TaxTMI 
TaxTMI 
2017 (1) TMI 1785
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....yment 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 Incometax 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. ....
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....aw 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 record^24 of any proceeding under this Act, and if he considers that any order passed therein by the ^25[Assessing] Officer is erroneous^24 in so far as^24 it is prejudicial to the interests of the revenue^24, 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 a....
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....ing 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 : "251. (1) In disposing of an appeal, the ^29[* * *] ^30[Commissioner (Appeals)] shall have the following powers- (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment^33 ^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 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 assessme....
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....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 com....
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....ily 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 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 deponen....
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....e 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 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 residenti....
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....nt 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 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 adjudic....
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....h 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. 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....
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....open 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 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 c....
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....dence 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. 27. Ground raised for ....
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....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 e....