SHRI JITENDRA VIRWANI,BANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1(3), BANGALORE

The facts of these cases are mostly similar as such we consider the facts as narrated in the ITR No. 1211/2019 for the AY 2009-10.

The facts of the case in ITA No.1211/Bang/2019 are that the assessee filed return of income consisting of salary receipts, income from

There was a search conducted u/s 132 of the Act in the assessee’s Farm House at Tarunhunse Village, Jala Hobli, Next to Stone Hill International School, Bangalore 562-157 on 07-01-2015. Consequent to search a notice u/s 153A was issued on 17-11-2015 to the assessee requiring him to file The Return of Income within 30 days from the Date of receipt of notice. In response to the notice issued u/s 153A, the assessee filed return on 28.12.2015 disclosing same income as originally returned. No incriminating material was found during the course of search. According to learned AR there is no requirement to interfere with the original assessment which had attained finality. Notice u/s. 142(1) and 143(2) was issued from time to time calling for certain particulars. During the assessment proceedings, assessee was asked to produce evidence for the status mentioned as ‘Non-resident’ in the return of income vide notice dated 20.12.2016. The assessee made several submissions along with copies of passport evidencing the dates of arrival and departure to and from India and submitted as follows:- (a) His stay in India during the relevant year was only 174 days. (b) He left the country for the purpose of employment in FY relevant to AY 2009-10 and was employed in Embassy Group International, Singapore. (c) As per Explanation 1(a) to section 6(1)(c), he was permitted to stay in India for 182 days inspite of being a non-resident. 5. The AO was however of the view that the assessee did not discharge the onus of proving his non-resident status and therefore he was a ‘resident’ as per section 6(1)(a) of the Act. Since some of the pages of

According to the AO, the assessee was drawing monthly salary from Golflink Embassy Management Services Pvt. Ltd. and Dynasty Developers (P) Ltd. Therefore, he had been in India and did not leave India, for the purposes of employment. Therefore the period of 182 days mentioned in Clause (a) of Explanation to section 6(1)(c) would not apply and rejected the assessee’s submission that the Act permitted dual employment i.e., employment in India as well as outside India. The AO relied on K. Sambasiva Rao v. ITO [2014] 62 SOT 167 (Hyd) and Second ITO v. K.Y. Patel [1990] 33 ITD 714. As per the AO, the assessee was an ultimate beneficiary owner of Romulus Assets Ltd. [RAL], a company incorporated in Bahamas and operating from Singapore based on information received from foreign tax authorities. The assessee was not aware of this information until produced during his summons proceedings and since the same were furnished on request upon concluding of assessment proceedings, the assessee did not have any opportunity to disprove the same. To hold that assessee was the beneficial owner of RAL, the AO relied on the following information:- (i) Minutes of the Meeting of Romulus Assets Limited dated 17.07.2008 granting limited Power of Attorney to the appellant and to an employee Director of Embassy Group International to operate the Duetsche Bank Account in Singapore. (ii) Minutes of the meeting of the Board of Directors of Romulus Assets Limited dated 10.2.2009, resolving to apply for Life Insurance Policy for US $ 1,00,00,000 on

In the appeals in ITA Nos.1215 to 1216/Bang/2019, there is no dispute neither relating to resident status of assessee nor framing of assessment u/s. 153A of the Act.

For the AYs 2009-10 to 2012-13 the first common ground in these appeals which require adjudication is with regard to framing of assessment u/s. 153A of the Income-tax Act, 1961.

In Appeals No.1215 to ITA No.1217/Bang/2019 for AY 2013-14 to AY 2015-16, the assessee challenges only the addition made in the assessments framed u/s. 143(3) of the Act by the AO and sustained by the CIT(Appeals).

Now coming to the common ground in ITA Nos.1211 to 1214/Bang/2019 in AYs 2009-10 to 2012-13 with regard to validity of assessment framed u/s. 153A of the Act, the ld. AR submitted as follows.

The search u/s 132 of the Act was conducted on 07.01.2015. All the returns for the above assessment years were filed before the date of the search. In fact, upto AY 2013-14, even the time limit for issuing the notice u/s 143(2) of the Act had expired. Time limit for issuing notice u/s 143(2) of the Act had not expired for AY 20I4-15 on the date of search.

It is well settled that the scope of assessment u/s 153A of the Act depends on the fact whether the assessment is pending and therefore abates or assessment is not pending and therefore, it does not abate. In this connection, it was submitted that for the AY 2009-10 to 2013-14 (both inclusive) the only addition made is in respect of certain payments made by RAL u/s 28(iv) of the Act and S.69C of the Act. The various materials relied on by the AO to make the above addition were obtained by him from Foreign Tax Division of the Ministry of Finance by making a request as per the pro- forma of "Request for Information Under The Provision of Tax Treaties" placed at Page 538 of PB. Based on the information received from Foreign Tax Authorities it is observed that the assessee, Shri Jitendra Mohandas Virwani is the ultimate beneficial owner of RAL, a company

For the AYs 2014-15 and 2015-16, the AO made addition in respect of Housewarming expenses and the guest house maintenance expenses u/s 28(iv) of the Act. It was submitted that the AO has simply referred to the documents seized and inventorised as A/JV01 (page 78). It was submitted that this is not a document seized as such, it is a printout taken from the computer. The panchanama which is placed at page 1 of the Paper Book states very clearly that no documents were seized. A perusal of the document marked A/JV01 would show that there is nothing incriminating therein, it does not show any undisclosed income of the appellant. It is an un-signed mere dumb document. Hence, this document cannot be considered as incriminating in nature. In respect of farmhouse maintenance charges, the assessment order does not refer to any seized material. The entire addition is based on the interpretation of the law and not on the basis of any incriminating material which shows undisclosed income.

Therefore, it is clear that neither the addition in respect of RAL nor the additions in respect of the Housewarming expenses and Guest House Maintenance expenses have been made on the basis of any seized incriminating materials. In this connection it was submitted that in respect of non-pending non-abated assessments, any addition can be made only on the basis of incriminating material in an assessment u/s 153A of the Act relying on the following decisions:- CIT Vs IBC Knowledge Park P. Ltd 385 ITR 346 (Kar) ACIT Vs Cornerstone Properties Pvt Ltd (ITA No. 1714 to l 717/Bang/2013) CIT Vs Kabul Chawla 380 ITR 573( Delhi)

The ld. AR further submitted that the decision of the Hon'ble Karnataka High Court in Canara Housing Development Company Vs DCIT 274 CTR 122 (Karn) relied on by the CIT(A) is not directly on the issue. The issue there was whether the Commissioner can revise an order of assessment passed u/s 143(3) of the Act after a search assessment has been made u/s 153A of the Act for the very same assessment year. The Hon'ble High Court held that the original order u/s 143(3) cannot be revised u/s 263 of the Act. The Hon'ble High Court observed that once the assessment is reopened, the assessing authority can take note of the income disclosed in the earlier return, any disclosed income found during the search or and also any other income which is not disclosed in the earlier return or which is not unearth during the search. The above observations cannot be applied bereft of context. The Hon'ble High Court was not dealing with the issue whether while framing an assessment u/s 153A of the Act an addition not supported by any incriminating material can be made in the case of a non-pending and non-abating assessment. The Hon'ble Bombay High Court in CIT V Continental Warehousing Corporation Ltd 374 ITR 645 at pages 667 to 670 discusses the decision of the Canara Housing. The Hon'ble Bombay High Court held, “We do not find anything in these observations and reproduce above which would enable us to conclude that the Division Bench judgment of this court in the case of Murli Agro requires reconsideration or does not lay down the correct principle of law”. It is also submitted that observations in the paragraph 10 of Canara Housing are not ratio decidendi and therefore, not binding. For this purpose, reliance was placed on the decision of the Hon'ble Supreme Court in Mavilayi Service Co- operative Bank Ltd Vs CIT 431 ITR I (SC).

In Mavilayi Service Co-operative Bank Ltd (supra) it was held that he ratio decidendi in Citizen Co-operative Society Ltd. Would depend upon the conclusion arrived at on the facts in that case, the case being an authority

It is further submitted that the decision of the Hon'ble Karnataka High Court in Canara Housing is no longer good law in view of the decision of the Hon'ble Supreme Court in PCIT vs Meeta Gutgutia(SLP C.No. 16 16287 of 2018). [405 ITR Statute 28]. The Hon'ble Supreme Court dismissed SLP filed against the Delhi High Court judgment in PCIT Vs Meeta Gutgutia 395 ITR 526. The Hon'ble Delhi High Court held that power u/s 153A of Income Tax Act 1961 enables the assessing authority to reopen the assessment for six year prior to the year of search u/s 132, if during the course of search u/s 132 incriminating material justifying the reopening of assessment for each of six previous years is found. It was held that assessment u/s 153A can be made for a year only if some incriminating material for that particular assessment year is found. The Delhi High Court was dealing with the case of the assessment u/s 153A in the case of a searched person. It was held therein that for the assessment years 2001 to 2003-04 no additions can be made in an assessment made u/s 153A if there are no incriminating material. This proposition has been accepted by the Supreme Court by dismissing the SLP.

The AR also relied on the Co-ordinate Bench decision of the Tribunal in Yunus Zia Vs DCIT, Central Circle 1(1) (ITA No. 126 to 130/Bang/2013) wherein it was held that Canara Housing would apply only if some incriminating materials were found during the search. He drew our

It was submitted that therefore the additions made for all the years i.e., from 2009- 10 to 204-15, are not based on any incriminating material. The additions in respect of RAL is made on the basis of documents received from Foreign Tax Division and the addition in respect of Housewarming expenditure is based on an un-signed dumb document which is a computer print-out not signed by anybody. The AO should bring on record corroborative evidence to prove the same. It is clear from the assessment order that the addition has been made on the basis of the information obtained from the financial statements of M/s. Embassy Knowledge Infrastructure Pvt Ltd. The amount added as income for the AY 2014-15 has no relevance whatsoever to the alleged seized material which is available in page no. 1146 of the Paper book. Therefore, the seized material at page 1146 is not an incriminating material. As far as guesthouse maintenance charges are concerned, as stated earlier, there is no reference whatsoever to the incriminating material. Hence, in the absence of any incriminating material, no addition can be made while framing an assessment u/s 153A if the assessment for the relevant assessment years is non-pending and non- abating.

It was submitted that for the AY 2010-11, the assessment was completed on 27.12.2012 which is before the date of search. Therefore, the assessment for the AY 2010-11 is non-pending and non-abating assessment. For the AYs 2009-10, 2011-12, 2012-13 and 2013-14, the time limit for issuing the notice u/s 143(2) expired on 30.09.2010, 30.09.2012, 30.09.2013 and 30.09.2014 respectively. Hence, the time limit for issuing notice u/s 143(2) has expired before the date of search. (the date of search being 7.1.2015). The assessments for the above years are also non-pending and non-abating. Reliance was placed on the following decisions wherein it was held that if the time limit for issuing notice had expired on the date of search, assessments are not to be treated as pending assessment:- Chintels India Ltd Vs DCIT 397 ITR 416 (Del) DCIT Vs Sarvana Stores 61 ITR(Trib) 20

In this connection, it was further submitted that that the decision of the Hon'ble Karnataka High Court in Canara Housing Development Company Vs DCIT 274 CTR 122 as relied on by the CIT(A) is not directly on the issue. The issue there was whether the Commissioner can revise an order of assessment passed u/s 143(3) of the Act after a search assessment has been made u/s 153A of the Act for the very same assessment year. The Hon'ble High Court held that the original order u/s 143(3) cannot be revised u/s 263 of the Act. In paragraph 10 of the order the Hon'ble High Court observed that once the assessment is reopened, the assessing authority can take note of the income disclosed in the earlier return, any disclosed income found during the search or and also any other income which is not disclosed in the earlier return or which is not unearthed during the search. It was submitted that the above observations cannot be applied bereft of context. The Hon'ble High Court was not dealing with the

It was submitted that observations in the paragraph 10 of Canara Housing are not ratio decidendi and therefore, not binding. For this purpose, he placed reliance on the decision of the Hon'ble Supreme Court in Mavilayi Service Co-operative Bank Ltd Vs CIT 431 ITR 1. Therefore, the decision of the Hon'ble Karnataka High Court in Canara Housing (supra) is no longer good law in view of the decision of the Hon'ble Supreme Court in PCIT vs Meeta Gutgutia(SLP C.No. 16 16287 of 2018) 405 ITR Statute 28. The Hon'ble Supreme Court dismissed SLP filed against the Delhi High Court judgment in PCIT Vs Meeta Gutgutia 395 ITR 526. The Hon'ble Delhi High Court held that power u/s 153A of Income Tax Act 1961 enables the assessing authority to reopen the assessment for six year prior to the year of search u/s 132, if during the course of search u/s 132 incriminating material justifying the reopening of assessment for each of six previous years is found. Assessment u/s 153A can be made for a year only if some incriminating material for that particular assessment year is found. It may kindly be noted that the Delhi High Court was dealing with the case of the assessment u/s 153A in the case of a searched person. It

The ld. AR also relied on the Co-ordinate Bench decision of the Tribunal in Yunus Zia Vs DCIT, Central Circle 1(1) (ITA No. 126 to 130/Bang/2013) wherein it was held that Canara Housing (supra) would apply only if some incriminating material is found during the search. The Tribunal held as follows:- “In our considered opinion, it may be plausible view that if such incriminating material leading to undisclosed income is seized for at least one year out of relevant six years, such addition may be made to any case where there is no such incriminating material leading to undisclosed income is seized even for one year out of relevant six years, no such addition must be made and the additions must be confined to the return income and additions made by the assessing officer in the original assessment proceedings.”

The ld. AR thus submitted that the additions made for all the years i.e., from AY 2009- 10 to 204-15 are not based on any incriminating material. The additions in respect of RAL is made on the basis of documents received from Foreign Tax Division and the addition in respect of Housewarming expenditure is based on an un-signed dumb document which is a computer print-out not signed by anybody and the AO should bring on record corroborative evidence to prove the same. It is clear from the assessment order that the addition has been made on the basis of the information obtained from the financial statements of M/s. Embassy Knowledge Infrastructure Pvt Ltd. [EKIPL]. The amount of addition as income for the AY 2014-15 has no relevance whatsoever to the alleged seized material which is available in page no. 1146 of the Paper book. Therefore, the seized material at page 1146 is not an incriminating

The ld. AR thus submitted that for AY 2010-11 assessment was completed on 27.12.2012 which is before the date of search and therefore the assessment for AY 2010-11 is non-pending and non-abating assessment. For AYs 2009-10 to 2013-14, the time limit for issuing notice us/. 143(2) expired on 30.9.2010, 30.9.2012, 30.9.2013 & 30.9.2014 respectively and hence the time limit for issuing notice u/s. 143(2) expired before the date of search i.e 7.1.2015. The assessments for these assessment years are also non-pending and non-abating. Reliance was placed on the following decisions:- (a) Chintels India Ltd Vs DCIT 397 ITR 416 (Del) wherein it was held as follows:- “21. In the present case, the facts speak for themselves. The Assessee filed its return on 21st October, 2008. The return was processed under Section 143(1) of the Act on 27th March, 2010. It has held by this Court in Indu Lata Rangwala (supra) that the mere processing of a return under Section 143(1) of the Act and the sending of an intimation to the Assessee will not make it an 'assessment'. At the same time, the consequences of the Department not issuing a notice under Section 143(2) of the Act within the time stipulated as far as the filing of the return in normal course is concerned was not examined either in Kabul Chawla (supra) or Indu Lata Rangwala (supra). As notice by the Punjab & Haryana High Court in Vipan Khanna (supra), the CBDT circular makes it abundantly clear that once an Assessee does not receive a notice under Section 143(2) of the Act within the period stipulated then such an Assessee "can take it that the return filed by him has become final and no scrutiny proceedings are to be started in respect of that return." 22. The inevitable conclusion, therefore, in the present case, is that the ITAT was in error in holding that the assessment for AY 2008-09 should be treated as 'pending' whereas in terms of the

As far as AY 2014-15 is concerned, the ld. AR submitted that even though the time limit for issuing a notice u/s. 143(2) did not expire on the date of search, even then the assessment is non-pending and non-abating. It can be said that assessment is pending only if notice u/s. 143(2) is issued before the date of search. Attention was invited to CBDT Circular

In view of the above submissions, it was prayed that the assessments made u/s. 153A of the Act for the AYs 2009-10 to 2014-15 are without jurisdiction.

The ld. DR placed reliance on the decision of Canara Housing Development Co. (supra) and submitted that u/s. 153A of the Act, the AO can take note of the income disclosed in the earlier return, any undisclosed income found during the search and also any other income which is not disclosed in the earlier return or which is not unearthed during the search in order to find out what is the “total income” of each year and then pass assessment order. According to the ld. DR, where search took place u/s. 132 in the case of any assessee, the assessment to be framed u/s. 153A of the Act. In the present case, there was a search u/s. 132 of the Act on 7.1.2015 in the group companies of assessee, Embassy Property Development Pvt. Ltd., consequently notice u/s. 153A was issued on 17.11.2015 to the assessee requiring him to file return of income within 30 days from the date of receipt of notice. The assessee filed a return u/s. 153A on 28.12.2015 relating to these assessment years and the assessments were framed u/s. 153A r.w.s. 143(3) of the Act. The assessments were framed for six assessment years and it is immaterial whether there is incriminating material pertaining to those six assessment

We have heard both the parties and perused the material on record. The issue before us is relating to the reassessment proceedings u/s 153A of the Act for the AY 2009-10 to AY 2012-13 as there was a ground on this issue in these Assessment Years only. However, the AR enlarged his arguments for AY 2013-14 and AY 2014-15 which we declined to entrain it as there is no ground of appeal or additional grounds of appeal raised by the assesse on this issue in these Assessment Years. Therefore, as far as the question of validity of initiation of reassessment proceedings u/ 153A is concerned in AY 2009-10 to AY 2012-13, we will proceed as follows.

Under the provisions of Section 153A, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature of this Section is that the Assessing Officer is empowered to assess or reassess the "total income" of the aforesaid years. This is a significant departure from the earlier block assessment scheme in which the block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under Section I53A, however, the Assessing Officer has been given the power to assess or reassess the 'total income' of the six assessment years in question in separate assessment orders. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax.

A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1))(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search /requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any unearthed during the search. For this purpose. the fetters imposed upon the Assessing Officer by the strict procedure to assume Jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which such section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section I53A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be.

Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub-section (1) of Section I53A says that such proceedings "shall abate". The reason is not far to seek. Under Section

Thus, it is clear that once a search/requisition is made u/s 132 of the IT Act, the Assessing Officer is bound to issue notice u/s 153A to the assessee to furnish the return for each Assessment Years falling within six Assessment Years immediately preceding the Assessment Year relevant to the previous year in which search conducted or requisition was made. Consequently, the Assessing Officer is empowered to assess or reassess the total income of all these six Assessment Years.

Before us, now the contention of the assessee for assessment years 2009-10 to 2012-13 is with regard to initiation of proceedings u/s. 153A of the Act, though there was no incriminating material found during the course of search and seizure action conducted 7.1.2015. The AO has simply referred to the documents seized and inventorised as A/JV01 placed at Paper Book page no. 78. This is not a document seized as such, it is a printout taken from the computer. The panchanama which is placed at page 1 of the Paper Book states very clearly that no documents were seized. A perusal of the document marked A/JV01 would show that there is nothing incriminating therein, it does not show any undisclosed income of the appellant. It is an un-signed mere dumb document. Hence, this document cannot be considered as incriminating in nature.

Further contention of the ld. AR is that for these assessment years, assessments were not pending on the date of search and the time for to issue notice under section 143(2) was already lapsed as below and it is to be considered that these assessments were already reached finality on the date of search and no scrutiny proceedings are to be started in respect of non-pending assessments where there is no incriminated material found during the course of search action u/s 132 of the Act. AY 2009-10 AY 2010-11 AY 2011-12 AY 2012-13 Date of filing 30-09-2009 14-10-2010 29-09-2011 28-09-2012 of return (Revised u/s139(1) Return on 18-02-2011)

Therefore, according to the ld. AR, assessments for these 4 years were already completed and were not pending on the date of search. According to him, framing assessment u/s. 153A of the Act in the case of completed assessment can be done only on the basis of some incriminating material unearthed during the course of search or requisition all documents or undisclosed income or property discovered in the course of search which are not produced or not already disclosed or made known in the course of original assessment. It is also submitted that in the case of pending assessments, the jurisdiction to make original assessment and assessment u/s. 153A merges into one. Only assessment shall be made separately for each assessment year on the basis findings of search and other material existing or brought on record by the AO.

In the case of first category, where the assessment is not pending on the date of initiation of search or making requisition, as the case may be, the assessment u/s. 153A would be in the nature of reassessment. Thus, the legislature has carved out the nature of assessment u/s 153A as assessment or reassessment in two different situations. According to the ld. AR, for AYs 2009-10 to 2012-13, wherein already assessment orders were passed u/s. 143(3) or time limit to issue notice u/s 143(2) is lapsed, the assessment u/s. 153A of the Act can be framed only on the basis of seized incriminating material. In these assessment years, initiating proceedings u/s. 153A is valid, however, the AO cannot resort to roving and fishing enquiry to find out whether any income has escaped assessment during the reassessment proceedings when there is no incriminating material found or seized during the course of search action u/s. 132 of the Act. In other words, we are of the opinion that AO was correct in law to issue notices u/s 153A for the years under consideration, as he was bound to pass Assessment orders in respect of all these concerned Assessment Years. However, addition in these Reassessment Years u/s 132 of the Act.

The ld. DR strongly relied on the decision of the Hon’ble Karnataka High Court in the case of Canara Housing Development Co. (supra) wherein it was held as follows:- “At this point, it is appropriate to draw inference from the Hon’ble Karnataka High Court judgment in the case of Canara Housing Development Co. (supra). In that case, the Assessee, which was carrying on real estate business filed its return for AY 2008-2009. His case was taken up under Section 143(3) of the Act and an order came to be passed on 31st December, 2010. Subsequently a search took place in the premises of the Assessee under Section 132 of the Act on 12th April, 2011. The judgment notes "in the course of search, incriminating material leading to undisclosed income was seized." The notice was issued to the Assessee under Section 153A(1) of the Act to file return of

It is important to note that Canara Housing (supra) was also a case where some material was unearthed during the search. Further, the High Court was clear that the addition to the income already disclosed would have to be based on some material unearthed during the search. This is clear from the observation in para 9 of the decision to the effect: "The AO is empowered to reopen those proceedings and reassess the total

In CIT Vs. Kabul Chawala 380 ITR 573 ( Delhi H.C) it was held that in the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The relevant extract is reproduced below:- “The legal position that emerges on a perusal of section 153A and section 132 of the Income-tax Act, 196 is as under : (i) Once a search takes place under section 132, notice under section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six assessment years immediately preceding the previous year relevant to the assessment year in which the search takes place. (ii) Assessments and reassessments pending on the date of the search shall abate. The total income for such assessment years will have to be computed by the Assessing Officers as a fresh exercise. (iii) The Assessing Officer will exercise normal assessment powers in respect of the six years previous to the relevant assessment year in which the search takes place. The Assessing Officer has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six assessment years 'in which both the disclosed and the undisclosed income would be brought to tax'. (iv) Although section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the Assessing Officer which can be related to the evidence found, it does not mean that the assessment 'can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this section only on the basis of seized material.' (v) In absence of any incriminating material, the completed assessment can be

In the above decisions it was further considered judgement in the case of Filatex India Ltd. v. CIT-IV (49 taxmann.com 465 (Delhi) reference pb 1387 and observed that one of the questions framed was whether the ITAT erred on facts and in law in not holding that re-computation of book profit, de-hors any material found during the course of search, in the order passed under Section 153A of the Act was without jurisdiction, being outside the scope of proceedings under that Section? The facts of the case were that there was incriminating material found during the course of search conducted in the premises of the Assessee on 18th January, 2006 and subsequent dates. This included a statement of the General Manager (Marketing). On the basis of the said material and statement additions were made to the disclosed income under Section 115 JB although no material was found specific to such addition. The Court held that under Section 153A "the additions need not be restricted or limited to the incriminating material, which was found during the course of search." Consequently even if no incriminating material was found for the addition under Section 115JB of the Act, since there was some incriminating material found which would

In Filatex India Ltd. the Court sought to explain the observations in CIT v. Chetan Das Lachman Das (supra) in the following manner:- In CIT v. Chetan Das Lachman Das [2012] 211 Taxman 61, it was noticed the insertion of Section 153A by Finance Act, 2003, its purpose and object, and the earlier proceedings for block assessment under Chapter XIVB, the difficulties and the legal issues which had arisen on the difference between regular assessment and block assessment. It is in this context that in the case of Chetan Das Lachman Das (supra), has observed that Section 153A(l)(b) provides for assessment or re-assessment of the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which the search took place. It was emphasized that there is no condition in this Section that the additions should be strictly made on the basis of evidence found during the course of the search or other post search material or information available with the Assessing Officer, related to the evidence found. Subsequent observation to the effect that the assessment under section 153A should not be arbitrary or made without any relevance or nexus with the seized material, is basically clarificatory that the assessment under Section 153A emanates and starts on the foundation of the search, which is the jurisdictional precondition. The additions cannot and should not be arbitrary...." 46. The above passage in Filatex India Ltd. (supra), paraphrases inter alia, the following line in CIT v. Chetan Das Lachman Das (supra): "This, however, does not mean that the assessment under Section 153A can be arbitrary or made without any relevance or nexus with the seized material". However, the immediately next line in CIT v. Chetan Das Lachman Das (supra)reads: "Obviously an assessment has to be made under this Section only on the basis of seized material....".

The decision of the Rajasthan High Court in Jai Steel (India), Jodhpur v. ACIT (2013) 1 ITR-OL 371 (Raj) involved a case where certain books of accounts and other documents that had not been produced in the course of original assessment were found in the course of search. It was held where undisclosed income or undisclosed property has been found as a consequence of the search, the same would also be taken into consideration while computing the total income under Section 153A of the Act. The Court then explained as under:- 22. In the firm opinion of this Court from a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that: (a) the assessments or reassessments, which stand abated in terms of II proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made; (b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material and (c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made." 48. The argument of the Revenue that the AO was free to disturb income de hors the incriminating material while making assessment under Section 153A of the Act was specifically rejected by the Court on the ground that it was "not borne out from the scheme of the said provision" which was in the context of search and/or requisition. The Court also explained the purport of the words "assess" and "reassess", which have been found at more than one place in Section 153A of the Act as under:- "26. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation

Thus provision of section 153A deals with situations where assessment shall be framed in connection with search u/s 132 or requisition

The sole reason for conducting search in the case of the assessee is information received from prior to search from The Foreign Tax Division, Ministry of Finance by making request as per the proforma of “Request for

Now the contention of the ld. AR is that when there was no incriminating material in these assessment years, then there is no jurisdiction u/s. 153A of the Act so as to frame assessment and assessment framed for these assessment years have to be quashed. When we read section 153A along with various judgments cited supra, we are of the opinion that the AO was correct in law in issuing notice u/s. 153A of the Act for all these assessment years i.e., 2009-10 to 2012-13; as he was bound to issue notice u/s. 153A of the Act consequent to search action u/s. 132 of the Act to furnish a return for each of these assessment years. Being so, the assessment u/s. 153A could not be quashed merely because there was no incriminating material found during the search action u/s. 132 of the Act to show that the assessee has concealed any part of his income. Once search is conducted u/s. 132 of the Act, the AO is bound to issue notice u/s. 153A and then has to frame assessment order thereafter. Therefore, the AO is justified in issuing notice u/s. 153A of the Act to the assessee in these assessment years. Further, the issue is squarely covered against the assessee by the judgment of jurisdictional High Court in the case of Canara Housing Development Co. Ltd. (supra) wherein it was held as under:-

Hence we are of the view that this contention of the learned counsel for the assessee cannot be accepted. As rightly contended by the DR, there is no requirement for an assessment made under section 153A of the Act being based on any material seized in the course of search. Further under the second proviso to section 153A pending assessment or re-assessment proceedings in relation to any assessment year falling within the period of six assessment years referred to in section 153A(b) of the Act shall abate. Thus the Assessing Officer gets jurisdiction for six years assessment years referred to in section 153A(b) of the Act for making an assessment or re- assessment. It is not the complaint of the assessee that any income, which is already subjected to assessment under section 143(3) or under section 148 of the Act completed prior to the search in respect of six assessment years referred to in section 153A(b) of the Act and in the second proviso to section 153A, has also been included in the assessment framed under section 153A of the Act. In such circumstances the plea of the assessee cannot be accepted.

In our considered opinion, as per clause (a) of sub section (1) of section 153A, at the stage of issue of notice u/s 153A, the only requirement is to ask the assessee to file return of income for relevant six years covered by section 153A and after filing of return of income, the assessment to be made by the AO will be assessment or reassessment has to be

Accordingly, the action of the AO in issuing notice u/s. 153A in these assessment years 2009-10 to 2012-13 is justified. This ground of the assessee is therefore dismissed.

The next common ground for the AYs 2009-10 to 2012-13 is whether the status of assessee is resident or non-resident. The AO has held that the assessee is a resident on the following grounds:- “Some pages of the copy of the passport were not clear and therefore, he is not able to arrive at a factual position whether the assessee was present in India for a period of 182 days or more for the relevant previous year. The assessee was employed in India in various companies and drawing salary. Therefore, the appellant had gone abroad only on visits and the appellant did not leave India to take up employment outside India. He also held that the appellant did not go abroad with an intention to leave India permanently and settle abroad. The appellant has been visiting Dubai from Singapore and therefore, the appellant did not leave India for the purpose of employment in Singapore.”

At the outset the ld. AR submitted the findings of the AO that the assessee had not furnished readable photocopy of the passport are not borne out of the facts. The assessee vide his letter dated 23.12.2016 had enclosed colour xerox of passport copies and working of stay based on the

According to the AO, the assessee was present in India as per the details below:- Financial Year No. of days 2008-09 174 2009-10 180 2010-11 181 2011-12 179 59. As per assessee, he was in India as per the details given below:- Financial Year No. of days 2008-09 145 2009-10 150 2010-11 160 2011-12 154

The ld. AR submitted that in page 231 of the Paper Book these details are furnished. The AO has included the dates of arrival in India also as being present in India. In this connection as held by the Co-ordinate Bench in Manoj Kumar Reddy Vs ITO, (International Taxation), 34 SOT 180, the date of arrival should be excluded while calculating the number of days present in India. It was held that the date of arrival should be excluded. The above decision of the Tribunal has been upheld by the Hon'ble Karnataka High Court in DIT Vs Manoj Kumar Reddy Nare, 12 Taxmann.com 326. The assessee worked out his presence in India during the FY 2008-09 to 2011- 12 and furnished the details in page nos. 238 to 245 of the Paper Book. The assessee had not stayed in India for any year for a period of more than 182 days.

It was further submitted that a perusal of the section 6 of the Act would show that normally a person would not be a resident in India if his presence in India during the previous year is less than 182 days. But Sec.6(l)(c) states that a person shall be deemed be a resident in India if he is present in India for a period of 60 days during the previous year and also present in India for a period or periods amounting in all to 365 days or more in the previous 4 years. But clauses (a) and (b) of the Explanation below S.6(l)(c) provide an exception to 60 days rule. Under clause (a) of the Explanation, if a person leaves India for employment outside India in any previous year, "60 days" shall be substituted by "182" days. Therefore, in the year in which an assessee leaves India for employment if he is in India for a period less than 182 days he will not be a resident.

The ld. AR submitted that the AO accepts that the appellant was present in India for the above years was less than 182 days. But he states that the appellant was employed in various companies in India, and therefore, he had not left India for employment outside India. It is submitted that the expression "employment outside India" in clause (a) of Explanation below S.6(l)(c) has not been defined. All it means is that the assessee has to leave India to take up an employment outside India The fact that an assessee continues to be employed in India in some other companies or he has some other economic interest in India does not detract from the fact that he has left India for taking up employment outside India.

The AO has relied on the decision of the ITAT in Shri KY. Patil 33 ITD 714. It is submitted that the reliance on this decision is misplaced. The assessee therein left India on account of the work in relation to his Indian employment. His employer in India sent him abroad for short visits on work. The assessee made a claim that his visits abroad was to take up employment outside India and therefore, clause (a) of the Explanation would apply. This was negatived by the Tribunal and it was held that his visits abroad will not

It is submitted that the AO has also rejected the appellant's case on the ground that the assessee did not intend to stay permanently outside India and he refers to the fact that the assessee was visiting India very often. It is submitted that the only criteria for deciding the residential status is the number of days present in India and whether a person left India for taking up employment outside India. Whether the appellant had an intention to stay permanently or otherwise is not a criterion to be followed in deciding the residential status as held in the following decisions:- i) Addl. Director of Income Tax Vs Sudhir Choudhrie 55 ITR (Trib) 681 ii) CIT Vs Suresh Nanda, 375 ITR 172

As per AO, the assessee had been visiting Dubai from Singapore quite often and therefore, he has not gone to Singapore to take up

The ld. DR submitted that the AO was justified in changing the status from non-resident to resident. He submitted that looking at the business affairs of the assessee in India and the number of visits to foreign countries and India, it is apparent that assessee was not visiting India, but he was an Indian resident and for all practical purposes he was visiting abroad in relation to his business affairs. Explanation (b) to section 6(1) provides stay of less than 182 days in case of a person of Indian origin who leaves outside and visits India to look after his investments. In this case, the assessee living in India carried out various business activities and visits outside India. Therefore, the benefit of Explanation (b) to section 6(1) has been righty denied. The assessee has been claiming status of non-resident without disclosing the proper facts. The ld. AR furnished details of his stay outside India before this Bench which was produced before the AO however not at

We have considered the rival submissions and perused the material on record. Now the question before us whether the assessee is to be treated as Non Resident or to hold him as Resident as being interpreted

In our considered opinion the controversy in question stands answered by Hon'ble Kerala High court in the case of Abdul Razaq 337 ITR 350 (Ker.), in similar facts and circumstances by following observations: "There is no controversy on facts inasmuch as the assessee was in India for only 177 days in the previous year relevant for the assessment year 1989-90, and unless it is established that Explanation (a ) to sub-clause (c ) of section 6(l) of the Act is not available to the assessee, he cannot be treated as a resident in India for the purpose of assessing his global income including the business income earned abroad during the previous year. Obviously Explanation (a ) is an exception to section 6(l)(c) of the Act, under which 60 days residence referred to in clause (c) is substituted to 182 days if the assessee went abroad in the previous year for the purpose of employment Admittedly, the assessee went abroad on 24- 9-1988 only to take up business there. If the business undertaken and carried on by the assessee in the previous year abroad amounts to employment within the meaning of Explanation (a ) to section 6(1)(c) of the Act, then the assessee is entitled to the status of non-resident declared by the CIT (Appeals), which is confirmed by the Tribunal.”

The contention of the learned DR is that employment necessarily involves employer-employee relationship with terms of employment and only under an employer a person can be employed. Learned counsel appearing

During hearing, learned DR has relied on the Memorandum explaining the provisions of the Finance Bill introducing the Explanation, contained in 134 ITR 137 (St.) [Para 35 of the Finance Bill], which reads as follow:'-- "(iii) lt is proposed to provide that where an individual who is a citizen of India leaves India in any year for the purposes of employment outside India, he will not be treated as resident in India in that year unless he has been in India in that year for 182 days or more. The effect of this amendment will be that the 'test' of residence in (c) above will stand modified to this extent in such cases."

Similarly the Central Board of Direct Taxes issued Circular No. 346, dated 30-6-1982, which reads as follows-'

What is clear from the above is that no technical meaning is intended for the word "employment" used in the Explanation. In our view, going abroad for the purpose of employment only means that the visit and stay abroad should not be for other purposes such as a tourist, or for medical treatment or for studies or the like. Going abroad for the purpose of employment therefore means going abroad to take up employment or any avocation as referred to in the Circular, which takes in self-employment like business or profession. So much so, in our view, taking up own business by the assessee abroad satisfies the condition of going abroad for the purpose of employment covered by Explanation (a) to section 6(l)(c) of the Act. For the purpose of the Explanation, employment includes self-employment like business or profession taken up by the assessee abroad.

The Hon'ble High Court in the case of CIT v. Abdul Razak [337 ITR 267 (Ker)] has considered the plain meaning of section 6(l)(c), the Board Circulars and held that the purpose of going abroad includes the purpose of seeking business in foreign countries also. The going abroad for business purposes will include self employment, business or profession taken up by the assessee. In our considered view, these facts cannot be construed in a manner to project that it implies carrying business activities from India.

In view of facts, circumstances, case laws and CBDT circular we reach to following conclusions:-

When the law mandates that an Indian Citizen can go abroad for the purpose of seeking employment or business, there is no room to misconstruction to assume that assessees larger presence/business investment/family ties are in India than abroad. This amounts to a guess work contrary to settled propositions. Therefore, we are unable to agree with department that assessee was not visiting India from outside India. There is no restriction for number of days spent abroad. What the law mandates is to look at the number of days stayed in India.

Similar view has been adopted by the Authority of Advance Rulings in the case of Dr. Virendra Kumar (308 ITR 28) and Canoro Resources (313 ITR 2). Departmental authorities, except for interpreting the words in their own manner, have not relied on any case law on the issue of section 6(l)(c) and expln. (b) specifically. Thus no judgment contrary to Hon'ble Kerala High Court has been cited by the Revenue. It is a trite law that in Income tax proceedings the words shall be given plain and ordinary meaning and interpretation should be resorted only when the meaning is ambiguous. We are unable to see any ambiguity in these provisions. Hon'ble Kerala High Court has held that for determining the status as Non Resident is to be decided in terms of no. of days of stay in India. This being the only judgment available on this issue, is binding and is to be respectfully followed by us. The AAR judgment have a persuasive value and the decisions in the case of Dr. Virendra Kumar and Canoro Resources also AAR has adopted the ratio of Hon'ble Kerala High Court judgment. Thus, the test of residence will be determined on the basis of number of days of stay in India and not by the interpretation adopted by the lower authorities in this case. It has not been

In view of the facts, circumstances and case laws cited and referred above on behalf of the assessee we hold that the determinative test for the status of Non Resident being number of days of stay in India and in assessee's case in these four years, the days of stay being less than 182 days; even after considering the days as recorded by the AO in his order; the status to be applied in this case is to be held as Non Resident as claimed by assessee. Thus, the assessee will be liable to tax on income accrued in India only. The assessee's grounds in this behalf are allowed.

The next ground in the appeals for the assessment years 2009-10 to 2014-15 is with regard to the following additions u/s. 69C / 28(iv) of the Act:- Assessment year Amount-Rs. 2009-10 30,87,99,113 2010-11 22,65,95,837 2011-12 9,11,51,660 2012-13 5,77,24,891 2013-14 1,66,64,009 2014-15 15,32,71,818 2015-16 NIL

The ld. AR submitted that RAL is a company registered in Bahamas with two shareholders. Those shareholders were Serangoon Ltd and Seletar Ltd. It appears that sometime later the wife of the appellant, Mrs. Lina Virwani became the sole shareholder of this company. The company is managed by a Board from Singapore. The AO seems to have obtained the

It is submitted that the appellant had consistently denied before the AO that he is in any way connected with RAL. The AO on the statement recorded on various dates notes that the appellant has been claiming that RAL belongs to his wife. He also notes that the appellant has categorically stated that he does not own RAL. The AO asked the appellant about certain transactions of RAL. The appellant had consistently told the AO that he is not connected with RAL and he is not aware of such transactions and he will not be able to explain these transactions. However, the AO comes to a

The ld. AR submitted that there are certain fundamental principles governing the role of evidences, enquiry and investigation by the AO while framing an assessment under the Income tax Act. AO cannot act on suspicion. He has to establish a fact with legal and acceptable evidence. No addition can be made on the basis of surmises and conjectures. In this connection, he relied on the decision of the Hon'ble Supreme Court in State of Kerala Vs M.M. Mathew and Another (1978) 4 SCC 65 wherein it was held that a strong suspicion from very strange coincidences and grave doubts cannot take the place of legal evidence. Suspicion can only be a starting point of enquiry, no conclusion can be drawn on the basis of a mere suspicion. Reliance was also placed on the decision of the Hon'ble Gujarat High Court in CIT Vs Bhanwarlal Sharma 214 Taxmann 132 wherein it was held that," Yet, this question do not cross the realm of suspicion to enter the sphere of proof, let alone the arena of convincing evidence".

In PCIT Vs Krishnadevi 431 ITR 361 the Hon'ble Delhi High Court held that the reliance of any material without further corroborative on the basis of cogent material cannot justify the conclusion the transaction is bogus, sham etc. It was held that the AO must dig deep into the issue. It was held that the court has to decide an issue on the basis of evidence and proof and not on suspicion alone. The AO cannot reject explanation offered by an assessee arbitrarily. Relying on decision of ITAT in Agson Global P ltd vs ACIT 76 ITR(Trib) 504, it was submitted that the Tribunal observed that an assessing officer is not vested with unfettered power to reject any explanation as being not to his satisfaction merely on the basis of surmises and conjectures. He is bound under law to act reasonably and justly while forming any satisfactory opinion surrounding the explanation offered by the taxpayer. He cannot act unreasonably and capriciously. It is well established

The ld. AR further submitted that in PCIT vs Kulwinder Singh 415 ITR 49 the Hon'ble High Court approved the finding of the Tribunal that the burden was on the department to prove understatement of sale consideration which was not discharged and therefore, the addition of S.69B is not justified.

In CIT Vs M. Swamy 241 ITR 363 the Hon'ble Madras High Court held that the burden of showing that the assessee has undisclosed income is on the revenue. That burden cannot be said to be discharged by merely referring to the statement given by the assessee to the third party in connection with the transaction which was not directly related to the assessment. It is important to note that the Hon'ble High court held that a statement made by an assessee himself to a third party cannot be the basis for any addition in his lax assessment. In the present case, the AO has relied on the statement of a third party to hold that the appellant is the owner of RAL without brining any concrete and tangible material to prove the same. This is not permissible in law.

In CIT Vs Subrata Roy 375 ITR 207 it was held that the primary burden to bring to tax the amounts on the ground the transaction is a deemed dividend (when it is not so otherwise) is on revenue. To discharge that burden, the revenue cannot rest content on surmises and assumptions; it should prove them on facts and materials on record.

In Baldev Singh & Co Vs CIT 384 ITR 91, at page 101, the Hon'ble court observed that the onus is to prove a fact is on the person alleging such fact.

The Hon'ble Rajasthan High Court in CIT Vs Smt. Sunitha Dhadda 406 ITR 220 held that when the department alleges the receipt of "on-money" the burden of proof is on it to prove the fact with acceptable evidence.

The ld. AR briefly rebutting each of the adverse presumptions drawn by the AO, firstly submitted, the AO refers to the proposal for the insurance on the life of the appellant by M/s. RAL. RAL is a private company owned by the appellant's wife and it is well within the company's rights to insure the life of any person it wants. The proposal for the insurance is placed at pages 642 to 658 of the Paper Book. Inviting attention to page 642 of PB, wherein the appellant has been shown as the insured. In page 655 in column 3 the beneficial owner is given as Karadi Trust and the beneficial ownership is shown as 100%. Strangely in page 656, the appellant is shown as the beneficial owner having 100% interest. This is apparently contradictory. Merely relying on this statement that the appellant has been declared as 100% beneficial owner of RAL, the AO has come to a conclusion that the RAL is owned by the appellant. In this connection it is submitted that when the appellant denies that he is the owner or shareholder of RAL, the documents referred to by the AO can at worst create a suspicion in his mind that the appellant might be the owner. Therefore, he is required to make further enquiry by examining the officials of RAL and find out whether the appellant is the real owner or not and on what basis they have disclosed the appellant as the owner. The AO did not make any such enquiries. Merely on the basis of this suspicion he has come to a conclusion that the appellant is the owner. It is submitted that the AO has merely acted on suspension. It is completely contrary to the principles laid down by the Hon'ble Supreme Court

The ld. AR further stated that it is also important to note that the Director of the company M/s RAL had written a letter directly to the AO stating that Mrs. Lina Virwani is the shareholder of RAL (page 83 PB). The AO has simply rejected this letter on the ground that the letter does not give the history of the shareholding and therefore, it cannot be accepted. The AO has simply rejected this letter merely on some suspicion. If the AO had wanted further information, he could have sent a letter to M/s. Greenland Ltd the sole director of RAL to furnish those details and come to a proper conclusion. The AO has utterly failed to do so. In this connection he relied on the decision of the Tribunal in Agson Global Pvt Ltd Vs ACIT 76 ITR (Trib) 504. It is submitted that the AO has precisely done what the Tribunal in 76 ITR (Trib) 504 says he should not do.

Further, the ld. AR submitted that another evidence relied on by the AO is the limited authority given to the appellant by RAL to operate the bank account (pages no. 600 to 602 of the PB). This is a limited authority given by the company to the appellant to carry out investment matters only with no powers to withdraw funds from the accounts. This is clear from the Board resolution placed at page 600 of the Paper Book. The AO comes to conclusion that the appellant is the owner of RAL because an authority to make investment is given to him. This is a strange conclusion. If the appellant is the owner, he does not need authority to make investments. Secondly, even the limited power is to make investment and not to withdraw funds. This also inconsistent that the appellant being the owner of M/s. RAL. Therefore, the reliance on these documents by the AO to come to a conclusion that the appellant is the owner of RAL is totally mis- placed and these documents do not show anywhere that the appellant is the owner of RAL.

The AO referred to a Board resolution of RAL dated 19.01.2010 wherein it was noted that RAL has hypothecated its assets in favour of EFG bank Singapore Branch in respect of credit facilities extended to the appellant. He also notes that the appellant has been disclosed as the ultimate beneficial owner of the company "Borrower". The Board note is placed at page 52 of the assessment order as Annexure - 4. Based on these documents he comes to a conclusion that the appellant is the owner of RAL. The appellant reiterates hat he has consistently denied that he is the owner of RAL or he holds any share in RAL. It is the submission of the appellant that RAL has wrongly described him as the owner. It was submitted that as stated earlier, when the appellant had denied that he is the shareholder of RAL, it is incumbent on the part of the AO to make further enquiries and find out whether the statement made by RAL is correct or not. He should have obtained the relevant information from various statutory authorities under the powers available to the Government of India to solicit the information from foreign government and foreign government departments. The AO has failed to do so. The Hon'ble Supreme Court in Mathew's case has clearly held that suspension cannot take the place of legal evidence. The AO has not brought on record any acceptable material or whatsoever to prove that the appellant is a shareholder of RAL. This is apart from the fact that the AO has wrongly rejected the confirmation furnished by the Director of the company that Mrs. Lina Virwani is the shareholder of RAL. Therefore, the material relied on by the AO are at best pointer to make further enquiry and it cannot be held conclusive. Any conclusion drawn on the basis of such documents would be perverse and is liable to be rejected.

The ld. AR further submitted that the AO has failed to discharge the burden cast on him to prove that the appellant is the shareholder of RAL. The AO has utterly failed to bring on record any tangible and acceptable material to hold that the appellant is the shareholder of RAL or is the

Further, it was submitted that the Appellant and M/s. RAL are Distinct Persons Even Assuming but Without Admitting that the Appellant is the Beneficial Owner of RAL. Assuming but without admitting that the finding of the AO that the appellant is the beneficial owner/shareholder of RAL, it cannot be said that the business carried on by RAL is the business carried on by the appellant. There is no doubt that RAL is a separate legal entity, and the appellant is also a separate legal person. The Hon'ble Supreme Court in Bacha F. Guzdar Vs CIT 27 ITR 1 has held that the shareholder and the company are two separate legal entities and the business carried on by the company cannot said to be a business carried on by the shareholder. Hence, the finding of the AO that the appellant will be taxed in respect of the activities carried out by M/s. RAL is totally untenable in law.

While discussing the applicability of S.28(iv) of the Act the AO has held that the business of RAL is nothing but the conduct of the business of Shri. Jitendra Virwani. This finding is contrary to the decision of the Hon'ble Supreme Court in Bacha F. Guzdar's case. The observations indirectly suggest that the AO has lifted the corporate veil in coming to the above conclusion. It is submitted that the corporate veil cannot be lifted at the whims and fancies of the AO. There has to be cogent and compelling reasons as to why the corporate veil has to be lifted. It cannot be lifted for an asking. In this connection he relied on the decision of the Hon'ble Allahabad High Court in CIT Vs Sahu Investment Mutual Benefit Co Ltd 396 ITR 595. The Hon'ble court observed that the doctrine of "lifting of corporate veil" is not to be

On the quantification of income, the AO candidly admits that the bank statements of RAL are not available and the Board resolutions are the only documents which reveal the quantum of payments made to several persons. He has wrongly placed the burden on the appellant. Thereafter, he comes to a conclusion that amounts mentioned in the Board resolutions which are authorization by the Board to the person managing RAL to incur the expenditure/payments The AO has not even given a finding that these payments have been made subsequently. It is submitted that this finding that the entire payments made by RAL is for the benefit of the appellant is totally perverse without any logic or reasoning. It is submitted that it is beyond belief that a reasonable person would come to a conclusion that all the payments made by the company in the course of carrying on its business is for the benefit of another individual without a shred of evidence. Therefore, the reliance by the AO only on the Board resolution to quantify the alleged benefit received by the appellant is liable to be quashed.

Regarding the Applicability of S. 28(iv), the AO has simply held that the business of RAL is nothing but the conduct of business of Shri. Jitendra Virwani and this finding has already been assailed in the preceding paragraphs. It is submitted that S.28(iv) of the Act which deals with perquisite received by an assessee to be income from profits and gains of business and profession pre-supposes the carrying on of business by an

On the applicability of S.69C of the Act, it was submitted that the AO has jumped to a conclusion and not given any reasons as to how S. 69C is attracted. S. 69C is attracted when the following conditions are satisfied:- (a) The assessee has to incur an expenditure; (b) for which he offered no explanation for the source of explanation or the explanation offered by him is unsatisfactory. 100. It is clear from the assessment order that the appellant has not incurred the expenditure. It is RAL which had incurred the expenditure. This is an undisputed fact. The fundamental requirement of S.69C that an assessee should have incurred an expenditure is not satisfied at all. Even assuming that all the authorisations for the payments in the Board resolution have been paid by the person managing RAL, it is clear the source of such expenditure is the funds of RAL. Therefore, the source is fully explained and S. 69C is not attracted at all.

