The Commissioner Of Income Tax vs M/S M N Dastur And Company Private ... on 14 July, 2010

[Cites 2, Cited by 3]

Karnataka High Court

The Commissioner Of Income Tax vs M/S M N Dastur And Company Private ... on 14 July, 2010

Bench: N.Kumar, B.V.Nagarathna

 M.-w«'w*»~" *' .'

VM   __P£a3'1.ga.1<>rc% ~ 0} .

H.»-'\ 33 3 5=-'2(}(}5

IN THE HIGH COURT or KARNATAKA, BANGALﬁ$'i?,§§)'..A'

Dm'E:{3 THIS '§"HlE9; 1.4% DAY cw §'<;é:.T.f .

PREsENé
TI-IE HUMBLE 1V£r.7JUSTIVCI'§;'i\T.KU?£\'i21R _ :;
 " 'V ' V

THE HOPFBLE 1vné§~;:~%«.JU:f54':*Ii.r_i1§'413_;xé';'1~3AGARATHNA
ENIZZ Q: 273  2005

B BTW 9: {six}  _  '  H V. "

1 . file (3(>~rr;§r1iss§i.i'{:>1:r:1*'of I m:<.}me '§'ax,
(3 . R'.E3'Lli,1C§i'I'ia§{.._' Q gm-j>."c;:1f2  ~.RL_>ad,
B:£l.I'1g'€;1.1()I'{3.V " L'   

2. V _ The t.3'_(.3<):Af:rr1ViI<.i.ssi(>r1t:r of Ir2(:€>mc Tax,
1_ Cijrcicz -- 32(1), C.R.BL2%iding,

 Q£§}E?t;'ﬂ  ¥'%c3ad';"i'3aI:g;aE0rét. ...App€¥].am's

V  _ W.»_(S§*ST%i';-E.R.Iind:"a1<uma2?, S(m1'.or C0z1ns£:§ for
.  .'.,S;i:'E'.S2mne:§hi inc:i§a§<'umar, Aoivmsate}

AND:

._  T?y'ffS. Z\z1';N.Dzastur and C<>rr2pe2r:y
..  ~ Pm' 1i'aJ..L€ Lin': i ted ,
" -,E\5c...'2f,>j27, 7?" F'i()c)2.~,

Rfeihejaa Towers, M.C%.Road,
..'Resp<mdent

{B}-' Smf:.S,R_AnL,:mdha, Ach--"0C23t;c) %\/ _



Titis rm ﬁled L111€§C:"" Sc(;1i(.>r1 :2%3()A oz.'.,;.ei-*r.A§t-;f"'
arising out of order Cieitcd 04.1.Z.1200»?"paé:§s:éd"=.:%r2-A 
 " 

 

N0.§O?1/Bargg/2004 for the  fé

p;"22yi.:r1.g that this Hon'b1<;% C(t>urt1'«mz:--}{ b<2 }5].§?£i.S€Li £;_5i~..(£:}._

fcirmtilate the s't,Ibstamtia1 tiutrsiiqxi of law tetatitrd t:v1f:{=,r§3V§:~-; ﬁ".lC.,'~, '

This {TA ccmiing gm R21"  "this   J.,

delivered the followirzgz-=.._ 

l,  J U D   i

This -Appeal' E€e\}"c'1'1'L;"e «:tha.11<:nging the order of
thc? TY}-ib_U1:iE'i1,VE&'hi'£%h--..§'I'&1f$ '€.§T:..ElStdC the order 4:21' the Appeiiatc
Auth(>ritjy' as well-a.S1_tihe.ﬁssesaiiig A1,:%';h0rity, wherein, an

£1C1_F;1<'i'3'§:.i()v1'1A.F)Vf R:§f€5(},;_9_2.,v527fw as une1<:c'.c)u11t€d c?Xpenciit.ure

' §i§i'd.er  of the ir1(':0m<: Tax Act (h<:rCir1aft;er referred

to asthei 'A¢t';ti=f<)r brevity} was made.

2. it .  V The facts leading :0 this appeal an-:: as under:

 §\./I".I\3.D.=.astt;r and ihmpagziy Private Limited, the

'é3,vSS(3HS'Sf;'{'?,. vc;iz1ii.t.ezri.1y filed the r<;:t;urn.:s of iﬂC{)Ti'1€j: on

it " (:)§E§.C)'2.i?§93:3 cieclariiig am énc:<'3m{:= of Rs.37_,64,22:786_;3. The

1

$2;/" i



{he assesses": cc>n1p21..:1y. 'I'hQugh the sum paici 13}; Lbs banks

L0 ihc: JTAS was shown as tremsacgtions oi" brokteragcz, 3;;14ti.;hc3

Assessing (f)§ficCr feii {hat in rca1iLy it was goari <_)_£'mL'h'«:«»..i_'n.t;¢'1."c:Vsf.«M

pafgaialcr $.10 the asscsscac company, which_.w;3.s':"~diVs:§t.ed 

in{:epii(m and was paid to JTAS 1:912 j..,%1<:>Zin-sii"Li<i'£.ic5;a'rgf 

 

assesses C()I'§1pEU'1:y'. Thus, a<:Vr:'<;r_c£ing L'u_ tfhe As,:;t"3': ,
the said payment constjiuted ufie:>_»; p§aineCi'expctfzditiure in the
}'22;2.371ds of the elsscssee '<'_;)1"11.pa1.'1}/'. _ V 

3.  ----  .AjA'g;gri'é%;z.r3ei "%--:>y'-.ihss*z1mvé, an appeal was filed to
{he C(i'mn'2issir_')ni':.f'»01'»s.Iv14icQV%r";6;t Tax. Durihg {he pcn.dem:y of
the e1ppeei:s,.__'z3 rerﬁand i'e2p.{>rt was caileci from the Assessing

()fiii<ig2r and a§sc§'--.0t;her«Vmatierials, which is said to have been

.:*(:1.i(f;-Ci _()':1  {he Assessirzg C)ff1'.<:.er in cancltiding the

'asE;c:;.;sff:éi{'1V.t:_f  ftititlipi of such report and c)t:h<:: material,

 ihough the impugned §a§_;mer1t': by the banks to

   c% 0'uid not be treated as uncxplaizled €x'p€r1ditu:"e under

*;';}'é{:t1"cm 69C in the hands of the assesseea, yet it a.m0Lmts to

---1'e{:eipt. of incmme by that assesses. "He: also negatived ail

0i,hc::::" gr<3L2:2€3s urggged by the Ei.SS€8Sf;'C'. in {he said appeal. IE is

%_;:g (')ffiC€:1 L

Ev.  



afier 1,a§<;ir1g inzo aee0Lm£ all those m.a%e.ria1s, the said appeal.

(tame {'0 be d.ism1':.~:.:;ed.
4. Aggrieved by tile said order, the aaeaessec

preferred. an appeal to the Trébumil. The Tribunal 

whoa the income is eamed by 2; third party 21nt:4l'l.dis.<:lVd:3etiebb}? "

such ;3art'};', an item of iz1c0:me, '»'l;*'}1'i'ClT1't,h<53 aSées.=l$ee" i$';r1E*::_t
ezititled to receive and which has he be_a1ril11ge.ri'the 1ll'vf_i'rIf:é1"iie

c()rr2;3u%:.2>.t.ic}z} of income of me :%1_s"s{:3ssee,"'iL c3_1fmQ¥.  thaée

he deliberately did get c§§sel_Qsle~.__th(:_ s8.ilL1"'«.iV1f1c0vz7.51c-2. The

pr0e;te(;_c§.ings 1;V.'{'1:ll.§_1' 22_1e'a:l_V fbrv l1f*e;_as;_sess;ment. was clearly barred by
time,  the re«v&1.$;.s;]sSr:1_eAf;t«i.>ught to have been completed
before 31.O'E%.V.1'¥999.'._ '1~".he;<e is an in¥;erp0i.a.t§0n in {he order of

$a§;iei§§aeiii<Jn pas"sed__by'.the Assessing (e)t'§icer. Therefere, the

VA :s:a:_i_d reé§:ég3nS"recc3rdeci d(} moi. co:3st;itL2te a. sufficient Cause for

%

:ie'4-lt')pc3r'1'irli;';;V_{he~=éée3sessrmmi:. Thus the order passcsd by the

Appe112::te~ A1].:i.l1<)ri{jy' as w<:=,.§§. as by 'she Assessing Fxuthofity

 was  aside.' Aggeievecl 'eff; lll'1C? sa.i.c§. order, the reverme is in

 



