Trilok Singh Dhillon vs Commissioner of Income Tax

Dhirendra Mishra, J.—These tax appeals u/s 260A of the income tax Act, 1961 preferred by the Assessee and cross-objectors are being disposed of by this common judgment as they are directed against the common order dated March 29, 2010 passed by the income tax Appellate Tribunal, Bilaspur, Bench Bilaspur (in short "the Tribunal"), by which all the connected appeals preferred by the Revenue, Assessee and cross-objectors have been disposed of.

With the consent of learned Counsel for the parties, all these appeals were heard for disposal at the admission stage.

For the purposes of this order, the facts of Tax Case No. 98 of 2010 Trilok Singh Dhillon v. CIT, pertaining to the assessment year 2005-06 and the substantial questions of law proposed in the memo of appeal, shall be referred until and unless specific reference is made to the other tax cases.

The Appellant/Assessee has preferred this appeal (Tax Case No. 98 of 2010) on the following substantial questions of law:

Whether survey u/s 133A can be conducted at the airport on a person getting out of aircraft instead of search u/s 132(1)(B)(iia) exclusively provided for such circumstances and if not, whether the survey and all the subsequent proceedings which followed such survey are valid, specifically keeping in view the law laid down by the hon''ble Supreme Court in the case of Union of India (UOI) Vs. Ajit Jain and Another, ?

Whether in the facts and circumstances of the case, the assessment order was made on the basis of instructions and dictates of other authorities and if so whether such assessment is not bad in law ?

Whether the order of the learned Tribunal is perverse with respect to restoring the issue of addition of Rs. 24,85,000 being cash found in the possession of the Appellant, particularly when the sources of the same were satisfactorily explained and when the addition was made without any corroborative material ?

Whether the order of the learned Appellate Tribunal, in the facts and circumstances of the case, is perverse with respect to treating various persons as benamidars of Shri Trilok Singh Dhillon, a copartner, without disputing the genuineness of the firm, which has advanced the money, without questioning the genuineness of sources of the money advanced, when the borrowings were interest bearing, when the interest income was separately assessed in the hands of the firm/other partners, when the other persons were not treated as benamidars of the other partners who stand on the same plank as the Appellant with respect to their capital contribution in the firm and loaned to the Appellant, when the excise licence was issued by the Excise Department in the names of different persons, when the Excise Department certified the execution of licence by them and when those persons owned the business and offered the income to tax in their individual capacity ?

Whether the income tax Appellate Tribunal is legally correct in confirming the addition of Rs. 22,13,218 made u/s 68 as unexplained cash credit, especially when the gift was received with the rider that if the same was not recognized as gift for any reasons, the same shall be returnable to the donor, whose identity and creditworthiness and genuineness of the transaction were substantiated by the Appellant ?

Briefly stated, the facts of the case are that on August 24, 2004 Assessee was carrying Rs. 24,85,000 in cash while travelling from Mumbai to Raipur by flight. Information to this effect was received from the Investigation Wing of Bombay. He was intercepted at Mana Airport and his statement was recorded at the airport. Later on, survey u/s 133A of the income tax Act, 1961 (in short "the Act") was conducted in the business premises of the Assessee. In his statement, the Assessee admitted that the cash found in his brief case is his income from undisclosed sources. Thereafter, survey was converted into search and the cash was seized. However, the Assessee retracted his statement by filing an affidavit on December 7, 2005 wherein he stated that he surrendered the entire amount of Rs. 24,85,000 as his unexplained income for the assessment year 2005-06 since he was compelled by the income tax authorities. His explanation that he withdrew the above sum from his wife''s cash balance from M/s. Carol Barter (P) Ltd. was disregarded.

The Assessee filed return of income for the assessment year 2005-06 on November 23, 2006 showing total income of Rs. 28,94,020 and agricultural income of Rs. 85,000 and the assessment was completed on a total income of Rs. 5,68,78,983. This assessment followed the assessment u/s 153A for the preceding six assessment years. The Assessing Officer also issued notice u/s 153C read with Section 153A of the Act on February 16, 2005. An objection was raised by the Assessee on the ground that the above notices were issued without requisite satisfaction and subsequently, the objection regarding lack of jurisdiction was agitated before the Commissioner of income tax (Appeals) (in short "CIT(A)") u/s 144. However, the Assessee filed return of income under protest. The Assessing Officer issued notices Under Sections 143(2) and 142(1) and again issued another notice u/s 153A read with Section 153C on September 4, 2006.

The Assessing Officer did not entertain the explanation of the Assessee through affidavit sworn on December 7, 2005 on the ground that it was offered after 16 months and from the statement of the notary, it is clear that the affidavit is an afterthought. The contention of the Assessee that there is no material to show that the Assessee earned undisclosed income, which was found during the course of search, it was held that the Assessee was engaged in liquor business in benami names, as detailed in the assessment order for the assessment year 1999-2000, which goes to show that the Assessee is making income from undisclosed sources. The stand of the Assessee was inconsistent. The Assessee was not aware about the place of availability of books of account of M/s. Carol Barter (P) Ltd., of which he is the principal director.

