ITO, New Delhi V. M/s. True Zone Buildwell (P) Ltd., New Delhi

ITA 1428/DEL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3947 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2006-2007
• Appeal Filed On: 11-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Additional evidence; Question of law; Assessment record
• Section: 69C; 143(3); 153A; 69; 6; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: BENCH D NEW DELHI BEFORE SRI G.D.AGRAWAL, HON BLE PRESIDENT AND SMT. BEENA A PILLAI, JM ITA NO.1 428 /DEL/2015 A.Y. 20 06 - 07 ITO, COMPANY WARD 25(4) VS. TRUE ZONE BUILDWELL P LTD. IP ESTATE, NEW DELHI 12, RING ROAD, LAJPAT NAGAR IV NEW DELHI 110 024 PAN: AABCT 9812B (APPELLANT) (RESPONDENT) APPELLANT BY: SRI AMIT JAIN, CIT , DR RESPONDENT BY: SRI SUDESH GARG, ADV. ORDER PER BEENA A PILLAI, JUDICIAL MEMBER THE PRESENT PENALTY APPEAL HAS BEEN FILED BY THE REVENUE AGAINST ORDER DATED 22/12/14 PASSED BY LD. CIT (A) - 24, NEW DELHI FOR ASSESSMENT YEAR 2006 - 07 ON THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) ERRED IN DELETING THE PENALTY U/S 271(1)(C ) OF RS.38,85,616/ - LEVIED BY AO BEING 100% OF TAX SOUGHT TO BE EVADED ON CONCEALED INCOME OF RS.1,2 9,52,053/ - . ITA 1428/DEL/2015 A.Y. 2006 - 07 ITO VS. M/S TRUE ZONE BUILDWELL P.LTD. 2 2. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING.' 2. BRIEF FACTS OF THE CASE ARE AS UNDER : ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT . A SEARCH AND SEIZURE OPERATION UNDER SECTION 132 OF THE ACT WAS CARRIED OUT ON RAJDARBAR GROUP OF CASES ON 31/07/08. ASSESSEE FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 22/03/10 DECLARING TOTAL INCOME OF RS.11,95,100/ - , IN RESPONSE TO NOTICE UNDER SECTION 153A OF THE ACT. ASSESSMENT WAS COMPLETED UNDER SECTION 153A READ WITH 143(3) OF THE ACT ON 29/12/10 AT TOTAL INCOME OF RS.1,58,74,490/ - . ASSESSING OFFICER MADE AN ADDITION OF RS.1,46,79,390/ - UNDER SECTION 69C OF THE ACT. AGGRIEVED BY THE ASSESSME NT ORDER ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) , WHO RESTRICTED THE ADDITION MADE BY LD. AO AT RS.1,29,52,053/ - . ACCORDINGLY LD. AO INITIATED PENALTY PROCEEDINGS AND ISSUED SHOW CAUSE NOTICE IMPOSING PENALTY OF RS.38,85,616/ - . 2.1. AGGRIEVED BY THE PENALTY ORDER PASSED BY LD. AO , ASSESSEE PREFERRED APPEAL BEFORE LD. CIT (A). THE LD. CIT (A) DELETED PENALTY BY OBSERVING AS UNDER: THE AO HAS LEVIED THE CONCEALMENT PENALTY OF RS. 38,85,616/ - BEING 100% OF TAX SOUGHT TO BE EVADED ON CONCEALED INCOME OF RS. 1,29,52,053/ - . THE SAID CONCEALED INCOME REPRESENTS THE ADDITION CONFIRMED BY THE FIRST APPELLATE AUTHORITY. IN THE SECOND APPEAL, HON'BLE ITAT HAS DELETED THE ADDITION OF RS. 1,29,52,053/ - VIDE ITS ORDER DATE D 31ST DECEMBER, 2012. SINCE THE QUANTUM ADDITION HAS BEEN DELETED BY HON'BLE ITAT, THE CONCEALMENT PENALTY LEVIED ON THE ITA 1428/DEL/2015 A.Y. 2006 - 07 ITO VS. M/S TRUE ZONE BUILDWELL P.LTD. 3 SAID QUANTUM ADDITION CANNOT BE SUSTAINED. THEREFORE, CONCEALMENT PENALTY OF RS. 38,85,616 / - LEVIED BY THE AO IS HEREBY DELETED. 2.2. AGGRIEVED BY THE ORDER OF LD.CIT(A) REVENUE IS IN APPEAL BEFORE US NOW. 3. AT THE OUTSET LD. AR SUBMITS THAT THIS T RIBUNAL IN ITA NO. 2091/DEL/2012 V IDE CONSOLIDATED ORDER DATED 31/12/12 DELETED ADDITION OF RS. 1,29,52,063/ - MADE BY LD. AO UNDER SECTION 6 9C BY OBSERVING AS UNDER: 13. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE, THESE BILLS WERE RAISED BY BROKERS WERE FOUND DURING THE SEARCH OPERATION AT THE RESIDENCE OF DIRECTOR OF ASSESSEE. AS PER REVENUE, THE PAYMENTS OF ALL THESE BILLS WERE NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNT AS THESE CANNOT BE RECONCILED WITH THE BOOKS OF ACCOUNT AND ONLY ON THIS BASIS, THE REVENUE PRESUMED THAT THESE PAYMENTS HAVE BEEN MADE OUT OF UNDISCLOSED SOURCE. WE HAVE PERUSED THE SEIZED MATERIAL AND THE RELEVANT PROVISIONS OF SECTION 69C OF THE ACT. THIS SEIZED MATERIAL RELATES TO CERTAIN CORRESPONDENCE BY WHICH THE BROKERS HAVE DEMANDED THEIR COMMISSION. AS PER THESE CORRESPONDENCES, THE RATE OF COMMISSION ASKED WAS VARYING FROM 4 - 6%. THERE IS NO DOCUMENT REFERRED BY THE AO OR BY THE CIT (A) OR EVEN BEFORE US BY THE REVENUE WHICH COULD SHOW THAT THE RATE OF COMMISSION WAS IN THE RANGE OF 4 - - 6 %. FURTHER THE REVENUE HAS FAILED TO CONFIRM THE CONTENTS OF THE CORRESPONDENCE WITH THE BROKERS BY WAY OF VERIFYING THEIR BOOKS OF AC COUNT OR RECORDING THE STATEMENT OF CONCERNED PERSONS. THE ASSESSING OFFICER, HAS NOT MADE ANY ENQUIRY IN RESPECT OF CORRECTNESS OF THE CONTENTS OF THE CORRESPONDENCE BY THE BROKERS. THERE IS NO EVIDENCE FOUND WITH REGARD TO THE PAYMENT OF THESE BILLS FROM ANY SOURCE OF INCOME. THE ASSESSEE'S CLAIM THAT PAYMENTS OF COMMISSION HAD BEEN MADE BY CHEQUES AND THE NECESSARY TDS WERE DEDUCTED HAD SOME FORCE. IN OUR CONSIDERED VIEW, NO ADDITION CAN BE MADE MERELY ON THE BASIS OF CERTAIN CORRESPONDENCE ON THE PRESUM PTION '}'HEN ADDITION IS TO BE MADE U / S 69C OF THE INCOME - TAX ACT WHILE ITA 1428/DEL/2015 A.Y. 2006 - 07 ITO VS. M/S TRUE ZONE BUILDWELL P.LTD. 4 MAKING THE ASSESSMENT U / S 153A OF THE INCOME - TAX ACT. NO ADDITION CAN BE MADE UNDER THE SCOPE OF .SECTION 153A ON PRESUMPTION BASIS. THE REVENUE HAS TO BRING CERTAIN CORROBORATIVE EVID ENCE OR SUPPORTING MATERIAL BY WAY OF MAKING INVESTIGATION OR ENQUIRIES. ALL THE BROKERS WERE LOCATED IN DELHI, HOWEVER, THE REVENUE HAS DONE NOTHING IN THIS REGARD. SOME OF THE BROKERS WERE EVEN CORPORATE ASSESSEES. THEIR RECORDS COULD HAVE BEEN EASILY V ERIFIED. THE SEIZED MATERIAL RELIED UPON BY THE AO ALONE CANNOT BE MADE A BASIS FOR DRIVING ADVERSE INFERENCE WITH REGARD TO THE UNDISCLOSED EXPENDITURE WHICH CAN BE ADDED U / S 69 OF THE INCOME - TAX ACT. IN OUR CONSIDERED VIEW, MATERIAL RELIED UPON BY THE AO FOR MAKING THE ADDITION WAS MERELY A CORRESPONDENCE WHICH ALONE CANNOT LEAD TO THE INFERENCE THAT ASSESSEE HAD INCURRED - SUCH EXPENDITURE. THIS CANNOT BE MADE BASIS FOR ADDITION MADE U/S 69 OF THE INCOME - TAX ACT WHILE FRAMING THE ASSESSMENT U/S 153A OF TH E INCOME - TAX. AC T,19 61. THERE IS NO EVIDENCE GATHERED BY REVENUE FROM ANYWHERE, WHICH COULD ESTABLISH A BIT OF THE FACT TH AT A SSESSEE HAS PAID ANYTHING MORE THAN WHATEVER RECORDED IN THE BOOKS OF ACCOUNT. THEREFORE, IN OUR CONSIDERED VIEW, SUCH ADDITION CANNOT BE SUSTAINED. 