DCIT CIR. 3(3)(1), MUMBAI vs. NINA BHADRASHYAM KOTHARI, MUMBAI

as to why the peak credit of Rs.1.40 crores should not be added to her total income.Vide her letter dated 25.02.2014,stated that she did not own the said account.From the information received from the investigation wing of Chinnai,the AO found that husband of the assessee Bhadrashayam Harshad Kothari(BHK) and the assessee were the beneficial owner of the account i.e.Sisal Holding Limited,that BHK had paid tax together with interest,amounting to Rs.73.04 lakhs ‘in order to buy peace and avoid protracted litigation.’However,the AO held that the disputed amount had to taxed in her hands.

3.Aggreived by the order of the AO,the assessee filed an appeal before the First Appellate Authority(FAA)and made detailed submission and relied upon certain case law.She raised objection about re-opening of the case.After considering the available material,he held that the AO was very well within his jurisdiction to evoke the provisions of section 147/148 of the Act. He further held that in the case of Late BHK the AO had referred to the existence of a foreign account in the name of Sisal,that the peak credit of the said account with HSBC Bank Geneva was Rs.1.40 crores,that while finalising the assessment of Late BHK on 31.03.2013,the AO had made a reference to the same bank account and had added Rs.1.40 crores as peak credit of the account to his total income for the AY.2006-07,that the income returned by Late BHK in respect of the said account was accepted by the department,that assessment in his case was made on substantive basis,that the same income was assessed again in case of the assessee on substantive basis,that it was a case of double taxation of same income,that the same was not permissible as per the provisions of the Act,that the AO had not disputed the fact that disputed amount was assessed in the hands of the husband of the assessee,that there was justification in assessing Rs.1.40 crores in the hands of the assessee under the head income from other sources.

4.Before us,the Departmental.Represnetative(DR)argued that as per the scheme of the Act income was to be taxed in the right hands and in the right assessment years,that owning of income by her husband no excuse for not assessing the income in the hands of the assessee.He referred to the cases of Ch.Atchaiah(218 ITR 239),Sirram Jagannath(250 ITR 689),S P Jaiswal (224 ITR 619).The Authorised Representative(AR)stated that same income could not be taxed in two hands,that department had assessed the disputed income in the hands of the husband of the assessee,that there was no justification in assessing the same income in her hands.He referred to the case of Ch.Atchaiah (supra).

2343&2344/M/16- Smt. Nina Bhadrashyam Kothari 5.We have heard the rival submissions and perused the material before us.Undispute facts of the case are that there was an account with HSBC,Geneva in the name of Sisal,that the assessee and her husband were the beneficiaries of the account,that the peak credit of the account for the year under consideration was Rs.1.40 crores,that the husband of the assessee admitted that the disputed amount was his income,that he paid tax and interest for the additional income offered,that the department accepted the claim made by Late BHK and assessed Rs.1.40 crores in his hands on substantive basis,that identical income from the same source and for the same year was assessed in the hands of the assessee also,that the assessment in her case was not made on protective basis.In short,there are two substantive assessment orders for the same income and for the same AY.We are of the opinion that the basic principles of tax jurisprudence stipulate that there should not be double taxation and that there should not be double deduction.No authority is required to support the said well reconginsed fundamental principle.If the Sovereign has right to tax the income of Subjects,the tax payers have right that income earned by them is taxed once only and in one AY. only.In the case before us,the Departmental authorities,in their wisdom, decided that peak credit appearing in the Sisal account was to be assessed in the hands of Late BHK,that income was not jointly assessed in the hands of the assessee and her husband though both were the joint beneficiaries of the Sisal Account.The AO could have assessed the income in the hands of the assessee and could have recovered the taxes from her if he was of the opinion that Late BHK was not the real owner and beneficiary of the Sisal Account.A conscious decision was taken by the departmental authorities after deliberating upon all the facts and the husband of the assessee was asked to pay the taxes for the income appearing in the Sisal account.If the department was of the opinion that income was wrongly assessed in the hands of Late BHK,it should have annulled the his assessment order.Two substantive orders for the same year and for the same income cannot survive. 5.1.We agree that income should be assessed in right hands,as argued by the DR.But,which hands are the right hands has to be decided by the AO.He accepted that the Late BHK was the real beneficiary of the Sisal Account and assessed the disputed income in his hands.The DR has not brought anything on record to prove as to how the conclusion drawn by the AO was factually or legally incorrect.Nothing prevented him in assessing the Sisal account income in right hands,but he should not have taxed the same income twice i.e. in two hands.The case laws relied upon by the DR are of no help as the facts of those cases are totally different from the facts of the 2343&2344/M/16- Smt. Nina Bhadrashyam Kothari case under appeal.First we would like to refer to the case of Ch.Atchaiah(supra)relied upon by the both the sides.The relevant portion of the order reads as under: “A comparison of the provisions of the Indian Income-tax Act, 1922, and the Income-tax Act, 1961, immediately brings out the difference between them. Section 3 of the 1922 Act provided that in respect of the total income of a firm or an association of persons, the income-tax shall be charged either on the firm or the association of persons or on the partners of the firm or the members of the association of persons individually. It is evident that this option was to be exercised by the Income-tax Officer keeping in view the interests of the Revenue. In such a situation, it was generally held that once the Income-tax Officer opted for one course, the other course was barred to him. But no such option is provided to him under the present Act. Section 4 of the Act of 1961 says that income-tax shall be charged on the total income "of every person" and the expression "person" is defined in clause (31) of section 2. The definition merely says that the expression "person" includes, inter alia, a firm and an association of persons or a body of individuals whether incorporated or not. There are no words in the present Act which empower the Income-tax Officer or give him an option to tax either the association of persons or its members individually or for that matter to tax the firm or its partners individually. If it is the income of the association of persons in law, the association of persons alone has to be taxed; the members of the association of persons cannot be taxed individually in respect of the income of the association of persons. Consideration of the interests of the Revenue has no place in this scheme. Where Parliament wanted to provide an option, or a discretion, to the Income-tax Officer, it has provided so expressly. Section 183 [which has since been omitted with effect from April 1, 1993, by the Finance Act, 1992] provided that in the case of an unregistered firm, it is open to the Income-tax Officer to treat it, and make an assessment on it, as if it were a registered firm, if such a course was more beneficial to the Revenue--in the sense that such a course would fetch more tax to the public exchequer……Under the present Act, the Income-tax Officer has no option like the one he had under the 1922 Act. He can, and he must, tax the right person and the right person alone. By "right person" is meant the person who is liable to be taxed, according to law, with respect to a particular income. The expression "wrong person" is obviously used as the opposite of the expression "right person". Merely because a wrong person is taxed with respect to a particular income, the Assessing Officer is not precluded from taxing the right person with respect to that income.” 5.2.As stated ealier,the AO has not proved as to how that taxation of Sisal account income in the hands of husband of the assessee was assessment of a wrong person.So,the case cited by the DR rather helps the argument advanced by the assessee.In the case of Sirram Jagannath(supra)the Hon’ble Rajasthan High Court had dealt with the assessment of firms and the partners.It is not the case of taxation of income of the husband and wife where tax has to levied on one person.So,we hold that facts of that case are not applicable to the facts of the case under appeal. In the case of SP Jaiswal(supra),the Hon’ble Apex Court had held that advancing of loan by the assess to his family members was nothing but a paper device designedly made to reduce the tax burden of the appellant.But,in the case under consideration the AO had alleged that there was an attempt to reduce the tax burden.The husband of the assessee had the tax at the maximum marginal rate. The AO had accepted the return filed by him and no revisionary proceedings were 2343&2344/M/16- Smt. Nina Bhadrashyam Kothari initiated.After assessing the disputed amount substantively in the hands of BHK,as stated earlier,there was no justification for assessing same in the hands of his wife also. Considering the above,we are of the opinion that there is no legal or factual infirmity in the order of the FAA.So,upholding the same,we decide the effective ground of appeal against the AO.

ITA/2344/Mum/2016-AY.2007-08: 6.Facts of the case for the AY.2007-08 are identical to the facts of earlier AY.-except for the amount involved.In this year the FAA had deleted the addition of Rs.8.95 crores made by the AO.Following our order for the earlier AY.,we confirm the order of the FAA.Effective ground raised by the AO is decided against the AO.