,14,843.65 2013-14 24,12,65,239.45 32,58,56,265.08 15,05,28,555.36 7,03,58,331.86 2014-15 48,87,76,534.00 34,20,48,086.14 11,04,08,182.00 7,07,84,654.00 2015-16 51,40,58,792.34 73,48,34,649.16 37,26,70,975.86 6,86,35,730.00 2016-17 49,78,03,974.40 30,75,07,184.66 12,96,75,720.89 8,05,24,579.64 2017-18 - - 15,02,54,370.24 Total 2,72,88,89,918.67 2,53,14,9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the assessee group with mutual understanding to share future profits. These parties also undertook renovation/ extension/ construction of certain properties including hotels, showrooms etc. belonging to the Appellant group. It was also agreed that the account of such expenses would be submitted on completion of such construction/ renovation/ extension when either the expenses made by them would be reimbursed with reasonable return or the same would be transferred to loan account or capital account. All these facts have been affirmed by Nagaland parties vide their respective affidavits enclosed in the paper books. It has further been submitted that that part of liaisoning and contract incomes remained undisclosed and therefore, the same were declared in IDS, 2016. Post search proceedings, the remaining undisclosed income was worked out which was intended to be settled before Hon ble ITSC. 8.8 The additional income proposed to be disclosed by the Appellant and his family members vide their respective settlement applications u/s 245C(1) of the Act has been tabulated by the Ld. AR in his written submissions as under (Table 10 of page no.73 of written submissions containing 140 pag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. Particulars Amount (Rs.) Tables in Paper-Book 1. Declarations made under IDS 2016 21.13 Crores Table 17 17A 2. Income disclosed in Income Tax Returns 00.02 Crores --- 3. Cash Payments to Nagaland based parties for subsequent transfers out of explaine sources 4.58 Crores Table 17B 4. Unsecured Loans received from Nagaland based parties 88.41 Crores Table 17C 5. Proposed Disclosure under ITSC 17.12 Crores Table 38 Total 131.26 Crores The necessary working and explanations for each of the head have been furnished in the written submissions and paper-book at various places which has duly been considered by us. The details of third-party transfers aggregating to Rs.111.93 Crores have also been submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acto owner of either Nagaland based bank accounts or the owner of bank accounts of various recipients. The other family members and group concerns of the assessee were separate Income Tax assessee and subjected to separate assessment. Therefore, the credit received in those accounts could not be held to be the assessee s income. Under these circumstances, the assessee s onus would remain confine to explain the credit received by it in his own bank accounts. Further, the assessment proceedings for AY 2018-19 have already been quashed by us on legal grounds. Therefore, at the outset, the addition, to that extent, could not be sustained in the hands of the assessee. We order so. 11. Upon perusal of Chart as extracted in para 8.10 and Table as extracted in para 8.11, it could be seen that credit entries received by assessee group was only to the extent of Rs.131.26 Crores whereas the remaining amount of Rs.111.93 Crores were third party transfers which could not be linked with the present assessee. There is nothing on record to prove that such transfers represent assessee s undisclosed income. These entries represent payments / investments / cash withdrawals etc. made by Nagaland pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Undisputedly, the source of such loans is government contractual receipts as held by Ld. AO himself. Upon perusal of table extracted in para 8.6, it is quite evident that both these parties are engaged as government contractors since past several years and executing voluminous contract for the government. Undisputedly the transactions have taken place through banking channels. On the basis of all these documentary evidences, it could be said that the requisite onus as required to be discharged u/s 68 was duly discharged by the assessee and it was the onus of the revenue to dislodge the same. However, upon perusal of orders of lower authorities, we find that no cogent material or evidences are on record to dislodge the claim of the assessee rather the additions are based more on allegations, surmises, conjectures and mere suspicion. In such a case, these amounts could not be considered to be the assessee s undisclosed income. We order so. In the result, the addition to the extent of Rs.5,44,90,000/- is sustained under this head and the balance additions stand deleted. The corresponding grounds raised by the assessee in all the years stands partly allowed. 14. The quantum of addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redit entries deposited outside Nagaland in the account of the family members / group concern has already been deleted by Ld. CIT(A). Aggrieved, the assessee is in further appeal before us. The assessee submissions, in this regard, are contained in para 9.1 to 9.21 of the written submissions which we have gone through. 