The ld. AR thus submitted the additions made by the AO on the basis of Board resolutions of RAL is not justified for the following reasons:-

The ld. DR submitted that assesse has not given any convincing answer as to why he should not be held to be a beneficiary and expenses/outflow of funds of the said company, to the extent information is available, be not held as unexplained expenditure u/s 69C of the Act. The appellant has not given the date of his marriage to Lina Virwani, nor has he approved that she was all along the owner of RAL and did not become the owner only after becoming married to him and become one by virtue of her getting married to him. The appellant has refused to cooperate in the matter and has desisted from providing the information sought for by the AO for fear of standing exposed in the matter. If he had nothing to hide and if his claims are indeed true, there is no reason why he should not be furnishing the required information. It is not a known and established fact that many rich and influential business men are stashing money abroad in tax havens and

We have heard both the parties and perused material on record and case law cited by the parties. The AO on the basis of minutes of meeting of the Directors of RAL, dated 17-07-2008 wherein limited Power of Attorney was granted to assesse Shri Jitendra Virwani and Mrs. Polly Byrne to operate the Deutsche Bank bearing account no 8014326 of RAL held at Singapore Branch. The assessee’s signature also appears in Limited letter of Authorisation sent by RAL to said bank. Further, minutes of meeting of Director of RAL Limited held on 10-02-2009 wherein resolution has been passed to apply for Insurance policy in favour of the present assesse Shri Jitendra Virwani for an amount of USD 1,00,00,000 is the basic sum assured and USD 20,85,000 is the premium and the Manufacturers Life Insurance Company is the insurer. There was another Board resolution by RAL on 10- 02-2009 wherein application form used for applying Life Insurance was approved. In the application form at page no 14 it was mentioned that Shri Jitendra Mohandas Virwani was mentioned as his life insured against the owner of the policy, Karadi Trust against the Beneficial Owner of the owner of the policy i.e., RAL. Further it was mentioned in page no 15 of the application form that Shri Jitendra Mohandas Virwani against Life Insured; “RAL being held by Karadi Trust” against Owner of the policy; Jitendra Mohandas Virwani against Grantor of said trust, Jitendra Mohandas Virwani

The Board resolution of RAL dated 18-02-2009 wherein it was noted that RAL had lent M/s Dynasty Business Parks SDN Bhd (DBPSB) a sum of USD 10,00,000 ( USD 2,00,000 on 30-10-2007 and USD 8,00,000 on 30-10- 2007). RAL resolved to demand USD 11,13,736.26 from DBPSB as principal and interest outstanding. Annexure of the minutes of the meeting contains a letter dated 18-02-2009 addressed by RAL to DBPSB demanding USD 11,13,736.36. Minutes of the meeting of the Directors of RAL dated 31.08.2009 wherein it was noted that the second instalment of the Manulife Policy taken for Jitendra Mohandas Virwani of USD 16,35,000 is dure for payment and is being paid out for RAL’s EFG Bank Account. Minutes of the meeting of RAL dated 19.01.2010 wherein it was noted that USD 10,00,000 is to be paid to Mrs. Barkha Mahatani to her Indian Bank Account, Overseas Branch, Bangalore. The same is reflecting as credit of Rs. 4,58,18,973 ( which is the United States Dollar 10,00,000 converted in Indian Rupees) in the Indian Account of Mrs. Barkha Mahtani on 20.01.2010. Further Assessing Officer observed that out of Rs. 4.58 crores by RAL to Mrs. Barkha Mahatni, she transferred a sum of Rs.50,00,000 directly to M/s Embassy Property Development Limited and Rs. 4 crores to M/s Pet Properties & Constructions Private Limited which in turn the same amount of Rs.4 crores to M/s Embassy Properties Development Limited on the same day.

Further the Assessing Officer found that there was a resolution dated 19-01-2010 wherein RAL executed pledge of assets as security in favour of EFG Bank, Singapore branch in respect of credit facilities extending by the bank to the present assesse Mr. Jitendra Virwani. In this said resolution it was mentioned that RAL is entering into pledge agreements with EFG Bank AG, in substantially to secure the payment and satisfaction of all the outstandings and liabilities whether future or present, actual or contingent, incurred by Jitendra Mohandas Virwani, the ultimate beneficial owner of the company.

Further the Assessing officer found that there was a Notes to account regarding contingent liability in respect of this pledge. The company has entered into the pledge agreements with EFB, Singapore Branch to pledge its assets maintained with the Bank to secure the payments and satisfaction of all outstanding and liabilities whether future or present, actual or contingent, incurred by Jitendra Mohandas Virwani, the ultimate beneficial owner of the company.

On the basis of above documents the assessing officer came to the conclusion that the assesse is the beneficiary owner of RAL. However it was recorded by AO that RAL bank account statements were not available on record and only the Board Resolutions which reveal the amount paid to various persons. According to Assessing officer various payments made by RAL to various persons is for benefit of the assesse as such all such payments considered as income of assesse u/s 28(iv)\69C of the Act. The assessing officer confronted all above mentioned evidence to the assesse during the statement recorded u/s 131(1) on 31-10-2016, 01-11-2016, 02- 01-2016 and 14-12-2016. The assesse consistently denied the facts before

It is also important to note that the Director of the company M/s RAL had written a letter directly to the AO stating that Mrs. Lina Virwani is the shareholder of RAL (page 83 PB). The AO has simply rejected this letter on the ground that the letter does not give the history of the shareholding and therefore, it cannot be accepted. The AO has simply rejected this letter merely on some suspicion. If the AO had wanted further information, he could have sent a letter to M/s. Greenland Ltd the sole director of RAL to furnish those details and come to a proper conclusion. The AO has utterly failed to do so. Further, aanother evidence relied on by the AO is the limited authority given to the appellant by RAL to operate the bank account placed

The AO referred to a Board resolution of RAL dated 19.01.2010 wherein it was noted that RAL has hypothecated its assets in favour of EFG bank Singapore Branch in respect of credit facilities extended to the appellant. He also notes that the appellant has been disclosed as the ultimate beneficial owner of the company "Borrower". The Board note is placed at page 52 of the assessment order as Annexure - 4. Based on these documents he comes to a conclusion that the appellant is the owner of RAL. The appellant has consistently denied that he is the owner of RAL or he holds any share in RAL. It is the submission of the appellant that RAL has wrongly described him as the owner. In our opinion when the appellant had denied that he is the shareholder of RAL, it is duty on the part of the AO to make further enquiries and find out whether the statement made by RAL is correct or not. He should have obtained the relevant information from various statutory authorities under the powers available to the Government of India to solicit the information from foreign government and foreign government departments. The AO has failed to do so. The Hon'ble Supreme Court in Mathew's case cited supra has clearly held that suspicion cannot take the

In our opinion , the AO has failed to discharge the burden cast on him to prove that the appellant is the shareholder of RAL. The AO has utterly failed to bring on record any tangible and acceptable material to hold that the appellant is the shareholder of RAL or is the beneficial owner of RAL. The AO also unjustly rejected the letter furnished by the Director of RAL that the appellant is not a shareholder. The AO having failed to make further enquires to establish that the appellant is the shareholder or beneficial owner of RAL, could not have held so in the assessment order. Further, in our opinion the Appellant and M/s. RAL are Distinct Persons and it cannot be said that the business carried on by RAL is the business carried on by the appellant. There is no doubt that RAL is a separate legal entity, and the appellant is also a separate legal person. The Hon'ble Supreme Court in Bacha F. Guzdar Vs CIT 27 ITR 1 has held that the shareholder and the company are two separate legal entities and the business carried on by the company cannot said to be a business carried on by the shareholder. Hence, the finding of the AO that the appellant will be taxed in respect of the activities carried out by M/s. RAL is totally untenable in law.

Further, while discussing the applicability of S.28(iv) of the Act the AO has held that the business of RAL is nothing but the conduct of the business of Shri. Jitendra Virwani. This finding is contrary to the decision of the Hon'ble Supreme Court in Bacha F. Guzdar's case. The observations indirectly suggest that the AO has lifted the corporate veil in coming to the

On the quantification of income, the AO candidly admits that the bank statements of RAL are not available and the Board resolutions are the only documents which reveal the quantum of payments made to several persons. He has wrongly placed the burden on the appellant. Thereafter, he comes to a conclusion that amounts mentioned in the Board resolutions which are authorization by the Board to the person managing RAL to incur the expenditure/payments The AO has not even given a finding that these payments have been made subsequently. In our opinion, this finding that the entire payments made by RAL is for the benefit of the appellant is totally perverse without any logic or reasoning. It is beyond belief that a reasonable person would come to a conclusion that all the payments made by the company in the course of carrying on its business is for the benefit of another individual without a shred of evidence. Therefore, the reliance by the AO only on the Board resolution to quantify the alleged benefit received by the appellant is liable to be quashed.

Regarding the Applicability of S. 28(iv), the AO has simply held that the business of RAL is nothing but the conduct of business of Shri. Jitendra Virwani and this finding has already been assailed in the preceding paragraphs. In our opinion, S.28(iv) of the Act which deals with perquisite received by an assessee to be income from profits and gains of business and profession pre-supposes the carrying on of business by an assessee. A perusal of the statement of total income for various years placed at pages 98 to 130 of the Paper Book would show that the appellant has disclosed income from business. But even a cursory glance at the nature of income disclosed would show that it is remuneration and interest on capital from partnership firms only. There is no independent business carried on by the appellant. It is not the case of AO that the alleged perquisites have been provided by RAL on behalf of these firms for the benefit of the appellant. Therefore, the fundamental requirement for invoking S.28(iv) of the Act is not satisfied as the appellant is not carrying on any business at all to which S.28(iv) would apply. Hence, invoking of S.28(iv) to tax the payments made by RAL to third parties is clearly untenable in law.

On the applicability of S.69C of the Act, in our opinion, the AO has jumped to a conclusion and not given any reasons as to how S. 69C is attracted. S. 69C is attracted when the following conditions are satisfied:- (c) The assessee has to incur an expenditure; (d) for which he offered no explanation for the source of explanation or the explanation offered by him is unsatisfactory. 117. It is clear from the assessment order that the appellant has not incurred the expenditure. It is RAL which had incurred the expenditure. This is an undisputed fact. The fundamental requirement of S.69C that an assessee should have incurred an expenditure is not satisfied at all. Even assuming that all the authorisations for the payments in the Board resolution

Further, it is noticed from the record that the assessee has denied that he is the beneficial owner of RAL. It was explained by the assessee that RAL is an independent company and its bank account is operated by the Director of that company only. According to the AO, the explanation offered by the assessee is not satisfactory. On a perusal of the facts, we find that the evidence gathered by the AO is not sufficient to indicate that the assessee is the beneficial owner of RAL and its bank account maintained by RAL. The AO was of the opinion that the assessee’s ex-wife, Ms. Leena Veerwani being the Director of the company was not produced by the assessee for enquiry before the AO; the assessee has to own up the bank account of RAL as belonging to him. As discussed earlier, the AO has to bring on record that the assessee is the real owner of the said bank account, which the AO failed to do so.

Further the Hon’ble Supreme Court in the case of R.B. Jodha Mal Kuthiala v. CIT, 1971 SCC 369, had explained the term “Owner” which is as follows:- “ The question is who is the "owner" referred to in this section? Is it the person in, whom the property vests or is it he who is entitled to some beneficial interest in the property It must be remembered that S. 9 brings to tax the income from property and not the interest of a person in the property. A property cannot he owned by two persons, each one having independent and exclusive right over it. Hence for the purpose of s. 9, the owner must he that person who can exercise the rights of the owner, not on behalf of the owner but in his own right. 17. ... It is not necessary for our present purpose to examine what the word "owner" means in different contexts. The meaning that we give to the word " owner" in s. 9 must not be such as to make that provision capable of being made an instrument of oppression, must be in consonance with the principles underlying the Act.”

From the above decision of the Court, it is clear that to hold that assessee is beneficial owner of bank account of RAL, the revenue must prove that assessee is owner of asset or value articles. Unless, the Revenue proves with necessary material that the asset belongs to the assessee or assessee is beneficial owner of such asset, then the provisions of section cannot be applied against the assessee. This clear proposition is further supported by the judgment of the Supreme Court in CWT v. Ellis Bridge Gymkhana, [1998] 1 SCC 384. Further, the onus to prove fully lies on the department. The department cannot be asking the assessee to prove the negative. The department cannot force impossible burden of proving negative on the assessee. This legal proposition is reiterated in the case of K.P. Varghese v. ITO, [1981] 4 SCC 137 wherein it was held that moreover to throw the burden of showing that there is no understatement of the consideration on the respondent would be attached and almost impossible burden upon him to establish the negative, namely, that he did not receive any consideration beyond that declared by him. Therefore, the addition made by the AO u/s. 69C of the Act is only on suspicion and surmise manner, without there being any material to prove that assessee is the beneficial owner of RAL or having financial interest in that bank account.

Further the Hon’ble Supreme Court judgment in the case of Vodafone (341 ITR 43) lays down a clear proposition that the companies being incorporated entities under the respective law possess independent and distinct status than their share holder or contributories. In case of structured investment transactions should not be disturbed on suspicions or casual considerations. In assessee’s case, the company RAL is duly incorporated in respective legal jurisdictions. All of these transactions are being disturbed on surmises and conjectures, assessee having furnished proper explanation supported with documents has discharged his burden. In the interest of justice, the additions have to be deleted.

Further, at no point of time, the AO brought on record or referred any seized material which can be said to be either incriminating or found during the course of search indicating undisclosed income of the assessee. On the contrary, the AO has based his conclusion only on the basis of material collected after the search action. Further, the assessment in the AYs 2009- 10 to 2012-13 has already been completed and the time period to issue notice u/s. 143(2) of the Act has been lapsed and there has been no incriminating material found during the course of search to sustain the addition made by the AO.

As discussed earlier, the completed assessment can be disturbed by the AO while making assessment u/s. 153A of the Act only on the basis of incriminating material unearthed during the course of search or requisition of document or undisclosed income or property discovered in the course of search which are not produced or not made known in the course of original assessment. In the present cases relating to AYs 2009-10 to 2012-13, there is no incriminating material found during the course of search action u/s. 132 of the Act. On this count also, the assessment framed for AYs 2009-10 to 2012-13 cannot be sustained, though notice issued u/s. 153A of the Act is valid.

Further, the Hon’ble Supreme Court in the case of Daulat Ram Rawatmull (87 ITR 349(SC) has held as follows:- “A person can still be held to be the owner of a sum of money even though the explanation furnished by him regarding the source of that money is found to be not correct. From the simple fat that the explanation regarding the source of money furnished by A, in whose name the money is lying in deposit, has been found to be false, it would be a remote and far-fetched conclusion to hold that the money belongs to B. There would be in such a case no direct nexus between the facts found and the conclusion drawn therefrom.”

In our opinion, the additions made by the AO on the basis of Board resolutions of RAL is not justified for the following reasons:- (a) The assessing officer has not discharged the burden cast on him to prove that the appellant is the shareholder/beneficial owner of RAL. (b) The assessing officer has merely acted on a suspicion and has not brought on record any legal evidence to prove that the appellant is the beneficial owner/shareholder of RAL. (c) RAL is duly incorporated in respective legal jurisdiction and assessee has discharged his burden by furnishing proper explanation with documents. (d) The assessing officer has failed to carry out the necessary enquiries and investigation to prove the allegation made by him in the assessment order. (e) The quantification of the addition based solely on the amounts mentioned in the Board resolution defies logic and is totally perverse. It is also not known whether the amount mentioned in the Board Resolution has been spent for the purpose mentioned therein. (f) S.28(iv) of the Act is not applicable as the appellant is not carrying on any independent business. (g) S.69C of the Act is not applicable for the very simple reason that the appellant has not incurred the expenditure and the source for various payments is the funds of RAL. (h) No seized material to sustain the addition.

Accordingly, the additions made under this head for all the Assessment years is deleted.

The next ground in ITA No.1216/B/19 for AY 2014-15 is regarding house warming expenses. The ld. AR submitted that the only ground on which the AO held that the housewarming expenses debited in the books of

The ld. DR relied on the order of the CIT(Appeals) and submitted that the addition was made on the ground that the company Embassy knowledge Infrastructure Projects (P) Ltd. in which assessee is a director was holding

We have heard both the parties and perused the material on record. In this case Housewarming expenses which was recorded in the books of Embassy Knowledge Infrastructure Private Limited is treated as perquisites u/s 28(iv) of the Act in the hands of the assesse. The reason for treating it as perquisites in hands of assesse was that the invitation sent by assesse and his family members refer to houses as “my house”. However, it is to be noted that the farmhouse solely owned by above Embassy Knowledge Infrastructure Private Limited and it was appearing in its Books of Accounts. Once the farmhouse is owned by the above mentioned company, the relevant expenditure relating to that farm house to be relating to that company only. Just because the name of the assesse mentioned in the invitation as his house or he’s staying in that premises that cannot be reason to treat the expenditure incurred by said company in hands of assesse. The assesse being Chairman and Managing Director got allotted that farmhouse for his stay in India and that cannot be reason to treat the housewarming expenses as deemed income of the assesse and being a Chairman of the company he invited the various dignitaries and customers of the company which is nothing but a sales promotion expenses in the hands of Embassy

The next issue is regarding farm maintenance charges for the AYs 2014-15 & 2015-16. The AO held that that the guesthouse maintenance charges have to be added in the hands of the appellant for the following reasons:- (a) Notes to accounts to the financials of the company states that the going concern is justified because the appellant has the ability and willingness to provide the necessary level of financial support to enable the company to operate as a going concern. (b) The company has not made any disclosure regarding the major assets i.e., the farmhouse in its financial statements.

The ld. AR submitted that the reliance on the notes to accounts has no relevance whatsoever to the issue. The fact that separate disclosure has not been made regarding the existence of farmhouse as an assets is also not relevant. The AO has failed to note that there is no requirement in law to make a separate disclosure. Statutory auditor of the company has not made any adverse comment on that. The guesthouse is disclosed as a fixed asset in the balance sheet of the company. The AO has failed to note the fundamental point that it is the company which owns the asset and therefore, it is its primary responsibility to maintain the asset i.e., the guesthouse. Just because the appellant is staying in the guesthouse it cannot be said that the guesthouse maintenance expenses are for the benefit of the appellant. Therefore the provisions of S.28(iv) of the Act are not applicable.

The ld. DR relied on the order of CIT(Appeals).

As discussed in earlier para relating to issue of housewarming expenses, this addition is deleted in both Assessment years.

In the result, the appeals by the assessee in ITA Nos.1211 to 1214/Bang/2019 are partly allowed and the appeals in ITA Nos.1215 to 1217/Bang/2019 are allowed.

Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore.