9911796707
TMI Blog2025 (1) TMI 379X X X X Extracts X X X X X X X X Extracts X X X X ..... ete facts of case/ supply of materials used against assessee / providing reasonable opportunity of being heard. (4) That learned ACIT erred in not issuing a single show cause notice before making additions of Rs. 2,47,940/- in A.Y. 92-93 & Rs. 19,36,095/- in A.Y. 93-94 w.r.t. alleged income tax refund money receipts belonging to Govt. of India and thereby further erred in raising demands of Rs. 2,37,368/- in A.Y. 92-93 & Rs. 13,21,127/- in Α.Y. 93-94. (5) That learned ACIT erred in not supplying evidence to prove alleged charges of claims / receipts / utilization / repayment of such alleged income tax refund money receipts, though directed to supply by Hon'ble ITAT. (6) That learned ACIT erred in not supplying copies of statement dt. 21-4-93 recorded by ITO Ward 8 (1), A'bad & statement dt. 22-4-93 recorded by ITO ward 8 (8) A'bad though directed to supply by Hon'ble ITAT. (7) That learned ACIT erred in not supplying legible Xerox copies or neat & clean typed copies of statements dt. 23, 24-4-93 u/s. 132 (4) of I.T. Act. (8) That learned ACIT erred in not supplying Annexure "A" & Annexure "B", containing relevant extracts of statements dt. 21,22,23,24/4/93, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect as stated in A.O. dt. 8-12-06. V (16) That learned ACIT erred in ignoring contentions raised in letters dt. 12-6-06, 12- 9-06 (253 pages), 28-11-2006, and thus overruled the directions of Hon'ble ITAT. VI (17) That learned ACIT ought to have appreciated that alleged income tax refund money receipts, which belongs to Govt. of India, and hence recovered fully with interest, does not constitute income chargeable to tax u/s. 2 (24)/U/s. 4 r.w. other sections of I.T. Act. (18) That learned ACIT erred in not appreciating that there is no provision under I.T. Act to recover Rs. 37.93 lakhs (Rs. 21.84 lakhs recovery of alleged income tax refund money receipts being Govt. property + Rs. 15.59 lakhs as income tax plus interest demand thereon treating same Govt. property as assessee's income) against Rs. 21.84 lakhs receipts. Appellants' income cannot be recovered. BUT such income can be taxed. Tax can be recovered out of income earned and balance of income is at the disposal of appellant. (19) That learned ACIT erred in relying upon case laws cited in A.O. dt. 8-12-06, which applies to taxation of income from illegal business only, and not to taxation of alleged mis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refund of balance amount with interest. The question of charge of interest u/s. 234 A/234 B of I.T. Act and question recovery proceedings of such demands does not arise under I.T. Act. (24) That, presuming even if alleged charges are proved before Hon'ble Supreme Court of India in a criminal case and even under any other laws in force, fact remains that such alleged income tax refund money receipts, belongs to Govt. of India. AND hence does not constitute taxable income under Income Tax Act AND/ or OTHERWISE assessee is entitled to a huge refunds along with interest u/s. 132 B (4)/244 A of I.T. Act as cited in above grounds of appeal." 3. This is second round of litigation before this Tribunal. The brief facts of the case as per the records are as under :- 3.1 The assessee is a Chartered Accountant by Profession. A search and seizure operation carried out at the residential and office premises of the assessee and several incriminating documents were found and seized. This search has been initiated after the Income-tax Officer, Ward 8(1), Ahmedabad while verifying the claims of refunds in the cases of Amratlal S. Vyas, Kishore B. Jagtiani, Kishore B. Jagatiani (HUF) and Kokilabe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principle of natural justice, the revenue is required to give the copies of statements and materials used against the assessee while framing the assessment so that the assessee can put his stand and defend his case. We find that the facts of the case have not been completely recorded by lower authorities as the assessee did not get reasonable opportunity to put his case before the lower authorities. After considering the totality of the facts of the case, we find appropriate to send back the matter of these appeals to the file of CIT(A) to decide the same afresh, with a direction to supply the copies of statement recorded and other materials which were used against the assessee while framing the assessment. The CIT(A) will provide a reasonable opportunity of hearing to both sides and will record the complete facts before deciding the matter, since, we have sent back the matter to the file of CIT(A) for fresh consideration as discussed above. Under the circumstances, we are not expressing any opinion or giving any finding on merit on the other grounds raised in these appeals." 