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TMI Blog2020 (6) TMI 373X X X X Extracts X X X X X X X X Extracts X X X X ..... om other sources. 2.1 As per the assessment order, during the course of search at the residential premises of the assessee at F-18, Sector 40, Noida, Uttar Pradesh, certain incriminating documents were found and seized. As per the Assessing Officer (AO), page 69 of Annexure A-I of the seized documents was an email sent by the assessee to Mr. Oliver Ferraton. This email allegedly discussed illegal gratification paid in respect of the contract for overlays awarded by the OC, CWG and DDA. Page 68 of the annexure allegedly contained working in respect of the modus operandi discussed in the e-mail at page 69. As per the AO, the assessee had booked bogus purchases and consultancy expenses to reduce the tax liability for the purpose of paying illegal gratifications to the officials of OC, CWG and DDA. As per the AO, the contents of this document were corroborated by the details entered in diary marked as Annexure A-2 seized from the same premises. As per the AO, during the course of assessment proceedings, the statement of the assessee was recorded under oath and the assessee was asked to explain these documents but the assessee failed to explain the same. As per the AO, in the statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax liability should accordingly fall on the company, grossly erred in having upheld the addition made by the Ld. AO on the basis of the seized documents in the hands of the Appellant on protective basis. 2. That the Ld. CIT(A) grossly erred in holding that the protective addition of Rs. 35,85,00,000/- in the hands of the Appellant was in line with the provisions of section 179 of the Income Tax Act, 1961. a. That the Ld. CIT(A) grossly erred in interpreting the said section 179 of the Act which fastens liability on directors for recovery/payment of tax due from a private company and does not fasten the liability of the tax due itself on the directors. b. That the Ld. CIT(A) grossly erred in interpreting that the section 179 of the Act allows the assessability of the tax due from a company in the hands of its directors,. 3. That, as the order of the Ld. CIT(A) suffering from illegality and being devoid of any merit, the same should be quashed and your appellant be given such relief(s) as prayed for." 3.0 At the outset, the Ld. AR submitted that the substantive addition in the hands of the company i.e. M/s. G L Litmus Events Pvt. Ltd. was deleted by the this Tribunal in ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely no evidence of illegal gratification allegedly paid by the company M/s. G.L. Litmus Events Pvt. Ltd. and based on this arbitral award, the ITAT had deleted the substantive addition in the hands of the company M/s. G.L. Litmus Events Pvt. Ltd. It was further submitted that the substantive addition having been deleted in the hands of the company, the liability of the assessee in the capacity of the Director of the Company also stood absolved and, thus, the protective addition was also liable to be deleted. 3.3 The Ld. AR further submitted that Ld. CIT (A), in the impugned order, has nowhere confirmed the protective addition on the ground that the impugned amount was paid by the assessee and the only reason for confirming the addition was that assessee was a Director in the Company. It was submitted that it was the duty of the Ld. First Appellate Authority to determine as to who was the owner of the income in question and this issue could not have been left undecided by the Ld. CIT (A). It was submitted that on facts, it was apparent that the seized documents belonged to the company and not to the assessee and since the substantive addition which had been made in the hands of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... coordinate bench of this Tribunal in ITA No. 2502/Del/2015 vide order dated 01.07.2009. While deleting the substantive addition in the hands of the company, the Tribunal had observed in Para 45 of the said order as under: "45. Thus from all of the above, it is clear that the Arbitration Tribunal has clearly negated the accusations of fraud, corrupt practices, collusion and cartelization levelled against the Appellant Company (Claimant). Also it is to be seen that from the award above, it is derived that the said accusation against the Appellant was purely and solely based on the Shunglu Committee Report, FIR ledged by the CBI based on which the search was conducted on the Appellant Company and pursuant to which in the assessment above addition was made. In view of above facts and without commenting on any other report or investigation, it is apparent that charges against the assessee of paying illegal gratification and its consequent addition u/s 69 of the Income Tax Act is without any evidence of incurring such expenses. Thus ground no. 2 of the appeal is allowed." 5.1 Thus, the substantive addition in the hands of the company M/s. G.L. Litmus Events Pvt. Ltd having been dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the ITAT, while deleting the substantive addition in the hands of the company, has relied upon the Arbitration Award dated 14.5.2018 which was pronounced in the case of company M/s. G.L. Litmus Events Pvt. Ltd. wherein the Arbitral Tribunal had negated the accusations of fraud, corrupt practices, collusion, etc against the company and had also held that the accusations were purely and solely based on the Shunglu Committee Report, the CAG Report and the FIR lodged by the CBI which remained unsubstantiated and unproven. It is also to be highlighted that petition against this Arbitral Award before the Hon'ble High Court of Delhi was also dismissed and the Hon'ble Delhi High Court upheld the arbitration award vide order No. OMP (COMM) 0390/2018 dated 30.9.2019. 5.4 Therefore, on an overall view of the fact of the case, it is our considered opinion that the protective addition in the hands of the assessee does not have any feet to stand on. Since the protective addition was upheld by the Ld. CIT (A) solely for the purposes of section 179 of the Act and since the substantive addition has been deleted, the basis for protective addition also goes. Therefore, for the reasons stated above ..... X X X X Extracts X X X X X X X X Extracts X X X X
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