Madras High Court
Shri Durai Murugan Kathir Anand vs Additional Commissioner Of ... on 25 September, 2021
W.P.Nos.21027 & 21854 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved on 03.02.2022
Pronounced on 25.02.2022
CORAM
THE HONOURABLE MR.JUSTICE C.SARAVANAN
W.P.Nos.21027 & 21854 of 2021
and
W.M.P.Nos.23032 & 23035 of 2020
(Through Video Conferencing)
Shri Durai Murugan Kathir Anand ... Petitioner in
both the W.Ps.
Vs.
1.Additional Commissioner of Income Tax,
Central Range – 1,
Chennai – 600 034.
2.Deputy / Assistant Commissioner of Income Tax,
Central Circle – 1(3),
Chennai – 600 034. ... Respondents
in both the W.Ps.
PRAYER in W.P.(MD)No.21027/2021:- Writ Petition filed under Article
226 of the Constitution of India, praying for issuance of a Writ of
Certiorarified Mandamus, calling for the records on the file respondents
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including the appraisal report in passing the impugned order in
ITBA/AST/F/167/2021-22/1035883599(1), dated 25.09.2021, for the
Assessment Year 2019-20 and quash the same as illegal, arbitrary and
devoid of merit and consequently, direct the first respondent to pass a
fresh order under Section 144A of the Income Tax Act, 1961, after
considering the petitioner's submissions and granting the petitioner
sufficient opportunity.
PRAYER in W.P.(MD)No.21854/2021:- Writ Petition filed under Article
226 of the Constitution of India, praying for issuance of a Writ of
Certiorarified Mandamus, calling for the records on the file second
respondent in passing the impugned order in ITBA/AST/S/153A/2021-
22/1035920667(1), dated 27.09.2021, for the Assessment Year 2019-20
and quash the same as illegal, arbitrary and devoid of merit and
consequently, direct the assessment to be done afresh by the second
respondent in an independent manner after considering the petitioner's
submissions and granting sufficient opportunity.
For Petitioner : Mr.P.S.Raman
(in both the W.Ps.) Senior Counsel
for Mr.R.Sivaraman
For Respondents : Mr.A.P.Srinivas
(in both the W.Ps.) Senior Standing Counsel
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COMMON ORDER
In W.P.No.21027 of 2021, the petitioner has challenged order dated
25.09.2021 passed under Section 144A of the Income Tax Act, 1961
(hereinafter referred to as ''the IT Act''). In W.P.No.21854 of 2021, the
petitioner has challenged the consequential Assessment Order dated
27.09.2021 passed under Section 153A of the IT Act, 1961.
2.The case of the petitioner is that a sum of Rs.11,48,51,800/- was
seized on 01.04.2019 from the residence of one Mr.Damodaran and
Mrs.Vimala Damodaran, Karigiri Road, Pallikuppam Railway Gate,
Katpadi. It is the case of the petitioner that the cash recovered from the
house of above couple did not belong to him and therefore, it cannot be
added to his total taxable income as undisclosed income contrary to the
return filed.
3.Learned Senior Counsel for the petitioner submits that pursuant
to the aforesaid seizure, a Show Cause Notice, dated 08.09.2021, was
issued by the second respondent to the petitioner, to which the petitioner
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replied and also moved an application dated 21.09.2021 under Section
144A of the IT Act, 1961 before the first respondent Additional
Commissioner of Income Tax, Chennai, for the following reliefs:-
(i) It is submitted and prayed that the
Hon'ble Additional Commissioner of Income-Tax,
Central Range-1, Chennai, may be pleased to call
for and examine the records, from the Assessing
Officer, i.e., Deputy/Assistant Commissioner of
Income-Tax, Central Circle 1(3), Chennai,
(including the various submissions and material
evidences submitted by the petitioner during the
course of Post-Search Proceedings and Assessment
Proceedings), pertaining to the petitioner, relevant
to the Assessment Year 2019-2020.
(ii) Further, to issue appropriate direction
(i.e., to conduct an independent inquiry in the light
of the detailed submissions furnished), to the
Deputy/Assistant Commissioner of Income-Tax,
Central Circle 1(3), Chennai, (who is
predominantly guided by the appraisal report of
the case) for the guidance of the Assessing Officer
to enable him to complete the Assessment on the
basis of the detailed grounds furnished above.
(iii) In the event, if any direction is to be
issued prejudicial to the interest of the petitioner,
the same may be given after affording a reasonable
opportunity of being heard to the petitioner.