§'l"A 2335.-'2()(I5
6
5. The appeal is ae:dmi1.t:ec§ {'0 C(),'f]SiC§€§.' the f<)11cJx-x.-ézlg

sa,1bs{.a11tial qa,1est'i0ns of 12m':

0

 i%}5{

Wfiether rhea Triburtal was Corre.;j5---- 

holding that {he Assessing 
order was confirrrzed   }1ppélEg.::€_s_ ' V

Commis.Sion.e2r could r1o'2§h'a._vé reO;;1.6ZA¥'aeVdA.

assessments and be-"Qugh.f'v~fo   .Svz@'an--.. 

of R.s.60,29,52 7/~    féiceivpgt
by sn:J. ?7.;31*rzj;2"it .s'£%:g;zI'j4.mﬁ'v-£_ng reﬁié'ivéd
the same frpm'  and
conﬁrmed Zizy-yqigviovug  under

o:_1'f?i sffzieid "i:§'2a.f'tﬁ,is wr2..é an interest

_ (i2f2._ouni*.pa*id"i'Q_ the assesses and at the

' . a.Vsses.sé_;'efs ~.. __ . . 'I-.nSEaI'iC€' transferred
 »,   J. T.Af:?,_r"ii'~sS.;'r1gh.?

 Whéfhew-*-----«r'h.e Tribunal was correct in

'sing (ha! the reopening of

 as'séssmenZ\s was barred by Zirnitafion

 any

consequemfiy the reassessment

order was also barred by lirnitarion?

Whether the Triburzal was correct in
hclcfing that the reason.s recarded for
reopemrig assessments based on the

infbrrn,(12'ior2 avaiiable in the assessment
is

 "



order of Sri.J,'I".AmriI: Sirzgh was not
s11ffieiemf and {here was no {fire gm}: 
between {The reasons reczordeci and 
material in ,K}o.9sess.ion of the 
Qﬁieer as heid by the Apex Courf__iri::
IT}? 437?   "  ' V

iv} Whether the Tribwaal "W.-_; eorrgzr: A z'.r:,'' '
holding that a  Rs.5o;2.9,j'52'7/'¥"
ecmnot be brought _f_o_  52:; the ifieovrriefﬁf

the asse.9Se.e.?-- 5

 

V(;?2;1i'-T1£:'?'d.>V'£,T()Ll1'i§Ci~~'f.()1" the revenue assailing
the érr;.;3ugg2'1<:d. "er'de1*'r$u"§:1rr1'it*£',t;,z that the maégerial on record
clearly cI§.3ci<)Vses'v.§'h2xi":1ri'=a.rr;euz"1£ of Rs.60,92,f3i337f- was due

from. five E5'znjk:~:_.as°im.eres¥: Lo Lhe assessee. The said

a:r:vc){;mi,:-eV.has§ beer;"'p'e%id on behaif of the assessee by the

'  10:»? e?:eque to their agent JTAS, which receipt,

" in his return. Ir: {he enquiry

CO§"i.C1Lj.C'._'i*s'3f3_V:~*i1'] these proceedings, ihe Banks have

 ea%;eg<:r:Le;3113»' stated that it is not: a. payment made by them

 erifnheir behalf. it is 23 paymem: made on behaif of the

':3s7se'Ss;<--:e cm his ins§.ru('.:t2'{ms;. The Barlk is not in {he habit of



ld_(§'--._rsOt" a sufficient ground for reopening

e>;pl24m2a.t.i'}:'J;.i, but an a l::c>';ri"c>weci opiriirm, when he cliei

ifitéated aricé as ri.gl3t:§3; held by the Tribunal would not be :3:

the first Appelleiie ALll'l}{)1'll:g' was justified in paesing the

impuggried orders, \A-"'l':{,'.¥'€;'.&35.S the Tribunal Without'...prQp::_rly'

appreciating the material. on 1'CC(}1"Cl, ignering__i:he't_

evidemte on record has erred in i1":l'.(?I'fCFl§'i'g_"'iVll€l"1ll'i~lf1€.AS&:_iCi"~

assessment orelers and therefore <:,a.se}l'c§r> i:2.te~rfereriee,:i.si

made out.

7. Per crintreifélie leairneid e('3tii:._sel eippearing for the
assesses? submitted that, it is S'etl{l¢ec§_.~l.giivftiiiat ilhe High Court

under Section.  has I':.1(,1.j:i,1I"l,£S&llC"LlVV{)11ti) interfere with the

(;i3:CStl3.'_,)I"1S of Alli.-ii_'€fivl.Sa,v  _deeided by the Tribunal. Orzee
the TI'li3L";E'i~e1l i"ec§tir.fti.Si"z-1 VA"?-<l_'T71"(illI"1§;', on a§)pre(ri.22ti0n of the

material (in 'reco"rc§7,tU'~.-"the effect that there was no

 SLI.ji)}ll}?17C:S_,S;i{ﬁ1f] e~2nel"rie...»;;itzzj;; to disclose, the said i"im:iirig is

» bl1".CllI':gOX1"i,l'lll'S__C(')'£,lI'[. Similarly, when sat1isf£1C.ti()r1 recorded

the
as;s'essrii'e*'i1.t_,--*"arid the ssaid SEi§lS{Ei(1§lDT] is not based on his

1'10';

 _i1.ai-*efany evicienee of his tjvm, the satisfaetitm recorded is

l:
ls

/
/



13
brokerage.  warzifd. to Ecnow whether this payment was
brokerage incarred {rm-ards commissitm payments to
M/s.r}.T.Amrith Singh and Cmmpany. II: was aiso 'Drc:ji;ig.E}t to

their "notice-' t.h:;1t. éihcy have ve1"i'§icd than most _.<.)f4'tk1'cér-'tfuyrizi

mobilizations £0 financiai i.rzsti1.L1tions were  am: '

routed through M/:~3.J.T.Amrith   as

their Soﬁe agc1"1ts and fir1a.nc:ia§ cor1.sfLii'1:jar1tS t h"t'(')'i;1§§'1'1 w']'1~;)Ar§1',

{hay were renewing the cicrtéfic-:»g.f%:--.bof dcps>.S1.{s;§x;it1i1V['h"C &ibO\="{'3

finarrcial institutionsr .1}; is '.{;"'Q"'1'(i'fi.:1."I{ thaé: th<é"e;1s's;essee has

auihcyrized M,/s.r}.T.Amrit_}f1'  __t.é')~ *:1c'is;;0ti;2tc on their

bczhalf, LhcAV1r1.:r:.s;g3;<;f.A '<31: a_3..cc<)Lmts with the finar1Cial
1'1'1S'EitL,§ti'("}3ff_iS', _whi.s_:h"«.iA;3* §:if'i--dr;%1€t frorrz the Eaters addressed 110

{he  by 'me: fiﬁancial institutirms. The assesses has

E*:3~§'~v~'.;(3."c;€i;i"131{5'I'-!"S("3(Z1 M'/§.J.T.AmrI'th Singh to receive par: of

I  ir1,&l;erc3:..\.,€ apéﬁriurird}on their deposits. Thereforvg, {hey called for

t§de%_uf()§§e;v:irjAg;;- irzformatiml:

K4" '

1}'. Your defailéd ﬁn:/estmenfs by way of
crerizficares of deposits,' negotiabie
certificate sf deposits with the various

ﬁnariciai institution with dates of

Mvestment and duration of deposits Plaid EVE;  ..



 pdid an Ehczt.

§'l}\ E33 $.="2{}£)5

14

'z.z.'=izii'z, re?c%e21p{.' of 1'2-'z.zere:a*3z. ciezczzfis cm.

in Z/'E?3ZI'7l.€:'?"i  z.g,=.he,>n I'?1.££f'.u?'6'd.

ii) 3331651535». fu.rm'sh cm cz.(><>0u.n.z copy (J_!fT fhe~

above zfr(m,saczi<ms as _fbun,d in 

boo ks.

{ii} if is fc'Jz,m(f {P2511 rnasz of gggzzfi'.V_ir1v€sI;r?'_;ef2.':s"

with the ,fir2.a,;~2.c:i(1.Z-;i:9zs.zf_izfu£'io%:,3  '

for (2 peeriozif of 9€2'L '£i.,r@_g;3V_» dufdéiieﬁft a.rzféi
r"s2r'ze22.ue.>,ci     
deposizfs f?'£,£}'€IJi!_":P'(27"  9.94 and
F6576? 'E ;:;/"W17 in A 'zfhe --:§i:pﬁ'z C' At)  994 cmd

2%/ifczy :§?~€£§P-61, 4'-}'z,c;i',:_,s " ?2c1.12_Ve.?A._gﬁ;z,:V' '<1,"c:E.'ou f2.i'E'{'J the

_ £9 «c;c:(::4::;;"::..az mi: _;:3 E03. 2994.

 P!5>.as ¢:? j'%;r2éié§'f-1 zfhez erztzire receipts on

'ir1;2é38{r"r1s.r;ES"%r1.a(;"e2 with euzitiencte during the

 g;r52ui@:zS g;éc;!'r""'i'aeZez.:cz:'u' to 0,s::e»,?3srne:'1t geozr

 . .'2/ou am? also reqzzesfed to give? enzfre

. z?ec:€3;51r3i's (';r*2: z'n,veész'me?r2.€s wiI?i'z. proper Ejifurcaziorl

of ~r_é{%g.?Az';3f3 on izmgg {.'e2z'm (moi Shari Eearrn
~~rie3p*(>3i€3 i2"zdiz2idua.EZy 'z.uz"2'h {he brokerage if any

Pierase (2230 su,E253tarz.z?z'ate with

 ﬁ'ze:'§:'.s that" yfﬁiil" zfn=.c?£}me rseturzmd un45ie?z" zfhe

rziéomia, ?2.{,;_r12{9 ?)€a»s.*:r'2. n:«:;fYe3<:I52(} :31 {he refurn, sf

2"r';.<79.me2 fzkéaif E25; gmu. ﬂﬁf" gm». czs:«;se5;s::rzer'2.z? yeizr



16

the proceedings before: the first £\p;3e11a%;e Aut.h(3rit.y, the
zzssesssec did. 1710i furnish the pa2"1.ic:L2.iars; scezught for in {he
Said letter' During the appeai proceedir1gs,"'--.» the

representative of {he  gave written s1;bm.i§é;--ig5h.S:"xsiée

letier 29.02.2003 and SLJ.,b¥)'1i.T.'¥Lf3d %.hat the 

SL1b1"1'i§SSi(}I3S made by him be t2"eaL(:d"&'s* his;4suhr1iis'si0n3Tarik:§

<:<Jr1c.1u<:ied. Ir: omer to appreciate the  L3.t&iI1C§ (if

the AR was asked £10 glivc his-1jéS_je_iz1dei* en'the-._regj)6r't.VVcif t§'1e'
A0 and 0L§:1e3" evédencesused ag-ei_i'is.t.'him. T'§1i:~:._we.:% given by

the AR viée letter ciaieo on the same

dam which 'E %4£?E=?.Ci  %a.ei_'ow:

 7'ACiI;'8eﬁ} 1'g  hearing today, your
_ Hone4icrs 'u,>er'e kf';1CvI"ez;a.ough to furnish. the Copy of
  ..E{jemeirid«.I€e_p:JrZ along with Annexures »~ 1 £0
  Honours else furnished me a copy of
z:.i} eV,'V.Zeeter:;eurpertedly written by DCIT, Circle -
'  A.}KoU<;afa dated 22.06.2000 marked
zc'e2}ﬁd'ential and addressed to JCIT, Special

fiftyege ~ 2"'.

At" the outset, the appeilcmt raises its
objections io certain evidences breught by the

Aeseesing Officer as 5: pom: of remand report fer E



§T.!7\ 3.3 3 5.?'?.()()5

E7

the first time in the appellarzt proceedings. 
Those papers Cannot be relied on in deeiclirzg thVeVr..r*
appeal, as they were not part' of the pr'oceeqii.nlg3\:~.:3. '
earlier. The Contents found therein cannot be
relied on as it is only an urtattothertticrzted  
Copy. Further, the so ﬁoalleecl j. 
statements are all unsubstantz'ate.ol ar'Lcl've§trt'nc:t ll
be relied on. The appell_c:VlntV_ request-ing:._;t'ne~ 
Assessing' Officer time ant?"-rflgeuin a.t.'tl":e_ltime}ef
assessment pvroC'aedi:igs_  t§J.:ll"furnisn" the
information in his  frclrning the
(1ssessrne_nt.V__ Hoio"eve'r, V   best

known to ilie Asse'ssling_VQ,fﬁCer;"nothir'lg was

:Jf:.trnisrF'ze5dV ctr?'-iclll  cm. A5: is deliberate and

Vinten4tionQl',  "Hen (:e;e.__ei'21'_denCes submitted at this

stage *Cqnlnot"Tl9e Vlrelied on and bound to be

'-vrejeetecll, " 

   Annexure A 1 containing purported

' ree_sons~. stated to have been recorded b the

Assessing Officer before initiating the

. jﬁrocheedings is fumished for the first time. There

are overwriting in Annexure ~-- I. The so Called
reasons extracted in the remand report is at
Lrariance. Further, even now the so called
finclings recorded in the assessment of

J(T.Af!'iI'lIC1SiI'1g?'2. which compelled Zthe A0 to

K'

//=_ . .



19

failed {(3 ;3r<:)dL':ce the d(.)C1}:3'I1f:'.1"1tS and subSt212'3i,iate hie 
not cmly i:)efore the Assczwssing ()ffi{:e1', bué; even 
first Appeiiate Authority he (Ed :10: clizoose te-
pa.r1.§c:u1ars sought" fez'. But' the  

1"aisi:1g legal pleas. The  did U!.)'€p:Y()d.§l "e Vti1ei'rfb__()(3};::s

of a.ce0L1z1ts. They did 1'1()?jv':}31?_(_J(:13.1C't'-".V_'£]'V'1€ bérgkﬂ_';§»tate:7:enhts:_ L

sought for by the Departmem.  als<5":11fC1' 'r10{}der1y the

relationship wi.th JTAS'>--.._ xfnfzg-ictt,,th.e<.a:3Sessee was examined

in the assessmem, p1ﬁ()C:e€<%ir;gs._(;3""*J*}f';5XjS."' In the said

prmeedings, ?_%"1.<)tfgzjnlywr{he'"'evi<i§eVr1ee"~:;~'f° {he assessee was

1'eec;rded, e_ve1'iftjhev"eV1d<e'f1:;e ofthe Bank was 1'er::orded. All
those e\iide.nce-we3*§;~Vp'rQ€i'L1.;tg:(§ in these pmceedings. Not a
word is s21'1Li_a130uI'._thAe_ e0;f;'LTec%;ness of the statements made in

these"e1$sessmc:nfpxxxgteedirzgs. §~I<)'w-'ever, £hey Submitted

 argt1.?r1€:,f;.f;s"hased tjfihhthe malerial on record. and poimed out

Tghaily"f}}vCZ».'V'i'(i'i%r;(;EJf1£;§.€ has failed $10 crstablish t:he2'.r (122362. The

s3:L1*szefaefi:)if1'..reeijrded do not satisfy the requireme1'1t of law.

Them i--:_~':. .a';v':"§.:1ie1'p(>1a£.i(Jn, i..e., a. va.ria.r1Ce with the reII:a.nc'i

 :ep<)r¥:. v:1_':'ici it. W83 alsc} ]3oim:ed. (}UT,, if it is an expenditure,

" _AAt'§v1.é?'%i§;:1<.> no': he-we 50 pa}; t::1:><:_ 



20

12. After considering {he aforesaid ccmierziiorxs anti
Eooki11g i:m':o the meiéeriai on. record, {he Firsz Appe11_a%e"{}():4rt

did feel that the aforesaid

S54

unexplained €15-(}Z)€;"I1(§ifL1E"{'3. 81,11 the feet. that"Eh't;it~.f€fi=¥iﬁ1'Y}S'Afilﬁld 

by the  do no? disciose t:he:se.1'r';I arr1o.L1h1.: 

ret'1,:1*ns do co.ns{iLuLc unc><p§.;:ii11__ed inc:<}_roe a1:rd"%;he,rVefc>r_¢:, he 

proceeded io dismiss the appeal§"=}1J1:for%:u:i'aie§y', the {riiounal
wiihout proper appreC§;;;'{i¢nr1 9}?" t.hi s..1,1v:1vVC%i'i«s;oLz§ed material on
record holds at para 6 oVs_1.j111der_: 

<'sr»o::e}}2j-;ge':':i;;)as 'po.'i--d griasezzgi by the bank to
T.Arn.rivtV"Sin:orh. an income is earned by

a 't.'1_z'rd_porr_y  in.'--a:_4i:<{:rns'oction and disclosed by

_ such parfy,_1§oe oirennable to understand as to
  xthe o'sse_s_see in this case should disclose
 é  '  Vfransaction in its assessment
 An item of income which the
ossesseie is not entiileci to receive and which
no.3  bearing on the computation of income of
the assessee, Cannot be expected to be
 disclosed by the assessee. Prom.'so to Section,
147 is very clear in this regard and {am
requires the disclosure of the moiteriai facts

which are necessary for assessment and not

escaped amount do not C4(3o§'=;':i_€u':_e.'



J")
E»)
K4)
Lu
Rf:
hi
3
':1
J:

23.

something which has ma bearing on the

assessmem'. "

13. It is  clear case of miJ's,ijc;f3x4+:1irig.-Qt,' 
record, ig1"1()?iU§§ the materia.1 3
evidence clearly disciose Lhé1'u.___l§f1ei' 
If10{}C:y" in six. banks under  FTVD.   bank
had to pay interest to   inticiriivst payahle
to the assesses  the    the assessee.

J.T.A.'mrit  ah  the barzk in

m()bi1§g4ing ?;1'iVC'iivii!V;11fi€i'5*§' a2'1«}.d"§§_c1t§:1g the EISSGSSCC? the good rate

of %r1t<:rt:st.'-- He'ximﬁj'i-:f1't--i.t1{~;€i«"t(i Cemmission. No Bank pays

COI?{3E'1'1iSS-31.(iiI'i~<_ fC}v?"  the Fixed Degaosits. it is {;h£;'

da5:%;)tis;it;<i_)i':>}V whci"'1s..__g,g_iim:n a higher I"aL<;' of ir1t<:r€s¥ for such

. Cié3;3L)s;iL, "A-"i"~)'(')A'i7.'V'c1S to  Commission. Thus i.r:s%,ead of paying

 :o=I'Lh¢é interest, who in tum was liabie to pay

1:i"is?._C<)rm.2'iiiis--;siori to the JTAS, the bank paid commission

dif(3CL}_\;;'Zi{) i§.T.A;T1ré%, ﬁingh. '{3}; way of a. iihecgue and debited

'th..<;<__ said amcnunt to thé: account' of the  on U36

" .'i}"._S'fZ:}}C§Ii()1"IS of {hrs assesses. It is not a case of iY1C()1'1'1€_



22

earneci. ':31; .,}.'§'./ixmriz Sézzgh w§:z§(:h s3hoL11d have been disclosed

by ihe  in its retums. The §..£3{',()I"I}C e::1.r§1::d~.V_by

\§'.T.Amri.t Singh ie an income 0? the assessee \&rhiVeh"w€:~$_ _

to him as brokerage. In these circumst,at1_ec--2:..,__':the"*~9?I'ai1ure'

an the pram of the  L0 dee§are,..tTh€: I£1ek2rf3t> i':s"c:eIea..r31ji'

eséabhshed. The period: <}fe'£{}ur j,§*1:'_c3I*s: pr<'>sCh-reiheci ié; r:<)1;"*

attracteci. in the Eighg of the eV'i'fa}1;esaid ft 'c.t1:1a'i':po:ée:iti.()n, the
case falls under Sectiori_ '1«%}9(?'V)h (b)t r'e.gxd zwj.th Exgdlaizaiion 2 of

Sectiozz 14?' of the Act, .f«}Iid' L_hefeVfr3re.--'£.he--»;f;0__fi.«:e issued under

Sect.i<)1"x 148 jg: §'£"'i".,V'Lj.1"1E*.';'::';EI"1(T:} Pi)? "tviri'é*£9_V'*E>£%_3;ﬁ-ed  contended by

the  i'h__<j: firldizég recorded by the tribunal
that it iS:,_I:5arred._ b§z" 3.'§§'f)'€}3_  illegal and rc:q_L3irC3 to be set

8.S§C§.fi; » Aer:<)re§i.ng1y'iL is; set aside.

   .._1ns{)I'é1:rv-.a..$«'the sai.isfact;1'0n to be recordeci bCf(}E"€

'éniti«£1tic:»h"{if-.the_ pr<)CeCd1'r1gs is cohCerr2e<f§, the satisfactiorl

1*::.c<§r'de<:§  sftznder:
V "In view of the ﬁndings recorded whiie

e0'n2pZe£in,g czssessmenf in the CCZSE' of

 smz.J,T.Anm'r Sirzgh by the DCIT, Circle-.i3{.Z),

Kolketa, 1 have reason to befieve that income  J/~



 

25

rightly initiated the reassessment proceedings

on the basis of subsequent information which.'-
was specific, releimint and reliable and, 
recorciing the reasons for the formation._.--:if.ii?iis';'f"--- 5'
own belief that in the original  i
proceedings, the assessee hciicimniot «QZis=cZo.seaT"theV"~17
material facts tm1.'y and 'fui:'y  itheifefore,
correctly invoked the': p.roi2isio:i_isi of cv;seCtivozis 

i47(a} and 348 of the Acti.""7._ 

Again the Apex Ccmrt  céinscif of "Krish.nai'Pi}t. Ltd. V/s.

Income--Ta.>c Oﬁicer and Others i"§"\7ii)ii.;2;72._i)  page 3339) held

 uncier:  7

i 4- "The  Officer can issuenotice
uncie'-r_ViLSectiio-ti  the In.come~Tax Act, I 96],
 f)r'oposinjg reoiien an assessment only where
i  has rea.sioiniito believe that on account on

it  T.  either the omission or_fai1ure on the
i  assessee to file the return or on
o._ccoii'ht' of the omission or failure on the part of

T u assessee to disciose fully and truly at!
 material facts necessary for his assessment for
that year, income has escaped assessrrient. The

existence of the reason[s) to beiieve is intended

to be a check, a limitation, upon his power to

ti» o



' misleading one.

26

reopen the assess merit.

Section 348(2) imposes .

a further cheek upon the said power, UiZ., 

requirement of recording of reasons for _si_ioli'%.V. '

reopening by the 1riCome»Ta_?< Ojﬂcer, Sectigiii  ,4  

imposes yet another cheek upori. the sciid' po'zeer,. 

i1iz., the COm.f?"tlSSlO?1€'?' or the; Board, tlie' C__a'se~ M

may be, has to be satisfied, ori t?i_e.basis_-.eof»tl1:eiV

reasons recorded by tl'ie_irieome~t'a.}c Offi::.er,"«Vtr2;at.. 

it is a fit ease for issuartcei"qfsuuch atriotiee. Yéhe
power conferred iipori  Ojfieern by
sections .147 and is..:}njis _-unbridleo'.
one. It is'-- hedged " iri  isaifeguards

Conceived  interest o_4f.el'i*rii'i'ria'ting room for

abuse' fgoiiiier by _tl/Vie Assessing Qﬁicer.
Tlie" idea i  'gto'=._sai_:e the assessees from

l'laTI£ZSS'tTterlii resul~tiIig. from rriectlianical reopening

' ofassesrsiirierits ljutitliis protection avails only to
V  diesel. Aassesse'es'Vwi/to disclose all material facts
 tvraly"4ar'id__.ﬁ4lly. Every disclosure is not and

.¢aii';i.g:V.i'V;'i:é treated to be a true and full

Cll::5('l_o$;'Lt?"€. A disclosure may be a false one or a

 one. It may be a full disclosure or it may

,  not be. A partial disclosure may very often be a

WI/tat is required is a' full arid
true disclosure of all mateiiai facts necessary for

making assessment for that year. All the



éﬁh».

fl 'A 233$..-'2(}(}$

2?

requirements stipulated by section 347 must be H

given due and equal weight"

The enquiry at the stage of  3' V
whether the reassessment notice is void. .
to see whether there are rea.soiria.'b€ee_
the IHCOIHQAEGX Officer to belief dad"
the omission/jaiture zin'd._V the'-esifapearn:en:t~.t_,of 
income is established.  heep

this distinction iié,I":'t.iirtd.  * 

Since the betief  fhcome--tax

Officer,__t.he: sittffiifientiof reasons  forming the

i)':€it'i":'_,'-C,itS2IjI"LOf"ftj';i' thc%»cou.rttojudge but it is open to

an ~.asses;3eeA"to°es'ta.b'Iish that, in fact there

eﬁéisted ho*be'i'«ief  the belief was not at all

._a bohai ﬁde OT1€""~.O?" was based or: vague,

 fgfrefeuanth"ar1d___rionAspecific information. To that

limited"-._Ve.xtent, the court may look into the

  arriized at by the Income--tax Officer

andiiiezramine whether there was any material

i zaaaiiable on the record from which the requisite

beiief could be formed by the Incomeetax Ofﬁcer

 and ﬁxrther whether that material had any

ratiortal connection or a live {ink for the formation

of the requisite belief "'  --



 

I'? '.s='\, 2335J2(}(}5

2.8

1.

