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Shri Suresh Nanda Circle-13,4, Casurina Avenue,Westend Greens, 30-D,Rajokri, New Delhi. Vs. ACIT, Central New Delhi.
July, 26th 2012
1                                                       ITA 1428, 1429, & 430/Del/2012
                                                            Shri Suresh Nanda



           IN THE INCOME TAX APPELLATE TRIBUNAL
                 DELHI BENCH "G" NEW DELHI
       BEFORE SHRI R.P. TOLANI AND SHRI SHAMIM YAHYA

                 ITA Nos: 1428, 1429, & 1430/+Del/2012
                  Asstt. Yrs: 2001-02,2002-03 &2004-05

Shri Suresh Nanda                     Vs.                   ACIT, Central
Circle-13,
4, Casurina Avenue,                                   New Delhi.
Westend Greens, 30-D,
Rajokri, New Delhi.
PAN No. AAPPN 9895 H
(Assessee)                                            (Respondent)


                 Assessees by : Sh. Ajay Wadhwa Adv.
               Respondent by : Sh. V.K. Saksena CIT(DR)





                                  ORDER

PER R.P. TOLANI. J.M.:

       These are three appeals by the assessee against separate orders of
CIT(A)-I, New Delhi dated, 8-2-2012 for A.Y. 2001-02 & 2002-03; dated
10-2-2012 for A.Y. 2003-04. Since common grounds are involved for
adjudication in these appeals, the same are heard together and being
disposed of by a consolidated order, for the sake of convenience.


2.     Assessee has raised various grounds. Common grounds Nos. 1 to 4 in
all these appeals are not pressed, hence dismissed.


2.1.   Ground nos. 9 & 10 in A.Y. 2001-02 ground nos. 14 & 15 in A.Y.
2002-03; & ground nos. 10 & 11 in A.Y. 2003-04 are general in nature,
requiring no adjudication.
2                                                       ITA 1428, 1429, & 430/Del/2012
                                                            Shri Suresh Nanda




3.     Coming to other grounds, common ground nos. 5, 6, 6.1, 6.2 & 6.3,
raised in all the appeals, are as under-


       "5. That on the facts and in the circumstances of the case, the
       Ld. CIT(A) has grossly erred in not admitting the additional
       evidence filed on 11-02-2011 under rule 46A of the Income-tax
       Rules, 1962 in spite of calling for remand report from the AO,
       without giving any valid reason.

       6. That on the facts and in the circumstances of the case, the Ld.
       CIT(A) has grossly erred in upholding the action of the
       Assessing Officer taking the status of the assessee as "resident'
       as against status of 'non' resident' claimed in the return and
       accepted in the original assessment made u/s 143(3) for A.Y.
       2001-02 and in appeal by the CIT(A) which became final as no
       appeal was preferred in ITAT by the Department.

       6.1. That on the facts and in the circumstances of the case, the
       Ld. CIT(A) has grossly erred in holding that assessee's
       residential status is governed by clause (c) and not by clause (b)
       of section 6 of the Income-tax Act, 1961 by saying that assessee
       is actually involved in managing his business in India directly
       or indirectly through his son, Mr. Sanjeev Nanda.

       6.2. The Ld. CIT(A) has further erred in saying that clause (b)
       cannot override clause (c) of section 6 of the Income-tax Act,
       1961.

       6.3 The ld. CIT(A) has erred in law in holding the assessee
       as a resident of India.

3.1.   Common ground nos. 8 & 8.1 in A.Y. 2001-02 & 2002-03 and ground
no. 9 & 9.1 in A.Y. 2003-04 (excepting quantum), are as under:


       "That on the facts and in the circumstances of the cases, the Ld.
       CIT(A) has erred in upholding the action of the Assessing
       Officer in adding a sum of Rs. 9,34,15,000/-and Rs. 65,85,000/-
3                                                      ITA 1428, 1429, & 430/Del/2012
                                                           Shri Suresh Nanda



       in A.Ys. 2001-02 and 2002-03 respectively representing share
       capital and Rs. 9,53,00,000/- as loan in A.Y. 2003-04
       subscribed in M/s Ol India Pvt. Ltd. The amounts were actually
       subscribed by its holding company M/s Y2K Systems
       International Ltd. Mauritius and not by the assessee.

       That the above addition made by the Assessing Officer and
       sustained by the Ld. CIT(A) is illegal as substantive addition
       has also been made in the case of M/s Ol India Pvt. Ltd. which
       tantamount to double addition not permissible under law.

3.2.   Common issue raised in ground no. 9 for A.Y. 2002-03 & ground no.
8 for A.Y. 2003-04 is as under:


       "That on the facts and in the circumstances of the cases, the Ld.
       CIT(A) has erred in upholding the action of the AO in adding a
       sum of Rs.2,17,57,724/- (A.Y. 2002-03) & Rs. 27,94,40,988/-
       (A.Y. 2003-04), on the basis of certain documents purportedly
       recovered by the Delhi Police on 20-02-2007 from the
       possession of Mr. M.V. Rao.




3.3. Common issue raised in ground no. 10 for A.Y. 2002-03 & ground no.
7 for A.Y. 2003-04 is as under:

       That on the facts and in the circumstances of the cases, the Ld.
       CIT(A) has erred in upholding the action of the Assessing
       Officer in adding a sum of Rs. 24,40,000/-(A.Y. 2002-03) &
       Rs. 23,20,000/- (A.Y. 2003-04), on the presumption that the
       same was paid by the assessee to his wife Smt. Renu Nanda out
       of undisclosed sources towards her maintenance expenses.

3.4. That leaves the individual grounds which are raised in following years:
A.Y. 2001-02:


       "7. That on the facts and in the circumstances of the cases,
       the Ld. CIT(A) has erred in upholding the action of the AO in
       adding a sum of Rs. 10,51,20,000/- made on the basis of
4                                                    ITA 1428, 1429, & 430/Del/2012
                                                         Shri Suresh Nanda



     handwritten page allegedly containing debit and credit entries in
     assessee's account with Deutsch Bank, Singapore on the ground
     that no explanation was given with regard to the source of the
     funds.

     7.1. That on the facts and in the circumstances of the case the
     above addition made by the AO and confirmed by the CIT(A) is
     not correct as deposits in foreign bank account of the non-
     resident are not exigible to tax in India as already held by the
     CIT(A)in his order dated 19-11-2004 in assessee's own case."

A.Y. 2002-03


     7. That on the facts and in the circumstances of the cases, the
     Ld. CIT(A) has erred in upholding the action of the AO in
     adding a sum of Rs. 45,95,000/- towards unexplained
     expenditure incurred on the wedding ceremony of daughter
     Sonali Nanda.

     11. That on the facts and in the circumstances of the cases,
     the Ld. CIT(A) has erred in upholding the action of the
     Assessing Officer in adding a sum of Rs. 18,76,165/-
     on the basis of certain documents purportedly recovered
     from the possession of Mr. Mohan Sambha Ji Jagtap.

     11.1. That the above addition made by the AO and confirmed
     by the CIT(A) is illegal as the same was on a false presumption
     that assessee has a proprietary concern by the name M/s
     Globtech International Corporation and the amount was
     received by the said proprietary concern.

     12. That on the facts and in the circumstances of the cases,
     the Ld. CIT(A) has erred in upholding the action of the AO in
     adding a sum of 1,20,000/- on the ground that during the search
     proceedings in the case of Shri Mohan Sambha Ji Jagtap, an
     imprest account was noticed         which    represented     an
     unaccounted amount spent on import of Chocolates during the
     wedding ceremony of assessee's daughter Sonali Nanda.
5                                                     ITA 1428, 1429, & 430/Del/2012
                                                          Shri Suresh Nanda



       13. That on the facts and in the circumstances of the cases,
       the Ld. CIT(A) has erred in upholding the action of the AO in
       adding a sum of in adding a sum of Rs. 1,78,850/- on the
       basis of certain documents purportedly recovered by the
       Delhi Police on 22-02-207 from the possession of Shri Mohan
       Sambha Ji Jagtap saying     that   the   same     represented
       unaccounted expenditure on Bijwasan Farm belonging to
       the assessee.

4      Brief facts are- Assessee has been regularly assessed to tax in India
since past so many years in the status of 'Non-resident' by way of
assessments u/s 143(3). On the same lines, original assessment under regular
provision of Sec. 143(3) for A.Y. 2001-02 was also framed on 26-3-2004,
treating the assessee as Non Resident. Some additions to the tune of Rs.
1,21,93,650/- were made by the AO in the assessment.


4.1.   Aggrieved assessee challenged the same in first appeal, wherein they
were deleted. On second appeal, by the Revenue, the ITAT dismissed the
same by upholding the order of CIT(A),


4.2.   In the meanwhile, on 22nd February, 2007, Delhi Police searched the
premises of one Dr. M.V. Rao who was found to be impersonating himself
as Scientific Advisor to the Prime Minister of India. Delhi police
accordingly    informed the Directorate of Income tax (lnv.) that during the
course of search action on one Dr. M.V. Rao they have found cash
amounting to Rs. two Crores lying at his Green Park house along with some
incriminating papers. Consequent thereto, the Director of Income Tax (Inv.)-
II, Delhi issued Warrant of Authorization under section 132 of the
Income tax Act, 1961 for search & seizure action at the premise of said Dr.
M. V. Rao.
6                                                    ITA 1428, 1429, & 430/Del/2012
                                                         Shri Suresh Nanda



4.3.   Subsequently, DIT (lnv) requested the Delhi Police to hand over
photocopies of the documents seized by them.        Search       and     seizure
operations were also carried out at assessee's premises by income tax
department on 28-2-2007 along with one Shri Mohan Sambhaji Jagtap.
Consequent to search, all these cases were centralized u/s 127(2). Notices
were issued for proceedings u/s 153A and these assessments are accordingly
framed u/s 153A read with Sec. 143(3).


4.4.   Assessee filed his returns of income u/s 153A claiming the same
status i.e. 'Non Resident' as claimed consistently. During the course of
assessment proceedings AO found that some papers seized from Dr. D V
Rao were confidential order sheet entries of the Ministry of Defence. Some
of these papers are related to M/s Tadiran Communication Israel. M/s
Transcom Services Ltd. was representing Tadiran in India for the servicing
of communication equipment used by Indian armed force.


4.5.   Among the papers received from the Delhi Police were page nos. 58
& 59 of Annexure A-10 which allegedly detail the working of commission
on arms contracts and the corresponding payments. Other papers include a
note on Page wirh page nos. 60 & 61 as its attachments. The contents of
page no. 58 & 59 and other pages are reproduced in the assessment order :-


4.6.   AO was of the view that these documents were details of the
commission payments related to contracts for Radio Sets of the Indian
Defence establishment. According to Delhi Police. Dr. M.V. Rao did not
furnish any explanation contending that he was not in a position to comment
upon the documents due to his critical health condition. The contents and
7                                                           ITA 1428, 1429, & 430/Del/2012
                                                                Shri Suresh Nanda



purported meaning of the page documented is reproduced by AO in his
order.

4.7.     Assessee denied any role or connection with these deals however
Assessing Officer held him to be closely involved with the business of
Tadiran in the Indian Defence establishment, as reflected by page no. 79 of
Annexure A-10, found and seized on 22.02.2007 from residence of Dr. M.V.
Rao.

4.8.     Based on the above mentioned documents, Assessing Officer derived
the following conclusions:


         (i)     Sh. Suresh Nanda is actively involved in facilitating defence
                 deals for foreign companies in India. Tadiran is one such client.
         (ii)    The four contracts mentioned in the page Nos. 58 & 59 of
                 Annexure A10 are contracts with Indian Defence establishment
                 given to Tadiran of Israel. Commission ranging from 5 to 10
                 percent of the total value of the contract has been paid.
         (iii)   The foot note on page 59 mentions that pages 58 & 59 are
                 reconciliation statement. Pages 60 & 61 confirm the receipt of
                 the amount mentioned in page 58 & 59. Thus, the commission
                 income has been actually received in the hands of Sh. Suresh
                 Nanda & his Group.


4.9.     On the basis of information received from Dr. M.V. Rao, similar
search & seizure operations were carried out in the premises of one Shri
Mohan Jagtap and assessee. It resulted in seizure of some other papers and
statement on oath of Shri Jagtap.
8                                                      ITA 1428, 1429, & 430/Del/2012
                                                           Shri Suresh Nanda



4.10. During the course of search proceedings a document in Russian
Language was found & seized as page no. 4, Annexure no. 2 from the
residence of Sh. Mohan Sambhaji Jagtap on 28-2-2007. The Russian to
English translation to this document was arranged during the course of
assessment proceedings.


4.11. This document has been signed by Sh. Mohan Sambhaji Jacthap as the
agent. The remittance has been made to the bank account of Globtech
International Inc. According to the AO, a perusal of the above document it
is amply clear that parts 53-65K worth US$384460 have been sold in India
and on this sale the commission due of USD 38446 has to be paid to the
account of Globtech International Inc. This is in accordance with an
agreement dated 30.03.1998.        The document bears a date stamp of
07.05.2001.


4.12. During the course of search proceedings, one profile of Sh. Suresh
Nanda was found & seized marked as page nos. l to 4, Annexure A15. As
per this document assessee was alleged to have formed Globtech
International Corporation as partnership concern dealing in consultancy and
shipping activities of a technical nature. Another profile of Sh. Suresh Nanda
was found and seized at page no. 22 Annexure A7, Party R-I, mentioning
assessee as owner of Globtech International Corporation. AO rejecting
assessee's explanations held that these papers represented that he had been
receiving commission on supply of these goods to India, which was
deposited in bank accounts situated in tax haven countries like Jersey Islands
etc. as stated in the documents.
9                                                     ITA 1428, 1429, & 430/Del/2012
                                                          Shri Suresh Nanda



4.13. On the basis of these observations and material found during the
course of search from the premises of the assessee, said M/s Dr. M.V. Rao &
Mohan Jagtap, the Assessing Officer drew following inferences:-


      3.1 Before year 2003 assessee had small set up in India in the
      form of small companies namely M/s. Crown Corporation Pvt.
      Ltd., M/s. Dynatron Services Pvt. Ltd., M/s C-l India Pvt.
      Ltd. and M/s.     Transcom Services India Pvt. Ltd. etc. These
      companies were mostly engaged in services and spares of
      defence armaments. Mr. Nanda being a former Navy Man
      specializes in contracts for services and spares for equipment
      used by the Indian Navy.

      3.2 In year 2003 he started investing heavily in hotel
      properties and lands in Delhi NCR and Mumbai. His first
      acquisition in India was the prestigious Hotel Claridges situated
      in Lutyens Delhi. After acquiring the Claridges he went on to
      extensively renovate the property and converted it into a
      boutique five star hotel. Along with this deal he also took
      management control of Claridges Nabha Palace, Mussorie. In
      year 2005 M/s        Claridges Hotel Pvt. Ltd. acquired a
      company by name of M/s Godawari Shilpkala Ltd., which has
      hotel property in Surajkund, Faridabad (Haryana) by name of
      Hotel Hill View. In year 2005 Claridges Hotel Pvt. Ltd. also
      acquired the holding companies of another company by name
      of M/s" Elel Hotels & Investment Pvt. Ltd., which was the
      owner of        very      prime       hotel     property       in
      Mumbai by name of Hotel Sea Rock.

      3.3 Apart from this, in 2006 assessee went on a land buying
      spree on Mumbai Pune Express Highway and consolidated to
      big land holdings-one admeasuring about 1100 acres in
      Karjat, Mumbai-Pune Expressway &       other    about    280
      acres of land in Panvel, Maharashtra. The first patch of
      land is owned by a company named as Claridges SEZ Pvt. Ltd.
      (formerly Tsunami Tech Pvt. Ltd.) and the second patch is
      owned by M/s Crown College & Education Institutions Pvt.
      Ltd. M/s Claridges SEZ Pvt. Ltd. has obtained an in principle
      approval from Ministry of Commerce for establishing a multi
      product SEZ and M/s Crown College & Education Institutions
10                                                      ITA 1428, 1429, & 430/Del/2012
                                                            Shri Suresh Nanda



      Pvt. Ltd., which is planning a multi disciplinary college or a
      Golf Course in the Pan vel land .

4.14. Assessing Officer      inferred that on     paper these companies were
controlled by entities situated out side India or by the entities which were
ultimately controlled by entities situated out side India. For example M/s
Claridges Hotel Pvt. Ltd. is ultimately controlled by an entity situated in
Mauritius by name of Universal         Business     Solutions,      Port     Louis,
Mauritius,    M/s Claridges Hotel Pvt. Ltd. in turn owns various
subsidiary companies which own different properties.


4.15. On papers, though there appeared to be no connection between
assessee and concerned Indian companies but their Board of Directors went
on appointing assessee as Chairman and his son Sh. Sanjeev Nanda as
Managing Director of these companies. Thus, it was presumed that these
companies were owned by assessee.


4.16. According to Assessing Officer the assesse has failed to disclose his
exact and true relationship and interest in the foreign entities controlling the
Indian companies on the pretext of assessee being a non resident and these
companies being foreign entities.


4.17. Assessing Officer was of the view that the assessee had been working
as middlemen for looking after various defense deals involving tedious
procedure,    documentation, persuasions and liaisoning in             clandestine
manner. These services were rendered in India by the assessee. The resultant
commission income arising from these were received abroad. AO alleged
that this income has been brought into India in form of F.D.I, and external
commercial borrowings and by floating various entities abroad. Thus, all
11                                                     ITA 1428, 1429, & 430/Del/2012
                                                           Shri Suresh Nanda



these incorporated foreign entities and their Indian investments were held to
be assessee's front organizations.


4.18. It was held that Dr. M.V. Rao is a close associate of assessee, who
operated from the office building of the companies of Nanda group at D-5.
Defence Colony, New Delhi. Dr. M.V. Rao was a Director in C1 India Pvt.
Ltd. and M/s Transcom Services Pvt. Ltd. Therefore, these companies were
held to be benami entities including C 1 India Pvt. Ltd. It was thus held that
assessee holds large stake through Mauritius based entity Y2K Systems
International Ltd. The main investor in Transcom India Pvt. Ltd. was one
Inet Communications Pvt. Ltd., which is controlled by one Sh. Bipin
B.Shah. He was also a close associate of Sh. Suresh Nanda and was a
Director in almost all the major companies of the group. In fine it
was held that assessee owned and controlled these Benami concerns,
though on papers they were shown to be controlled by other persons. Thus
the funds for investments came from clandestine arms deals, which were
routed by assessee.


4.19. On the basis of the above, Assessing Officer drew various conclusions
including that assessee was earning income from brokerage of clandestine
arms deals and Dr. M. V. Rao and Mohan Jagtap were working together.


4.20. Assessee's statement recorded on 8.03.2007 before the DDIT, was
construed by AO as implied admission of having various business interests
in India. The relevant portion of the statement is reproduced the below for
ready reference"
12                                                    ITA 1428, 1429, & 430/Del/2012
                                                          Shri Suresh Nanda



      Q.10. Please disclose your all movable assets including Bank
      accounts. FDRs, investment in banking, investment in capital
      market, investment in (P) Ltd. Company/ firm/ AOP etc.

      Ans. Jly bank accounts are as follows-

      Deutsche Bank, New Delhi NRO & NRE ale

      Some FDRs in the State Bank of India, branch I don't remember

      Demat a/c with the ICICI Bank

      I have interest in following companies as a share holder:

      Crown Corporation (P) Ltd.

      Dynatron Services (P) Ltd.

      Cl India (P) Lt-Investment through Y2K Ltd., Mauritius

      Claridges Hotels (P) Lt-Investment made through Mauritius
      based company UBS.

4.21. Apropos C 1 India Pvt. Ltd, it was inferred that assessee controls the
day to day functioning of the company. An e-mail from one Shri Vivek
Aggarwal, President and CEO of C-l India Pvt. Ltd. was found and seized
addressing      his resignation to Sh. Suresh Nanda citing his inadequate
compensation. This was construed to be indicting that assessee controlled
the affairs of Cl India Pvt. Ltd.


