DCIT, New Delhi V. Sh. Suresh Nanda, New Delhi

ITA 2606/DEL/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5437 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2005-2006
• Appeal Filed On: 02-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAMESH CHAND
• Keywords: Unexplained investment; Income from undisclosed sources; Residential status; Search and seizure; Double taxation relief; Document seized; Opportunity of cross examination; Source of fund; Advance ruling; Question of law; Wholly owned subsidiary; Valuation report; Non compliance; Competent authority; Onus to prove; Documents seized; Capital expenditure
• Section: 69C; 143(3); 153A; 260A; 131; 132; 92

Judgement Text

PAGE 1 OF 91 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : G NEW DELHI BEFORE SHRI J.SUDH AKAR REDDY, AM AND SHRI RAJPAL YADAV, JM ITA NO. 2236/DEL/2013 ASSESSMENT YEA R : 2006-07 SHRI SURESH NANDA VS. ACIT 4, CASUARINA AVENUE CENTRAL CIRCLE 13 WESTEND GREENS, RAJKORI NEW DELHI NEW DELHI PAN: AAFPN 9895 H ITA NO. 2601/DEL/2013 ASSESSMENT YEA R : 2006-07 DCIT, CC 13 VS. SHRI SURESH NANDA NEW DELHI NEW DELHI ITA NO. 2605/DEL/2013 ASSESSMENT YEA R : 2004-05 DCIT, CC 13 VS. SHRI SURESH NANDA NEW DELHI NEW DELHI C.O. 165/DEL/2013 (IN ITA 2605/DEL/2013) ASSESSMENT YEAR 2004-05 SHRI SURESH NANDA VS. DCIT, CC 13 NEW DELHI NEW DELHI ITA NO. 2606/DEL/2013 ASSESSMENT YEA R : 2005-06 DCIT, CC 13 VS. SHRI SURESH NANDA NEW DELHI NEW DELHI PAGE 2 OF 91 C.O.NO.166/DEL/13 (IN ITA NO. 2606/DEL/2013) ASSESSMENT YEA R : 2005-06 SHRI SURESH NANDA VS. DCIT, CC 13 NEW DELHI NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY:- SH.AJAY WADHWA, C.A. RESPONDENT BY:- SH. RAMESH CHAND, CIT, D.R O R D E R PER J.SUDHAKAR REDDY, AM ITA 2605/DEL/13, ITA 2606/DEL/13 AND ITA 2601/DEL/ 13 ARE FILED BY THE REVENUE. ITA 2236/DEL/13 IS FILED BY THE ASSESSEE . THE ASSESSEE HAS ALSO FILED C.O. 165/DEL/2013 FOR THE AY 2004-05 AND C.O. 166/DEL/2013 FOR THE A.Y. 2005-06. 1.1. AS THE ISSUES ARISING IN ALL THESE APPEALS ARE CO MMON, FOR THE SAKE OF CONVENIENCE THEY ARE HEARD TOGETHER AND ARE DISP OSED OFF BY WAY OF THIS CONSOLIDATED ORDER. PAGE 3 OF 91 2. FACTS IN BRIEF :- THE MAIN ISSUE THAT ARISE FOR OUR CONSIDERATION IN THESE APPEALS, IS IDENTICAL TO THE ISSUE THAT AROSE FOR T HE CONSIDERATION OF THE TRIBUNAL FOR THE AYS 2001-02, 2002-03 AND 2004-05 I N ITA NOS. 1428-1429- 1430/DEL/2012. THE TRIBUNAL VIDE ORDER DT. 24 TH JULY,2012 HAD ADJUDICATED THE MATTER. THE REVENUE CARRIED THE MATTER IN APP EAL BEFORE THE HONBLE DELHI HIGH COURT IN ITA NOS. 85/2013 AND ITA 100/13, ITA 87/13. VIDE JUDGEMENT DT. 25.2.2013 THE HONBLE HIGH COURT HAD UPHELD THE ORDER OF THE I.T.A.T. THE ASSESSING OFFICER FOLLOWED HIS ORDER FOR THE EA RLIER AYS AND MADE ADDITIONS TO THE INCOME OF THE ASSESSEE. THE ASSESSEE CARRIE D THE MATTER IN APPEAL. THE FIRST APPELLATE AUTHOIRTY APPLIED THE DECISION OF T HE ITAT FOR THE ASSESSMENT YEAR 2001-02, 2002-03, 2003-04 AND ADJUDICATED THE ISSUE IN FAVOUR OF THE ASSESSEE ON THE ISSUE OF DETERMINATION OF RESIDENTI AL STATUS, AS WELL AS THE OTHER ADDITIONS TO INCOME. RELIEF WAS GRANTED AND A DDITIONS DELETED. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ALSO REJECTED CERTAIN GROUNDS RAISED BY THE ASSESEE. AGGRIEVED WITH THE RELIEF GRANTED BY THE LD.COMMISSIONER OF INCOME TAX (APPELAS) THE REVENUE HAS FILED THESE AP PEALS. THE ASSESSEE ALSO FILED CROSS OBJECTIONS FOR THE ASSESSMENT YEAR 2004 -05 AND 2005-06. 3. BOTH THE PARTIES SUBMIT THAT THE FACTS OF THE CASE ARE SAME AS THE FACTS NARRATED BY THE ITAT WHILE DISPOSING OFF THE APPEA LS FOR THE ASSESSMENT YEARS 2001-02, 2002-03 AND 2003-04. IN FACT IT WAS SUBMI TTED THAT THE A.O. HAD USED THE CUT AND PASTE TECHNIQUE IN THE COMPUTER, T O NARRATE THE FACTS IN THESE PAGE 4 OF 91 AYS ALSO. THE ITAT RECORDED THE FACTS IN THE EARLIE R ASSESSMENT YEAR. FOR THE SAKE OF CONVENIENCE WE EXTRACT THE FACTS AS NARRATE D BY THE TRIBUNAL FROM PARA 4 TO PARA 4.35 OF THAT ORDER. 4 BRIEF FACTS ARE- ASSESSEE HAS BEEN REGULARLY ASS ESSED TO TAX IN INDIA SINCE PAST SO MANY YEARS IN THE STATUS OF 'NON-RESIDENT' BY WAY OF ASSESSMENTS U/S 143(3). ON THE SAME LINES, ORIGINAL ASSESSMENT UNDE R REGULAR PROVISION OF SEC. 143(3) FOR A.Y. 2001-02 WAS ALSO FRAMED ON 26-3-200 4, TREATING THE ASSESSEE AS NON RESIDENT. SOME ADDITIONS TO THE TUNE OF RS. 1,2 1,93,650/- WERE MADE BY THE AO IN THE ASSESSMENT. 4.1. AGGRIEVED ASSESSEE CHALLENGED THE SAME IN FIR ST APPEAL, WHEREIN THEY WERE DELETED. ON SECOND APPEAL, BY THE REVENUE, THE ITAT DISMISSED THE SAME BY UPHOLDING THE ORDER OF CIT(A), 4.2. IN THE MEANWHILE, ON 22 ND FEBRUARY, 2007, DELHI POLICE SEARCHED THE PREMISES OF ONE DR. M.V. RAO WHO WAS FOUND TO BE IMPERSONATING HIMSELF AS SCIENTIFIC ADVISOR TO THE PRIME MINISTER OF INDIA. DELHI POLICE ACCORDINGLY INFORMED THE DIRECTORATE OF INCOME TAX (LNV.) THAT DURING THE COURSE OF SEARCH ACTION ON ONE DR. M.V. RAO THEY HAVE FOUND CASH AMO UNTING TO RS. TWO CRORES LYING AT HIS GREEN PARK HOUSE ALONG WITH SOME INCRI MINATING PAPERS. CONSEQUENT THERETO, THE DIRECTOR OF INCOME TAX (INV .)-II, DELHI ISSUED WARRANT OF AUTHORIZATION UNDER SECTION 132 OF THE INCOME TA X ACT, 1961 FOR SEARCH & SEIZURE ACTION AT THE PREMISE OF SAID DR. M. V. RAO . 4.3. SUBSEQUENTLY, DIT (LNV) REQUESTED THE DELHI PO LICE TO HAND OVER PHOTOCOPIES OF THE DOCUMENTS SEIZED BY THEM. SEARC H AND SEIZURE OPERATIONS WERE ALSO CARRIED OUT AT ASSESSEE'S PREMISES BY INCOME TAX DEPARTMENT ON 28- 2-2007 ALONG WITH ONE SHRI MOHAN SAMBHAJI JAGTAP. C ONSEQUENT TO SEARCH, ALL THESE CASES WERE CENTRALIZED U/S 127(2). NOTICES WE RE ISSUED FOR PROCEEDINGS U/S 153A AND THESE ASSESSMENTS ARE ACCORDINGLY FRAM ED U/S 153A READ WITH SEC. 143(3). 4.4. ASSESSEE FILED HIS RETURNS OF INCOME U/S 153A CLAIMING THE SAME STATUS I.E. 'NON RESIDENT' AS CLAIMED CONSISTENTLY. DURING THE COURSE OF ASSESSMENT PAGE 5 OF 91 PROCEEDINGS AO FOUND THAT SOME PAPERS SEIZED FROM D R. M V RAO WERE CONFIDENTIAL ORDER SHEET ENTRIES OF THE MINISTRY OF DEFENCE. SOME OF THESE PAPERS ARE RELATED TO M/S TADIRAN COMMUNICATION ISR AEL. M/S TRANSCOM SERVICES LTD. WAS REPRESENTING TADIRAN IN INDIA FOR THE SERVICING OF COMMUNICATION EQUIPMENT USED BY INDIAN ARMED FORCE. 4.5. AMONG THE PAPERS RECEIVED FROM THE DELHI POLIC E WERE PAGE NOS. 58 & 59 OF ANNEXURE A-10 WHICH ALLEGEDLY DETAIL THE WORK ING OF COMMISSION ON ARMS CONTRACTS AND THE CORRESPONDING PAYMENTS. OTHER PAP ERS INCLUDE A NOTE ON PAGE WIRH PAGE NOS. 60 & 61 AS ITS ATTACHMENTS. THE CONTENTS OF PAGE NO. 58 & 59 AND OTHER PAGES ARE REPRODUCED IN THE ASSESSM ENT ORDER :- 4.6. AO WAS OF THE VIEW THAT THESE DOCUMENTS WERE DETAILS OF THE COMMISSION PAYMENTS RELATED TO CONTRACTS FOR RADIO SETS OF THE INDIAN DEFENCE ESTABLISHMENT. ACCORDING TO DELHI POLICE. DR. M.V. RAO DID NOT FURNISH ANY EXPLANATION CONTENDING THAT HE WAS NOT IN A POSITIO N TO COMMENT UPON THE DOCUMENTS DUE TO HIS CRITICAL HEALTH CONDITION. THE CONTENTS AND PURPORTED MEANING OF THE PAGE DOCUMENTED IS REPRODUCED BY AO IN HIS ORDER. 4.7. ASSESSEE DENIED ANY ROLE OR CONNECTION WITH T HESE DEALS HOWEVER ASSESSING OFFICER HELD HIM TO BE CLOSELY INVOLVED W ITH THE BUSINESS OF TADIRAN IN THE INDIAN DEFENCE ESTABLISHMENT, AS REFLECTED B Y PAGE NO. 79 OF ANNEXURE A- 10, FOUND AND SEIZED ON 22.02.2007 FROM RESIDENCE O F DR. M.V. RAO. 4.8. BASED ON THE ABOVE MENTIONED DOCUMENTS, ASSESS ING OFFICER DERIVED THE FOLLOWING CONCLUSIONS: (I) SH. SURESH NANDA IS ACTIVELY INVOLVED IN FACIL ITATING DEFENCE DEALS FOR FOREIGN COMPANIES IN INDIA. TADIRAN IS ONE SUCH CLIENT. (II) THE FOUR CONTRACTS MENTIONED IN THE PAGE NOS. 58 & 59 OF ANNEXURE A10 ARE CONTRACTS WITH INDIAN DEFENCE ESTA BLISHMENT GIVEN TO TADIRAN OF ISRAEL. COMMISSION RANGING FRO M 5 TO 10 PERCENT OF THE TOTAL VALUE OF THE CONTRACT HAS BEEN PAID. (III) THE FOOT NOTE ON PAGE 59 MENTIONS THAT PAGES 58 & 59 ARE RECONCILIATION STATEMENT. PAGES 60 & 61 CONFIRM THE RECEIPT OF THE AMOUNT MENTIONED IN PAGE 58 & 59. THUS, THE COMMISS ION INCOME PAGE 6 OF 91 HAS BEEN ACTUALLY RECEIVED IN THE HANDS OF SH. SURE SH NANDA & HIS GROUP. 4.9. ON THE BASIS OF INFORMATION RECEIVED FROM DR. M.V. RAO, SIMILAR SEARCH & SEIZURE OPERATIONS WERE CARRIED OUT IN THE PREMIS ES OF ONE SHRI MOHAN JAGTAP AND ASSESSEE. IT RESULTED IN SEIZURE OF SOME OTHER PAPERS AND STATEMENT ON OATH OF SHRI JAGTAP. 4.10. DURING THE COURSE OF SEARCH PROCEEDINGS A DOC UMENT IN RUSSIAN LANGUAGE WAS FOUND & SEIZED AS PAGE NO. 4, ANNEXURE NO. 2 FROM THE RESIDENCE OF SH. MOHAN SAMBHAJI JAGTAP ON 28-2-2007. THE RUSS IAN TO ENGLISH TRANSLATION TO THIS DOCUMENT WAS ARRANGED DURING TH E COURSE OF ASSESSMENT PROCEEDINGS. 4.11. THIS DOCUMENT HAS BEEN SIGNED BY SH. MOHAN SA MBHAJI JACTHAP AS THE AGENT. THE REMITTANCE HAS BEEN MADE TO THE BANK ACC OUNT OF GLOBTECH INTERNATIONAL INC. ACCORDING TO THE AO, A PERUSAL OF THE ABOVE DOCUMENT IT IS AMPLY CLEAR THAT PARTS 53-65K WORTH US$384460 HAVE BEEN SOLD IN INDIA AND ON THIS SALE THE COMMISSION DUE OF USD 38446 HAS TO BE PAID TO THE ACCOUNT OF GLOBTECH INTERNATIONAL INC. THIS IS IN ACCORDANCE W ITH AN AGREEMENT DATED 30.03.1998. THE DOCUMENT BEARS A DATE STAMP OF 07. 05.2001. 4.12. DURING THE COURSE OF SEARCH PROCEEDINGS, ONE PROFILE OF SH. SURESH NANDA WAS FOUND & SEIZED MARKED AS PAGE NOS. L TO 4 , ANNEXURE A15. AS PER THIS DOCUMENT ASSESSEE WAS ALLEGED TO HAVE FORMED G LOBTECH INTERNATIONAL CORPORATION AS PARTNERSHIP CONCERN DEALING IN CONSU LTANCY AND SHIPPING ACTIVITIES OF A TECHNICAL NATURE. ANOTHER PROFILE O F SH. SURESH NANDA WAS FOUND AND SEIZED AT PAGE NO. 22 ANNEXURE A7, PARTY R-I, M ENTIONING ASSESSEE AS OWNER OF GLOBTECH INTERNATIONAL CORPORATION. AO REJ ECTING ASSESSEES EXPLANATIONS HELD THAT THESE PAPERS REPRESENTED TH AT HE HAD BEEN RECEIVING COMMISSION ON SUPPLY OF THESE GOODS TO INDIA, WHICH WAS DEPOSITED IN BANK ACCOUNTS SITUATED IN TAX HAVEN COUNTRIES LIKE JERSE Y ISLANDS ETC. AS STATED IN THE DOCUMENTS. 4.13. ON THE BASIS OF THESE OBSERVATIONS AND M ATERIAL FOUND DURING THE COURSE OF SEARCH FROM THE PREMISES OF THE ASSESSEE, SAID M/S DR. M.V. RAO & MOHAN JAGTAP, THE ASSESSING OFFICER DREW FOLLOWING INFERENCES:- PAGE 7 OF 91 3.1 BEFORE YEAR 2003 ASSESSEE HAD SMALL SET UP IN I NDIA IN THE FORM OF SMALL COMPANIES NAMELY M/S. CROWN CORPORATI ON PVT. LTD., M/S. DYNATRON SERVICES PVT. LTD., M/S C- L INDIA PVT. LTD. AND M/S. TRANSCOM SERVICES INDIA PVT. LTD. ETC. THESE COMPANIES WERE MOSTLY ENGAGED IN SERVICES AN D SPARES OF DEFENCE ARMAMENTS. MR. NANDA BEING A FORMER NAVY MAN SPECIALIZES IN CONTRACTS FOR SERVICES AND SPARES FO R EQUIPMENT USED BY THE INDIAN NAVY. 3.2 IN YEAR 2003 HE STARTED INVESTING HEAVILY IN HO TEL PROPERTIES AND LANDS IN DELHI NCR AND MUMBAI. HIS FIRST ACQUIS ITION IN INDIA WAS THE PRESTIGIOUS HOTEL CLARIDGES SITUATED IN LUT YENS DELHI. AFTER ACQUIRING THE CLARIDGES HE WENT ON TO EXTENSI VELY RENOVATE THE PROPERTY AND CONVERTED IT INTO A BOUTIQUE FIVE STAR HOTEL. ALONG WITH THIS DEAL HE ALSO TOOK MANAGEMENT CONTROL OF C LARIDGES NABHA PALACE, MUSSORIE. IN YEAR 2005 M/S CLA RIDGES HOTEL PVT. LTD. ACQUIRED A COMPANY BY NAME OF M/S G ODAWARI SHILPKALA LTD., WHICH HAS HOTEL PROPERTY IN SURAJ KUND, FARIDABAD (HARYANA) BY NAME OF HOTEL HILL VIEW. IN YEAR 2005 CLARIDGES HOTEL PVT. LTD. ALSO ACQUIRED THE HOLDING COMPANIES OF ANOTHER COMPANY BY NAME OF M/S' ELEL HOTELS & INV ESTMENT PVT. LTD., WHICH WAS THE OWNER OF VERY PRIME HOTEL PROPERTY IN MUMBAI BY NAME OF HOTEL SEA ROC K. 3.3 APART FROM THIS, IN 2006 ASSESSEE WENT ON A LAN D BUYING SPREE ON MUMBAI PUNE EXPRESS HIGHWAY AND CONSOLIDAT ED TO BIG LAND HOLDINGS-ONE ADMEASURING ABOUT 1100 ACRES I N KARJAT, MUMBAI-PUNE EXPRESSWAY & OTHER ABOUT 280 ACRES OF LAND IN PANVEL, MAHARASHTRA. THE FIRST PATCH OF LAND IS OWNED BY A COMPANY NAMED AS CLARIDGES SEZ PVT. LTD. (FORM ERLY TSUNAMI TECH PVT. LTD.) AND THE SECOND PATCH IS OWN ED BY M/S CROWN COLLEGE & EDUCATION INSTITUTIONS PVT. LTD. M/ S CLARIDGES SEZ PVT. LTD. HAS OBTAINED AN IN PRINCIPLE APPROVA L FROM MINISTRY OF COMMERCE FOR ESTABLISHING A MULTI PRODUCT SEZ AN D M/S CROWN COLLEGE & EDUCATION INSTITUTIONS PVT. LTD., WHICH I S PLANNING A MULTI DISCIPLINARY COLLEGE OR A GOLF COURSE IN THE PAN VEL LAND . PAGE 8 OF 91 4.14. ASSESSING OFFICER INFERRED THAT ON PAPER THESE COMPANIES WERE CONTROLLED BY ENTITIES SITUATED OUT SIDE INDIA OR B Y THE ENTITIES WHICH WERE ULTIMATELY CONTROLLED BY ENTITIES SITUATED OUT SIDE INDIA. FOR EXAMPLE M/S CLARIDGES HOTEL PVT. LTD. IS ULTIMATELY CONTROLLED BY AN ENTITY SITUATED IN MAURITIUS BY NAME OF UNIVERSAL BUSINESS SOL UTIONS, PORT LOUIS, MAURITIUS, M/S CLARIDGES HOTEL PVT. LTD. IN TURN OWNS VARIOUS SUBSIDIARY COMPANIES WHICH OWN DIFFERENT PROPERTIES . 4.15. ON PAPERS, THOUGH THERE APPEARED TO BE NO C ONNECTION BETWEEN ASSESSEE AND CONCERNED INDIAN COMPANIES BUT THEIR BOARD OF DIRECTORS WENT ON APPOINTING ASSESSEE AS CHAIRMAN AND HIS SON SH. SANJEEV NANDA AS MANAGING DIRECTOR OF THESE COMPANIES. THUS, IT WAS PRESUMED THAT THESE COMPANIES WERE OWNED BY ASSESSEE. 4.16. ACCORDING TO ASSESSING OFFICER THE ASSESSE HA S FAILED TO DISCLOSE HIS EXACT AND TRUE RELATIONSHIP AND INTEREST IN THE FOR EIGN ENTITIES CONTROLLING THE INDIAN COMPANIES ON THE PRETEXT OF ASSESSEE BEING A NON RESIDENT AND THESE COMPANIES BEING FOREIGN ENTITIES. 4.17. ASSESSING OFFICER WAS OF THE VIEW THAT THE AS SESSEE HAD BEEN WORKING AS MIDDLEMEN FOR LOOKING AFTER VARIOUS DEFENSE DEALS INVOLVING TEDIOUS PROCEDURE, DOCUMENTATION, PERSUASIONS AND LIAISON ING IN CLANDESTINE MANNER. THESE SERVICES WERE RENDERED IN INDIA BY TH E ASSESSEE. THE RESULTANT COMMISSION INCOME ARISING FROM THESE WERE RECEIVE D ABROAD. AO ALLEGED THAT THIS INCOME HAS BEEN BROUGHT INTO INDIA IN FORM OF F.D.I, AND EXTERNAL COMMERCIAL BORROWINGS AND BY FLOATING VARIOUS ENTIT IES ABROAD. THUS, ALL THESE INCORPORATED FOREIGN ENTITIES AND THEIR INDIAN INVE STMENTS WERE HELD TO BE ASSESSEES FRONT ORGANIZATIONS. 4.18. IT WAS HELD THAT DR. M.V. RAO IS A CLOSE ASSO CIATE OF ASSESSEE, WHO OPERATED FROM THE OFFICE BUILDING OF THE COMPANIES OF NANDA GROUP AT D-5. DEFENCE COLONY, NEW DELHI. DR. M.V. RAO WAS A DIREC TOR IN C1 INDIA PVT. LTD. AND M/S TRANSCOM SERVICES PVT. LTD. THEREFORE, THES E COMPANIES WERE HELD TO BE BENAMI ENTITIES INCLUDING C 1 INDIA PVT. LTD. I T WAS THUS HELD THAT ASSESSEE HOLDS LARGE STAKE THROUGH MAURITIUS BASED ENTITY Y2 K SYSTEMS INTERNATIONAL LTD. THE MAIN INVESTOR IN TRANSCOM INDIA PVT. LT D. WAS ONE INET PAGE 9 OF 91 COMMUNICATIONS PVT. LTD., WHICH IS CONTROLLED BY ON E SH. BIPIN B.SHAH. HE WAS ALSO A CLOSE ASSOCIATE OF SH. SURESH NANDA AND WAS A DIRECTOR IN ALMOST ALL THE MAJOR COMPANIES OF THE GROUP. IN FINE IT WAS HELD THAT ASSESSEE OWNED AND CONTROLLED THESE BENAMI CONCERNS, THO UGH ON PAPERS THEY WERE SHOWN TO BE CONTROLLED BY OTHER PERSONS. THUS THE FUNDS FOR INVESTMENTS CAME FROM CLANDESTINE ARMS DEALS, WHICH WERE ROUTED BY A SSESSEE. 4.19. ON THE BASIS OF THE ABOVE, ASSESSING OFFICER DREW VARIOUS CONCLUSIONS INCLUDING THAT ASSESSEE WAS EARNING INCOME FROM BRO KERAGE OF CLANDESTINE ARMS DEALS AND DR. M. V. RAO AND MOHAN JAGTAP WERE WORKING TOGETHER. 4.20. ASSESSEE'S STATEMENT RECORDED ON 8.03.2007 BE FORE THE DDIT, WAS CONSTRUED BY AO AS IMPLIED ADMISSION OF HAVING VARI OUS BUSINESS INTERESTS IN INDIA. THE RELEVANT PORTION OF THE STATEMENT IS REP RODUCED THE BELOW FOR READY REFERENCE' Q.10. PLEASE DISCLOSE YOUR ALL MOVABLE ASSETS INCL UDING BANK ACCOUNTS. FDRS, INVESTMENT IN BANKING, INVESTMENT I N CAPITAL MARKET, INVESTMENT IN (P) LTD. COMPANY/ FIRM/ AOP E TC. ANS. JLY BANK ACCOUNTS ARE AS FOLLOWS- DEUTSCHE BANK, NEW DELHI NRO & NRE ALE SOME FDRS IN THE STATE BANK OF INDIA, BRANCH I DON' T REMEMBER DEMAT A/C WITH THE ICICI BANK I HAVE INTEREST IN FOLLOWING COMPANIES AS A SHARE H OLDER: CROWN CORPORATION (P) LTD. DYNATRON SERVICES (P) LTD. CL INDIA (P) LT-INVESTMENT THROUGH Y2K LTD., MAURIT IUS CLARIDGES HOTELS (P) LT-INVESTMENT MADE THROUGH MAU RITIUS BASED COMPANY UBS. 4.21. APROPOS C 1 INDIA PVT. LTD, IT WAS INFERRED T HAT ASSESSEE CONTROLS THE DAY TO DAY FUNCTIONING OF THE COMPANY. AN E-MAIL FROM O NE SHRI VIVEK AGGARWAL, PRESIDENT AND CEO OF C-L INDIA PVT. LTD. WAS FOUND AND SEIZED ADDRESSING HIS RESIGNATION TO SH. SURESH NANDA CITING HIS INADEQUA TE COMPENSATION. THIS WAS CONSTRUED TO BE INDICTING THAT ASSESSEE CONTROLLED THE AFFAIRS OF CL INDIA PVT. LTD. 4.22. APROPOS THE BALANCE SHEET AND THE PROFIT AND LOSS ACCOUNTS OF M/S. Y2K SYSTEMS INTERNATIONAL LIMITED, AO INFERRED THAT THE COMPANY DOES NOT HAVE ANY PAGE 10 OF 91 SIGNIFICANT INCOME. IT HAS BEEN USED AS MERE CON DUIT TO CHANNELIZE ASSESSEES UNACCOUNTED MONEY IN THE GUISE OF LOANS AND OTHER B ORROWINGS. 4.23. BASED ON THE ABOVE FACTS, IT IS WAS OBSERVE D THAT THE ASSESSEE HAS BEEN BRINGING IN UNACCOUNTED MONEY THROUG H MAURITIUS BASED ENTITY Y2K SYSTEMS INTERNATIONAL LIMITED DUE TO WEAK EXCHANGE CONTROL NORMS THERE. 4.24. THE E-MAIL OF SHRI VIVEK AGRAWAL ESTABLISHED THAT ASSESSEE WAS CONTROLLING C-L INDIA AND WAS THE ULTIMATE SOURCE O F INVESTMENT IN C-L INDIA PVT. LTD. THROUGH YK2 SYSTEMS AND CONTROLLED ITS AF FAIRS. HENCE, THE CAPITAL RECEIVED BY CL INDIA PVT. LTD. WAS TREATED AS UNEXP LAINED INVESTMENT OF THE ASSESSEE AND ADDED TO HIS TAXABLE INCOME. THUS ASSE SSING OFFICER HELD THAT- I) ASSESSEE WAS ENGAGED IN THE BUSINESS OF A RMS DEALINGS ALONG WITH DR. M.V. RAO & MOHAN JAGTAP. II) Y2K WAS BENAMI COMPANY OF THE ASSESSEE. III) CAPITAL INTRODUCED BY Y2K IN C-L INDIA WA S ASSESSEE'S MONEY. 4.25. ASSESSING OFFICER ALSO PROPOSED TO ASSESSEE T O SHOW CAUSE, AS TO WHY HE SHOULD NOT BE TREATED AS 'RESIDENT' ASSESSEE INSTEA D OF 'NON-RESIDENT' AS HELD EARLIER AND TAXED ACCORDINGLY IN INDIA. THE PASSPOR T ENTRIES ABOUT ASSESSEE'S STAY OVER A PERIOD IN INDIA WERE FOUND TO BE AS UND ER- A.Y. NO. OF DAYS IN INDIA AS COMPUTED BY THE ASSESSEE ACTUAL NO. OF DAYS 2001-02 154 172 2002-03 138 150 2003-04 158 176 2004-05 159 177 2005-06 155 171 2006-07 158 176 PAGE 11 OF 91 4.26. AO HAS NOT DISPUTED THE DAYS OF STAY GIVEN IN ABOVE CHART. HOWEVER ACCORDING TO HIM FOR DETERMINING THE STATUS OF RESI DENCE, CLAUSE (C) OF SEC. 6 WAS APPLICABLE TO ASSESSEE AND NOT CLAUSE (B) OF TH E I. T. ACT, BY WHICH HE WAS TO BE TREATED AS RESIDENT IN INDIA FOR THESE YEARS. 4.27. ASSESSEE OBJECTED TO THIS PROPOSITION AND FIL ED A DETAILED REPLY WHICH IS PLACED ON THE PAPER BOOK. THE REPLY EMPHASIZED THE FOLLOWING ISSUE:- 4.28. UNDER SECTION 2(30), AN ASSESSEE WHO FAILS TO QUALIFY AS A RESIDENT UNDER SECTION 6 (L) OF THE ACT WILL BE REGARDED AS A NON- RESIDENT FOR ALL THE PURPOSES OF THE INCOME TAX ACT 1961. SECTION 6 (1) OF THE IN COME TAX ACT 1961 PROVIDES AS UNDER: - AN INDIVIDUAL IS SAID TO BE RESIDENT IN INDIA IN AN Y PREVIOUS YEAR, IF HE: (A) IS IN INDIA IN THAT YEAR FOR A PERIOD OR PERIOD S AMOUNTING IN .ALL TO ONE HUNDRED AND EIGHTY TWO DAYS OR MORE; OR (B) . (C) HAVING WITHIN THE FOUR YEARS PRECEDING THAT YEA R BEEN IN INDIA FOR A PERIOD OR PERIODS AMOUNTING IN ALL TO THREE HUNDRED AND SIXTY FIVE DAYS OR MORE, IS IN INDIA FOR A PERIOD OR PERIODS AMOUNT ING IN ALL TO SIXTY DAYS OR MORE IN THAT YEAR. EXPLANATION - IN THE CASE OF AN INDIVIDUAL, (A) BEING A CITIZEN OF INDIA, WHO LEAVES INDIA IN ANY PREVIOUS YEAR [AS A MEMBER OF THE CREW OF AN INDIAN SHIP AS DEFINED I N CLAUSE (18) OF SECTION 3 OF THE MERCHANT SHIPPING ACT, 1958 (44 OF 1958), OR] FOR THE PURPOSE OF EMPLOYMENT OUTSIDE INDIA, THE PROVISIONS OF SUB-CLAUSE (C) SHALL APPLY IN RELATION TO THAT YEAR. (B) BEING A CITIZEN OF INDIA OR A PERSON OF INDIAN ORIGIN WITHIN THE MEANING OF EXPLANATION TO CLAUSE (E) OF SECTION 115 C, WHO, BEING OUTSIDE INDIA, COMES ON A VISIT TO INDIA IN ANY PREVIOUS YE AR, THE PROVISION OF SUB-CLAUSE (C) SHALL APPLY IN RELATION TO THAT YEAR AS IF FOR THE WORDS PAGE 12 OF 91 'SIXTY DAYS' OCCURRING THEREIN, THE WORDS ONE HUND RED AND EIGHTY TWO DAYS HAD BEEN SUBSTITUTED' 4.29. THUS UNDER THE LEGISLATIVE SCHEME AS CONTAIN ED IN SECTION 6 (1) OF THE INCOME TAX ACT 1961. AN INDIVIDUAL IS CONSIDERED TO BE A RESIDENT IN INDIA IN ANY PREVIOUS YEAR (A) IF HE IS IN INDIA IN THAT YEAR FOR A PERIOD OR PERIODS AMOUNTING IN ALL TO ONE HUNDRED AND EIGHTY TWO DAYS OR MORE OR; (B) IF- I. HE HAS BEEN IN INDIA WITHIN THE FOUR YEARS PRECE DING THAT YEAR FOR A PERIOD OR PERIODS AMOUNTING IN ALL TO THREE H UNDRED AND SIXTY FIVE DAYS OR MORE, AND II. IS IN INDIA FOR A PERIOD OR PERIODS AMOUNTING I N ALL TO SIXTY DAYS OR MORE IN THAT YEAR. 4.30. IT WAS OBSERVED BY THE GOVT. THAT THE APPLIC ATION OF CLAUSE (C) WAS HARSH ON THE FIRST CATEGORY OF INDIVIDUALS AS AN INDIAN C ITIZEN WHO HAS BECOME A NON- RESIDENT FOR THE FIRST TIME BY DEPARTURE FOR EMPLOY MENT OUTSIDE WOULD HAVE NECESSARILY STAYED FOR MORE THAN ONE HUNDRED AND EI GHTY TWO DAYS IN INDIA IN THE YEAR PREVIOUS TO THE YEAR WHEN HE BECAME A NON- RESIDENT. THUS, IN CALCULATING THE FOUR YEARS PREVIOUS TO THE ASSESSME NT YEAR WITHIN THE MEANING OF CLAUSE (C) IN THE CASE OF AN INDIAN CITIZEN GOIN G ABROAD WOULD INCLUDE THE YEAR OR YEARS WHEN HE WAS A RESIDENT DURING WHICH H E MIGHT HAVE STAYED ALL THREE HUNDRED AND SIXTY FIVE DAYS IN ONE YEAR IN IN DIA. IN ORDER TO SET OFF THIS DISADVANTAGE AND MITIGATE THE HARDSHIPS THE LEGISLA TURE HAS PROVIDED IN CLAUSE (A) THE EXPLANATION TO SECTION 6(1) THAT WHERE AN I NDIAN CITIZEN GOES FOR EMPLOYMENT IN ANY PREVIOUS YEAR THE RIGOR OF CLAUSE (C) OF SUB-SECTION (1) OF SECTION 6 IS DILUTED TO SOME EXTENT BY PROVIDING A RELAXATION FOR THE YEAR THE ASSESSEE LEFT FOR EMPLOYMENT OUTSIDE INDIA, NAMELY HE WILL BE TREATED AS 'NON- RESIDENT IF HE IS IN INDIA FOR LESS THAN 182 DAYS IN THAT YEAR. 4.31. SIMILARLY, A CITIZEN OF INDIA/PERSON OF INDI AN ORIGIN WHO VISITS INDIA IN THE ASSESSMENT YEAR SUCCEEDING THE YEAR IN WHICH HE BECAME A NON-RESIDENT IN CALCULATING THE FOUR YEARS PREVIOUS TO THE YEAR OF DEPARTURE FROM INDIA WITHIN PAGE 13 OF 91 THE MEANING OF CLAUSE (C) OF SUB-SECTION (1) OF SEC TION 6 WOULD INCLUDE THE YEAR OR YEARS WHEN HE WAS A RESIDENT DURING WHICH HE MIG HT HAVE STAYED ALL THE THREE HUNDRED AND SIXTY FIVE DAYS IN ONE YEAR ITSEL F IN INDIA. IN ORDER TO SET OFF THIS DISADVANTAGE THE LEGISLATURE HAS PROVIDED IN C LAUSE (B) OF THE EXPLANATION THAT WHERE AN INDIAN CITIZEN/PERSON OF INDIAN ORIGI N VISITS INDIA IN THE PREVIOUS YEAR SUCCEEDING THE YEAR IN WHICH HE BECAME A NON-R ESIDENT, THE RIGOR OF CLAUSE (C) OF SECTION 6(1)IS DILUTED TO SOME EXTENT BY PRO VIDING A RELAXATION FOR THE ASSESSMENT YEAR SUCCEEDING THE YEAR IN WHICH HE BEC AME A NON-RESIDENT, NAMELY, HE WILL BE TREATED AS NON-RESIDENT IF HE IS IN INDIA FOR LESS THAN 182 DAYS IN THAT YEAR. THUS, THESE AMENDMENTS WERE BROU GHT TO MITIGATE THE HARDSHIP BEING FACED BY THE NON-RESIDENT ASSESSES A ND WAS INTRODUCED TO DO AWAY WITH THE MISCHIEF WHICH WAS INADVERTENTLY CAUS ED BY EARLIER PROVISIONS. 4.32. CONSEQUENT TO BUDGETARY AMENDMENT IN FINANCE ACT, BY WAY OF EXPLANATORY NOTES A CIRCULAR OF CBDT NO 684 DATED 1 0.06.1994 IN THIS BEHALF WAS ISSUED TO CLARIFY THE MEANING AND PURPOSE OF AM ENDMENT AS UNDER-- '19.2 SUGGESTIONS HAD BEEN RECEIVED TO THE EFFECT T HAT THE AFORESAID PERIOD OF ONE HUNDRED AND FIFTY DAYS SHOU LD BE INCREASED TO ONE HUNDRED AND EIGHTY-TWO DAYS. THIS IS BECAUSE THE NON- RESIDENT INDIANS, WHO HAVE MADE INVESTMENTS IN INDI A, FIND IT NECESSARY TO VISIT INDIA FREQUENTLY AND STAY HERE F OR THE PROPER SUPERVISION AND CONTROL OF THEIR INVESTMENTS. THE F INANCE ACT, THEREFORE, HAS AMENDED CLAUSE (B) OF THE EXPLANATIO N TO SECTION 6(L) (C) OF THE INCOME TAX ACT, IN ORDER TO EXTEND THE PERIOD OF STAY IN INDIA IN THE CASE OF THE AFORESAID INDIVIDUALS F ROM ONE HUNDRED AND FIFTY DAYS TO ONE HUNDRED AND EIGHTY TWO DAYS, FOR BEING TREATED AS RESIDENT IN INDIA, IN THE PREVIOUS YEAR IN WHICH THEY VISIT, INDIA. THUS, SUCH NON-RESIDENT INDIANS WOULD NOT LOSE THEIR 'NON-RESIDENT' STATUS IF THEIR STAY IN INDIA, DURIN G THEIR VISITS, IS UP TO ONE HUNDRED AND EIGHTY ONE DAYS IN A PREVIOUS YE AR.' 4.33. THE ASSESSING OFFICER WAS OF THE VIEW THAT IF CLAUSE (B) OF EXPLANATION TO SECTION 6 (1) IS INTERPRETED IN THE ABOVE MANNER IT WILL RENDER CLAUSE (C) OF SECTION 6 (1) NUGATORY IN ITS APPLICATION TO CITIZE NS OF INDIA OR PERSONS OF INDIAN ORIGIN. IT WAS HELD THAT ASSESSEE'S INTERPRETATION OF EXPLANATION (B) OF SECTION PAGE 14 OF 91 6(L)(C) WOULD RENDER SECTION 6(L)(C) ITSELF REDUNDA NT AS FAR AS ITS APPLICATION TO CITIZENS OF INDIA/PERSONS OF INDIAN ORIGIN ARE C ONCERNED, WHICH WAS NOT PERMISSIBLE IN LAW. RELIANCE WAS PLACED ON THE JUDG MENT IN THE CASE OF HARDEV MOTOR TRANSPORT V. STATE OF M.P., (2006) 8 SEE 613( 626): '31. THE ROLE OF AN EXPLANATION OF A STATUTE IS WEL L KNOWN. BY INSERTING AN EXPLANATION IN THE SCHEDULE OF THE ACT , THE MAIN PROVISIONS OF THE ACT CANNOT BE DEFEATED BY REASON OF AN EXPLANATION, EVEN OTHERWISE, THE SCOPE AND EFFECT O F A PROVISION CANNOT BE ENLARGED IT WAS SO HELD IN S. SUNDARAM PI LLAI V. VR. PATTABIRAMAN IN THE FOLLOWING TERMS: 4.34. THE AO, HOWEVER, HELD THAT ASSESSEE WAS TO B E TREATED AS RESIDENT AND NOT AS NON-RESIDENT IN THESE YEARS ON FOLLOWING OB SERVATIONS: (A) THE EXPLANATION (B) TO SECTION 6(L)(C) RELAXES THE 60 DAYS STAY IN INDIA TO 182 DAYS IF THE INDIVIDUAL IS AN I NDIAN CITIZEN OR A PERSON OF INDIAN ORIGIN AND IF HE BEING OUTSIDE IND IA VISITS INDIA DURING THAT YEAR. ACCORDING TO THE AO, THE ASSES SEE, THOUGH NOT CITIZEN, FOR ALL PRACTICAL PURPOSES W AS RESIDENT I.E. LIVING WITHIN INDIA WHO GOES ABROAD ON VISITS. IN OTHER WO RDS HE WAS NOT OUTSIDE INDIA AND CAME ON VISIT TO INDIA. THEREFORE , HE WAS NOT ELIGIBLE FOR RELAXATION PROVIDED BY EXPLANATION (B) AS HE WAS NOT A PERSON WHO BEING OUTSIDE INDIA COMES ON A VISIT T O INDIA- (B) ACCORDING TO THE ASSESSING OFFICER 'BEING OUTSI DE INDIA' CONNOTES SOME PERMANENCE ABROAD. IT IS FOR THE BENE FIT OF THE PERSON WHO STAYS ABROAD AND COMES ON A VISIT TO IND IA. THE ASSESSEE HAS BEEN STAYING IN INDIA FOR APPROXI MATELY HALF OF THE YEAR DURING THE LAST TEN - FIFTEEN YEARS. (C) THE A.O REFERRED TO ASSESSES PROFOU ND SOCIAL TIES MAINTAINED IN INDIA WITH HIS SON, WIFE AND OTHER RE LATIONS AND TO KEEP CONTROL OVER INDIAN COMPANIES WHICH WERE SUFFI CIENT TO HOLD THAT THE ASSESSEE WAS INSIDE INDIA AND A RESIDENT I N INDIA FOR ALL PRACTICAL PURPOSES. PAGE 15 OF 91 (D) THE AO MADE REFERENCE TO THE RENOVATION CARRI ED BY THE ASSESSEE AT HIS FARM HOUSE IN INDIA TO SH OW THAT ASSESSEE WAS TO BE TREATED AS 'INSIDE INDIA'. 4.35. CONSEQUENTLY, AO MADE THE ADDITIONS IN THIS B EHALF IN ALL THESE YEARS. FURTHER ASSESSEES RESIDENTIAL STATUS WAS CHANGED F ROM NON-RESIDENT TO RESIDENT AND THUS THE ENTIRE GLOBAL INCOME OF THE A SSESSEE WAS BROUGHT TO TAX IN INDIA. 3.0. THE ISSUES THAT COMES FOR OUR DETERMINATION IN T HE IMPUGNED ASSESSMENT YEAR ARE THE RESIDENTIAL STATUS OF THE A SSESSEE, AND ADDITIONS/DISALLOWANCES IN VARIOUS AYS, PERTAINING TO (A) COMMISSION INCOME FROM DEFENCE DEALS; B) UNEXPLAINED INVESTMENTS IN H OTEL CLARIDGES; (C) DEPOSITS IN DUETSCHE BANK, SINGAPORE; D) PAYMENTS TO MRS.REN U NANDA ETC. THESE ADDITIONS/DISALLOWANCES HAVE BEEN AGITATED BY WAY O F VARIOUS GROUNDS. 3.1 WE FIRST CONSIDER THE REVENUES APPEAL FOR THE ASS ESSMENT YEAR 2004-05 IN ITA NO.2605/DEL/2013. THE GROUNDS OF APPEAL REA D AS UNDER. 1. THE ORDER OF THE LD.COMMISSIONER OF INCOME TAX (APPEALS) IS NOT CORRECT IN LAW AND ON FACTS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD.COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE ADD ITION OF RS.25,48,12,645/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF COMMISS ION INCOME EARNED BY ASSESSEE IN DEFENCE DEALS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD.COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE ADD ITION OF RS.1,04,68,35,904/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLA INED INVESTMENTS MADE BY ASSESSEE IN M/S CLARIDGES HOTELS P.LTD. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD.COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE ADD ITION OF RS.34,60,000/- MADE PAGE 16 OF 91 BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED INVESTMENTS MADE BY ASSESSEE IN M/S CLARIDGES SEZ P.LTD. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD.COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE ADD ITION OF RS.4,32,90,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLA INED DEPOSITS WITH DEUTSCHE BANK, SINGAPORE. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE ADD ITION OF RS.23,90,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF PAYMENT MADE TO ASSESSEES WIFE SMT.RENU NANDA OUT OF UNDISCLOSED SOURCES. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD.COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN HOLDING THE ASSE SSEE TO BE A NON-RESIDENT FOR THE YEAR UNDER CONSIDERATION WITHOUT APPRECIATING T HE FACT THAT EXPLANATION (B) OF SECTION 6(1)(C ) WAS NOT APPLICATION TO ASSESSEE. 8. THE APPELLANT CRAVES LEAVE TO ADD, AMEND ANY/AL L GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL. WE FIRST TAKE UP GROUND NO.7 ON THE ISSUE OF RESID ENTIAL STATUS OF THE ASSESEE. THE LD. DR SUBMITTED THAT THE FINDING OF T HE HONBLE HIGH COURT ARE NOT BINDING AS THE REVENUE APPEALS WERE DISMISSED O N THE GROUND THAT IT IS A QUESTION OF FACT. THE LD. COUNSEL OF THE ASSESSEE S UBMITS THAT THE ISSUE IS IN ASSESSEES FAVOUR. 3.2. THE LD.D.R. FILED DETAILED SUBMISSIONS WHICH ARE EXTRACTED FOR READY REFERENCE: ( B) QUESTION OF RESIDENTIAL STATUS : 1. THIS ISSUE IS COMMON FOR ALL THE YEARS INVOLVED UNDER PRESENT APPEAL FOR ASSESSMENT YEAR 2004-05 TO 2006-07. VERY BRIEFLY T HE ASSESSING OFFICER HAS EXTRACTED THE DETAILS OF THE PERIOD SPENT BY THE AS SESSEE IN INDIA WHICH IS AS UNDER: A.Y. NO. OF DAYS IN INDIA NO. OF VISITS TO INDIA FR OM PAGE 17 OF 91 ABROAD FROM DIFFERENT COUNTRIES BEING UK, SINGAPORE, DUBAI, FRANCE, THAILAND, RUSSIA, HONGKONG. * 2004-05 177 18 2005-06 155 16 2006-07 157 18 IT BE NOTED THAT ASSESSEE HAS HUGE BUSINESS STAKES IN MAURITIUS & STILL NO VISITS TO INDIA FROM MAURITIUS. 2. THE AO HAS INTER ALIA POINTED OUT THAT THE INTER PRETATION SOUGHT TO BE GIVEN BY THE ASSESSEE TO CLAUSE (B) OF EXPLANATION TO SEC . 6(1)(C) CANNOT BE ACCEPTED BECAUSE SUCH AN INTERPRETATION WILL RENDER CLAUSE ( C) OF THIS EXPLANATION NUGATORY IN ITS APPLICATION TO CITIZENS OF INDIA OR PERSONS OF INDIAN ORIGIN WHICH IS NOT A PERMISSIBLE PRINCIPLE OF INTERPRETATION AND HENCE A S CORRECTLY HELD BY AO IN PARA 7.13 OF ORDER (A Y 04-05) CLAUSE (B) IS NOT APPLICA BLE TO THE SUBSEQUENT YEARS OF ARRIVAL IN INDIA AND IS LIMITED TO THE SUBSEQUENT Y EAR OF ARRIVAL ONLY. THE LD. CIT(A) ( PARA 4.3 OF HIS ORDER FOR AY 04-05) HAS DE LETED THE ADDITION SOLELY RELYING ON THE ITAT ORDER DATED 24-07-2012 AND HELD THE STA TUS TO BE' ON-RESIDENT'. 2.1 ASSESSEE CANNOT PLACE ANY RELIANCE ON THE DELH I HIGH COURT JUDGMENT IN HIS OWN CASE BECAUSE THE HIGH COURT INSTEAD OF ADMI TTING DISMISSED THE REVENUE'S APPEAL FILED U/S 260A WITH THE FINDING TH AT NO SUBSTANTIAL QUESTION OF LAW ARISES. THUS, OBSERVATIONS OF THE HIGH COURT WE RE JUST OBITER DICTA AND NOT CONTAINING ANY STATEMENT OF LAW AND HENCE DID NOT C ARRY ANY PRECEDENTIAL VALUE. TO THIS EFFECT READY REFERENCE CAN BE MADE OF THE S UPREME COURT JUDGMENT REPORTED IN 194 ITR 434 WHERE IT HAS BEEN HELD THAT A DECISION BECOMES PRECEDENT ONLY WHEN IT DECIDES A QUESTION OF LAW. E VEN OTHERWISE ALSO THE QUESTION WHETHER A PERSON IS RESIDENT OR NOT IS A P URE QUESTION OF FACT (AMONG OTHERS REFER RAI BAHADUR SETH TEOMAL 48 ITR 170 CAL L AND HENCE DELHI HIGH COURT WOULD NOT HAVE GOT THE JURISDICTION TO DECIDE THE ISSUE OF RESIDENTIAL STATUS OF THE PERSON. 2.2 WORDS 'ON A VISIT' AS CONTAINED IN CLAUSE (B) OF THE EXPLANATION GO TO SHOW THAT IF IN A YEAR THE ASSESSEE PAYS MULTIPLE VISITS TO INDIA HE CANNOT TAKE BENEFIT OF THE PROVISIONS OF THIS CLAUSE. LEGISLATURE DELIB ERATELY RESTRICTED THE APPLICATION TO A SINGLE VISIT STAY IN INDIA BECAUSE OTHERWISE I T WOULD HAVE LEAD TO EVASION OF TAX STATUTES AS IS DONE BY THE ASSESSEE. PAGE 18 OF 91 2.3 TRIBUNAL'S EARLIER ORDER RELIED BY CIT(A) DOES NOT DEAL WITH THE ARGUMENT THAT THE INTERPRETATION ADVOCATED BY THE RESPONDENT ASSESSEE WILL RENDER THE EXPLANATION QUA THE INDIAN CITIZEN OR QUA THE PEOPL E OF INDIAN ORIGIN AS REDUNDANT. FURTHER, RESPONDENT'S INTERPRETATION EXP ANDS THE SCOPE OF SEC. 6(1) WHICH IS NOT PERMISSIBLE AT ALL. 2.4 WHILE ADJUDICATING THE ISSUE THE CIT(A) HAS FA ILED TO APPRECIATE THAT AFTER ALL THE INCOME EARNED BY THE ASSESSEE HAS TO BE BRO UGHT TO TAX IN SOME TAX JURISDICTION EVEN IF NOT TAXABLE IN THE INDIAN TAX JURISDICTION. HAD THIS ATTEMPT BEEN MADE BY THE CIT(A) HE WOULD HAVE BEEN ABLE TO APPRECIATE THE TAX EVASION CENTRIC PLANNING. CIT(A) FAILED TO APPRECIATE THAT IF THE ASSESSEE WAS NOT THE RESIDENT OF INDIA OR INCOME WAS REALLY ACCRUING OR ARISING ABROAD INCRIMINATING MATERIAL WOULD NOT BEEN FOUND FROM THE ASSESSEE'S P REMISES IN INDIA. 4. WE HAVE HEARD RIVAL CONTENTIONS ON THE ISSUE OF R ESIDENTIAL STATUS OF THE ASSESSEE. THE HONBLE JURISDICTIONAL HIGH C OURT OF DELHI IN A JUDGEMENT DELIVERED ON 25 TH FEB.,2013 IN ITA NOS.85/13, ITA 100/13, ITA 87/13 IN THE ASSESSEES OWN CASE FOR THE AYS 2001-02, 2002-03 AN D 2003-04 HAD CONSIDERED THE ISSUE. AFTER EXTRACTING S.6 OF THE I.T.ACT AT PARA 7, AT PARAS 8 TO 12 OF THE ORDER IT WAS HELD AS FOLLOWS. 8. BEFORE WE EXAMINE THE PROVISIONS OF SECTION 6 IT WOULD BE APPROPRIATE TO SET OUT THE NUMBER OF DAYS OF STAY OF THE RESPONDENT/AS SESSEE IN INDIA. THIS HAS BEEN TABULATED IN THE ASSESSMENT ORDER. THERE IS A DISCREPANCY BETWEEN THE NUMBER OF DAYS AS COMPUTED BY THE ASSESSEE AND THE SO-CALLED ACTUAL NUMBER OF DAYS AS COMPUTED BY THE ASSESSING OFFICER. THE SAM E IS GIVEN IN THE CHART BELOW:- A.Y. NO.OF DAYS IN INDIA ACTUAL NO.OF DAYS AS COMPUTED BY THE ASSESSEE 2001-02 154 172 2002-O3 138 150 PAGE 19 OF 91 2003-04 158 176 2004-05 159 177 2005-06 155 171 2006-07 158 176 9. WHETHER WE TAKE THE COMPUTATION OF THE RESPONDE NT/ASSESSEE OR OF THE ASSESSING OFFICER, IT IS EVIDENT THAT THE RESPONDEN T/ASSESSEE HAS SPENT LESS THAN 182 DAYS IN EACH OF THE THREE YEARS IN QUESTION, T HAT IS, ASSESSMENT YEARS 2001- 02, 2002-03 AND 2003-04. 10. WE SHALL NOW EXAMINE THE PROVISIONS OF SECTION 6. IT IS APPARENT THAT SECTION 6( 1 )( A) MAKES IT CLEAR THAT AN INDIVIDUAL WOULD BE A RESIDENT OF INDIA IN ANY PREVIOUS YEAR IF HE WAS IN INDIA IN THAT YEAR FOR A PERIOD OR PERIODS AMOUNTING IN ALL TO 182 DAYS OR MORE. THE RESPONDENT/ASSESSEE, C LEARLY, IS NOT SUCH AN INDIVIDUAL BECAUSE IN NONE OF THE YEARS IN QUESTION DID HE STAY IN INDIA FOR 182 DAYS OR MORE. 11. THE LEARNED COUNSEL FOR THE APPELLANT SOUGHT TO ARGUE THAT THE RESPONDENT/ASSESSEE WOULD FALL WITHIN SECTION 6( 1) ( C) READ WITH EXPLANATION (B). HOWEVER, WE FAIL TO SEE AS TO HOW THAT PROVISION WO ULD COME TO AID OF THE APPELLANT. SECTION 6(1)(C) APPLIES TO CITIZENS OF I NDIA AS WELL AS TO PERSONS OF INDIAN ORIGIN. IT ALSO APPLIES TO FOREIGNERS. INSOF AR AS FOREIGNERS ARE CONCERNED SECTION 6(1)(C) HAS THE STIPULATION OF STAY IN INDI A FOR A PERIOD OR PERIODS AMOUNTING IN ALL TO 60 DAYS OR MORE IN THE YEAR IN QUESTION. HOWEVER, THIS IS IN ADDITION TO THE CONDITION OF TOTAL STAY IN THE PREC EDING FOUR YEARS AMOUNTING IN ALL TO 365 DAYS OR MORE. BUT, IN THE CASE OF CITIZENS O F INDIA, THE LENGTH OF STAY IN INDIA IN A PARTICULAR YEAR HAS BEEN EXTENDED TO 182 DAYS AS COMPARED TO 60 DAYS FOR FOREIGNERS. THIS PERIOD OF 182 DAYS WAS EA RLIER 150 DAYS AND BY VIRTUE OF THE FINANCE ACT 1994, WITH EFFECT FROM 01.04.199 5 THE WORD 'FIFTY' HAS BEEN SUBSTITUTED BY 'EIGHTY-TWO'. IN OTHER WORDS, INSTEA D OF 150 DAYS STAY IN INDIA, THE PERIOD OF STAY REQUIRED IS 182 DAYS FOR AN INDIVIDU AL TO BE COVERED UNDER SECTION 6(L)(C) READ WITH EXPLANATION (B), IN CASE HE IS AN INDIAN CITIZEN OR A PERSON OF INDIAN ORIGIN. 12. IN THE PRESENT CASE, ALTHOUGH, THE RESPONDENT /ASSESSEE HAS, IN THE PRECEDING 4 YEARS BEEN IN INDIA FOR A PERIOD IN EXC ESS OF 365 DAYS IN INDIA, IN NONE OF YEARS HAS HE BEEN IN INDIA FOR A PERIOD IN EXCESS OF 182 DAYS. THEREFORE, THE TRIBUNAL IS ABSOLUTELY RIGHT IN CONCLUDING THAT THE RESPONDENT/ASSESSEE WAS NOT A RESIDENT OF INDIA. THIS IS A PURE QUESTION OF FACT BASED ON A PLAIN R EADING OF THE PROVISIONS OF SECTION 6. ALL THAT HAS TO BE SE EN IS THE NUMBER OF DAYS THAT THE PAGE 20 OF 91 RESPONDENT/ASSESSEE HAS SPENT IN INDIA IN THE YEAR IN QUESTION AS ALSO IN THE PRECEDING 4 YEARS. NO SUBSTANTIAL QUESTION OF LAW ARISES INSOFAR AS THIS ASPECT OF THE MATTER IS CONCERNED. 4.1. A PERUSAL OF THE ABOVE JUDGEMENT DOES NOT SUPPORT T HE CONTENTIONS OF THE D.R. THAT THE HONBLE HIGH COURT HAS NOT ADJ UDICATED THE MATTER AND HENCE IT IS NOT A BINDING PRECEDENT. A PLAIN READIN G OF THE JUDGMENT THAT ON DEEM IT CLEAR THAT THE HIGH COURT HAS INTERPRETED T HE LAW AND APPLIED THE SAME TO THE FACTS. SUCH ARGUMENTS ARE DEVOID OF MERIT. THE HONBLE HIGH COURT, AFTER EXTRACTING THE DATA FOR SIX YEARS AT PARA 8 OF ITS ORDER HAS INTERPRETED THE PROVISIONS OF SECTION 6 AND THIS IS BINDING ON US. HENCE WE UPHOLD THE ORDER OF THE LD.COMMISSIONER OF INCOME TAX (APPEALS) ON THE ISSUE OF RESIDENTIAL STATUS AND DISMISS GROUND NO.7 OF REVENUE FOR THE A.Y. 2 004-05. 4.2. GROUND NO. 1 AND 8 ARE GENERAL IN NATURE. GROUND NO.2 TO 6 ARE ON SEPARATE ADDITIONS WHICH WE WOULD BE DEALING ITE M WISE. BEFORE WE GO INTO ALL THESE ADDITIONS ISSUE WISE, WE PREFER TO DEAL W ITH THE GENERAL SUBMISSIONS OF THE LD.D.R. ON THE ISSUE OF THE LD. CIT (A) FOLLOWI NG THE ORDER OF THE ITAT PASSED IN THE ASSESSEES OWN CASE FOR THE EARLIER A SSESSMENT YEARS. 4.3. LD.D.R. SUBMITS THAT THE HONBLE SUPREME COURT IN THE CASE OF DISTRIBUTORS BARODA PVT.LTD. VS. UOI 155 ITR 120 (S .C.) AND THE DECISION IN THE CASE OF OMAR SALAY MOHMED SAIT, 37 ITR 151 (S.C.) HELD THAT IN DESERVING CASES AND FOR COGENT REASONS, THE ITAT CAN APPLY IT S MIND AFRESH TO THE MATTER IRRESPECTIVE OF THE DECISION TAKEN IN EARLIER YEARS IN THE ASSESSEES OWN CASE PAGE 21 OF 91 AND ON THE SAME SET OF FACTS, FOR THE CAUSE OF SUBS TANTIAL JUSTICE. HE PRAYED THAT THE BENCH SHOULD APPRECIATE THAT CERTAIN CONTE NTIONS WERE NOT SPECIFICALLY RAISED BEFORE THE TRIBUNAL AND HENCE THEY WERE NOT DEALT BY IT, WHILE ADJUDICATING THE CASE FOR THE EARLIER YEARS. HE SU BMITS THAT FROM ASSESSMENT ORDER THE FOLLOWING BROAD CONCLUSIONS CAN BE DRAWN: (A) SHRI SURESH NANDA IS INVOLVED IN FACILITATING DEFENCE DEALS FOR FOREIGN COMPANIES; (B) IN FOUR DEFENSE CONTRACTS GIVEN TO TADIRAN OF ISRAEL, COMMISSION RANGING FROM 5 TO 10% IS PAID; (C ) SEIZED DOCUMENTS SHOW THAT THE INCOME WA S ACTUALLY ACCRUED AND RECEIVED IN THE HANDS OF SHRI SURESH NANDA. HE GAVE WRITTEN SUBMISSIONS ON THE ARGUMENTS, WHICH WE WOULD BE DEALING WITH, WHEN EACH ISSUE ADJUDICATED. 4.4. THE LD.COUNSEL FOR THE ASSESSEE VEHEMENTLY CONTRO VERTED THESE ARGUMENTS OF THE LD.D.R. AND SUBMITTED THAT (A) SHR I SURESH NANDA IS NOT INVOLVED IN FACILITATING DEFENCE DEALS IN ANY MANN ER;(B) THERE IS NO IOTA OF EVIDENCE FOUND BY THE REVENUE OR ANY OTHER AGENCY T HAT SHRI SURESH NANDA RECEIVED ANY COMMISSION OR ANY INCOME FROM SUCH TRA NSACTIONS; (C) THAT NO DOCUMENT WAS SEIZED FROM THE PREMISES OF MR.SURESH NANDA AND THAT HE HAS NOTHING TO DO WITH ANY OF THE SEIZED DOCUMENTS FOUN D IN THE PREMISES OF DR.M.V.RAO; (D) A PERUSAL OF THE SEIZED DOCUMENTS A ND THE STATEMENTS OF DR.M.V.RAO OR MR. JAGTAP DEMONSTRATED THAT THEY HER E NOT EVEN A REMOTE CONNECTION WHATSOEVER WITH THE ASSESSEE. PAGE 22 OF 91 4.5. THE LD.COUNSEL FURTHER CONTENDED THAT THE TRIBUNA L IN THE ASSESSEES OWN CASE, ON THE VERY SAME SET OF FACTS HAD ADJUDICATED THE MATTER IN A PARTICULAR MANNER, AND THAT THE SAME HAS TO BE FOLLOWED BY THE COORDINATE BENCH OF THE TRIBUNAL. 5. AFTER HEARING RIVAL CONTENTIONS ON THE ISSUE OF F OLLOWING THE ORDER OF THE COORDINATE BENCH IN THE ASSESSEES OWN CASE ON THE VERY SAME SET OF FACTS, WE RELY ON THE DECISION OF HONBLE SUPREME COURT I N THE CASE OF KESHORAM & CO. VS. UOI (1989) 3 SCC 151 WHEREIN, AT PAGE 160 I T IS HELD AS FOLLOWS: THE BINDING EFFECT OF A DECISION OF THIS COURT DOE S NOT DEPEND ON WHETHER PARTICULAR ARGUMENTS ARE CONSIDERED OR NOT, PROVIDE D THE POINT WITH REFERENCE TO WHICH THE ARGUMENT IS ADVANCED SUBSEQUENTLY WAS ACTUALLY DECIDED IN AN EARLIER DECISION. SIMILAR IS THE VIEW OF HONBLE SUPREME COURT IN THE CASE OF AMBIKA PRASAD (1980) 3 SCC 719 WHEREIN IT WAS HELD THAT E VERY DISCRETIONARY OR ARGUMENTATIVE NOVELTY CANNOT UNDO OR COMPEL RECONSI DERATION OF A BINDING PRECEDENT. IN OTHER WORDS, WHAT THE LD.D.R. SEEKS IS THAT THE TRIBUNAL HAS TO HOLD THAT ITS EARLIER DECISION IS PER IN CURIUM A ND THAT THE JUDGMENT OF THE HONBLE HIGH COURT IS NOT BINDING. WE ARE UNABLE TO ACCEPT THIS ARGUMENT, AS THE LD. DEPARTMENTAL REPRESENTATIVE IN HIS ARGUMENT S HAS NOT BROUGHT OUT ANY NEW FACT OR EVIDENCE. NOW WE CONSIDER EACH OF THE ISSUES ON MERITS. 6. GROUND NO.2 IS REGARDING ADDITION OF RS.25,48,12,6 45/- ON ALLEGATION OF COMMISSION INCOME. PAGE 23 OF 91 6.1 THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER P AGE 5 PARA 5 ONWARDS, REFERRED TO THE SEARCH AND SEIZURE OPERATION CONDUC TED ONE DR. M. V. RAO AND SHRI SURESH NANDA. HE RECORDED THAT THE DELHI POLIC E ON 22 ND FEBRUARY, 2007 INFORMED THE DIRECTOR OF INCOME-TAX (INVESTIGATION) THAT DURING THE SEARCH ACTION ON ONE DR. M. V. RAO, THEY FOUND CASH OF RS. 2 CRORES LYING AT HIS GREEN PARK HOUSE. THIS WAS SEIZED BY THE DEPARTMENT. THE DOCUMENTS AND EVIDENCE SEIZED BY THE DELHI POLICE WERE REQUISITIONED BY TH E REVENUE AND THE ASSESSING OFFICER, EXAMINED AND ANALYZED ALL THESES DOCUMENTS . THESE PAPERS RELATED TO M/S TADIRAN COMMUNICATIONS LTD. ISRAEL. M/S TRANSCOM SERVICES PVT. LTD. IS REPRESENTING M/S TADIRAN COMMUNICATION LTD. IN INDIA, FOR THE SERVICING OF C OMMUNICATION EQUIPMENT USED BY INDIAN ARMED FORCES. THE ASSESSING OFFICER EXAMINED DOCUMENTS AT PAGE NO.58 AND 59 OF ANNEXURE A-10, FOOT NOTE AT PA GE 59 AND PAGES 60 AND 61, WHICH GIVES DETAILS OF CONTRACT. AS PER THE ASS ESSING OFFICER THESE DOCUMENTS GIVE THE DETAILS OF THE COMMISSION PAYMEN TS WHICH ARE RELATED TO CONTRACTS FOR RADIO SETS FOR THE INDIAN DEFENCE EST ABLISHMENT. ANNEXURE A-5 IS ALSO A DOCUMENT SEIZED FROM THE RESIDENCE OF MR. M. V. RAO. MR. RAO DID NOT OFFER ANY COMMENT ON THESE DOCUMENTS. THE ASSESSING OFFICER EXAMINED PAGE 62 OF ANNEXURE A-11 AND IS COME TO A CONCLUSION THA T THESE DOCUMENTS DO RELATE TO THE INDIAN DEFENCE ESTABLISHMENT. ANNEXUR E A-10 PAGE NO.79 WAS RELIED UPON FOR COMING TO A CONCLUSION TO MR. SURES H NANDA HAS ADVISED STRATEGIES AND HENCE THAT IT CAN BE CONTENDED THAT HE WAS CLOSELY INVOLVED IN THE BUSINESS OF M/S TARIDAN COMMUNICATION LTD. TH PAGE 24 OF 91 THE ASSESSING OFFICER AT PARA 5.7 AND PARA 5.8 HEL D AS FOLLOWS: 5.7 BASED ON THE ABOVE MENTIONED DOCUMENTS, THE F OLLOWING CONCLUSIONS ARE IN ORDER: A) SH. SURESH NANDA IS ACTIVELY INVOLVED IN FACILITATI NG DEFENCE DEALS FOR FOREIGN COMPANIES IN INDIA. TADIRAN IS ONE OF H IS CLIENTS. B) THE FOUR CONTRACTS MENTIONED IN THE PAGE NO.58 AND 59 OF ANNEXURE A-10 ARE CONTRACTS WITH INDIAN DEFENCE EST ABLISHMENT GIVEN TO TADIRAN OF ISRAEL. C) THE FOOT NOTE ON PAGE 59 MENTIONS THAT PAGES 58 AND 59 ARE RECONCILIATION STATEMENT. PAGE 60 AND 61 CONFIRM TH E RECEIPT OF THE AMOUNT MENTIONED IN PAGE 58 AND 59. THUS, THE COMMI SSION INCOME HAS BEEN ACTUALLY RECEIVED IN THE HANDS OF S H. SURESH NANDA AND HIS GROUP. 5.8 IT CAN BE SAFELY CONCLUDED THAT SH. SURESH NAND A HAS BEEN WORKING FOR TADIRAN AND OTHER OVERSEAS SUPPLIERS TO PUSH THROUGH THEIR CONTRACTS IN INDIA. THE ASSESSING OFFICER ALSO EXAMINED THE PAPERS SEI ZED FROM ONE MR. MOHAN S. JAGTAP, AN EMPLOYEE OF M/S CROWN CORPORATI ON LTD. MR. MOHAN S. JAGTAP WAS AN INTERPRETER. ON EXAMINATION OF THESE DOCUMENTS THE ASSESSEE CAME TO A CONCLUSION THAT SHRI MOHAN S. JAGTAP WAS CLOSELY CONNECTED WITH MEDIATING IN DEFENCE DEALS. ANNEXURE 2, PAGE 4 WAS EXAMINED WHICH SHOWS THAT PARTS OF CERTAIN DEFENCE EQUIPMENTS WAS SOLD I N INDIA AND THE COMMISSION PAGE 25 OF 91 THEREFROM HAS TO BE PAID TO THE ACCOUNT OF GLOBAL T ECH INTERNATIONAL INC. THE ASSESSING OFFICER ALSO EXAMINED ANNEXURE A-15 PAGE NO.1 TO 7 SEIZED DURING THE SEARCH WHICH IS OF THE FILE OF MR. SURESH NANDA . ANNEXURE A-7 PAGE NO.22 WAS ALSO RELIED UPON FOR COMING TO A CONCLUSION THA T MR. SURESH NANDA IS AN OWNER OF GLOBE-TECH INTERNATIONAL CORPORATION. THUS , BASED ON THE EXAMINATION OF ALL THESE DOCUMENTS FOUND DURING THE SEARCH AND SEIZURE BY THE DELHI POLICE FROM THE PREMISES OF DR. M. V. RAO AND ALSO FROM TH E PREMISES OF ONE MR. JAGTAP, THE ASSESSING OFFICER CAME TO CONCLUSION TH AT THE ASSESSEE HAS EARNED COMMISSION INCOME FROM DEFENCE PAYMENTS. 6.2 THIS ISSUE WAS GROUND NO.9 BEFORE THE LD. COMMI SSIONER OF INCOME TAX (APPEALS). THE FIRST APPELLATE AUTHORITY HAS DEAL T WITH IT AT PAGE 79 AS FOLLOWS. 9.1. THE NINTH GROUND OF APPEAL IS AGAINST THE ADD ITION OF RS.25,48,12,645/- AS COMMISSION INCOME IN THE APPELLANTS HANDS ON THE B ASIS OF CERTAIN DOCUMENTS RECOVERED BY THE DELHI POLICE ON 22.2.2007 FROM TH E POSSESSION OF DR.M.V.RAO. THE ADDITION ON THE SAME GROUND FOR AYS 2002-03 AND 2003-04, I.E. COMMISSION INCOME ON THE BASIS OF DOCUMENTS RECOVERED BY THE D ELHI POLICE ON 22.2.2007 FROM THE POSSESSION OF DR.MV RAO, WAS RESTORED TO T HE ASSESSING OFFICER WITH DIRECTIONS BY HONBLE ITAT VIDE PARA 11 OF ITS ORDE R DT. 24 TH JULY,2012 IN ITA NOS. 1428, 1429 AND 1430/DEL/2012 . THE DECISION OF THE HONBLE ITAT IS APPLICABLE TO THE PRESENT ASSESSMENT YEAR, SUPERSEDES THE EARL IER ORDERS OF CIT(A) ON THIS GROUND, AND HAS BECOME BINDING ON THE APPELLATE AUT HORITY. THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. IN THE APPEAL CAS ES OF DR.MV RAO FOR AYS 2002- 03 TO 2004-05 IN APPEAL NOS. 69, 66 AND 67/11-12, A ND FOR AYS 2005-06 AND 2006-07 IN APPEAL NOS. 68 AND 65/11-12, I HAVE GIVE N SPECIFIC DIRECTIONS IN CONSONANCE WITH THE DIRECTIONS OF HONBLE ITAT AS U NDER: THE TRUTH OF THE MATTER (I) WHETHER THESE AMOUNT S REPRESENT ANY COMMISSION PAID BY M/S TADIRAN COMMUNICATION LTD., (II) WHETHE R THE TOTAL AMOUNT WAS INDEED US $ 27.603 MILLION OR RS.123.27 CRORE AS HE LD BY THE REVENUE ON THE BASIS OF DOCUMENTS SEIZED BY DELHI POLICE; (III) WH ETHER THE APPELLANT WAS INDEED THE BENEFICIARY OF THE COMMISSIONS; (IV) WHETHER TH E APPELLANT WAS THE SOLE PAGE 26 OF 91 BENEFICIARY OR THERE WERE OTHER BENEFICIARIES; (V) WHAT EXTENT, CANNOT BE ASCERTAINED ON THE BASIS OF AVAILABLE DOCUMENTS AND ARE, THEREFORE, A MATTER OF FURTHER INVESTIGATION AND VERIFICATION. THE HONBLE ITAT, VIDE PARA 11 OF ITS COMMON ORDER DT. 24.7.2012 IN THE CASE OF SHRI SURESH NANDA (ITA NOS. 1428, 1429 & 1430/DEL/2 012 FOR AYS 2001-02, 2002-03 AND 2003-04, REGARDING THE SAME ADDITIONS A LSO MADE IN THE HANDS OF SHRI SURESH NANDA, HELD THAT INTEREST OF JUSTICE W ILL BE SERVED IF THE ISSUES ABOUT INCOME FROM COMMISSION/BUSINESS OF DEALINGS IN ARMS ARE DECIDED AFRESH BY ASSESSING OFFICER. SINCE THE DIRECTIONS OF THE HO NBLE ITAT IN THE CASE OF SHRI SURESH NANDA RELATE TO THE SAME ADDITIONS OF INCOME AS IN THE CASE OF THE APPELLANT, THE SAID DIRECTION WILL ALSO BE APPLICAB LE IN THE CASE OF THIS APPELLANT. IN MY CONSIDERED VIEW, THE TRUTH OF THE MATTER CAN NOT BE ASCERTAINED WITHOUT MAKING A REFERENCE TO THE GOVT. OF ISRAEL THROUGH T HE COMPETENT AUTHORITY, FT & TR DIVISION OF THE CBDT, ON THE ISSUES RAISED IN PA RA 5.9 OF THIS ORDER, WHICH ARE THE SAME AS, AND IN COMPLIANCE TO, THE ORDER OF HON BLE ITAT IN THE CASE OF SHRI SURESH NANDA AND COMPLEMENTS THE AFORESAID ORDERS B Y SPECIFYING THE ISSUES TO BE FURTHER ENQUIRED INTO. THESE ISSUES WILL REACH FINALITY AFTER REFERENCE TO THE GOVT. OF ISRAEL UNDER THE DTAA AND RECEIPT OF REPOR T THEREFROM. I DIRECT THE ASSESSING OFFICER ACCORDINGLY. 9.2. THIS GROUND OF APPEAL WILL BE SUBJECT TO THE O UTCOME/FINDINGS IN THAT CASE. THE HONBLE ITAT, VIDE ITS ORDER CITED ABOVE, HAD A LLOWED THIS GROUND OF APPEAL FOR STATISTICAL PURPOSE IN THE CASE OF THE APPELLAN T FOR ASSESSMENT YEAR 2002-03 AND 2003-04. FOLLOWING THE ABOVE ORDER OF HONBLE ITAT, THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSE FOR THIS ASSESSM ENT YEAR ALSO. 6.1. THE LD.D.R. SUBMITTED AS FOLLOWS: 1. AS NOTED BY AO ASSESSEE WAS INVOLVED IN THE DEFE NCE DEALS OUT OF WHICH ILLEGAL COMMISSIONS INCOME WAS ACCRUING TO HIM RESU LTING IN ADDITION OF RS.25.48 CRORES IN A Y 04-05 INTER ALIA ON THE BASIS OF DOCU MENTS SEIZED BY DELHI POLICE FROM MR. MV. RAO. THE LD. CIT(A) INSTEAD OF DEALING WITH VARIOUS CONTENTIONS PUT FORTH BY THE AO IN HIS ORDER, ( PARA 9 ) DELETED TH E ADDITION SOLELY RELYING ON THE ITAT ORDER DATED 24-07-2012 ( PAGE 47) BUT MADE THE ORDER SUBJECT TO OUTCOME OF PAGE 27 OF 91 CERTAIN ENQUIRIES TO BE CONDUCTED ON THE REFERENCE TO BE MADE TO GOVERNMENT OF ISRAEL. THE ITAT HAS, DEALING WITH ISSUE IN EARLIER YEARS IN PARA 11 (PAGE 47) ADJUDICATED THE APPEAL. 2.1 THE AR OF THE ASSESSEE HAS ARGUED THAT THE ORDE R OF THE CIT(A) TO THE EXTENT OF RESTORING THE ISSUE TO AO IS NOT AS PER THE LAW BECAUSE POWER OF RESTORING THE ISSUE BACK TO AO IS NOT VESTED ANY MORE WITH HIM AN D HENCE WANTS EXPUNCTION OF THESE DIRECTIONS. IN THIS CONNECTION, IT IS TO BE N OTED THAT THE CIT(A) HAS NOT SET ASIDE THE ISSUE TO BE DECIDED DE-NOVO ( WHICH ALONE IS BARRED ILL LAW) AND THAT THESE DIRECTIONS ENDORSED BY THE TRIBUNAL IN EARLIE R YEARS WERE ACCEPTED BY THE ASSESSEE AS NO APPEAL HAS BEEN FILED IN THE HIGH CO URT AGAINST THESE DIRECTIONS. FURTHER, THE CIT(A) INSTEAD OF ADJUDICATING THE APP EAL, EITHER AT HIS OWN OUGHT TO HAVE TAKEN UP THE ENQUIRY OR OUGHT TO HAVE REMANDED THE MATTER TO AO FOR DESIRED REPORT/ENQUIRY. 6.2. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED AS FOLL OWS. (I) THE APPELLANT BEING A NON-RESIDENT INDIAN, HIS INCOME IN INDIA CAN ONLY BE TAXED IF THERE IS EVIDENCE TO ESTABLISH THAT IT ACC RUED IN INDIA OR WAS RECEIVED IN INDIA. KINDLY REFER TO SEC.5(2) . THE APPELLANT CLAIMS THAT HIS INCOME OTHER THAN THAT RETURNED BY HIM ACCRUED OR AROSE OR WAS RECEIV ED OUTSIDE INDIA. THE BURDEN IS, THEREFORE, SQUARELY ON THE DEPARTMENT TO ESTABL ISH FROM FACTS AVAILABLE ON RECORD THAT THE INCOME WAS RECEIVED IN INDIA. (II) THE ABOVE ADDITION WAS MADE ON THE BASIS OF DO CUMENTS SEIZED FROM THE RESIDENCE OF ONE DR. M. V. RAO. THE DOCUMENTS PURP ORTEDLY RELATED TO AY 2002- 03 TO 2006-07. . THE HONBLE ITAT VIDE THEIR ORDER DATED 24.07.2012 ADJUDICATED THE SAID ISSUE AND SET ASIDE THE SAME T O THE AO FOR THE FOLLOWING DIRECTIONS. (KINDLY REFER 47 OF PB) . APROPOS COMMON GROUND RAISED IN A.YS. 2002-03 & 20 03-04 IN RESPECT OF ALLEGED INCOME FROM ARMS DEALS MADE ON ACCOUNT OF S EARCHES IN THE CASE OF M.V. RAO AND MOHAN SAMBHA JI JAGTAP, THE RELEVAN T STATEMENTS HAVE NEITHER BEEN PROVIDED NOR THESE PERSONS HAVE BEEN A LLOWED TO BE CROSS EXAMINED BY ASSESSEE. IN THE PRESENCE OF THESE INFI RMITIES IN THE PROCEEDINGS, THESE ADDITIONS CANNOT BE MADE. THE AO MAY BE DIRECTED TO PAGE 28 OF 91 DO THE NEEDFUL IN THIS BEHALF; CONSIDER THE OUTCOME OF ASSESSMENT PROCEEDING IN THEIR CASES PROVIDE THE OPPORTUNITY F OR THE CROSS EXAMINATION AND DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW. WE ARE OF THE VIEW THAT THE ADDITION BASED ON DOCUMENTS FOUND FROM THI RD PARTIES CANNOT BE MADE WITHOUT CONFRONTING THE MATERIAL AND ALLOWING THE OPPORTUNITY OF CROSS EXAMINATION TO THE ASSESSEE. THIS PROPOSITION HAS BEEN REPEATEDLY LAID DOWN BY ALL THE COURTS. BESIDES, THERE IS A PR ESUMPTION IN LAW THAT THE PERSON FROM WHOM THE DOCUMENT IS FOUND IS THE O WNER OF THE DOCUMENT. THE DEPARTMENT SHOULD DISCHARGE THEIR BUR DEN BEFORE SEEKING TO TAX THE ASSESSEE ON THE BASIS OF DOCUMENTS FOUND FROM DR. M.V. RAO OR SHRI MOHAN SAMBHAJI JAGTAP. SINCE THE ASSESSEE HAS NOT BEEN PROVIDED NECESSARY MATERIAL INCLUDING THEIR STATEMENTS, OPPO RTUNITY OF CROSS EXAMINATION AND HEARING BASED THEREON, INTEREST OF JUSTICE WILL BE SERVED IF THE ISSUES ABOUT INCOME FROM COMMISSION/ BUSINESS O F DEALINGS IN ARMS ARE DECIDED AFRESH BY AO IN THE LIGHT OF THESE OBSE RVATIONS. THESE GROUNDS RAISED BY THE ASSESSEE IN A.YRS. 2002-03 & 2003-04 ARE ALLOWED FOR STATISTICAL PURPOSES. THE DIRECTIONS OF THE ITAT WERE, (A) PROVIDE CROSS EXAMINATION TO THE ASSESSEE, (B) PROVIDE DOCUMENTS SEIZED FROM DR. M. V. RAO AND MR. MOHAN SAMBHAJI JAGTAP, (C) DISPEL THE PRESUMPTION IN LAW THAT A PERSON FROM WHOM THE DOCUMENT IS FOUND IS THE OWNER OF THE DOCU MENTS BEFORE SEEKING TO TAX THE ASSESSEE. (III) FOLLOWING THE DIRECTIONS OF THE ITAT , THE AO PROVIDED THE FOLLOWING DOCUMENTS PERTAINING TO DR. M. V. RAO AND MR. MOHAN SAMBHAJI JAGTAP WHICH WERE RESPONDED TO BEFORE THE LD. CIT(A) : A. PGS 58,59,60,61 AND 79 OF ANNEXURE A10, P62 OF ANNEXURE A11, P 1 OF ANNEXURE A5 PURPORTEDLY SEIZED BY DELHI POLICE FROM THE RESIDENCE OF DR. M. V. RAO. B. P4 ANNEXURE A2, PURPORTEDLY SEIZED BY INCOME TAX DEPARTMENT FROM THE RESIDENCE OF MR. MOHAN S JAGTAP. C. COPIES OF STATEMENTS OF DR. M V RAO DATED 22.02. 2007 AND 05.04.2011 AND MR. MOHAN S JAGTAP DATED 28.02.2007. (IV) THE FOLLOWING CONTENTIONS ARE MADE TO ESTABLIS H THAT NO ADDITION ON THE BASIS OF DOCUMENTS FOUND FROM DR. M.V. RAO CAN BE MADE IN THE HANDS PAGE 29 OF 91 OF THE ASSESSEE. THE CONTENTIONS IN RESPECT OF THE DOCUMENTS FOUND ARE AS FOLLOWS : REGARDING ANNEXURE A-10, P 58 & 59 (PB/338-339) I. ANNEXURE A10, P58 AND 59 ARE FADED AND UNCLEAR PIEC ES OF PAPER WHICH CONTAIN A LIST OF DATES AND PAYMENTS MADE. IN RESP ECT OF THE SAID PAPERS, THE ASSESSEE WISHES TO STATE AS UNDER:- (A) THE ASSESSEE STATES AND AFFIRMS THAT HE HAS NEVER S EEN THESE PAPERS AND HAS NOTHING WHATSOEVER TO DO WITH THE SA ME. (B) THE SAID PAPERS DO NOT MENTION ANY NAME MUCH LESS T HAT OF THE ASSESSEE AND THEREFORE TO WHOM THESE PAPERS BELONG CANNOT BE STATED. (C) MERELY BECAUSE SOME DATES AND PAYMENT PARTICULARS H AVE BEEN MENTIONED WITHOUT ANY NAME OF PERSONS TO WHOM THEY HAVE ALLEGEDLY BEEN MADE, IT CANNOT BE HELD THAT THE PAY MENTS HAVE BEEN MADE TO THE ASSESSEE. (D) THE HANDWRITING ON THESE TWO DOCUMENTS IS NOT OF TH E ASSESSEE OR ANYBODY KNOWN TO HIM (E) NO DOCUMENTARY EVIDENCE RELATING TO THESE DOCUMENTS WAS FOUND IN THE POSSESSION OF THE ASSESSEE OR HIS FAMILY MEM BERS TO EVEN REMOTELY SUGGEST THAT ANY SUCH PAYMENT WAS RECEIVED BY THE ASSESSEE. (F) THERE IS NO BANK ACCOUNT ETC OF THE ASSESSEE TO SHO W THAT ANY OF THESE PAYMENTS WERE MADE TO HIM. (G) NO PERSON INCLUDING DR. M.V. RAO HAS STATED THAT TH ESE PAYMENTS WERE EVER MADE TO THE ASSESSEE. (H) ONE FAILS TO UNDERSTAND HOW A PAPER FOUND FROM A TH IRD PARTY MENTIONING SOME AMOUNTS, WITHOUT MENTIONING THE NAM E OF THE PERSON WHO HAS MADE THESE PAYMENTS OR THE PERSONS T O WHOM THE PAYMENTS HAVE BEEN MADE, CAN BE SAID TO BE REFE RRING TO THE ASSESSEE. AS FAR AS THE ASSESSEE IS CONCERNED, HE REITERATES THAT HE HAS NOTHING TO DO WITH THE SAID PAPERS AND THERE FORE COMPLETELY AND TOTALLY REFUTES AND DISREGARDS THE S AME. II. ANNEXURE A10 P 60 AND 61 : THESE DOCUMENTS HAVE BEEN SEEN BY THE ASSESSEE FOR THE FIRST TIME ON 12.12.2012 AFTER COP IES OF THESE DOCUMENTS WERE PROVIDED BY AO. THESE DOCUMENTS ALSO DO NOT C ONTAIN THE NAME OF THE ASSESSEE AND MERELY CONTAIN SOME DATES AND AMOU NTS. IT ALSO HAS A COLUMN TITLED PAID TO HUDAR US$. THE ASSESSEE DO ES NOT KNOW WHO PAGE 30 OF 91 HUDAR IS AND HAS NEVER HEARD THIS NAME. THESE PAPE RS ARE ALSO DUMB IN NATURE AND DO NOT MENTION THE NAME OF THE ASSESS EE ANYWHERE. THE ASSESSEE FIRMLY STATE THAT HE HAS NOTHING TO DO WIT H THE SAME. III. ANNEXURE A-5, PAGE-1 - IT IS A TYPED STATEMENT CONTAINING SOME CONTR ACT NUMBERS OF WHICH, THE ASSESSEE HAS NO KNOWLEDGE AT ALL. EVEN IN THIS DOCUMENT, THE NAME OF THE AUTHOR DOES NOT EXIST. I T WAS REQUESTED THAT ANY QUESTION REGARDING THIS DOCUMENT MUST BE ASKED FROM THE PERSON WITH WHOM IT WAS FOUND. ON THE PERUSAL OF THE STAT EMENT OF DR M.V. RAO GIVEN TO THE ASSESSEE ON 09.12.2012, IT IS FOUND TH AT NO QUESTION HAS BEEN ASKED TO HIM REGARDING THIS DOCUMENT. THE LAW RELATION TO PRESUMPTION OF OWNERSHIP HAS NOT BEEN COMPLIED WITH AND THE BURDEN WHICH LAY ON THE DEPARTMENT HAS NOT BEEN DISCHARGED . HOW IS THIS DOCUMENT LINKED TO THE ASSESSEE IS ALSO NOT KNOWN? IV. ANNEXURE A11, P 62: IT IS A LETTER ADDRESSED BY ONE MR. PULEL FLEISHMA N TO ONE MR. VIBHOR SHARMA. THIS LETTER ALSO MAKES NO REFERENCE TO THE ASSESSEE. FROM THE STATEMENT OF DR. M.V. RAO, IT I S FOUND THAT HE PERHAPS KNOWS MR. PULEL FLEISHMAN. DR. M.V. RAO HA S NOT STATED ANY CONNECTION OF MR. PULEL FLEISHMAN WITH THE ASSESSEE AND THE ASSESSEE CATEGORICALLY DENIES HAVING ANY KNOWLEDGE OF THE SA ID MR. PULEL FLEISHMAN OR MR. VIBHOR SHARMA ETC. THE ASSESSEE REITERATES THAT HE HAS NOTHING TO DO WITH THIS DOCUMENT AND THERE IS N O EVIDENCE TO EVEN REMOTELY CONNECT HIM WITH THE SAME. V. ANNEXURE A-10, PAGE-79 - THIS IS A PIECE OF PAPER TITLED PRESENTATION MATERIAL CONCEIVED AS BEING ADDRESSED TO TADIRAN. THE COMMENTS OF THE ASSESSEE IN RESPECT OF THE SAME ARE AS FOLLOWS:- (A) THE ASSESSEE HAS SEEN THIS DOCUMENT FOR THE FIRST TIME ON 12.12.2012, AFTER IT WAS PROVIDED BY AO ON THE DIRE CTIONS OF CIT(A). (B) IT IS AN UNNAMED, UNSIGNED DOCUMENT AND EVEN THE AU THOR OF THIS PAPER IS NOT KNOWN. (C) WHO HAS WRITTEN THE LINE MAKING REFERENCE TO THE AS SESSEE? WHOM DOES THIS PAPER BELONG? WHAT IS THE PURPOSE O F THIS PAPER? ALL THESE ISSUES SHOULD HAVE BEEN POSED TO DR. M.V. RAO BEFORE SEEKING ANY RESPONSE OF THE ASSESSEE IN THE MATTER. (D) THE ASSESSEE CANNOT STOP ANYBODY FROM WRITING HIS N AME. MERE WRITING OF A NAME WITHOUT ANY CORROBORATIVE EVIDENC E MEANS NOTHING AND IS NOT EVEN WORTH THE PAPER IT IS WRITT EN ON. (E) THE TITLE OF THE PAPER ITSELF IS NOT CLEAR. WAS TH IS A PRESENTATION MATERIAL ADDRESSED TO TADIRAN OR WAS IT BEING CONCE IVED TO BE ADDRESSED TO TADIRAN? WHO WAS GIVING THE PRESENTAT ION MATERIAL PAGE 31 OF 91 AND TO WHOM? WHEN WAS THIS PRESENTATION MATERIAL G IVEN AND HAS ANY PERSON NAMED IN THE SAID MATERIAL BEEN EXAM INED. HAS ANYBODY NAMED IN THE DOCUMENT CLAIMED TO HAVING EVE N KNOWN THE ASSESSEE? (F) THIS DOCUMENT NOWHERE SAYS THAT ANY COMMISSION HAS BEEN PAID TO THE ASSESSEE AND THE SERVICES THAT HE HAS RENDER ED IN RESPECT OF ANY BUSINESS TRANSACTION. (G) IN FACT, THE ASSESSEE DOES NOT KNOW ANY OF THE PERS ON NAMED IN THE PRESENTATION MATERIAL AND FIRMLY DENIES HAVING ANYTHING TO DO WITH THE NARRATIVE IN THE SAID MATERIAL. (H) THE ASSESSEE ALSO WONDERS WHY THIS PAPER WAS NEVER SHOWN TO HIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS. C OULD IT HAVE BEEN DOCTORED OR PLACED BY SOMEBODY? ALL THIS IS N OT KNOWN. THE ASSESSEES SUSPICION GETS FURTHER ACCENTUATED B Y THE FACT THAT NO QUESTION ABOUT THIS DOCUMENT WAS ASKED FROM DR. M.V. RAO DESPITE HIS STATEMENT HAVING BEEN TAKEN TWICE. (I) IT MAY NOT BE OUT OF PLACE TO MENTION HERE THAT AS PER THE ALLEGATIONS MADE IN THE ASSESSMENT ORDER, DR. M.V. RAO WAS SAID TO HAVE IMPERSONATED AS THE SCIENTIFIC ADVISOR OF T HE HON'BLE PRIME MINISTER OF INDIA BECAUSE OF WHICH, THE DELHI POLICE SEARCHED HIS RESIDENCE ON 22.02.2007. IF A PERSON COULD BE ACCUSED OF SUCH A SERIOUS CRIME OF IMPERSONATING AS THE ADVISOR OF THE PRIME MINISTER, THE USE OF ASSESSEES NAME O R ANYBODY ELSES NAME JUST TO PROMOTE SELF INTEREST CANNOT BE RULED OUT. STATEMENTS TAKEN FROM DR. M. V. RAO THE ANALYSIS OF THE STATEMENT FROM DR. M. V. RAO DOES EVEN MAKE WHISPER OF THE ASSESSEE HAVING TO NOT DO WITH THESE DOCUMENTS. THE FOLLOWING INFERENCES DRAWN FROM THE STATEMENTS FURNISHED TO T HE APPELLANT :- (I) A) THE FIRST STATEMENT FROM DR. M.V. RAO WAS TAKEN ON 22.02.2007 BY THE DEPARTMENT. DR. M.V. RAO STATED THAT HE WAS HEADING A COMPANY CALLED M/S TRANSCOM SERVICES PVT. LTD AND W AS ALSO A DIRECTOR IN A COMPANY CALLED M/S C-1 INDIA PVT. LTD. DR. M.V. RA O STATED THAT HE IS A MECHANICAL ENGINEER BY PROFESSION. B) NO WHERE DID ANY REFERENCE OR CONNECTION OF THE DOCUMENTS WITH SHRI SURESH NANDA I.E THE ASSESSEE WAS EVER BR OUGHT OUT OR STATED BY DR. M.V. RAO. IN FACT THE NAME OF SHRI SURE SH NANDA WAS NOT EVEN MENTIONED IN THE STATEMENT. C) IN THE SEARCH CASH OF RS. 2 CRORES WAS FOUND FR OM DR. M.V. RAO PAGE 32 OF 91 WHICH HE CLAIMED BELONGED TO HIM AND HIS FAMIL Y. THIS CLEARLY GOES TO SHOW THAT DR. M.V. RAO WAS A MAN OF MEANS A ND WAS PERHAPS ENGAGED IN SOME BUSINESS ACTIVITY ETC OF HIS O WN. D) TO REITERATE, THERE IS NO REFERENCE TO OF PAPERS ALLEGEDLY RELATING TO DEFENCE DEALINGS ETC IN THE ENTIRE STATEMENT OF DR M.V. RAO AND NEEDLESS TO ADD, THERE IS NOT EVEN A WHISPER OF THE APPELLANT. E) THE OTHER STATEMENT WAS TAKEN IN COMPLIANCE WIT H THE DIRECTION OF THE CIT(A)-II ON 05.04.2011. IN THE SAID STATEMENT ALS O, THERE IS NO MENTION OF ANY CONNECTION OF DR. M.V. RAO WITH THE APPELLANT. IN THE ENTIRE STATEMENT, DR. M.V. RAO HAS NOWHERE STATED T HAT THE DOCUMENTS FOUND WERE BELONGING TO OR HAD ANY RELATION WITH TH E APPELLANT. AS FAR AS THE OWNERSHIP OF THE DOCUMENT IS CONCERNED, DR. M.V. RAO EVEN DENIED HAVING EVER SEEN THOSE DOCUMENTS AND MUCH LE SS BEING THEIR OWNER. HE DID TALK ABOUT HIS CONNECTION WITH ONE M R. PULEL FLEISHMAN AND M/S TADIRAN COMMUNICATION LTD BUT CATEGORICALLY REFUSED HAVING ANYTHING TO DO WITH THE DOCUMENTS ALLEGEDLY FOUND F ROM HIS PREMISES. (II) WE WOULD LIKE TO PAUSE HERE AND RESPECTFULLY SUBMIT THAT IF THE ALLEGED OWNER OF THE DOCUMENTS HAS HIMSELF DENIED HAVING EV ER SEEN THEM OR HAVING ANYTHING TO DO WITH THEM, HOW CAN THE SAID D OCUMENTS BE SAID TO BE BELONGING TO THE APPELLANT. THE DOCUMENTS INDU BITABLY DO NOT BELONG TO THE APPELLANT AS THEY WERE NOT FOUND ON HIM AND EVE N OTHERWISE DO NOT BEAR HIS NAME OR SIGNATURES TO SIGNIFY ANY FORM OF OWNERSHIP. (III) THE DEPARTMENT HAS NOT BEEN ABLE TO ESTABLISH THE OWNERSHIP OF THE DOCUMENTS VIS--VIS DR. M.V. RAO WHO DID NOT EVEN A DMIT THAT THE DOCUMENTS WERE FOUND FROM HIS PREMISES. IN SUCH A SITUATION ONE FAILS TO UNDERSTAND HOW THE DOCUMENTS CAN BE SAID TO BE BELO NGING/RELATED TO THE APPELLANT. HENCE, THE HON'BLE TRIBUNALS DIRECTION THAT THE PRESUMPTION IN LAW THAT THE PERSON FROM WHOM THE DOCUMENT IS FOUND IS THE OWNER OF THE DOCUMENT AND THE BURDEN IS ON THE DEPARTMENT TO PRO VE THAT IS ALSO NOT DISCHARGED. (IV) FOR EASE OF REFERENCE THE RELEVANT PORTION OF DR. M.V. RAOS STATEMENT ON 05.04.2011 WHERE HE COMPLETELY DENIED HAVING ANY THING TO DO WITH THE DOCUMENTS IS REPRODUCED AS UNDER:- Q.1 PLEASE IDENTIFY YOUR SELF? ANS. I AM DR. M.V. RAO S/O SH. JAGANNATH RAO R/O F -58, GREEN PARK MAIN, NEW DELHI-110016. 1 AM WORKING AS DIRECTOR IN M/S TRANSCOM PAGE 33 OF 91 SERVICES INDIA PVT. LTD. MY AUTHORISED REPRESENTATI VE WILL SUBMIT A COPY OF THE PROOF OF IDENTIFICATION BY 07.04.20 I1. Q.2. I AM SHOWING YOU A COPY OF DOCUMENTS SEIZED F ROM YOUR RESIDENCE AND USED DURING THE COURSE OF ASSESSMENT PROCEEDING S. WERE YOU SHOWN THIS DOCUMENTS FOR EXPLANATIONS DURING THE PERIOD O CTOBER, 2009 TO DECEMBER, 2009 I.E. PENDENCY OF THE ASSESSMENT PROC EEDINGS? ANS. I WAS IN THE HOSPITAL DURING THAT PERIOD. I D O NOT EVEN REMEMBER THAT THESE DOCUMENTS WERE PRESENTED TO ME FOR EXPLANATIO NS. Q.3. DO YOU IDENTIFY THESE DOCUMENTS AS BEING SEIZ ED FROM YOUR RESIDENCE ON 22.02.2007 BY THE DELHI POLICE? ANS. I HAVE NOT SEEN THESE DOCUMENTS AT MY RESIDEN CE AND 1 AM NOT ABLE TO IDENTIFY THESE DOCUMENTS AS HAVING BEEN SEIZED F ROM MY RESIDENCE. Q.4. WHY DID YOU CHOOSE TO FURNISH AN E XPLANATION FOR THE ABOVE DOCUMENTS WHEN YOU CANNOT EVEN IDENTIFY (HEM AS BEI NG SEIZED FROM YOUR RESIDENCE? ANS. I CHOSE TO FURNISH AN EXPLANATION FOR THESE D OCUMENTS TO BE ABLE TO GET OUT OF THE HUGE TAX LIABILITIES LEVIED AS A CON SEQUENCE OF THE ADDITIONS MADE ON THE BASIS OF THESE DOCUMENTS. REGARDING ALLEGATION OF ASSOCIATION WITH TRANSCOM I NDIA PVT.LTD. (I) NO DOCUMENT, PAPE R, BOOKS ETC WERE FOUND FROM THE PREMISES OF THE ASSESSEE OR ENTITIES IN WHICH HE HAS A CONTR OLLING INTEREST RELATING TO M/S TRANSCOM SERVICES PVT. LTD. (II) THE ASSESSEE NEITHER IS NOR HAS EVER BEEN THE SHARE HOLDER OR THE DIRECTOR IN THE SAID COMPANY AND HAS HAD NO DEALING WHATSOEVER WITH THE SAME. NONE OF THE COMPANIES WHERE THE ASSE SSEE HAS A CONTROLLING INTEREST, I.E. M/S CROWN CORPORATION PV T. LTD, M/S DYNATRON SERVICES PVT. LTD ETC HAVE HAD ANY DEALING S WITH THE SAID COMPANY. (III) IT IS FOUND FROM THE STATEMENT GIVEN BY DR. M.V. RA O THAT HE WAS THE MANAGING DIRECTOR AND THEN THE DIRECTOR OF M/S TRANSCOM SERVICES PVT. LTD AND HE HAS NEVER STATED THAT THE SAID COMPANY BELONGS TO THE ASSESSEE OR IT IS BELIEVED THAT THE ASSESSMENTS IN THE CASE OF M/S TRANSCOM SERVICES PVT. LTD WERE MADE IN THE SAME CIRCLE AND NOWHERE IN PAGE 34 OF 91 THE ORDER HAS ANY FINDING OF ASSESSEES RELATIONSHI P OR OWNERSHIP OF THE SAID COMPANY EXISTS. (IV) IT HAS BEEN ALLEGED THAT THE SHARE HOLDER OF THE CO MPANY IS ONE M/S INET COMMUNICATION, MUMBAI. THE ASSESSEE HAS N OTHING TO DO WITH M/S INET COMMUNICATION AND THE COMPANY, ADM ITTEDLY AS PER THE ORDER, IS OWNED AND RUN BY ONE MR. BIPIN B. SHAH. (V) MR. BIPIN B. SHAH IS A PROFESSIONAL WITH AN INDEPEN DENT AND ROARING PRACTICE AND THERE CAN BE NO DOUBT THAT HE COULD BE RUNNING CERTAIN COMPANIES WHILE CARRYING ON WITH HI S PROFESSION. TO THE BEST OF THE KNOWLEDGE AND BELIEF OF THE ASSE SSEE, NO WHERE MR. BIPIN SHAH STATED THAT HE WAS HOLDING SHA RES ON BEHALF OF THE ASSESSEE AND THAT M/S TRANSCOM SERVIC ES PVT. LTD BELONGS TO THE ASSESSEE. (VI) THE ASSESSEE FAILS TO UNDERSTAND HOW MERELY ON CONJ ECTURES AND SURMISES AND ON SOME ALLEGATIONS BEFORE THE SEARCH CAN THE STATEMENT BE MADE THAT M/S TRANSCOM SERVICES PVT. L TD BELONG TO HIM. (VII) IT IS TRITE THAT EVERY COMPANY IS THE SEPARATE LEGA L ENTITY AND MERELY ON ALLEGATIONS IT CANNOT BE HELD THAT IT BEL ONGS TO PERSONS OTHER THAN THE SHARE HOLDERS. (VIII) THERE IS NO FINDING OF THE ASSESSING OFFICER OR ANY OTHER AUTHORITY THAT THE COMPANY IS BENAMI OF THE ASSESSEE OR BELON GS TO HIM. THERE IS NOTHING TO SHOW THAT THE ASSESSEE IS A SHA RE HOLDER OR HAS INVESTED HIS FUNDS TO THE COMPANY. (IX) THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF V ODAFONE HELD THAT A COMPANY HAVING A SINGLE SHARE HOLDER, IS ALS O A SEPARATE LEGAL ENTITY AND IT CANNOT BE HELD TO BE BELONGING TO ANYBODY ELSE ON THE BASIS OF MERE STATEMENT, CONJECTURES AND SUR MISES. (X) HENCE, THE ASSESSEE FIRMLY STATES THAT MS TRANSCOM SERVICES PVT. LTD DOES NOT BELONG TO HIM AND SINCE THE DIRECTORS OF M/S TRANSCOM SERVICES PVT. LTD ARE KNOWN TO THE DEPARTM ENT AND HAVE OWNED UP, THEY ONLY SHOULD HAVE BEEN ASKED THE QUESTION RELATING TO THAT COMPANY, IF ANY. NO CROSS EXAMINATION AS DIRECTED BY HONBLE ITAT GI VEN TO THE ASSESSEE. CROSS EXAMINATION DIRECTIONS OF HONBLE ITAT PAGE 35 OF 91 NO ADVERSE VIEW AGAINST THE ASSESSEE CAN BE DRAWN O N THE BASIS OF THE PURPORTED DOCUMENTS SEIZED FROM DR. M.V. RAO AND, T HEREFORE, THE ASSESSEE SOUGHT CROSS EXAMINATION OF DR. M.V. RAO A S DIRECTED BY THE HON'BLE TRIBUNAL. THE DIRECTIONS OF THE HON'BLE TRI BUNAL TO THIS EFFECT ARE REPRODUCED HEREIN UNDER ONCE AGAIN FOR YOUR KIND CO NSIDERATION:- WE ARE OF THE VIEW THAT THE ADDITION BASED ON THE DOCUMENTS FOUND FROM A THIRD PARTY CANNOT BE MADE WITHOUT CONFRONTING TH E MATERIAL AND ALLOWING THE OPPORTUNITY TO CROSS EXAMINE TO THE AS SESSEE. THIS PROPOSITION HAS BEEN REPEATEDLY LAID DOWN BY ALL THE COURTS. NO CROSS EXAMINATION WAS ALLOWED TO THE ASSESSEE DE SPITE THE DIRECTIONS OF THE TRIBUNAL. IN ANY CASE, DR. M. V. RAO DID NO T MAKE ANY STATEMENT AGAINST THE ASSESSEE BEFORE THE AO. SETTING ASIDE DIRECTIONS BY CIT(A): THE LD. CIT(A) HAS EXCEEDED HIS JURISDICTION BY STA TING THAT REFERENCE HAS TO BE MADE TO ISRAEL AND IF THE REFERENCES THROW AN Y ADVERSE RESULT AGAINST THE ASSESSEE, THE SAME SHOULD BE APPLIED. THIS TAN TAMOUNTS TO POSTPONING THE DECISION AND TANTAMOUNTS TO SETTING ASIDE THE ISSUE. THE CIT(A) U/S 250 CAN ANNUL, ENHANCE OR DELETE AND CAN NOT SET ASIDE. SINCE ON THE FACTS ON RECORD, THE DOCUMENTS SEIZED FROM D R. M. V. RAO ON THE STATEMENT TAKEN FROM DR. RAO HAS NO ANY REFERENCE H AS BEEN MADE TO THE APPELLANT, SUCH REFERENCE IS UNWARRANTED. THE LD. DR HAS ALSO CONCERNED THAT THE LD. CIT(A) HAS EXCEEDED HIS JURISDICTION I N THE MATTER. WITHOUT PREJUDICE: THE DEPARTMENT HAS NOT FOUND ANY EVIDENCE IN THE FO RM OF BANK ACCOUNT, CASH ETC. TO SHOW THAT SUCH HUGE AMOUNTS WERE RECEI VED BY THE ASSESSEE. THERE IS NO EVIDENCE TO SHOW THAT THE ALLEGED TRANS ACTION EVER TOOK PLACE. HENCE, IT IS NOTHING BUT A FIGMENT OF IMAGINATION O F THE DEPARTMENT AND THE ADDITION DESERVES TO BE DELETED. 