5. The ITAT later modified the order holding that ".....After considering the facts of the case, we find s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9-06 AND as further demanded by your office letter dt. 20-4-09 from the office of Learned ACIT Cir-9. Ahmedabad. Thus learned ACIT has failed to establish complete facts of case (1) by not supplying copies of statements so recorded on which heavy reliance has been place in A.O. dt. 23-3-95 u/s. 143 (3) and A.O. dt. 8-12-06 u/s. 143 (3) r.w.s. 254 (1) of 1.T. Act (2) by not providing evidence & material used w.r.t. alleged changes (page 6377) (3) by not providing opportunity of being heard (Page 58-62), violating principles of justice as per directions of Hon'ble ITAT's order dt. 8-6-05 & 7-9-05. No such evidence has been filed before Hon'ble Criminal Court/High Court/ICAI even till today." 7. Referring to the submission dated 27.08.2009, the assessee pleaded reiterating the facts there on : * that alleged misappropriation of income tax refund /money receipts of Rs. 21.98 lakhs, has been recovered fully, by Govt. of India, hence does not constitute income chargeable to tax under I.T. Act, Govt. property cannot be assessed at its citizen's income. * that alleged income tax refund money receipts of Rs. 21.98 lakhs, belongs to Govt. of India, and hence same has been recovered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such alleged income tax, refund receipts has been filed before any competent Court including Criminal Court even after twenty years. * that Income tax refund received by him was recovered subsequently fully, further, the said refund amount belongs to Govt. of India and therefore does not constitute income u/s 2(24) of the I.T. Act 1961. 8. On the other hand, Ld. CIT(DR) Shri Karun Kanth Ojha argued and filed Revenue's arguments in writing that: (i) The assessee has confirmed that the amount of Rs. 2,47,943/- and Rs. 19,36,095/- for Assessment Years 1992-93 and 1993-94 respectively were indeed received by him by en-cashing of Refunds fraudulently. (ii) If the assessee was aware that the Refunds received fraudulently belonged to Govt. of India, then why was he waiting for Income tax Department to recover the amount? Further, had there been no detection, the amount would never be deposited in Government account. (iii) As per the findings of The Ld. CIT (A), the fraudulently en-cashed refunds received by the assessee in the FYs 1990-91, 1991-92 and 1992-93 had been utilized by him in the following manner:- (i) Rs. 10,26,060/- had been invested in shares in the name of the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ares in the name of HUF. In assessment year 1994-95 and 1995-96, the recoveries have been made out of investments made by the assessee in the name of the HUF and its members. Therefore, the deduction of an expenditure, if any, has to be considered from the income of assessment years 1994-95 and 1995-96 only. The assessee is a professional and has shown income from profession on mercantile basis. There is no reason to consider and allow expenditure to the assessee in A.Yrs. 1992-93 & 1993-94 on that basis. Arguing so, the Ld.DR submitted that the addition has been made rightly in the hands of the assessee. Further, the ld. DR relied on the order of the ld. CIT(A), the operative part of which is as under:- "... After going through the directions issued by the Hon'ble ITAT, the assessment order passed by the AO, various submissions made by the appellant, the remand report submitted by the AO and the rejoinder submitted by the appellant, this appeal is decided in paras below. The Hon'ble ITAT directed the AO to provide copies of the material used against the appellant and after giving reasonable opportunity of being heard the assessment may be made afresh. As mentioned in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Amratlal S. Vyas, Kishore B. Jagtiani, Kishore B. Jagatiani (HUF) and Kokilaben H. Shah, became suspicious about the genuineness of the challans attached with the returns of income, because the refunds claimed were disproportionately high compared to the income shown by them. On further verification, it was found that the challans have been fabricated and a fraud has been perpetrated by the appellant who happens to be the Authorized Representative of the above named assessee. Thereafter, the Deputy Commissioner of Income-tax, Range 8. Ahmedabad, brought these facts to the knowledge of the Commissioner of Income-tax, Gujarat- III, Ahmedabad to the effect that the appellant had defrauded the Revenue as well as the government by forging advance tax challans and subsequently filing these forged challans in various Wards along with the return of income in bogus names with an intention to claim refunds. The above allegation was duly supported by the confession made by the appellant in the statement recorded by the Income-tax Officer, Ward 8(8) and Ward 8(1), Ahmedabad. In the statements recorded on 21/4/1993, 23/4/1993and 24/4/1993, the appellant had admitted that he had defrauded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d professional premises of the appellant u/s 132(1) of the I.T. Act. The department identified 106 cases where such bogus refunds were claimed and obtained by the appellant. By the above act, the appellant had made, himself liable to the prosecution under various provisions of the Indian Penal Code for which the ITO, Ward 8(1) had launched First Information Report with the Ellisbridge Police Station, Ahmedabad on 24/4/1993 vi) From the scrutiny of the seized documents, case records available with the I. T. Department and the statement recorded, it was found that the appellant had earned a total income Rs. 21,75,500/- which pertained to assessment year 1991- 92.. 