TMI Blog2024 (4) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration the certificate issued by the Director of Industries. On an overall conspectus of the aforesaid, it came to conclude that the petitioner-assessee would be entitled and eligible to claim deductions u/s 80 IC of the Act albeit up to AY 2013-14. Additions pertaining to the share capital investment made by M/s Amit Goods and Supplier Private Ltd. is concerned, we find that the petitioner-assessee had duly drawn the attention of the respondents to the fact that an addition of INR 37.60 crores had been made in the income of that entity in the course of assessments undertaken for AYs 2007-08, 2008-09 and 2009-10. In those assessments, an amount of INR 37.60 crores was added in the hands of M/s Amit Goods and Suppliers Private Ltd. on the allegation that it had invested its own funds by re-routing the same as share capital. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Ashwini Kumar, Mr. Nikhil Jain, Advs. Mr. Gaurav Gupta, SSC with Mr. Shivendra Singh, Ms. Mahima Garg, Advs. JUDGMENT YASHWANT VARMA, J. 1. The petitioner-assessee impugns the order dated 28 February 2017 passed by the Income Tax Settlement Commission [ITSC] with the challenge being restricted to the additions made with respect to the infusion of share capital by M/s Amit Goods and Supplier Private Ltd. and the denial of benefit of deductions under Section 80IC of the Income Tax Act, 1961 [Act] on the income of INR 24.99 crores. The Principal 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ten by CIT DR, Additional Bench, ITSC to the CIT Central-I. 7. Learned counsel for the Respondent draws attention to the paragraph 15 of the order where ITSC has recorded the concession by the Petitioner during the course of hearing on 18th July, 2013 regarding treating Rs. 24,91,54,640/ as additional income attributable to infusion of unexplained share capital. 8. Mr Sanjeev Sabharwal, learned Senior Advocate appearing for the Petitioner, on instructions, however, 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 ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforenoted two issues, the ITSC while dealing with the issue pertaining to share capital took note of the following particulars. S. No. Name of subscriber of share capital A.Y. 2008-09 A.Y. 2009-10 TOTAL 1. M/s Himalyan Fincon Pvt. Ltd. 8,50,00,000/- 4,67,96,950/- 13,22,96,950/- 2. M/s Amit Goods Supplier Pvt. Ltd. 4,82,00,000/- 6,44,60,000/- 11,26,60,000/- 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 cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to conduct the necessary verification with respect to the bank statement of the share capital subscribers and report the 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot raised any serious objections to the explanation furnished by the applicant 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, this income shall not qualify 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 reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... criminating 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:- Reply not r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rated 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 benefits had been elaborately examined and allowed by the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 enterprise, as covered under Section 80 IC and therefore, the claim for benefits has been rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erion with respect to income added by virtue of Section 68 of the Act. 27. We are therefore of the considered opinion that the surrendered income would not fall within the ambit of Section 115 BBE since the said provision did not even exist for the AYs in question. Section 115 BBE came to be inserted by virtue of Finance Act, 2012 with effect from 01 April 2013. As Mr. Ganesh rightly points out, since the aforesaid provision did not even exist at the relevant point in time, the same could not have been invoked by the ITSC. 28. In light of the aforesaid findings rendered by us in the backdrop of the challenge addressed by the writ petitioner-assessee, we are of the considered opinion that the issues which stand raised at the behest of the Department in connected WP(C) 7834/2017 would have to be answered against them. Consequently, we refuse to grant the reliefs as sought by the respondents-Department to set aside the ITSC s impugned order insofar as it granted immunity from penalty and prosecution to the petitioner-assessee or for that matter its decision to allow the claim of the petitioner-assessee relating to infusion in share capital from M/s Balaji Enterprises, M/s Sai Enterpri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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