1. This appeal of the assessee is directed against the order under Section 158BC r/w Section 254 of the IT Act, 1961 for the block period 1st April, 1986 to 12th Sept., 1996. The grounds taken in appeal are as under: 1. On the facts and circumstances of the case and in law the learned Jt. CIT, Special Range-27 ("the AO") erred in passing order under Section 158BC r/w Section 254 of the Act on 13th March, 2001 which was barred by limitation.
2. The appellant prays that it be held that the order passed by the AO was time-barred and consequently the assessment made be annulled.
1. The AO erred in not complying with specific directions given by the Hon'ble Tribunal in its order dt. 18th Aug., 1998.
2. He failed to appreciate and ought to have held that it was incumbent upon him to follow specific directions given by the Hon'ble Tribunal while setting aside the original assessment.
3. He further failed to appreciate and ought to have held that it was not open to him to frame an assessment disregarding the specific directions of the Hon'ble Tribunal.
4. The appellant prays that an assessment framed by the AO disregarding the specific directions given by the Hon'ble Tribunal be held to be ab initio and or otherwise void and bad in law.
5. The appellant further prays that the order passed by the AO be annulled.
1. The AO erred in making addition of Rs. 1,48,741 on account of alleged undisclosed income for asst. yr. 1996-97.
(a) The return of income for asst. yr. 1996-97 had been validly under Section 139(4) filed and, therefore, the income cannot be said to be from undisclosed sources as defined.
(b) The Hon'ble Tribunal had already considered in its order dt.
18th Aug., 1998, the filing of IT Return after the date of search and had directed the AO to delete the said addition on appellant producing evidence for filing the return of income.
(c) The appellant had already filed evidence before the AO and, therefore, the addition ought to have been deleted.
(d) No fresh ground or objections could be raised by the AO at the stage of reassessment and the directions of the Hon'ble Tribunal ought to be strictly followed.
1. The AO erred in making addition of Rs. 43,15,00,000 on account of alleged receipts from Shaw Wallace & Co. Ltd. (a) On Department's own stand the said amount never reached the assessee as his income.
(b) The said amount had already been taxed in the hands of Shaw Wallace & Co. Ltd. (c) The said amount cannot be again brought to tax in the hands of the appellant.
(d) The AO could not gather any fresh evidence to prove the receipt of money by the appellant and in any case as income and has relied upon the same evidence which has been scrutinised by the Tribunal and decided upon.
(e) No fresh ground of objection could be raised by the AO at the stage of reassessment and the directions of the Hon'ble Tribunal are required to be strictly followed.
(f) It is a settled legal position that the same amount cannot be taxed twice, i.e., once in the hands of the Shaw Wallace & Co. Ltd. and again in the hands of the appellant.
3. The appellant therefore prays that the addition of Rs. 43,15,00,000 be deleted.
The appellant craves leave to add, to amend, and or modify all or any of the above grounds of appeal." 2.1 The assessee is an individual and has been assessed to tax. A consequential search action under Section 132 was carried out in assessee's premises in August/September, 1996. The main search was in the case of Shaw Wallace & Co. Ltd. and its group companies on the allegation that they were siphoning off the funds of Shaw Wallace & Co.
Ltd. by inflating sale promotion expenses. The assessee being brother-in-law of Shri M.R. Chhabria, the main person behind Shaw Wallace group was thus covered under search action and block assessment was completed on 26th Sept., 1997 determining undisclosed income at Rs. 43,31,48,001. Aggrieved by the order, the assessee filed appeal before the Tribunal. The Hon'ble Tribunal disposed of the appeal on 18th Aug., 1998 in which while confirming some of the additions, restored two issues to the file of the AO for fresh decision, viz., income for asst.
yr. 1996-97 for which return was not filed till the date of search and alleged cash receipt from Shaw Wallace & Co. Ltd. amounting to Rs: 43,15,00,000. A fresh order has been passed by the AO and the above two additions have been repeated. Aggrieved by this order, the assessee is in appeal before the Tribunal with above grounds, 3. Before the learned counsel could start his arguments, the learned Departmental Representative submitted that since the appeal in the main case, viz. Shaw Wallace & Co. Ltd. where similar additions have been made, is pending, appeal in the present case should be kept pending till the decision in that case, i.e., Shaw Wallace & Co. Ltd., At this point, the learned counsel filed a copy of interim order of the Hon'ble Bombay High Court in Writ Petition No. 2186 of 2003 wherein the Hon'ble Court has observed as below: Both the parties made grievance that the Tribunal has not taken up the appeal bearing Appeal IT (SS) A No. 93/Mum/2001 for hearing on board in spite of the fact that as per the order-sheet dt. 1st Aug., 2003 the appeal was to be taken up for hearing in the last week of December, 2003. The Tribunal is, therefore, directed to take this appeal of board so as to proceed with the hearing of the appeal in question.
"Both the parties have made statements before us that none of them shall seek any adjournment before the Tribunal if the appeal is taken up for hearing by the Tribunal. In spite of the co-operation from rival parties/if the Tribunal finds difficult to proceed with the hearing of the appeal, the Tribunal should record reasons therefore so as to enable this Court to understand the difficulty, if any, in the way of Tribunal to proceed with the hearing of the matter." In view of the clear direction of the Hon'ble Bombay High Court and in view of the fact that we apparently do not have any difficulty to proceed with the hearing, we express our inability to keep the case pending.
