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Facts
A search and seizure operation was conducted on Mohan India Group, in which the assessee, a director, was also covered. The assessment order for AY 2014-15 made an addition of Rs. 473.71 crores. The assessee contested the validity of the panchnama and the assessment procedure.
Held
The Tribunal held that the panchnama, though naming a bank account, substantially complied with Section 132(1) of the Act as it specified the person searched. The assessment under Section 143(3) was also deemed correct for the year of search. However, the addition made by the AO under Section 2(24)(iv) of the Act was not sustainable as it lacked a proper charging section.
Key Issues
Whether the addition made by the AO under Section 2(24)(iv) of the Income Tax Act is sustainable without a proper charging section, and whether the assessment order was passed under the correct provisions of law.
Sections Cited
132, 143(3), 153A, 2(24)(iv), 28(i)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “C”, DELHI
Before: SHRI VIKAS AWASTHY & SHRI M. BALAGANESH
ORDER
PER VIKAS AWASTHY, JM:
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-28, New Delhi [in short ‘the CIT(A)’] dated 18/09/2017, for Assessment Year 2014-15.
A search and seizure operation u/s.132 of the Income was conducted on 26.08.2013 in the case of Mohan India Group. The assessee is one of the Directors of Mohan India Group and the assessee was also covered under said search. During
the course of search on Mohan India group, bank account of the assessee was also searched. A copy of panchnama dated 26.08.2013 is at page 1 to 5 of the paper book. Thereafter, second panchnama was drawn on 24.10.2013 whereby bank account no. 910010004736234 in the name of the assessee with Axis Bank Ltd. was also searched. A copy of second panchnama is at pages 6 to 9 of the paper book. Consequent to the search, assessment in the case of Mohan India P. Ltd. for AY 2013-14 was completed vide assessment order dated 31.03.2016 u/s. 153A/143(3) of the Act, with NIL addition. On the basis of same search, assessment for AY 2014- 15 in the case of assessee was completed making addition of Rs.473,71,00,000/-. Aggrieved by the assessment order dated 31.03.2016, the assessee filed appeal before the CIT(A), inter alia assailing addition on merits as well as on legal grounds. The CIT(A) vide impugned order reiterated findings of the Assessing Officer and dismissed appeal of the assessee. Hence, the present appeal by the assessee.
Shri Mohit Gupta appearing on behalf of the assessee, challenging validity of search submits that the panchnama dated 24.10.2013 was drawn in the name of bank account no. 910010004736234 and not in the name of assessee. Search cannot be in the name of a bank account it should be on the person/holder of said bank account. To support his submissions, he placed reliance on the decision in the case of Department of Income-tax (Investigation) vs. S.R. Batliboi & Co., 186 Taxman 350 (SC) and Shilpa Choudhary vs. Principal Director of Income Tax in WP(C) 5207/2020 decided on 07/12/2020 .
3.1 The ld. AR of the assessee further argued that the consequent to search u/s 132 of the Act, assessment in the case of assessee is made u/s. 143(3) of the Act, whereas, it should have been u/s.153A of the Act. Since, the assessment order is 3.2. On merits of the addition, the ld. AR submits that the search was made on Mohan Group consequent to some reports in the media in the month of August 2013 that huge payment crisis has taken place in National Spot Exchange Ltd. (NSEL) due to default in payments to NSEL. The list of prominent defaulters was also published in the newspaper (Economic Times) wherein the name of Mohan India/Tavishi Enterprises was mentioned. Both the said companies are part of Mohan India Group. It was alleged that default of Rs.952 crores was made by the aforesaid two entities. Based on the media report, the department carried the search on Mohan Group including its directors. The AO in the assessment order came to the conclusion that the money received from NSEL by Mohan Group of Companies was siphoned off and was used by the Directors of the companies for their personal use. It was alleged that huge money amounting to Rs.1,000 crores (approx.) was given to three newly incorporated companies of Mohan India Group which includes M/s. Mohan India P. Ltd., Tavishi Enterprises P. Ltd. and Brinda Commodities P. Ltd. The said companies did not have any business before they got funds from NSEL. As per the revenue the outstanding liabilities of Mohan India Group are as under:-
CM/TM Code Trading Member Name Outstanding amount in crores 14510 Mohan India P. Ltd. 600.09 14740 Tabishi Enterprises P Ltd. 333.03 14730 Brinda Commodities P Ltd. 14.03 Total 947.14
The revenue alleged that the entire aforesaid amount of Rs.947.14 crores was syphoned by the two Directors of the aforesaid companies one of them is the assessee and the other director is Jai Shankar Shrivastava. The Assessing Officer (AO) made addition of 50% of the total amount Rs.947.42 crores i.e. Rs.473.71 crores in the hands of each director holding it as the income under section 2(24)(iv) of the Act.
3.3. The first plank of argument made by ld. AR of the assessee is that income can be charged only if it falls under any of the heads of income specified in section 14 of the Act, i.e. the charging section. In the Assessment Order the AO has made addition u/s.2(24)(iv) of the Act which is a section for the definition and not the charging section. Only provisions of section 2(24)(iv) of the Act cannot be invoked for making addition. In first appellate proceedings the CIT(A) has sustained the addition by giving the passing reference of section 28(i) of the Act stating the since these receipts were in the nature of business receipts of the group companies hence the same would be treated as the income of the assessee of same nature. He asserted that for any addition to be valid in assessment, it must not only fall within the definition of income, must also be chargeable to tax under the charging provision. To support his argument he placed reliance of the following decisions:
- CIT vs. Rajan Nanda 349 ITR 8 (Delhi); and - Nanikant Ambalal Mody vs CIT 61 ITR 428 (SC).
3.4 Next ld. AR of the assessee contended that the assessment order in the case of the assessee is verbatim to the assessment order dated 31.03.2016 passed in the case of Mohan India P. Ltd. for AY 2013-14. He submitted that a perusal of the assessment order in the case of Mohan India P. Ltd. would show that the AO has recorded a fact that the alleged amounts received by the company i.e. Mohan India P. Ltd. Rs.600.09 crores from NSEL were utilized towards advancing of money by the company. The AO has given list of seventy parties in the assessment order of Mohan India P. Ltd. to whom amount of Rs.208.83 crores was advanced by the company. He contended that the AO has further recorded that from the bank accounts of group of companies Pay Orders(PO)/Demands Drafts (DD) were issued to various parties. The AO has given list of parties were an amount aggregating to Rs.159.85 crores was transferred. The AO has also given a list of POs/DDs issued in the name of group companies/individuals allegedly in favor of the assessee. The list of the parties as given by the AO clearly show that none of the DDs/POs have either been issued by the assessee/ at the behest of assessee nor the name of assessee is mentioned in the list of person in whose favour said DDs/POs have been issued. An identical finding has been given by the AO in the assessment order of assessee.
3.5. The AO further alleged that the money has been siphoned off by the assessee through Shri Ram Awadh Sharma. However, it is not emanating from the statement of Ram Awadh Sharma that the amount advanced to him were at the behest of assessee. In fact Ram Awadh Sharma in his entire statement has not mentioned the name of assessee.
3.6. In respect of allegation of the AO with regard to investment in shares of M/s. Mohan Infra Con P. Ltd., the ld. AR submits that the AO in the assessment order for M/s. Mohan India P. Ltd. has given a categoric finding that it is from bank of Mohan India P. Ltd. that Pay Orders have been issued in the name of certain companies where an amount of Rs.120 crores approximately was transferred to M/s. UK Paints India P Ltd., Shahi Exports P Ltd. & M/s. Span India P. Ltd. on sale of shares of M/s. Mohan Infra Con P Ltd.
The AO in the assessment order of Mohan India P. Ltd. has alleged that there is diversion/siphoning of funds by Jai Shankar Shrivastava, nowhere in findings the AO has given details of siphoning off of funds by the assessee, except in the last paragraph where the name of the assessee has been mentioned along with the name of Jai Shankar Shrivastava. He contended that in similar manner with regard to purchase of gold and immovable property no finding has been given by the Assessing Officer that the assessee purchased any gold/immovable property by the assessee for his personal benefit.
3.8. The ld. AR submitted that despite the fact that the AO while passing the assessment order for AY 2013-14 has rejected books of the company, makes no addition in the income returned. Likewise, in the case of Tavishi Enterprises P. Ltd. and Brinda Commodities P. Ltd. verbatim assessment orders have been passed, books of account rejected, NIL addition was made. The AO in the respective assessment orders of the three company’s records finding that the investment in immovable property/gold, etc. have been made by the respective companies. Whereas in the case of assessee, the AO has accepted books of account of the assessee and still makes addition alleging siphoning off funds from the accounts of M/s. Mohan India P. Ltd., Tavishi Enterprises P. Ltd. and Brinda Commodities P. Ltd. He contended that from perusal of balance sheet of the company it would be evident that all the properties/gold, etc. were purchased in the name of the companies of Mohan India Group and not in the personal name of the assessee. To substantiate, he placed on record extract of provisional balance sheet as on 31.03.2014 of Mohan India Ltd. From the said extract of Balance Sheet, he pointed that investment in gold, shares of Mohan Infra Con. P Ltd. are in the name of company and the loans and advances to various parties is also reflected in the balance sheet of the company. He further pointed that the property attached by ED/EOW including properties at Civil Lines, Delhi and Bikaner belong to the group companies i.e. M/s. Mohan India P. Ltd., Tavishi Enterprises P. Ltd. and Brinda Commodities P. Ltd. and not in the personal name of the assessee. The sale of properties at Civil Lines, Delhi and Bikaner by ED/EOW for recovery purposes confirmed that the assets remained with the corporate entities and were not transferred for the personal benefit of the assessee. The ld. AR submits that Rs.60 crores seized by the Income Tax Department during search belongs to the group concerns and not the assessee. The outstanding amount as per settlement agreement with NSEL continues to be in force. Therefore, no income has accrued to the assessee.
Per contra, Ms. Namita Khurana representing the department vehemently defending the assessment order and the impugned order passed by CIT(A) submitted that rejection of books of account by the AO has not been contested by the assessee either before the CIT(A) nor has been challenged the same before the Tribunal. Therefore, books of account losses their evidentiary value, hence, cannot be relied upon by the assessee at this stage. Therefore, reference to the balance sheet by the assessee at this stage is misconceived and deserves to be rejected. Likewise, books of account of the company Mohan India P. Ltd. were rejected by the AO during assessment proceedings of the company and the same were not contested before the Appellate Authority in appellate proceedings.
4.1. The ld. DR submits that the AO in the assessment order has meticulously demonstrated that the funds received by Mohan India Group from NSEL for buying commodity i.e. sugar were siphoned off. He contended that the AO while passing the assessment order has not only relied on material seized during search but has also made independent enquiries and has recorded the statements of various persons on oath. The analysis of fund flow clearly establishes that monies were paid without corresponding delivery of goods - an arrangement which squarely falls under mischief of section 2(24)(iv) r.w.s 28(iv) of the Act. The transactions have been rightly taxed by the AO as Business Income of the assessee. The funds siphoned off from NSEL represents income in hands of the assessee and not merely a liability repayable to NSEL by the company. The ld. DR placed reliance on the decision rendered in the case of Ketan Parik vs. UOI 134 Taxman 234 (Bom) to contend that circular fund movement to camouflage real income can be unraveled by lifting the corporate veil and taxing the substance of transaction.
4.2 The ld. DR asserted that addition of Rs.473.71 crores u/s.2(24)(vi) of the Act is fully justified in law and facts of the case. The assessee either directly or through its group entities has received funds from NSEL without any commensurate obligation. The doctrine of real income is not applicable in situation where the benefit has accrued and vested in the assessee in terms of monetary gain. The theory of hypothetical income cannot override the actual flow of funds. He thus prayed for upholding the impugned order and dismissing appeal of the assessee.
We have heard the submissions made by rival sides and have examined the orders of authorities below. We have also examined the assessment order of Mohan India P. Ltd. for AY 2013-14 and have considered case laws on which respective sides have placed reliance to support their submissions. The assessee is one of the Directors of the companies of Mohan India Group i.e. M/s. Mohan India P. Ltd., Tavishi Enterprises P. Ltd. and Brinda Commodities P. Ltd. Consequent to search on Mohan India Group on 26.08.2013 wherein the assessee was also covered in the search, assessment for AY 2014-15 was framed u/s 143(3) of the Act. The addition of Rs.473.71 crores was made in the hands of the assessee u/s.2(24)(iv) of the Act by the AO alleging that the assessee has siphoned off funds from M/s. Mohan India P. Ltd., Tabishi Enterprises P. Ltd. and Brinda Commodities P. Ltd. received by the said companies from NSEL for purchase of sugar.
The assessee at the outset has raised preliminarily objection challenging validity of panchnama dated 24.10.2013 on the ground that panchnama is in the name of bank account not the assessee. Whereas, the requirement of section 132(1) of the Act is that it should be in the name of a person. A perusal of panchnama at page 6 of the paper book reveals that the warrant is in the name of, “Bank Account no. 910010004736234 in the case of Shri Jag Mohan Gupta”. Though in the warrant the name of assessee is mentioned after bank account no., in our considered view this is not a flaw that would invalidate search warrant or would in any manner vitiate search proceedings in any manner. The search warrant clearly brings out the name of a person against whom search action is carried out and also specifies the place where the search is to be conducted. Therefore, in our considered view the search warrant substantially complies with the provisions of section 132(1) of the Act clearly specifying the name of person searched. The decisions on which the ld. AR of the assessee has placed reliance to buttress his submissions are distinguishable on facts hence, does not support the case of assessee. Consequently, ground no. 1 to 4 of assessee’s appeal are dismissed being devoid of any merit.
In ground of appeal No.6 & 7, the assessee has assailed validity of assessment order as the same has been passed u/s143(3) of the Act instead of section 153A of the Act. The date of search is 26/8/2013, therefore, AY 2014-15 is the year of search. The provisions of section 153A of the Act (as they were applicable to assessment year under appeal) provides that the AO shall issue notice to the person searched u/s 153A to furnish return of income in respect of six AY immediately preceding the AY in which search was conducted. Thus, the assessment for immediately six preceding AY shall be made u/s 153A of the Act and the assessment for the year of search shall be made u/s 143(3) of the Act. Thus, the assessment has been rightly framed by the AO for AY 2014-15 u/s 143(3) of the Act. The ground of appeal 6 & 7 are dismissed being devoid of any merit.
8. The assessee in appeal has raised as many as 17 grounds. Ground no. 9 & 10 are the primary grounds assailing addition of Rs.473.71 crores u/s.2(24)(iv) of the Act, rest of the grounds are argumentative and are support of ground no. 9 & 10.
9. At the outset, we would like to observe that we have examined the assessment order in the case of assessee for the impugned assessment year. It runs into 94 pages and have also perused the assessment order in the case of Mohan India P. Ltd. dated 31.03.2016 for AY 2013-14. The same is also very exhaustive and runs into 97 pages. It is interesting to note that the assessment order in the case of assessee is verbatim to the assessment order passed in the case of Mohan India P. Ltd. for AY 2013-14, except the final outcome. In the case of Mohan India P. Ltd., books of the Company were rejected. In fact as per the statements of the directors recorded during the course of search, the directors have admitted on oath that no books of account were maintained by the companies M/s. Mohan India P. Ltd. and Tavishi Enterprises P. Ltd. The AO in the assessment order of the company after having recorded the fact that the assessee- company has received Rs.947.42 crores from NSEL for purchase of commodity i.e. sugar, and that the loans and advances are made by the company and the investment in the immovable property and gold are made by the company, made NIL addition in the hands of the company.
