Income Tax Appellate Tribunal - Delhi
M/S. Annie Investment And Finance Pvt. ... vs Dcit, New Delhi on 24 April, 2018
1 IT(SS)A No. 6 & Ors/Del/2012
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'F' NEW DELHI
BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER
AND
MS SUCHITRA KAMBLE, JUDICIAL MEMBER
IT(SS) A .No. 6/DEL/2012 (A.Y 1/4/1986 to 27/6/1996)
Kandla Petro Chemicals Corporation Vs DCIT
Ltd. Central Circle-23
E-10, Sector-15 New Delhi
Noida
AACK4740L (RESPONDENT)
(APPELLANT)
IT(SS) A .No. 4/DEL/2012 (A.Y 1/4/1986 to 08/07/1996)
Patliputra International Trading Ltd. Vs DCIT
E-10, Sector-15 Central Circle-23
Noida New Delhi
AAACP7221N
(APPELLANT) (RESPONDENT)
IT(SS) A .No. 1/DEL/2012 (A.Y 1/4/1986 to 27/6/1996)
Annie Investment and Fiannce Pvt. Vs DCIT
Ltd. Central Circle-23
E-10, Sector-15 New Delhi
Noida
AAACA9913F (RESPONDENT)
(APPELLANT)
Appellant by Sh. Vinod Kumar Bindal,
CA
Respondent by Smt. Paramita Tripathy,
CIT(DR)
Date of Hearing 06.02.2018
Date of Pronouncement 24.04.2018
ORDER
PER BENCH These appeals are filed by the assessee against the orders dated 12/12/2011 passed by DCIT, New Delhi.
2 IT(SS)A No. 6 & Ors/Del/20122. The grounds of appeal are as under:- IT(SS) A .No. 6/DEL/2012
1. The assessing officer erred in law and on facts in making additions of the amounts deposited in bank of the assessee other than received from Mr. Anil Sanghi ignoring the facts and evidences placed on record to prove the source of such deposit and without raising any query in this regard. Thus the said additions should be deleted.
2. The assessing officer erred in law and on the facts in making an addition of Rs. 1,0007- being cash deposited for opening the bank account of the assessee out of cash in hand available with the assessee on account of subscription money of Rs. 7,000/- received from 7 initial subscribers. Thus the addition so made should be deleted.
3. The assessing officer erred in law and on the facts in making an addition of Rs. 1,24,000/- received by the assessee from M/s Annie Investment & Finance P Limited through banking channel ignoring the facts and evidences placed on record to prove the source of deposit. Thus the addition so made should be deleted.
4. The assessing officer erred in law and on the facts in making an addition of Rs. 25,00,000/- "received by the assessee from M/s Ganpati Investment Consultants without properly appreciating the facts and evidences placed on record and without raising any further query in this regard. Thus the addition so made should be deleted.
5. The assessing officer erred in law and on facts in making an addition of Rs(69,863/- in AY 1996-97 being interest on FDR with Andhra Bank ignoring the facts and evidences placed on record that transactions regarding FDR were duly recorded in the books of account and the interest thereon was duly declared as income in the regular return of income. Thus the addition so made should be deleted.
6. Without prejudice to the above submissions, if the addition of Rs. 69,863/- is sustained in the block assessment period, then directions should be issued to exclude the said income offered for taxation in the regular assessment as the same income cannot be taxed twice.
7. The assessing officer erred in law and on facts in making an addition of Rs. 8,76,576/- in the AY 1997-98 being interest on deposits with companies ignoring the facts and evidences placed on record that transactions regarding deposits were duly recorded in the books of account and the interest thereon was duly declared as income in the regular return of income filed before due date. Thus the addition so made should be deleted.
3 IT(SS)A No. 6 & Ors/Del/20128. Without prejudice to the above submissions, if the addition of Rs. 8,76,576/- is sustained in the block assessment period, then directions should be issued to exclude the said income offered for taxation in the regular assessment as the same income cannot be taxed twice.
9. The assessing officer erred in law and on the facts in making an addition of Rs. 49,60,000/- on the basis of entries in seized material found during the course of search in the case of Mr. Anil Sanghi on 1/11/96 and with a predetermined and prejudiced mind by alleging that no directions were given by the Hon'ble ITAT on this issue and ignoring the facts and evidences placed on record. Thus the addition so made should be deleted.
10. The assessing officer erred in law and on the facts in making an addition of Rs. 2,02,695/- on the basis of entries in seized material found during the course of search in the case of Mr. Anil Sanghi on 1/11/96 and with a predetermined and prejudiced mind by alleging that no directions were given by the Hon'ble ITAT on this issue and ignoring the facts and evidences placed on record. Thus the addition so made should be deleted.
11. The assessing officer erred in law and on the facts in making an addition of Rs. 10,96,405/- on the basis of entries in seized material found during the course of search in the case of Mr. Anil Sanghi on 1/11/96 and with a predetermined and prejudiced mind by alleging that no directions were given by the Hon'ble ITAT on this issue and ignoring the facts and evidences placed on record. Thus the addition so made should be deleted.
The appellant craves the leave to add, substitute, modify, delete or amend all or any ground of appeal either before or at the time of hearing.
3. The assessee company is related to Shri Prakash Chandra Yadav group of cases. Shri Prakash Chandra Yadav is allegedly the key person accused in the Rs.133-crore Urea Import Scandal. Search warrant u/s 132 (1) of the Income Tax Act, 1961 (hereinafter called the Act) was issued in the case of the assessee on 27/06/1996 covering its bank account number 2385 in Andhra Bank, Asaf Ali road, New Delhi, which was executed on 20/09/1996. Thereafter, notice u/s 158 BC of the Act was issued on 07/04/1997 and assessment u/s 158 BC (c) of the Act was completed on 29/09/1997 at an undisclosed income of Rs. 3,97,46,539/- against the returned undisclosed income of Rs. NIL.
4. The assessee filed an appeal against this order before the ITAT, New 4 IT(SS)A No. 6 & Ors/Del/2012 Delhi. The ITAT, New Delhi vide its order dated 17/03/2006 in IT(SS)A No. 244/Del/1997 observed that warrant of authorization was never issued, no search warrant was produced before it for verification. Thus, the ITAT held that the block assessment proceedings as void ab initio. Accordingly, the assessment was declared as invalid and was quashed by the ITAT, New Delhi. The department filed appeal before the Hon'ble High Court of Delhi against this order and produced the warrant of authorisation before it. Thereafter, the Hon'ble Delhi High Court vide its order dated 31/10/2007 restored the appeal to the ITAT, Delhi for considering it afresh.
5. The ITAT, New Delhi vide its order dated 30/04/2008 in IT(SS)A No. 244/Del/1997, held that the block assessment was not valid because search warrant issued u/s 132 (1) was illegal; the assessment order passed by the AO on 29/09/1997 was passed beyond the date of limitation specified u/s 158 BE of the Act and also that the warrant of authorization signed by the Additional Director of Income Tax was without any authority. The department filed an appeal before the Hon'ble High Court of Delhi against this order. The Hon'ble High Court vide its order dated 30/11/2009 held that the warrant signed by the Additional Director of Income Tax would not be invalid as he had the necessary authority, in view of the amended provisions of the section 132 of the Act. Accordingly, the Hon'ble High Court set aside the judgment of the Tribunal and restored back the appeal to the file of the Tribunal for decision on merits.
6. Consequently, the ITAT, Delhi Bench 'A', New Delhi vide its order dated 10/01/2011 in IT(SS)A No. 244/Del/97, set aside and restored back the issues involved in the appeal of the assessee to the file of the AO with the direction to decide the issues in question in the light of its observations in the case of M/s Patliputra Credit and Securities Limited in IT(SS)A No. 372/Del/97 dated 17/03/2006, and in IT(SS)A No. 10/Del/08 dated 31/03/2009.
7. In order to comply with the directions of the ITAT, notices uIs 143(2) and 42(1) of the Income Tax Act, 1961 alongwith questionnaire were issued 5 IT(SS)A No. 6 & Ors/Del/2012 to the assessee, on 03/08/2011 for compliance of direction issued on 12/08/2011. In response to these notices, Shri Anil Sanghi, Director of the Company attended the proceedings and filed necessary details and clarifications which was placed on record by the Assessing Officer. The details submitted were discussed with him by the Assessing Officer. The Assessing Officer made various additions and passed order dated 12/12/2011 u/s 158 BC (C) /254 of the Income Tax Act.
8. Being aggrieved by the same, the assessee filed appeal before us.
9. As relates to Ground Nos. 1 and 2 addition of Rs. 1,000/- in A.Y. 1996-97, the Ld. AR submitted that this addition was made for the amount of Rs. 1,000/- which was deposited in cash in A/c No. 2385, in Andhra Bank, Asaf Ali Road, New Delhi of the assessee on 27.01.1996. The Ld. AR submitted that the assessee received Rs. 7,000/- in cash as share capital and Rs.1,000/- was deposited in bank out of the same amount. The Ld. AR submitted that the Trial Balance as on 31.03.1996 which shows share capital of Rs. 7,000/- was produced before the Assessing Officer along with ledger account of Share capital in the books of assessee showing cash receipt of Rs.7,000/- towards share capital as well as Cash Book of the assessee showing receipt of Rs.7,000/- as share capital on 03.01.1996 and payment of Rs.1,000/- for opening a new account No. 2385-3 with Andhra Bank on 27.01.1996. Thus, the source of deposit of cash in bank stands explained and addition of Rs.1,000/- should be deleted.
10. The Ld. DR relied upon the Assessment Order.
11. We have heard both the parties and perused the records. It is pertinent to note that the Assessee has given all the details to the Assessing Officer and has explained the cash deposit through the bank details. Therefore, the Assessing Officer was not correct in making addition of Rs.1,000/-. Thus, Ground Nos. 1 and 2 of the Appeal is allowed.
6 IT(SS)A No. 6 & Ors/Del/201212. As relates to Ground No. 3 for addition of Rs. 1,24,000/- received from Annie Investment & Finance Co. Pvt. Ltd. the Ld. AR submitted that the amount of Rs. 1,24,000/- was received from A/c No. 1125, in J&K Bank, Noida of M/s Annie Investment and Finance Co. Pvt. Ltd. The Assessing Officer made the addition by alleging that the assessee did not submit any confirmation of this loan from M/s Annie Investment and Finance Co. Pvt. Ltd. The Ld. AR submitted that the Assessing Officer admitted the fact that the amount was received from Annie Investment & Finance Co. Pvt. Ltd., a group company assessed with the same Assessing Officer. The Trial Balance upto the date of search showing credit balance of Rs.1,24,000/- in the account of Annie Investment & Finance Co. Pvt. Ltd. which is placed under the head Current Liabilities was produced before the Assessing Officer along with the ledger account of Annie Investment & Finance Co. Pvt. Ltd. in the books of the assessee showing a credit balance of Rs. 1,24,000/- as well as the balance sheet of the assessee for the year ended 31.03.197 showing balance of Rs. 1,24,000/- of Annie Investment & Finance Co. Pvt. Ltd. under the head current liabilities. The Ld. AR further submitted that the assessee also submitted before the Assessing Officer the balance sheet of M/s Annie Investment & Finance Co. Pvt. Ltd. for the year ended on 31.03.1997 which shows an amount of Rs.29,36,121/- as loans and advances. The break-up of the said amount of loans and advances is given in Schedule B which records an amount of Rs.1,24,000/- as loan to Kandla Petro Chemical Corp. Ltd. alongwith photocopy of bank account of Annie Investment & Finance Co. Pvt. Ltd. showing payment of Rs.1,24,000/- and photocopy of the bank account of the assessee showing receipt of the amount of Rs.1,24,000/- on
07..06.1996 and is included in Rs.26,24,000/- all these documents were produced before the Assessing Officer. As regards the photocopy of the confirmation of M/s Annie Investment & Finance Co. Pvt. Ltd. the same was not produced before the Assessing Officer as the same was not called for. The Ld. AR submitted that the same company was also assessed with the same AO and he could have verified it directly from the said company which has not been done. Thus, it is clear that the amount has been received from Annie Investment & Finance Co. Pvt. Ltd. and has been duly declared in the 7 IT(SS)A No. 6 & Ors/Del/2012 balance sheet of Annie Investment & Finance Co. Pvt. Ltd. and therefore, the addition of Rs.1,24,000/- should be deleted.
13. The Ld. DR relied upon the Assessment Order.
14. We have heard both the parties and perused all the records. It is pertinent to note that the Assessee has given all the details to the Assessing Officer except confirmation of Annie Investment & Finance Co. Pvt. Ltd. From the bank details and the balance sheet of the said company it was clear at the threshold that the assessee has given proper explanation with the evidence. Merely not producing confirmation cannot be the ground for making addition when the same Assessing Officer is also assessing the said company for the said amount itself during the same period. Therefore, the Assessing Officer is not justified in making an addition and Ground No. 3 is allowed.
15. As relates to Ground No. 4 for addition of Rs. 25,00,000/- received from M/s Ganpati Investment Consultant for the AY 1997-98, the Ld. AR submitted that an amount of Rs.25,00,000/- was received from M/S Ganpati Investment Consultant ( Proprietor Anil Sanghi) by way of a cheque on 7/6/1996. The Ld. AR further submitted that the Assessing Officer made the addition stating that though said amount was credited in the account of M/s Ganpati Investment Consultant on 3/6/1996 from M/s Anil Sanghi & Associates but no such amount was found debited in the accounts of M/s Anil Sanghi & Associates on 3/6/1996 and Anil Sanghi has not offered this amount for taxation as his undisclosed income. The Ld. AR submitted that the Assessing Officer admitted the amount was received from M/s Ganpati Investment. The Assessee produced ledger account of M/s Ganpati Investment Consultant in the books of the assesssee showing receipt of Rs. 25,00,000/- on 6/6/1996 vide cheque no. 676446 of City Bank Account No. 0-412349-008. The Ld. AR further submitted that Mr. Anil Sanghi has two proprietary concerned namely Anil Sanghi & Associates and Ganpati Investment Consultants. Mr. Anil Sanghi declared undisclosed 8 IT(SS)A No. 6 & Ors/Del/2012 income of Rs.27.64 crore in his return of income filed for block assessment period :-
Particulars AY Undisclosed Income (Rs.)
Anil Sanghi & Associates 1994-95 4,61,500/-
1995-96 1,58,27,900/-
1996-97 24,36,50,370/-
Ganpati consultants 1996-97 1,65,55,000/-
Total undisclosed Income 27,64,94,770/-
16. The Ld. AR submitted the assessee furnish the balance sheet showing the asset side of Anil Sanghi regarding utilization of undisclosed income of Rs.27.64 core. This shows that an amount of Rs. 2,19,21,285/- (Rs.1,26,40,000/-) through Ganpati Investment Consultant and Rs.92,81,285/- through Anil Sanghi and Associates (was given to the assessee by Anil Sanghi out of undisclosed income declared his return of income. The assessee also furnished photocopy of the statement of City Bank Account No. 0-412349-008 of M/s Ganpati Investment Consultants showing receipt of a total sum of Rs.25,00,000/- on 1/6/1996 and 3/6/1996 through 11 different cheques and payment of the same amount to the assessee through a single cheque no. 676446 on 7/6/1996 as well as the ledger account of the assesssee in the books of Ganpati Investment Consultant from 1/4/1996 to 31/3/1997 showing payment of Rs.25,00,000/- to the assessee on 7/6/1996 through a cheque issued on its City bank Account and vice versa. The assessee also submitted the balance sheet of the assessee for the year ended 31/3/1997 showing a total outstanding liability of Rs.1,26,40,000/- to M/s Ganpati Investment Consultant. Thus, total amount received from Ganpati Investment is Rs.1,26,40,000/- which tallies with the amount mentioned balance sheet of Mr. Anil Sanghi. Photocopy of the bank Account of the assessee showing receipt of Rs.26,24,000/- on 7/6/1996 which amount includes Rs.25,00,000/- from M/s Ganpati Investment Consultant (Prop. Anil Sanghi) and Rs.1,24,000/- from M/s Annie Investment and Finance 9 IT(SS)A No. 6 & Ors/Del/2012 Company Pvt. Ltd. The cash book of M/s Anil Sanghi & Associates from 1/4/1996 to 1/11/1996 showing opening balance of cash Rs.54,15,122/-. The Ld. AR submitted that banker's cheques/DD of Rs.25,00,000/- (Rs.14,00,000/- on 1/11/1996 and Rs. 11,00,000/- on 3/6/1996 were purchased in cash which were deposited in the bank account of M/s Ganpati Investment Consultant. Since the bankers cheques were purchased in cash, the amount was reduced from cash balance and not from the bank account of the Anil Sanghi & Associates. The assessee also submitted a letter dated 24.11.1997 submitted by Anil Sanghi to the then Assessing Officer in his personal case enclosing these books of account from 01.04.1993 to 01.11.1996 which tallies with the cash book produced. This fact clearly proves as per the Ld. AR the source of Rs.25,00,000/- as amount received from Ganpati Investment Consultants out of the undisclosed income of Rs.27.64 crores offered for taxation by Mr. Anil Sanghi and thus the addition of Rs. 25,00,000/- should be deleted.
17. The Ld. DR relied upon the Assessment Order.
18. We have heard both the parties and perused all the relevant records. It is pertinent to note that the Assessee has given all the details to the Assessing Officer. After going though the Banker's cheques/DD of Rs.25,00,000/- (Rs.14,00,000/- on 1/11/1996 and Rs. 11,00,000/- on 3/6/1996 were purchased in cash which were deposited in the bank account of M/s Ganpati Investment Consultant. Since the bankers cheques were purchased in cash, the amount was reduced from cash balance and not from the bank account of the Anil Sanghi & Associates. The assessee also submitted a letter dated 24.11.1997 submitted by Anil Sanghi to the then Assessing Officer in his personal case enclosing these books of account from 01.04.1993 to 01.11.1996 which tallies with the cash book produced. This fact clearly proves that the assessee has properly discharged its onus. Thus, Ground No. 4 is allowed.
19. As relates to Ground No. 5 to 8 in respect of interest on FDR with Bank for A.Y. 1996-97 for Rs. 69,863/-, interest from Companies for A.Y. 10 IT(SS)A No. 6 & Ors/Del/2012 1996-97 for Rs. 8,76,576/- and alternate grounds, the Ld. AR submitted that identical issue is decided by the ITAT in the following group companies:
i) Shilpi Securities (P) Ltd. ITA No.2/DEL/2012 order dated 29.01.2016
ii) Harmony Psychiatry Centre Pvt. Ltd. IT(SS)A No. 3/DEL/2012 order dated 07.10.2016 The Ld. AR further submitted that this addition of interest was made by the Assessing Officer on the basis of entries in the bank account and not on the basis of any seized material. Section 158BB provides for computation of undisclosed income for the block period. The incomes computed on the basis of Section 158BB(1)(a) to (f) has to be excluded while computing undisclosed income. Section 158BB (1)(d) provides that in a case where the previous year has not ended or the date of filing of return of income under Section 139(1) has not expired, then income determined on the basis of entries relating to such income or transactions as recorded in the books of account and other documents maintained in the normal course on or before the date of search shall be excluded from the undisclosed income. Search was undertaken on the assessee on 27.06.1996. Return of income for the AYs 1996-97 and 1997-98 were due to be filed on 30.11.1996 and 30.11.1997 respectively. Thus, both these returns were not due for filing as on the date of search. Both the returns were filed on 12.11.1997 (belated in case of AY 1996-97 and before due date in case of A.Y. 1997-98). The Ld. AR submitted that the assessee produced photocopies of the books of account which was maintained regularly before the Assessing Officer. The same were filed before the then Assessing Officer during the block assessment proceedings vide letter dated 16.09.1997 which proves that books of account were not only maintained but were also filed before the Assessing Officer in the first round of assessment and must have been available to the Assessing Officer in the second round of assessment. The averment of the Assessing Officer that the books were not found or seized during search is baseless as the search was undertaken on the bank account of the assessee. Books of accounts are maintained on the registered officer of the company or its 11 IT(SS)A No. 6 & Ors/Del/2012 branches and not at the bank premises. TDS of Rs.16,068/- and Rs.65,503/- on bank interest on FDR has been deducted for the AY 1996-97 and 1997-98 respectively as is evident from intimation u/s 143(1). The Ld. AR submitted that it is settled law that income in respect of which tax has been deducted at source cannot be construed as undisclosed income u/s 158BC. The moment TDS is deducted, the income stands disclosed to revenue. The Ld. AR relied on the Delhi High Court decision in case of Dr. (Mrs.) Surjit Tosaria Vs. JCIT (2005) 92 TTJ 338 (Del). The interest income was duly declared in the profit and loss accounts for the years ended 31.03.1996 and 31.03.1997. The same were accepted in the intimation u/s 143 (1) and also in the regular assessment passed u/s 143(3) in both the assessment years. Since interest earned thereon was duly recorded in books of account and the returns for the AYs 1996-97 and 1997-98 have not fallen due at the time of search, the interest income cannot be considered as undisclosed income in view of the provisions of section 158BB(1). Identical issue has been decided by the ITAT in the case of Shilpi Securities (P) Ltd., a group company, in IT (SS) /02/DEL/2012 passed on 29.01.2016 wherein the addition of interest has been deleted from the block assessment since TDS was deducted on the said income and the same was accepted u/s 143(1) and 143(3). The Ld. AR further submitted that without prejudice to Ground No. 5 and 7, relating to Ground No. 6 and 8, the assessee has declared the impugned interest income in its regular returns of income filed for AY 1996-97 and 1997-98 which has been accepted as such by the Assessing Officer in regular assessment framed u/s 143(3). The Assessing Officer has accepted the fact that the interest amount as stated above is the same amount of interest income declared by the assessee in his regular returns of income as this fact has been rebutted by him in the Assessment Order. If the impugned interest income is assessed as undisclosed income u/s 158BC then the same should be excluded from the income assessed in regular assessments framed for the AYs 1996-97 and 1997-98 as the same income cannot be taxed twice.
20. The Ld. DR relied upon the Assessment Order.
12 IT(SS)A No. 6 & Ors/Del/201221. We have heard both the parties and perused all the records. It is pertinent to note that identical issue is decided by the ITAT in the following group companies:
i) Shilpi Securities (P) Ltd. ITA No.2/DEL/2012 order dated 29.01.2016
ii) Harmony Psychiatry Centre Pvt. Ltd. IT(SS)A No. 3/DEL/2012 order dated 07.10.2016 Thus, this issue is covered in favour of the assessee. Ground No. 5 to 8 are allowed.