6.3. AFTER HEARING RIVAL CONTENTIONS, WE FIND THAT THE ADDITION IN QUESTION CANNOT BE SUSTAINED FOR THE FOLLOWING REAS ONS. THE A.O. HAS ARRIVED AT THE CONCLUSIONS BASED ON EXAMINATION OF CERTAIN DOCUMENTS FOUND DURING THE COURSE OF SEARCH. STATEMENTS OF SHRI M. V. RAO AND MR. MOHAN JAGTAP WERE PAGE 36 OF 91 REFERRED TO THE ASSESSEE, ON BEING GIVEN COPIES OF THESE DOCUMENTS, GIVEN HIS CONTENTIONS, THE LD. DEPARTMENTAL REPRESENTATIVE RE LIED ON THE ORDER OF THE ASSESSING OFFICER, DOCUMENTS FOUND WERE ANALYSED AN D INFERENCES WERE DRAWN AND RELIED ON THE EVIDENCES DURING THE ARGUMENTS. W E ADJUDICATE THE ISSUE ON HAND BY EXAMINING THE DOCUMENT IN QUESTION, AFTER C ONSIDERING THE FINDINGS OF THE ASSESSING OFFICER AND THE CONTENTION OF THE D.R . AND THE CONTENTIONS OF THE ASSESSEE. AS THE A.O. HAS ALREADY GIVEN HIS FINDIN GS ON THE DOCUMENT, IN OUR VIEW NO USEFUL PURPOSE WOULD BE SERVED BY RESTORIN G THE MATTER ONCE AGAIN TO THE FILE OF THE A.O. FOR FRESH ADJUDICATION. 6.4. FROM A PERUSAL OF THE DOCUMENTS SEIZED FROM THE P REMISES OF DR. M. V. RAO AND MR. MOHAN JAGTAP AND FROM A READING O F THE STATEMENTS RECORDED FROM DR.M.V.RAO, WHO HAS PURPORTEDLY IMPER SONATED AS THE SCIENTIFIC ADVISER TO THE PRIME MINISTER OF INDIA, AND THE STA TEMENT OF MR. MOHAN JAGTAP IT CANNT BE HELD THAT THE ASSESSEE HAS RECEIVED COM MISSION INCOME, FROM DEFENCE DEALS. IN THIS CASE THE ASSESSING OFFICER, IN PURSUANCE TO THE DIRECTIONS OF THE TRIBUNAL IN THE EARLIER AYS PROVIDED COPIES OF THE STATEMENTS RECORDED FROM DR.MV RAO ON 22.2.2007 AND MR.MOHAN S.JAGTAP O N 28.2.2007 TO THE ASSESSEE ALONG WITH COPIES OF A CERTAIN PAPER AND D OCUMENTS WHICH WERE RELIED UPON BY THE ASSESSING OFFICER. THE CONTENTIONS OF BOTH THE PARTIES ARE BASED ON THEIR EVIDENCE. A PERUSAL OF COPIES OF THESE DOCUMENTS AND STATEMEN TS REVEAL THAT : PAGE 37 OF 91 (A) ALL THESE DOCUMENTS WERE FOUND EITHER IN THE PO SSESSION OF DR.MV RAO OR MR.MOHAN S.JAGTAP AND HENCE THE PRESUMPTION IN LAW U/S 132(4)(A) IS THAT THESE DOCUMENTS PERTAIN TO THEM. THUS THE DOCUMENTS CANNOT BE PRESUMED TO BELONG TO THE ASSESSEE UNLESS, CERTAIN EVIDENCE ARE BROUGHT ON RECORD BY THE REVENUE TO PROVE THE SAME. NO SUCH EVIDENCE IS BROU GHT ON RECORD BY THE REVENUE. (A) A PERUSAL OF ANNEXURE A-10, P 58 AND 59 WHICH ARE A T ASSESSEES PAPER BOOK PAGES 338 AND 339, MAKES IT CLEAR THAT THE PAP ERS DO NOT MENTION (I) ANY NAME, MUCH LESS THE NAME OF THE ASSESSEE; (II) THE PAPERS DO NOT INDICATE THAT ANY PAYMENTS HAVE BEEN MADE TO ANY PARTICULAR PERSO N, MUCH LESS THE ASSESSEE; (III) DR.MV RAO, FROM WHOSE POSSESSION TH IS PAPER IS SEIZED, HAS NOT STATED THAT ANY PAYMENTS WERE MADE TO THE ASSESSEE; (IV) THE PAPER IN QUESTION RECORD SOME DATES AND FIGURES. WITHOUT CORROBORATIN G EVIDENCES OR AT LEAST A CONFESSIONAL STATEMENT NO ADDITION CAN BE MADE BASE D ON THESE DOCUMENTS; (V) ANNEXURE A-10 PAGES 60 AND 61 THESE PAPERS DO NOT C ONTAIN THE NAME OF THE ASSESSEE. CERTAIN DATES AND AMOUNTS ARE MENTIONED. IT IS A COLUMN TITLED PAID TO HUDAR US DOLLARS. WE HAVE DEALT WITH THE EVIDENCIARY VALUE OF SIMILAR DOCUMENT WHICH AS ANNEXURE A-10 FOR THE SAME REASO NS AS GIVEN WHILE DEALING WITH DOCUMENT ANNEXURE A-10 PAGE 58 AND 59 WE HOLD THAT NO ADDITION CAN BE MADE IN THE CASE OF THE ASSESSEE BASED ON TH ESE DOCUMENTS AS THEY DO NOT INDICATE EARNING OF COMMISSION BY THE ASSESSEE. (B) ANNEXURE A-5 IS A PAPER CONTAINING SOME NUMBERS. D R.MV RAO, IN WHOSE POSSESSION THIS PAPER WAS FOUND, HAS NOT BEE N QUESTIONED ON THIS PAGE 38 OF 91 PAPER. NO NAMES ARE MENTIONED. HENCE FOR THE SAME REASONS GIVEN, IN THE CASE OF OTHER SUCH EVIDENCES, WE ARE OF THE VIEW TH AT NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE BASED ON THESE PAPERS. (C) ANNEXURE A-11 PAGE 62 IS A LETTER WHICH DOES NOT MA KE ANY REFERENCE TO THE ASSESSEE. THERE IS NO EVIDENCE TO CONNECT THIS PAPER WITH THAT OF THE ASSESSEE. (D) ANNEXURE A-10 AT PAGE 79 IS A PAPER TITLED PRESENT ATION MATERIAL CONCEIVED AS BEING ADDRESSED TO TADIRAN. THIS DOES NOT PROVE THAT THE ASSESSEE HAS RECEIVED OR EARNED ANY COMMISSION INCO ME FROM DEFENCE DEAL. 6.5. FOR THE SAME REASONS GIVEN IN PARAGRAPH NOABO VE, WE ARE OF THE CONSIDERED OPINION THAT NO ADDITION CAN BE M ADE BASED ON THIS DOCUMENT. DR.MV RAO HAS NOT BEEN QUESTIONED ON THE SE DOCUMENTS. THE DOCUMENT DOES NOT INDICATE THAT SERVICES HAVE BEEN RENDERED BY THE ASSESSEE OR THAT ANY COMMISSION WAS RECEIVED. THUS, NO ADDI TION CAN BE MADE BASED ON THIS DOCUMENT. 6.6 . IN THE STATEMENT GIVEN BY DR.MV RAO, NO MENTION OR A REFERENCE WAS MADE TO THE ASSESSEE MR.SURESH NANDA, MUCH LESS ANY SUGGESTION BEING MADE THAT MR. SURESH NANDA WAS INVOLVED IN DEFENCE DEALS OR THAT HE HAD EARNED ANY COMMISSION. THUS IN OUR VIEW THE STATEM ENT DOES NOT SUPPORT THE CONTENTIONS OF THE REVENUE THAT THE ASSESSEE HAS EA RNED COMMISSION IN PAGE 39 OF 91 QUESTION. DR.MV RAO HAS NOT ADMITTED THE OWNERSHIP OF THE DOCUMENT FOUND IN HIS PREMISES THOUGH THE PRESUMPTION IS AGAINST H IM. IN ANY EVENT THE DOCUMENTS HAVE NOT BEEN DEMONSTRATED AS THOSE WHICH BELONG TO THE ASSESSEE BY THE REVENUE. UNDER THE CIRCUMSTANCES, NO ADDITI ON CAN BE MADE IN THE HANDS OF THE ASSESSEE, WITHOUT FURTHER EVIDENCE BEI NG BROUGHT ON RECORD, THAT THE DOCUMENTS IN QUESTION ACTUALLY DID NOT BELONG T O DR.MV RAO, BUT IN FACT BELONG TO THE ASSESSEE. ADDITION CANNOT BE MADE BAS ED ON PRESUMPTION. 6.7. ON THE ISSUE OF ASSOCIATION OF THE ASSESSEE WIT H TRANSCOM INDIA PVT.LTD., THE ASSESSEE STATES THAT HE HAS NEVER BEE N A SHAREHOLDER OR DIRECTOR OF THE SAID COMPANY; NOR HAD HE OR THE COMPANIES IN WHICH HE HAD SUBSTANTIAL INTEREST HAVE ANY DEALINGS WITH TRANSCOM INDIA P.LT D. THIS FACTUAL STATEMENT COULD NOT BE CONTROVERTED BY THE REVENUE WITH EVIDE NCE. THUS, IN OUR VIEW THERE IS NO EVIDENCE TO LINK THE ASSESSEE WITH TRAN SCOM INDIA P.LTD. 6.8. THUS FOR ALL THESE REASONS, IN THE ABSENCE OF ANY EVIDENCE, THE DELETION OF AN ADDITION MADE BY THE LD.COMMISSIONER OF INCOME TAX (APPEALS) IS HEREBY UPHELD, THOUGH ON DIFFERENT REASONS. AS ON EXAMINATION OF EVIDENCES, WE HAVE UPHELD THAT DECISION OF THE LD. COMMISSIONE R OF INCOME TAX (APPEALS), WE DO NOT GO INTO THE OTHER LEGAL ARGUMENTS RAISE B Y THE ASSESSEE REGARDING THE POWERS OF THE LD.COMMISSIONER OF INCOME TAX (APPEAL S) ETC. AS IT WOULD BE AN ACADEMIC EXERCISE. THUS GROUND NO.2 OF THE REVENU E IS DISMISSED. PAGE 40 OF 91 7. GROUND NO.3 AND 4 ARE ON THE ISSUE OF UNEXPLAIN ED INVESTMENTS MADE BY THE ASSESSEE IN M/S CLARIDGES HOTELS PVT.LT D. AND IN M/S CLARIDGES SEZ PVT.LTD. 7 .0 THE ASSESSING OFFICER AT PARA 7.20 AT PAGE 25 RE FERRED TO CERTAIN DOCUMENTS FOUND DURING THE SEARCH AND SUBSEQUENT IN VESTIGATION, AND CAME TO A CONCLUSIONS THAT SHRI SURESH NANDA WAS CLOSELY INVOLVED WITH THE MANAGEMENT AND FUNCTIONING OF CLARIDGES HOTEL AS WE LL AS THREE OTHER COMPANIES. HE EXAMINED PAGES NO.4,8, AND 15 OF ANNE XURE-A-7, WHICH IS A DOCUMENT FOUND AND SEIZED DURING THE COURSE OF SEAR CH IN THE RESIDENCE OF THE ASSESSEE FOR COMING TO A CONCLUSION THAT MR. NANDA CONTROLS AFFAIRS OF C-1 INDIAN PVT. LTD. THE FACT THAT MR. NANDA PURCHASED LAND ON BEHALF OF THE COMPANY IN MAHARASTRA IN THE CAPACITY OF FOUNDER DI RECTOR WAS ALSO HELD AS A CIRCUMSTANCE TO SHOW THAT THE ASSESSEE IS HAVING CO NTROL OVER THE COMPANY. THE ASSESSING OFFICER EXAMINED PAGE NO.70 OF ANNEXU RE A-15, WHICH IS A DOCUMENT FOUND AND SEIZED FROM THE RESIDENCE OF MR. SURESH NANDA, WHICH DETAILS THE DEBIT AND CREDIT ENTRIES IN THE ACCOUNT IN DEUTSCHE BANK SINGAPORE AND CAME TO A CONCLUSION THAT THE ENTRIES THEREIN A RE INCOME OF THE ASSESSEE. AT PARA 9.4 PAGE 34 THE ASSESSING OFFICER HAS EXAMI NED THE FOLLOWING DOCUMENTS: A) ANNEXURE A-8 PAGE 17 TO 34 PARTY R-1. B) ANNEXURE A-8 PAGE 35 PARTY R-1. C) ANNEXURE A-8 PAGE 36 PARTY R-1 PAGE 41 OF 91 AFTER GIVING A FACTUAL NARRATION AS WHAT IS GIVEN I N EACH OF THESE DOCUMENTS , THE ASSESSING OFFICER CAME TO A CONCLUSION THAT MR. SURESH NANDA IS OWNER OF UBS LTD. MAURITIUS, AS WELL AS UPS TRADING ,FZC, UA E. FOR THE SAKE OF BREVITY WE DO NOT EXTRACT THE CONCLUSION ARRIVED IN THE ORD ER, AS NARRATED BY THE ASSESSING OFFICER AT PARA 9.5. THE ASSESSING OFFICE R REFERS, ENQUIRY SENT TO THE GOVT. OF MAURITITIUS THROUGH THE FT & TR DIVISION O F THE CBDT, AND HAS RECEIVED A REPLY AND CAME TO A CONCLUSION THAT MR. SURESH NANDA, HAS USED THE MAURITIUS ROUTE, TO BRING THE UNACCOUNTED MONEY INT O THE INDIAN COMPANIES TO AVOID DISCLOSURE. THE EXPLANATIONS GIVEN BY THE ASS ESSEE AND THE SUBMISSION THAT THE ASSESSEE WAS ONLY A 20% SHAREHOLDER OF UBS MAURITITUS WAS REJECTED AS VAGUE. THE CONFIRMATION FROM MR. HAMILTON WAS HE LD AS NOT VERIFIABLE AT. AT 9.40 AND 9.11 THE ASSESSING OFFICER HELD AS FOLLOWS : 9.0 ON ANALYSIS OF THE SEIZED DOCUMENTS IT WAS AL SO NOTICES THAT SHRI SURESH NANDA WAS A DIRECTOR OF UNIVERSAL BUSIN ESS SOLUTIONS LTD. TILL NOVEMBER, 2006. 9.11 THE CONTROL OF SHRI SURESH NANDA ON CLARIDGES HOTEL PVT. LTD. IS EVIDENT FROM THE FACT THAT HE WAS THE CHAIR MAN AND HIS SON SANJEEV NANDA THE MANAGING DIRECTOR OF THE COMPANY. HIS CLOSE CONFIDANT LIKE SHRI BIPIN B. SHAH AND SHRI HARIVANS H CHAWLA WERE DIRECTORS OF THE COMPANY. BASED ON THE ABOVE FACTS, IT IS EVIDENT THAT THE ASSESSEE HAS BEEN BRINGING IN UNACOUNTED M ONEY AFTER CREATING LAYERS OF INTERMEDIARIES INCLUDING UNIVERS AL BUSINESS SOLUTIONS MAURITIUS DUE TO THE LESS STRINGENT EXCHA NGE CONTROL NORMS THERE. THE INTERMEDIARIES HAVE MERELY PROVIDE D THE NAMES. THE TRUE SOURCE OF FUNDS HAS NOT BEEN DISCLOSED BEF ORE THE INCOME TAX AUTHORITIES. HENCE, AN ADDITION OF RS.1,40,02,1 8,500/- IS MADE FOR THE ASSESSMENT YEAR 2005-06. PENALTY PROCEEDING S U/S 271 (1) (C) OF THE INCOME TAX ACT,1961 ARE BEING INITIATED SEPARATELY. THE LD.COMMISSIONER OF INCOME TAX (APPEALS) CONSI DERED THIS ISSUE AT GROUND NO.7 AT PARA 7.1 AND 7.2. PAGE 42 OF 91 7.2. I HAVE CONSIDERED THE ASSESSMENT ORDER, THE O RDER OF THE HONBLE ITAT, DELHI DT. 24.7.2012 IN ITA NOS. 1428, 1429 AND 1430 /DEL/2012 AND SUBMISSIONS OF THE LD.A.R. ALTHOUGH EXACTLY THIS G ROUND WAS NOT RAISED IN ITA NOS. 1428, 1429 AND 1430/DEL/2012, SIMILAR GROUND O F TAXATION OF SHARE CAPITAL AND LOAN BROUGHT INTO M/S C-1 INDIA P.LTD. BY THE H OLDING COMPANY M/S Y2K SYSTEMS INTERNATIONAL LTD., MAURITIUS, AS INCOME OF THE APPELLANT WAS ADJUDICATED BY HONBLE ITAT IN ITS AFORESAID ORDER AT PARAGRAPH 10, WHICH SET ASIDE THE MATTER AND RESTORED IT TO THE ASSESSING O FFICER TO DECIDE AFRESH AND CONSIDER WHETHER ANY ADDITION ON THIS ACCOUNT IS CA LLED FOR IN ANY CASE AND IF SO IN WHICH CASE THE ADDITION IS TO BE MADE. THE STAT US OF THE APPELLANT IS HELD AS NON RESIDENT AT PARA 4.2 ABOVE. ACCORDINGLY, EVE N IF ANY AMOUNT INVESTED IN INDIA IS FOUND TO BELONG TO THE APPELLANT, IT CANNO T BE BROUGHT TO TAX AS INCOME IN HIS HANDS UNLESS IT IS PROVED THAT THE INCOME ACCRU ED TO HIM IN INDIA, AS HELD BY HONBLE ITAT VIDE PARA 8.3 OF ITS ORDER DT. 24.7.2 012. IT AHS BEEN HELD BY THE HONBLE SUPREME COURT IN UOI VS. KAMLAKSHI FINANCE CORP.LTD. (AIR 1992 SC 711) AND KHALID AUTOMOBILES VS. UOI (4 SCC (SUPPL.) 653) THAT THE DECISIONS OF THE JURISDICTIONAL HIGH COURT AND THE TRIBUNAL ARE BINDING ON THE INCOME TAX AUTHORITIES WITHOUT ANY RESERVATION. ACCORDINGLY, THE DECISION OF THE HONBLE ITAT IS APPLIED TO THE PRESENT ASSESSMENT YEAR, SUP ERSEDES THE EARLIER DECISION OF CIT(A) ON THIS GROUND, THE EARLIER ORDER OF CIT( A) MERGES WITH THE SUBSEQUENT ORDER OF ITAT, WHICH AHS BECOME BINDING ON THE APPE LLATE AUTHORITY. CONSEQUENTLY, THIS GROUND OF APPEAL IS ALLOWED. AP PELLANT GETS RELIEF OF RS.104,68,35,904/-. 7.3. IT IS NOTED THAT THE IMPUGNED AMOUNTS HAVE NOT BEEN BROUGHT TO TAX IN THE HANDS OF THE BENEFICIARY COMPANIES, NAMELY M/S SHAN TIDEEP FOODS (P) LTD., M/S SHANTIDEEP HOTELS (P) LTD. AND M/S PRADIGM HOTELS ( P) LTD. IT IS ALSO NOTED THAT SO FAR THERE IS NO EVIDENCE TO ESTABLISH THAT THE A MOUNTS INVESTED ARE INCOME OF THE APPELLANT THAT HAS ARISEN IN INDIA. IT IS SEEN FROM PARA 10.6 (PAGE 4) OF THE ASSESSMENT ORDER THAT CERTAIN INFORMATION, SUCH AS BANK STATEMENTS OF THE MAURITIUS BASED COMPANIES, ARE STILL AWAITED FROM T HE GOVERNMENT OF MAURITIUS. THE ADDITION WAS, THEREFORE, ALSO PREMATURE AND PEN DED ASCERTAINING FULL FACTS. ON THIS REASON ALSO THE APPEAL ON THIS GROUND HAS T O BE ALLOWED FOR STATISTICAL PURPOSES. ASSESSING OFFICER IS DIRECTED TO PURSUE THE REFERENCE TO MAURITIUS THROUGH THE FT & TR DIVISION OF CBDT AND ANY FURTHE R INVESTIGATION THAT MAY BE REQUIRED TO ASCERTAIN THE TRUTH. 7.1. THE LD.D.R. SUBMISSIONS ARE AS FOLLOWS. PAGE 43 OF 91 (D) UNEXPLAINED INVESTMENTS IN CLARDIGES HOTEL:- (1) THE ASSESSING OFFICER MADE ADDITION OF 104 CRORES IN ASSESSMENT YEAR 2004-05. IN SHORT (PAGE 35 TO 45 OF THE ORDER), TH E ASSESSING OFFICERS CASE IS THAT ASSESSEE WAS BRINGING HIS UNACCOUNTED INCOM E THROUGH MAURITIUS BASED ENTITIES BY CREATING A WEB OF INTERMEDIARIES SO AS TO HIDE TRUE SOURCE. SIMILAR ADDITION OF DIFFERENT AMOUNT IS MA DE IN ASSESSMENT YEAR 2005-06 AND 2006-07. CIT(A) (E.G. 7.2 AND 7.3 OF H IS ORDER) THOUGH FOUND THE ISSUE TO BE NOT EXACTLY RAISED/COVERED IN ITA 1 428, 1429 AND 1430 OF 2012 YET DELETED THE ADDITION SOLELY RELYING ON THE ITAT ORDER DT. 24.7.2012 AND ALSO OBSERVING THAT EVEN IF AMOUNT BE LONGS TO ASSESSEE STILL IT CANNOT BE TAXED AS HIS TAX STATUS IS NON-RESIDEN T. (2) THE A.R. OF THE ASSESSEE HAS ARGUED THAT THE ORDER OF THE CIT(A) TO THE EXTENT OF RESTORING THE ISSUE TO ASSESSING OFFICER IS NOT AS PER THE LAW BECAUSE POWER OF RESTORING THE ISSUE BACK TO ASSESS ING OFFICER IS NOT VESTED ANY MORE WITH HIM AND HENCE WANTS EXPUNCTION OF THESE DIRECTIONS. IN THIS CONNECTION, IT IS TO BE NOTED THAT THE CIT( A) HAS NOT SET ASIDE THE ISSUE TO BE DECIDED DE-NOVO (WHICH ALONE IS BARRED IN LAW) AND THAT THESE DIRECTIONS ENDORSED BY THE TRIBUNAL IN EARLIER YEAR S WERE ACCEPTED BY THE ASSESSEE AS NO APPEAL HAS BEEN FILED IN THE HIGH CO URT AGAINST THESE DIRECTIONS. FURTHER, CIT(A) INSTEAD OF ADJUDICATIN G THE APPEAL, EITHER AT HIS OWN OUGHT TO HAVE TAKEN UP THE ENQUIRY OR OUGHT TO HAVE REMANDED THE MATTER TO ASSESSING OFFICER FOR DESIRED REPORT/ENQU IRY. ISSUE OF UNDISCLOSED INVESTMENTS MADE IN CLARIDGES SEZ P.LTD.: (1) IN SHORT, THE ASSESSING OFFICER HAS DEALT WITH THI S ISSUE OF ADDITION OF RS.34.60 LAKHS ON PAGES 45-31 POINTING OUT THAT THE LAND WAS PURCHASED BY CLARIDGES SEZ PVT.LTD. IN THE NAMES OF SURESH AN D SANJEEV NANDA. THE LD.COMMISSIONER OF INCOME TAX (APPEALS) (PARA 8.2 A ND 8.3) FOUND THE ISSUE TO BE NOT EXACTLY RAISED/COVERED IN ITA 1428, 1429,1430/DEL/12 YET DELETED THE ADDITION SOLELY RELYING ON THE ITAT ORD ER DT. 24.7.2012 AND ALSO OBSERVING THAT EVEN IF AMOUNT BELONGS TO ASSES SEE STILL IT CANNOT BE TAXED AS HIS STATUS IS NON-RESIDENT, BUT SINCE BANK STATEMENT FROM MAURITIUS WAS PENDING HOLDING THE ADDITION TO BE PR EMATURE HAS DIRECTED ASSESSING OFFICER TO PURSUE QUA INVESTIGATION TO AS CERTAIN TRUTH. (2.1) WHEN THIS ISSUE WAS NOT THERE BEFORE THE TRI BUNAL IT WAS INCORRECT ON THE PART OF THE CIT(A) TO INSTEAD OF DEALING WIT H VARIOUS ARGUMENTS PAGE 44 OF 91 GIVEN BY THE ASSESSING OFFICER WHILE MAKING ADDITIO N, SEEK ANY COVER OF THE TRIBUNAL ORDER. THE CIT(A) HAS FAILED TO APPRE CIATE THAT IF THE MONEY DID NOT BELONG TO THE ASSESSEE WHY WAS THE LAND PUR CHASED IN THE NAMES OF THE ASSESSEE AND HIS SON SANJEEV NANDA. (2.2) THE AR OF THE ASSESSEE HAS ARGUED THAT THE O RDER OF THE CIT(A) TO THE EXTENT OF RESTORING THE ISSUE TO ASSESSING OFFICER IS NOT AS PER THE LAW BECAUSE POWER OF RESTORING THE ISSUE BACK TO ASSESS ING OFFICER IS NOT VESTED ANY MORE WITH HIM AND HENCE WANTS EXPUNCTION OF THESE DIRECTIONS. IN THIS CONNECTION, IT IS TO BE NOTED THAT THE CIT(A) HAS NOT SET ASIDE THE ISSUE TO BE DECIDED DE-NOVO (WHICH ALONE IS BARRED IN LAW) AND THAT THESE DIRECTIONS ENDORSED BY THE TRIBUNAL IN E ARLIER YEARS WERE ACCEPTED BY THE ASSESSEE AS NO APPEAL HAS BEEN FILE D IN THE HIGH COURT AGAINST THESE DIRECTIONS. FURTHER, CIT(A) HAS NOT ADDRESSED THE VERY PERTINENT ISSUE RAISED BY THE ASSESSING OFFICER THA T VERY FACT OF BUYING AGRICULTURAL LAND IN THE NAMES OF THE ASSESSEE AND HIS SON (INSTEAD OF THE COMPANY) GOES TO SHOW THAT MONEY WAS OF THE ASSESSE E ONLY. 7.2. THE LD.COUNSEL FOR THE ASSESSEE SUBMITS AS UNDER. 3. GROUND NO.3 REGARDING UNEXPLAINED INVESTMENT MADE BY THE APPELLANT IN CLARIDGES HOTEL OF RS.104,68,35,904/-: AOS CONTENTION: THIS AMOUNT REPRESENTS MONEY RECEIVED BY CLARIDGES HOTELS PVT. LTD. FROM ITS HOLDING COMPANY UNIVERSAL BUSINESS SOLUTIONS LIMITE D MAURITIUS THROUGH BANKING CHANNELS. ACCORDING TO THE AO, UBS MAURITI US HAS BEEN USED AS A MERE CONDUIT AND THE MONEY REMITTED BELONGS TO THE APPEL LANT. THE DEPARTMENT HAS TAXED CLARIDGES HOTELS PVT. LTD AS WELL IN RESPECT OF THE ENTIRE SUM BY APPLYING SEC. 68 OF THE ACT, THUS DOUBLY TAXING THE SAME AM OUNT ON SUBSTANTIVE BASIS. APPELLANTS CONTENTION: 1. FOLLOWING THE ORDER OF HONBLE DELHI HIGH COURT IN APPELLANTS OWN CASE SINCE THE APPELLANT IS A NON-RESIDENT INDIAN, THE DEPARTM ENT HAS TO PROVE THAT INCOME RECEIVED IN INDIA OR ACCRUED IN INDIA HAS NOT BEEN TAXED. HENCE, THE DEPARTMENT HAD TO ESTABLISH THAT THE MONEY RECEIVED BY CLARIDG ES HOTEL PRIVATE LIMITED FROM ITS HOLDING COMPANY UNIVERSAL BUSINESS SOLUTIONS LI MITED MAURITIUS EITHER ACCRUED TO APPELLANT IN INDIA OR WAS RECEIVED BY TH E APPELLANT IN INDIA. THE PAGE 45 OF 91 DEPARTMENT HAS FOUND NO BANK ACCOUNT OR ANY OTHER A CCOUNT TO SHOW THAT THE MONEY WAS RECEIVED BY THE APPELLANT AS ALLEGED. 2. ACCORDING TO THE APPELLANT 80% OF THE SHAREHOLDI NG IN UBS MAURITIUS BELONGS TO PARANEL FINANCE SA AND MIDEAST CONSORTIUM S.A. O WNED BY MR. HAMILTAN ANDREWS, A BRITISH NATIONAL. COPIES OF THE CONFIRM ATION BY MR. ANDREWS WERE FILED DURING THE COURSE OF PROCEEDINGS. THE APPEL LANT IS A SHAREHOLDER IN THE COMPANY NAMED INFOTEC SERVICES LTD. WHICH HAS A 20% STAKE IN UBS MAURITIUS. THE APPELLANT CLAIMS THAT ALL DOCUMENTS FOUND BY TH E DEPARTMENT CLEARLY SHOW THAT THE APPELLANT WAS MAKING GOOD HIS 20% STAKE I N UBS MAURITIUS THROUGH HIS COMPANY INFOTEC SERVICES LTD. 3. EVIDENCE TO SHOW THAT MONEY BELONGS TO M/S UBS, MAURITIUS AND NOT THE APPELLANT. (I) UBS LTD., MAURITIUS IS AN INDEPENDENT ENTITY AN D IS NOT A FRONT COMPANY OF THE APPELLANT. A. INCORPORATION CERTIFICATE AND MEMORANDUM AND AR TICLES OF UBS LTD., MAURITIUS THE INCORPORATION CERTIFICATE ALONG WITH THE MEMORA NDUM AND ARTICLES OF ASSOCIATION WERE FILED BEFORE THE LEARNED A.O. AT T HE TIME OF ASSESSMENT BY CLARIDGES HOTELS P LTD B. TAX RESIDENCY CERTIFICATE IT WAS ALSO SUBMITTED THAT UBS LTD. IS A TAX RESIDE NT OF MAURITIUS AND IN SUPPORT THE TAX RESIDENCY CERTIFICATE OF THE COMPANY WAS AL SO FURNISHED BY CLARIDGES HOTELS P LTD C. SHAREHOLDING OF UBS LTD., MAURITIUS ALSO FILED THE APPELLANT THOUGH NOT REQUIRED IN LAW, HAS GONE TO THE EXTENT OF SHOWING THE SHARE HOLDERS OF UBS LTD. AND EVEN THE SHARE HOLDE R OF THE SHARE HOLDERS I.E. THE ULTIMATE BENEFICIARY. AS REGARDS THE SHARE HOLDING IN UBS LTD., IT WAS SU BMITTED THAT THERE ARE THREE SHARE HOLDERS IN UBS LTD., NAMELY, PARANAL FINANCE S.A. MIDEAST CONSORTIUM S.A. AND INFOTEC SERVICES LTD. THESE THREE SHARE-HO LDERS OWNED 60%, 20% AND 20% SHARE RESPECTIVELY IN UBS LTD. (D) CONFIRMATION BY SHAREHOLDERS OF UBS LTD MAURIT IUS PAGE 46 OF 91 THE APPELLANTS CONTENTION IS THAT HE IS SHARE HOLD ER IN INFOTEC SERVICES LTD. WHICH HAS A 20% STAKE IN UBS LTD. IT WAS FURTHER SU BMITTED THAT PARANAL FINANCE S.A. AND MIDEAST CONSORTIUM S.A. ARE OWNED BY ANOTHER INVESTOR, MR. HAMILTON ANDREWS WHO IS A BRITISH CITIZEN. THE CONF IRMATION AS REGARDS THE OWNERSHIP OF PARANAL FINANCE S.A. AND MIDEAST CONSO RTIUM S.A. BY MR. HAMILTON ANDREWS WAS ENCLOSED DURING THE ASSESSMENT PROCEEDI NGS. (PB 173-176) THE SAID CONFIRMATION HAS BEEN FILED BEFORE AO BY CLARI DGES HOTEL PVT. LTD DURING ASSESSMENT PROCEEDINGS AND BY THE APPELLANT DURING APPEAL PROCEEDINGS BEFORE LD. CIT(A) VIDE LETTER DATED 11.02.2011. THE ASSESSING OFFICER SUMMARILY IGNORED THE DETAILE D INFORMATION AVAILABLE BEFORE HIM, GIVEN BY MR. HAMILTON ANDREWS OF HIS OW NERSHIP OF PARANAL FINANCE S.A. AND MIDEAST CONSORTIUM S.A., AND WITHOUT ANY F URTHER BASIS, CONCLUDED THAT UBS LTD., MAURITIUS A FRONT COMPANY OF THE APPELLAN T AND GAVE REFERENCE OF SOME DOCUMENTS SEIZED DURING THE COURSE OF SEARCH. ANNEXURE A-26 PARTY R 1 PAGE 14 FOUND CLEARLY SHO WS THE SHAREHOLDING OF UBS LTD MAURITIUS IT IS FURTHER SUBMITTED THAT THE ANNEXURE A-26, PAG E 14 AND OTHER DOCUMENTS FOUND DURING THE COURSE OF SEARCH CLEARLY SHOW THA T PARANAL FINANCE, MIDEAST CONSORTIUM AND INFOTEC SERVICES LTD. ARE THE SHARE HOLDERS OF UBS LTD., MAURITIUS AS AFORESAID. THE DOCUMENTS RELIED UPON BY THE AO AT PAGE 38 TO 41 OF THE ASSESSMENT ORDER CLEARLY SHOW THAT THEY PERTAIN TO THE CONTRIB UTION BY THE APPELLANT TO THE EXTENT OF 20% OF INFOTEC SHARES IN UBS MAURITIUS. EXPLANATION TO EACH DOCUMENT IS AS FOLLOWS : (A) ANNEXURE NO. A-8 PAGE NOS. 17-34, PARTY R-1 - THE AO HAS CORRECTLY STATED THAT THESE ARE DRAFT AM ENDMENTS TO CREDIT FACILITY AGREEMENT. IT HAS FURTHER BEEN STATED BY AO THAT THE CREDIT FACILITY AGREEMENT IS TO BE SIGNED BY THE APPELLANT ON BEHALF OF M/S INFOTEC SE RVICES LTD. THE APPELLANT HAVE ALREADY SUBMITTED THAT HE IS A MAJOR ITY SHARE HOLDER IN M/S INFOTEC SERVICES LTD AND THEREFORE, THE CREDIT AGRE EMENT HAD NECESSARILY TO BE SIGNED BY THE APPELLANT. THE OTHER CREDIT FACILITY AGREEMENTS BETWEEN PARANAL FINANCE AND MIDEAST CONSORTIUM AND UNIVERSAL BUSINE SS LTD MAURITIUS, NOWHERE STATE THAT THOSE ARE APPELLANTS COMPANIES OR THE APPELLANT HAVE TO SIGN ANY OF THE SAID AGREEMENT. THIS DOCUMENT IN FACT C LEARLY ESTABLISHES THAT THE APPELLANTS INTEREST IN UNIVERSAL BUSINESS SOLUTION S LTD IS ONLY THROUGH M/S INFOTEC SERVICES LTD AND THE OTHER TWO SHARE HOLDER S ARE INDEPENDENT COMPANIES. PAGE 47 OF 91 THE APPELLANT REITERATES THAT THE CONFIRMATION FROM THE OWNER OF THE TWO SHAREHOLDING COMPANIES IS ALSO CONCLUSIVE PROOF OF OWNERSHIP BY MR. HAMILTON ANDREWS AND THE SAID FACT HAS REMAINS UN-REBUTTED T ILL DATE. (B) ANNEXURE NO. A-8, PAGE-35 PARTY R-1 THIS DOCUMENT ALSO CONCLUSIVELY ESTABLISHES THE FAC T THAT THE APPELLANT HAVE A STAKE IN UNIVERSAL BUSINESS SOLUTIONS MAURITIUS ONL Y THROUGH HOLDING MAJORITY SHARES IN M/S INFOTEC SERVICES LTD, JERSEY, CHANNEL ISLAND. THE APPELLANT WAS A RESIDENT OF UAE DUBAI DURING THE ENTIRE BLOCK PERIO D. DURING THIS PERIOD, APPELLANT HAD MAJORITY STAKE IN A COMPANY CALLED M/ S UBS TRADING FZC, SHARJAH. UBS TRADING FZC WAS ENGAGED IN SALE AND P URCHASE OF COMMODITIES AND WAS BEING MANAGED PROFESSIONALLY IN SHARJAH. T HE BOOKS OF ACCOUNTS OF THIS COMPANY WERE DULY AUDITED AND THE AUDITED BALANCE S HEETS FOR THE YEAR ENDING 31ST DECEMBER 2004 AND 31ST DECEMBER, 2005 ARE AVAI LABLE ELSEWHERE IN THE DOCUMENTS SEIZED BY THE DEPARTMENT DURING THE COURS E OF SEARCH U/S 132(1) OF THE INCOME-TAX ACT, 1961. AS IS EVIDENT FROM THE LETTER REFERRED TO BY YOUR G OODSELF, THERE WAS A SECOND ROUND OF FINANCING REQUIREMENT IN UNIVERSAL BUSINES S SOLUTION LTD ,MAURITIUS AND INFOTEC SERVICES LTD HOLDING 20% STAKE WAS REQUIRED TO CONTRIBUTE ITS 20% SHARE OF THE FINANCE IN UNIVERSAL BUSINESS SOLUTION LTD THE LETTER IS INTIMATION TO INFOTEC SERVICES LTD TH AT A REQUEST HAS BEEN MADE TO UBS TRADING, FZC, A COMPANY ENGAGED IN PURCHASE AND SALE OF COMMODITIES IN SHARJAH TO DECLARE INTERIM DIVIDEND WHICH WOULD CON TRIBUTE THE 20% SHARES OF INFOTEC SERVICES LTD IN THE SECOND ROUND OF FINANCI NG. HENCE, THE CONTRIBUTION OF INFOTEC SERVICES IN THE SECOND ROUND OF FINANCING IN UNIVERSAL BUSINESS SOLUTIONS WAS THROUGH INTERIM DI VIDENDS DECLARED BY UBS TRADING FZC. THIS ESTABLISHES THE FACT THAT THE SO URCE OF FUNDS IN ISL FOR INVESTMENT IN UNIVERSAL BUSINESS SOLUTIONS MAURITIU S, WAS THROUGH UBS LTD SHARJAH. (C) ANNEXURE A-8 PAGE-36, PARTY R-1 - THIS IS A LETTER WRITTEN TO UBS TRADING FZC TO DECL ARE AN INTERIM DIVIDEND WHICH WOULD BE THE PART CONTRIBUTION OF INFOTEC SERVICES LTD IN THE TOTAL FUNDING IN UNIVERSAL BUSINESS SOLUTION LTD. MAURITIUS. IN ORD ER TO EFFECT EXPEDITIOUS REMITTANCE OF THE MONEY TO UNIVERSAL BUSINESS SOLUT ION LTD, UBS TRADING FZC WAS REQUESTED TO REMIT THE INTERIM DIVIDEND THROUGH THE OTHER CO-INVESTOR IN PAGE 48 OF 91 UNIVERSAL BUSINESS SOLUTION LTD., M/S MID EAST CONS ORTIUM S.A. WHO HAD THE NECESSARY BANKING FACILITIES AND A SWIFT CODE TO RE MIT THE MONEY. YOUR GOODSELF WILL APPRECIATE THAT M/S MID EAST CON SORTIUM IS REFERRED TO AS THE CO-INVESTOR OF M/S UBS LTD. NO WHERE IS THERE ANY EVIDENCE OF THE APPELLANTS RELATIONSHIP WITH MID EAST CONSORTIUM S.A. THE REM ITTANCE THROUGH MID EAST CONSORTIUM WAS ONLY TO FACILITATE EXPEDITIOUS REMIT TANCE AS ALREADY SUBMITTED. THE SAID ENTITY HAD NECESSARY BANKING FACILITIES AN D SWIFT CODE. (D) ANNEXURE A-8, PAGE 38, PARTY R-1 - THIS LETTER IS SELF EXPLANATORY AS IT STATES THAT T HE INVESTMENT IN UNIVERSAL BUSINESS SOLUTIONS TO THE EXTENT OF 20% WOULD BE MA DE BY ISL ONLY. THIS IS AGAIN IN CONSONANCE WITH THE APPELLANTS ASSERTION THAT H IS INTEREST IN HOTEL CLARIDGES IS ONLY THROUGH INFOTEC SERVICES LTD WHICH OWNS 20% SHARE OF UNIVERSAL BUSINESS SOLUTIONS OF MAURITIUS. (E) ANNEXURE A-8, PAGES 39-71 PARTY R-1 THIS IS A CREDIT FACILITY AGREEMENT BETWEEN INFOTEC SERVICES LTD AND UNIVERSAL BUSINESS SOLUTION LTD. THE FUNDS CONTRIBUTED BY IN FOTEC SERVICES LTD ARE THE ONES WHICH WERE REMITTED BY UBS TRADING SHARJAH FZC AND THE SAID FUNDS WERE IN TURN PROVIDED BY INFOTEC SERVICES LTD TO UNIVERS AL BUSINESS SOLUTION LTD MAURITIUS AS A TERM LOAN. THE AO HAD MENTIONED THAT THE NAME OF THE SIGNATORI ES ON THE DRAFT INCLUDED MR. SURESH NANDA, DIRECTOR, M/S INFOTEC SERVICES SERVIC ES LTD. THIS ESTABLISHES THE FACT THAT THE APPELLANTS STAKE IN UNIVERSAL BUSINE SS SOLUTIONS MAURITIUS IS ONLY THROUGH M/S INFOTEC SERVICES SERVICES LTD, AS SUBMI TTED ELSEWHERE IN THIS REPLY. (F) ANNEXURE A8 PAGE-13 THE AOS INTERPRETATION OF THIS DOCUMENT IS ABSOLUT ELY CORRECT. THE DOCUMENT SHOWS THAT THERE ARE THREE SHAREHOLDERS OF UNIVERSA L BUSINESS SOLUTIONS LIMITED WHO HAVE, BESIDES CONTRIBUTING TO SHARE CAPITAL ALS O GIVEN LOANS TO THE SAID COMPANY. THE AO HAS FURTHER STATED THAT UNDER THE COLUMN I THE PHRASE EX UBS SHARJAH HAS BEEN MENTIONED. THIS CLEARLY MEANS THA T ISL HAD CONTRIBUTED THE SAID AMOUNT TO UNIVERSAL BUSINESS SOLUTIONS MAURITI US BY RECEIVING REMITTANCES FROM UBS SHARJAH. THE AO HAS FURTHER OBSERVED THAT AT PAGE 38 ANNEXURE A8 PARTY A-1 IT IS WRITTEN THAT THE INVESTMENT IN UNIV ERSAL BUSINESS SOLUTIONS MAURITIUS BY ISL IS FOR AND ON BEHALF OF MR. SURESH NANDA. THIS OBSERVATION IS PAGE 49 OF 91 ABSOLUTELY CORRECT. AS ALREADY SUBMITTED ISL IS A 2 0% SHAREHOLDER IN UNIVERSAL BUSINESS SOLUTIONS MAURITIUS AND THE APPELLANT IS A MAJORITY SHAREHOLDER IN IT. THE APPELLANT IS ALSO A 99% SHAREHOLDER IN UBS TRAD ING SHARJAH AND HAD DIRECTED THE COMPANY TO REMIT DIVIDENDS OUT OF PROF ITS MADE BY IT DURING THE YEARS TO ISL ON HIS BEHALF. (G) ANNEXURE A8, PAGES 72-75, PARTY R-1 THE AOS INTERPRETATION OF THIS ANNEXURE IS CORRECT . THE CREDIT FACILITY TO UNIVERSAL BUSINESS SOLUTIONS MAURITIUS WAS INDEED INCREASED T O US DOLLARS ONE CRORE. IT IS CORRECTLY OBSERVED THAT THE DRAFT AGREEMENT ON BEHA LF OF INFOTEC SERVICES LTD WAS TO BE SIGNED BY THE APPELLANT BECAUSE AS ALREADY SU BMITTED, HE WAS THE MAJORITY SHAREHOLDER OF THE SAID INFOTEC SERVICES. THIS FACT ALSO LEADS TO THE ONLY IRREFUTABLE INFERENCE THAT THE APPELLANTS STAKE IN UNIVERSAL BUSINESS SOLUTIONS MAURITIUS IS ONLY THROUGH INFOTEC SERVICES LTD OF W HICH HE IS A MAJORITY SHAREHOLDER. (H) ANNEXURE A22 PAGE NO 67-70, PARTY R-1. MR. HAMILTON ANDREWS WAS LOOKING TO SELL HIS STAKE IN PARANAL FINANCE AND FOR THAT PURPOSE, HAD SENT THE BALANCE SHEET ETC OF THE COMPANY TO THE APPELLANTS COUNSEL. A PERUSAL OF THE EMAIL WILL SHOW THAT THE BALANCE SHEET OF PARANAL FINANCE WAS BEING EXAMINED BY THE APPELLANTS ADVIS OR.. HOWEVER, MR. ANDREWS WAS NOT ABLE TO FIND A SUITABLE INVESTOR AND THE AP PELLANT WAS ALSO NOT INTERESTED TO ACQUIRE THE SAID COMPANY. THE SAID COMPANY CONT INUED WITH MR. ANDREWS AS IS EVIDENT FROM THE CONFIRMATION FILED BY HIM. THE EMAIL AS STATED BY THE AO MENTIONS THAT THE APP ELLANT WOULD BE ACQUIRING PARANAL FINANCE. THIS CLEARLY SHOWS THAT PARANAL F INANCE WAS AN INDEPENDENT COMPANY HAVING NOTHING TO DO WITH THE APPELLANT. I N FACT, THIS EMAIL FURTHER ESTABLISHES THE APPELLANTS REPEATED CONTENTION THA T BOTH PARANAL FINANCE AND MID EAST CONSORTIUM ARE NOT OWNED BY HIM AND HIS IN TEREST IN CLARIDGES HOTEL IS ONLY THROUGH M/S INFOTEC SERVICES LTD. AS ALREADY SUBMITTED ABOVE, AFTER EXAMINING THE FINANCIALS, THE APPELLANT DECIDED NOT TO ACQUIRE PARANAL FINANCE AND THIS FACT IS EVIDENT FROM THE CONFIRMATION FILE D BY MR HAMILTON ANDREWS. (I) ANNEXURE A-26, PAGES 11-13, PARTY R-1 THE AOS INTERPRETATION OF THE SAID DOCUMENTS APPEA RS TO BE CORRECT. THE DATASHEET OF M/S INFOTEC SERVICES LTD SHOWS INVESTM ENT IN UNIVERSAL BUSINESS SOLUTIONS MAURITIUS AND THIS FURTHER ESTABLISHES TH E APPELLANTS CLAIM THAT HIS STAKE IN UNIVERSAL BUSINESS SOLUTIONS MAURITIUS IS ONLY THROUGH M/S INFOTEC PAGE 50 OF 91 SERVICES LTD. FROM ALL THE AFORESAID DOCUMENTS REL IED UPON BY THE AO, IT IS ABUNDANTLY CLEAR THAT PARANAL FINANCE AND MID EAST CONSORTIUM ARE OWNED BY MR. HAMILTON ANDREWS AS THESE COMPANIES TOGETHER OW NED ABOUT 80% SHARES IN UNIVERSAL BUSINESS SOLUTIONS MAURITIUS. IT IS ALSO CLEAR THAT M/S INFOTEC SERVICES LTD, A COMPANY IN WHICH THE APPELLANT OWN MAJORITY STAKE, OWNS ONLY 20% SHARES IN UNIVERSAL BUSINESS SOLUTIONS MAURITIUS. THEREFORE, THE AOS CONTENTION THAT THE APPELLANT O WN UNIVERSAL BUSINESS SOLUTIONS MAURITIUS IS GROSSLY INCORRECT AS IS EVID ENT FROM THE DOCUMENTS RELIED UPON BY THE AO HIMSELF. THE DEPARTMENT SOUTH INFORMATION FROM MAURITIUS REG ARDING UBS LTD. MAURITIUS AND THE MAURITIUS AUTHORITIES CONFIRMED THAT THE DO CUMENTS ADDRESSED TO UBS MAURITIUS AND NOT MR. SURESH NANDA AND THAT LOANS E TC. TAKEN BY THEM ARE FROM THE SHAREHOLDERS. THE ANALYSIS OF THE BALANCE SHEET OF UBS MAURITIUS. REGARDING ENQUIRY SENT TO GOVERNMENT OF MAURITIUS T HROUGH FT & TR ARE AS FOLLOWS : 4. INFORMATION SOUGHT FROM GOVERNMENT OF MAURITIU S THROUGH FT & TR DIVISION OF CBDT . THE REPLY OF THE GOVERNMENT OF MAURITIUS AS REPRODU CED IN PARA 10.6 PAGE-41 OF THE ASSESSMENT COMPLETELY SUPPORTS THE CONTENTION O F THE APPELLANT. AS PER CLAUSE (I) THE GOVERNMENT OF MAURITIUS HAS S TATED THAT THE EQUITY STRUCTURE IS AS PER BALANCE SHEET. THE GOVERNMENT OF MAURITIUS HAS CONFIRMED THE EQUIT Y STRUCTURE OF UBS LTD. AS ALREADY SUBMITTED UBS LTD. HAS THREE SHARE HOLDERS NAMELY PARANAL FINANCE S.A., MIDEAST CONSORTIUM, S.A. AND INFOTEC SERVICES LTD. HENCE THERE IS A 3 RD PARTY CONFIRMATION OF NO LESS THAN THE GOVERNMENT OF MAURITIUS VIDE THEIR LETTER DATED 4.4.2008 AS TO THE EQUITY STRUCTURE OF THE U BS LTD. MAURITIUS. THE GOVERNMENT OF MAURITIUS HAS FURTHER STATED: AS SHOWN IN THE BALANCE SHEET, THE SOURCE OF FUNDS ENABLING INVESTMENT MADE IN THE INDIAN COMPANIES ARE FROM LOANS/SHARE HOLDERS LOANS. THIS STATEMENT ALSO VINDICATES THE APPELLANTS CONTENTION THAT MONEY WAS RAISED IN UBS LTD. BY THE SHARE HOLDERS BY WAY OF EQUITY AND SHARE HOLDER LOANS. THE GOVERNMENT OF MAURITIUS HAS FURTHER STATED THAT THERE IS NO REQUIREMENT OF SUBMISSION OF DOCUMENTS FOR BRINGING FUNDS BECAUSE THERE ARE NO EXCHANGE PAGE 51 OF 91 CONTROLS IN MAURITIUS. THIS IS A STATEMENT OF FACT THAT NOTHING ADVERSE COMES OUT OF THE SAME. IN ANY CASE, THE APPELLANT HAS FURNISH ED CONFIRMATION FROM SHARE HOLDERS WHO HAVE AFFIRMED HAVING BROUGHT IN THE FUN DS IN UBS LTD., MAURITIUS. HENCE THE REPLY OF THE GOVERNMENT OF MAURITIUS COMP LETELY SUPPORTS THE APPELLANTS REPEATED CONTENTIONS THAT HE IS A SHARE HOLDER IN INFOTEC SERVICES LTD. WHICH IS 20% STAKE IN UBS LTD. MAURITIUS AND THAT T HERE ARE TWO OTHER SHARE HOLDERS INDEPENDENT OF HIM. 5. ANALYSIS OF BALANCE SHEET OF UBS MAURITIUS : (A) THE BALANCE SHEET OF UBS LTD., MAURITIUS AS ON 31.3.2004 CORROBORATES THE APPELLANTS CONTENTION THAT MONEYS HAVE BEEN RA ISED BY THREE SHARE HOLDERS OF THE COMPANY IN UBS LTD. THE SHARE CAPITAL IS SHO WN AT USD 2 MILLIONS AND THE BORROWINGS AT USD 22 MILLIONS IN THE AUDITED BALANC E SHEET OF UBS LTD.,MAURITIUS. IT IS APPOSITE TO MENTION HERE THAT DURING THE COURSE OF SEARCH, DOCUMENT WHICH WAS FOUND CONTAINS A DETAILED STATEM ENT SHOWING THE SHARE CAPITAL SUBSCRIBED BY THREE SHARE HOLDERS, NAMELY, PARANAL FINANCE S.A., MIDEAST CONSORTIUM S.A. AND INFOTEC SERVICES LTD. I N UBS LTD. IT ALSO SHOWS THAT BORROWINGS BY THESE COMPANIES HAVE ALSO BEEN SHOWN AS INVESTMENTS IN UBS LTD. (KINDLY REFER P37 OF ASSESSMENT ORDER) A PERUS AL OF THIS STATEMENT WILL CLEARLY SHOW THAT UBS LTD., MAURITIUS IS AN INDEPEN DENT FOREIGN COMPANY HAVING THREE INDEPENDENT SHARE HOLDERS. IT MAY BE FURTHER SUBMITTED THAT THOUGH NOT STRICTL Y REQUIRED IN LAW THE APPELLANT HAS TAKEN PAINS TO EVEN ESTABLISH THE IDENTITY OF S HAREHOLDER OF PARANAL FINANCE S.A. AND MIDEAST CONSORTIUM S.A.AND INFOTEC SERVICE S LTD. (B) ON PERUSAL OF BALANCE SHEET OF UBS LTD, WHICH T HE AO HAS PRODUCED IN HIS ASSESSMENT ORDER, IT MAY FURTHER BE SEEN THAT THE I NVESTMENT MADE IN ITS SUBSIDIARY I.E. M/S SHANTIDEEP FOOD P LTD. HAS ALSO BEEN CLEARLY REFLECTED AS ASSETS. THE BALANCE SHEET OF UBS LTD., MAURITIUS C OMPLETELY CORROBORATES THE APPELLANTS CONTENTIONS AS REGARDS THE UBS LTD. AND ITS SHARE HOLDERS IN TERMS OF THE OWNERSHIP OF THE SHARE HOLDING COMPANIES. 6. STATEMENT GIVEN BY THE APPELLANT DURING SEARCH: AT PARA 9.3, THE ASSESSING OFFICER HAS REPRODUCED R EPLY TO QUESTION NO. 10 RERECORDED BY DDIT INVESTIGATION, NEW DELHI ON 8.3. 2007. AT THE VERY INCEPTION, IT IS RESPECTFULLY SUBMITTED THAT THE COPY OF THE STAT EMENT RECORDED ON 8.3.2007 HAS STILL NOT BEEN FURNISHED DESPITE REQUEST BEING MADE . IT IS TRITE THAT NO STATEMENT CAN BE USED AGAINST THE APPELLANT UNLESS THE SAME I S CONFRONTED TO HIM. PAGE 52 OF 91 EVEN ON PERUSAL OF THE REPLY GIVEN BY THE APPELLANT , IT IS FOUND THAT THE APPELLANT HAS STATED THAT HIS INTEREST IN CLARIDGES HOTEL PVT . LTD. IS BY WAY OF INVESTMENT MADE THROUGH MAURITIUS BASED COMPANY UBS LTD. THERE IS NOTHING WRONG WITH THE STATEMENT. AS ALREADY SUBMITTED, INFOTEC SERVIC ES LTD. IS A SHARE HOLDER OF UBS LTD. TO THE EXTENT OF 20% AND THE ASSESSEE IS T HE MAJORITY SHARE HOLDER IN INFOTEC SERVICES LTD. HENCE THE APPELLANT HAS INTE REST THROUGH HIS COMPANY INFOTEC SERVICES LTD. IN CLARIDGES HOTEL PVT. LTD. NOTHING MORE REQUIRES TO BE READ, IN RESPECT OF THE STATEMENT AND IN FACT THE SAID STATEMENT CORROBORATES THE APPELLANTS CONTENTION A S STATED ELSEWHERE IN THESE SUBMISSIONS. 7. REGARDING ALLEGATION OF MANAGEMENT OF HOTEL: REGARDING MANAGEMENT OF HOTEL THE A.O. HAS STATED THAT THE APPELLANT WAS THE CHAI RMAN AND HIS SON WAS MANAGING DIRECTOR OF THE COMPANY, CLARIDGES HOTEL P VT.LTD. AND THEREFORE CLARIDGES HOTEL PVT.LTD. BELONGS TO THE APPELLANT. THIS IS A VERY ENERAL AND HYPOTHETICAL VIEW AND THE CONCLUSION DRAWN HAS NO M ERIT. IT WAS SUBMITTED BEFORE THE A.O. VIDE LETTER DATED 02.12.2009 (PB PAGE 172) THAT THE INVESTOR IN UBS LTD. MR. HAMILTON ANDREWS IS A BRITISH CITIZEN AND A FRIEND OF THE APPELLANT AND HAS OTHER BUSINESSES ABROAD. HE SOUGHT THE HELP OF THE APPELLANT TO INTRODUCE HIM TO SOME PROFESSIONALS WH O COULD ASSIST HIM IN LOOKING AFTER HIS INVESTMENTS IN INDIA THROUGH UBS LTD., MAURITIUS. HE SELECTED EACH ONE OF THE PROFESSIONALS NAMED BY THE A.O. AFTER PE RSONAL INTERVIEWS WITH THEM. THESE PROFESSIONALS ARE INDEPENDENT, HAVE A REPUTED BACKGROUND AND HAVE HIGH PROFESSIONAL STANDING. THE APPELLANT HAS FUNCTIONED AS A NON-EXECUTIVE CHAIRMAN OF THE CLARIDGES HOTEL. MR. SANJEEV NANDA IS AN M.B.A. FROM INSEAD AND WAS UNANIMOUSLY APPOINTED BY BOARD OF UBS LTD A S THE MANAGING DIRECTOR OF CLARIDGES HOTEL PVT. LTD. THE APPELLANT FURTHER SUBMITTED THAT THE CLARIDGES HOTEL IS BEING PROFESSIONALLY MANAGED BY THE GENERA L MANAGER WHO IS A , FOREIGNER HAVING WORKED IN HOTEL INDUSTRY FOR A LON G PERIOD OF TIME. MR. DIETER JANSSON WAS BROUGHT IN AS GENERAL MANAGER AND WAS P ERSONALLY INTERVIEWED AND SELECTED BY MR. HAMILTON ANDREWS. IT WAS THEREF ORE SUBMITTED THAT THE CLARIDGES HOTEL IS BEING MANAGED BY INDEPENDENT PRO FESSIONALS WHO ARE DRAWING SALARIES FROM THE SAME. 8. ORDER OF CIT(A) PAGE 53 OF 91 CIT(A) VIDE ORDER DATED 07.02.2013 WHILE ADJUDICATI NG THE APPEAL OF CLARIDGES HOTEL PVT. LTD. HAS HELD THAT THE MONEY BELONGS TO UBS MAURITIUS AND DELETED THE ADDITION MADE IN THE HANDS OF THE APPELLANT, 9. IN VIEW OF THE ASSESSEE BEING A NON-RESIDENT, TH ERE IS EVIDENCE OF DIVIDEND HAVING BEEN RECEIVED BY HIM OUTSIDE INDIA FROM A CO MPANY INCORPORATED OUTSIDE INDIA WHICH IS THE SOURCE OF INVESTMENT IN UBS MAUR ITIUS TO THE EXTENT OF 20%. HENCE THAT INCOME CANNOT BE SUBJECTED TO TAX. THERE IS ALSO FINDING OF FACT THAT THE REMAINING 80 % OF THE SHAREHOLDING BELONG TO MR. HAMILTON ANDREWS AND THE SAME HAS BEEN CONFIRME D BY HIM. 10. LEGAL SUBMISSIONS: (I) WHOEVER ALLEGES A FRAUD HAS TO PROVE IT (A) IT MAY BE SUBMITTED THAT THE A.O. IS TRYING TO STATE THAT THE EQUITY STRUCTURE OF UBS LTD. IS A SHAM AND THAT ITS MR. SU RESH NANDA IS THE REAL OWNER. IT IS SETTLED LAW THAT WHOEVER ALLEGES FRAUD HAD TO ESTABLISH THE SAME. HENCE BURDEN OF PROVING THIS A LLEGATION SQUARELY VESTS WITH THE DEPARTMENT. THE ASSESSEE HAS BEEN AB LE TO CLEARLY SHOW THAT UBS LTD., MAURITIUS IS AN INDEPENDENT ENTITY HAVING THREE SHARE HOLDERS, THE PERSON BEHIND TWO SHARE HOLDERS IS MR . HAMILTON ANDREWS HOLDING SHARES IN THE COMPANY TO THE EXTENT OF 80% AND MR. SURESH NANDA TO THE EXTENT OF 20%. THIS EQUITY STRUCTURE C OMES OUT FROM THE DOCUMENTS SEIZED AND DESCRIBED EARLIER AND THE APPE LLANT HAS ALSO MAINTAINED THIS POSITION CONSISTENTLY. EVEN THE GOV ERNMENT OF MAURITIUS IN THEIR RESPONSE TO INCOME TAX DEPARTMENT HAS CONF IRMED THE EQUITY STRUCTURE OF THE UBS LIMITED. THE ASSESSING OFFICER IS MERELY RESORTING TO CONJECTURES, SURMISES AND HEARSAY WHILE MAKING T HESE ALLEGATIONS. B) UBS LTD., MAURITIUS AND THREE SHARE HOLDERS ARE CORPORATE ENTITIES, HOW CAN ADDITION MADE IN THE HANDS OF APPELLANT WHO IS AN INDIVIDUAL AND HAS NO PRESENCE IN THE ENTIRE EQUITY STRUCTURE. C) SUBSTANTIVE ADDITION HAS ALSO BEEN MADE IN THE HANDS OF THE RECIPIENTS OF FUNDS I.E.M/S. CLARIDGES HOTEL PVT.LT D. BY HOLDING THAT THE SAID FUNDS ARE ITS UNDISCLOSED INVESTMENT. D) IN THE CASE OF LOVELY EXPORTS (P) LTD THE HONB LE SUPREME COURT HELD THAT THE ADDITION CAN BE MADE IN THE HANDS OF THE S HAREHOLDER. THE PAGE 54 OF 91 SHAREHOLDER OF M/S CLARDIGES HOTELS P LTD. IS UBS LTD OF MAURITIUS. THE SHAREHOLDERS OF UBS MAURITIUS ARE THREE PRIVATE LIMITED COMPANIES IE PARANAL FINANCE, INFOTEC OF JERSEY AND MIDEAST C ONSORTIUM P LTD. THE APPELLANT IS NOWHERE THE SHAREHOLDER. HENCE NO ADDITION OF SHARE CAPITAL CAN BE MADE IN HIS HANDS. (II) BENAMI TANSACTIONS ALLEGATION : A) THE HONBLE SUPREME COURT IN THE CASE OF JAI DAY AL PODDAR HAS HELD THAT THE BURDEN OF PROVING THAT THE PARTICULAR SALE IS BENA MI AND APPARENT PURCHASERS ARE NOT THE REAL OWNERS ALWAYS RESTS ON THE PERSON ASSERTING IT TO BE SO. THIS BURDEN IS DISCHARGED BY STRICTLY ADDUCING LEGAL E VIDENCE OF A DEFINITE CHARACTER WHICH WOULD EITHER DIRECTLY PROVE THE FACT OF THE B ENAMI OR ESTABLISH CIRCUMSTANCES UNERRINGLY AND UNREASONABLY RAISING A N INFERENCE OF THAT FACT. THE ESSENCE OF BENAMI IS THE INTENTION OF PARTIES C ONCERNED AND NOT UNOFTEN SHROUDED IN A THICK VEIL WHICH CANNOT BE PIERCED TH ROUGH. BUT SUCH DIFFICULTIES DO NOT RELIEVE THE PERSON ASSERTING THE TRANSACTION TO BE BENAMI OF ANY PART OF THE SERIOUS ONUS THAT RESTS ON HIM NOR JUSTIFY THE ACCE PTANCE OF MERE EXPLANATIONS, CONJECTURES AND SURMISES AS A SUBSTITUTE FOR PROOF. B) APPLYING THIS RATIO OF HONBLE SUPREME COURT IT MAY BE SEEN THAT VERY CLEARLY CLARIDGES HOTELS PVT. LTD. IS OWNED BY M/S SHANTIDE EP HOTELS P LTD, M/S SHANTIDEEP FOODS P LTD AND M/S PARADIGM HOTELS P LT D. M/S SHANTIDEEP HOTELS P LTD, M/S SHANTIDEEP FOODS P LTD AND M/S PARADIGM HOTELS P LTD IS IN TURN OWNED BY UBS LTD., MAURITIUS WHICH IS A CORPORATE E NTITY. THIS FACT STANDS ESTABLISHED FROM THE DOCUMENTS SEIZED DURING THE CO URSE OF SEARCH. CONFIRMATION FROM THE MAJOR SHAREHOLDER OF TWO OUT OF THE THREE COMPANIES OF M/S UBS LTD, MAURITIUS HAS BEEN FILED DURING THE CO URSE OF ASSESSMENT. APPELLANT HAS HIMSELF ADMITTED THAT HE IS THE MAJOR SHAREHOLDER OF THE THIRD CORPORATE ENTITY I.E. INFOTEC SERVICES LTD WHICH OW NS 20% SHARE CAPITAL OF UBS LTD. NEEDLESS TO ADD THAT BALANCE SHEET OF UBS LTD. AND ITS SHARE HOLDERS CONSTITUTION HAS BEEN FILED BEFORE THE A.O. DURING THE PROCEEDINGS RELATING TO CLARIDGES HOTELS PVT.LTD. THE SOURCE OF FUNDS OF IN FOTECH SERVICES LTD. WHO IS 20% SHARE HOLDER OF UBS LTD. HAS ALSO BEEN ESTABLI SHED IN AS MUCH AS THE SAME HAS COME BY WAY OF DIVIDEND FROM UBS FZC., SHARJAH. SIMILARLY, THE OWNER OF PARANAL FINANCE LTD., AND MID EAST ONLINE, MR. H AMILTON ANDREWS HAS GIVEN AN ATTESTED CONFIRMATION THAT HE OWNS THE SAID COM PANIES AND ALSO THAT THESE COMPANIES OWN 80% SHARES IN UBS LTD., MAURITIUS. IT IS FURTHER SUBMITTED THAT PAGE 55 OF 91 WHEN THE LINE OF OWNERSHIP IS SO CLEAR THEN UNDER N O STRETCH OF IMAGINATION CAN THE APPELLANT MR.SURESH NANDA BE HELD TO BE THE OWN ER OF M/S SHANTIDEEP HOTELS P LTD, M/S SHANTIDEEP FOODS P LTD AND M/S PA RADIGM HOTELS P LTD. THE DEPARTMENT ALLEGES THAT THE APPELLANT OWNS CLAR IDGES HOTEL PVT. LTD. THE BURDEN TO PROVE THIS ALLEGATION IRREFUTABLY LIES ON THE DEPARTMENT. THE DEPARTMENT HAS DONE NOTHING TO CHECK AND COUNTER TH E EVIDENCE PLACED ON RECORD AS REGARDS THE OWNERSHIP OF CLARIDGES HOTEL PVT. LT D. HENCE THE CONTENTION OF THE DEPARTMENT THAT THE MONEY BROUGHT INTO CLARIDGES H OTEL PVT. LTD. BY UBS LTD., MAURITIUS BELONGS TO APPELLANT, IS GROSSLY INCORREC T AND BASED ON CONJECTURES AND SURMISES. C. THE APPELLANT RELIES UPON THE LAND MARK JUDGEMEN T OF ALLAHABAD HIGH COURT IN THE CASE OF PRAKASH NARAIN 134 ITR 634 WHEREIN THE FOLLOWING FOUR PROPOSITIONS HAVE BEEN PROPOUNDED.:- A) THE BURDEN OF PROOF REGARDING BENAMI IS UPON THE PERSON WHO ALLEGES BENAMI. B) TO PROVE BENAMI IS THE MOST IMPORTANT POINT IS T O EXAMINE THE SOURCE OF CONSIDERATION. THE SOURCE OF CONSIDERATION HAS ALRE ADY BEEN GIVEN AND PLACED ON RECORD OF THE DEPARTMENT IN AS MUCH AS, CLARIDGES H OTEL IS FUNDED BY UBS LTD. UBS LTD., MAURITIUS IN TURN OWNED BY THREE CORPORAT E ENTITIES WHO HAVE CONFIRMED THEIR OWNERSHIP OF UBS LTD.,MAURITIUS. TH E DEPARTMENT HAS NOT EVEN MADE A WHISPER ON WHETHER THERE IS ANY EVIDENC E TO SHOW THAT THE FUNDS CONTRIBUTED BY UBS LTD. IN TO CLARIDGES HOTEL IN FA CT BELONGED TO THE APPELLANT. C) THE MERE REJECTION OF AN EXPLANATION WOULD NOT E NTITLE THE DEPARTMENT TO CLAIM THAT THE CONSIDERATION FOR THE PURCHASE OF PR OPERTY IS IN THE NAME OF ASSESSEE AND WAS PROVIDED BY THE ASSESSEE. IT MAY B E SEEN THAT THE DEPARTMENT HAS MERELY REJECTED THE EXPLANATION OF THE ASSESSEE WHICH HAS BEEN BACKED BY EVIDENCES. THIS IS IMPERMISSIBLE. THE DEPARTMENT CA NNOT REJECT GOOD EVIDENCE WITHOUT ANY BASIS AND WITHOUT GIVING THE REASON FOR REJECTION. D) A FINDING REGARDING BENAMI IS A FINDING OF FACT. THE SAID FINDING CANNOT BE QUESTIONED UNLESS IT IS WITHOUT EVIDENCE IN SUPPORT OF IT. WHEN THE FINDING IS BASED ON MATERIAL PARTLY RELEVA NT AND PARTLY IRRELEVANT THEN SUCH A FINDING IS VITIATED IN LAW. IT IS SUBMITTED THAT THE DEPARTMENT HAS NOT PLACED ANY EVIDENCE TO SUGGEST THAT THERE IS A FIND ING THAT THE APPELLANT IS OWNER PAGE 56 OF 91 OF CLARIDGES HOTEL PVT.LTD. THE DEPARTMENT HAS MERE LY ALLEGED ON THE BASIS OF IRRELEVANT CONSIDERATIONS THAT CLARIDGES HOTEL PVT. LTD. IS BEING RUN BY DIRECTORS CLOSE TO THE APPELLANT THAT THE APPELLANT WAS NON-E XECUTIVE CHAIRMAN. THE APPELLANT HAS BROUGHT IN VALUABLE FOREIGN EXCHANGE INTO THE COUNTRY AND HAS ALSO GOT INVESTMENTS OF A FRIEND, MR. HAMILTON ANDREWS W HO IS A BRITISH CITIZEN. THE MERE FACT THAT THE APPELLANT IS ON THE BOARD OF DIR ECTORS DOES NOT MEAN THAT HE OWNS THE CLARIDGES HOTEL PVT.LTD. IT IS PERTINENT TO MENTION THAT THE CLARIDGES HOTEL IS BEING MANAGED BY GENERAL MANAGER WHO IS A PROFESSIONAL AND IS A FOREIGNER. E) FURTHER RELIANCE IS PLACED ON THE HONBLE SUPREM E COURT IN THE CASE OF DAULAT RAM RAWATMULL 87 ITR 349 WHEREIN AT PAGE 359 IT HAS BEEN HELD THAT:- A PERSON CAN STILL BE HELD TO BE THE OWNER OF A SU M OF MONEY EVEN THOUGH THE EXPLANATION FURNISHED BY HIM REGARDING THE SOURCE O F THAT MONEY IS FOUND TO BE NOT CORRECT. FROM THE SIMPLE FACT THAT THE EXPLANAT ION REGARDING THE SOURCE OF MONEY FURNISHED BY A, IN WHOSE NAME THE MONEY IS L YING IN DEPOSIT, HAS BEEN FOUND TO BE FALSE, IT WOULD BE A REMOTE AND FA R-FETCHED CONCLUSION TO HOLD THAT THE MONEY BELONGS TO B. THERE WOULD BE IN SUCH A CASE NO DIRECT NEXUS BETWEEN THE FACTS FOUND AND THE CONCLUSION DRAWN TH EREFROM. IT MAY BE APPRECIATED THAT UBS LTD., MAURITIUS HA S GIVEN COMPLETE EVIDENCE OF ITS OWNERSHIP OF CLARIDGES HOTEL PVT.LTD. AND WITHO UT PREJUDICE EVEN IF IT IS FOR ANY REASON HELD THAT UBS LTD. NOT A REAL OWNER EVEN THEN IT CANNOT BE HELD THAT THE APPELLANT IS THE OWNER. F) IN THE CASE OF SUBRAMANIAM 55 ITR 610 (MADRAS), IT WAS HELD THAT JUST BECAUSE OF CERTAIN DEPOSITS IN A BANK IN THE NAME O F WIFE WERE NOT FULLY EXPLAINED, IT CANNOT BE HELD THAT THEY WERE THE ASS ESSEES HUSBANDS UNDISCLOSED INCOME. THERE ARE PLETHORAS OF JUDGEMENTS ON THE SAID ISSUE . G) IN THE CASE OF MAN SINGH 1 ITD 741 (DELHI), IT W AS HELD THAT MERE REJECTION OF ASSESSEES EXPLANATION THAT THE HOUSE WAS MADE PART LY OUT OF HER SAVINGS AND PARTLY OUT OF LOANS ADVANCED FROM HER HUSBAND DOES NOT ESTABLISH THAT THE HOUSE BELONGS TO HER HUSBAND. (III) BURDEN OF PROOF DISCHARGED BY THE ASSESSEE PAGE 57 OF 91 A) THE APPELLANT HAS BEEN HELD TO HAVE INVESTED IN CLA RIDGES HOTELS PVT. LTD. AND THE MONEYS REMITTED BY UBS LTD ., MAURITIUS HAVE BEEN IMPUTED TO BE BELONGING TO THE APPELLANT. THE APPELLANT HAS FILED THE BALANCE SHEE T OF UBS LTD. AND THE DEPARTMENT HAS HAD INDEPENDENT CONFIRM ATION FROM THE MAURITIUS GOVERNMENT THAT THE BALANCE SHEE T OF UBS LTD. WAS TRUE AND CORRECT. THE SHARE HOLDING PATTER N IN UBS LTD. HAS ALSO BEEN FOUND TO BE CORRECT. THE APPELLA NT HAS FILED CONFIRMATION OF MR. HAMILTON ANDREWS WHO HAS CONFI RMED OWNING TWO COMPANIES, PARANAL FINANCE LTD. AND MID EAST CONSORTIUM FROM ALL THESE CONFIRMATIONS, IT CAN BE STATED THAT THE APPELLANT HAS DISCHARGED THE ONUS THAT LAY ON HIM AND NOW THE BURDEN OF PROOF HAS CLEARLY SHIFTED TO THE DEPARTMENT. THE DEPARTMENT HAD TO PROVE WITH CLINCH ING EVIDENCE THAT THE MONEYS REMITTED TO CLARIDGES HOTE L PVT. LTD. BELONGED TO THE APPELLANT. B) RELIANCE IS PLACED ON THE JUDGEMENT OF THE PATNA HI GH COURT IN THE CASE OF HANUMAN AGARWAL 151 ITR 150, WHEREIN IT WAS HELD THAT ONCE THE ASSESSEE FILED THE CONFIRMATORY LETTER WITH CORRECT NAME AND ADDRESS, HE HAS DISCHARGED THE ONU S OF PROVING THE GENUINENESS OF THE CREDIT IN HIS ACCOUN TS. THE RELEVANT PORTION OF THE JUDGEMENT IS REPRODUCED AS UNDER FOR CARE OF REFERENCE: HELD THAT THE CONFESSION MADE BY THE CREDITOR WAS NOT MADE AVAILABLE TO THE ASSESSEE OR THE TRIBUNAL. THE ASSE SSEE HAVING FURNISHED THE CORRECT NAME AND ADDRESS OF THE CREDI TOR, HAVING GIVEN THE GIR NUMBER AND HAVING FILED THE CONFIRMATORY L ETTER FROM THE CREDITOR, DID ALL THAT IT COULD DO AND THESE TH REE GENUINENESS OF THE TRANSACTION AND ALSO THE CAPACITY OF THE CREDI TOR AND, AS SUCH, THE ASSESSEE COMPLETELY DISCHARGED ITS INITIAL ONUS UNDER SECTION 68 OF THE I.T. ACT, 1961. THE REVENUE, ON ITS PART, DI D NOT SUMMON THE CREDITOR UNDER SECTION 131 OF THE ACT. IT TOOK NO STEPS TO VERIFY THE STATEMENT OF THE ASSESSEE. THUS, AFTER THE ASSESSEE FILED THE CONFIRMATORY LETTER WITH THE CORRECT NAME AND ADDRE SS OF THE CREDITOR AND THE GIR NUMBER AS WELL, THE ONUS IMMEDIATELY SH IFTED ON THE DEPARTMENT WHICH WAS NOT DISCHARGED BY THE DEPARTME NT IN THIS PAGE 58 OF 91 CASE. THE DELETION OF THE ADDITION OF RS.41,500 AND ALLOWANCE OF INTEREST ON IT BY THE TRIBUNAL WAS, THEREFORE, PROP ER. PER SUSHIL KUMAR JHA: WHERE AN ASSESSEE GIVES THE C ORRECT NAME, ADDRESS AND GIR NUMBER OF THE CREDITOR, HE HAS DISC HARGED HIS ONUS TO PROVE THE GENUINENESS OF CREDITS IN HIS ACCOUNTS AND UNLESS A NOTICE IN DUE FORM UNDER SECTION 131 OF THE ACT IS ISSUED BY THE REVENUE AUTHORITY TO TEST THE GENUINENESS OF THE TR ANSACTION OR THE CAPACITY OF THE CREDITOR TO PAY, THE AMOUNTS CANNOT BE ASSESSED IN THE HANDS OF THE ASSESSEE. THE RATIO OF THE JUDGEMENT APPLIES TO APPELLANT AS WELL. ADDITIONALLY IN THE CASE OF APPELLANT ON AN ENQUIRY MADE TO MAUR ITIUS AUTHORITIES, IT WAS CONFIRMED THAT IT IS UNIVERSAL BUSINESS SOLU TIIONS LTD. MAURITIUS WHICH HAS MADE THE INVESTMENT INTO CLARID GES HOTEL PVT.LTD. C) IN THE CASE OF SAROGI CREDIT CORPORATION 103 ITR 344 (PATNA) IT WAS HELD THAT: ONCE THE IDENTITY OF THE THIRD PARTY IS ESTABLISHE D BEFORE THE INCOME-TAX OFFICER AND OTHER SUCH EVIDENCE ARE PRIM A FACIE PLACED BEFORE HIM POINTING TO THE FACT THAT THE ENTRY IS N OT FICTITIOUS, THE INITIAL BURDEN LYING ON THE ASSESSEE CAN BE SAID T O HAVE BEEN DULY DISCHARGED BY HIM. IT WILL NOT, THEREFORE, BE FOR THE ASSESSEE TO EXPLAIN FURTHER AS TO HOW OR IN WHAT CIRCUMSTANCES THE THIRD PARTY OBTAINED THE MONEY OR HAVE OR WHY HE CAME TO MAKE A N ADVANCE OF THE MONEY AS A LOAN TO THE ASSESSEE. ONCE SUCH IDEN TITY IS ESTABLISHED AND THE CREDITORS, AS IN THE PRESENT CA SE, HAVE PLEDGED THEIR OATH THAT THEY HAVE ADVANCED THE AMOUNTS IN Q UESTION TO THE ASSESSEE, THE BURDEN IMMEDIATELY SHIFTS ON TO THE DEPARTMENT TO SHOW AS TO WHY THE ASSESSEES CASE COULD NOT BE ACC EPTED AND AS TO WHY IT MUST BE HELD THAT THE ENTRY, THOUGH PURPORTI NG TO BE IN THE NAME OF A THIRD PARTY, STILL REPRESENTED THE INCOM E OF THE ASSESSEE FROM A SUPPRESSED SOURCE. AND, IN ORDER TO ARRIVE AT SUCH A CONCLUSION, EVEN THE DEPARTMENT HAS TO BE IN POSSES SION OF SUFFICIENT AND ADEQUATE MATERIALS. HENCE IN THE CASE OF ASSESSEE ALSO THE BURDEN SQUAR ELY LIE ON THE DEPARTMENT WHICH NEEDLESS TO ADD HAS NOT BEEN DISCH ARGED TILL DATE. PAGE 59 OF 91 D) IN THE CASE OF TOLA RAM DAGA 59 ITR 632(GAUHATI ). A DEPOSIT WAS APPEARING IN THE NAME OF WIFE OF THE PARTNER WHO CL AIMED THAT THE MONEY WAS HERS. IT WAS HELD THAT AN ENTRY IS A PRIMA FACI E PROOF THAT THE AMOUNT IN QUESTION WAS DEPOSITED BY THE PERSON IN WHOSE NA ME THE DEPOSIT STANDS. IT CAN NOT BE ASSUMED THAT THE AMOUNT BELON GED TO THE ASSESSEE (HUSBAND). (IV) SOURCE OF THE SOURCE NOT REQUIRED TO BE ESTABL ISHED A) IN THE CASE OF APPELLANT, IT IS ON RECORD THAT M ONEY HAS COME FROM UBS LTD., MAURITIUS. IN THE ABSENCE OF PROOF AS TO THE SOURCE IT CANNOT BE SAID THAT THE MONEY BELONGS TO THE APPELLANT. B) IT IS FURTHER SUBMITTED THAT THE ASSESSEE DOES N OT REQUIRE TO PROVE THE SOURCE OF THE SOURCE OF THE DEPOSIT WHICH HE HAS IN ANY CASE DONE. RELIANCE IS PLACED ON THE JUDGEMENT OF RAJASTHAN HI GH COURT IN THE CASE OF ARAVALI TRADING 220 CTR 622. IT WAS HELD AS UNDER:- NEITHER THE PROVISIONS OF SECTION 68 NOR ON GENER AL PRINCIPLE, IT CAN BE SAID THAT ONCE THE EXISTENCE OF PERSONS IN WHOSE NAME CREDITS ARE FOUND IN THE BOOKS OF THE ASSESSEE IS PROVED AND SU CH PERSONS OWN SUCH CREDITS WITH THE ASSESSEE STILL THE ASSESSEE IS T O FURTHER PROVE THE SOURCE FROM WHICH THE CREDITORS COULD HAVE ACQUIRED MONEY TO BE DEPOSITED WITH HIM. THE FACT THAT THE DEPOSITORS EXPLANATION ABO UT THE SOURCES WHERE FROM THEY ACQUIRED THE MONEY IS NOT ACCEPTABLE TO T HE A.O., IT CANNOT BE PRESUMED THAT THE DEPOSITS MADE BY SUCH CREDITORS I S THE MONEY OF THE ASSESSEE HIMSELF. THERE IS NO WARRANT FOR SUCH PRE SUMPTION. IN SUCH EVENT, IF THE CREDITORS EXPLANATION IS FOUND TO BE NOT ACCEPTABLE ABOUT SUCH DEPOSITS, THE INVESTMENT OWNED BY SUCH PERSONS MAY BE SUBJECTED TO THE PROCEEDINGS FOR INCLUSION OF SUCH INVESTMENT AS THE IR INCOME FROM UNDISCLOSED SOURCES OR IF THEY HAVE BEEN FOUND BENA MI, THE REAL OWNER CAN BE BROUGHT TO THE TAX NET. BUT IN ORDER TO FAST EN LIABILITY ON THE ASSESSEE BY INCLUDING SUCH CREDITS AS HIS INCOME FR OM UNEXPLAINED SOURCES A NEXUS HAS TO BE ESTABLISHED THAT HE SOURC ES OF CREDITORS DEPOSIT FLEW FROM THE ASSESSEE. IN THE ABSENCE OF ANY SUCH LINK, ADDITIONS OF CASH CREDITS FOUND AT THE BOOKS OF ACCOUNT OF THE ASSESS EE CANNOT BE CONSIDERED TO BE UNEXPLAINED INCOME OF THE ASSESSEE, WHERE EXI STENCE OF DEPOSITORS OF SUCH CREDITS IS ESTABLISHED AND SUCH DEPOSITS/ADVA NCE/LOAN IS OWNED BY SUCH EXISTING PERSON. ON SUCH PROOF THE ASSESEES O NUS IS DISCHARGED. PAGE 60 OF 91 IN THE CASE OF APPELLANT, THE IMMEDIATE CREDITOR I. E. UBS LTD., MAURITIUS HAS CLAIMED OWNERSHIP OF FUNDS. THE SAID FUNDS WERE RAISED FROM THE SHARE HOLDERS OF UBS LTD. MAURITIUS WHO HAVE FURTHE R CONFIRMED HAVING PROVIDED THE FUNDS TO UBS LTD. MAURITIUS. HENCE THE SOURCE OF SOURCE HAVE ALREADY CONFIRMED HAVING PROVIDED THE FUNDS TO CLA RIDGES HOTEL PVT.LTD. AND THEREFORE NO FURTHER ENQUIRY IS TO BE MADE AND THE ONUS OF THE ASSESSEE STANDS DISCHARGED. IN VIEW OF THE ABOVE SUBMISSIONS, YOUR HONOUR WOULD APPRECIATE THAT NO ADDITION IS CALLED FOR IN THE CASE OF THE APPELLANT . 4. GROUND NO.4 REGARDING UNEXPLAINED INVESTMENT IN CLARIDGES SEZ PRIVATE LIMITED RS.34,60,000/- (I) OBSERVATION OF LD ASSESSING OFFICER A.THE ASSESSING OFFICER HAS ALLEGED THAT THE APPELL ANT HAS MADE SUBSTANTIAL INVESTMENT THROUGH MAURITIUS BASED COMP ANY CALLED M/S PALM TECHNOLOGIES LTD INTO M/S CLARIDGES SEZ PVT. LTD. ACCORDING TO THE AO, THE FACT THAT AGRICULTURAL LAND HAS BEEN PURCHASED IN T HE NAME OF THE APPELLANT AND HIS SON MR. SANJEEV NANDA, ACTING ON BEHALF OF THE COMPANY AND OTHER CLOSE CONFIDENTS GOES TO PROVE THAT THE F UND BELONG TO THE APPELLANT. THE AO HAS FURTHER MADE QUERY ABOUT M/S PALM TECHNO LOGIES LTD., MAURITIUS THROUGH THE FT & TR DAVISON OF THE CBDT A ND ACCORDING TO HIM, THE STATEMENT BY THE GOVERNMENT OF MAURITIUS THAT T HERE IS NO EXCHANGE CONTROL IN MAURITIUS AND THEREFORE, THERE IS NO REQ UIREMENT TO SUBMIT DOCUMENTATION FOR BRINGING FUNDS IN MAURITIUS SUGGE ST THAT SURESH NANDA IS BRINGING HIS UNACCOUNTED MONEY AFTER CREATING LA YER TO INTER-MEDIATRIES INCLUDING M/S PALM TECHNOLOGIES LTD., MAURITIUS. T HE ASSESSING OFFICER HAS FURTHER ANALYZED THE BALANCE SHEET OF M/S PALM TECHNOLOGIES LTD., MAURITIUS AND ACCORDING TO HIM; THE MONEY IN M/S PA LM TECHNOLOGIES HAS BEEN SOURCED AS LOAN FROM M/S UBS TRADING FZC AND Y 2K SIL WITH THE APPELLANT. THE AO HAS CONCLUDED THAT PALM TECHNOLO GIES IS MERELY A CONDUIT FOR THE APPELLANT TO SOURCE HIS UNDISCLOSED INCOME. B.IN RESPONSE TO THE ALLEGATION OF THE ASSESSING OF FICER, IT IS HUMBLY SUBMITTED AS UNDER PAGE 61 OF 91 (II) SUBMISSION MADE DURING ASSESSMENT PROCEEDINGS DURING THE COURSE OF ASSESSMENT PROCEEDINGS, VIDE L ETTER DATED 02.12.2009 IN RESPONSE TO A QUERY RELATING TO CLARI DGES SEZ, THE ASSESSEE SUBMITTED AS UNDER:- I HAVE NO INTEREST IN TERMS OF SHARE HOLDING OR OW NERSHIP IN CLARIDGES SEZ (P) LTD. CLARIDGES SEZ (P) LTD IS OW NED BY PALM TECHNOLOGIES LTD WHICH IS A FOREIGN COMPANY INCORPO RATED IN MAURITIUS. AS FAR AS I AM AWARE, PALM TECHNOLOGIES IS OWNED BY AN UK CITIZEN MR. E.A. HOFFLAND WHO IS A FRIEND AND WA S INTRODUCED TO ME BY MR HAMILTON ANDREWS. MR. HOFFLAND WAS INTERE STED IN SETTING UP A TECHNOLOGY COMPANY. WHEN HE FOUND THE GOING DI FFICULT AS A TECHNOLOGY COMPANY THE OBJECTS OF THE COMPANY WERE CHANGED TO ESTABLISHING AN SEZ IN INDIA AND FOR THAT PURPOSE, REMITTED MONEY FOR ACQUISITION OF LAND. HE SOUGHT MY ASSISTANCE I N INTRODUCING HIM TO CERTAIN PROFESSIONALS AND EXPERTS WHO COULD HELP IN EXECUTING THE TRANSACTIONS ON BEHALF OF THE COMPANY. AT ONE STAG E, I WAS CONTEMPLATING ON TAKING A STAKE IN THE COMPANY AS M R.HOFFLAND WAS FINDING IT DIFFICULT TO MANAGE THE LAND ACQUISITION ETC IN INDIA. EVEN OTHERWISE, I FELT THAT THERE WAS A GOOD INVESTMENT POTENTIAL IN THE SEZ PROJECT AND I AT ONE STAGE ADVANCED A SUM OF RS . 3,25,00,000 AS SHARE APPLICATION MONEY IN CLARIDGES SEZ (P) LTD . HOWEVER, BECAUSE OF UNFORTUNATE TURN OF EVENTS THAT DEVELOPE D AFTER THE SEARCH THAT TOOK PLACE ON MY PREMISES, I WAS UNABLE TO TRAVEL ABROAD AND THEREFORE, COULD NOT PROCEED ANY FURTHER IN THE MATTER AND THE SHARE APPLICATION MONEY WAS REFUNDED BACK T O ME. MR HOFFLAND HAS BEEN VERY KIND TO HAVE SENT ME CERTIFI ED LIST OF SHARE HOLDERS OF PALM TECHNOLOGIES AND ON PERUSAL OF THE SAME, YOUR GOODSELF WILL APPRECIATE THAT I HAVE NO INTEREST IN THE SAID COMPANY. (III) CERTIFIED LIST OF SHAREHOLDERS OF PALM TECHNO LOGIES YOUR GOODSELF WILL APPRECIATE THAT THE ASSESSEE ENC LOSED THE CERTIFIED LIST OF SHARE HOLDERS OF M/S PALM TECHNOLOGIES WHICH CLEARL Y SHOW THAT THE APPELLANT IS NEITHER THE REGISTERED OR BENEFICIAL O WNER OF SHARES OF PALM TECHNOLOGIES. HIS STATEMENT THAT A UK CITIZEN MR. E.A. HOFFLAND WHO IS A CONCERNED, OWNS PALM TECHNOLOGIES LTD AND THAT HE W AS HELPING HIM IN EXECUTING TRANSACTIONS ON BEHALF OF THE COMPANY IN INDIA. PAGE 62 OF 91 (IV) NO EVIDENCE TO SHOW THAT PALMS FUNDS ARE UNDI SCLOSED INCOME OF APPELLANT. WITHOUT PREJUDICE TO THE AFORESAID, IT IS FURTHER S UBMITTED THAT THERE IS NO EVIDENCE WITH THE DEPARTMENT TO SHOW THAT THE FUNDS IN PALM TECHNOLOGIES ARE THE UNDISCLOSED FUNDS OF THE APPELLANT. HENCE, THE CONTENTION OF THE ASSESSING OFFICER IS GROSSLY INCORRECT AND THE ADDI TION DESERVES TO BE DELETED ON THIS COUNT ALONE. (V) ENQUIRY FROM MAURITIUS STRENGTHEN APPELLANTS CLAIM WITHOUT PREJUDICE, IT IS FURTHER SUBMITTED THAT THE RESULT OF THE ENQUIRY FROM THE GOVERNMENT OF MAURITIUS AT PAGE-25 OF THE ASSES SMENT ORDER CLEARLY GOES TO BUTTRESS THE STAND OF THE APPELLANT. THE G OVERNMENT OF MAURITIUS HAS CONFIRMED THAT THE EQUITY STRUCTURE OF PALM TEC HNOLOGIES IS AS PER THE BALANCE SHEET. THE SOURCES OF FUNDS ENABLING THE I NVESTMENT ARE FROM LOAN AND SHARE HOLDERS LOAN AND THEREFORE, THE BALA NCE SHEET SO SUBMITTED AND EQUITY STRUCTURE GIVEN IS TRUE AND CORRECT. IT IS FURTHER SUBMITTED THAT AS PER THE RULING OF T HE AUTHORITY OF ADVANCE RULING IN THE CASE OF E-TRADE MAURITIUS, IT HAS BEE N HELD THAT THERE IS NO NEED TO GO INTO THE BENEFICIAL OWNERSHIP OF THE COM PANY AS TREATY BENEFIT ARE TO BE ACCORDED ON THE BASIS OF THE FACT THAT TH E COMPANY IS A TAX RESIDENT OF MAURITIUS. THE BALANCE SHEET/AUDITED ACCOUNTS OF PALM TECHNOL OGIES ARE WITH THE DEPARTMENT ALONG WITH THE EQUITY STRUCTURE. THE SO URCES OF FUNDS ARE FROM SHARE HOLDER WHO IS MR. E.A. HOFFLAND. THE APPELLA NT FAILS TO UNDERSTAND AS TO WHAT MORE IS REQUIRED TO ESTABLISH THE GENUIN ENESS OF THE TRANSACTION RELATING TO THE INFUSION OF FUNDS BY PALM TECHNOLOG IES INTO ITS WHOLLY OWNED SUBSIDIARY M/S CLARIDGES SEZ. THE JUDGEMENTS AND LEGAL POSITION ON BENAMI ETC., C ITED IN THE CASE OF ADDITION RELATING TO CLARIDGES HOTELS P LTD WOULD A PPLY TO THE IMPUGNED ADDITION AS WELL. IT IS FURTHER SUBMITTED THAT THERE IS NOT AN IOTA OF EVIDENCE TO EFFECT THAT THE INDIVIDUAL APPELLANT IS A SHAREHOLDER IN M/S PALM T ECHNOLOGIES, OR A CONTRIBUTORY TO FUNDS IN THE SAID COMPANY. HENCE TH E MERE ALLEGATION OF THE DEPARTMENT THAT THE APPELLANT IS DE FACTO M/S P ALM TECHNOLOGIES IS PAGE 63 OF 91 BEREFT OF ANY BASIS OR REASON. IT IS TRITE THAT THE ONUS IS ON THE PERSON WHO ALLEGES BENAMI. THE DEPARTMENT, EXCEPT FOR BALD ALLEGATIONS HAS NOT BEEN ABLE TO TENDER ANY PROOF OR EVIDENCE OF THE APPELLANTS MONEY BEIN G ROUTED THROUGH PALM TECHNOLOGIES. HENCE THE ADDITION SO MADE DESERVES T O BE DELETED. WITHOUT PREJUDICE TO THE AFORESAID IT IS SUBMITTED THAT THE APPELLANT HAS MADE A SUBSTANTIVE ADDITION OF THE SAME AMOUNT IN T HE HANDS OF THE INDIAN COMPANY CLARIDGES SEZ PRIVATE LIMITED WHICH RECEIVED THE AMOUNT FROM ITS SHAREHOLDER M/S PALM TECHNOLOGIES. SUCH AD DITIONSON TWO HANDS ON SUBSTANTIVE BASIS IS UNTENABLE IN LAW. IT IS FURTHER SUBMITTED THAT IN RESPECT OF REMITTAN CE FROM A TAX RESIDENCE OF A COUNTRY WITH WHOM INDIA HAS A DTAA, NO QUESTION N EED TO BE ASKED AS REGARDS THE SOURCE OF THE REMITTANCE. FOR THIS PROP OSITION THE JUDGMENT IN THE CASE OF AZADI BACHAO ANDOLAN IS SQUARELY APPLIC ABLE. IN VIEW OF THE AFORESAID THE ADDITION MADE IN THE H ANDS OF THE APPELLANT DESERVES TO BE DELETED. 7.3. AFTER HEARING RIVAL CONTENTIONS WE HOLD AS FOLLOWS . 7.4. THE HONBLE DELHI HIGH COURT IN THE ASSESSEES OW N CASE FOR THE EARLIER AYS AT PARA 13 HELD AS FOLLOWS. 13. IN VIEW OF THE FACT THAT THE TRIBUNAL HAS CORR ECTLY DECIDED THAT THE RESPONDENT/ASSESSEE WAS NOT A RESIDENT IN INDIA IN THE YEARS IN QUESTION, IT IS AXIOMATIC THAT THE ADDITION OF RS.10,51,20,000/- U/ S 68 WOULD HAVE TO BE DELETED BECAUSE IT WAS A TRANSFER FROM THE RESPONDE NT/ASSESSEES FOREIGN ACCOUNT TO THE DOMESTIC ACCOUNT. 7.4.1. THE TRIBUNAL WHILE ADJUDICATING THE ISSUE IN THE E ARLIER YEARS, AT PARA 9 HELD AS FOLLOWS. PAGE 64 OF 91 9. APROPOS THE ADDITION OF RS. 10,51,20,000 /- MADE ON THE BASIS OF A HAND WRITTEN PAGE ALLEGEDLY CONTAINING DEBIT AND CR EDIT ENTRIES IN ASSESSEE'S ACCOUNT WITH DEUTSCH BANK, SINGAPORE ON THE GROUND THAT NO EXPLANATION WAS GIVEN WITH REGARD TO THE SOURCE OF THE FUNDS, IS TO BE DELETED AS THE SAME DOES NOT REPRESENTS INCOME ACCRUED IN INDIA. ASSESSEE H AS DEMONSTRATED THAT PAPER CONTAINS DETAILS OF TRANSFER OF HIS OWN FUNDS FROM FOREIGN BANK ACCOUNTS MAINTAINED FOR THE INVESTMENT AND BUSINESS ACTIVITI ES CARRIED OUT IN THOSE COUNTRIES. THE AO HAS NOT LEAD ANY EVIDENCE TO SHOW THAT ASSESSES EXPLANATION IS INCORRECT OR THE CREDITS IN THE BANK ACCOUNT ARE AS A RESULT OF ANY INCOME WHICH ACCRUED IN INDIA. ADMITTEDLY THE ASSESSEE B EING A NON-RESIDENT CLAIMS TO HAVE ACTIVITIES AND BANK ACCOUNTS IN THESE COUNT RIES. IN THESE CIRCUMSTANCES THE BURDEN TO PROVE THAT ASSESSEES EXPLANATION IF FALSE OR THE RECEIPTS OUTSIDE INDIA WERE AS A RESULT OF ANY INCOME WHICH ACCRUED IN INDIA WAS ON THE DEPARTMENT. AO HAS FAILED TO DISCHARGE THE BURDEN A ND NO ADVERSE MATERIAL HAS BEEN BROUGHT ON RECORD. BESIDES THE ITAT IN TH E CASE OF THE ASSESSEE HAS HELD THAT THESE ARE REMITTANCES FROM THE ASSESSEES OWN ACCOUNT OUTSIDE INDIA TO INDIAN BANK ACCOUNTS CANNOT BE TAXED U/S 68 OF T HE ACT. THE DECISION OF THE TRIBUNAL HAS BEEN ACCEPTED BY THE DEPARTMENT AND NO APPEAL HAS BEEN PREFERRED TO THE HIGH COURT. HENCE, WE DELETE THI S ADDITION, THIS GROUND OF THE ASSESSEE IS ALLOWED AND THE ADDITION OF RS. 10,51,2 0,000/- IS DELETED. 7.4.2. APPLYING THE PROPOSITIONS LAID DOWN BY THE HONBLE HIGH COURT WE UPHOLD THE ORDER OF THE LD.COMMISSIONER OF INCOME T AX (APPEALS) WE HOLD THAT THE ADDITION IN QUESTION IS BAD IN LAW, THE ORDER O F THE TRIBUNAL IS ALSO IN FAVOUR OF THE ASSESSEE. AS IN THE EARLIER ISSUE OF ADDITIONS MADE ON ALLEGED COMMISSION INCOME, HERE ALSO THE ASSESSING OFFICER MADE ADDITIONS BASED ON CERTAIN DOCUMENTS. THE ASSESSEE HAS MADE DETAILED CONTENTIONS ON THESE DOCUMENTS. WE EXAMINE THESE DOCUMENTS AND THE CONT ENTIONS OF BOTH THE PARTIES. PAGE 65 OF 91 7.4.3. AS IT IS HELD THAT THE ASSESSEE IS A NON-RESIDENT INDIAN, THE BURDEN TO PROVE THAT A PARTICULAR INCOME HAS EITHER ACCRUE D OR RECEIVED IN INDIA IS ON THE REVENUE, IF IT CHOOSES TO BRING TO TAX A PARTIC ULAR RECEIPT AS INCOME. IN CASES WHERE EXEMPTIONS OR DEDUCTIONS ARE CLAIMED FR OM TAXABLE INCOME, THEN THE BURDEN OF PROOF IS ON THE ASSESSEE. 7.4.4 . IN THIS CASE M/S CLARDGES HOTELS P.LTD. RECEIVED MONEY FROM ITS HOLDING CO. M/S UBS OF MAURITIUS. THIS IS NOT A CA SE WHERE THE ASSESSEE RECEIVED ANY MONEY. M/S UBS, MAURITIUS IS NOT A COMPANY CONTROLLED BY THE ASSESSEE AND THERE IS NO MATERIAL WITH THE REVENUE TO PROVE THAT M/S UBS, MAURITIUS IS A BENAMI COMPANY OF THE ASSESSEE. TAX RECEIPT CERTIFICATE AND SHARE HOLDING PATTERN OF UBS, MAURITIUS LTD. WERE F ILED BY THE ASSESSEE. THE SHAREHOLDERS OF UBS, MAURITIUS HAVE FILED LETTERS O F CONFIRMATION AS REGARDS THE OWNERSHIP. THERE IS NO DOCUMENT OR EVIDENCE WHATSO EVER WITH THE ASSESSING OFFICER, WHICH WOULD CONTRADICT THE EVIDENCE FURNIS HED BY THE ASSESSEE. THE CORRESPONDENCE RECEIVED BY THE ASSESSING OFFICER DI RECTLY CONSEQUENT TO EQUIRIES, ARE SUPPORTING THE TAX OF THE ANY. UNDER THE CIRCUMSTANCES IT IS WRONG ON THE PART OF THE ASSESSING OFFICER TO IGNORE THE EVIDENCES AND MAKE A HUGE ADDITION BASED ON SURMISES AND CONJECTURES. WE ARE ALSO INFORMED THAT THE SAME AMOUNT WAS ADDED U/S 68 IN THE HANDS OF CLARID GES HOTEL (PVT.) LTD. AND THE SAME WAS DELETED IN APPEAL. BE IT AS IT MAY WE DO NOT FIND ANY LOGIC IN THE ASSESSING OFFICER MAKING AN ADDITION OF THIS AMOUNT IN THE NAME OF THE COMPANY. PAGE 66 OF 91 7.4.5 . COMING TO DOCUMENTS FOUND DURING THE COURSE OF S EARCH WE EXAMINE THE SAME AND HOLD AS FOLLOWS:- (I) ANNEXURE A 26 SUPPORTS THE CLAIM OF THE ASSESSE E ON THE ISSUE OF SHARE HOLDING AND FURTHER THAT THE ASSESSEE DOES NOT CONT ROL UBS LTD. MAURITIUS. (II) ANNEXURE A-8 AT PAGES 17 TO 34 DOES NOT SUPPOR T THE CONCLUSIONS OF THE ASSESSING OFFICER THAT UBS LTD. MAURITIUS IS CONTRO LLED BY THE ASSESSEE. ON THE OTHER HAND IT DEMONSTRATES THAT THE ASSESSEE IS A MAJOR SHAREHOLDER OF INFOTECH SERVICES, WHICH IN TURN HOLDS ONLY 20% OF SHAREHOLDING OF UBS LTD., MAURITIUS. THE BALANCE 80% OF THE SHARE HOLDING OF UBS LTD. IS HOLD BY THE PARTIES WHO ARE NOT RELATED, MUCH LESS CONTROLLED B Y THE ASSESSEE. (III) ANNEXURE A 8 ALSO SUPPORTS THE CLAIM OF THE A SSESSEE THAT INFOTECH SERVICES LTD. HOLDS 20% OF UBS LTD. MAURITIUS. THE CLAIM O F THE ASSESSEE THAT THE LETTER IN QUESTION REFERS TO SECOND ROUND OF FINANC IAL REQUIREMENTS OF UBS LTD., MAURITIUS AND THAT INFO SERVICES LTD. WAS REQUIRED TO CONTRIBUTE 20% OF SHARE OF FINANCE OF UBS LTD. MAURITIUS AND THAT THIS WAS MET THROUGH INTERIM DIVIDEND DECLARED BY M/S UBS TRADING FZC, WHERE TH E ASSESSEE IS A MAJORITY SHAREHOLDER IS PROVED BY THIS DOCUMENT. (IV) ANNEXURE A 8 AT PAGE 36 IS A LETTER WRITTEN BY M/S UBS TRADING FZC DECLARE INTERIM DIVIDEND REFERRED TO ABOVE. THIS LETTER DOES NOT DEMONSTRATE THAT THE ASSESSEE HAS ANY RELATIONSHIP WITH M/S MID EAST, S.A. PAGE 67 OF 91 (V) ANNEXURE A 8 PAGE 38, 39 TO 71 SUPPORT THE CON TENTIONS OF THE ASSESSEE THAT INFO SERVICES LTD. PROVIDE FUNDS TO UBS LTD., MAURITIUS. (VI) ANNEXURE A 8 PAGE 13 ALSO CORROBORATES THE CL AIM OF THE ASSESSEE REGARDING FUNDING OF M/S UBS, MAURITIUS. THERE IS NO CONTROVERY ON THE INTERPRETATION OF THIS ;DOCUMENT BETWEEN THE ASSESS ING OFFICER AND THE ASSESSEE. SIMILAR IS THE INTERPRETATION OF ANNEXUR E A 8 PAGES 70 TO 75. (VII) ANNEXURE A 22 PAGES 67 TO 70 DOES NOT DEMONST RATE THAT THE ASSESSEE HAS ACQUIRED OR THAT THE ASSESSEE HAD INVESTED FURTHER IN M/S PARAMEL FINANCE. MERELY BECAUSE THE FINANCIAL STATEMENTS INCLUDING B ALANCE SHEET OF PARAMEL FINANCE IS SENT TO THE ASSESSEE, IT DOES NOT FOLLOW THAT THE ASSESSEE HAD PURCHASED THOSE COMPANY THAT TOO WITHOUT ANY FURTHE R EVIDENCE. (VIII) SIMILARLY ANNEXURE A 26 PAGES 11 TO 13 ONLY CORROBORATE THE VERSION OF THE ASSESSEE THAT HE INVESTED IN UBS, MAURITIES THROUGH INFORTECH SERVICES LTD. AND THAT THE STALE IS ONLY 20% AND THAT 80% SHARES OF UBS, MAURITIUS IS OWNED BY MR.HAMITTON AND RUSE THROUGH M/S PARAMAL FINANCE AND MITES COMPANY. IN OUR VIEW THE STATEMENT GIVEN BY THE ASSESSEE TO THE DIT INVESTIGATION, NEW DELHI ON 8.3.2007 (A COPY OF WHICH HAS LATTER BEEN FURNISHED TO THE ASSESSEE), DOES NOT BETTER THE CASE OF THE REVENUE, AS THE ASS ESSEE HAS CLAIMED THAT HIS INTEREST IN M/S CLARIDGES HOTELS P.LTD. IS ONLY BY WAY OF INVESTMENTS MADE THROUGH M/S UBS, MAURITIUS, IN WHICH COMPANY HE HAS ONLY 20% STAKE. SIMPLY BECAUSE THE ASSESSEE IS THE CHAIRMAN OF M/S CLARDGES HOTELS P.LTD. AND BECAUSE HIS SON WAS MANAGING DIRECTOR OF THE CO MPANY, IT DOES NOT PAGE 68 OF 91 SUPPORT THE ADDITION IN QUESTION, AS ADMITTEDLY THE INVESTMENT IN THE HOTEL IS MADE BY M/S UBS LTD., MAURITIUS IN WHILE THE COMPAN Y WHICH THE ASSESSEE CONTROLS IT IS A MINORITY SHARE HOLDER. THE ASSESSE E HAS DEMONSTRATED THAT HE CONTROLS ONLY 20% STAKE HOLDER IN M/S UBS LTD., MAU RITIUS. THE A.O. HAS NOT BROUGHT ANY EVIDENCE ON RECORD TO DEMONSTRATE THAT THE FUNDS INVESTED IN M/S CLARDGES HOTELS P.LTD. BY M/S UBS LTD., MAURITIUS, HAS ACTUALLY BEEN INVESTED FROM UNACCOUNTED INCOME OF THE ASSESSEE. THE DIVID END EARNED BY THE ASSESSEE FROM A COMPANY CONTROLLED BY HIM I.E. M/S UBS TRADING FZC WAS INVESTED IN M/S UBS LTD. MAURITIUS, THROUGH INFOTEC H SERVICES LTD. IN VIEW OF THIS FACTUAL MATRIX, WE UPHOLD THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). HENCE WE DO NOT GO INTO THE LEGAL SUBMIS SIONS MADE BY THE ASSESSEE THAT WHOEVER ALLEGES FRAUD, HAS TO PROVE IT; (B) TH E BURDEN OF PROOF LIES ON THE PERSON ALLEGING BENAMI TRANSACTIONS; (C) THAT THE A SSESSEE HAS DISCHARGED THE BURDEN OF PROOF THAT LIE ON IT; (D) THAT SORUCES OF SOURCE NEED NOT BE ESTABLISHED. 7.5. IN THE RESULT GROUND NOS.3 AND 4 OF THE REVENUE AR E DISMISSED. 8. GROUND NO.5 IS REGARDING UNEXPLAINED DEPOSITS IN D EUTSCHE BANK, SINGAPORE. THE LD.COMMISSIONER OF INCOME TAX (APPEALS) HAS D EALT WITH THE ISSUE AT PARA 5.2 AT PAGE 16 OF HIS ORDER. PAGE 69 OF 91 8.0 THE ASSESSING OFFICER, AS ALWAYS STATED RELIED UPON THE HAND WRITTEN PAGE FOUND AND SEIZED AS PAGE NO.70, ANNEXURE A -15 PARTY R-1, DURING THE COURSE OF SEARCH PROCEEDINGS IN THE ASSESSEES RESI DENCE, THE CONTENTS OF THIS PAGE HAVE BEEN EXTRACTED AT PAGE 28-29 OF THE ASSES SMENT ORDER, ON THE GROUND THAT THE ASSESSEE HAS NOT FURNISHED THE SOURCE OF D EPOSIT INTO THE SINGAPORE BANK, RUPEES EQUIVALENT OF THE TRANSACTION IN THIS ACCOUNT. 8.1. THE LD.D.R. SUBMITTED AS FOLLOWS. (F) UNEXPLAINED DEPOSITS IN THE DEUTSCHE BANK: 1. ASSESSING OFFICER IN PARA 8 OF HIS ORDER HAS, TAKIN G NOTE OF ANNEXURE A-15 (PAGE 70) WHICH SHOWED IN AND OUT OF MONEY IN ASSES SEES A/C WITH DEUTSCHE BANK, SINGAPORE TO HIS NRE A/C WITH DEUTSC HE BANK, NEW DELHI, WHICH DOCUMENT WAS CALLED BY THE ASSESSEE AS HAVING MERE ROUGH SCRIBBLING, MADE ADDITION BECAUSE ASSESSEE DID NOT GIVE DETAILS OF HIS BUSINESS ABROAD. CIT(A) INSTEAD OF DEALING WITH VA RIOUS CONTENTIONS PUT FORTH BY THE ASSESSING OFFICER IN HIS ORDER, AS SEE N ;FROM HIS ORDER (E.G. PARA 5.2 OF HIS ORDER FOR ASSESSMENT YEAR 2004-05), INSTEAD OF DEALING WITH VARIOUS CONTENTIONS/POINTS OF THE ASSESSING OF FICER, DELETED THE ADDITION SOLELY RELYING ON THE ITAT ORDER DT. 24.7. 2012. 2. CIT(A) OUGHT TO HAVE TAKEN NOTE OF THE FINDING RECO RDED BY THE ASSESSING OFFICER THAT DESPITE BEING ASKED THE ASSESSEE HAS ( QUESTION NO.31), TO HIDE THE TRUTH, DISOWNED THE DOCUMENT CALLING TO BE CONT AINING MERE SCRIBBLING AND THAT (EXCEPT ASSERTING THAT THE BANK ACCOUNT HA D BEEN SUBJECTED TO SCRUTINY) HE DID NOT PROVIDE BANK A/C TO THE ASSESS ING OFFICER WHICH OUGHT TO HAVE BEEN DONE ESPECIALLY WHEN THE ASSESSING OFF ICER HAD EVERY RIGHT TO EXAMINE THE ISSUE FROM THE ANGLE OF STATUS BEING RE SIDENT. THE CIT(A) HAS FAILED TO APPRECIATE THAT THE BANK A/C CONTAINED TH E PROCEEDS OF ILLEGAL COMMISSION INCOME DERIVED FROM FACILITATING DEFENCE DEALS. 8.2 . THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED AS FOLL OWS. PAGE 70 OF 91 5. GROUND NO.5 REGARDING UNEXPLAINED DEPOSIT IN DE UTSCHE BANK RS.4,32,90,000 : THIS ISSUE HAS BEEN COVERED BY THE DECISION OF THE HONBLE HIGH COURT IN THE CASE OF THE APPELLANT WHERE THE DEPOSITS IN THE SAM E BANK ACCOUNT FOR THE AY 2001-02, 2003-04 WERE DELETED WITH THE FOLLOWING OB SERVATIONS : WE ARE LEFT TO CONSIDER THE ADDITION OF RS.10,51,20 ,000/- MADE UNDER SECTION 68 OF THE SAID ACT. INSOFAR AS THIS ADDITION IS CONCE RNED, THE DECISION WITH REGARD TO IT WOULD DEPEND ON WHETHER THE RESPONDENT/ASSESSEE IS REGARDED AS A RESIDENT OR A NON-RESIDENT. IN CASE HE IS REGARDED AS A RES IDENT THEN, OBVIOUSLY, THIS ADDITION WOULD HAVE TO BE MADE. BUT, IF HE IS REGA RDED AS A NON-RESIDENT THEN THIS ADDITION WILL HAVE TO BE DELETED. THIS IS EXA CTLY WHAT THE TRIBUNAL HAS DONE. THE TRIBUNAL CONSIDERED THE CASE OF THE REVENUE AS WELL AS THAT OF THE RESPONDENT/ASSESSEE AND DETERMINED THAT THE RESPOND ENT/ASSESSEE WAS A NON- RESIDENT AND THEREFORE THE SAID ADDITION HAS IN VIEW OF THE FACT THAT THE TRIBUNAL HAS CORRECTLY DECIDED THAT THE RESPONDENT/ASSESSEE WAS NOT A RESIDENT IN INDIA IN THE YEARS IN QUESTION, IT IS AXIOMATIC THAT THE ADDITION OF RS.10,51,20,000/- UN DER SECTION 68 WOULD HAVE TO BE DELETED BECAUSE IT WAS A TRANSFER FROM THE RESPO NDENT/ASSESSEES FOREIGN ACCOUNT TO THE DOMESTIC ACCOUNT. HENCE, THE MATTER IS SQUARELY COVERED SINCE IT IS THE SAME BANK ACCOUNT WHICH HAS ALREADY BEEN CON SIDERED AND ADJUDICATED UPON BY THE HONORABLE HIGH COURT. 8.3. IN OUR CONSIDERED VIEW PARA 13 OF THE JUDGEMENT O F HONBLE DELHI HIGH COURT COVERS THE ISSUE. RESPECTFULLY FOLLOWIN G THE SAME WE UPHOLD THE ORDER OF THE LD.COMMISSIONER OF INCOME TAX (APPEALS ) AND DISMISS THIS GROUND OF THE REVENUE. IN THE RESULT GROUND NO.5 OF THE R EVENUE IS DISMISSED. PAGE 71 OF 91 9. GROUND NO.6 IS ON THE ADDITION MADE FOR PAYMENTS M ADE TO THE ASSESSEES WIFE SMT.RENU NANDA. THE ASSESSING OFFI CER DEALT WITH THE ISSUE IN THE ASSESSMENT YEAR 2004-05 AT PARA 9 OF HIS ORDER. THE ASSESSEES CASE IS THAT, HE FILED A SUIT ON HIS WIFE FOR LEGAL SEPARAT ION, AFTER THE EXPIRY OF THE DEED OF SETTLEMENT ON 4.4.1998 AND THAT THOUGH THERE WAS NO FURTHER SETTLEMENT OR AGREEMENT BETWEEN THE ASSESSEE AND MRS. RENU NANDA AFTER THE SUIT FOR LEGAL SEPARATION WHICH WAS DECIDED ON 24.3.2004, AS A MOR AL DUTY, HE CONTINUED TO SUPPORT HER FINANCIALLY. AT PARA 9.2 THE ASSESSING OFFICER LISTS OUT THE PAYMENTS MADE FROM DEUTSCHE BANK, SINGAPORE, TO HIS WIFE. THE ASSESSING OFFICER AT PARA 9.6 AND 9.7 HELD AS FOLLOWS. 9.6. BASED ON THE ABOVE, IT IS EVIDENT THAT THE AS SESSEE IS NOT GIVING ANY FIXED AMOUNT TO HIS WIFE THROUGH BANKING CHANNELS. A MIN IMUM CONSERVATIVE ESTIMATE OF THE AMOUNT PAID BY THE ASSESSEE AS SUPPORT TO HI S WIFE WOULD BE BASED ON THE AGREEMENT DATED 11 TH SEPTEMBER,2004. THE DETAILS ARE WORKED OUT AS BEL OW:- (I) FIXED PAYMENTS = RS.1,00,000 PM X 12M + RS.2,00,000 FOR DIWALI = RS.14,00,000/- (II) PAYMENTS TO 1 GUARDS, 4 SERVANTS, 2 DRIVERS, 1 MALI AND RS.10,000/- TO ONE ALOK IS ESTIMATED AT RS.1,00,000 PM AND THUS THE TOTAL ANNUAL PAYMENT ON THIS ACCOUNT WOULD BE RS.1, 00,000X12=RS.12,00,000/- (III) PHONE BILLS, MAINTENANCE OF HOUSE, FURNITURE AND FIXTURE, CAR EXPENSES AND MAINTENANCE, OVERSEAS AND DOMESTIC AIRLINES TIC KETS ARE ESTIMATED TO RS.50,000 PM. THUS THE ANNUAL PAYMENT WOULD BE RS.6 ,00,000/-. (IV) TOTAL AMOUNT = RS.32,00,000/-. 9.7. IT IS TO BE NOTED THAT THIS AMOUNT BROADLY MAT CHES WITH THE FIGURE OF RS.31,00,000/- THAT IS AGREED AS THE PAYMENT TO BE MADE BY THE ASSESSEE TO HIS WIFE VIDE THE AGREEMENT DT. 4.4.1998 FOUND AND SEIZ ED AT PAGE NO.59-61 ANNEXURE A 50 PARTY R-1 AS DESCRIBED ABOVE. ON THE BASIS OF THE DISCUSSION ABOVE, IT IS CLEAR THAT DURING THE RELEVANT PY THE ASSESSEE HAS TRANSFERRED RS.8,10,000/- THROUGH BANKING CHANNELS TO HIS WIFE. THE MONEY GIVEN BY THE ASSESSEE DURING THE RELEVANT PY IS NOT SUFFICIENT T O MEET THE TERMS OF THE AGREEMENT DT. 11 TH SEPTEMBER,2004 AND 4.4.1998. THE REMAINING AMOUNT OF RS.23,90,000/- (BASED ON THE ESTIMATE IN THE PARA A BOVE) IS PAID BY THE PAGE 72 OF 91 ASSESSEE THROUGH UNDISCLOSED MEANS. THUS THE SAME IS ADDED TO THE TAXABLE INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS U/S 27 1(1)(C) OF THE ACT ARE BEING SEPARATELY INITIATED. (ADDITION: RS.23,90,000/-). 9.1. ON APPEAL THE FIRST APPELLATE AUTHORITY DEALT WITH THE ISSUE AT PARA 6.2 AND HELD AS FOLLOWS. 6.2. THE ADDITION ON THE SAME GROUND FOR AYS 2002- 03 AND 2003-04 I.E. MAINTENANCE PAID BY THE APPELLANT TO HIS WIFE, WAS DELETED BY HONBLE ITAT VIDE PARA 12 OF ITS ORDER DT. 24.7.2012 IN ITA NOS. 1428 , 1429 AND 1430/DEL/2012, THE RELEVANT PORTIONS OF WHICH HAVE BEEN CITED ABOV E BY THE LD.AR AND ARE NOT REPEATED HERE FOR THE SAKE OF BREVITY. IT HAS BEEN HELD BY THE HONBLE S;UPREME COURT IN UOI VS.KAMLAKSHI FINANCE CORP.LTD. (AIR 19 92 SC 711) AND KHALID AUTOMOBILES VS. UOI (4 SCC SUPPL. 653) THAT THE DE CISIONS OF THE JURISDICTIONAL HIGH COURT AND THE TRIBUNAL ARE BINDING ON THE INCO ME TAX AUTHORITIES WITHOUT ANY RESERVATION. ACCORDINGLY, THE DECISION OF THE HONBLE ITAT IS APPLIED TO THE PRESENT ASSESSMENT YEAR, SUPERSEDES THE EARLIER DEC ISION OF CIT(A) ON THIS GROUND, THE EARLIER ORDER OF CIT(A) MERGES WITH THE SUBSEQUENT ORDER OF ITAT, WHICH HAS BECOME BINDING ON THE APPELLATE AUTHORITY . CONSEQUENTLY, THIS GROUND OF APPEAL IS ALLOWED AND THE ADDITION IS DELETED. APPELLANT GETS RELIEF OF RS.23,90,000/-. 9.2. THE LD.D.R. SUBMITTED AS FOLLOWS. (A) UNRECORDED PAYMENTS MADE TO RENU NANDA: 1. THIS ISSUE IS DISCUSSED BY THE ASSESSING OFFICER I N PARA 9 OF THE ORDER FOR THE ASSESSMENT YEAR 2004-05. THE CIT(A) (E.G. PARA 6.2) HAS DELETED ADDITIONS SOLELY RELYING ON ITAT ORDER DT. 24.7.201 2 (ITA 1428, 1429 & 1430/DEL/12) WITHOUT GOING THROUGH THE APPLICABLE P ORTION WHICH READS AS UNDER: IN OUR CONSIDERED VIEW THE BASIS OF ADDITION BEIN G ONLY ON PRESUMPTIONS, THERE BEING NO MATERIAL WHATSOEVER, T HE ADDITION IS DELETED. PAGE 73 OF 91 WE FIND MERIT IN THE ARGUMENT OF THE LD.COUNSEL THA T WITH ESTRANGED RELATIONS ON RECORD SUCH PRESUMPTION IS BASELESS. 2. ADDITIONS ARE NOT PRESUMPTIONS MADE BUT ARE MADE O N THE BASIS OF SPECIFIC EVIDENCES FOUND IN SEARCH WHICH HAVE NOT B EEN VIRTUALLY CONSIDERED BY THE CIT(A)/ITAT. WHEN THE ADDITIONS ARE REFERABLE TO THE EVIDENCES FOUND IN THE SEARCH ACTION IT IS ABSOLUTE LY INCORRECT TO SAY THAT ADDITIONS WERE BASED ON PRESUMPTIONS AND HENCE EITH ER THE ORDER OF THE ASSESSING OFFICER BE RESTORED OR ALTERNATIVELY THE MATTER BE SET ASIDE TO CIT(A) FOR DEALING WITH THE SPECIFIC CHARGES/REASON S/CONTENTIONS OF THE ASSESSING OFFICER. 9.3 . THE LD.COUNSEL FOR THE ASSESSEE ARGUED THAT THE I SSUES ARE COVERED THROUGH THE JUDGEMENT OF HONBLE DELHI HIGH COURT V IDE ORDER DT. 25.2.2013. HE FURTHER SUBMITTED THAT THE TRIBUNAL, ON APPRECIA TION OF FACTS HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN THE EARLIER AYS. HE SUBMITTED AS FOLLOWS. 6. GROUND NO.6 .REGARDING ADDITION OF RS.23,90,000 /- - PAYMENT TO ASSESSEES WIFE RENU NANDA : THIS ISSUE IS ALSO COVERED BY THE DELHI HIGH COURT ORDER DATED 25.02.2013 FOR AY 2001- 02TO 2003-04. (KINDLY REFER PB PAGE 47-48) THE ADDITION WITH REGARD TO THE PAYMENT MADE TO EST RANGED WIFE SMT. RENU NANDA, FOR THE ASSESSMENT YEAR 2003-04, HAS BEEN DELETED BY TH E TRIBUNAL. THIS IS CHALLENGED BY THE REVENUE IN THE APPEAL PERTAINING TO THE ASSESSM ENT YEAR 2003-04. HOWEVER, WE FIND THAT THE SAME HAS BEEN CONCLUDED BY THE TRIBUN AL PURELY ON AN APPRECIATION OF FACTS. THE TRIBUNAL HAS NOTED THAT THE RESPONDENT/ ASSESSEE AND HIS WIFE SMT. RENU NANDA HAD SEPARATED BY WAY OF A DEED OF SETTLEMENT DATED 04.04.1998 AND THE PAYMENTS WERE BASED THEREON. THE TRIBUNAL ALSO NOT ED THAT THE ADDITION HAS NOT BEEN BASED ON ANY EVIDENCE OR INCRIMINATING MATERIAL IND ICATING THAT ANY PAYMENT HAD BEEN MADE OUTSIDE THE BOOKS. THE TRIBUNAL OBSERVED THAT THE SOLE BASIS FOR THE ASSUMPTION ON THE PART OF THE ASSESSING OFFICER WAS THAT THERE WAS SOME UNWRITTEN UNDERSTANDING BETWEEN THE RESPONDENT/ASSESSEE AND HIS ESTRANGED W IFE SMT. RENU NANDA. THEREFORE, THE TRIBUNAL WAS OF THE VIEW THAT THE PU RPORTED BASIS OF THE ADDITION WAS ONLY PAGE 74 OF 91 A PRESUMPTION RAISED BY THE ASSESSING OFFICER. THE RE BEING NO OTHER MATERIAL WHATSOEVER, THE TRIBUNAL HELD THAT THE ADDITION WAS LIABLE TO BE DELETED AND IT ORDERED ACCORDINGLY. THE TRIBUNAL MADE IT CLEAR THAT THIS GROUND WAS RAISED ONLY IN THE ASSESSMENT YEAR 2003-04. WE ARE OF THE VIEW THAT T HIS IS A PURE FINDING OF FACT AND NO SUBSTANTIAL QUESTION OF LAW ARISES INSOFAR AS THIS ISSUE IS CONCERNED. THE BASIS OF ADDITION MADE DURING THE IMPUGNED ASSE SSMENT YEAR IS ALSO IDENTICAL AND THE APPELLANTS CONTENTION IN RESPECT OF THE SAME A RE AS FOLLOWS : LD AO MADE ADDITION OF RS. 23,90,000/- PAID BY THE APPELLANT TO HIS WIFE FROM HIS NRE / NRO BANK ACCOUNTS, AS INCOME FROM UNDISCLOSED MEANS . THE APPELLANT HAS AN ESTRANGED RELATIONSHIP WITH HI S WIFE MRS. RENU NANDA. VIDE DEED OF SETTLEMENT DATED 04.04.1998, EXPIRING IN 2000; T HE APPELLANT WAS REQUIRED TO SUPPORT HER FINANCIALLY DURING THE CURRENCY OF LEGAL SEPARA TION. THE APPELLANT FOR THE F.Y. 2003- 04 PAID MRS. RENU NANDA A SUM OF RS. 8,10,000/- TOW ARDS THE MAINTENANCE I.E. DAY TO DAY EXPENSES. THE EXPENSES ON ACCOUNT OF GUARDS, S ERVANTS, DRIVER AND OTHER CAPITAL EXPENDITURE WERE MET BY THE APPELLANT FROM HIS ACCO UNT BY WAY OF ACCOUNT PAYEE CHEQUES. THE ASSESSING OFFICER HAS ESTIMATED THAT THE EXPEND ITURE SHOULD HAVE BEEN A TOTAL SUM OF RS. 32 LACS FOR THE YEAR UNDER CONSIDERATION. T HE BASIS OF HIS ESTIMATION IS AS FOLLOWS:- (A) THAT THE APPELLANT PAID RS. 31 LACS AS ANNUAL M AINTENANCE TO HIS WIFE IN THE YEAR 1997-98 AND THEREFORE, WHY WOULD HE NOT PA Y MORE AT LEAST THE SAME AMOUNT 10 YEARS LATER. (B) THE ESTIMATION OF THE PAYMENT THAT WOULD HAVE B EEN MADE TO HIS WIFE IS TO BE BASED ON THE AGREEMENT DATED 11.09.2004 WHEREIN MRS. NANDA WAS TO BE PAID RS. 1 LACS PER MONTH AND RS. 2 LACS FOR DIW ALI. IT IS RESPECTFULLY SUBMITTED THAT THE ADDITION MADE IS ILLEGAL AND DESERVES TO BE SET ASIDE FOR THE FOLLOWING REASONS:- (I) THAT DURING THE COURSE OF SEARCH ON 28.02.2007, NO EVIDENCE WHATSOEVER WAS FOUND TO EVEN REMOTELY SUGGEST THAT ANY PAYMENT OTHER THAN RS. 8,10,000/- BY CHEQUE WAS MADE TO MRS. RENU NANDA BY THE APPELLANT. (II) THE APPELLANT HAS PAID RS. 8,10,000/- BY CHEQU E FOR HER DAY TO DAY EXPENSES WHICH IS MORE THAN ENOUGH CONSIDERING THAT MRS. RENU NANDA IS PAGE 75 OF 91 ALONE IN THE HOUSE PROVIDED BY THE APPELLANT AND AL L THE OTHER FIXED EXPENSES ARE MADE BY THE APPELLANT. (III) NO EXAMINATION OF THE APPELLANT OR MRS. RENU NANDA WAS MADE TO ARRIVE AT THE ESTIMATION. (IV) THE ESTIMATION IS BASED ON THE AGREEMENT DATED 11.09.2004 WHICH IS ONE YEAR PAST F.Y. 2003-04. HOW CAN AN AGREEMENT WHICH IS VALID AFTER 11.09.2004 APPLY TO THE PERIOD 2003-04? (V) THE TERMS OF THE AGREEMENT ARE NOT SACROSANCT. IT MAY BE OBSERVED THAT MUCH HIGHER AMOUNT WAS PAID BY THE APPELLANT TO HIS WIFE IN CERTAIN YEARS. HENCE THE APPELLANT PAID MONEY TO MRS. RENU NANDA A S AND WHEN SHE NEEDED IT AND THEREFORE, NO ESTIMATION CAN BE MADE ON ANY BASIS. (VI) THE ADDITION HAS PURPORTEDLY BEEN MADE U/S 69C OF THE ACT. AS PER THE SAID SECTION, THERE MUST BE EVIDENCE OF EXPENDITURE HAVING BEEN INCURRED OVER AND ABOVE THE SAID AMOUNT. NO SUCH EVIDENCE H AS BEEN FOUND AND THEREFORE, NO ESTIMATION CAN BE RESORTED TO. NEEDL ESS TO ADD THAT THERE IS NO EVIDENCE TO SHOW THAT ANY EXPENDITURE OUTSIDE TH E BOOKS/BANK WAS MADE TO MRS. RENU NANDA. (VII) IN ANY CASE, RENU NANDA HAD SUFFICIENT BANK B ALANCE RETAINED OUT OF THE MONEYS GIVEN BY THE APPELLANT AND EVEN OTHERWISE, R S. 8,10,000/- GIVEN TO HER DURING F.Y. 2003-04 WAS SUFFICIENT TO SUPPOR T HER. IT IS FURTHER SUBMITTED THAT DURING THE SAID YEAR, RENU NANDA WIT HDREW RS.14,40,800/- FROM HER BANK ACCOUNT FOR HER MAINTENANCE WHICH FUR THER SHOW THAT SHE WAS NOT IN NEED OF ANY MORE MONEY FROM THE APPELLAN T. IN VIEW OF THE AFORESAID, IT IS REQUESTED THAT THE ADDITION MADE MAY KINDLY BE DELETED. THE HONOURABLE ITAT IN THE CASE OF THE APPELLANT FO R AY 2001-02 TO AY 2003-04 AT PAGES 47 TO 48, HAVE DELETING THE SIMILAR ADDITION STATING THAT THE ADDITION HAS BEEN MADE ON PRESUMPTIONS. THE RELEVANT TEXT OF THE ORDE R DATED 24.07.2012 CITED AT PARA 12 IS BEING REPRODUCED BELOW FOR THE CONVENIENCE OF YO UR HONOUR: APROPOS THE ADDITION IN RESPECT OF THE ESTRANGED W IFE SMT. RENU NANDA, WE ARE UNABLE TO UPHOLD THIS ADDITION INASMUCH AS BOTH WERE SEPARATED BY WAY OF DEED OF SETTLEMENT DATED 4-4-1998 AND THE PAYMENTS BASED TH EREON ON WERE ALREADY MADE. THE ADDITION HAS BEEN MADE NOT BASED ON ANY EVIDENC E OR INCRIMINATING MATERIAL, PAGE 76 OF 91 INDICATING THAT ANY PAYMENT WAS MADE OUT OF BOOKS. THE SOLE BASIS OF ADDITION IS AN ASSUMPTION THAT THERE WAS SOME UNWRITTEN UNDERSTAND ING BETWEEN THE ASSESSEE AND HIS ESTRANGED WIFE SMT. RENU NANDA. THEREFORE, IT H AS BEEN ASSUMED THAT LESSER AMOUNT FOR SUPPORT WAS PAID BY THE ASSESSEE AS COMP ARED TO EARLIER YEARS. IN OUR CONSIDERED VIEW THE BASIS OF ADDITION BEING ONLY ON PRESUMPTIONS, THERE BEING NO MATERIAL WHAT SO EVER, THE ADDITION IS DELETED. WE FIND MERIT IN THE ARGUMENT OF LD. COUNSEL THAT WITH ESTRANGED RELATIONS ON RECORD SUC H PRESUMPTION IS BASELESS. THIS GROUND OF ASSESSEE RAISED IN A.Y. 2003-04 IS DE LETED. SIMILAR BASIS HAS BEEN ADOPTED BY THE AO WHILE MAKI NG THE ADDITION ON THE ISSUE IN AY 2004-05. IN VIEW OF THE FACTS AND THE DECISION OF T HE ITAT, ADDITION OF RS. 23,90,000/- ON ACCOUNT OF MONEY PAID BY APPELLANT TO HIS WIFE FROM HIS BANK ACCOUNT DESERVES TO BE DELETED. 9.4. ON CAREFUL CONSIDERATION OF RIVAL SUBMISSIONS, WE FIND THAT ON THE VERY SAME SET OF FACTS, THE COORDINATE BENCH OF THE TRIBUNAL HAD DELETED THE ADDITION ON THE GROUND THAT THE SOLE BASIS OF THE A DDITION IS PRESUMPTION AND ASSUMPTION. THE HONBLE DELHI HIGH COURT HAD UPHEL D THIS FINDING. AS CLAIMED BY THE LD. DEPARTMENTAL REPRESENTATIVE THERE IS NO EVIDENCE FOUND DURING THE SEARCH. ONLY ON ESTIMATES WAS MADE WHICH IS NOT BAS ED ON ANY EVIDENCE. THUS, WE UPHOLD THE ORDER OF THE FIRST APPELLATE AUTHORIT Y AND DISMISS GROUND NO.6 OF REVENUE. IN THE RESULT THE APPEAL OF THE REVENUE FOR A. Y. 2004-05 IS LATER DISMISSED. 10. WE NOW TAKE UP REVENUES APPEAL FOR THE ASSESSMEN T YEAR 2005- 06 IN ITA NO.2605/DEL/2013. 1. THE ORDER OF THE LD.COMMISSIONER OF INCOME TAX (APPEALS) IS NOT CORRECT IN LAW AND FACTS. PAGE 77 OF 91 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE ADD ITION OF RS.21,34,501/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INVESTMENT M ADE BY ASSESSEE IN RENOVATION OF SONALI FARMS FROM HIS OVERSEAS BANK A CCOUNTS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE ADD ITION OF RS.41,88,22,533/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF COMMISS ION INCOME EARNED ON DEFENCE DEALS. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD.COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE ADD ITION OF RS.140,02,18,500/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLA INED INVESTMENTS MADE BY ASSESSEE IN M/S CLARIDGES HOTESL P.LTD. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD.COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE ADD ITION OF RS.49,00,45,853/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLA INED INVESTMENTS MADE BY ASSESSEE IN M/S CLARIDGES HOTESL P.LTD 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD.COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE ADD ITION OF RS.8,72,40,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLA INED DEPOSITS WITH DEUTSCHE BANK, SINGAPORE. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE ADD ITION OF RS.21,81,00,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTERIM DIVIDEND DECLARED BY UBS TRADING FZC, DUBAI ACCRUED TO THE ASSESSEE. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN HOLDING THE ASSES SEE TO BE A NON-RESIDENT FOR THE YEAR UNDER CONSIDERATION WITHOUT APPRECIATING T HE FACT THAT EXPLANATION (B) OF S. 6(1)(C ) WAS NOT APPLICATION TO ASSESSEE. 9. THE APPELLANT CRAVES LEAVE TO ADD, AMEND ANY/AL L THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HEARING OF THE APPEA L. 11. FOR THE ASSESSMENT YEAR 2005-06 GROUND NOS. 1 AND 9 ARE GENERAL IN NATURE. PAGE 78 OF 91 12. GROUND NO.2 IS ON THE ADDITION MADE ON ACCOUNT OF INVESTMENTS MADE BY THE ASSESSEE IN THE RENOVATION OF SONALI FA RMS FROM HIS OVERSEAS BANK ACCOUNT PERTAINING TO ASSESSMENT YEAR 2005-06 AND 2 006-07. 12.1. THE LD.D.R. REFERRED TO PARA 13 OF THE ORDER OF THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 2005-06 AND BASED I S ARGUMENTS ON DOCUMENT IN ANNEXURE A-10, WHICH LISTED OUT AT PARA 13.1 OF ASSESSING OFFICERS ORDER. THE ASSESSING OFFICER ARRIVED AT TOTAL PAYMENTS OF US DOLLARS 48934. THE LD.DR SUBMITTED THAT IN THE ABSENCE OF ANY EXPLANAT ION GIVEN BY THE ASSESSEE AS TO THE SOURCE OF FUNDS INTO THERE OVERSEAS BANK ACCOUNT THIS AMOUNT HAS BEEN ADDED. HIS FURTHER SUBMISSIONS ARE AT PARA G OF HIS SUBMISSIONS, WHEREIN HE STATES AS FOLLOWS: (G) ISSUE OF RENOVATION OF SONALI FARM FROM OVERSE AS BANK A/C:- (1) THIS ISSUE IS RELEVANT TO ASSESSMENT YEAR 2005-06 AND 2006-07. I N ASSESSMENT YEAR 2005- 06 (PARA 13), THE ASSESSING OFFICER HAD MADE ADDITI ON OF RS.21.34 LACS. ASSESSING OFFICER HAS DISCUSSED THE RELEVANT ANNEXU RE A-2(PAGES 35-37) WHICH REVEALED ENGAGEMENT OF VARIOUS CONSULTANTS FROM ABR OAD FOR RENOVATION OF SONALI FARM WHICH DOCUMENTS WERE BEING TERMED AS MERE ROUG H ESTIMATES. ON FAILURE OF THE ASSESSEE TO FURNISH THE DETAILS OF THE FOREI GN BANK ACCOUNTS FROM WHICH THESE PAYMENTS WERE MADE, THE ASSESSING OFFICER, TR EATED THE PAYMENTS AS UNEXPLAINED. (2) CIT(A) IGNORING THE SPECIFIC NON COMPLIANCE OF THE ASSESSEE WHICH ONLY PROMPTED THE ASSESSING OFFICER TO MAKE THE ADDITION , AS SEEN ;FROM HIS ORDER (E.G. PARA 9.2 OF HIS ORDER) DELETED THE ADDITION S OLELY PLACING RELIANCE ON THE ITAT ORDER DT. 24.7.2012 (ITA 1428, 1429 AND 1430 OF 201 2) HOLDING THAT IF THE AMOUNT REPRESENTS THE INCOME OF THE APPELLANT, IT C ANNOT BE BROUGHT TO TAX AS PAGE 79 OF 91 INCOME IN HIS HANDS UNLESS IT IS PROVED THAT INCOME ACCRUED TO HIM IN INDIA. CIT(A) OUGHT NOT TO HAVE IGNORED ASSESSEES NON-COM PLIANCE AND NON DISCHARGE OF THE BURDEN QUA THE DOCUMENTS WHICH WERE IN ASSES SEES OWN HAND WRITING AND WERE FOUND FROM ASSESSEES OWN CUSTODY. 12.2. THE LD.COMMISSIONER OF INCOME TAX (APPEALS) GRANT ED RELIEF TO THE ASSESSEE BY OBSERVING AS FOLLOWS. 9.2. I HAVE CONSIDERED THE ASSESSMENT ORDER, THE O RDER OF THE HONBLE ITAT, DELHI DT. 24.7.2012 IN ITA NOS. 1428, 1429 AND 1430 /DEL/2012 AND SUBMISSIONS OF THE LD.A.R. THIS GROUND WAS NOT THE RE IN ITA NOS. 1428, 1429 AND 1430/DEL/2012. THE STATUS OF THE APPELLANT IS HELD AS NON-RESIDENT AT PARA 4.2 ABOVE. ACCORDINGLY EVEN IF THE AMOUNT REP RESENTS THE INCOME OF THE APPELLANT, IT CANNOT BE BROUGHT TO TAX AS INCOME IN HIS HANDS UNLESS IT IS PROVED THAT THE INCOME ACCRUED TO HIM IN INDIA, AS HELD BY HONBLE ITAT VIDE PARA 8.3 OF ITS ORDER DT. 24.7.2012. IT HAS BEEN HELD BY THE HONBLE SUPREME COURT IN UNOI VS. KAMLAKSHI FINANCE CORP.LTD. (AIR 1992 SC 711) A ND KHALID AUTOMOBILES VS. UOI (4 SCC SUPPL. 653) THAT THE DECISIONS OF THE JU RISDICTIONAL HIGH COURT AND THE TRIBUNAL ARE BINDING ON THE INCOME TAX AUTHORIT IES WITHOUT ANY RESERVATION. ACCORDINGLY, THE DECISION OF THE HONBLE ITAT IS AP PLIED TO THE PRESENT ASSESSMENT YEAR, SUPERSEDES THE EARLIER DECISION OF CIT(A) ON THIS GROUND, THE EARLIER ORDER OF CIT(A) MERGES WITH THE SUBSEQUENT ORDER OF ITAT, WHICH HAS BECOME BINDING ON THE APPELLATE AUTHORITY. CONSEQU ENTLY, THE GROUND OF APPEAL IS ALLOWED. APPELLANT GETS RELIEF OF RS.21,34,501/ -. 12.3. THE LD.COUNSEL SUPPORTED THE ORDER OF LD.CIT(A) A ND SUBMITTED THAT THE ASSESSING OFFICER MADE THE ADDITION ON THE SOLE GROUND THAT THE ASSESSEE IS A RESIDENT. HE POINTED OUT THAT ALL TH E CREDITS IN THE SINGAPORE BANK ACCOUNT HAVE ALREADY BEEN ADDED AS UNEXPLAINED INCOME U/S 68 OF THE PAGE 80 OF 91 ACT AND ONCE AGAIN THE DEBITS BY WAY OF EXPENDITURE ON SONALI FARMS, IS ALSO ADDED THUS MAKING IT A CASE OF DOUBLE ADDITION. 12.4. AFTER HEARING RIVAL CONTENTIONS, WE ARE OF THE CON SIDERED OPINION THAT THE ORDER OF THE LD.COMMISSIONER OF INCOME TAX (APPEALS) HAS TO BE UPHELD IN VIEW OF THE OBSERVATIONS AT PARA 13 OF TH E HONBLE HIGH COURTS ORDER IN THE ASSESSEES OWN CASE DT. 25.2.2013. WE HAVE ALREADY HELD WHILE DISPOSING OFF GROUND NO.7 FOR THE ASSESSMENT YEAR 2 004-05 THAT THE CREDITS IN THE BANK ACCOUNT AT SINGAPORE HELD BY THE ASSESSEE IN DEUTSCHE BANK CANNOT BE ADDED. CONSEQUENTLY THE DEBITS FROM THE VERY BA NK ACCOUNT WHICH WAS USED FOR INVESTMENTS IN SONALI FARMS CANNOT BE ADDE D. IN THE RESULT GROUND NO.2 OF THE REVENUE IS DISMISSED. 13. GROUND NO.3 IS ON THE ISSUE OF ADDITION E OF RS.4 1,88,22,533/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ALLEGED COMMISSION INCOME EARNED BY THE ASSESSEE ON DEFENCE DEALS. THE VERY SAME IS SUE HAS BEEN ADJUDICATED BY US IN THE ASSESSMENT YEAR 2004-05 VIDE GROUND NO .2 AT PARAS 6.3 TO 6.8 AT PAGES 32 TO 36. THE GROUNDS FOR MADE IN THE ADDITI ON AND THE FACTS OF THE CASE BEING THE SAME, FOR THE REASONS GIVEN THEREIN, AND CONSISTENT WITH THE VIEW TAKEN THEREIN WE UPHOLD THE ORDER OF THE LD.COMMISS IONER OF INCOME TAX (APPEALS). 14. GROUND NOS. 4 AND 5 ARE ON THE ISSUES OF ADDIT IONS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED INVESTM ENTS MADE BY ASSESSEE IN PAGE 81 OF 91 M/S CLARIDGES HOTELS P.LTD. THIS ISSUE HAS BEEN AD JUDICATED BY US IN THE ASSESSMENT YEAR 2004-05. WHILE ADJUDICATING GROUND NOS. 3AND 4 FOR THE A. Y. 2004-05 AT PARAS 7 TO 7.5 FROM PAGES 36 TO 62 ABOVE WE HAVE CONSIDERED THE FACTS AND EVIDENCES AND UPHELD THE ORDER OF THE LD. CIT (A). CONSISTENT WITH THE VIEW TAKEN THEREIN, AND FOR THE VERY REASONS WE UPHOLD THE ORDER OF THE LD.COMMISSIONER OF INCOME TAX (APPEALS) AND DISMISS GROUND NOS. 4 AND 5 OF THE REVENUE. 15. GROUND NO.6 IS ON THE ADDITION MADE ON ACCOUNT OF UNEXPLAINED DEPOSITS WITH DEUTSCHE BANK, SINGAPORE. THE VERY S AME ISSUE HAS BEEN ADJUDICATED BY US IN ASSESSMENT YEAR 2004-05 WHILE DECIDING GROUND NO.5 AT PARAS 8 TO 8.3 PAGES 63 TO 64 ABOVE. FOR THE VERY S AME REASONS, AS THE FACTS ARE IDENTICAL AND CONSISTENT WITH THE VIEW TAKEN TH EREIN, WE UPHOLD THE ORDER OF LD.COMMISSIONER OF INCOME TAX (APPELAS) AND DISM ISS GROUND NO.6 OF THE REVENUE. 16. GROUND NO.7 FOR THE ASSESSMENT YEAR 2005-06 IS AN ADDITION MADE ON DIVIDEND EARNED BY THE ASSESSEE ON SHARES HELD IN M /S UBS TRADING FZC, DUBAI. THE LD.D.R. REFERRED TO PARA 12.1 AND 12.2 OF THE ORDER OF THE ASSESSING OFFICER AND ALSO RELIED ON THE SEIZED DOC UMENTS ANNEXURE A-8 WHICH IS DISMISSED AT PARA 12 OF PAGE 12 OF THE ASSESSMEN T ORDER. HE SUBMITTED THAT THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS A NON RESIDENT PAGE 82 OF 91 AND THE INTERIM DIVIDEND EARNED BY THE, NON RESIDEN T COUNTRY ABROAD, DOES NOT FALL WITHIN THE SCOPE OF SECTION 5 OF THE ACT. 17. AFTER HEARING RIVAL CONTENTIONS, IN CONSEQUENCE TO OUR FINDING THAT THE ASSESSEE IS A NON-RESIDENT AND AS IT IS UNDISPUTED THAT UBS TRADING FZC DUBAI IS A FOREIGN COMPANY AND THE ASSESSEE EARNED DIVIDEND FROM THE SAME OUTSIDE INDIA, THE DIVIDEND IN QUESTION CANNOT BE B ROUGHT TO TAX IN INDIA AS HELD BY THE HONBLE HIGH COURT VIDE PARA 13 OF THE ORDER DT. 25.2.2013. IN THE RESULT THIS GROUND OF THE REVENUE IS DISMISSED. GROUND NO.8 IS ON THE ISSUE OF RESIDENTIAL STATUS O F THE ASSESSEE. WE HAVE ADJUDICATED THIS ISSUE IN THE A. Y. 2004-05. RESPEC TFULLY FOLLOWING THE JUDGMENT OF THE HONBLE DELHI HIGH COURT ON THIS IS SUE WE DISMISS THIS FINDING OF REVENUE. 18. IN THE RESULT THIS APPEAL OF THE REVENUE FOR A. Y. 2005-06 IS DISMISSED. 19. ITA NO.2601/DEL/2013 IN REVENUE APPEAL FOR THE ASSE SSMENT YEAR 2006-07 , THE GROUNDS ARE AS FOLLOWS: 1. THE ORDER OF THE LD. CIT (A) IS NOT CORRECT IN LAW AND FACTS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT (A) HAS ERRED IN RESTRICTING THE ADDITION TO RS.2,66,31,299/- AND ALLOWING A REL IEF OF RS.2,82,34,008/- ON ACCOUNT OF UNDISCLOSED INVESTMENT MADE BY ASSESSEE IN SONALI F ARMS FROM HIS UNDISCLOSED SOURCES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION TO RS.7,44,07,498/- ON ACCOUNT OF UNDI SCLOSED INVESTMENT MADE BY ASSESSEE IN RENOVATION OF SONALI FARMS IN THE FORM OF PAYMENT T O THE OVERSEAS CONTRACTORS FROM HIS OVERSEAS BANK ACCOUNTS. PAGE 83 OF 91 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION TO RS.25,79,27,065/- MADE BY ASSESSING OFFICER ON ACCOUNT OF COMMISSION INCOME EARNED BY ASSESSEE AGAINST CONTRACTS IN DEFENCE DEA LS. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION TO RS.44,16,86,000/- MADE BY ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED INVESTMENTS MADE BY ASSESSEE IN M/S CLARIDGES HOTEL S (PVT.) LTD. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION TO RS.23,43,64,000/- MADE BY ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED INVESTMENTS MADE BY ASSESSEE IN M/S CLARIDGES HOTEL S (PVT.) LTD. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION TO RS.14,10,54,263/- MADE BY ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED DEPOSITS WITH DEUTSCHE BANK SINGAPORE. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION TO RS.16,64,133/- MADE BY ASSESSING OF FICER ON ACCOUNT OF PAYMENT MADE TO ASSESSEES WIFE, SMT. RENU NANDA OUT OF UNDISCLOSED SOURCES TOWARDS HER MAINTENANCE EXPENSES. 9. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION TO RS.20,01,60,000/- ON ACCOUNT OF INT ERIM DIVIDEND DECLARED BY UBS TRADING FZC, DUBAI ACCRUED TO THE ASSESSEE. 10. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT (A) HAS ERRED IN HOLDING THE ASSESSEE TO BE A NON-RESIDENT FOR THE YEAR UNDER CO NSIDERATION WITHOUT APPRECIATING THE FACT THAT EXPLANATION (B) OF SECTION 6(1) (C) WAS NOT AP PLICATION TO ASSESSEE. 11. THE APPELLANT CRAVES LEAVE TO ADD, AMEND ANY/ ALL THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL. AFTER HEARING A RIVAL CONTENTIONS AND PERUSING THE PAPERS ON RECORD WE HOLD AS FOLLOWS: GROUND NO.1 IS GENERAL IN NATURE. GROUND NO.2 AND 3 OR IN THE ISSUE OF UNDISCLOSED IN VESTMENTS MADE BY THE ASSESSEE IN SONALI FARMS. THIS ISSUE WAS PARTLY CONSIDERED BY US BY AD JUDICATING GROUND NO.2 FOR THE ASSESSMENT PAGE 84 OF 91 YEAR 2005-06 AS THE FACTS ARE THE SAME, FOR THE REA SONS GIVEN AT PARA 12.4 OF THESE ORDER WE UPHOLD THE ORDER OF THE FIRST APPELLATE AUTHORITY. AT THIS JUNCTURE, WE OBSERVE THAT THE ASSESSEE HAS FILED A CROSS APPEALS ON THE VERY SAME ISSUE. W E WOULD BE DEALING WITH THE SAME IN THE LATTER PART OF THIS ORDER. IN THE RESULT, GROUND NO.2 AND 3 ARE DISMISSED. GROUND NO.4 IS AN ADDITION MADE ON THE GROUND THAT THE ASSESSEE HAS EARNED COMMISSION INCOME. THE VERY SAME ISSUE, BASED ON THE VERY SAME FACTS AND EVIDENCES WAS CONSIDERED BY US AT PARA 6.3 TO PARA 6.8 OF THIS ORDER, WHILE DISPOS ING OFF GROUND NO.2 OF THE REVENUE APPEAL FOR THE ASSESSMENT YEAR-2004-05. CONSISTENT WITH THE VI EW TAKEN THEREIN, WE UPHOLD THE ORDER OF THE LD. CIT (A) AND DISMISSED THE GROUND NO.4 OF TH E ASSESSEE. GROUND NO.5 AND 6 RELATE TO AN ADDITION MADE ON TH E GROUND THAT THE ASSESSEE HAS MADE CERTAIN UNEXPLAINED INVESTMENTS IN M/S CLARIDG ES HOTEL PVT. LTD. THIS ISSUE IS SIMILAR ON FACTS TO THE ADDITION MADE IN THE ASSESSMENT YEAR 2 004-05. WE HAVE DEALT WITH THIS ISSUE AS GROUND NO. 3 FOR THE ASSESSMENT YEAR 2004-05 AT PAR A 7.3 TO PARA7.5 OF THIS ORDER. CONSISTENT WITH THE VIEW TAKEN THEREIN, WE UPHOLD THE ORDER OF THE FIRST APPELLATE AUTHORITY AND DISMISS THIS GROUND OF THE REVENUE. GROUND NO.7 RELATES TO AN ADDITION MADE ON THE GRO UND THAT THE ASSESSEE HAD UNEXPLAINED DEPOSITS WITH DEUTSCHE BANK, SINGAPORE. THE VERY SAME ISSUE WAS DEALT BY US AS GROUND NO.5, WHILE ADJUDICATING THE APPEAL FOR THE ASSESSMENT YEAR 2004-05, AT PARA 8.3, WE APPLIED THE JUDGMENT OF THE JURISDICTIONAL HIGH COU RT AND DISMISSED THE GROUND OF REVENUE. PAGE 85 OF 91 CONSISTENT VIEW TAKEN THEREIN, WE UPHOLD THE ORDER OF THE LD. CIT (A) AND DISMISSED GROUND NO.7 OF THE REVENUE. GROUND NO.8 IS AN ADDITION ON THE GROUND THAT THE ASSESSEE WOULD HAVE MADE CERTAIN PAYMENTS TO HIS FORMER WIFE SMT. RENU NANDA ON AN E STIMATE BASIS. SIMILAR ISSUE WAS DEALT BY US, WHILE DISPOSING GROUND NO.6 FOR THE ASSESSMENT YEAR 2004-05. AS THE BASIS OF THE ADDITION REMAINS THE SAME FOR ALL THE ASSESSMENT YEARS, CONS ISTENT WITH THE VIEW TAKEN THEREIN, WE UPHOLD THE ORDER OF THE FIRST APPELLATE AUTHORITY A ND DISMISS GROUND NO.8 OF THE REVENUE. GROUND NO.9 IS IN THE ISSUE OF ADDITION ON ACCOUNT OF INTERIM DIVIDEND DECLARED BY UBS TRADUBG FZC DUBAI. SIMILAR ISSUE WAS CONSIDERED BY US, WHILE DISPOSING OF THE APPEAL FOR THE ASSESSMENT YEAR 2005-06 AS GROUND NO.7 AT PARAZ 16 OF THIS ORDER. WE HAVE DEALT WITH THE ISSUE. CONSISTENT WITH THE VIEW TAKEN THEREIN, AS THE ASSE SSING OFFICER HAS NOT DEMONSTRATED THAT THE INCOME IN QUESTION BY WAY OF DIVIDEND HAS ACCRUED O R HAS ARISEN IN INDIA. WE DISMISS THIS GROUND OF APPEAL. GROUND NO.10 IS ON THE ISSUE OF RESIDENTIAL STATUS . RESPECTFULLY FOLLOWING THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE ASSESSEES OWN CASE ON THE VERY SAME ISSUE, WE UPHOLD THE ORDER OF THE LD. CIT (A) AND DISMISS THIS GROUN D OF REVENUE. IN THE RESULT THE APPEAL OF THE REVENUE FOR THE ASS ESSMENT YEAR 2006-07 IS HEREBY DISMISSED. 20. ITA NO. 2236/ DEL/ 2013 IS FILED BY THE ASSESSE E FOR THE A. Y. 2006-07 GROUND1, 2 AND 5 ARE GENERAL IN NATURE. GROUND NO. 2 THE CROSS APPEAL IS ON ADDITION MADE F OR ASSESSMENT YEAR 2006- 07 AS UNDISCLOSED INVESTMENTS IN SONALI FARMS FROM UNDISCLOSED SOURCES. THIS PAGE 86 OF 91 IS ONLY ISSUE. THE ASSESSING OFFICER CONSIDERED THE ISSUE AT PARA 8 ONWARDS. THE GROUNDS FOR ADDITION AS PER THE ASSESSING OFFIC ER IS THAT THERE WERE 3 RUNNING ACCOUNT BILLS ISSUED BY JAYANT K FURNISHERS , FOR WORK DONE AT SONALI FARMS WHICH REFLECTS THE PAYMENT MADE OF RS.3722405 6/- AND WHEREAS A SECOND SET OF RUNNING ACCOUNT BILLS HAVING THE SAME DATE AND THE SAME NUMBER, REFLECTED PAYMENTS OF RS.1,24,20,071/-. TH E DIFFERENCE BETWEEN THESE TWO SETS OF RUNNING ACCOUNT BILLS WHEREIN THE DATE AND NUMBER ARE IDENTICAL, WAS ADDED ON THE GROUND THAT THESE ARE UNEXPLAINED INVESTMENTS MADE IN CASH. THE ASSESSING OFFICER FURTHER HELD THAT AS P ER THE DOCUMENTS RETAINED. THE TOTAL VALUE OF CONTRACT WITH M/S JAYANT K FURNI SHERS WAS STATED TO BE A SUM OF RS.105765307/- AND WHEREAS THE ASSESSEE CLAI MS THE VALUE OF THE CONTRACT IS RS.5,09,00,000/-. THE DIFFERENCE IN VA LUE TO THE TUNE OF 5,48,65,037/- WAS ADDED. ON APPEAL THE FIRST APPEL LATE AUTHORITY CONSIDERED THE CONTENTIONS OF THE ASSESSEE AND GRANTED PART RE LIEF. HE TOOK THE TOTAL CONTRACT VALUE WITH M/S JAYANT K FURNISHERS AT RS.1 05765307/- AND AFTER DEDUCTING THE TOTAL PAYMENTS MADE TO THE TUNE OF RS .7934008/- HAD SUSTAINED AN ADDITION TO THE TUNE OF RS.26631299/-. BOTH THE ASSESSEE AND THE REVENUE ARE IN APPEAL. THE LD.D.R. RELIED ON THE ORDER OF THE ASSESSING OFFICER AND POINTED OUT THAT THE ADDITION WAS BASED ON CERTAIN SEIZED MATERIAL WHICH IS ANALYSED IN DETAIL AT PARA 8 OF HIS ORDER. THE LD. COUNSEL FOR THE ASSESSEE MADE DETAILED SUBMISSIONS: 1) THAT THE RUNNING ACCOUNT BILLS RAISED BY THE CONTRA CTOR WERE SCRUTINIZED BY THE ASSESSEE OR HIS APPOINTED EXPERT S AND AFTER PAGE 87 OF 91 DISALLOWING MANY OF THE CLAIMS, FOR THE APPROVED AM OUNT, AFRESH R. A. BILLS WAS RAISED, BY THE CONTRACTORS. 2) THERE IS NO EVIDENCE OF ANY PAYMENTS IN CASH OR OTH ERWISE OVER AND ABOVE THE APPROVED AND PASSED BILLS. 3) THAT THE CONTRACT VALUE IS RS.5,09,00,000/- AS PER THE AGREEMENT AND THER IS NO BASIS FOR THE CONTRACT VAL UE OF RS.10,57,65,307/- ARRIVED. 21. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE SUM AND SUBSTANCE OF THE ASSESSEES SUBMISSIONS ARE THAT THE FACTS WERE PLACED BEFORE THE ASSESSING OFFICER IN LETTERS DT. 30.11.09, 14.12.09 AND 25.12 .09 WHICH WAS NOT CONSIDERED. HE SUBMITS THAT ORIGINAL RUNNING ACCOU NT BILLS WHICH WERE SUBMITTED HAVE CRYSTALLIZED ONLY AFTER DISALLOWING THE PART OF THE CLAIMS. THE SCALED DOWN AMOUNT WAS PAID. 21.1 HIS CASE IS THAT, THERE IS NO EVIDENCE WHATSOE VER THAT THE TOTAL CONTRACT VALUE OF RS.10.57 LAKHS EXCEPT A ROUGH NOTE. ON P ERUSAL OF THESE CONTENTIONS, WE ARE OF THE CONSIDERED OPINION THAT ANY ADDITION U/S 69 C CAN BE MADE ONLY IF EVIDENCE IS FOUND OF THE ASSESSEE HAVING INCURRE D EXPENDITURE, OVER AND ABOVE THAT WHICH IS RECORDED IN THE BOOKS OF ACCOUN TS OR ABOVE WHAT HAS BEEN DECLARED AND EXPLAINED. THE ASSESSING OFFICER HAD REFERRED THE MATTER OF INVESTMENT ESTIMATION TO THE REGISTERED VALUER. TH E ASSESSMENT WAS COMPLETED BY THE ASSESSING OFFICER PRIOR TO THE REPORT OF THE REGISTERED VALUER. PAGE 88 OF 91 21.2 AS NO EVIDENCE HAS BEEN FOUND DURING THE COURS E OF SEARCH POINTING OUT TO A FACT THAT EXPENDITURE HAS BEEN INCURRED OVER A ND ABOVE THE APPROVED BILLS NO ADDITION CAN BE MADE U/S 69C OF THE ACT. IT IS S TATED AT THE BAR THAT THE VALUE ARRIVED AT BY THE REGISTERED VALUER IS NOT I N VARIANCE WITH THE EXPENDITURE INCURRED AND DECLARED BY THE ASSESSEE. UNDER THE CIRCUMSTANCES THE ADDITIONAL QUESTION CANNOT BE SUSTAINED FOR THE REASON THAT NO EVIDENCE WHATSOEVER IS AVAILABLE WITH THE REVENUE TO SUBSTAN TIATE THE ADDITION. IN ANY EVENT AS THE VALUATION REPORT HAS TO BE LOOKED INTO , WE REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR THE LIMITED PURPO SE OF VERIFICATION. 21.3 IN THE RESULT THIS APPEAL OF THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES. 22 WE NOW TAKE UP ASSESSEES CROSS OBJECTIONS. CROSS OBJECTION NO. 165/DEL/2013(IN ITA NO.2605/DEL /2013), A. Y. 2005-06 AND CROSS OBJECTION NO.166/DEL/2013 ( IN ITA NO.2606/DE L/2013) A. Y. 2005-06 22.1 THE ASSESSEE FILED CO NO. 165/DE/2013 IN ITA 2 605/DEL/2013 FOR THE A. Y. 2005-06 AND ALSO CO.NO.166/DEL/2013 IN ITA 2606/ DEL/2013 FOR THE A. Y. 2006-07 TAKING THE FOLLOWING GROUNDS. 1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT (A) HAS ERRED IN HOLDING THE PROCEEDING U/S 153A/ 1 43(3) OF THE INCOME TAX ACT, 1961 CANNOT BE HELD TO BE VITIATED SPECIALLY W HEN NO MATERIAL MUCH LESS PAGE 89 OF 91 INCRIMINATING MATERIAL WAS FOUND OR SEIZED DURING T HE COURSE OF SEARCH CONDUCTED ON 28.02.2007 AND NO ASSESSMENT OR REASSE SSMENT WAS PENDING AS SON THE DATE OF INITIATION OF SEARCH WHICH COULD HA VE ABATED IN TERMS OF SECOND PROVISO TO SECTION 153(1) OF THE INCOME TAX ACT,196 1. 2. WITHOUT PREJUDICE TO THE ABOVE, THE SEARCH U/S 1 32 HAVING BEEN CONCLUDED ON 28.02.2007, THE ASSESSMENT MADE ON 30. 12.2009 IS BARRED BY LIMITATION AND HENCE, THE LD. CIT (A) OUGHT TO HAVE CANCELLED THE ASSESSMSENT IN VIEW OF THE ABOVE OF THE JUDGMENT OF HONBLE HIG H COURT IN THE CASE OF C. RAMAIAH REDDY VS. CIT (2011)61DTR(KAR.) 82. 3. THAT WHILE DELETING THE AZDDTIONS NAMELY (I) RS. 104,68,35,904/- REPRESENTING INVESTMENT OF UBS LTD. MAURITIUS IN TH REE INDIAN COMPANIES AND (II)RS.34,60,000/- BEING SHARE CAPITAL INVESTED BY PALM TECHNOLOGY. MAURITIUS IN TSUNAMI TECHNOLOGIES P. LTD. (NOW KNOW N AS CLARIDGES SEZ P. LTD.), THE LD. CIT (A) IN PARS 3.7 AND 8.3 OF HIS O RDER HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO PURSUE THE REFERENCE TO M AURITIUS THROUGH FT & TR DIVISION OF CBDT AZND ANY FURTHER INVESTIGATION THA T MAY BE REQUIRED TO ASCERTAIN THE TRUTH. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE ADDITION OF RS.25,48,12,645/- MADE SON THE BASIS OF CERTAIN DOC UMENTS RECOVERED BY DELHI POLICE FROM THE POSSESSION OF DR. M. V. RAO O UGHT TO HAVE BEEN DELETED ON SUBSTANTIVE BASIS INSTEAD OF DELETING THE ADDITI ON FOR STATISTICAL PURPOSE DIRECTING THE ASSESSING OFFICER TO FOLLOW THE ITAT S ORDER DT.24.07.2012 WHEREIN SIMILAR ADDITION MADE FOR A. Y. 2001-02.200 2-03 AND 2003-04 WAS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR D ECIDING THE ISSUE AFRESH. 5. THE LD. CIT (A) HAS EXCEEDED HIS JURISDICTION BY SETTING ASIDE THE MATTER AND DIRECTING MAKING OF REFERENCES TO THE AUTHORITI ES ABROAD. 6. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS BY NOT APPRECIATING THE FACT THAT NO ADDITION TO INCOME CAN BE SUSTAINED IN THE HANDS OF THE APPELLANT ON THE BASIS OF DOCUMENTS FOUND IN THE PREMISES OF DR. M. V. RAO. 7. THAT THE ASSESSEE CRAVES LEAVE TO ADD, ALTER OR AMEND ANY GROUND OF CO ON OR AT THE TIME OF HEARING OF THE APPEAL. 22.2 GROUND NOS.1 & 2 ARE DISMISSED AS NOT PRESSED . THE ASSESSEE HAD RAISED GROUNDS NO.5 THAT THE LD. CIT (A) HAS NO POW ER TO SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR FRE SH ADJUDICATION. THE LD. DEPARTMENTAL REPRESENTATIVE DOES NOT DISPUTE THIS L EGAL POSITION. UNDER PAGE 90 OF 91 THESE CIRCUMSTANCES THIS CROSS OBJECTION I.E. GROUN D NO.5 WHICH IS RELATABLE TO THE POWERS OF THE FIRST APPELLATE AUTH ORITY HAVE TO THE ALLOWED. THE CIT (A) DOES NOT HAVE THE POWER TO SET-ASIDE AN Y MATTER OR ISSUE TO THE ASSESSING OFFICER. 22.3 THE GROUND NO.3, 4, AND 6 IS AGAINST THE DIREC TION GIVEN BY THE LD. CIT (A) ON THE ISSUE OF INVESTMENTS MADE BY M/S UBS , MAURITIUS IN THREE COMPANIES M/S SHANTIDEEP HOTELS P. LTD. AND M/S SHA NTDI FOODS P. LTD. AND PARADIGM HOTELS P. LTD. AND INVESTMENT MADE BY PALAM TECHNOLOGIES MAURITIUS IN TSUNAMI TECHNOLOGY (P) (LTD.) 22.4 WE HAD EARLIER IN PARA 7.4.2 PAGE 64 TO PARA 7 .4.5 PAGE 68 OF THIS ORDER DELT WITH THE ISSUE. ON A QUERY FROM THE BENC H IT WAS SUBMITTED THAT NO CHARGE SHEET WAS FILED BY ANY AGENCY TILL DATE A ND NO MATERIAL IS SUGGESTED OF THE ORDER OF THE ASSESSING OFFICER IS AVAILABLE WITH ANY AGENCY OR GOVT. DEPARTMENT AND THAT THE F. I. RS WERE CLOS ED. BE IT AS IT MAY, WE HAVE ALREADY DEALT WITH THE ISSUE ON MERITS. 22.5 IN VIEW OF OUR DECISION ON MERITS ON ALL THE ISSUE WE HOLD THAT THESE GROUND NEED NOT BE SPECIFICALLY DEALT WITH. T HUS, THESE GROUNDS ARE DISMISSED AS SUCH. IN THE RESULT THE CROSS OBJECTION ARE ALLOWED IN P ART. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST FEBRUARY, 2014. SD/- SD/- PAGE 91 OF 91 (RAJPAL YADAV) (J.SUD HAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE .21 ST FEBRUARY, 2014 *MANGA/S. SINHA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT (A); 5.DR; 6.GUARD FILE BY ORDER ASST. REGISTRAR