Lalithaa Jewellery Mart Pvt Ltd., CHENNAI V. ACIT Central Circle 1(4), CHENNAI

ITA 665/CHNY/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1510 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 14-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S BHARATH
• Assessee Lawyers: K MAHENDRAN
• Keywords: Unexplained cash credit; Fair market value; Set aside
• Section: 131; 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . !' , $ % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NOS.663, 664 & 665/CHNY/2019 ' (' / ASSESSMENT YEARS : 2013-14, 2014-15 & 2015-16 M/S LALITHAA JEWELLERY MART PVT. LTD., 123, USMAN ROAD, T. NAGAR, CHENNAI - 600 017. PAN : AAACL 1523 A V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(4), CHENNAI. (*+/ APPELLANT) (,-*+/ RESPONDENT) *+ . / / APPELLANT BY : SHRI K. MAHENDRAN, ADVOCATE ,-*+ . / / RESPONDENT BY : SHRI S. BHARATH, CIT 0 . 1$ / DATE OF HEARING : 09.05.2019 2!( . 1$ / DATE OF PRONOUNCEMENT : 14.06.2019 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : ALL THE APPEALS OF THE ASSESSEE ARE DIRECTED AGAI NST THE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)-18, CHENNAI, DATED 25.02.2019 AND PERTAIN TO ASSESSMENT YEARS 2013- 14, 2014-15 AND 2015-16, SINCE COMMON ISSUES ARISE FOR CONSIDERATION IN ALL THESE APPEALS, WE HEARD THESE APPEALS TOGETHER AND DISPOSING THE SAME BY THIS COMMON ORDER. 2 I.T.A. NOS.663 TO 665/CHNY/19 2. SHRI K. MAHENDRAN, THE LD.COUNSEL FOR THE ASSESS EE, SUBMITTED THAT THE ASSESSEE-COMPANY IS ENGAGED ITSE LF IN MANUFACTURING AND TRADING OF GOLD JEWELLERY. DURIN G THE ASSESSMENT YEARS UNDER CONSIDERATION, ACCORDING TO THE LD. COU NSEL, THE ASSESSEE RECEIVED SHARE APPLICATION MONEY / SHARE P REMIUM FROM ITS MANAGING DIRECTOR SHRI M. KIRAN KUMAR AND M/S K OTHARI CREDIT INDIA PVT. LTD. ACCORDING TO THE LD. COUNSEL, THE ASSESSING OFFICER MADE CONTRADICTORY OBSERVATION ON THE GROUND THAT T HE VALUATION OF THE SHARES WAS NOT DONE PROPERLY. MOREOVER, THE A SSESSING OFFICER ALSO FOUND THAT THE SHARE PREMIUM RECEIVED BY THE A SSESSEE HAS TO BE ASSESSED UNDER SECTION 68 OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') AS UNEXPLAINED CREDIT. ACCORDING TO THE LD. COUNSEL, IF THE SHARE PREMIUM WAS CONSIDERED TO BE EXCESS OF FAIR M ARKET VALUE OF THE SHARES, THEN THE QUESTION OF APPLICATION OF SEC TION 68 DOES NOT ARISE FOR CONSIDERATION. IN THIS CASE, ACCORDING T O THE LD. COUNSEL, THE ASSESSING OFFICER PROCEEDED MAINLY ON THE GROUN D THAT THE VALUATION OF SHARES WAS INFLATED FOR RECEIVING THE SHARE APPLICATION MONEY. ALTERNATIVELY, HE ALSO FOUND THAT IT IS AN UNEXPLAINED CREDIT. ACCORDING TO THE LD. COUNSEL, ONCE THE ASSESSING OF FICER ACCEPTED THE TRANSACTION AS GENUINE AND COMPUTES THE FAIR MA RKET VALUE OF 3 I.T.A. NOS.663 TO 665/CHNY/19 THE SHARE AND DETERMINES THE EXCESS AMOUNT AS INCOM E OF THE ASSESSEE COMPANY UNDER SECTION 56(2)(VIIB) OF THE A CT, THE PROVISIONS OF SECTION 68 OF THE ACT CANNOT BE INVOK ED FOR ASSESSING THE SAME EXCESS AMOUNT AS UNDISCLOSED INCOME. ACCO RDING TO THE LD. COUNSEL, THE LIABILITY SHALL BE DEFINITE AND PR ECISE. THE LD.COUNSEL FURTHER SUBMITTED THAT THE MONEY WAS REC EIVED FOR SHARE APPLICATION FROM SHRI M. KIRAN KUMAR, WHO IS NONE O THER THAN THE MANAGING DIRECTOR OF THE ASSESSEE-COMPANY. THEREFO RE, ACCORDING TO THE LD. COUNSEL, THE IDENTIFICATION OF THE CREDI TOR IS EXPLAINED AND PROVED THAT THE MONEY WAS FLOWN FROM THE ACCOUNT OF SHRI M. KIRAN KUMAR TO THE ASSESSEE-COMPANY. ACCORDING TO THE LD . COUNSEL, IT IS NOT THE CASE OF THE REVENUE THAT SHRI M. KIRAN KUMA R HAS NO SOURCE FOR MAKING INVESTMENT IN THE ASSESSEE-COMPAN Y. THEREFORE, THE CAPACITY OF SHRI M. KIRAN KUMAR IS ALSO ESTABLI SHED BEFORE THE AUTHORITIES BELOW. ACCORDING TO THE LD. COUNSEL, T HE TRANSACTION WAS ADMITTEDLY MADE BETWEEN SHRI M. KIRAN KUMAR AND THE ASSESSEE- COMPANY AND AVAILABLE FUND IN THE ACCOUNTS OF SHRI M. KIRAN KUMAR WAS TRANSFERRED TO THE ASSESSEE-COMPANY THROUGH BAN KING CHANNEL. THEREFORE, THE GENUINENESS OF TRANSACTION IS ALSO E STABLISHED. HENCE, ACCORDING TO THE LD. COUNSEL, THERE IS NO RE ASON TO DOUBT THE TRANSACTION BETWEEN THE ASSESSEE-COMPANY AND SHRI M . KIRAN 4 I.T.A. NOS.663 TO 665/CHNY/19 KUMAR. HENCE, ACCORDING TO THE LD. COUNSEL, THE AD DITION MADE BY THE ASSESSING OFFICER UNDER SECTION 68 OF THE ACT I N RESPECT OF SHRI M. KIRAN KUMAR IS NOT JUSTIFIED. 3. COMING TO THE ADDITION MADE UNDER SECTION 56(2)( VIIB) OF THE ACT, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT SECTION 56(2)(VIIB) PROVIDES FOR ASSESSMENT OF THE AMOUNT O F SHARES WHICH EXCEEDED FAIR MARKET VALUE OF SHARES. EXPLANATION TO SECTION 56(2)(VIIB) OF THE ACT EXPLAINS THE FAIR MARKET VAL UE OF THE SHARES. ACCORDING TO THE LD. COUNSEL, THE FAIR MARKET VALUE OF THE SHARES IS NOTHING BUT THE VALUE DETERMINED AS PER RULE 11UA O F THE INCOME- TAX RULES, 1962 OR THE VALUATION PROVIDED BY THE CO MPANY ON THE BASIS OF ITS ASSETS INCLUDING GOODWILL, KNOWHOW, PA TENTS, COPYRIGHTS, TRADEMARKS, LICENCES, FRANCHISES, ETC. WHICHEVER IS HIGHER. ACCORDING TO THE LD. COUNSEL, THE ASSESSING OFFICER IN THIS CASE FOUND THAT SHARE PREMIUM IS MUCH HIGHER THAN THE VA LUE ESTIMATED UNDER RULE 11UA. THE ASSESSING OFFICER FAILED TO C ONSIDER EXPLANATION (A)(II) TO SECTION 56(2)(VIIB) OF THE A CT. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE VALUE OF THE SHAR E PREMIUM DETERMINED BY THE ASSESSEE-COMPANY IN ALLOTMENT OF SHARES TO M/S KOTHARI CREDIT INDIA PVT. LTD. AT 1590 PER SHARE IS NOT EXCESSIVE. 5 I.T.A. NOS.663 TO 665/CHNY/19 THE FACE VALUE OF SHARE IS 10/-. THEREFORE, INCLUDING THE PRICE OF 1590/-, THE SHARES WERE ALLOTTED AT 1600/- TO M/S KOTHARI CREDIT INDIA PVT. LTD. HENCE, ACCORDING TO THE LD. COUNSE L, THE SHARE PREMIUM CANNOT BE CONSIDERED TO EXCEED FAIR MARKET VALUE OF THE SHARES. 4. THE LD.COUNSEL FOR THE ASSESSEE FURTHER SUBMITTE D THAT THE ASSESSING OFFICER AS WELL AS THE CIT(APPEALS) ON TH E BASIS OF THE STATEMENT RECORDED FROM SHRI MAHENDRA SETHIA OF KOL KATA, THE FOUND THAT THE MONEY RECEIVED IN THE GUISE OF SHARE PREMIUM IS NOTHING BUT AN ACCOMMODATION ENTRY AND IT IS NOT FO R SHARE PREMIUM. ACCORDING TO THE LD. COUNSEL, THE STATEME NT RECORDED UNDER SECTION 131 OF THE ACT IS NOT AN ADMISSIBLE P IECE OF EVIDENCE UNDER THE INCOME-TAX ACT. THE ASSESSING OFFICER OR THE AUTHORITIES UNDER THE ACT ARE NOT OBLIGED TO ADMINISTER OATH TO THE DEPONENT. THEREFORE, ACCORDING TO THE LD. COUNSEL, SUCH A STA TEMENT ALONE CANNOT BE BASIS FOR MAKING ANY ADDITION. ACCORDING TO THE LD. COUNSEL, SHRI MAHENDRA SETHIA FROM WHOM THE STATEME NT WAS SAID TO BE RECORDED UNDER SECTION 131 OF THE ACT WAS NOT CONNECTED WITH M/S KOTHARI CREDIT INDIA PVT. LTD., THEREFORE, THE STATEMENT OF SHRI MAHENDRA SETHIA IS IRRELEVANT FOR DETERMINING THE I SSUE UNDER 6 I.T.A. NOS.663 TO 665/CHNY/19 CONSIDERATION. MOREOVER, A COPY OF THE STATEMENT O F SHRI MAHENDRA SETHIA WAS NOT FURNISHED TO THE ASSESSEE. ACCORDIN G TO THE LD. COUNSEL, SHRI MAHENDRA SETHIA HAS NOT STATED ANYTHI NG THAT THE MONEY BELONGS TO THE ASSESSEE-COMPANY WAS ROUTED TH ROUGH HIM. ONLY ON PRESUMPTION, ACCORDING TO THE LD. COUNSEL, THE ASSESSING OFFICER FOUND THAT M/S KOTHARI CREDIT INDIA PVT. LT D. PROVIDED ACCOMMODATION ENTRY. THERE IS NO DEFINITE EVIDENCE AVAILABLE BEFORE THE ASSESSING OFFICER THAT THE ASSESSEE-COMP ANY RECEIVED BACK THE FUNDS SAID TO BE INVESTED BY M/S KOTHARI C REDIT INDIA PVT. LTD. MERELY BECAUSE SHRI MAHENDRA SETHIA WHO IS NO T CONNECTED IN ANY WAY WITH M/S KOTHARI CREDIT INDIA PVT. LTD. MAD E THE STATEMENT THAT HE IS PROVIDING ACCOMMODATION ENTRY, ACCORDING TO THE LD. COUNSEL, IT DOES NOT MEAN THAT M/S KOTHARI CREDIT I NDIA PVT. LTD. IS PROVIDING ACCOMMODATION ENTRY. HE IS NOT THE AUTHO RIZED REPRESENTATIVE OF M/S KOTHARI CREDIT INDIA PVT. LTD . THEREFORE, ACCORDING TO THE LD. COUNSEL, THE STATEMENT MADE BY SHRI MAHENDRA SETHIA CANNOT BE A BASIS FOR MAKING ANY ADDITION IN THE HANDS OF THE ASSESSEE. THE ASSESSING OFFICER, ACCORDING TO THE LD. COUNSEL, CONVENIENTLY IGNORED THE STATEMENT OF SHRI MAHENDRA SETHIA THAT M/S KOTHARI CREDIT INDIA PVT. LTD. HAD SUFFICIENT B ALANCE IN THEIR ACCOUNTS AND THE SAID BALANCE WAS BROUGHT INTO THE COMPANY BY 7 I.T.A. NOS.663 TO 665/CHNY/19 SEVERAL LAYERS OF PURCHASE AND SALE. THE STATEMENT OF SHRI MAHENDRA SETHIA ABOUT THE AVAILABILITY OF FUND IN T HE ACCOUNTS OF M/S M/S KOTHARI CREDIT INDIA PVT. LTD. WAS NOT CONS IDERED BY BOTH THE AUTHORITIES BELOW. ACCORDING TO THE LD. COUNSE L, OTHER THAN THE STATEMENT OF SHRI MAHENDRA SETHIA, NO OTHER MATERIA L IS AVAILABLE ON RECORD TO SUGGEST THAT THE TRANSACTION IS AN ACCOMM ODATION ENTRY OR BOGUS. THERE IS NO MATERIAL AVAILABLE ON RECORD TO SUGGEST THAT THE ASSESSEE HAS RECEIVED BACK THE MONEY PAID BY M/S KO THARI CREDIT INDIA PVT. LTD. ACCORDING TO THE LD. COUNSEL, THER E IS NO EVIDENCE TO SHOW THAT SHRI MAHENDRA SETHIA SIGNED THE SHARE TRA NSFER APPLICATION AND HANDED OVER TO THE ASSESSEE. IT IS NOBODYS CASE THAT THE SHARES ALLOTTED TO M/S KOTHARI CREDIT INDI A PVT. LTD. WERE TRANSFERRED TO ASSESSEE-COMPANY AT ANY POINT OF TIM E. IN THE ABSENCE OF ANY MATERIAL EVIDENCE, ACCORDING TO THE LD. COUNSEL, THE ASSESSING OFFICER IS NOT JUSTIFIED IN TREATING THE TRANSACTION OF INVESTMENT IN THE EQUITY SHARES OF THE ASSESSEE-COM PANY BY M/S KOTHARI CREDIT INDIA PVT. LTD. AS ACCOMMODATION ENT RY. 5. REFERRING TO THE JUDGMENT OF MADRAS HIGH COURT I N THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2007-08, TH E LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT AN IDENTICAL SHARE PREMIUM AMOUNT 8 I.T.A. NOS.663 TO 665/CHNY/19 WAS RECEIVED BY THE ASSESSEE. INITIALLY THE ASSESS ING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE BY MAKING SIMI LAR OBSERVATION AS IT IS MADE IN THE IMPUGNED ORDERS. THE CIT(APPE ALS), HOWEVER, REVERSED THE SAME AND ALLOWED THE CLAIM OF THE ASSE SSEE. ON FURTHER APPEAL BY THE REVENUE, THIS TRIBUNAL FOUND THAT IT IS ONLY ACCOMMODATION ENTRY. HOWEVER, ON APPEAL FILED BY T HE ASSESSEE BEFORE THE HIGH COURT, THE HIGH COURT REVERSED THE ORDER OF THIS TRIBUNAL AND FOUND THAT SO LONG AS THE PROOF AND ID ENTITY OF THE INVESTOR AND THE PAYMENT RECEIVED FROM HIM IS THROU GH DOUBTLESS CHANNEL LIKE THAT OF BANKING CHANNEL, THE RECEIPT I N THE HANDS OF THE ASSESSEE TOWARDS SHARE CAPITAL OR SHARE PREMIUM DOE S NOT CHANGE ITS COLOUR. THE HIGH COURT FURTHER HELD THAT THE M ONEY SO INVESTED IN THE ASSESSEE-COMPANY WOULD STILL BE THE MONEY AV AILABLE AND BELONGING TO THE INVESTORS. THE HIGH COURT FURTHER OBSERVED THAT THE CONSISTENT PRINCIPLE FOLLOWED IS THAT THE INVESTORS SOURCES AND CREDITWORTHINESS CANNOT BE EXPLAINED BY THE ASSESSE E. IN VIEW OF THIS JUDGMENT OF MADRAS HIGH COURT IN THE ASSESSEE' S OWN CASE FOR ASSESSMENT YEAR 2007-08, ACCORDING TO THE LD. COUNS EL, THE ASSESSING OFFICER IS NOT JUSTIFIED IN TREATING THE SHARE PREMIUM AS RECEIVED BY THE ASSESSEE AS ACCOMMODATION ENTRY OR BOGUS. ACCORDING TO THE LD. COUNSEL, IN THE ABSENCE OF ANY MATERIAL 9 I.T.A. NOS.663 TO 665/CHNY/19 EVIDENCE TO SUGGEST THAT EITHER THE ASSESSEE HAS RE TURNED THE MONEY TO M/S KOTHARI CREDIT INDIA PVT. LTD. OR M/S KOTHARI CREDIT INDIA PVT. LTD. HAS RECEIVED THE MONEY FROM ASSESSE E, THERE CANNOT BE ANY ADDITION UNDER SECTION 68 OF THE ACT. ADMIT TEDLY, ACCORDING TO THE LD. COUNSEL, THERE IS NO MATERIAL AVAILABLE ON RECORD TO SUGGEST THAT THE MONEY INVESTED BY M/S KOTHARI CRED IT INDIA PVT. LTD. IN THE SHARE PREMIUM WAS RETURNED TO THEM BY T HE ASSESSEE- COMPANY. EVEN IN THE STATEMENT SAID TO BE RECORDED BY THE REVENUE FROM SHRI MAHENDRA SETHIA, ACCORDING TO THE LD. COUNSEL, THERE IS NO SUCH ALLEGATION IS MADE, THEREFORE, THE RE IS NO FOUNDATION FOR MAKING ANY ADDITION UNDER SECTION 68 OF THE ACT . 6. REFERRING TO THE ALTERNATIVE CLAIM OF THE REVENU E THAT SHARES WERE NOT VALUED IN THE FAIR MARKET VALUE, THE LD. C OUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING AUTHORITY HAS FAILED TO CONSIDER THE SECOND LIMB OF SECTION 56(2)(VIIB) OF THE ACT. CONSIDERING THE INTANGIBLE ASSETS LIKE GOODWILL, KN OWHOW, PATENTS, COPYRIGHTS, TRADEMARKS, LICENCES, FRANCHISES, ETC. HELD BY THE ASSESSEE, ACCORDING TO THE LD. COUNSEL, THE FAIR MA RKET VALUE OF THE SHARES WERE ESTIMATED / DETERMINED, THEREFORE, NO A DDITION IS CALLED FOR EVEN UNDER SECTION 56(2)(VIIB) OF THE ACT. 10 I.T.A. NOS.663 TO 665/CHNY/19 7. ON THE CONTRARY, SHRI S. BHARATH, THE LD. DEPART MENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSEE CLAIMED BEFORE THE ASSESSING OFFICER THAT IT HAS RECEIVED INVESTMENTS IN THE FORM OF SHARE CAPITAL FROM ITS MANAGING DIRECTOR SHRI M. KI RAN KUMAR AND M/S KOTHARI CREDIT INDIA PVT. LTD. ACCORDING TO TH E LD. D.R., THE ASSESSING OFFICER FOUND THAT IN THE CASE OF SHRI M. KIRAN KUMAR, THE MANAGING DIRECTOR OF THE ASSESSEE-COMPANY, THE SHAR ES WERE NOT VALUED PROPERLY AS PER RULE 11UA OF THE INCOME-TAX RULES, 1962. THEREFORE, ACCORDING TO THE LD. D.R., THE ASSESSIN G OFFICER MADE ADDITION WITH REGARD TO SHARE PREMIUM WHICH EXCEEDE D THE FAIR MARKET VALUE OF THE SHARES. IN THE CASE OF M/S KOT HARI CREDIT INDIA PVT. LTD., ACCORDING TO THE LD. D.R., THE ASSESSING OFFICER FOUND THAT M/S KOTHARI CREDIT INDIA PVT. LTD. PROVIDED ACCOMMO DATION ENTRY TO VARIOUS COMPANIES AND THE ASSESSEE-COMPANY IS ALSO ONE OF THE COMPANIES WHICH RECEIVED ACCOMMODATION ENTRY. ACCO RDING TO THE LD. D.R., THE ASSESSING OFFICER PLACED HIS RELIANCE ON THE STATEMENT RECORDED FROM SHRI MAHENDRA SETHIA UNDER SECTION 13 1 OF THE ACT. SHRI MAHENDRA SETHIA HAS CLEARLY STATED THAT ACCOMM ODATION ENTRY WAS GIVEN TO THE ASSESSEE-COMPANY. ACCORDING TO TH E LD. D.R., SHRI MAHENDRA SETHIA EXPLAINED THAT THEY SIGNED THE SHARE TRANSFER 11 I.T.A. NOS.663 TO 665/CHNY/19 DOCUMENTS WITHOUT FILLING UP THE TRANSFEREE NAME. IN VIEW OF THE STATEMENT OF SHRI MAHENDRA SETHIA, ACCORDING TO THE LD. D.R., IT IS OBVIOUS THAT THE ASSESSEE-COMPANY RECEIVED ONLY ACC OMMODATION ENTRY. THEREFORE, ACCORDING TO THE LD. D.R., THE E NTIRE TRANSACTION WAS BOGUS. HENCE, ACCORDING TO THE LD. D.R., THE A SSESSING OFFICER FOUND THAT IT IS AN UNEXPLAINED CREDIT IN THE ACCOU NTS OF THE ASSESSEE-COMPANY, THEREFORE, THE ADDITION WAS MADE UNDER SECTION 68 OF THE ACT. 8. THE LD. D.R. FURTHER SUBMITTED THAT ALTERNATIVEL Y, THE ASSESSING OFFICER FOUND THAT THE ENTIRE SHARE PREMI UM RECEIVED BY THE ASSESSEE-COMPANY AT 1590 PER SHARE IN ADDITION TO THE FACE VALUE OF 10/- PER SHARE IS HIGHLY EXCESSIVE AND THE VALUE OF SHARES WAS NOT PROPERLY VALUED UNDER RULE 11UA. EVEN THOU GH THE ASSESSING OFFICER REFERRED SECTION 56(2)(VIIB) OF T HE ACT AND RULE 11UA OF INCOME-TAX RULES, 1962, ACCORDING TO THE LD . D.R., SINCE THE ADDITION WAS MADE UNDER SECTION 68 OF THE ACT, THE ASSESSING OFFICER OBSERVED IN THE ASSESSMENT ORDER THAT NO AD DITION WAS MADE UNDER SECTION 56(2)(VIIB) OF THE ACT. THEREFO RE, ACCORDING TO THE LD. D.R., IT IS NOT A CONTRADICTORY STATEMENT A S CLAIMED BY THE LD.COUNSEL FOR THE ASSESSEE. THE ASSESSING OFFICER CATEGORICALLY 12 I.T.A. NOS.663 TO 665/CHNY/19 FOUND THAT WHAT WAS RECEIVED BY THE ASSESSEE IS ONL Y ACCOMMODATION ENTRY. THEREFORE, IT IS UNEXPLAINED CREDIT, HENCE, ACCORDING TO THE LD. D.R., ADDITION WAS MADE UNDER SECTION 68 OF THE ACT. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE CLAIMS SHARE APPLICATION MONEY / SHARE PREMIUM FROM ITS MANAGING DIRECTOR SHRI M. KIRAN KU MAR AND ONE COMPANY AT KOLKATA M/S KOTHARI CREDIT INDIA PVT. LT D. AS RIGHTLY SUBMITTED BY THE LD.COUNSEL FOR THE ASSESSEE AND TH E LD. D.R., THE ADDITION WAS MADE BASED UPON THE STATEMENT RECORDED BY THE INVESTIGATION WING OF THE DEPARTMENT FROM SHRI MAHE NDRA SETHIA UNDER SECTION 131 OF THE ACT. OTHER THAN THE STATE MENT OF SHRI MAHENDRA SETHIA, NO OTHER MATERIAL EVIDENCE IS REFE RRED EITHER IN THE ASSESSMENT ORDER OR IN THE APPELLATE ORDER BY T HE CIT(APPEALS). THEREFORE, IT IS OBVIOUS THAT ONLY MATERIAL AVAILAB LE ON RECORD IS THE STATEMENT SAID TO BE RECORDED FROM SHRI MAHENDRA SE THIA UNDER SECTION 131 OF THE ACT. THE QUESTION ARISES FOR CO NSIDERATION IS WHETHER THE STATEMENT RECORDED UNDER SECTION 131 OF THE ACT CAN BE A BASIS FOR MAKING ANY ADDITION UNDER THE INCOME -TAX ACT? THIS 13 I.T.A. NOS.663 TO 665/CHNY/19 TRIBUNAL IS OF THE CONSIDERED OPINION THAT UNDER SE CTION 131 OF THE ACT, THE AUTHORITIES ARE NOT EMPOWERED TO ADMINISTE R OATH TO THE DEPONENT. THEREFORE, SUCH A STATEMENT RECORDED UND ER SECTION 131 OF THE ACT HAS NO EVIDENTIARY VALUE. THEREFORE, TH E SO CALLED STATEMENT SAID TO BE RECORDED FROM SHRI MAHENDRA SE THIA NEEDS TO BE EXCLUDED FROM CONSIDERATION. IF WE EXCLUDE THE S TATEMENT RECORDED UNDER SECTION 131 OF THE ACT, THERE IS NO MATERIAL AVAILABLE ON RECORD FOR MAKING ANY ADDITION EITHER UNDER SECT ION 68 OR SECTION 56(2)(VIIB) OF THE ACT. THEREFORE, THE AD DITION MADE BY THE ASSESSING OFFICER CANNOT BE SUSTAINED. 10. WE HAVE CAREFULLY GONE THROUGH THE STATEMENT SA ID TO BE RECORDED FROM SHRI MAHENDRA SETHIA. THE ASSESSEE C LAIMS THAT A COPY OF STATEMENT WAS NOT FURNISHED TO THEM. HOWEV ER, THE ASSESSING OFFICER HAS EXTRACTED THE STATEMENT IN HI S ORDER. EVEN THOUGH SHRI MAHENDRA SETHIA CLAIMS THAT ACCOMMODATI ON ENTRY WAS GIVEN TO THE ASSESSEE-COMPANY, IT IS NOT HIS CLAIM THAT HE RECEIVED MONEY FROM THE ASSESSEE-COMPANY. IN RESPONSE TO QU ESTION NO.19, SHRI MAHENDRA SETHIA CLARIFIED THAT IT IS PO SSIBLE THAT CASH WOULD HAVE BEEN RECEIVED BY ANY OF THE GROUP COMPAN IES AND HE 14 I.T.A. NOS.663 TO 665/CHNY/19 DID NOT REMEMBER CLEARLY. FOR THE PURPOSE OF CONVE NIENCE, WE ARE REPRODUCING QUESTION NO.19 AND ITS ANSWER AS FOLLOW S: QN. NO.19: DID YOU RECEIVE CASH FROM EITHER M/S LALI THAA JEWELLERY MART PVT. LTD. OR ITS PROMOTER WHICH WAS FINALLY ROUTED BACK TO THE COMPANY AS SHARE CAPITAL AND PRE MIUM? ANS: IT IS POSSIBLE THAT CASH WOULD HAVE BEEN RECEIVED BY ANY OF THE GROUP COMPANIES. I DO NOT R EMEMBER CLEARLY. 11. FROM THE ABOVE QUESTION AND ANSWER, THE ASSESSI NG OFFICER PRESUMED THAT THE ASSESSEE-COMPANY PAID TO M/S KOTH ARI CREDIT INDIA PVT. LTD. FROM THE ABOVE QUESTION AND ANSWER , IT IS OBVIOUS THAT IT IS NOT A CATEGORICAL STATEMENT OF SHRI MAHE NDRA SETHIA THAT M/S KOTHARI CREDIT INDIA PVT. LTD. RECEIVED MONEY F ROM THE ASSESSEE. IT IS ONLY A PRESUMPTION. IN OTHER WORD S, SHRI MAHENDRA SETHIA PRESUMED THAT ONE OF THE GROUP COMPANIES WOU LD HAVE RECEIVED BUT HE IS NOT ABLE TO RECOLLECT. THE STAT EMENT OF SHRI MAHENDRA SETHIA IS VERY VAGUE AND THERE IS NO BASIS . THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THIS VAGUE STATEM ENT OF SHRI MAHENDRA SETHIA CANNOT BE A BASIS FOR MAKING ANY AD DITION UNDER SECTION 68 OF THE ACT. IN RESPONSE TO QUESTION NO. 21, SHRI MAHENDRA SETHIA CLARIFIED THAT THE ORIGINAL AMOUNT WOULD HAVE BEEN RECEIVED BY CASH BY ANY ONE OF THE LAYERS OF THE GR OUP. HE ALSO 15 I.T.A. NOS.663 TO 665/CHNY/19 CLARIFIED THAT THE AMOUNT OF SHARE PREMIUM RECEIVED BY THE ASSESSEE-COMPANY WAS BROUGHT INTO THE COMPANY BY SE VERAL LAYERS OF PURCHASES AND SALES. FOR THE PURPOSE OF CONVENI ENCE, WE ARE REPRODUCING QUESTION NO.21 AND ANSWER AS FOLLOWS:- QN. NO.21: THE AMOUNT OF 38 CRORES TRANSFERRED BY M/S KOTHARI CREDIT (INDIA) LIMITED DID NOT BELONG TO TH E COMPANY. PLEASE CONFIRM OR DENY THIS. IF YOU CONF IRM HOW YOU DID GET THE BANK BALANCE OF 38 CRORES IN A COMPANY THAT WAS NOT DOING WELL EITHER BEFORE THIS EVENT OR AFTER THIS EVENT? ANS.: THIS AMOUNT OF 38 CRORES OF BANK BALANCE WAS BROUGHT INTO THE COMPANY BY SEVERAL LAYERS OF PURCH ASES AND SALES. BUT THE ORIGINAL AMOUNT WOULD BE CASH RECEIP TS BY ANY ONE OF THE LAYERS OF THE GROUP. BUT THE TRACE OF TH IS CASH RECEIPTS ARE NOT LEFT IN THE BOOKS OF ANY OF THE CO MPANY. 12. IT IS OBVIOUS FROM THIS ANSWER TO QUESTION NO.2 1 THAT BY WAY OF VARIOUS LAYERS OF PURCHASES AND SALES, THE MONEY WAS BROUGHT INTO THE BOOKS OF M/S KOTHARI CREDIT INDIA PVT. LTD . HE ALSO PRESUMED THAT THE MONEY MIGHT HAVE BEEN ORIGINALLY RECEIVED BY CASH BY ANY ONE OF THE LAYERS. BUT, NO CONCRETE ST ATEMENT WAS MADE THAT MONEY WAS RECEIVED FROM THE ASSESSEE-COMP ANY AT ANY STAGE. MOREOVER, NO MATERIAL IS AVAILABLE ON RECOR D TO SUGGEST THAT EITHER THE ASSESSEE-COMPANY PAID MONEY TO M/S KOTHA RI CREDIT INDIA PVT. LTD. OR TO SHRI MAHENDRA SETHIA, WHICH W AS INVESTED IN 16 I.T.A. NOS.663 TO 665/CHNY/19 THE FORM OF SHARE PREMIUM IN THE ASSESSEE-COMPANY. IN THE ABSENCE OF ANY MATERIAL EVIDENCE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THERE CANNOT BE ANY ADDITION ON PRESUM PTION AND ASSUMPTION UNDER SECTION 68 OF THE ACT. MOREOVER, AS RIGHTLY SUBMITTED BY THE LD.COUNSEL FOR THE ASSESSEE, THE A SSESSING OFFICER MADE ADDITION UNDER SECTION 56(2)(VIIB) OF THE ACT IN RESPECT OF THE SO-CALLED EXCESS AMOUNT. IN OTHER WORDS, THE ASSES SING OFFICER HAS ADMITTEDLY TREATED THE TRANSACTION AS GENUINE AND A LSO ADMITTED THE CAPACITY OF THE PERSON FOR MAKING INVESTMENT IN THE SHARES OF THE ASSESSEE-COMPANY. THEREFORE, THE ADDITION MADE UND ER SECTION 68 OF THE ACT CANNOT STAND IN THE EYE OF LAW. 13. MOREOVER, THE MADRAS HIGH COURT IN THE ASSESSEE 'S OWN CASE FOR ASSESSMENT YEAR 2007-08, CONSIDERED AN IDE NTICAL ISSUE AND OBSERVED AS FOLLOWS AT PARA 42:- 42. ON THE OTHER HAND, THE LEGAL PRINCIPLE ENUNCIATED BY THE SUPREME COURT, AS NOTICED SUPRA BY US, IS THAT SO L ONG AS THE PROOF AND IDENTITY OF THE INVESTOR AND THE PAYMENT RECEIVED FROM HIM IS THROUGH A DOUBTLESS CHANNEL LIKE THAT O F A BANKING CHANNEL, THE RECEIPT IN THE HANDS OF THE AS SESSEE TOWARDS SHARE CAPITAL OR SHARE PREMIUM DOES NOT CHA NGE ITS COLOUR. THE MONEY SO INVESTED IN THE ASSESSEE-COMPA NY WOULD STILL BE THE MONEY AVAILABLE AND BELONGING TO THE INVESTORS. THE CONSISTENT PRINCIPLE FOLLOWED IS THA T THE INVESTORS' SOURCES AND CREDITWORTHINESS CANNOT BE E XPLAINED BY THE ASSESSEE. IF THE DEPARTMENT HAS A DOUBT ABOU T THE 17 I.T.A. NOS.663 TO 665/CHNY/19 GENUINENESS OF THE INVESTORS CAPACITY, IT IS OPEN T O IT TO PROCEED AGAINST THOSE INVESTORS. WITHOUT TAKING SUC H A COURSE OF ACTION, THE ASSESSING OFFICER AND THE TRI BUNAL ARE PROCEEDING ON CONJECTURES THAT THE ASSESSEE HAS, IN FACT, PLOUGHED BACK THE MONEY. THE VERY APPROACH OF THE ASSESSING OFFICER AND THE TRIBUNAL ARE COMPLETELY O PPOSED TO SETTLED LEGAL PRINCIPLES ENUNCIATED AND THEY HAV E ARRIVED AT CONCLUSIONS CONTRARY TO THE LEGAL PRINCIPLES ON THE SUBJECT. FURTHER, THEY ARE FINDING FAULT WITH THE A SSESSEE FOR THE ALLEGED FAILURE OF ITS INVESTORS IN PROVING BEYOND DOUBT THAT THEY HAVE THE CAPACITY TO INVEST AT THE MOMENT THEY DID IN THE ASSESSEE-COMPANY. THAT IS CLEARLY A PERVERSE VIEW, AS THE ASSESSING OFFICER IS NOT EXPECTED TO PE RFORM A NEAR IMPOSSIBILITY. THE ASSESSEE CANNOT CALL UPON I TS INVESTORS TO DISCLOSE ALL SUCH BUSINESS TRANSACTION S THEY CARRIED ON IN THE IMMEDIATE PAST AND AS TO HOW MUCH THEY MADE FROM THEIR RESPECTIVE BUSINESS ENTERPRISES. TH E ASSESSEE CANNOT ALSO CALL UPON ITS INVESTORS TO PRO VE THEIR GOOD BUSINESS SENSE IN INVESTING IN THE ASSESSEE-CO MPANY, AS SUCH INVESTORS CANNOT GAIN ANY CONTROLLING STAKE. 14. IN VIEW OF THE ABOVE OBSERVATION OF THE MADRAS HIGH COURT IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2007-08 , THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSE SSING OFFICER AS WELL AS THE CIT(APPEALS) CANNOT IGNORE THE FINDING OF THE HIGH COURT FOR ASSESSMENT YEAR 2007-08. THE SIMILAR / IDENTIC AL FINDINGS RECORDED BY THE ASSESSING OFFICER AS WELL AS THE CI T(APPEALS) FOR THE ASSESSMENT YEAR UNDER CONSIDERATION IN THIS CAS E WAS ALSO RECORDED BY THIS TRIBUNAL FOR ASSESSMENT YEAR 2007- 08. HOWEVER, THE HIGH COURT FOUND SUCH A FINDING WAS PERVERSE. THE HIGH COURT 18 I.T.A. NOS.663 TO 665/CHNY/19 FURTHER FOUND THAT THE ASSESSEE CANNOT CALL UPON IT S INVESTORS TO DISCLOSE ALL SUCH BUSINESS TRANSACTIONS THEY CARRIE D ON IN THE IMMEDIATE PAST AND HOW MUCH THEY MADE FROM THEIR RE SPECTIVE BUSINESS ENTERPRISES. IN VIEW OF THE ABOVE FINDING OF THE MADRAS HIGH COURT, THIS TRIBUNAL IS UNABLE TO UPHOLD THE O RDERS OF BOTH THE AUTHORITIES BELOW. 15. NOW COMING TO VALUATION OF SHARES, AS RIGHTLY S UBMITTED BY THE LD.COUNSEL FOR THE ASSESSEE, THERE ARE TWO LIMB S IN SECTION 56(2)(VIIB) OF THE ACT. AS PER EXPLANATION TO SECT ION 56(2)(VIIB) OF THE ACT, THE FIRST LIMB IS VALUATION TO BE MADE AS PER THE PRESCRIBED METHOD. IN FACT, THE METHOD FOR VALUATION OF SHARE S IS PRESCRIBED UNDER RULE 11UA OF THE INCOME-TAX RULES, 1962. THE SECOND LIMB IS THE VALUATION OF THE COMPANY BASED ON VALUE ON T HE DATE OF ISSUE INCLUDING ITS ASSETS. ASSETS INCLUDE INTANGIBLE AS SETS SUCH AS GOODWILL, KNOWHOW, PATENTS, COPYRIGHTS, TRADEMARKS, LICENCES, FRANCHISES, ETC. THE ASSESSING OFFICER HAS NOT TAK EN INTO CONSIDERATION THE SECOND LIMB IN EXPLANATION TO SEC TION 56(2)(VIIB) OF THE ACT. THE SECOND LIMB PROVIDES THAT WHEN VAL UATION WAS MADE BY THE COMPANY, IF THE ASSESSING OFFICER IS NOT SAT ISFIED ABOUT THE VALUATION, HE HAS TO CALL FOR MATERIAL FROM THE ASS ESSEE HOW THE 19 I.T.A. NOS.663 TO 665/CHNY/19 VALUATION WAS MADE BY THE ASSESSEE-COMPANY. SATISF ACTION OF THE ASSESSING OFFICER AS REFERRED IN EXPLANATION TO SEC TION 56(2)(VIIB) OF THE ACT WOULD BE JUDICIAL SATISFACTION OF THE ASSES SING OFFICER. JUDICIAL SATISFACTION MEANS THE ASSESSING OFFICER H AS TO TAKE INTO CONSIDERATION THE WELL ESTABLISHED METHOD OF VALUAT ION OF SHARES INCLUDING THE ASSETS AS EXPLAINED IN EXPLANATION 2 TO SECTION 56(2)(VIIB) OF THE ACT. IT CANNOT BE ARBITRARY. T HE ASSESSING OFFICER HAS TO TAKE NOTE OF THE JUDICIAL AND ESTABLISHED PR INCIPLES IN ARRIVING AT HIS SATISFACTION. IN THIS CASE, THE ASSESSING O FFICER HAS NOT FOUND ANY SPECIFIC FAULT IN REJECTING OR NOT SATISFYING W ITH THE VALUATION MADE BY THE ASSESSEE. WHEN THE ASSESSING OFFICER H AS NOT FOUND ANY DEFECT OR ERROR IN THE VALUATION OF SHARES BY T HE ASSESSEE- COMPANY, IT MAY NOT BE NECESSARY TO APPLY THE METHO D OF VALUATION PRESCRIBED UNDER RULE 11UA OF THE I.T.RULES. THERE FORE, THIS TRIBUNAL IS UNABLE TO UPHOLD THE VALUATION MADE BY THE ASSESSING OFFICER UNDER RULE 11UA OF THE INCOME-TAX RULES, 19 62. 16. IN VIEW OF THE ABOVE DISCUSSION, ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE ADDITION MADE BOTH UNDE R SECTION 68 OF THE ACT AND UNDER SECTION 56(2)(VIIB) OF THE ACT IS DELETED. 20 I.T.A. NOS.663 TO 665/CHNY/19 17. FOR THE ASSESSMENT YEAR 2013-14, THE ASSESSEE H AS ALSO RAISED ONE MORE GROUND OF DISALLOWANCE UNDER SECTIO N 40A(2)(B) OF THE ACT TO THE EXTENT OF 12,79,314/-. 18. SHRI K. MAHENDRAN, THE LD.COUNSEL FOR THE ASSES SEE, SUBMITTED THAT THE ASSESSEE-COMPANY PAID LEASE RENT OF 16,85,400/- TO ITS MANAGING DIRECTOR SHRI M. KIRAN KUMAR IN RESPECT OF THE PROPERTY AT 122, USMAN ROAD, T. NAGA R, CHENNAI-17. THE AREA OF PROPERTY WAS 4023 SQ.FT. THE ASSESSEE PAID THE LEASE RENT AT THE RATE OF 418/- PER SQ.FT. ACCORDING TO THE LD. COUNSEL, THE PROPERTY IS SITUATED IN A PRIME COMMERCIAL LOCATION IN THE HEART OF CHENNAI CITY, THEREFORE, THE LEASE RENT AT THE RATE OF 418/- IS VERY REASONABLE. HENCE, ACCORDING TO THE LD. COUNSEL, I T DOES NOT CALL FOR DISALLOWANCE UNDER SECTION 40A(2)(B) OF THE ACT. 19. ON THE CONTRARY, SHRI S. BHARATH, THE LD. D.R. SUBMITTED THAT THE ASSESSING OFFICER MADE ENQUIRY THROUGH INSPECTO R. ACCORDING TO THE LD. D.R., NO DOUBT, THE PROPERTY WAS SITUATE D IN A PRIME COMMERCIAL LOCATION IN THE HEART OF CHENNAI, BUT, T HE AVERAGE LEASE RENT PAID IN THAT AREA IS ONLY 100/- PER SQ.FT. THEREFORE, ACCORDING TO THE LD. D.R., THE ASSESSING OFFICER FOUND THAT T HE ASSESSEE WAS PAYING 318/- PER SQ.FT. IN EXCESS OF FAIR MARKET VALUE. H ENCE, 21 I.T.A. NOS.663 TO 665/CHNY/19 ACCORDING TO THE LD. D.R., THE DISALLOWANCE OF 12,79,314/- WAS RIGHTLY MADE. 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER FOUND THAT THE LEASE RENT PAID BY THE ASSES SEE-COMPANY TO ITS MANAGING DIRECTOR WAS IN EXCESS OF FAIR MARKET VALUE. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE FAIR RENT HAS TO BE ESTIMATED CONSIDERING THE LOCATION OF THE BUILDING, AMENITIES PROVIDED AND PREVAILING MARKET VALUE OF THE LAND IN THE LOCALITY. MOREOVER, THE ASSESSING OFFICER SHALL ALSO TAKE INT O CONSIDERATION THE PROCEDURE PRESCRIBED UNDER TAMIL NADU BUILDINGS (LEASE AND RENT CONTROL) ACT, 1960 AND CITY MUNICIPAL CORPORAT ION ACT. SINCE SUCH AN EXERCISE WAS NOT DONE, THE ASSESSING OFFICE R SHALL RECONSIDER THE MATTER AFRESH. ACCORDINGLY, THE ORD ERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE DISALLOWANC E MADE UNDER SECTION 40A(2)(B) OF THE ACT IS REMITTED BACK TO TH E FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE- EXAMINE THE MATTER AND THEREAFTER DECIDE THE ISSUE AFRESH IN AC CORDANCE WITH LAW, AFTER GIVING A REASONABLE OPPORTUNITY TO THE A SSESSEE. 22 I.T.A. NOS.663 TO 665/CHNY/19 21. FOR THE ASSESSMENT YEAR 2014-15, THE ASSESSEE H AS RAISED TWO MORE GROUNDS WITH REGARD TO DISALLOWANCE MADE B Y THE ASSESSING OFFICER UNDER SECTION 36(1)(III) AND 36(1 )(VA) OF THE ACT. 22. SHRI K. MAHENDRAN, THE LD.COUNSEL FOR THE ASSES SEE, SUBMITTED THAT THE ASSESSEE-COMPANY ENTERED INTO AN AGREEMENT IN TAKING LEASE OF THE PROPERTY AT 124, USMAN ROAD, T. NAGAR, CHENNAI TO THE EXTENT OF 7649 SQ.FT. ACCORDING TO THE LD. COUNSEL, THE PROPERTY WAS OWNED BY THE MANAGING DIRECTOR SHR I M. KIRAN KUMAR AND THE LEASE RENT WAS FIXED AT 1,50,000/- PER MONTH. THE ASSESSEE-COMPANY PAID REFUNDABLE ADVANCE OF 15 CRORES TO ITS MANAGING DIRECTOR. ACCORDING TO THE LD. COUNSEL, T HIS PROPERTY WAS MEANT FOR PARKING OF CUSTOMERS VEHICLES. THEREFOR E, IT IS FOR BUSINESS NECESSITY THE PROPERTY WAS TAKEN ON LEASE. HENCE, ACCORDING TO THE LD. COUNSEL, THE INTEREST PAID BY THE ASSESSEE- COMPANY FOR THE BORROWED AMOUNT CANNOT BE DISALLOWE D. 23. ON THE CONTRARY, SHRI S. BHARATH, THE LD. D.R. SUBMITTED THAT THE ASSESSEE HAS AVAILED CASH LOAN FROM VARIOUS BAN KS TO THE EXTENT OF 567 CRORES AND THE ASSESSEE CLAIMED PAYMENT OF INTEREST TO THE EXTENT OF 60 CRORES. THEREFORE, ACCORDING TO THE LD. D.R., IT IS OBVIOUS THAT THE ASSESSEE DIVERTED 15 CRORES IN THE 23 I.T.A. NOS.663 TO 665/CHNY/19 GUISE OF LEASE ADVANCE TO ITS MANAGING DIRECTOR. H ENCE, ACCORDING TO THE LD. D.R., THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE PAYMENT OF INTEREST PROPORTIONATELY TO THE EXTENT O F DIVERTED BORROWED AMOUNT. 24. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE ADMITTEDLY PAID 15 CRORES TO ITS MANAGING DIRECTOR SHRI M. KIRAN KUMAR FOR TAKING THE PROPERTY ON LEASE AT 124, USMA N ROAD, T. NAGAR, CHENNAI. THE MONTHLY LEASE RENT WAS 15,00,000/-. THE ASSESSEE ADMITTEDLY PAID LEASE ADVANCE OF 15 CRORES. AS PER TAMIL NADU BUILDINGS (LEASE AND RENT CONTROL) ACT, 1960, THE RENTAL PREMIUM SHALL BE EQUIVALENT TO 3 MONTHS MONTHLY REN T. MOREOVER, SECTION 30 OF THE SAID ACT EXEMPTS CERTAI N TYPE OF BUILDINGS AS ENUMERATED THEREIN. THEREFORE, THE AS SESSING OFFICER SHALL RECONSIDER THE MATTER IN THE LIGHT OF THE PRO VISIONS OF TAMIL NADU BUILDINGS (LEASE AND RENT CONTROL) ACT, 1960. ACCORDINGLY, THE ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET AS IDE AND THE MATTER IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFIC ER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE MATTER AND THEREAFTER DECIDE THE ISSUE 24 I.T.A. NOS.663 TO 665/CHNY/19 AFRESH IN ACCORDANCE WITH LAW, AFTER GIVING A REASO NABLE OPPORTUNITY TO THE ASSESSEE. 25. SIMILARLY, IN RESPECT OF THE PROPERTY TAKEN ON LEASE AT NO.122, USMAN ROAD, T. NAGAR, CHENNAI ALSO NEEDS TO BE RECO NSIDERED AS ABOVE. ACCORDINGLY, ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE MATTER IS REMITTED BACK TO THE FILE O F THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RECONSIDER TH E MATTER AND DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. 26. NOW COMING TO THE DISALLOWANCE MADE UNDER SECTI ON 36(1)(VA) OF THE ACT TO THE EXTENT OF 31,81,821/-. ADMITTEDLY, THERE WAS A DELAY IN THE PAYMENT OF EMPLOYEES CONTRIBUTI ON TO THE RESPECTIVE ACCOUNT. THE MADRAS HIGH COURT IN CIT V . INDUSTRIAL SECURITY AND INTELLIGENCE INDIA (P.) LTD. IN TC(A). NO.585 & 586 OF 2015 FOUND THAT IF BOTH THE EMPLOYEES AND EMPLOYER S CONTRIBUTIONS WERE PAID TO THE RESPECTIVE ACCOUNT WITHIN THE DUE DATE PROVIDED FOR FILING THE RETURN OF INCOME, IT HAS TO BE ALLOWED. THEREFORE, ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE EN TIRE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE MATTER AND BRING ON RE CORD THE ACTUAL 25 I.T.A. NOS.663 TO 665/CHNY/19 DATE OF PAYMENT MADE BY THE ASSESSEE TO THE GOVERNM ENT ACCOUNT AND THEREAFTER DECIDE THE ISSUE AFRESH AS PER THE J UDGMENT OF MADRAS HIGH COURT IN INDUSTRIAL SECURITY AND INTELL IGENCE INDIA (P.) LTD. (SUPRA). 27. IN THE RESULT, ALL THE THREE APPEALS FILED BY T HE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 14 TH JUNE, 2019 AT CHENNAI. SD/- SD/- (. !' ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESA N) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 14 TH JUNE, 2019. KRI. . ,156 76(1 /COPY TO: 1. *+ /APPELLANT 2. ,-*+ /RESPONDENT 3. 0 81 () /CIT(A)-18, CHENNAI-34 4. PRINCIPAL CIT, CENTRAL-1, CHENNAI 5. 69 ,1 /DR 6. :' ; /GF.