22. As relates to Ground No. 9 to 11, 13 and additional ground regarding addition on the basis of Annexure A-13 seized from the search conducted in case of Mr. Anil Sanghi on 01.11.1996 amounting to Rs. 1,49,60,000/- and legal additional ground, the Ld. AR submits that first of all legal ground is discussed as if this is admitted and adjudicated in favour of the assessee as has been done in other appeals of the group, the additions stands deleted. The additional ground raised by the assessee is purely legal in nature and should be admitted in view of the judgment of Hon'ble Supreme Court in case of NTPC Co. Ltd. vs. CIT 229 ITR 383 (SC). Identical ground was raised in the case of M/s Harmony Psychiatry Centre (P) Ltd. in IT(SS)/03/Del/2012, group company of the assessee, which has been admitted by the ITAT vide order dated 07.10.2016 as well as M/s Uikam Investment & Finance (P) Ltd. in IT(SS)/10/DEL/2013, group company of the assessee, vide order dated 07.10.2016. Thus, additional ground raised by the assessee should be admitted and decided.
23. The Ld. AR for Additional Ground No. 13 submitted that in case of assessee, the search operations were carried out on 27.06.1996 only at the bank account of the assessee and nowhere else. Annexure A-13, Party S-3 was found during the course of search at the residence of Mr. Anil Sanghi on 01.11.1996 and not from the possession of the assessee company. Thus, this annexure has been seized after the search was concluded in the case of the assessee company as the block period of the assessee company is from 13 IT(SS)A No. 6 & Ors/Del/2012 01.04.1986 to 08.07.1996. Information collected post search can be used in the assessment for the block period if and only if the Assessing Officer was of the opinion that the said seized material was related to the assessee company and he has recorded his satisfaction u/s 158 BD to this effect. However, this has not been done in this case. It is settled law no addition can be made on the basis of material seized from the premises of some other assessee after conclusion of search in case of the assessee company without recording satisfaction u/s 158BD. Further the seized annexure did not relate to the material seized during the course of search in the case of the assessee as nothing has been mentioned about the same in the assessment order. Thus, addition made on the basis of Annexure A-13 should be deleted.
24. The Ld. AR further submitted that perusal of page 89 of Annexure A- 13, Party S-3 seized from the residence of Mr. Anil Sanghi during the course of search on 01.11.1996 mentions certain entries pertaining to the assessee company. It shows deposit of cheques of some cheques aggregating to Rs. 2,49,39,695/- and certain payments of Rs.10,96,405/-. The assessee stated that an amount of Rs.1,49,60,000/- and Rs.2,02,695/- out of the said cheques for the AY 1996-97 and 1997-98 were to be deposited in the bank account of the assessee but were never deposited by Mr. Anil Sanghi for further investment. As per provisions of Section 132(4A) of the Act, the material seized during the course of search is to be considered as true. Since Annexure A-13 has been found and seized during the course of search, it can be reasonably assumed that these entries pertain to assessee company only. The assessee has not been able to produce any documentary evidence in support of its contention that the entries not reflected in the assessee's book pertain to other concerns.
25. The Ld. AR further submitted that regarding ground No. 9 to 11, the facts of the case are that the cheques of Rs. 1,49,60,000/- and Rs.2,02,695/- were not deposited in the bank account of the assessee. It was a part of planning to deposit these cheques to subscribe to the share issue of Patliputra Credit & Securities Limited. However, this planning could 14 IT(SS)A No. 6 & Ors/Del/2012 not be executed and these cheques were never deposited in the bank account of the assessee. It is categorically submitted that there was only one bank account of the assessee which was within the knowledge of the department and these amounts have not been deposited therein. No other bank account was found during the course of search or came to the knowledge of the department where these cheques could have been deposited. Further this annexure was not found from the possession of the assessee company but was found from the possession of Mr. Anil Sanghi that also after the date of search carried out on the assessee. Since these amounts have not been found deposited into the bank account of the assessee, no addition of these amounts can be made in the hands of the assessee. Thus, the addition should be deleted. Perusal of the said expenses shows that many of these expenses relate to DSE i.e. Delhi Stock Exchange, public issue, listing etc. It is categorically submitted that no public issue was brought out by the assessee which shows that these expenses does not belong to this company. The letter dated 18.09.1997 mentions that the entries belong to Mr. Anil Sanghi and not to the assessee company except Rs.1,57,000/- paid towards ROC fees. The prospectus issued for public issue of M/s Patliputra Credit & Securities Ltd. also supports that expenses incurred towards Delhi Stock Exchange fees and other public issue expenses belong to M/s Patliputra Credit & Securities Ltd. and not to the assessee. The ledger account of M/s Patliputra Credit & Securities Ltd. in the books of Anil Sanghi & Associates shows those public issue expenses and vice versa. Ledger account of Anil Sanghi & Associates in the books of the assessee shows preliminary expenses of Rs. 1,60,285/- spent on its behalf by Anil Sanghi including therein Rs. 1,57,000/-. The Ledger account of assessee in the books of account of Anil Sanghi & Associates showing preliminary expenses of Rs.1,57,285/- spent on its behalf including therein bank charges of Rs.285/-. The Ld. AR further submitted that presuming without admitting, if the additions of these amounts are confirmed then no separate addition for the expenses of Rs. 10,96,405/-, as the said amount has been reduced from the total amount received and thus shows the utilization of the said amount and no separate addition for the said amount 15 IT(SS)A No. 6 & Ors/Del/2012 can be made.
26. The Ld. DR relied upon the Assessment Order.
27. We have heard both the parties and perused all the relevant records. The Ld. AR's contention was that documents were produced before the Assessing Officer and therefore, the Assessing Officer should have taken proper cognizance to that effect. The cheques of Rs. 1,49,60,000/- and Rs.2,02,695/- were not deposited in the bank account of the assessee. It was a part of planning to deposit these cheques to subscribe to the share issue of Patliputra Credit & Securities Limited. However, this planning could not be executed and these cheques were never deposited in the bank account of the assessee. Thus, when the assessee does the tax planning that is permissible under Income Tax Act. No public issue was brought out by the assessee which shows that these expenses does not belong to this company. The letter dated 18.09.1997 mentions that the entries belong to Mr. Anil Sanghi and not to the assessee company except Rs.1,57,000/- paid towards ROC fees. The prospectus issued for public issue of M/s Patliputra Credit & Securities Ltd. also supports that expenses incurred towards Delhi Stock Exchange fees and other public issue expenses belong to M/s Patliputra Credit & Securities Ltd. and not to the assessee. The ledger account of M/s Patliputra Credit & Securities Ltd. in the books of Anil Sanghi & Associates shows those public issue expenses and vice versa. Ledger account of Anil Sanghi & Associates in the books of the assessee shows preliminary expenses of Rs. 1,60,285/- spent on its behalf by Anil Sanghi including therein Rs. 1,57,000/-. The Ledger account of assessee in the books of account of Anil Sanghi & Associates showing preliminary expenses of Rs.1,57,285/- spent on its behalf including therein bank charges of Rs.285/-. Thus, all the explanation along with the documents was produced before the Assessing Officer, but the Assessing Officer has not taken cognizance of the same. Therefore, it will be appropriate to remand back this issue to the file of the Assessing Officer. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Ground Nos. 9 to 11 are allowed for statistical purpose.
16 IT(SS)A No. 6 & Ors/Del/201228. Ground No. 12 is general in nature. Hence, the same is not adjudicated by us.
29. Additional Ground No. 13, the Ld. AR submitted that in case of assessee, the search operations were carried out on 27.06.1996 only at the bank account of the assessee and nowhere else. Annexure A-13, Party S-3 was found during the course of search at the residence of Mr. Anil Sanghi on 01.11.1996 and not from the possession of the assessee company. Thus, this annexure has been seized after the search was concluded in the case of the assessee company as the block period of the assessee company is from 01.04.1986 to 08.07.1996. Information collected post search can be used in the assessment for the block period if and only if the Assessing Officer was of the opinion that the said seized material was related to the assessee company and he has recorded his satisfaction u/s 158 BD to this effect. However, this has not been done in this case. It is settled law no addition can be made on the basis of material seized from the premises of some other assessee after conclusion of search in case of the assessee company without recording satisfaction u/s 158BD. Further the seized annexure did not relate to the material seized during the course of search in the case of the assessee as nothing has been mentioned about the same in the assessment order.
30. The Ld. DR vehemently opposed the additional ground and submitted that the decision of National Thermal Power Corporation Ltd. vs. CIT 229 ITR 383 (SC) is not applicable in the present case.
31. We have heard both the parties and perused all the relevant records. The additional ground is a legal ground which has to be admitted that as the same is purely legal in nature and the decision of the Hon'ble Apex Court in case of National Thermal Power Corporation Ltd. is squarely applicable in the present case. In fact identical ground was raised in case of group companies, M/s Harmony Psychiatry Centre (P) Ltd. and M/s Uikam Investment Finance (P) Ltd. wherein the ITAT decided this ground in favour of the assessee. Therefore, we are now discussing the merit of this ground.
17 IT(SS)A No. 6 & Ors/Del/2012The seized annexure did not relate to the material seized during the course of search in the case of the assessee as nothing has been mentioned about the same in the assessment order. Therefore, Additional Ground No. 13 is allowed.
32. In result, appeal being IT(SS)A No.6/DEL/2012 filed by the Assessee is allowed for statistical purpose.
Now we are taking up appeal of Patliputra International Trading Ltd.
33. The grounds of appeal are as under:- IT(SS) A .No. 6/DEL/2012
1. The assessing officer erred in law and on facts in making additions of the amounts deposited in bank of the assessee other than received from Mr. Anil Sanghi ignoring the facts and evidences placed on record to prove the source of such deposit and without raising any query in this regard. Thus the said additions should be deleted.
2. The assessing officer erred in law and on the facts in making an addition of Rs.2,50,000/- received by the assessee from M/s Professional Leasing & Capital Services Ltd. on behalf of Mr. Anil Sanghi ignoring the facts and evidences placed on record to prove the source of the said amount and without raising any further query in this regard. Thus the addition so made should be deleted.
3. The assessing officer erred in law and on facts in making an addition of Rs. 35,398/- of preliminary expenses incurred by Mr. Anil Sanghi on behalf of the assessee ignoring the facts and evidences placed on record and without raising any query in this regard. Thus the addition so made should be deleted.
4. The assessing officer erred in law and on the facts in making an addition Rs. 500/- being cash deposited for opening the bank account of the assessee ignoring the fact that the same has been deposited out of share subscription money of Rs. 7,000/- received from the initial subscribers of the company without raising any query in this regard. Thus the addition so made should be deleted.
5. The assessing officer erred in law and on the facts in making an addition of Rs. 9,99,474/- being interest received on NCD with Citibank and Rs. 29,180/- being interest received from P C Yadav for AY 96-97, ignoring the facts and evidences placed on record that transactions regarding NCD and long to P. C. Yadav were duly recorded in the books of account and the 18 IT(SS)A No. 6 & Ors/Del/2012 said interest was duly declared as income in the regular return of income. Thus the said addition should be deleted.
6. Without prejudice to the above submissions, if the addition of Rs. 9,99,474/- and Rs. 29,180/- is sustained in the block assessment period, then directions should be issued to exclude the said interest income offered for taxation in the regular assessment as the said income cannot be taxed twice.
7. The assessing officer erred in law and on the facts in making an addition of Rs. 12,83,917/- being interest received on NCD with Citibank for AY 97-98 ignoring the facts and evidences placed on record that transactions regarding NCD were duly recorded in the books of account and the said interest was duly declared as income in the regular return of income filed before the due date. Thus the said addition should be deleted.
8. Without prejudice to the above submissions, if the addition of Rs. 12,83,917/- is sustained in the block assessment period, then directions should be issued to exclude the said interest income offered for taxation in the regular assessment as the same income cannot be taxed twice.
