2017 (1) TMI 1785 - AT - Income Tax

Tax Tribunal: Decision on Section 69A & 69C additions, Rule 46A violations, debit card payment, & cross objections

Asstt. Commissioner of Income-tax-2 (1), Raipur Versus Shri B.L. Agrawal

The Tribunal upheld the CIT(A)'s decision to delete additions under Sections 69A and 69C of the Income-tax Act, based on lack of evidence and unreliable ... Addition on account of investment in share capital / premium of four different companies u/s 69A - Bogus share capital and share premium - addition of 2% commission attributed to this transaction - HELD THAT:- On 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 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. 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 - 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. Admission of additional evidence by CIT-A - HELD THAT:- 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. Addition on account of payment made through debit card - DR relied upon the orders of the AO and reiterated that the AO has not examined the additional evidence on merits - HELD THAT:- 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 thereafter decide accordingly. Issues Involved:1. Deletion of addition made by the AO on account of investment in share capital/premium of four companies under Section 69A of the Income-tax Act, 1961.2. Deletion of addition made by AO on account of payment of commission to a Chartered Accountant under Section 69C of the Income-tax Act, 1961.3. Admission of additional evidence by CIT(A) in violation of Rule 46A of I.T. Rules, 1962.4. CIT(A)'s decision on protective assessment orders while substantive quantum addition was pending before the Settlement Commission.5. Admissibility of appeal against an order of protective assessment.6. Deletion of addition made by the AO on account of payment made through a debit card under Section 54(2)(v) of the Income-tax Act, 1961.Detailed Analysis:1. Deletion of Addition under Section 69A:The AO added Rs. 5,55,01,870/- to the income of the assessee under Section 69A, based on a statement by a Chartered Accountant (CA) stating that the money invested in share capital/premium of four companies belonged to the assessee. The CA later retracted his statement, claiming it was made under duress. The CIT(A) found no direct or indirect evidence linking the assessee to the funds and deleted the addition. The Tribunal upheld this decision, noting the lack of cogent material and the retraction of the CA's statement, which rendered it unreliable.2. Deletion of Addition under Section 69C:The AO added Rs. 11,10,037/- under Section 69C, based on the CA's statement that he received a 2% commission for his services. The CIT(A) deleted this addition, and the Tribunal upheld this decision, reasoning that since the primary addition under Section 69A was quashed, the related commission addition also did not survive.3. Admission of Additional Evidence in Violation of Rule 46A:The Revenue argued that CIT(A) admitted additional evidence in violation of Rule 46A. However, the Tribunal found no specific submission or cogent material supporting this claim and rejected the ground, stating there was no justification for the allegation.4. Decision on Protective Assessment Orders:The AO made protective assessments due to ongoing substantive assessments before the Settlement Commission. The CIT(A) quashed these protective assessments, and the Tribunal upheld this decision, noting no appeal was pending before the Settlement Commission regarding the assessee. The Tribunal found no merit in the Revenue's ground that CIT(A) prejudged the matter.5. Admissibility of Appeal Against Protective Assessment:The Revenue challenged the admissibility of the appeal against the protective assessment order. The Tribunal found no specific submission supporting this challenge and agreed with the assessee's counsel that there is no bar to admit an appeal challenging protective addition, thus rejecting the ground.6. Deletion of Addition under Section 54(2)(v):The AO added Rs. 40,000/- under Section 54(2)(v) for a payment made through a debit card of Shri D.P. Mehta, treating it as a receipt without consideration. The CIT(A) deleted this addition, accepting the assessee's explanation that the amount was returned to Shri D.P. Mehta. The Tribunal remitted this issue back to the AO for examining the veracity of the additional evidence provided by the assessee.Conclusion:The Tribunal upheld the CIT(A)'s order on most grounds, including the deletion of additions under Sections 69A and 69C, and the rejection of the Revenue's claims regarding Rule 46A violations and the admissibility of appeals against protective assessments. The issue of payment through a debit card was remitted back to the AO for further examination. The cross objections by the assessee were dismissed as infructuous.