SNJ DISTILLERS PVT. LTD..COMPANY,CHENNAI vs. ACIT, CENTRAL CIRCLE 3(2), , CHENNAI

PER MANOMOHAN DAS, J.M: This is an appeal by the assessee is directed against the order of the Learned Commissioner of Income-Tax (Appeals) [hereinafter (CIT(A)] dated 31-01-2023 pertaining to the Assessment Year (AY) 2013-14. The grounds of appeal

2. The appellant submits that the assessing officer having assessed the cash seized from Sri Bilash Khatiwada of Rs. 50,00,000 as undisclosed income of the appellant ought to have granted credit for the said cash seized to the appellant against the tax demanded.

4. The appellant submits that the Hon'ble High Court of Madras has not directed the CIT(A) to adjudicate the issue of double taxation but only to consider the fact of double taxation while considering the appeal of the appellant for grant of credit of the cash seized of Rs. 50,00,000/-.

5. The learned CIT(A) erred in observing that it is not possible to give directions to the AO of the appellant as prayed especially when the status of seized amount is not known and the individual, Shri Bilash Khatiwada, ex-employee of the assessee, has not been impleaded by the appellant in the writ petition filed before the Hon'ble High Court especially when Sri Bilash Khatiwada has no cause of action in the writ proceedings.

6. The learned CIT(A) ought to have seen that the assessing officer was well aware of the fact of assessment of the cash seized in the hands of Sri Bilash Khatiwada before completion of assessment in the appelalnt's case and therefore there is no need for the appellant to inform about the said fact to him.

7. The learned CIT(A) ought to have seen that the assessing officer has not returned the seized amount in terms of section 132B(3) either to the appellant nor to Sri Bilash Khatiwada.

10. The learned CIT (A) having found that a sum of Rs.25,38,359 is still lying with the PD account with the Department ought to have directed the assessing officer to grant credit for the said amount to the appellant without any formality to be observed by the appellant.

11. The appellant therefore prays that the assessing officer may be directed to grant credit for the cash seized of Rs.50,00,000 in his hands or else to delete the addition of Rs.50,00,000 made in the hands of the appellant as it amounted to double addition and render justice.” 2. The facts of the case are that the Assam Police on 11-05-2012 had seized cash of Rs. 50,00,000/- at Bakoklia in Karbi Anglong District of Assam from one Mr. Bilash Kathiwada who is a resident of Rajendra Nagar, New Delhi. Before the ADIT, Investigation, Unit-2 Guwahati, Mr. Bilash Khatiwada admitted that he was an employee of Gaming India Distributors Pvt. Ltd, a Chennai base company and in the process of starting office at Dimapur, he was carrying the sum of Rs. 50 lakhs. It was also deposed by him that Gaming India Distributors Pvt. Ltd. is one of the group concerns of M/s SNJ Distilleries Pvt. Ltd. During the enquiries, it was noticed that the payment of salary of Bilash Katiwada was debited to the profit and loss account of M/s SNJ Distilleries Pvt. Ltd. Subsequently, Shri Jayamrugan, Managing Director of M/s SNJ Distilleries Pvt. Ltd claimed that the payment was sourced in cash from Nandhini Transport Pvt. Ltd. Shri Jayamurugan during the Investigation submitted that the amount of Rs. 50 lakhs came in cash from books from Nandhini Transports Pvt. Ltd. to Gaming India Ditributors Pvt. Ltd as investment being share application money which was withdrawn from time to time and paid to Bilash Khatiwada. The learned Assessing Officer [AO], Chennai observed that the said amount of Rs. 50 lakhs were the unaccounted cash belongs to SNJ Distilleries Pvt. Ltd and need to be taxed in the hands of M/s SNJ Distilleries Pvt. Ltd. The said sum of Rs. 50 lakhs had not been admitted in the return of income and ultimately, the Ld. AO the same was brought to tax as undisclosed cash u/s 69A of the Act.

3. Being aggrieved, the assessee filed appeal before the Ld. CIT(A)-18, Chennai vide and submitted that the assessee decided not to press the ground related to addition of Rs. 50 lakhs to end the litigation but prayed to give direction to the AO to give credit of Rs. 50 lakhs against the tax payable by them. The Ld. CIT(A) vide order dated 07-01-2016 accepted the prayer of the assessee and directed the AO to give credit of Rs. 50,00,000/- against the tax payable by the assessee but sustained the addition made by the learned AO.

“In connection with the writ petition the Hon’ble Madras High Court has directed the undersigned to dispose of your petition on merits within three weeks of receipt of its order. In this regard, it is to inform you that the cash of Rs. 50 lakhs was seized in the hands of Shri Bilash Khatiwada, who was assessed with the ACIT (CC)-25, New Delhi and the seized cash was transferred in the PD account of Pr.CIT, Central-1, Delhi. This office vide letter dated 30-07-2018 to the Deputy/Assistant Commissioner of Income Tax, Central Circle-25, Delhi, requested to para-wise comments stating the reasons for not transferring the seized cash of RS. 50 lakhs lying in the PD account of Pr. CIT, Central-1, Delhi to the PD account of Pr. CIT, Chennai-2, Chennai.In response to which the PCIT(C )-1, New Delhi, vide letter dated 23- 08-2018 intimated that out of total cash seizure of Rs. 50 lakhs, a sum of Rs. 24,61,641/- has been adjusted towards tax liability of Shri Bilash Khatiwada and the balance sum of Rs. 25,38,359/- was returned back to the PD account of Pr. CIT, Jorhat, Assam. Thus, as the part of seized cash had been adjusted towards the tax liability of Shri Bilash Khatiwada, it appears that he had claimed the ownership of seized cash and offered the seized cash as his undisclosed income. Since the seized ash of Rs. 50 lakhs had never been transferred to the PD account of Pr. CIT, Central-2, Chennai. Therefore, your request for adjustment of the seized cash against your tax liability cannot be processed under the given circumstances”.

6. The assessee, thereafter, filed another Writ Petition No. 8030 of 2019 before the Hon’ble High Court of Madras. The Hon’ble High Court vide order dated 11-08-2022 inter-alia observed as under:

“5. In such circumstances, I see merit of the petitioner to challenge the order dated 26-09-2016 by way of appeal against the non-grant of credit of a sum of Rs. 50,00,000/- as directed by the Commissioner of Income-Tax (Appeals) in order dated 07-01-2016. The appellate authority would be better positioned, seeing as the issue in this matter relates, prima facie, the double taxation of the amount of Rs. 50,00,000/-, once in the hands of the petitioner and secondly, in the assessment of Bilash Khatiwada.

8. The Ld. CIT(A) considered the appeal of the assessee and vide para No. 6.1 of his order dated 31-01-2023 observed as under:

“6.1. The grounds of the assessee filed in the appeal consequent to the order of the Hon’ble High Court, and the written submissions filed by the AR are duly considered. The written submissions are basically reiterating its stand as made out in its grounds of appeal. The Hon’ble High Court in its order has observed that, -“The appellate authority would be better positioned, seeing as the issue in this matter relates, prima facie, the double taxation of the amount of Rs. 50,00,000/-, once in the hands of the petitioner and secondly, in the assessment of Bilash Khatiwada”. However, the jurisdiction over the case of Shri Bilash Khatiwada does not lie with the undersigned and moreover, in the appeal filed by the assessee in consequent to the order of the Hon’ble High Court, the assessee did not raise the issue of double taxation in the grounds preferred by it in this appeal. As appearing from the grounds and the connected written submissions, it is not the case of the assessee that there is double taxation in the hands of the assessee. To state more specifically, the assessee never raised in the grounds double taxation if an in its hands. Therefore, there is no locus standi for me to adjudicate on double taxation if any in the hands of the assessee. The assessee only seeks that there is double taxation in the case of another assessee. (the individual – Shri Bilash Khatiwada), whose jurisdiction does not lie with the undersigned. The assessment order in the case of the individual Shri Bilash Khatiwada, a copy of which has come to notice now, shows the assessment order of the individual for the impugned AY 2013-14.” Assessment order Originally, Shri Bilash Khatiwada and the assessee had stated that the amount seized belong to the assessee. However, later on, Shri Bilash Khatiwada changed his stand and filed revised return of income claiming that the seized amount of Rs. 50,00,000/- was his income from other source. The learned AO of Shri Bilash Khatiwada, AO, New Delhi accepted the revised return of income as filed by Shri Bilash Khatiwada. The learned CIT(A) finally disposed of the appeal in favour of the assessee. The Ld. CIT(A) directed the ld.AO to approach the PCIT, Guwahati, Assam for appropriation of the amount of Rs. 25,38,359/- towards the tax liability of the assessee if the amount is still available.The ld. CIT(A) also issued other directions to the ld. AO of the assessee as stated in the order. The ld. CIT(A) vide para No. 7 of the order stayed the proceedings for the collection of any outstanding demand relating to the addition of said amount of Rs. 50 lakhs.”

Being dissatisfied, the assessee filed the present appeal before the Tribunal.

9. Heard the representatives of both the parties and perused the materials available on record. The Ld. AR submitted for issuance of a direction to the Ld. AO to grant credit for the cash seized of Rs.50,00,000/- or else to delete the addition of Rs. 50,00,000/- in the hands of the assessee.

The assessment order passed by the Ld. A.O, Chennai is dated 30-03- 2015. The individual Shri Bilash Khatiwada did not make any claim before the AO, Chennai that the said amount of Rs. 50,00,000/- was belong to the assessee company. However, the assessee company is free to proceed against Shri Bilash Khatiwada through a proper legal way if that sum was belongs to it. We have no jurisdiction to direct the Tax Authority at Delhi to cancel the assessment order made by the AO, New Delhi. But the fact is that the same amount has been assessed by two different Tax Authorities in the hands of two different persons. In our view, the CIT(A), ought to consider this aspect as the assessment order passed by the Ld. AO, New Delhi was before him while passing of the order dated 31-01-2023 by him. But the Ld. CIT(A) stated that the matter of double taxation was not before him and therefore, both the assessment orders as passed by the Ld. AO’s new Delhi and Chennai are in force. In view of the peculiar nature of the case, we are of the considered view that the Ld. AO, Chennai should reframe the assessment order by considering the assessment order dated 18-03-2014 passed by the Ld. AO, New Delhi on the matter. Accordingly, we set aside the assessment order passed by Ld. AO, Chennai dated 30-03-2015 as well as the orders of the 1st appellate authority and so far as the seized amount of Rs. 50,00,000/- is concerned and direct the Ld. AO, Chennai for passing of a de-novo assessment order in respect of that seized amount by giving to the assessee an opportunity of being heard. Order passed accordingly.