9. The assessing officer erred in law and on the facts in making an addition of Rs. 29,78,000/- on the basis of entries in seized material found during the course of search in the case of Mr. Anil Sanghi on 1/11/96 and with a predetermined and prejudiced mind by alleging that no directions were given by the Hon'ble ITAT on this issue and ignoring the facts and evidences placed on record. Thus the addition so made should be deleted.
10. The appellant craves the leave to add, substitute, modify, delete or amend all or any ground of appeal either before or at the time of hearing.
34. The assessee company is related to Shri Prakash Chandra Yadav group of cases. Shri Prakash Chandra Yadav is the key person accused in the Rs.133-crore Urea Import Scandal. Search warrant u/s 132 (1) of the Income Tax Act, 1961 (hereinafter called the Act) was issued in the case of the assessee on 8/7/1996 and 29/09/1996 covering its bank account number 800351 in Allahabad Bank Madras Hotel, Connaught Place, New Delhi, which was executed on 20/09/1996 & 24/9/1996 respectively. Thereafter, notice u/s 158 BC of the Act was issued on 07/04/1997 and assessment u/s 158 BC (c) of the Act was completed on 29/09/1997 at an undisclosed income of Rs. 3,32,71,735/- against the returned undisclosed 19 IT(SS)A No. 6 & Ors/Del/2012 income of Rs. NIL.
35. The assessee filed an appeal against this order before the ITAT, New Delhi. The ITAT, New Delhi vide its order dated 17/03/2006 in appeal no. IT(SS)A No. 245/Del/1997 observed that warrant of authorization was never issued as no search warrant was produced before it for verification and held the block assessment proceedings as void-ab-initio. Accordingly, the assessment was declared as invalid and was quashed by the ITAT, New Delhi. The department filed appeal before the Hon'ble High Court of Delhi against this order and produced the warrant of authorisation before it. Thereafter, the Hon'ble Delhi High Court vide its order dated 31/10/2007 restored the appeal to the ITAT, Delhi for being considered afresh.
36. The ITAT, New Delhi vide its order dated 30/04/2008 in IT(SS)A No. 245/Del/1997, without examining the merits of the additions made, held that the block assessment was not valid because search warrant issued u/s 132 (1) was illegal; the assessment order passed by the AO on 29/09/1997 was passed beyond the date of limitation specified u/s 158 BE of the Act and also that the warrant of authorization signed by the Additional Director of Income Tax was without any authority. The department filed an appeal before the Hon'ble High Court of Delhi against this order. The Hon'ble High Court vide its order dated 30/11/2009 held that the warrant signed by the Additional Director of Income Tax would not be invalid as he had the necessary authority, in view of the amended provisions of the section 132 of the Act. Accordingly, the Hon'ble High Court set aside the judgment of the Tribunal and restored back the appeal to the file of the Tribunal for decision on merits.
37. Consequently, the ITAT, Delhi Bench 'A', New Delhi vide its order dated 10/01/2011 in IT(SS)A No. 245/Del/97, set aside and restored back the issues involved in the appeal of the assessee to the file of the AO with the direction to decide the issues in question in the light of its observations in the case of M/s Patliputra Credit and Securities Limited in IT(SS)A No. 372/Del/97 dated 17/03/2006, and in IT(SS)A No. 10/Del/08 dated 20 IT(SS)A No. 6 & Ors/Del/2012 31/03/2009.
38. The ITAT further held that these orders of the Tribunal, mutatis mutandis will apply to the present case. Vide para-5 of its order dated 10/01/2011, the ITAT has restored back the issues involved in the appeal to the file of the AO with the directions to decide the issues in question in the light of its observations in the case of Patliputra Credit and Securities Limited (supra).
39. The Assessing Officer issued notices. In response to the notices, Shri Anil Sanghi, Director of the Company attended the proceedings and filed necessary details and clarifications as placed on record. The details submitted were discussed with him.
40. The Assessing Officer made various additions and passed order dated 12/12/2011 u/s 158 BC (C) /254 of the Income Tax Act.
41. Being aggrieved by the same, the assessee filed appeal before us.
42. As relates to Ground Nos. 1 and 2 for addition of Rs. 2,50,000/- received from Professional Leasing & Capital Services Ltd., another group company, the Ld. AR submitted that the amount of Rs. 2.50 lacs was received by the assessee company from Professional Leasing & Capital Services Ltd. on behalf of Mr. Anil Sanghi (Prop. Anil Sanghi & Associates). The Assessing Officer made the addition by alleging that only copies of ledger accounts were provided and no confirmation from M/s Professional Leasing & Capital Services Ltd. has been filed. However, this has been admitted by the Assessing Officer in the original assessment order as well as in the present assessment order that the amount was received from the said company. The Ld. AR submitted that the assessee company received an amount of Rs. 2.50 lacs by cheque from Professional Leasing & Capital Services Ltd. on behalf of Mr. Anil Sanghi. Thus the amount was received from the said company but credited in the account of Mr. Anil Sanghi in the books of the assessee. The Ld. AR submitted that the assessee produced Bank account of Professional Leasing & Capital Services Ltd. showing 21 IT(SS)A No. 6 & Ors/Del/2012 payment of Rs. 2.50 lacs to the assessee company before the Assessing Officer along with the ledger account of Professional Leasing & Capital Services Ltd. in the books of Anil Sanghi showing payment of money by this company to assessee company on behalf of Anil Sanghi and the ledger account of assessee company in the books of Anil Sanghi showing receipt of money from Professional Leasing on behalf of Anil Sanghi, Ledger account of Anil Sanghi in the books of Professional Leasing & Capital Services Ltd. showing payment to the assessee company on behalf of Anil Sanghi & Associates. The Ld. AR submitted that the cheque number mentioned therein matches with the number mentioned in bank account. The ledger account of Anil Sanghi & Associates in the books of assessee company showing the receipt of Rs. 2.50 lacs on behalf of Anil Sanghi. All these ledger accounts prove beyond doubt that the assessee received a cheque of Rs. 2,50,000/- from M/s Professional Leasing on behalf of Anil Sanghi and Associates and all the three parties have recorded this transaction in their books of account. Confirmation from Professional Leasing & Capital Services Ltd that the amount of Rs. 2.50 lacs has been paid by it to the assessee company. Mr. Anil Sanghi has two proprietorship concerns namely Anil Sanghi & Associates and Ganpati Investment Consultants. Mr. Anil Sanghi declared undisclosed income of Rs. 27.64 Crores in his return of income filed for block assessment period as per details hereunder:
Particulars A.Y
Undisclosed Income
Anil Sanghi & Associates 1994-95 4,61,500/-
1995-96 1,58,27,900/-
1996-97 24,36,50,370/-
Ganpati Consultants 1996-97 1,65,55,000/-
Total undisclosed Income 27,64,94,770/-
A copy of the balance sheet of Anil Sanghi placed before the AO as stated in submissions filed before the AO shows that the assets side of the Balance sheet of Anil Sanghi shows the utilization of the undisclosed income of Rs. 27.64 crores. This shows that an amount of Rs. 2,79,81,164/- has been 22 IT(SS)A No. 6 & Ors/Del/2012 given to the assessee by Anil Sanghi out of his undisclosed income declared in his return of income which includes the following amounts:-
Paid directly by Anil Sanghi 4,61,000/- Paid by Professional Leasing on behalf of 1,58,27,900/- Anil Sanghi Preliminary expenses paid by Mr. Anil 24,36,50,370/- Sanghi Insurance expenses paid by Mr. Anil 1,65,55,000/- Sanghi Closing Balance as per Ledger account 27,64,94,770/-
The Ld. AR submitted that perusal of the ledger account of the assessee company in the books of Anil Sanghi & Associates and vice versa, it would be seen that entry of Rs. 2.50 lacs has been duly reflected and the closing balances in both the ledgers tally which confirms the transactions and explains the source of Rs. 2.50 lacs. Thus the addition so made should be deleted. All the three persons were assessed by the same assessing officer who had access to their books of account, bank accounts etc. and could have examined the issue which has not been done. Once it is established that the assessee company has received the money from Professional Leasing & Capital Services Ltd. (on behalf of Mr. Anil Sanghi) who is an independent assessee, then the source stands explained and no addition can be made in the hands of the assessee company at all.
43. The Ld. DR relied upon the Assessment Order.
44. We have heard both the parties and perused all the records. The Assessee has produced all the records before the Assessing Officer. It is pertinent to note that the ledger account of the assessee company in the books of Anil Sanghi & Associates and vice versa, it would be seen that entry of Rs. 2.50 lacs has been duly reflected and the closing balances in 23 IT(SS)A No. 6 & Ors/Del/2012 both the ledgers tally which confirms the transactions and explains the source of Rs. 2.50 lacs. Besides that there is confirmation received from the said company. In fact, all the three persons were assessed by the same assessing officer who had access to their books of account, bank accounts etc. and could have examined the issue which has not been done. Once it is established that the assessee company has received the money from Professional Leasing & Capital Services Ltd. (on behalf of Mr. Anil Sanghi) who is an independent assessee, then the source stands explained and no addition can be made in the hands of the assessee company at all. Thus, all the explanation along with the documents was produced before the Assessing Officer therefore, the Assessing Officer is not correct in making these additions. Ground Nos. 1 to 2 are allowed.
45. As regards Ground no. 3 for addition of Rs. 35,398/- of preliminary expenses, the Ld. AR submitted that the assessing officer has stated that these expenses were incurred by Mr. Anil Sanghi in cash but this amount has not been paid out of his undisclosed income and therefore the addition was made. The assessing officer has accepted the fact that the said amount has been paid in cash by Mr. Anil Sanghi. Once it is established that the amount has been spent by Mr. Anil Sanghi who is an independent assessee, then the source of these expenses stands explained and no addition can be made in the hands of the assessee company. The Assessee produced the cash book of Anil Sanghi & Associates showing the payment of the said amount out of its cash balance on 01/05/1995 before the Assessing Officer. The Ld. AR submitted that perusal of ledger account of the assessee company in the books of Anil Sanghi & Associates clearly shows the payment of preliminary expenses in cash. The closing balances of the ledger accounts tally with each other and with the balance sheet of Mr. Anil Sanghi after recording the said entry. Balance sheet of Mr. Sanghi shows that an amount of Rs. 2,79,81,164/- has been given to assessee company out of his undisclosed income of Rs.27,64,93,670/- which includes this amount of preliminary expenses as explained above. Thus source of this amount stands explained. Mr. Anil Sanghi has declared the 24 IT(SS)A No. 6 & Ors/Del/2012 undisclosed income on the basis of peak calculated on the basis of cash receipts / payments / deposits in bank etc. Once the peak is declared as income then the utilization of funds cannot be added again. This amount of Rs. 35,398/- is a utilization of undisclosed income of Mr. Anil Sanghi and therefore cannot be taxed in the hands of assessee company in any manner.
