M/s. King Entertainment Private Limited, Nawanshahr V. The Deputy Commissioner of Income tax, Central Circle - II, Jalandhar

ITA 523/ASR/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0431 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 19-12-2019
• Assessment Year: 2005-2006
• Appeal Filed On: 09-08-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 271(1)(c); 68; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. N. K. CHOUDHRY, JUDICIAL MEMBER AND SH. O. P. MEENA ACCOUNTANT MEMBER I.T.A. NO. 523/ASR/2017 A SSESSMENT YEAR: 2005-06 M/S KING ENTERTAINMENT PVT. LTD., K.C. TOWER, CHADIGARH ROAD, NAWANSHAAHAR [PAN: AAGFK 9842E] VS. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-II, JALANDHAR (APPELLANT) (RESPONDENT) APPELLANT BY : WRITTEN SUBMISSIONS RESPONDENT BY: SH. ALOK KUMAR CIT-DR DATE OF HEARING: 19.12.2019 DATE OF PRONOUNCEMENT: 19.12.2019 ORDER PER O. P. MEENA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-5, LUDHIANA DA TED 03.05.2017 FOR THE ASSESSMENT YEAR 2005-06. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IS A UNDER: 1. THAT THE LEARNED CIT(A) ERRED IN CONFIRMING PENALTY OF RS.1,10,000/- ON INTRODUCTION OF SHARE CAPITAL TO THE TUNE OF RS. 2,50,000/-. WHEREAS, CIT(A), IN QUANTUM APPEAL ORDER ONLY CONFI RMED RS.90,000. THE ORDER OF CIT(A) COULD NOT BE INTERPR ETED CORRECTLY WHILE PASSING PENALTY ORDER. IT IS PRAYED THAT KEEP ING IN VIEW THE ITA NO. 523/ASR/2017 (AY 2005-06) M/S KING ENTERT AINMENT P. LTD. V. DY. CIT 2 JUDGMENT OF LOVELY EXPORTS PRIVATE LIMITED, NO ADDI TION CAN BE MADE IN THE HANDS OF THE COMPANY. IT IS PRAYED PENA LTY MAY BE DELETED. 2. THE CIT(A) ERROR IN CONFIRMING PENALTY ON DISALL OWANCE OF EXPENSES LIKE PRELIMINARY EXPENSES W/OFF WHICH ARE ALLOWABLE U/S 35D. THE OTHER EXPENSES RENT, BANK CHARGES ARE SELF-EXPLANAT ORY. HENCE NO PENALTY CAN BE IMPOSED. IT IS PRAYED PENALTY MAY PL EASE DELETED. 3. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND GROUN D OF APPEAL. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E AO MADE ADDITION OF RS.23,95,852/- (PAGE 9 OF ASSESSMENT ORDER). THE LD . CIT(APPEAL) VIDE ORDER DATED 29.01.2013 DELETED ALL THE ADDITIONS AND CONF IRMED ONLY ADDITION OF RS.90,000/-. HOWEVER, THE CIT(A) DID NOT GAVE CLEAR FINDINGS ABOUT THE ADDITION OF RS.1,60,000/- MADE ON ACCOUNT OF SHARE CAPITAL/SHAR E APPLICATION MONEY PAID BY PREM PAL GANDHI. THE AO MADE THE ADDITION BECAUSE C REDITWORTHINESS OF SH. PREM PAL GANDHI WAS NOT ESTABLISHED. THE LD. COUNSEL IN HIS WRITTEN SUBMISSIONS STATED THAT AS PER THE DECISION IN THE CASE OF CIT V. LOVELY EXPORTS LTD. [2009] 319 ITR 5 (ST) (SC), SHARE APPLICATION MONEY CANNOT BE PUT TO TEST OF SECTION 68 OF THE INCOME TAX ACT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. FIRST PROVISO TO SECTION 68 WAS INSERTED BY FINANCE ACT, 2012, W.E.F . 01.04.2013. EVEN ACCORDING TO CLAUSE (XVI) OF SECTION 2(24) OF THE ACT, THIS C ONSIDERATION RECEIVED FOR ISSUE OF SHARES AS EXCEEDS THE FARE MARKET VALUE OF THE SHAR ES REFERRED TO IN CLAUSE (VIIB) OF SUB-SECTION 2 OF SECTION 56 COULD BE TREATED AS INC OME. HOWEVER, NO SUCH EXERCISE WAS DONE AND ADDITION WAS MADE. THE LD CIT(A) DID N OT GIVE ANY CLEAR FINDINGS THAT THE ADDITION WAS DELETED BUT FROM THE ORDER IT IS CLEARED THAT ADDITION WAS DELETED OR INTENDED TO BE DELETED BECAUSE HE ONLY C ONFIRMED ADDITION OF RS.90,000/- AND RS.45,852/-. AS PER THE WRITTEN SUB MISSIONS THE AR CONTENDED THAT ITA NO. 523/ASR/2017 (AY 2005-06) M/S KING ENTERT AINMENT P. LTD. V. DY. CIT 3 THE PENALTY OF ADDITION OF RS.90,000/- CAN BE LEVIE D. EVEN THAT ISSUE IS HIGHLY CONTROVERSIAL BECAUSE THAT AMOUNT WAS ON ACCOUNT OF SHARE APPLICATION WITH REGARD TO THE EXPENSES OF RS.45,852/- RELATING TO RENT, BA NK CHARGES AND PRELIMINARY EXPENSES ARE STATUTORY ALLOWABLE U/S 35D OF THE ACT . THE BANK CHARGES WERE PAID TO BANK WHICH ARE STATUTORY OBLIGATIONS AND CLEARLY NO PENALTY IS LEVIABLE ON THE EXPENSES. 4. WE HAVE HEARD THE LD. DR AND PERUSED THE WRITTEN SUBMISSION OF THE ASSESSEE AND FIND THAT THE PENALTY U/S 271(1)(C) CA N BE SUSTAINED IN RESPECT OF ADDITION OF RS.90,000/- BEING SHARE APPLICATION WHI CH HAS NOT BEEN ESTABLISHED BY THE ASSESSEE. WITH REGARD TO EXPENSES OF RS.45,852/ - NO PENALTY IS LEVIABLE, THEREFORE PENALTY RELATING TO EXPENSES OF RS.45,952 /- IS DELETED AND PENALTY IS IN RESPECT TO ADDITION OF RS.90,000/- IS SUSTAINED. TH E AO IS THEREFORE DIRECTED TO RECALCULATE THE PENALTY ON THE IMPUGNED ADDITION OF RS.90,000/-. ACCORDINGLY THIS GROUND OF APPEAL IS PARTLY ALLOWED. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON DECEMBER 19, 2019 SD/- SD/- (N. K. CHOUDHRY) (O. P. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 19.12.2019 /GP/SR. PS. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: (2) THE RESPONDENT: (3) THE CIT(APPEALS), (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T. ITA NO. 523/ASR/2017 (AY 2005-06) M/S KING ENTERT AINMENT P. LTD. V. DY. CIT 4 TRUE COPY BY ORDER