ACIT, New Delhi V. M/s. Kuldip Singh Dhingra (Ind.), New Delhi

ITA 1300/DEL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7927 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 03-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R K KAPOOR
• Keywords: Search and seizure; Wholly owned subsidiary
• Section: 143(3); 133A; 153A; 143(2); 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI D BENCH, NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER, AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER, ITA NO.1300/DEL/2017 [ASSESSMENT YEAR: 2007-08] ACIT, CIRCLE-8, ROOM NO.333, ARA CENTRE, JHANDEWALAN EXTN. NEW DELHI KULDIP SINGHDHINGRA (IND.), 19, DDA COMMERCIAL COMPLEX KAILASH COLONY, EXT. ZAMRUDPUR, NEW DELHI-110048 PAN- AAJPD8095P APPELLANT RESPONDENT APPELLANT BY SHRI J. K. MISHRA CIT-DR RESPONDENT BY SHRI PRADEEP DINODIA, & SHRI R. K. KAPOOR DATE OF HEARING 20/01/2020 DATE OF PRONOUNCEMENT 23/01/2020 ORDER PER M. BALAGANESH, AM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A)-24, NEW DELHI, DATED 26/12/2016, FOR ASSESSMENT YEAR 2007-08. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL:- 1. THE ORDER OF LD. CIT(A) IS NOT CORRECT IN LAW AND O N FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CI T(A) HAS ERRED IN DELETING THE ADDITION OF RS. 2,27,51,586/- ON AC COUNT OF UNDISCLOSED CONSULTANCY FEE. 3. ON THE FACTS AND CIRCUMSTANCES, THE CASE, THE CIT( A) HAS ERRED IN 2 ITA NO. 1300/DEL/2017 HOLDING THAT THE INCOME PERTAINS TO THE COMPANY WHO RAISED THE INVOICE AND NOT THE ASSESSEE DESPITE THE FACT THAT THERE WAS NO DOCUMENTARY EVIDENCE TO ESTABLISH THAT ANY CONSULTA NCY SERVICE WAS PROVIDED BY IT. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CI T(A) HAS ERRED IN HOLDING THAT THE INCOME DOES NOT PERTAIN TO THE ASSESSEE DESPITE THE STATEMENT OF PAYEE STATING THAT THE SER VICE WAS PROVIDED BY THE ASSESSEE AND INVOICE WAS RAISED BY THE COMPANY AT THE BEHEST OF THE ASSESEE. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CI T(A) HAS ERRED IN HOLDING THAT THE STATEMENT OF THE PAYEE, RECORDE D ON OATH HAS NO RELEVANCE. 3. THE ONLY EFFECTIVE ISSUE THAT EMANATES FROM THE GRO UNDS OF REVENUE IS AS TO WHETHER AN ADDITION IN THE SUM OF RS.2,27,51,586/- ON ACCOUNT OF UNDISCLOSED CONSULTANCY FEE COULD BE ASSESSED IN THE HANDS OF THE ASSESSEE HEREIN. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THERE WAS A SEARC H AND SEIZURE ACTION CONDUCTED ON U/S 132 OF THE ACT IN THE HANDS OF THE ASSESSEE ON 16/09/2011 WHICH GOT CONCLUDED ON 17/09/2011. TH E ASSESSEE IS MAIN PROMOTER AND CHAIRMAN AND MANAGING DIRECTOR OF U. K. PAINTS GROUP OF COMPANIES, THE FLAGSHIP COMPANY IN THE U. K. PAINTS INDIA LTD. THIS GROUP HAS OVERSEAS BUSINESS CONCERNS ALS O. M/S U. K. PAINTS (OVERSEAS) LTD. IS ONE SUCH FOREIGN COMPANY WHICH IS 100% SUBSIDIARY OF U.K. PAINTS INDIA LTD. PARALLELLY, A SURVEY U/S 133A OF THE ACT WAS ALSO CONDUCTED ON U.K. PAINTS (OVERSEAS ) LTD. ON 17/09/2011. THE FIRST NOTICE U/S 153A OF THE ACT IN RESPECT OF SEARCH CONDUCTED ON 16/09/2011 WAS ISSUED ON THE ASSESSEE ON 3 ITA NO. 1300/DEL/2017 22/05/2013. THE ASSESSEE FILED ITS RETURN OF INCOME IN RESPONSE TO SUCH NOTICE ON 12/06/2013. NOTICE U/S 143(2) OF THE ACT WAS ISSUED FOR THE SAID RETURN ON 30/09/2013. THE LAST DATE FO R COMPLETION OF ASSESSMENT U/S 153A OF THE ACT IN RESPECT OF SEARCH CONDUCTED ON 16/09/2011 WAS 31/03/2014 I.E. TWO YEARS FROM THE E ND OF THE FINANCIAL YEAR, IN WHICH THE SEARCH WAS CONDUCTED A ND CONCLUDED IN TERMS OF SECTION 153B OF THE ACT. THE LD. AR BEFORE US, SUBMITTED THAT NO ASSESSMENT WAS FRAMED U/S 153A OF THE ACT F OR THE AY 2007- 08 ON OR BEFORE 31/03/2014 IN RESPECT OF SEARCH CON DUCTED ON 16/09/2011 IN THE HANDS OF THE ASSESSEE. 5. SUBSEQUENTLY, THERE WAS A SECOND SEARCH CONDUCTE D U/S 132 OF THE ACT ON ASSESSEE ON 16/01/2013. NOTICE U/S 153A OF THE ACT WAS ISSUED ON 15/10/2013 PURSUANT TO THE SAID SEARCH ON 16/01/2013. THE ASSESSEE FILED ITS RETURN ON 05/11/2013 IN RESP ONSE TO NOTICE ISSUED U/S 153A OF THE ACT. THE ASSESSMENT U/S 153A R.W.S 143(3) OF THE ACT FOR THE AY 2007-08 WAS FRAMED ON 30/03/2015 AFTER ADDING A SUM OF RS.2,27,51,586/- ON ACCOUNT OF UNDISCLOSED C ONSULTANCY INCOME IN THE HANDS OF THE ASSESSEE. THIS ADDITION WAS MADE BASED ON AN INVOICE WHICH WAS RAISED BY M/S U.K. PAINTS ( OVERSEAS) LTD. FOR USD $ 515909 (EQUIVALENT TO RS.2,27,51,586/-) ON UN RELATED INDIAN COMPANY M/S ERA CONSTRUCTION INDIA LTD. THIS INVOIC E WAS DULY IMPOUNDED ON 16/09/2011 FROM THE OFFICE PREMISES OF THE U.K. 4 ITA NO. 1300/DEL/2017 PAINTS LTD. AT 38, DDA COMMERCIAL COMPLEX, ZAMRUDPU R, AT THE TIME OF SURVEY PROCEEDINGS U/S 133A OF THE ACT ON THE SA ID CONCERN. WE FIND THAT THE ASSESSEE HAD DULY SUBMITTED THAT THIS INVOICE HAD BEEN DULY RECORDED AND ACCOUNTED IN THE BOOKS OF M/S U. K. PAINTS (OVERSEAS) LTD. PRIOR TO DATE OF SEARCH AND SEIZURE ITSELF. ACCORDINGLY, THE ASSESSEE HAD SUBMITTED BEFORE THE AO THAT THE S AID INVOICE WHICH WAS IMPOUNDED DURING SURVEY CONDUCTED ON 17/09/2011 IN THE OFFICE PREMISES OF U.K. PAINTS (OVERSEAS) LTD. WOULD NOT B ECOME INCRIMINATING MATERIAL TO BE USED IN THE SEARCH ASS ESSMENT FRAMED IN THE HANDS OF THE ASSESSEE HEREIN. WE FIND THAT THE ASSESSEE HAD PLEADED THAT IN ANY CASE, THIS INVOICE HAD ALREADY BEEN ACCOUNTED IN THE BOOKS OF THE U.K. PAINTS (OVERSEAS) LTD. AS CO NSULTANCY INCOME AND THERE IS NO QUESTION OF MAKING ANY FURTHER ADDI TION IN THE HANDS OF THE ASSESSEE IN RESPECT OF VERY SAME SUM OF RS.2 ,27,51,586/-. IN FACT, THE ASSESSEE HAD ALSO GIVEN PROPER EXPLANATIO N WITH REASON AS TO HOW THE SAID INVOICE WAS FOUND AT THE TIME OF SURVE Y BY STATING THAT M/S U.K. (OVERSEAS) PVT. LTD. WAS OUTSOURCING ITS B OOK KEEPING ACTIVITY TO THE OFFICE OF M/S U. K. PAINTS INDIA LT D. WHICH IS PARENT COMPANY. THE DOCUMENTS OF OVERSEAS COMPANY AND BOOK S OF ACCOUNTS, BANK STATEMENTS WERE KEPT IN THE PREMISES IN INDIA. THEREFORE, THIS INVOICE WHICH WAS RAISED BY U.K. PA INTS (OVERSEAS) PVT. LTD. ON UNRELATED INDIAN PARTY WAS FOUND IN TH E SAID OFFICE PREMISES AT THE TIME OF SURVEY/SEARCH. THE ASSESSEE HAD FURTHER 5 ITA NO. 1300/DEL/2017 PLEADED THAT IN ANY CASE, THIS DOCUMENT WAS ONLY FO UND IN THE PREMISES OF U.K. PAINTS OVERSEAS PVT. LTD. AND THE PRESUMPTION IN TERMS OF SECTION 132(4A) AND SECTION 292C OF THE AC T WOULD BE ONLY IN FAVOUR OF U. K. PAINTS (OVERSEAS) LTD. AND NOT THE ASSESSEE. IN ANY CASE, THE ASSESSEE HAD ALSO PLEADED THAT EVEN IF AN Y ADDITION NEED TO BE MADE PURSUANT TO THIS INVOICE WHICH WAS FOUND ON 17/09/2011, THE ASSESSEE COULD HAVE AT BEST BEEN PROCEEDED ONLY U/S 153C OF THE ACT AND NOT U/S 153A OF THE ACT. 6. WE FIND THAT THE LD. AO DISREGARDED ALL THESE CO NTENTIONS IN THE ASSESSMENT AND PROCEEDED TO MAKE THE ADDITION IN TH E HANDS OF THE ASSESSEE FOR THE VERY SAME SUM AND COMPLETED THE AS SESSMENT U/S 153A OF THE ACT. WE FIND THAT THE LD. CIT(A) HAD CA TEGORICALLY OBSERVED THAT THE LD. AO HAD NOT CONDUCTED ANY ENQU IRY TO ASCERTAIN THE FACTS AS TO WHO HAD ACTUALLY RENDERED SERVICES TO M/S ERA CONSTRUCTIONS IN ORDER TO DERIVE THE INCOME OF RS.2 ,27,51,586/-. ACCORDINGLY, THE LD. CIT(A) HAD DIRECTED THE LD. AO TO CONDUCT FURTHER ENQUIRY IN THE REMAND PROCEEDINGS. WE FIND THAT IN THE REMAND REPORT, THE AO HAD CATEGORICALLY SUBMITTED THAT NO DOCUMENTARY INFORMATION WAS PROVIDED BY THE M/S ERA CONSTRUCTIO N INDIA LTD. BY WAY OF FORMAL AGREEMENT EXECUTED BETWEEN THEM EITHE R WITH THE ASSESSEE HEREIN OR U. K. PAINTS (OVERSEAS) PVT. LTD . IN THE SAID REMAND REPORT, THE LD. AO HAD ALSO STATED THAT THE INVOICE FOR 6 ITA NO. 1300/DEL/2017 RS.2,27,51,586/- WAS RAISED BY M/S U.K. (OVERSEAS) LTD. ON ERA CONSTRUCTION INDIA LTD. THE ASSESSEE HAS ALSO FILED A REJOINDER TO THE REMAND REPORT SUBMITTED BY THE LD. AO. WE FIND THAT THE LD. CIT(A) AFTER CONSIDERING THE REMAND REPORT OF THE LD. AO A ND THE REJOINDER GIVEN BY THE ASSESSEE HAD DELETED THE ADDITION BY O BSERVING AS UNDER:- 4.2.5 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT, THE FIRST QUESTION THAT NEEDS TO BE ADDR ESSED IS WHETHER THE ADDITION COULD HAVE BEEN JUSTIFIABLY BE MADE U/S 153A. THERE WERE TWO SEARCHES ON THE APPELLANT. THE FIRST SEARCH WAS CONDUCTED IN NOVEMB ER, 2011 ON THE APPELLANT. THE DOCUMENT IN QUESTION VIZ ., THE INVOICE WAS IMPOUNDED FROM THE OFFICE PREMISES OF U.K. PAINTS GROUP, OF WHICH THE APPELLANT IS THE MANAGING DIRECTOR. THUS TO SAY THAT THE OFFICE PREM ISES AT 38, DDA COMMERCIAL COMPLEX, ZAMRUDPUR IS NOT THE PREMISES OF THE APPELLANT BUT OF U.K. PAINTS OVERSE AS LTD. IS AN ERRONEOUS DISTINCTION. NO DOUBT THE DOCU MENT HAS BEEN RECOVERED IN A SURVEY AT THE PREMISES, WAS CONDUCTED ALONG WITH THE SEARCH AND SEIZURE ACTION AT THE APPELLANTS RESIDENCE. THIS DOCUMENT WAS RECOVE RED IN THE SURVEY BEFORE THE COMPLETION OF THE SEARCH A T THE RESIDENCE PREMISES AND IN CONJUNCTION WITH THE SEAR CH. THE DISTINCTION MADE BY THE APPELLANT IS HYPERTECHN ICAL. TO MY MIND, THIS CONSTITUTES EVIDENCE RECOVERED IN THE COURSE OF THE SEARCH. HAVING SAID THAT, IT DOCS HOW EVER LOOK LIKE THE DOCUMENT IN QUESTION IS ONLY AN INVOI CE WHICH HAS ALREADY BEEN RECORDED IN THE BOOKS OF U.K . PAINTS OVERSEA LTD. NOTHING IN THE DOCUMENT PER SE SUGGESTS THAT THE DOCUMENT WAS FALSE OR THAT THE IN COME PERTAINS TO SHRI KULDIP SINGH DHINGRA AND NOT TO U. K. PAINTS OVERSEAS PVT. LTD. THEREFORE THIS DOCUMENT CANNOT BE SAID TO BE INCRIMINATING ITSELF. THE ONLY OTHER MATERIAL RELATING TO THIS ADDITION IS THE STATEMENT OF SH. U.S. BHARANA, MD OF THE LIRA CONSTRUCTIONS GROUP. T HIS STATEMENT WAS RECORDED ON AN INDEPENDENT SURVEY MADE ON 02.12.2011. NOTHING IN THIS STATEMENT, AS REPRODUCED BY THE A.O. IN THE ASSESSMENT ORDER INDICATES THAT THE SERVICES WERE RENDERED BY SH. KU LDIP SINGH DHINGRA FOR WHICH THE RECEIVED WOULD AS INCOM E IN HIS OWN HANDS. THE ONLY GROUNDS ON WHICH THE ADDITI ON 7 ITA NO. 1300/DEL/2017 HAS BEEN MADE IN THE APPELLANTS HANDS IS THAT SH.H .S. BHARANA HAD STATED THAT HE HAD REQUESTED ASSISTANCE OF THE APPELLANT; HOWEVER, BY ITSELF THIS DOES NOT PRO VE THAT THE APPELLANT PROVIDED