46. The DR relied upon the Assessment Order.
47. We have heard both the parties and perused all the relevant records. The documents were produced before the Assessing Officer and therefore, the Assessing Officer should have taken proper cognizance to that effect. perusal of ledger account of the assessee company in the books of Anil Sanghi & Associates clearly shows the payment of preliminary expenses in cash. The closing balances of the ledger accounts tally with each other and with the balance sheet of Mr. Anil Sanghi after recording the said entry. Balance sheet of Mr. Sanghi shows that an amount of Rs. 2,79,81,164/- has been given to assessee company out of his undisclosed income of Rs.27,64,93,670/- which includes this amount of preliminary expenses as explained above. Thus source of this amount stands explained. Mr. Anil Sanghi has declared the undisclosed income on the basis of peak calculated on the basis of cash receipts / payments / deposits in bank etc. Once the peak is declared as income then the utilization of funds cannot be added again. This amount of Rs. 35,398/- is a utilization of undisclosed income of Mr. Anil Sanghi and therefore cannot be taxed in the hands of assessee company in any manner. Thus, all the explanation along with the documents was produced before the Assessing Officer therefore, the Assessing Officer is not correct in making these additions. Ground Nos. 3 are allowed.
48. As regards Ground no. 4 for addition of Rs. 500/- being cash for opening bank account, the Ld. AR submitted that nothing has been mentioned for making addition of Rs. 500/-. No query was raised regarding this amount during assessment proceedings. The said amount was deposited on 28/9/95 in Allahabad Bank (to open the bank account) out of 25 IT(SS)A No. 6 & Ors/Del/2012 Rs. 7,000/- received in cash on 21/9/1995 as share application money from initial subscribers.
49. The Ld. DR relied upon the Assessment Order.
50. We have heard both the parties and perused all the records. It is pertinent to note that the Assessee has given all the details to the Assessing Officer. No query was raised regarding this amount during assessment proceedings. The said amount was deposited on 28/9/95 in Allahabad Bank (to open the bank account) out of Rs. 7,000/- received in cash on 21/9/1995 as share application money from initial subscribers. Therefore, the Assessing Officer is not justified in making an addition and Ground No. 4 is allowed.
51. As regards As relates to Ground No. 5 to 8 in respect of interest on NCD with Bank for A.Y. 1996-97 for Rs. 9,99,474/-, interest from P. C. Yadav for A.Y. 1996-97 for Rs. 29,180/- as well as interest on NCD with Bank of Rs.12,83,917/- for A.Y. 1997-98. Thus, addition totally to Rs.23,12,571/-, the Ld. AR submitted that identical issue is decided by the ITAT in the following group companies:
i) Shilpi Securities (P) Ltd. ITA No.2/DEL/2012 order dated 29.01.2016
ii) Harmony Psychiatry Centre Pvt. Ltd. IT(SS)A No. 3/DEL/2012 order dated 07.10.2016 The Ld. AR further submitted that this additions were made by the Assessing Officer on the basis of no books of account were found or seized during search as has been mentioned in the original assessment order. The Assessing Officer further observed that the Assessee did not produce any books of account before Investigation Wing or before the Assessing officer during block assessment proceedings. The Assessee did not file its returns of income for the AYs 1996-97 and 1997- 98 till the date of completion of block assessment proceedings u/s 158BC on 29/9/97 but filed the same on 12/11/97. This proves that the assessee did not have any books of account 26 IT(SS)A No. 6 & Ors/Del/2012 but prepared the same after completion of its block assessment to give the colour of regular income to its undisclosed income. The Ld. AR submitted this addition of interest has been made by the assessing officer on the basis of entries in the bank account as has been referred to in the original assessment order at page 8 para 28 and not on the basis of any seized material. Section 158BB provides for computation of undisclosed income for the block period. The incomes computed on the basis of section 158BB(l)(a) to (f) has to be excluded while computing undisclosed income.
Section 158BB(l)(d) provides that in a case where the previous year has not ended or the date of filing of return of income under 139(1) has not expired, then income determined on the basis of entries relating to such income or transactions as recorded in the books of account and other documents maintained in the normal course on or before the date of search shall be excluded from the undisclosed income. Search was undertaken on the assessee on 08/07/1996. Return of income for the AYs 1996-97 and 1997- 98 were due to be filed on 30/11/96 and 30/11/97 respectively. Thus both these returns were not due for filing as on the date of search. Both the returns were filed on 12/11/97 (belated in case of AY 1996-97 and in time in case of AY 1997-98). The Ld. AR submitted that the books of account were maintained by the assessee regularly. The same were filed before the then AO during the block assessment proceedings vide letter dated 12/9/97. This letter clearly proves that books of account were not only maintained but were also filed before the assessing officer in the first round of assessment and must have been available to the assessing officer in the second round of assessment. The averment of the assessing officer that the books were not found or seized during search is baseless as the search was undertaken on the bank account of the assessee as mentioned in para 1 of the assessment order. Books of account are maintained on the registered office of the company or its branches and not at the bank premises. The interest income was duly declared in the profit and loss accounts for the years ended 31/3/96 and 31/3/1997. The same were accepted in the intimation u/s 143(1) and also in the regular assessment passed u/s 143(3) in both the assessment years. Since NCD was made through banking 27 IT(SS)A No. 6 & Ors/Del/2012 channel and the interest earned thereon was duly recorded in books of account and the returns for the AYs 1996-97 and 1997-98 have not fallen due at the time of search, the interest income cannot be considered as undisclosed income in view of the provisions of section 158BB(1). As regards Grounds no. 6 and 8, the Ld. AR submitted that without prejudice to Grounds no. 5 and 7, the assessee has declared the impugned interest income in its regular returns of income filed for AY 1996-97 and 1997-98 which has been accepted as such by the assessing officer in regular assessment framed u/s 143(3). The AO has accepted the fact that the interest of Rs. 23,12,571/- as stated above is the same amount of interest income declared by the assessee in his regular returns of income as this fact has not been rebutted by him in the assessment order. If the impugned interest income is assessed as undisclosed income u/s 158BC then the same should be excluded from the income assessed in regular assessments framed for the AYs 1996-97 and 1997-98 as the same income cannot be taxed twice.
52. The Ld. DR relied upon the Assessment Order.
53. We have heard both the parties and perused all the records. It is pertinent to note that identical issue is decided by the ITAT in the following group companies:
i) Shilpi Securities (P) Ltd. ITA No.2/DEL/2012 order dated 29.01.2016
ii) Harmony Psychiatry Centre Pvt. Ltd. IT(SS)A No. 3/DEL/2012 order dated 07.10.2016 Thus, this issue is covered in favour of the assessee. Ground No. 5 to 8 are allowed.
54. As regards Ground No. 9 and Additional Ground No. 11, the Ld. AR submitted that addition of Rs.29,78,000/- on the basis of seized material found from the residence of Mr. Anil Sanghi on 01.11.1996 as per Annexure A-13, the Assessing Officer was totally incorrect in adding the said amount. The Ld. AR further submitted for the additional Ground No. 11 that in case 28 IT(SS)A No. 6 & Ors/Del/2012 of assessee, the search operations were carried out on 27.06.1996 only at the bank account of the assessee and nowhere else. Annexure A-13, Party S-3 was found during the course of search at the residence of Mr. Anil Sanghi on 01.11.1996 and not from the possession of the assessee company. Thus, this annexure has been seized after the search was concluded in the case of the assessee company as the block period of the assessee company is from 01.04.1986 to 08.07.1996. Information collected post search can be used in the assessment for the block period if and only if the Assessing Officer was of the opinion that the said seized material was related to the assessee company and he has recorded his satisfaction u/s 158 BD to this effect. However, this has not been done in this case. It is settled law no addition can be made on the basis of material seized from the premises of some other assessee after conclusion of search in case of the assessee company without recording satisfaction u/s 158BD. Further the seized annexure did not relate to the material seized during the course of search in the case of the assessee as nothing has been mentioned about the same in the assessment order.
55. The DR relied upon the Assessment order and opposed the additional ground.
56. The Ld. DR vehemently opposed the additional ground and submitted that the decision of National Thermal Power Corporation Ltd. vs. CIT 229 ITR 383 (SC) is not applicable in the present case.
57. We have heard both the parties and perused all the relevant records. As regards ground No. 9 is concerned the Ld. AR submitted that the assessee has produced all the records despite that the Assessing Officer made the addition. Thus, all the explanation along with the documents was produced before the Assessing Officer, but the Assessing Officer has not taken cognizance of the same. Therefore, it will be appropriate to remand back this issue to the file of the Assessing Officer. Needless to say, the assessee be given opportunity of hearing by following principles of natural 29 IT(SS)A No. 6 & Ors/Del/2012 justice. Ground No. 9 is allowed for statistical purpose. The additional ground is a legal ground which has to be admitted that as the same is purely legal in nature and the decision of the Hon'ble Apex Court in case of National Thermal Power Corporation Ltd. is squarely applicable in the present case. In fact identical ground was raised in case of group companies, M/s Harmony Psychiatry Centre (P) Ltd. and M/s Uikam Investment Finance (P) Ltd. wherein the ITAT decided this ground in favour of the assessee. Therefore, we are now discussing the merit of this ground. The seized annexure did not relate to the material seized during the course of search in the case of the assessee as nothing has been mentioned about the same in the assessment order. Therefore, Additional Ground No. 13 is allowed.
58. In result, appeal being IT(SS)A No.4/DEL/2012 filed by the Assessee is allowed for statistical purpose.
Now we are taking up of Annie Investment & Finance (P) Ltd.
59. The grounds of appeal are as under:- IT(SS) A .No. 1/DEL/2012
1. The assessing officer erred in law and on facts in making additions of the amounts deposited in bank of the assessee other than received from Mr. Anil Sanghi ignoring the facts and evidences placed on record to prove the source of such deposit and without raising any query in this regard. Thus the said additions should be deleted.
2. The assessing officer erred in law and on the facts in making an addition of Rs. 500/- (incorrectly mentioned as Rs. 5,000/- while computing assessable income) being cash deposited for opening the bank account # 1125 with J&K Bank ignoring that the same has been deposited out of cash in hand available with the assessee. Thus the addition so made should be deleted.
3. The assessing officer erred in law and on the facts in making an addition of Rs. 1,00,000/- received by the assessee from M/s Professional Leasing & Capital Services Limited through banking channels ignoring the facts and evidences placed on record and without raising any further query in this regard. Thus the addition so made should be deleted. 4 The assessing officer erred in law and on the facts in making an 30 IT(SS)A No. 6 & Ors/Del/2012 addition of Rs. 1,90,000/- received from Anil Sanghi through banking channel and not from Professional Leasing and Capital Services Ltd. as mentioned in the assessment order ignoring the facts and evidences placed on record to prove the source of the said deposit. Thus the addition so made should be deleted.
5. The assessing officer erred in law and on the facts in making an addition of Rs. 2,50,000/- received by the assessee from saving bank account nos. 3323 to 3327 which in turn received money from Mr. Anil Sanghi ignoring the facts and evidences placed on record to prove the source of the said deposit. Thus the addition so made should be deleted.
6. The assessing officer erred in law and on the facts in making an addition of Rs. 1,97,004/- being interest and other income ignoring the facts and evidences placed on record to show that the transactions regarding the said income were duly recorded in the books of account and the same was duly declared in the regular return of income. 1 ;ius the addition so made should be deleted.
7. Without prejudice to the above submissions, if the addition of Rs. 1,97,004/- is sustained in the block assessment period, then directions should be issued to exclude the said interest income offered for taxation in the regular assessment as the same income cannot be taxed twice.
8. The assessing officer erred in law and on the facts in making an addition of Rs. 1,000/- being cash deposited for opening the bank account #32249 with Punjab National Bank ignoring the fact that the same has been deposited out of cash in hand available with the Thus the addition so made should be deleted.
9. The assessing officer erred in law and on the facts in making an addition of Rs. 3,00,000/- received by the assessee from M/s Devyani Securities Private Limited through banking channels ignoring the facts and evidences placed on record. Thus the addition so made should be deleted.