Accordingly, his explanation that the cash amount seized from him is the cash balance which he had withdrawn from M/s. Carol Barter (P) Ltd. in connection with purchase of some property at Mumbai has been rejected, and the amount of Rs. 24,85,000 was assessed as undisclosed income of the Assessee. The Assessing Officer by reference to the assessment order of the assessment year 1999-2000 rejected the claim of agricultural income of Rs. 85,000 and also assessed the income of 35 benamidars of Rs. 4,72,31,310 in the hands of the Assessee on substantive basis. The expenditure of Rs. 18,41,758 being amount of bills of Adarsh Service Station, Supela, Bhilai, seized during search proceedings issued in the names of different persons, has been assessed in the hands of the Assessee as unexplained expenditure with a finding that the same was unexplained expenditure of the Assessee through benamidars. Similarly, an amount of Rs. 18,096, on the basis of details mentioned in three papers found from the room of Manoj Chelak and Rs. 22,13,218 received by the Assessee as gifts from Parminder Singh Bains ($ 25,000) and Shri Deepak Kumar ($ 26,100) have been added u/s 68 as unexplained cash with an observation that the Assessee has failed to furnish confirmation or any evidence regarding relationship or creditworthiness of the donors.

Depreciation of Rs. 1,22,581 claimed by the Assessee on Qualis vehicle has also been rejected on the ground that looking to the nature of income, it cannot be said that the vehicle was used for the Assessee''s business purpose. Accordingly, the assessment was completed at Rs. 5,68,78,983 u/s 153A. It has been also directed to charge interest under Sections 234A, 234B and 234C and separate penalty proceedings u/s 271(1)(c) of the Act.

The Assessee preferred an appeal against the above order of the Assessing Officer. The Commissioner of income tax (Appeals) rejected the objection of the Assessee regarding conducting survey u/s 133A on the person of the Assessee at Raipur airport and converting the survey into search u/s 132 of the Act and the contention of the Assessee that assessment was not done independently by the Assessing Officer, but at the instructions and dictates of other authorities. The Commissioner of income tax (Appeals), however, deleted the addition of Rs. 24,85,000 which was seized from the Assessee at the airport by accepting his explanation in this regard and further deleted the addition of Rs. 85,000 and directed the Assessing Officer to treat the above income as agricultural income. The Commissioner also deleted the addition of Rs. 4,72,31,310, which was added as undisclosed income allegedly earned in the names of benamidars. Referring to the reasons detailed in the appeal order for the assessment year 2002-03, the addition has been deleted and the Assessing Officer has been directed to assess the income determined in the cases of those persons in their respective hands on substantive basis, as the income has already been assessed in their hands on protective basis. The addition of Rs. 18,41,758 on account of unexplained expenditure on fuel purchase, has been further deleted by reference to the discussions in the appeal order for the assessment year 2004-05. The addition of Rs. 18,096 made on account of Supela Bar Collection on August 16, 2004 has been further deleted on the ground that necessary elements in respect of benami transaction have not been established. However, the addition of Rs. 22,13,218 made on account of NRI gifts has been confirmed, and disallowance of depreciation claimed at Rs. 1,22,581 has been set aside and the Assessing Officer has been directed to allow the depreciation after disallowing 1/5th for personal purposes.

The Revenue, Assessee as well as cross-objectors (benamidars) preferred separate appeal against the order of the Commissioner of income tax (Appeals) passed for each assessment year, and the Tribunal has disposed of all the appeals by a common order in the following terms:

(1) Rejecting the objection of the Assessee and confirming the order of both forums below against the initiation of survey u/s 133A at the airport, it was held that the scope of survey u/s 133A includes verification of cash with reference to books of account. Since the cash found with the person of the Assessee was to be verified with reference to books of account, survey was conducted. The Assessee was accompanied to his office and when he could not satisfactorily explain the nature and possession of the cash found with him, survey was rightly converted into search.

(2) Considering the cross-objection of the Assessee with regard to validity of the notice u/s 153C and subsequent assessment, it has been observed that there was no requirement for recording of satisfaction that the documents found and seized reflected earning of any undisclosed income, as the provision u/s 153C and the erstwhile provisions u/s 158BD are differently worded. The seized material was received on October 21, 2005 and prior to this, the Assessing Officer was having enough evidence to record satisfaction and the same is contained in the order-sheet and notice has been issued after application of mind. The subsequent notice was issued as a matter of abundant precaution and there is no bar for issuing second notice. Fresh notice u/s 153C supersedes the earlier proceedings. Accordingly, the finding of the Assessing Officer, which has been subsequently confirmed by the Commissioner of income tax (Appeals) has been further confirmed.

(3) Rejecting the alternative stand of the Assessee that papers were found from the premises of Manharanlal Verma, who has been projected as excise consultant of all benamidars of Trilok Singh Dhillon, it has been held that all the Assessees of Trilok Singh Dhillon group were his benamidars, including Manharanlal Verma. Manharanlal Verma was one of his trusted employees for the past several years and he was also handling bank accounts of all benamidars and family member of Trilok Singh Dhillon and no such consultancy activity was done by him. Accordingly, the Tribunal rejected the claim of Manharanlal Verma being an excise consultant.

(4) Repelling the argument of the Assessee that protective assessment is not permissible u/s 153C, it has been held that if the Assessing Officer is of the opinion that income is assessable in the hands of some other person than the ostensible person, nothing precludes him from doing so. However, in order to safeguard the interest of the Revenue in the event of different view by the appellate authority, protective assessment is justified. Reliance is placed on the decision of the Supreme Court in the matter of Lalji Haridas Vs. Income Tax Officer and Another, .

