Deepak R. Shak A.M.
These three appeals by revenue and cross-objections by assessee are arising out of the orders of Commissioner (Appeals)-V, Bangalore dated 31-7-2000.
The main ground of appeal by revenue is against setting aside of the assessment with direction to redo the same after examining the search materials etc. and affording opportunity to the assessee.
At the time of hearing the learned Departmental Representative Mr. Amitabh Kumar submitted that since assessing officer has passed the orders subsequent to the direction of learned Commissioner (Appeals), the appeals are not pressed into service. He therefore sought leave to withdraw the appeals. The learned counsel for assessee (authorised representative) Mr. Pradeep submitted that the appeals may be allowed to be withdrawn.
Since the revenue do not want to press these appeals, the appeals a re dismissed as not pressed.
In the result the appeals of revenue are dismissed.
We shall now take up the cross-objection raised by the assessee.
At the outset Mr. Amitabh Kumar submitted that the CO may not be entertained for the reason that
(i) There is no appeal pending and hence there cannot be a CO.
(ii) The CO is belated and not filed within the statutory time-limit and hence cannot be, entertained.
To this Mr. Pradeep submitted that the COs are as good as the appeals and hence can be pressed into service even in the absence of the appeal before the Tribunal. For this purpose he submitted that provisions of section 253(4) are clear. He also relied upon the decision of Tribunal, Pune in Assistant Commissioner v. Kripa Chemicals (P) Ltd. (2002) 82 ITD 449 (Pune). As regards the delay, it was submitted that there is no delay in filing the appeal since the copy of appeal memo along with grounds of appeal was received by the assessee only on 22-5-2002 and the COs have been filed on 24-5-2002. Though originally the Form No. 36 was received on 28-11-2000, the same was defective as per the notice of defect issued by the Asst. Registrar of the Tribunal and the said defect was rectified only on or after 14-12-2000. Appeal memo duly rectified has not been sent to assessee after 14-12-2000. The assessee had also requested that the grounds of appeal were not received by the assessee and,the copy of the same was made available only on 22-5-2002. Thus there is no delay. As regards the delay, if any, between Nov., 2000 and April 2002, it was submitted that the papers were handed over to the counsel by the assessee. The counsel was not available at the relevant time and since assessee was too pre-occupied with other civil and criminal cases filed against the assessee by several parties, the matter remained unattended. It was therefore submitted that apparently there is no delay. However, even if it is considered as delay in filing CO, the delay needs to be condoned in view of the decision of Hon'ble Supreme Court in Collector, Land Acquisition v. Mst. Katiji & Ors. (1987) 167 ITR 471 (SC). In reply learned Departmental Representative submitted that since the assessment has been reframed after the matter has been set aside, the assessee has an option to challenge the same in appeal and hence the CO before the Tribunal does not survive. For this proposition he relied upon the decision of Hon'ble Supreme Court in Shiromani Gurdwara Parbandhak Committee v. Raja Shiv Rattan Dev Singh AIR 1955 SC 576 and Ajit Singh Thakur Singh & Anr. v. State of Gujarat AIR 1981 SC 733. As regards the delay, no reasonable cause has been demonstrated and hence the delay of almost 15 months cannot be condoned.
Before we proceed with the grounds raised in the CO, we would like to deal with whether the CO can be validly disposed off by us or not. Section 253(4) states that the assessee or the revenue can file a CO notwithstanding that he may not have appealed against the order of Commissioner (Appeals). It also prescribes that the CO is as good as an appeal and is required to be disposed off as if it is an appeal presented. We are also in agreement with the decision of Tribunal, Pune in CIT v. Kirpa Chemicals (supra) wherein the decision of Hon'ble Supreme Court in Superintending Engineer v. B. Subba Reddy AIR (1999) SCW 1479 was relied upon. Hon'ble Supreme Court in the said case held as under : ,
"Appeal is substantive right. It is a creation of the statute. Right to appeal does not exist unless it is specifically conferred. Cross-objection is like an appeal. It has all the trappings of an appeal. It is filed in the form of memorandum and the provisions of rule I of 0. 41 of the Code, so far as these relate to the form and contents of the memorandum of appeal apply to cross-objection as well. Court fee is payable on cross-objection like that on the memorandum of appeal. Provisions relating to appeals by indigent person also apply to cross -objection. Even where the appeal is withdrawn or is dismissed for default, cross-objection may nevertheless be heard and determined. Respondent even though he has not appealed may support the decree on any other ground but if wants to modify it, he has to file cross-objection to the decree which objections he could have taken earlier by filing an appeal. Tune for filing objection which is in the nature of appeal is extended by one month after service of notice on him of the day fixed for hearing the appeal. This time could also be extended by the court like in appeal. Cross-objection is nothing but an appeal, a cross-appeal at that. It may be that the respondent wanted to give quietus to whole litigation by his accepting the judgment and decree or order even if it was partly against his interest. When, however, the other party challenged the same by filing an appeal statute gave the respondent a second chance to file an appeal by way of cross-objection if he still felt aggrieved by the judgment and decree and order."
The decision relied upon by learned Departmental Representative are not directly on the issue involved and hence does not support the contention of revenue. We therefore hold that a CO is still required to be dealt with and disposed off in absence of an appeal which had been withdrawn.
As regards the delay in filing the CO we have perused the record of the Registry, from which it is found that the grounds of appeal filed by the department were submitted to the assessee on 22-5-2002. The appeal memo was served to the assessee on 28-11-2000, which has been duly acknowledged on behalf of the assessee. If the appeal memo is received by the assessee, we do not see any reason that the grounds of appeal were not supplied along with the same. If that is not the case one extra copy of the grounds of appeal should have remained in the file of the Tribunal. The objection by the assessee that the grounds of appeal filed by the Tribunal were not received by him was objected to as late as 11-4-2002. If the assessee has not received the grounds of appeal on 20-11-2000, he would have immediately or within a reasonable time thereafter requested for the same. Hence we have no reason to hold that the grounds of appeal were not furnished to the assessee along with appeal memo. Thus there is a delay in filing of the CO. We are therefore required to determine whether there is any sufficient cause for not presenting the same within the lime-limit. The assessee in his affidavit as averred stated that when the appeal memo was received the same was handed over to the counsel of assessee. The counsel was not available and hence no discussion could take place for further action. The assessee was facing various civil and criminal cases which are born out of the facts of the case. Hon'ble Suprem court in the case of Collector, Land Acquisition v. Master Katiji & Ors. (supra) held that :
"The legislature has conferred the power to condone delay by enacting section 5 of the Limitation Act of 1963 in order to enable the Courts to do substantial justice to parties by disposing of matters on "merits." The expression "sufficient cause" employed by the legislature is adequately elastic to enable the Courts to apply the law in a meaningful manner which subserves the ends of justice-that being the life-purpose of the existence of the institution of Courts. It is common knowledge that this court has been making a justifiably liberal approach in matters instituted in this Court. But the message does not appear to have percolated down to all the other Courts in the hierarchy. And such a liberal approach is adopted on principle as it is realized that :
(a) Ordinarily, a litigant does not stand to benefit by lodging an appellate.
(b) Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits alter hearing the parties."
In view of the affidavit filed by the assessee and the decision of Hon'ble Supreme Court, we condone the delay in filing the CO after the expiry of the relevant period as we are satisfied that there is a sufficient cause for not presenting the same within the time-limit.
Before we lake up the grounds raised in the cross- objection, certain vital facts as narrated by the assessee and which are not in dispute are as under :
A search was conducted in the premises of Sri K.S. Dattareya. (KSD), father of the assessee Mr. K. Venkatesh Dutt (KVD) in June, 1985. No incriminating documents or cash was seized at the time of search. The books of accounts of M/s Inter Corp Associates (ICA), a partnership firm of which Mr. KVD is the Managing Partner was seized during the course of search in the premises of Sri. K.S. Dattatreya. Another search was conducted in the premises of the firm M/s Intercorp Associates and the residence of Sri K.S. Dattatreya during February, 1988. Various records and documents and the books of accounts were seized during the search proceedings. Mr. KVD along with Smt. K. Sudharshanamma, mother and Sri Indrajit Ghorpade started a partnership firm in June, 1984 under the name and style of M/s Intercorp Associates. The firm M/s Intercorp Associates was stated to be dissolved effective from 9-2-1986, wherein an the assets and liabilities of the firm M/s Intercorp, Associates were taken over by Sri. K. Venkatesh Dutt. In view of the above, the entire income of the firm M/s Intercorp Associates and that of Sri KVD were declared in the hands of the assessee as he has taken over all the assets and liabilities of the firm.
The firm M/s Intercorp Associates opened an account in Canara Bank , Colaba. Bombay for the purpose of financing business. During the period June, 1984 to September, 1984 bills were discounted in Canara Bank , Colaba, Bombay to the extent of Rs. 21,00,000. The cost of discounting these bills namely discounting charges and other expenses connected therewith Was approximately Rs. 21,00,000. Part of the proceeds realized out of this was remitted to State Bank of India, Shivajinagar, Bangalore and Canara Bank , Langford Town, Bangalore. Out of these remittance a sum of Rs. 1,29,50,000 was deposited in F.D. in the State Bank of India, Shivajinagar, Bangalore and a sum of Rs. 20,00,000 in Canara Bank , Langford Town, Bangalore during the period June, 1984 to December, 1984. The overdraft facilities was availed against the Fixed Deposit in State Bank of India, Shivajinagar, Bangalore and Canara Bank , Langford Town, Bangalore and amounts were advanced for purpose of film production and distribution and also for purpose of financing on security of properties and personal guarantees. Approximately of Rs. 20,00,000 was advanced for production of firms and other activities for the period June, 1984 to Dec., 1984. In February 1985 there were several implications in connection with the bill discounting facility availed by the firm ICA and as sucli in order to clear the bill discounting facility with the Canara Bank , Colaba, Bombay, cheques to the extent of Rs. 3,50,00,000 was drawn by Sri K.V.D. on Oriental Bank of Commerce, New Delhi and the same were discounted with State Bank of India. Shivajinagar, Bangalore. The amount drawn from State Bank of India, Shivajinagar, Bangalore were utilised to clear the liabilities with Canara Bank , Colaba, Bombay. These cheques which were discounted with the State Bank of India were not realized as sufficient funds were not available in the Oriental Bank of Commerce in February1985. Immediately thereafter the State Bank of India entered into, an agreement with Sri KVD and others for the purpose of the repayment of this amount. Having disregard to the agreement entered into, the State Bank of India filed Police Complaint and gave paper publicity in the second week of February1985 stating that Sri KVD and others had cheated the Bank to the extent of Rs. 3.5 crores. Utilising the cheque discounting facilities, the firm made advances to various persons and income was earned by way of interest, commission, etc. and the same was not properly reflected in the Memoranda Books maintained by the firm. During May-June, 1985, the excise auctions in Karnataka came up and Sri KVD planned to bid in the excise auction in various districts of Karnataka. Huge amounts were required for the purpose of depositing amounts towards kist (rental) deposit in the excise auctions and as such the amounts available with Sri KVD were brought as credits in the books of Sri KSD, father of assessee who has borrowed from Shri. P.J. Fernandes. A search was conducted in the premises of Shri. KSD father of Sri KVD in June, 1985 and statements were recorded from Sri KSD wherein he stated that the credit found in his pass book to the extent of Rs. 1.35 crores was the amount borrowed from P.J. Fernandes. A search was conducted in the premises of Sri P.J. Fernandes in July, 1985. Even though Sri P.J. Fernandes confirmed the transactions, at the time of search in the statement on oath Sri P.J. Fernandes denied the transactions. Assessee in order to buy peace with the department accepted that the amount brought as credit in the name of P.J. Fernandes in the books of Sri KSD was the income earned by Sri KVD utilizing the funds out of the cheque/biIl discounting facilities obtained from the Bank . A search was conducted by the C.B.I. authorities in Sept., 1985 and various documents and records available with the firm and Mr. KVD were seized. As all the records were seized by the Income Tax authorities and CBI authorities memoranda books of accounts were prepared on the basis of the Bank statements and other relevant information available with Mr. KVD for the year ended 30-6-1985, 30-6-1986 and 30-6-1987. On the basis of the memoranda books, statements such as P&L a/c, balance sheet, etc. have been prepared keeping in view the various advance and other investments made by Mr. KVD. In the statements prepared, the losses incurred by the various branches and the concerns in which Mr. KVD is interested under the name and style of Transcorp, Delhi, Megacerp, Bombay 4ave been taken into consideration. Shortage of cash and the credits in various names of firm ICA have been taken as income of Mr. KVD. The expenses incurred for conducting the business and the loss incurred in various other concerns have been taken on the basis of the books of accounts available with Mr. KVD. On the basis of the said statements the income earned by the firm ICA and Mr. KVD is approximately Rs. 92,00,000 in the period June, 1984 to June. 1987. This income was offered for taxation for the assessment years 1986-87 to 1988-89. The assessee submits that he offered the income for taxation with a view to buy peace, with the department and to avoid litigation and, he is coming forward voluntarily for settling all his cases and that of his father and mother Sri K.S. Dattatreya and Srnt. K. Sudarshanamma by offering a sum of Rs. 92,00,000 for the assessment years 1986-87 to 1987-88.
It was submitted that his affairs are in a turmoil due to the fact that the State Bank of India, Shivajinagar, Bangalore with whom the cheques were discounted even though entered into an agreement for the purposes of clearing the loan created complications by filing a criminal complaint and informing the matter to CBI authorities. Further wide paper publicity was given stating that there has been a case of cheating by Mr. KVD and that he cheated the State Bank of India to the extent of Rs. 3.50 crores. In view of the above, there was great slander on the image of the petitioner and the business potential of the firm was in disaster. Further, Mr. KVD has not been able to recover the amount advanced as there is legal complication and all the amount advanced have been assigned to the State Bank of India. As on date the State Bank of India has filed a civil suit for the recovery of the amount and the various amounts advanced to the parties have been attached.
Assessee filed original return for assessment year 1986-87 under section 139(4) on 31-3-1987 declaring income of Rs. 30 lacs as per original settlement petition. Subsequently, he filed revised return for assessment year 1986-87 and original return for assessment years 1987-88 and 1988-89 on 13-3-1989, declaring income as under:
The returns were filed as per settlement petition filed before CIT along with certain conditions like payment of taxes in instalments, non-levy of interest under sections 139(8) and 215/217 etc. waiver of penalty under sections 271 and 273 as well as prosecution. It was also subject to not making addition in name of KSD and ICA, since their income is offered in hands of assessee, as well as non-levy of interest/penalty.in case of KSD/ICA. The income as computed in settlement petition is as under :
M/s Inter Corp. Associates, Bangalore
P&L a/c for the year ending on
Loss in Intercorp Associates Bangalore
Loss in Trans Corp. Delhi
Loss in Megacorp, Bombay
Loss in Exercise Business
Loss in Intercorp, Bombay
Amounts wiitten off
Intersouth Finance Pvt. Ltd.
Loss in distribution business
Usha Art Films
Shortage of Cash
The assessing officer passed original orders taking the income offered on agreed basis in respect of ICA but disallowed various losses, disregarding the petition. Appeal before Commissioner (Appeals) was dismissed since the taxes due under section 140A as per return of income were not paid. In further appeal, Hon'ble Tribunal vide its orders dated 18-12-1995, restored the appeals to Commissioner (Appeals) holding that section 249(4) was operative subsequent to filing of return and hence he should have heard the appeal on merits. Commissioner (Appeals) thereafter passed the order restoring the matter to assessing officer for passing fresh order considering the seized material. A ground by way of additional ground was raised to annul the assessment or to exclude the income/loss of ICA from computation. The same was neither disused nor disposed off. This in other words means dismissal of the said ground. Now revenue is in appeal before us whereas assessee has filed cross- objection.
As discussed earlier, learned Departmental Representative sought permission to withdraw the appeals, to which authorised representative has no objection for the same. We therefore dismiss the appeals of revenue as withdrawn. We now take up the cross- objections.
Mr. Pradeep, learned CA counsil for assessee, took us through the paper book filed containing 380 pages. The arguments were advanced on the sole ground that income of firm ICA offered by him in settlement application be excluded from total income computed in his hands. It was submitted that-
(a) Revised return for assessment year 1986-87 cannot be taken as base for assessment as same is not valid return. Since original return was not within time-limit prescribed under section 139(4), same cannot be validly revised under section 139(5). (Kumar Jagdischandra Sinha (Dead) Through LRs. Etc. v. CIT (1993) 220 ITR 67 (SC) relied upon).
(b) Assessment is based on income disclosed in settlement, petition dated 13-3-1989. Since same has not been acted upon as per conditions, same is not binding upon assessee. The income included income of ICA only. Since separate proceedings for ICA and KSD are all pursued, assessee is not to be taxed in respect of income of ICA. Against the order of Tribunal in respect of KSD exonerating him from being taxed in respect of unexplained cash credit of Rs. 135 lacs for assessment year 1986-87, revenue has filed reference application under section 266(2) which has been allowed by Hon'ble Karnataka High Court in CIT v. K.S. Dattathreya in Civil Petition No. 397/1996 (Paper book p. 290).
(c) ICA was issued notice under section 148 for asst. year 1986-87 to 1994-95. ICA has filed necessary returns in response to such notice and assessment has been framed thereupon. This finds place in paper book pp. 254 to 289.
(d) The firm ICA is not dissolved under an agreement dated 9-2-1986, but it is only a memorandum of settlement between assessee and one Mr. Indrajeet Ghorpade (IG), a partner of ICA, regarding IG's share in firm and other companies as well so as to exclude him from management and profit/loss and also to decide the amount payable to him for this purpose.
(e) Though assessee has agreed to, be assessed in respect of Income of ICA, the concession is against provision of law. Correct income is to be taxed in correct person's hands only and anything contrary to same is not binding. Reliance was placed on decisions of :
(i) Asit Kumar Ghosh v. CIT (1953) 24 ITR 576 (Cal)
(ii) Pullangode Rubber Produce Co. Ltd. v. State of Kerala & Anr. (1973) 91 ITR 18 (SC)
(iii) CIT v. MRP Firm, Muar (1965) 56 ITR 67 (SC)
(iv) CIT v. Ajax Products Ltd. (1965) 55 ITR 741 (SC)
(v) CIT v. Bharat General Reinsurance Co. Ltd. (1971) 81 ITR 303 (Del).
(f) Amount of Bank deposit of Rs. 135 lacs in assessment year 1986-87 in the name of KSD has flown from loans from SBI by way of bill discounting only., The amount is therefore not connected to assessee in either way. Similarly all credits are in books of ICA are only from Bank accounts. Thus neither section 68 nor section 69 is applicable.
(g) Firm ICA is a valid partnership firm in the eye of law and not a sham entity or benami concern of assessee. There is valid partnership deed dated 15-6-1984, Settlement petition was from assessee as well as ICA. Civil and criminal cases have been filed against firm settlement commission has passed order under section 245D(1) dated 22-1-1997, against ICA Notices under section 148 has been issued to the firm ICA, returns have been filed by it and even assessment order are passed thereafter all these documents prove genuiness of firm ICA.
(h) Commissioner (Appeals) is not correct in remanding the matter back with direction to redo assessment after considering seized material. The same is not proper as no seized material pertain to assessee but ICA only. Presumption in respect of seized materials is that contents are true which indicates the same towards ICA and not assessee. Hence a second innings is not allowable to tax assessee in respect of income of ICA.
Mr. Amitabh Kumar learned Departmental Representative CIT, filed two paper books containing 67 and 32 pages. He also took us through the order of Commissioner (Appeals). It was submitted that :
(a) Since the grievance of assessee is limited to the extent that proper opportunity was not given to explain the seized material. Commissioner (Appeals) was justified in remanding the matter to assessing officer with necessary direction. The assessee cannot be said to be aggrieved in such a situation and hence order of Commissioner (Appeals) needs to be upheld. Reliance was placed on decisions in
1. CIT v. Grand Bazar (1991) 187 ITR 471 (Mad);
2. Smt. Sheela Gupta v. IAC & Ors. (2002) 253 ITR 551 (Del);
3. Vishwa Niryat (P) Ltd. v. Income Tax Officer (1991) 38 ITD 600 (Del); and
4. CIT v. Mrs. Ratanbai N. K Dubhash (1998) 230 ITR 495 (Bom).
(b) The assessee has voluntarily filed returns for years under appeal accepting the income of ICA in his hands. Similarly in settlement petition dt.13-3-1989, before CIT, in application before settlement commission, in affidavit dated 29-3-1989, statement under section 132(4) dated 28-2-1988, assessee has shown income of ICA in his hands. Thus if assessee himself accepts the income of ICA, now he cannot go back on his admission. Even Tribunal in case of KSD has held as under :
"Therefore, from the facts and the statements of various parties, it appears to us that the version of the assessee and of his son that the entire money amounting to Rs. 135 lacs belonged to Shri Venkatesh Dutt and represented unaccounted income of various businesses carried on by him in the film financing line as well as in bill discounting line is quite plausible one and seems also to be believable. "
Thus admission made at not only one place but several places is binding on assessee. Assessee cannot be allowed to retract thereafter. Reliance was placed on decision in
1. Durga Timber Works v. CIT (1971) 79 ITR 63 (Del)
2. CIT v. Durga Prasad More (1971) 82 ITR 540 (SC)
3. Addl. CIT v. Bhartiya Bhandar (1980) 122 ITR 622 (MP) and
4. Mahesh B. Shah v. Asstt. CIT & Anr. (1999) 238 ITR 130 (Ker).
Even admission before other authorities will bind assessee in income-tax proceedings as held in Addl. CIT v. Chikkaveerayya Lingaiah (1987) 164 ITR 41 (Kar).
(c) The agreement dated 9-2-1986, between assessee and IG is to relieve Mr. IG from business of ICA and to the effect that they will not continue the business together. ICA is just a smoke screen and if looked beyond the same, it is a non-existing entity. Even as per section 6 of Partnership Act, 1932 existence of firm is to be viewed from all angles, i.e., profit/loss is to be shared by all. The said agreement goes against the existence of valid partnership firm. Thus for all practical purposes, the so-called firm ICA is proprietorship concern of assessee only and hence all its income is includible in assessee's hands only. Reliance was placed on decision of CIT v. L.N. Dalmia (1994) 207 ITR 89 (Cal).
(d) Assessee cannot make conditional disclosure. If conditions for waiver are not fulfilled, assessee cannot be given the benefit. Similarly if income of firm is to be computed, it can not be restricted to the amount offered. If losses are claimed, same has to be proved. Hence, the assessing officer was justified in computing correct income as per law and also in denying the benefit. For this purpose, reliance was placed on the decision of Rathnam & Co. v. IAC (1980) 124 ITR 376 (Mad).
(e) The decision relied upon in respect of taxing correct income in hands of correct entity is not in dispute. However, since assessee himself has owned the income of ICA in his hands, he cannot now go back.
In reply Mr. Pradeep submitted that :
(a) Original return for assessment year 1986-87 was filed under the then amnesty scheme, hence such return should have been accepted for assessment year 1986-87.
(b) Revised return for assessment year 1986-87 is not valid return in view of Kumar Jagdish Chandra Sinha case (supra)
(c) In all admission, it is specifically mentioned that income belonging to firm ICA is disclosed. Nowhere it is admitted that firm is sham or benami.
(d) The agreement between assessee and ICA is not a dissolution deed. The firm ICA is between three partners and even if it is presumed that IG is not a partner, the firm still survives for all purposes.
(e) Referring to decision in Rathnarn & Co. v. IAC (supra), it was submitted that statutory rights and obligation will prevail over agreements if same is contrary to provision of law.
(f) The agreement dated 9-2-1986, is also in respect of other entities. If firm is a sham entity, assessee need not enter into any agreements.
(g) assessee has not made conditional disclosure in respect of his own income but only in respect of other person's income. Same was subject to certain conditions.
We have carefully considered relevant facts of the case brought to our notice., arguments advanced on either side and case laws relied upon. The assessee is shown to have carried on business as excise contractor. The firm ICA carried on the finance business. The bill discounting facility from Bank found place in the books of the firm ICA. The funds borrowed from Bank found place in the books of the firm ICA. From the said firm the amount is withdrawn and is reappearing in the form of deposit in Bank in the name of K.S.D. The assessee is facing court cases and is being investigated by CBI. During the course of search under section 132, the assessee failed to offer any explanation for the deposit in the name of his father. He therefore chooses to surrender by way of settlement owning up the income of firm ICA as well as KSD and IG in his name. However, the fact remains that the root of income lies in the firm's hands only. The assessee cannot for various reasons like criminal/civil cases, admit that deposit is out of amount borrowed from Bank s, yet the fact remain that an assessee who is indebted to Bank s for such huge sum will never out of his own fund make deposit with Bank s. The fact of borrowal and court cases against the assessee is an established fact beyond any doubt. Assessee is not found owner of sums larger than that borrowed from Bank s. Just to avoid any further litigation, the assessee filed settlement application before CIT and filed return conforming to such application. Still in such Settlement Petition or Affidavit, everywhere assessee has shown the firm ICA only as correct entity liable to tax. Though the assessee is willing to settle the dispute by offering the income of firm ICA and KSD in his hands, it seems, the revenue is not interested in same. Revenue has chosen to tax the firm ICA also which is evident from assessment orders passed by reopening the assessment. Revenue authorities may argue that the income of ICA assessed in hands of assessee is not taxed in the said firm, in our opinion quantum of income is not material in present discussion, What is to be seen is that the firm is taxed subsequent to filing settlement petition by reopening all past assessments including years under present appeals. They are also pushing the matter in respect of KSD by filing reference application under section 256(2). In the circumstances, the assessee is justified in disowning the income of firm in his hands. The assessee is therefore also within his powers to retract from his admission.
Hon'ble Supreme Court had occasion to consider as to in which circumstances an assessee can retract from-his earlier admission. In case of Krishna v. Kurukshetra University AlR 1976 SC 376. Hon'ble court observed as under :
"Any admission made in ignorance of legal rights or under duress cannot bind the maker of the admission. It is an accepted position that what is admitted by the party to be true, must be presumed to be true, unless the contrary is demonstrated. However, mere admission cannot be bedrock or foundation of an assessment. It is always open to the assessee who made the admission to show that what he admitted was not correct. Thus, it cannot be said that the admission made by a person is relevant in deciding the matter. But it is not always conclusive. The person who admitted the fact is at liberty to explain or clarify the circumstances and the nature of statement and also the correct facts. It is well settled that the effect of an alleged admission depends upon the circumstances in which it was made. Therefore, it cannot be said that an admission is the best evidence that revenue can rely upon and though not conclusive, is decisive of the matter unless successfully withdrawn and proved erroneous."
Once again in the case of Pullangode Rubber Produce Co. Ltd. v. Stale of Kerala & Anr. (supra), Hon'ble Supreme Court observed as under :
"It is no doubt true that entries in the account books of the assessee amount to an admission that the amount in question was laid out or expended for the cultivation, upkeep or maintenance of immature plants from which no agricultural income was derived during the previous year. An admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the person who made the admission to show that it is incorrect."
To the same effect is the observation of Hon'ble Supreme Court in CIT v. VMRP Firm, Muar (supra) wherein it was held as under :
"The doctrine of "approbate and reprobate" is only a species of estoppel; it applies only to the conduct of parties. As in the case of estoppel, it cannot operate against the provisions of a statute. If a particular ihcome is not taxable under the Income Tax Act, it cannot be taxed on the basis of estoppel or any other equitable doctrine. Equity is out of place in tax law; a particular income is either eligible to tax under the taxing statute or it is not. If it is not, the Income Tax Officer has no power to impose tax on the said income."
The decisions relied upon by learned Departmental Representative are not applicable to facts as the issue invoked therein was in respect of admission of certain facts and the admission was not against the statutory provision, or that admission was not proved wrong by the person admitting the same. He therefore do not propose to deal with them in detail.
Jurisdiction to tax certain amount is not by contract but only because of express provision contained in the Act. Concession against a statute is not binding. There cannot be a waiver on an illegality. Hon'ble Gujarat High Court in the case of P. V Doshi v. CIT (1978) 113 ITR 4 (Guj) held as under :
"There could never be a waiver of a mandatory provision for the simple reason that in such cases jurisdiction could not be conferred on the authority by mere consent, but only on conditions precedent for the exercise of jurisdiction being fulfilled. If jurisdiction cannot be conferred by consent, there would be no question of waiver, acquiescence or estoppel or the bar of res judicata being attracted because the order in such cases would lack inherent jurisdiction and would be a void order or a nullity. If an original order is without jurisdiction it would be a nullity confirmed in further appeals. The appellate order of the Tribunal thereon would also be a nullity and the Tribunal cannot confer any jurisdiction on the Income Tax Officer by making a remand order."
In view of aforesaid principle, it is clear that even if assessee agreed to be assessed in respect of income of ICA, same was under mistaken belief which is against the statutory provision and hence not binding on assessee.
A firm and a partner are two distinct entity under the Act. One cannot be substituted for other meaning that income of 'firm' cannot be taxed in hands of partner' unless it is found that the firm is benamidar or sham entity of the concerned individual or any partner. Hon'ble Supreme Court in case of Income Tax Officer v. Ch. Atchaiah (1996) 218 ITR 239 (SC) held as under :
"Section 4 of the Act of 1961 says that Income-tax shall be charged on the total income "of every person " and the expression "person" is defined in clause 31 of section 2. The definition merely says that the 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 Income Tax Officer 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 assessing officerP in law, the AOP alone has to be taxed; the members of the AOP cannot be taxed individually in respect of the income of the AOP. Consideration of the interests of the revenue has no place in this scheme."
Since in the present case sufficient material is available which suggest that a valid partnership firm in name of ICA was in existence and is not found to be a sham entity or benamidar of assessee, the income of firm ICA cannot be taxed in the hands of assessee before us. This material is found by way of valid partnership deed, business being carried on by him, books of accounts, Bank accounts, assessment and reassessment of firm under Income Tax Act. Civil/Criminal cases against it etc. All these suggest the firm ICA is a separate taxable entity.
Learned Departmental Representative strongly submitted that since the assessment is only remanded back, no grievance is caused to assessee. We do not subscribe to such a view, Commissioner (Appeals) has directed to retrame the assessment considering seized material. However, Commissioner (Appeals) has not directed to exclude the income of the firm ICA even though specific ground was raised before him. On a specific query from bench as to what is seized material in respect of assessee which is required to be considered, same remained unanswered. The original assessment order is based on settlement petition only. In the circumstances, we have all the reason to believe that seized materials do not pertain to assessee but firm ICA only. In such a situation, we do not think that the setting aside of assessment with direction to reframe the same was correct on facts of the case. We therefore expunge the said direction contained in the said order of Commissioner (Appeals).
In view of our above finding and various decisions cited, we hold that :
(a) assessee is entitled to retract from his earlier settlement application as the same is against the express provision of law and is also erroneous.
(b) The income of ICA, including its divisions, other credit entries in its books and other disallowances in respect of income of ICA is to be excluded while computing income of assessee for all the years under appeal.
(c) From the assessment order it is seen that the income is computed based on computation filed in Settlement Petition (As reproduced in para 4.4 above). The assessing officer shall therefore exclude the credits of 1.40 crores, 83.80 lacs and 68.00 lacs for assessment years 1986-87, 1987-88 and 1988-89 respectively as the same pertains to the firm ICA. Similarly the income of Intercorp Associates, Bangalore, Transcorp, Delhi, Megacorp. Bombay, Intercorp., Bombay as computed by assessing officer also be excluded from income of assessee for all the three years.
(d) Any other income of assessee earned individually will be retained as the same is not challenged in appeal before us and no arguments are advanced for excluding or reducing the same.
(e) Interest under sections 139(8) and 215/217 will be charged as pet law considering the decision of Hon'ble Supreme Court in Modi Industries Ltd. v. CIT (1995) 216 ITR 759 (SC).
In the result the appeals of revenue are dismissed and cross- objections of assessee are partly allowed.