1992-93 and 1993-94. The break-up of the above income has been furnished in paragraph 3.1 of the assessment order for assessment year 1991-92 as follows:- Α.Υ. 1991-92 - Rs 14,905/- Α.Υ. 1992-93 - Rs. 2,37,141/- A.Y.1993-94 - Rs. 19,23,453/- This was the total amount reflected in the RHS Family Account Ho.581. Out of the above amount, Rs. 23,444/- had been withdrawn by the appellant in cash from time to time. The withdrawals amounting to Rs 23,444/- pertained to assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ously productive but must be one whose; object is the production of; a definite return excluding anything in the nature of a windfall (CIT vs. Shaw Wallace & Co, AIR PC. 133)." (b) For the purpose of taxation of any income at the hands of an assessee, two things are necessary (i) firstly, the income must have accrued or arisen to or must have been received by the assessee, and (ii) secondly, the income, profits and gains to form the basis of tax must represent the true Income, apart from the deemed or fictional Income under the statutory provisions. Once it is held that a particular income had accrued or arisen during a particular accounting year and that that represented the true income of the assesses for that year, then the income is taxable notwithstanding the rival claim put forward by the third party to the amount In question (Indian Copper Corporation Ltd. Vs. CIT(1976) CTR (Pat), 227, 233, 234). (c) Although the distinction between capital receipt and revenue receipt is well recognized, the task of assigning it to the appropriate head in borderline cases is not free from difficulty and becomes one of much refinement. Decided cases can provide illustrations and afford ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section are not to be cut down by the consideration that the trade is tainted with illegally. The taint of illegality or wrong-doing associates with income, profits and gains is immaterial for the purpose of taxation. Even if a trade is illegal, it is still a trade within the meaning of income Tax Act, and its income, profits and gains are chargeable to Income-tax (see, Wheatoroft's Law of Income-tax part 1- 411, page 1196, Simon's Income-tax, Second edition, Vol.2, para 480). The cases where these principles were laid down are - (1) Mann. V. Nash (1932)16 TAX Cas. 523,527-8) It was held that in truth, the revenue representing the state, is merely looking at an accomplished fact. It is not condoning it, it has not taken part in it, it merely finds profits made from what appears to be a trade which has to be taxed. 2) Lindsay vs. Comrs of Inland Revenue (1932) 18 Tax Case, 43.56)- A case on bootlegging partnership between three persons for the purpose of getting whisky into the United States by committing a breach of laws. Profits held to be taxable 3) Canadian Minister of Finance vs. Smith (1927)A.C.193(PC): Once the character of business has been ascertained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the character of the activity has been ascertained as being in the nature of trade, the person who carries it on cannot found himself upon the element of illegality in it, to avoid the tax (Lindsay vs. IRC 18 TC 43). He cannot invoke his (owrn turpitude and claim immunity (Canadian Minister of Finance vs. Smith (1927) AC 193). By taxing such income, the State is not taking part in the crime or condoning it, nor would it become a principal or a sharer in the illegality. The revenue merely looks at an accomplished fact, viz of profits having been earned and assesses the same. The assessee may be prosecuted for the crime and yet be charged on the profit (Mann v. Nash 16 TC 523). To hold otherwise would be to put a premium on dishonesty and fraud. The burglar and the swindler are also liable to tax as the honest businessman and, in addition, they may also reap their deserts elsewhere (Canadian Minister of Finance V. Smith (1927 AC 193,193) In short, Income Tax Acts are not necessarily restricted in their application to lawful business only (Southern Vs AB Ltd 18 TC 59,73). It is, however, possible to urge in some cases that the crime is such that there can be no trade or business in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the law, in addition to a penalty or fine, the goods are confiscated and sold at a lower price which is paid to the assessee, the resultant loss on sale of stock in trade would be an allowable loss. (j) Infraction of the law in the course of carrying on unlawful business - Profits in the carrying on of unlawful business shall have to be computed according to commercial principles. The commercial conception of profits does not vary according as the business in question is tainted or untainted. No businessman would agree that his business say, of smuggling, is the sum of the gross receipts, ignoring the expenses he had laid out to earn the income. In CIT vs. Piara Singh (1930) 124 ITR 40(SC), the assessee was carrying on the business of smuggling. He was apprehended by the Police while crossing the Indo-Pakistan border into Pakistan. A sum of Rs. 63,500/- in currency notes was recovered from his person. On interrogation, he stated that he was taking the currency notes to Pakistan to enable him to purchase gold in that country with a view to smuggling it into India. The confiscation of the currency Officer then took proceedings determined his tax liability. A sum notes was ordere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : The chargeability of sums of money embezzled or stolen would depend upon the application of several principles touching the subject, some of which are well established. It is well settled that the element of unlawfulness or illegality or immorality in the acquisition of income does not exempt the income from charge. It is equally well settled that the fact that theft or embezzled may give rise to deductible loss to the owner of the money, has no relevance to the chargeability of the sum embezzled in the hands of the embezzler. The two are uncorrelated. Also, if the embezzled or misappropriated sum be employed in business or in a productive investment, there is no question that the profit or yield resulting there from is taxable. The difficulty raised in the attributing of income-quality to the sum embezzled or stolen. If the embezzler is in the habit of committing misappropriation, there would arise a continuity which would be said to constitute a source, It would be improper to attribute this coarse to business or profession within the meaning of section 28 of the Act, since, in law, there can be no business in stealing and misappropriation Consequently, the source would have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The receipts arising from profession will necessarily be taxed under the head "profession", whereas the TAINTED income must be brought to tax under the residuary head "Other sources" The assessee's contention that unless and until he is proved guilty in a Court of law, the question of income does not arise, cannot be entertained as determination of income is independent of the view a Court of law may take with regard to a case that is governed by a different statute. According to the assesses the of defrauded amount was utilized as follows: Rs. 10, 26,060 have been invested in shares in the name of his HUF. Rs.4.53 lakhs have been invested with Sahayog Co. Op Bank S.B.a/c. No. 1408, Madalpur Branch, Ahmedabad The balance has not been explained hence, it is presumed to be expenditure which has not been recorded in the books of accounts 11.1 The relevant portions of Section 56 and 57 read as follow:- "56(1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to Income-tax under the head "Income from other sources11, if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciate the fact that the appellant had not earned income at all from the Income-tax refunds obtained from the Government India. No such income had either accrued to the appellant or arosed to him in any of the previous year relevant to assessment year 1992-33 and 1993-94 in view of CBDT order u/s 119(2A) dated 2/5/1994 The Assessing Officer also failed to appreciate the fact that the appellant had not earned income at all from the Income-tax refunds obtained from the Govt. of India. No such income had either accrued to the appellant or arosed to him in any of the PY relevant to assessment year 1992-93 and 1993-94 in view of CBDT order u/s 119(2A) dated 2/5/1994. The AO also failed to appreciate that even otherwise the appellant had suffered a loss of Rs, 12219/-on this account since the gross payment of Rs. 2187719/- exceeded the gross receipts of Rs. 2135500/-. The appellant had informed these facts under him letter dated 22/1/1995 which have been ignored while framing the assessment. The Assessing Officer was not justified in bringing the gross receipts only to the preview of the I.T. Act without considering the outgoings in the shape of repayment of embezzled money to the Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23/11/1995 and the department had not filed appeal against the said order, the addition made in assessment year 1992-93 was able to be deleted. It was contended that the addition wade in appellant's total income may be deleted 12. The contention of the appellant has been carefully considered. From the facts of the case as discussed in the earlier paragraphs and by the Assessing Officer in his order for assessment year 1991-92, it is emerges that the appellant had received a total sum of Rs. 21,75,500/- by en-cashing the refunds obtained from the IT. Department. These refunds had been obtained frequently in the names of the persons who had neither deposited such amounts by way of Income-tax nor had any income as disclosed in their return. The funds so obtained by the appellant had been utilized by him In the following manner :- (i) Rs. 1026060/- had been invested in shares in the name of the HUF (ii) Rs. 453,000/- had been invested with Sahayog Co. Op. Bank F.D. account No 1408, Madalpur Branch (iii) The balance had not been explained It is further seen from the facts of the case that the above amount regained in the possession and control of the appellant during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the recoveries have been made from the appellant not during the accounting period relevant to assessment year 1992-93 & 1993-94. As stated earlier, the amount has been recovered from the appellant only. In A.Y. 1994- 95 and 1995-96. Therefore, the deduction in respect of the above expenditure can be allowed to the appellant only in the assessment years 1994-95 and 1995-96. So far as assessment year 1992-93 & 1993-94 is concerned, since no recovery has been made by the Government, the question of allowing deduction from such Income in respect of the expenditure does not arise. In view of this, the income from other sources amounting to Rs. 2,47,943/- and Rs. 19,36,095/- has to be taxed in assessment years 1992-93 & 1993-94 respectively. 13. The appellate order referred to by the appellant has been carefully considered. The learned DCIT (Appeals) 2. Ahmedabad has not given any specific finding in the appellate order that the appellant has not earned any income from the activity of encashment of the refunds, in fact, the learned DCIT (Appeals) has accepted the taxability of these receipts in the appellant's hands in assessment year 1991-92. In this connection, a reference is ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r income for assessment year 1994-95 and 1995- 06. Appellant is a professional and has shown income from profession on mercantile basis. There is no reason consider and allow expenditure to the appellant in A.Y 1992-93 & 1993-94 on that basis. Therefore, it is held that the additions has been correctly made and no interference is called for in this respect. Accordingly, this ground is dismissed and decided against the appellant. 9. Heard rival submissions at length and perused the materials available on record. We have gone through the judgement of the Hon'ble ACMM, Ahmedabad discharging the assessee from the prosecution filed by the Department u/s 277 of the Income-tax Act. For the sake of ready reference, the said order is reproduced as under:- Cr. Case no 333/1993 English translation of original Gujarati version of order dt 12/12/2023 in response to discharge petition dt 06/09/2023 Complainant: Ld. Sp. Prosecutor Shri J. C. Yagnik accused party in person (self) 1. In this case, accused has filed a petition for discharging him from alleged charges u/s 177,193,196,199 of Indian Penal Code. 2. Accused has stated reasons for discharge that Sec. 277 of Income Tax Act applie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and hence such documents have been returned to crime branch. It is further disclosed that crime branch has again collected certain documents but same being incomplete, it is not possible to establish a chain of evidence. It is further disclosed that complainant P. M. Makwana has expired even before a long time period. It has been further stated that this discharge petition has been sent to judicial department of income tax dept. Hence it is being prayed either to postpone the case for a shorter time or to pass an appropriate order 3. In the present case, alleged offence has to be proceeded with through warrant trial basis. Hence taking into consideration cognizance as per sec. 245 of cr.pr code, it is being read as follows. Sec 245:- when accused shall be discharged (1) if, upon taking all evidence referred to in sec 244, the magistrate considers, for reasons to be recorded, that no case against accused has been made out which, if unrebutted, warrant his conviction, the magistrate shall discharge him. (2) nothing in this section shall be deemed to prevent a magistrate from discharging the accused at any previous stage of case if, for reasons to be recorded by such magistrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment order has been cancelled by the tribunal, prosecution cannot be proceeded with. It is being further argued that it has been held in the case of Uttamchand 133 ITR 909 (SC), Shivsankar Shah 106 Taxman 536 (Ρatna HC), that once penalty u/s 271(1)(c) of income tax act has been cancelled by tribunal, prosecution proceedings automatically ends. It is further pleaded that it has been held in the case of K.C. Builders 265 ITR 562(SC), that findings of tribunal are binding on the criminal court. It is further pleaded that in this case, prosecution cannot be sustained, as tribunal has restored the case matter to the CIT (Appeal) vide its order dt 08/06/2005 in ITA nos. 2664, 2665/Abad/1997. It is further pleaded that Hon'ble Guj HC has passed an order dt 28/12/2005 in sp. Cr. Appl. No 857/01 and directed to transfer the Cr. Case no 59/97 to this court. Complainant has confirmed that they do not have any documentary evidence in possession. 