(iv) In view of the detailed background
narrated as above, it is prayed that the Hon'ble
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Additional Commissioner of Income-Tax, Central
Range-1, Chennai may be pleased to consider this
petition judicially and render justice."
4.Learned Senior Counsel for the petitioner submits that the
aforesaid petition was disposed in a peremptory manner without any
discussion by the first respondent accepting the views in the Show Cause
Notice issued by the second respondent on 08.09.2021 and the views
expressed by the Investigating Officer.
5.Learned Senior Counsel submits that the first respondent
Additional Commissioner of Income Tax abdicated his function under
Section 144A of the IT Act, 1961 while passing the impugned order dated
25.09.2021, which has been challenged/impugned in W.P.No.21027 of
2021.
6.It is submitted that before disposing the petition under Section
144A of the IT Act, the Officer concerned exercising jurisdiction under
Section 144A of the IT Act was required to apply his mind independently.
However, the said Officer has rejected the application on suspicions,
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conjectures and surmises based on the report of Jurisdictional
Investigating Officer.
7.In this connection, the learned Senior Counsel for the petitioner
has relied on the following decisions:-
i. Omar Salay Mohamed Sait Vs Commissioner of
Income-tax, [1959] 37 ITR 151 (SC).
ii. Umacharan Shaw & Brothers Vs Commissioner
of Income-tax, [1959] 37 ITR 271 (SC).
iii. Lalchand Bhagat Ambica Ram Vs Commissioner
of Income-tax, [1959] 37 ITR 288 (SC).
iv. Commissioner of Income-Tax, Faridabad Vs
Anupam Kapoor, [2008] 166 Taxman 178 (Punjab
& Haryana).
8.Learned Senior Counsel for the petitioner futher submits that
under Section 132(4A)(1) of the IT Act, where any books of account,
other documents, money, bullion, jewellery or other valuable article or
thing are or is found in the possession or control of any person in the
course of a search, it is to be presumed that such books of account, other
documents, money, bullion, jewellery or other valuable article or thing
belong or belongs to such person. It is submitted that presumption
cannot be rebutted in the absence of evidence to the contrary as the owner
of cash Mr.Srinivasan has claimed ownership.
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9.It is further submitted that one Mr.S.Srinivasan, the brother-in-
law of Mr.Damodaran and brother of Mrs.Vimala [from whose residence
the cash was recovered], has given a voluntary statement on the date of
seizure that the cash belonged to him and he has also approached the
Settlement Commission to settle the case.
10. It is therefore submitted that the cash recovered from the
premises of Mr.Damodaran and Mrs.Vimala cannot be treated as
undisclosed income of the petitioner under Section 69A of the I.T. Act.
11.It is further submitted that the said Srinivasan claimed to be a
party worker and has categorically stated that the money was sourced by
him as a party worker to ensure the victory of the petitioner in the
Parliamentary Election and kept it in his sister's house and has given a
sworn statement and has also approached the Settlement Commission
and has paid the admitted tax on the cash recovered from the premises of
his brother-in-law and sister, namely, Mr.Damodaran and his wife
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Mrs.Vimala.
12.It is therefore submitted that impugned proceeding also results
in double taxation as the additional liability has been fastened under
Section 69 A of the IT Act, 1961 on the petitioner while the same income
is being taxed in the hands of the Mr.S.Srinivasan who claimed to be the
owner of the money.
13.Learned Senior Counsel further submits that in view of the
abolition of the Settlement Commission in the Finance Act, 2021 with
effect from 01.02.2021, the case was not taken up for hearing and
therefore Mr. S.Srinivasan filed W.P.No.5463 of 2021. It is submitted
that the said writ petition along with a batch of writ petitions came up
for admission before this Court on 05.03.2021 and the said Writ Petition
is pending as on date.
14.Learned Senior Counsel for the petitioner incidentally submits
that the Central Board of Direct Taxes has now issued a clarification to
the effect that the applications filed before the Settlement Commission to
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settle the case before 30.09.2021 will be entertained and heard by the
Settlement Commission and therefore in the light of the admission of
Mr.S.Srinivasan that the amount recovered from the premises of
Mr.Damodaran and Smt.Vimala cannot be treated as the amount of the
petitioner merely because the statements were obtained on 01.04.2019
from Mr.Damodaran. It is therefore submitted that the impugned order
passed under Section 144A of the IT Act is unsustainable.
15.It is submitted that after the Show Cause Notice was issued, a
specific prayer was made to the first respondent so as to give guidance to
the second respondent Assessing Officer to complete the assessment
which has been rejected without proper reasoning. It is submitted that
the first respondent has merely extracted the report of the Investigating
Officer and rejected the application filed by the petitioner under Section
144-A of the Income Tax Act, 1961.
16. Learned Senior Counsel for the petitioner further submits that
while passing an order under Section 144A of the IT Act, 1961, the
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Officer has to exercise a discretion as is contemplated under the aforesaid
provision and cannot simply rely on the report of the Investigating
Officer.
17. It is further submitted that as a consequence of the order dated
25.09.2021 under Section 144-A of the Income Tax Act, 1961,
Assessment Order dated 27.09.2021 for the Assessment Year 2019-2020
was presented as a fait accompli even though there is a clear presumption
under law under Section 134-A read with Section 292C of the Income
Tax Act.
18.It is further submitted that the order passed under Section 144A
of the IT Act, 1961 on 25.09.2021 impugned in W.P.No.21027 of 2021
has to therefore go and therefore the consequential Assessment Order
passed on 27.09.2021 under Section 153A of the IT Act, 1961 impugned
in W.P.No.21854 of 2021 also has to go.
19.Opposing the prayer in the present writ petitions, the learned
standing counsel for the respondents submits that not only statements
were obtained from the persons from whom cash was recovered, but also
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from the petitioner. The statement given by Mr.Srinivasan, voluntarily
claiming ownership of the cash was not satisfactory. It is submitted that
statements were also obtained from the petitioner. It is submitted that
Mr.Srinivasan is a person of no means as neither he has shown any
genuine source of such huge amount nor filed any returns.
20.It is submitted that a notice under Section 153 A of the IT Act,
1961 was issued to the petitioner on 17.08.2020 and thereafter, a notice
under sub-section 1 to Section 142 of the IT Act, 1961 was issued to the
petitioner on 13.01.2021.
21.In this connection, reference was made to Annexure attached to
notice under Section 142(1) of the IT Act, 1961, wherein it has been
clearly stated as follows:-
"3. You have been made aware that cash of
Rs.11.50 crores was found in packets marked as
Alangayam, Pallikonda, etc., with marking of
Municipal Wards falling under Vellore
Parliamentary Constituency and containing details
of number of men and women voters, therein, from
the residence of Shri. Damodaran and Smt.Vimala,
karigiri Road, Pallikuppam Railway Gate, Katpadi.
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Since, you were the contesting candidate for Vellore
Parliamentary Constituency, please explain as to
how the packets indicating that the cash meant for
distribution in Vellore constituency was found in the
residence of Shri.Damodaran and Smt.Vimala.
4. Please explain your relationship with
Shri.Poonjolai Srinivasan, who claimed in the
course of his sworn statement dated 01.04.2019
that he had kept cash of Rs.11.50 crores for
distribution to voters in Vellore Parliamentary
constituency, to secure the success of the DMK
candidate in the Parliamentary election, 2019, and
you were the DMK candidate."
22.It is submitted that it is only thereafter a Show Cause Notice
was issued on 08.09.2021 to which the petitioner has replied and
thereafter filed a petition under Section 144A of the IT Act, 1961 on
25.09.2021.
23.Learned Standing Counsel for the respondents submits that the
submission of the petitioners were considered before passing of the
Impugned Order dated 25.09.2021 under Section 144A of the IT Act,
1961. The Officer has directed the Assessing Officer to proceed with the
assessment in accordance with law and therefore, there is no reason to
interfere with the impugned order.
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24.It is submitted that the Assessing Officer namely, the second
respondent has thereafter proceeded in accordance with law and an
Assessment Order has been passed on 27.09.2021 with the approval of
the first respondent, who passed the order under Section 144-A of the IT
Act, 1961.
25.Learned Senior Standing Counsel for the respondents further
submits that the Officer namely, the first respondent has considered the
submissions/statements and has come to a conclusion that the order has
to be passed by the second respondent in accordance with law and
therefore, the petitioner cannot challenge the order passed under Section
144A of the IT Act, 1961.
26.Learned Senior Standing Counsel for the respondents further
submits that W.P.No.21027 of 2021 has to be dismissed as infructuous in
view of the assessment order passed by the second respondent.
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27.It is therefore submitted that there is no merit in these writ
petitions as the petitioner has an alternate remedy before the Appellate
Commissioner under Section 246A of the IT Act, 1961.
28.It is further submitted that the petitioner has an alternate
remedy by way of appeal against the Assessment Order passed under
Section 153A of the IT Act, 1961 and therefore, on this count also,
W.P.No.21854 of 2021 has to be dismissed.
29.I have considered the rival submissions and perused the
impugned order and the case laws submitted by the learned Senior
Counsel for the petitioner.
30.The show cause notice issued to the petitioner elicits
contradiction and therefore applying the principle of preponderance of
probability, the petitioner was called upon to show cause as to why the
aforesaid amount and other amounts totalling to Rs.12,49,99,000/-
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should not be treated as undisclosed income in the hands of the petitioner
in terms of section 69 A of the Income Tax Act, 1961.
31.Though the petitioner had filed a reply dated 17.09.2021 to the
show cause notice, within four days, thereafter, the petitioner filed a
petition under Section 144A of the IT Act, 1961.
32.The first respondent Additional Commissioner has passed the
impugned order dated 25.09.2021 and disposed the application filed by
the petitioner under Section 144A of the IT Act, 1961. The second
respondent has thereafter, proceeded to the pass the impugned
assessment order dated 27.09.2021. There is no discussion in the order
dated 25.09.2021. It merely reproduces the content of the petitioner's
application filed under Section 144A of the IT Act, 1961 and report of
the Investigating Officer. The impugned order dated 25.09.2021 passed
by the first respondent Additional Commissioner filed under Section
144A of the IT Act, 1961 however, directs the second respondent to
pass orders in accordance with law.
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33.Therefore, the issue is to be considered in these writ petitions is,
whether the first respondent was bound to necessarily give direction to
the second respondent under Section 144A of the IT Act,1961, as was
prayed by the petitioner in the application and whether the order passed
under Section 144A of the IT Act, 1961 suffers from any vices of non-
application of mind.
34.Section 144A of the IT Act, 1961 deals with the power of Joint
Commissioner to issue directions. It reads as under:-
''Power of Joint Commissioner to issue
directions in certain cases.
144-A. A Joint Commissioner may, on his own
motion or on a reference being made to him by the
Assessing Officer or on the application of an
assessee, call for and examine the record of any
proceeding in which an assessment is pending and,
if he considers that, having regard to the nature of
the case or the amount involved or for any other
reason, it is necessary or expedient so to do, he
may issue such directions as he thinks fit for the
guidance of the Assessing Officer to enable him to
complete the assessment and such directions shall
be binding on the Assessing Officer :
Provided that no directions which are
prejudicial to the assessee shall be issued before an
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opportunity is given to the assessee to be heard.
Explanation.—For the purposes of this
section no direction as to the lines on which an
investigation connected with the assessment should
be made, shall be deemed to be a direction
prejudicial to the assessee.''
35.A direction under Section 144A of the IT Act, 1961 can be
issued ''where such officer considers it necessary or expedient to do
so having regard to the nature of the case or the amount involved or
for any other reason''.
36.A direction under Section 144A of the IT Act, 1961 can be
issued to the Assessing Officer, either on his own motion suo motu or a
on reference by the jurisdictional Assessing Officer or on an application
of an assessee. The above-mentioned power of the Joint Commissioner/
Additional Commissioner to issue pre-assessment directions to the
Income-tax Officer in individual cases is in addition to the general power
conferred on him by section 119(3) to issue instructions which stood up
to 01.04.88.
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37.Directions once issued is binding on the Income-tax Officer.
Where, however, any directions prejudicial to interest of the assessee is to
be issued, it shall be only after the assessee has been given an opportunity
of being heard. Any direction issued by the Inspecting Assistant
Commissioner in regard to the lines on which investigation may be made
in an assessment, shall not be treated as a direction prejudicial to the
assessee. In this case, the first respondent has directed the second
respondent to complete the assessment in accordance with law.
38.Sections 144A and 144B were inserted in the IT Act, 1961 by
the Taxation Laws (Amendment) Act, 1975. They were inserted
pursuant to the recommendations of the Wanchoo Committee. The
recommendations which lead to the incorporation of Section 144A are
as follows:
''We recommend that the law should authorise
the Inspecting Assistant Commissioner to call for
the records of a case on his own motion or on a
reference by the Income-tax Officer or a petition
made by the assessee before the assessment is
finalised and issue such directions as he considers
fit in the circumstances of the case for completion of
the assessment. The directions given will be legally
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binding on the Income-tax Officer. The law should
provide for an opportunity to the assessee of being
heard by the Inspecting Assistant Commissioner
before any directions prejudicial to him are
issued.''
39.Board Circular No.197, dated April 17, 1976, clarified the scope
and effect of Section 144A and 144B of the IT Act, 1961. The Calcutta
High Court in Arrah Sasaram Light Railway Co. Ltd. v.
Commissioner of Income-Tax, [(1993) 204 ITR 807] at Page 819, has
extracted in Para 24, the Board Circular No.197, dated April 17, 1976.
Para 24 from the said judgment is reproduced below:-
''24.The Board in Circular No. 197, dated
April 17, 1976 (see [1977] 110 ITR (St.) 17),
explains the scope and effect of the two provisions.
It would be useful to refer to them as they afford
some clue to the scope and effect and the differentia
of the two legislative measures.
''Powers of the Inspecting Assistant
Commissioner to issue pre assessment directions
[new section 144A].
2.The Amending Act has inserted a new
section 144A empowering the Inspecting Assistant
Commissioner to issue pre-assessment directions to
the Income-tax Officer. It provides that the
Inspecting Assistant Commissioner may, either on
his own motion or on a reference from the Income-
tax Officer or on the application of the assessee,
call for and examine the assessment record of any
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assessee in which an assessment is pending, and
issue such directions to the Income-tax Officer as
he deems fit so as to enable the Income-tax Officer
to complete the assessment. The directions shall be
issued only where the Inspecting Assistant
Commissioner considers it necessary or expedient
to do so having regard to the nature of the case or
the amount involved or for any other reason. The
directions in question shall be binding on the
Income-tax Officer. However, any directions which
are prejudicial to the assessee shall be issued by
the Inspecting Assistant Commissioner only after
the assessee has been given an opportunity of being
heard. Any direction issued by the Inspecting
Assistant Commissioner in regard to the lines on
which investigation may be made in an assessment,
shall not be treated as a direction prejudicial to the
assessee.
3.The above-mentioned power of the
Inspecting Assistant Commissioner to issue pre-
assessment directions, to the Income-tax Officer in
individual cases is in addition to the general power
conferred on him by section 119(3) to issue
instructions.''
40.A reading of the above provision makes it clear that the decision
whether to issue a direction is to be based on objective material available.
It is however on a subjective decision of such officer. The power is to be
exercised to give a sense of direction to the assessing officer ''where such
officer considers it necessary or expedient to do so having regard to
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the nature of the case or the amount involved or for any other
reason.''
41.As far as the facts of the case are concerned, Rs.11.49 crores
in cash was recovered on 01.04.2019 from the house of Mr.Damodaran
and Mrs.Vimala Damodaran in packet with markings such as
Alangayam, Pallikonda etc. with the marking of the Municipal Wards,
falling under the Vellore Parliamentary Constituency from where the
petitioner was contesting.
42.The brother of Mrs.Vimala Damodaran namely, Mr.S.Srinivasan
came forward and gave a voluntary statement dated 01.04.2019 and
stated that the cash belonged to him for distribution to the Voters in the
Vellore Parliamentary constituency to secure victory of the petitioner in
the parliamentary election and that the amount was earned by him in his
real estate business suggesting corrupt practice in the parliamentary
election either by the petitioner or his party.
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43.However, the record indicate that Mr.S.Srinivasan has no
documents to substantiate that he was a man of sufficient means and
that the money was either earned by him from his real estate business or
was given to him by the party sponsoring the petitioner to contest the
election and that the former had given cash to him to corrupt the voters
and indulge in corrupt electoral practice.
44.The presumption under Section 132(4A)(i) and Section 292C of
the IT Act, 1961 that the books of account, the documents, money,
bullion or other valuable article or thing are or is found in the possession
or control any person is a rebuttable presumption.
45.Such a presumption under Section 132 (4A)(i) and Section
292C of the IT Act, 1961 can be drawn against Mr.Damodaran and
Mrs.Vimala Damodaran from whose premises seizure of the cash was
effected.
46.Though such a presumption is a rebuttable presumption, it can
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be rebutted only if there are adequate evidence by a person claiming
ownership that they belong to any other person.
47.The show cause notice issued to the petitioner also suggest that
Mr.Damodaran was an employee of the Colleges run by the Trust Durai
Murugan Educational Trust in which the petitioner is a Trustee. Along
with the cash, details of bus fees/hostel fees/mess fees payable by the
students of were found along with the cash of Rs.11.49 crores.
48.The evidence gathered by the respondent during the course of
investigation prima facie appears to be overwhelmingly against petitioner.
The first respondent could possibly come to no different conclusion while
passing the impugned order, dated 25.09.2021, on the application filed
by the petitioner under Section 144A of IT Act, 1961.
49.The statement of Mr.S.Srinivasan claiming that the cash
belonged to him does not satisfy the test of preponderance of probability
that the cash indeed belongs to him. Mr.S.Srinivasan has not produced
any records to substantiate that the cash belonged to him. The show
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cause notice also indicates that Mr.S.Srinivasan has not filed any income
tax returns to justify his version. Mr.Srinivasan has also not given any
satisfactory explanation to substantiate his claim. On the other hand,
there is a preponderance of probability that the cash belonged to the
petitioner.
50.Since preponderance of probability indicate that the seized cash
was an undisclosed income of the petitioner and was kept at the residence
of Mr.Damodaran and Mrs.Vimala Damodaran by the petitioner. These
facts suggest that Mr.S.Srinivasan, Mr.Damodaran and Mrs.Vimala
Damodaran are trusted person of the petitioner.
51.Merely, because Mr.S.Srinivasan came forward and gave a
sworn statement claiming ownership over seized money does not mean
that the liability which can be fastened on the petitioner under the IT Act,
1961 can to be shifted on Mr.S.Srinivasan. Merely, because
Mr.S.Srinivasan has filed application to settle case before the the
Settlement Commission, by declaring the seized cash to his cash is of no
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relevance.
52.The subsequent engineering of an application of settling the
dispute before the settlement commission by Mr.S.Srinivasan appears to
be a mere ploy, ruse to divert attention. It was filed to detract the
assessment proceedings. The application under Section 144A of the IT
Act itself appears to be an afterthought. Instead of giving attention to the
show cause notice and participating in the adjudication, the petitioner
appears to have been illadvised to venture out in filing the above
application.
53.Further, the cash was not found under the control and the
possession of the said Mr.S.Srinivasan. It was found in the residence of
Mr.Damodaran and Mrs.Vimala Damodaran with packet markings as
Alangayam, Pallikonda etc. with the marking of the Municipal Wards,
falling under the Vellore Parliamentary Constituency from where the
petitioner was contesting. The presumption under Sections 132(4A) and
292C of the IT Act though a rebuttable presumption, is to be presumed
against the petitioner.
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54.Mere voluntary sworn statement on the same day by
Mr.S.Srinivasan claiming that the seized cash were his, is not sufficient.
Mr.S.Srinivasan has not shown himself to be a man of substantial means.
On the other hand, the fact that the documents pertaining to the
College/Trust of the Petitioner were found along with the seized cash as
indicated above show that cash belonged to the petitioner which was not
disclosed by the petitioner in his regular return.
55.Further, the decision under Section 144A of the IT Act, 1961 is
based on the subjective satisfaction of the first respondent based on
objective material available. An Officer exercising jurisdiction under
the aforesaid provision, has to rely only on the information that are
available to give a sense of direction to the Assessing Officer. Disposal
of application under Section 144A of the IT Act does not warrant a
detailed reasoning. In this case, the Officer has directed the second
respondent to complete the assessment in accordance with law. As
mentioned above, discretion can be exercised where such officer
considers it necessary or expedient to do so having regard to the nature of
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the case or the amount involved or for any other reason.
56.The power under Section 144A of the IT Act is to be exercised
when such an Officer deems it expedient so to enable the assessing officer
to complete assessment. In this case, the rejection was based on the
report of the jurisdiction assessing officer which is quite damaging.
Therefore, I do not find any reasons to interfere with the order rejecting
the request of the petitioner under Section 144A of the IT Act as non
speaking or suffering from non application of mind.
57.Instead of defending himself in the Show Cause Notice
proceedings, the petitioner attempted to divert the attention to prolong the
longevity of the litigation both before the respondents and now before this
Court. It was unwarranted.
58.It is also noticed that the impugned assessment order dated
27.9.2021 was passed immediately after the impguned order dated
25.09.2021 was passed referring to Section 144A of the Act. Relevant
portion of the Assessment order reads as under:-
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W.P.Nos.21027 & 21854 of 2021
''4.4 In this regard, it may also be noted that
the person who claimed ownership of the case
(S.Srinivasan) did not have the wherewithal to own
such a huge cash, on account of factors highlighted
supra. It would also be pertinent to note that cash of
Rs.11,48,51,800/- (Rs.10,48,52,800/- in 200 rupee
denomination and remaining Rs.99,99,000/- in
denominations of 500 and 2000 rupees) was found in
packets marked as Alangayam, Pallikonda, etc., with
marking of Municipal wards falling under Vellore
Parliamentary constituency and containing details of
number of men and women voters, therein. This also
reveals that the cash belongs to the assessee, Shri.
D.M.Kathir Anand, who was the DMK (Dravida
Munnetra Kazhagam party candidate for the 2019
Vellore Parliamentary constituency.
4.5. Further, it was also noticed during the
course of enquiry with Canara Bank currency chest
Manager (statement of whom was furnished to Shri.
D.M.Kathir Anand, on his A.R.’s requisition) and few
other Canara Bank Branch Managers that
Rs.11,50,00,000/- was converted into 200 rupee
denominations by Shri. Poonjolai Srinivasan from
Canara Bank but only Rs.10,48,52,800/- was found
in 200 rupee denomination during the search on
01.04.2019 from the residence of Smt. Vimala and
Shri. Damodaran. Thus, as against cash converted
into 200 rupee denomination of Rs.11,50,00,000/-
only Rs.10,48,52,800/- was found, giving the
inference that the balance amount of
Rs.1,01,47,200/- (Rs. 11,50,00,000-Rs.10,48,52,800)
was already expended. The source for the balance
expended cash of Rs.1,01,47,200/- also remains
unexplained. For the reasons stated supra, it is
inferred that the assessee, Shri. D.M.Kathir Anand,
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W.P.Nos.21027 & 21854 of 2021
and not Shri. Poonjolai Srinivasan, is the owner of
the expended sum of Rs.1,01,47,200/- also.
4.6. Thus, in the light of the above aspects, it
is inferred that the cash seized (Rs.11,48,51,800)
from the residence of Shri. Damodaran and the cash
expended (Rs.1,01,47,200) totaling to
Rs.12,49,99,000/- is owned by Shri D.M.Kathir
Anand. The income returned details of the assessee
(Shri. D.M.Kathir Anand) as seen from his income-
tax returns reveal that this cash of Rs.12,49,99,000/-
has not been disclosed to the department and it has
been earned by him from undisclosed sources.
4.7. The assessee was given show cause
notice dated 08.09.2021 as to why the aforesaid
amount of Rs.12,49,99,000/- ought not to be brought
to tax, by highlighting the above factors. The
assessee replied to the show cause notice on
20.09.2021 and simultaneously, filed petition
u/s.144A to the Range Head (Addl.CIT, Central
Range-1, Chennai). The range head heard both the
assessing officer and the assessee’s A.R., Shri.
Shunmughasundaram, C.A., on 23.09.2021 and after
considering the submissions of both the assessing
officer and the assessee, rejected the petitioner
u/s.144A, vide order dated 25.09.2021. Now, coming
to the reply of the assessee to the show cause notice
issued by the assessing officer, the crux of the
assessee’s objections are enumerated below:
The assessee has no financial or business
connection with Shri. S.Srinivasan (alias) Poonjolai
Srinivasan and it is unreasonable to pin the actions
of Shri. S.Srinivasan on him.
Merely because the assessee is the Chairman
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W.P.Nos.21027 & 21854 of 2021
of Duraimurugan Educational Trust and the
materials pertaining to Duraimurugan Educational
Trust were found along with the cash at the
residence of Damodaran, it cannot be concluded that
the assessee is the owner of the cash.
Section 292C states that any assets, books of
accounts, documents, etc. found in possession/control
of any person during search may be presumed belong
to such person.
4.7.1. On objection marked as (a) hereinabove,
Shri. S.Srinivasan has explicitly stated that he was a
DMK representative and he wanted to ensure victory
of his party’s candidate. However, he did not have
the wherewithal to possess cash of Rs.12,49,99,000/-.
This aspect coupled with the fact that papers
pertaining to Duraimurugan Educational Trust (of
which the assessee is the Chairman) were found
along with the cash and the voters details relating to
the Vellore Parliamentary constituency indicate that
the cash belongs to Shri. D.M.Kathir Anand only and
Shri. S.Srinivasan is only a name lender.
4.7.2. On objection (b), no logical reason has
been given by the assessee to explain as how the
materials pertaining to Duraimurugan Educational
Trust were found alongwith the cash at the residence
of Damodaran. Also, the assessee was the DMK
candidate for the 2019 Vellore Parliamentary
constituency. Hence, at the time of election, the cash
found alongwith the Trust papers (of which the
assessee is the Chairman) indicate that the cash
belongs only to the assessee and not to Shri.
S.Srinivasan.
4.7.3. As regards objection (c), it may be noted
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W.P.Nos.21027 & 21854 of 2021
that section 292C only lays down a presumption of
money, jewellery, etc. belonging to a person from
whom it was found. In the case on hand, in the light
of all the factors discussed supra, the presumption is
rebutted with the finding that the amount of
Rs.12,49,99,000/- belong to the assessee and not to
Shri. S.Srinivasan.