4. The learned counsel appearing on behalf of the assessee, thereafter started his arguments. He did not press the first ground, hence it is treated as dismissed. He then took up first, issue raised in second ground, i.e. issue pertaining to addition of Rs. 1,48,741. The learned counsel submitted that in the first round of appeal, the Tribunal has noted that the assessee had produced the receipt No. 0051 in support of filing the return for asst, yr. 1996-97 on 22nd April, 1997. It was contended that the return being a valid return under Section 139(4) was required to be taken into consideration. The Tribunal noticed that the AO had proceeded in the course of original assessment proceedings on the assumption that no return was filed. In this view of the matter, the Tribunal directed the AO to consider the evidence produced before the Tribunal by way of above mentioned receipt and thereafter to consider the claim for excluding the aforesaid amount of Rs. 1,48,741 from the undisclosed income.
5. The learned counsel then submitted that the AO in the reassessment proceedings admitted the evidence for filing the return of income on 22nd April, 1997 declaring total income of Rs. 1,46,460 on the basis of acknowledgement receipt filed. However, the AO repeated the addition on the ground that the return was not filed in time. The return was due by 30th June, 1996 and the same was filed on 22nd April, 1997. The AO referred to the provisions of Clause (c) of Section 158BB(1) and added the income returned. The learned counsel submitted that the return for asst. yr. 1996-97 was a valid return though issued under Section 139(4). The income consisted mostly of salary and some other sources like, interest income, etc. All the sources of income were known to the Department; hence, there was no question of considering the income to be of undisclosed nature as there was no attempt on the part of the assessee to keep these items of income outside the view of the Department.
6. It was further submitted that so far as the salary income is concerned, the same duly suffered tax by way of deduction of tax at source and such deduction of tax was already within the knowledge of the tax Department from the TDS return filed by the employer-company, M/s Prime Distributors Ltd. The other source of income, i.e., interest income mainly bore the nature of regular income, which could not have been hidden or concealed from the Department. The due date for filing the return under Section 139(1) was only 30th June, 1996 whereas the same for filing return under Section 139(4) was much later and the return was actually filed within the latter due date. The learned counsel further submitted that the statute is not specific as to which due date, i.e., whether the due date for filing return under Section 139(1) or the due date for filing return under Section 139(4) is referred to in Clause (c) of Section 158BB(1) and that in the absence of such a clear mention in the statute, the interpretation, which is more favourable to the assessee is required to be adopted. For this proposition the learned counsel relied on the decision of the Supreme Court in the case of CIT v. Vegetable Products Ltd. (1973) 88 ITR 192 (SC). The learned counsel further submitted that the AO had considered the figure of Rs. 1,48,741 in the regular assessment for asst. yr.
1996-97. It is submitted that there are number of cases where it has been decided that a regular assessment is different from the block assessment and that if an item of income has been considered in the regular assessment, the same cannot be considered in block assessment or vice versa. He referred to the decision of CIT v. Dr. M.K.E. Memon (2001) 248 ITR 310 (Bom). In this regard he also referred to the Explanation to Section 158BA(2) inserted by the Finance (No. 2) Act, 1988 with retrospective effect from 1st July, 1995 and submitted that this amendment clarifies the position as mentioned above, Therefore, the learned counsel submitted that Rs. 1,48,741 cannot be treated as undisclosed income in the block assessment. He also referred to the decision of Tribunal, Madras Bench, (Third Member) in the case of J.K.Narayanan (HUF) v. Asstt. CIT (1994) 64 TTJ (Mad)(TM) 823 : (1999) 69 ITD 104 (Mad)(TM) where even with regard to the invalid returns filed for some of the years comprised in a block period, the Tribunal held that returns might be invalid being out of time, but the information contained therein was certainly a valid information given by the assessee to the AO long time before the search. The Hon'ble Tribunal also noted that the assessment of undisclosed income was based on the declaration of income made by the assessee in the invalid returns filed by it, which had been accepted in toto by the AO in the block assessment. In that circumstance, it was held that it would not be possible to consider the income in the computation of undisclosed income. The Tribunal also held that in that case, for the purpose of assessment to be made under Chapter X3V-B, it is necessary undisclosed income should only be considered and furthermore that Section 158BB only prescribes the method of computing the undisclosed income for block period.
7. On the other hand, the learned Departmental Representative supported the order of the authorities below and submitted that the case of the assessee is hit by the provisions of Clause (c) of Section 158BB(1) which prescribes the manner of computation of undisclosed income.
Therefore, the learned Departmental Representative submitted that the AO was justified in treating the amount of Rs. 1,48,741 as undisclosed income of the assessee.
8. We have considered the submissions made from both sides. Here, we have to see whether the charging provisions contained in Section 158B(b) comes into play or not. It is settled law that computational provision will not supersede the charging provisions. If some income cannot become undisclosed income under Section 158B(b), it cannot be brought to tax by way of computational provisions contained in Section 158B(b). Reliance is placed on the decision of Tribunal, Chandigarh, in the case of Smt Shanti Ram v. Asstt. CIT 128 Taxman (Mag) (sic). In our considered opinion, the amount of Rs. 1,48,741 cannot be treated as undisclosed income as defined under Section 158B(b). It is not undisclosed income as it is not hidden and not likely to remain undisclosed by its very nature. Tax has already been deducted from salary income. Interpretation made by the Department will certainly lead to absurdity which cannot be the intention of legislature to bring such income in the scope of computation of undisclosed income. The intention of the legislature is not to include such type of income in computation of undisclosed income. We can clarify the position by an example. If an assessee has paid the tax by way of advance-tax, and TDS and return is ready to be filed and if per chance search is conducted on the very due date of filing return and assessee is not able to file the return due to commencement of search, can the income as per that return be taken as undisclosed income? Certainly not. Therefore, Rs. 1,48,741 cannot be treated as undisclosed income, hence, deleted.