4.22. Apropos the balance sheet and the Profit and Loss accounts of M/s.
Y2K Systems International Limited, AO inferred that the company does not
have any significant income. It        has been used as mere conduit to
channelize assessee's unaccounted money in the guise of loans and other
borrowings.
13                                                     ITA 1428, 1429, & 430/Del/2012
                                                           Shri Suresh Nanda



4.23. Based on the above facts, it is was observed that the assessee has
been bringing in unaccounted money through Mauritius based entity
Y2K Systems International Limited due to weak exchange control norms
there.


4.24. The e-mail of Shri Vivek Agrawal established that assessee was
controlling C-l India and was the ultimate source of investment in C-l India
Pvt. Ltd. through YK2 Systems and controlled its affairs. Hence, the capital
received by Cl India Pvt. Ltd. was treated as unexplained investment of the
assessee and added to his taxable income. Thus Assessing Officer held that-
            i)       Assessee was engaged in the business of arms dealings
                     along with Dr. M.V. Rao & Mohan Jagtap.
            ii)      Y2K was benami company of the assessee.
            iii)     Capital introduced by Y2K in C-l India was assessee's
                     money.


4.25. Assessing Officer also proposed to assessee to show cause, as to why
he should not be treated as 'Resident' assessee instead of 'Non-Resident' as
held earlier and taxed accordingly in India. The passport entries about
assessee's stay over a period in India were found to be as under-


                  A.Y.            No. of days in        Actual No. of
                                    India as                days
                                 computed by the
                                    assessee
              2001-02                  154                     172
              2002-03                  138                     150
              2003-04                  158                     176
              2004-05                  159                     177
              2005-06                  155                     171
              2006-07                  158                     176
14                                                        ITA 1428, 1429, & 430/Del/2012
                                                              Shri Suresh Nanda




4.26. AO has not disputed the days of stay given in above chart. However
according to him for determining the status of residence, clause (c) of Sec. 6
was applicable to assessee and not clause (b) of the I. T. Act, by which he
was to be treated as Resident in India for these years.


4.27. Assessee objected to this proposition and filed a detailed reply which
is placed on the paper book. The reply emphasized the following issue:-


4.28. Under Section 2(30), an assessee who fails to qualify as a resident
under Section 6 (l) of the Act will be regarded as a non-resident for all the
purposes of the Income Tax Act 1961. Section 6 (1) of the Income Tax Act
1961 provides as under: -
      An individual is said to be resident in India in any previous year, if he:
      (a) is in India in that year for a period or periods amounting in .all to
      one hundred and eighty two days or more; or
      (b) .............
      (c) having within the four years preceding that year been in India for a
      period or periods amounting in all to three hundred and sixty five days
      or more, is in India for a period or periods amounting in all to sixty
      days or more in that year.


      Explanation - In the case of an individual,
      (a)     being a citizen of India, who leaves India in any previous year
      [as a member of the crew of an Indian ship as defined in clause (18) of
      section 3 of the Merchant Shipping Act, 1958 (44 of 1958), or] for the
      purpose of employment outside India, the provisions of sub-clause (c)
      shall apply in relation to that year.
15                                                      ITA 1428, 1429, & 430/Del/2012
                                                            Shri Suresh Nanda



      (b)   being a citizen of India or a person of Indian origin within the
      meaning of Explanation to clause (e) of section 115C, who, being
      outside India, comes on a visit to India in any previous year, the
      provision of Sub-clause (c) shall apply in relation to that year as if for
      the words "sixty days" occurring therein, the words "one hundred and
      eighty two days" had been substituted"


4.29. Thus under the legislative scheme as contained in section 6 (1) of the
Income Tax Act 1961. an individual is considered to be a resident in India in
any previous year
      (a)   If he is in India in that year for a period or periods amounting in
      all to one hundred and eighty two days or more or;
      (b)   If-
            i. he has been in India within the four years preceding that year
            for a period or periods amounting in all to three hundred and
            sixty five days or more, and
            ii. is in India for a period or periods amounting in all to sixty
            days or more in that year.
4.30. It was observed by the Govt. that the application of clause (c) was
harsh on the first category of individuals as an Indian citizen who has
become a non-resident for the first time by departure for employment
outside would have necessarily stayed for more than one hundred and eighty
two days in India in the year previous to the year when he became a non-
resident. Thus, in calculating the four years previous to the assessment year
within the meaning of clause (c) in the case of an Indian citizen going
abroad would include the year or years when he was a resident during which
he might have stayed all three hundred and sixty five days in one year in
India. In order to set off this disadvantage and mitigate the hardships the
16                                                      ITA 1428, 1429, & 430/Del/2012
                                                            Shri Suresh Nanda



legislature has provided in clause (a) the Explanation to section 6(1) that
where an Indian citizen goes for employment in any previous year the rigor
of clause (c) of sub-section (1) of section 6 is diluted to some extent by
providing a relaxation for the year the assessee left for employment outside
India, namely he will be treated as 'Non-Resident" if he is in India for less
than 182 days in that year.


4.31. Similarly, a citizen of India/person of Indian origin who visits India in
the assessment year succeeding the year in which he became a non-resident
in calculating the four years previous to the year of departure from India
within the meaning of clause (c) of sub-section (1) of section 6 would
include the year or years when he was a resident during which he might have
stayed all the three hundred and sixty five days in one year itself in India. In
order to set off this disadvantage the legislature has provided in clause (b) of
the Explanation that where an Indian citizen/person of Indian origin visits
India in the previous year succeeding the year in which he became a non-
resident, the rigor of clause (c) of section 6(1)is diluted to some extent by
providing a relaxation for the assessment year succeeding the year in which
he became a non-resident, namely, he will be treated as Non-Resident if he
is in India for less than 182 days in that year. Thus, these amendments were
brought to mitigate the hardship being faced by the non-resident assesses
and was introduced to do away with the mischief which was inadvertently
caused by earlier provisions.


4.32. Consequent to budgetary amendment in Finance Act, by way of
explanatory notes a Circular of CBDT No 684 dated 10.06.1994 in this
behalf was issued to clarify the meaning and purpose of amendment as
under--
17                                                      ITA 1428, 1429, & 430/Del/2012
                                                            Shri Suresh Nanda



      "19.2 Suggestions had been received to the effect that the
      aforesaid period of one hundred and fifty days should be
      increased to one hundred and eighty-two days. This is because
      the non-resident Indians, who have made investments in India,
      find it necessary to visit India frequently and stay here for the
      proper supervision and control of their investments. The
      Finance Act, therefore, has amended clause (b) of the
      Explanation to section 6(l) (c) of the Income tax Act, in order to
      extend the period of stay in India in the case of the aforesaid
      individuals from one hundred and fifty days to one hundred and
      eighty two days, for being treated as resident in India, in the
      previous year in which they visit, India. Thus, such non-
      resident Indians would not lose their "non-resident" status if
      their stay in India, during their visits, is up to one hundred and
      eighty one days in a previous year."

4.33. The Assessing Officer was of the view that if Clause (b) of
Explanation to Section 6 (1) is interpreted in the above manner it will render
clause (c) of section 6 (1) nugatory in its application to citizens of India or
persons of Indian origin. It was held that assessee's interpretation of
Explanation (b) of Section 6(l)(c) would render Section 6(l)(c) itself
redundant as far as its application to citizens of India/persons of Indian
origin are concerned, which was not permissible in law. Reliance was
placed on the judgment in the case of Hardev Motor Transport v. State of
M.P., (2006) 8 see 613(626):


      "31. The role of an Explanation of a statute is well known. By
      inserting an Explanation in the Schedule of the Act, the main
      provisions of the Act cannot be defeated By reason of an
      Explanation, even otherwise, the scope and effect of a provision
      cannot be enlarged It was so held in S. Sundaram Pillai v. VR.
      Pattabiraman in the following terms:

4.34. The AO, however, held that assessee was to be treated as Resident and
not as Non-resident in these years on following observations:
18                                                      ITA 1428, 1429, & 430/Del/2012
                                                            Shri Suresh Nanda



      (a) The Explanation (b) to section 6(l)(c) relaxes the 60 days
      stay in India to 182 days if the individual is an Indian citizen or
      a person of Indian origin and if he being outside India visits
      India during that year. According to the AO, the assessee,
      though not citizen,            for all practical purposes was
      resident i.e. living within India who goes abroad on visits. In
      other words he was not outside India and came on visit to India.
      Therefore, he was not eligible for relaxation provided by
      Explanation (b) as he was not a person who being outside
      India comes on a visit to India-

      (b) According to the Assessing Officer 'being outside India'
      connotes some permanence abroad. It is for the benefit of the
      person who stays abroad and comes on a visit to India.

      The Assessee has been staying in India for approximately half
      of the year during the last ten - fifteen years.

      (c) The A.O            referred to assesses profound social
      ties maintained in India with his son, wife and other relations
      and to keep control over Indian companies which were
      sufficient to hold that the assessee was inside India and a
      resident in India for all practical purposes.

      (d) The AO made reference to the renovation carried by the
      Assessee at his farm house in India to show that assessee
      was to be treated as "inside India".

4.35. Consequently, AO made the additions in this behalf in all these years.
Further assessee's residential status was changed from Non-Resident to
Resident and thus the entire global income of the assessee was brought to tax
in India.


4.36. Aggrieved assessee preferred first appeal. CIT(A) however confirmed
the additions. Aggrieved, assessee is before us.
19                                                     ITA 1428, 1429, & 430/Del/2012
                                                           Shri Suresh Nanda



5.     Ld counsel for the assessee Shri Ajay Wadhwa first adverted to the
common ground about the status of Non Resident and contends that-'


5.1.   The assessee has been a Non-Resident since more than 25 years.
Status of Non Resident has been accepted by the respective Assessing
Officers year after year.


5.2.   During his entire history of assessments, they have been framed
under the status of non-resident, u/s 143(3), in appeals before CIT(A) and
ITAT, which is not disputed. Thus the issue of Non resident status has
attained finality. AO accepts the number of days of stay as per passport. No
incriminating document is found during the search to suggest any increase in
the number of days of stay in India. Only on the basis of second thought,
about the interpretation of same law, AO has arbitrarily held the assessee to
be Resident. Thus department has done a somersault on the issue of Non
Resident status, which is settled and constantly followed over a number of
years in the assessments of the assessee. When facts & circumstances and
legal proceedings are same and no incriminating material is found, about
days of stay, the rule of consistency as laid down by Hon'ble Supreme court
in Radhasoamy Satsang and Delhi High court in Lovely Bal Shiksha
Parishad and other cases has to be followed. Though the principle of
resjudicata is technically not applicable to the income tax proceedings, the
rule of consistency is fully applicable.


5.3.   Ld counsel contends that a plain reading of section 6 of Income-tax
Act, along with Explanation, makes it clear that-
       a. Clause (c) above and part (b) of the Explanation to the sub
       section, make it abundantly clear that for an individual covered
       by part (b) of the Explanation, the period of stay in India is to
20                                                        ITA 1428, 1429, & 430/Del/2012
                                                              Shri Suresh Nanda



       be counted at 182 days and not at 60 days provided in clause (c)
       of sub section (1) of section 6. In other words, if the individual
       is citizen of India or a person of Indian origin within the
       meaning of Explanation to clause (e) of section 115C, he can
       stay in India upto 181 days and he will not be treated as a
       resident of India. Such a person can come to India for any
       purposes including businesses, medical treatment, visit relatives
       - Thus for the status, days of stay in India is the sole criteria and
       purpose of visit to India not relevant.

       b.     It is trite law that in income tax law words and terms
       used shall be given only their ordinary and plain meaning.
       Words "being outside India" or "on a visit to India" are to be
       meant in plain and simple way. They do not need any
       interpretation and in that guise, AO has attempted to convey
       beyond what these words actually and plainly state. It is thus
       pleaded that:

5.4. AOs interpretation is based on words which are already omitted and no
longer remain on statute book:
       a.     Clause (b) of section 6(1) which was omitted from the statue by
       the Finance Act 1982 w.e.f. 1st April, 1983. It had provided that an
       individual would be resident in India if he maintained for himself a
       dwelling place in India and has been in India for 30 days or more in
       that year.

       b.    The AO's order shows that he has applied conditions of the
       omitted provisions and the theory of dwelling place in India
       underlying such provision. That is why he has referred to the
       improvement of the farm house, family ties, business interest of the
       assessee in different concerns and the like, which indicated to
       dwelling place;

5.5.   Reliance is placed on General Finance Co. v ACIT (2002) 257 ITR
338 (S.C) where the Supreme Court found that the Constitutional Bench had
already decided in Rayala Corporation Pvt Ltd v Director of Enforcement
AIR 1970 SC 494 and Kohlapur Cane Sugar Works Ltd v Union of India
AIR 2000 SC 811 that where a provision is omitted, it should be deemed to
21                                                        ITA 1428, 1429, & 430/Del/2012
                                                              Shri Suresh Nanda



have never been part of the statue at any part of time. The Assessing Officer
in order to wily nily change the status to Resident has traveled into the ambit
of an omitted provision. It is vehemently argued that :

      a. An Explanation by its language, may supply or take away
      something from contents of the provision. They are introduced
      as a matter of abundant caution without adding or subtracting
      anything to the main section; this has been observed by the
      Supreme Court in the case of Keshavji Ravji & Co. v CIT
      (1990) 183 ITR 1 (SC). Explanation to be read so as to
      harmonize with and clear up any ambiguity in main section and
      should not be construed as to widen the ambit of the section.
      Rules of interpretation are applied only when words used in
      statute are ambivalent and don't manifest legislative intention.
      When language is clear, supposed intention of legislation
      cannot be applied to defeat the plain statutory language which
      otherwise is unambiguous.

      b. Sampath Iyengar in his commentary "Law of Income Tax",
      10th edition at page 1127, has noted the decision of English
      court in the case of Mackenzie, Re (1941) Ch 69. and has
      observed "It is thus not necessary that the stay must have been
      in connection with the purpose of earning income which is
      sought to be taxed; the intention and the purpose of the stay is
      not relevant".

      c.     Amendment has been brought into effect for benefit of
      the citizen of India who 'stay abroad but have
      investments in India. The basic purpose appears to be that
      citizen of India who are non-resident should not get attracted
      into tax reach in respect of their income earned outside India. It
      is also seen that in terms of plain reading of section 6 of the IT
      Act the "Residential Status" is determined on the basis of the
      number of days "spent in India" or "outside India". The concept
      of grants of economic or legal presence as mentioned by the
      AO is not indicated in the Act. The mere requirement
      is with regard to number of days a person is in India or outside
      India.

      d.    Circular of the Board is binding on the AO. This has
      been accepted in the case of Varghese (K.P) v. ITO (1981) 131
22                                                       ITA 1428, 1429, & 430/Del/2012
                                                             Shri Suresh Nanda



      597 (SC) which decision has again        been approved and
      followed by the Supreme Court in the case of Pradip J. Mehta
      v. CIT (SC) 300 ITR 231 (SC) on a question relating to status
      of an individual as a resident.

5.6. Ld counsel for the assessee contends that CIT(A) also erred in
upholding the order of AO. It is pleaded that it is settled law that the only
test for determining the residential status of a person of Indian origin in India
is number of days of stay in India. This is held by the Authority of Advance
Ruling in ABC 223 ITR 4621 Dr Virindra Kumar 308 ITR 28; Canoro
Resources 313 ITR 2:


      "The Explanation to section 6(l)(c) of the Income-tax Act, 1961
      relaxes the provision requiring less than 60 days stay in India during
      the relevant year for Indian citizen and persons of Indian origin.
      Lower authorities failed to appreciate that this relaxation does not
      apply to foreign citizen."

5.7. The Assessing Officer at para 7.14 has himself referred to the Finance
Minister's speech to hold that the relaxation extended to self employed and
other occupations irrespective of their vocation and nature of visits to India.
Self employed means and includes who have their own business abroad This
clearly shows that the relaxation is applicable to the assessee.


5.8. In the case of CIT v. Abdul Razzaq 337 ITR 350 (Ker), the word
'employment' outside India appearing in Explanation - (a) to section 6(1)
means going abroad to take up employment or any vocation referred to in
circular which includes self employment like business or profession. Visit
and stay abroad should not be only for other purposes such as tourist or for
medical treatment. Thus, in Abdul Razzaq's case dispels the complicated
23                                                      ITA 1428, 1429, & 430/Del/2012
                                                            Shri Suresh Nanda



interpretation applied by AO and CIT(A) to the interpretation of Explanation
(b).


5.9. Without prejudice to the aforesaid it is argued that 'being outside India'
means that the assessee came from abroad to India. Admittedly, the assessee
has been outside India for larger number of days as compared to his stay in
India in each of the 6 years. Hence, from this angle alone, he could said to
have visited India from abroad, purpose being immaterial as held by Abdul
Razzaq's status of Non Resident has been properly given earlier.


5.10. Assessee is having a bank account in Singapore. Large deposits are
appearing therein. Remittances being made to India from this account for
expenses in India suggest that assessee's active income and business
enterprise remained abroad. Thus assessee has passive income from India.


5.11 Ld counsel for the assessee vehemently relied on Rule of consistency.
It is submitted that, the assessee has been a non-resident since more than 20
years in the status of Non Resident. It is based on the test of no of days of
stay in India, which have not be doubted to be below 182 days in these
years. There is no change in law, facts and circumstances. The issue of Non
resident status has attained finality in earlier years in view of the fact that
assessment proceedings have become conclusive by ITAT and other orders.
Hon'ble Supreme court in Radhasoamy Satsang v. CIT (1992) 193 ITR 321
has laid down that law. Facts and circumstances being same, department
can not be allowed to change it's stand which has been consciously adopted
in earlier years. This proposition has become an established principle of law.
Radha Swamy judgment has been followed in number of cases including by
Hon'ble Delhi High Court in the case of Lovely Bal Siksha Parishad (2004)
24                                                   ITA 1428, 1429, & 430/Del/2012
                                                         Shri Suresh Nanda



266 ITR 349 (Del); DIT v. Escorts Cardiac Diseases Hospital Society (2008)
308 ITR 75 (Del); DIT v. Apparel Export Promotion Council (2000) 244
ITR 735 (Del). Similarly ITAT Benches have applied it in various cases
including Tahreem Electrical (P) Ltd 112 TTJ (Lucknow) 586. Jindal Photo
Films Ltd 116 TTJ 483,


5.12. Assessing Officer has erroneously held that the assessee is managing
companies in India and therefore is a resident going abroad for business on
following mistaken inferences as:
      (a) Assessee is resident of Dubai, which has issued residence &
      health     cards;    driving license. Business is owned there and
      business activities
      are carried therefrom.

      (b) The assessee has been considered a non-resident in last 20 years
      and comes to India only to meet his family members and look
      after his
      investments.

      (c) He has not drawn any salary/remuneration from any company
      in India and has never been a working director or working employee
      ever since he became non-resident 2o years ago.

      (d) Infotech Services Ltd of Jersy had invested by way of loan
      into Y2K Systems (P) Ltd of Mauritius which is the Holding
      Company for M/s
      C-l India (P) Ltd. The assessee is a major shareholder in Infotech
      Ltd. In order to protect his interest in Infotech Ltd,, through his
      company the assessee may have involved himself sometimes
      in the affairs of the M/s C-l India (P) Ltd. The running of M/s C-l
      India (P) Ltd and its management is operated by professional CEO,
      CFO and directors and not by assessee.

      (e) Claridges Hotels Pvt. Ltd, Claridges SEZ etc came into
      existence only in A.Y. 2004-05 and are therefore, this fact is not
      relevant for these years.
25                                                     ITA 1428, 1429, & 430/Del/2012
                                                           Shri Suresh Nanda



     (f) He has maintained non-resident accounts in the Indian banks as per
     the provisions of FEMA and importantly has been considered as a
     non-resident Indian as per the provisions of FEMA.

     (g) The assessee has been a resident of UAE since 2000 having
     residential address in UAE which is 312, Wafi Residence, Wafi City,
     Dubai. This is also an unrebutted fact. . He holds a UAE
     resident card, UAE driver's license and UAE health card. This fact
     has not been rebutted by the assessing officer and the evidence of the
     same is part of the seized record. Thus the seized record also supports
     the claim of the assessee.


     (h) AO at para 3 of his has mentioned that Mr Nanda has houses in
     London, Dubai and other parts of the world. Consequently on one
     hand he admits that the assessee has permanent residences abroad on
     other hand it is being held that he is resident in India because of visits
     and farm house repairs done by assessee. This is an apparent
     contradiction in AOs conclusion and militates against the proposition
     that assessee is to be treated as Resident in India.

     (i) It is accepted by AO that assessee is Director in various Companies
     abroad and income and has earned income abroad from Infotec
     Services Ltd, UBS FZC etc. which is a matter of seized record itself.

     (j) The assessee has no steady income in India and has been making
     remittances into India from his own bank accounts from abroad for
     meeting
     expenses and use by his family in India.

     (k) Some investments in properties and shares of companies in India,
     are routinely made by Non Residents of all hues in India. Assessee
     has carried out similar activities. They have been misconstrued by AO
     to do a somersault on settled residential status as Non-resident since
     last 20 years.


     (l)   The assessee on visits to India stays in a rented property.
     (m) If AO's interpretation is accepted then all persons working in the
     Middle East will become residents of India because they have some
     investments in India and their families also reside in India
26                                                     ITA 1428, 1429, & 430/Del/2012
                                                           Shri Suresh Nanda



      (n) The assessee has two children, both of whom are British citizens.
      Unfortunately, his son is facing criminal charges for a road accident in
      India because of which he had to stay in India. The assessee therefore
      comes to India to help him in legal matters and for moral support and
      to keep in touch with family. The assessee's wife does not live with
      him as they have estranged relationship for which monthly
      maintenance is provided to her as per the order of the court. These
      facts in any way have no adverse reflection on Non resident status and
      have been arbitrary used by AO against assessee.

      (o) The assessee was a full time Chairman-cum-Managing Director in
      a company UBS Trading FZC situate at Sharjah (UBS) for the years
      2002-03, 2003-04, 2004-05, 2005-06 and 2006-07. This is evidenced
      by audited Balance Sheets of UBS which are found in the searched
      premises. The assessee is 99% share holder in UBS, which has not
      been disputed, as per the seized Annexure 6E, Balance Sheet and
      Profit & Loss Account this company.

      (p) From these facts it shall be properly appreciated that the assessee
      for all practical purposes was fully involved in the business activities
      of UBS Trading FZC, Sharjah and apart from huge remuneration, he
      also received dividend from the said company.



5.13. Lower authorities failed to consider that:
      (a) Claridges Chairmanship came about much later i.e AY 2004-05
      and not in relevant assessment these years. Therefore, the adverse
      inference drawn is baseless.

      (b) Ownership structure of Claridges has not been considered
      which reveals that it is not owned by the assessee. One Mr. Hugh
      Hamilton confirms
      owing 80% through companies i.e. Mideast Online and Infotech
      Services Ltd and he owns remaining 20%. Thus assessee has no
      stakes in Hotel Claridges.

      (c) Details about shareholding of C-l India's ownership
      have been fully explained which reveals that assessee hold no
      stakes. It belongs to Mauritius based Y2K Systems (P) Ltd. Assessee
      is only a minor share holder in Y2K Systems. By figment of
27                                                       ITA 1428, 1429, & 430/Del/2012
                                                             Shri Suresh Nanda



      imagination and pure surmises, AO held that these are assesses's
      benami concerns.

      (d) Datasheet of Infotech Services Ltd reveals that it is an
      independent company, not owned by the assessee.

      (e) Details about loan received by Y2K Systems from another
      foreign company one Palm Technologies in 2007 was explained to be
      source of share capital money and loan given to C-I India. Thus
      assessee furnished a proper explanation supported by documents in
      this behalf.



5.14 Thus, for investment in M/s C1 India P Ltd., Ld. AR contended that
complete details of ownership of C-1 India were given during assessment
proceedings.     About assessee's interest in foreign concerns, following
submissions are made:



      a.       Some investment by way of advance was made in Y2K
               Systems International Ltd. by another company called Infotec
               Services Ltd. of Jersey and assessee was a shareholder in the
               said Infotec Services Ltd. International Ltd. to Infotec Services
               Ltd. Thus, the assessee was not a shareholder in Y2K Systems
               International Ltd. in his individual capacity.


      b.       The assessee was a non Executive Chairman in C-1 India Pvt.
               Ltd. for a short period and owned 100 shares in it. Request was
               madeto Assessing Officer to make an independent enquiry
               from abroad about C-1 India. Mauritius authorities confirmed
               ownership of C-1 India by Y2K Systems of Mauritius and
               existence of Y2K Systems. However the information has not
               been provided.

      f.   There is not an iota of evidence with department to even suggest
           that the assessee remitted any money personally through Y2K
           Systems International Ltd. to C-1 India Pvt. Ltd.
28                                                 ITA 1428, 1429, & 430/Del/2012
                                                       Shri Suresh Nanda



     g.     The assessees association with C-1 India Pvt. Ltd. is merely
          because of Infotec Services Ltd. of Jersey which had a stake in
          Y2K Systems International Ltd. by way of loan. To look after
          the investment it was desirable to involve himself in some
          matters of the Company. C1 India is completely independent
          and is professionally managed by a Chief Operating Officer and
          assessee has no role to play in day to day affairs. The Company
          interacts with its parent Company for its financial needs and is
          controlled by Y2K Systems International Ltd.

     h.   The burden of proof is on the person who alleges. The
          allegation that the assessee has remitted money into C-1 India
          Pvt. Ltd. from undisclosed sources is squarely on the
          Department. The assessee has discharged the onus that lay
          upon even by filing the balance sheets of Y2K Systems
          International Ltd., the list of shareholders of Y2K System
          International Ltd. and a positive submission that he has not
          made any investment whatsoever into Y2K Systems
          International Ltd. or C-1 India Pvt. Ltd.

     i.     The amount of share application money and loan amount has
          been held to be the unexplained income of the assessee at the
          same time these amounts have been taxed in the hands of C-1
          India (P) Ltd as unexplained income by using the same
          language in the assessment order of C1 India.

          The following case laws were cited to emphasize that double
          addition is not permissible

          (1)  CIT v. Smt. Saraswati Devi (1995) 212 ITR 0445 (Raj)
          (2)  CIT v. Smt. Tara Devi (2007) 292 ITR 539 (Raj)
          (3)  Lalji Haridas v. ITO (1961) 43 ITR 0387 (SC)
          (4)  ACIT v. Precision Metal Works and ors (1985) 156 ITR
               0693 (Del)
          (5) Smt. Dayabai v. CIT (1985) 154 ITR 0248 (MP)
          (6) ITO v. Ch. Atchaiah (1996) 218 ITR 0239 (SC)
          (7) CIT v. Smt Durgawato Singh ((1998) 234 ITR 0249 (All)
          (8) CIT v. Taj Oil Traders (2003) 262 ITR 0500 (Raj)
          (9) CIT v. Cochin Company Pvt. Ltd. (1976) 104 ITR 0655
               (Ker)
          (10) Jaggannath Hanumanbux v. ITO (1957) 31 ITR 603 (Cal)
29                                                    ITA 1428, 1429, & 430/Del/2012
                                                          Shri Suresh Nanda




5.15. As regards addition on the basis of documents recovered by Delhi
Police on 20.02.2007 from the possession of Dr. M.V. Rao, the Ld counsel
for the assessee contends that:


      i. During the course of assessment proceedings, copies of document
      Nos. 58 and 59 seized from Mr. Rao were not given and were only
      shown. Despite this handicap, assessee, to best of his ability, on 21-
      12-2009 responded to them. No further questions were asked by the
      Department and huge addition was made. .


      ii The AO has relied on various documents and other papers found
      from the premises of Dr. M.V. Rao, without giving copies of
      documents and statement and a proper            opportunity to cross
      examination. Thus, there is no basis for additions. These infirmities
      were pointed out to ld. CIT(A), but for no avail.
      iii.   It is trite law that no addition can be made on the basis of
      evidence found from a third party unless evidence is confronted to the
      assessee and the sine qua non of principle of natural justice "audi
      altem partem" is not complied with. .
      v.     Presumption of ownership u/s 132(4A) of the Act and under
      section 292C of the Act about papers found from his premises extends
      only to Dr. Rao. It has been arbitrarily applied to the assessee.
      Reliance is placed on SMS Investment 207 ITR 364 (Raj); Surender
      M. Khander 321 ITR 254 (Bom), Dr. Bansal 327 ITR 44 (Chattisgarh)


      vi     Dr. M.V. Rao, a former director of BHEL, may be employed
      with M/s C-I India Pvt Ltd and M/s Transcom Services Pvt. Ltd. M/s
30                                                     ITA 1428, 1429, & 430/Del/2012
                                                           Shri Suresh Nanda



      Transcom Services Pvt. Ltd has no connection with the assessee and
      M/s C-I India Pvt Ltd. as is evident from the assessment order is
      connected through Y2K system.


      vii The Department has gathered information from Mauritius about
      M/s C-I India Pvt Ltd. However, this information is not provided to
      the assessee despite repeated requests.


      viii. Without supply of copies of Mr Rao's statement and all
      documents are proposed to be used against assessee. They cannot be
      relied up against assessee. It is trite law that, no addition can be made
      on the basis of documents found from a third party without examining
      the third party and linking the contents of the documents with him.
      Reliance is placed on following judgments:
      (i)     Bangodaya Cotton Mills Ltd. vs CIT 224 CTR62
      (ii) DCIT vs Mahendra Ambalal Patel 40 DTR 243
      (iii) Prakash Chand Nahta vs CIT 301ITR 134
      (iv) CIT vs. Salek Chand 300 ITR 426 (All)
      (v) SMC Share Broker Ltd 288 ITR 345 (Del)
      (vi) JMD Computers 20 DTR 317
      (vii) S.M. Aggarwal (2007) 293 ITR 43
      (viiii) Amarjit Singh Bakshi 263 ITR 75
      (ix) Krishna Textiles 11 DTR 217
      (x) M.A. Chidambaram 63 ITR 203 (Mad)
      (xi) Kishan Chand Chela Ram 125 ITR 713
      (xii) A.N. Dyaneswaran (2008) 214 CTR (Mad) 482

5.16 Apropos the allegations that about the arms dealings with Dr. M V
Rao and Mohan Jagtap Y2K and Cl- India all being Benami transactions Ld.
Counsel vehemently argues that the entire burden to prove that assessee is a
Benami beneficiary of these transaction lies on the department. The
31                                                    ITA 1428, 1429, & 430/Del/2012
                                                          Shri Suresh Nanda



allegation is devoid of any cogent material and is based on suspicions,
surmises and conjecture.


5.17. Various Courts have held that the burden of proving that a particular
sale is Benami and apparent purchasers are not the real owners always rests
on the person asserting it to be so. This burden is discharged by strictly
adducing legal evidence of a definite character which would either directly
prove the fact of the Benami or establish circumstances unerringly and
unreasonably raising an inference of that fact.


5.18. Further reliance is placed on judgment of Hon'ble Allahabad High
Court in the case of Prakash Narain 134 ITR 364 wherein the following four
propositions have been propounded:-
      a)    The burden of proof regarding Benami is upon the person who
      alleges Benami.

      b)    To prove Benami the most important point is to examine the
      source of consideration.

      c)      The mere rejection of an explanation would not entitle the
      department to claim that the consideration for the purchase of property
      is in the name of assessee and was provided by the assessee.

      d)    A finding regarding Benami is a finding of fact. The said
      finding cannot be questioned unless it is without evidence in support
      of it

5.19 Further reliance is placed on the judgment of the Hon'ble Supreme
Court in the case of Daulat Ram Rawatmull 87 ITR 349 wherein it has been
held that:


      "A person can still be held to be the owner of a sum of money even
      though the explanation furnished by him regarding the source of that
32                                                    ITA 1428, 1429, & 430/Del/2012
                                                          Shri Suresh Nanda



      money is found to be not correct. From the simple fact that the
      explanation regarding the source of money furnished by A, in whose
      name the money is lying in deposit, has been found to be false, it
      would be a remote and far-fetched conclusion to hold that the money
      belongs to B. There would be in such a case no direct nexus between
      the facts found and the conclusion drawn therefrom."

5.20. In the case of Subramaniam 55 ITR 610 (Madras), it was held that
just because of certain deposits in a bank in the name of wife were not fully
explained, it cannot be held that they were the assessee husband's
undisclosed income.


5.21. In the case of Man Singh 1 ITD 741 (Delhi), it was held that mere
rejection of assessee's explanation that the house was made partly out of her
savings and partly out of loans advanced from her husband does not
establish that the house belongs to the husband.


5.22. Apropos the addition on account of alleged payments to estranged
wife Smt Renu Nanda, Id counsel vehemently argues that the edifice of
this addition is based on pure surmises and conjectures. Facts in this
behalf are-


(i)   The assessee has an estranged relationship with his wife Mrs. Renu
      Nanda. Vide Deed of Settlement dated 04.04.1998, expiring in 2000,
      the assessee was required to support her financially during the
      currency of legal separation. The assessee for the F.Y. 2001-02 paid
      Mrs. Renu Nanda a sum of Rs. 7,60,000/- towards the maintenance
      i.e. day to day expenses. The expenses on account of guards, servants,
      driver and other capital expenditure were met by the assessee from his
      account by way of account payee cheques.
33                                                      ITA 1428, 1429, & 430/Del/2012
                                                            Shri Suresh Nanda




(ii)   The Assessing Officer has assumed that the expenditure should have
       been a total sum of Rs. 32 lacs for the year under consideration on
       following guess work-
       (a)   That the assessee paid Rs. 30 lacs as annual maintenance to his
       wife in the year 1997-98 and therefore, why would he not pay more at
       least the
       same amount 5 years later.
       (b)   The estimation of the payment that would have been made to
       his wife is to be based on the agreement dated 11.09.2004 wherein
       Mrs. Nanda was to be paid Rs. 1 lacs per month and Rs. 2 lacs for
       diwali.


5.23. The addition is contested as untenable and deserves to be deleted for
the following reasons--
       (a)   That during the course of search on 28.02.2007, no evidence,
       whatsoever, was      found     to   even   remotely suggest that any
       payment other than Rs. 7,60,000/- by cheque was made to Mrs.
       Renu Nanda by the assessee.


       (b)   The assessee has paid Rs. 7,60,000/- by cheque for her day to
       day expenses which is more than enough considering that Mrs.
       Renu Nanda is alone in the house provided by the assessee and all the
       other fixed expenses are paid by the assessee.


       (c)   No corroboration from the end of Mrs. Renu Nanda was made
       to arrive at the estimation.
34                                                   ITA 1428, 1429, & 430/Del/2012
                                                         Shri Suresh Nanda



     (d)    The    estimation is    based on      the     agreement dated
     11.09.2004 which is three years after F.Y. 2001-02. the agreement
     which is valid after 11.09.2004 cannot be applied to the period 2001-
     02?


     (e)    The addition has purported to be made u/s 69C of the Act, is
     not based on some evidence therefore, the estimate is arbitrary and
     untenable.   In case, the assessee had paid the estranged wife less
     than she would have raised an issue in this behalf, instead AO has
     raised objection. Thus there is neither any evidence                      nor
     circumstance to suggest that any amount outside the books/bank
     was made to Mrs. Renu Nanda for her support.


     (f)    In any case, Renu Nanda had sufficient bank balance retained
     out of the moneys given by the assessee and even otherwise, Rs.
     7,60,000/- given to her during F.Y. 2001-02 was sufficient to support
     her.


     (g)    Mrs. Renu Nanda had sufficient cash available for the defraying
     her house hold expenses, more so when expenses on electricity, water,
     driver, guard etc of her residence are being met by the assessee
     directly.


     (vii) Reliance is placed on ; David Dhawan vs ACIT 71 ITD 1
     Mumbai & PRABHU DAYAL LALLU RAM. vs. INCOME TAX
     OFFICER - 63 TTJ (Del) 557
35                                                        ITA 1428, 1429, & 430/Del/2012
                                                              Shri Suresh Nanda



5.24. Apropos additions on account of daughter's wedding it is pleaded that
the addition has been made on the basis of some loose papers in respect of
        (i)    Mr. Paul Nanda           Rs. 13,00,000/-
        (ii)   Abujani & Sandeep Khosla       Rs. 14,50,000/-
                                        Rs. 5,70,000/-
                                        Rs. 12,75,000/-


5.25. According to the assessee proper explanation about the expenditure
was furnished. However, AO still made the addition without appreciating
that:


        (i) The addition of Rs. 12,75,000/- has been made twice.


        (ii) No rebate for cash in hand of Rs. 44,66,000/-available with the
        assessee has been given by AO. It has been held on presumption that
        assessee could not keep such a huge cash in hand.


        (iii) The expenditure was incurred by the assessee and her wife jointly
        and their withdrawals in the year amounted to Rs. 53.66 lacs which
        has also not been considered.


        (iv) Reliance is placed on Hon'ble Delhi High Court's judgment in the
        case of Kulwant Rai 291 ITR 36 (Del.), for the proposition that the
        burden is on the department to disprove the assessee's contention that
        amount of cash in hand was available with the assessee.


6.      Ld. DR apropos the residential status, vehemently argues that the AO
was justified in changing the status of the Assessee from Non Resident to
36                                                        ITA 1428, 1429, & 430/Del/2012
                                                              Shri Suresh Nanda



Resident on just and proper reasons. Looking at the information, bank
accounts, business affairs, number of visits to foreign countries and India it
is apparent that the assessee was not visiting India but he was an Indian
resident for all practical purposes and was visiting abroad in relation to his
business affairs. The Explanation (b) to sec. 6(1) provides stay of less than
182 days in the case of PIO who live outside and visit India to look after
their investments. In this case, assessee is living in India carrying out various
business activities and visits outside India. Therefore, the benefit of
Explanation (b) to sec. 6 (1) has been rightly denied.


6.1. Principles of res judicata are not applicable to Income Tax assessments.
If the AO comes in possession of such information which suggests that the
assessee has been claiming the status of Non Resident without disclosing the
proper facts! AO is justified to change the status to Resident. The principle
of consistency will not apply in a case where there is a change in facts due to
unearthing of some new information during the course of search. Therefore,
the assessee's plea to apply rule of consistency based on Hon'ble Supreme
Court judgment in the case of Radha Swami Satsang (supra), in this behalf is
not tenable.


6.2.    Assessee's reliance on Dubai Resident Card, driving license, owning
a house in Dubai and London and other documents are irrelevant. The word
"Non Resident" is not specifically defined under I.T. Act, Section 2(30)
defines, 'non-resident' means a person who is not a 'resident'. Thus, first of
all, it is to be ascertained whether assessee is a resident or not, section 6(l)(b)
is applicable only for non-resident '. Therefore, if the assessee is a resident,
then no other provisions will apply. The word used in explanation (a)talks
about     employment outside India and explanation (b) talks about 'visit to
37                                                     ITA 1428, 1429, & 430/Del/2012
                                                           Shri Suresh Nanda



India'. Thus, an Indian citizen living abroad in order to claim the status of
'non-resident' has to come on a visit to India and not for the purposes of
carrying on business in India.


6.3.   The material obtained during the search indicates that the assessee
was carrying on business activities by way of investments in hospitality
sector i.e hotel Claridges at Delhi, Faridabad and Mussorie,' investment in
Ol India acquiring various business properties! commission in arms
dealings. Thus, looking at the frequency of business activities it cannot be
said to be a person who being outside India comes on a visit to India in
previous year in terms of explanation (b) to section 6(l). Assessee is rather
inside India who goes abroad for business.


6.4. Thus, the assessee's case is not covered by clause (b) but the same.falls
under clause (c) of section 6(l). The status of the assessee, therefore, has
been rightly held as 'Resident' which should be upheld. Order of AO and
CIT(A) are relied on for this purpose.
6.5.   Apropos other additions ld. DR relies on the orders of lower
authorities.
7. Ld. Counsel for the assessee in reply contends that apropos the assessee's
status, no new information or fact has been unearthed during the search. The
fact about the assessee's being share holder in Y-2K Systems Mauritius is
already in the record by way of bank a/cs of the company Infotech Services
of Jersey in which assessee is a major share holder. The assessee became
Chairman of Claridges Hotel in 2004 ', SEZ land for Claridges SEZ Pvt. Ltd.
was also purchased in Maharastra in 2005 loan by YK2 was given to Palm
Technology during the year 31-3-2007. Therefore, there is no discovery of
new facts for these years. As such, no adverse inference thereof can be taken
38                                                         ITA 1428, 1429, & 430/Del/2012
                                                               Shri Suresh Nanda



in these years which are prior happenings in time. The lower authorities have
tried to clutter the facts to create confusion and have relied on the facts
which may have some effect in 2004. Thus, there being no change in facts
and law, the rule of consistency has to apply.


7.1.   AO applied section 6(l)(b) on the terms of provisions of which were
omitted by Finance Act 1982 w.e.f.            1-4-1983 which provided that an
individual would be resident in India if he maintained for himself a dwelling
place in India. The   provisions       have    undergone      amendments            and
maintenance of dwelling place has been omitted. Since the Legislature has
consciously omitted the provision about dwelling place in India, it is a clear
indicator that dwelling place, no. of residence places in one or other country
are no more relevant for deciding the issue of residential status. Govt.
desired to keep the parameter of no. of days of stay simpliciter as the
conclusive test.


7.2.   It is trite law that the literal meaning to the words and terms used in
Income-tax has to be accorded. The lower authorities have tried to apply the
rules of interpretations where     the meaning of terms is plain and simple
supported by circulars of        the    Board.     When the        meaning of the
provisions is unambiguous and clear, rule of interpretation do not apply.
Merely being influenced by the media publicity, it has been held                    that
assessee is an arms dealer and by twisting the provisions that assessee
is a resident.


7.3.   CBDT vide Circular no. 684 (supra) has clearly explained
that it is the number of days of stay in India which will be decisive in
determining the status and not the other factors. The binding nature of
39                                                       ITA 1428, 1429, & 430/Del/2012
                                                             Shri Suresh Nanda



Board circular has been upheld by Hon'ble Supreme Court in the case of
K.P. Varghese (supra). The determination of status as `non-resident ' on
the basis of days only has been upheld in the case of O Abdul Razzak
(supra) and by the AAR in the case of Dr. Virendra Kumar and Canoro
Resources (supra). Thus, the only factor for determination of the status of
non-resident is the number of days of stay in India. The distortion of
provisions of sec. 6(l)(b) & (c) is without any basis and contrary to the
express provisions and binding CBDT clarifications.
7.4 Ld. Counsel for the assessee Shri Ajay Wadhwa further relied on
Hon'ble Supreme court judgment in the case of Vodafone 341 ITR 43 which
lays down a clear proposition that the companies being incorporated entities
under respective law possess independent and distinct status than their share
holder or contributories. In case of structured investment transactions should
not be disturbed on suspicions or casual considerations. In assesses case all
the companies concerned are duly incorporated in respective legal
jurisdictions. Necessary papers about their incorporation, existence, bank
accounts have been produced. The investments in properties, assets and
shares etc. have been made by structured deals. All of these legal
transactions are being disturbed on surmises and conjectures, assessee
having furnished proper explanation supported with documents has
discharged his burden. In the interest of justice all these additions be deleted.


8.    We have heard rival contentions and perused the material available on
record. The first question which requires determination is whether the
assessee is to be treated as Non Resident as has been held since past 25 years
or to hold him as Resident as being interpreted by the AO. Whether the days
of stay in India is the only test for determining the status as Non Resident
and the provisions and Board Circular are clear and this being so require no
40                                                      ITA 1428, 1429, & 430/Del/2012
                                                            Shri Suresh Nanda



further interpretation. In our considered opinion the controversy in question
stands answered by Hon'ble Kerala High court in the case of 0. Abdul Razaq
337 ITR 350 (Ker.), in similar facts and circumstances by following
observations:
            "There is no controversy on facts inasmuch as the
            assessee was in India for only 177 days in the previous
            year relevant for the assessment year 1989-90, and unless
            it is established that Explanation (a ) to sub-clause (c ) of
            section 6(l) of the Act is not available to the assessee, he
            cannot be treated as a resident in India for the purpose of
            assessing his global income including the business
            income earned abroad during the previous year.
            Obviously Explanation (a ) is an exception to section
            6(l)(c) of the Act, under which 60 days residence referred
            to in clause (c) is substituted to 182 days if the assessee
            went abroad in the previous year for the purpose of
            employment Admittedly, the assessee went abroad on 24-
            9-1988 only to take up business there. If the business
            undertaken and carried on by the assessee in the previous
            year abroad amounts to employment within the meaning
            of Explanation (a ) to section 6(1)(c) of the Act, then the
            assessee is entitled to the status of non-resident declared
            by the CIT (Appeals), which is confirmed by the
            Tribunal.

            5.     The contention of the learned senior counsel
            appearing for the revenue is that employment
            necessarily involves employer-employee relationship
            with terms of employment and only under an employer a
            person can be employed. Learned senior counsel
            appearing for the assessee, on the other hand,
            contended that employment in the context of
            Explanation (a) includes seh-employment, and taking up
            and continue business is also employment for the purpose
            of the above Explanation.

            6.    During hearing, learned senior counsel for the
            revenue has relied on the decision of the Supreme Court
            in Lakshminarayan Ram Gopal & Son Ltd. v Government
            of Hyderabad [1954] 25 ITR 449. We do not think the
41                                               ITA 1428, 1429, & 430/Del/2012
                                                     Shri Suresh Nanda



     decision is applicable to the facts of this case. Learned
     senior counsel for the assessee has relied on the
     Memorandum explaining the provisions of the Finance
     Bill introducing the Explanation, contained in 134 ITR
     137 (St.) [Para 35 of the Finance Bill], which reads as
     follow:'--

     "(iii)lt is proposed to provide that where an individual
     who is a citizen of India leaves India in any year for the
     purposes of employment outside India, he will not be
     treated as resident in India in that year unless he has
     been in India in that year for 182 days or more. The
     effect of this amendment will be that the 'test' of
     residence in (c) above will stand modified to this extent
     in such cases."

     Similarly the Central Board of Direct Taxes issued
     Circular No. 346, dated 30-6-1982, which reads as
     follows-'

     "7.3 With a view to avoiding hardship in the case of
     Indian citizens, who are employed or engaged in other
     avocations outside India, the Finance Act has made the
     following modifications in the tests of residence in
     India:'--
     (i)& (ii) ******
     (Hi) Where an individual who is a citizen of India leaves
     India in any year for the purposes of employment outside
     India, he will not be treated as resident in India in that
     year unless he has been in India in that year for 182 days
     or more. The effect of this amendment will be that the test
     of residence in (c) above will stand modified to that
     extent in such cases."
     7. What is clear from the above is that no technical
     meaning is intended for the word "employment" used in
     the Explanation. In our view, going abroad for the
     purpose of employment only means that the visit and stay
     abroad should not be for other purposes such as a
     tourist, or for medical treatment or for studies or the like.
     Going abroad for the purpose of employment therefore
     means going abroad to take up employment or any
42                                                       ITA 1428, 1429, & 430/Del/2012
                                                             Shri Suresh Nanda



              avocation as referred to in the Circular, which takes in
              self-employment like business or profession.
              So much so, in our view, taking up own business by the
              assessee abroad satisfies the condition of going abroad
              for the purpose of employment covered by Explanation
              (a) to section 6(l)(c) of the Act. Therefore, we hold that
              the Tribunal has rightly held that for the purpose of the
              Explanation, employment includes seh-employment like
              business or profession taken up by the assessee abroad.

              We therefore dismiss the appeal filed by the revenue."

8.1.    Hon'ble High Court has considered the plain meaning of section
6(l)(c), the Board Circulars and held that the purpose of going abroad
includes the purpose of seeking business in foreign countries also. The going
abroad for business purposes will include self employment, business or
profession taken up by the assessee. In our considered view, these facts
cannot be construed in a manner to project that it implies carrying business
activities from India.
In view of facts, circumstances, case laws and CBDT circular we reach to
following conclusions:

     a. Residential status is always determined for the Previous Year because
        the assessee has to determine the total income of the Previous Year
        only. In other words, as the tax is on the income of a particular
        Previous Year, the enquiry and determination of the residence
        qualification must confine to the facts obtaining in that Previous Year.
     b. If a person is resident in India in a Previous Year in respect of any
        source of income, he shall be deemed to be resident in India in the
        Previous Year relevant to the Assessment Year in respect of each of
        his other sources of Income.
     c. Relevant Previous Year means, the Previous Year for which
        residential status is to be determined
     d. It is not necessary that the stay should be for a continuous period.
     e. It is not necessary that the stay should be at one place in India.
     f. A person may be resident of more than one country for any Previous
        Year.
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                                                             Shri Suresh Nanda



     g. Citizenship of a country and residential status of that country are two
        separate concepts. A person may be an Indian national/Citizen but
        may not be a resident in India and vice versa.
     h. No. of days of stay in India determines the status.
     i. Assessee can take any vocation in any of the countries.
     j. During these years assessee had for more greater business
        engagements abroad as compared to India. Therefore it cannot be
        assumed that he did not come from outside of India.
     k. The explanation (b) to sec. 6, the explanatory notes for this
        amendment as clarified by CBDT in this behalf also make the no. of
        days provision very clear and unambiguous and leaves no room for
        interpretation.
     l. Even for the sake of arguments we accept the AOs interpretation it
        leads to absurd result by making practically every nonresident as a
        resident in India. This does not seem to be the legislative intent behind
        this amendment as the mischief sought to be redressed by this
        amendment to reduce the hardship and not to increase the hardship by
        unsettling what is settled.


