ITO, Ward-11(3), New Delhi V. Sushil Kumar Sharma, New Delhi

ITA 5343/DEL/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2228 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2008-2009
• Appeal Filed On: 18-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P RAKASH DUBEY SENIOR
• Keywords: Reassessment proceedings; Set aside
• Section: 153; 153C; 147; 148; 132; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) BEFORE HONBLE N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER (THROUGH VIDEO CONFERENCE) ITA NO.5343/DEL./2017 (ASSESSMENT YEAR : 2008-09) ITO, WARD 11 (3), VS. SHRI SUSHIL KUMAR SHARMA, NEW DELHI. B 30, BLOCK B, JHILMIL COLONY,SHAHDARA, NEW DELHI 110 095. (PAN : AXZPS9955Q) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P.C. YADAV, ADVOCATE REVENUE BY : SHRI PRAKASH DUBEY, SENIOR DR DATE OF HEARING : 23.06.2021 DATE OF ORDER : 30.06.2021 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, ITO, WARD 11 (3), NEW DELHI (HEREINAFTER REFERRED TO AS THE REVENUE) BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 16.06.2017 PASSE D BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-4, NEW DELHI Q UA ASSESSMENT YEAR 2008-09 ON THE GROUNDS INTER ALIA T HAT :- WHETHER ON THE FACTS & CIRCUMSTANCES OF CASE, THE LD. CIT(A) WAS CORRECT IN QUASHING THE REOPENING OF THE ASSESS MENT U/S 148 OF THE LT. ACT BY STATING THAT THE ACTION SHOUL D HAVE BEEN ITA NO.5343/DEL./2017 2 TAKEN U/S 153(C) OF THE ACT BY HOLDING THAT TRANSAC TION OF SWEAT EQUITY SHARES ALLOTTED TO THE ASSESSEE AT NIL CONSI DERATION RECORDED IN THE BOOKS AND OBSERVED DURING THE POST SEARCH INVESTIGATION WOULD FALL WITHIN THE MEANING OF WORD 'BELONGS TO', AS PROVIDED US 153C OF THE ACT. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ASSESSEE FILED RETURN OF INCOME ON 25.07.2009 AT THE INCOME OF RS.1,09,750/-. M/S. RO CKLAND HOSPITAL LTD. GROUP OF COMPANY WAS SEARCHED UNDER S ECTION 132 OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) ON 06.09.2011, IN WHICH ASSESSEE IS NEITHER AN EMPLOYEE NOR DIRECTOR. HOWEVER, ASSESSEE WAS ISSUED 3,50,000 SWEAT EQUITY SHARES OF RS.10 EACH WITH PREMIUM OF RS.190 PER SHARE WITHOUT ANY CONSID ERATION. 3. AO INITIATED THE REASSESSMENT PROCEEDINGS ON THE BASIS OF INFORMATION AND COPY OF SWEAT EQUITY SHARE AGREEMEN T DATED 28.01.2008 THAT THE ASSESSEE HAS RECEIVED 3,50,000 SWEAT EQUITY SHARES OF RS.10 EACH AT THE PREMIUM OF RS.190 PER S HARE DURING FINANCIAL YEAR 2007-08 WITHOUT ANY CONSIDERATION WH ICH THE ASSESSEE HAD NOT OFFERED AS PART OF HIS TAXABLE INC OME. AO PROCEEDED TO HOLD THAT SWEAT EQUITY SHARES WAS COVE RED UNDER THE PROVISIONS OF FRINGE BENEFIT FAX (FBT) AND TILL AY 2009-10, FBT @ 30% WAS PAYABLE ON THE VALUE OF SWEAT EQUITY ALLOTTED BY THE COMPANY TO ITS DIRECTOR OR EMPLOYEES. IT IS AL SO BROUGHT ON RECORD BY THE AO THAT VIDE SWEAT EQUITY AGREEMENT, THE EQUITY ITA NO.5343/DEL./2017 3 SHARES WERE ISSUED TO THREE PERSONS INCLUDING THE A SSESSEE, NAMELY, SHALABH UPADHYAY, SUSHIL KUMAR SHARMA (ASSESSEE) & MRS. RITU SHARMA, WHO ARE RELATIVES OF THE DIRECTOR OF M/S. R OCKLAND HOSPITAL LTD.. AO REACHED THE CONCLUSION THAT ASSE SSEE HAS DERIVED BENEFIT OF RS.7,00,00,000/- IN THE FORM OF EQUITY S HARES WITHOUT ANY CONSIDERATION ON ACCOUNT OF HIS RELATION WITH SHRI ADITYA KUMAR BHANDARI WHICH IS INCOME OF THE ASSESSEE AND CONSE QUENTLY MADE ADDITION THEREOF TO THE TOTAL INCOME OF THE ASSESSE E. 4, ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) BY WAY OF FILING AN APPEAL WHO HAS ANNULLED THE REOPENING AND THEREBY QUASHED THE ASSESSMENT ORDER BY ALLOWING THE APPEAL . FEELING AGGRIEVED BY THE ORDER PASSED BY THE LD. CIT (A), T HE REVENUE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PR ESENT APPEAL. 5. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. UNDISPUTEDLY, 3,50,000 SWEAT EQUITY SHARES OF RS .10 EACH WITH PREMIUM OF RS.190 PER SHARE WERE ISSUED TO THE ASSESSEE BY M/S. ROCKLAND HOSPITAL LTD. IN ACCORDANCE WITH THE AGREEMENT DATED 28.01.2008. IT IS ALSO NOT IN DISPUTE THAT D URING SEARCH OPERATION CONDUCTED U/S 132 OF THE ACT IN M/S. ROCK LAND HOSPITAL ITA NO.5343/DEL./2017 4 LTD. GROUP OF CASES, NO INCRIMINATING MATERIAL WAS SEIZED RATHER AO INITIATED THE REOPENING ON THE BASIS OF INFORMAT ION AND COPY OF SWEAT EQUITY SHARE AGREEMENT DATED 28.01.2008. IT IS ALSO NOT IN DISPUTE THAT ASSESSEE IS NEITHER AN EMPLOYEE NOR A DIRECTOR OF M/S. ROCKLAND HOSPITAL LTD. AND HIS WIFE IS ONLY A HOUSE WIFE. IT IS ALSO NOT IN DISPUTE THAT AS PER SWEAT EQUITY SHARE AGREE MENT, THERE IS A LOCK-IN PERIOD OF THREE YEARS AND THESE SHARES WOUL D VEST IN THE ASSESSEE ONLY AFTER LOCK-IN PERIOD. IT IS ALSO NOT IN DISPUTE THAT IN CASE OF RAJAT SHUBRA CHATTERJEE WHO WAS ALSO ALLOTT EE OF 1000 SHARES OF RS.10 EACH AT THE PREMIUM OF RS.190 EACH BY M/S. ROCKLAND HOSPITAL LTD., THE COORDINATE BENCH OF THE TRIBUNAL IN ITA NO.2430/DEL/2015 VIDE ORDER DATED 20.05.2016 QU ASHED THE REASSESSMENT INITIATED ON THE BASIS OF INCRIMINATIN G MATERIAL FOUND DURING SEARCH IN THE CASE OF THIRD PARTY, NAMELY, M /S. ROCKLAND HOSPITAL LTD. IN WHICH PROVISIONS CONTAINED U/S 153 C WERE APPLICABLE AND NOT THE PROVISIONS CONTAINED UNDER S ECTION 147/148 OF THE ACT. 7. IN THE BACKDROP OF THE AFORESAID FACTS AND CIRCU MSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE LD . CIT (A) HAS RIGHTLY ANNULLED THE ASSESSMENT ORDER BY RETURNING FOLLOWING FINDINGS :- ITA NO.5343/DEL./2017 5 9. THE APPELLANT HAS RELIED ON THE DECISION OF HON 'BLE ITAT, DELHI IN THE CASE OF RAJAT SHUBRA CHATTERJEE ITA NO.2430/DEL/2015, ORDER DT. 20TH MAY, 2016, SH. RAJ AT SHUBRA CHATTERJEE, WHO WAS A DOCTOR AND WAS ALLOTTED 1,000 SHARES OF RS.10 EACH AT A PREMIUM OF RS. 190 EACH. THE QUANTU M OF ADDITION INVOLVED WAS ONLY RS. 2,00,000/-. THE OTHE R ADDITIONS RELIED UPON BY THE APPELLANT ARE THE DECISIONS OF O THER CIT, APPEALS. THE HON'BLE ITAT IN THE ABOVE DECISION HEL D THAT SINCE THE REASSESSMENT WAS INITIATED ON THE BASIS O F INCRIMINATING MATERIAL FOUND DURING SEARCH IN THE C ASE OF THIRD PARTY I.E. M/ S ROCKLAND HOSPITAL LIMITED, THE PROV ISIONS OF 153C WERE APPLICABLE IN THIS CASE AND NOT THE PROVI SIONS OF SECTION 147/148 FOR THIS REASON. THE REASSESSMENT W AS QUASHED AND PROCEEDINGS U/S 147/148 WERE TREATED AS VOID-AB -INITIO. THE QUANTUM INVOLVED IN THE SAID CASE AND ALSO IN THE D ECISIONS OF CIT (A) IN OTHER CASES WERE MUCH SMALLER AND, THERE FORE, THERE IS A POSSIBILITY THAT THESE DECISIONS HAVE NOT BEEN CONTESTED BY THE REVENUE FURTHER. FROM A PERUSAL OF NUMBER OF SH ARES ALLOTTED, REPRODUCED IN ASSESSMENT ORDER, IT IS NOT ICED THAT THE SHARES ALLOTTED TO THE APPELLANT AND HIS SPOUSE ARE OF LARGE HIGHER VALUE. THE APPELLANT'S WIFE IS ONLY A HOUSEW IFE AS CONFIRMED IN HER STATEMENT ON OATH IN HER CASE, WHI LE APPELLANT IS ALSO NEITHER AN EMPLOYEE NOR A DIRECTOR. THEREFO RE, THE SECTIONS UNDER WHICH ADDITIONS WERE MADE IN THE CAS ES OF EMPLOYEES/ DIRECTORS ETC. WERE DIFFERENT FROM THE A DDITION IN THE CASE OF THE APPELLANT, WHERE THE ADDITION HAS B EEN MADE U/S 2(24)(IV). THE ASSESSMENT ORDER STATES THAT THE ISS UE OF SHARES WAS DETECTED IN POST SEARCH INVESTIGATION. HOWEVER, FROM A PERUSAL OF THE ORDER OF HON'BLE ITAT (SUPRA), IT IS NOTICED THAT THE EVIDENCE WAS FOUND DURING THE SEARCH. SINCE, NO THING CONTRARY HAS BEEN BROUGHT ON RECORD BY AO, IT IS PR ESUMED THAT THE AGREEMENT WITH APPELLANT WAS FOUND DURING SEARCH ONLY AND NOT SUBSEQUENTLY. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE ITAT (SUPRA), THE ASSESSMEN T ORDER IS ANNULLED AND GROUND NO. 2 OF THE APPEAL IS ALLOWED. 8. WHEN UNDISPUTEDLY THE REOPENING HAS BEEN INITIAT ED U/S 147/148 OF THE ACT ON THE BASIS OF SAME THIRD PARTY DOCUMENT BELONGING TO M/S. ROCKLAND HOSPITAL LTD., THE SAME IS VOID AB INITIO BECAUSE IN ANY CASE THE REOPENING WAS TO BE INITIATED IT COULD HAVE BEEN INITIATED U/S 153C OF THE ACT. LD. CIT ( A) HAS RIGHTLY QUASHED THE ASSESSMENT BY FOLLOWING THE ORDER PASSE D BY THE ITA NO.5343/DEL./2017 6 COORDINATE BENCH OF THE TRIBUNAL IN CASE OF RAJAT S HUBRA CHATTERJEE IN WHICH REASSESSMENT WAS INITIATED ON T HE BASIS OF SAME THIRD PARTY INCRIMINATING MATERIAL. 9. FURTHERMORE, LD. AR FOR THE ASSESSEE ALSO PLACED ON RECORD ORDER PASSED BY THE COORDINATE BENCH OF THE TRIBUNAL IN ITA NO.4054/DEL/2015 & CO NO.166/DEL/2018 IN CASE OF SH RI UMESH UPADHYAY ORDER DATED 19.03.2019, DISCUSSED BY THE AO IN PARA 7.8 OF THE ASSESSMENT ORDER, IN WHICH REASSESSMENT WAS INITIATED ON THE BASIS OF SAME THIRD PARTY INCRIMINATING MATERIA L QUA ISSUANCE OF 100,000 EQUITY SHARES WITH FACE VALUE OF RS.10 HAVI NG PREMIUM OF RS.190 PER SHARE AS SWEAT EQUITY SHARES BY M/S. ROC KLAND HOSPITAL LTD. WHEREBY QUASHING OF REASSESSMENT BY LD. CIT (A ) WAS UPHELD. 10. IT IS ALSO UNDISPUTED FACT THAT HONBLE DELHI HIGH COURT VIDE ORDER DATED 26.02.2010 IN A COMPANY PETITION N O.399/2009 IN THE MATTER OF THE COMPANIES ACT, 1956 AND PETITI ON U/S 101 OF THE COMPANIES ACT, 1956 AND M/S. ROCKLAND HOSPIT AL LTD. DIRECTED THAT ALL THE SWEAT EQUITY SHARES INCLUDI NG SUBJECT MATTER OF THE PRESENT APPEAL WERE ORDERED TO BE RETURNED A ND ENTRY WAS REVERSED AND THE ASSESSEE QUITTED THE ASSOCIATION O F THE ASSESSEE ON 07.02.2011 BEING AN ESSENTIAL CONDITION UNDER THE SWEAT EQUITY SHARE AGREEMENT TO DERIVE THE BENEFIT THEREUNDER. IT IS ALSO MATTER OF FACT THAT BOARD OF DIRECTORS OF M/S. ROCKLAND HO SPITAL LTD. HAS ITA NO.5343/DEL./2017 7 PASSED A RESOLUTION AND THEREBY ACCEPTED THE SURREN DER OF SHARES BY THE ASSESSEE. 11. LD. CIT (A) HAS EVEN DECIDED THE ISSUE ON MERIT S ALSO IN FAVOUR OF THE ASSESSEE ON THE GROUND THAT AS PER CL AUSE IN THE SWEAT EQUITY SHARE AGREEMENT WHEREBY ASSESSEE WIL L GET FULL RIGHT TO DISPOSE OFF THE SHARES ONLY AFTER THREE YEARS LO CK IN PERIOD, MEANING THEREBY SHARES WOULD VEST IN ASSESSEE ONLY IN AY 2011-12 OR AY 2016-17 (WHERE APPROVAL OF THE BOARD WAS RECE IVED FOR TRANSFER OF THE SHARES TO THE TRUST). 11. IN VIEW OF WHAT HAS BEEN DISCUSSED IN THE PRECE DING PARAS, LD. CIT (A) HAS RIGHTLY QUASHED THE ASSESSMENT INIT IATED ON THE BASIS OF THIRD PARTY INCRIMINATING MATERIAL U/S 147 /148 OF THE ACT. SO, FINDING NO ILLEGALITY OR PERVERSITY IN THE IMPU GNED ORDER, APPEAL FILED BY THE REVENUE IS HEREBY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 30 TH DAY OF JUNE , 2021. SD/- SD/- (N.K. BILLAIYA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 30 TH DAY OF JUNE, 2021/TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-4, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.