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

ITA 2343/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9696 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2006-2007
• Appeal Filed On: 29-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIJIT PATANKAR; V VIDHYADHAR
• Keywords: Double taxation relief; Maximum Marginal Rate; Peak credit; Deemed to accrue or arise in india

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -GBENCH MUMBAI , , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMARJIT SINGH,JUDICIAL MEMBER ./I.T.A./2343/MUM/2016, / ASSESSMENT YEAR: 2006-07 ./I.T.A./2344/MUM/2016, / ASSESSMENT YEAR: 2007-08 DCIT-CIRCLE-3(3)(1) ROOM NO.609, 6TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 006. PAN:AAHPK 5415 A VS. SMT. NINA BHADRASHYAM KOTHARI 39, SEAWIND, CUFFE PARADE, COLABA, MUMBAI-400 005. ( /APPELLANT ) ( / RESPONDENT) / REVENUE BY: S/SHRI ABHIJIT PATANKAR & V. VIDHYADHAR-CIT-DR /ASSESSEE BY: SHRI VIJAY MEHTA / DATE OF HEARING: 04/01/2018 / DATE OF PRONOUNCEMENT: 28/03/2018 , - PER RAJENDRA, AM - CHALLENGING THE ORDERS DATED 29/01/2016 OF THE CIT( A)-8, MUMBAI,THE ASSESSING OFFICER(AO) HAS FILED PRESENT APPEAL.THE ASSESSEE IS AN INDIVIDUAL AND IS DIRECTOR OF M/S. SPELLBOUND TRADING PVT. LTD. DET AILS OF DATES OF FILING OF RETURNS,RETURNED INCOMES,DATE S OF ASSESSMENTS AND ASSESSED INCOMES CAN BE TABULA TED AS UNDER: A.Y. ROI FILED ON RETURNED INCOME ASSESSMENT DT. AS SESSED INCOME 2006-07 31/7/2006 RS.8,45,960/- 26/03/2014 RS.14.08 CRORES 2007-08 30/07/2007 RS.5,19,260/- 26/03/2014 RS.9.00 CRORES ITA/2343/MUM/2016,AY,2006-07: 2. THE EFFECTIVE GROUND OF APPEAL IS ABOUT DELETION OF ADDITION MADE BY THE AO AS DEEMED INCOME.ORIGINAL ASSESSMENT,IN THE CASE OF THE ASSES SEE,WAS MADE ON 12.12.2008, U/S.143(3)OF THE ACT,DETERMINING HER INCOME AT RS.8.45 LAKHS.LATER O N,A NOTICE WAS ISSUE U/S.147 OF THE TO ASSESS THE ESCAPED INCOME.AS PER THE INFORMATION RECEIVED FROM THE FRENCH AUTHORITIES UNDER INDO- FRENCH DTAA,SISAL HOLDINGS LIMITED(A/C NO.509136491 0)WAS HAVING A BANK ACCOUNT.WITH HSBC PRIVATE BANK (UK)LTD.GENEVA.IT WAS FURTHER FOU ND BY THE AO THAT THE ASSESSEE WAS THE BENEFICIAL OWNER OF THE ACCOUNT,THAT THE PEAK CREDI T OF THE ACCOUNT WAS RS.1.40 CRORES FOR THE YEAR UNDER CONSIDERATION.THE AO ISSUED A NOTICE TO HER ON 18.02.2014 AND DIRECTED HER TO EXPLAIN 2343&2344/M/16- SMT . NINA BHADRASHYAM KOTHARI 2 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 TOG ETHER WITH INTEREST,AMOUNTING TO RS.73.04 LAKHS IN ORDER TO BUY PEACE AND AVOID PROTRACTED L ITIGATION.HOWEVER,THE AO HELD THAT THE DISPUTED AMOUNT HAD TO TAXED IN HER HANDS. 3 .AGGREIVED BY THE ORDER OF THE AO,THE ASSESSEE FILE D AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA)AND MADE DETAILED SUBMISSION AND RELI ED UPON CERTAIN CASE LAW.SHE RAISED OBJECTION ABOUT RE-OPENING OF THE CASE.AFTER CONSID ERING THE AVAILABLE MATERIAL,HE HELD THAT THE AO WAS VERY WELL WITHIN HIS JURISDICTION TO EVOKE T HE PROVISIONS OF SECTION 147/148 OF THE ACT. HE FURTHER HELD THAT IN THE CASE OF LATE BHK THE A O HAD REFERRED TO THE EXISTENCE OF A FOREIGN ACCOUNT IN THE NAME OF SISAL,THAT THE PEAK CREDIT O F THE SAID ACCOUNT WITH HSBC BANK GENEVA WAS RS.1.40 CRORES,THAT WHILE FINALISING THE ASSESS MENT OF LATE BHK ON 31.03.2013,THE AO HAD MADE A REFERENCE TO THE SAME BANK ACCOUNT AND HAD A DDED 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 D ISPUTED THE FACT THAT DISPUTED AMOUNT WAS ASSESSED IN THE HANDS OF THE HUSBAND OF THE ASSESSE E,THAT THERE WAS JUSTIFICATION IN ASSESSING RS.1.40 CRORES IN THE HANDS OF THE ASSESSEE UNDER T HE 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 TH E RIGHT ASSESSMENT YEARS,THAT OWNING OF INCOME BY HER HUSBAND NO EXCUSE FOR NOT ASSESSING T HE INCOME IN THE HANDS OF THE ASSESSEE.HE REFERRED TO THE CASES OF CH.ATCHAIAH(218 ITR 239),S IRRAM JAGANNATH(250 ITR 689),S P JAISWAL (224 ITR 619).THE AUTHORISED REPRESENTATIVE(AR)STAT ED 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 ASSESSI NG THE SAME INCOME IN HER HANDS.HE REFERRED TO THE CASE OF CH.ATCHAIAH (SUPRA). 2343&2344/M/16- SMT . NINA BHADRASHYAM KOTHARI 3 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,T HAT THE PEAK CREDIT OF THE ACCOUNT FOR THE YEAR UNDER CONSIDERATION WAS RS.1.40 CRORES,THAT THE HUS BAND 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 INCOM E 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 PR INCIPLES 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 FUNDA MENTAL PRINCIPLE.IF THE SOVEREIGN HAS RIGHT TO TAX THE INCOME OF SUBJECTS,THE TAX PAYERS HAVE RIGH T 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 ACC OUNT WAS TO BE ASSESSED IN THE HANDS OF LATE BHK,THAT INCOME WAS NOT JOINTLY ASSESSED IN THE HAN DS OF THE ASSESSEE AND HER HUSBAND THOUGH BOTH WERE THE JOINT BENEFICIARIES OF THE SISAL ACCO UNT.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 BENEFICIAR Y OF THE SISAL ACCOUNT.A CONSCIOUS DECISION WAS TAKEN BY THE DEPARTMENTAL AUTHORITIES AFTER DE LIBERATING UPON ALL THE FACTS AND THE HUSBAND OF THE ASSESSEE WAS ASKED TO PAY THE TAXES FOR THE INC OME APPEARING IN THE SISAL ACCOUNT.IF THE DEPARTMENT WAS OF THE OPINION THAT INCOME WAS WRONG LY ASSESSED IN THE HANDS OF LATE BHK,IT SHOULD HAVE ANNULLED THE HIS ASSESSMENT ORDER.TWO S UBSTANTIVE ORDERS FOR THE SAME YEAR AND FOR THE SAME INCOME CANNOT SURVIVE. 5.1. WE AGREE THAT INCOME SHOULD BE ASSESSED IN RIGHT HA NDS,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 T HE CONCLUSION DRAWN BY THE AO WAS FACTUALLY OR LEGALLY INCORRECT.NOTHING PREVENTED HIM IN ASSES SING 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 4 CASE UNDER APPEAL.FIRST WE WOULD LIKE TO REFER TO T HE CASE OF CH.ATCHAIAH(SUPRA)RELIED UPON BY THE BOTH THE SIDES.THE RELEVANT PORTION OF THE ORDE R READS AS UNDER: A COMPARISON OF THE PROVISIONS OF THE INDIAN INCOM E-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 PE RSONS 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 INCO ME-TAX OFFICER OPTED FOR ONE COURSE, THE OTHER COURSE WAS BARRED TO HIM. BUT NO SUCH OPTION IS PRO VIDED TO HIM UNDER THE PRESENT ACT. SECTION 4 OF THE ACT OF 1961 SAYS THAT INCOME-TAX SHALL BE CH ARGED ON THE TOTAL INCOME 'OF EVERY PERSON' AND THE EXPRESSION 'PERSON' IS DEFINED IN CLAUSE (3 1) OF SECTION 2. THE DEFINITION MERELY SAYS THAT THE EXPRESSION 'PERSON' INCLUDES, INTER ALIA, A FIR M 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 AS SOCIATION OF PERSONS ALONE HAS TO BE TAXED; THE MEMBERS OF THE ASSOCIATION OF PERSONS CANNOT BE TAX ED INDIVIDUALLY IN RESPECT OF THE INCOME OF THE ASSOCIATION OF PERSONS. CONSIDERATION OF THE INTERE STS 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 ASSESSM ENT 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 EXCHEQUERUNDER THE PRESENT ACT, THE INCOME-TAX OFFICER HAS NO OPTION LIKE THE ONE HE HAD UNDER THE 1922 ACT. HE CAN, AND HE M UST, 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 'WRO NG 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 PRE CLUDED FROM TAXING THE RIGHT PERSON WITH RESPECT TO THAT INCOME. 5.2. AS STATED EALIER,THE AO HAS NOT PROVED AS TO HOW TH AT 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 HONBLE RAJASTHAN HIGH COURT HAD DEALT WITH THE ASS ESSMENT OF FIRMS AND THE PARTNERS.IT IS NOT THE CASE OF TAXATION OF INCOME OF THE HUSBAND AND W IFE WHERE TAX HAS TO LEVIED ON ONE PERSON.SO,WE HOLD THAT FACTS OF THAT CASE ARE NOT A PPLICABLE TO THE FACTS OF THE CASE UNDER APPEAL. IN THE CASE OF SP JAISWAL(SUPRA),THE HONBLE APEX C OURT HAD HELD THAT ADVANCING OF LOAN BY THE ASSESS TO HIS FAMILY MEMBERS WAS NOTHING BUT A PAPE R DEVICE DESIGNEDLY MADE TO REDUCE THE TAX BURDEN OF THE APPELLANT.BUT,IN THE CASE UNDER CONSI DERATION 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 5 INITIATED.AFTER ASSESSING THE DISPUTED AMOUNT SUBST ANTIVELY IN THE HANDS OF BHK,AS STATED EARLIER,THERE WAS NO JUSTIFICATION FOR ASSESSING SA ME IN THE HANDS OF HIS WIFE ALSO. CONSIDERING THE ABOVE,WE ARE OF THE OPINION THAT TH ERE IS NO LEGAL OR FACTUAL INFIRMITY IN THE ORDER OF THE FAA.SO,UPHOLDING THE SAME,WE DECIDE THE EFFE CTIVE 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 TH E ADDITION OF RS.8.95 CRORES MADE BY THE AO.FOLLOWING OUR ORDER FOR THE EARLIER AY.,WE CONFI RM THE ORDER OF THE FAA.EFFECTIVE GROUND RAISED BY THE AO IS DECIDED AGAINST THE AO. AS A RESULT, APPEALS FILED BY THE AO FOR BOTH THE AY.S STAND DISMISSED. ORDER PRO NOUNCED IN THE OPEN COURT ON 28 TH MARCH , 2018. 28 TH , 2018 SD/- SD/- ( / AMARJIT SINGH ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ,MUMBAI; /DATED : 28 .03.2018. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR G BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.