THE COMMISSIONER OF INCOME TAX vs. SRI. MANISH KUMAR BOTHRA

The Commissioner of Income-Tax C.R. Building, Queens Road, Bangalore-560 001.

The Assistant Commissioner of Income-Tax Circle-12(1), C.R. Building, Queens Road, Bangalore.

The Commissioner of Income-Tax C.R. Building, Queens Road, Bangalore-560 001.

The Assistant Commissioner of Income-Tax Circle-12(1), C.R. Building, Queens Road, Bangalore.

The Commissioner of Income-Tax C.R. Building, Queens Road, Bangalore-560 001.

The Assistant Commissioner of Income-Tax Circle-12(1), C.R. Building, Queens Road, Bangalore.

The Commissioner of Income-Tax C.R. Building, Queens Road, Bangalore-560 001.

The Assistant Commissioner of Income-Tax Circle-12(1), C.R. Building, Queens Road, Bangalore.

The Commissioner of Income-Tax C.R. Building, Queens Road, Bangalore-560 001.

The Additional Commissioner Income-Tax Circle-12(1), C.R. Building, Queens Road, Bangalore.

The revenue being aggrieved by the common order passed by the tribunal allowing the appeals filed by individual assesses to set-aside the orders passed by the appellate commissioner as also the orders passed by the Commissioner – CIT in five appeals of the assesses before him and also the orders dated 5.10.2005 with reference to applications filed by the assesses dated 3.10.2005 under Section 154 of the Act rejecting the same, has come before us.

The tribunal under the common order, set-aside the order passed by the Commissioner of CIT (Appeals),

The revenue contending that the tribunal has proceeded on a totally erroneous assumption that the application filed by the assesses seeking for rectification of the order of the assessing officer unless rectified will amount to taxing an income twice; that the income of Rs.20.00 lakhs as had been originally offered by the assesses in each case was an income that is required to be deleted as it was offered by mistake and that such income had been offered and assessed in the hands of another company by name M/s Mulberry Silks Limited (MSL) who had offered the amount for tax for the very block assessment period and it was the subject matter of proceedings before the settlement commission on an application filed by the other assessee viz., MSL and therefore bringing to tax the very amount in the hands of the present respondent/the assesses, the appellants before it, was not proper and they should be allowed to rectify the

The whole episode and the proceedings have a background. The income tax authorities had an occasion to search the premises of M/s MSIL under the provisions of Section 132 of the Act as on 25.1.1999. On that occasion, the authorities had seen the unexplained investments in the books of the company to the tune of Rs.4,84,88,500/- in respect of these amounts which

As a consequence, the assessing officer assessed only an amount of Rs.3,84,88,500/- in the hands of the company where in the amount was found to have been not accounted for when search had been conducted, excluding the amount as offered and returned by each of the five respondents/individual assesses. Such order came to be

Incidentally, it so happened that all the five respondents/assesses also happens to be relatives and members of one family and also the directors of the company M/s MSIL. The company followed up the matter by filing an appeal and met with success before the tribunal insofar as the assessment in its hands is concerned.

In the meanwhile, another company by name M/s MSL – the sister concern of M/s MSIL in which the respondents/assesses in these appeals were all common directors, made an offer before the settlement commission offering an amount of Rs. Rs.4,84,88,500/- as their share capital invested in M/s MSIL and the entire amount had been invested by the company itself and some balance investment in the share capital by M/s MSIL was by some other person as per its application dated 18.6.2001 and ultimately its application under Section 245D(4) of the Act

However, it is submitted at the bar that the assesses had filed revision petitions before the Commissioner as against these assessment orders and it was pending before the revision commissioner.

In the proceedings before the settlement commission, on the application filed by M/s MSL offering an undisclosed income of Rs.4,84,88,500/-, the settlement commission ultimately by passing final orders accepted only an amount of Rs.2,65,04,026/- as the undisclosed

It is after conclusion of all these proceedings, the respondent/assesses had given applications before the assessing officer seeking for rectification of the earlier assessment order in respect of each of them by giving an application on 3.10.2005 (wrongly referred to as the applications dated 3.7.2001 in the order of the tribunal). Under the applications seeking for rectification, each of the assesses wanted to go back on their declared income of Rs.20.00 lakhs as their share capital investment in M/s MSIL and on the premise that this amount formed part of the amount offered by M/s MSL and by mistake the amount had earlier been offered by these assesses as their investment to the extent declared in the hands of each of the assesses and therefore, the assessment order be rectified by deleting this amount of Rs.20.00 lakhs from the earlier undisclosed income now disclosed by each of the assesses. The applications filed under Section 154 of

CIT (appeals) opined that an application under Section 154 can only be in respect of an order where a mistake is apparent from the face of the record, that no such mistake existed in the assessment order passed by the assessing officer; that the assessing officer simply proceeded on the premise of a return that the assessee himself had filed and had offered a sum of Rs.20.00 lakhs as undisclosed income of the earlier period and by way of investment in the shares of M/s MSL and therefore, there

It is as against these five orders passed by the CIT – appeals rejecting the appeals of the assesses in each of their appeals, the assesses preferred further appeals to the Income Tax Appellate Tribunal and as noticed in the five appeals, the income tax appellate tribunal proceeded to pass a common order which is the subject matters of these appeals.

The appellate tribunal allowed all the five appeals mainly on the premise that the amount was the subject matter of search and investigation at the premises of M/s MSIL for a sum of Rs.4,84,88,500/- that the entire amount has been offered as the undisclosed income of M/s MSL by way of share investment in M/s MSIL in the application filed by M/s MSL and before the settlement commission under Section 245D(4) of the Act and when such entire amount of Rs.4,84,88,500/- had already been offered as the undisclosed income of another company M/s MSL and

The tribunal also made a reference and relied upon its earlier order passed on 12.8.2005 in IT(SS)A No.11/Banga/2002 taking a similar view that as the entire amount of Rs.4,84,88,500/- had been offered by the sister concern of M/s MSIL and therefore the assessing officer bringing to tax a sum of Rs.3,84,88,500/- as the income of M/s MSIL after excluding Rs.1.00 crore amount which had been offered by the directors was not sustainable and therefore, allowed the appeals.

It is as against the common order passed by the tribunal in the case of these five respondents/individual assesses, the present appeals by the revenue.

What is vehemently urged by Sri Aravind, learned standing counsel for the income tax authorities, is that the tribunal proceeded on the erroneous assumption that the amount detected as the unexplained amount in the books of accounts of M/s MSIL during the search by the income tax authorities as on 25.1.1999 instead of assessing in the hands of the very assessee had been offered by its sister concern M/s MSL as its investment by way of share application in that company, had been assessed in the hands of the sister concern and therefore, part of this amount i.e., a sum of Rs.20.00 lakhs in the hands of each of the respondent/assesses which had been offered cannot be brought to tax again; that it was a clear mistaken assumption as the settlement commission in fact had accepted only an amount of Rs.2,65,04,626/- by way of investment by M/s MSL in the share capital of M/s MSIL and as has been indicated in the order of the settlement commission i.e, settlement commission had not examined for settlement and the application of M/s MSL for any amount more than Rs.2,65,04,626/- and as such, it has still left as an unexplained amount in the hands of

Learned counsel also submits that though in the case of the Company M/s MSIL, the view taken by the appellate tribunal has been affirmed by this Court in the further appeal by the revenue by dismissing ITA 170/06 as per order dated 12.12.2011 for passing this order this Court had also proceeded on the assumption as has been made by the tribunal and the lower authorities and the matter had not been examined and therefore, at any rate, the assesses being different on the mistaken assumption is clear, matter warrants examination and therefore,

For such purpose, Mr Aravind has drawn our attention to the order of the settlement commission dated 30.3.2005 and the computation of tax in that and the total undisclosed income of M/s MSL is taken only to be Rs.2,65,04,626/-. It is also contended that what was sought for rectification is not the order of assessment passed by the assessing officer but a rectification of the return that had been taken by the assesses and correction of a return which had been filed by each of the assesses withdrawing that offer of Rs.20.00 lakhs is nothing but the rectification of the return and not the order and therefore, such a request not being within the scope of Section 154, there is no occasion for the tribunal to remand the matter to pass orders afresh on Section 154 application.

On the other hand appearing on behalf of the assesses Mr Parthasarthy and Mallaha Rao have vehemently contended that the respondents/assesses will

We notice from the sequence of events insofar as the respondents/assesses are concerned, their

However Mr Parthasarthy has made a plea for remanding the matter to the tribunal to enable the assesses to make good their case and tribunal to bestow its attention to make an explicit order about the precise question as to whether the amount of Rs.20.00 lakhs in the hands of each of the assesses at Rs.1 crore had infact been brought to tax in the hands of any of the players in the drama viz., in the hands of M/s MSIL or in the hands of M/s MSL.

Perhaps this argument could have been accepted but for one reason. The stand of M/s MSIL and the present respondents-assesses, not to bring the amount of Rs.4,84,88,500/- to the extent of Rs.3,84,88,500/- in the hands of the Company and to the extent of Rs.1 crore 20 lakhs in the hands of the respondents/assesses, all proceeded on the premise that the very amount had been offered by M/s MSL before the settlement commission as its undisclosed income but a perusal of the order passed by the settlement commission does reveal that it is not the entire amount that is brought to tax as an undisclosed income of M/s MSL but it is only to the extent of Rs.2,65,04,626/-. We find that there is assumption based on which the tribunal allowed the appeal of the assessee viz., that the amount had been assessed as income of M/s MSL and that M/s MSL had also paid tax on this amount and this assumption is erroneous .

The tribunal which had based its conclusion for such purpose, on the order passed by the settlement commission. But the order passed by the commission does

In fact that settlement commission has also given its reasons as to why it is accepting only a part of the amount offered. The settlement commission has also positively declined to give a direction to exclude the assessment of a sum of Rs.20.00 lakhs each in the case of the respondents/assesses on the premise that the applicant M/s MSL was making an offer of Rs.4,84,88,500/- as its undisclosed income for the reason that it cannot issue such directions in respect of persons not before the Commission and insofar as limiting the offer to a sum of Rs.2,65,04,626/- the settlement commission noticed that such alone could have been the undisclosed

In this view of the matter, we have to necessarily answer the question posed for determination in these appeals in the negative, against the assessee and in favour of the revenue. Appeals are allowed. The orders passed by the appellate tribunal in all the five appeals are set-aside and their applications for rectification stands rejected. Assessment orders passed by the Assessing Officer and affirmed by CIT (appeals) restored.