Shri Vikram Singh, Banda V. ACIT,Central-1, Bhopal

ITSSA 139/Ind/2020

AI Insights

The case involves a series of appeals by both the revenue and the assessee, Shri Vikram Singh, concerning the assessments made under sections 153A and 143(3) of the Income Tax Act, 1961, for the assessment years 2013-14 to 2016-17. The primary issues revolved around the existence of syndicates formed by the assessee for liquor trading, the undisclosed income derived from these syndicates, and the unexplained capital investments made by the assessee in these syndicates. The CIT(A) had provided substantial relief to the assessee by deleting most of the additions made by the AO, which was contested by the revenue. The Tribunal's decision leaned heavily on the legal interpretation of the provisions applicable to associations of persons (AOP) and the specific circumstances of the case, including the application of the Direct Taxes Vivad Se Vishwas Scheme by the assessee.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 130753 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 14-06-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 21-03-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 12-11-2020
• Other Referred Cases: ITO vs. CH. Atchaiah (1996) 218 ITR 239 (SC)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: WAY OF ANY GROUND
• Keywords: Unexplained investment; Gift; Business income; Rectification of order; Document seized; Maximum Marginal Rate; Additional evidence; Non compliance; Documents seized; TDS
• Section: 154; 143(3); 153A; 40(a)(ia); 142(2A); 13; 22; 153C

Judgement Text

Page 1 of 41 आयकर अपीलीय अिधकरण, इंदौर ायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER IT(SS)A No. 19 to 21/Ind/2021 (Assessment Year: 2013-14, 2014-15 & 2015-16) JCIT (OSD), Central-I, Bhopal बनाम/ Vs. Shri Vikram Singh, Chudi Gali, Atarra, Village – Banda (UP) (Appellant / Revenue) (Respondent / Assessee) IT(SS)A No. 139 to 141/Ind/2020 (Assessment Year: 2013-14, 2014-15 & 2016-17) Shri Vikram Singh, Chudi Gali, Atarra, Village – Banda (UP) बनाम/ Vs. JCIT (OSD), Central-I, Bhopal (Appellant / Assessee) (Respondent / Revenue) PAN: AYLPS4186L Assessee by Shri Sapan Usrethe, Adv & AR Revenue by Shri P.K. Mishra, CIT-DR Date of Hearing 22.03.2023 Date of Pronouncement 15.06.2023 आदेश / O R D E R Per Bench: Feeling aggrieved by appeal-order dated 11.09.2020 passed by learned Commissioner of Income-Tax (Appeals)-3, Bhopal [“Ld. CIT(A)”], which in turn arises out of assessment-order dated 11.08.2018 passed by learned ACIT, Central-1, Bhopal [“Ld. AO”] u/s 153A/143(3) of Income-tax Act, 1961 [“the Act”], the revenue and assessee have come in these cross-appeals for Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 2 of 41 different Assessment-Years [“AY”] ranging from AY 2013-14 to 2016-17. Since all these appeals relate to the same assessee, arise from common- orders of lower-authorities and the issues are also common/ identical; they were heard together and are being disposed of by this consolidated order for the sake of convenience and brevity. 2. Heard the learned Representatives of both sides and case records perused. 3. Registry has informed that the assessee’s appeals are delayed by 3 days and therefore time-barred. In this regard, the assessee has fairly filed a condonation-application explaining the delay being attributable to the locational distance between assessee and his counsels. But at the same time, Ld. AR also prayed that the delay has occurred due to Covid-19 Pandemic. Ld. AR further placed reliance on the order of Hon’ble Supreme Court in Suo Motu Writ Petition (C) No. 3 of 2020 read with Misc. Applications, by which suo motu extension of the limitation-period for filing of appeals w.e.f. 15.03.2020 under all laws has been granted and hence there is no delay in fact. We confronted Ld. DR who agreed to the submission of Ld. AR. In view of this, the appeal is proceeded with for hearing, there being no delay in fact. 4. Briefly stated the facts leading to these appeals are such that the assessee is an individual engaged in the business of liquor trade. A search u/s 132 was conducted upon one “Shivhare group” and the assessee on 07.01.2016, in consequence of which the assessments were framed u/s 153A for preceding six years, namely AY 2010-11 to 2015-16 and u/s 143(3) for search-year, namely AY 2016-17. During assessment-proceeding, a Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 3 of 41 reference was made for special audit u/s 142(2A) of the Act and accordingly, the special auditors submitted their report on 18.06.2018. The report of the special auditors was considered by the AO and also by the CIT(A). Finally, the Ld. AO completed assessments after making certain additions. Aggrieved, the assessee preferred separate appeals for all assessment years under consideration before Ld. CIT(A). While the first-appeal was pending, the AO also passed rectification-order dated 12.11.2018 u/s 154 of the act by which certain apparent mistakes in assessment-order were rectified; therefore the assessee took revised grounds before CIT(A) as mentioned by CIT(A) in Para 1 of appeal-order dated 11.09.2020. Finally, the CIT(A) adjudicated the appeals of assessee thereby giving substantial relief and also confirming certain additions. Now, both sides are in appeals before us assailing the order of CIT(A) for their respective grievances. 5. The grounds raised by parties are as under: Revenue’s IT(SS)A No. 19/Ind/2021 (AY 2013-14): “1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,80,60,503/- made by the AO on account of undisclosed income from liquor trading business. 2. On the fact and in the circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 1,34,900/- made by the AO on account of undisclosed income. 3. On the fact and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 1,57,78,000/- made by the AO on account of undisclosed investment.” Revenue’s IT(SS)A No. 20/Ind/2021 (AY 2014-15): “1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,96,99,389/- made by the AO on account of undisclosed income from liquor trading business.” Revenue’s IT(SS)A No. 21/Ind/2021 (AY 2015-16): “1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 4,93,78,222/- made by the AO on account of undisclosed income from liquor trading business.” Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 4 of 41 Assessee’s IT(SS)A No. 139/Ind/2020 (AY 2013-14), IT(SS)A No. 140/Ind/2020 (AY 2014-15), IT(SS)A No. 141/Ind/2020 (AY: 2016-17): In these three appeals, the Grounds No. 1 to 4 are identical except varying figures of Rs. 28,25,792/-, Rs. 3,37,516/- and Rs. 54,56,490/- respectively in AY 2013-14, 2014-15 and 2015-16 (Extra Ground No. 5 and 6 raised in AY 2016-17 were not pressed at the time of hearing; hence they are treated as withdrawn). Therefore, the ground Nos. 1 to 4 of AY 2013-14 are only re-produced for the sake of brevity: “1. The Ld. CIT(A) was not justified in confirming the addition of Rs. 28,25,792/- made by the ld.AO on account of capital investment in various Syndicates without appreciating that appellant has not invested in these alleged Syndicates and addition was based on wild estimates. 2. The Ld. CIT(A) was not justified in confirming the addition of Rs. 28,25,792/- made by the ld.AO on account of capital investment in various Syndicates without appreciating that AO, has not given set off, of the disclosed income from the business against the alleged syndicate income, part of which from the same business and same contract and taxing the same income twice, is unjustified. 3. The Ld. CIT(A) was not justified in confirming the addition on account of capital investment without appreciating that the appellant has already accepted the addition on account of undisclosed capital investment in syndicate (after orders u/s 154) of Rs. 16,09,537/- in assessment year 2011- 12 and Rs. 23,18,532/- in A.Y. 2012-13 and therefore even if it assumed that there was investment in the alleged syndicate, the past investment and profit accrued explained the capital of the subsequent years and no fresh investment was required. 4. The Ld. CIT(A) was not justified in confirming the addition of Rs. 28,25,792/- made by the ld.AO on account of capital investment in various Syndicates on estimates and when no incriminating documents/material is seized from the appellant’s premises.” 6. We would first adjudicate Revenue’s appeals and thereafter Assessee’s appeals. Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 5 of 41 Revenue’s appeals: Revenue’s Ground No. 1 in all years: 7. In these grounds, the revenue claims that the CIT(A) has erred in deleting the addition of Rs. 1,80,60,503/- in AY 2013-14, Rs. 1,96,99,389/- in AY 2014-15 and Rs. 4,93,78,222/- in AY 2015-16, made by the AO on account of undisclosed income from liquor trading business. 8. Facts apropos to these grounds are such that during the course of search-action, various incriminating documents were seized from which it was revealed that to operate liquor trading business, the assessee had formed syndicates/cartels/groups in different districts as self-organizing group formed to transact specific business, to pursue or promote a shared interest and the assessee was one of the key members of such syndicates [Para 10.1 of assessment-order]. The AO further taking support from oxford dictionary observed that such “syndicates” were formed by individuals or organizations to promote common interest and earning profit [Para 10.1.1 of assessment-order]. According to AO, the existence of syndicates was beyond doubt as the same was accepted by various members of the syndicates/ cartels/groups in their statements given during search/post-search investigations. Further, according to AO, the ‘syndicates’ were clearly discernible from the seized-material itself in which the members have used the term “syndicate” to explain their modus operandi [Sub-para (i) to (iv) of Para 10.2 of assessment-order]. Then, in Sub-para (v) of Para 10.2 of assessment-order, the AO made a clear and unequivocal finding that various investigations like correspondence with various departments, online searching of data and third party enquiries strengthened the contention that there existed syndicates and various assessees were part of such syndicates. Thereafter, in Sub-Para (vi) of Para No. 10.2 of assessment-order, the AO further observed that the licence granted for a particular shop or area to carry on liquor trade, cannot be sold, transferred to sub-leased to any contractor or cannot be transferred to any partnership without written Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 6 of 41 permission of collector and this is the main reason that various licences in the name of third party are found during search, which further indicated the existence of “syndicates”. Then, in Para No. 10.3, the AO observed that during the course of search various incriminating-documents were found which indicated that the syndicates were operating and the assessee was one of the persons operating those syndicates. It was further found by AO that the incriminating-material seized during search contained the record of receipts and payment of cash specifying the details of investment made by assessee and his share in profit (computation of profit and its distribution) in various syndicates/groups/shops in which he had a beneficial interest. In Para No. 10.3.1 of assessment-order, the AO has noted the details of various corroborative evidences like bank transactions, tally accounts, etc. of various syndicates; thereby the AO observed that the assessee was a member of syndicates and earned profit therefrom which was credited to his capital a/c in the Balance-Sheets of syndicates. Then, in Para No. 10.5 of assessment-order, the AO further found, from seized data and documents, that the aforesaid syndicates had incurred certain expenses which were inadmissible, like payment of illegal gratification to local police/government officers, rent payment without TDS, payment of commission, TCS wrongly debited in P&L A/c, expenses on gifts, donation, personal expenses, breakage and leakages, payments made in cash exceeding Rs. 20,000/- in violation of section 40A(3)/(3A), etc. Then, the AO also found that the assessee had made capital investment in those syndicates but the sources are not satisfactorily explained. After giving detailed findings, reproducing various seized data including the report of special audit, the AO made working of syndicate-wise/year-wise details in a Tabular Format in Para No. 10.7 and 10.8 of assessment-order and finally made additions for various assessment years in the hands of assessee under three sub-heads viz. (i) assessee’s share in undisclosed income from syndicates; (ii) assessee’ share in inadmissible expenses incurred by syndicates; and (iii) undisclosed capital invested by assessee in syndicates. Originally, the AO made Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 7 of 41 additions of Rs. 3,52,22,434/-, Rs. 3,83,25,120/-, Rs. 6,08,39,565/- and Rs. 22,44,821/-, but later rectified the same to Rs. 2,08,86,295/-, Rs. 2,00,36,905/-, Rs. 4,93,78,222/- and Rs. 65,78,901/- respectively for AY 2013-14, 2014-15, 2015-16 and 2016-17, through rectification order dated 12.11.2018 u/s 154. The year-wise break-up of final additions, as discernible from the order of CIT(A), is as under: A.Y. Assessee’s share in undisclosed income from syndicates + Assessee’s share in inadmissible expenses incurred by syndicates Undisclosed capital invested by assessee in syndicates Total 2013-14 1,80,60,503 28,25,792 2,08,86,295 2014-15 1,96,99,389 3,37,516 2,00,36,905 2015-16 4,93,48,222 -- 4,93,78,222 2016-17 11,22,411 54,56,490 65,78,901 9. During first-appeal before CIT(A), the assessee argued that he carried on liquor business in individual capacity and declared income earned therefrom in return of income; he had not formed any syndicate as alleged and had not earned any income from syndicates as alleged. However, the CIT(A), having regard to the various documents/data seized during search, rejected such claim of assessee and concluded that the assessee had certainly formed Syndicates with various persons. The CIT(A) has given the relevant findings in Para No. 4.3.3 and 4.3.4 of his order which are reproduced below: “4.3.3 I do not find any substance in the contention of the appellant that since he was carrying out the business of liquor in his individual capacity and was also showing income from carrying out such business in his returns of income, from year to year, no further income can be considered on the ground of share of his profit in the syndicates. From the records and seized material, it is Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 8 of 41 evident that the appellant was carrying out liquor business by forming different syndicates and therefore, there cannot be two views that the appellant had derived income from such syndicates. The appellant has vehemently claimed that factually, he had not formed any syndicate. In support of his contention, the A.R. of the appellant was heavily harping upon the license policy of the State Government and according to the A.R. of the appellant, the syndicates were not granted any separate licenses for carrying out the business of liquor and without having the licenses, such syndicates could not have carried out any business. However, such an argument of the A.R. of the appellant has no stand for the reason that merely because the appellant and other members of the syndicates have violated Excise Laws, it cannot be said that factually no syndicates were formed by them in a situation where the seized data and incriminating documents clearly reveal formation of such syndicates. Looking into totality of the facts, the appellant along with other persons had formed syndicates to carry out the business of liquor in which the appellant and other members were having certain share as agreed upon between themselves. Further, the syndicates had incurred certain expenses which were either prohibitory or inadmissible in the nature u/s. 37 of the Act or were not allowable for non compliance of the provisions of section 40(a)(ia) or section 40A(3)/(3A) of the Act. The appellant had made undisclosed investment towards his capital contribution in the various syndicates and in various years. 4.3.4 Having given the findings as aforesaid, now, it has to be adjudicated here that whether the share of profit of the appellant in the syndicates’ income, even if it remained undisclosed in the returns furnished by him, can legally be added to the income of the appellant and whether any tax, effectively, be levied on such income. As discussed above, the nature of share of appellant in the inadmissible expenses incurred by the syndicates is the same as that of share in profit from such syndicates, the tax treatment for both the additions in the hands of the appellant would remain the same. Thus, in my considered view, the appellant had derived undisclosed income in the form of share of profit from some syndicates, which are nothing but Association of Persons (AOP) or Body of Individuals (BOI) formed by the appellant along with various other persons for the purpose of carrying out the liquor business with a motive to earn profit from such business in an agreed ratio. The provisions of section 2(31) of the Act which gives the definition of the expression ‘Person’, a person includes, an association of persons or a body of individuals, whether incorporated or not. It is therefore, the syndicates formed by the appellant along with others is a separate taxable legal entity and separately chargeable to tax u/s. 4 of the IT Act. Further, such syndicates (AOPs/BOIs) are chargeable to tax at the Maximum Marginal Rate (MMR). Thus, in the instant case, any assessment of income, on the basis of the seized incriminating material and data, ought to have been made in the hands of the respective syndicates, a separate taxable entity, either u/s. 153C of the Act or under any other legal recourse available to the Department. However, in view of the specific provisions of section 86 of the IT Act, 1961 r.w.s. 67A, in computing the total income of the appellant, his share, as member of the AOP/BOI, was not liable to be included. The appellant has also taken separate grounds taking the aforesaid plea and therefore, a detailed separate adjudication has been made elsewhere in the present order, while Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 9 of 41 adjudicating the relevant grounds. However, since, in the Ground Nos. 6(a),6(b), 7(a) & 7(b), the appellant is agitating the additions on account of share of profit of the appellant in the various syndicates and share of appellant in inadmissible expenses of the syndicates, without having recourse to the provisions of section 86 and section 67A of the Act, these Grounds of Appeal of the appellant, are held as academic in the nature only, requiring no specific adjudication.” 10. However, after giving above findings, the CIT(A) went on holding that although, the assessee had undisputedly formed various syndicates/groups with different persons for carrying out the business of liquor for a definite share of profit, but, in any case, the share of the assessee in the profit of those syndicates and also, in the inadmissible expenses incurred by such syndicates cannot be added to the income of the assessee in view of the specific provision of section 86 read with section 67A of the Income-Tax Act, 1961. According to CIT(A), the status of syndicates is that of Association of Persons (AOP) or Body of Individuals (BOI) which are separately and specifically included in the definition of the expression 'Person' as prescribed in section 2(31) of the Act. According to Ld. CIT(A), such syndicates are a separate taxable legal entity and separately charged to tax u/s 4 of the Act at the maximum marginal rate (MMR). The Ld. CIT(A) further held that income derived by various syndicates, in which the assessee was one of the members, was required to be assessed in the hands of syndicates only and the direct assessment in the hands of the assessee could not have been made in respect of income derived by syndicates. The Ld. CIT(A) also held that even the question of admissibility or inadmissibility of any expenditure could have been raised in the assessments of syndicates. The CIT(A) further held that the assessee could have, at the best, been assessed in respect of his share in income of such syndicates but even that could not be taxed due to the specific provision of section 86 of the Act, which provides that Income-Tax shall not be payable by the assessee in respect of his share in the income of “Association of Persons” or “Body of Individuals”. Finally, relying upon the decision of Hon'ble Supreme Court in ITO vs. CH. Atchaiah (1996) 218 ITR 239 (SC), the CIT(A) deleted the additions made by the AO in Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 10 of 41 the assessee's hands, for various assessment years, on account of (i) assessee's share in profit of syndicates and (ii) assessee’s share in the inadmissible expenses incurred by such syndicates. But, however, the CIT(A) upheld the addition made by AO on account of capital investment made by assessee in syndicates. The relevant findings given by CIT(A) in various paras of appeal-order are reproduced as under: Relating to capital investment made by assessee in syndicates – Additions upheld by. CIT(A): “4.3.5 However, in respect of appellant’s undisclosed investment in various syndicates, in various assessment years, for which the appellant has taken various grounds, there is no substance in the appellant’s contention. Before me, it has been argued that first of all there was no syndicate and even if there was any such syndicate, the investments were made out of the explained sources only. It has also been argued that the amount of unexplained investments determined by the AO is not correct and suffer from various errors. In respect of incorrect determination of amount of undisclosed investment in syndicates, the appellant has also taken separate grounds of appeal. I have already given the finding that the appellant had formed syndicates with various persons for carrying out the business of liquor. From the ample of seized material, it is also evident that the appellant had made investment towards capital contribution in such syndicates. The appellant, neither during the course of the assessment proceedings nor before me, could explain the sources of making investments in such syndicates. Hence, the ground raised by the appellant, so far as they relate to his denial of forming any syndicates and making of any undisclosed investment in such syndicates are concerned, have no merit. However, since for quantum of undisclosed investments, the appellant has raised separate grounds, the issue relating to quantum of addition on these grounds of undisclosed investment has been adjudicated separately while dealing with such grounds. Therefore, appeal on these grounds is Dismissed.” Relating to (i) assessee's share in profit of various syndicates and (ii) assessee’s share in the inadmissible expenses incurred by such syndicates – Additions deleted by CIT(A): “4.4.1 I have duly considered the facts of the case, the Assessment Order and the written as well as oral submissions of the appellant. On perusal of the seized tally data and other documents, it is evidently clear that the appellant had formed syndicates with various persons, in various years and such syndicates had carried out liquor business for deriving profits to be shared by the appellant and other members of the syndicates in certain agreed ratio. The Special Auditors nominated under section 142(2A) of the Act have also given the same finding in their report. Further, the AO, at various places in the Order, has given clear findings that (i) the appellant had formed syndicates with various persons for carrying out the liquor business; (ii) from carrying out Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 11 of 41 such businesses, the appellant had derived share of profit; (iii) such syndicates had incurred certain expenditure which were not permissible under the provisions of the Income Tax Act, 1961; and (iv) the appellant had made investment by way of capital contribution in such syndicates the sources whereof were not explained. It has been held that the appellant had formed syndicates for carrying out the liquor business. Once such findings are given, it becomes apparent that under the scheme of the Income Tax Act, 1961, such syndicates would fall within the definition of ‘Persons’ as ascribed to under clause (31) of section 2 of the Act either as ‘Association of Persons’ or ‘Body of Individuals’. Consequently, in respect of any income derived by such syndicates, such syndicates alone would be chargeable to tax under section 4 of the Act. The Syndicates would be chargeable to tax independent from the members forming such syndicates. Needless to say, the income of such syndicates either under the head ‘Income from profits or gains from Business or Profession’ or under any other head would be required to be computed in accordance with the provisions of the Act only. Consequently, income under the head ‘Income from Profits or Gains from Business or Profession’, would be required to be computed in the manner provided under Part-D of the Chapter- IV of the Act which, inter alia, provides for disallowance of certain expenditure on various grounds. Such assessments in the hands of the syndicates, are to be made in accordance with the provisions of section 167B of the Act. Section 167B contemplates two situations. Sub-section (1) of section 167B deals with those cases in which individual shares of the members of an Association of Persons or Body of Individuals in the whole or any part of the income of such AOP/BOI are indeterminate or unknown. In such a situation, it has been provided that the tax shall be charged on the total income of the AOP or BOI at the maximum marginal rate and if any member of the AOP or BOI is chargeable to tax at a rate higher than maximum marginal rate, then, tax on the AOP or BOI shall be charged at such higher rate. Sub-section (2) of section 167B deals with other cases, viz. those cases which do not fall under sub- section (1) of section 167B of the Act. Accordingly, it envisages those cases in which the shares of the members of AOP or BOI are determinate and known. In such cases, if income of any of the members of the AOP or BOI exceeds the maximum amount which is not chargeable to tax, in the case of that member, such AOP or BOI would be chargeable to tax at the maximum marginal rate and where income of any member or members is chargeable at a rate or rates higher than the maximum marginal rate, tax shall be charged on that portion or portions of the total income of the AOP or BOI which is relatable to the income of such member or members and for the balance income, the tax shall be charged at the maximum marginal rate. In other words, irrespective of the status of the AOP/ BOI, it is required to pay tax at least at maximum marginal rate on its income. 4.4.2 I find a significant force in the contention of the appellant that if there existed any syndicates, then income earned by such syndicates from carrying out businesses would be required to be assessed in the hands of such syndicates and such income cannot directly be assessed to tax in the hands of its members forming the syndicates. The investigation wing during the course of search found that the appellant is doing liquor business along with other persons by forming syndicates. The investigation wing has emphasized the formation of syndicates (group) to carryout the liquor business. The emphasis Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 12 of 41 is on that there exists an entity syndicate which is carrying out the business. Statements of key persons of the syndicates were also recorded wherein, they has accepted the existence of syndicates. The AO during the course of assessment proceedings has referred the matter to special auditor u/s 142(2A) of the Act for special audit in the case of appellant. The Auditor has also emphasized the formation of the syndicate and has given a finding that the syndicate is carrying out the business independently. The syndicates are functioning from separate offices and are preparing accounts separately. Further, the AO while passing the impugned assessment order from page no 4 to 21 of the assessment order has elaborately dealt that there exists a syndicate. The AO has also dealt with ingredients of the syndicates. Also, the AO has accepted the statements of key persons of the syndicates wherein they had accepted existence of the syndicate. Nevertheless, the AO’s of the syndicates in other group concern has made addition of the undisclosed income in the hands of syndicate for respective assessment years. The brief details of assessment orders passed by ACIT- 2(1), Indore /DCIT-3(1), Gwalior/ITO, Shivpuri are as under:- Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 13 of 41 Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 14 of 41 On perusal of these assessment orders, it is found that the concerned AO i.e. ACIT-2(1), Indore /DCIT-3(1), Gwalior/ITO, Shivpuri in the cases of AOP has made additions on account of undisclosed business income from carrying out the liquor business have been assessed on the basis of various materials which were seized during the course of the search carried out in the case of Shivhare Group. Further, in these assessment orders, it has been held that these AOPs being the liquor syndicates, had carried out business of liquor in various years and as per the Special Auditors Report given under s.142(2A) of the Act in the case of Shivhare Group, these syndicates had earned profit and Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 15 of 41 had also incurred some expenses which were liable for disallowance. The amount of profits/ inadmissible expenses, considered by the AO framing the separate assessments of the syndicates, were the same as were considered while making the assessment in the hands of the appellant and other members of Shivhare Group. In view of the findings of the investigation wing, special auditor, AO of the appellant and AO of the syndicates, the income earned by the syndicates is taxable in the hands of syndicate and not in the hands of appellant. Therefore, making any addition on account of income earned by syndicate in the hands of appellant is nothing but double taxation of the same income. The settled law is that right income should be added in the hands of the right person and in the right year. Under the new scheme of the law, there is no option available to an Assessing Officer either to make the assessment in the hands of the AOP/BOI or in the hands of the members of the AOP/BOI. The similar view was expressed by the Hon’ble Apex Court in the case of ITO vs. Ch. Atchaiah (1996) 218 ITR 239 (SC). The relevant findings of the Hon’ble Apex Court are reproduced as under: “4. In our opinion, the contention urged by Dr. Gauri shanker merits acceptance. We are of the opinion that under the present Act, the ITO has no option like the one he had under the 1922 Act. He can, and he must, tax the right person and the right person alone. By "right person", we mean the person who is liable to be taxed, according to law, with respect to a particular income. The expression "wrong person" is obviously used as the opposite of the expression "right person". Merely because a wrong person is taxed with respect to a particular income, the AO is not precluded from taxing the right person with respect to that income. This is so irrespective of the fact which course is more beneficial to the Revenue. In our opinion, the language of the relevant provisions of the present Act is quite clear and unambiguous. Sec. 183 shows that where the Parliament intended to provide an option, it provided so expressly. Where a person is taxed wrongfully, he is no doubt entitled to be relieved of it in accordance with law but that is a different matter altogether. The person lawfully liable to be taxed can claim no immunity because the AO (ITO) has taxed the said income in the hands of another person contrary to law. We may proceed to elaborate. 5. Sec. 3 of the Indian IT Act, 1922, as amended by the Indian IT (Amendment) Act, 1939, read as follows: "3. Charge of Income-tax.—Where any Central Act enacts that income- tax shall be charged for any year at any rate or rates, tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of, this Act in respect of the total income of the previous year of every individual, HUF, company and local authority, and of every firm and other AOP or the partners of the firm or the members of the association individually." Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 16 of 41 The expression "person" was defined in cl. (9) of s. 2 in the following words: "9. `Person' includes an HUF and a local authority". As against the above provisions, s. 4 of the Present Act [before it was amended by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1st April, 1989] read thus: "4(1). Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income tax at that rate or those rates shall be charged for that year in accordance with and subject to the provisions of this Act in respect of the total income of the previous year or previous years, as the case may be, of every person: Provided that where by virtue of any provision of this Act income-tax is to be charged in respect of the income of a period other than the previous year, income-tax shall be charged accordingly. (2) In respect of income chargeable under sub-s. (1), income-tax shall be deducted at the source or paid in advance, where it is so deductible or payable under any provision of this Act." (The amendments made by the aforesaid Amendment Act of 1987 do not make any difference so far as the present controversy is concerned.) The expression "person" is defined in cl. (31) of s. 2 in the following words: "Person' includes— (i) an individual, (ii) an HUF, (iii) a company, (iv) a firm, (v) an AOP or a BOI, whether incorporated or not, (vi) a local authority, and (vii) every artificial juridical person, not falling within any of the preceding sub-clauses." A comparison of the provisions of both enactments immediately brings out the difference between them. Sec. 3 of the 1922 Act provided that in respect of the total income of a firm or an AOP, the income tax shall be charged either on the firm or the AOP or on the partners of the firm or on the members of the AOP individually. It is evident that this option was to be exercised by him keeping in view of the interest of Revenue. Whichever course was more advantageous to Revenue, he was entitled to follow it. In such a situation, it was generally held that once the ITO opted for one course, the other course was barred to him. But no such option is provided to him under the present Act. Sec. 4 extracted hereinabove says that income-tax shall be charged on the Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 17 of 41 total income "of every person" and the expression "person" is defined in cl. (31) of s. 2. The definition merely says that expression "person" includes inter alia a firm and an AOP or a BOI whether incorporated or not. There are no words in the present Act which empower the ITO or give him an option to tax either the AOP or its members individually or for that matter to tax the firm or its partners individually. If it is the income of the AOP in law, AOP alone has to be taxed; the members of the AOP cannot be taxed individually in respect of the income of the AOPs. Consideration of the interest of revenue has no place in this scheme. When s. 4(1) of the present Act speaks of levy of income-tax on the total income of every person, it necessarily means the person who is liable to pay income-tax in respect of that total income according to law. The tax has to be levied on that person, whether an individual, HUF, Company, Firm, AOP/BOI, a local authority or an artificial juridical person. From this, it follows that if income of A is taxed in the hands of B, A may be legitimately aggrieved but that does not mean that B is exonerated of his liability on that account. B cannot say, when he is sought to be taxed in respect of the total income which is lawfully taxable in his hands, that since the ITO has taxed very same income in the hands of A, he himself cannot be taxed with respect to the said total income. This is not only logical but is consistent with the provisions of the Act. In this connection, it may be pointed out that where the Parliament wanted to provide an option, a discretion, to the ITO, it has provided so expressly. Sec. 183 [which has since been omitted w.e.f. 1st April, 1993 by the Finance Act, 1992] provided that in the case of an unregistered firm, it is open to the ITO to treat it, and make an assessment on it, as if it were a registered firm, if such a course was more beneficial to Revenue in the sense that such a course would fetch more tax to the public exchequer. Sec. 183 read as follows : "183. Assessment of unregistered firms.—In the case of an unregistered firm, the Assessing Officer— (a) may determine the tax payable by the firm itself on the basis of the total income of the firm, or (b) if, in his opinion, the aggregate amount of the tax payable by the firm if it were assessed as a registered firm and the tax payable by the partners individually if the firm were so assessed would be greater than the aggregate amount of the tax payable by the firm under cl. (a) and the tax which would be payable by the partners individually, may proceed to make the assessment under sub-s. (1) of s. 182 as if the firm were a registered firm; and, where the procedure specified in this clause is applied to any unregistered firm, the provisions of sub-ss. (2), (3) and (4) of s. 182 shall apply thereto as they apply in relation to a registered firm." It may be mentioned that s. 183 corresponded to s. 23(5)(b) of the 1922 Act. The 1922 Act not only provided an option to the ITO in the matter of firm and AOP under s. 3 but also expressly enabled him to Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 18 of 41 assess an unregistered firm as a registered firm [s. 23(5)(b)], if by doing so, more tax accrued to the State. The 1961 Act has omitted the first option, while retaining the second. 6. In this connection, it would be relevant to notice the relevant provisions of the draft Bill proposed by the Law Commission in its XIIth Report, which constitutes the basis for the 1961 Act. Clause (27) of s. 2 of the draft (definition of "person") did expressly provide an option similar to the one contained in s. 3 of the 1922 Act. Clause 27 read thus: "(27) `Person' includes— (i) an individual, (ii) an HUF, (iii) a company, (iv) a firm, (v) an AOP or a BOI, whether incorporated or not, (vi) a local authority, and (vii) every artificial juridical person, not falling within any of the preceding sub-clauses." In the "Notes on Clauses" appended to the draft, the Commission stated: "27. Person. The definition of `person' in existing s. 2(9) has been amplified. The existing definition includes (a) HUF and (b) a local authority. The General Clauses Act, defines `person' as including a company or AOP or BOI whether incorporated or not. The charging section (s. 3) of the IT Act enumerates the units for taxation as `individual, HUF, company, local authority, firm and other AOPs or the partners of a firm or the members of the association individually'. Sec. 4 of the Act refers to a `person'. It seems desirable to have a comprehensive definition of the word `person' in the Act so as to cover all entities mentioned in— (i) the existing definition [s. 2(9)]. (ii) the existing charging provisions [ss. 3 and 4], and (iii) the General Clauses Act. The definition has therefore been amplified on the above lines." The Parliament, however, chose not to accept the suggested definition in toto; it deleted the words indicating the option. The Committee, which drafted the draft Bill comprised Sri P. Satyanarayana Rao, Sri G.N. Joshi and Sri N.A. Palkhivala, who was specifically appointed as a member for the purpose of the revision of the IT Act. [Extracts are taken from the XIIth Report of the Law Commission of India, published by Govt. of India, Ministry of Law.] Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 19 of 41 7. This question has also been troubling the High Courts in the country. As a matter of fact, Patna and Andhra Pradesh High Courts have taken different views. Be that as it may, we may mention that the Patna High Court in Mahendra Kumar Agrawalla vs. ITO 1975 CTR (Pat) 33 : (1976) 103 ITR 688 (Pat), Punjab and Haryana High Court in Rodamal Lalchand vs. CIT (1977) 109 ITR 7 (P&H), Andhra Pradesh High Court in Choudry (supra) and Delhi High Court in Punjab Cloth Stores vs. CIT 1978 CTR (Del) 257 : (1980) 121 ITR 604 (Del) have taken the view which we have taken. On the other hand, Madras High Court in CIT vs. Blue Mountain Engg.Corpn. 1978 CTR (Mad) 142 : (1978) 112 ITR 839 (Mad) and Patna High Court in its earlier decision in CIT vs. Pure Nichitpur Colliery Co. 1975 CTR (Pat) 83 : (1975) 101 ITR 79 (Pat) have taken the opposite view. The Andhra Pradesh High Court first expressed the other view, then in Choudry it took the view which we have taken and again in B.R. Constructions (FB) (supra) it has gone back to the other view and reiterated the view taken in the judgment under appeal. In Ramanlal Madanlal vs. CIT (1979) 116 ITR 657 (Cal), Sabyasachi Mukharji, J., speaking for a Bench of the Calcutta High Court, recognised the distinction in the language employed in s. 3 of the 1922 Act and s. 4 of the present Act but that was a case of an unregistered firm where the ITO had assessed the incomes in the hands of the partners individually. In such a situation, the learned Judge held, the ITO cannot, at the same time, bring the unregistered firm to tax in respect of the very same income. Sec. 183 was also referred to in that connection. The decision of the High Courts taking the contrary view appears to have been influenced largely by the decisions of this Court in CIT vs. Kanpur Coal Syndicate (1964) 53 ITR 225 (SC) : TC 6R.197 and CIT vs. Murlidhar hawar & Purna Ginning & Pressing Factory (1966) 60 ITR 95 (SC) which were rendered under the 1922 Act and have not given due weight to the marked difference in the language of the relevant provisions in the two enactments.” 4.4.3 In view of the specific finding of the Hon’ble Supreme Court, I am of the firm view that income derived by various syndicates, in which the appellant was found one of the members, was required to be assessed in the hands of such syndicates only and a direct assessment in the hands of the appellant could not have been made in respect of such income derived by the syndicates. Even the question of admissibility or inadmissibility of any expenditure could have been raised only while making the assessment in the cases of such syndicates. The appellant could have, at the best, been assessed in respect of his share in taxable income of such syndicates but for the provisions of section 86 of the Income Tax Act, 1961, which provide that income tax shall not be payable by an assessee in respect of his share in the income of the association of persons or body of individuals. 4.4.4 The AO while making the addition in the hands of the appellant, has worked out the appellant’s share in each of the syndicates under consideration. It is thus evident that the syndicates formed as AOP or BOI are such in which the shares of their members are determinate and known. In Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 20 of 41 such circumstances, the share of the appellant, being a member of such AOP/ BOI, would be required to be computed in accordance with the provisions of section 67A of the Act. However, in view of the specific provisions of clause (a) of the proviso to section 86 of the Act, where the Association of Persons or Body of Individuals is chargeable to tax on its total income at the maximum marginal rate or at any higher rate under any of the provisions of Act, the share of a member in the income of such AOP/BOI as computed under section 67A shall not be included in the total income of such member. In my view, in the instant case, all the conditions for invoking the clause (a) to section 86 of the Act are getting explicitly fulfilled. For a ready reference, the provisions of section 86 are being reproduced as under: “S. 86: Share of member of an association of persons or body of individuals in the income of the association or body.-Where the appellant is a member of an association of persons or body of individuals (other than a company or a co-operative society or a society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India), income-tax shall not be payable by the appellant in respect of his share in the income of the association or body computed in the manner provided in Section 67A. Provided that,- (a) where the association or body is chargeable to tax on its total income at the maximum marginal rate or any higher rate under any of the provisions of this Act, the share of a member computed as aforesaid shall not be included in his total income; (b) in any other case, the share of a member computed as aforesaid shall form part of his total income: Provided further that where no income-tax is chargeable on the total income of the association or body, the share of a member computed as aforesaid shall be chargeable to tax as part of his total income and nothing contained in this section shall apply to the case." 4.4.5 Further, it was observed that (i) the appellant was a member of an Association of Persons or Body of Individuals; (ii) share of the members of such Association of Persons or Body of Individuals were determinate and known; and (iii) such Association of Persons or Body of Individuals were chargeable to tax on their total income at the maximum marginal rate or any higher rate. In such circumstances, the appellant’s case would squarely fall under substantive provisions of section 86 of the Act read with clause (a) of the first proviso to such section 86 and the other clause (b) of the first proviso and as also, the second proviso would have no application. Accordingly, in my view, there was no justification for the AO in making the addition in the appellant’s income on account of his share in profit of the syndicates and as also, on account of his share in inadmissible expenses incurred by the syndicates. Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 21 of 41 4.4.6 The AO during the course of assessment proceedings observed that appellant made capital investment in various syndicates amounting to Rs. 56,61,585/- in AY 2013-14, Rs. 6,75,032/- in AY 2014-15, Rs. 6,54,77,891/- in AY 2016-17. However, the AO later on observed that there were various mistakes apparent from record and therefore, the AO on 12.11.2018 passed order u/s 154 of the Act making all the apparent mistakes in AYs 2013-14 to 2016-17. The AO after passing rectification order held that the appellant has made investment of Rs. 28,25,792/- in AY 2013-14, Rs. 3,37,516/- in AY 2014-15 and Rs. 54,56,490/- in AY 2016-17. I have considered the working made by the Special Auditors, findings of the AO and written as well as oral submissions of the appellant made before me. After considering the facts of the case, I do not find any merit in the contention of the appellant. I do not find any infirmity in the quantum of the undisclosed investment computed by the AO. I find that the AO has diligently allowed the credits, wherever necessary, from the withdrawals made by the appellant in earlier years from the capital so invested. Thus, addition made by the AO on account of capital investment by appellant in syndicate is confirmed. 4.4.7 Accordingly, the additions made by the AO amounting to Rs. 28,25,792/- in AY 2013-14, Rs. 3,37,516/- in AY 2014-15 and Rs. 54,56,490/- in AY 2016-17 are Confirmed and appellant gets relief of Rs. 1,80,60,503/- in AY 2013-14, Rs. 1,96,99,389/- in AY 2014-15, Rs. 4,93,78,222/- in AY 2015-16 and Rs. 11,22,411/- in AY 2016-17. Therefore, appeal on these grounds is Partly allowed.” 11. During hearing before us, Ld. DR representing the revenue vehemently argued supporting the observations of the AO. He submitted that in the instant case, ample documentary evidences and tally data were found during search and from such material, it was evident that the assessee had carried on unaccounted business of liquor by forming syndicates and groups with other persons. He further contended that many of the syndicates could not be subjected to tax and therefore, for collecting the due tax for the exchequer, the tax should be collected from its members and assessee is also one of the members. He further submitted that if the action of CIT(A) is confirmed, then, it may result into a huge revenue loss for the reason that the department may not get any tax from syndicates or the members (including assessee). Lastly, the Ld. DR placed a heavy reliance on the detailed findings made by AO in assessment-order and prayed to uphold the entire additions made by AO. Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 22 of 41 12. Per contra, Ld. AR heavily relied upon the order of CIT(A). Ld. AR argued that the AO has himself accepted the existence of syndicates and the CIT(A) has deleted addition on the basis of such acceptance by AO himself coupled with the analysis of legal provisions, namely section 86 read with section 67A of the Income-tax Act, 1961; therefore there is nothing wrong in the approach of CIT(A). Then Ld. AR submitted that one “Shri Ramswaroop Shivhare” was also a part of the same search and in his case also, the AO made identical additions treating him as member of syndicates. The assessee carried matter in first-appeal whereupon the CIT(A) deleted additions on the exactly same findings/observations/analysis as in present case. Thereafter, the revenue challenged the order of first-appellate autority before ITAT, Indore Bench in IT(SS)A No. 12 to 18/Ind/2021. Ld. AR submitted that the Co-ordinate Bench of ITAT, Indore has already decided the impugned appeal vide Order dated 19.04.2022 wherein the order passed by first-appellate authority has been upheld on the subject issue and the relief granted by first-appellate authority has been accepted. Ld. AR has placed on record a copy of the order of ITAT. Drawing our attention to Para No. 7 to 9 of the order, which are running over several pages, Ld. AR submitted that the Co-ordinate Bench has considered exactly same findings/observations made by first-appellate authority in that case as made by Ld. CIT(A) in present case. Thereafter, in the operative paragraphs, the Co-ordinate Bench has held thus: “8.1 We have heard rival contentions, perused the records placed before us, duly considered the facts and circumstances, carefully gone through the orders of the authorities below, Special Auditors Report, written and oral submissions made from both the sides and also gone through the judgments and decisions referred to and relied upon by both the sides. 8.2 First we would take the assessee's grounds of Appeal challenging the action of the ld. CIT(A) confirming the AO's action of holding that the assessee had formed syndicates with various persons and had derived share of profit Association of Persons (AOP), in form of syndicates/cartels/groups, with various other persons to carry out the business of liquor trade which is evident from the seized material/data and as also, report given by the Special Auditors. We also find ourselves in agreement with the findings given by the AO that the assessee was having specified percentage of share of profit in all Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 23 of 41 such syndicates. We find that the AO at para (15.7) at page no. 75 to 96, by way of drawing a table, has given the details of various syndicates and the assessee's share in such syndicates. Further, we find that in the same table, the ld. AO has also made a reference of the relevant seized documents. Thus, there cannot be two views that the assessee had formed the syndicates and had also derived share of profit from such syndicates. We find that while computing the income of the assessee from such syndicates, the AO at para (15.11) of his Assessment Order has taken into consideration the assessment year wise aggregate amount of share of profit/(loss) of the assessee from the syndicates and has also taken into consideration the assessee's share in inadmissible expenses found incurred by such syndicates. We find that while making the assessment year wise additions in the assessee's income, the AO has taken the sum of both the figures after giving set-off for share of loss in syndicates for each year. We are of the view that that having given a finding to the effect that the assessee had formed the syndicates and such syndicates had carried out the liquor business as separate entities there was absolutely no justification for the AO to subject the assessee in respect of profit of such syndicates which in the legal phraseology are nothing but Association of Persons/Body of Individuals, a separate taxable legal entity. 8.3.1 We find that as per the provisions of section 86, as contained in Chapter VII of the Income-Tax Act, 1961, the entire share of an assessee in income of the Association of Persons or Body of Individuals, as computed in the manner provided in section 67A shall not be chargeable to income-tax. In our view, in the present case, the clause (a) of the first proviso to section 86 would apply, inasmuch, the syndicates are chargeable to tax at the maximum marginal rate and consequently, the share of any member in the syndicates as computed in the manner provided in section 67A shall not be included in the total income of the member i.e. the assessee in the present case. 8.3.2 We find as per the provisions of section 67A of the Act, in computing the total income of an assessee who is a member of an association of persons or a body of individuals wherein the shares of the members are determinate and known, after making certain adjustments share of each member is required to be computed. However, after making the computation of share of a member in AOP or BOI as per the provisions of section 67A, in view of the specific provisions of section 86, such share of income shall be excluded from the total income of the assessee. We find that there are only two exceptions to the applicability of the provisions of section 86 viz. (i) when the association or body is not chargeable to tax on its total income at the maximum marginal rate or any higher rate; and (ii) where no income-tax is chargeable on the total income of the association or body, but, for the reasons discussed hereinbelow, none of the exceptions to section 86 are applicable in the present case. 8.3.3 We further find that in the instant case, as per the findings given by the AO himself, the share of the assessee, as a member of the syndicates (AOPs), was determinate and therefore, the assessee’s case would not fall under the provisions of sub-section (1) to section 167B of the Act. On the other hand, the case of the assessee would fall under the provisions of sub-section (2) to section 167B of the Act. In such a situation, the entire income of the Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 24 of 41 syndicates, of which the assessee was found to be a member, would be chargeable to maximum marginal rate in accordance with clause (i) of sub- section (2) to section 167B of the Act in the hands of such syndicates only. 8.3.4 We find that since all the subject syndicates are liable for charge of tax at the maximum marginal rate and therefore, the first exclusion as contemplated in clause (b) of the first proviso to the section 86 read with clause (a) of the first proviso thereof would have no application. For the second proviso to section 86, we find that the income of the syndicates are, undisputedly, chargeable to tax under section 167B of the Act and therefore, such proviso would also not apply in the instant case. In other words, by having a combined reading of section 167B, section 86 and section 67A, it can be safely concluded that the share of profit of the assessee in various syndicates, which in the eyes of the law are nothing but Association of Persons, would be completely entitled for exclusion from total income of the assessee. 8.3.5 In the light of the legal position, as enunciated hereinabove, in our considered view, income of all the syndicates, as determined by the AO, can be assessed in the hands of the respective syndicates only as these syndicates, being AOPs are classified as separate persons and tax entity u/s. 2(31) of the Act, but, in any circumstance, in the present case, any share of profit from such syndicates cannot be added as income chargeable to tax in the hands of any of its members. We find that, as per the findings given by the ld. CIT(A) at para (4.7.2) which remained uncontroverted by the Revenue, even in respect of one of the syndicates, separate assessments have already been framed by one assessing officer u/s. 144/153C of Act and while making assessments in the hands of such syndicate, the amount of undisclosed income earned by such syndicate, has already been determined. It is well known maxim of the law that same income cannot be taxed twice in the multiple hands unless otherwise so warranted by the specific provisions of the Act itself. 8.3.6 In the present case, we also find that the AO besides making addition on account of assessee’s having derived share of profit from various syndicates, has also made addition, to the extent of the assessee’s share in such syndicate, qua some alleged inadmissible expenses incurred by these syndicates. We find full substance in the assessee's contention that since none of these inadmissible expenditure was claimed by the assessee himself, and therefore, any disallowance for claim of any such expenses can only be made in the hands of the syndicates which have actually incurred such expenditure. In our view, after making such additions on account of disallowances of expenses, the income of the syndicates ought to have been computed in accordance with the various provisions of the Act and once such income of the syndicate was computed, for the purpose of section 67A, the resultant share of income of the assessee in the total income of the syndicates was required to be apportioned. Thus, any share of the assessee in the inadmissible expenses of the syndicates ought to have been taken as in the nature of share of profit and that was required to be added under section 67A of the Act, but again, after making such addition, the necessary relief in accordance with the provisions Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 25 of 41 of section 86 ought to have been granted by the AO to the assessee which has not been so done in the instant case. 8.3.7 In our view, even if for any reason the Revenue failed to make any assessment in the hands of the syndicates, then also the income, which is otherwise chargeable to tax in a different tax entity i.e. the syndicate, cannot be added to the income of the assessee. We find that unlike under section 3 of the Income-Tax Act, 1922, in the present Income Tax Act, 1961 there is no such discretion or option available to an assessing officer as regard to taxing of any income earned by an AOP either in the hands of AOP or its members. Now, the assessing officer, subject to the provisions contained in ss. 67A, 86 and 167B is statutorily bound to make the assessment only in the hands of AOP and no addition, on the count of share of profit of a member in the AOP, can be made in the hands of such member. For such proposition, we rely on the decision of the Hon’ble Apex Court in the case of ITO vs. Ch. Atchaiah (1996) 218 ITR 0239 (SC) in which their Lordships was pleased to hold that under the present Act there is no discretion available to an AO either to assess the income in the hands of AOP or its members, but the same has to be assessed only in the hands of the AOP. The Apex Court further held that right income must be assessed in the hands of the right person. We also respectfully follow the decision of the Hon’ble High Court of Karnataka in the case of Pr. CIT vs. Ind Sing Developers (P) Ltd. (2016) 288 CTR 0154 (Kar) in which the Lordships relying upon the decision of Hon’ble Supreme Court of Ch. Atchaiah held that merely because the right person could not be taxed it would not be open to the Revenue to tax a wrong person. We find that the similar view was expressed by the Coordinate Delhi ‘G’ Special Bench, in the case of Pradeep Agencies – Joint Venture vs. ITO (2007) 111 TTJ 0346 (SB) and as also, by the Bangalore Bench, in the case of K.S. Sathyanarayana vs. ACIT (2008) TTJ 0716. 9. In view of the above findings, we find no infirmity in the findings given by the ld. CIT(A) deleting the entire additions made by the AO in the hands of the assessee on account of assessee's share in profit and inadmissible expenses of various syndicates, for various assessment years in the appeal. Accordingly, Ground No. 1 of the Revenue for all the assessment years viz. A.Y. 2010-11 to A.Y. 2016-17, being devoid of any merit, are hereby Dismissed.” Ld. AR submitted that the assessee’s case is squarely covered by the order of Co-ordinate Bench and the decisions taken therein is applicable. Therefore, the same view as taken therein has to be applied in present appeals. 13. We have considered rival submissions of both sides and perused the material held on record including the orders of lower-authorities and the aforesaid Order dated 19.04.2022 of Co-ordinate Bench in the case of Shri Ramswaroop Shivhare to which our attention has been drawn. After Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 26 of 41 perusal and careful consideration, we find merit in the submission of Ld. AR that both the present assessee and Shri Ramswaroop Shivhare were part of the same search and same or identical syndicates. Further, the observations/findings/analysis made by AO and CIT(A) in the present assessee and Shri Ramswaroop Shivahare are exactly same. Therefore, there is no reason to deviate from the decision already taken by Co-ordinate Bench. Ld. DR, though dutifully supported the order of AO, but however could not put forward any contention, on facts or in law, to show the non- applicability of the Order of Co-ordinate Bench. Consequently, we are inclined to apply the decision taken by Hon’ble Co-ordianate Bench and upheld the relief granted by CIT(A). The revenue, thus, fails in these grounds. Revenue’s Ground No. 2 in AY 2013-14: 14. In this ground, revenue claims that the CIT(A) has erred in deleting the addition of Rs. 1,34,900/- made by the AO on account of undisclosed income. 15. The AO has made this addition vide Para No. 16 of assessment-order. During search proceeding, loose-paper marked as “JBS-4-LPS-9-Page 15” was seized on the basis of which it was found that a sum of Rs. 1,00,000/- was received by assessee from sale of Mill on 01.03.2013. Further, on the basis of another loose-paper marked as “JBS-4-LPS-9-Page 1”, it was observed that the assessee had deposited a sum of Rs. 34,900/-. When the AO confronted the assessee on these documents, the assessee failed to submit any response. Therefore, the AO made addition of Rs. 1,34,900/-. 16. During first-appeal, the assessee made submission which is re- produced by CIT(A) in Para No. 4.6.1 of appeal-order. After considering the same, Ld. CIT(A) deleted addition by holding thus: “4.6.2 I have considered facts of the case, plea raised by the appellant and findings of the AO. The appellant has claimed that it has been explained Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 27 of 41 before the AO that the payment entry as mentioned on Page No. 15 of LPS-9 is only of Rs. 1,000/- which has been duly recorded in the books of accounts and debited to the assessee’s capital account towards advance to meal tiffin centre. As regards the other amount of Rs. 34,900/- it was explained that this amount was covered by withdrawals from capital account and the same has been utilized towards payment of various household and non-business expenditure. As these transactions were of personal nature, therefore, the same have not been recorded in the books of account. I find strong force in the contentions raised by the Appellant, firstly, the amount mentioned on Page No. 15 of LPS-9 is only Rs. 1,000/-, therefore the AO was not justified in presuming the same to be Rs. 1,00,000/-. Further the AO has also not brought on record any detail of sale of Mill by the appellant. The appellant thas claimed that the same was amount advanced to Tiffin meal centre and the AO has wrongly assumed that appellant has sold a Mill. Secondly, the appellant has claimed that a withdrawal was made out of capital account time to time and the same has been jotted down on Page No. 1 of LPS-9. Out of the said amount of Rs. 34,900/- the appellant has made various personal expenses amounting to Rs. 22,600/-, therefore, the entries mentioned on loose paper page no. 1 of LPS-9 were not recorded in the books of account. 4.6.2 In view of above discussion, addition made by the AO amounting to Rs. 1,34,900/- in AY 2013-14 is deleted. Therefore, appeal on this ground is allowed.” 17. Before us, Ld. Representatives of both sides did not make any specific pleading except that the Ld. DR supported the order of AO and the Ld. AR supported the order of CIT(A). We observe that the CIT(A) has adequately dealt the issue and the amount involved is also meagre; hence we do not find any reason to upset the finding/conclusion made by CIT(A). Therefore, we uphold the order passed by CIT(A) on this issue, there being no infirmity or fallacy in the same brought to our notice by the revenue/appellant. The revenue, thus, fails in this ground. Revenue’s Ground No. 3 in AY 2013-14: 18. In this ground, revenue claims that the CIT(A) has erred in deleting the addition of Rs. 1,57,78,000/- made by the AO on account of undisclosed investment in properties. 19. The AO made this addition vide Para No. 11 of assessment-order. During search proceeding, various loose papers were found containing details of investment in immovable properties. The AO has noted brief Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 28 of 41 details of such documents/property transactions on Page No. 22 to 24 of assessment-order. During assessment-proceeding, when the AO confronted the assessee to explain source of investment in properties, the assessee submitted a reply stating that no adverse inference had been drawn by the special auditor appointed by department. The AO considered reply of assessee and accepted part of the investments but made balance addition of Rs. 1,57,78,000/- in AY 2013-14. 20. Ld. DR carried us to assessment-order and submitted that when the AO confronted the assessee, the reply of assessee was not sufficient; the assessee simply mentioned that the special auditor has not made any adverse comment in report. Thereafter, the AO made detailed observations in a Tabular Format in assessment-order for various loose-papers/property transactions and finally made addition after due consideration. Therefore, the action of AO is very much correct and the addition made by him must be upheld. 21. Per contra, Ld. AR invited our attention to Para No. 4.5 of CIT(A)’ order running from Page No. 71 to 84. Ld. AR mentioned that before CIT(A), the assessee made a detailed submission which is re-produced by CIT(A) in Para No. 4.5.1 of order. Further, the assessee also filed additional evidences in terms of Rule 46A whereupon the CIT(A) called for comments of AO. Then, the AO submitted remand-report dated 23.10.2019. Ld. AR submitted that the CIT(A) has taken into account entire material available before him and thereafter discussed each and every component (property-wise) of the addition of Rs. 1,57,80,000/- at length in Para No. 4.5.2. Ld. AR submitted that after vehement consideration, the CIT(A) found that the entire addition made by AO was based on pure guess work, assumption and presumption. Accordingly, the CIT(A) deleted addition and granted relief to assessee. Ld. AR submitted that there is no mistake or infirmity in the reasoned decision given by CIT(A); his order must be upheld and the revenue’s ground should be dismissed. Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 29 of 41 22. We have considered rival submissions of both sides and perused the material held on record. First of all, we extract the order of CIT(A) deleting the addition made by AO: Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 30 of 41 Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 31 of 41 Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 32 of 41 Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 33 of 41 Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 34 of 41 Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 35 of 41 Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 36 of 41 Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 37 of 41 23. On perusal of same, we find that the CIT(A) has taken into consideration the additional evidences submitted by assessee under Rule 46A, which is not disputed before us by the revenue by way of any ground. Then, we find that the CIT(A) has called for remand-report from AO and the Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 38 of 41 AO has furnished remand-report as well. Going further, we observe that the CIT(A) has analysed each component of the impugned addition under various sub-headings in Para No. 4.5.2 of his order and finally concluded in Para No. 4.5.3 that the AO has made addition on pure guess work assumption and presumption. During hearing before us, Ld. DR did/could not rebut or contradict the detailed findings made by CIT(A), he has simply relied upon the observations of AO. Since the CIT(A) has analysed the facts and figures of each component of addition in minute detail and his findings have not been rebutted or contradicted by revenue, we do not find any reason to interefere with his findings. That brings us to conclude that the CIT(A) has rightly deleted the addition and there is no infirmity in his action. Consequently, we are inclined to uphold the order of CIT(A). The revenue fails in this ground as well. 24. With above conclusions, all grounds in all appeals of revenue fail. In the result, all appeals of revenue are liable to dismissed. Ordered accordingly. Assessee’s appeals: 25. In these appeals, the sole grievance of assessee is that the CIT(A) has erred in upholding addition of Rs. 28,25,792/-, Rs. 3,37,516/- and Rs. 54,56,490/- respectively in AY 2013-14, 2014-15 and 2016-17 on account of unexplained capital investment made by assessee in syndicates. 26. Although Ld. AR has filed a Written-Note on this issue incorporating several points, but during hearing, he chose to base his argument on a very limited point as mentioned in Point No. 31 of his Written-Note. Drawing our attention to same, Ld. AR submitted that the assessee has voluntarily offered additional income in the returns filed u/s 153A and also adopted the Direct Taxes Vivad Se Vishwas Scheme for preceding AY 2010-11, 2011-12 and 2012-13. Ld. AR submitted that the assessee has offered huge income of Rs. 1,20,31,190/-, Rs. 2,63,86,140/- and Rs. 2,96,81,720/- respectively Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 39 of 41 in those years. Ld. AR submitted that such additional income offered by assessee was very much available to assessee for making impugned investment of Rs. 28,25,792/-, Rs. 3,37,516/- and Rs. 54,56,490/- respectively in AY 2013-14, 2014-15 and 2016-17 by way of capital in the syndicates. Ld. AR submitted that the income offered by assessee is much higher as compared to the quantum of capital investment. Ld. AR submitted that having regard to the additional income already offered by assessee and taxed by revenue-authorities in preceding years, the sources of capital investment made by assessee in subsequent years are automatically proved; therefore the additions made by AO ought to be deleted. 27. Per contra, Ld. DR invited our attention to Para No. 4.4.6 of the order of CIT(A) extracted below for a ready reference: “4.4.6 The AO during the course of assessment proceedings observed that appellant made capital investment in various syndicates amouting to Rs. 56,61,585/- in AY 2013-14, Rs. 6,75,032/- in AY 2014-15, Rs. 6,54,77,891/- in AY 2016-17. However, the AO later on observed that there were various mistakes apparent from record and therefore, the AO on 12.11.2018 passed order u/s 154 of the Act making all the apparent mistakes in AYs 2013-14 to 2016-17. The AO after passing rectification order held that the appellant has made investment of Rs. 28,25,792/- in AY 2013-14, Rs. 3,37,516/- in AY 2014-15 and Rs. 54,56,490/- in AY 2016-17. I have considered the working made by the Special Auditors, findings of the AO and written as well as oral submissions of the appellant made before me. After considering the facts of the case, I do not find any merit in the contention of the appellant. I do not find any infirmity in the quantum of the undisclosed investment computed by the AO. I find that the AO has diligently allowed the credits, wherever necessary, from the withdrawals made by the appellant in earlier years from the capital so invested. Thus, addition made by the AO on account of capital investment by appellant in syndicate is confirmed.” [Emphasis supplied] Ld. DR referred to the underlined portion and argued that the CIT(A) has made a clear finding that the AO has diligently allowed the credits, where necessary. Therefore, the assessee does not deserve further credit or at the best this issue can be remanded back to AO for a fresh examination. Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 40 of 41 28. We have considered rival submissions. On a careful reading of CIT(A)’s observation we find that the CIT(A) is talking of the credit given by AO from the withdrawals made by appellant in earlier years from the capital invested. But, however, the contention of Ld. AR is different. Ld. AR is linking the capital investment with additional income offered by assessee in earlier years. At the same time, we are not able to verify from the records the nature of additional income offered in earlier years, whether it was in liquid form or not so that cash flow is available to assessee for making investment in subsequent years. Hence, the contention raised by Ld. AR requires verification at AO level. Therefore, we think it appropriate to remand this issue back to the file of AO for consideration afresh. The AO shall verify the records of preceding years for ascertaining the form/nature/type of additional income offered by assessee and whether such additional income generates cash flow for making investment in subsequent years. Needless to mention that the AO shall afford opportunity to assessee to explain his stand adequately and the assessee shall also participate in the hearing fixed by AO. Thereafter, the AO shall take a final call on the issue. With this, we remand this issue to AO. 29. Resultantly, all appeals of revenue are dismissed and that of assessee are allowed for statistical purposes. Order pronounced in the open court on 15/06/2023. Sd/- Sd/- (T.R. Senthil Kumar) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore िदनांक /Dated : 15.06.2023 Shri Vikram Singh IT(SS)A No.19 to 21/Ind/2021 and 139 to 141/Ind/2020 Assessment year 2013-14 to 2016-17 Page 41 of 41 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Indore Bench, Indore