2016 (12) TMI 1299

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....d' income of the assessee? 2. Brief facts of the case are as follows:- The assessee company is a sister concern of one Hindustan Hotels Limited, Goa (HHL). The assessee and HHL have common Directors. HHL had undertaken a hotel project and entered into a construction contract with the assessee. In 1995 HHL abandoned the hotel project. The building which was still under construction was then sold to one Peerless Finance in April/May 1995 for a consideration of Rs. 11 crores. 3. Meanwhile it transpires that the assessee was in need of finance and had planned to increase its share capital and had approached HHL to contribute. HHL paid to the assessee a sum of Rs. 1 crore vide two cheques. The first cheque for Rs. 50 lakhs was dated....

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....23rd September, 1996 stated as follows:- "It is not compensation but could be a loan ". 5. In yet another statement of the Managing Director recorded on 4th April, 1996 he stated that it is a payment by HHL towards share capital . He also admitted that he did not know whether any Board Resolution had been passed. The record reveal that 3500 shares of the assessee were allotted to HHL at the rate of Rs. 2857/- per share. The assessee contended that there was no compensation received from HHL and the sum of Rs. 1 crore could not be treated as compensation. The Assessing Officer did not accept the contention of the assessee and treated the sum of Rs. 1 crore as compensation. 6. In appeal, the Tribunal after considering the rival conte....

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....the payment and the treatment of the amounts in the books of the company is what was material. This statement of the Managing Director though vague, they could not be relied upon by the revenue since at one stage he clearly admitted that he did not know whether it was a compensation or loan. He also admitted that he was unaware whether there was a board resolution passed in respect of the issuance of capital. 9. In our view the statements recorded of the Managing Director of the company are not reliable. We find that the consideration by the Tribunal of the records was appropriate. The conclusion drawn by the Assessing Officer that the amount received was compensation and amount which was undisclosed income of the assessee cannot be sust....