TMI Blog2013 (1) TMI 185X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. Therefore, assessee was not a person responsible for deduction of tax at source in terms of section 194C, accordingly, provisions of section 40(a)(ia) cannot be invoked - in favour of assessee. Bad debts written off - disallowance as assessee could not demonstrate that debts which have been claimed as bad debts has actually become irrecoverable - Held that:- As per existing provisions of section 36(1)(vii), after amendment w.e.f. 1.4.1989, it is not necessary for the assessee to prove that the amount written off as bad debt is indeed bad for the purpose of allowance under section 36(1)(vii) as decided in TRF Ltd Vs CIT [2010 (2) TMI 211 - SUPREME COURT] - in favour of assessee. Addition on account of share premium amount - AO on statement of Shri George Joseph and relying on the statement made u/s.133A at the time of survey considered the issuance of share capital as bogus and not genuine - Held that:- assessee filed copies of requisite details viz; copy of share application form from each of the above named four applicants’ along with copy of board resolution, their bank statement giving particulars of cheque nos. and the amount debited from their accounts, as also cop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 012 - B.R. Mittal and P.M. Jagtap, JJ. Appellants Rep by: Shri S.C. Tiwari Natasha Mangat Respondent Rep by: Smt Rupinder Brar ORDER Per: B.R. Mittal: These cross appeals are filed by department as well as assessee for assessment year 2005-06 against order dated 18.7.2008 of ld CIT(A). 2. Grounds taken by department are as under: 1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the addition of Rs.18.79 crores made by the A.O. on account of the fact the said sum was not expended wholly and exclusively for the purposes business of the assessee ignoring, inter-alia, the following :- i) The assessee never produced before the A.O. the details of the said amount, except small bills, in support of the above amount claimed to be reimbursement of expenditure on behalf of the clients. ii) Failed to produce the books of accounts before the A.O. stating that the same were voluminous which can never be a fact as the books of account can never be voluminous it is only the supporting details which can run into volumes. iii) The assessee s claim of reimbursement of the said amount from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unrealizable amount from the clients remitted by way of discount without satisfying herself as to the manner in which the amount claimed as bad debt had been offered as income so as to fulfill the requirement of section 36(2) of the Income-tax Act, 1961 and also without examining the full facts and details in this respect and solely relying on certain case laws which was not sufficient in the given circumstances. 3. Grounds of appeal raised by assessee are as under: Being aggrieved by the Order u/s.250 of the Income-tax Act, 1961 ( Act ) dated 8 July, 2008. passed by the learned Commissioner of Income-Tax (Appeals) VII, Mumbai, your appellant prefers this appeal among others, on the following grounds of appeal, each of which is independent of and without prejudice to, the others: 1. On the facts and in the circumstances of the case, and in law, the learned CIT (A) erred in sustaining the addition of Rs.72.00.000/- made by the Assessing Officer on account of share premium amount received b the appellant on allotment of shares, holding the same to be a non-genuine transaction, even though there as adequate documentary evidence on record that established beyond doubt g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, port charges, container freight charges, loading unloading, transportation etc. The appellant collects the charges from the clients and makes the payments to various authorities in connection with clearing the consignment. The appellant charges its agency fees for rendering the services to its clients. (2) The Assessing Officer noted that appellant had received Rs. 18,79,38,741/- from its clients towards such expenses apart from agency commission, while the agency commission forms part of appellant income. Various expenses collected and paid on behalf of the client will be reflected in the separate accounts mentioned in the ledger account of each client. (3) During the year, the appellant handled 2351 jobs resulting in voluminous business transactions. On 24.12.2007, the Assessing Officer called for various details of these payments in less than 5 working days. It was humanly impossible to compute the details in such short span of time due to sheer volume of transactions. (4)The appellant had not claimed these expenses as they did not constitute the appellant s expenses. (5) That the books of accounts are maintained as per the accounting standards and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses in its books of accounts. (14) That the Service Tax Dept. issued clarification to the effect that the collections made from the clients for meeting various expenses are not considered for the purpose of levy of Service- tax. (15) In the case of CIT Vs. Dunlop Rubber Co. Ltd. (142 ITR 493) (Cal) it was held that reimbursement of expenses were not income. (16) As per Circular No. 723, the freight and other charges made to foreign shipping lines or their resident agents are covered by Section 172(8) and the assessee is not obliged to deduct TDS. In any case, wherever the TDS provisions are applicable, the appellant deducted the TDS on Rs. 7,96,68,298/-. 6. Ld CIT(A) vide para 6.2 of the impugned order deleted the said addition of Rs.18.79 crores and stated that the said addition is devoid of any merit and contrary to evidence on record. Hence, department is in appeal before the Tribunal. 7. At the time of hearing, ld D.R. relied on order of AO. 8. On the other hand, ld A.R. relied on order of ld CIT(A). He further submitted that assessee is acting as clearing and forwarding agent to clear the import consignment. During the course of its activity, asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various bills raised by various shipping companies and find that the shipping companies raised their bills on the ultimate customer, who is the exporter or importer of the goods. The assessee used to raise bills upon exporter or importer i.e. assessee s client, including the charges payable to shipping lines, and as well the charges of the assessee on account of various services rendered by it. It has not been disputed by the AO that the bills issued by shipping companies were raised in the name of clients, whose goods were exported or imported, and the assessee thereafter raised the bill to its client separately indicating charges of the assessee as well as the charges paid by the assessee to shipping companies on behalf of its clients. Therefore, from the various details filed by the assessee and nature of the assessee s business of clearing and forwarding agents, we find that the assessee is nothing but an intermediary between the exporters and the shipping lines. The assessee facilitates the contract for carrying goods for and on behalf of its client i.e. exporters or importers, and the principle contract for carrying goods is between the exporter/importer and the shipping line ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by its order dated 1.8.2012 in the case of Jay Kay Freighters Pvt Ltd (supra) and it was held that the amount mentioned in the bill raised by shipping companies on ultimate consumer were initially paid by the assessee and, thereafter assessee got reimbursed the said amount from its client including the charges of the assessee for service rendered. Therefore, assessee was not a person responsible for deduction of tax at source in terms of section 194C of the Act and, accordingly, provisions of section 40(a)(ia) cannot be invoked in respect of the payments made by the assessee to shipping lines for and on behalf of assessee s clients. Further, we also observe that department has not disputed the submissions made by the assessee before ld CIT(A) that assessee rendered 2351 jobs resulting in voluminous business transactions and the AO called for various details of the payments in less than 5 working days. We agree that it is not possible for computing the details in a short span of time and no adverse inference could be drawn for not able to furnish the same. Considering the facts of the case and the reasons as given by ld CIT(A), mentioned hereinabove, we hold that there is no reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... monstrative proof for the quality of the debts written off, which was not required to be given in the postamendment regime after 1/4/1989. It was contended that assessee had actually written off the said debt in the books and that it is no longer required to establish to the satisfaction of the AO that debt has actually become bad. It was further contended that if the amounts are recovered the same can be taxed under section 41(4) of the Act and placed reliance on the decision of ITAT Mumbai (SB) in the case of DCIT vs. Oman International Bank, 100 ITD 285(Mum)(SB). Ld CIT(A) considered the submission of assessee and deleted the disallowance of Rs.22,28,000 made by the AO. Hence, this appeal by the department. 13. Ld D.R. relied on the order of AO and submitted that assessee could not furnish the details and no evidences were filed as to in which year the income actually credited by the assessee. 14. Ld A.R. made his submissions on the lines of submissions made before ld CIT(A). He submitted that AO disallowed the claim on the ground that details were not filed to demonstrate by the assessee that those debts become irrecoverable. He submitted that after the amendment in section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany No.of shares allotted FV(Rs.)face value at Rs.100 per share Share premium (Rs.) 1. JMD Telefilms Inds. Ltd. 300 30,000 24,00,000 2. Warner Multimedia Ltd. 200 20,000 16,00,000 3. Shresth Leasing Fin. Ltd. 200 20,000 16,00,000 4. Trio Mercantile and Trading Ltd. 200 20,000 16,00,000 Total: 900 90,000 72,00,000 19. AO has stated that during the course of survey, it was noticed that the shares were alloted in the financial year 2004-05 but no certificates were issued to the investors till the date of survey. Further, there was no resolution passed for allotment of those shares. AO has stated that statement u/s.133A of the Director of the assessee company Shri George Joseph was recorded on 23.2.2006, wherein, he admitted that the share premium account amounting to Rs.72 lakhs is the unaccounted money of the assessee, which was routed with the help of the concerns against whose name, the share premium is shown. AO has further stated that during the course of post su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts are assessed to income tax and filed the copy of the income tax returns alongwith their annual returns and the copy of the certificate of incorporation and the Memorandum and Article of Association. Ld A.R. submitted that the relevant copies and details are placed in the paper book at pages 30 to 113 in respect of share applicant of JMD Telefilms Industries Ltd., at pages 114 to 175 of PB in respect of share applicant of Warner Multimedia Ltd., at pages 176 to 300 in respect of share applicant of Shresth Leasing and Finance ltd., and at pages 301 to 405 of share applicant of Trio Mercantile and Trading Limited. Ld A.R. submitted that assessee also filed return of allotment of shares before the Registrar of Companies and submitted that copy of the said return is placed at pages 407 to 409 of PB evidencing the allotment of 900 equity shares of the assessee company, filed on 21.11.2005. Ld A.R. submitted that book value of the share as on 31.3.2004 of the assessee company was Rs.10,305 and the assessee company discounted its valuation of about 20% and arrived at the premium of Rs.8000 per share. Ld A.R. submitted that assessee has filed requisite details before the authorities bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seizure and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, Assessing Officers should rely upon the evidences/materials gathered during the course of search/ survey operations or thereafter while framing the relevant assessment orders. 21. Ld A.R. submitted that assessee filed requisite details to establish the genuineness of the transactions and, therefore, assessee discharged its burden which lay upon it and hence, addition made is not justified. 22. Ld A.R. also referred the decision of Hon ble Supreme Court in the case of Lovely Exports Ltd., 216 CTR (SC) 195 and also the decision of Hon ble apex Court in the case of CIT vs. Steller Investment Ltd., 251 ITR 263(SC) and submitted that if the assessee has proved identity of the share applicants and the AO considered that application money is received by the assessee from bogus shareholders whose names are given, AO could proceed to make the addition in the hands of the individual in accordance with law instead of making the assessment in the hands of the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re premium account amounting to Rs.72,00,000 is the unaccounted money of the assessee, which had been routed with the help of the concerns against whose name share premium is shown. He further declared a sum of Rs.25,00,000 as undisclosed income of the assessee. We observe that at the time of assessment proceedings, assessee filed a letter dated 6.5.2006, copy placed at pages 27-29 of PB and stated that said statement was made by Shri George Joseph, Director under pressure without knowing the consequence of the same. AO did not accept the said retraction of statement of Shri George Joseph and relying on the statement made u/s.133A at the time of survey, considered the issuance of share capital as bogus and not genuine. Now the question arises as to whether, on the facts and circumstances of the case, the retraction of the statement made by Shri George Joseph is justified or not. 27. We observe that assessee filed copies of requisite details viz; copy of share application form from each of the above named four applicants along with copy of board resolution, their bank statement giving particulars of cheque nos. and the amount debited from their accounts, as also copy of confirmat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the said retraction and also ignoring the evidence on record but proceeded to make the addition only on the basis of the said statement without bringing any evidence on record to controvert the evidence filed by the assessee. The CBDT in its Instruction dated 10.3.2003 (supra) stated that confessions, if not based upon credible evidence, are later retracted by the concerned assessee and, therefore, such confession during the course of search and seizure and survey operations do not serve any useful purpose. The CBDIT also advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income tax Department. It was also stated in the Instruction that while recording statement during the course of search seizure and survey operation, no attempt should be made to obtain confession as to the undisclosed income. The ITAT Mumbai in the case of Presons (supra) has also held after considering the decisions of Hon ble Hon ble Madras High Court in the case of CIT vs. S.Khader Khan son (supra) and the Hon ble Kerala High Court in the case of Paul Mathew Sons vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as undisclosed income under section 68 of the I.T.Act, 1961? We find no merit in this Special Leave Petition for the simple reason that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment. 31. In the case under consideration before us, as stated above, assessee has furnished details of share application with PAN No. and bank statement. Further, said share applicants have also filed confirmation letters placed at page 34 in the case of JMD Telefilms Industries Ltd., at page 117 in the case of Warmer Multimedia Ltd., at page 179 in the case of Shrestha Leasing Finance Ltd,. and at page 302 in the case of Trio Mercantile Trading Ltd. In the said confirmation letters, bank details to make the payment to assessee company for allotment of shares is also stated. The transactions are admittedly recorded in the books of account both by the assessee company as well as aforesaid share applicants. Therefore, we are of the considered view that no addit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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