9. Coming to the addition of Rs. 43,15,00,000 on account of alleged receipts from Shaw Wallace & Co. Ltd. we find that the AO has repeated the addition in the reassessment order. The relevant portion of the assessment order is reproduced below: "4.2 Before Hon'ble Tribunal, assessee's counsel objected that the addition is not based upon any material found during a search on the premises of the assessee and there was no legal basis for making addition in the hands of assessee. Assessee's arguments on this account was rejected by Hon'ble Tribunal considering that the addition of Rs. 43.15 crores is based on information received by the AO during a search action on the concerns with which assessee is associated. Another argument of the assessee's counsel was that the additions of Rs. 43.15 crores have been made in the hands of the assessee though the AO himself has mentioned that the assessee was conduit for passing on the funds to Shri M.R. Chhabria. It was also claimed that same amount has been brought to tax in the hands of M/s Shaw Wallace also, and therefore, there is no justification for bringing to tax the same income in the hands of two different persons on substantive basis. The Department has not made up is mind as to the person in whose name the amount of Rs. 43.15 crores is to be assessed. It was also pleaded that assessee has not received the funds in question. Though he admitted initially but later on he retracted the statement. Another plea taken was that proper opportunities was not provided while making the assessment. The assessment was set aside with a view to provide assessee proper opportunity of presenting his case and also to make up its mind as to in whose hands the amount has to be substantially assessed, 4.3 Assessee was given fresh opportunities to explain its case and to submit any other submission. Copy of all the statements recorded either by IT Department or by Enforcement Directorate have been made available to the assessee. Such statements given to the assessee, apart from the copies already given at the time of block assessment, are as follows: (i) Statement of Shri R.P. Rathi, Director Finance, Shiva Marketing dt. 24th Sept., 1997.
(iii) Statement of assessee recorded by Enforcement Directorate on 5th Dec., 1996.
(iv) Statement of Shri Rajeshj Lihala, M.D. Shiva Marketing, recorded by IT Department.
(v) Statement of Shri Govindram Babani recorded by Enforcement Directorate on 5th Dec., 1996.
(vi) Statement of Shri A. Sadashivam recorded by Enforcement Directorate on 23rd Dec., 1996.
As regards statement of Shri R.R. Modi, assessee was asked to obtain the same from Shaw Wallace, Calcutta where statement was recorded.
With the above, copies of all statements relied on by the Department was given to the assessee. Assessee was given following opportunities to make out his case: Despite giving several opportunities and providing copies of all relevant statements, assessee did not submit any fresh fact. By letter dt. 4th Jan., 2001 assessee, instead of using the opportunities provided to it, only questioned the Department's stand. By order sheet noting dt. 4th Jan., 2001, assessee was clearly asked as to what further opportunities it granted in view of the directions given by Tribunal setting aside the issue. The extract of the order sheet is quoted below : '(i) All the statements, copies were given to the assessee on 17th Nov., 2000 only and assessee was asked to submit further details or opportunities but even after lapse of one and half months, assessee is just asking for copy of statements etc. This aspect is clarified to Shri Jain today. If any other document or statement is needed/required, the same should be expressly conveyed within 7 days from today.
(ii) The Department's stand in this case is clear from the 1st hearing that addition in the case of assessee is being made on account of use of receipt of unaccounted money based on statement given by various persons. Thus, there should not be any confusion over the stand of Department and the treatment given in Shaw Wallace assessment is also not relevant in deciding the issue here.
(iii) Submit copy of charge-sheet filed by FERA and produce any evidence to prove that money added in assessment was not received by the assessee. Please note no further opportunities will be given and it will be presumed that assessee has nothing more to add than what is available on record.' 4.4 It can be seen from the above that enough opportunities were provided to the assessee to prove his claim that he did not receive the money from various persons associated with Shaw Wallace Group in cash. Since various persons in their statement have mentioned that they have given cash totalling to Rs. 43.15 crores to the assessee, it was assessee's obligation to prove that he did not receive any money from any of those persons. In fact assessee admitted to have received cash initially, though he retracted his statement subsequently. Assessee has also not accepted or evidenced that he was only acting as conduit for shifting money to Dubai. In the absence of any submission or evidence to suggest that money received by the assessee has been passed on to Shri Manu Chhabria, it has to be presumed that assessee kept the cash received from various persons relating to Shaw Wallace Group and was in beneficial enjoyment of the funds received by him.
The addition in the case of Shaw Wallace was made on account of expenses incurred for business purpose/claim of bogus expenses. The money has gone out of the bank accounts/books of Shaw Wallace and therefore, even when the expenses were considered not allowable, the taxability of recipient of money will not be affected. Each transaction has two sides. For any expense of a person, the same will be income/revenue for the other side. It is possible that due to certain provisions under IT Act, expense may not be allowed fully or partially, the status of income in the hands of recipient will not change. Therefore, assessee's argument that if the expenses have been disallowed in the case of Shaw Wallace, the same should not be added again in the hands of assessee, is not logical and correct, The disallowance of expenses in Shaw Wallace and taxability of income received in cash in the hands of assessee are two different sides pf the transactions and therefore, the disallowance in one side does not amount to double taxation. Considering the fact that bogus sales promotion expenses are not reaching Shaw Wallace in the form of cash, instead the cash is coming to the assessee as stated by various connected persons. The receiving side of sales promotion expenses are various distributors, who have admitted to have passed on the cash to the assessee. The receipt of cash from various persons is undisclosed income of the assessee for the block period.
The directions of Hon'ble Tribunal as mentioned earlier, have been met in view of the following: (i) Assessee is not treated as conduit since the money received by him is not evidenced to have passed on further. Even assessee did not admit that the cash received by him was transferred to his brother-in-law in Dubai through Hawala route. Therefore, based on the evidence of receipt of cash, it has to be held that assessee was in beneficial enjoyment of the funds received by him.
(ii) The copies of all statements have been given to the assessee along with whatever documents assessee asked for. Several opportunities were given to the assessee for presenting his case.
(iii) In view of the discussion made earlier, additions on account of disallowance of expense in Shaw Wallace is different than addition on account of undisclosed money received by the assessee and both are independent of each other, Thus, Department need not make addition on substantive basis only in one hand.
(iv) All possible opportunities including opportunity to cross-examine the persons whose statement is relied upon by the Department, were given. However, assessee did not want to cross-examine any person.
4.5 Based on the above and considering all relevant facts, I consider Rs. 43.15 crores as undisclosed income of the assessee for the block period considering the same as unaccounted money received by him." 10. The learned counsel appearing on behalf of the assessee first referred to the details of receipt totalling Rs. 43,15,00,000, which are as under: Receipts from Amount (Rs. in crores)Balaji Marketing Co.
1.96Shiva Marketing Ltd. 3.23Geekay Sales (P) Ltd. 2.50Priyajee Distributors 2.50Other receipts (as per Enforcement Directorate) 3.73R.R. Modi 20.00Receipts as per documents seized (excluding receipts 9.23from Geekay Sales & Priyajee Distributors)Total 43.15 __________ The learned counsel submitted that the searches were conducted by the Department and also the Enforcement Directorate on Shaw Wallace group on the allegation that they were siphoning off the funds of Shaw Wallace & Co. Ltd. by inflation of sales promotion expenses. While completing assessment, the AO referred to the deposition on behalf of some of the concerns before the Enforcement Directorate/the IT Department in respect of following items only :Proprietor of Balaji Marketing Co.
Reg. Rs. 1.96 croresRajesh Lihala of Shiva Marketing Co.
Reg. Rs. 3.23 croresEarlier Distributor prior to 1990, Viz., G.K. Sales Reg. Rs. 2.50 croresAgencyShri R.P. Modi stating that during the period 1994- Rs. 20 crores95, he had made payment of Rs. 20 crores The learned counsel also submitted that the AO has also made reference to certain other statements made by other persons before the Department and Enforcement Directorate. However, the other statements were most general in terms and the ASO made a specific use of abovementioned statements. It is also submitted that discussions made by AO are general and vague without quoting specific reply from the statements of any person. It is submitted that the Tribunal had specifically directed the AO to supply the copies of deposition made by various persons in the course of reassessment proceedings. It has been stated by the AO at para 4,3 of the impugned assessment order that he had supplied the copies of statement of 6 different persons out of which the statement of Shri R.P. Rathi, P.R. Pandya and S. Sadasivan are in general terms and the AO has specifically not utilised their statements in making the additions. On the other hand, the AO has utilised the statement of Shri Rajesh Lihala and Govindram Bhawani whose statements are relevant to the reason of addition of Rs. 3.23 crores and Rs. 1.96 crores, respectively. It is submitted that apart from these two items, the so-called statements in respect of other items of addition have not been supplied to the appellant. In respect of Mr. R.R. Modi, the AO has merely stated that the assessee was asked to obtain the same from Shaw Wallace & Co., Calcutta, where the statement was recorded. The learned counsel submitted that this is clearly in violation of direction of the Tribunal to the AO to supply the copies of statements of all the persons, which he would propose to utilise in making the decision.
Thus, the AO has partially complied with the directions of the Tribunal by supplying copies of statements of Shri Govindram Bhawani of Balaji Marketing Co. in respect of Rs. 1.96 crores and Shri Rajesh Lihala of Shivram Marketing Co. regarding another sum of Rs. 3.23 crores. Thus, the addition of other amounts have not been made clearly in contravention of directions of Tribunal must fail. It is also pointed out that Shri Rajesh Lihala while deposing before the AO never mentioned the name of the assessee although he has stated at various places of the statement that the sum of Rs. 3.23 crores was returned to M/s Shaw Wallace & Co. Ltd. Accordingly, the learned counsel submitted that his statement cannot be utilised in making addition in the hands of the assessee. Coming further, the learned counsel submitted that the Tribunal has clearly directed the AO to allow the appellant proper opportunity to cross-examination of the persons, whose statements were to be utilised. This part of the order of the Tribunal has not been complied with at all. The learned counsel submitted that various judicial authorities have held that if any authority is relying on the testimony of witness, the assessee is required to be afforded an opportunity to cross-examine him failing which the testimony cannot be utilised against the assessee. The learned counsel referred to the following two decisions : (i) err v. Eastern Commercial Enterprises (1994) 210 ITR. 103 (Cal) at p. 111 (ii) P.S. Abdul Majeed v. Agrl ITO and Ors. (1994) 209 ITR 821 (Ker) at pp. 823-824.
The learned counsel further referred to following decisions, where it has been held that any material collected by the AO behind the back of the assessee cannot be utilised against him unless the assessee has been allowed a chance to examine the same and also given a chance to rebut the same: Further, the learned counsel placed reliance on the decision of the Hon'ble Bombay High Court in the case of Lata Mangeshkar reported in (1974) 97 ITR 696 (Bom), wherein it was held that the addition cannot be made in the case of the assessee merely on the basis of a statement of outsider in some other proceedings. The learned counsel submitted that the AO also referred to the statement of the assessee himself recorded by the Enforcement Directorate on 5th Dec., 1996. The said statement was retracted. The relevant portion of retraction letter was referred to, which is as under: "I was forced to write that I have received money from Super Distributors and distributed to various persons who are fictitious and non-existent. I was also forced to give false descriptions of such non-existent persons.
I say that the so-called writings purported to be of my statement are not true and voluntary one and in fact I do not recollect the complete text of the same.
