Income Tax Appellate Tribunal - Bilaspur
Assistant Commissioner Of Income-Tax ... vs B.L.Agrawal , Raipur (Cg) on 9 January, 2017
1 ITA Nos. 110 to 114/BLPR/2012 &
C.O. Nos. 21 to 25/BLPR/2012.
IN THE INCOME TAX APPELLATE TRIBUNAL,
RAIPUR BENCH, RAIPUR
BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER,
AND SHRI C.M. GARG, JUDICIAL MEMBER..
S.No. ITA No. Asstt. Year
1. 110/BLPR/2012 2005-06.
2. 111/BLPR/2012 2006-07.
3. 112/BLPR/2012 2007-08.
4. 113/BLPR/2012 2008-09.
5. 114/BLPR/2012 2009-10.
Asstt. Commissioner of Income-tax-2(1), Shri B.L. Agrawal,
Raipur. Vs. Raipur.
PAN ALCPA 5669A.
Appellant. Respondent.
S.No. C.O. No. Arising out of Asstt. Year.
ITA No.
1. 21/BLPR/2012 110/BLPR/2012 2005-06.
2. 22/BLPR/2012 111/BLPR/2012 2006-07.
3. 23/BLPR/2012 112/BLPR/2012 2007-08.
4. 24/BLPR/2012 113/BLPR/2012 2008-09.
5. 25/BLPR/2012 114/BLPR/2012 2009-10.
Shri B.L. Agrawal, Asstt. Commissioner of Income-tax,
Raipur. Vs. 2(1), Raipur.
Cross Objector. Respondent.
Department by : S/Shri P.K. Mishra, Darshan Singh& D.K. Jain.
Assessee by : Shri K.P. Dewani.
Date of Hearing : 20-10-2016 Date of Pronouncement : 9th January, 2017.
O R D E R. These are appeals by the Revenue and the cross objections by the assessee emanating out of common order of learned CIT(Appeals), Raipur dated 2 ITA Nos. 110 to 114/BLPR/2012 & C.O. Nos. 21 to 25/BLPR/2012.
31-05-2012 for the concerned assessment years. Common grounds of appeal read as under:
1. Whether in law and on facts & circumstances of the case, the CIT(A) has erred in deleting the addition made by the AO on account of investment in share capital / premium of four different companies u/s 69A of the Income-tax Act, 1961.
2. Whether in law and on facts & circumstances of the case, the CIT(A) has erred in deleting the addition made by AO on account of payment of commission to Shri Sunil Agrawal, CA u/s 69C of the Income-tax Act, 1961.
3. Whether in law and on facts & circumstances of the case, the CIT(A) was justified in admitting additional evidence in violation of Rule 46A of I.T. Rules, 1962.
4. Whether in law and on facts & circumstances of the case, the CIT(A) has erred in prejudging the matter by deciding the protective assessment order, when the substantive quantum addition is still pending adjudication before the Hon'ble Settlement Commission.
5. Whether in law and on facts & circumstances of the case, the CIT(A) has erred in admitting appeal against an order of protective assessment.
2. One more ground has been raised in assessment year 2007-08 which reads as under :
"Whether in law and on facts & circumstances of the case, the CIT(A) has erred in deleting the addition made by the AO on account of payment made through a debit card of Shri D.P. Mehta u/s 54(2)(v) of the Income- tax Act, 1961."
3. At the outset in this case learned D.R. Shri P.K. Mishra, Commissioner of Income Tax, referring to following appeals, submitted as under :
ITA No. 110-115/BLPR/12 AY. 2009-10.
ITA No. 6 to 11/BLPR/12 AYs. 2003-04 to 2008-09 ITA 12/BLPR/12 AY 2009-10.
" The assessments for the above AYs suffer from serious legal defects. When the search and seizure operation in assessee's premises 3 ITA Nos. 110 to 114/BLPR/2012 & C.O. Nos. 21 to 25/BLPR/2012.
were conducted on 4.2.2010 assessment u/s 153C were pending which related to an earlier search operation. As per the second proviso to section 153A of the Act, " Assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub- section pending on the fate of initiation of the search under section
132.....shall abate."
On 4.2.2010 i.e. on the date of search and seizure operation in assessee's premises, assessment under section 153C for AYs 2003-04 to 2009-10 were pending. The AO carried on the assessment proceedings and separate orders u/s 153C relating to earlier proceedings and u/s 153A in respect of search operation dated 4.2.2010 were passed. Therefore all these assessments are not validly passed as per the provisions of the IT Act. The appeals at sr. No. 1 and 2 relate to the assessments u/s 153C and those at sr. No. 3 relate to assessments u/s 153A. All these assessments are defective."
4. Referring to the above, learned D.R. submitted that all the assessments in this case should have been annulled by the learned CIT(Appeals) and matter remitted to the AO for fresh assessments, that the Department is in the process of filing additional grounds in this regard. Hence adjournment may be granted. In the alternative learned D.R. submitted that the matter may be remitted to the file of the AO. In this regard another Commissioner of Income Tax, Shri Darshan Singh who was also appearing for the Revenue submitted that he is not in agreement with the request of the Commissioner of Income Tax Shri P.K. Mishra that the mater should be remitted to the file of the AO. He submitted that the Tribunal is competent to pass proper order as it thinks fit.
4 ITA Nos. 110 to 114/BLPR/2012 &C.O. Nos. 21 to 25/BLPR/2012.
5. We have heard both the counsel and perused the records. We find that in the above averments learned D.R. is accepting that the assessments are defective and they have not been validly passed. This signifies that these are invalid assessments. If this plea is accepted then there cannot be any grievance to the Revenue in learned CIT(Appeals) deleting the additions made by the AO. It is settled law that an invalid assessment cannot be cured .
6. As regards the learned D.R's plea that in this case the CIT(Appeals) should have annulled the assessment and sent the matter back to the AO for reconsideration is totally an unsustainable plea. What the learned D.R. is seeking is a direction from the Tribunal that learned CIT(Appeals) should have invoked the provisions of section 263 of the I.T. Act. This is totally unsustainable in law. Annulling the assessment and sending the matter back to the AO is a prerogative of Commissioner of Income-tax u/s 263 of the I.T. Act. We may gainfully refer to the provision of section as under :
263. (1) The 23a[Principal Commissioner or] Commissioner may call for and examine the record24 of any proceeding under this Act, and if he considers that any order passed therein by the 25[Assessing] Officer is erroneous24 in so far as24 it is prejudicial to the interests of the revenue24, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment24 and directing a fresh assessment.26
[Explanation.--For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,--
(a) an order passed 27[on or before or after the 1st day of June, 1988] by the Assessing Officer shall include--
(i) an order of assessment made by the Assistant Commissioner 28[or Deputy Commissioner] or the Income-tax Officer on the basis of the directions issued by the 29 [Joint] Commissioner under section 144A;
(ii) an order made by the 29[Joint] Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, 5 ITA Nos. 110 to 114/BLPR/2012 & C.O. Nos. 21 to 25/BLPR/2012.
him under the orders or directions issued by the Board or by the 29a[Principal Chief Commissioner or] Chief Commissioner or 29a[Principal Director General or] Director General or 29a[Principal Commissioner or] Commissioner authorised by the Board in this behalf under section 120;
(b) "record" 30[shall include and shall be deemed always to have included] all records relating to any proceeding under this Act available at the time of examination by the 29a [Principal Commissioner or] Commissioner;
(c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal 31[filed on or before or after the 1st day of June, 1988], the powers of the 31a[Principal Commissioner or] Commissioner under this sub-section shall extend 31[and shall be deemed always to have extended] to such matters as had not been considered and decided in such appeal.] 32 [(2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed.] (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, 33[National Tax Tribunal,] the High Court or the Supreme Court.
Explanation.--In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded.
From the above it is clear that the relief sought by the learned D.R. falls under the realm of section 263 of the I.T. Act. This is not at all permissible by the CIT(Appeals) under the present appeal which he was ceased of u/s 246 of the I.T. Act. Section 251 of the I.T. Act dealing with the power of CIT(Appeals) read as under :
29 30 "251. (1) In disposing of an appeal, the [* * *] [Commissioner (Appeals)] shall have the following powers--
(a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment33 34[* * *];35
[(aa) in an appeal against the order of assessment in respect of which the proceeding before the Settlement Commission abates under section 245HA, he may, after taking 6 ITA Nos. 110 to 114/BLPR/2012 & C.O. Nos. 21 to 25/BLPR/2012.
into consideration all the material and other information produced by the assessee before, or the results of the inquiry held or evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduce, enhance or annul the assessment;]
(b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty;
(c) in any other case, he may pass such orders in the appeal as he thinks fit.
(2) The 36[* * *] 37[Commissioner (Appeals)] shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction.
Explanation.--In disposing of an appeal, the 36[* * *] 37[Commissioner (Appeals)] may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the 36[* * *] 37[Commissioner (Appeals)] by the appellant.
A reading of the above makes it clear that the Act does not empower the Commissioner of Income Tax to annul the assessment and send the matter back to the AO for reconsideration.
7. In view of the above discussion it appears from the above averments of the learned D.R., Shri P.K. Mishra, CIT, that the assessments in this case deserved to be quashed abinitio. However, since there is no such ground raised either by the Revenue or by the assessee, we do not deem it appropriate to engage into this adjudication to hold the assessments to be invalid. Further learned DR's plea that learned CIT(Appeals) should have annulled the assessments and send the matter back to the AO for reconsideration also has no merits. Hence there is no cogent reason for seeking adjournment.
Now we consider and adjudicate the Revenue's grounds raised:
8. In this case a search was conducted in which apart from the residential premises of the assessee, residential premises of his partners/brothers, business premises of M/s Prime Ispat Limited, a closely held company dealing in 7 ITA Nos. 110 to 114/BLPR/2012 & C.O. Nos. 21 to 25/BLPR/2012.
manufacture and sale of structural steel and other related business concerns and also the residential and office premises of the then Chartered Accountant, Shri Sunil Kumar Agrawal were also covered. The AO noted that the said M/s Prima Ispat Limited is a newly come-up entity but it was observed that in the first few years of its existence it manages to amass huge capital which was found to be coming from cash deposits made by numerous individuals. The AO further observed that Shri Sunil Kumar Agrawal, C.A. in this regard stated that he was doing capital building work for benefit of M/s Prime Ispat Limited. Shri Sunil Kumar Agrawal, C.A. further stated that such money is belonging to Shri Babulal Agrawal, the assessee and he is doing this activity and he is getting commission of 2% for this work. The AO was of the opinion that this statement of Shri Suniil Kumar Agrawal who was associated with the assessee in capacity of tax adviser of the whole group clearly indicts the assessee. When the assessee was confronted in this regard he submitted that Shri Sunil Kumar Agrawal, C.A. has later retracted from this statement. However, the A.O. held that the theory of retraction of a statement given under duress does not hold good. As no other explanation about the source of such funds applied towards the share capital of companies belonging to the Agrawal group was given, the AO held that the assessee is found to have not discharged his onus as per the averment of Shri Sunil Kuma Agrawal, and hence the assessee is found to have not satisfactorily explained the source of these investments. Hence the AO held that the total investments made during the relevant accounting period in the group companies of Agrawal group namely M/s Prime Ispat Limited, M/s Mahamaya Agrotech Pvt. Ltd., M/s Bapu Agriculture Pvt. Ltd. and M/ Xpress Mining Pvt. Ltd., comes to Rs.5,55,01,870/- which is added u/s 69A to the income of the assessee.
9. The AO further observed that in his statement Shri Sunil Kumar Agrawal has also averred that for the funds introduced through him he was getting a 8 ITA Nos. 110 to 114/BLPR/2012 & C.O. Nos. 21 to 25/BLPR/2012.
commission of 2%, which for this transaction comes to Rs.11,10,037/- the source of which is also not explained by the assessee. Hence this amount of Rs.11,10,037/- is added u/s 69C to the income of assessee. The AO further observed that this addition is made in case of assessee on protective basis for reasons which are discussed in the foregoing paragraph.
10. The AO further observed that the above described scheme of funds transfer is ultimately benefitting M/s Prime Ispat Limited as the unaccounted funds belonging to persons connected to this company are being transferred and securely placed at the disposal of this company. The issue was also being considered in the assessment in case of M/s Prime Ispat Limited, however the said company has filed application before Hon'ble Settlement Commission. However, since the provisions of limitation are operative in case of the assessee the matter is decided as discussed above, albeit on protective basis. Thus only because a similar matter is before adjudication of Hon'ble Settlement Commission, the assessee can be saved from the rigours of tax payment on a disputed issue till the finality upon it is reached in a higher judicial forum by completing the above assessment on protective basis.
11. Upon assessee's appeal learned CIT(Appeals) elaborately considered the submissions and held as under :
"3.11 I have gone through the observations of the AO and submissions of the appellant as also the stand of the A.O. taken during appeal proceedings. The issues covered in these grounds of appeal relate to addition of share capital u/s.69A and payment of commission made u/s.69C of the Act. The one and only reason for making these additions is that, in the course of search in the case of Shri Sunil Kumar Agrawal, he stated that some cash was deposited into the bank accounts of villagers from Kharora and from there, it was transferred through one or two intermediaries to the company named M/s Prime Ispat Ltd. owned by the extended family members of the appellant and such money probably belonged to the appellant and for this work he was getting commission of 2%. Admittedly, no other direct or indirect evidence was found or recovered during the extensive search conducted in the residential premises of the appellant, in the office/residential premises of Shri Sunil Kumar Agrawal, C.A. or in the business or residential premises of the concerned companies. The Commissioner of Income-tax, Raipur has also endorsed this fact in his report to the Hon'ble Settlement Commission.
Then the only
9 ITA Nos. 110 to 114/BLPR/2012 &
C.O. Nos. 21 to 25/BLPR/2012.
basis left was the statement of Shri Sunil Kumar Agrawal, which was retracted through duly sworn affidavit immediately on 06.02.2010 on the ground that it was elicited under duress. Shri Sunil Kumar Agrawal has retracted the statement on 06.02.2010 i.e., shortest possible time and filed copy of the same before the District & Sessions Judge, Raipur. The appellant intimated about this retraction to the DGIT(lnv), Bhopal vide his letter dated 11.02.2010. To this fact, news item was also published in the local news papers at that point of time only. Thus, the retraction was very well in the knowledge of the department and the deponent was not immediately cross examined on the retraction made by him by the Department. Shri Sunil Kumar Agrawal was asked about this for the first time only on 26.12.2011, i.e. just four days before completion of assessment and in his further statement also, Shri Sunil Kumar Agrawal has reaffirmed his deposition that the original statement was taken under duress and the depositions recorded therein were not made by him and he was made to sign the statement in the course of search in his case. In between Shri Sunil Kumar Agrawal has also filed two more affidavits on 21.07.2011 and 16.08.2011 reaffirming the same facts of involuntary statements elicited by the search team. The AO did not conduct any enquiry. He has simply stated that Shri Sunil Kumar Agrawal was again examined and was not found to give satisfactory explanation. Therefore, he concluded that the theory of retraction does not hold good, which is not sustainable, being not based on any enquiry or material.
3.12 Thus, the oblique nature of the statement of Shri Sunil Kumar Agrawal and absence of any direct evidence to establish nexus of the funds with the appellant was admitted by the department and under such circumstances, the protective assessment made by the AO is not correct. As per the law laid down by the Hon'ble Supreme Court in the case of Lalji Haridas vs. ITO (1961) 43 ITR 387 (SC), protective assessment can be possible only when the IT authorities are not clear as to in whose hands a particular income is to be assessed and then as a precautionary and protective measure, they can initiate proceedings on more than one person in respect of the same income. Admittedly, there is no direct evidence for any confusion regarding ownership of the disputed income except the unsubstantiated and baseless statement of Shri Sunil Kumar Agrawal with respect to Prima Ispat Ltd. There is also no evidence to hold that the various investments made were any time sprung from the appellant or the fruits of the investments have any time been enjoyed by him. Further, it is undisputedly clear from the assessment orders in the case of Mahamaya Agrotech. Pvt. Ltd, Bapu Agriculture, Xpress Mining Pvt. Ltd. that the AO completed substantive assessments in these cases without any reservations. This clearly shows that there was no doubt prevailing in the mind of the AO and under such circumstances, the same income, which was assessed on substantive basis in one case cannot be dragged to another case, to assess on protective basis that too without any material or evidence. Under these circumstances these additions are deleted and this ground of appeal is allowed."
12. Against the above order, Revenue is in appeal before the ITAT.
13. We have heard both the counsel and perused the records. The learned D.R. relied upon the orders of the AO. He reiterated that Shri Sunil Kumar Agrawal, C.A. in his submission to the Department has admitted that the entire money is belonging to Shri Babulal Agrawal, the assessee, and that he is doing 10 ITA Nos. 110 to 114/BLPR/2012 & C.O. Nos. 21 to 25/BLPR/2012.
his work for a commission of 2%. Learned D.R. submitted that the retraction of Shri Sunil Kumar Agrawal has no meaning. He submitted that the two persons who were present at the time of search as witness were not present in the retraction statement of Shri Sunil Kumar Agrawal. Hence learned D.R. submitted that the retraction cannot be relied upon.
14. Per contra learned counsel of the assessee submitted that ;
Undisputedly no direct or indirect evidence or material was found or recovered during the extensive search conducted in the residential premises of assessee, office and residential premises of Sunil Kumar Agrawal, CA or in the business or residential premises of concerned companies and relatives to show that any money is flown from assessee for contribution towards share capital.
That the huge protective addition made at the hands of assessee is without there being any shred of evidence on record for the same. The sum total of share capital contribution is assessed arbitrarily for no valid justification.
That perusal of assessment order would show that protective addition is solely based on initial oral statement on 04/02/2010 which stand retracted on 06/02/2010. The statement of Shri Sunil Kumar Agrawal obtained by the Authorised Officer was not voluntarily. Statement obtained was contrary to legal evidence on record. Shri Sunil Kumar Agrawal has retracted his statement made before Authorised Officer on the very next day of the search and has filed affidavit retracting the statement obtained from him. Shri Sunil Kumar Agrawal was examined by AO. in the course of assessment proceedings wherein he has clearly stated that the statement recorded at the time of search was not voluntarily and factually incorrect. The whole edifice of AO. in basing addition on the basis of 11 ITA Nos. 110 to 114/BLPR/2012 & C.O. Nos. 21 to 25/BLPR/2012.
statement of Shri Sunil Kumar Agrawal collapses on the face of retraction given by him immediately after the search. The addition made by AO. is unjustified and unsustainable. Retracted statement has no evidentiary value.
Reliance on:
i) Hon'ble Andhra High Court order in ITTA No.112 of 2003 in the case of Sri Naresh Kumar Agarwal vide judgement dated 09/09/2014.
That Shri Sunil Kumar Agrawal had filed application before the District Court in terms of provisions of section 164 of Criminal Procedure Code wherein it was stated that the statement given by him at the time of search is not true and correct. In view of above reliance on same without there being any corroborative evidence to make protective addition at the hands of assessee IS unjustified and unsustainable.
That the assessee on 11/2/2010 immediately after search has forwarded communication to Director General, Investigation, Bhopal clarifying that assessee has no connection with share capital of the various companies belonging to relatives of assessee and had also appraised the affidavit of Chartered Accountant wherein he had categorically explained that the statement recorded during the course of search action was not voluntary and the same has been retracted.
That in the course of search no evidence or material was found to show that money received as share capital contribution by various companies has flown from assessee. Even In the course of assessment proceedings A.O. has not brought any corroborative material or evidence on record to show that money has flown from the coffers of assessee towards contribution of share capital. It is not the case of A.O. that assets held and owned by the companies are under control and enjoyment of assessee. On above undisputed factual position there is no nexus/relation of share capital received by companies not owned by 12 ITA Nos. 110 to 114/BLPR/2012 & C.O. Nos. 21 to 25/BLPR/2012.
assessee being assessed on protective basis at the hands of assessee. The assessee is neither shareholder nor director in any of the companies of whom share capital contribution has been assessed to tax at the hands of assessee on protective basis.
That the A.O. at Page 4 of assessment order has observed that issue was also being considered in assessment of M/s. Prime Ispat Ltd. and similar matter is for adjudication before Hon'ble Settlement Commission The petition of Prime Ispat Ltd. has been finalized by Settlement Commission by passing an order u/s 245(4) on 31/10/2012 settling the issue of share capital contribution received by such company. Perusal of order would show that income has been assessed on estimated basis for share capital contribution received by Prime Ispat Ltd. Rule 9 report and order u/s 245(4) would clearly demonstrate that matter of share capital was fully considered by Hon'ble Settlement Commission. In terms of provisions of sec. 245-1 matter of share capital cannot be taken up by revenue for making protective addition at the hands of assessee.
Reliance on:
(i) (2015) 43 CCH 0073 (Del.) Omni Farms Pvt. Ltd. vs. DCIT
(ii) (2002) 225 ITR 0514 (SC) NIRMAL & NAVIN (p) Ltd. & ORS. Vs. D. RAVIODRAN.
That in assessment framed share capital contribution received by M/s.
Mahamaya Agrotech Pvt. Ltd., M/s. Bapu Agriculture Pvt. Ltd. and M/s. Xpress Mining Pvt. Ltd. has also been assessed to tax on protective basis at the hands of assessee. A.O. for making addition has referred to statement of Shri Sunil Kumar Agrawal. Perusal of statement of Shri Sunil Kumar Agrawal would reveal that he was 13 ITA Nos. 110 to 114/BLPR/2012 & C.O. Nos. 21 to 25/BLPR/2012.
being questioned for capital of M/s. Prime Ispat Ltd. In entire statement there is no adverse observation in the name of assessee for contribution of capital in respect to these three companies. Protective attention made in respect on above facts is without there being any evidence on record and is unjustified and unsustainable.
That it is settled proposition of law that u/s 69A and 69C of I.T. Act 1961 onus is on the revenue to show that assessee has made investment/expenditure In financial year and same remained unexplained at the hands of assessee. In the course search no incriminating evidence has been found to show that assessee has made any investment/expenditure and thus the basic ingredients of invoking the aforesaid provisions in the case of assessee are absent. The addition thus made at the hands of assessee is unsustainable.
Reliance on:
i) (1999) 237 ITR 570 (SC)
CIT vs Smt. P.K. Noorjahan.
That it is settled position of law that in 153A assessment proceedings addition could be only in respect to incriminating material found in the course of search. In search proceedings of assessee no incriminating evidence is found of whatsoever nature and thus no addition as made by AO. is justifiable.
Reliance on:
i) ITAT order in ITA No.278 & 279/RjU2015 in the
case of Shri Navinchandra Mohanlal Patel vide
order dated 10/02/2016
ii) ITAT order in ITA No.5728/0el/2013 in the case
of Manjulata Kurela vide order dated 26/02/2016.
14 ITA Nos. 110 to 114/BLPR/2012 &
C.O. Nos. 21 to 25/BLPR/2012.
That statement of Shri Sunil Agrawal cannot be said to be evidence found in the course of search of assessee and thus it could not be used for making any addition at the hands of assessee. The statement having been retracted deserves no consideration. It is statement of third party on the basis of which no addition u/s 69A can be made at the hands of assessee in the absence of any independent evidence on record.
Reliance on:
i) ITAT order in ITA No.5149/0el/2012 in the case of M/s. Bhola Nath Radha Krishan vide order dated 05/04/2013.
(ii) AIR 1979 SC / 408 Surajmal vs. State (Delhi Admn.) on 13th February, 1979.
15. Upon careful consideration we find that the core of the issue in this case is the addition of investment in share capital/premium of 4 different companies in the hands of the assessee on protective basis. It is to be noted that the assessee is neither the shareholder nor the Director of these companies. The sole basis for addition is a statement by the Chartered Accountant Shri Sunil Kumar Agrawal that he was doing capital building work for benefit of M/s Prime Ispat Ltd. It was stated that the company amassed huge capital which was coming from cash deposits made by numerous individuals. Shri Sunil Kumar Agrawal has stated that the money was belonging to the assessee and he was doing this activity on 2% commission basis. The said Shri Sunil Kumar Agrawal, C.A. has later on retracted from his statement and has given an affidavit that his earlier statement was under duress.
16. Learned D.R's plea against this retraction is that the two witnesses present at the time of search and the two witnesses present at the time of retraction of affidavit are not the same persons. In our considered opinion this alone is not a cogent basis to find fault with the retraction. It is to be noted that the matter of Prime Ispat Ltd. gone to the Settlement Commission. The Settlement Commission has finalised the issue by passing an order u/s 245(2) on 15 ITA Nos. 110 to 114/BLPR/2012 & C.O. Nos. 21 to 25/BLPR/2012.
31-10-2012 settling the issue of share capital contribution receipt by such company. The income has been assessed on estimate basis for share contribution receipt of Prime Ispat Ltd.
17. As far as the share capital of the companies whose share capital and share premium has been added in the hands of the assessee on protective basis, it is noted that the assessee is neither shareholder nor a Director of these companies. No cogent material has been brought on record linking the assessee with the share capital of these companies. First of all it is the onus of these companies to prove the veracity of the share capital and share premium of themselves. If they are not able to justify the veracity of the share premium/share capital, the onus will shift upon the individual in whose name the share capital and share premium is held. So if the protective assessment has to be done then it has to be in the names of these shareholders. The Hon'ble Apex Cour in the case of M/s Lovely Exports 216 CTR 195 has held that if the share application money is received by the assessee from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law.
18. From the above it is clear that in case of a lack of veracity of share capital/premium of a company it is the company and /or the shareholders in whose name shares are held have the onus to explain the same. The assessee who is neither a shareholder nor a Director of these companies cannot be deemed to be the owner of these shares just by a statement of the Chartered Accountant who has later on retracted the same. A company is an artificial juridical entity. It has a right of ownership. It can be sued and it can sue. For the wrong doings of a company, the company itself is responsible and it is only in rare circumstances that corporate veil can be pierced and the person behind a veil i.e. the Directors and shareholders can be made accountable for the wrong doing of the company. But a person who is neither shareholder nor a director of the company cannot be deemed to be the owner of the share capital of a 16 ITA Nos. 110 to 114/BLPR/2012 & C.O. Nos. 21 to 25/BLPR/2012.
company without bringing cogent material on record. No material has been brought on record to show that Settlement Commission in the case of Prime Ispat Ltd. has implicated or found the assessee liable for the share capital and share premium.
19. In our considered opinion the statement of Shri Sunil Kumar Agrawal which has been duly retracted can by no stretch of imagination be a basis to hold that the assessee was owner of the share capital of these four companies. This presumption is not tenable under any Law be it the Income Tax Law or Company Law.
20. In this regard we also note that Hon'ble Apex Court in the case of Surajmal vs. State (Supra) has expounded that it is well settled that where witnesses make two inconsistent statements in their evidence either at one stage or at two stages, the testimony of such witnesses becomes unreliable and unworthy of credence. Thus we find that in absence of any cogent evidence, this statement alone which has been duly retracted cannot be a basis for addition of share capital and share premium of these companies in the hands of the assessee. Addition has to be based upon cogent material and not mere heresay. In this regard we also note that in the case of P.V. Kalyanasunderam, deletion of addition for allegation on on-money merely on the basis of conflicting statement of the seller and loose papers was upheld by the Hon'ble Madras High Court in 282 ITR 259 and by the Hon'ble Apex Court in Appeal (Civil) No. 4262 of 2007 vide judgement dated 14-09-2007.
21. In these circumstances, in our considered opinion, there is no infirmity in the order of learned CIT(Appeals) in quashing the protective assessment of the share capital and share premium of these companies in the hands of the assessee.
22. Since we have already quashed the addition of these share capital and share premium in the hands of the assessee, the 2% commission attributed to this transaction and added in assessee's hands also does not survive. Hence we 17 ITA Nos. 110 to 114/BLPR/2012 & C.O. Nos. 21 to 25/BLPR/2012.
uphold the learned CIT(Appeals)' order deleting this addition also.
23. As regards the Revenue's ground relating to admission of additional evidence in violation of Rule 46A by the learned CIT(Appeals), no specific submission has been made before us. Learned counsel of the assessee in this regard submitted that no additional evidence has been submitted by the assessee as is clear from the evidence on record and the order of the learned CIT(Appeals).
24. Upon careful consideration we find that in absence of any material cogently supporting the plea that the learned CIT(Appeals) has admitted additional evidence in violation of Rule 46A, we do not find any justification in the ground raised in this regard. Hence the same is rejected.
25. We also note that no submission has been made before us that quantum addition on the issue in appeal before us is also pending before the Settlement Commission with regard to the assessee in this case. Hence ground raised by the Revenue that learned CIT(Appeals) has erred in pre judging the matter has no merits as there is no appeal by the assessee before the Settlement Commission. Hence ground in this regard raised by the Revenue is also liable to be rejected.
26. As regards the plea that learned CIT(Appeals) has erred in admitting the appeal against the order of protective assessment, we note that there is no specific submission by the Revenue in this regard. Learned counsel of the assessee in this regard has submitted that there is no bar to admit appeal challenging protective addition and that the appeal has been decided by the learned CIT(Appeals) as per the provision of Income-tax Act, 1961. We find ourselves in agreement with this submission and hence ground raised by the Revenue in this regard is also rejected.
18 ITA Nos. 110 to 114/BLPR/2012 &C.O. Nos. 21 to 25/BLPR/2012.
27. Ground raised for assessment year 2007-08 regarding deletion of addition on account of payment made through debit card of Shri D.P. Mehta :
On this issue the AO observed that the appellant during one of his visit to Mumbai has stayed at a Hotel and for this stay made payment of Rs.73,540.67, out of which part payment of Rs.40,000/- was made through a debit card belonging to one Shri D.P. Mehta who has stated that as courtesy gesture to maintain good relations with the appellant and considering his position he allowed use of his debit/credit card in making part payment of hotel bills. Accordingly, the AO treated the same as receipt falling u/s 56(2)(v) and added to the total income.
28. Before the learned CIT(Appeals), learned counsel of the assessee submitted that during his stay at Mumbai, an amount of Rs.40,000/- was paid through a debit/credit card of Shri D.P. Mehta as the hotel denied to accept cash payment and the appellant was not having any debit/credit card of his own. This amount was returned back to Shri D.P. Mehta. Therefore, it does not fall within ambit of the provisions of Section 56(2)(v) of the Act. The assessee also filed a copy of receipt dated 10-05-2011 issued by Shri D.P. Mehtan with a request to accept the same as additional evidence under Rule 46A of the Rules, his address and PAN was also given. The AO in this regard objected to the admission of additional evidence and submitted that no confirmation was submitted earlier despite several opportunities and present evidence is an after thought. Learned CIT(Appeals) in this regard deleted the addition holding as under :
" I have gone through the observations of the AO and submissions of the appellant as also the stand of the A.O. during appeal proceedings. Admittedly Shri D.P. Mehta was an outsider and the non-supply of requisite confirmation by him in time cannot be attributed to the appellant. Therefore, it continues a sufficient cause and accordingly the additional evidence is admitted after affording opportunity to the A.O. under rule 46A of the Rules. The provisions of Section 56(2) regarding 19 ITA Nos. 110 to 114/BLPR/2012 & C.O. Nos. 21 to 25/BLPR/2012.
deemed gift comes into operation only when it is substantiated that an assessee has received any amount without consideration and 'received' in this context means 'receiving the money irretrievably'. In this case, the appellant substantiated that the money was not received irretrievably but it was of returnable nature. Accordingly, the AO is not justified in invoking of provision of Sec. 56(2). There is no dispute regarding correctness of the transaction. During appeal proceedings, the appellant has also filed the receipt given by Shri D.P. Mehta, which could not be filed during assessment proceedings due to non-availability of the same at the time of assessment. Shri D.P. Mehta is also an Income-tax assessee and there is no reason to disbelieve the repayment made to him. The A.O. could have conducted independent inquiry, if considered necessary, which was not done. The appellant invited my attention to the decision of Hon'ble ITAT, Mumbai in the case of Chandra Kant S. Shah vs. ITO (2009) 121 TTJ (Mum) 145 wherein the Hon'ble Tribunal has held that interest free loan which was partly repaid cannot be said to be without consideration, hence, not assessable to tax. In view of the above, the addition made by the AO is not sustainable, hence deleted."
29. Against the above order, Revenue is in appeal before us. We have heard both the counsel and perused the records. Learned D.R. relied upon the orders of the AO and reiterated that the AO has not examined the additional evidence on merits. Hence he pleaded that the issue may be remitted to the file of the AO.
30. Learned counsel of the assessee in this regard supported the order of the learned CIT(Appeals). He pleaded that the additional evidence was submitted which was necessary for adjudication of the ground of appeal. It was forwarded to the AO for consideration and full opportunity was given to him. Hence learned counsel pleaded that there is no justification of remitting the matter back to the AO.
31. Upon careful consideration we find that the additional evidence in this regard has not been examined on merits by the AO. It is also not the case that the learned CIT(Appeals) has himself examined the veracity of the additional evidence. In these circumstances we deem it appropriate to remit the issue to the file of the AO. The AO shall examine the veracity of additional evidence and 20 ITA Nos. 110 to 114/BLPR/2012 & C.O. Nos. 21 to 25/BLPR/2012.
thereafter decide accordingly.
32. In the result ITA No. 112/BLPR/2012 for assessment year 2007-08 is partly allowed for statistical purposes and other Revenue appeals stand dismissed.
33. The cross objections filed by the assessee are in support of the learned CIT(Appeals)' order which we have already dealt with in the above Revenue appeals. Hence these cross objections by the assessee have become infructuous and accordingly the same are dismissed.
Order pronounced on this 9th January, 2017.
Sd/- Sd/-
( C.M. GARG) ( SHAMIM YAHYA)
JUDICIAL MEMBER. ACCOUNTANT MEMBER.
Dated: 9th January,2017.
Copy forwarded to :
1. Shri B.L. Agrawal,
Near Radha Krishna Saw Mills,
New Timber Market, Fafadih,
Raipur.
2. A.C.I.T.-2(1), Raipur.
3. C.I.T., Raipur.
4. CIT(Appeals), Raipur.
5. D.R., ITAT, Raipur.
6. Guard File
True Copy
By Order
Assistant Registrar,
Income Tax Appellate Tribunal,
Nagpur Bench, Nagpur.
Wakode.