13.1. THE REVENUE HAS ALSO RAISED THE ISSUE OF ADMITTING ADDITIONAL EVIDENCE IN CONTRAVENTION OF RULE 46A OF THE INCOME - TAX RULES. OUR NOTICE WAS BROUGHT TO THE RELEVANT COPIES OF THE LEDGER A C COUNT SHOWING PAYMENTS TO VARIOUS PARTIES ON WHICH TDS WAS DEDUCTED. THE CONFIRMATION OF THE ACCOUNT WAS ALSO FILED ALONG WITH LEDGER ACCOUNT. THESE EVIDENCES WERE PART OF THE ASSESSMENT RECORD AND IN OUR CONSIDERED VIEW, NOTHING NEW HAS BEEN BROUGHT INTO NOTICE OF CITCA). THEREFORE, THERE WAS NO VIOLATION OF RULE 46A OF INCOME - TAX RULES, 1962. THESE DOCUMENTS WERE FILED BEFORE THE ASSESSING OFFICER AND THIS WAS NOT FILED FOR THE FIRST TIME BEFORE THE CIT CA). THEREFORE, THE REVENUE'S CONTENTION IS NOT TENABLE. 13.2. W E DISMISS THIS GROU ND OF REVENUE'S APPEAL AND ALLOW THE ASSESSEE'S GROUND OF APPEAL. ITA 1428/DEL/2015 A.Y. 2006 - 07 ITO VS. M/S TRUE ZONE BUILDWELL P.LTD. 5 3.1. LD. AR FURTHER SUBMITTED THAT REVENUE THEREAFTER APPEALED AGAINST THE ORDER OF THIS T RIBUNAL BEFORE HON BLE DELHI HIGH COURT IN ITA NO. 400/2013. IT IS SUBMITTED THAT THE HON BLE HIGH COURT UPHELD THE DECISION OF THIS T RIBUNAL BY OBSERVING AS UNDER : THE REVENUE IMPUGNS THIS DECISION IN THE PRESENT PROCEEDINGS. IT IS URGED THAT THE AO S ORDER ADDING THE AMOUNT OF RS.1,46,79,390/ - WAS BASED UPON THE FAIR ASSESSMENT OF THE MATERIAL S WHICH SUGGESTED THAT IN FACT A HIGHER COMMISSION TO THE TUNE OF 4 - 6% HAD BEEN PAID. LEARNED COUNSEL FOR THE REVENUE RELIED UPON THE MATERIALS IN THIS REGARD AND AL S O STATED THAT ON ACCOUNT OF ' SECTION 69 (E) READ WITH SE C TION 2 92(E) THE PRESUMPTION LOGICALLY DRAWN HAD TO BE SUSTAINED. HE ALSO POINTED OUT TO THE CIT( APPEALS ) DECISION WHICH HA S SU BSTANT IALL Y UPHELD THE AO S ORDER AND THAT THE TRIBUNAL FELL L INTO ERROR IN DISTURBING THIS FINDING . WHILST THERE CAN B E NO DISPUTE ABOUT THE REVE NUE S CONTENTIONS THAT PRESUMPTION REQUIRED TO BE DRAWN IN LAW ON ACCOUNT O F THE STATUTOR Y PRESCRIPTION AR E TO BE COMPLIED WI TH , YET THE FOUNDATIONAL FACTS NECESSARY FOR THE COURT OR ' T RIBUNAL TO SEEK RECOURSE TO SUCH STIPULATION IS ESSENTIAL. IN THE PRE SENT CASE APART FROM THE DEMANDS MADE BY THE FIVE NAMED COMM ISSION AGENTS OR BROKERS FOR A HIGHER RATE OR COMMISSION AT 4 - 6%, THERE WAS NO REASONABLE BASIS FOR THE R EVENUE TO ASSUME O R CONCLUDE THAT IN F ACT SUCH AMOUNTS. CONSTITUTING THE DIFFERENCE OF WHAT WAS REVEALED I N THE BOOKS AND, W HAT WOULD ARISE ON ACCOUNT OR FULFILMENT OF SUCH DEMANDS WERE ACTUALLY PAID. H AD THERE BEEN AN Y MATERIAL IN THE FORM OR EVEN THE VAGUEST DOCUMENTS OR LEDGER OR B OOK ENTRY IN SUPPORT O F THE REVENUE'S CONTENTIONS OR EVEN A STATEMENT UNDER SECTION 132 ( 4 ) OR