Glebe Trading P.Ltd, New Delhi V. ITO, Ward-10(2), New Delhi

ITA 191/DEL/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1977 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 10-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift; Principle of natural justice; Set aside

Judgement Text

1 ITA NO. 191/DEL/2019 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: I(2) + SM C NEW DELHI BEFORE MS SUCHITRA KAMBLE, JUDICIAL MEM BER, AND SHRI PRASHANT MAHARISHI, ACCOU NTANT MEMBER ITA NO. 191/DEL/2019 ( A.Y 2014-15) GLEBE TRADING PVT. LTD. 28, SHIVAJI MARG, RAMESH NAGAR, NAJAFGARH ROAD, NEW DELHI AAECG0208K (APPELLANT) VS ITO WARD-10(2) C. R. BUILDING NEW DELHI (RESPONDENT) APPELLANT BY SH. VINOD KUMAR BINDAL, CA, MS. SWEETHY KOTHARY, CA, MS. RINKY SHARMA, ITP RESPONDENT BY SH. PRADEEP SINGH GAUTAM, SR. DR ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER DATED 24/09/2018 PASSED BY CIT(A)-35, NEW DELHI FOR ASSESSMENT YEAR 2014-15. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DISMISSING THE APPEAL FILED BY THE ASSESSE E AND FAILING TO ADJUDICATE THE GROUNDS RAISED BY THE ASSESSEE, CHALLENGING THE EXTRANEOUS AND EXTRA- JURISDICTIONAL FINDINGS/OBSERVATIONS OF THE ASSESSI NG OFFICER IN THE ASSESSMENT ORDER. DATE OF HEARING 02.03.2020 DATE OF PRONOUNCEMENT 12.05.2020 2 ITA NO. 191/DEL/2019 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT THE FOLLOWING OBSERV ATIONS/FINDINGS IN THE ASSESSMENT ORDER WERE IN TOTAL DISREGARD OF APPELLA NTS FACTUAL AND LEGAL SUBMISSIONS, WERE ERRONEOUS, EXTRANEOUS, UNSUBSTANT IATED, FALSE, BASELESS AND FOUNDED ON CONJECTURES AND SURMISES, AND THEREF ORE OUGHT TO HAVE BEEN SET ASIDE BY THE LD.CIT(A). 2.1. THAT THE ASSESSING OFFICER ERRED IN HOLDING TH AT SHARES OF LISTED COMPANIES RECEIVED BY THE APPELLANT COMPANY AS GIFT WITHOUT CONSIDERATION, AS PART OF INTERNAL FAMILY REALIGNMENT AMONGST MEMB ERS OF THE FAMILY, COULD NOT BE REGARDED AS VALID GIFT, AND FURTHER GROSSL Y ERRED IN ALLEGING THE SAME TO BE SHAM AND COLORABLE TRANSACTIONS, WITHOUT ANY COGENT REASONS. THAT THE ASSESSING OFFICER OUGHT TO HAVE APPRECIATED THAT TH E GIFT WAS GIVEN IN COMPLIANCE WITH NECESSARY STATUTORY PROVISIONS, AFT ER OBTAINING NECESSARY AUTHORIZATIONS AND AFTER FOLLOWING THE DUE PROCESS UNDER THE LAW . 2.2 THAT THE ASSESSING OFFICER, DESPITE MAKING NO A DDITION IN THE HANDS OF THE APPELLANT, EXCEEDED HIS JURISDICTION IN ALLE GING THAT BENEFIT AROSE TO THE APPELLANT THROUGH RECEIPT OF SHARES FROM VARIOUS CO MPANIES AND HOLDING THE SAME TO BE TAXABLE UNDER SECTION 2(24)(IV) OF THE I NCOME TAX ACT, 1961 (THE ACT) IN THE HANDS OF MRS. ARTI JINDAL ALLEGED TO B E THE BENEFICIARY, BY LIFTING THE CORPORATE VEIL, WITHOUT PROVIDING ANY COGENT RE ASONS, AND WITHOUT APPRECIATING THAT THE ALLEGED BENEFICIARY NEVER OBT AINED ANY BENEFIT FROM THIS TRANSACTION AT ANY TIME. 2.3. THAT THE ASSESSING OFFICER ERRED IN HOLDING TH AT THE TRANSACTION OF GIFT OF SHARES HELD BY MRS. ARTI JINDAL IN THE APPELLANT COMPANY TO M/S PRJ HOLDING PRIVATE TRUST WAS NOT VALID AND WAS A SHAM AND VOID TRANSACTION WHICH WAS UNDERTAKEN TO AVOID TAX. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT THE FINDINGS IN THE ASSESSMENT ORDER 3 ITA NO. 191/DEL/2019 PERTAINING TO TAXATION OF ALLEGED BENEFIT IN THE HA NDS OF THE ALLEGED BENEFICIARY UNDER SECTION 2(24)(IV) OF THE ACT, BESIDES BEING B EYOND JURISDICTION, ARE CAPRICIOUS AND VIOLATIVE OF PRINCIPLES OF NATURAL J USTICE AND FAIR PLAY. 3. THE ASSESSEE IS AN INVESTMENT COMPANY. RETURN O F INCOME WAS ELECTRONICALLY FILED ON 29/09/2014 DECLARING TOTAL INCOME OF RS. 2,75,836/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER OBSERVED THAT THE ASSESSEE COMPANY HAS CLAIMED TO RECEIVE SH ARES OF VARIOUS COMPANIES FROM VARIOUS COMPANIES AS GIFT WITHOUT PAYING ANY C ONSIDERATION. THE DETAILS OF WHICH ARE AS UNDER:- S. NO. DONOR NO. OF SHARES NAME OF THE COMPANIES WHOSE EQUITY SHARES HAS BEEN GIFTED 1 M/S JSW INV. PVT. LTD. 17,15,793/- M/S JSW STEEL LTD. 2 -DO- 14,53,32,820/- M/S JSW ENERGY LTD. 3 M/S GAGAN INFRA ENGERY LTD. 1,76,94,108/- M/S JINDAL & STEEL POWER LTD. 4 M/S GROOVY TRADING PVT. LTD. 1,22,306/- M/S NALWA SONS INV. LTD. 5 -DO- 4,35,511/- M/S JSW HOLDINGS LTD. 4 ITA NO. 191/DEL/2019 THE ASSESSING OFFICER FURTHER OBSERVED THAT THE FIN ANCIALS FILED BY THE ASSESSEE COMPANY CLEARLY SHOWS THAT SMT. ARTI JINDAL WAS HOL DING 99.9% SHARES OF THE ASSESSEE COMPANY. HOWEVER, DURING THE FINANCIAL YE AR 2013-14 RELATING TO THE ASSESSMENT YEAR 2014-15, 99.6% OF SHARES HOLDING OF M/S GLEBE TRADING WAS TRANSFERRED TO M/S P R J HOLDINGS PRIVATE TRUST AS GIFT. THE ASSESSING OFFICER MADE ADDITION OF RS. 1593,19,34,79/- IN THE HANDS O F THE BENEFICIARY WITHIN THE PROVISIONS OF SECTION 2(24) (IV) OF THE INCOME TAX ACT, 1961. THERE IS NO ADDITION MADE IN THE HANDS OF THE ASSESSEE COMPANY. 4. THE ASSESSEE FILED APPEAL BEFORE THE CIT(A) RAIS ING THEREIN THE FOLLOWING GROUNDS:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSING OFFICER ERRED IN HOLDING THAT SHARES RECEIVED BY THE APPELLANT AS GIFT WITHOUT CONSIDERATION, AS PART OF INTERNAL FAMILY REALIGNME NT AMONGST MEMBERS OF THE FAMILY OF LATE SH. O.P. JINDAL, COULD NOT BE REGARD ED AS VALID GIFT. 1.1. THAT THE ASSESSING OFFICER ERRED IN FACTS AND IN LAW IN LEVELING VARIOUS FALSE/BALD/BASELESS ALLEGATIONS, INCLUDING HOLDING THE TRANSACTION OF RECEIPT OF SHARES TO BE SHAM. 1.2 THAT THE ASSESSING OFFICER ERRED ON FACTS AND I N LAW IN MAKING/RETURNING THE AFORESAID EXTRANEOUS OBSERVATI ONS/FINDINGS, DESPITE ACCEPTING THAT THE TRANSACTION OF RECEIPT OF SHARES AS GIFT DOES NOT RESULT IN ANY TAX INCIDENCE IN THE HANDS OF THE APPELLANT. 1.3. THAT THE ASSESSING OFFICER EXCEEDED HIS JURIS DICTION IN OBSERVING THAT THE TRANSACTION OF RECEIPT OF SHARES, WAS TAXA BLE IN THE HANDS OF THE BENEFICIARY UNDER SECTION 2(24)(IV) OF THE INCOME T AX ACT, 1961 (THE ACT). THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE. 5 ITA NO. 191/DEL/2019 5. THE LD. AR SUBMITTED THAT THERE IS A DELAY OF 18 DAYS IN THE PRESENT APPEAL AND APPLICATIONS SEEKING CONDONATION OF DELA Y IS FILED BY THE ASSESSEE. 6. THE LD. DR DID NOT OBJECT TO THE APPLICATION OF CONDONATION OF DELAY. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE DELAY IN FILING THE PRESENT APPEAL IS EXPLAINED BY THE ASSESSEE THROUGH AFFIDAVIT FILED BY THE DIRECTOR OF THE ASSE SSEE COMPANY. THE DELAY IS GENUINE. THEREFORE, WE ARE CONDONING THE DELAY AND HEARING THE APPEAL ON MERIT. 8. AS REGARDS GROUND NO.1, THE LD. AR SUBMITTED THA T THE CIT(A) FAILED TO ADJUDICATE THE GROUNDS RAISED BY THE ASSESSEE, CHAL LENGING THE EXTRANEOUS AND EXTRA-JURISDICTIONAL FINDINGS/OBSERVATIONS OF THE A SSESSING OFFICER IN THE ASSESSMENT ORDER. THE LD. AR FURTHER SUBMITTED THAT THE ASSESSING OFFICER FAILED TO APPRECIATE THAT THE SHARES OF LISTED COMP ANIES RECEIVED BY THE ASSESSEE COMPANY AS GIFT WITHOUT CONSIDERATION, AS PART OF I NTERNAL FAMILY REALIGNMENT AMONGST MEMBERS OF THE FAMILY, COULD NOT BE REGARDE D AS VALID GIFT, AND FURTHER GROSSLY ERRED IN ALLEGING THE SAME TO BE SH AM AND COLORABLE TRANSACTIONS, WITHOUT ANY COGENT REASONS. THE LD. A R FURTHER SUBMITTED THAT THE ASSESSING OFFICER OUGHT TO HAVE APPRECIATED THA T THE GIFT WAS GIVEN IN COMPLIANCE WITH NECESSARY STATUTORY PROVISIONS, AFT ER OBTAINING NECESSARY AUTHORIZATIONS AND AFTER FOLLOWING THE DUE PROCESS UNDER THE LAW . THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER, DESPITE MAKIN G NO ADDITION IN THE HANDS OF THE ASSESSEE, EXCEEDED HIS JURISDICTION IN ALLEG ING THAT BENEFIT AROSE TO THE ASSESSEE THROUGH RECEIPT OF SHARES FROM VARIOUS COM PANIES AND HOLDING THE SAME TO BE TAXABLE UNDER SECTION 2(24)(IV) OF THE I NCOME TAX ACT, 1961 (THE ACT) IN THE HANDS OF MRS. ARTI JINDAL ALLEGED TO B E THE BENEFICIARY, BY LIFTING THE CORPORATE VEIL, WITHOUT PROVIDING ANY COGENT REASON S, AND WITHOUT APPRECIATING THAT THE ALLEGED BENEFICIARY NEVER OBTAINED ANY BEN EFIT FROM THIS TRANSACTION AT ANY TIME. THE LD. AR SUBMITTED THAT THE ASSESSING O FFICER ERRED IN HOLDING THAT THE TRANSACTION OF GIFT OF SHARES HELD BY MRS. ARTI JINDAL IN THE ASSESSEE 6 ITA NO. 191/DEL/2019 COMPANY TO M/S PRJ HOLDING PRIVATE TRUST WAS NOT VA LID AND WAS A SHAM AND VOID TRANSACTION WHICH WAS UNDERTAKEN TO AVOID TAX. THE LD. AR SUBMITTED THAT THE FINDINGS IN THE ASSESSMENT ORDER PERTAINING TO TAXATION OF ALLEGED BENEFIT IN THE HANDS OF THE ALLEGED BENEFICIARY UNDER SECTION 2(24)(IV) OF THE ACT, BESIDES BEING BEYOND JURISDICTION, ARE CAPRICIOUS AND VIOLA TIVE OF PRINCIPLES OF NATURAL JUSTICE AND FAIR PLAY. THE LD. AR FURTHER SUBMITTED THAT IT IS A FAMILY ARRANGEMENT AND INTERNAL FAMILY REALIGNMENT AMONGST THE MEMBERS OF THE FAMILY OF LATE SHRI O.P. JINDAL AND CANNOT BE TAKEN AS GIFT. THE LD. AR SUBMITTED THE MOU FOR REALIGNMENT OF EQUITY SHARE H OLDINGS DATED 12/11/2012. THE LD. AR FURTHER POINTED OUT THE EXT RACT OF THE RESOLUTION PASSED AT THE MEETING OF THE BOARD OF DIRECTORS HEL D ON 18 TH MARCH, 2014 THEREBY GIVING THE APPROVAL FOR THE ACCEPTANCE OF T HE GIFT OF EQUITY SHARES FROM J S W INVESTMENT PVT. LTD., GAGAN INFRA ENERGY PVT. LTD AND GROOVY TRADING PVT. LTD. THE NAME OF THE COMPANY WHOSE SHARES ARE GIFTED ARE J S W STEEL LTD AND J S W ENERGY LTD AS WELL AS NALWA SONS INVESTME NT LTD, J S W HOLDINGS LTD. 9. THE LD. DR RELIED UPON THE ORDER OF THE CIT(A) A ND THE ASSESSMENT ORDER. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS PERTINENT TO NOTE HERE THAT THE ASSES SING OFFICER DID NOT MAKE ANY ADDITION IN THE HANDS OF THE ASSESSEE BUT HELD THAT BENEFIT AROSE TO THE ASSESSEE THROUGH RECEIPT OF SHARES FROM VARIOUS COM PANIES AND HOLDING THE SAME TO BE TAXABLE UNDER SECTION 2(24)(IV) OF THE I NCOME TAX ACT, 1961 IN THE HANDS OF MRS. ARTI JINDAL AS THE BENEFICIARY. FIRST LY WE WILL LOOK INTO SECTION 2(24)(IV) WHICH IS AS FOLLOWS: 2(24) INCOME INCLUDES .. 7 ITA NO. 191/DEL/2019 (IV) THE VALUE OF ANY BENEFIT OR PERQUISITE, WHETHE R CONVERTIBLE INTO MONEY OR NOT, OBTAINED FROM A COMPANY EITHER BY A DIRECTOR O R BY A PERSON WHO HAS A SUBSTANTIAL INTEREST IN THE COMPANY, OR BY A RELATIVE OF THE DIRECTOR OR SUCH PERSON, AND ANY SUM PAID BY ANY SU CH COMPANY IN RESPECT OF ANY OBLIGATION WHICH, BUT FOR SUCH PAYME NT, WOULD HAVE BEEN PAYABLE BY THE DIRECTOR OR OTHER PERSON AFORESAID; THE WORDS BENEFIT AND PERQUISITE ARE USED IN THIS C LAUSE OF SUB-SECTION (24) TO SECTION 2. WHETHER GIFTING SHARES AMOUNTS ANY BENEF IT OR PERQUISITE HAS TO BE LOOKED INTO. IN THE PRESENT CASE AT ONE POINT THE A SSESSING OFFICER HAS STATED THAT THERE IS BENEFIT TO ASSESSEE COMPANY BUT AT TH E SAME TIME STATES THAT THE TRANSACTION OF GIFT OF SHARES HELD BY MRS. ARTI JIN DAL IN THE ASSESSEE COMPANY TO M/S PRJ HOLDING PRIVATE TRUST WAS NOT VALID AND WAS A SHAM AND VOID TRANSACTION WHICH WAS UNDERTAKEN TO AVOID TAX. BUT FROM THE MOU SUBMITTED BY THE ASSESSEE COMPANY IT CAN BE CLEARLY SEEN THAT IT A FAMILY ARRANGEMENT AND INTERNAL FAMILY REALIGNMENT AMONGST THE MEMBERS OF THE FAMILY OF LATE SHRI O.P. JINDAL AND CANNOT BE TAKEN AS GIFT. THE C HART REPRODUCED IN PARA 3 HEREINABOVE FROM THE ASSESSMENT ORDER CLEARLY SHOWS THAT IT IS NOT A GIFT BUT A FAMILY ARRANGEMENT AND THESE KIND OF FAMILY ARRANGE MENT CANNOT BE TERMED AS GIFT/BENEFIT OR PERQUISITE. THE ASSESSING OFFICER B Y LIFTING THE CORPORATE VEIL, WITHOUT PROVIDING ANY COGENT REASONS, AND WITHOUT A PPRECIATING THAT THE BENEFICIARY NEVER OBTAINED ANY BENEFIT FROM THIS TR ANSACTION AT ANY TIME CANNOT COMMENT ON THE SAID TRANSACTION AS SHAM AND BOGUS. THUS, THE OBSERVATIONS MADE BY THE ASSESSING OFFICER IN THE PRESENT ASSESS MENT ORDER ARE WITHOUT ANY JURISDICTION. IN FACT, THE ASSESSING OFFICER OVERST EPPED THE PROVISIONS OF THE INCOME TAX ACT WHEREIN THE ASSESSMENT IS NIL IN THE CASE OF PRESENT ASSESSEE COMPANY AND COMMENTED ON THE THIRD PARTY ASSESSEE W HICH IS NOT PERMISSIBLE UNDER THE ACT. THUS, GROUND NO. 1 OF THE ASSESSEES APPEAL IS ALLOWED. AS 8 ITA NO. 191/DEL/2019 RELATES TO OTHER GROUNDS, THE SAME ARE CONSEQUENTIA L TO GROUND NO. 1, HENCE ARE ALLOWED. THE APPEAL OF THE ASSESSEE IS ALLOWED. 11. IN RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 12TH DAY OF MAY, 2020. SD/- SD/- (PRASHANT MAHARISHI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIA L MEMBER DATED: 12/05/2020 R. NAHEED COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 9 ITA NO. 191/DEL/2019 DATE OF DICTATION 03.03.2020 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 03.03.2020 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 1 3 . 0 5 . 2 0 2 0 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER