High Court Of Rajasthan : Jaipur Bench
Samurai Software (P) Ltd. vs. CIT
Section 69
Asst. Year 1991-92
R.M. Lodha & Mahesh Chandra Sharma, JJ.
IT Appeal No. 21 of 2003
26th October, 2007
Counsel Appeared
Sanjay Jhanwar, for the Appellant : Ms. Parinitoo Jain, for the Respondent
JUDGMENT
R.M. Lodha, J. :
The only contention raised by the counsel for the appellant assessee company in challenging the order of the Tribunal, Jaipur Bench, Jaipur dt. 10th June, 2002 is that if the Tribunal is held to be justified in making the addition of Rs. 4,37,048 in the hands of the appellant company then the said amount could not have been taxed in the hands of the director Shri Mahesh Toshniwal as was done by the CIT(A) and the Tribunal ought to have, to that extent, modified the order of the CIT (A).
2. We are satisfied that the following substantial question of law arises in this appeal for consideration : “Whether Tribunal ought to have clarified in view of its order that the addition of Rs. 4,37,048 has to be made in the hands of the appellant company that the said addition is not taxable in the hands of its director Mahesh Toshniwal as was done by CIT(A) ?”
3. The afore-referred question arises in the facts and circumstances which may be briefly noticed by us immediately now. The appellant company is a private limited company. The premises of the company were searched on 8th Jan., 1993 and so also the residential premises of its director Mahesh Toshniwal. During the course of search, the books of accounts of the company were seized which reflected purchases from five parties namely (one) M/s M.P. Electronics Circuits Ltd., New Delhi; (two) M/s R. Prakash Plastics, Delhi; (three) M/s R.K. Electronics; (four) M/s Cosmos Systems and (five) M/s Integral Electronics. The statement of Mahesh Toshniwal, one of the directors of the company was recorded during the course of search. His statement was also recorded under s. 131 thereafter. In both the statements, he was not in a position to explain the source and expressed his willingness to surrender that amount for tax.
4. The AO in his order dt. 26th Dec., 1994 observed thus :
“7. From the statement of Shri Mahesh Toshniwal it is clear that purchases of Rs. 4,37,048 from the above mentioned five parties are not genuine. It is also accepted by him that the payment for the alleged purchases have been made, though the amount are shown outstanding in the books of accounts. Shri Mahesh Toshniwal has also not been able to give any evidence about the purchases from the other parties. There is no evidence about the quantum of money spent for such purchases. The alleged purchases from such unknown parties are totally unvouched. Therefore, no deduction can be allowed to the assessee company on account of the purchases of Rs. 4,37,048 from the abovementioned parties. Regarding the source of the alleged payment to unidentified parties, any evidence of such payments is not available. Though, the assessee has accepted that such payments have been made from unaccounted money but Shri Toshniwal, director of the assessee company is not able to give any evidence that such unaccounted payments were made by him from his own funds. Therefore, as far as the claim of purchases from the above parties are concerned, the same are disallowable in the hands of the assessee company as bogus purchases and added to the total income under the head income from undisclosed sources.” He, accordingly, added a sum of Rs. 4,37,048 in the income of the company from undisclosed sources.
5. The appellant company challenged the order of the AO in appeal before the CIT(A). The CIT(A) in its order dt. 20th March, 1995 noticed the two statements of Mahesh Toshniwal and observing that since no material was brought on record by the AO to show that the appellant company had utilised its own unaccounted money for making the purchases for the amount of Rs. 4,37,048, he deleted the said amount from the income of the appellant company and directed the AO to include the amount of Rs. 4,37,048 in the income of Mahesh Toshniwal for the asst. yr. 1991-92. This is what the CIT(A) held in its order dt. 20th March, 1995 : “1.5 I have closely examined the statement of Shri Mahesh Toshniwal and the other facts. The appellant had shown the five alleged sellers as creditors in the books of account. No payment was shown to have been made by the appellant to them. The director, Shri Mahesh Toshniwal, in his two statements, claimed that the payment was made by him from his personal funds. No material was brought on record by the Dy. CIT to show that the appellant had utilised its own unaccounted money for making the purchases for the aforesaid amount of Rs. 4,37,048 in the case of the appellant is deleted. However, the AO dealing with the case of Shri Mahesh Toshniwal is directed to include the said amount of Rs. 4,37,048 as his income for the period relevant to the asst. yr. 199192. Consequently, the appellant gets a relief of Rs. 4,37,048.” The Revenue was aggrieved by the order of the CIT(A) dt. 20th March, 1995 and preferred appeal before the Tribunal. The contention of the Revenue before the Tribunal was that the CIT(A) erred in deleting the addition of Rs. 4,37,048 made on account of unexplained investment from the income of the company and directing the AO to include the same in the hands of Mahesh Toshniwal. The Tribunal considered the matter in para 6 of its order thus :
6. We have carefully considered the rival submissions of the parties, perused the material available on record and the decision relied upon by the learned Departmental Representative. We find that as a result of search on assessee company, the purchases totaling to Rs. 4,37,048 were not found recorded in the seized books of accounts of the assessee company. No surrender was made on behalf of the company by any of the directors of the assessee company. The surrender was made by Shri Mahesh Toshniwal, one of the directors of the company in his individual capacity and not on behalf of the assessee company and the same was considered in his personal assessment. Under the law, the company is a separate juridical person. The surrender made by Shri Mahesh Toshniwal, in his individual capacity is not binding on the assessee company. Shri Mahesh Toshniwal in his personal statements, has nowhere stated that the surrender was made on behalf of the assessee company. We also find that even in the return filed in response to notice under s. 148, the assessee company did not include the said amount of bogus purchases. The assessee company has not placed any material as to show that the said purchases, in fact, belong to Shri Mahesh Toshniwal and not the assessee company. Under these circumstances, we do not find any merit in the plea of the learned Authorised Representative that since the said amount of purchases has been added in the hands of Shri Mahesh Toshniwal, no addition can be made in the hands of the assessee company. It is a settled law that the tax has to be levied on the real person. Under these circumstances and keeping in view the decision of Hon’ble Delhi High Court as relied by the learned Departmental Representative in the case of CIT vs. LA Medica (2001) 168 CTR (Del) 314 : (2001) 250 ITR 575 (Del), we are of the view that the assessee company has debited bogus purchases in its books of accounts which the assessee company could not substantiate and, accordingly, the CIT(A) was not justified in deleting the addition of Rs. 4,37,048, which is directed to be reversed and added in the income of the assessee company. Consequently, the addition made by the AO amounting to Rs. 4,37,048 is upheld. The ground taken by the Revenue, is therefore, allowed.”
The Tribunal, thus, by its order dt. 10th June, 2002 set aside the order of the CIT(A) and restored the addition of Rs. 4,37,048 in the hands of the appellant company as was done by the AO. Insofar as the addition of Rs. 4,37,048 in the hands of the appellant company is concerned, we are satisfied with the reasons given by the Tribunal in para 6 of its order. The addition of the amount of Rs. 4,37,048 in the hands of the appellant company cannot be said to be unjustified. The surrender of that amount for tax by its director Mahesh Toshniwal in his individual capacity had no legal sanctity. As a matter of fact, the counsel for the appellant company in the light of the facts noticed by the Tribunal did not challenge that finding. The grievance of the appellant company is limited and that grievance is that the amount of Rs. 4,37,048 having been added to the income of the appellant company, the said amount has to be deleted from the income of Mahesh Toshniwal; the same amount could not have been taxed twice in the hands of the appellant company as well as its director. Ms. Parinitoo Jain, the counsel for the Revenue did not dispute the position that the same amount could not be taxed in the hands of the director of the company once it has been added to the income of the appellant company. She was, therefore, not averse to the clarification being made by us to that extent. We hold that the Tribunal having made the addition of Rs. 4,37,048 in the hands of the appellant company, it ought to have ordered deletion of that amount from the income of Mahesh Toshniwal. The order of the CIT(A) must have been set aside by making this position very clear. We answer the question accordingly. Consequent upon what we have said above, we clarify that the order of the CIT(A) dt. 20th March, 1995 stands set aside to the extent the addition of Rs. 4,37,048 has been made in the hands of Mahesh Toshniwal. To avoid the multiplicity of litigation, we further observe that the income-tax paid by Mahesh Toshniwal on the said amount of Rs. 4,37,048 shall be refunded to him. The appellant company shall discharge its tax liability as per the order of the AO without any delay. The appellant company shall, however, be at liberty to apply to the CBDT for waiver of interest. We observe that if such application is made, the Board shall consider the same in accordance with law and pass appropriate order thereon. The parties shall bear their own costs.
[Citation : 299 ITR 324]