CONSULTANCY SERVICES ON HIS OWN ACCOUNT. NO EVIDENCE IS AVAILABLE TO THIS EFFECT AL SO. THE FACT THAT A COPY OF THIS INVOICE WAS FOUND IN THE O FFICE PREMISES OF THE APPELLANT IS ALSO NOT EVIDENCE AGAI NST THE APPELLANT, SINCE THE PREMISES IS ALSO THE OFFIC E OF UK PAINTS LTD, WHICH IS THE HOLDING COMPANY OF UK PAIN TS OVERSEAS P. LTD , AND THE APPELLANT IS THE MD OF BO TH. THE APPELLANT IS THE MD OF UK PAINTS OVERSEAS LTD., THE COMPANY IN WHOSE BOOKS THE TRANSACTION APPEARS IN T HE REGULAR COURSE OF ITS BUSINESS. THE DOCUMENTS FORWA RDED BY THE A.O. IN THE REMAND REPORT, IN THE FORM OF TH E OFFER DOCUMENT FOR THE FCCB ISSUE ALSO DOES NOT MENTION THE NAME OF THE APPELLANT AS A CONSULTANCY PROVIDER FOR THE FCCB ISSUE. THEREFORE, I AM OF THE VIEW THAT THERE IS NO EVIDENCE TO PIN THIS CONSULTANCY I NCOME ON THE APPELLANT. CONSEQUENTLY, THE ADDITION MADE I N THE HANDS OF THE APPELLANT HAS TO BE DELETED. 7. WE FIND THAT THE LD. CIT(A) HAD CATEGORICALLY ST ATED THAT THE INVOICE THAT WAS FOUND DURING THE COURSE OF SURVEY IN THE OFFICE PREMISES OF THE U.K. PAINTS (OVERSEAS) LTD. SUGGEST ED THAT THE SERVICES WERE RENDERED ONLY BY U. K. PAINTS OVERSEA S LTD. AND NOT BY THE ASSESSEE HEREIN. HE HAD ALSO STATED THAT THIS I NVOICE HAD ALREADY BEEN ACCOUNTED IN THE BOOKS OF U.K. PAINTS (OVERSEA S) LTD. MUCH PRIOR TO THE DATE OF SEARCH AND SURVEY. HENCE THIS DOCUMENT CANNOT BE SAID TO BE OF INCRIMINATING NATURE TO BE USED IN THE SEARCH ASSESSMENT FRAMED U/S 153A OF THE ACT. WE FIND THAT THE LD. CIT(A) HAD CATEGORICALLY STATED THAT NO SERVICES WERE REND ERED BY THE ASSESSEE TO M/S ERA CONSTRUCTION LTD. IN ORDER TO E ARN CONSULTANCY INCOME OF RS.2,27,51,586/-. THESE TWO CRUCIAL FINDI NGS OF THE LD. CIT(A) WERE NOT CONTROVERTED BY THE REVENUE BEFORE US. IN ANY CASE, 8 ITA NO. 1300/DEL/2017 WE FIND THAT SAID SUM OF RS.2,27,51,586/- HAD ALREA DY BEEN OFFERED AS CONSULTANCY INCOME IN THE BOOKS OF U.K. PAINTS (OVERSEAS) LTD. AND THERE CANNOT BE DOUBLE TAXATION OF THE SAME IN THE HANDS OF THE ASSESSEE. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND ACCORDINGLY DEEM IT FIT NOT TO INTERFERE IN THE SAME. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 23/0 1/2020. SD/- SD/- [AMIT SHUKLA] [M. BALA GANESH] JUDICIAL MEMBER ACCOUNTANT MEMBE R DELHI; DATED: 23/01/2020. F{X~{T? F{X~{T? F{X~{T? F{X~{T? FA FA FA FA P.S P.SP.S P.S / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) 4. , , / DR, ITAT, DELHI 5. / GUARD FILE. / BY ORDER , /ASSISTANT REGISTRAR, , / ITAT, DELHI