6:' In the instant. case this :"eAasses.s_ment pmctccditugs stzmicd on receipt of a ietter dated from the D€:p'u.t;y Commissioner of Income '§'a:><-,u"Cir{;ié:u.'"i8{:£'j; ' Kolkzetta, adciressed to the Joint' C{§§1).I}1iSSi(}I3f§i"<ﬁ)f" IV.V1V--},(3"{'*,'-ITlV(.'.fV' V Tax. The C.()t3§(;'DtS of £110 said §€3tte1r?.&w'P:'_i'Ch" isthé' i_I.1;£P{'jI"§v,*i1'ki%.Li'A(;1T}:

to the Assessing ()ff%cer rez:1ds'i¢1.s~~1,z1'1Ci<2i"':-

"3. it/2'r.J.T.;§ifn.r*itasir3.gji'i:'s 'i'(~:tum bfvirzccaze for Asstt' year' ;aJas'--v._svn19ttt§rzized and assessed u/s. 143(3) 'q;§:Ié.'¢~"1:fzco~rn,,é ca.-x _Ac:, J 952 on 27.3, .7. thév assessment was .séf¥a:s.id'e.Aby.._the Appellate Authority with the dérec::ioVﬁ"t§)* .réfraf::.e.~*the assessment. Such re- asséssrnvent ~_ has'«.._--sirzCe been ﬁnalised on 3o.s3.20Oa.__V' V the course of reassessment _ it was gathered that ]i{,'T?'.tr'tT;';?'tm.r*itasirzg?2 had mobilised deposits of Dastur and Company Ltd, with G) Hortgkong & Shanghai Banking Corparatrfan Ltd.

33, B89 Bag, iiafcuttai ' M I ,1... A 2§ £3} Americran Express £35m}: Ltd., 2}, 0252' Court House Street, Cczlcuttcr Z. M "

The South Indian Batik §;.td. V t 3, Daccas Lame V t CczlCutt:2v69. V 4_ (:1) Bank 0fAmeticC:--Vs.i R' 8, India fivcha 7ilg,.7€Vv:P5£1_CE3<,v Z CaZcutta;.._.?_rtd'A_t _ ' _ ABN' Amro ._ T . tt

-. of such deposits of I1/Itk"-L14")a:sttzr._ _ "C_?c:§.'/; J.T.Amritasingh was V.purpo"rted t<}..;hat)_e feceiued commission from the ' ' Q _fes*esaid v 3 _ enquiries conducted at this end " teL'e.bt3eVc:i=VV'Vthat the amount received by Mr. J-._'T;An:{rttasingh was not commission, but part of interest on the mobiifzed funds of M.N.Dastur A cmd Co.

6. The Managers cf the aforesaid banks were examined on oath L1./'s. 3'3] of the .I.T.Act, 195.2 and they categorzfcalfy stated that M.N.Dastur <3:

23 3 5 '?.(J(}5 LE/est 39 Co., had instructed the banks to pay partﬂt interest to Mr. J.T.Amrithasingh, which normally have gone to M.N.Dastur 85 Co--,',:._ '7' there not been speciﬁc instruction to this .

7. M..!V'.Dastur 85 Co, was r;-.;e.Vj"»._.

opportunity to explain: _t_heiri"'stand Z3f,ii;~'.~..f.i;l€:}j simpty suggested that hahtze-'not away with theininteres.t--------iiiCQ?ﬁ€' aI"i§ii"€'??.(1IVA..?:'a§4'r. J. T.Amrz'tha sing}: girgen " ~--'I."C?oirirnission " by the Banks concerned."

8. The e;ntire.v 4'i'ssI._ze 'beef; discussed threadba-are». ihnttie "asses~s.men=: order, xerox copy 29f u_2hioh'v.i.s...being«enetosegﬁ along with this fetter fo'.'? yourpen'1s_"ai_.i __ ' This in_fo'rn1,ation...'is being provided to you for necessary "aCtio'n at your end. Should you req'u.ii'eiany further informationfrom this end, the . i2':3.aefsi§rted shall only be too willing." $75.. -.:tI'3y that time. the assessment. oréez" under S<:jctio23=----§43(3) had been passed by the Assessing C)f§'ic<:r. informati~:m was not availabie with the Assessment u fjfficer or was not diselcmed in the return ﬂied. by the 32 issued to ii and these partécuiars not disclosed. When the assesses calico upon them to furnish. pairtictulars,iiiough the particulars were furr1ished., ihcy did 110%,. gngiifc ' _ ()}3}:)OI'T§1l1'1i3;j§-' to m.cr;tt tizosc aiicggatiioris and"'c:E<:.{e';§3f(>Vr€; the entire procccdérigs are viiiaircd. i§'1"--A.l~%:}§S--..(i'()1;§'T,(3I3{§':V"'-it'rjifs necessary to know the nat'L1.rc of {,hc'rg:q_roc.eed;Eri'g$' before the income tax a.Lz.thori1'1cs as hcici bj~'=I;hc,Various 'coélrts,

19. In rho cas'c~._of ::1é'--cg:m'm_iss:oner of Income Tax 975. Mahaziram 1§¢}riiicia--.s,~f'(i'195120:} i-1"._R 442 (re) they have %;1.LcrprcVfcriV Section 34 of 1922. Act wjriich is f_TO1'1"€Sp(§%?i§1i'11,§{ i<3v.Sce£ir)_1i'*«.§ ?'i¥T'()f the present Acéi. V _L Tiie "ope_r(1tviue part' of Section 34 empowers proceed de novo under subsection {2} :22 and that in turn, leads, if there s'tiZZ be a question of the accuracy of the to an enquiry under Section 23(2) and (3) __ (mo? in that enquiry the ossessee has Ci statutory righf to appear and to produce E?I!id€f'?,C€. Therefore, a construction of Section 34 which requires G'. quaszkjiiciieicii enquiry to be held before the powers under the section can bee 1%/.

33 c.)pem::ed' wouid. ;v*e:;uZ2'.' if? mere (2up£icé(2.2fioz':. ;;=re<:5,?::iz,x;re cme' in {we ea2':4qz.=;z}**z'e5; of the same §V_}"(t.i?i,:ii.l_' ' inzfc: the sa.:r;-e§.e. matzer, e<mdu.(:red by L. Qffeicigzf (mo? w:!L'Z'1.(m.t any V~.:z"dz;¢z:a.£'a§e _. A _g3m*{ies. A c:on.sz':nmiz'0zz. so W;,:r*zr:§e'c;._.:eo?2abfe u21p2*ac:tz'cai oughf. n<)2fg '51:; be"p?e,?"erre?;?"'V-3wide}:

cznotkzer" (:or'z.s1fmez:or'1. is AceQrdV::'1gl_:1:r,, Zordships are Qf: opirzéeza...iAimt*.;he fTC):V_,i§g_}%ot required by the ;S€£_(':'%':(3f??,"_fO 3-V:taeru1.i;'--e%2.e"'£=?:e assessee or to mtzimafe to i'1,im alleged E%,<3C{1}t)e?T.3.efj4:i, gr ).L4I:Ifi"?<?:::".{_;"2'1v'(J;';)§VO?'IZ1?l1:ly of being ._v_bef'1ere.1 operate the powerjs ug§rgf{é;A}4e.«z

20. " 'Tilt?=C}L'lﬁi8Vfi"€')§'1 é1.1"<.>sc% for <':c)r1sideI';;1§:i{')n under the old r'\,_(§{' _b<-':f_orc>:.. Apex Court in the case of S.Nﬁrtzyanap;i2tz.. others V/3. Commissioner of Income mraag, _BL:n~gefZo_re (1%: V::>i LX111 '1%? page 1219}, The .é%,1:§"1:1¢}1&5f1{:"_§;<q1i{§ffiC§ed {ha-1:. t;.§3<«3 1:1c:<'}:1"1e': 'I'ax. ()1'.'£'"1'c,:c'>I' s«s%mL:id have c<)11:1":"r1:;1'--i?zic?'a {sci 110 the :a1.p';3::E$a1"1L 1133:: r€:ée::s;<>1'1s which led him :0 iAn:§»r_j2:2t.eV"'t:he p1"<;><:eedéng$ iifédiif E3';::2C,ti<}1.r'2 34 ("sf the Ac? amd '"?il1.'{jL2'§gh E'7~"L1Ch ea r:::q'L3:=:s£ ve.=a:~:; made by the za1.pj;3(-tllant {:0 the ITA 2335:-'3(}()5 34 Encome Tax (,}ffiCT€"if} he deciéneci to diseiose {he reasons. The Supreme Court heid as L,in.c§ez:

"The Sc}'2,em.e of Section 34 of -1- V that, if the conditions of the main seCf,io_nVa're' ' satisfied, a notice has rojbie "i3«i<-Eﬁueci .;ir3_i"'i.3iieV £ISS€SS€'€ requirements which may -be iriciudec? if1'.CZ"'f7:g'I3fiQ€ under Sub~SecIion (2) ofiSeVTeiion 22) .__E3u§'.1Z9efore issuing the noiioeﬂthe requires' ﬁ'£C£f~=i:}'£€' officer shouid re<'5::=§i(';;_'}/iis initiating action under SectiQn]{34 obifaiii sanction of the Corraimvissioneri i<.2.?i,o"m,iiSi-be satisfied that ti'ie'"aeIio-n urifi;Z'er Eeeiiori 3'4~a)as justified. There is no'r*eqi1i:"e:nerii"inany of the provisions of the Acigor ':1r1yxSE3(iili€;vi hiigiiizfigj down as a condition for _ ihe initiation"i'ofiti'iei;oroCeedings Ihai the reasons which in"ci'i;«ce_d«.Vthe Commissioner to accord sanction io proceed under Section 34 must also 'be"co'r;1niunicated to the assessee. "

Containing ail 3% ?,i.ACii:~'iv9' iii.'/3-iié the presem Act dealing wit)": Section others (vo1.;2:39 12003 pagégﬁ 19) we as under:

143{2}, za.nd 148, the Apex Cour': in the case of GKN Briiiﬁeshafts (India) Ltd, V/s. Income Tax Officer and 35 "'izVher1 a. notice under Section. .248 of the fneornej' Tax Act, 296} is issued, the proper course":of~:.:"*<.."' action for the notice is to ﬁle the return ' so desires, to seeis: reasons for notices. The Assessing Qffioer' is to:

furnish reasons within at rect;soi%;'§tb'te receipt of reasons, the'n'o.tiee erititlediitgi .Jﬁi§g objections to issL.:anceu"».of notiee._ 'VC£'??,vd the Assessing Ofﬁeer' .js be-'r1'ndiVe_:'toudispose"of the some by passing it '.22. """ '--:FVh-€f€i€§jI'C it.fo11(')v,?s"'thait the ITO is not required under iS?w_ee'tior1 é»htéeve.Ati't_.t<> convey to the assessee or to intimate ttjhim the ri.a't'o.re of the aiéeged escapement, or to giV_e'5'hin_d'an c3pf3ort.j§i1_1ity of being' heard, before it decideé to 'r,>§erate_ t?3e..._}5§c>wers conferred by the section. There is no i*equ.i'rerne.n~t. iiiony of the provisions of the Act or any section laying ""{1'o\?;?n as a condition for the initiation of the "rioe_eedings that the reasons which induced the "€3oi'r1Amissioner to accord sanction to proceed. under Section. V '"i~4~8 must aiso be C€)II"1IT}3.,1T'1i{2E3fl(:":d to the assessee. The proper Course of action for the ncnioee is to file the return and, if he give IIEX 2335s"3{){)5 37

123. Ir: ibis bacL<.:gr0Lm<§ ii is also usefui to refer to the p0w<:;:s of the \zari.()u:s a2_.1t,h(.Jritie$ Léﬁdﬂi" the Income Tax Act and the nature of j'ur:;sdéctt'éor1 {hat is excrrciscd an-ri_ {he ciifferences betweez1 the original and appeliate h§urist1§€:'£i{>*nV'{;f {he au.€.hL}riti<:s urzder AC3. 2.1r:.de1"su>oci in $;he--'.£)fdinafy "<;iex}_§Ee H law unciez the Civil Pr{>ccC¥'urc: Cc)df:.'""Th-e A'_pe>.;e'C(t>'t4r$x 'ir1f,t%ie.

case of Commissioner of Income U.P. Kﬁfzpﬂr. Coal Syndicate (Val. LIII 1964-}:V}m_ge 2:25) haaiav-§.h'>e§_;t:"*"

"The Appezilqie ASS: " = _Comm'issi0?Ler has pienary powers in, an appeal he sebpe _Qj:'4his4._g5D;pers' is Conterminous with that of the Ofﬁcer. He can do what the fmgdrseaewtax can do and can aiso direct him to do AAz.e,7}}c.:z has failed to do. in_ the Case of State of Andhra Pradesh V/s. .:23s-faestos Cement Production Ltd. ('€91.94 1.994) 4___i C3}. Apex Couré; held as Lmder:

"Not in the narrow sense of revising those mcztfers about which the asseseee has a grievance, but a revising au.:hori€g in the sense 'L 38 that, once the appeal is before him, he can revisrei not enly the ultimate computation arrivecl » ix.) 'VJ §.;J :4- [-3 the [assessing officer], but he can revisel'-every. process which led to the ultim-rate--CQ?nputa'tio--h"or assessment."

The power ofappeal"ii_r1der"'the State S:a'tes.. Tax enactment herein is alt_oge,th.eritlitterentvfgin character and uni¥iér"m.e Code of Civil Procelclu'._re.l" w Lofappellate authorities' ' u,ndert- the Clerieral Sales Tax Aer}: afid f>i?é'.iAritihra'Pi*araesh General Sales 'Tag? . vall;?Oig'eth;er different from trhje'p9ii}r;§r oft,'-"tire a-pp*elllate"<.:oii:rz's wider the Code Civil. if the appeal by the dealer "is. 'rconfAii'iel'c;?«-._bto'l a particular aspect of .asses'snfien€,.. it', open to the appellate g:iiitl'2oritiesl"'to__l__enhanr:e the assessment. They can .also anniil the order of assessment and iiericler a'ss:essm.er1t. The appellate authorities uricler1._those Acts are in the nature of revising za'uthor£ties net in the narrow sense of revising those matters about which the assessee has a grievance, but a revising autherity in the sense that, once the appeal is before him he can revise not only the ultimate Computation arrived at by the [assessing officer}, but he C{I1?'1. revise every 39 process which led to the ultimate computation or assessmentt

25. in fact 21 {L111 bench of the Madras High C'oiir{ in the casstzr of State of Tamil Nadu V/s. Arulmunzggm:'§5'5Cb.._ ('\fo1.i'5?. 1982} page 381) had art occasion .1_c;°'e:xh5:u:§;.i<.zéi3%_ '' consider the scope of the a.p'pc-Vhlhlateh§gfisdictioVr:--._x, 'AVftef« reviewing the law on the poirit it'.Wé1-.3 he1c§.>:i_:;Ai,1ndez*i' "The decision of the Stiptfeme MiZlcm's Case (1958,3«33 is not to be :eor1siri1e;?L5.:?V.gV:'eA me fe__a:'J.aZogy. In our judgment, of construction of tax appeals, which is _§: eeneraiV'in.__VVr{1t:ttuh.?, and therefore, applicaiaie to h the Aovfeeerzt Foiiowing the line of approach 3 T. construction. adopted by the h we hold that the power to extend the. tirhe forﬁling Cform declarations, which the ﬁroviso to section 8(4) of the Central Sales Tax Act confers, is ayailtxbie to be exercised by every A authority whe has jurisﬁtction to deal with the assessment in one way or another, and at one time or cmother, and is not conﬁned strictly to IT./'~. 2335.:'3{){):3 40 the assessing authority along, as the prescribeoh au thority. "' F"ur%;her t.hej«; held as Lmder:

"An appetlate authority ._vthe enactments sits in appeal, only in rnannetj Of" '' speaking. What it a'oes,_ 'fa.nctior1aittgg isivioirtlg.'/.fQ_ adjust the assessmentihiiiitlf' the app_etiant':':§in accordance with the facts" on':4the=Jfecord "and in accordance withhhhthet tit/<3;iA:;?ai'itm_t>71»'§L€"'? by the Zegisiature- An app-'ea'ZV is avv.e'cont.in'iltaEiorz of the process!'offassessment; titnd '--an.._a.ssessment is 'but anoit._het_V:'n.ame""for. adjustment of the tax liabili-ty to_aj«:eoi9it'..;o'ith.-'the taxable event in the parttcttlar ta;x5paye.r~}s Case. There can be no analogyVnomoaraltaet between a tax appeal and an agape}:-5 say, in Civil Cases. A civil appeal, like a it _ in the Court offirst instance out of which 'it is realty and truly an adversary g:-__r*.oceeeZing, that is to say, a controversy or tussle mutaai rights and obiigations between V Contesting Iitigants ranged against each other as A opponents. A tax appeat is quite diﬁerent. Even as the assessing authority is not the tax~payer's "O onent", in the strietl roctedural sense 0 P137 31 19 V tsax: ».appella't'e'"' 'Vauthority, it of the Supreme Court. "' 41 the term, so too the appellate authority sitting in ._ appeal over the assessing authority's order assessment is not strictly an arbitral deciding a contested issue between two litliyants' 'V ranged on opposite sides. Iii tax appellate authority is very Zfnuchbicorizmityted the assessment process, The agg;_ie.l_late authority it can itself enter the areiiailof assessirz.eii:._{ either. by pursuing farther inuestigatiori .'or_l_oausVi3hg further investigation to pan doisol on its own initiative, ioit_houZ-.beiinglylpitoclelea by any of the parties. 1:4:-'cm tvheialssessment, takingaidutiittage'-ofthe O1éﬂbflllVT£i'$y afforded by the Clj9'p.ea,l, though the appeal itself hasllbeeii only with a view to a 7'8dlLQl,lOl't iii the assessment. These are special ' 'arid e2a:e;oti(;iia.l llattiibutes of the jurisdiction of at These attributes u,_n'.de;=zi'%'ie._ the truth that the appellate authority is functionally and substantially, from the assie.ssing authority itself This ,UOsition has ~~beeri well brought out in more than one decision 331/it 42 25, This jL:C§ggm<=:r1L has been upheld by the Apex Court. in {be cause of State ofﬂlndhra Pradesh l//S. Asbestos Cement Production Ltd. refer1'ed to l "

27'. There can be U(}V&l§'§€lll'l'E_:'::y4' tax appeal and an appeal, seV1jx,.T*5v._%§';..civil"<:a.$€e3.,AV like 2: law suit. in thc2vc--:r_)z1V,11't §%iStancc; (':'u.t which it arises, is really and 'git: ;3gG'Cr:edir1g, that is to say", a C(.)nL1:(1\:*:<%51'S}; rights and <)b1ég21V:':it')1i_<,-.l§§;\ﬁ=éég:;V'«r:cj'1l.l.fE'sl;i1l1g"iii-ig3;a.11ts 1'ar1ged against each other is qmte difﬁzrent. Even as the the ix-1x--pay€1"s "0pp0ner1t", in ¥Il"1€4§§'tI'?i{TLly p1't;5:c§€:l'Llral'scns{3 of the term, so 100 the appellate r:1;it'h\()r"§iy §i.1;tin.g in appeal ()ve1' {he assessing auil'10rity's la.s"s:;s§g~;;mcm. is not st.ri<:'£1y an arbétral tribunal <:i€~%c'i'd§.:<2g é;l:'j_c'(:%1¥;est€:<:l issue b(':'LW'C€§'3 two litigants ranged on (}}i)}f)"().$.§{f3'VSl§{,'S. in a tax appeal, the appeilata' authority is " \~'€2'._T'y' niuch (:<.)mmi!;tccl to the é-18S{3SSH1t'3I1t p§(){,'('3i~'.-S. The 'app-éllatii alzthorétjy can itself €3I'l'£€I' the a1'€:n.a. <33" atssessmem, Either by pursuing fur%;hc*.1' inv€sL%gai'%(')n or c:a.uSing.=; §"u1'%h€r EV, 43 investigation. to be done. it can do so on its own i:1itia1:ive, with(.>u}'. being, prociaieei by ziiiy of the parties. It {i21Uv{?i'1h&i'ﬂC€ the assessment, t21i<ir;g advantage of the <)pporti1%__1it§'"é§fo1§d-6:_d' _ by the ta.x--p21jy'cér's appeal, even th<3t;Agh the_*21pp--c§:s»1bitself has"

been mooted onlv wit_h a Vif3\a't=':', t.(I§;:"-2"; assessnrsem. These are Speeiézi-._§tnd the jurisdictim": of a tax eapgoeiiviiviéiitevia2,§th<ii'i't}i_::'igfhevfiappellate authorities are in the r§rV_%'xAIV;"s:i.r_i.§%Zantheimtiiesvvnot in the narrow sense of' rev:%siA1f1_,<g;V:i' which the hasfa ":~;§r.i7evai3.cei. *b't2t"'s,V1"-E-évisirﬁg authority in the sense 7that,_oh'e_e _'before him he can revise not only the ..L_11tima.t*e_ coniptziaﬁjfjn arrived at by the [assessing o£'i'iee1'§v_,_buth-e' Ca'i"1 fevise every process which led to the 3,11t'i'1h21t"e':_:oVinpL:tatio:r1 or assessment. An appeliate authority t.§1'.}_'dCI' tax'i~ng~ena.ctmen.ts sits in appeal, ozziy in a manner of What it does, functionaiiyg is only to a.d§us2 the assessment of the appeliant in accordance with the facts on _th_e f;':cord and in a.eeord:»;m.ce with the law iaié Clown by the it leggés-1e11:L:re. Ar: appeal is a e<:sntinuation. of the process of assessment, and an assessment is riothing but: another name ER./"

44

im" aci_§ust.me1'1t. of the {ax iieibiliiy to accord with the taxable everii in the partictiiiar La::<vpajy*er's <::21.se.

28. in the b&1Ck§§§"OUz}'1d of the settieci vmen we ariaiyse {he facts of this case, it is assessment proceedirzgs of one J showri his income as a C()I'}"11'ria1',sS1'(")r1':i'ffigi§"t}')€ cm mobilisation of the depijsitsiwisr 'she saiéii amount paid to him w;1's~..iiot iii"2*;.e""Eiar1i<, 'gut ow. of the interest on the m_o§_3ii.1'i--s:Vec§ i-L'1_'1'ii'i{;i!:_§"~.f.)f"L3'1"1E'? assessee. En the assessmeié'i.'pr§>t:s:ediﬁgs of the said .J.'F.A.S, the assessee was giV('3i'iv,_'c1'I1,()p}30?"i:1}i1'?iiiﬁii-._tii}' explain iheii" s¥;ar}d. Their ease WaS:VL;ﬁ3fﬂ:'¥. th.ey*.Aé1:"ei nail aware about the iriierest income. iv"J.vTI}'\.S::'i'iV.ra:E5">'%iver1 commission by the banks (:or1Cerned. The =.b'c3f_I-'1§{Sth.{f§.}fV,:~p&§I"t eategwieaiiy si.at.ed that the assessee hé1.d_ i.nsirL_%c§':ed the bank is pay part of the interest to I\*Ir.i}.'i'.,ﬁ§:E's which wouici have n()rma§§y gone to the assessee. .Altv_is.i:1 {hose CTifCUY§1S€a§1C(3S, when admittedly, the aforesaid cijmmissioiii paid to J."I'.A.S, is moi disclosed in the returns med by the assessee, the re~assc:ssrr:a:2:ri': pmc:ee<:1ir1gs were is/e 46 ihereiizim, the assessmenl orciers were passed andhthus, again violating the principles of r2at'ural justice. H01 prc>sCribe a1"1y time limit for the await. for furriishing of pg-u'i"ieul.a.rs. V been initiated iwo years bacl<..l=__V particulars though there wasiwo the reasons. "§'ha.t by itself \2'x«'()L'li'li'lii§.:._l'>1"l1(1';V to seek sufficiently long The assessee is not an person. It is a ctimpany ar2d;"all'«;.L_lﬁ'at its sgo;1'ght'viAii-.tIhafg_Hie¥;ter is cmeuments wh.i<:hﬂwe_re. ilr1lv.*t,h..ei'1*.Vp'o.sseVssic)i; in the nature of a(:CoL21'1ts books, baljliéz ls{atﬁ3m*si'1ib_éI'ﬂo§4'Ehat. l,i1€:_Vf have to show {hat the t:ansa.r:1:lon isi-.';1*1;ie' of'1:1ot. If really, the assessee had a i"*teVziéi?)lel"-Eieefenee, the§ic()uld have files their objections 'to the sa.l_d lE;l_t'éij settinig out what their is and {hen I.'CQL;i€StCCl §()i"«_Lime.~t~.o_i§;s--1*<>duce the d()CLE1'.1'1C1'ElLS. We do riot such a coursevol' conduct. Elven otherwise, after the assessment " .'()'I7(_i§{f¥nf.' was passed and an appeal was filed, {hey eoulci have V si;a.te:i. is-"ha.t. their ease is in writing before the appellate E§'li11hC)I"ii},-', but tlhey have moi close so, in the first appellate Kw"