15.2 The details of impugned cash deposit as tabulated by the assessee in Table-21 is as under: - PARTICULARS AY 2012-13 AY 2013-14 AY 2014-15 AY 2015-16 AY 2016-17 AY 2017-18 AY 2018-19 TOTAL Cash Deposit in Self, Family Group Entities Bank Accounts: - M K Rajendran Pillai, Assessee 5,889,874 5,670,735 10,108,000 14,620,000 11,251,000 12,417,000 2,648,300 62,604,909 - Valsala Raj, Wife of Assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additions to that extent may be sustained. 15.4 The Ld. AR submitted that such income intended to be declared in the settlement applications aggregate to Rs.20.59 Crores out of which amount of Rs.5.75 Crores was proposed to be declared by the present assessee. The same has been tabulated in Table 38 to 38D in the written submissions. The Ld. AR submitted that complete cash flow statements were submitted before Ld. CIT(A) vide submissions dated 16.09.2021 which were completely overlooked. These cash flow statements provide complete details of the source of impugned cash deposits. The nature of entries on the debit side of the cash flow statements (i.e., receipt side) has been broadly categorized by the Ld. A.R. under the following sub-heads (as evident from the cash flow statements): - (i) Liaisoning and contract income earned in cash and declared under IDS, 2016 details tabulated in Table 34A of the written submissions (Rs.11,90,36,231/- for the family as a whole, declaration by each family member considered in his/her respective cash flow statements); (ii) Liaisoning and contract income earned in cash and disclosed in the ITR of the respective family members (Rs.3,97,68,277/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he accounted and unaccounted cash entries of the assessee group for the impugned years. The cash flow statements already form part of the departmental records and the same has been overlooked by lower authorities. The sources of the impugned cash deposits in the bank accounts of the assessee group and the movement of cash (i.e., the intra family transfers) between accounts is clearly visible from the cash flow statements. The unaccounted cash receipts constituting part of the assessee group has duly been incorporated in the cash flow statement which form the basis of proposed declaration before Hon ble ITSC. Therefore, these workings are to be accepted. We order so. 17. So far as the addition of cash deposit in the Nagaland based bank accounts of family members / entities are concerned, the addition thereof would not be maintainable in the hands of the assessee for the reason that those entities were separate taxable entities having independent sources of income. Therefore, the cash deposit so made in their account would be subject matter of consideration in their respective hands only and the same are beyond the scope of present appeal. 18. So far as the addition of Rs.6.26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under this head. However, Ld. CIT(A) held that other credit entries in the bank accounts of family members / group entities for Rs.18.78 Crores would not be sustainable since these entities were separate taxable entities. The balance credit entries of Rs.3.77 Crores as appearing in assessee s bank accounts were restored back to the file of Ld. AO to find out the income component therein. 21.2 The Ld. AR submitted that while working out additional income for the purpose of disclosure before Hon ble ITSC, the assessee realized that he was not having complete details / supporting evidences in support of credit entries aggregating to Rs.88.50 Lacs as tabulated in Table 22B and therefore the addition to that extent could be confirmed. For ease of reference, the same is tabulated as under: - Date Bank Details Amount Credited Description as per Assessment Order 30.01.2013 Vijaya Bank A/c No. 810101450000004 40,00,000 TAC Gear 9044125000923, Syndicate Bank, Nehru Place 04.03.2013 Vijaya Bank A/c No. 810101450000004 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tries are either not in the nature of income and a part of these entries has already been disclosed under IDS 2016. Few of the entries have already been disclosed in the Income Tax Returns of the assessee. The complete details of these entries have been placed by the assessee on page numbers 58 and 59 of Paper Book No.3A. We have perused the same. We find that all the other credit entries are in the nature of maturity proceeds of LIC, Chit money received by the assessee, directors loan withdrawn, mutual funds proceeds from UTI, refunds etc. These entries are not in the nature of assessee s income. Therefore, the additional amount of Rs.88.50 Lacs as worked out by the assessee is found to be correct and therefore, sustained in the hands of the assessee. The remaining addition stands deleted since the same is not the in nature of income. The additions as sustained by us for various years would be as under: - Assessment Year Amount 2013-14 50,00,000 2015-16 20,50,000 2017-18 18,00,000 Total 88,50,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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