Income Tax Appellate Tribunal - Delhi
Sunshine Capital Ltd., New Delhi vs Dcit, New Delhi on 8 October, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES "G" : DELHI
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
AND
SHRI L.P. SAHU, ACCOUNTANT MEMBER
ITA.No.787/Del./2014
Assessment Year 2008-2009
Sunshine Capital Ltd.,
209, Bhanot Plaza-II, 3-D.B. The DCIT, Circle-9(1),
vs.
Gupta Road, New Delhi-055 New Delhi.
PAN AABCS1913J
(Appellant) (Respondent)
Shri Rohit Garg, And
For Assessee : Shri Siddharth Joshi,
Advocates
For Revenue : Shri S.S. Rana, CIT-D.R.
Date of Hearing : 29.08.2018
Date of Pronouncement : 08.10.2018
ORDER
PER BHAVNESH SAINI, J.M.
This appeal by Assessee has been directed against the Order of the Ld. CIT(A)-XI, New Delhi, Dated 29.11.2013, for the A.Y. 2008-2009.
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2. We have heard the Learned Representatives of both the parties and perused the material available on record.
3. The facts of the case are that assessee-company filed return of income declaring an income of Rs.19,92,354/- on 29.09.2008. The same was processed under section 143(1). Case was selected for scrutiny. The assessee during the relevant year derived income from Investments. During the year under consideration, the assessee has increased its share capital from Rs.3,02,09,000/- to Rs. 13,02,09,000/-. Assessee-company has also received share premium amounting to Rs. 90,00,00,000/-. In all, the assessee has received Rs.100 crores as share capital and share premium during year under consideration. The assessee has submitted list of shareholders as on 17-03-2008 which runs into 23 pages and the shareholder are 555 are in number. However as on 31-03-2008 the shareholders are eight investment and 3 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
finance companies only i.e. all the shares from the shareholders as on 17-03-2008 has been transferred to the eight listed companies mentioned at page-2 of the assessment order which are (1) M/s. Hillridge Investment Ltd., (2) Karishma Industries Ltd., (3) Nisha Holding Ltd., (3) Parisudh Finance Co. Pvt. Ltd., (5) Pellcon Finance & Leasing Ltd., (6) Pitambara Securities Pvt. Ltd., (7) S.R. Cables Pvt. Ltd., and (8) Vogue Leasing & Finance Pvt. Ltd., The addresses of these parties, PAN, number of share and percentage are mentioned. The assessee submitted confirmation, copy of bank account, copy of ITR, copy of audited balance sheet, statement of account for F.Y 2007- 08 and copies of earlier assessment orders in respect of all these eight parties. Information under section 133(6) was called for from the Bank, which revealed that almost all the accounts were opened in the month of February and March, 2008. None of the account opening forms were introduced by any introducer. The account opening forms were not 4 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
properly filled-up. The A.O, therefore, found it to be dubious. The A.O. also noted that funds have moved from one company to another company and finally went into a company which is not part of this web of companies. The A.O. in order to investigate further, deputed the Inspector to identify the addresses and business addresses/activities of the shareholders companies, who has filed enquiry report dated 21.12.2010 mentioning the local inspection done by him that the five of the shareholder companies were not functioning from the property in question at the time of his inspection. The Inspector did not find any share Register/Share Transfer Certificate at the time of his visit. The assessee could not produce any of the single shareholder out of 555 shareholders during the assessment proceedings. The A.O. examined Shri S.K. Jain, Director of the assessee-company under section 131 of the I.T. Act on 23.12.2010, his statement is reproduced in the assessment order. The A.O. after examining the issue concluded that 5 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
the share capital, share premium received by the assessee are nothing but sham transaction to give legal colour to the unaccounted money of the assessee-company. Therefore, entire amount of Rs.100 crores was added to the income of assessee under section 68 of the I.T. Act, 1961.
4. The A.O. noted that during the year assessee- company has earned dividend income of Rs.590/-. The A.O. asked the assessee-company as to why the expenses be not disallowed under section 14A read with Rule 8D of the I.T. Rules. The A.O. after considering the explanation of assessee-company, disallowed Rs.22,74,040/- under section 14A read with Rule 8D of the I.T. Rules, 1962.
5. The assessee-company challenged both the additions before the Ld. CIT(A). The written submissions of the assessee-company is reproduced in the appellate order in which the assessee-company briefly explained that assessee - company filed documentary evidences of each of the 6 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
shareholder and despite finding no defect of these evidences, the A.O. made addition for accommodation entries under section 68 of the I.T. Act. The documents filed before A.O. were copies of the confirmation from all the shareholders, copies of their ITRs, copies of their audited balance-sheet, copies of the statement of account for each year in question, copies of the schedules of investment of these companies to show that these companies have made investment in share capital of the assessee company, copies of the earlier assessment orders in their cases, copies of the bank accounts, copies of the bank statements of all the shareholders of relevant period reflecting the transaction with the assessee-company, copies of the confirmations of statement of accounts of all the shareholders and copies of master data of these eight companies obtained from the website of Registrar of Companies. The assessee- company, therefore, proved the identity of the shareholders, their creditworthiness and genuineness of the transaction. The assessee-company also filed parawise replies to the report of 7 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
the Inspector above and the functioning of the shareholders. It was explained that assessee-company has no concern with the opening of the bank account by the shareholders. They are existing companies and assessed to tax. The report of the Inspector was not confronted to the assessee-company. The report of the Inspector did not dispute that these companies were functioning at the address given by the assessee- company. The assessee-company relied upon the decision of the Hon'ble Delhi High Court in the case of CIT vs. Kamdhenu Steel and Alloys Ltd., 19 taxman.com 26, CIT vs. Oasis Hospitalities (P) Ltd., 198 Taxman 247 (Del.), CIT vs. Winstral Petrochemicals Pvt. Ltd., 10 Taxman.com 137 and CIT vs. Dwaradheesh Investment Pvt. Ltd., 194 Taxman 42. It was submitted that assessee-company is NBFC and is engaged in the business of investments, giving loans and advances and thereby earning interest, dividend and profit on sale of shares. The assessee-company has earned exempt income of Rs.590/- 8
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only. Therefore, disallowance more than the exempt income is wholly unjustified.
6. The A.O. filed the remand report before Ld. CIT(A) in which facts stated in the assessment order have been reiterated. It is also submitted in the remand report that summons under section 131 were issued to all the corporate shareholders. Directors of the shareholder companies were present and their statements have been recorded on oath who have also submitted copies of their balance-sheet for A.Y. 2008-2009, bank statement, confirmation of the account and their assessment orders under section 143(3) of the I.T. Act.
7. The assessee-company in the rejoinder reiterated the submissions already made above and submitted that initial burden upon assessee-company to prove genuine credits have been discharged.
8. Ld. CIT(A) considering the material on record noted that the shareholders have shown nominal profit which 9 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
indicates the non-genuine activity of these companies. The Directors of the Companies are frequently changed. The persons who appeared before A.O. are the new Directors and some of them were not having any share in any of the companies. The Inspector reported that these companies are not operating from the place and are managed by Shri S.K. Jain, Director of the assessee-company. The bank accounts have been opened by the investment companies without introduction and no details have been submitted for charging of the premium. Though the assessee-company done the documentation by filing the documentary evidences, but failed to prove genuineness of the companies on the transactions. The Ld. CIT(A) relied upon the decision of the Hon'ble Delhi High Court in the case of CIT vs. N.R. Portfolio Pvt. Ltd., and confirmed the addition and dismissed this ground of appeal of assessee.
9. As regards addition under section 14A of the I.T. Act, the Ld. CIT(A) also noted that assessee-company has 10 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
earned dividend income of Rs.590/- only. The action of the A.O. in making disallowance was upheld in principle, but, it was found reasonable if 1/3rd of the expenditure claimed by the assessee-company is attributable towards earning of the exempt dividend income. The Ld. CIT(A) accordingly upheld the disallowance of a sum of Rs.5,27,32,100/- and deleted the rest of the addition. The appeal of the assessee-company has been partly allowed.
10. The assessee on Ground Nos. 1 to 8 challenged the addition of Rs.100 crores under section 68 of the I.T. Act as well as disallowance under section 14A read with Rule 8D of the I.T. Rules, 1962. The assessee-company also filed an application for admission of the following additional ground of appeal :
"On the facts and in the circumstances of the case and also in law, the assessment order passed in the appellant's case under section 153C/153A dated 11 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
28.03.2013 need be given precedence over the impugned order of assessment dated 31.12.2010 in view of the decision of the Hon'ble jurisdictional Delhi High Court in the case of CIT vs. Anil Kumar Bhatia 352 ITR 493."
11. Learned Counsel for the Assessee submitted that it is purely a legal ground and also placed on record copy of the assessment order dated 28.03.2013 under section 153C/153A of the I.T. Act, 1961, for the A.Y. 2008-2009 in the case of assessee-company. He has submitted that only one assessment is to be framed. Proceedings under section 153C shall have to be done on the basis of the incriminating material. The assessment order under section 153C are prevailed over the assessment order under section 143(3). The procedure for assessment under section 153A or 153C is same. The order under section 153C in the case of assessee- company is final. So, it will supersede the impugned order under section 143(3). Learned Counsel for the Assessee relied upon decision of the Hon'ble Delhi High Court in the case of 12 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
CIT vs. Anil Kumar Bhatia (2013) 352 ITR 493 (Del.) in which in paras 20 to 23, it was held as under :
"20. Under the provisions of Section 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature of this Section is that the Assessing Officer is empowered to assess or reassess the "total income" of the aforesaid years. This is a significant departure from the earlier block assessment scheme in which the block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under Section 153A, however, the Assessing Officer has been given the power to assess or reassess the „total 13 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
income‟ of the six assessment years in question in separate assessment orders. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax.
21. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search. For this purpose, the fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment 14 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
under Sections 147 and 148, have been removed by the non obstante clause with which sub section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time- limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. 15
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22. Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub section (1) of Section 153A says that such proceedings "shall abate". The reason is not far to seek. Under Section 153A, there is no room for multiple assessment orders in respect of any of the six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the „total income‟ of the assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the same assessment year determining the total income of the assessee. In order to ensure this state of affairs namely, that in respect of the six assessment years preceding the assessment year relevant to the year in 16 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
which the search took place there is only one determination of the total income, it has been provided in the second proviso of sub Section (1) of Section 153A that any proceedings for assessment or reassessment of the assessee which are pending on the date of initiation of the search or making requisition "shall abate". Once those proceedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of those six years determining the total income of the assessee which would include both the income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, unearthed during the search or requisition. The position thus emerging is that where assessment or reassessment proceedings are pending completion when the search is initiated or requisition is made, they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be 17 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
included, but in cases where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee‟s total income and such orders are subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In this latter situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to follow the strict provisions or complying with the strict conditions of Sections 147, 148 and 151) and determine the total income of the assessee. Such determination in the orders passed under Section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the total income. In such a case, to reiterate, there is no question of any abatement of the earlier 18 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
proceedings for the simple reason that no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders when the search was initiated or the requisition was made.
23. In the light of our discussion, we find it difficult to uphold the view of the Tribunal expressed in Para 9.6 of its order that since the returns of income filed by the assessee for all the six years under consideration before the search took place were processed under Section 143(1)(a) of the Act, the provisions of Section 153A cannot be invoked. The Assessing Officer has the power under Section 153A to make assessment for all the six years and compute the total income of the assessee, including the undisclosed income, notwithstanding that the assessee filed returns before the date of search which stood processed under Section 19 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
143(1)(a). The other reason given by the Tribunal in the same paragraph of its order that no material was found during the search is factually unsustainable since the entire case and arguments before the departmental authorities as well as the Tribunal had proceeded on the basis that the document embodying the transaction with Mohini Sharma was recovered from the assessee. While summarizing the contentions of the assessee in Paragraph 5 of its order, the Tribunal itself has referred to the contention that no document much less incriminating material was found during the search of the assessee‟s premises, except one unsigned undertaking for loan. Again in Paragraph 10 of its order, while dealing with the assessee‟s contention against the addition of `1,50,000/- being unexplained loan given to Mohini Sharma, the Tribunal has stated that it has analyzed "the subject document carefully, recovered from search" suggesting that the document was recovered during the search from 20 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
the assessee. The Tribunal has even proceeded to delete the addition of `1,50,000/- as well as the notional interest on merits, holding that the document was unsigned, that Mohini Sharma was not examined by the income tax authorities and there was no corroboration of the unsigned document. If it is not in dispute that the document was found in the course of the search of the assessee, then Section 153A is triggered. Once the Section is triggered, it appears mandatory for the Assessing Officer to issue notices under Section 153A calling upon the assessee to file returns for the six assessment years prior to the year in which the search took place. There are contradictions in the order of the Tribunal. We are unable to appreciate how the Tribunal can say in Para 9.6 that no material was found during the search and at the same time in Paragraph 10 deal with the merits of the additions based on the document recovered during the search which allegedly contain the loan transaction with Mohini 21 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
Sharma. Therefore, both the reasons given by the Tribunal for holding that the assessments made under Section 153A were bad in law do not commend themselves to us. The result is that the first substantial question of law is answered in the negative, in favour of the Revenue and against the assessee."
11.1. Learned Counsel for the Assessee submitted that additional ground being legal in nature may be admitted for adjudication in view of decision of the Hon'ble Supreme Court in the case of National Thermal Power Co. Limited vs. CIT (1998) 229 ITR 383 (SC) in which it was held that "the Tribunal is not confined only to issues arising out of the appeal before the Ld. CIT(A) but has discretion to allow a new ground to be raised if a pure question of Law arise, for which are on record of the authorities below, the question should be allowed to be raised if it is necessary to assess the correct tax liability." He has submitted that assessee-company could not raise this 22 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
additional ground before Ld. CIT(A) because the assessment order under section 153A/153C dated 28.03.2013 was passed after filing of the first appeal before Ld. CIT(A).
12. The Ld. D.R. on the other hand, strongly objected to the admission of the additional ground of appeal on the ground that such additional ground has been raised for the first time. There is no mention of any search in the case of assessee-company or any assessment under section 153A/153C of the I.T. Act. Any subsequent search or subsequent assessment cannot invalidate the assessment order in dispute. The additional ground of appeal was not raised before Ld. CIT(A). Therefore, there is no justification to raise the same now. He has submitted that Ld. CIT(A) passed the order on 29.11.2013 after the assessment order under section 153C dated 28.03.2013 was passed. But, assessee- company did not raise any such question before Ld. CIT(A). If the A.O. did not take addition of Rs.100 crores in assessment order under section 153C, it would not mean such addition is 23 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
deleted. The assessments under section 153A and 153C are totally different. Completed assessment cannot be touched upon in the regular assessment proceedings. The Ld. D.R. relied upon decision of Hon'ble Bombay High Court in the case of Ultratech Cement Ltd., vs., Addl. CIT (2017) 298 CTR 437 (Bom.) and decision of Hon'ble Supreme Court in the case of Addl. CIT vs. Gurjargravures (P.) Ltd., (1978) 111 ITR 1 (SC).
13. We have considered the rival submissions and perused the material available on record. In this case, the A.O. passed the impugned assessment order under section 143(3) of the I.T. Act, 1961, for the A.Y. 2008-2009 on dated 31.12.2010 and made the above two additions which were under challenge before the Tribunal. The A.O. passed another assessment order in the case of same assessee-company for the A.Y. 2008-2009 under appeal under section 153C/153A of the I.T. Act dated 28.03.2013, copy of the same is filed on record. In this order, A.O. has mentioned that search and seizure operation was carried-out at various premises of Shri 24 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
S.K. Jain group of cases and associated persons on 14.09.2010. During the course of search and seizure operation at various premises of Shri S.K. Jain group of cases, many books of account and documents belonging to the assessee company were found and seized and A.O. was satisfied to proceed under section 153C of the I.T. Act against the assessee-company. The A.O. accordingly issued notice under section 153C/153A of the I.T. Act on 26.02.2013 and directed the assessee-company to file return of income. The assessee- company submitted before A.O. that the return originally filed on 29.09.2008 declaring income of Rs.19,92,354/- may be treated as return filed in response to notice under section 153C/153A of the I.T. Act, 1961. The A.O. after discussion, assessed the income at returned income of Rs.19,92,354/-. It is, therefore, clear from these two assessment orders that search was conducted in Shri S.K. Jain group of cases and associated persons. Shri S.K. Jain is Director of the assessee company. During the course of search incriminating material 25 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
pertaining to assessee-company were found and seized. Therefore, A.O. initiated proceedings under section 153C of the I.T. Act, 1961 against the assessee-company and ultimately, completed the assessment. Learned Counsel for the Assessee relied upon decision of Hon'ble Delhi High Court in the case of CIT vs. Anil Kumar Bhatia (supra) in which it was held that "there can be only one assessment order in respect of each of the six assessment years in which both the disclosed and undisclosed income would be brought to tax." The Hon'ble Delhi High court also further observed that "in case, assessments are completed under sections 143(1) or 143(3) and noted that if such an Order is already in existence, having obviously been passed prior to initiation of search/requisition, A.O. is empowered to reopen those proceedings and re-assess the total income taking note of undisclosed income, if any, unearthed during the course of search. Therefore, no multiple assessment orders shall have to be passed". The findings in the case of CIT vs. Anil Kumar Bhatia (supra) prima facie 26 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
support the additional ground of appeal raised by the assessee-company.
14. The Hon'ble Punjab & Haryana High Court in the case of VMT Spinning Co. Ltd., vs. CIT & Another (2016) 389 ITR 326 (P & H) considering the Judgment of Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd., (supra) held as under :
"Held, that the Tribunal could decide the appeal on a ground neither taken in the memorandum of appeal nor by seeking its leave. The only requirement was that the Tribunal could not results its decision on any other ground unless the party who might be affected had sufficient opportunity of being heard on that ground. Therefore, the Tribunal ought to have exercised its discretion in view of the fact that the assessee intended raising only a legal argument without reference to any disputed questions of fact: Since there were no additional evidence required for 27 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
the decision on the new ground raised by the assessee and such question arose from the facts which were already on the record of the assessment proceedings and since a decision upon the new ground raised by the assessee would only help in determining the assessee's correct tax liability, the matter could be remanded to the Tribunal for adjudicating upon the additional ground on its merits. [Matter remanded)".
15. The Hon'ble Delhi High Court in the case of Pr. CIT vs. Neelkant Concast (P.) Ltd., (2016) 387 ITR 568 (Del.) considering the decision of Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd., vs. CIT (supra) held as under :
"The powers of the Tribunal are wide enough to consider a point which may not have been urged before the Commissioner (Appeals) as long as the 28 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
question requires to be examined in the interest of justice.
Held accordingly, that the Tribunal had not exceeded its jurisdiction in examining the question whether the Assessing Officer was justified in extending the time for the auditor nominated under section 142(2C) of the Income-tax Act, 1961, to submit the audit report."
16. Since the additional ground of appeal is legal in nature and all the facts are available on record and is prima facie supported by the Judgment of Honb'le Delhi High Court in the case of CIT vs. Anil Kumar Bhatia (supra), therefore, we are of the view that such additional ground should be admitted for the purpose of hearing. There is no bar in admitting such additional ground of appeal even if it was not taken before the authorities below. The delay in filing the additional ground is of no consequence because when appeal 29 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
is filed within the period of limitation, the additional ground could be raised at any time during the pendency of the appeal before the Tribunal. The decisions relied upon by the Ld. D.R. would not support the case of the Revenue. Considering the totality of the facts and circumstances of the case and above discussion, we admit the additional ground of appeal for the purpose of deciding the matter in issue. Since this issue goes to the root of the matter and authorities below has no occasion to examine the correctness of the additional ground raised by the assessee-company for the first time before the Tribunal, therefore, we are of the view that the additional ground should be set aside to the file of A.O. for deciding the same in accordance with law. We, accordingly, set aside the Orders of the authorities below and restore the additional ground of appeal to the file of A.O. with a direction to decide the additional ground of appeal strictly in accordance with law, by giving reasonable, sufficient opportunity of being heard to the assessee.
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17. As regards the merit of the addition is concerned under section 68 of the I.T. Act, we are of the view that since additional ground is legal in nature so admitted above, therefore, merit shall be decided by the A.O. after deciding the legal question. Both the parties have extensively argued on merit of the addition also. Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that assessee-company is a Public Limited NBFC Company. All documentary evidences were filed before the authorities below. Assessee is a listed company with Delhi Stock Exchange and registered with RBI. Investors were summoned by the A.O. Report from the Bank under section 133(6) was not confronted to the assessee-company. The report of the Inspector was also not confronted to the assessee-company. The bank details called for under section 133(6) were also not confronted to the assessee-company. Report of the Inspector is with reference to five investment companies only. All transactions are carried-out through 31 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
banking channel. The investors are assessed to tax. There is no evidence on record that the amount in question came from the coffers of the assessee-company. No cash was found deposited in the bank account of the investors. Director of the assessee-company in reference to question 12 explained justification and reasons for taking premium on allotment of shares. Directors were examined at the remand proceedings. But copies of their statements have not been provided to assessee-company. Remand report is not reliable. A.O. should not see profit of the investor company, but should see net worth of the investor company. No link of the assessee- company with investor company has been established. All the information has been provided to the Stock Exchange in which no objections have been raised. He has relied upon several decisions in support of his contention, copies of which are filed in the paper book.
18. On the other hand, the Ld. D.R. relied upon the orders of the authorities below and submitted that assessee 32 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
declared nominal income. Investors have also declared nominal income. Seven investors opened bank account with the same bank. Bank opening forms are not properly filled-in. Inspector report was against the assessee-company because they were not found functioning from their address. The investors/Directors were new only and appointed after assessment order. Most of them having no investment in their company. The onus is upon assessee-company which have not been discharged. No justification have been given for issuing shares at premium. The Ld. D.R. also relied upon several decisions in support of the findings of the authorities below in his written submissions.
19. We have considered rival submissions. Though we have noted above that once legal ground is restored to the file of A.O. for adjudication as per Law, therefore, this issue on merit shall also be restored to the file of A.O. for deciding the same afresh after taking decision on the legal issue. However, we may note certain more facts which also justify for 33 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
remanding of the matter on merits to the file of A.O. The statement of Shri S.K. Jain, Director of the assessee-company was recorded at assessment stage under section 131 of the I.T. Act in which in answer to Question No.12 he has given justification for issuing shares at premium. The SEBI guidelines were filed in the paper book to justify the same. But the authorities below have not examined or probed the explanation of assessee-company in this regard. The assessee- company submitted several documentary evidences of the investor companies to show their identity, creditworthiness and genuineness of the transaction in the matter, to the authorities below. However, the authorities below have not examined the documentary evidences in detail in the impugned orders. The report of the Inspector giving adverse comment against the investors have not been confronted to the assessee-company. Unless such report is confronted to the assessee-company, the same would not be admissible in evidence against the assessee-company. The report obtained 34 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
from the Bank under section 133(6) was also not confronted to the assessee-company. The statements of the Directors recorded at the remand proceedings supporting the claim of assessee-company have not been provided to the assessee- company. They have also produced documentary evidences before A.O. in support of the explanation which have not been discussed in detail in the impugned order. Whatever material is collected in the remand proceedings have not been provided to the assessee-company or confronted for proper explanation. Therefore, such documents shall have to be provided to the assessee-company. It is well settled law that the authorities below should not see profit of the investors, but shall have to see their worth in making investments. All these facts would show that authorities below have failed to record any specific finding of fact against the assessee-company based on the evidence and material available on record. Therefore, in such circumstances, when entire evidence on record have not been discussed by the authorities below, it would require 35 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
reconsideration at the level of the A.O. More particularly, when we have admitted the additional ground which is legal in nature, therefore, the entire matter shall have to be dealt with by the authorities below in accordance with law based on the evidence on record. In this view of the matter, we are of the view that even the addition on merit shall have to be restored to the file of A.O. for fresh adjudication. In view of the above, there is no need to consider the decisions cited by both the parties. In view of the above discussion and restoration of the additional ground of appeal to the file of A.O, we set aside the orders of the authorities below on addition on merit of Rs.100 crores under section 68 of the I.T. Act, 1961, to the file of A.O. with a direction to re-decide this ground of appeal in accordance with law on the basis of the entire evidence and material on record, by giving reasonable, sufficient opportunity of being heard to the assessee. A.O. shall pass the order on merit discussing all the evidences in the assessment order. 36
ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
Ground Nos. 1 to 7 of the appeal of assessee-company are allowed for statistical purposes.
20. On ground No.8, assessee challenged disallowance under section 14A of the I.T. Act.
21. It is an admitted fact that assessee-company earned dividend income of Rs.590/- only. Learned Counsel for the Assessee relied upon decision of Hon'ble Delhi High Court in the case of Joint Investment Pvt. Ltd., vs. CIT (2015) 372 ITR 694 (Del.) in which it was held as under :
"By no stretch of imagination can Section 14A or Rule 8D be interpreted so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in Section 14A, and is only to the extent of disallowing expenditure "incurred by the assessee in relation to the tax exempt income". This proportion or portion of the tax exempt income surely 37 ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
cannot swallow the entire amount as has happened in this case."
21.1 Learned Counsel for the Assessee, therefore, submitted that disallowance under section 14A should not exceed the exempted income of Rs.590/- only.
22. Ld. D.R. however, relied upon the orders of the authorities below.
23. After considering the rival submissions, we are of the view that contention of assessee-company is justified that disallowance of expenditure under section 14A should not exceed the exempt dividend income of Rs.590/-. In view of the above, we set aside the orders of the authorities below and restrict the disallowance under section 14A of the I.T. Act to Rs.590/- only. Ground No.8 of appeal of Assessee is partly allowed.
24. In the result, appeal of Assessee is Partly Allowed. 38
ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
Order pronounced in the open Court.
Sd/- Sd/-
(L.P. SAHU) (BHAVNESH SAINI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Delhi, Dated 8th October, 2018
VBP/-
*Kavita Arora
Copy to
1. The appellant
2. The respondent
3. CIT(A) concerned
4. CIT concerned
5. D.R. ITAT "G" Bench
6. Guard File
// BY Order //
Asst. Registrar : ITAT Delhi Benches :
Delhi.
39
ITA.No.787/Del./2014 Sunshine Capital Ltd., New Delhi.
Date of dictation 26.09.2018 Date on which the typed draft order is placed before the 05.10.2018 dictation Member
Date on which the approval draft comes to the Sr. PS Date on which the fair order is placed before the Dictation member for pronouncement Date on which the fair order comes back to the Sr. P.S. Date on which the final order is uploaded on the website of ITAT Date on which the file goes to the Bench Clerk Date on which the file goes to the Head Clerk The date on which the file goes to the Assistant Registrar for signature on the order Date of dispatch of the Order.