INCOME TAX ACT, 1961

Section 143(3)

Assessment - Addition to income - Unexplained income/expenditure pertaining to company - AO made addition in the hands of assessee being managing director

Assessee was managing director of VNR Infrastructures Ltd. and derived income from salary. Search was conducted in case of M/s. VNR and AO made most of the additions on account of unexplained expenditure and unexplained income in the hands of the assessee on substantive basis and in the hands of M/s. VNR Infrastructure Ltd. on protective basis. Held:/i> AO can and he must, tax the right person and the right person alone. By 'right person' it is meant the person who is liable to be taxed according to law with resect to a particular income. By the connotation of 'right person', it is meant the person who is liable to be taxed, according to law, with resepct to a particular income. And that the expression 'wrong person' is obviously used 'managing director' of M/s. VNR Infrastructure Ltd. and this latter entity was engaged in all the business activities and had been assessed separately throughout. There is yet another landmark decision in Salomon v. Salomon and Co. Ltd. (1897) AC 22 whereby the Court held long back in corporate parlance that a company is a body corporate and a distinct entity, apart from its director. There was not even an indicaton in the revenue's grounds that impugend additions pertained to assessee himself than his company VNR Infrastructure Ltd. Therefore, impugned twin additions of undisclosed/unaccounted expenditure and undisclosed income pertained to assessee's company VNR Infrastructure Ltd. carrying out business in its own name and, therefore, could not be sustained in assessee /individual's hands.