TMI Blog2017 (1) TMI 1785X X X X Extracts X X X X X X X X Extracts X X X X ..... tal 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. 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 - There is no infirmity in the order of learned CIT(Appeals) in quashing the protective assessment of the share capital and share premium of these companies in the hands of the assessee. Admission of additional evidence by CIT-A - HELD THAT:- 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(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal 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 for the above AYs suffer from serious legal defects. When the search and seizure operation in assessee s premises were conducted on 4.2.2010 assessment u/s 153C were pending which related to an earlier search operation. As per the second proviso to section 153A of the Act, Assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this subsection pending on the fate of initiation of the search under section 132.....shall abate. On 4.2.2010 i.e. on the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner 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 assessment, or cancelling the assessment 24 and directing a fresh assessment. 26 [Explanation.-For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) an order passed 27 [on or before or after the 1st day of June, 1988] by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner 28 [or Deputy Commissioner] or the Income-tax Officer on the basis of the directions issued by the 29 [Joint] Commissioner under section 144A; (ii) an order made by the 29 [Joint] Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst 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 [* * *] 37 [Commissioner (Appeals)] shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. Explanation.-In disposing of an appeal, the 36 [* * *] 37 [Commissioner (Appeals)] may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anation 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 ₹ 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 Kumar Agrawal has also averred that for the funds introduced through him he was getting a commission of 2%, which for this transaction comes to ₹ 11,10,037/- the source of which is also not explained by the assessee. Hence this amount of ₹ 11,10,037/- is added u/s 69C to the income of assessee. The AO further observed that this addition is made in case of assessee on protective basis for reasons which are discussed in the foregoing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss. 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 deposition that the original statement was taken under duress and the depositions recorded therein were not made by him and he was made to sign the statement in the course of search in his case. In between Shri Sunil Kumar Agrawal has also filed two more affidavits on 21.07.2011 and 16.08.2011 reaffirming the same facts of involuntary statements elicited by the search team. The AO did not conduct any enquiry. He has simply stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 there being any shred of evidence on record for the same. The sum total of share capital contribution is assessed arbitrarily for no valid justification. That perusal of assessment order would show that protective addition is solely based on initial oral statement on 04/02/2010 which stand retracted on 06/02/2010. The statement of Shri Sunil Kumar Agrawal obtained by the Authorised Officer was not voluntarily. Statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed 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. Rule 9 report and order u/s 245(4) would clearly demonstrate that matter of share capital was fully considered by Hon'ble Settlement Commission. In terms of provisions of sec. 245-1 matter of share capital cannot be taken up by revenue for making protective addition at the hands of assessee. Reliance on: (i) (2015) 43 CCH 0073 (Del.) Omni Farms Pvt. Ltd. vs. DCIT (ii) (2002) 225 ITR 0514 (SC) NIRMA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 belonging to the assessee and he was doing this activity on 2% commission basis. The said Shri Sunil Kumar Agrawal, C.A. has later on retracted from his statement and has given an affidavit that his earlier statement was under duress. 16. Learned D.R s plea against this retraction is that the two witnesses present at the time of search and the two witnesses present at the time of retraction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ector 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 inconsistent statements in their evidence either at one stage or at two stages, the testimony of such witnesses becomes unreliable and unworthy of credence. Thus we find that in absence of any cogent evidence, this statement alone which has been duly retracted cannot be a basis for addition of share capital and share premium of these companies in the hands of the assessee. Addition has t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal 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 ₹ 73,540.67, out of which part payment of ₹ 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/credit card in making part payment of hotel bills. Accordingly, the AO treated the same as receipt falling u/s 56(2)(v) and added to the total income. 28. Before the learned CIT(Appeals), learned counsel of the assessee submitted that during his stay at Mumbai, an amount of ₹ 40,000/- was paid through a debit/credit card of Shri D.P. Mehta as the hotel de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 additional evidence in this regard has not been examined on merits by the AO. It is also not the case that the learned CIT(Appeals) has himself examined the veracity of the additional evidence. In these circumstances we deem it appropriate to remit the issue to the file of the AO. The AO shall examine the veracity of additional evidence and thereaf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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