When the law mandates that an Indian Citizen can go abroad for the purpose
of seeking employment or business, there is no room to misconstruction to
assume that assessees larger presence/business investment/family ties are in
India than abroad. This amounts to a guess work contrary to settled
propositions. Therefore, we are unable to agree with department that
assessee was not visiting India from outside India. There is no restriction for
number of days spent abroad. What the law mandates is to look at the
number of days stayed in India.


8.2.    Similar view has been adopted by the Authority of Advance Rulings
in the case of Dr. Virendra Kumar (supra) and Canoro Resources (supra).
Departmental authorities, except for interpreting the words in theor own
manner, have not relied on any case law on the issue of section 6(l)(c) and
expln. (b) specifically. Thus no judgment contrary to Hon'ble Kerala High
Court has been cited by the Revenue. It is a trite law that in Income tax
44                                                      ITA 1428, 1429, & 430/Del/2012
                                                            Shri Suresh Nanda



proceedings the words shall be given plain and ordinary meaning and
interpretation should be resorted only when the meaning is ambiguous. We
are unable to see any ambiguity in these provisions. Hon'ble Kerala High
Court has held that for determining the status as Non Resident is to be
decided in terms of no. of days of stay in India. This being the only
judgment available on this issue, is binding and is to be respectfully
followed by us. The AAR judgment have a persuasive value and the
decisions in the case of Dr. Virendra Kumar and Canoro Resources also
AAR has adopted the ratio of Hon'ble Kerala High Court judgment. Thus,
the test of residence will be determined on the basis of number of days of
stay in India and not by the interpretation adopted by the lower authorities in
this case. It has not been disputed by the revenue that the number of days of
the stay of assessee in India are less than 182 days. In these facts and
circumstances the assessee's arguments on this issue deserve to be upheld.


8.3. In view of the facts, circumstances and case laws cited and referred
above on behalf of the assessee we hold that the determinative test for the
status of Non Resident being number of days of stay in India and in
assessee's case in these three years, the days of stay being less than 182
days; the status to be applied in this case is to be held as Non Resident as
claimed by assessee. Thus, the assessee will be liable to tax on income
accrued in India only. The assessee's grounds in this behalf are allowed.


9.    Apropos the addition of Rs. 10,51,20,000/- made on the basis of a
hand written page allegedly containing debit and credit entries in assessee's
account with Deutsch Bank, Singapore on the ground that no explanation
was given with regard to the source of the funds, is to be deleted as the same
does not represents income accrued in India. Assessee has demonstrated
45                                                      ITA 1428, 1429, & 430/Del/2012
                                                            Shri Suresh Nanda



that paper contains details of transfer of his own funds from foreign bank
accounts maintained for the investment and business activities carried out in
those countries. The AO has not lead any evidence to show that assesses
explanation is incorrect or the credits in the bank account are as a result of
any income which accrued in India. Admittedly the assessee being a non-
resident claims to have activities and bank accounts in these countries. In
these circumstances the burden to prove that assessee's explanation if false
or the receipts outside India were as a result of any income which accrued in
India was on the Department. AO has failed to discharge the burden and no
adverse material has been brought on record. Besides the ITAT in the case
of the assessee has held that these are remittances from the assessee's own
account outside India to Indian bank accounts cannot be taxed u/s 68 of the
Act. The decision of the Tribunal has been accepted by the Department and
no appeal has been preferred to the High Court. Hence, we delete this
addition, this ground of the assessee is allowed and the addition of Rs.
10,51,20,000/- is deleted.
10. Apropos the addition on account of share capital and loans of M/s C-l
India Pvt. Ltd. by its holding company M/s Y2K Systems; Id. Counsel for
the assessee that C-1 India is a private limited company incorporated on 11-
08.2000 with the main object of pursuing E-Commerce and software business.
It was contended on behalf of C-1 India that no addition ought to be made as
cash credits under section 68 of the Act on account of share capital and also
the loans received from Y2K Systems Ltd as the onus that lay upon it had
been discharged during the assessment proceedings. It was explained that:-

     (i) the share capital and loans had been received by C-I India from its
            holding company Y2K Systems Ltd Mauritius through banking
            channels;

     (ii) the audited Balance Sheets of the holding company had been filed and
             had also been obtained independently by the Department;

     (iii)   these Balance Sheets clearly reflect the said amounts having been
             received by C-1 India;
46                                                       ITA 1428, 1429, & 430/Del/2012
                                                             Shri Suresh Nanda



     (iv)   the tax residency certificate of Y2K Systems Ltd had been filed;

     (v) the particulars about incorporation of the company in Mauritius have
            been filed which have not been disputed.

     Thus in respect of share application money and loan to C-I India no
     addition under 68 of the Act can be made.

     The assessee contends that there is no evidence whatsoever in the form of
     bank account, document, paper etc to show that the amount received by
     C-1 India belongs to him.

     It was further contended that the same amount with the same explanation
     was held to be belonging to C-1 India and was also added substantively
     in his hands. As such, the same amount had been taxed substantively in
     two hands with the same explanation and findings. The nature of the
     amount is also the same being money allegedly belonging to Mr Suresh
     Nanda and purportedly brought in by him as share capital in C-1 India.

     It is trite that the same amount cannot be taxed doubly unless the nature
     of the amount changes or it is so provided in the Act. various judgments
     have been cited by both parties but this issue is well settled and does not
     need any judicial examination.

     Same additions were made in both the cases on substantive basis. Both the
     parties agreed that the facts & circumstances are similar in both the cases
     and the issues may be decided keeping in mind the view taken in the case
     of the assessee.

     In our considered view C1 India has been held as a separate entity held
     by department by way of assessments. It has not been held to be a
     Benami concern of the assessee. The addition have been made on
     account of Share application moneys and loan in both the cases i.e.
     assessee and C1 India without examining the relevant aspects like
     identity, creditworthiness, issues about genuineness of transaction and
     the issue of separate status of the entities in view of Hon'ble supreme
     court judgment in the case of Vodafone (supra). Lower authorities also
     seems to be ambivalent as to in which case the addition should be
     made.

     Considering all the facts, circumstances and the law on the issue, ends
     of justice will meet if the issue is set aside and sent back to the file of
47                                                         ITA 1428, 1429, & 430/Del/2012
                                                               Shri Suresh Nanda



      AO accordingly to decide afresh to consider, whether any addition on this
      account is called for in any case and if so in which case the addition is to
      be made.

11. Apropos common ground raised in A.Ys. 2002-03 & 2003-04 in respect
of alleged income from arms deals made on account of searches in the case
of M.V. Rao and Mohan Sambha Ji Jagtap, the relevant statements have
neither been provided nor these persons have been allowed to be cross
examined by assessee. In the presence of these infirmities in the
proceedings, these additions cannot be made. The AO may be directed to do
the needful in this behalf; consider the outcome of assessment proceedings
in their cases provide the opportunity for the cross examination and decide
the issue afresh in accordance with law. We are of the view that the addition
based on documents found from third parties cannot be made without
confronting the material and allowing the opportunity of cross examination
to the assessee. This proposition has been repeatedly laid down by all the
Courts. Besides, there is a presumption in law that the person from whom
the document is found is the owner of the document. The Department
should discharge their burden before seeking to tax the assessee on the basis
of documents found from Dr. M.V. Rao or shri Mohan sambhaji Jagtap.
Since the assessee has not been provided necessary material including their
statements, opportunity of cross examination and hearing based thereon,
interest of justice will be served if the issues about income from
commission/ business of dealings in arms are decided afresh by AO in the
light of these observations. These grounds raised by the assessee in A.Yrs.
2002-03 & 2003-04 are allowed for statistical purposes.


12.      Apropos the addition in respect of the estranged wife Smt. Renu
Nanda, we are unable to uphold this addition inasmuch as both were
48                                                    ITA 1428, 1429, & 430/Del/2012
                                                          Shri Suresh Nanda



separated by way of deed of settlement dated 4-4-1998 and the payments
based thereon on were already made. The addition has been made not based
on any evidence or incriminating material, indicating that any payment was
made out of books. The sole basis of addition is an assumption that there
was some unwritten understanding between the assessee and his estranged
wife Smt. Renu Nanda. Therefore, it has been assumed that lesser amount
for support was paid by the assessee as compared to earlier years. In our
considered view the basis of addition being only on presumptions, there
being no material what so ever, the addition is deleted. We find merit in the
argument of ld. Counsel that with estranged relations on record such
presumption is baseless. This ground of assessee raised in A.Y. 2003-04 is
deleted.


13.   The only ground left is in respect of unexplained expenditure of Rs.
45,95,000/- on the wedding ceremony of assessee's daughter, the Ld.
Counsel for the assessee contends that there are mistakes in the amounts
alleged to be paid to one Mr. Pal Nanda as mentioned in paper book page
278 which has not been considered. Similarly, the amount of Rs. 12.75 lacs
appearing at page 282 has been wrongly included. The assessee and his wife
are assessed to tax and are persons of means. The reconciliation of
availability of cash in hand of Rs. 53.66 lacs with the assessee and his wife
has been ignored by AO without giving any reasons and Hon'ble Delhi High
Court judgment in the case of Kulwant Rai 291 ITR 36 has not been
considered, holding that the assessee can keep the cash in hand. Looking at
the facts and circumstances of the case, it emerges that proper factual
verification has not been done by AO. Besides the issue of availability of
cash with assessee and his wife needs to be considered in the light of
Hon'ble Delhi High Court judgment. In view thereof we set aside this issue
49                                                   ITA 1428, 1429, & 430/Del/2012
                                                         Shri Suresh Nanda



about unexplained expenditure on the daughter's wedding back to the file of
AO to decide the same afresh in view of above observations and after giving
the assessee opportunity of being heard.


14. In the result, assessee's appeals are partly allowed for statistical
purposes.


Order pronounced in open court on 24-07-2012.


Sd/-                                            Sd/-
(SHAMIM YAHYA)                                  (R.P. TOLANI)
ACCOUNTANT MEMBER                          JUDICIAL MEMBER
Dated: 24-07-2012.
MP
Copy to '
1.    Assessee
2.    AO
3.    CIT
4.    CIT(A)
5.    DR
 
 
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