SACHIN VILAS CHAUGULE ,MUMBAI vs. CIT (APPEALS) , MUMBAI

This is the bunch of 6 appeals filed by assessee against the Consolidated appellate order passed by the Commissioner Of Income Tax (Appeals) 47, Mumbai (the learned CIT – A) dated 17/1/2013 wherein the appeal filed by the assessee against the assessment order passed under section 153A read with section 143 (3) and under section 143 (3) of The Income Tax Act, 1961 (the Act) by The Assistant Commissioner Of Income Tax, Central Circle – 1 (2), Mumbai (the learned AO) for Assessment Year 2008 – 09 to assessment year 2013 – 14 and 2014 – 15 respectively are dismissed. The assessee aggrieved with the same has preferred appeal before us for assessment year 2008 – 09, 2010 – 11 to 2014 – 15.

Brief facts of the case shows that assessee is one of the employee, general manager Liaison with Hiranandanai group. He is an engineering graduate and law graduate. He has been

A search and seizure action under section 132 and a survey under section 133A of the income tax act, 1961 were initiated in the case of Hiranandani group of cases on 11/3/2014 by the deputy director of income tax (investigation) unit – IV (3), Mumbai. On the same day, the assessee’s residential premises at 1503B Gundecha Heights, LBS, kanjurmarg, Mumbai was also covered. During the course of search, jewellery worth ₹ 2,574,800 and cash of ₹ 75,250,500/– was found. Cash of ₹ 7.5 crores was seized. During the course of search, various diaries and pen drive were also seized. The diaries were in the handwriting of the assessee detailing the work done during the day and pending work. These diaries indicated the various government offices assessee has visited on various dates, which clearly showed that he is taking direct instructions from Mr. Niranjan Hiranandani for the work. His statement was recorded under section 132 (4) on 11 and 12/3/2014. In response to question number 21 of the above statement assessee admitted that out of ₹ 75,250,000, a sum of ₹ 55,250,000 is his unaccounted cash receipt. For the balance, Rs 2 crores he submitted that it is given to him by one Mr. Dilip kapadia for work which was to be delivered to him but he could not deliver as that person is out of town. In statement, he also admitted that there are various cash deposits in the bank accounts of the assessee on different dates amounting to ₹ 6,847,928. Subsequently assessee filed an application before the settlement commission on 8/1/2016 offering the total

Thus, assessee offered ₹ 3,167,164 for assessment year 2008 – 09 before the settlement commission. As per the return filed by the assessee under section, 153A of the act salary income was shown at ₹ 513,616 and income from other sources was shown at ₹ 2500 along with the loss from income from house property of ₹ 30,000. The learned assessing officer computed the income of the assessee by including the income declared before the settlement commission as well as the income shown by the assessee as per return of income filed under section 153A of the act at the gross total income of ₹ 3,653,280/–, granted deduction under chapter VIA of ₹ 1 lakh and determined the total income of the assessee at ₹ 3,583,280/–

For assessment year 2010 – 11, assessee filed or in the return of income under section 139 (1) of the act of ₹ 4,33,372/– the same income was repeated in response to notice under section 153A and further before the settlement commission assessee disclosed 2,69,84,316/–. Assessment under section 153A read with section 143 (3) of the income tax act was passed on 30/3/2016 determining the total income of the assessee at ₹ 27,417,688. In the assessment, the learned assessing officer made the addition of ₹ 26,984, 316 that was disclosed by the assessee before settlement commission.

For assessment year 2011 – 12 assessee filed return under section 139 (1) of the act amounting to ₹ 956,485. Assessee disclosed before the settlement commission for the same year amount of additional income of ₹ 33,678,398. The learned assessing officer assessed the total income as per order under section 153A read with section 143 (3) on 30/3/2016 at ₹ 34,634,883/–.

For assessment year 2012 – 13 assessee did not file any return of income under section 139 (1) however in response to notice under section 150 3A of the act the assessee disclosed the income of ₹ 1,500,198/– before settlement commission the assessee further disclosed additional income of ₹ 10,528,970. Assessment order under section 153A read with section 143 (3) of the act was passed on 30/3/2016 determining total income of the assessee at ₹ 1,20,29,115/–.

For assessment year 2013 – 14 assessee filed his return of income at ₹ 7,254,635/–. The same income was returned in section 153A of the act. Before settlement commission, assessee disclosed additional income of ₹ 1,52,93,654. The learned assessing officer passed an order under section 153A

For assessment year 2014 – 15, assessee filed original return of income under section 139 (1) of the act on 30/11/2014 declaring total income of ₹ 28,549, 340/–. The assessee revised its return of income on 6/1/2016 declaring total income of ₹ 12,997,280/–. Subsequently the assessee against revised its return of income and 3/3/2016 declaring total income at ₹ 84,719,040/–. Assessment was framed under section 143 (3) of the act on 30/3/2016 by determining total income of the assessee at ₹ 85,447,038.

All these assessment order was challenged before the learned CIT – A – 47, Mumbai who passed a consolidated order for assessment year 2008 – 09 to assessment year 2014 – 15 for all seven years. However, before us the appeal is filed only for six years wherein as appeal for assessment year 2009 – 10 is not before us at present.

The learned CIT – A by passing the consolidated order dealt with issue of addition for each of the assessment year. Assessee contested that all the addition in the assessment years starting from assessment year 2008 – 9 to assessment year 2013 – 14 are based on the table mentioned in the assessment order. Assessee submitted that there is a double taxation of the cash amounting to ₹ 5.52 crores. While furnishing disclosure before the settlement commission assessee has spread cash of the above sum in three years included in additional income. For assessment year 2010 – 11 sum of ₹ 2 crores, for assessment year 2011 – 12 ₹ 275 Lacs and for assessment year 2012 – 13 Rs. 77 lakhs were offered. For the generation of cash, assessee disclosed repairing and gratuitous payment in his return of income before settlement commission of RS. 2.60 crores for assessment year 2010 – 11,

The learned CIT – A considered the explanation of the assessee. However he found that during the course of search cash amounting to ₹ 7.52 crore was found and seized, assessee has accepted and owned cash of only ₹ 5.52 crores and stated that balance cash of ₹ 2 crores belong to Hiranandani group where he worked as a general manager. Therefore, he considered the whether the balance case of ₹ 2 crores is taxable in the hands of the assessee or not. He referred to the order of the settlement commission in case of Hiranandani group where though Hiranandani group had

The learned CIT – A disbelieved the statement that assessee had an opening cash balance of ₹ 24 lakhs which was disclosed before the settlement commission as opening cash on hand. The learned CIT – A also noted that assessee was a non-filer of return of income for the relevant assessment year. He noted that assessee has made a bald statement that cash of ₹ 24 lakhs was an opening cash balance without bringing on record

Similarly for all other additions, he rejected the contentions of the assessee that assessee has offered the same income in assessment year 2014 – 15, however before the settlement commission the same income was spread over number of assessment years, therefore, the addition is to be made according to the income tax act only for assessment year 2014 – 15 as income belonged to that year. The main reason for rejection is that in the statement of facts filed before the settlement commission assessee has offered this income for respective years and therefore it is the duty of the assessee, onus is on the assessee to show that it is the same income which is also offered for taxation in the return of income for assessment year 2014 – 15. According to him, assessee has failed to show the same and therefore there is no infirmity in the addition made by the AO in respective years and also tax the same income in assessment year 2014 – 15 as it is offered by the assessee in the return of income. He further held that merely because the settlement commission has rejected the application of the assessee, it does not wipe out the spirit of the search, findings of the search and the meticulous and exhaustive manner with proper justification pertaining to the income, which was offered year wise as additional income in the statement of fact, furnished before settlement commission. He further noted that the learned AO for assessment year 2014 – 15 has made addition only on protective basis with the intention of safeguarding the interest of the revenue. Further,

For the appeal of the assessee for other years, he held that except the issue of the enhancement of ₹ 2 crores, all other issue remains the same and therefore his decision applies in other appeals Mutatis mutandis. Accordingly, he dismissed all the appeals of the assessee.

Assessee is aggrieved and has preferred appeals before us.

In these appeals following issues emerges for our consideration

Ld DR vehemently supported the orders of lower authorities. It was submitted that statement before Settlement commission in SOF is the evidence to tax the income declared by assessee in respective years. Assessee needs to prove that those income were not earned in earlier years but in AY 2014-15. With respect to Rs 2 Crores , it was submitted that it is not

We have carefully considered rival contention and perused the orders of lower authorities. We address the issues raised before us as under :-

We first come to the issue of cash found during the course of search and in whose hands it should be taxed. Admittedly, from the residence of the assessee sum of ₹ 75,250,500 was found as per inventory of cash dated 11/3/2014 placed at paper book page number 83. Therefore, naturally it is the duty of the assessee to explain source of the above cash found. The first instance was the statement recorded under section 132 (4) of the assessee on 11/3/2014. In response to question number 20 of the statement, assessee confirms that the cash of ₹ 75,250,500 has been found from his residence. In response to question number 21 he explains the source of cash. He says that out of ₹ 75,250,500, a sum of ₹ 55,250,000 is unaccounted cash receipt not recorded in any of the books of accounts of the assessee. He further says that there is unaccounted cash has been generated over the period through brokerage received from land sale purchase dealings and unaccounted cash receipt of repairing fabrication work etc. He offers that amount for taxation as his undisclosed income over and above his regular income. However, with respect to the sum of ₹ 2 crores, he explains that it has been given to him by one person who is working with Hiranandani group i.e.

Now we come to the (ii) and (iii) issue the year in which the income is required to be taxed. Undisputedly assessee filed a settlement petition before the settlement commission. Assessee offered an additional income of ₹ 96,134,411/– spread over 7 years. The assessee has disclosed ₹ 83,400,000 as profits and gains of business in his proprietary concern as well as Gratuitous payments received. It is further disclosed a sum of ₹ 4,329,750 as salary income and further offered opening cash balance of ₹ 24 lakhs. The settlement petition was not admitted as assessee failed to disclose the manner in which the income was earned. On rejection of the settlement petition, the claim of the assessee is that though before the settlement commission assessee has spread the undisclosed income over number of years but now the income of the assessee is required to be assessed based on the principles laid down under the income tax act. Therefore, most of the income was required to be offered in assessment year 14 – 15. As per the revised return filed by the assessee on 3/3/2016, he declared total income of ₹ 84,719,040. Total cash found during the search was offered as income for assessment year 2014 – 15. The other income, which was also disclosed during the course of search, was also offered for taxation in this assessment year. The learned assessing officer while making the assessment for respective years taxed the income disclosed by the assessee based on year wise disclosure as per statement of facts before settlement commission. It is also an admitted fact that except the statement of facts before the settlement commission, there is no evidence that the income of the assessee is earned in respective years as offered before

Coming to the last issue of the violation of the principles of natural justice, we find that the assessee has not made any submission, and as we have set-aside the whole assessment framed for all these 6 assessment years back to the file of the learned assessing officer, the above grievance, has become infructuous.