MANSAROVAR COMMERCIAL PVT. LTD. versus COMMISSIONER OF INCOME TAX, DELHI

Citation: [2023] 8 S.C.R. 452 · Decided: 10-04-2023 · Supreme Court of India · Bench: M.R. SHAH · Disposal: Dismissed

Cited by 1 judgment(s) · cites 3 · see the full citation network in Lexace

Judgment (excerpt)

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SUPREME COURT REPORTS
[2023] 8 S.C.R.
[2023] 8 S.C.R. 452
452
MANSAROVAR COMMERCIAL PVT. LTD.
v.
COMMISSIONER OF INCOME TAX, DELHI
(Civil Appeal No. 5769 of 2022)
APRIL 10, 2023
[M. R. SHAH AND B. V. NAGARATHNA, JJ.]
Constitution of India – The Constitution (Thirty Sixth
Amendment) Act, 1975 – Art. 371-F – Sikkim State Income-Tax
Manual, 1948 – Sikkim (Collection of Taxes and Prevention of
Evasion of Payment of Taxes) Act, 1987 – Income Tax Act, 1961 –
ss. 2(35)(a), 2(35)(b), 6(3), 148, 271(1)(a), 271(1)(c), 273, 274,271-
B – By a notification dated 07.11.1988 issued u/Art. 371-F(n) of the
Constitution, the Income Tax Act, 1961 were extended to the State of
Sikkim – The case of the assessees (incorporated under the
Registration of Companies (Sikkim) Act, 1961) was that each of
them was a resident of Sikkim, carrying on business in Sikkim and
not elsewhere and that till 31.03.1990, each of them were governed
by the Sikkim Manual, 1948 and not the Income Tax Act, 1961 –
Therefore, the stand of the assessees was that the income earned by
them till that date was income earned in Sikkim from the business
conducted/done in Sikkim – On the other hand, the case of the
Revenue was that the control and management of each of the assessee
companies was wholly with their auditor, RG, Chartered Accountants,
who had their offices in New Delhi and therefore, were companies’
resident in India in terms of Section 6(3) of the Act – A search was
conducted on 15.03.1990 at the premises of Chartered Accountant
at New Delhi and during the course of the search, books of account,
cheque books, signed blank cheques, vouchers and other income
documents of the assessees were found – Notices were issued by the
ACIT (Investigation), to each of the assessees u/s 148 of the Act, in
respect of Assessment Years 1987-88, 1988-89 and 1989-90 – Held:
On appreciation of the entire evidence on record, the AO, CIT(A)
and the High Court have specifically held against the assessees
that in fact auditor (the chartered accountant, RG) did not merely
render professional services but had a vital say in the control and
management of the assessee companies and in fact he was in control
and management of the affairs of the respective assessee companies
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– Once documents were seized and statements were recorded from
various persons, the burden gets shifted to the assessees to produce
some evidence to counter the picture and, the court found that its
extremely unusual that the seals and the signed blank cheques would
be lying with the Chartered Accountant – The head and seat and
directing power of the affairs of the company and the control and
management is must be shown is not merely theoretical control and
power, i.e., not de jure control and power, but de facto control and
power actually exercised in the course of the conduct and
management of the affairs of the firm – The domicile or the
registration of the company is not at all relevant and the determinate
test is where the sole right to manage and control of the company
lies and therefore the findings recorded by the AO, confirmed by the
CIT(A), it was rightly concluded that the control and management
of the affairs of the respective assessees were with Chartered
Accountant in Delhi – It appears that the assessees with mala fide
intention and to evade the payment of tax under the Income Tax Act,
1961 came out with a case that they earned the income within Sikkim,
which has not been established and proved – It was an attempt to
wriggle out of the clutches of the Income Tax Act, 1961 – Further,
the levy of interest u/s. 234A for default in furnishing the return of
income is mandatory and automatic – s. 234A of the Act provides
that where the return of income for any assessment year is furnished
after the due date or is not furnished, the assessee shall be liable to
pay simple interest.
Dismissing the appeals, the Court
HELD: 1. On appreciation of the entire evidence on record,
the AO, CIT(A) and the High Court have specifically held against
the assessees that in fact RG, Chartered Accountant in Delhi did
not merely render professional services but had a vital say in the
control and management of the assessee companies and in fact
he was in control and management of the affairs of the respective
assessee companies. [Para 7][483-A-B]
2. Where the head and seat and directing power of the affairs
of the company and the control and management is must be shown
is not merely theore

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