ITO, New Delhi V. M/s. Kyjol Entertainment Media (P) Ltd, New Delhi

ITA 4466/DEL/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5660 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 22-03-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 23-11-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SANDEEP BANDHU
• Assessee Lawyers: L N MALIK
• Keywords: Business income; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH G DELHI ] BEFORE SHRI C. L. SETHI, JM AND SHRI K. D. RANJAN, AM I. T. APPEAL NO. 4466 (DEL) OF 2009. ASSESSMENT YEAR : 2006-07. THE INCOME-TAX OFFICER, M/S. KYJOL ENTERTAIN MENT MEDIA P. LTD., W A R D : 5 (3), VS. OFFICE FLOOR HOTEL CROWN PLAZA, N E W D E L H I. NEW FRIENDS COLONY, N E W D E L H I. P A N / G I R NO. AAC CK 5184 C. ( APPELLANT ) ( R ESPONDENT ) ASSESSEE BY : SHRI SATISH KHOSLA, ADV.; & SHRI L. N. MALIK, C. A.; DEPARTMENT BY : SHRI SANDEEP BANDHU, SR. D.R. ; O R D E R. PER K. D. RANJAN, AM : THIS APPEAL BY THE REVENUE FOR ASSESSMENT YEAR 2006 -07 ARISES OUT OF THE ORDER OF THE LD. CIT (APPEALS)-VIII, NEW DELHI. 2. THE GROUNDS OF APPEAL, RAISED BY THE REVENUE, AR E REPRODUCED AS UNDER :- 1. THE ORDER OF THE LD. CIT (APPEALS) IS ERRONE OUS AND CONTRARY TO FACTS AND LAW; 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS. 1,00,00,000/- MADE BY THE A.O. BEING THE UNCONFIRMED SHARE APPLICATION MONEY; 2.1 THE LD. CIT (APPEALS) FAILED TO APPRECIATE TH E FACT THAT THE ASSESSEE DID NOT DISCHARGE THE ONUS OF PROVING THE CREDITWORTHIN ESS OF THE CREDITORS AND GENUINENESS OF THE TRANSACTIONS; 2 I. T. APPEAL NO. 4466 (DEL) OF 2009. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT (APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS. 8,33,884/- MADE BY THE A.O. BY DISALLOWING THE EXPENSES CLAIMED BY THE ASSESSEE; 3.1 THE LD. CIT (APPEALS) DID NOT APPRECIATE THE F ACT THAT THE ASSESSEE DID NOT CARRY OUT ANY BUSINESS ACTIVITIES DURING THE YEAR. ' 3. THE FIRST ISSUE FOR CONSIDERATION RELATES TO DEL ETING THE ADDITION OF RS. ONE CRORE ON ACCOUNT OF SHARE APPLICATION MONEY. THE FACTS OF T HE CASE STATED IN BRIEF ARE THAT THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION RECEIVED SHARE APPLICATION MONEY OF RS.3.5 CRORES FROM DIFFERENT PARTIES. THE ASSESSEE WAS REQUIRED TO FI LE CONFIRMATIONS, INCOME-TAX ASSESSMENT PARTICULARS ETC. FROM THE INVESTORS OF SHARE APPLIC ATION MONEY. THE ASSESSEE DID NOT FURNISH ANY EVIDENCE IN RESPECT OF MRS. RITA MULLICK [RS.50 LAK HS] AND SHRI NEEL KAMAL MALHOTRA [RS.50 LAKHS]. SINCE THE ASSESSEE FAILED TO FILE CONFIRMA TIONS, BANK STATEMENTS / ASSESSMENT PARTICULARS THE ASSESSING OFFICER TREATED THE SUM OF RS. ONE CR ORE AS ASSESSEE'S OWN MONEY INTRODUCED IN THE BOOKS OF ACCOUNTS IN THE GARB OF SHARE APPLICATION MONEY. 4. BEFORE THE LD. CIT (APPEALS) IT WAS CONTENDED TH AT THE ASSESSEE COMPANY WAS NOT ALLOWED ADEQUATE OPPORTUNITY TO PRESENT ITS CASE BEFORE ASS ESSING OFFICER. ACCORDINGLY, A PRAYER UNDER RULE 46-A OF THE I. T. RULES, 1962 WAS MADE FOR ADM ISSION OF ADDITIONAL EVIDENCE IN FORM OF PAN CARD OF MS. RITA MULLICK AND SHRI NEEL KAMAL MA LHOTRA AND CONFIRMATIONS FROM MRS. RITA MULLICK AND SHRI NEEL KAMAL MALHOTRA. THE REASON F OR NOT PRODUCING THE EVIDENCE BEFORE THE AO WAS THAT THESE TWO PERSONS BEING NRIS WERE NOT A VAILABLE IN INDIA AND, THEREFORE, THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE FROM PRO DUCING EVIDENCE WHICH HAD BEEN CALLED UPON BY THE AO. THE LD. CIT (APPEALS) OBTAINED THE COMM ENTS OF THE ASSESSING OFFICER ON ADDITIONAL EVIDENCE FILED BY THE ASSESSEE. THE ASSESSING OFFI CER OBJECTED TO ADMISSION OF ADDITIONAL EVIDENCE ON THE GROUND THAT SUFFICIENT TIME WAS GRA NTED TO THE ASSESSEE. EVEN AFTER ISSUING A FINAL SHOW CAUSE NOTICE FOR 23 RD DECEMBER, 2009, THE ASSESSEE WAS ACCOMMODATED TILL 29 TH DECEMBER, 2009 TO FILE NECESSARY DETAILS / DOCUMENT S. THE ASSESSING OFFICER ALSO STATED THAT THE CONFIRMATIONS, PAN NUMBERS AND COPY OF THE INCOME T AX RETURNS OF BOTH MS. RITA MULLICK AND SHRI NEEL KAMAL MALHOTRA WERE INCONCLUSIVE INASMUCH AS THOSE WERE NOT CORROBORATED WITH THE 3 I. T. APPEAL NO. 4466 (DEL) OF 2009. COPIES OF BANK ACCOUNTS OF NRI AND FOREIGN REMITTAN CE. HE FURTHER COMMENTED THAT AS PER THE CONFIRMATION FILED BY MS. RITA MULLICK, A SUM OF RS .50 LAKHS WAS INVESTED VIDE CHEQUE NO.356246 DATED 6/10/2005 AND SHRI NEEL KAMAL MALHO TRA HAD GIVEN TWO CHEQUES FOR RS.25 LAKHS EACH BEARING NOS. 946753 AND 946754 DATED 23 RD JANUARY, 2006. FROM THE COPY OF BANK ACCOUNT, THESE AMOUNTS WERE NOT REFLECTED DURING TH E PERIOD 17/10/2005 ONWARDS. THE LD. CIT (A) OBTAINED THE COMMENTS OF THE ASSESSEE ON THE RE MAND REPORT SUBMITTED BY THE AO. THE LD. CIT (A) AFTER OBTAINING THE COMMENTS OF THE ASSESSE E, ADMITTED THE ADDITIONAL EVIDENCE. FINALLY THE LD. CIT (A) RELYING ON VARIOUS DECISIONS OBSERV ED THAT SINCE THE ASSESSEE HAD FILED NECESSARY PROOF FOR SHARE APPLICATION MONEY RECEIVED FROM MS. RITA MULLICK AND SHRI NEEL KAMAL MALHOTRA ALONG WITH COPY OF THEIR PAN AND I. T. RET URNS, HE WAS OF THE OPINION THAT THE ASSESSEE HAD DISCHARGED INITIAL ONUS IN PROVING THE IDENTITY OF SHARE APPLICANTS. HE ALSO NOTED THAT THE ASSESSING OFFICER HAD NOT BROUGHT ON RECORD ANY EVI DENCE THAT THE MONEY IN QUESTION WAS ORIGINATED FROM THE COFFERS OF THE ASSESSEE COMPANY . HE ACCORDINGLY DELETED THE ADDITION. 5. BEFORE US THE LD. SR. DR SUBMITTED THAT THE ASSE SSEE HAD NOT FURNISHED THE NECESSARY EVIDENCE BEFORE THE ASSESSING OFFICER THOUGH THE AS SESSEE WAS PROVIDED SUFFICIENT OPPORTUNITY TO PROVE HIS CASE. HE FURTHER SUBMITTED THAT BEFORE T HE LD. CIT (A) THE AO OBJECTED TO ADMISSION OF ADDITIONAL EVIDENCE ON THE GROUND THAT SUFFICIENT T IME WAS PROVIDED. THE AMOUNT MENTIONED IN THE CONFIRMATIONS FILED BY MS. RITA MULLICK AND SHR I NEEL KAMAL MALHOTRA WAS NOT REFLECTED IN THE COPY OF BANK ACCOUNT FILED BY THE ASSESSEE FOR THE PERIOD 17/10/2005 ONWARDS. THEREFORE, THE GENUINENESS OF TRANSACTION HAS NOT BEEN PROVED. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT (APPEALS). 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE OBJECTIONS FILED BY THE ASSESSING OFFICER AGAIN ST ADMISSION OF ADDITIONAL EVIDENCE, IT IS EVIDENT THAT THE AMOUNT GIVEN IN CONFIRMATIONS HAD NOT BEEN REFLECTED IN THE BANK ACCOUNT OF THE ASSESSEE FOR THE PERIOD 17/10/2005 ONWARDS. THE LD. CIT (A) HAS NOT GIVEN ANY FINDING TO THIS EFFECT. THEREFORE, IN OUR CONSIDERED OPINION, THE MATTER RE QUIRES TO BE SET ASIDE TO THE FILE OF THE AO WITH THE DIRECTIONS TO EXAMINE THE CASE OF THE ASSESSEE WHETHER THE SHARE APPLICATION MONEY INVESTED 4 I. T. APPEAL NO. 4466 (DEL) OF 2009. BY SHRI NEEL KAMAL MALHOTRA AND MS. RITA MULLICK AR E GENUINE. THE ASSESSEE WOULD PROVIDE NECESSARY EVIDENCE IN SUPPORT OF HIS CONTENTION THA T SHARE APPLICATION MONEY HAS BEEN INVESTED BY THE TWO NRIS. WE ORDER ACCORDINGLY. 7. THE NEXT ISSUE FOR CONSIDERATION RELATES TO DELE TING THE ADDITION OF RS.8,33,884/- MADE ON ACCOUNT OF DISALLOWANCE OF EXPENSES CLAIMED BY THE ASSESSEE. THE ASSESSING OFFICER DISALLOWED THE CLAIM UNDER SECTION 35-D OF THE ACT ON THE GROU ND THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF INVESTMENT, FINANCE, HIRE PURCHASE AND LEASING OF MOVABLE AND IMMOVABLE PROPERTIES. IT WAS EXPLAINED BY THE ASSESSEE THAT THE INTEREST / DIVIDEND INCOME RECEIVED BY THE ASSESSEE WAS IN THE NATURE OF BUSINESS INCOME AND, THEREFORE, DE DUCTION UNDER SECTION 35-D OF THE ACT WAS ALLOWABLE. HOWEVER, THIS CONTENTION OF THE ASSESSE E WAS REJECTED ON THE GROUND THAT THE COMPANY HAD NOT COMMENCED ITS BUSINESS AND, THEREFO RE, THE EXPENDITURE CLAIMED IS NOT PERMISSIBLE AS DEDUCTION. THE ASSESSEE COULD HAVE AMMORTISED EXPENSES AS ARE PERMISSIBLE UNDER PROVISIONS OF SECTION 35-D WHEN THE COMPANY S TARTED ITS BUSINESS. HE ACCORDINGLY REJECTED THE CONTENTION OF THE ASSESSEE FOR DEDUCTI ON UNDER SECTION 35-D OF THE ACT. 8. BEFORE THE LD. CIT (APPEALS) IT WAS SUBMITTED BY THE ASSESSEE THAT THE FINDINGS RECORDED BY THE ASSESSING OFFICER WERE DEVOID OF ANY MERITS AND WERE NOT IN CONSONANCE WITH THE LEGAL AND FACTUAL POSITION OF THE CASE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE COMPANY HAD NEVER ADMITTED OR SUBMITTED THAT NO BUSINESS WA S CARRIED OUT BY IT DURING THE YEAR UNDER CONSIDERATION. WHAT WAS SUBMITTED BEFORE THE AO WA S THAT NO MANUFACTURING ACTIVITY HAD COMMENCED DURING THE YEAR UNDER CONSIDERATION AND T HIS WAS ALSO IN RELATION TO SPECIFIC QUERY RAISED BY HIM. THE ASSESSEE WAS ENGAGED IN THE BUS INESS IN PURSUANCE OF ALLIED /ANCILLARY OBJECTS OF INVESTMENT, FINANCE, HIRE PURCHASE AND LEASING O F MOVABLE AND IMMOVABLE PROPERTIES. THEREFORE, THE EXPENDITURE INCURRED WAS IN RESPECT OF BUSINESS CARRIED ON BY THE ASSESSEE. THE LD. CIT (A) ON CONSIDERATION OF SUBMISSIONS MADE BY THE ASSESSEE OBSERVED THAT THE AO HAD NOT MADE OUT ANY CASE TO SUGGEST THAT ANY ITEM OF THE E XPENDITURE DEBITED TO PROFIT AND LOSS ACCOUNT WAS IN RELATION TO ITEMS SPECIFIED IN CLAUSES (A) T O (D) OF SECTION 35-D(2) OF THE ACT. THERE WAS NO SUGGESTION IN THE ASSESSMENT ORDER THAT THE AO A T ANY STAGE INTENDED TO TAKE RECOURSE OF 5 I. T. APPEAL NO. 4466 (DEL) OF 2009. SECTION 14-A OF THE ACT. HE ACCORDINGLY DIRECTED T HE ASSESSING OFFICER TO ALLOW THE EXPENDITURE INCURRED IN RELATION TO DAY-TO-DAY ADMINISTRATIVE M ATTERS AND IN CARRYING OUT ANCILLARY/ALLIED ACTIVITIES. 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE FACTS APPEARING FROM THE ASSESSMENT ORDER, IT I S CLEAR THAT THE AO HAS ASSESSED THE INCOME FROM INTEREST AND INVESTMENTS UNDER THE HEAD 'OTHER SOURCES' AND HAD DISALLOWED THE EXPENSES ON THE GROUND THAT BUSINESS HAS NOT COMMENCED. FROM T HE LANGUAGE USED IN THE ASSESSMENT ORDER, IT APPEARS THAT THE AO HAS DISALLOWED THE EXPENDITURE ONLY ON THE GROUND THAT THE BUSINESS HAS NOT COMMENCED AND HENCE THE ASSESSEE COULD HAVE CLAIMED EXPENDITURE UNDER SECTION 35-D OF THE ACT. HOWEVER, THE LD. CIT (A) HAD TREATED THE INCO ME FROM INTEREST AND DIVIDEND AS INCOME FROM BUSINESS. HE HAS NOT RECORDED ANY FINDING AS TO HO W THE INCOME RECEIVED FROM DIVIDEND AND INTEREST WOULD BE ASSESSABLE UNDER THE HEAD 'BUSINE SS' WHEN THE MANUFACTURING ACTIVITIES, WHICH IS THE MAIN OBJECT OF THE COMPANY HAD NOT COMMENCED . IN OUR CONSIDERED OPINION, THE MATTER REQUIRES A FRESH LOOK AS TO WHETHER THE INTEREST AN D DIVIDEND INCOME IS ASSESSABLE UNDER THE HEAD 'BUSINESS' OR 'OTHER SOURCES'. WE, THEREFORE, SET ASIDE THIS MATTER TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTIONS TO DECIDE THE NATURE OF THE INCOME AND EXAMINE THE CLAIM OF EXPENSES ACCORDINGLY. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED, FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 22 ND MARCH, 2010. SD/- SD/- [ C. L. SETHI ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 22 ND MARCH, 2010. *MEHTA * 6 I. T. APPEAL NO. 4466 (DEL) OF 2009. COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT. 7 I. T. APPEAL NO. 4466 (DEL) OF 2009.