5. Petitioner/accused is a senior citizen.. complainant has not submitted paper book till today since filing of case in April 1993. Complainant has not declared facts before this court, as to within how much time-period, he will submit pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... From the above sequence of events from the year 1993, the following facts emerge :- * A search was conducted at the premises of the assessee on the allegation of fraudulent claim of refunds by producing forged challans. * Assessments for the AYs 1991-92 to 1993-94 have been completed taking into consideration the amount of fraudulent refunds claimed. * The matter went on a series of litigations and the appeal before the Tribunal is pending. * It is not in dispute that the assessee has obtained fraudulent refunds and invested in shares in other accounts. * It is also a fact on record that the embezzled amount of the refunds have been recovered from the assessee in the year 1994-95 and 1995-96 from the accounts of the persons in whose name the amounts have been invested. * It is also not disputed that the amount out of the fraudulent refunds have been invested in shares and the Department has recovered the amount by disposal of the shares and investments. * The Revenue has initiated prosecution proceedings u/s 277 of the Income-tax Act in the year 1993 and the same has been dismissed in the year 2023. * The Additional Chief Metropolitan Magistrate (ACMM), Ahmedabad di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inted money, reinforces the principle that such income must be attributed to the assessee for tax purposes. While the taxability of the economic benefits derived from such fraudulent income is beyond the current scope, the fact that the assessee leveraged these funds for personal gains adds weight to the case for taxing the income in the year of accrual. This aligns with the established principle that income, once accrued or received, irrespective of its legality, must be taxed under the Income-tax Act, 1961. 13. On these issues we are guided by the facts of the case as well as the established judgments of Hon'ble Supreme Court and High Courts. 14. It is an undisputable fact that the assessee has admitted to fraudulently earning income and parking the same in the accounts operated by him. The deliberate act of parking funds in the accounts operated by him do not absolve the assessee of the taxability of such income. The assessee had dominion over the funds and utilized them for economic gains, including investments. This clearly establishes that the income accrued to the assessee, making it taxable in his hands. In CIT v. Sitaldas Tirathdas [(1961) 41 ITR 367 (SC)], the Hon'ble S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intent of the Income-tax Act. It would effectively permit the assessee to benefit from their wrongful acts by reducing their tax liability in subsequent years. 16. In A. Raman & Co. v. CIT [(1968) AIR 49 (SC)], the Hon'ble Supreme Court ruled that statutory provisions must be interpreted to align with legislative intent and should not enable unintended benefits to taxpayers involved in fraudulent or wrongful acts. Thus, the fraudulent income of Rs. 2,47,943/- for Assessment Year 1992-93 and Rs. 19,36,095/- for Assessment Year 1993-94 is taxable in the hands of the assessee under the head "Income from Other Sources." The parking of these funds in the different accounts and subsequent leveraging for economic benefits reinforces the attribution of such income to the assessee. The deductions claimed for the recovery or repayment of fraudulent income in subsequent years are disallowed. Recovery of such income does not constitute an expense incurred wholly and exclusively for the purpose of earning income under Section 57 of the Act. Therefore, the order of the ld CIT(A) confirming the addition of the fraudulent income is hereby upheld. The denial of deductions for subsequent recovery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of the income-tax act for making false statements in verification under the IT Act. The assessee has been discharged from these charges owing to non-substantiation of this allegation in any form by the Revenue. The Income-tax Department being an arm of the Govt. of India appears to have not launched any criminal proceedings against the assessee for defrauding a Govt. Department by way of claiming of wrong amounts from the Government, like in any other department viz. CPWD, NHAIL, Health, Education or Telecommunications. In this case, the Income-tax Department has to act in dual role of the executor of the income-tax statute and also as an arm of Government. The prosecution launched was limited in its role as the executor of the income-tax statute. The act of perpetuation of a criminality per se have been ignored by the Income-tax Department as a part of Govt. of India. It is well settled principle that tax authorities are not only responsible for enforcing compliance under Income-tax Act but also act as an arm of Government in ensuring that violations of other laws particularly involving public exchequer are addressed through appropriate legal mechanisms. That is the reason ..... 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