4.8. In the circumstances, the cash of
Rs.12,49,99,000/- is to be taxed in the assessee’s
(Shri D.M.Kathir Anand) hands substantively u/s.69A
of the I.T.Act, 1961, for the assessment year 2019-
2020 [since, the search and the cash found was on
01.04.2019, the preponderance of probability
indicates that the amount of Rs.12,49,99,000/- could
not have been earned in the assessment year (2020-
2021) relevant to the date of seizure, viz.,
01.04.2019].
In the light of the above, the total income of the
assessee, Shri.D.M.Kathir Anand, is computed as
under :
Total income returned :Rs. 55,17,990/-
Add: As discussed in para 4,
addn. u/s.69A :Rs.12,49,99,000/-
------------------------
Total income assessed :Rs.13,05,16,990/-
------------------------
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W.P.Nos.21027 & 21854 of 2021
Demand notice and calculation sheet enclosed.
This order is passed with the prior approval of the
Additional Commissioner of IncomeTax, Central
Range-1, Chennai as per sec.153D of the Act.
Penalty proceedings u/s.270A of the I.T.Act, 1961 is
initiated separately.''
59.Therefore, there is no merit in the challenge to the impugned
order dated 25.09.2021 passed by the first respondent under Section
144A of the Income Tax Act, 1961. Hence, W.P.No.21027 of 2021 filed
by the petitioner is liable to be dismissed.
60.The impugned assessment order dated 27.9.2021 passed by the
second respondent appears to be well reasoned and therefore does not
warrant any interference under Article 226 of the Constitution of India.
Therefore, I do not find any reason to quash impugned assessment order
dated 27.9.2021. Therefore, W.P.No.No.21854 of 2021 is also liable to be
dismissed.
61.At the same time, I give liberty to the petitioner to file a
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W.P.Nos.21027 & 21854 of 2021
statutory appeal before the Appellate Commissioner under Section 246A
of the IT Act, 1961 against the impugned assessment order dated
27.9.2021 passed by the second respondent within a period of 30 days
from the date of receipt of this order. If an such an appeal is filed by the
petitioner within such time, the Appellate Commissioner shall pass orders
on merits and in accordance with law.
62.The Appellate Commissioner shall pass orders in the proposed
appeal to be filed by the petitioner on merits and in accordance with law
without getting influenced with the observations in this order. The
observation in this order is not intended to influence the appellate
Commissioner. He shall pass orders on merits on the proposed appeal.
63.Considering the fact that the petitioner has enjoyed a temporary
repreive during the pendency of these writ petitions, the recovery
proceedings shall be kept in abeyance for a period of 60 days from the
date of receipt of a copy of this order, provided the petitioner files such
statutory appeal against the impugned assessment order dated
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W.P.Nos.21027 & 21854 of 2021
27.09.2021, within the time stipulated herein and an application under
Section 220(6) of the Income Tax Act, 1961 before the second respondent
herein. The second respondent shall endeavour to dispose the same
preferably within 60 days from the date of receipt of a copy of this order.
64.Needless to state that the second respondent shall be guided by
the principle enunciated by this Court in Kannammal Vs. Income Tax
Officer, Ward1(1), Tiruppur [W.P.No.3849 of 2019, dated 13.02.2019]
reported in (2019) 413 ITR 390 (Mad) and M/s.Queen Agencies, Rep.
by its Managing Director vs. The Assistant Commissioner of Income
Tax (Circle-1), Karaikudi and another [W.P.(MD)No.5550 of 2020,
dated 08.04.2021] reported in CIT (2021) 18 ITR-OL 120 (Mad) and
decision of the Hon'ble Supreme Court in Principal Commissioner of
Income Tax and others vs. L.G. Electronics India Private Limited
[2018 (18) SCC 447] and the Circulars of the Board while disposing the
proposed application under Section 220(6) of the I.T. Act.
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W.P.Nos.21027 & 21854 of 2021
65.In the result, W.P.No.21027 of 2021 and W.P.No.21854 of 2021
are dismissed with the above observations. No costs. Consequently,
connected Miscellaneous Petitions are closed.
Index : Yes/No 25.02.2022
jen/smn2
To
1.Additional Commissioner of Income Tax,
Central Range – 1,
Chennai – 600 034.
2.Deputy / Assistant Commissioner of Income Tax,
Central Circle – 1(3), Chennai – 600 034.
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W.P.Nos.21027 & 21854 of 2021
C.SARAVANAN, J.
jen/smn2
Pre-delivery common order in
W.P.Nos.21027 & 21854 of 2021
25.02.2022
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