l"l";*\ 2335."2(){)5 47 proceedings, they furnished with the copy' 0f the order reducing the satisfactitm in writing, copy of lhsif Ijtiinand r<:':p<.)rt which was sought. for by the first appellzatg and also copies of the sworn statement proceedings pertaining to J.'l'.A.S asmivcii 21.6.2000 which is the starté.n.g ptiiint They did not file any objections_:d~i_sputizigfjhgi Gill these documents. The Jstzanci t.h.e~ma.s:sessment proceedings are barrsci taken note of do not cc'3ns_tittite stiflicirﬁjntlArsasozi-1s«..'lio:' reopeni11g the assess':nCnf:_ é2in:»:l foij thp department to prove by acceptable; c5>.tIViden(:e'».t'l:aitI'-theft: is receipt of incozne which is sazpprsssed VEt1'.1'ClV"}'iD'c':1"3,-"'I"i1¥'1f:'¥}.l. of expenditure which is also purpose 0? Section l4~7 is to ensure that a I an-'a.y willftzlly making 2:1 false 0:" untrue Sla.':Cn1('3§"'i.l: the time of original assessment. When it came:

to th€"l<if§0t&'ledge of the Assessing Off%Cc:*r that there is such _w.i§f1j;l orriissicin in the returns already filed, anti an V c>i§3p0rt:,,1nit:; to the to putfcsrth his ('.%:1.St';', in writing and to aclduce (;'Vl(§lC'2m;'t.' to substantiate his case that the WA 23 3 S 3005 48 ma.teréa2 eotleczed by them C.a.rmot be believed or 21ctedj":u.pon. If the does not avail the said be said that by mere poirxtmg out some 'V assessee can succeed. The fast' oi;

the assessee is not in dispute.

fixeci deposit receipts of six the' person who was 1'esp(>osf;§3le pg ft1oCE::..z1s:d making deposits in the banks. the bank is bound to pay §;1te'1'est the bank paid a. five cheques diretftlii to :.}.T.'}¥;.S. *".?h'e.. s"h,_o1'ts euest:Ior1 :ls, whether the said paj_;'men.'t« is-by 1'1-']_C"§)t11T1}{"~Qti"«tH€§I' c)wr2 account or on account of the assessee. V In tdrxetassessment proceedings of J.'I'.A,S, the..«.3-}:,sao'}:. (>i'i"§Cii*.:11s_ have been examined, On oath in ,.¢--,5;Aa1Té§.:()r:ir:'a.§ terms, they have stated that they have paid by __\2€s§;u(>f:C'hVeqtie_ €:i§.1'C?C'{.1_V to k.§.TuA.$, out of the interest amount ;5s_y'*¢:b1.e ¥j;,:9--V'sjthAem to the assessee, on the instructions of the Ed the said ;31'oceedi:"1gs, ail that the assesses: says .is,Tth.e}7'vEéave not parted away with their interest. income and _t.}.T.AfS, was given cjtrmmissicnn fig! the banks Concerned. As R/..

49 rightly e.ontended 1}}: the bank, there is no provision inn any law or contract £03" payme1'1t of commis:sior1 to :'nobi1isation of the depoasits. In fact, the same We find it difficult to accept that the b€i.Z'}.k directly" to ..}.T.A.S, is on theit"

rendered by him in m(>bi1isir1g'_'t}1e «Va§1'f'1'(511nt, hatzd, they have cat,egoriCal1y'u§tVd:ted_ thedtdt'-the had instructed the banks d.T.A.S, it is not in d.is1:3u%e that J €LSSfi'-S66. in the 1"G'L'L1I'E'}S f%l.*:d"'£)'§?_' the'--*..}1ai}e tshowrz brokera e 1 W . . a .3 8 of a lsum to J.T.A.S. in the letter' addressed_'é'o by the department dated 19.22003, «ELI-"athteté. information 1.5} the effect that for the year 199-4~9:"3 while computing the i.r1Come, the at sum of R:s.26,85,9'72/m as br<3.l_<era1_g§e._'If'hc::y wa--mt.ed to krzow Whetluer this is; a bmkerage in.cL1r;*'e.d__towards cemmission payment to J.'f'.A.S., and C0. _§\.'0_ repl}; was given. Even in the first appeilate cot,u"t, the Said i:if<>rm.at.é()n is not fc)rthc:(Jming;§. In the CiI'{tL1:mSta§'}C€tS, the assessing officer and the appeiiate e2uth<)ritjy' xrceret fuliy 50 justified in drawing the erorzclusiori éhat {he saidj"a{1?:~r)é;ii:t represented Linc ':ri?..£:z"€:st 2'-zmourzt payabie by ihff and {hat {$36 1OEi_\/'i'I1(311t 0-xi bcihalf of {he assesses to the arnourit is not reﬂectied in L1/1€ii_'ue"':-1V,z1rr1 Vbra L expendimre. Hence, :f_.hc1'<=-3 of this income: and expezzdiiu-V; which is fiieci.

The:"cf0r<:_, the t1,"i,bUnaif...~,vi.EL§:2()L1Vt of the facts. in .':_1.:_4Vsgérfi.6%.J's"':eI'1'c>1' in :inte1'fe1':i;'1g with the by {he first appellate 2:L1thc>1?it'y.__ 'I'ribLmaE igriorirag the m.:-1?;<:i'ia1 f;"Vi(§f3I}C'.i;'!' eV:_:€d_ which an: moi supported by any giegal CK-'1'Ci.€1"'1CVT'€' a}'1(."§ ir1f.e1'f€1'ir:g wi{h an order passed by 'tbe""a1p}§5'i1aVte_authoriéy which was based on legal eviderice. Iv.Th;;2:"é2hi9'c:«,é;':1i§*~.E:§;Zg%1 C0L2.1't is dL;i{},~' bound to éntczrfeiv with such pCI'Vf3.T;S.€A order.

29. .. Lastijy' it was .r;n:)r1i.{:1is:i<:ci {hai vi.-'hcr1 once it is is;ri.(}'wr1 that. the C()mméssicm was paid out 0f the interest; due tip the assessec-3 from the bzinks on the fixed deposit I't':E{X3ipiT,S_, 'ii/i 52 "69C. Unexplained expenditure, etc. --

Where in any financial year an assessee has incurred any expenditure and he offers no expalncztion about the source of such' expenditure of part xhereof, or the explanaiichg if any, offered by him. is not, in the op.iz'zc:;f5:<e..ofi' {he Assessing Ofﬁeer, sat?'sfq;c'f6ry,« .the.&az(no:i,zri.1ﬁ ' A covered by such expendimre fhehfeof, the case may be, mayﬂﬂe deehpeél to income of the assessee jbf«si,2ci1 fir1ai:,cid{year, Provided no;t':withs:qnd{ng anything inuff_c:z'rLy"L2.:r:_her yvfcheisiori of this Act, sec}: 4um;.x;5z~$:'n::¢cs.§:cg§:V;.d{rure which is deemed to hincoxm_e"V'cf' assessee shall not be "allcwexdr-»c;s"f1 zsfedyction under any head of ii1*come".

30;.,_ » . _"ji--2.i the :ct'u.ms filed, the ass:-sssee has not shown Rs.60;29j52?,f~ as émeresi inceme received. 1%. is also not "_Ash_Qv§§-1r: as an e:><:§{~:r2di1.u§€ incur1'ed., E'Jf3.'£'1. aﬁer {he said V <>5mis$i()n is poir2te<:1 out, :30 explanation is <:}ffc:r{-3<:i. On {he c{}nt:*ary, t.§3.<;: stand is, it is i'1('}'E a goeszjgrrnentz made by the \a,/c ¥'I'./'K 233i?i'3f){)5 S4 and the order of the first appelfate authority is restored to its originaIfile._. ' é *§E3Q§ 4'

Legal Document View

Unlock Advanced Research with PRISMAI

Karnataka High Court

The Commissioner Of Income Tax vs M/S M N Dastur And Company Private ... on 14 July, 2010

Bench: N.Kumar, B.V.Nagarathna