HIGH COURT OF MADRAS
T. Jayachandran
Versus
Deputy Commissioner of Income-tax, Special Range-III, Chennai
T.C. (A) NOS. 366 TO 368 OF 2005
W.P. NOS. 38858, 38859, 38860 OF 2005, 7279, 25811
25812, 25813 OF 2008 & 17040 OF 2011
OCTOBER 29, 2012
JUDGMENT
Mrs. Chitra Venkataraman, J.
The assessee has preferred Tax Case (Appeals) Nos.366 to 368 of 2005 as against the order of the Income Tax Appellate Tribunal, raising the following substantial questions of law:
(i) Whether on the facts and circumstances of the case, there was any evidence or materials before the Income Tax Appellate Tribunal to come to the conclusion that the appellant did not act as an agent of Indian Bank?
(ii) Whether on facts and circumstances of the case, when admittedly as per the instructions of Indian Bank the broker (appellant) had drawn the demand drafts to and in favour of the public sector undertakings (the depositors) and the appellant acted as an agent to convey these drafts, was the Appellate Tribunal right in law in holding that there was no diversion of title?
(iii) Whether Income Tax Appellate Tribunal was right in law in holding that the findings of Principal Special Judge for CBI cases was not binding and had no relevance for deciding the case especially when they had waited for ten long years for ascertaining the outcome of the decision before disposal of the same appeals?
(iv) Whether the Tribunal was right in law in not considering the evidence placed before it, ignoring essential facts and arriving at a conclusion based on illusory assumptions?
(v) Whether the Tribunal was right in law in ignoring the fact that the respondent had accepted the appellant’s stand on the same facts of the case for the earlier assessment year?
(vi) Whether the findings of the Tribunal without due and proper consideration of the entire materials before it were not perverse but right in law and ignoring the fact that there was triple taxation of the same income in the hands of appeal, Indian Bank and PSUs?
2. The assessment years under consideration herein are 1991-92, 1992-93 and 1993-94 respectively. He is a stock broker registered with the Madras Stock Exchange. He is stated to be an approved broker of the Indian Bank for carrying out certain security transactions on their behalf during the previous years relevant to the assessment years 1991-92, 1992-93 and 1993-94. The assessee is an individual and the proprietor of Chandrakala and Company.
3. It is seen from the facts herein that in the course of the assessment proceedings for the assessment year 1991-92, the assessee was asked to submit the report on the types of security transactions done by the assessee, the transactions made in securities, profit and loss accounts for each head of income, transactions in shares and debentures where the assessee acted as a broker and transactions in shares and debentures where the assessee had acted on his own. Apart from that, details sought for also included the details of call money transactions and the brokerage received. The assessee accordingly submitted these details.
4. It is seen from the facts herein that one of the transactions undertaken by the assessee related to purchase of securities for and on behalf of Indian Bank. The facts herein were that the assessee herein acted as a broker for Indian Bank in purchasing securities at a particular rate quoted by the Bank and selling them to Indian Bank. Bank of Madura was the routing bank through which the securities were purchased and sold to Indian Bank, for which, Bank of Madura charged service charges. In respect of the transactions done on behalf of Indian Bank, the assessee was paid certain commission. On enquiry with Bank of Madura, it was found that the assessee had directed them to buy the securities at a particular rate from banks or financial institutions and sell the same only to Indian Bank at a particular price. Under instructions from the Indian Bank, a portion of the amount realized from the security transactions carried on behalf of Indian Bank was paid as by way of additional interest to certain public sector undertakings on the deposits made with the Indian Bank. According to the assessee, his role was only that of a conduit for taking demand drafts in respect of additional interests payable to the public sector undertakings and the “demand drafts taken” on behalf of the Indian Bank did not form part of the total income of the assessee. According to the Assessing Officer, this gave the assessee a profit of Rs. 16,74,79,420/-. According to the assessee, a sum of Rs. 15,17,44,653/- represented additional interest payable by Indian Bank to eight public sector undertakings who had made fixed deposits with Indian Bank. The assessee pointed out that a sum of Rs. 14,78,91,000/-, in fact, did not belong to the assessee and they, in fact, represented money belonging to Indian Bank, which were utilized for the purpose of taking demand drafts in favour of eight public sector undertakings, namely towards additional interest payable by Indian Bank on the deposits kept by the public sector undertakings; the details were as follows:
