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TMI Blog2017 (1) TMI 1785X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. ITA No. 6 to 11/BLPR/12 AYs. 2003-04 to 2008-09 ITA 12/BLPR/12 AY 2009-10. "The assessments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 record24 of any proceeding under this Act, and if he considers that any order passed therein by the 25[Assessing] Officer is erroneous24 in so far as24 it is prejudicial to the interests of the revenue24, 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 assessment, or cancelling the assessment24 and directing a fresh assessment. 26[Explanation.-For the removal of doubts, it is hereby declared that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 assessment33 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 assessment;] (b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty; (c) in any other case, he may pass such orders in the appeal as he thinks fit. (2) The 36[* ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k. 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 companies of Agrawal group namely M/s Prime Ispat Limited, M/s Mahamaya Agrotech Pvt. Ltd., M/s Bapu Agriculture Pvt. Ltd. and M/ Xpress Mining Pvt. Ltd., comes to Rs. 5,55,01,870/- which is added u/s 69A to the income of the assessee. 9. The AO further observed that in his statement Shri Sunil K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial 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 deponent was not immediately cross examined on the retraction made by him by the Department. Shri Sunil Kumar Agrawal was asked about this for the first time only on 26.12.2011, i.e. just four days before completion of assessment and in his further statement also, Shri Sunil Kumar Agrawal has reaffirmed his deposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore 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 residential premises of assessee, office and residential premises of Sunil Kumar Agrawal, CA or in the business or residential premises of concerned companies and relatives to show that any money is flown from assessee for contribution towards share capital. That the huge protective addition made at the hands of assessee is without t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 adjudication before Hon'ble Settlement Commission The petition of Prime Ispat Ltd. has been finalized by Settlement Commission by passing an order u/s 245(4) on 31/10/2012 settling the issue of share capital contribution received by such company. Perusal of order would show that income has been assessed on estimated basis for share capital contribution received by Prime Ispat Ltd. Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse 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 companies in the hands of the assessee on protective basis. It is to be noted that the assessee is neither the shareholder nor the Director of these companies. The sole basis for addition is a statement by the Chartered Accountant Shri Sunil Kumar Agrawal that he was doing capital building work for benefit of M/s Prime Ispat Ltd. It was stated that the company amassed huge capital which was coming from cash deposits made by numerous individuals. Shri Sunil Kumar Agrawal has stated that the money was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uridical 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 capital and share premium. 19. In our considered opinion the statement of Shri Sunil Kumar Agrawal which has been duly retracted can by no stretch of imagination be a basis to hold that the assessee was owner of the share capital of these four companies. This presumption is not tenable under any Law be it the Income Tax Law or Company Law. 20. In this regard we also note that Hon'ble Apex Court in the case of Surajmal vs. State (Supra) has expounded that it is well settled that where witnesses make two in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce 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 assessment year 2007-08 regarding deletion of addition on account of payment made through debit card of Shri D.P. Mehta : On this issue the AO observed that the appellant during one of his visit to Mumbai has stayed at a Hotel and for this stay made payment of Rs. 73,540.67, out of which part payment of Rs. 40,000/- was made through a debit card belonging to one Shri D.P. Mehta who has stated that as courtesy gesture to maintain good relations with the appellant and considering his position he allowed use of his debit/cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 evidence on merits. Hence he pleaded that the issue may be remitted to the file of the AO. 30. Learned counsel of the assessee in this regard supported the order of the learned CIT(Appeals). He pleaded that the additional evidence was submitted which was necessary for adjudication of the ground of appeal. It was forwarded to the AO for consideration and full opportunity was given to him. Hence learned counsel pleaded that there is no justification of remitting the matter back to the AO. 31. Upon careful consideration we find that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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