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15-04-2019, OM PRAKASH JAKHOTIA, Section 127(2), 153A, HIGH COURT OF DELHI
1. The Income Tax Department (hereinafter referred to as the Revenue) is aggrieved by the order of the Income Tax Settlement Commission (ITSC) dated 26.11.2014 which accepted the application made by the respondent assessees (collectively referred to as the Jakhotias) and issuing consequential directions.
2. The search was conducted in the premises of the assessee and related companies together with that of the Dalmia Group on 20.01.2012. Cash to the tune of `35 lakhs and an incriminating register containing details of cash loans was also recovered and seized. The first respondent, Om Prakash Jakhotia made a statement recorded under oath under Section 132(4) of the Income Tax Act. The relevant details disclosed over pricing of bags/sacks of cement sold to the Dalmia Group. The statement regarding loan credits inter alia, is as follows:
“No, the loan credits are genuine. However, it is not feasible to me to prove it. The raw materials I sold to various parties to" meet the unexplained expenditure of my business. This amount has not been entered into my books of accounts. These total transactions come to Rs. 16.5 Cr. I am voluntarily offering this amount in my group and in my personal hands. I ·will pay the taxes thereon. The detailed break up of Rs. 16.50 Cr will be submitted in due course. (Reply to query 16)”
In reply to the query regarding the loan credits which emerged from the books of accounts seized, the statement on oath stated as follows:
… "I have not maintained this type of account books for unaccounted transactions for previous years. I have maintained only for this year. "
3. The first respondent submitted an entity-wise and year wise bifurcation of the surrendered amount aggregating `21.5 crores on 08.05.2012. Subsequently, an order centralising the assessment made in the case after search was issued under section 127(2) transferring the entire search proceeding to Delhi from Hyderabad. Later, notices were issued under Section 153A to all the Jakhotias requiring them to file returns for AY 2006-2007 to AY 2013-14. The returns were filed for some years by some respondents and for some other years by the other respondents.
However, none of the assessees filed returns in respect of all the years. Notice issued under Section 142(1) indicates that the questionnaire to the Jakhotias was in respect of the assessment years for which the returns were furnished. At that stage, the assessees approached the ITSC with an application. On 29.10.2013, in the application under Section 245C of the Act, the disclosure made was of the income to the tune of `1,93,04,200/-. An affidavit in addition was filed by the first respondent Jakhotia, and he retracted from his statement made on 20.01.2012, citing two grounds; that the surrender was made without referring to the seized documents and entirely on ad hoc basis without the help of any professional and secondly that the statement was untenable in law in light of a CBDT Circular dated 10.03.2003.
4. The disclosure made under Section 245C of the Act before the Settlement Commission, on 31.10.2013, was to the tune of `38,15,000/- on behalf of the second respondent and `34,30,000 on behalf of third respondent. On 11.11.2013, the Commission passed an order under Section 245D(1) allowing the settlement application to proceed
5. Subsequently, on 16.12.2013, a report was filed by Revenue under Section 245D(2B) of the Act highlighting firstly, that the surrender made by the first respondent was in his own hand through his voluntary statement on oath under Section 132(4) on 20.01.2012; secondly, an entity wise and yearwise break-up of the bifurcation of surrendered amount was disclosed on 08.05.2012. Thirdly, in tune with surrendered amount, deposit of tax during 2012-13 were made to the tune of `52 lakhs. It was highlighted therefore that the retraction was more than 1 year and 10 months after the search, this showed that it was an afterthought and the surrender made before the commission was much lower in comparison to the surrender made during the search. It was stated that this did not amount to true and full disclosure as required by Section 245C(1).
6. On 30.12.2013, the Jakhotia’s application was allowed to be proceeded with by an order under Section 245D(2C). As a consequence, Revenue sought permission from the commission to conduct an enquiry under Section 245D(3) regarding the genuineness of the loan transaction, share capital and share premium. A Report prepared by the Revenue under Rule 9 of the Settlement Commission (Procedure) Rules, 1997, was sought – which was given on 25.04.2014. It was again urged that the disclosure of Rs.2.65 crores was far too low compared to the voluntary statement and disclosure made during the search to the tune of more than Rs.2.65 crores. Permission sought was for conduct of inquiry by the AO. However, this was declined and the Settlement Commission asked the parties to remain present before the Joint Director, Income Tax, of the Settlement Commission for verification and enquiry.
7. The JDIT filed a report on 12.09.2014, stating that the claims made by the assessee in the course of the proceedings could not remain unverified. The material part of the report dated 12.09.2014 is retracted below:
“5. The DCIT produced the seized register A/OPJ/03 on 26.08.2014. He also produced the original surrender latter dated 08.05.2012. The seized register was perused. The accounts of the cash loans were seen. The A.R was asked to provide the details of cash Loans stated-that-the applicant feasible to -give-the addresses of the loan-creditors as most of the loans were arranged through brokers who only gave names of the creditors without the addresses. It was stated by the AR that the seized register A/OPJ/03 contains all the details of the loans taken by the applicant and it also shows that interest has been paid on the same, which is reflected in the seized register in the Interest account, which is at pages 208, 210, 211, 212, 213, 214. The A.O stated that they are disputing the fact that these are loan accounts. The AR pointed to the Rule9 report page 6 para 2, wherein the A.O himself has stated that the chart enclosed as Annexure 2 reveals that the assesse has received cash loans and has repaid the loan in cash. The A.O stated that it was his internal report and was not to be treated as Rule 9 report.