SAMURAI SOFTWARE (P) LTD. v. COMMISSIONER OF INCOME TAX
[Citation -2007-LL-1026-1]

Citation 2007-LL-1026-1
Appellant Name SAMURAI SOFTWARE (P) LTD.
Respondent Name COMMISSIONER OF INCOME TAX
Court ITAT
Relevant Act Income-tax
Date of Order 26/10/2007
Assessment Year 1991-92
Judgment View Judgment
Keyword Tags unexplained investment • individual capacity • unaccounted money
Bot Summary: JUDGMENT The judgment of the court was delivered by R. M. Lodha J. The only contention raised by counsel for the appellant assessee-company in challenging the order of the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, dated June 10, 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 Commissioner of Income-tax and the Tribunal ought to have, to that extent, modified the order of the Commissioner of Income-tax. The Commissioner of Income-tax in his order dated March 20, 1995, noticed the two statements of Mahesh Toshniwal and observing that since no material was brought on record by the Assessing Officer 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 Assessing Officer to include the amount of Rs. 4,37,048 in the income of Mahesh Toshniwal for the assessment year 1991- 92. The Assessing Officer 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 assessment year 1991-92. The contention of the Revenue before the Tribunal was that the Commissioner of Income-tax 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 Assessing Officer to include the same in the hands of Mahesh Toshniwal. The grievance of the appellantcompany 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 appellantcompany as well as its director. Consequent upon what we have said above, we clarify that the order of the Commissioner of Income-tax dated March 20, 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 fur ther observe that the income-tax paid by Mahesh Toshniwal on the said amount of Rs. 4,37,048 shall be refunded to him.


JUDGMENT judgment of court was delivered by R. M. Lodha J. only contention raised by counsel for appellant assessee-company in challenging order of Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, dated June 10, 2002, is that if Tribunal is held to be justified in making addition of Rs. 4,37,048 in hands of appellant-company, then said amount could not have been taxed in hands of director Shri Mahesh Toshniwal as was done by Commissioner of Income-tax (Appeals) and Tribunal ought to have, to that extent, modified order of Commissioner of Income-tax (Appeals). We are satisfied that following substantial question of law arises in this appeal for consideration: Whether Income-tax Appellate Tribunal ought to have clarified in view of its order that addition of Rs. 4,37,048 has to be made in hands of appellant-company that said addition is not taxable in hands of its director Mahesh Toshniwal as was done by Commissioner of Income-tax (Appeals)? aforereferred question arises in facts and circumstances which may be briefly noticed by us immediately now. appellant-company is private limited company. premises of company were searched on January 8, 1993, and so also residential premises of its director Mahesh Toshniwal. During course of search, books of account of company were seized which reflected purchases from five parties, namely, (1) M/s. M. P. Electronics Circuits Ltd., New Delhi; (2) M/s. R. Prakash Plastics, Delhi; (3) M/s. R. K. Electronics; (4) M/s. Cosmos Systems and (5) M/s. Integral Electronics. statement of Mahesh Toshniwal, one of directors of company, was recorded during course of search. His statement was also recorded under section 131 thereafter. In both statements, he was not in position to explain source and expressed his willingness to surrender that amount for tax. Assessing Officer in his order dated December 26, 1994, observed thus: 7. From statement of Shri Mahesh Toshniwal it is clear that purchases of Rs. 4,37,048 from abovementioned five parties are not genuine. It is also accepted by him that payment for alleged purchases have been made, though amount are shown outstanding in books of account. Shri Mahesh Toshniwal has also not been able to give any evidence about purchases from other parties. There is no evidence about quantum of money spent for such purchases. alleged purchases from such unknown parties are totally unvouched. Therefore, no deduction can be allowed to assessee- company on account of purchases of Rs. 4,37,048 from abovementioned parties. Regarding source of alleged payment to unidentified parties, any evidence of such payments is not available. Though, assessee has accepted that such payments have been made from unaccounted money but Shri Toshniwal, director of 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 claim of purchases from above parties are concerned, same are disallowable in hands of assesseecompany as bogus purchases and added to total income under head Income from undisclosed sources . He, accordingly, added sum of Rs. 4,37,048 in income of company from undisclosed sources. appellant-company challenged order of Assessing Officer in appeal before Commissioner of Income-tax (Appeals). Commissioner of Income-tax (Appeals) in his order dated March 20, 1995, noticed two statements of Mahesh Toshniwal and observing that since no material was brought on record by Assessing Officer to show that appellant-company had utilised its own unaccounted money for making purchases for amount of Rs. 4,37,048, he deleted said amount from income of appellant-company and directed Assessing Officer to include amount of Rs. 4,37,048 in income of Mahesh Toshniwal for assessment year 1991- 92. This is what Commissioner of Income-tax (Appeals) held in its order dated March 20, 1995: 1.5 I have closely examined statement of Shri Mahesh Toshniwal and other facts. appellant had shown five alleged sellers as creditors in books of account. No payment was shown to have been made by appellant to them. director, Shri Mahesh Toshniwal, in his two statements, claimed that payment was made by him from his personal funds. No material was brought on record by Deputy Commissioner of Income-tax to show that appellant had utilised its own unaccounted money for making purchases for aforesaid amount of Rs. 4,37,048 in case of appellant is deleted. However, Assessing Officer dealing with case of Shri Mahesh Toshniwal is directed to include said amount of Rs. 4,37,048 as his income for period relevant to assessment year 1991-92. Consequently, appellant gets relief of Rs, 4,37,048. Revenue was aggrieved by order of Commissioner of Income- tax (Appeals) dated March 20, 1995, and preferred appeal before Tribunal. contention of Revenue before Tribunal was that Commissioner of Income-tax (Appeals) erred in deleting addition of Rs. 4,37,048, made on account of unexplained investment from income of company and directing Assessing Officer to include same in hands of Mahesh Toshniwal. Tribunal considered matter in paragraph 6 of its order thus: 6. We have carefully considered rival submissions of parties, perused material available on record and decision relied upon by learned Departmental representative. We find that as result of search on assessee-company, purchases totalling to Rs. 4,37,048 were not found recorded in seized books of account of assessee-company. No surrender was made on behalf of company by any of directors of assessee- company. surrender was made by Shri Mahesh Toshniwal, one of directors of company in his individual capacity and not on behalf of assessee-company and same was considered in his personal assessment. Under law, company is separate juridical person. surrender made by Shri Mahesh Toshniwal, in his individual capacity is not binding on assessee-company. Shri Mahesh Toshniwal in his personal statements, has nowhere stated that surrender was made on behalf of assessee- company. We also find that even in return filed in response to notice under section 148, assessee-company did not include said amount of bogus purchases. assessee-company has not placed any material as to show that said purchases, in fact, belong to Shri Mahesh Toshniwal and not assessee-company. Under these circumstances, we do not find any merit in plea of learned authorised representative that since said amount of purchases has been added in hands of Shri Mahesh Toshniwal, no addition can be made in hands of assessee-company. It is settled law that tax has to be levied on real person. Under these circumstances and keeping in view decision of hon ble Delhi High Court as relied on by learned Departmental representative in case of CIT v. La Medica [2001] 250 ITR 575, we are of view that assessee-company has debited bogus purchases in its books of account which assesseecompany could not substantiate and, accordingly, Commissioner of Income-tax (Appeals) was not justified in deleting addition of Rs. 4,37,048, which is directed to be reversed and added in income of assessee-company. Consequently, addition made by Assessing Officer amounting to Rs. 4,37,048 is upheld. ground taken by Revenue, is therefore, allowed. Tribunal, thus, by its order dated June 10, 2002, set aside order of Commissioner of Income-tax (Appeals) and restored addition of Rs. 4,37,048 in hands of appellant-company as was done by Assessing Officer. In so far as addition of Rs. 4,37,048 in hands of appellant company is concerned, we are satisfied with reasons given by Tribunal in paragraph 6 of its order. addition of amount of Rs. 4,37,048 in hands of appellant-company cannot be said to be unjustified. surrender of that amount for tax by its director Mahesh Toshniwal in his individual capacity had no legal sanctity. As matter of fact, counsel for appellant-company in light of facts noticed by Tribunal did not challenge that finding. grievance of appellantcompany is limited and that grievance is that amount of Rs. 4,37,048 having been added to income of appellant-company, said amount has to be deleted from income of Mahesh Toshniwal; same amount could not have been taxed twice in hands of appellantcompany as well as its director. Ms. Parinitoo Jain, counsel for Revenue did not dispute position that same amount could not be taxed in hands of director of company once it has been added to income of appellant-company. She was, therefore, not averse to clarification being made by us to that extent. We hold that Income-tax Appellate Tribunal having made addition of Rs. 4,37,048 in hands of appellant-company, it ought to have ordered deletion of that amount from income of Mahesh Tosh niwal. order of Commissioner of Income-tax (Appeals) must have been set aside by making this position very clear. We answer question accordingly. Consequent upon what we have said above, we clarify that order of Commissioner of Income-tax (Appeals) dated March 20, 1995, stands set aside to extent addition of Rs. 4,37,048 has been made in hands of Mahesh Toshniwal. To avoid multiplicity of litigation, we fur ther observe that income-tax paid by Mahesh Toshniwal on said amount of Rs. 4,37,048 shall be refunded to him. appellant-company shall discharge its tax liability as per order of Assessing Officer without any delay. appellant- company shall, however, be at liberty to apply to Central Board of Direct Taxes for waiver of interest. We observe that if such application is made, Board shall consider same in accordance with law and pass appropriate order thereon. parties shall bear their own costs. *** SAMURAI SOFTWARE (P) LTD. v. COMMISSIONER OF INCOME TAX
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