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TMI Blog2024 (12) TMI 1113X X X X Extracts X X X X X X X X Extracts X X X X ..... required to be involved to give effect to the same. We are unable to accept that any of the orders passed in the case of Sh. Pawan Kumar Bansal and Sh. Mahesh Kumar Bansal are dispositive of the assessee s liability to pay tax and therefore, no notice u/s 148 of the Act was warranted for giving effect to any such finding. We hold that it is clear from the perusal of the order of the Coordinate Bench of this Court [ 2015 (8) TMI 373 - DELHI HIGH COURT ] as well as the order of the learned ITAT, CIT(A) that in none of the orders, there was any finding or direction that the undisclosed income of Rs. 7 crores was required to be assessed to tax in the hands of the assessee, which warranted issuance of notice u/s 148 of the Act to give effect to such finding or direction. We are thus of the view that in the present case, the learned CIT(A) and the learned ITAT have rightly examined the decisions [ 2014 (10) TMI 221 - ITAT DELHI ] and connected matters, and of Coordinate Bench of this Court in [ 2015 (8) TMI 373 - DELHI HIGH COURT ], and held that there was no finding or direction given by the Courts on the basis of which powers u/s 150 of the Act could have been invoked for issuance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money of Rs. 7 crores, received on account of undisclosed income from unaccounted property dealings have been invested in share capital/cash found. The investment have been made by me and Sh. Mahesh Kumar Gupta and the details are as follows:- Name Undisclosed investment 1. Shri Pawan Kumar Bansal : A. cash found at the residence of Vikram Bansal amounting to Rs. 20,00,000/-. B. investment in share capital of various companies amounting to Rs. 3,35,00,000/- Rs. 3,55,00,000/- 2. Shri Mahesh Kumar Bansal : Investment in share capital of various companies amounting to Rs. 3,45,00,000/- Rs. 3,45,00,000/- Total of 1 2 Rs. 7,00,00,000/- 3. However, in his Return of Income for AY 2007-08, Sh. Pawan Kumar Bansal only disclosed an amount of Rs. 20 lakhs as undisclosed cash found, and did not include the remaining amount of Rs. 6.8 crores in his Returned Income. As a result, while passing the final assessment order, the concerned Assessing Officer added the amount of Rs. 6.8 crores to the income of Sh. Pawan Kumar Bansal Rs. 3.35 crores on substantive basis and Rs. 3.45 crores on protective basis and Rs. 3.45 crores in the hands of Sh. Mahesh Kumar Gupta on substantive basis. 4. Both the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,110/-. The case of the assessee was picked up for scrutiny. However, eventually, an assessment order was passed on 31.12.2008 whereby the income of Rs. 80,53,110/-, returned by the assessee, was accepted. 8. However, the Deputy Commissioner of Income Tax, Circle-5(2), New Delhi [hereafter the AO ] issued a notice under Section 148 of the Act on 19.11.2015 to the assessee, proposing to reassess its income for the AY 2007-08 on the ground that there were reasons to believe that the income of the assessee for the said AY had escaped assessment. In the reasons for initiating action under Section 148 of the Act separately recorded by the AO, the AO noted that in the proceedings pertaining to Sh. Pawan Kumar Bansal, the learned ITAT (in ITA No. 5201/Del/2010 connected matters) as well as the Coordinate Bench of Court (in ITA 529/2015) had concluded that the income of Rs. 7 crores was disclosed by Capital Power Systems Ltd. and not by individuals , and therefore, the said income was to be added in the hands of the assessee. The AO, therefore, invoked the provisions of Section 150 of the Act on the premise that there was a conclusive finding of the learned ITAT as well as this Court which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the income of Rs. 7 crores was disclosed by Capital Power Systems Ltd . and not by individuals. It is therefore, obvious that Rs. 7 crore has escaped from assessment and the escapement has been resulted by the finding of Hon'ble ITAT. Hence, it is a fit case for reassessment u/s 148 r.u 150 (1) of the Income Tax Act, 1961. 10. In view of the above, I have reasons to believe that an amount of Rs. 7,00,00,000 (Rupe seven crores) chargable to tax in the hands of M/s Capital Power Systems Pvt. Ltd. (PAN AAACC0119R) during the A.Y. 2007-08 has escaped assessment and I am satisfied that it is a case for issue of notice u/s 148 r.w.s. 150 of the Income-tax Act 9. The Assessment Order was passed under Section 147 read with Section 143 (3) of the Act by the AO on 16.03.2019. The AO observed that Sh. Pawan Kumar Bansal had himself declared the amount of Rs. 7 crores and also the fact that the said amount belonged to the assessee, and the statements to this effect were not retracted by him either. Therefore, the AO concluded that the amount of Rs. 7 crores was undisclosed in the hands of assessee. Accordingly, the income of the assessee for the AY 2007-08 was assessed at Rs. 7,80,53,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is perverse in law as well as on facts in respect of the terms referred to in the question herein above? 