AN Y REPLY TO THE QUESTIONNAIRE W HICH WAS CIRCULATED IN THIS CASE , THE CONCLUSIONS DRAWN WOULD HAVE FOUND SUPPORT IN LAW . IN THE ABSENCE O F THESE , THIS COURT IS OF' THE OPINION THAT T HE FINDINGS OF THE AO AND THAT OF THE CIT TO THE EXTENT THAT THE Y CONFIRM THEM , WERE CONJECTURAL AND NOT BASED ON ANY MATERIAL. IN THESE CIRCUMSTANCES THE ITA 1428/DEL/2015 A.Y. 2006 - 07 ITO VS. M/S TRUE ZONE BUILDWELL P.LTD. 6 PRESUMPTIONS WHICH THE REVENUE FALLS BACK UPON U/S 292C DO NOT SUPPORT ITS CASE I N THE PRESENT CIR CUMSTANCE S FOR THE SA ME REASON THE FAILURE TO GROSS UP ON ACCOUNT OF THE ADDITION OF THE NOTIONAL INCOME AND THE CONSEQUENTIAL LIABILITY TO DEDUCT TAX FOR TDS PURPOSE TOO COULD NOT HAVE BEEN CAST UPON THE ASSESSE. W E , THEREFORE , CONFIRM THE FINDINGS OF T HE TRIBUNAL ON THE FIRST AND SECOND ASPECT . SO F AR AS THE THIRD ASPECT GOES, THERE WAS N O DISPUTE THAT THE FUNDS DEPLOYED BY THE ASSESSEE TO ITS SUBSIDIARIES OR SISTER CONCERN S W AS NOT BORROWED FUNDS BUT IT S SHARE CAPITAL AND OTHER SURPLUS THAT HAD BEEN GENERATED IN THE COURSE OF THE BUSINESS, . IN THESE CIRCUMSTANCES , IT IS SETTLED THAT IN SUCH CIRCUMSTANCES, THE FUNDING BY THE PARENT OR HOLDING COMPANY TO THE SISTER CONCERN OR SUBSIDIARY TO ADVANCE ITS BU SINESS OBJECTIVE WOULD FALL WITHIN THE FRAMEWORK OR LEGITIMATE EXPENDITURE . THE T RIBUNAL THEN APPLIED THE SETTLED LA W TO THE CASE. WE F IND NO REASON TO INTERFERE WITH THAT CONCLUSION. F OR THE ABOV E REASONS T HIS COURT IS O F THE OPINION THAT NO SUBSTANTIA L QUESTION OF LAW ARISE S FOR CONSIDERATION. THE APPEAL I S ACCORDINGLY DIS MISSED. 3.2. LD.AR THUS SUBMITTED THAT PENALTY APPEAL DESERVES TO BE DISMISSED ON THE BASIS OF FINALITY OBTAINED OF THE DECISION BY THIS T RIBUNAL IN QUANTUM APPEAL. 4. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH THE SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US AND THE ORDERS SUBMITTED BY LD.AR IN ASSESSEE S CASE FOR THE YEAR UNDER CONSIDERATION BY THIS T RIBUNAL AS WELL AS BY HON BLE HIGH COURT IN QUANTUM APPE AL. 4.1 . ON PERUSAL OF THESE ORDERS WE ARE OF THE CONSIDERED OPINION THAT AS THE ADDITION NO LONGER SUSTAINS, PENALTY APPEAL CANNOT SURVIVE. ITA 1428/DEL/2015 A.Y. 2006 - 07 ITO VS. M/S TRUE ZONE BUILDWELL P.LTD. 7 5. IN THE RESULT, PENALTY APPEAL FILED BY REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH JANU ARY, 2018. SD/ - SD/ - (G.D.AGRAWAL) (BEENA A PILLAI) PRESIDENT JUDICIAL MEMBER DT . 17 TH JANUARY, 2018 *MV COPY FORWARDED TO: - 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR, ITAT - TRUE COPY - BY ORDER, ASSISTANT REGISTRAR ITAT DELHI BENCHES ITA 1428/DEL/2015 A.Y. 2006 - 07 ITO VS. M/S TRUE ZONE BUILDWELL P.LTD. 8 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON DRAGON 15.01.2018 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 16.01.2018 SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 1 7 . 0 1 . 1 8 SR. PS/PS 7 FILE SENT TO BENCH CLERK SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER