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Income Tax Appellate Tribunal, DELHI BENCH ‘H’, NEW DELHI
Before: Dr. B. R. R. KumarSh. Yogesh Kumar US
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘H’, NEW DELHI Before Dr. B. R. R. Kumar, Accountant Member Sh. Yogesh Kumar US, Judicial Member ITA No. 675/Del/2020 : Asstt. Year : 2008-09 ITA No. 676/Del/2020 : Asstt. Year : 2009-10 ITA No. 677/Del/2020 : Asstt. Year : 2010-11 ITA No. 678/Del/2020 : Asstt. Year : 2011-12 M/s U K Paints (Overseas) Ltd., Vs ACIT, C/o Mr. Kuldip Singh Dhingra, Central Circle-8, 19, DDA Commercial Complex, Kailash New Delhi-110055 Colony Ext., Zamradpur, New Delhi-110048 (APPELLANT) (RESPONDENT) PAN No. AABCU7038E Assessee by : Sh. Pradeep Dinodia, CA & Sh. R. K. Kapoor, CA Revenue by : Ms. Sapna Bhatia, CIT-DR Date of Hearing: 06.11.2023 Date of Pronouncement: 19.01.2024 ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeals have been filed by the assessee against the orders of ld. CIT(A)-24, New Delhi dated 10.12.2019.
The common grounds have been raised by the assessee in ITA Nos. 675, 676, 677 & 678/Del/2020. In ITA No. 675/Del/2020, following grounds have been raised by the assessee:
“1) That the Ld. CIT(A) has erred in law and on facts and in the circumstances of the case in upholding the action of the AO in assuming jurisdiction u/s 153C of the Income Tax Act.
ITA Nos. 675 to 678/Del/2020 2 U K Paints (Overseas) Ltd. 2) That the order passed by the Ld. CTT(A) upholding the action of Ld. AO is bad in law and on facts of the appellant's case. 3) That the Ld. CIT(A) erred in holding that AO has legally and validly assumed jurisdiction u/s 153C of the Income Tax Act in absence of any incriminating material found during the search on Mr. K. S. Dhingra and Mr. G. S. Dhingra on 16.09.2011. 4) That the Ld. CIT(A) erred in law and on facts in holding that books of accounts prepared in raw form on outsourcing basis on commercial terms are of incriminating nature for assuming jurisdiction u/s 153C of the Income Tax Act. 5) That the Ld. CIT(A) erred in law and on facts in holding that AO has interpreted and applied the directions of Hon'ble High Court vide its order dated 02.05.2018 in the writ proceedings in correct legal manner in deciding the issue of assumption of jurisdiction u/s 153C of the Income Tax Act. 6) That the Ld. CIT(A) erred and on facts in law in holding the action of the Ld. AO in relying on:- i) Inadmissible statements recorded during survey mainly of Mr. Rajneesh Gupta, Accountant u/s 133A of the Income Tax Act for assuming jurisdiction u/s 153C of the Income Tax Act. ii) Illegally holding that although the documents found per se don't reveal any undisclosed income yet such documents indicate that appellant is resident in India for assuming jurisdiction u/s 153C of the Income Tax Act. iii) Illegally concluding that even if no documents are found pertaining to a particular year falling in the block of years, yet assessment u/s 153C is required to be framed. 7. That the Ld. CIT(A) erred in law and on facts in holding for assuming jurisdiction u/s 153C of the Income Tax Act, the AO could travel beyond the documents identified in the satisfaction note dated 08.10.2013. 8. That the Id. CIT(A) erred in law and on facts in not appreciating that presumption about a document u/s 132(4A) and section 292C of the Income Tax Act cannot be partial in as much as that the income mentioned in the document is correct, but expenses incurred are incorrect and are required to be proved. 9. That the Id. CIT(A) erred in law and on facts in holding that presumptions u/s 132(4A) is applicable only to a searched
ITA Nos. 675 to 678/Del/2020 3 U K Paints (Overseas) Ltd. person u/s 153A and not to proceedings u/s 153C of the Income Tax Act. 10. The Ld. CIT(A) erred in law and on facts in upholding the action of Ld. AO in distinguishing the judgment of Hon'ble Delhi High Court in the case of Kabul Chawla merely on the plea that no returns of income were filed by the assessee in India. 11. The Ld. CIT(A) erred in law and on facts in concluding that the judgment of Hon'ble Delhi High Court in the case of Kabul Chawla is distinguishable because it was rendered with reference to section 153A and not 153C of the Income Tax Act 12. The Ld. CIT(A) erred in law and on facts in distinguishing the judgments of Hon'ble Delhi High Court in the case of ARN Infrastructure India Ltd. 394 ITR 561 and Pr. CIT Vs. Instronics Ltd. 82 Taxman.com 357 (Delhi) and erroneously held that AO has correctly assumed jurisdiction, although none of the documents in the satisfaction note dated 08.10.13 or none of other documents are of incriminating nature and are merely audited books of accounts duly accounted for in the audited Balance Sheets of these companies. 13. The Ld. CIT(A) erred in law and on facts in holding that even if no satisfaction note is recorded by the A.O. as an A.O. of the searched person assuming of jurisdiction u/s 153C is still valid. 14. The Ld. CIT(A) erred in law and on facts in upholding the action of AO in brining to tax a sum of Rs. 29,70,14,630/- from the audited Balance Sheet by treating the said audited Balance Sheet of the foreign company as incriminating in nature. 15. The Ld. CIT(A) failed to appreciate that all necessary disclosures to RBI, Tax Authorities in the assessments of parent holding company, Statutory Declarations in Statutory Forms 3ECB etc. had been made and no addition could be made as there was no undisclosed income in the documents impounded/seized. 16. That the ld. CIT(A) erred in law and on facts in holding that assessee company is resident in India within the meaning of section 6(3)(ii) of the Income Tax Act ignoring the vital evidences such as Board Meeting held overseas and all business activities carried out in overseas. 17. That the Ld. CIT(A) erred in law and on facts in concluding that the documents indentified in the satisfaction note dated 08.10.2013 convey that management and control of the affairs of assessee foreign company was wholly situated in India during all the year under consideration.
ITA Nos. 675 to 678/Del/2020 4 U K Paints (Overseas) Ltd.
That the Ld. CIT(A) erred in law and on facts in not accepting the contention that residential status of an assessee is required to be determined on a year-to-year basis and there is no presumption in law that once a resident always a resident'. 19. That the Ld. CIT(A) erred in law and on facts of the assessee's case in treating the shareholder's activities and equating the same with the management and control for the purposes of determining the residential status u/s 6(3)(ii) of the Income Tax Act. 20. That the Ld. CIT(A) erred in law and on facts in holding the action of the Ld. AO in relying on:- i. In erroneously holding that Indian Directors never visited Jersey where the assessee company is incorporated and registered for deciding the issue of residential status of the assessee foreign company. ii. Erroneously holding that income generating activities were carried out in India or from India at the directions of Sh. K. S. Dhingra, Director of the company for deciding the issue of residential status of assessee foreign company. iii. Erroneously holding that availability of PAN in India means that assessee has taxable income in India for taxing the income of assessee foreign company in India. iv. Erroneously holding and concluding that maintenance of books of accounts in India on commercial basis is for the purposes of exercising the management and control on the affairs of the foreign company for the purposes of determining residential status of the company. 21. That Ld. CIT(A) erred in law and on facts in holding the action of the AO in taxing gross income of the assessee at Rs. 29,70,14,630/- and disallowing the expenses incurred as per the audited Balance Sheet. 22. That the Ld. CIT(A) erred in law and on facts in not allowing the expenses which had been accounted for in the same audited balance sheet from where the gross income has been picked up by the AO for making the assessment. 23. The Ld. CIT(A) failed to appreciate that all income generating activities i.e. affairs within the meaning of section 6(3)(ii) of the Income Tax Act is as also all other corresponding affairs/expenses were incurred wholly outside India and findings to the contrary are based on conjectures, surmises and imagination and inadmissible evidences.
ITA Nos. 675 to 678/Del/2020 5 U K Paints (Overseas) Ltd. 24. The Ld. CIT(A) erred in law and on facts in holding that all decisions about income generating affairs are taken by Mr. K. S. Dhingra from India. These findings are based on no evidences and are prayed to be expunged in Para 5.7.3 of CIT(A)'s Order. 25. That Ld. CIT(A) erred in law and on facts in holding that Mr. K. S. Dhingra and Mr. G. S. Dhingra are the Principal Officers within the meaning of section 2(35) of the Income Tax Act. 26. That the Ld. CIT(A) erred in law in not calling for the records from A.O. in respect of direct enquiries made by Tax Department from the corresponding authorities in Jersey to check the residential status of the assessee. 27. That the Ld. CIT(A) failed to appreciate that assessee could not be a party to such enquiries and could not provide any evidence as alleged by the CIT(A). 28. Without prejudice, if assessee is treated as resident in India, the Ld. CIT(A) erred in law and on facts of the assessee's case in not directing the AO to exclude the dividend income received from Indian companies u/s 10(34) / 10(35) of the Income Tax Act on wholly irrelevant considerations.” 3. A search & seizure action u/s 132 of the Income Tax Act, 1961 was conducted on Dhingra Group of cases on 16.09.2011. During the course of search operation, the Revenue alleged that certain documents, papers belonging to M/s U. K. Paints (Overseas) Ltd. were found and seized. Accordingly, in the case of the assessee proceedings u/s 153C of the Act have been initiated and Assessment Order u/s 153C of the Act have been passed on 24.10.2018 for A.Y. 2008-09, A.Y. 2009-10, A.Y. 2010-11 and A.Y. 2011-12.
The additions made were subject matter of appeal before the ld. CIT(A) who affirmed the additions made and the assessee filed appeal before the Tribunal.
ITA Nos. 675 to 678/Del/2020 6 U K Paints (Overseas) Ltd. 5. During the proceedings before the Tribunal, the assessee filed letter issued from ACIT, Central Circle-8 which is reproduced below in toto:
“Sub: Notice u/s 148A(b) of the Income Tax Act - Subsequent to order dated 25.04.2023 passed by Hon’ble Supreme Court in the case of DCIT vs. UK Paints Overseas Ltd. - Reg.
Please refer to the subject mentioned above.
A search & seizure action was conducted u/s 132 of the Act on Sh. Dhingra Group of cases on 16.09.2011. In consequent to the same, notice u/s 153C was issued to you on 08.10.2013. The assessment proceedings in your case were finalized vide order u/s 153C r.w.s. 143(3) of the Act, 1961 on 19.03.2014 at an assessed income of Rs. 26,88,20,083/-on account of unexplained income earned by the company in India.
Notably, the Revenue went into appeal before the Hon’ble Supreme Court wherein the Hon’ble Supreme Court vide order dated 25.04.2023 in the case of DCIT vs. UK Paints Overseas Ltd. held that as under:-
“………As observed hereinabove, as no incriminating material was found in case of any of the Assessees either from the Assessee or from the third party and the assessments were under Section 153-C of the Act, the High Court has rightly set aside the Assessment Order(s). Therefore, the impugned judgment and order(s) passed by the High Court do not require any interference by this Court. Hence, all these appeals deserve to the dismissed and are accordingly dismissed. However, so far as the prayer made on behalf of the Revenue to permit them to initiate the re-assessment proceedings is concerned, it is observed that it will be open for the Revenue to initiate the re-assessment proceedings in accordance with law and if it is permissible under the law.”
The Hon’ble Supreme Court while passing the above order, held that if it is permissible under the law, the re-assessment proceedings in accordance with the law is open for the Revenue. The above order was passed wherein other cases with similar issues were also tagged, including your case.
ITA Nos. 675 to 678/Del/2020 7 U K Paints (Overseas) Ltd.
It is brought to your notice that subsequent to the order of Hon'ble Supreme Court, the Board has issued Instruction No. 1 of 2023 dated 23.08.2023 vide F. No. 279/Misc./M- 54/2023-ITJ. Para 7.2.1 of the instruction is reproduced as under:-
“In the lead and all the tagged cases, necessary action u/s 148/147 need to be taken in the situation stated by the Court in the para 14(iv) of the said order in view of section 150 of the Act. The AO will be required to reopen the cases following the currently applicable procedure for reopening i.e. following the procedure prescribed u/s 148A of the Act as inserted by Finance Act, 2021 in accordance with the law laid down by the Hon’ble Supreme Court by its order dated 04.05.2022 in Union of India vs. Ashish Agarwal case (2022 SSC Online SC 543). In view of the specific provisions of section 153(6) of the Act, all the cases reopened u/s 147/148 of the Act will be required to be completed by 30.04.2024." 5. During the course of assessment proceedings u/s 153C of the Act in your case, it was noticed that during the search and seizure action carried out at various premises related to Dhingra Group on 16.09.2011, certain documents/paper belonging to M/s U.K. Paint (Overseas) Ltd. (UKPO, in short) were found and seized/impounded therefrom. These documents and post-search investigation/ enquiries revealed that the company is wholly controlled and managed from India by the Dhingra family and hence is Resident in India as per the section 6(3) of the I.T. Act, 1961.
5.2 As per section 6 (3)(ii) of the Act, a company is said to be resident in India in any previous year if during that year, the control and management of its affairs is situated wholly in India. That M/s UKPO is controlled and managed wholly in India is established from the facts discussed hereunder:
5.2.1.Books of accounts regularly prepared and maintained in India: Books of account of assessee company M/s U.K. Paints Overseas Ltd. were found and seized/impounded during the course of search and survey action at the addresses - 38 & 19, DDA Commercial Complex, Zamrudpur, Kailash Colony, New Delhi. This shows that the books of account of the assessee company are prepared and maintained in India. In this connection
ITA Nos. 675 to 678/Del/2020 8 U K Paints (Overseas) Ltd. statement of Sh. Rajnish Gupta, Deputy Manager of accounts of UK Paints India Pvt. Ltd was recorded on oath on 16.09.2011. Sh. Gupta admitted that for the last three and a half years he has been regularly maintaining books of accounts of UKPO Ltd. at 38, DDA Commercial Complex Zamrudpur. The relevant excerpts of his statement are reproduced below for ready reference:
“...Q: Please explain who is responsible for maintaining books of accounts of other subsidiary companies of UK Paints India Pvt. Ltd. ?
Ans: The responsibility has been delegated by the management to five or six people who sits usually in this premise i.e. 38, DDA Commercial Complex, Zamarudpur, New Delhi-48. Further to state that books of accounts in respect of most of the subsidiary companies of UK Paints India Pvt. Ltd are maintained regularly in this building.
Q: Please elaborate what type of accounts with respect to UKPO Ltd. are being maintained in this premise?
Ans. For the past three and half year I have been regularly maintaining books entries, bank accounts, Journal entries, cash and voucher entries etc.
Q: Please state the procedure after daily book keeping is done by you with respect to accounts of UK Paints (Overseas) Ltd.?
Ans: Towards the year end the account books are closed and final balance sheet and Profit & Loss account are submitted to higher authorities including Sh. Naveen Choudhary, CFO of UK Paints (India) Pvt. Ltd. For finalization. Q: How do you prepare the accounts pertaining to UK Paints Overseas Ltd.
Ans: I Prepare the accounts including general entries based on bank statements of the bank accounts maintained in the name of UK Paints (Overseas Ltd.)
ITA Nos. 675 to 678/Del/2020 9 U K Paints (Overseas) Ltd. The above fact was further confirmed by Mr. Naveen Choudhary, CFO, in his statement recorded on oath under section 132(4) on 16.09.2011. The relevant excerpts are reproduced below for ready reference:
Q. No. 24: Please explain who prepare the accounts of all the overseas company?
Ans: The bank accounts of all the overseas company are received by us and on the basis of that accounts we prepare the accounts of the overseas company in India.
Further the Director of the company in India, Sh. G.S. Dhingra, in his statement recorded on 17.09.2011 during the course of survey action at 38 DDA Commercial Complex, Zamrudpur, Kailash Colony, New Delhi, accepted that the books of accounts of these foreign companies are being maintained in India. The relevant excerpts of his statement are reproduced below for ready reference:
“Q:9 There are papers, seized in annexure A-6 page no. 54 seen that the balance sheet, P & L account, vouchers, ledger are being sent to Michael Trunchion by Sh. Anil Bhalla through Concord couriers from UK Paints (lndia) to jersey, Channel, Island. Please comment.
Ans.: As I have said above our books of accounts maintained at 38, DDA Commercial Complex, Zamrudpur, Kailash Colony, New Delhi and Mr. Clivb Tomes & Co. who is our C.A. who files returns on our behalf and audit the same in Jersey in Channel Island.
Similarly, the Chairman and Director of the company, Mr. K.S. Dhingra, 'when confronted with the statement of Sh. Rajnish Gupta,(supra), admitted that the books of accounts of UKPO was being prepared at 38, DDA Commercial Complex, Zamrudpur office. The relevant excerpts of his statement are reproduced below for ready reference:
“Q.10. During the course of survey carried out u/s 133A of I. T. Act at 38, DDA Commercial Complex, Kailash Colony Extn. N. Delhi Sh. Rajnish, accountant in recording statement admitted that he is maintaining the
ITA Nos. 675 to 678/Del/2020 10 U K Paints (Overseas) Ltd. books of accounts of M/S U K Paints Overseas Ltd. and worked under Sh. Naveen Choudhury, CFO of your company. Please explain.
Ans.: As owners and ultimate beneficiaries of O.K. Paints Group Companies including overseas companies, UK Paints India Pvt. Ltd. CFO & Accountant must oversee, advise, supervise if necessary, if required the operating people of overseas entities whose task it is mainly to maintain accounts of these companies.
...Q.13.. I am showing you the pages no. 55 to 79 of Annexure A-6 impounded during the course of Survey u/s 133A of I. T. Act as per letter 23/11/2006 on page 79 and also page 130 of Annexure 7 which confirm that the Books of Accounts and Financial Statements are prepared in India and sent to your CA Clive Tomes & company after Sh. Anil Bhalla who is your financial advisor & CA unofficially prepared & Audits your Books of Accounts. Please explain.
Ans.: To the best of my knowledge we prepare the books of accounts in raw form in the 38 Zamrudpur Office and as you know there are no employees in Jersey and this is only an investment company therefore books of accounts are prepared in office and the audit is conducted by the CA firm Clive Tomes & Co. and they only file the return in Jersey after due diligence.
There is an extremely important admission in the above statement of Sh. K. S. Dhingra. In his answer to Q. No. 13, Sh. K. S. Dhingra, who is the main and controlling director in UKPO, has categorically admitted two things:
that the "owners and ultimate beneficiaries" of UKPO are located in India, and that is why the CFO & accountant in India "must oversee, advise, supervise if necessary, if required the operating people of overseas entities whose task it is mainly to maintain accounts of these companies.”
This shows that complete control over UKPO is exercised from India.
ITA Nos. 675 to 678/Del/2020 11 U K Paints (Overseas) Ltd. 5.2.2.All Strategic/investment decisions of UKPO are taken by Sh. K. S. Dhingra in India: Strategic investment decisions of the company are taken by the Chairperson of UKPO, Sh. K.S. Dhingra. In this context, it will not be out of place to mention that BJN Holdings Ltd. is a 100% subsidiary of M/S UKPO. However the final decision to dissolve the same and create two more subsidiaries, was taken by Sh. K.S Dhingra in India. This fact has been categorically admitted by the CFO of the company Sh. Naveen Choudhary in his statement recorded on oath on 10.04.2012, under section 131 (IA) of the Act. The relevant excerpt of the statement is reproduced below for ready reference:
"Q.36.: How and where the decision regarding creating the companies that, is BJN Holdings (D) Limited and BJN Holdings (I) Limited were taken?
Ans.: Sh. Anil Bhalla and Mr. Jerry Adams advised Mr. K S. Dhingra that we should dissolve BJN Holding Ltd. which was being administered in Isle of Man and instead new companies BJN Holdings (BD) Limited and BJN Holdings (I) Limited shall be formed. Thereafter Mr. KS Dhingra after taking opinion from me also okayed the proposal to form these companies. This decision was taken by Mr. K S Dhingra in India and then communicated to the Directors abroad who consequently approved the decision in the Board of Directors meeting.
The above excerpt shows that the Board of Directors (excluding Sh. K. S. Dhingra) does not have any independence or power to take any decision, and a decision of such serious nature is taken singlehandedly in India and communicated to them. The above action of Mr. K.S Dhingra also stems from the fact that the company UKPO, located in Jersey, is controlled and managed by him in India. This has been admitted by Sh. K.S. Dhingra himself during the course of search. The relevant excerpt of his statement is reproduced below:
“Q.3 Who is the Managing Director in M/s U.K. Paints (India) Pvt. Ltd. And UK Paints (Overseas) Limited and who controlled the affairs of these companies?
ITA Nos. 675 to 678/Del/2020 12 U K Paints (Overseas) Ltd. Ans. There is no formal Managing Director in the above said companies. Being I am holding the substantial shares of company and senior Director in the company I am responsible for the affairs of the above two companies."
Another important decision, taken singlehandedly by Mr. K.S Dhingra, is reflected from the seized document Annexure A-11, Page 69 seized from 38, DDA Commercial complex, Zamrudpur, New Delhi. This document is a letter dated 20 February 2003 written by Sh. Anit Bhalla, terminating the services of the service provider in Jersey. The letter states as below:
"Dear Jeremy,
As the terms set out by you are not acceptable to the Chairinan Mr. K. S. Dhingra, he has decided to shift to another service provider namely — Jane A. Hurley……..”
This once again comes as an instance showing that the control and management of the company UKPO lies exclusively in the hands of Sh. K.S. Dhingra in India. It is pertinent to mention that UKPO has no employees in Jersey (admitted by K.S. Dhingra in Q.13) (supra), and that service provider is hired in Jersey to carry out various responsibilities related to the company. Hence dismissing and hiring such service provider is an important and strategic decision which appears to be taken by Sh. K. S. Dhinpra singlehandedly, showing the extent of control over UKPO.
5.2.3.Board meeting and Resolutions of M/s UKPO: The seized/impounded documents clearly suggest that meetings of Board of Directors are held in India. This is evidenced from document extracted from the hard disc i.e. Annexure A35/British Paints/Vasanta Mail. This document is an email sent by Mr. Vinod Kaushik to Rajnish Gupta, Deputy Manager of Accounts of UK Paints India Pvt. Ltd. and is reproduced below:
“Subject : FW: Ukpo (draft) Bd. Reso. (grouped)- Apr— 07 to Mar 08, Ukpo (draft) Bd.
ITA Nos. 675 to 678/Del/2020 13 U K Paints (Overseas) Ltd.
"Dear Mr. Rqjnish,
Please find attached Board Resolution for UKPO as discussed.
Regards Vinod Kaushik
Attachments----------- Ukpo (draft) Bd. Reso (grouped) —Apr-07 to Mar-08 31.5KB Uk20 (draft) Bd. Reso (grouped) —ApF-08 to Mar-09 32.5KB Part 1.4 72bytes"
Attachments to the email show that the draft Board resolutions have been prepared on the letter head of UKPO with its registered address of Jersey. However, the subject on the draft shows the place of meeting in India, and reads as "EXTRACT FROM THE MINUTES OF THE MEETING OF THE BOARD OF DIRECTORS OF U.K.PAINTS (OVERSEAS) Ltd. HELD ON-----, THE---- DAY OF------ AT 19, ADA COMMERCIAL COMPLEX. KALASH COLONY EXTN.. ZAMRUDPUR, NEW DELHI: 110048 (INDIA). These draft resolutions have been prepared for different days and are dated 09, 17, 20 & 31 s t August 2007 and 11 t h and 19 t h March 2009. They pertain to important investment decisions and are summarized hereunder:
Date of draft Subject Resolved to resolution 9 Aug. 2007 Investment in "That surplus funds of the company shares of PPG to the extent of USD.5,51,000 be Industries inc. invested by purchasing shares of PPG Industries INC." 17 Aug. 2007 Investment in "That surplus funds of the company shares/Bonds to the extent of USD.60,00,000 be invested in different securities like Shares /Bonds etc. 20 Aug 2007 Sale of shares of "RESOLVED THAT the do hereby sell AKZO Nobel NV. & 34875 Shares of Akzo Nobel NV & Sherwin Williams 88700 Sherwin Williams Shares of
ITA Nos. 675 to 678/Del/2020 14 U K Paints (Overseas) Ltd. held in the name of the Company”. 31st Aug. 2007 Investment in “...the surplus funds of the Shares Company to the extent of USD$ 11,00,000 be invested in Shares of KANSAI PAINTSCO LTD. “...the surplus funds of the 11 Mar. 2009 Investment in Shares/Bonds company to the extent of USD 16,70,000 be invested in different Securities like Shares /Bonds etc.” 18 Mar. 2009 Sale of Shares of "RESOLVED THAT the Company do ROHM and HAAS hereby sell 20000 Shares of ROHM and HAAS held in the name of the Company."
The above documents distinctly prove that Board Meetings are held in India and crucial investments decisions in respect of M/S UKPO, Jersey, are also taken in India. Even when the meetings are held in Jersey which is for the sake of formality and paper evidence, the resolutions are adopted by them in accordance with the decisions taken by Mr. K.S. Dhingra in India.
5.2.4 Accordingly, the Assessment order for the A.Y. 2007-08 was passed and addition of Rs. 26,88,20,083/- was made in your income on 19.03.2014 u/s 153C r.w.s. 143(3) of the Act, 1961. However, the above addition was not specifically based on any incriminating material found during the course of search proceedings, hence the same did not sustain. Therefore, the income earned by you in India to the tune of Rs. 26,88,20,083/- has escaped assessment as the earlier assessment has been set aside by the Apex Court vide order dated 25.04.2023 in the case of DCIT vs. UK Paints (Overseas) Ltd and other tagged cases.
As per the para 4, reproduced above, the procedure for reopening is to be followed as prescribed u/s 148A of the Act as inserted by Finance Act, 2021 in accordance with the law laid down by the Hon’ble Supreme Court by its order dated 04.05.2022 in Union of India vs. Ashish Agarwal case (2022 SSC Online SC 543).
ITA Nos. 675 to 678/Del/2020 15 U K Paints (Overseas) Ltd. 7. Keeping in view the above facts and circumstances of the case and in compliance to the order of Hon’ble Supreme Court and the CBDT’s instruction no 1 of 2023, you are hereby being provided with the information and the material relied upon by the revenue i.e. the assessment order passed u/s 153C dated 19.03.2014 before issuing the notice u/s 148 of the Act for reopening of the case for theA.Y.2007-08.
You are required to submit your response to the above within one week from the issue to this notice i.e. on or before 06.10.2023.
In case no response is received from your end, the matter will be processed further in accordance with provisions of section 148A of the Act, based on material available on record.”
At para 5.2.4 of the above letter, the Assessing Officer specifically mentions that the additions made to the income of the assessee was not specifically based on any incriminating material and the same did not sustain. The AO has also proposed to initiate proceedings u/s 148 after duly following the procedure prescribed u/s 148A of the Act as inserted by Finance Act, 2021. Since, the Revenue itself has embarked upon the process of initiation of proceedings u/s 148 after accepting that the assessment made u/s 153C of the Act was not based on any incriminating material, the appeals of the assessee assailing the additions made u/s 153C are liable to be allowed.
In the result, the appeals of the assessee are allowed. Order Pronounced in the Open Court on 19/01/2024.
Sd/- Sd/- (Yogesh Kumar US) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 19/01/2024 *Subodh Kumar, Sr. PS*