10. The assessing officer erred in law and on the facts in making an addition of Rs. 6,87,728/- being interest on deposits and other income ignoring the facts and evidences placed on record to show that the transactions regarding the said income were duly recorded in the books of account and the same was duly declared in the regular return of income before the due date. Thus the addition so made should be deleted.
11. Without prejudice to the above submissions, if the addition of Rs. 6,87,728/- is sustained in the block assessment period, then directions should be issued to exclude the said interest income offered for taxation in the regular assessment as the same income cannot be taxed twice.
31 IT(SS)A No. 6 & Ors/Del/201212. The assessing officer erred in law and on the facts in making an addition of Rs. 1,000/- being cash deposited for opening the bank account # 1498 in Syndicate Bank ignoring the fact that the same has been deposited out of cash in hand available with the assessee. Thus the addition so made should be deleted.
13. The assessing officer erred in law and on facts in making an addition of Rs. 4,10,959/- being the interest received on deposit with Surya Roshni Ltd. ignoring the fact that due TDS was deducted on the said interest and the transactions were dvly recorded in the books of the assessee and regular bank account and the interest income was duly declared in the regular returns of income filed before the due date. Thus the addition so made should be deleted.
14. The assessing officer erred in law and on facts in not allowing credit of tax of Rs. 94,521/- deducted on the interest income of Rs. 4,10,959/- though the conditions laid down by the law have been fulfilled by the assessee. Necessary directions to allow credit of TDS of Rs. 94,521/- should be given.
15. Without prejudice to the above submissions, if the addition of Rs. 4,10,959/- is sustained in the block assessment period, then directions should be issued to exclude the said interest income offered for taxation in the regular assessment as the same income cannot be taxed twice.
16. The assessing officer erred in law and on facts in making an addition of Rs. 14,65,000/- being the amount invested to purchase shares of some listed companies ignoring the facts that the consideration for the same has been paid to the seller (Professional Leasing and Capital Services Ltd.) by issuing shares of the assessee company. Thus the addition so made should be deleted.
17. The assessing officer erred in law and on facts in making an addition of Rs. 20,00,000/- being the amount excess mentioned in the Form no. 2 filed during the course of search ignoring the fact that a mistake was made while filling the said form and no evidence was found to show that any undisclosed income was earned by the assessee. Thus the addition so made should be deleted.
18. Without prejudice to the above submission, the share capital of Rs. 20 lacs has been mentioned against Professional Leasing and Capital Services Ltd. who was being assessed by the same assessing officer. Since the assessee has been able to establish the identity of the share holder, no addition could be made in the hands of the assessee company. Thus the addition so made should be deleted.
32 IT(SS)A No. 6 & Ors/Del/201219. Without prejudice to the grounds no. 16,17 and 18, if the addition of Rs. 20 lacs is sustained then telescoping of the said amount against purchase of shares worth Rs. 14,65,000/- should be allowed as the addition cannot be made for receipt of money as well as utilization of the same.
20. The appellant craves the leave to add, substitute, modify, delete or amend all or any ground of appeal either before or at the time of hearing.
60. The assessee company is related to Shri Prakash Chandra Yadav group of cases. Shri Prakash Chandra Yadav is allegedly the key person accused in the Rs.133-crore Urea Import Scandal. Search warrant u/s 132 (1) of the Income Tax Act, 1961 (hereinafter called the Act) was issued in the case of the assessee on 27/6/1996 and 19/09/1996 covering its bank account number 1125 in J & K Bank, Noida and account number 1498 in Syndicate Bank, Maliwara, Ghaziabad, respectively which were executed on 20/9/1996. Thereafter, notice u/s 158 BC of the Act was issued on 07/04/1997 and assessment u/s 158 BC (c) of the Act was completed on 29/09/1997 at an undisclosed income of Rs. 2,18,47,245/- against the returned undisclosed income of Rs. 15,69,171/-.
61. The assessee filed an appeal against this order before the Hon'ble ITAT, New Delhi. 'The ITAT, New Delhi vide its order dated 17/03/2006 in appeal no. IT(SS)A No. 243/Del/1997 observed that warrant of authorization was never issued as no search warrant was produced before it for verification and held the block assessment proceedings as void ab initio. Accordingly, the assessment was declared as invalid and was quashed by the ITAT, New Delhi. The department filed appeal before the Hon'ble High Court of Delhi against this order and produced the warrant of authorisation before it. Thereafter, the Hon'ble Delhi High Court vide its order dated 31/10/2007 restored the appeal to the ITAT, Delhi for being considered afresh.
62. The ITAT, New Delhi vide its order dated 30/04/2008 in IT(SS)A No. 245/Del/1997, without examining the merits of the additions made, held that the block assessment was not valid because search warrant issued u/s 33 IT(SS)A No. 6 & Ors/Del/2012 132 (1) was illegal; the assessment order passed by the AO on 29/09/1997 was passed beyond the date of limitation specified u/s 158 BE of the Act and also that the warrant of authorization signed by the Additional Director of Income Tax was without any authority. The department filed an appeal before the Hon'ble High Court of Delhi against this order. The Hon'ble High Court vide its order dated 30/11/2009 held that the warrant signed by the Additional Director of Income Tax would not be invalid as he had the necessary authority, in view of the amended provisions of the section 132 of the Act. Accordingly, the Hon'ble High Court set aside the judgement of the Tribunal and restored back the appeal to the file of the Tribunal for decision on merits.
63. Consequently, the Hon'ble ITAT, Delhi Bench 'A', New Delhi vide its order dated 10/01/2011 in IT(SS)A No. 243/Del/97, set aside and restored back the issues involved in the appeal of the assessee to the file of the AO with the direction to decide the issues in question in the light of its observations in the case of M/s Patliputra Credit and Securities Limited in IT(SS)A No. 372/Del/97 dated 17/03/2006, and in IT(SS)A No. 10/Del/08 dated 31/03/2009.
64. The ITAT further held that these orders of the Tribunal, mutatis mutandis will apply to the present case. Vide para-5 of its order dated 10/01/2011, the Hon'ble ITAT has restored back the issues involved in the appeal to the file of the AO with the directions to decide the issues in question in the light of its observations in the case of Patliputra Credit and Securities Limited (supra).
65. In response to these notices, Shri Anil Sanghi, Director of the Company attended the proceedings and filed necessary details and clarifications as placed on record. The details submitted were discussed with him. The Assessing Officer made various additions and passed order dated 12/12/2011 u/s 158 BC (C) /254 of the Income Tax Act.
66. Being aggrieved by the same, the assessee filed appeal before us.
34 IT(SS)A No. 6 & Ors/Del/201267. As regards Ground No. 1 is general nature as per the submissions of the Ld. AR. As regards, Ground Nos. 2, 8, and 12, the Ld. AR submitted that addition made for deposit of Cash of Rs. 500/-, 1,000/- and 1,000/- for opening three different bank accounts. The said cash was deposited out of cash received as share application money and cash in hand available in the books of account. These bank balances have been duly disclosed in the books of account and audited financial statements and thus no addition is called for.
68. The Ld. DR relied upon the Assessment Order.
69. We have heard both the parties and perused all the record. It is pertinent to note that the addition made for deposit of Cash of Rs. 500/-, 1,000/- and 1,000/- for opening three different bank accounts. The said cash was deposited out of cash received as share application money and cash in hand available in the books of account. These bank balances have been duly disclosed in the books of account and audited financial statements by the Assessee before the Assessing Officer. Thus, the addition made on this account by the Assessing Officer is not just and proper. Therefore, Ground Nos. 2, 8 and 12 are allowed.
70. As regards Ground no. 3 relating to addition of Rs. 1,00,000/- received from Professional Leasing & Capital Services Ltd., another group company Averments of the AO (Para 3.1 Page 6 of the Asstt. Order), the Ld. AR submitted that an amount of Rs. 1,00,000/- was received through cheque from M/s Professional Leasing & Capital Services Ltd. and deposited into bank account of the assessee. Addition was made by the AO since the confirmation from the said party was not filed. The Ld. AR further submits that bank account of the assessee where the said amount has been received, bank account of the said company from where the payment has been made, Copy of ledger account of the assessee in the books of the said company showing payment of Rs. 1 lac vide cheque no. 1892227, A confirmation from the said party were produced before the Assessing Officer. A letter dated 12/09/97 filed during the original assessment proceedings 35 IT(SS)A No. 6 & Ors/Del/2012 explaining that the said amount was received from the said company. All these ledger accounts prove beyond doubt that the assessee received a cheque of Rs. 1,00,000/- from M/s Professional Leasing and both the parties have recorded this transaction in their books of account. Since the amount has been received from another company of the group, who is an independent assessee, the source stands explained and no addition can be made in the hands of the assessee company at all.
71. The Ld. DR relied upon the Assessment Order.
72. We have heard both the parties and perused the records. The evidences were produced before the Assessing Officer by the Assessee. It is pertinent to note that bank account of the assessee where the said amount has been received, bank account of the said company from where the payment has been made, Copy of ledger account of the assessee in the books of the said company showing payment of Rs. 1 lac vide cheque no. 1892227, A confirmation from the said party were produced before the Assessing Officer. A letter dated 12/09/97 filed during the original assessment proceedings explaining that the said amount was received from the said company. All these ledger accounts prove that the assessee received a cheque of Rs. 1,00,000/- from M/s Professional Leasing and both the parties have recorded this transaction in their books of account. Since the amount has been received from another company of the group, who is an independent assessee, the source stands explained and thus, the Ld. AR's contention that no addition can be made in the hands of the assessee company at all is right. The Assessing Officer ignored this in entirety. Ground No. 3 is allowed.
73. As regards Ground No. 4 relating to addition of Rs. 1,90,000/- received from Mr. Anil Sanghi (incorrectly mentioned as Professional Leasing in the assessment order) which are the averments of the AO (Para 3.2.2 Page 6 of the Asstt. Order), the Ld. AR submitted that an amount of Rs. 1,90,000/- was received through cheque from M/s Anil Sanghi & Associates Prop. Anil Sanghi and deposited into bank account of the assessee. Addition 36 IT(SS)A No. 6 & Ors/Del/2012 was made by the AO since the confirmation from the said party was not filed. The Ld. AR submitted that the assessee submitted bank account of the assessee where the said amount has been received, bank account of Mr. Anil Sanghi from where the payment has been made, a confirmation from the said party confirming the payment of the said amount to the assessee. Copy of ledger account of the bank in the books M/s Anil Sanghi & Associates showing payment of Rs. 1,90,000/- to the assessee, a copy of ledger account of the assessee in the books M/s Anil Sanghi & Associates showing payment of Rs. 1,90,000/-, all these documents were produced before the Assessing Officer. The said payment was made by Mr. Anil Sanghi out of the professional fees of Rs. 1,80,000/- received in his bank and available bank balance, copy of his assessment orders shows that the said amount was duly taxed in his hands. Since the said amount has been received from Mr. Anil Sanghi, who was also being assessed by the same assessing officer who had access to their books of account, bank accounts etc. and could have examined the issue which has not been done. Thus, the Ld. AR submitted that once it is established that the assessee company has received the money from Mr. Anil Sanghi, who is an independent assessee and whose entire undisclosed income has been assessed, then the source stands explained and no addition can be made in the hands of the assessee company at all.
74. The Ld. DR relied upon the Assessment Order.
75. We have heard both the parties and perused all the records. It is pertinent to note that an amount of Rs. 1,90,000/- was received through cheque from M/s Anil Sanghi & Associates Prop. Anil Sanghi and deposited into bank account of the assessee. The addition was made by the AO since the confirmation from the said party was not filed. The assessee submitted before the Assessing Officer his bank account details where the said amount was received, bank account of Mr. Anil Sanghi from where the payment has been made, a confirmation from the said party confirming the payment of the said amount to the assessee along with copy of ledger account of the bank in the books M/s Anil Sanghi & Associates showing payment of Rs.
37 IT(SS)A No. 6 & Ors/Del/20121,90,000/- to the assessee, a copy of ledger account of the assessee in the books M/s Anil Sanghi & Associates showing payment of Rs. 1,90,000/-. The said payment was made by Mr. Anil Sanghi out of the professional fees of Rs. 1,80,000/- received in his bank and available bank balance, copy of his assessment orders shows that the said amount was duly taxed in his hands. Since the said amount has been received from Mr. Anil Sanghi, who was also being assessed by the same assessing officer who had access to their books of account, bank accounts etc. and could have examined the issue which has not been done. Thus, it is established that the assessee company has received the money from Mr. Anil Sanghi, who is an independent assessee whose entire undisclosed income has been assessed, thus the source stands explained and there cannot be any addition in the hands of the assessee company. From the bank details and the balance sheet of the said company it was clear at the threshold that the assessee has given proper explanation with the evidence. Merely not producing confirmation cannot be the ground for making addition when the same Assessing Officer is also assessing the said company for the said amount itself during the same period. Therefore, the Assessing Officer is not justified in making an addition and Ground No. 4 is allowed.
76. As relates to Ground No. 5 regarding addition of Rs. 2,50,000/- being amount received from some parties on behalf of Mr. Anil Sanghi, the Ld. AR submitted that an amount of Rs. 2,50,000/- was transferred from five bank accounts number 3323 to 3327 which in turn were transferred from Mr. Anil Sanghi. The Assessing Officer made addition since no supporting document was filed. The Ld. AR further submits that the assessee produced before the Assessing Officer a copy of ledger account of other parties in the books of M/s Anil Sanghi and Associates who has issued five cheques of different amounts aggregating to 2,50,000/-. The Ld. AR submits that this amount received by them from Mr. Anil Sanghi has been transferred by them to the assessee company for which the Ld. AR relied upon the copy of the bank statement of M/s Anil Sanghi & Associates showing payment of the said five cheques, copies of the five bank statements showing receipt of 38 IT(SS)A No. 6 & Ors/Del/2012 money from Mr. Anil Sanghi & Associates and Assessment Order of Mr. Anil Sanghi, all of these documents were submitted before the Assessing Officer. Thus, the Ld. AR submits that once it is established that the those five persons received the money from Mr. Anil Sanghi (who is an independent assessee and whose entire undisclosed income has been assessed) and then paid the same to the assessee company, the source stands explained and no addition can be made in the hands of the assessee company at all.
77. The Ld. DR relied upon the Assessment Order.
78. We have heard both the parties and perused all the records. It is pertinent to note that the assessee produced before the Assessing Officer a copy of ledger account of other parties in the books of M/s Anil Sanghi and Associates who has issued five cheques of different amounts aggregating to 2,50,000/-. This amount received by them from Mr. Anil Sanghi has been transferred by them to the assessee company for which the Ld. AR relied upon the copy of the bank statement of M/s Anil Sanghi & Associates showing payment of the said five cheques, copies of the five bank statements showing receipt of money from Mr. Anil Sanghi & Associates and Assessment Order of Mr. Anil Sanghi, all of these documents were submitted before the Assessing Officer. Thus, it is established that the those five persons received the money from Mr. Anil Sanghi (who is an independent assessee and whose entire undisclosed income has been assessed) and then paid the same to the assessee company, thus source was explained by the Assessee. Therefore, the addition was not correctly made by the Assessing Officer in the hands of the assessee company at all. Ground No. 5 is allowed.
79. As regards to Ground No. 6, 7, 10 and 11, relating to addition of Rs. 1,97,004/- for the AY 1996-97 and Rs. 6,87,728/- for the AY 1997-98, the Ld. AR submitted that the assessing officer made the addition observing that no supporting documents were furnished. The Ld. AR further submitted that identical issue has been decided by the ITAT in the case of Harmony Psychitary Centre P Ltd., a group company, in appeal no. IT 39 IT(SS)A No. 6 & Ors/Del/2012 (SS) /03/Del/2012 passed on 07/10/16, wherein the addition of interest has been deleted from the block assessment since the same was declared by the assessee in its regular returns of income and accepted by the AO in the regular assessment u/s 143(3) of the Act. The Ld. AR also relied on the decision of Shilpi Securities (P) Ltd. in ITA No. 02/Del/2012 dated 29/01/16. Thus, the Ld. AR submitted that the addition of Rs. 1,97,004/- for the AY 1996-97 and Rs. 6,87,728/- for the AY 1997-98 should be deleted. The Ld. AR further submitted that Section 158BB provides for computation of undisclosed income for the block period. The incomes computed on the basis of section 158BB(l)(a) to (f) has to be excluded while computing the undisclosed income. Section 158BB(l)(d) provides that in a case where the previous year has not ended or the date of filing of return of income under 139(1) has not expired, then income determined on the basis of entries relating to such income or transactions as recorded in the books of account and other documents maintained in the normal course on or before the date of search shall be excluded from the undisclosed income. Search was undertaken on the assessee on 27/06/1996. The Ld. AR submitted that return of income for the AYs 1996-97 and 1997-98 were due to be filed on 30/11/96 and 30/11/97 respectively. Thus both these returns were not due for filing as on the date of search. These incomes were duly recorded in the books of account of the assessee and have been declared in the audited balance sheets as well as returns of income by the and have been accepted in the regular assessments by the assessing officer as explained below. Thus, the Ld. AR submitted that no addition can be made following the above judgments. As relates to addition of Rs. 1,97,004/- for the AY 1996-97, the Ld. AR submitted that the assessing officer has made addition on the basis of amounts received in the bank account. The Ld. AR submitted that the assessee submitted before the Assessing Officer a copy of acknowledgement for filing return of income for the AY 1996-97 on 29/11/96 showing that the return of income has been filed within due date along with Audited Balance sheet and Profit and Loss account for the year ended 31/3/96 wherein the amounts of Rs. 1,97,004/- has been declared as income. Copy of ledger account of interest received in 40 IT(SS)A No. 6 & Ors/Del/2012 the books of the assessee showing that the amount of Rs. 1,67,246/- is included in the amount of Rs. 3,76,075/-. Misc income of Rs. 4,758/- and professional fees of Rs. 25,000/- are declared together in the profit and loss account and are part of Misc. income of Rs. 29,758/-. The assessee also submitted before the Assessing Officer Bank account in the books of the assessee showing the receipt of the four amounts, copy of TDS certificate showing therein the interest of Rs. 2,17,200/- which was earned on which TDS of Rs. 49,957/- has been deducted and balance amount of Rs. 1,67,243/- was received in bank account for which addition has been made. Therefore, the Ld. AR submitted that since tax has been deducted at source on this income, it cannot be considered as undisclosed income in any manner.
Total Income (Rs.) TDS Received in Bank TDS cert, on page no. 2,17,200/- 49,957/- 1,67,243/- 87
The Ld. AR relied upon the following cases wherein it has been held that the incomes which are subject to TDS cannot be taxed under the block assessment period:
1. CIT & ANR. Vs. H.E. Mynuddin Pasha (2011) 338 ITR 533 (Kar)
2. DCIT vs. Damodardas Jerambhai Wadhwa (2005) 2 SOT 98 (Kol)
3. P.R. Patel vs. DCIT (2001) 73 TTJ (Mumbai) 262 : (2001) 78 ITD 51 (Mumbai)
4. Dr. (Mrs.) Surjit Tosaria vs. JCIT (2005) 92 TTJ (Del) 338 The Ld. AR further submitted that copy of letter dated 22/9/97 filed before the assessing officer along with Books of account for the block period have been submitted to the assessing officer during the original assessment proceedings on 10/09/97 wherein this income was duly recorded. The assessee also submitted that copy of the assessment order passed u/s 143(3) for the AY 1996-97 in case of the assessee where the returned income has been accepted by the AO. The assessing officer made the addition of Rs. 6,87,728/- for the AY 1997-98 on the basis of amounts received in the bank account. The Ld. AR submitted that Bank account in 41 IT(SS)A No. 6 & Ors/Del/2012 the books of the assessee showing the receipt of the 7 amounts for which addition has been made were produced before the Assessing Officer, along with copy of the acknowledgement for filing return of income for the AY 1997-98 on 12/11/97 showing that the return of income has been filed within due date and Audited Balance sheet and Profit and Loss account for the year ended 31/3/97 where the amount of Rs. 6,87,728/- has been declared as income. The two figures of Rs. 61,515/- and 60,816/- received in the bank account during the AY 97-98 were part of interest receivable for which income has been recorded in the preceding year the AY 1996-97. For demonstrating the same copy of ledger account of interest receivable in the books of the assessee for the year ended 31/3/97 were produced before the Assessing Officer. The Ld. AR submitted that this fact can be tallied from the books of account of the preceding year and TDS certificates.
Total Income (Rs.) TDS Received in Bank TDS cert, on page no.
79,890/- 18,375/- 61,515/- 85 78,982/- 18,166/- 60,816/- 86The Ld. AR submitted that a copy of ledger account of Professional fees for the year ended 31/3/97 wherein all the other amounts for which addition have been made have been declared as income by the assessee. In case of the following three amounts, tax has been deducted at source and has also been claimed in the return of income filed by the assessee. No addition can be made for the amounts on which TDS has been made as has been held in the authorities.
Total Income
(Rs.) TDS Received in Bank TDS cert, on page no.
4,43,835/- 25,521/- 4,18,314/- 108
66,575/- 3,828/- 62,747/- 109
81,370/- 4,679/- 76,691/- 110
The Ld. AR further submitted that copy of intimation u/s 143(1) for the AY 1997-98 wherein returned income has been accepted by the department 42 IT(SS)A No. 6 & Ors/Del/2012 and the assessment order u/s 143(3) for the AY 1997-98 wherein returned income has been accepted. In view of the above facts, the Ld. AR submitted that the said income was duly recorded in books of account, duly declared in return of income, was subject to TDS and the returned income has been accepted by the assessing officer in regular assessment proceedings, the addition of Rs. 1,97,004/- and Rs. 6,87,728/- cannot be made and the same should be deleted. As regards to Grounds no. 7 and 11, the Ld. AR submitted that without prejudice to Ground No. 6 and 10, the assessee has declared the impugned incomes in its regular returns of income filed for AY 1996-97 and 1997-98 which has been accepted as such by the assessing officer in regular assessment framed u/s 143(3). If the impugned interest income is assessed as undisclosed income u/s 158BC then the same should be excluded from the income assessed in regular assessments framed for the AYs 1996-97 and 1997-98 as the same income cannot be taxed twice. Thus necessary directions should be given.
80. The Ld. DR relied upon the Assessment Order.
81. We have heard both the parties and perused all the records. It is pertinent to note that identical issue is decided by the ITAT in the following group companies:
i) Shilpi Securities (P) Ltd. ITA No.2/DEL/2012 order dated 29.01.2016
ii) Harmony Psychiatry Centre Pvt. Ltd. IT(SS)A No. 3/DEL/2012 order dated 07.10.2016 Thus, this issue is covered in favour of the assessee. Ground No. 6, 7, 10 and 11 are allowed.
82. As regards to Ground No. 9, relating to addition of Rs. 3,00.000/- received from Devyani Securities (P) Ltd., the Ld. AR submitted that the assessee furnished bank account of the assessee where the said amount has been received along with copy of ledger account of the assessee in the books of the said company showing payment of Rs. 3,00,000/- vide cheque 43 IT(SS)A No. 6 & Ors/Del/2012 no. 24234, copy of ledger account of the said company in the books of the assessee showing receipt of Rs. 3,00,000/- from the said company and copy of bank statement of the said company showing payment of the said amount. The Ld. AR submitted that a copy of confirmation from the said party is also available at this juncture. Thus, the Ld. AR submitted that all these ledger accounts prove beyond doubt that the assessee received a cheque of Rs. 3,00,000/- from M/s Devyani Securities and both the parties have recorded this transaction in their books of account. Since the amount has been received from another company of the group, who is an independent assessee, the source stands explained and no addition can be made in the hands of the assessee company at all.
83. The Ld. DR relied upon the Assessment Order.
84. We have heard both the parties and perused all the records. We have heard both the parties and perused all the records. It is pertinent to note that the assessee produced before the Assessing Officer a copy of bank account of the assessee where the said amount has been received along with copy of ledger account of the assessee in the books of the said company showing payment of Rs. 3,00,000/- vide cheque no. 24234, copy of ledger account of the said company in the books of the assessee showing receipt of Rs. 3,00,000/- from the said company and copy of bank statement of the said company showing payment of the said amount. From the bank details and the balance sheet of the said company it was clear at the threshold that the assessee has given proper explanation with the evidence. Merely not producing confirmation cannot be the ground for making addition when the same Assessing Officer is also assessing the said company for the said amount itself during the same period. Therefore, the Assessing Officer is not justified in making an addition and Ground No. 9 is allowed.
85. As regards to Ground No. 13, 14 and 15, relating to addition of Rs. 4,10,959/- being interest received from Surva Roshni Ltd., the Ld. AR submits that the averment of the Assessing Officer that the books were not found or seized during search is baseless as the search was undertaken on 44 IT(SS)A No. 6 & Ors/Del/2012 the bank account of the assessee as mentioned in para 1 of the assessment order. The Ld. AR submitted that the books of account are maintained on the registered office of the company or its branches and not at the bank premises. The returns for both the AYs 1996-97 and 1997-98 have been filed before due date for filing the returns of income. Books of account were produced before the Assessing Officer on 10/09/97 as mentioned in the letter dated 22/9/97 (duly stamped) filed before the assessing officer in the original assessment proceedings along with copy of profit and loss account for the year ended 31/3/97 wherein the interest income of Rs. 4,10,959/- received from Surya Roshni has been duly declared, copy of the TDS certificate which shows that TDS of Rs. 94,521/- has been deducted on the said amount. The Ld. AR also submitted that the Assessing officer also accepted the fact that TDS has been deducted on the said income in para 4.5 of the assessment order and increased the addition. Thus, no addition can be made for the amount on which TDS has been made relying upon the authorities, Copies of the assessment orders u/s 143(1) and 143(3) wherein returned income has been accepted. Since tax has been deducted at source on the said income which duly recorded in books of account and the returns for the AY 1997-98 have not fallen due at the time of search, the interest income cannot be considered as undisclosed income in view of the provisions of section 158BB(1). The Ld. AR relied upon the decision in the case of Harmony Psychiatry (P) and Shilpi Securities (P) Ltd. As relates to Ground no. 14, the Ld. AR submits that without prejudice to Ground no. 13, the assessing officer did not allow credit of TDS of Rs. 94,521/- deducted on the interest income of Rs. 4,10,959/- added to the income of the assessee. Presuming without admitting, if the addition of interest of Rs. 4,10,959/- is sustained in the block assessment period, then claim for the TDS should also be allowed. Necessary directions in this regard should be issued. As relates to Ground no. 15, the Ld. AR submits that without prejudice to Ground no. 13, the assessee has declared the impugned incomes in its regular return of income filed for the ASSESSMENT YEAR 1997-98 which has been accepted as such by the assessing officer in regular assessment framed u/s 143(3). The Ld. AR further submits that 45 IT(SS)A No. 6 & Ors/Del/2012 if the impugned interest income is assessed as undisclosed income u/s 158BC then the same should be excluded from the income assessed in regular assessment framed for the AY 1997-98 as the same income cannot be taxed twice. Thus the Ld. AR submitted that necessary directions should be given.
86. The Ld. DR relied upon the Assessment Order.
87. We have heard both the parties and perused all the records. It is pertinent to note that identical issue is decided by the ITAT in the following group companies:
i) Shilpi Securities (P) Ltd. ITA No.2/DEL/2012 order dated 29.01.2016
ii) Harmony Psychiatry Centre Pvt. Ltd. IT(SS)A No. 3/DEL/2012 order dated 07.10.2016 Thus, this issue is covered in favour of the assessee. Ground No. 13, 14 and 15 are allowed.
88. As relates to Ground Nos. 16 to 19 and additional ground No. 21, the Ld. AR submitted that the share capital as per Form 2 filed by the assessee shows issued capital at Rs. 34,70,000/- whereas the balance sheet shows the capital at Rs. 14,70,000/-. As per the provisions of section 132(4), books of account found during the course of search are presumed to be true. The number of shares and paid up share capital has been mentioned at four places and same mistake cannot be committed while writing a given number. It is signed by one of the directors who admitted to have allotted 3,46,500/- shares to Professional Leasing. Mr. Anil Sanghi, another director could not explain why this mistake was not rectified. Further assessee has shown purchase of shares worth Rs. 14,65,000/- during the FY 1994-95. The addition of Rs. 34,65,000/- was made for the difference in share capital (Rs. 20 lacs ) and value of shares purchased (Rs. 14.65 lacs). Copy of form 2 which was seized as page 51 of Annexure A-8 from the residence of Mr. Anil Sanghi on 01/11/96 wherein the number of shares allotted was mentioned 46 IT(SS)A No. 6 & Ors/Del/2012 as 3,46,800/-. The Ld. AR submitted that audited Balance sheet of the assessee as on 31/3/95 shows the share capital of Rs. 14,70,000/-. The Ld. AR submits that a copy of letter dated 22/9/97 by the assessee to the AO stating that there was the amount of capital was mentioned as 34,68,000/- instead of Rs. 14,68,000/- and this fact can be verified from Professional Leasing (against whose name these shares were mentioned). Audited balance sheet of M/s Professional Leasing and Capital Services (P) Ltd. for the year ended 31/3/95 which shows inventories of Rs. 48.99 lacs. Details of the same shows that the said company has purchased 1,46,600/- shares of the assessee company for Rs. 14,66,000/-. Letter dated 22/9/97 from the said company to the assessing officer stating that the shares were allotted to it against sale of shares worth Rs. 14,65,000/- and giving details of the shares sold by it. The Ld. AR submitted that the additional ground No. 21 relating to addition of Rs. 34,65,000/- on the basis of seized material found from the residence of Mr. Anil Sanghi on 1-11-1996 as per Annexure A-8 observation of the assessing officer, the issue is covered in favour of the assessee. The Ld. AR submitted that additional ground raised by the assessee is purely legal in nature and should be admitted in view of the judgment of Hon'ble Supreme Court in the case of NTPC Co. Ltd. Vs CIT 229 ITR 383 (SC). Identical ground was raised in the case M/s Harmony Psychiatry Centre (P) Ltd. in IT(SS) /03/D/2012, group company of the assessee, which has been admitted by the ITAT. Identical ground was raised in the case of M/s Uikam Investment & Finance (P) Ltd. in IT(SS)/10/D/13, group company of the assessee, which has been admitted by the ITAT. Thus the additional ground raised by the assessee should be admitted and decided. In case of assessee, the search operations were carried out on 27/06/1996 only at the bank accounts of the assessee and nowhere else. Annexure A-8 was found during the course of search at the residence of Mr. Anil Sanghi on 01/11/1996 and not from the possession of the assessee company. Thus this annexure has been seized after the search was concluded in the case of the assessee company as the block period of the assessee company is from 01/04/86 to 27/06/96. Information collected post search can be used in the assessment for the block period if and only if 47 IT(SS)A No. 6 & Ors/Del/2012 the assessing officer was of the opinion that the said seized material was related to the assessee company and he has recorded his satisfaction u/s 158BD to this effect. However, this has not been done in this case. It is a settled law no addition can be made on the basis of material seized from the premises of some other assessee after conclusion of search in case of the assessee company without recording satisfaction u/s 158BD. Further the seized annexure did not relate to the material seized during the course of search in the case of the assessee as nothing has been mentioned about the same in the assessment order. Identical issue was decided by the Hon'ble ITAT in favour of the assessee in the case M/s Harmony Psychiatry Centre (P) Ltd. in IT(SS) /03/D/2012. Identical issue was decided by the Hon'ble ITAT in favour of the assessee in the case M/s Uikam Investment & Finance (P) Ltd. in IT(SS)/10/D/2013, The Ld. AR submitted that the said decisions on identical ground in case of group companies, the addition made on the basis of Annexure A-8 should be deleted.
89. The Ld. DR opposed to admit the additional ground and relied upon the Assessment Order.
90. We have heard both the parties and perused all the relevant records. All the details were given before the Assessing Officer. The assessee has shown the purchase of shares worth Rs. 14,65,000/- during the F.Y. 1994- 95 for which the assessee has given details of audited balance sheet of M/s Professional Leasing and Capital Services (P) Ltd. for the year ended 31.03.1995 which shows inventories of Rs. 48.99 lacs of which details shows the said company has purchased 1,46,600/- shares of the ssessee company for Rs. 14,66,000/-. Thus, the Assessing Officer was not correct in ignoring this evidence and making the said additions. Thus, all the explanation along with the documents was produced before the Assessing Officer, but the Assessing Officer has not taken cognizance of the same. Therefore, it will be appropriate to remand back this issue to the file of the Assessing Officer. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Ground Nos. 16 to 19 are 48 IT(SS)A No. 6 & Ors/Del/2012 allowed for statistical purpose. The additional ground is a legal ground which has to be admitted that as the same is purely legal in nature and the decision of the Hon'ble Apex Court in case of National Thermal Power Corporation Ltd. is squarely applicable in the present case. In fact identical ground was raised in case of group companies, M/s Harmony Psychiatry Centre (P) Ltd. and M/s Uikam Investment Finance (P) Ltd. wherein the ITAT decided this ground in favour of the assessee. Therefore, we are now discussing the merit of this ground. The seized annexure did not relate to the material seized during the course of search in the case of the assessee as nothing has been mentioned about the same in the assessment order. Therefore, Additional Ground No. 21 is allowed.
91. In result, appeal being IT(SS)A No.1/DEL/2012 filed by the Assessee is allowed for statistical purpose.
Order pronounced in the Open Court on 24th APRIL, 2018.
Sd/- Sd/-
(R. K. PANDA) (SUCHITRA KAMBLE)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 24/04/2018
R. Naheed *
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
49 IT(SS)A No. 6 & Ors/Del/2012
Date
1. Draft dictated on 17.04.2018 PS
2. Draft placed before author 17.04.2018 PS
3. Draft proposed & placed before .2018 JM/AM
the second member
4. Draft discussed/approved by JM/AM
Second Member.
5. Approved Draft comes to the 24.04.2018 PS/PS
Sr.PS/PS
6. Kept for pronouncement on PS
7. File sent to the Bench Clerk 24.04.2018 PS
8. Date on which file goes to the AR
9. Date on which file goes to the
Head Clerk.
10. Date of dispatch of Order.