(5) After referring to the entire circumstances as emerging from the record, and after hearing rival submissions, findings of fact have been recorded in paragraph 26 of the impugned order and it has been finally held in paragraph 33 thus:

In view of the factual and legal discussion, we hold that the money was indirectly invested by Trilok Singh Dhillon and the fruit of business has gone back to him as well. Therefore, the income computed in the Panchuram case was rightly held assessable only in the hands of the said Shri Trilok Singh Dhillon on substantive basis. Similar issue has been raised by the Revenue on the point of benamidars of Shri Trilok Singh Dhillon, in case of different Assessees. The facts and modes operandi being the same, so following the same reasoning, we hold that all other Assessees are also benamidars of Shri Trilok Singh Dhillon. Accordingly these liquor business income is also directed to be assessed on substantive basis, in the hands of Shri Trilok Singh Dhillon. The Assessing Officer is directed accordingly.

First substantial question of law Whether survey u/s 133A can be conducted at the airport on a person getting out of the aircraft instead of search u/s 132(1)(B)(iia) exclusively provided for such circumstances and if not, whether the survey and all the subsequent proceedings which followed such survey are valid, specifically keeping in view the law laid down by the hon''ble Supreme Court in the case of Union of India (UOI) Vs. Ajit Jain and Another, ?

Shri Rajeshwar Rao, learned Counsel appearing for the Assessee, argued that survey u/s 133A can be conducted at business premises. This aspect has been overlooked by all the forums below. In the instant case, the Assessee was intercepted at Raipur airport and his signatures were obtained on authorization for survey u/s 133A and thereafter, he was taken to his office at Bhilai where his second statement was recorded. The Assessing Officer has admitted that the survey was conducted at the airport for the purposes of verification of the cash. However, no document according legal sanction under which the Assessee was intercepted at the airport has been filed, which was necessary as per the proviso to Section 133A(6), which mandates approval of the Joint Director. No reason has been shown for avoiding action u/s 132(1)(B)(iia). Since the matter was not considered within the ambit of Section 132(1)(c) at the initial stage while intercepting the Assessee at the airport, resorting to the same provision subsequently after survey was not called for as there was no change in circumstance. From the above fact, it is clear that the survey at the airport u/s 133A is without jurisdiction and therefore, all other proceedings which followed invalid survey are void, as held by the Supreme Court in the case of Union of India (UOI) Vs. Ajit Jain and Another, .

The argument that validity of search cannot be decided by the Tribunal has no force as the same was never advanced before the forums below. The Assessee had raised this specific issue in his memo of appeal and the judgment cited by the Revenue is distinguishable inasmuch as the same relates to approval of assessment and not to acquisition of jurisdiction. It was alternatively submitted that no new material was found during the survey and there was no need for converting the survey into search subsequently after extensive survey because the requisite ingredients were not present.

It was further argued that the material found during illegal search may be used in assessment proceedings under regular provisions, but not under the special procedure for assessment of search cases Under Sections 153A to 153D.

Shri Rajeev Shrivastava, learned Counsel for the Revenue, would argue that no search or survey was conducted at the airport. On receiving information in the morning of August 24, 2004 that the Assessee was carrying cash while travelling by flight from Mumbai to Raipur, he was escorted from the airport to Dhillon complex where survey was conducted and subsequently, the same was converted into search. His initial statement was recorded at the airport. All the three forums below have recorded a concurrent finding of fact with regard to legality of search. It was further argued that validity of search cannot be questioned in the assessment proceedings.

Reliance is placed on the decisions in the matters of Commissioner of Income Tax Vs. Paras Rice Mills, ), M.B. Lal Vs. Commissioner of Income Tax, and Gaya Prasad Pathak Vs. Assistant Commissioner of Income Tax and Others, .

It was further argued that the judgments relied upon by the Appellants have been delivered by the hon''ble Supreme Court and different High Courts in matters arising out of writ proceedings and not in proceedings arising out of the assessment order.

Finding

In the assessment order, the Assessing Officer has mentioned that on receipt of information that the Assessee was carrying cash, his statement was recorded at the airport. Later on, survey u/s 133A was conducted in the business premises of the Assessee. The Commissioner of income tax (Appeals) rejecting the argument of the Assessee in this regard held that the scope of survey u/s 133A includes verification of cash with respect to books of account. In this case, the cash found in the person of the Appellant was to be verified with respect to books of account and for this purpose, survey u/s 133A was carried out. The asses-see was accompanied to his office and he could not satisfactorily explain the nature of possession of cash found with him along with evidence and accordingly, survey was converted into search. In the impugned order, the Tribunal affirmed the above finding in appeal by the Commissioner of income tax (Appeals).

The question for our consideration is-Whether the questions touching the validity of search conducted u/s 132 of the Act can be agitated during the block assessment proceedings or in an appeal before the Commissioner of income tax (Appeals) or before the Tribunal against the impugned order ?

In the matter of AJIT JAIN Vs. UNION OF INDIA and Others, , in a writ petition filed by the Assessee, the issue before the High Court was validity of authorization issued by the Director of income tax (Investigation) u/s 132(1) of the income tax Act and block assessment order passed u/s 158BC on the same date. The authorization u/s 132(1) by the Director of income tax and the assessment were challenged on the ground that there was no information on record on the basis whereof the Director of income tax, could form the belief that the said recovered amount represented income which had not been or would not have been disclosed for the purposes of the Act, a condition precedent for exercise of power u/s 132(1) of the Act.

Allowing the writ petition of the Assessee, it was held that for the purposes of exercise of powers u/s 132(1), the authorizing officer has to form the belief on the basis of receipt of information that the person is in possession of money etc., which represents undisclosed income. Though sufficiency or otherwise of the information cannot be examined by the court in writ jurisdiction, the existence of information and its relevance to the formation of the belief is open to judicial scrutiny because it is the foundation of the condition precedent for exercise of a serious power of search of a private property or person, to prevent violation of privacy of a citizen. Therefore, for the purposes of Section 132, there has to be a rational connection between the information or material and the belief about undisclosed income. Holding the search to be without jurisdiction and void ab initio on the facts of the above case, it was further held that provisions of Chapter XIV-B can also not be invoked pursuant to the said search and consequently, the block assessment order cannot be sustained.

The Revenue went up in appeal before the hon''ble Supreme Court and the Supreme Court affirmed the order of the High Court, vide Union of India (UOI) Vs. Ajit Jain and Another, .

Chapter XIV-B deals with special procedure for assessment of search cases. Section 158BC provides for procedure for block assessment, whereas Section 158BD deals with undisclosed income of any other person and Section 158BE prescribes time limit for completion of block assessment. Section 158BE(1)(b) and Explanation 2 are relevant for the present purpose and the same may be extracted as under:

158BE. Time limit for completion of block assessment.-(1) The order u/s 158BC shall be passed, -

(b) within two years from the end of the month in which the last of the authorizations for search u/s 132 or for requisition u/s 132A, as the case may be, was executed in cases where a search is initiated or books of account or other documents or any assets are requisitioned on or after the 1st day of January, 1997.

Explanation 2.-For the removal of doubts, it is hereby declared that the authorization referred to in Sub-section (1) shall be deemed to have been executed,-

(a) in the case of search, on the conclusion of search as recorded in the last panchnama drawn in relation to any person in whose case the warrant of authorization has been issued ;

(b) in the case of requisition u/s 132A, on the actual receipt of the books of account or other documents or assets by the authorized officer.

The Division Bench of the Delhi High Court in the matter of M.B. Lal Vs. Commissioner of Income Tax, , considering the above deeming provisions contained in Section 158BE, held that the validity of search proceedings cannot be examined in appeal filed before the Tribunal against the block assessment and the remedy lies Under Article 226 of the Constitution.

In Commissioner of Income Tax Vs. Paras Rice Mills, , the Punjab and Haryana High Court following the decision of the Delhi High Court in M.B. Lal Vs. Commissioner of Income Tax, , held that while hearing an appeal against the order of assessment, the Tribunal cannot go into the question of validity or otherwise of any administrative decision for conducting search and seizure.

In the matter of Gaya Prasad Pathak Vs. Assistant Commissioner of Income Tax and Others, , it has been held that the jurisdiction exercised by the statutory authority while hearing an appeal cannot enter into the justifiability of an action u/s 132A.

Whether the order passed by the Commissioner of income tax is without jurisdiction or not cannot be the subject-matter of assessment as the same does not arise in the course of assessment. Therefore, neither the Assessing Officer nor the appellate authority can dwell upon the said facet. Ore may note with profit, it would not be a jurisdictional fact within the parameters of assessment proceeding or an appeal arising therefrom. It can only partake of the nature and character of adjudicatory fact to the limited extent whether such search and seizure had taken place and what has been found during the search and seizure. The validity of search and seizure is neither jurisdictional fact nor adjudicatory fact and, therefore, the same cannot be dwelled upon or delved into in an appeal. The submission that the Tribunal having been constituted Under Article 323 of the Constitution can delve into it, is an unacceptable proposition in law, especially in the teeth of the provision contained u/s 253.

Shri Rajeshwara Rao, learned Counsel for the Assessee, placing reliance on the decision in the matter of Commissioner of Income Tax Vs. Smt. Chitra Devi Soni, argued that the question as to whether there existed any material at all, which constituted reason to believe, is a matter which can definitely be looked into by the Tribunal, as also by the court, as the absence would vitiate the entire action. He stressed upon the proviso to Section 133A(6) and argued that to proceed under Sub-section (1) or (3) to Section 133A, approval of the Joint Director is a condition precedent. However, the Respondent has not filed copy of the order/legal sanction under which the Assessee was intercepted at the airport.

Considering the aforesaid submission of learned Counsel for the Assessee, the Revenue has produced the entire record of the assessment proceedings, including the appraisal report in a sealed cover. From a perusal of the orders of the forums below, we find that on the basis of search proceedings, notices u/s 153C read with Section 153A were issued to the Assessee and thereafter, return was filed and assessment was completed and assessment order was passed. The Assessee participated in the assessment proceedings and did not challenge the validity and legality of search and seizure proceedings initiated against him by filing any writ petition in the High Court. Therefore, following the decisions of the High Courts, referred to hereinabove, we are of the opinion that it was not open to the Assessee to question the legality and validity of search and seizure proceedings during assessment proceedings before the Assessing Officer or in appeal before the Commissioner of income tax or the Tribunal. Accordingly, we reject the objection of the Assessee in this regard.

The second substantial question of law - Whether in the facts and circumstances of the case, the assessment order was made on the basis of instructions and dictates of other authorities and if so whether such assessment is not bad in law ?

Shri Rajeshwara Rao advancing the argument on this question, submitted that the above issue has not been decided by the Tribunal. Notice u/s 153C was issued on February 16, 2005, on the basis of the appraisal report. It clearly reveals that the Assessing Officer was influenced by the directions in the appraisal report. The entire assessment has been made at the dictates of other authorities and income of other persons has been treated as deposits in the bank accounts of the Assessee as undisclosed income, by ignoring the fact that the predecessor of the Assessing Officer completed assessment in the cases of Kamlesh Kumar Chandel and Yuvraj Mane as independent persons and not benamidars. The successor Assessing Officer has also completed assessment for the assessment year 2006-07 in the case of Manoj Kumar Chelak as independent person without treating him as benamidar of the Assessee. However, action Under Sections 153C and 153A has been taken only on the basis of the appraisal report at the dictates of other authorities.

On the other hand, Shri Rajeev Shrivastava, learned Counsel appearing for the Revenue, would argue that the Assessing Officer has recorded a categorical finding based on evidence available on record. The Assessee has not disputed the factual findings in the assessment order and there is no perversity in the order. The argument of the Assessee in this regard is based on conjectures and surmises without any material or legal foundation. Reference to earlier order in the case of Kamlesh Chandel and others is of no avail as the said persons filed their return on March 31, 2004 for the relevant assessment year and the assessment order was passed on March 28, 2006 whereas search was conducted on August 24, 2004, and Kamlesh replied to the notice u/s 153C on February 24, 2006 and assessment order was passed on December 28, 2006. The notice u/s 153C was issued on February 16, 2005. In view of Sub-section (1)(b) of Section 153A, the assessment order passed by the Assessing Officer in the case of Kamlesh Chandel u/s 143(3) is a nullity, without jurisdiction and void ab initio.

Finding

The objection of the Assessee in this regard has been rejected by the Commissioner of income tax (Appeals) with an observation that after considering the facts and circumstances of the case and the relevant record, I am of the opinion that the Assessing Officer acted independently and there was no instructions, as alleged by the Assessee. It appears that the Appellant presumed that there might be some direction by the Investigation Wing in the appraisal report to complete the assessment in a particular manner. The appraisal report is a report furnishing a brief discussion of the result of search and the points required to be examined while completing the assessment. The discussion in the appraisal report is not a direction influencing the liberty of the Assessing Officer. The Assessing Officer is free to complete the assessment on the basis of materials available on record and on the basis of the Appellant''s explanation. There is no such direction as alleged by the Appellant in the instant case.

The Assessee, instead of referring to any specific paragraph in the order of assessment based on factual findings, has imputed biased approach at the dictates of other authorities, which has been rejected by the forums below after examination of the record. Thus, in our considered opinion, the question raised by the Assessee is a pure question of fact that has already been answered by the forum below against the Assessee.

Third substantial question of law - Whether the order of the learned Tribunal is perverse with respect to restoring the issue of addition of Rs. 24,85,000 being cash found in the possession of the Appellant, particularly when the sources of the same were satisfactorily explained and when the addition was made without any corroborative material ?

Addressing on the above issue, Shri Rao submitted that there is no dispute regarding availability of cash with the Assessee. The genuineness of transaction was accepted in the case of M/s. Carol Barter (P) Ltd. in the assessment proceedings u/s 143(3) of the Act and the statement recorded during survey has no evidentiary value. There was no corroboratory material available with the Assessing Officer to support the addition. The Tribunal was not justified in setting aside the order of the Commissioner of income tax (Appeals), whereby the addition was deleted, and restoring the matter to the Assessing Officer to decide the same afresh.

Finding

We have perused the order of the Assessing Officer as also that of the Commissioner of income tax (Appeals) in this regard and we are of the opinion that restoration of the above matter to the Assessing Officer for fresh adjudication after affording opportunity of hearing to the parties does not involve any substantial question of law.

Fourth substantial question of law-Whether the order of the learned Appellate Tribunal, in the facts and circumstances of the case, is perverse with respect to treating various persons as benamidars of Shri Trilok Singh Dhillon, a co-partner, without disputing the genuineness of the firm, which has advanced the money, without questioning the genuineness of sources of the money advanced, when the borrowings were interest bearing, when the interest income was separately assessed in the hands of the firm/other partners, when the other persons were not treated as benamidars of the other partners who stand on the same plank as the Appellant with respect to their capital contribution in the firm and loaned to the Appellant when the excise licence was issued by the excise department in the names of different persons, when the Excise Department certified the execution of license by them and when those persons owned the business and offered the income to tax in their individual capacity ?

Finding

The Assessing Officer, after considering the entire evidence available on record and having elaborately detailed the circumstances leading to an inference that others were benamidars of Trilok Singh Dhillon, has recorded a finding of fact. The above finding of fact has been further confirmed by the Tribunal in its detailed order. After closely examining the assessment order, the order of the Commissioner of income tax (Appeals) and the impugned order of the Tribunal in this regard, we are of the opinion that the finding of fact arrived at by the Tribunal, which is a final court of fact, is based on uncontroverted material available on record, which cannot be termed perverse and therefore, no such substantial question of law, as proposed by the Assessee, arises for adjudication by this Court.

Fifth substantial question of law-Whether the income tax Appellate Tribunal is legally correct in confirming the addition of Rs. 22,13,218 made u/s 68 as unexplained cash credit, especially when the gift was received with the rider that if the same was not recognised as gift for any reasons, the same shall be returnable to the donor, whose identity and creditworthiness and genuineness of the transaction were substantiated by the Appellant ?

Shri Rao argued that the gifts were received from the relatives of the Assessee in America in the form of dollars. The addition has been made by the Assessing Officer u/s 68 as unexplained cash credit, and confirmed by both the appellate forums on the ground that the Assessee has not furnished confirmation or details of relations and creditworthiness of the donors etc. It was argued that the donors had forwarded affidavit and confirmation along with copy of bank accounts directly to the Assessing Officer the Commissioner of income tax (Appeals) afforded opportunity Under Rule 46A of the income tax Rules for examining the additional evidence ; however, the Assessing Officer did not allow time to produce these witnesses and in these circumstances, the Tribunal ought to have restored this issue also in the file of the Assessing Officer for providing a reasonable opportunity to the Assessee.

Finding

From a perusal of the orders passed by the Assessing Officer and the appellate forums, it is clear that the above addition u/s 68 has been made as unexplained cash credit when the Assessee failed to produce confirmation of the gifts by the donors even after he was afforded opportunity for the same by the Commissioner of income tax (Appeals). We find substance in the argument of learned Counsel for the Revenue that the above addition as unexplained cash credit has been rightly made, especially when the gift was received with the rider that if the same was not recognized as gift for any reason, it shall be returnable to the donor, whose identity, and creditworthiness and genuineness of the transaction were not substantiated by the Assessee. We find that the question raised by the Assessee in this regard is a pure question of fact and the same does not give rise to any substantial question of law.

Apart from the above issue, learned Counsel for the Appellants was also heard on the following substantial questions of law, proposed in other connected appeals at the instance of the Appellants other than Trilok Singh Dhillon.

SQL No. 6: Whether on the facts and circumstances of the case, the income tax Appellate Tribunal was justified in law in summarily rejecting Appellant''s appeal on ground Nos. 1 and 2 of the grounds of appeal, when these grounds were decided by a speaking order by the first appellate authority ?

SQL No. 7: Whether, in the facts and circumstances of the case, the income tax Appellate Tribunal is legally correct in allowing the Revenue''s appeal by way of summarily remanding the matter to the file of the Assessing Officer without passing a speaking order ?

Learned Counsel for the Appellants submitted that they do not want to press these issues, hence the same need no consideration.

SQL No. 8: Whether the learned Tribunal, in the facts and circumstances of the case, was legally correct in endorsing the order of the learned Commissioner of income tax (Appeals) regarding validity of the assessment made u/s 153C, particularly when the notice u/s 153C was issued before receipt of the seized material, when the issue of notice preceded the initiation of search under the provision of Section 153C, when the notice was issued without recording requisite proper satisfaction, which was not possible without receipt of the seized material and when the second notice was issued without finally concluding the assessment proceedings set to motion through the first disputed notice ?

Shri Rao submitted that the Assessing Officer issued notices u/s 153C of the Act on February 16, 2005. The Assessee filed objection and also filed an application u/s 144A before the Additional Commissioner of income tax. However, no reply was received and in these circumstances, he filed return under protest. Notices u/s 143(2) and 143(1) were issued by the Assessing Officer and thereafter, the assessment proceedings were set in motion. However, without deciding the earlier notice, another notice was issued u/s 153C on September 4, 2005 and the assessment was completed on the basis of both these notices. He further argued that Sections 153C and 148 are in pari materia.

Relying upon the decisions of the Tribunal in the case of Suncity Alloys (P) Ltd. v. Asst. CIT (2009) 124 TTJ (Jd) 674 : (2009) 27 DTR 139 it was argued that once the proceedings were set in motion, the Assessing Officer was required to logically conclude the same.

On the other hand, Shri Rajeev Shrivastava would argue that the forums below have rejected the arguments of the Appellant in this regard by a concurrent finding and held the notices issued u/s 153C valid. This issue has been dealt with by the Tribunal in paragraph 8 of its order in detail. The Assessee could not point out any fault with the findings recorded by the Tribunal. Even if the contention of the Assessee with respect to issuance of subsequent notice u/s 153C is accepted, it is a mere procedural irregularity and not any illegality, and the entire assessment proceedings cannot be held to be invalid on this ground only.

Finding

The Tribunal has dealt with the issue of validity of notice u/s 153C in detail from paragraphs 6 to 8 of its order, wherein it has been held that there was no requirement of recording satisfaction that the documents found and seized reflected the earning of any undisclosed income. The satisfaction may be inferred from the facts and circumstances of the case. The provisions of Section 153C were not at par with the erstwhile provisions of Section 158BD as the provisions u/s 153C are differently worded. As per the amended provisions of Section 153C, satisfaction has to be arrived at with regard to belonging of the documents found during search and not regarding the undisclosed income. The Assessing Officer has issued notice after considering all the related particulars. Though the seized material was received on October 21, 2005, even prior to this, the Assessing Officer was having enough evidence to record satisfaction and the same is contained in the order-sheets. The satisfaction gives specific particulars of annexures to the seized material and the contents of the seized material, which shows that the Assessing Officer applied his mind before issuing notices. For the purposes of the proviso to Section 153C, the date of receipt of material is the date of search. In this case, the material was received on October 21, 2005. However, there was no deviation in the particulars of the seized material recorded in the order-sheet and received physically. Thus, the satisfaction recorded earlier still holds good and a fresh notice u/s 153C was issued by way of abundant precaution and there is no bar for issuing second notice. In the instant case, the Assessing Officer in the case of Shri Trilok Singh Dhillon and group is the same as the Assessing Officer having jurisdiction against the third person and therefore, there was no question of handing over the documents etc. to any other Assessing Officer as provided in Sub-section (1) to Section 153C of the Act. On due consideration of the reasonings in the order of the Tribunal and after going through the provisions u/s 153C, we are of the opinion that the Tribunal considering that the Assessing Officer of the Assessee and the third person was the same and therefore, issuance of notice to such other person in the manner provided u/s 153A even before the date of receiving the books of account or documents or assets seized, would not invalidate the notice as notice has been issued by the same Assessing Officer, who has effected seizure during search and recorded the same in the order-sheets, has rightly observed that the Assessing Officer issued subsequent notice by way of abundant precaution. We find no illegality or infirmity in the finding of the Tribunal.

SQL No. 9: Whether the order of the learned Appellate Tribunal, in the facts and circumstances of the case, was perverse with respect to treating the Appellant a benamidar of Shri Trilok Singh Dhillon, a co-partner, without disputing the genuineness of the firm, which has advanced the money, without questioning the genuineness of sources of the money advanced, when the borrowings were interest bearing, when the interest income was separately assessed in the hands of the firm/other partners, when the Appellant was not treated as benamidar of the other partners who stand on the same plank as Shri Dhillon with respect to their capital contribution in the firm and loaned to the Appellant, when the excise licence was issued by the Excise Department in the Appellant''s name, when the Excise Department certified the execution of licence by the Appellant and when the Appellant offered the income to tax in his individual capacity ?

Finding

This issue has already been considered while considering issue No. 4 and answered against the Assessee and in favour of the Revenue.

SQL No. 10: Whether the Assessing Officer had jurisdiction to take the case under scrutiny for the assessment year 2005-06 as a consequence of notices issued u/s 153C read with Section 153A for the preceding six assessment years against the provisions of the Act ?

Finding

The above issue has already been considered and decided while considering issue No. 1.

SQL No. 11: Whether the order of the Tribunal in the facts and circumstances of the case, is perverse with respect to restoring the matter of deposit in the bank accounts to the Assessing Officer when the Appellant filed his return u/s 44AF ?

Learned Counsel for the Appellants submits that the Appellants filed return of income for the assessment year 2005-06 u/s 44AF. For filing return under the aforesaid provision, the Assessee is not required to maintain books of account and the addition was made on the basis of entries contained in the bank passbook. However, the bank passbook cannot be regarded as the Assessee''s books of account, therefore, the addition is not justified.

Finding

From a perusal of the order of the Tribunal, it is seen that in the case of Panchuram Deshmukh the Assessing Officer made addition of Rs. 9,44,000 as unexplained deposit in the bank account. In appeal, the Commissioner of income tax (Appeals) deleted the addition of Rs. 4,50,000 on the ground that the above amount was credited as the same was transferred from the Assessee''s current account, which was ascertainable from the bank account, and granted relief to that extent. The Tribunal upheld the order of the Commissioner of income tax (Appeals). Since similar issues arose in various other appeals filed by the Revenue, so following the same reasonings, the above issue in all appeals have been restored to the Assessing Officer with a direction to decide this addition in different cases after verification of nexus of deposits with liquor business. It has been categorically mentioned that in case, it is found to have nexus with the liquor business, it should be decided in the light of the Assessee being benamidar of Shri Trilok Singh Dhillon and where the Assessee comes out with cogent reasoning and establishes the deposits independent of liquor business, in that case, the addition may be deleted.

We do not find any illegality or perversity in the above finding of the Tribunal giving rise to any substantial question of law, particularly when the matter is still open and to be considered by the Assessing Officer afresh in the light of the directions issued by the Tribunal.

SQL No. 12: Whether the notice u/s 153C and all subsequent proceedings are not bad in law and without jurisdiction, when there was no search conducted u/s 132 in the premises of the person from whose possession the seized material was found and particularly when he owned the same ?

Finding

In the light of reasonings detailed in this order while considering the issue No. 4 and issue No. 8, this question is also decided against the asses-see and in favour of the Revenue.

SQL No. 13: Whether the Appellate Tribunal was legally correct in not following the order of the jurisdictional Bench without ascribing any reasons ?

In the matters of Arihant Builders, Developers and Investors Pvt. Ltd. Vs. Income Tax Appellate Tribunal and Others, , in a writ petition filed by the Assessee, the matter was remanded to the Tribunal for decision afresh in accordance with law on the ground that the decision was passed by the Tribunal in the past and the Tribunal ought to have followed the same in later appeal to maintain consistency.

In Berger Paints India Ltd. Vs. Commissioner of Income Tax, Calcutta, the hon''ble Supreme Court considering that the issue involved in the matter was already decided in the case of other Assessees by the Gujarat High Court and the law laid down by the Gujarat High Court was accepted by the Revenue, held that in that case, it is not open to the Revenue to challenge its correctness in case of other Assessees, without just cause.

Similar view has been taken by the Supreme Court in the matter of Commissioner of Income Tax Central, Kanpur Vs. J.K. Charitable Trust Kamal Tower, Kanpur, .

Placing reliance on the principles of law laid down in the aforesaid judgments, it is argued that in the case of M/s. Shakti Traders, Durg, in identical circumstances, the decision of the Commissioner of income tax (Appeals) was upheld by the coordinate Bench of the Tribunal and the Revenue accepted the said decision and did not prefer appeal u/s 260A of the Act and in such circumstances, the Tribunal ought to have referred the present set of appeals to the larger Bench u/s 255(4) of the Act.

Finding

The decision of the Tribunal is based on the material available on record in the present case and therefore, notice issued by the Assessing Officer u/s 153C on the facts of the present case cannot be questioned on the ground that on similar facts, the Department accepted the decision of the Tribunal, whereby the order of the Commissioner of income tax (Appeals) holding that the Assessing Officer had no jurisdiction for issuing notice u/s 153C, was confirmed as the same is dependent on the facts of the each case.

SQL No. 14: Whether the protective assessment is permissible u/s 153C, specifically when action under this section is based on the ultimate satisfaction of the Assessing Officer that the material relates to a person other than the person in whose case search was conducted ?

Finding

Having heard learned Counsel for the parties, we are of the opinion that the Tribunal was right in justifying the protective assessment to safeguard the interest of the Revenue in the event of different view by the appellate authority by relying upon the decision of the hon''ble Supreme Court in the matter of Lalji Haridas Vs. Income Tax Officer and Another, .

SQL No. 15: Whether the order of the learned Tribunal, in the facts and circumstances of the case, is perverse with respect to restoring the matter of estimation of profit to the Assessing Officer, when the order of the Commissioner of income tax (Appeals) itself was based on the rate of profit estimated by the Revenue in identical cases ?

Finding

Since the Tribunal has restored the matter to the Assessing Officer with a direction to re-compute profit on the basis of profit shown in other similar cases the same does not give rise to any substantial question of law. SQL No. 16: Whether the order of the learned Appellate Tribunal, in the facts and circumstances of the case, is perverse with respect to confirming the disallowance of interest expenses, which are also assessed to tax in the hands of the recipient firm and without disputing the genuineness of the firm and all related transactions in the firm''s case ?

Finding

The Tribunal, on the basis of material available on record, has arrived at a conclusion that the firm M/s. Supreme Traders is only an instrument to finance the money of Shri Trilok Singh Dhillon and his concerns etc., and the Assessees were made partner for obvious reasons. The claim of interest of Rs. 2,88,000 has been disallowed with a finding that the entire funds are those of Shri Trilok Singh Dhillon and the Assessees are benamidars of Trilok Singh Dhillon. We have already considered the above finding while considering other issues and confirmed the finding of the Tribunal that the firm is only an instrument to finance the money of Trilok Singh Dhillon and the Assessees were made partners to circumvent the new liquor policy of the State Government. Accordingly, this issue is also decided against the Assessees and in favour of the Revenue.

SQL No. 17: Whether the order of the learned Tribunal, in the facts and circumstances of the case, is perverse with respect to rejecting the income from excise consultancy activity, particularly when the income was offered in returns regularly filed by the Appellant before occurring of the search and accepted by the Assessing Officer under regular provisions ?

Finding

This aspect has already been dealt with by the Tribunal while dealing with the cross-objection of the Assessee with respect to validity of the notice u/s 153C of the Act and subsequent assessment. We are in agreement with the reasonings assigned by the Tribunal on this issue.

SQL No. 18: Whether the order of the Appellate Tribunal was perverse with respect to restoring the issue raised in the appeal memo without considering the fact that no such addition was made by the Assessing Officer in the assessment order ?

SQL No. 19: Whether the order of the learned Appellate Tribunal, in the facts and circumstances of the case, is perverse with respect to restoring the matter of unexplained investment to the Assessing Officer when the same was already decided by the Commissioner of income tax (Appeals) in the Appellant''s favour ?

Learned Counsel for the Appellants do not want to press these issues, hence the same need no consideration.

SQL No. 20: Whether the learned Tribunal was legally correct in confirming the addition made by the Assessing Officer without enquiry and without any basis ?

Finding

The addition has been made on the basis of estimation by the Assessing Officer and the same has been subsequently confirmed by the Tribunal. The Assessee has not been able to establish that the estimate so made is not borne out of and is contrary to the material available on record and as such, perverse. Therefore, in our considered opinion, it is a pure and simple question of fact, which has been decided against the Assessee and in favour of the Revenue by the Tribunal, which is the final court of fact.

SQL No. 21: Whether the order of the Tribunal, in the facts and circumstances of the case, is perverse with respect to recording of satisfaction for initiating proceedings u/s 153C of the Act, particularly when the seized bills were found verifiable from the records maintained by the Appellant ?

Finding

The notices have been issued u/s 153C to the Appellant after the Assessing Officer has recorded satisfaction that the Assessee was running the restaurant as benamidar of Trilok Singh Dhillon and after due enquiry, the addition has been made. However, the Tribunal has restored the matter to the Assessing Officer with a direction that in case, the Assessee is running restaurant as benamidar of Trilok Singh Dhillon, then the same has to be assessed at the hands of Trilok Singh Dhillon. There is a specific direction to the Assessing Officer to decide the same as per facts and law after providing opportunity of hearing to the Assessee. In our considered view, the above issue is to be ultimately decided by the Assessing Officer afresh after affording opportunity to the Assessee and therefore, no interference is called for on this issue by this Court as no substantial question of law arises for adjudication.

On the basis of the aforesaid discussions, we decide the issues proposed by the Appellants/Assessees in favour of the Revenue and against the Appellants/Assessees in this batch of appeals and accordingly, dismiss the appeals with no order as to costs.