14. However, by virtue of order dated 24.10.2024, it was observed that the principal question of law arising for the Court s consideration was: Whether the learned ITAT has erred in proceeding on the basis that conditions set out in Section 150 of the Act were not satisfied? SUBMISSIONS BEFORE THIS COURT 15. The learned counsel appearing for the Revenue contended that the learned ITAT failed to appreciate the fact that Sh. Pawan Kumar Bansal, in his capacity as the CEO of the assessee herein, had filed the letter dated 01.09.2006, surrendering the additional income of Rs. 7 crores. He submits that the learned ITAT also ignored the finding of its Coordinate Bench in order dated 30.09.2014 (in the case of Sh. Pawan Kumar Bansal) wherein it was clearly observed that the disclosure of Rs. 7 crores was made by the Capital Power System Ltd. (assessee) and not by Sh. Pawan Kumar Bansal in his individual capacity. He also pointed out that this Court in ITA 529/2015 had also noted that the disclosure of Rs. 7 crores was made on behalf of the company (i.e. the assessee herein) and not in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been made at the time the order which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken. 19. A plain reading of the above provision reveals that an assessing officer can issue a notice under Section 148 of the Act, at any time, for the purpose of making an assessment, reassessment or recomputation, in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision or by a Court in any proceeding under any other law. 20. In this background, it would be first relevant to consider the scope and purport of the terms finding or direction as contained in Section 150 (1) of the Act. 21. In ITO v. Murlidhar Bhagwan Das: (1964) 52 ITR 335, the Constitution Bench of the Hon ble Supreme Court elaborated on the scope of the terms finding and direction , though in context of Section 34 of the old Indian Income Tax Act, 1922. The Court clarified that a finding refers to a decision on a material question that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g refers to a decision on a core issue directly necessary for resolving the specific case at hand, while a direction is a statutorily empowered instruction that is indispensable for the disposal of the case. Both terms demand a direct and substantive nexus to the matter under adjudication and cannot extend to incidental or ancillary conclusions. Consequently, the invocation of Section 150 of the Act requires a strict and cautious application of these terms to prevent the reopening of assessments based on findings or directions that are only incidental, tangential, or beyond statutory authority. 24. Thus, the sole question to be answered by us, in the given set of facts, is whether there was any finding or direction in the order of the learned ITAT (in ITA No. 5201/Del/2010 and connected matters) or in the order of Coordinate Bench of this Court (in ITA 529/2015) to give effect to which the AO could have issued notice under Section 148 of the Act for the purpose of reassessment or recomputation and specifically with regard to the addition of an amount of Rs. 7 crores on the ground of the same being undisclosed income of the assessee i.e. Capital Power Systems Ltd. 25. In this regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Q-4 : Kindly give the source of generation of this Rs. 7 crores of additional income? Ans : The detailed explanation regarding the source of this additional income of Rs. 7 crore will be submitted later on after going through the seized material. In general this additional income of Rs. 7 crores have been generated through different transactions conducted outside the regular books of accounts. Q-5: Do you want to say anything else? Ans : No. The above statement has been given by me voluntarily out of my free will without any pressure, force, coercion, undue influence. I have read over the above statement and found that it is correctly recorded and/stand by the above statement. 10. From the above, it is evident that in response to question No. 2, it has been stated by the assessee that Shri Pawan Kumar Bansal disclosed the income on behalf of Capital Group of companies. In response to question No.8, it was also mentioned that the details of the disclosure can be given by the assessee only after going through the seized material. The same was reiterated in response to question No. 4 also. Thus, from the entire statement, it is evident that the disclosure was made by Shri Pawan Kumar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrying on any business in his individual capacity. The business is carried on by Capital Group of Companies including Capital Power Systems Ltd. whose CEO is Shri Pawan Kumar Bansal, i.e., the assessee. The original disclosure made vide letter dated 1st September, 2006 was for and on behalf of Capital Power Systems Ltd. The assessee signed the above letter in his capacity as CEO of the said company. In the statement dated 8th September, 2006, he deposed before the Revenue authorities in which he affirmed the voluntary disclosure of additional income of Rs. 7 crores on behalf of Capital Group of companies . Thus, even in the statement dated 8th September, 2006, there was no disclosure in the individual capacity of Shri Pawan Kumar Bansal. In another statement dated 12th September, 2006, he reiterated his earlier statement vide letter dated 1st September, 2006 and statement dated 8th September, 2006. Thus, the disclosure of income was by Capital Group of companies. However, in reply to another question in his statement dated 12th September, 2006, he disclosed the income of Rs. 3,55,00,000/- in his individual capacity and the income of Rs. 3,45,00,000/- in the name of Shri Mahesh Kum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO for the purpose of issuance of notice under Section 148 of the Act reveal that he has placed reliance solely on the above-noted observations of the learned ITAT, as contained in paragraph 9 of the order dated 30.09.2014. The AO appears to have considered these observations as a conclusive finding that Rs. 7 crores constituted undisclosed income of the assessee. However, we are of the opinion that this reasoning is erroneous for the reason that the AO has overlooked the subsequent findings contained in the same order. 28. Notably, in the succeeding paragraphs of the same order, the learned ITAT had noted that Sh. Pawan Kumar Bansal in his statement recorded on 08.09.2006 had stated that the income of Rs. 7 crores was disclosed on behalf of the Capital Group of Companies. The learned ITAT also referred to the statement of Sh. Pawan Kumar Bansal recorded on 12.09.2006, wherein he had reiterated his earlier statements and had provided bifurcation of the amount of Rs. 7 crores disclosing part of the income in his own hands and the remainder in the hands of Sh. Mahesh Kumar Gupta. Significantly, the learned ITAT observed in paragraph 12 of its order that the business was not being car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... low: 2. The question sought to be urged is whether the ITAT erred in upholding the order of the Commissioner of Income Tax (Appeals) [CIT(A)] which in turn held that the income of the Respondent Assessee was to be determined on the basis of the undisclosed income as per the noting on the loose papers recovered during search and consequently deleted the addition of Rs. 3,07,00,000/- which was made on account of a statement recorded of the Respondent Assessee during the Course of search. 3. The central plank of the Revenue's case is a letter written on 1st September 2006 whereby the company of which Respondent Assessee was Chief Executive Officer voluntarily surrendered additional income of Rs. 7 crores to avoid litigation and buy peace of mind subject to non-initiation of penalty or prosecution... . The ITAT has analysed the aforementioned letter and come to the conclusion, and in view of the Court rightly, that it was made explicit from the said letter that the surrender was being made by the company and not by the Respondent Assessee in his individual capacity. 4. It transpires that the above letter was followed by other letters and statements made on 8th 12th September 2006. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel for the Revenue stated that he would have to seek instructions. (Emphasis added) 32. We are of the view that though the order of the Coordinate Bench of this Court did not contain any finding or direction, as has been assumed by the AO, evident from the reasons mentioned by him for initiating action under Section 148 of the Act recorded by him, he had committed an error by assuming that there were findings for invoking jurisdiction under Section 147 of the Act by him. It will be relevant to note that the AO had concluded that the Coordinate Bench of this Court had observed in paragraph 3 of the order dated 29.07.2015 that Rs. 7 crores constituted the undisclosed income of the assessee. However, a closer reading of paragraph 3 of the order dated 29.07.2015 makes it clear that the Coordinate Bench had made the said observation specifically in paragraph 3 of the order in context of discussing the contents of the letter dated 01.09.2006 and had concurred with the view of the learned ITAT in that regard. However, the AO had committed an error as he had relied on paragraph 3 of the order selectively, completely ignoring the contents of the succeeding paragraph 4 of the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 08.09.2006, Sh. Pawan Kumar Bansal had disclosed that the additional income of Rs. 7 crores was being declared and surrendered on behalf of the Capital Group of Companies, not by assessee alone. The AO had not conducted any further inquiry to find out as to whether the undisclosed income of Rs. 7 crores belonged to the assessee or any other company of the Capital Group of Companies, its directors, senior executives, spouse, family members, relatives, etc. 37. Resultantly, we are of the view that the AO, in the present circumstances of the case, despite there being contradictions in the letter dated 01.09.2006 and the two statements of Sh. Pawan Kumar Bansal had failed to notice, the common thread in the statements as well as the letter that, the income of Rs. 7 crores was not declared by him in his individual capacity or on behalf of the assessee but on behalf of the Capital Group of Companies etc., as observed in the preceding paragraphs. 38. The necessary conclusion, in such circumstances and background of facts, is that the income so declared and surrendered was not declared on behalf of the assessee but could have been spread amongst the Group s entities, individuals and t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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