"I, therefore, hereby retract and disown the inculpatory portion of the said writings purported to be of my statement as the same was obtained from me during the illegal custody under force, duress and false promises and threats of assaults." On the basis of above retraction, the learned counsel submitted that the so-called confession made by the assessee looses all evidentiary value. Reference was also made to the decision of the Hon'ble Supreme Court in the case of Pullangode Rubber & Products Co. Ltd. v. State of Kerala and Anr. (1973) 91 ITR 18 (SC) wherein it was held that although an admission is extremely important piece of evidence, the same cannot be said to be conclusive. It is open to the person, who made the admission to show that it is incorrect. In view of the above, the learned counsel submitted that no reliance can be placed on the depositions given by the assessee before the enforcement authorities.
Thus, on the basis of above, the learned counsel submitted that there are no proper evidence regarding the receipt of money and the consideration by the assessee from different sale promoters of Shaw Wallace & Co. Ltd. Hence, addition is not proper.
11. The learned counsel also argued the case from a different angle, i.e., from the angle of the provisions of the IT -Act enabling the AO to treat any amount as income of the assessee. The learned counsel referred to the provisions of Section 2(24) which defines "income". It is submitted that Section 2(24) enumerates different types of income.
Section 2(45) was also referred to by the learned counsel, which says that "total income" means the total amount of income referred to in Section 5 and computed in the manner laid down in the Act. He also referred to Section 4 of IT Act, which lays down the charging provisions and Section 5 provides that all the income accruing or arising to an assessee or received by him shall form the "total income" for the purpose of income-tax assessment, It is submitted by the learned counsel that in the present case, there is no undisclosed income falling within the scope of and ambit of these directions which can be subjected to tax.
12. The learned counsel also referred to deeming provisions contained in Sections 68, 69, 69A, 69B, 69C and 69D of the IT Act, 1961. It is submitted that the conditions mentioned in these deeming provisions do not stand satisfied.
13. The learned counsel also argued the case from yet another angle that even if it is assumed without admitting that the assessee had actually received money, the same has got to be considered to have been on behalf of Shaw Wallace & Co. Ltd. and the main person, Shri M.R.Chhabria. The learned counsel pointed out that in reassessment order at para 4.1, the AO has referred to the admission of Shri A Sadasivan. VP (Finance) of Shaw Wallace group. Secondly, the AO also mentioned that Govindram Bhawani, proprietor of Balaji Marketing Ltd. has also made a statement about receiving Rs. 2.13 crores from Shaw Wallace & Co. and returning cash of Rs. 1.96 crores out of the same to Shri Niranjan Thakur, the assessee, under the advice and instructions of Shri Sadasivan. The learned counsel has vehemently argued that if that be the case, certainly, Shri Sadasivan would not allow the assessee to retain such huge sum of money and would immediately demand that the same should be passed on to Shaw Wallace companies group/Shri M.R.Chhabria. The learned counsel also referred to the discussions made by learned AO regarding the statement of Dy. Director, Enforcement to the effect that the documents were available with the Enforcement Directorate revealing that cash amount to Rs. 13.92 crores had been generated from Shaw Wallace Co. and received by the assessee and sent the money abroad through hawala route. Thus, both the income-tax as well as Enforcement Directorate admitted that the money generated from Shaw Wallace Co. was actually routed back to the authorities of said company like Shri M.R. Chhabria and that the assesses was merely a conduit for such process. It is reiterated by the learned counsel that the entire search operations were initiated by the Department on the basis of allegation/information that M/s Shaw Wallace & Co. Ltd. has fixed some sales promoters, like Shiva Marketing Co. and Balaji Marketing Co., etc. to whom Shaw Wallace was paying Rs. 50 per case for alleged sales promotion activity; however, they were required to return the money in cash after deducting commission @ 8 per cent to Shaw Wallace & Co. or to its main person, Shri M.R. Chhabria. The Enforcement Directorate was even moving on the assumption that this amount was being sent back, to Dubai (on Shri M.R. Chhabria's account) through hawala method. The learned counsel submitted that so far as the assessee is concerned, he was never having any substantial shareholding in any of the companies belonging to the Shaw Wallace group. The learned counsel submitted that the Department had accepted that he was not even a salaried person of the group. Of course, being a close relative of Shri M.R. Chhabria, he might have enjoyed the confidence of Shri M.R. Chhabria and, therefore, in all likelihood, he might have acted merely as a conduit.
14. Lastly, it was contended by the learned counsel that the same amount has already been held as undisclosed income of M/s Shaw Wallace & Co. Ltd. The learned counsel referred to the arguments of the AO in this connection to the effect that the addition was made in the case of Shaw Wallace & Co. on the ground of bogus expenditure having been claimed in its account and submitted that the main ground for holding the expenditure to be bogus is that of money covered by the expenditure was routed back to the company, through plain clandestine means and back-hand process. It is contended that if the entire money was enjoyed by the assessee himself, then so far as the Shaw Wallace & Co. Ltd. is concerned, it cannot be a case of routing the money back to it, as the assessee is neither a director nor a holder of substantial interest in the group cases at the point of time when the alleged money was handed over to the assessee. It is submitted that from this angle, once the Department sticks to its stand that bogus expenditure was claimed by Shaw Wallace, the necessary corrollary would be that the money actually came back to the company or to the person having substantial interest like Shri M.R. Chhabria and that the assessee was merely a conduit in the process. Even the circumstantial evidences so far clearly shows that the assessee could not have enjoyed the beneficial ownership of money. The Department has also failed to bring any material on record that the assessee was in beneficial enjoyment of such huge money alleged to have been received by the assessee.
15. The learned Departmental Representative after hearing the learned counsel submitted that if it is correct that the AO has not carried out the directions given by Tribunal, the case may be restored to the AO for complying with the various directions of Tribunal. The learned Departmental Representative placed reliance on the decision of the Hon'ble Bombay High Court in the case of CIT v. Bharat Kumar Modi and Ors. (2000) 246 ITR 693 (Bom). To this also we are unable to agree with the learned Departmental Representative as somewhere final decision has to be arrived at because there has to be finality of litigation. How long democle's sword could be kept hanging on the head of small taxpayer? Already a long period of 8 years has been elapsed. Claiming remand is also not a vested right of a litigant. As is fundamentally well known in the administration of justice system, remand of a case cannot be ordered so as to enable the desiring and praying party to fill up the lacunae, blanks or vacuum in the evidence of the case to the prejudice of other contesting party. Thus, the discretion, which the appellate authority like this Tribunal has been given for exercising power to set aside assessment or remand is a judicial discretion and the same must be governed by rule and not by humour or any other extraneous consideration. Considering the submission of the learned Departmental Representative, in the light of above observation we do not find it a fit case to set aside once again. Therefore, this request of the learned Departmental Representative is not acceded to.
16. Coming to the decision of the Hon'ble Bombay High Court relied on by the learned Departmental Representative in the case of Bharat Kumar Modi (supra), we have carefully considered the decision. The facts of the case of the assessee are totally different from the facts of the case of Bharat Kumar Modi. In that case the bare facts were that on appeal by the assessee, the learned CIT(A) had set aside the order and aggrieved by that order, the assessee filed appeal before Tribunal. The Hon'ble Tribunal has annulled the assessment order. On these facts, the Hon'ble High Court reversed the order of the Tribunal. As against this, the present case was already set aside by the Tribunal with clear, certain and definite directions which have not been complied with and, therefore, request for setting side of the case for a second time is considered not acceptable.
17. Coming to the merit, the learned Departmental Representative extensively referred to various observations made by the AO and submitted that the witnesses have clearly mentioned the name of assessee to whom cash was paid. The learned Departmental Representative also referred to the statement made by the assessee before the Enforcement Directorate though it was subsequently retracted and submitted that in view of the clear statement given by various parties concerned, the conclusion arrived at by the AO is correct and that has to be assessed as undisclosed income of the assessee.
18. Regarding the submission of the learned counsel that the same amount has already been taxed in the hands of Shaw Wallace & Co. on substantive basis, it is submitted that in the case of Shaw Wallace & Co., the amount has been added on account of bogus expenditure. But in the hands of the assessee, this has been assessed on the basis of receipt as income of the assessee. Therefore, there is nothing wrong in assessing the amount in the hands of the assessee. The learned Departmental Representative also referred to the assessment order in the case of Shaw Wallace & Co. Ltd. which was passed on 28th Nov., 1997 determining the undisclosed income of Rs. 298,49,08,300 which has been set aside by Tribunal for passing a fresh order after giving proper opportunity to the assessee, a copy of the order was also supplied to us by the learned Departmental Representative. On the basis of all these materials as available in the assessment order of the company and the assessee and the various statements recorded by the Department and Enforcement Directorate, the learned Departmental Representative submitted that the order of the AO in the case of the assessee is perfectly in order and should be upheld.19. We have considered the submissions made from both sides. We have perused various papers placed in the paper book by the assessee. We have also perused carefully the block assessment order in the case of Shaw Wallace & Co. Ltd. and the original block assessment order dt.
26th Sept., 1997. We have also perused carefully the order of Tribunal setting aside the order for passing a fresh order. It will be pertinent to reproduce the relevant portion of the order of the AO which has been extracted from the original order of the AO in the case of the assessee and the relevant portion of the order of the Tribunal: Relevant portion of the order of AO extracted from the original order of the AO "4.1 The AO discussed the issues in detail while framing the block assessment order dt. 26th Sept., 1997. A gist of discussion made by AO while making addition is mentioned below: (i) Searches were conducted by IT Department and Enforcement Directorate on Shaw Wallace Group on the allegation that they were siphoning out funds by inflation of sales promotion expenses.
(ii) Shaw Wallace was paying Rs. 50 per case to sales promoters namely Shiva Marketing Ltd. and Balaji Marketing Company. The evidences were found that the payment was made for sales promotion activities carried out by these entities but no such activities were actually carried out by them. These were admitted by Shri A. Sadashivam, Vice President, Finance, of Shaw Wallace Group.
(iii) Shri Govindram Babani, Prop. of Balaji Marketing Co. stated on oath before Enforcement Directorate that he had received about Rs: 2.13 crores from Shaw Wallace & Co. and out of which a sum of Rs. 1.96 crores have been returned in cash to Shri Niranjan Thakur under the advice and instruction of Shri A. Sadashivam.
(iv) Shri Rajesh Lihala of Shiva Marketing Ltd. also accepted having paid the cash to the extent of Rs. 3.23 crores to Shri Niranjan Thakur. Shri Niranjan Thakur admitted before Enforcement Directorate on 5th Dec., 1996 that he had been receiving sales promotion consideration paid by Shaw Wallace from Shiva Marketing and Balaji Marketing.
(v) Even earlier distributors M/s Gee Kay Sales Agencies and Priyajee Distributors (P) Ltd. paid Rs. 3.5 crores and Rs. 2.5 crores prior to 1990.
(vi) In the statement Shri. R.P. Rathi, Director Finance of Shiva Marketing, stated that he had personally paid about Rs. 60 lakhs to Shri Niranjan Thakur after withdrawing the amount from the bank accounts of the company and Shri Lihala stated that the balance amount has been handed over by him to Shri Thakur.
(vii) The Dy. Director Enforcement, stated that documents available with Enforcement Directorate revealed that cash amounting to Rs. 13.92 crores was generated from Shaw Wallace Co. and received by Shri Niranjan Thakur who sent the money abroad through hawala route.
This figure is inclusive of the four distributors payments mentioned above.
(viii) Shri R.R. Modi stated that during the period 1994-95 he had made payments of about Rs. 20 crores in cash to Shri Niranjan Thakur. The relevant documents were not forwarded by Enforcement Directorate since the investigation was in progress.
(ix) In the search conducted by IT Department in the case of Kishor Chhabria, brother of Shri Manu Chhabria, a document was found which listed various cash receipts from various persons during the period 5th Jan., 1990 to 28th July, 1991 and the receipts were signed below by Shri Niranjan Thakur. The total receipts as per that was Rs. 12,50,52,640. In this regard A.C., Central Cir. IX, Mumbai, assessing the case of Kishor Chhabria, examined Shri P.R. Pandya, company secretary, who confirmed paying cash to Shri Niranjan Thakur.
(x) Various opportunities were given during the block assessment to counter the facts/allegations mentioned above. Assessee either did not attend or did not submit any evidence to counter the above except mentioning that he has not received any cash from any person and that he had retracted his statement given before Enforcement Authority.
Considering the above, the undisclosed income for the block period on account of receipt of cash from Shaw Wallace Group was considered as under: Receipts from Amount (Rs. in crores)Balaji Marketing Co.
1.96Shiva Marketing Ltd. 3.23Geekay Sales (P) Ltd. 2.50Priyajee Distributors 2.50Other receipts (as per Enforcement Directorate) 3.73R.R. Modi 20.00Receipts as per documents seized (excluding receipts 9.23from Geekay Sales & Priyajee Distributors) _________ 43.15" "21. We are of the view that we have to set aside the assessment on the issue of the addition of Rs. 43.15 crores and restore the matter to the file of the AO for further enquiry. The Department has firstly to make up its mind as to in whose hands, the amount of Rs. 43.15 crores can be brought to tax. If the assessee is only a conduit for passing the money of Shri M.R. Chhabria, it cannot be assessed as his income even if it is initially received by him. If on the other hand, the case of the Department is that the assessee was in beneficial enjoyment of the funds received by him, it has to make a case to that effect. As already mentioned, the assessee had denied even the initial receipt of money let alone its beneficial enjoyment. The AO may furnish copies of the statement on which he has relied to the assessee along with the other seized documents, give proper opportunity of presenting his case and the AO should also make up his mind as to in whose hands the amount has to be substantially assessed. If the assessee wants to cross-examine any deponent in this regard, a suitable opportunity has to be given. We accordingly set aside the assessment on the issue of addition of Rs. 43.15 crores and the AO may reframe the assessment after giving an opportunity to the assessee of presenting his case. The appeal is partly allowed." After considering the stand taken by the AO in the original order which has been extracted in the reassessment order, and reproduced above, the Tribunal has given the same directions while setting aside the order.
The Hon'ble Tribunal has held that firstly, the Department has to make up its mind as to in which hand, the amount of Rs. 43.15 crores can be brought to tax. From this observation of the Hon'ble Tribunal it can be safely deduced that this amount of Rs. 43.15 crores has to be assessed at one point either in the hands of the company or in the hands of the assessee. Secondly, the Tribunal has clearly recorded its finding that in case the assessee is only a conduit for passing on money to Shri M.R. Chhabria, it cannot be assessed as his income even if it is initially received by him. Thirdly, the Tribunal has observed that if the case of the Department is that the assessee in beneficial enjoyment of the funds received by him, it has to make a case to that effect.
Fourthly, the Tribunal has directed to the AO to furnish the copies of the statements on which he has relied to the assessee along with other seized documents, and to give proper opportunity of presenting his case. Fifthly, the Tribunal has observed that the AO should also make up his mind as to in whose hand, this amount has substantially to be assessed. Finally, if the assessee wants to cross-examine any deponent in this regard, a suitable opportunity has to be given. In the light of above, we have to examine the present-order of the AO.20. Now coming to the first direction of the Tribunal, we find that the AO has failed to come to a conclusion whether this amount is to be assessed in the hands of the assessee or in the hands of the company M/s Shaw Wallace & Co. Ltd. The AO, in his order has simply stated that "the Department's stand in this case is clear from the first hearing that the addition in the case of the assessee is being made on account of sale of unaccounted money based on statement of various persons: Thus, there should not be any confusion over the stand of the Department and the treatment given in Shaw Wallace's assessment is also not relevant in deciding the issue here". This plea of the AO has already been considered by the Tribunal and only after considering this type of submission, the Tribunal has come to a conclusion that it has to be assessed either in the hands of the assessee or in the hands of the company and, therefore, the direction was given by Tribunal that Department has to make up its mind in which hand, this amount has to be brought to tax. Thus, the very first direction of the Tribunal has not been complied with.
21. Coming to second direction of the Tribunal, simple answer is that AO has not treated the assessee as a conduit for passing on money to Shri MR. Chhabria. No reason has been assigned to come to this conclusion, whereas we find from the facts of the case that the, AO has clearly referred to the admission of Shri Sadashivam. VP (Finance) of Shaw Wallace group, who has clearly stated that the money was handed over to the assessee on the direction of the company. Secondly, one Shri Govindram Bhawahi, proprietor of Balaji Marketing Ltd. has also made a statement about Rs. 2.13 crores from Shaw Wallace & Co. Ltd. and returning cash of Rs. 1.96 crores out of the same to Shri Niranjan Thakur, the assessee, under the advice and instruction of Shri Sadashivam. The learned counsel has correctly argued that if that be so, certainly, Shri Sadashivam would not allow the assessee to retain such huge money and would demand that the same should be immediately passed on to Shaw Wallace group/Shri M.R. Chhabria. Further, the statement of Dy. Director of Enforcement to the effect that the documents were available with the Enforcement Directorate revealing that cash amount of Rs. 13.19 crores had been generated from Shaw Wallace & Co. and received by the assessee and sent the money abroad through hawala route. Thus, both the income-tax as well as Enforcement Directorate have admitted that the money generated from Shaw Wallace & Co. Ltd, was actually routed back to the authorities of the said company, like Mr. M.R. Chhabria and the assessee was merely a conduit in such process. In spite of these facts, the learned AO has observed that the assessee is not treated as conduit since money received by him is not evidenced to have passed on further and the assessee has also not admitted that cash received by him was transferred to his brother-in-law in Dubai through hawala route. These observations carry no weight in view of the facts mentioned above and the statements given by witness that monies were returned on the instructions of the company or its employees.
22. Apart from above, there are various evidences brought on record in the assessee-company, M/s Shaw Wallace & Co. to show that the assessee has merely acted as a conduit and this is also supported by the fact that no evidence was found as a result of search to show that this money was received by the assessee for his beneficial enjoyment when the assessee was not holding any position in the company merely being a close relative of the main person of the company, Mr. M.R. Chhabria 23. The third direction given by the Tribunal say that if the Department is of the view that assessee is in beneficial enjoyment of the funds received by him, then the Department has to make out a case.
Here again, we find that the AO has failed miserably to prove that the assessee was in beneficial enjoyment of such a huge fund of Rs. 43.15 crores. The search result does not support the case that the assessee was in beneficial enjoyment of the funds. In our considered view, the weight of entire evidences available on the record is much heavier against the company, M/s Shaw Wallace & Co. Ltd. than the assessee.
24. Coming to the fourth direction of the Tribunal that the AO has to furnish copy of the statement, we find that this direction has also not been fully complied with. The AO has, of course, supplied some of the statements of some of the parties and the major addition of Rs. 20 crores was made on the basis of a statement of Shri R.R. Modi and his statement was not supplied by the AO to the assessee. In this regard, the AO has simply stated in his order "as regards statement of Shri R.R. Modi, the assessee, was asked to obtain the same through Shaw Wallace, Calcutta where the statement is recorded", (emphasis, italicized in print, supplied). It looks very strange that the AO should depend on the assessee to procure the evidence which has been or which has to be utilised against the assessee. It is a clear-cut flouting of the direction given by the Tribunal.
25. Finally, as regards the cross-examination, the Tribunal has directed that assessee should be allowed to cross-examine any deponent and suitable opportunity should be given. Of course, the AO has allowed opportunity but the assessee has failed to avail the same. In any case, no legal principles or propositions has been laid down for universal application for all the times to come that if the declarant has not been cross-examined, then the averment made in the statement become acceptable as true and correct. The assessee might have got more than one reason for not availing the opportunity of cross-examination. Thus, we find that the clear directions, given by the Tribunal have not been complied with by the AO before completing reassessment on the basis of direction.
26. When an order passed by AO refuses or fails to carry out the direction given by appellate authority which is a superior Tribunal, such refusal or failure will result into denial of justice and it would be destructive of one of the principles in administration of justice based on "a hierarchy of Courts. If a subordinate authority refuses to carry out direction given to it by a superior Tribunal, the result will be chaos in the administration of justice. In this regard, a reference may be made to the decision of the Hon'ble Supreme-Court in the case of Bhopal Sugar Industries Ltd. v. ITO (1960) 40 ITR 618 (SC), The only prerequisite necessary to invoke the above principle is that there could be an order of superior Tribunal, clear, certain, definite, in terms and without any ambiguity to which the subordinate authority or officer to whom it is addressed. In this regard, reference may be made to the decision of the apex Court in the case of Tobacco Manufacturing India Ltd. v. CST (1961) 12 STC 87 SC AIR 1961 SC 402. From our above discussion, it is clear that the Tribunal has given the direction to the AO in no uncertain terms that the Department has to make up its mind first in whose hands this income is to be assessed that; if the assesses was a conduit, the income cannot be assessed in the hands of the assessee, that if the assessee is found in beneficial enjoyment of the same, a case has to be made out; and that all the statements utilised while making the additions should be provided to the assessee and sufficient opportunity should be allowed to the assessee to cross-examination if he so desires. Thus, these clear, certain and definite directions of the Tribunal have not been complied with by the AO while doing reassessment consequent to setting aside the original order. Therefore, we are unable to uphold the decision by the AO.27. There is also lot of force in the argument of the learned counsel that it would be difficult in the present case to invoke the charging provisions of Section 5 and provisions of Section 4 of the IT Act and also the deeming provisions contained in Sections 68, 69A, 69B, 69C.28. After analysing the entire facts on record including the order in the case of the company, M/s Shaw Wallace & Co. Ltd., we find that both the income-tax, and the Enforcement Directorate admit that the money generated was actually routed back to the authorities of the said company through Shri M.R. Chhabria, and that the appellant was merely a conduit in such process. The entire search operations were initiated by the Department on the basis of suspicion or information that M/s Shaw Wallace & Co. had fixed some sale promoters like Shiva Marketing Co.
and Balaji Trading Co., etc. to whom Shaw Wallace & Co. Ltd. was paying Rs. 50 per case for alleged sale promotion activities though they were required to return the money in cash after deducting commission @ 8 per cent to Shaw Wallace & Co. Ltd. or its main person, Shri M.R. Chhabria.
The Enforcement Directorate was even moving on the assumption that this amount was being sent back to Dubai on Shri M.R. Chhabria's account through hawala method and the appellant was admittedly never having any substantial interest in the company by holding substantive shares in the companies belonging to the Shaw Wallace group. He was also not even a very high salaried person of the group. Being a close relative of Shri M.R. Chhabria, he might have enjoyed the confidence of Shri M.R.Chhabria and, therefore, in all likelihood, he might have acted merely as a conduit. If the Department sticks to its very basis of the action against the group companies, of Shaw Wallace that the bogus expenditure was claimed, the necessary corollary would be that the money actually came back to the company or to the person having substantial interest like Shri M.R. Chhabria that the appellant was merely a conduit in the process and we hold accordingly.