While passing the assessment order in the case of Mohan India, the Assessing Officer has rejected books of accounts. In assessment order in the case of assessee verbatim findings have been given for rejecting books of accounts. The entire discussion in the assessment order of the present assessee is in respect of books of the companies. The expression “assessee” used in the assessment order refers to the company Mohan India P. Ltd. and not Jag Mohan. This is evident from the fact that at some places the expression “assessee companies” have been used by the AO in the order. Nowhere, in the assessment order there is any reference to the books of Jag Mohan. The AO has raised doubt over the credential of the companies, the findings of the AO revolves around authorized capital, subscribed capital, turnover and other income of the companies. Since, the AO has verbatim reproduced the assessment order of the company in the case of the assessee, some of the findings are superfluous and thus, makes the order ambiguous.
We find that the AO in the assessment order has referred to the conflicting stand/statements of the Directors. A perusal of the assessment order reveals that the consistent stand of the assessee (Jag Mohan) is that the affairs of the companies i.e. M/s. Mohan India P. Ltd. and Tavishi Enterprises P. Ltd. are managed by Jai Shankar Shrivastava. Jag Mohan in his statement recorded on 22.08.2013, has categorically stated that Jai Shankar Shrivastava is dealing with the two companies M/s. Mohan India P. Ltd. and Tavishi Enterprises P. Ltd. and is not aware about day to day working and trading of the said companies. It is not emanating from the assessment order that this fact was at any stage rebutted by Jai Shankar Shrivastava. There is no conflict or contradiction in the said statement made by the assessee.
The AO in assessment order has observed that the money received by Mohan Group of companies from NSEL for purchase of commodity i.e. sugar has been diverted by the Directors for their personal gains and investments. From perusal of statement of Jag Mohan post search, it emerges that the money received from NSEL was utilized for investment in properties etc. as there was no check on the manner of utilization of NSEL funds. However, it is not conclusively proved that the entire amount of Rs.947.71 crores was diverted by the Directors and in particular the assessee. Since, no books of accounts were maintained by Mohan Group of companies, the complete details of utilization of funds received from NSEL was not available. The AO on the basis of bank statement/physical enquiries held that the money has been siphoned off by the Directors. The AO on the basis of bank statement observed that the “assessee company” i.e. Mohan India P. Ltd. has advanced around Rs.402.8 crores in the month of July/August 2013 to the following parties:
S.No. Name of the Party Amount (in crores) 1 Vishnu Trading Company 55.31 2 Vijay Shree 48.08 3 Shree Raghav Trading Company 74.92 4 Sandeep Kumar Anuj Kumar 81.15 5 Neki Ram Vijay Kumar 57.23 6 Anuj Traders 56.29 7 Ram Swarop & Sons 29.82 Total 402.8
The AO has alleged that the advances given to the aforesaid parties were after trading was suspended in the NSEL. A specific query was made to the assessee u/s.131 of the Act regarding the details of the payments/transactions with the above said parties and also whether they are related to the assessee in any manner. The assessee in his statement dated 05.02.2016 firmly denied that the aforesaid parties are not related to him and that the money was advanced to the said parties for business transactions. Thus, no adverse inference can be drawn against the assessee from the advances made by the company to the aforesaid parties.
Further, the AO has alleged that the investments are made in the properties by the Directors i.e. Jai Shankar Shrivastava and the assessee. The AO has identified seven such properties as under: -
S.No. Details of the property 1 45, Tatvam Villa, Shona Road 2 8, Plots at Prime City Karnal 3 Flat no. 3401, 3402, Gomti Enclave, Lucknow 4 Flat No. PNC/163, Pinacle Gurgaon 5 Property at Vineet Khand, Lucknow 6 Flat No.11B, Florence, Gurgaon 7 7 Court Road, Civil Line, Delhi
The assessee admitted that part of the amount received from NSEL was invested in properties. As per reply of the assessee property at Sr. No. 1 in above table was purchased in the name of Mohan India P. Ltd. and the property at Sr. No. 7 was initially owned by M/s. Mohan Infra Con. P. Ltd. but now since the shares of the said company are purchased by Mohan India P. Ltd. the owner of the property is Mohan India P. Ltd. In so far as remaining properties at Sr. no. 2 to 6 name of the purchaser was not disclosed in the statement. At the same time, no enquiry was conducted by the Assessing Officer to find the name of beneficial owner of the remaining five properties at Sr. No. 2 to 6. There is no positive finding of fact by the AO that any of the properties mentioned in the above table are in the name of the assessee or the assessee is the beneficial owner of any of the above properties.
We find that the AO in the assessment order has observed that, “from perusal of the bank statement it was seen that the assessee has advanced huge
money to the following person”. The AO, thereafter, has tabulated the name of the parties (70 nos.) and amount (aggregating to Rs.208.835 crores) to whom advances were given. Since, the assessment order in the case of assessee is copy of the assessment order passed in the case of company in Ay 2013-14, it is not clearly emerging that the expression “assessee” used by the AO refers to Mohan India Ltd. or Jag Mohan. Nevertheless, from the context in which it is used, it would be apt to presume that the bank statement referred to in the assessment order is the bank statement of the company Mohan India P. Ltd. Therefore, the logical conclusion would be that the advances are given by the company and not the assessee-Jag Mohan. The AO has referred to the aforesaid advances as an illustrative example to show that the money was used for personal purpose of the Directors. There is no finding given by the AO linking any of the seventy parties named in the table with the assessee. The AO has failed to substantiate that the assessee was benefited in any manner by advancing of loans to the parties tabulated in the assessment order. Thus, the said illustration given by the Assessing Officer is without any substantive material and his merely an allegation without any basis.
Further, the Assessing Officer has pointed that Pay Orders and Demand Drafts were issued from the bank account of Mohan India Group of Companies. The Assessing Officer has given in the name of various parties to whom pay orders and demand drafts were issued aggregating to Rs.159.85 crores and it is alleged that the pay orders/demand drafts were issued in the favour of Directors Jag Mohan/Jai Shankar Shrivastava and their relatives. We have examined the list of pay orders and demand drafts as tabulated in the assessment order at pages 73 and 74. The name of the assessee neither appears in the list of parties who has issued the POs/DDs nor in the column of persons in whose favour such pay orders and demand
drafts have been issued. The AO has not even mentioned as to how the assessee is related to the parties in whose favour PO’s/DD’s are issued. Thus, the allegation of the AO that the assessee has siphoned off funds by issuance of PO’s/DD’s is unsubstantiated.
The AO has further highlighted that the Directors have siphoned off money through Shri Ram Awadh Sharma by transferring of funds from the account of M/s. Brinda Commodities P. Ltd. to Ram Awadh Sharma. Ram Awadh Sharma is stated to be known/related to Jai Shankar Shrivastava. In the assessment order, the entire discussion by the AO with regard to the transfer of funds to Ram Awadh Sharma is with reference to Jai Shankar Shrivastava and not the assessee. Thus, nothing transpires from examination of said transaction against the assessee.
The Assessing Officer after referring to the balance sheet of M/s. Mohan India P. Ltd. has alleged that gold worth Rs.6.15 crores was purchased during AY 2013-14. Further, the AO observed that immovable property of Rs.6.66 crores was purchased in AY 2013-14 and Rs.10.58 crores was purchased during AY 2014-15. On the one hand, the AO has rejected books of account of the companies and on the other he is referring to the same books to hold that investment in gold and immovable properties were made. Be that as it may, no adverse inference can be drawn on such investments when the same have been made in the name of the company and have been reflected in the books of the company.
The Assessing Officer has tried to make out a case of syphoning of funds by the Directors of the Mohan Group of Companies. The assessee being one of the Director has been attributed with usurping 50% (Rs.473.71 crores) of the Total funds received NSEL (Rs.947.42 crores). The Assessing Officer made addition u/s “(24) “income” includes- (iv) the value of any benefit or perquisite, whether convertible into money or not, obtained from a company either by a director or by a person who has substantial interest in the company, or by a relative of the or such person, and any sum paid by any such company in respect of any obligation which, but for such payment, would have been payable by the director or other person aforesaid” The AO has only made reference to the aforesaid provision to make addition. The AO has not specified the head under which the alleged income shall be taxable.
The fundamental principle of taxation laws is that the liability to tax is based on the charging section and not on a definition section. The definition given in section 2 of the Act explain the terms, they do not create the liability to pay tax; only charging sections create the legal obligation. An item may fit in a definition, but it is not taxed unless a charging section brings it into the tax net. Charging sections determine the taxable entity, the tax base (total income), and the timing of taxation. They are the legal base for the tax authorities to raise a demand. While charging section creates the liability, machinery section provides the mechanism for computing the tax. The Hon’ble Supreme Court of India in the case of CIT vs B.C. Srinivasa Setty, 128 ITR 294 has held:
“8. ……….. This inference flows from the general arrangement of the provisions in the Income- tax Act, whereunder each head of income the charging provision is accompanied by a set of provisions for computing the income subject to that charge. The character of the computation provisions in each case bears a relationship to the nature of the charge. Thus, the charging section and the computation provisions together constitute an integrated code. When there is a case to which the computation provisions cannot apply at all, it is evident that such a case was not intended to fall within the charging section. Otherwise one would be driven to conclude that while a certain income seems to fall within the charging section, there is no scheme of computation for quantifying it. The legislative pattern discernible in the Act is against such a conclusion. It must be borne in mind that the legislative intent is presumed to run uniformly through the entire conspectus of provisions pertaining to each head of income. No doubt there is a qualitative difference between the charging provision and a computation provision. And ordinarily the operation of the charging provision cannot be affected by the construction of a particular computation provision. But the question here is whether it is possible to apply the computation provision at all if a certain interpretation is pressed on the charging provision. That pertains to the fundamental integrity of the statutory scheme provided for each head.” Thus, mentioning of charging/machinery provision is necessary for justifying addition made in assessment order. Mere inclusion in the definition of income is not enough.
The CIT(A) in the impugned order has held that the income shall be chargeable to tax as ‘business income’ u/s28(i) of the Act. Even if we assume that the vacuum of charging section left by the AO is filled by the CIT(A), the amount usurped by the assessee can not be taxed in the hands of the assessee as ‘business income’. Neither, the assessee is in the business of usurping the funds of the companies nor it is established by the authorities below that the assessee is in the business commensurate to the objects of the Companies. Hence, no addition can be made in the hands of the assessee u/s 28(i) of the Act.
Thus, in light of above discussion, we find merit in ground no. 9 & 10 of appeal, hence, the same are allowed.
In the result, appeal of the assessee is partly allowed in the terms aforesaid.
Order pronounced in the open court on Wednesday the 07th day of January, 2026.
Sd/- Sd/- (M. BALAGANESH) (VIKAS AWASTHY) लेखाकार सदस्य/ACCOUNTANT MEMBER न्यानयक सदस्य/JUDICIAL MEMBER धिल्ली/Delhi, ददिांक/Dated 07/01/2026 NV/- प्रतिलिपि अग्रेपिि/Copy of the Order forwarded to : अपीलार्थी/The Appellant , 1. प्रनिवादी/ The Respondent. 2. 3. The PCIT ववभागीय प्रनिनिथि, आय.अपी.अथि., वदल्ली /DR, ITAT, धिल्ली 4. गार्ड फाइल/Guard file. 5.
ORDER, //True Copy//
(Asstt. Registrar) ITAT, DELHI