ITO,Co.Ward-4(3), V. Frostaire Pvt. Ltd.,

ITA 4691/DEL/2002

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7305 (ITAT-DELHI)
• Duration Of Justice: 13 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 12-10-2015
• Assessment Year: 1996-1997
• Appeal Filed On: 09-12-2002
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RICHA RASTOGI
• Assessee Lawyers: RAKESH GUPTA; SONIL AGGARWAL
• Keywords: Bogus Share capital
• Section: 260A; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D NEW DELHI) BEFORE SHRI I.C. SUDHIR AND SHRI L.P. SAHU ITA NO. 4691/DEL/2002 ASSESSMENT YEAR: 2009-10 INCOME-TAX OFFICER, VS. M/S. FROSTAIR PVT.LTD., WARD-11(3), 6-66, NDSE-I, NEW DELHI. NEW DELHI. (PAN: AAACF1093) (APPELLANT) (RESPONDENT) CROSS OBJ. NO.113/DEL/2006 ( IN ITA NO. 4691/DEL/2002 ASSESSMENT YEAR: 2009-10 M/S. FROSTAIR PVT. LTD., VS. INCOME-TAX OFFICER, J-66, NDSE-I, WARD-11(3), NEW DELHI. NEW DELHI. (PAN: AAACF1093) (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI RAKESH G UPTA & SONIL AGGARWAL, ADV. DEPARTMENT BY: MS. RICHA RASTOG I, SR. DR DATE OF HEARING : 13.10.2015 DATE OF PRONOUNCEMENT: 11:01.2016 ORDER PER I.C. SUDHIR: JUDICIAL MEMBER THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDER W HEREBY THE LEARNED CIT(APPEALS) HAS DELETED THE PENALTY OF RS. 44 LACS LEVIED UNDER SEC. 271(1)(C) OF THE INCOME-TAX ACT, 1961. 2. THE ASSESSEE ON THE OTHER HAND HAS OBJECTED THE ACTION OF THE LEARNED CIT(APPEALS) ( C.O. NO. 113/DEL/2006 ) ON THE BASIS THAT RECEIPT OF RS.95 2 LACS AS SHARE CAPITAL MONEY DID NOT CONSTITUTE INCO ME IN THE HANDS OF THE ASSESSEE, HENCE, THERE WAS NEITHER CONCEALMENT OF A NY INCOME NOR FURNISHING INACCURATE PARTICULARS OF ITS INCOME TO ATTRACT INI TIATION OF PENALTY PROCEEDINGS AND SECONDLY THE SHOW-CAUSE NOTICE WAS ISSUED WITHOUT PRIOR RECORDING OF MANDATORY SATISFACTION AND THUS INITIA TION OF PENALTY WAS NOT VALID. 3. HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY T HE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW, MATERIAL AVAILA BLE ON RECORD AND THE DECISIONS RELIED UPON. 4. THE FACTS IN BRIEF ARE THAT THE LEARNED CIT(APPE ALS) HAS DELETED THE PENALTY IN QUESTION LEVIED BY THE ASSESSING OFFICER ON THE GROUND THAT THE ADDITION MADE ON ACCOUNT OF UNEXPLAINED SHARE CAPIT AL WHICH REMAINED THE SUBJECT MATTER OF THE PENALTY, HAS BEEN DELETED BY THE ITAT. 5. IN SUPPORT OF THE GROUND OF APPEAL PREFERRED BY THE REVENUE, THE LEARNED SENIOR DR HAS BASICALLY PLACED RELIANCE ORD ER ON THE PENALTY ORDER AND HAS INFORMED THAT AGAINST THE ORDER OF THE ITAT IN THE QUANTUM APPEAL, THE REVENUE HAS PREFERRED AN APPEAL UNDER SEC. 260A OF THE INCOME-TAX ACT, 3 1961 BEFORE THE HON'BLE DELHI HIGH COURT WHEREIN VI DE JUDGMENT DATED 24.8.2012 IN ITA NO. 183/2002 AND 1638/2006, THE IS SUE OF ADDITION HAS BEEN DECIDED IN FAVOUR OF THE REVENUE. IN RESULT, T HE ASSESSMENT ORDER ON QUANTUM HAS BEEN RESTORED. 6. THE LEARNED AR ON THE OTHER HAND SUBMITTED THAT PENALTY PROCEEDINGS ARE INDEPENDENT PROCEEDINGS AND IN CASE QUANTUM HAS BEEN UPHELD, IT DOES NOT MEAN THAT THE ASSESSEE WILL BE LIABLE TO PAY PE NALTY. THE REQUIREMENT OF INVOCATION OF PENAL PROVISIONS UNDER SEC. 271(1)(C) OF THE ACT THAT THERE WAS CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS THEREOF ON THE PART OF THE ASSESSEE TOWARDS THE ADD ITION. HE SUBMITTED THAT ALL THE NECESSARY INFORMATION WERE FURNISHED BEFORE THE ASSESSING OFFICER AND THE ADDITION ON ACCOUNT OF UNEXPLAINED SHARE CA PITAL WAS MADE BY THE ASSESSING OFFICER ON THE BASIS OF INFORMATION RECEI VED FROM THE INVESTIGATION WING OF THE DEPARTMENT. THE ASSESSING OFFICER HAS MADE ADDITION WITH THIS OBSERVATION THAT THE ASSESSEE FA ILED TO FURNISH INFORMATION REGARDING PAN OF SHARE APPLICANTS CONSISTING OF 18 COMPANIES/CONCERNS AND THAT NONE OF THE SHARE APPLICANTS WAS FOUND EXISTED AT THE ADDRESSES GIVEN BY THE ASSESSEE NOR HAD THEY APPEARED BEFORE THE ASSES SING OFFICER IN RESPONSE TO SUMMONS ISSUED TO THEM. THUS, ADDITION OF RS.95 LACS WAS MADE BY THE 4 ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED SHARE C APITAL UNDER SEC. 68 OF THE ACT. THE ITAT THEREAFTER VIDE ORDER DATED 31.10 .2001 IN ITA NO. 1868/DEL/2001 HAD DELETED THE ADDITION ON THE BASIS THAT PAYMENTS IN RESPECT OF SHARE APPLICATIONS WERE RECEIVED THROUGH ACCOUNT PAYEE CHEQUES AND CLEARED THROUGH BANKING CHANNELS. IT WAS HELD BY TH E ITAT THAT ADVERSE INFERENCE, IF ANY, COULD BE DRAWN IN THE HANDS OF T HE SHARE-HOLDERS ONLY AND NOT IN THE HANDS OF THE ASSESSEE COMPANY. THE REVEN UE WENT IN APPEAL AGAINST THE SAID ORDER AND SUCCEEDED. THE LEARNED A R POINTED OUT THAT VIDE ORDER DATED 03.10.2012 IN REVIEW PETITION NO. 578/2 012 IN ITA NO. 1638/2006, THE HON'BLE HIGH COURT OF DELHI HAS BEEN PLEASED TO MAKE IT CLEAR THAT THE COMMON JUDGMENT IN ITA NO. 1638/2006 (IN QUANTUM) IS NOT DEEMED TO BE CONCLUSIVE WITH REGARD TO THE ASSESSEE S PENALTY LIABILITY. THE MATTER WAS ACCORDINGLY REMITTED TO THE ITAT TO PROC EED TO DETERMINE THE MERITS OF THE PENALTY APPEAL, INDEPENDENTLY AND IN ACCORDANCE WITH LAW. ALL RIGHTS AND CONTENTIONS OF THE PARTIES ARE KEPT OPEN . 7. THE LEARNED AR CONTENDED FURTHER THAT WHILE INIT IATING PENALTY PROCEEDINGS, THE ASSESSING OFFICER HAS NOT RECORDED SATISFACTION WHICH IS MANDATORY IN NATURE AND THUS THERE WAS NO VALID SHO W-CAUSE NOTICE FOR LEVY OF PENALTY UNDER SEC. 271(1)(C) OF THE ACT. HE SUBM ITTED THAT THERE ARE TWO 5 VIEWS OF THE APPELLATE AUTHORITY ON THE ISSUE OF AD DITION MADE ON ACCOUNT OF UNEXPLAINED SHARE APPLICATION MONEY, HENCE, PENALTY CANNOT BE LEVIED ON THIS BASIS AS WELL. HE PLACED RELIANCE ON THE FOLLO WING DECISIONS: I) JAHANGIR H.C. VS. ITO (2015) 54 TAXMAN.COM 68 (BOMBAY HIGH COURT); II) SALMAN KHAN VS. ACIT (2014) 40 CCH 594 (MUMB AI); III) SHRI RUSHABH N. PATEL VS. DCIT ITA NO. 3006 /AHD./2008- ORDER DATED 16.12.2014; IV) NAIN BUILDERS & DEV. (2014) 89 CCH 187 (MUM) ; V ) CIT VS. LIQUID INVESTMENT & TRADING CO. ITA NO. 240/2009 DATED 5.10.2014 (DELHI HIGH COURT); 8. THE LEARNED AR SUBMITTED FURTHER THAT AGAINST TH E JUDGMENT OF HON'BLE HIGH COURT IN QUANTUM APPEAL, THE ASSESSEE HAS PREFERRED CIVIL APPEAL (NO. 196 OF 2015) BEFORE THE HON'BLE SUPREME COURT, WHICH HAS BEEN ADMITTED AND IS PENDING FOR DISPOSAL. HE SUBMITTED THAT SINCE THE APPEAL HAS BEEN ADMITTED, HENCE, IT CANNOT BE SAID BEYOND DOUB T THAT THERE WAS CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS THEREOF ON THE PART OF THE ASSESSEE TO ATTRACT PENA L PROVISIONS. 9. CONSIDERING THE ABOVE SUBMISSIONS, THERE IS NO D OUBT THAT ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS BOTH ARE INDEPE NDENT TO EACH OTHER AND LEVY OF PENALTY IS NOT AN AUTOMATIC PROCESS IN CONS EQUENCE TO THE ADDITION 6 MADE. BEING PENAL IN NATURE, THERE IS MANDATORY ON THE PART OF THE REVENUE TO ESTABLISH THAT THERE WAS CONCEALMENT OF PARTICUL ARS OF INCOME OR FURNISHING INACCURATE PARTICULARS THEREOF ON THE PA RT OF THE ASSESSEE TO ATTRACT PENALTY UNDER SEC. 271(1)(C) OF THE ACT. ON EARLIER OCCASION, THE ITAT HAD UPHELD THE FIRST APPELLATE ORDER DELETING THE PENAL TY ON THE BASIS THAT THE ASSESSEE HAD SUCCEEDED BEFORE THE ITAT IN QUANTUM A ND THE ASSESSING OFFICER HAD NOT RECORDED HIS SATISFACTION REGARDING CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PART ICULARS THEREOF WHILE DIRECTING FOR INITIATION OF PENAL PROVISIONS. THE H ON'BLE DELHI HIGH COURT WHILE RESTORING THE ADDITION, AS SUBMITTED ABOVE, H AS MADE IT CLEAR THAT IT WILL NOT AFFECT THE RIGHT OF THE PARTY TO MAKE THEIR RES PECTIVE SUBMISSION IN THE PENALTY APPEAL AND REMITTED THE MATTER TO THE FILE OF THE ITAT. HOWEVER, THE ASSESSEE HAS WENT IN CIVIL APPEAL AGAINST THE ORDER OF THE HON'BLE HIGH COURT IN THE QUANTUM APPEAL AND THE APPEAL HAS BEEN CONVE RTED TO APPEAL CIVIL 196 OF 2015 AND IS PENDING FOR HEARING THUS IT CANNOT B E SAID AT THIS STAGE THAT THERE WAS CONCEALMENT OF PARTICULARS OF INCOME OR F URNISHING INACCURATE PARTICULARS THEREOF ON THE PART OF THE ASSESSEE TOW ARDS THE ADDITION MADE ON ACCOUNT OF UNEXPLAINED SHARE CAPITAL TO ATTRACT THE PENAL PROVISIONS UNDER SEC. 271(1)(C) OF THE ACT AGAINST THE ASSESSEE. WE THUS HOLD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN IMPOSING PEN ALTY OF RS.44 LACS UNDER 7 SEC. 271(1)(C) OF THE INCOME-TAX ACT, 1961 ON THE A DDITION MADE BY HIM ON ACCOUNT OF UNEXPLAINED SHARE CAPITAL WHICH IS NOW S UBJECT MATTER OF ADJUDICATION BEFORE THE HON'BLE SUPREME COURT. THE PENALTY LEVIED THUS STANDS DELETED. 9. IN RESULT, THE APPEAL PREFERRED BY THE REVENUE I S DISMISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 .01.2016 SD/- SD/- ( L.P. SAHU ) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 11 /01/2016 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR 8 DATE DRAFT DICTATED ON COMPUTER 11.01.2016 DRAFT PLACED BEFORE AUTHOR 11.01.2016 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 11.01.2016 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 11.01.20 16 APPROVED DRAFT COMES TO THE SR.PS/PS 11.01.2016 KEPT FOR PRONOUNCEMENT ON 11.01.2016 FILE SENT TO THE BENCH CLERK 12.01.2016 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.