C/TAXAP/607/2015 IA JUDGMENT IN HIGH COURT OF GUJARAT AT AHMEDABAD MISC. CIVIL APPLICATION (OJ) NO. 1 of 2016 In R/TAX APPEAL NO. 607 of 2015 FOR APPROVAL AND SIGNATURE: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE MR.JUSTICE A.G.URAIZEE 1 Whether Reporters of Local Papers may be NO allowed to see judgment? 2 To be referred to Reporter or not? NO 3 Whether their Lordships wish to see fair copy NO of judgment? 4 Whether this case involves substantial NO question of law as to interpretation of constitution of India, 1950 or any order made thereunder? PRI.COMMISSIONER OF INCOME TAX-1 Versus M/S KUNVARJI COMMODITIES BROKERS PVT.LTD. Appearance: MRS MAUNA M BHATT for PETITIONER(s) No. MR B S SOPARKAR for RESPONDENT(s) No. RULE SERVED for RESPONDENT(s) No. CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE MR.JUSTICE A.G.URAIZEE Page 1 of 9 Downloaded on : Wed May 06 10:38:50 IST 2020 C/TAXAP/607/2015 IA JUDGMENT Date : 12/03/2020 IA JUDGMENT (PER : HONOURABLE MS.JUSTICE HARSHA DEVANI) 1. By this application, applicant (original appellant) seeks recall of order dated 02.11.2015 passed by this Court in Tax Appeal No. 607 of 2015 and seeks admission of appeal on proposed substantial questions of law. 2. applicant, as appellant, preferred captioned Tax Appeal against order dated 19.03.2015 made by Income Tax Appellate Tribunal, Ahmedabad Bench, 'A' (hereinafter referred to as Tribunal ) in IT (SS) No. 678/Ahd/2010 by proposing following questions, stated to be substantial questions of law: (A) Whether Appellate Tribunal has substantially erred in law in deleting addition without appreciating full facts of case elaborately dealt with by Assessing Officer and thereby order of Appellate Tribunal is perverse? (B) Whether Appellate Tribunal has substantially erred in law in not appreciating that disclosure of undisclosed income u/s. 132(4) of Act made voluntarily and without any element of coercion could not be retracted without cogent evidence? 3. By order dated 02.11.2015, this Court had dismissed appeal by placing reliance upon order dated 06.10.2015 made in Tax Appeal No. 610 of 2015 in case of Principal Commissioner of Income Tax v. Kunvarji Finance Private Limited. Page 2 of 9 Downloaded on : Wed May 06 10:38:50 IST 2020 C/TAXAP/607/2015 IA JUDGMENT 4. It is case of applicant that as can be seen from assessment order, addition was proposed on issue of client code modification. However, addition with regard to client code modification was subsumed in addition made on account of disclosure made under section 132(4) of Income Tax Act, 1961 (hereinafter referred to as Act ). That addition made pursuant to disclosure under section 132(4) of Act was on account of undisclosed income on basis of client code modification conducted by assessee. 5. Mr. M. R. Bhatt, Senior Advocate, learned counsel for applicant submitted that this Court had admitted appeal in case of Kunvarji Finance Private Limited in Tax Appeal No. 610 of 2015 on issue of client code modification and that, in this case also, addition was proposed on issue of client code modification. learned counsel invited attention of Court to paragraph 6 of assessment order, to submit that amount of Rs.2 crore has been added as amount of unaccounted income earned by assessee by virtue of client code modification. It was submitted that proposed question (A) does not relate to question (B) inasmuch as question (B) relates to disclosure of undisclosed income under section 132(4) of Act, whereas, question (A) relates to deletion of addition including addition made on account of client code modification. It was submitted that addition made pursuant to disclosure was on basis of client code modification conducted by assessee. It was accordingly submitted that issue of client code modification is duly covered by proposed question (A) and hence, order dated 02.11.2015 passed in Tax Appeal No. Page 3 of 9 Downloaded on : Wed May 06 10:38:50 IST 2020 C/TAXAP/607/2015 IA JUDGMENT 607 of 2015 be recalled and appeal be admitted on proposed substantial question of law. 6. Opposing application, Mr. S. N. Soparkar, Senior Advocate, learned counsel for respondent submitted that there is no error in order dated 02.11.2015 passed by this Court as client code modification can never apply to assessee as it is not client but broker. It was submitted that allegation against assessee is that it permitted its clients to have inter se adjustment, and hence, no addition can be made in its hands in name of client code modification. 6.1 Next it was submitted that for purpose of exercising powers of review, error must be error apparent on record. Reliance was placed upon decision of Supreme Court in Parsion Devi v. Sumitri Devi, (1997) 8 SCC 715, wherein, Court held thus: 7. It is well settled that review proceedings have to be strictly confined to ambit and scope of Order 47, Rule 1, CPC. In Thungabhadra Industries Ltd. v. Govt. of A.P., AIR 1964 SC 1372, this Court opined: "What, however, we are now concerned with is whether statement in order of September, 1959 that case did not involve any substantial question of law is 'error apparent on face of record'. fact that on earlier occasion Court held on identical state of facts that substantial question of law arose would not per se be conclusive, for earlier order itself might be erroneous. Similarly, even if statement was wrong, it would not follow that it was 'error apparent on face of record', for there is distinction which is real, though it might not always be capable of exposition, between mere erroneous decision and decision which could be" Page 4 of 9 Downloaded on : Wed May 06 10:38:50 IST 2020 C/TAXAP/607/2015 IA JUDGMENT characterised as vitiated by 'error apparent'. review is by no means appeal in disguise whereby erroneous decision is reheard and corrected, but lies only for patent error ." (emphasis ours) 8. Again, in Meera Bhanja v. Nirmala Kumari Choudhury, (1995) 1 SCC 170, while quoting with approval passage from Aribam Tuleshwar Sharma v. Aribam Pishak Sharma, (1979) 4 SCC 369, this Court once again held that review proceedings are not by way of appeal and have to be strictly confined to scope and ambit of Order 47 Rule 1 CPC. 9. Under Order 47 Rule 1 CPC judgment may be open to review inter alia if there is mistake or error apparent on face of record. error which is not self-evident and has to be detected by process of reasoning, can hardly be said to be error apparent on face of record justifying court to exercise its power of review under Order 47 Rule 1 CPC. In exercise of jurisdiction under Order 47 Rule 1 CPC it is not permissible for erroneous decision to be "reheard and corrected". review petition, it must be remembered has limited purpose and cannot be allowed to be "an appeal in disguise"." 6.2 It was submitted that order dated 02.11.2015 passed by this Court in Tax Appeal No. 607 of 2015 being just, legal and proper, there is no warrant to review or recall same. It was accordingly urged that application being devoid of merits, deserves to be rejected. 7. facts as appearing from assessment order dated 23.12.2009 passed under section 153A(1)(b) read with section 143(3) of Act are that assessee is broker and Kunvarji Finance Private Limited is client of assessee. Inquiries revealed that assessee M/s. Kunvarji Commodities Brokers Private Limited had done client code modifications for Page 5 of 9 Downloaded on : Wed May 06 10:38:50 IST 2020 C/TAXAP/607/2015 IA JUDGMENT unusually high number of times. According to Assessing Officer, client code modifications have been made to hide correct profit of particular client. In assessment order, Assessing Officer has recorded that analysis of data captured in computer hard disk seized from head office of respondent was made by Investigation Wing. profit/loss was recomputed without effecting client code modification i.e. without code modifications . In other words, profit/loss has been worked out with reference to old clients instead of new clients . result of such re- computation revealed that different clients of Kunvarji Commodities Broker Private Limited (the assessee) including group company Kunvarji Finance Private Limited had diverted their profits to other persons. 7.1 fact regarding suppression of profits of its various clients along with relevant details came to be furnished to assessee and it was asked as to why said difference as furnished to broker does not represent unaccounted profits of its clients which have been derived by methodology of repeated client ID modifications carried out through terminals of broker. 7.2 Insofar as assessee is concerned, case of Assessing Officer is that for providing such facility of broker, assessee had earned unaccounted income. Assessing Officer has attributed Rs.2 crore to assessee based on statement of Shri Nayan Thakkar who had accepted unaccounted income of Rs.12 crore in his statement recorded on 26.03.2008 and had stated that this unaccounted income pertains to assessee, Kunvarji Finance Private Limited, Page 6 of 9 Downloaded on : Wed May 06 10:38:50 IST 2020 C/TAXAP/607/2015 IA JUDGMENT Kunvarji Finstock Private Limited, etc. Out of such amount, Rs.8 crore was disclosed in hands of Kunvarji Finance Private Limited. 7.3 Assessing Officer held that out of balance Rs.4 crore, Rs.2 crore had been earned by assessee for providing client code modification to its clients and group concerns. This unaccounted income was then attributed year- wise in ratio of client code modification. 8. In case of Principal Commissioner of Income Tax v. M/s. Kunvarji Finance Private Limited in Tax Appeal No. 610 of 2015, proposed question (A) reads thus: Whether ITAT has erred in law and on facts in accepting view of assessee that disclosure at time of search had no basis even though retraction was afterthought? 8.1 This Court, in its order dated 06.10.2015 rendered in above appeal, has in context of proposed question (A), held thus: 7. Thus, while it is true that on behalf of assessee Mr. Nayan Thakkar had admitted unaccounted income of Rs.12,00,00,000/- which was subsequently reiterated by letter dated 10.04.2008. However, facts reveal that statement had been recorded under circumstances which clearly disclose that admission could not have been recorded voluntarily. subsequent letter and retraction which has been made much later have to be seen in backdrop of facts of case, which clearly show that relevant documents which were seized by Department were not made available to assessee for long time. Moreover, Commissioner (Appeals) and Tribunal Page 7 of 9 Downloaded on : Wed May 06 10:38:50 IST 2020 C/TAXAP/607/2015 IA JUDGMENT have recorded concurrent findings of fact that additions have no reference to seized material and that there is no material or evidence to support additions made by Assessing Officer. In other words, addition is sought to be made solely on basis of statement recorded under section 132(4) of Act which has been subsequently retracted, without such statement being corroborated by any material on record. In decisions on which reliance has been placed upon by learned counsel for appellant, statement of assessee, though subsequently retracted, was corroborated by material seized during search, whereas in present case Tribunal has recorded categorical finding to effect that in assessment order, Assessing Officer has not pointed out any defect or discrepancy in any of documents seized from business premises of assessee and that addition has been made only on account of client modification code. Under circumstances, conclusion arrived at by Tribunal that disclosure at time of search had no basis being based upon findings of fact recorded after appreciation of material on record, does not give rise to any question of law. ground of appeal raised vide question [A] is, therefore, rejected." 9. From facts noted hereinabove, it is apparent that Assessing Officer had made addition in hands of assessee on basis of disclosure made by Shri Nayan Thakkar by bifurcating amount of Rs.12 crore into three parts, Rs.8 crore in hands of Kunvarji Finance Private Limited, Rs.2 crore in hands of Shri Nayan Thakkar and Rs.2 crore in hands of assessee as amount received for providing client code modification. 10. While it is true that Assessing Officer has held that Rs.2 crore was received by assessee for providing client code modification and he has attributed this amount year-wise in ratio of client code modifications, such Page 8 of 9 Downloaded on : Wed May 06 10:38:50 IST 2020 C/TAXAP/607/2015 IA JUDGMENT addition is not based on any material other than disclosure made by Shri Nayan Thakkar. Assessing Officer has merely held that amount of Rs.2 crore out of amount disclosed by Shri Nayan Thakkar has been received by assessee from clients by aiding them by suppressing their profits by way of diversion of profits through methodology of client code modifications. 11. In light of above facts, this Court is of view that contention of revenue that addition with regard to client code modifications was subsumed in addition made on account of non-disclosure made under section 132(4) of Act, does not merit acceptance. This Court is of view that both questions proposed in appeal stand covered by findings recorded in paragraph 7 of order dated 06.10.2015 passed in Tax Appeal No. 610 of 2015. Under circumstances, no case is made out for recall of order dated 02.11.2015 made in captioned appeal. 12. application, therefore, fails and is, accordingly, rejected. [ Harsha Devani, J. ] [ A. G. Uraizee, J. ] hiren Page 9 of 9 Downloaded on : Wed May 06 10:38:50 IST 2020 Pri. Commissioner of Income-tax-1 v. Kunvarji Commodities Brokers Pvt. Ltd