AI Drafter 
TaxTMI 
TaxTMI 
2024 (4) TMI 97
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....pal Commissioner of Income Tax [PCIT] has also assailed the aforesaid order of the ITSC and to the extent that relief was accorded to the assessee, including grant of immunity from prosecution. 2. The present writ petitions constitute the second round of litigation since the application for settlement had initially come to be disposed of by the ITSC in terms of an order dated 31 July 2013. The aforesaid order was assailed before this Court by way of W.P.(C) 929/2015 which came to be allowed by way of an order dated 06 May 2016, whereby the Court quashed and set aside the order passed by the ITSC and required it to examine the issues emanating from the infusion of unexplained share capital and the deductions liable to be accorded in terms of Section 80 IC of the Act. 3. We deem it apposite to extract the order dated 06 May 2016 which is reproduced hereinbelow:- "1. The challenge in this petition is to an order dated 31st July, 2013 passed by the Income Tax Settlement Commission ("ITSC") where the income of the Petitioner for the Block Period 2004-05 to 2010-11 has been computed under Section 245D(4) of the Income Tax Act, 1961 ('Act'). Inter alia, in determini....
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.... states that the above concession was given an anticipation of the deduction under Section 80IC as in that event no tax liability would be outstanding. Although the impugned order does not record the above submission, the Court is of the view that the letter dated 18^th March, 2013 referred to above was a critical document which ought to have been taken note of by the ITSC while deciding the two issues referred to therein. 9. Consequently, the impugned order dated 31^st July, 2013 of the ITSC as regards the above two issues is hereby set aside and the said two issues viz., introduction of unaccounted money as chare capital and claiming of deduction under Section 80IC are remanded to the ITSC for a fresh adjudication in accordance with law. In particular the ITSC shall take into account the letter dated 13^th July, 2013 written by the Principal Commissioner Additional Bench ITSC to the Commissioner of Income Tax Central. 10. The matter shall be listed before the ITSC on 12^th July, 2016 for further proceedings in light of the above directions. 11. The writ petition is disposed of in the above terms with no order as to costs. 12. Order dasti to the....
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....,60,000/- 3. M/s Jindal Dal Mill Pvt. Ltd. 12,00,000/- - 12,00,000/- 4. M/s Adarsh Foods Product Pvt. Ltd. 55,00,000/- - 55,00,000/- 5. M/s Molu Ram Pramanand 25,00,000/. - - 25,00,000/- 6. M/s Abhipra Capital Ltd. - 55,00,000/- 55,00,000/- 7. M/s Balaji Enterprises (Sh. Rajiv Kumar) - 3,22,00,000/- 3,22,00,000/- 8. M/s Sai Enterprises (Jugal Kishore Gupta) - 3,60,00,000/- 3,60,00,000/- 9. Shri Ram Bindal - 80,00,000/- 80,00,000/- 10. Total 15,37,00,000/- 19,29,56,950/- 34,66,56,950/- 8. It appears that during the course of proceedings, the petitioner-assessee in terms of its letter dated 13 February 2017 had asserted that the amount of INR 34,66,56,950/- was in respect of share capital infusion and as per the details and explanations submitted, the said amount was duly verifiable. It, however, asserted that the inclusion of share capital aggregating to INR 16,32,96,950/- and representing investments made by M/s Himalayan Fincon Pvt. Ltd., M/s Jindal Dal Mill Pvt. Ltd., M/s Adarsh Foods Products Pvt. Ltd., M/s Abhipra Capital Ltd. and Sh. Hari Ram Bindal cannot....
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....he outcome of such verification on the next date of hearing i.e. 20.02.2017. The verification report dated 18.02.2017 was filed before the Bench during the course of final hearing on 20.02.2017. As per this report, the Pr. CIT has by and large found the claim of the applicant as correct but has pointed out to few instances when no immediate cash was deposited in the bank account for issuing cheque for share capital. Shri Sanjeev Sabarwal, Sr. Advocate sought to explain the said discrepancies by stating that total cash deposited during the period is much more than the amount of cheques issued for the share capital and he urged the Bench to take a practical view of the situation in the given circumstances of the case where matching each cash entry with cheque entries was not possible. The Pr. CIT(Central)-1, New Delhi who was present during the hearing, did not raise any serious objections to the explanation given by the AR of the applicant and asked the Bench to take decision on its own wisdom. We have considered rival submissions and contentions on this issue. It is an admitted fact that majority of the transactions in regard to share capital raised by the applicant compan....
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....t on this issue, we hold that the claim of the applicant in regard to the share capital amounting to Rs. 25,00,000/- raised from M/s Molu Ram Pramanand is in order and accordingly, no interference is considered necessary on this issue." 13. That left the ITSC to examine the infusion of an amount of INR 11,26,60,000/- and which was claimed to be the investment in share capital made by M/s. Amit Goods and Supplier Pvt. Ltd. Dealing with the particulars pertaining to the aforenoted party, the ITSC held as follows: - "We have considered the arguments and submissions made by both the sides. It has not been disputed that enquiry letter u/s 133(6) of the IT Act issued to the share subscriber was not complied with. Details of bank account or copies of bank statements were also not furnished to the AO for necessary verification of the claim. The applicant cannot simply get away by not furnishing the requisite details for verification of its claim to the AO. The arguments of the applicant that the amount of share capital has already been assessed as income of the subscriber i.e. M/s Amit Goods & Suppliers Pvt. ltd. is rather tenuous. We also note that the share capital has been i....
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....y for the purpose of computing the claim of the applicant u/s 80IC of the IT Act in consonance with the Section 115BBE of the IT Act, 1961." 15. Proceeding then to examine the questions flowing from Section 80IC of the Act, the ITSC in its impugned order has made the following pertinent observations: - "15. During the course of hearing on 20.02.2017, Shri Sanjeev Sabarwal, Sr. Advocate submitted that verification of claim regarding substantial expansion was done by the Assessing Officer and in his report dated 10.07.2013 addressed to the Secretary, ITSC, Additional Bench-1, New Delhi, he had observed that the total purchases found to be bogus is Rs. 45,07,88,913/- out of total purchases verified at Rs. 49,69,38,519/- as against which the total cost of plant and machinery shown by the applicant is at Rs. 23,14,33,683/- as on 31.03.2009 and Rs. 58,13,01,563/- as on 31.03.2009. He further stated that as the purchase of material for acquisition of plant and machinery to the extent of Rs. 45,07,88,913/- has remained unverified and therefore, becomes bogus and infructuous. The assessee's claim for deduction u/s 80IC becomes also unvalid due to this reason as provisions of....
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....ting documents found during the search which may suggest that the applicant was not eligible for claiming deduction u/s 80IC which have been allowed to it in the above noted assessment years. During the course of hearing on 20.02.2017, the applicant filed copies of certificate dated 19.04.2005 from Director of Industries, Himachal Pradesh certifying, the expansion of installed capacity of the plant from 15000 TPA as on 06.01.2003 to 84000 TPA as on 24.03.2005. As per this certificate the investment in plant and machinery is shown at Rs. 319.94 lakhs as on 06.01.2003 and Rs. 536.70 lakhs as on 24.03.2005 which corroborate the applicant's claim that substantial expansion had taken place in the unit. 17. The Pr. CIT(Central)-1, New Delhi was permitted enquiries u/s 245D(3) of the I.T. Act vide order dated 26.07.2016. The Pr. CIT furnished his report vide letter dated 29.11.2016. We have perused the Pr. CIT's report on this issue. As per this report the Department has furnished a list of 691 bills of plant and machinery amounting to Rs. 36.77 crores, out of which, an amount of Rs. .34 crores relates to such bills where the following narration has been given:- ....
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....onsidered view that the applicant has successfully demonstrated that it has carried out substantial expansion to the existing unit as required under clause (ix) of sub section 8 of section 80IC which defines the term "substantial expansion". Accordingly, we hold that applicant is entitled to claim deduction u/s 80 IC of the IT Act. However, it may be clarified that since the applicant claimed deduction u/s 80IC for the first time in A.Y. 2004-05, it shall be eligible to claim deduction u/s 80IC of the IT Act up to A.Y. 2013-14 only." 16. While holding in favour of the petitioner-assessee insofar as the claim for deductions under Section 80IC of the Act and the investments made towards substantial expansion of an existing unit, it took into consideration the fact that in the reports which were submitted to it, no tangible material or evidence had been gathered and which may have cast a doubt on the claim as raised. It further significantly found that the assessments for AYs' 2006-07 to 2008-09 in the case of the petitioner- assessee had been completed under Section 143(3) of the Act. The ITSC holds that a perusal of those orders would establish that its claim for Section 80IC ben....
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....ght of the undisputed position of the additions made in the course of assessment proceedings initiated in respect of M/s Amit Goods and Suppliers Private Ltd having been subjected to tax and the source of the funds having been duly identified by the respondents themselves. In our considered opinion, therefore, the ITSC clearly erred in making the addition of INR 11.26 crores while settling the income upon the application preferred by the petitioner-assessee. 22. That only leaves us to examine the contention of Mr. Rai and Mr. Gupta, learned counsels appearing for the respondents-Department, who vehemently contended that the amount which was surrendered by the petitioner-assessee and details whereof appear in para 11 of the impugned order would be liable to be added in terms of Section 68 of the Act, and in any case, would not constitute part of the gross total income of the assessee which could constitute subject matter of consideration under Section 80IC of the Act. According to learned counsels, since the source of the surrendered income remained unverified, the same would be liable to be treated as income derived otherwise than from the business of an undertaking or enterpris....