Appeal Details
Counselvise Citation
[2016] 133 COUNSELVISE.COM (IT) 2921 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
2 year(s) 9 month(s) 6 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
18-01-2016
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
B
Next Hearing Date
13-10-2015
Assessment Year
2009-2010
Appeal Filed On
12-04-2013
Judgement Text
] IQ.KS ] IQ.KS ] IQ.KS ] IQ.KS IQ.KS IQ.KSIQ.KS IQ.KS IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . . , , ' # BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.844/PN/2013 '% % / ASSESSMENT YEAR : 2009-10 DY.CIT, CIRCLE-1, JALGAON . / APPELLANT V/S HARI INFRASTRUCTURE PVT. LTD., 6, SHREYAS BUILDING, GANESH WADI, JALGAON, DIST : JALGAON PAN NO. AABCH5608M . / RESPONDENT . / ITA NO.848/PN/2013 '% % / ASSESSMENT YEAR : 2009-10 HARI INFRASTRUCTURE PVT. LTD., 6, SHREYAS BUILDING, GANESH WADI, JALGAON, DIST : JALGAON PAN NO. AABCH5608M . / APPELLANT V/S DY.CIT, CIRCLE-1, JALGAON . / RESPONDENT / ASSESSEE BY : SHRI RAKESH JOSHI / DEPARTMENT BY : SMT. DIVYA BAJPAI / DATE OF HEARING :26.10.2015 / DATE OF PRONOUNCEMENT:18.01.2016 2 ITA NOS.844 & 848/PN/2013 / ORDER PER R.K. PANDA, AM : THESE ARE CROSS APPEALS. THE FIRST ONE IS FILED BY THE ASSE SSEE AND THE SECOND ONE FILED BY THE REVENUE AND ARE DIRECTED AG AINST THE ORDER DATED 18-02-2013 OF THE CIT(A)-II, NASHIK RELATING TO A SSESSMENT YEAR 2009-10. FOR THE SAKE OF CONVENIENCE BOTH THE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL A S IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LEARNED ASSESSING OFFICER IN DISALLOWING THE CLAIM OF EXPENSES OF RS.1,08 ,81,171/ - U/S.14A OF THE INCOME TAX ACT, 1961, WITHOUT CONSIDERING THE FA CTS AND CIRCUMSTANCES OF THE CASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LEARNED ASSESSING OFFICER IN MAKING AN ADDITION U/S.68 OF THE INCOME T AX ACT, 1961 OF RS. 93,240/ - BY TREATING THE LABOUR CHARGES AS BOGUS, WIT HOUT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONSIDERING THE VARIOUS STA TEMENT OF PARTIES WITHOUT GRANTING AN OPPORTUNITY TO THE APPELLANT, T O COMMENT ON SUCH STATEMENT. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONSIDERING THE REPORTS OF JCLT, RANGE 1 WHICH WAS PREPARED WITHOUT ANY JURISDICTION AND AUTHORITY O F LAW. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LEARNED ASSESSING OFFICER IN MAKING AN ADDITION U/S.68 OF THE INCOME T AX ACT, 1961 BY TREATING THE SHARE CAPITAL & SHARE PREMIUM OF RS.16, 84,24,300/- (1,30,86,000/ - PLUS 15,53,38,300/-) AS ALLEGED UNEX PLAINED CASH CREDIT, WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN ENHANCING THE APPELLANT INCOME BY RS.81,75,700/- BY TREATING THE ENTIRE SHARE CAPITAL O F RS.17,66,00,000/- AS ALLEGED BOGUS SHARE CAPITAL, WITHOUT CONSIDERING THE F ACTS AND CIRCUMSTANCES OF THE CASE. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN ENHANCING THE APPELLANT INCOME BY RS.35,32,000/ - ON ACCOUNT OF ALLEGED COMMISSION PAID ON BOGUS SHARE CAPITAL, WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANC ES OF THE CASE. 3 ITA NOS.844 & 848/PN/2013 8. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LEARNED ASSESSING OFFICER IN MAKING AN ADDITION OF RS.2.33 CORERS ON AC COUNT OF WAIVER OF PRINCIPAL LOAN BY SAHAKAR MITRA SHRI CHANDRAKANT HA RI BADHE SIR URBAN CO. OPERATIVE SOCIETY, WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE. 9. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER O R DELETE THE SAID GROUND OF APPEAL. 3. GROUNDS RAISED BY THE REVENUE ARE AS UNDER : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD.CIT(A)- II, NASHIK ERRED IN DELETING THE ADDITION ON ACCOUNT OF WAIVER OF INTEREST AMOUNTING TO RS.3,78,00,000/-. THE ADDITION WAS MADE BY THE AO AFTER TAKING INTO CONSIDERING FACTS THAT CHANDRAKANT HARI B ADHE SIR CREDIT CO- OPERATIVE SOCIETY AFTER SETTLEMENT OF LOAN WITH ASSESSEE HAS WAIVED INTEREST WHICH WAS NOT CREDITED BY THE ASSESSEE TO P& L ACCOUNT AS PER SYSTEM OF ACCOUNTANCY. 2. ON THE FACTS AND CIRCUMSTANCES, OF THE CASE THE ORDE R OF THE CIT(A)- II, NASHIK BE CANCELLED AND THAT OF THE A.O. BE RESTO RED. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND T HE GROUNDS OF APPEAL, IF FELT IT NECESSARY. 4. THE ASSESSEE HAS ALSO RAISED AN ADDITIONAL GROUND WH ICH READS AS UNDER : ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS I N LAW, THE LD.AO AS WELL AS LD.CIT(A) HAS ERRED IN NOT GRANTING THE DEDUC TION U/S.80IA TO THE EXTENT OF ADDITION MADE U/S.14A AS WELL AS U/S.68, AS TH E ASSESSEE IS NOT HAVING ANY OTHER BUSINESS ACTIVITIES OTHER THAN THE ELI GIBLE BUSINESS. 4.1 THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADDITIONAL GROUND IS PURELY A LEGAL ONE AND NO NEW FACTS ARE NECES SARY TO BE INVESTIGATED. RELYING ON VARIOUS DECISIONS HE SUBMITTED TH AT THE ADDITIONAL GROUND SHOULD BE ADMITTED. FOR THE ABOVE PROP OSITION HE RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CA SE OF NTPC LTD. REPORTED IN 229 ITR 383 AND JUTE CORPORATION OF IN DIA LTD. REPORTED IN 187 ITR 688 AND THE DECISION OF HONBLE BOMB AY HIGH COURT IN THE CASE OF AHMEDABAD ELECTRICITY COMPANY REP ORTED IN 199 ITR 351. 4 ITA NOS.844 & 848/PN/2013 5. AFTER HEARING BOTH THE SIDES WE ADMIT THE ADDITIONAL GR OUND FOR ADJUDICATION SINCE THE SAME IS A LEGAL GROUND AND NO NEW FACTS ARE REQUIRED TO BE INVESTIGATED. 6. IN GROUND OF APPEAL NO.1 THE ASSESSEE HAS CHALLENGED THE ORDER O F THE CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS.1,08,81,171/- U/S .14A BY THE AO. 7. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE CO MPANY IS A SUBSIDIARY OF M/S. RAM INFRASTRUCTURE PVT. LTD. (RIL) OF JALG AON IN WHICH IT HAS SHOWN TO HAVE INVESTED IN SHARE OF RS.17,74,5 0,000/- AS ON 31-03-2008 AND RS.24,37,38,850/- AS ON 31-03-2009. BE SIDES THE ABOVE THE ASSESSEE HAD INVESTED RS.5,25,00,000/- IN THE E QUITY SHARES OF M/S. PRANJAL INFRASTRUCTURE PVT. LTD. (PIPL), ANOTHER GROUP CONCER N IN A.Y. 2009-10. HENCE, THE TOTAL INVESTMENT OF THE ASSESSE E COMPANY IN SHARES OF RIL AND PIPL COMES TO RS.29,62,68,850/- AS ON 31-03-2009. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE THE A O NOTED THAT ASSESSEE COMPANY HAS SHOWN SECURED LOAN OF RS.25,83,83,44 2/- FROM FEDERAL BANK LTD. AS ON 31-03-2009. THE ASSESSEE HA D PAID TOTAL INTEREST OF RS.2,29,61,446/- INCLUDING INTEREST OF RS.28,17,406/- TO RIL AND RS.2,00,71,507/- TO BANK ON ITS TERM LOAN. ON BEING QU ESTIONED BY THE AO AS TO WHY PROPORTIONATE DISALLOWANCE OF INTERES T U/S.36(1)(III) SHOULD NOT BE MADE THE ASSESSEE, RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF S.A. BUILDERS VS. CIT REPORT ED IN 148 TAXMANN 74, SUBMITTED THAT IF THE BORROWED MONEY WAS GIV EN TO SUBSIDIARY COMPANY FOR COMMERCIAL EXPEDIENCY THEN THE PRO PORTIONATE DISALLOWANCE OF INTEREST U/S.36(1)(III) OF THE ACT CANNOT BE MADE. 8. IT WAS SUBMITTED THAT THE ASSESSEE HAD TAKEN SHORT TERM LOAN OF RS.32 CRORES FROM SAHAKAR MITRA SHRI CHANDRAKANT HARI BADHE SIR 5 ITA NOS.844 & 848/PN/2013 URBAN COOPERATIVE CREDIT SOCIETY AGAINST CHANDWAD-MANMA D- NANDGAON BOT PROJECT DURING A.Y. 2008-09. OF THE TOTAL A MOUNT OF RS.32 CRORES, THE ASSESSEE HAS REIMBURSED RS.12.84 CRORE S TO RIL FOR LATTERS REPAYING ITS TERM LOAN OF SBI, MUMBAI. THE ASSESS EE INVESTED RS.17 CRORES AND R.74.50 LAKHS IN PURCHASING OF PREFERENCE SHARES AND EQUITY SHARES RESPECTIVELY OF RIL. IT WAS SUBMITTED THA T THE PROVISIONS OF SECTION 14A WERE NOT APPLICABLE AS IT DID NOT RECEIVE A NY EXEMPT INCOME (DIVIDEND) ON THE AFORESAID INVESTMENT. IT WAS SUBMIT TED THAT RIL HAS INVESTED THE SAID AMOUNT OF RS.17.75 CRORES IN ITS SUBSIDIARY COMPANY AND SPECIAL PURPOSE VEHICLE (SPV) PIPL AS PER THE REQUIREMENTS OF PWD DEPARTMENT OF MAHARASHTRA. RELYING ON VARIOUS DECISIONS IT WAS SUBMITTED THAT NO DISALLOWANCE U/S.14A R. W. RULE 8D OR U/S.36(1)(III) OF THE ACT CAN BE MADE. 9. HOWEVER, THE AO WAS NOT SATISFIED WITH THE ARGUMENTS A DVANCED BY THE ASSESSEE. HE OBSERVED THAT OUT OF RS.32 CRORE S LOAN OBTAINED FOR BUSINESS PURPOSE BY THE COMPANY ONLY SMALL AMOUNT HAS BEEN UTILIZED FOR BUSINESS PURPOSE AND REST AMOUNT HAS EITHER BEEN I NVESTED IN SHARE CAPITAL OR FOR THE REPAYMENT OF LOAN OF M/S. RAM INFR ASTRUCTURE LTD. THE DIVIDEND INCOME RECEIVABLE FROM THE SHARE IS EXE MPT U/S.10(38) OF THE I.T. ACT AND THEREFORE PROVISIONS OF SECTIO N 14A R.W. RULE 8D IS CLEARLY APPLICABLE. 10. AS REGARDS THE ARGUMENT OF THE ASSESSEE THAT THE ASSESSEE COMPANY HAS NOT RECEIVED ANY EXEMPT INCOME FROM THESE COMPANIES AND THEREFORE PROVISIONS OF SECTION 14A R.W. RULE 8D ARE NOT APPLICABLE THE AO HELD WHETHER ASSESSEE HAS RECEIVED ANY DIVIDEND INCOME OR NOT, THE PROVISIONS OF SECTION 14A R.W. RULE 8D ARE CLEARLY APP LICABLE. TO ACQUIRE SHARES IN NEW COMPANIES IS NOT THE BUSINESS OF TH E ASSESSEE AND DIVIDEND WHETHER EARNED OR NOT IS NOT TAXABLE UNDER THE I.T. ACT. 6 ITA NOS.844 & 848/PN/2013 HENCE, PROVISIONS OF SECTION 14A R.W. RULE 8 D IS CLEARLY AP PLICABLE. IN VIEW OF THE ABOVE, THE AO DISALLOWED AN AMOUNT OF RS.1,08,81 ,171/- U/S. 14A OF THE I.T. ACT. 11. BEFORE CIT(A) IT WAS SUBMITTED THAT THE WORKING OF DISALLO WANCE REFERRED TO IN THE ASSESSMENT ORDER WAS DONE AT THE IN STANCE OF THE AO. HOWEVER, IN ABSENCE OF ANY EXEMPT INCOME EARNED BY THE ASSESSEE THE QUESTION OF DISALLOWANCE U/S.14A R.W. RULE 8D DOES NOT ARISE AT ALL. REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIGH COUR T IN THE CASE OF CIT VS. DELIGHT ENTERPRISES AND THE DECISION OF THE MUMB AI BENCH OF THE TRIBUNAL IN THE CASE OF AVSHESH MERCANTILE PVT. LTD. VS . DCIT AND VARIOUS OTHER DECISIONS IT WAS SUBMITTED THAT NO DISALLOWA NCE U/S.14A CAN BE MADE IN THE INSTANT CASE. 12. HOWEVER, THE CIT(A) WAS ALSO NOT SATISFIED WITH THE EXP LANATION GIVEN BY THE ASSESSEE AND UPHELD THE DISALLOWANCE MADE B Y THE AO. WHILE DOING SO, HE NOTED THAT THE ASSESSEE HAD MADE INVE STMENT IN THE SHARES OF GROUP COMPANIES OUT OF THE BORROWED FUNDS AND PAID INTEREST ON THE SAID BORROWED FUNDS. ACCORDING TO THE CIT(A) EARNIN G OF EXEMPT INCOME IS NOT RELEVANT FOR MAKING DISALLOWANCE U/S.14A OF TH E I.T. ACT. IF INTEREST BEARING BORROWED FUNDS ARE UTILIZED FOR PURPOSE OF INVESTMENT IN SHARES AND THERE IS NO RECEIPT OF DIVIDEND IN COME OR SUCH DIVIDEND INCOME RECEIVED IS MEAGER, EVEN THEN, WHOLE AMOUN T OF INTEREST EXPENDITURE INCURRED FOR THIS PURPOSE WILL BE SUBJ ECT TO DISALLOWANCE U/S.14A BECAUSE THE SAME HAS BEEN INCURRED FOR EARNING EXEMPT INCOME. DISTINGUISHING THE VARIOUS DECISIONS CITED BE FORE HIM AND RELYING ON VARIOUS DECISIONS THE LD.CIT(A) UPHELD THE ACTION OF THE AO. 7 ITA NOS.844 & 848/PN/2013 13. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 14. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE A SSESSEE HAS BORROWED MONEY FROM BANKS AND INVESTED THE SAME IN THE SPECIAL PURPOSE VEHICLE. FURTHER, ASSESSEE HAS NOT RECEIVED ANY DIVIDEND INCOME SINCE NO DIVIDEND HAS BEEN DECLARED BY ANY OF THE SPECIAL PURPOSE VEHICLE COMPANIES. REFERRING TO THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ORIENTAL STRUCTURA L ENGINEERS PVT. LTD. VIDE ITA NO.605/2012 ORDER DATED 15-01-2012 T HE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS UPHELD THE ORDER OF THE TRIBUNAL WHEREIN IT HAS BEEN HELD THAT THE INVESTMENT OF RS.60.78 CRORES MADE IN SUBSID IARY COMPANIES ARE ATTRIBUTABLE TO COMMERCIAL EXPEDIENCY BECA USE AS PER THE SUBMISSIONS MADE BY THE ASSESSEE IT HAD TO FORM SP ECIAL PURPOSE VEHICLES IN ORDER TO OBTAIN CONTRACTS FROM THE NHAI AND THE SPV WAS FORMED ENGAGING THE ASSESSEE COMPANY AS CONTRACTOR TO EXECUTE THE WORKS AWARDED TO THEM. IT WAS ACCORDINGLY HELD THAT N O EXPENSES AND INTEREST ATTRIBUTABLE TO THE INVESTMENTS MADE BY THE AS SESSEE IN THE SPVS CAN BE DISALLOWED U/S.14A R.W. RULE 8D BECAUSE IT CA NNOT BE TERMED AS EXPENSE/INTEREST INCURRED FOR EARNING EXEMPT ED INCOME. RELYING ON VARIOUS OTHER DECISIONS HE SUBMITTED THAT SINC E NO EXEMPT INCOME HAS BEEN RECEIVED BY THE ASSESSEE COMPANY, THER EFORE, THERE IS NO QUESTION OF ANY DISALLOWANCE U/S.14A R.W. RULE 8D. 15. IN HIS ALTERNATE CONTENTION THE LD. COUNSEL FOR THE AS SESSEE SUBMITTED THAT SINCE THE ENTIRE INCOME IS EXEMPT U/S.80IA (4), THEREFORE, EVEN IF DISALLOWANCE IS MADE U/S.14A, DEDUCTION U/S .80IA(4) WOULD INCREASE TO THAT EXTENT. FOR THE ABOVE PROPOSITION , THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF HONBLE SUPREME 8 ITA NOS.844 & 848/PN/2013 COURT IN THE CASE OF LIBERTY INDIA LTD. VS. CIT REPORTED IN 317 ITR 218 AND VARIOUS OTHER DECISOINS. HE ACCORDINGLY SUBMITTED T HAT IN CASE THE DISALLOWANCE U/S.14A R.W. RULE 8D IS UPHELD, THEN A DIRECTION MAY BE GIVEN TO THE AO TO INCREASE THE DEDUCTION U/S.80IA(4) TO THAT EXTEN T. 16. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE LD.CIT(A) HAS GIVEN COGENT REASONS WHILE UPHOLDING THE ORDER OF THE AO IN DISALLOWING AN AMOUNT OF RS.1,08,81,171/- U/S.14A OF THE ACT. THE AS SESSEE HAS DIVERTED ITS INTEREST BEARING FUNDS TOWARDS SHARE CAPITA L OF SISTER CONCERN, I.E. THE HOLDING COMPANY. MERELY BECAUSE THEY HA VE NOT RECEIVED ANY DIVIDEND THE SAME CANNOT BE A GROUND NOT TO MAKE DISALLOWANCE U/S.14A OF THE ACT. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE CIT(A) BE UPHELD AND THE GROUND RAISED BY T HE ASSESSEE ON THIS ISSUE SHOULD BE DISMISSED. 17. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIO US DECISIONS CITED BEFORE US. WE FIND THE AO ON THE BASIS OF HIS FINDING THAT INTEREST BEARING FUNDS HAVE BEEN DIVERTED TO HOLDING COMPANY FOR ACQUISITION OF THEIR SHARES MADE DISALLOWANCE OF RS.1,08,81,177/- U/S.14A OF THE I.T. ACT R.W. RULE 8D OF THE I.T. RULES. WHILE DOING SO, HE REJE CTED THE CONTENTION OF THE ASSESSEE THAT THE INVESTMENT MADE IN THE SHARES OF HOLDING COMPANIES ARE DUE TO COMMERCIAL EXPEDIENCY AND TH EREFORE NO DISALLOWANCE OF INTEREST SHOULD BE MADE U/S.36(1)(III) OR U/S.14A . WE FIND THE LD.CIT(A) REJECTING THE VARIOUS SUBMISSIONS MADE BE FORE HIM AND DISTINGUISHING THE VARIOUS DECISIONS CITED BEFORE HIM REJ ECTED THE CLAIM OF THE ASSESSEE THAT NO DISALLOWANCE IS CALLED FOR U/S. 14A OF THE I.T. ACT. 9 ITA NOS.844 & 848/PN/2013 18. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSE E THAT SINCE THE INVESTMENTS ARE MADE IN SHARES OF THE HOLDING C OMPANY WHO IN TURN HAS INVESTED THE AMOUNT IN THE SUBSIDIARY COMPAN Y AND SPECIAL PURPOSE VEHICLE COMPANIES, FOR GETTING CONTRACTS FR OM THE PWD DEPARTMENT OF GOVERNMENT OF MAHARASHTRA, THEREFORE, THE INVESTMENT WAS FOR COMMERCIAL EXPEDIENCY AND THEREFORE NO DISALLOWANCE OF INTEREST IS CALLED FOR. IT IS ALSO THE ALTERNATE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT SINCE NO DIVIDEND INCOME HA S BEEN RECEIVED WHICH IS EXEMPT FROM TAX, THEREFORE, NO DISALLOWANCE U/S.14A SHOULD BE MADE. IT IS ALSO ANOTHER ALTERNATE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT SINCE THE ENTIRE INCOME OF THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S.80IA(4), THEREFORE, EVEN IF ANY DISALLO WANCE IS MADE THE BUSINESS INCOME OF THE ASSESSEE WILL GO UP AND T HEREFORE THERE WILL BE CORRESPONDING DEDUCTION OF THE SAID AMOUNT A ND THEREFORE IT IS REVENUE NEUTRAL. 18.1 WE FIND SOME FORCE IN THE ARGUMENTS ADVANCED BY THE LD. COUNSEL FOR THE ASSESSEE. WE FIND AN IDENTICAL ISSUE HAD CO ME UP BEFORE THE HONBLE DELHI HIGH COURT IN THE CASE OF ORIENTAL STRUCTURE ENGINEERS PVT. LTD. (SUPRA). IN THAT CASE ALSO INVESTMENT S WERE MADE IN THE SUBSIDIARY COMPANIES OUT OF BORROWED FUNDS. THE SU BSIDIARY COMPANY HAD TO FORM SPECIAL PURPOSE VEHICLES (SPV) IN ORDER TO OBTAIN CONTRACTS FROM NHAI. THE DISALLOWANCE U/S.14A R.W. RULE 8 D WAS RESTRICTED BY THE CIT(A) WHICH WAS UPHELD BY THE ITAT. O N FURTHER APPEAL BY THE REVENUE, THE HONBLE HIGH COURT DISMISSED THE APPEAL FILED BY THE REVENUE BY OBSERVING AS UNDER : THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAINST THE ORDER DATED 02.12.2011 PASSED BY THE INCOME TAX APPELLATE TRIBUNA L, NEW DELHI IN ITA NO.4245/DEL/20 11 IN RESPECT OF THE ASSESSMENT YEAR 2008 -09. THE ISSUE BEFORE THE TRIBUNAL, WHICH IS ALSO AN ISSUE BEFORE US, W AS WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE COMMISSIONER OF I NCOME TAX 10 ITA NOS.844 & 848/PN/2013 (APPEALS) HAD ERRED IN RESTRICTING THE DISALLOWANCE UN DER SECTION 14A OF THE INCOME TAX ACT, 1961 TO 2% OF DIVIDEND INCOME O F RS.20,27,812/-. IT WAS THE CONTENTION OF THE REVENUE THAT RULE 8D OF THE INCOME TAX RULES, 1962 HAD NOT BEEN APPLIED PROPERLY IN RESPECT OF THE ASSESSMENT YEAR 2008-09. THIS ASPECT HAS BEEN CONSIDERED BY THE TRIBUNA L IN DETAIL AND IT HAS OBSERVED AS UNDER: - 6.3 WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PE RUSED THE RECORDS. WE FIND THAT LD. COMMISSIONER OF INCOME TAX ( APPEALS) HAS GIVEN A FINDING THAT ONLY INTEREST OF RS 2,96,731/- WAS PAID ON FUNDS UTILIZED FOR MAKING INVESTMENTS ON WHICH EXEMPTED INCOME WAS RECEIV ABLE. FURTHER, LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS OBSERVED TH AT IN RESPECT OF INVESTMENT OF RS 6,07,775,000/- MADE IN SUBSIDIARY COMPANIES AS PER DOCUMENTS PRODUCED BEFORE HIM, THEY ARE ATTRIBUTABLE TO COMMERCIAL EXPEDIENCY, BECAUSE AS PER SUBMISSION MADE BY THE ASSESSEE, IT HAD TO FORM SPECIAL PURPOSE VEHICLES (SPV) IN ORDER TO OBTAI N CONTRACTS FROM THE NHAI AND THE SPVS SO FORMED ENGAGED THE ASSESSEE COMPANY AS CONTRACT TO EXECUTE THE WORKS AWARDED TO THEM (I.E. SPVS) BY THE NHAI. IN ITS PROFIT AND LOSS ACCOUNT FOR THE YEAR, THE ASSESSEE HAS SHOWN THE T URNOVER FROM EXECUTION OF THESE CONTRACTS AND THEREFORE NO EXPENSE AND INTEREST ATTRIBUTABLE TO THE INVESTMENTS MADE BY THE APPELLANT IN THE PSVS CAN BE DISALLOWED U/S. 14A R.W. RULE 80 BECAUSE IT CANNOT BE TERMED AS EXPE NSE/ INTEREST INCURRED FOR EARNING EXEMPTED INCOME. UNDER THE CIRCUMSTANCES, LD. COMMISSIONER OF INCOME TAX (APPEALS) IS CORRECT IN HOLDING THAT DISALLOWANCE OF A FURTHER SUM RS 40,556/- CALCULATED @ 2% OF THE DIVIDEND EARNED IS SUFFICIENT. UNDER THE CIRCUMSTANCES, WE DO NO T FIND ANY INFIRMITY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A PPEALS), HENCE WE UPHOLD THE SAME. ON GOING THROUGH THE ABOVE OBSERVATIONS WE ARE OF THE VIEW THAT THIS IS MERELY A QUESTION OF FACT AND DOES NOT INVOLVE ANY QU ESTION OF LAW MUCH LESS A SUBSTANTIAL QUESTION OF LAW, AS THE TRIBUNAL HELD THAT THE EXPENSES WHICH HAVE BEEN CLAIMED BY THE ASSESSEE WERE NOT TOWARD S THE EXEMPTED INCOME. THE DISALLOWANCE, THEREFORE, WAS RIGHTLY LIMI TED TO A SUM OF RS 40,556/-. THE QUESTION OF INTERPRETING RULE 8-D IS NO T IN DISPUTE AND THE ONLY DISPUTE IS WITH REGARD TO FACTS WHICH HAVE BEEN S ETTLED BY THE TRIBUNAL. THE APPEAL IS DISMISSED. 19. WE ALSO FIND MERIT IN THE ALTERNATE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT SINCE ASSESSEE IS ENTITLED TO DEDU CTION U/S.80IA(4), THEREFORE, THE ADDITION, IF ANY, HAS TO BE ALLOWED U/S.80IA(4) AND THEREFORE, THE SAME IS REVENUE NEUTRAL. A DMITTEDLY, THE INCOME OF THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S.80IA WHICH THE AO HIMSELF HAS ALLOWED IN THE BODY OF THE ASSESSMENT ORDE R. THE RETURNED BUSINESS INCOME HAS BEEN ALLOWED BY THE AO A S DEDUCTION 11 ITA NOS.844 & 848/PN/2013 U/S.80IA AS PER THE CLAIM. THEREFORE, ONCE A PART OF THE INTEREST EXPENDITURE IS DISALLOWED THEN THE CORRESPONDING BUSINESS INCOME WILL GO UP. THEREFORE, THE REQUEST OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE AO MAY BE DIRECTED TO INCREASE THE DEDUCTION U/S.80 IA(4) TO THE EXTENT OF DISALLOWANCE U/S.14A WHICH INCREASES THE BUSINESS PROFIT TO THAT EXTENT IS ACCEPTABLE. IN THIS VIEW OF THE MATTER, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO DELETE THE DISALLO WANCE MADE U/SA.14A. GROUND OF APPEAL NO.1 AS WELL AS THE FIRST ISSUE IN THE ADDITIONAL GROUND RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED. 20. IN GROUNDS OF APPEAL NO.2 TO 7 THE ASSESSEE HAS CH ALLENGED THE ORDER OF THE CIT(A) IN TREATING THE ENTIRE SHARE CAPITAL O F RS.17.66 CRORES AS BOGUS SHARE CAPITAL AND FURTHER ENHANCING THE INCOME BY RS.35,32,000/- ON ACCOUNT OF ALLEGED COMMISSION PAID FOR OBTA INING BOGUS SHARE CAPITAL. 21. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND IS ENGAGED IN INFRASTRUCTURE DEVELOPM ENT ACTIVITY MAINLY CONSTRUCTION OF ROADS AND BRIDGES ON BUILT , OPERATE AND TRANSFER (BOT) BASIS. THE ASSESSEE FILED THE RETURN OF INCOME ON 19-09- 2009 DECLARING TOTAL INCOME AT NIL AFTER CLAIMING DEDUCTION U/S.80IA AT RS.20,62,716/-. 22. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE ASSESSEE HAS SHOWN RECEIPT OF SHARE CAPITAL FROM THE FOLLOWING PARTIES : S. NO. NAME OF THE ALLOTTEE IN FULL ADDRESS OF THE ALLOTTEE OCCUPATION NUMBER OF SHARE ALLOTTED NOMINAL AMOUNT AS PER SHARE TOTAL NOMINAL AMOUNT EQUITY PREF. 1 AMICITIA INFRASTRUCTURE PVT. LTD. BHUSAWAL DIST. JALGAON BUSINESS 75000 - 100 7500000 12 ITA NOS.844 & 848/PN/2013 2 COUNTSHIP COMMODITIES PVT. LTD. 85, NETAJI SUBHAS ROAD, PS HARE STREET, KOLKATA BUSINESS 1250 - 100 125000 3 ANUSUYA TRADELINK PVT. LTD. 56/1/1 KINGS ROAD, HOWARA (W.B.)-711101 BUSINESS 1250 - 100 125000 4 ALEMBIC SECURITIES PVT. LTD. BLOCK H SHRI SADASHIV CHS,6 TH ROAD, SANTACRUX (EAST), MUMBAI BUSINESS 1250 - 100 125000 5 ABHARANI VINIMAY PVT. LTD. 85, NETAJI SUBHAS ROAD, KOLKATA BUSINESS 1250 - 100 125000 6 ZIWANI BARTEC PVT. LTD. 85, NETAJI SUBHAS ROAD, 3 RD FLOOR, PS HARE STREET, KOLKATA (WB) BUSINESS 1250 - 100 125000 7 KALASH ADVERTISING PVT. LTD. BHANDARI BUNGLOW, SUBHASH LANE MALAD WEST MUMBAI BUSINESS 1293 - 100 129300 8 TOLL TIE UP PVT. LTD. 7, MUNSHI SADRUDDIN LANE, IST FLOOR, R.NO.5, KOLKATA (WB) 700 007 BUSINESS 750 - 100 75000 9 MAPLE MERCANTILE PVT. LTD. 18A, RAMA KANTA BOSE STREET, KOLKATA (WB) 700 003 BUSINESS 750 - 100 75000 10 ROMEX CORPORATE BHANDARI BUNGLOW BUSINESS 757 - 100 75700 11 ALLIANCE INTERMEDIATERIES & NETWORK PVT. LTD. BLOCK H SHRI SADASHIV CHS, 6 TH ROAD, SANTACRUZ (EAST) MUMBAI BUSINESS 500 - 100 50000 12 HANUMAN COMMODITIES PVT. LTD. 22, STRAND ROAD, 2 ND FLOOR, KOLKATA (WB) 700 001 BUSINESS 500 - 100 50000 13 PUNYA LEATHER PVT. LTD. 85, N.S. ROAD, KOLKATA (WB) 700 001 BUSINESS 500 - 100 50000 14 SHAGUN TIE UP PVT. LTD. 18A, RAMA KANTA BOSE STREET, KOLKATA (WB) 700 003 BUSINESS 1000 - 100 100000 15 GILTEDEE VINCON PVT. LTD. 85, NETAJI SUBHAS ROAD, KOLKATA (WB) 700 001 BUSINESS 1000 - 100 100000 TOTAL 88300 23. THE AO THEREFORE ISSUED NOTICE U/S.133(6) TO THE ABOV E PARTIES OUT OF WHICH NOTICES IN RESPECT OF FOLLOWING 6 PARTIES WERE R ECEIVED BACK UNSERVED : 1. ANUSUYA TRADELINK PVT. LTD. 2. KALASH ADVERTISEMENT PVT. LTD. 3. COUNTSHIP COMMODITIES PVT. LTD. 4. ZIWANI BARTEC PVT.LTD. 5. PUNYA LEATHER PVT. LTD. 6. GILTEE VINCON PVT. LTD. 13 ITA NOS.844 & 848/PN/2013 HE ALSO NOTED THAT THERE ARE DIFFERENCES IN THE BALANCES AND IN SOME CASES THE ASSESSEE HAS NOT GIVEN THE EXTRACTS OF THE PARTIES AS APPEARING IN THE BOOKS OF ACCOUNTS. 24. THE AO, THEREFORE, VIDE LETTER DATED 30-11-2011 ASK ED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE AMOUNTS, AS APP EARING IN THE ABOVE-MENTIONED ACCOUNTS, SHALL NOT BE ADDED TO THE TOT AL INCOME OF THE ASSESSEE. HE NOTED THAT SUDDENLY AT 5.01PM ON 05 -12-2011 A LETTER FROM THE ABOVE 6 PARTIES WAS RECEIVED THROUGH FA X STATING THEREUNDER AS UNDER : RE : INFORMATION REQUIRE U/S.133(6) IN CASE OF HARI INFRASTRUCTURE PVT. LTD. SUBMISSION OF INFORMATION A.Y. 2009-10. SUB : REQUESTED TO GIVE A WEEK TIME. WE ARE IN RECEIPT OF YOUR OFFICE LETTER, MENTIONED ABOVE. IN THIS RESPECT WE ARE SUBMITTING THE RELEVANT PAPERS WITHIN A WEEK TIME SO PLEASE DO THE NEEDFUL AND OBLIGED. THANKING YOU, YOURS FAITHFULLY, 25 HE OBSERVED THAT OUT OF THE ABOVE 6 PARTIES, 5 PAR TIES ARE HAVING COMMON ADDRESS AT 85, N.S. ROAD, KOLKATA 700 001 AND TH E OTHER ONE, I.E. MAPLE MERCANTILE PVT. LTD. AT 18A, RAMAKANT BOSE STREET , KOLKATA 700 003. THE AO NOTED THAT WHEN THE NOTICES U/S.133(6) WERE RECEIVED BACK UNSERVED IN THE MONTH OF JULY 2011, IT IS NOT UNDERS TOOD AS TO HOW THEY ARE NOW REQUESTING FOR TIME AND HOW THEY CAME TO KNOW THAT INFORMATION U/S.133(6) HAS BEEN CALLED FOR. ON BEING CONFRONTE D THE ASSESSEE VIDE LETTER DATED 07-12-2011 STATED AS UNDER : 7. AS REGARDS SHARE CAPITAL RAISED FROM THE SIX COMPAN IES: 14 ITA NOS.844 & 848/PN/2013 IN THIS RESPECT WE ARE SUBMITTING FOLLOWING INFORMATIO N AND EXPLANATION. A. DURING THE YEAR UNDER CONSIDERATION OUR COMPANY R AISED ITS SHARE CAPITAL BY ISSUING 88300 EQUITY SHARES OF RS.100 EACH A T PREMIUM AT RS.1900. WE ARE ENCLOSING HEREWITH THE LIST OF SHARE APPLICATION A/C. SHARE CAPITAL ACCOUNT AND ALSO COPY OF FORM NO.2 (RE TURN OF ALLOTMENT) SUBMITTED BY OUR COMPANY ONLINE TO THE REGISTRAR OF C OMPANIES, MUMBAI (SEE PAGE NO.21 TO 33). B. IT IS SUBMITTED THAT THE AMOUNT OF THIS SHARE CAPI TAL TRANSFER TO OUR BANK ACCOUNT BY THE SHAREHOLDER COMPANIES THROUGH RTG S/CHEQUES. C. AS MENTIONED IN POINT NO.1 WE HAVE FILED THE RETU RN OF ALLOTMENT REGARDING THE SAME TO THE REGISTRAR OF COMPANIES, MUMB AI, INFORMING THE DETAILS OF SHARE HOLDERS, TO WHOM THE SHARES WERE ALLO TED. D. IT IS COME TO OUR NOTICE THAT THE CONFIRMATION OF 6 SHARES HOLDER COMPANIES OF HAS NOT BEEN RECEIVED. THE TOTAL AMOUNT OF SHARE CAPITAL RAISED RS.130.86 LACS (6543 EQUITY SHARES OF RS.100 EACH AT PREMIUM AT RS.1900 SHARE). E. IT IS SUBMITTED THAT THE AMOUNT OF SHARE CAPITAL O F THE COMPANIES, HAS BEEN MAINLY RECEIVED IN OUR ICICI BANK STATEMENT CURRENT A/C. NO.037505003970. WE ARE ENCLOSING HEREWITH THE COPY OF THE ICICI BANK STATEMENT (SEE PAGE NO.34) F. IT IS SUBMITTED THAT THE CONFIRMATION LETTER SENT BY THE DEPT. HAS BEEN RETURN IN RESPECT OF THE 6 COMPANIES. IT IS SUBMI TTED THAT THERE MAY BE THE REASON THAT THE ADDRESS OF THE COMPANIES HAS BEEN CHANGED OR PRESENTLY OUR FINANCIAL POSITION IS NOT GOOD AND WE H AVE NOT GIVEN ANY DIVIDEND TO THE SAID COMPANIES. PRESENTLY WE ARE UNAB LE TO RETURN THEIR SHARE CAPITAL AMOUNT. THEREFORE, THESE PARTIES ARE NO T CO-OPERATING US. G. WE ARE NOT HAVING RELATIONS WITH THE COMPANY AND ITS DIRECTORS AND NOT KNOW TO THEM. IT IS SUBMITTED AS REGARDS THESE COMP ANIES WE HAVE COLLECTED THE INFORMATION LIKE CO. PAN NO., COMPANY REGISTRATION NUMBER, FINANCIAL STATEMENTS, ETC. WHICH IS POSSIBLE TO US. TH E DETAILS OF COMPANIES AND DOCUMENTS COLLECTED AND ATTACHED ARE AS UNDER : SR. NO. NAME OF THE ALLOTTEE IN FULL ADDRESS OF THE ALLOTTEE PAN NO. & CO. REG. NO. NO. OF SHARES ALLOTTED DOCUMENTS ENCLOSED (SEE PAGE NO.35 TO 53) EQUITY 1 ANASUYA TRADELINK PVT. LTD. 56/1/1, KINGS ROAD, HOWARA (W.B. 701101) AAGCA4402K CO. REG. NO. 1250 PAN CARD PROOF ROC INSPECTION RECEIPT (35-36) 2 KALASH ADVERTISING PVT. LTD. BHANDARI BUNGLOW, SUBHASH LANE, MALAD (WEST) KUMBAI 400097 AADCK1331L CO. REG.NO. U22110MH2007PT C171358 1293 PAN CARD, CO. REG. CERTIFICATE ROC INSPECTION RECEIPT (37-39) 3 COUNTSHIP COMMODITIE S PVT. LTD. 85 NETAJI SUBHAS ROAD P.S. HARE STREET KOLKATA (W.B.) 700001 0 1250 0 4 ZIWANI BARTEC PVT. LTD. 85 NETAJI SUBHAS ROAD P.S. HARE STREET KOLKATA (W.B.) 700001 AAACZ1935 CO. REG. CO. 1250 PAN CARD PROOF, FINANCIAL STATEMENTS 31.3.2009, 23AC ROC INSPECTION RECEIPT (40-51) 15 ITA NOS.844 & 848/PN/2013 5 PUNYA LEATHER PVT. LTD. 85, N.S. ROAD, KOLKATA (W.B.) 700001 AABCP5690F CO. REG. NO.U61909WB199 5P C067641 500 PAN CARD PROOF, BALANCE SHEET 31.3.2009 (52-53) 6 GILTEDEE VINCON PVT. LTD. 85, NETAJI SUBHAS ROAD, KOLKATA (W.B.) 700001 AACCG0461E CO. REG.NO. 1000 PAN CARD PROOF, FINANCIAL STATEMENTS 31.3.2009, 23AC ROC INSPECTION RECEIPT (54-59) 26. THE AO THEREFORE NOTED THAT THESE PARTIES ARE NO T KNOWN TO THE ASSESSEE AND ASSESSEE HAS EXTRACTED DETAILS FROM THE R OC WHICH IS AN ADMITTED FACT. ACCORDING TO THE AO THE PRIVATE PARTIES S ITTING AT KOLKATA AND OTHER PLACES HAVE SUBSCRIBED TO THE SHARE CAPITAL AND HAVE ALSO PAID EXORBITANT PREMIUM OF RS.1900/- PER SHARE TO TH E PVT. LTD. COMPANY OF JALGAON HAVING NO SOUND BACKGROUND IS NOT BELIE VABLE. THE VALUE OF SHARE AS ON 31/3/2007, 31/3/2008 AND 31/3 /2009 IS ONLY RS.118.70, RS.362.239 AND RS.518.66 RESPECTIVELY AS PER CALCULATION GIVEN BY THE ASSESSEE. THE COMPANY HAS ALSO NOT DECLARED ANY DIVIDEND IN THE PAST. IT IS NOT A LISTED COMPANY. THE SHARE OF PVT. LTD. COMPANY ARE SUBSCRIBED AMONG THE KNOWN PERSONS A ND CLOSELY RELATED PERSON AND NOT SUBSCRIBED BY THE STRANGERS. T HE PREMIUM IS ALSO BEING PAID OVER THE ACTUAL VALUE OF SHARES AND BY TH E PERSON HAVING INTERNAL KNOWLEDGE AND SUCH PERSONS CAN ONLY BE CLOSE RELATIVES AND ONLY WELL KNOWN PERSON AND NOT STRANGERS. WHEN IT WAS BROUG HT TO THE NOTICE OF THE ASSESSEE, THE ASSESSEE VIDE LETTER DAT ED 8/12/2011 SURRENDERED THE ABOVE BY STATING THAT IT IS NOT IN A PO SITION TO PRODUCE THE PARTIES AS WELL AS THEIR CONFIRMATIONS IN THE FOLLOWING CASES : ANASUYA TRADELINE PVT. LTD., KOLKATA RS.25,00,000/- KALASH ADVERTISING PVT. LTD. MUMBAI RS.25,86,000/- COUNTSHIP COMMODITIES PVT. LTD. KOLKATA RS.25,00,000/- ZIWANI BARTEC PVT. LTD., KOLKATA RS.25,00,000/- PUNYA LEATHER PVT. LTD., KOLKATA RS.10,00,000/- GILLTEDEE VINCON PVT. LTD., KOLKATA RS.20,00,000/- --------------------- TOTAL RS.1,30,86,000/- --------------------- 16 ITA NOS.844 & 848/PN/2013 27. IT WAS FINALLY STATED THAT THE ASSESSEE, TO AVOID FURT HER LITIGATION AND FOR WANT OF PEACE OF MIND, WANTS TO SURRENDER THE A BOVE AMOUNT OF RS.1,30,86,000/-. THE AO ACCORDINGLY MADE ADDITION OF THE A BOVE AMOUNT U/S.68 OF THE I.T. ACT. 28. THE AO FURTHER NOTED THAT THE COMPANY HAS ALLOTTED S HARES TO THE DIRECTORS AND OTHER PERSONS OF SISTER CONCERNS FOR THE YEAR ENDING 2009 ONLY ON THE FACE VALUE AND APART FROM THE ABOVE THE C OMPANY HAS ALSO ALLOTTED SHARES TO UNKNOWN PERSONS/STRANGERS AT A PRE MIUM OF RS.1900/- PER SHARE IN THE YEAR UNDER CONSIDERATION. HE ANALYSED THE SHAREHOLDING PATTERN AS ON 31-03-2008 AND AS ON 31-03 -2009 AND NOTED THAT THE ASSESSEE DURING THE YEAR UNDER CONSIDE RATION HAS ALLOTTED SHARES TO RAM INFRASTRUCTURE LTD. WITHOUT ANY P REMIUM AND THOSE SHARES WERE HELD BY M/S. PRANJAL INFRASTRUCTURE P VT. LTD.. ACCORDING TO THE AO IF THE PREMIUM OF RS.1900/- PER SHARE WERE RECEIVED FROM STRANGERS, THEN WHY NOT THE SAME WERE CH ARGED BY PRANJAL INFRASTRUCTURE PVT. LTD. FROM RAM INFRASTRUCTURE LTD. THEREFORE, HE WAS OF THE OPINION THAT NO PREMIUM WAS ACTU ALLY RECEIVED AND JUST TO INTRODUCE OWN MONEY THE SHARE PREMIUM IN T HE NAME OF OTHERS HAS BEEN INTRODUCED. HE OBSERVED THAT THERE IS NO IMMOVABLE ASSET IN THE FIXED ASSETS SHOWN BY THE ASSESSEE IN THE BALANCE SHEET. THERE IS NO RESERVE AVAILABLE EXCEPT THE SHARE PREMIUM O F RS.16,77,70,000/-, PLUS ACCUMULATED PROFIT U/S.80IA OF RS.2,07,22,822/-. THE SHARE PREMIUM HAS BEEN SHOWN TO HA VE BEEN RECEIVED DURING THE YEAR UNDER CONSIDERATION AND IF THE S HARE PREMIUM IS REDUCED THE NET WORTH OF THE COMPANY IS ONLY RS.26,70 ,24,273/- DIVIDED BY TOTAL NO. OF SHARES 8,38,300. THUS, THE VALUE PER SHARE COMES TO ONLY RS.318.53, I.E. THE SHARE VALUE IN REAL TERMS HAVE COME DOWN FROM RS.362.39 AS ON 31-03-2008 TO RS.318.53 AS ON 31-03- 17 ITA NOS.844 & 848/PN/2013 2009. WHEN THE AO ASKED THE ASSESSEE TO JUSTIFY THE PREMIUM, THE ASSESSEE VIDE LETTER DATED 08-12-2011 SUBMITTED AS UND ER WHICH HAS BEEN REPRODUCED BY THE AO AT PAGE 14 OF THE ORDER A ND WHICH READS AS UNDER : DURING THE YEAR UNDER CONSIDERATION OUR COMPANY RAI SED ITS SHARE CAPITAL BY ISSUING 88300 EQUITY SHARES OF RS.100/- EACH AT PREM IUM OF RS.1900/-. THIS IS THE ONLY ALLOTMENT OF SHARES IN F.Y. 2008-09. WE HAVE ISSUED THE SHARES AT PREMIUM AS : A. THE VALUE OF EQUITY SHARE OF OUR COMPANY WAS SUBSTANTIA LLY INCREASED IN LAST 3 YEARS (SEE LIST-1 ATTACHED). B. DURING THE YEAR OUR GROUP COMPANIES ARE ALSO CARRYING GOUT PROJECT WORK TO THE TUNE OF AROUND RS.300/- CRORES AND THE G ROUP IS ALSO PLANNING TO BID FOR SOME MORE WORK SO THAT THE OVERAL L FINANCIAL POSITION OF THE GROUP CAN IMPROVE. C. DURING THE YEAR UNDER CONSIDERATION OUR COMPANY WAS A LSO PLANNING TO TAKE OVER ANOTHER ADJACENT TOLL PROJECT IN ORDER TO INCREASE ITS VOLUME OF OPERATION AND PROFITABILITY. D. PWD ALSO APPROACHED THE COMPANY FOR CARRYING OUT SOME ADDITIONAL WORK AND IN TURN WOULD INCREASE THE CONCESSION PERIOD SUITABLY. NATURALLY THE PROJECT PERIOD (I.E. THE COLLECTION P ERIOD) AND ALSO THE PROFITABILITY OF OUR COMPANY WILL INCREASE AND ALSO W ILL BE HELPFUL IN ORDER TO UNDERTAKE AND FOR THE PURPOSE OF MORE UTILI ZATION TO THE BENEFIT OF SHAREHOLDERS IN TERMS OF WORK AND DIVIDEND . BASED ON THE ABOVE REASONS, OUR COMPANY ISSUED SHARES AT T HE PREMIUM OF RS.1900/- PER SHARE AND THE INVESTORS ALSO RESPONDED T O THE SAME. 29. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. ACCORDING TO THE AO THE ASSESSEE HAS N O REASON FOR CHARGING SUCH A HEFTY PREMIUM AND THEREFORE IT CANNOT BE JUSTIFIED BY IT. KEEPING ALL THESE FACTS IN MIND, THE AO HELD THAT IT IS ITS OWN MONEY. THE VALUE OF SHARE PREMIUM FOR 88,300 SHARES COME S TO RS.16,77,70,000/-. OUT OF IT FOR 6543 SHARES THE ASSESSEE HAS ALREADY SURRENDERED THE SHARE VALUE AND THE SHARE PREMIUM AND THUS FOR THE BALANCE OF 81,757 SHARES THE VALUE OF SHARE PREMIUM COMES TO RS.15,53,38,300/-. THE AO, THEREFORE, ADDED THE ABOVE AMO UNT OF SHARE PREMIUM TO THE TOTAL INCOME OF THE ASSESSEE U/S.68 OF THE I.T. 18 ITA NOS.844 & 848/PN/2013 ACT. THE AO ALSO HAD MADE ADDITION OF RS.93,420/- U/S.68 IN CASE OF CONTRACTOR MR. CHANDRA KANTA SONAWANE FOR NON-FURNISHING OF CONFIRMATION LETTER WHERE NOTICE U/S.133(6) WAS RETURNED UNSERVE D. 30. SINCE THE REST OF THE PARTIES HAVE CONFIRMED THE TRAN SACTIONS THE AO FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE C ASE OF CIT VS. SUMATI DAYAL REPORTED IN 214 ITR 801 (SC) AND CIT VS. DURGA PRASAD MORE REPORTED IN 82 ITR 540 (SC) AND THE DECISION IN THE CASE OF MCDOWELL REPORTED IN 154 ITR 148 DID NOT ADD THE FACE V ALUE OF SHARES AS INCOME OF THE ASSESSEE. HOWEVER, HE PASSED ON THE IN FORMATION TO THE RESPECTIVE ASSESSING OFFICERS TO TAKE NECESSARY ACTIO NS IN THEIR CASES BY ADDING BACK THE SHARE PREMIUM WHICH THEY HAV E RECEIVED BACK IN CASH FROM THE ASSESSEE. 31. BEFORE CIT(A) THE ASSESSEE MADE ELABORATE SUBMISSIONS AND FILED CERTAIN DETAILS BASED ON WHICH THE LD.CIT(A) CALLED FOR A REM AND REPORT FROM THE AO. AFTER CONSIDERING THE REMAND REPORT OF THE AO AND THE REJOINDER OF THE ASSESSEE TO SUCH REMAND REPORT THE L D.CIT(A) NOT ONLY UPHELD THE ADDITION MADE BY THE AO BUT ALSO ENHANCED TH E INCOME OF THE ASSESSEE BY RS.1,17,07,700/- BEING THE FACE VALUE OF R S.100/- EACH FOR 81757 SHARES AND COMMISSION OF RS.35,32,000/- FOR ARRAN GING SUCH BOGUS SHARE CAPITAL. THE RELEVANT FINDING GIVEN BY THE C IT(A) AT PARA 36 OF THE ORDER READ AS UNDER : 36. AFTER TAKING INTO CONSIDERATION THE FACTS OF THE CASE AND THE VARIOUS DETAILS FURNISHED BY AO IN HIS REMAND REPORTS ESPECIALLY IN REGARD TO ACCOMMODATION ENTRY OF RS.15 CRORES BETWEEN THE APPEL LANT AND M/S. AMICITIA, I HAVE NO HESITATION WHATSOEVER, TO CONCLUD E THAT THE ENTIRE SHARE CAPITAL AND SHARE PREMIUM AMOUNTING TO RS.88,30,000/- AND RS/16,77,70,000 RESPECTIVELY ARC BOGUS. THE AO HAD MAD E AN ADDITION OF RS.1,30,86,000/- ON ACCOUNT OF FACE VALUE AND PREMIU M OF 6543 SHARES FOR WHICH SHARE APPLICANTS WERE NOT VERIFIABLE. [THE APPE LLANT HAD SURRENDERED THIS AMOUNT DURING THE ASSESSMENT PROCEEDINGS VIDE ITS LET TER DT. 08/12/2011 BUT RETRACTED SUBSEQUENTLY] AND RS.15,53,38 ,300/- ON ACCOUNT OF BOGUS SHARE PREMIUM. THE APPELLANT HAS ALSO NOT PRO VED CREDITWORTHINESS AND GENUINESS OF TRANSACTIONS IN RESPECT OF REMAINING COMPANIES NAMELY M/S. KALASH ADVERTISING (P) LTD., M/S. ROMEX CORPORATE, 19 ITA NOS.844 & 848/PN/2013 M/S. ALIANCE INTERMEDIATERIES & NETWORK (P) LTD. AND M/S. ALEMBIC SECURITIES (P) LTD. IN VIEW OF THE ABOVE AN ENHANCEM ENT NOTICE WAS SENT TO THE APPELLANT ON 13/12/2012 PROPOSING TO ADD BACK TH E ENTIRE SHARE CAPITAL OF RS.17,66,00,000/- INCLUDING SHARE PREMIUM INTRODUCED DURING A.Y. 2009-10, TO ITS INCOME BESIDES ENHANCING ITS INCOM E BY RS.52.98 LAC I.E. @ 3% OF RS.17.66 CRORE ON ACCOUNT OF COMMISSION PAID F OR ARRANGING THE ENTRIES. THE APPELLANT VIDE LETTER DT. 20/12/2012 RE ITERATED THAT IT HAD PROVED THE CREDITWORTHINESS OF THE SHARE APPLICANTS AND GENUINESS OF THE TRANSACTIONS. HOWEVER, THE CONTENTION OF THE APPELLAN T STANDS EXPOSED IN VIEW OF THE AFORESAID FINDINGS IN RESPECT OF THE SHARE CAPITAL TRANSACTIONS ESPECIALLY FROM AMICITIA INFRASTRUCTURE (P) LTD. (RS. 15 CRORE). THE APPELLANT'S CONTENTION IS THEREFORE REJECTED. THE ENT IRE SHARE CAPITAL OF RS.17,66,00,000/- IS TREATED AS BOGUS AND ADDED BACK U/ S 68 OF THE ACT. THE APPELLANT HAD BEEN GIVEN A REASONABLE OPPORTUNITY B Y THE AO DURING THE REMAND PROCEEDINGS TO CONFRONT THE REVELATIONS MADE B Y DIRECTORS OF M/S. AMICITIA INFRASTRUCTURE (P) LTD. AND M/S. B. C. BIYAN I PROJECTS (P) LTD. SINCE IT HAS BEEN ESTABLISHED THAT THE APPELLANT HAD PAID RS. 30 LAC AS COMMISSION FOR AN ENTRY OF RS. 15 CRORE I.E. 2%, I HEREBY ENHAN CE APPELLANT'S INCOME BY RS.35,32,000/- (2% OF RS.17,66,00,000/-) ON ACCOUNT O F COMMISSION PAID OUTSIDE THE BOOKS OF ACCOUNT AND RS.81,75,700/- ON ACC OUNT OF BOGUS SHARE CAPITAL (I.E. RS.17,66,00,000/- (-) RS.16,84,24,300/- , ALREADY ADDED BY A.O.) HENCE, TOTAL ADDITION ON ACCOUNT OF BOGUS SHARE CAPI TAL, SHARE PREMIUM AND COMMISSION COMES OUT TO BE RS.18,01,32,000/-. HENCE TH E APPELLANT'S INCOME IS ENHANCED BY RS. 1,17,07,700/- (RS.81,75,700/ - + RS.35,32,000/-). SINCE THE ENTIRE SHARE CAPITAL INCLUDING PREMIUM OF RS. 15 CRORE SHOWN TO HAVE BEEN RECEIVED FROM M/S. ARNICITIA INFRASTRUCTURE (P) LTD. HAS BEEN ADDED U/S 68 OF THE ACT, NO SEPARATE ADDITION OF UNEX PLAINED CASH AMOUNTING TO RS. 15 CORE, IS BEING MADE U/S 69 OF THE ACT IN THE HANDS OF THE APPELLANT. AO IS DIRECTED TO INITIATE PENALTY PR OCEEDINGS U/S 27L(1)(C) OF THE ACT ON ENHANCED INCOME ALSO FOR FURNISHING OF INA CCURATE PARTICULARS AND CONCEALMENT OF INCOME (BOGUS SHARE CAPITAL AND UN EXPLAINED EXPENSES IN THE FORM OF COMMISSION PAID). AO IS ALSO DIRECTED T O TAKE FOLLOW UP ACTION IN THE CASE OF M/S. B.C. PBIYANI PROJECTS (P) L TD., M/S. AMICITIA INFRASTRUCTURE (P) LTD., M/S. RAM INFRASTRUCTURE (P) L TD. AND M/S. PRANJAL INFRASTRUCTURE (P) LTD. IN THE LIGHT OF THE REVELATI ONS MADE BY VARIOUS PERSONS IN REGARD TO CASH DEPOSITS, BOGUS TDS CERTIFICATE S AND BOGUS PAYMENTS BY M/S. PRANJAL INFRASTRUCTURE (P) LTD. TO M/ S. B.C. BIYANI PROJECTS (P) LTD. 32. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US 33. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO PAGE 20 OF THE PAPER BOOK DREW THE ATTENTION OF THE BENCH TO THE CONFIRMATION OF ACCOUNTS BY SHRI CHANDRAKANT SONAWANE, LABOUR CONTRACTOR. HE SU BMITTED THAT THE ORDER OF THE CIT(A) IS SILENT ON THIS ISSUE WHICH RELAT ES TO ADDITION OF RS.93,420/-. 20 ITA NOS.844 & 848/PN/2013 34. SO FAR AS VARIOUS OTHER PARTIES ARE CONCERNED WHO HAVE INVESTED IN THE SHARE OF THE ASSESSEE COMPANY THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS SURRENDERED THE SHAR E CAPITAL AND SHARE PREMIUM OF THE FOLLOWING 6 PARTIES : 1 COUNTSHIP COMMODITIES PVT. LTD. 85, NETAJI SUBHAS ROAD, PS HARE STREET, KOLKATA BUSINESS 1250 - 100 125000 2 ANUSUYA TRADELINK PVT. LTD. 56/1/1 KINGS ROAD, HOWARA (W.B.)-711101 BUSINESS 1250 - 100 125000 3 ZIWANI BARTEC PVT. LTD. 85, NETAJI SUBHAS ROAD, 3 RD FLOOR, PS HARE STREET, KOLKATA (WB) BUSINESS 1250 - 100 125000 4 KALASH ADVERTISING PVT. LTD. BHANDARI BUNGLOW, SUBHASH LANE MALAD WEST MUMBAI BUSINESS 1293 - 100 129300 5 PUNYA LEATHER PVT. LTD. 85, N.S. ROAD, KOLKATA (WB) 700 001 BUSINESS 500 - 100 50000 6 GILTEDEE VINCON PVT. LTD. 85, NETAJI SUBHAS ROAD, KOLKATA (WB) 700 001 BUSINESS 1000 - 100 100000 35. AS REGARDS THE REMAINING PARTIES ARE CONCERNED HE SUBMITTED THAT DESPITE THE DETAILS GIVEN BY THE ASSESSEE THE LOWER AUTHORITIES HAVE NOT CONSIDERED THE ISSUE PROPERLY. HE SUBMITTED THAT T HE AO IN THE ORDER PASSED U/S.143(3) HAS ACCEPTED THE SHARE CAPITAL P ORTION IN CASE OF 8 PARTIES BUT DISALLOWED THE SHARE PREMIUM PORTION HOLDIN G THAT THE SAME IS BOGUS. THE CIT(A) ON THE OTHER HAND ENHANCED T HE INCOME BY DISALLOWING THE SHARE CAPITAL PORTION ALSO. HE HAS FURTHER ENHANCED THE INCOME BY RS.35,32,000/- BEING COMMISSION PAID FOR ARRANGING THE SHARE CAPITAL WHICH HAS BEEN TREATED AS BOGUS. 36. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO THE APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE SUBMITTED THAT SUBSEQUENT TO THE INFORMATION GIVEN BY THE AO, THE AO IN THE CASE OF M/S. AMIT ICIA INFRASTRUCTURE PVT. LTD. AND M/S. PRANJAL INFRASTRUCTURE PVT. LTD. HAVE PASSED THE ORDERS U/S.143(3)/147 FOR A.Y. 2009-10. ADMITT EDLY, THESE 21 ITA NOS.844 & 848/PN/2013 ORDERS WERE PASSED AFTER THE ORDER OF THE CIT(A), THERE FORE, THESE COULD NOT BE PRODUCED BEFORE THE LOWER AUTHORITIES. SO FAR AS THE ASSESSMENT ORDER PASSED U/S.143(3) FOR A.Y. 2009-10 IN CASE OF M/S. PR ANJAL INFRASTRUCTURE PVT. LTD. AND M/S. B.C. BIYANI PROJECTS P VT. LTD. HE SUBMITTED THAT THESE ORDERS WERE OBTAINED BY THE ASS ESSEE AFTER THE COMPLETION OF THE ORDER OF THE CIT(A). SINCE THESE DOCUMEN TS ARE OF VITAL IMPORTANCE TO DECIDE THE APPEAL, THEREFORE, THE SAME SHOULD BE ACCEPTED AND THE MATTER MAY BE DECIDED ACCORDINGLY. 37. HE SUBMITTED THAT THE AO IN THE RE-ASSESSMENT PRO CEEDING IN THE CASE OF AMICITIA INFRASTRUCTURE PVT. LTD. HAS ACCEPTED TH E INVESTMENT IN PURCHASE OF SHARES IN HARI INFRASTRUCTURE PVT. LTD. AT A PREMIUM OF RS.1,900/- PER SHARE. THE ORDER DATED 08-03-2013 PASS ED U/S.143(3)/147 IS AFTER THE DATE OF THE ORDER OF THE CIT(A) WHICH IS DATED 18-02-2013. THEREFORE, THE ADDITION TO THIS EXTENT HAS TO BE DELETED. 38. SO FAR AS THE INVESTMENT BY THE OTHER PARTIES ARE CONCERNED (8 NO.) HE SUBMITTED THAT THE AO HAD MADE THE ADDITION ONLY IN RESPECT TO THE SHARE PREMIUM ON THE GROUND THAT NO UNKNOWN PART Y WOULD GIVE SUCH A HEFTY PREMIUM AND ACCEPTED THE AMOUNT OF FACE V ALUE OF SHARES RECEIVED BY THE COMPANY FROM THESE COMPANIES AS GENUINE . HE SUBMITTED THAT THE COMMERCIAL PRUDENCE HAS TO BE LOOKED INTO FROM THE BUSINESSMANS POINT OF VIEW. THEREFORE, THE VIEW OF THE AO AND CIT(A) ON THIS ISSUE IS UNTENABLE IN LAW. FURTHER, THE AO HAS RELI ED ON THE STATEMENT OF THE PERSONS WHO ARE NOT INVOLVED IN DAY-TO-DAY OPER ATIONS. THE STATEMENTS HAVE ALSO BEEN RECORDED SUBSEQUENTLY. THIS FACT HAS NOT BEEN DEALT WITH PROPERLY BY THE CIT(A). HE SUBMITTED THAT THE CIT(A) CALLED FOR THE REMAND REPORT VIDE LETTER NO.NSK/CIT (A)-II/R R APPEAL NO.405/11-12/2012-13/241 DATED 15-06-2012 & NS K/CIT(A)- 22 ITA NOS.844 & 848/PN/2013 II/R R APPEAL NO.405/11/1-12/2012-13/241 DATED 15-06- 2012. HOWEVER, THE AO CONTINUED THE INVESTIGATIONS EVEN AFTER C OMPLETION OF ASSESSMENT PROCEEDINGS AND AFTER SUBMITTING REMAND REPO RT AND SUPPLEMENTARY REMAND REPORT TO THE CIT(A). THE CIT(A) HA S ALSO RELIED ON AOS REPORT/LETTER DATED 07-02-2013 AND DATED 16- 01-2013. IT WAS NEVER CONFRONTED TO THE ASSESSEE. HENCE, VIOLATION OF PRIN CIPLES OF NATURAL JUSTICE HAS BEEN DONE ON ONE HAND AND THIS SOR T OF ACTION BY THE AO AS WELL AS THE CIT(A) SHOWS THAT THEIR APPROACH W AS BIASED AND TO MAKE ADDITION IN ALL CIRCUMSTANCES BY IGNORING THE OVERW HELMING EVIDENCE SUBMITTED BY THE ASSESSEE TO PROVE THE IDENTIT Y, GENUINENESS AND CREDIT WORTHINESS OF THESE TRANSACTIONS AND TO COMP LY WITH ALL REQUIREMENTS OF SECTION 68 OF THE I.T. ACT, 1961. HE SUBM ITTED THAT NEITHER THE AO NOR THE CIT(A) EITHER IN THE COURSE OF ORIG INAL ASSESSMENT PROCEEDINGS OR IN REMAND PROCEEDINGS HAVE B EEN ABLE TO FIND OUT THAT THIS MONEY WAS UNACCOUNTED MONEY OF THE A SSESSEE. THERE IS NO IOTA OF FINDING AS TO HOW THE ASSESSEE COMPA NY OR ITS HOLDING COMPANY OR OTHERWISE COULD HAVE GENERATED THIS MUCH OF UNACCOUNTED CASH SO AS TO ROUTE THE SAME IN THIS FORM. RELYING ON VARIOUS DECISIONS HE SUBMITTED THAT WHERE THE SHARE APP LICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS S HAREHOLDERS WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDA NCE WITH LAW BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY. FOR THE ABOVE PROPOSITION THE LD. COUNSEL FOR T HE ASSESSEE RELIED ON THE FOLLOWING DECISIONS : 1. CIT VS. LOVELY EXPORTS PVT.LTD. 216 CTR 195 (SC) 2. CIT VS. DIVINE LEASING & FINANCE 299 ITR 268 (SC) 3. CIT VS. CREATIVE WORLD TELEFILMS LTD 333 ITR 100 (B OMBAY) 4. CIT VS. SIRI RAM SYAL HYDRO POWER PVT. LTD. 196 TA XMANN 441 (DELHI) 5. BHAV SHAKTI STEEL MINES PVT. LTD. VS. CIT 320 ITR 619 (DELHI) 6. CIT VS. DWARKADHISH FINANCIAL SERVICES 197 CTR (DEL) 202 7. CIT VS. WINSTRAL PETROCHEMICALS PVT. LTD. 333 ITR 60 3 (DELHI) 23 ITA NOS.844 & 848/PN/2013 8. CIT VS. M/S. VALUE CAPITAL SERVICES PVT. LTD. 307 IT R 334 (DELHI) 9. CIT VS. MAKHNI AND TYAGI PVT. LTD. 267 ITR 433 (DE LHI) 10. CIT VS. ANTARCTICA INVESTMENT PVT. LTD. 262 ITR 49 3 (DELHI) 11. CIT VS. DOLPHIN CANPACK LTD. 283 ITR 190 (DELHI) 12. CIT VS. ACHAL INVESTMENT LTD. 268 ITR 211 (DELHI) 13. A-ONE HOUSING COMPLEX LTD. VS. ITO 110 ITD 361 14. HINDUSTHAN TEA TREADING CO. LTD. VS. CIT 263 ITR 28 9 (CALCUTTA) 15. CIT-VS. NAMASTEY CHEMICALS PVT. LTD. 33 TAXMANN.COM 271 (GUJARAT) 16. HINDUSTAN INKS & RESINS LTD. VS. DY.CIT 60 DTR 18 (KAR NATAKA) 17. CIT & ANR VS. ARUNANANDA TEXTILES PVT. LTD. 333 ITR 116 (KARNATAKA) 18. CIT VS. ELECTRO POLYCHEM LTD. 294 ITR 661 (MADRAS) 19. CIT VS. GOBI TEXTILES LTD. 294 ITR 663 (MADRAS) 20. CIT VS. STL EXTRUSION PVT. LTD. 333 ITR 269 (MADHYA PRADESH) 21. CIT VS. SHREE BARKHA SYNTHETICS LTD. 270 ITR 477 (R AJASTHAN) 22. CIT VS. FIRST POINT FINANCE LTD. 286 ITR 477 (RAJAST HAN) 23. CIT VS. AKJ GRANITES PVT. LTD. 301 ITR 298 (RAJASTHA N) 24. CIT VS. OASIS HOSPITALS (P) LTD. 333 ITR 119 (DELHI) 25. CIT VS. GP INTERNATIONAL LTD. 325 ITR 25 (PUNJAY & HARYANA) 26. CIT VS. JAY DEE SECURITIES AND FINANCE LTD. 350 ITR 220 (ALLAHABAD) 27. CIT VS. VICTOR ELECTODES LTD. ITA NO.586/2010 (DEL HI) 28. CIT VS. ULTRATECH FINANCE & INVESTMENT LTD. ITA NO. 1122/2010 (DELHI) 29. CIT VS. HLT FINANCE PVT. LTD. ITA NO.1133/2010 (DE LHI) 30. CIT VS. J.J. JINDAL INFIN PVT. LTD. ITA NO.1507/20 10 (DELHI) 31. CIT VS. DERBY OVERSEAS PVT. LTD. ITA NO.1497/2010 (D ELHI) 32. CIT VS. EXPO GLOBE INDIA LTD. ITA NO.1257/2011 (DE LHI) 33. CIT VS. M/S. NATRAJ ALBUM INDUSTRIES PVT. LTD. ITA NO .15423/2010 (DELHI) 34. CIT VS. RAGHVI FINANCE LTD. ITA NO.1264/2010 (DELH I) 35. CIT VS. KAMDHENU STEEL & ALLOYS LTD. ITA NO.972/200 9 (DELHI) 36. CIT VS. BHAVANA PROPERTY DEVELOPERS LTD. ITA NO.103 9/2009 (GUJARAT) 37. CIT VS. HIMATSU BIMET LTD. ITA NO.546/2009 (GUJARAT ) 38. CIT VS. UJALA DYEING & PRINTING MILLS PVT. LTD. ITA NO.375/2008 (GUJARAT) 39. CIT VS. M/S. GOYAL SYNTHETICS PVT. LTD. ITA NO.498/2 010 (GUJARAT) 40. CIT VS. M/S. AKS ALLOYS PVT. LTD. ITA NO.495/2011 (MA DRAS) 41. CIT VS. AKJ GRANITES PVT. LTD. 212 CTR 25 (RAJASTHAN) 42. CIT VS. M/S. SANCHATI PROJECTS PVT. LTD. ITA NO.140/ 2011 (CALCUTTA) 43. ACIT VS. THE MAHAKALI DEVELOPERS PATIALA & RESORTS PVT. LTD. ITA NO.544/CHD/2010 (ITAT CHANDIGARH) 39. HE SUBMITTED THAT SINCE THE ASSESSEE IN THE INSTANT CASE HAS GIVEN FULL DETAILS OF THE SHAREHOLDERS INCLUDING THEIR PAN NO., M ANNER OF RECEIPT, I.E. CHEQUE NO. OR DD NO. ETC, THEREFORE, ADDITION, IF ANY CAN BE MADE IN THE HANDS OF THOSE SHAREHOLDERS ONLY AND N OT IN THE HANDS OF THE ASSESSEE COMPANY. 40. IN HIS ALTERNATION CONTENTION HE SUBMITTED THAT SINCE VARIOUS DOCUMENTARY EVIDENCES FILED BEFORE THE LOWER AUTHORITIES WE RE NOT 24 ITA NOS.844 & 848/PN/2013 PROPERLY APPRECIATED BY THEM, THEREFORE, THE MATTER MAY BE RESTORED TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE ISSUE AFRE SH IN THE LIGHT OF THE VARIOUS DECISIONS INCLUDING THE DECISION OF THE JURISDIC TIONAL HIGH COURT. 41. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE ASSESSEE WAS UNABLE TO SUBSTANTIATE THE HUGE AMOUNT OF SHARE PREMIUM OF RS.1,900/- PER SHARE ON A FACE VALUE OF RS.100/- CHARGED BY THE ASSESSEE FROM SHAREHOLDERS WHO ARE NOT KNOWN TO IT. HE SUBMITTED THAT ON BEING CONFRONTED BY THE AO THE ASSESSEE SURRE NDERED THE SHARE CAPITAL RECEIVED FROM 6 CALCUTTA BASED COMPANIES. HOWEVE R, FOR THE REMAINING COMPANIES THE ASSESSEE WAS UNABLE TO CONCLUSIV ELY PROVE SUCH HUGE AMOUNT CHARGED AS SHARE PREMIUM. HE SUBMITT ED THAT THE LD.CIT(A) HAS GIVEN COGENT REASONS WHILE SUSTAINING THE ADD ITION MADE BY THE AO AS WELL AS BY ENHANCING THE INCOME OF THE ASS ESSEE TO THE EXTENT OF SHARE PREMIUM CHARGED BY IT. THE VARIOUS DECIS IONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE ARE NOT APPLICABLE T O THE FACTS OF THE PRESENT CASE AND ARE DISTINGUISHABLE. HE ACCORDINGL Y SUBMITTED THAT THE ORDER OF THE CIT(A) BE UPHELD AND THE GROUNDS RAISED BY THE ASSESSEE ON THIS ISSUE BE DISMISSED. 42. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIO US DECISIONS CITED BEFORE US. WE FIND THE ASSESSEE IN THE INSTANT CASE HAS ISSUED 88300 SHARES OF RS.100/- EACH WITH PREMIUM OF RS.1,900/- PER SHARE, THE DETAILS OF WHICH ARE ALREADY GIVEN AT PARA 22 OF THIS O RDER. WE FIND THE AO ISSUED NOTICE U/S.133(6) TO THE PARTIES CONCERNED OUT OF WHICH NOTICE IN RESPECT OF 6 COMPANIES WERE RECEIVED BACK UNS ERVED. AFTER 25 ITA NOS.844 & 848/PN/2013 THE SAME WAS BROUGHT TO THE NOTICE OF THE ASSESSEE AN D ON SUBSEQUENT CONFRONTATION THE ASSESSEE SURRENDERED THE SHARE CA PITAL RECEIVED FROM THE FOLLOWING COMPANIES : 1 COUNTSHIP COMMODITIES PVT. LTD. 85, NETAJI SUBHAS ROAD, PS HARE STREET, KOLKATA BUSINESS 1250 - 100 125000 2 ANUSUYA TRADELINK PVT. LTD. 56/1/1 KINGS ROAD, HOWARA (W.B.)-711101 BUSINESS 1250 - 100 125000 3 ZIWANI BARTEC PVT. LTD. 85, NETAJI SUBHAS ROAD, 3 RD FLOOR, PS HARE STREET, KOLKATA (WB) BUSINESS 1250 - 100 125000 4 KALASH ADVERTISING PVT. LTD. BHANDARI BUNGLOW, SUBHASH LANE MALAD WEST MUMBAI BUSINESS 1293 - 100 129300 5 PUNYA LEATHER PVT. LTD. 85, N.S. ROAD, KOLKATA (WB) 700 001 BUSINESS 500 - 100 50000 6 GILTEDEE VINCON PVT. LTD. 85, NETAJI SUBHAS ROAD, KOLKATA (WB) 700 001 BUSINESS 1000 - 100 100000 43. SINCE ASSESSEE HAS SURRENDERED THE SHARE CAPITAL R ECEIVED FROM THE ABOVE PARTIES AND LD. COUNSEL FOR THE ASSESSEE ALSO DID NOT BRING TO OUR NOTICE ANY OTHER MATERIAL, THEREFORE, ADDITION TO TH IS EXTENT SUSTAINED BY AO AND UPHELD BY THE CIT(A) IS UPHELD. 44. SO FAR AS OTHER PARTIES ARE CONCERNED WE FIND THE A O ACCEPTED THE FACE VALUE OF THE SHARES OF RS.100/- EACH IN RESPECT OF 81757 SHARES INVESTED BY THESE COMPANIES. HOWEVER, HE DID NOT ACCEPT THE HUGE AMOUNT OF SHARE PREMIUM OF RS.1,900/- PER SHARE OF RS.15,53,38,300/- RELATABLE TO 81,757 SHARES. SINCE THE AS SESSEE HAS ALREADY SURRENDERED THE SHARE CAPITAL AND SHARE PREMIUM IN RESPECT OF 6 PARTIES NUMBERING 6543 SHARES THE AO MADE ADDITION OF RS.15,53,38,300/- FOR THE BALANCE OF 81,757 SHARES BEING THE SHARE PREMIUM U/S.68 OF THE I.T. ACT. WHILE DOING SO, THE AO HAD ALSO GIVEN A FINDING THAT THE PARTIES HAVE CONFIRMED THE TRANSACTIONS . HOWEVER, SINCE THE PARTIES WHO HAVE CONFIRMED THE TRANSACTIONS HA VE RECEIVED BASK IN CASH THE SHARE PREMIUM PAID TO THE ASSESSEE TH E AO TREATED 26 ITA NOS.844 & 848/PN/2013 THE SHARE PREMIUM AS MERE ACCOMMODATION ENTRIES TO THE ASSESSEE. HE ACCORDINGLY PASSED ON INFORMATION TO THE RESPECTIVE A SSESSING OFFICERS TO TAKE NECESSARY ACTION IN THEIR CASE. WE FIND IN APPEAL THE LD.CIT(A) NOT ONLY CONFIRMED THE SHARE PREMIUM AMOUNT ADD ED BY THE AO BUT ALSO ENHANCED THE INCOME OF THE ASSESSEE TO TH E EXTENT OF THE FACE VALUE OF THE SHARE CAPITAL IN RESPECT OF 81750 SHARES OF THE FACE VALUE OF RS.100/-, I.E. RS.81,75,700/-. HE ALSO ENHANCED THE IN COME OF THE ASSESSEE TO THE EXTENT OF RS.35,32,000/- BEING THE COMMISSION PAID FOR ARRANGING THE SHARE CAPITAL. IN EFFECT THE CIT(A)EN HANCED THE INCOME BY RS.1,17,07,700/-. 45. IT IS THE CASE OF THE LD. COUNSEL FOR THE ASSESSEE T HAT IN THE CASE OF AMICITIA INFRASTRUCTURE PVT. LTD. FROM WHOM THE ASSESSEE HAS OBTAINED SHARE CAPITAL OF RS.15 CRORES, THE AO IN THE ORDE R PASSED U/S.143(3)/147 DATED 08-03-2013, WHICH IS AFTER THE DATE O F ORDER OF THE CIT(A), HAS ACCEPTED SUCH INVESTMENT IN SHARES WITH PREMIUM OF RS.1,900/- PER SHARE OF THE FACE VALUE OF RS.100/-. SO FAR AS THE SHARES INVESTED BY THE OTHER COMPANIES ARE CONCERNED, IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT SINCE THE VOLUMINOUS DETAILS FILED BY THE ASSESSEE HAVE NOT BEEN PRO PERLY APPRECIATED BY THE LOWER AUTHORITIES AND SINCE THE STAT EMENTS RECORDED AT THE BACK OF THE ASSESSEE WERE NOT CONFRONTED TO TH E ASSESSEE, THEREFORE, NO ADDITION CAN BE MADE U/S.68 OF THE I.T. ACT . ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE ADDITION, IF ANY, CAN BE MA DE IN THE HANDS OF THE BOGUS SHAREHOLDERS WHOSE DETAILS SUCH AS N AME AND ADDRESS, PAN NUMBER ETC WERE GIVEN TO THE AO AND NO A DDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE. 27 ITA NOS.844 & 848/PN/2013 46. SO FAR AS THE INVESTMENT IN SHARE CAPITAL OF THE ASSE SSEE COMPANY BY AMICITIA INFRASTRUCTURE PVT. LTD. IS CONCERNED WE FIND THE AO OF AMICITIA INFRASTRUCTURE PVT. LTD. HAS CONSIDERED THE INVESTMENT BY IT IN THE SHARES OF THE ASSESSEE COMPANY AND HAS NO T MADE ANY ADDITION IN THE ORDER PASSED U/S.143(3)/147 DATED 08-03-2 013. RELEVANT ORDER OF THE AO WHICH IS PASSED AFTER THE ORDER OF THE CIT(A) DATED 18-02-2013 READ AS UNDER : ASSESSMENT ORDER IN THIS CASE NOTICE U/S.148 WAS ISSUED ON 15-02-2012, W HICH WAS DULY SERVED. IN COMPLIANCE TO NOTICE U/S.148, THE ASSE SSEE FILED A LETTER ON 13-03-2012 STATING THAT THE RETURN OF INCOME FILED U /S.139(1) ON 30-09- 2009 VIDE E-FILING NO.98054580300909 MAY BE CONSIDER ED AS THE RETURN FILED U/S.148 OF THE I.T.ACT, 1961. SUBSEQUENTLY, NO TICE U/S.143(2) AND 142(1) WERE ISSUED ON 12-10-2012, SEEKING COMPLIANCES. INITIALLY, SUBMISSION WAS FILED ON 01-11-2012, AFTER CONSIDERING WH ICH NOTICE U/S.142(1) WAS AGAIN ISSUED ON 19-11-2012. ON THE BASI S OF INFORMATION SUBMITTED AGAIN, NOTICE U/S.142(1) WAS ISSUED ON 14-12-2 012 AND ON 21- 02-2013. SUBMISSIONS ARE FILED ON 20-02-2013, 21-02-2 013, 28-02-2013 AND ON 04-03-2013. THE CASE WAS REPRESENTED BY SHRI D EVENDRA AGRAWAL, ITP AUTHORIZED BY THE ASSESSEE & ALSO BY DIRECTOR SHRI M URLIDHAR P. JAWALE. 2) DURING ASSESSMENT PROCEEDINGS, VERIFICATION OF PURCHA SES AND SALES MADE DURING THE YEAR WERE MADE AND CONFIRMATION THE REOF WERE BROUGHT ON RECORD. ALSO VERIFICATION IN RESPECT OF PURCHASE O F SHARES AT PREMIUM OF RS.1,900/- PER SHARE WAS ALSO MADE. AS PER SUBMISSIONS FILE D BY THE ASSESSEE, IT IS SEEN THAT THE SHARES WERE PURCHASED OUT OF A MOUNT RECEIVED FROM B.C. BIYANI PROJECT PVT. LTD., BHUSAWAL. IT WA S ALSO SUBMITTED IN THE ASSESSMENT PROCEEDINGS THAT PROCEEDING WERE RECORDED U/S. 131 OF THE I.T. ACT, 1961 BEFORE JT. CIT, RANGE-1, JALGAON FROM TIM E TO TIME AS A RESULT OF SUCH PROCEEDINGS IT HAS BEEN SUBMITTED ON RECORD THAT THE RELEVANT PORTION OF THE SUBMISSION MADE ON 21-02-2013 IS REPRODUCED AS UN DER : IN THIS STATEMENTS IT HAS COMES TO OUR KNOWLEDGE T HAT, MR. MANOJ BANSILAL BIYANI DIRECTOR OF B.C. BIYANI PROJECTS PVT. LTD. B HUSAWAL HAS STATED THAT THE CASH DEPOSITED IN THEIR NAHATA BANK ACCOUNT ON 24-0 3-2009, 28-03-2009 & 30-03-2009 WAS NOT BELONGS TO B.C. BIYANI PROJECTS PVT. LTD., BHUSAWAL, THIS CASH WAS ARRANGED BY MR. PRADEEP NEHETE DIRECTOR OF HARI INFRASTRUCTURE PVT. LTD., JALGAON, AND THERE ARE ACCOMMODATION EN TRIES MADE FOR THE PURPOSE OF HAIR INFRASTRUCTURE PVT. LTD. JALGAON. B.C. BIYANI PROJECTS PVT. LTD., BHUSAWAL COMPANY HA S ISSUED THE ACCOUNT PAYEE CHEQUES TO OUR COMPANY AND OUR COMPANY HAS PA ID THE ENTIRE AMOUNT TO HARI INFRASTRUCTURE PVT. LTD. JALGAON BY ACCOUNT PAYEE CHEQUES ONLY, WHICH MAY PLEASE BE ACCEPTED. 3) CONSIDERING THE FACTS OF THE CASE OF THE STATEMENTS MADE, IT IS OBSERVED THAT AMOUNT HAS BEEN RECEIVED AS LOAN FROM B. C. BIYANI PROJECTS PVT. LTD., BHUSAWAL, WHICH HAS BEEN UTILIZED FOR PURC HASE OF SHARE IN HARI INFRASTRUCTURE PVT. LTD. AT A PREMIUM OF RS.1,900/- P ER SHARE. ALTHOUGH, THE 28 ITA NOS.844 & 848/PN/2013 SOURCES OF FUNDS HAVE BEEN EXPLAINED AS FUNDS HAVING REC EIVED FROM B.C. BIYANI PROJECTS PVT. LTD., AT THE SAME TIME THE TRANSA CTION OF RECEIVED FUNDS FROM B.C. BIYANI PROJECTS PVT. LTD., CAUSE APPLICABIL ITY OF PROVISION OF SEC.2(22)(E) OF THE I.T. ACT, 1961 IN THE CASES OF D IRECTORS SHRI MANOJ B. BIYANI AND SHRI VINOD B. BIYANI WHO HAVE SUBSTANTIAL INTEREST IN THE COMPANY B.C. BIYANI PROJECTS PVT. LTD. THE CONCERNED AO IS BEING INTIMATED OF THE FACTS OF THE CASE FOR INITIATING PROCEEDINGS U/ S.2(22)(E) OF THE I.T. ACT, 1961 IN THE CASE OF DIRECTORS HOLDING SUBSTANTIAL INTER EST IN THE COMPANY B.C. BIYANI PROJECTS PVT. LTD., BHUSAWAL. 47. SINCE THIS IS AN ADDITIONAL EVIDENCE FILED BEFORE US AND SINCE THE LOWER AUTHORITIES HAD NO BENEFIT OF THIS ASSESSMENT ORDER, THEREFORE, WE ADMIT THE ADDITIONAL EVIDENCES FILED BY LD. COUNSEL FOR THE AS SESSEE AND RESTORE THIS ISSUE TO THE FILE OF THE AO WITH A DIRECTIO N TO VERIFY THE RECORDS FROM THE AO OF AMICITIA INFRASTRUCTURE PVT. LTD. I N CASE THE INVESTMENT BY AMICITIA INFRASTRUCTURE PVT. LTD. IN THE SHAR ES OF HARI INFRASTRUCTURE PVT. LTD. HAS BEEN ACCEPTED BY THE AO O F AMICITIA INFRASTRUCTURE PVT. LTD., THEN IN THAT CASE NO ADDITION C AN BE MADE IN THE HANDS OF THE ASSESSEE AND THE AO HAS TO DELETE TH E ADDITION TO THIS EXTENT. WE HOLD AND DIRECT ACCORDINGLY. 48. SO FAR AS THE INVESTMENT BY THE REMAINING 8 PARTIES ARE CONCERNED ADMITTEDLY THE ASSESSEE HAS PROVIDED THE CO MPLETE DETAILS INCLUDING NAMES AND ADDRESSES, PAN NUMBERS, DETAILS OF THE INVESTORS AND THE DETAILS OF CHEQUE NOS. ETC. THROUGH WHICH THE AMO UNTS HAVE BEEN RECEIVED. WE ALSO FIND FORCE FROM THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE STATEMENT RECORDED FROM DIFFERENT PARTIES WERE NOT CONFRONTED TO THE ASSESSEE AND HE WA S NOT PROVIDED WITH AN OPPORTUNITY TO REBUT THE SAME. SUBSEQUENT TO THE PASSING OF THE ORDER OF THE CIT(A) VARIOUS DECISIONS HAVE COME ACCOR DING TO WHICH ADDITION CANNOT BE MADE IN THE HANDS OF THE ASSESSEE CO MPANY WHERE IT HAS GIVEN THE NAMES AND ADDRESSES, PAN NUMBERS AND BANK ACCOUNTS DETAILS OF THE ALLEGED BOGUS SHAREHOLDERS AND TH E ADDITION 29 ITA NOS.844 & 848/PN/2013 CAN BE MADE ONLY IN THE HANDS OF THE BOGUS SHARE HOLDE RS. THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND IN TH E INTEREST OF JUSTICE, WE RESTORE THIS ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE ISSUE AFRESH AND IN ACCORDANCE WITH LAW AFTER G IVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. 49. SO FAR AS THE ADDITION OF RS.93,420/- IN THE CASE OF SH RI CHANDRAKANT SONAWANE IS CONCERNED, WE FIND THE CONFIRMATIO N LETTER FILED BY THE ASSESSEE WAS NOT PROPERLY CONSIDERED AND A DJUDICATED BY THE AO OR THE CIT(A). WE THEREFORE REMIT THIS ISSUE ALSO T O THE FILE OF THE AO FOR FRESH ADJUDICATION. GROUNDS OF APPEAL NO.2 TO 7 BY THE ASSESSEE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 50. GROUND OF APPEAL NO.8 BY THE ASSESSEE RELATE TO PAR T RELIEF GIVEN BY THE CIT(A) OUT OF THE ADDITION OF RS.6,11,00,000/- BY THE AO ON ACCOUNT OF REBATE OF INTEREST AND WAIVER OF LOAN. 51. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAS T AKEN LOAN FOR BUSINESS PURPOSES FROM CHANDRAKANT HARI BADHE SIR CREDIT COOPERATIVE SOCIETY. THE SOCIETY AFTER SETTLEMENT WITH TH E ASSESSEE HAS WAIVED INTEREST OF RS.3.78 CRORES AND PRINCIPAL AMOUNT OF RS .2.33 CRORES. THE AO, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE ABOVE-MENTIONED WAIVER OF INTEREST AND PRINCIPAL AMOUNT SH OULD NOT BE CHARGED TO TAX. THE ASSESSEE VIDE LETTER DATED 07-12- 2011 REPLIED AS UNDER : AS REGARDS WAIVER OF LOAN OF RS.2.33 CR. FROM SOCIETY LOAN : A. AS PER THE INSTRUCTION OF THE COMMISSIONER OF COOPERATI VE SOCIETY, PUNE, THE COMPANY HAS REPAID IN FULL RS.24.75 CRORES T O SOCIETY AGAINST 30 ITA NOS.844 & 848/PN/2013 THE PRINCIPAL OUTSTANDING BALANCE OF RS.27.08 CRORES. THE BALANCE PRINCIPAL AMOUNT OF RS.2.33 CRORES IS WAIVED BY SOCIETY . B. APART FROM WAIVER OF RS.2.33 CRORES THE SOCIETY HAS ALSO WAIVED RS.3.78 CRORES CHARGED TOWARDS INTEREST ON LOAN FROM THE BEGIN NING TILL DATE OF CLOSURE OF ACCOUNT. THE COMPANY HAS NOT RECORDED INT EREST OF RS.3.78 CRORES IN THE BOOKS OF ACCOUNTS. C. THE AMOUNT OF RS.2.33/- HAS BEEN REDUCED BY THE COMPA NY FROM THE OPENING BALANCE OF B.O.T. PROJECT COST. IT IS SUBMITT ED OUR COMPANY HAS TAKEN AND UTILIZED THE LOAN FOR CONSTRUCTION OF B.O. T. PROJECT, WHICH IS A CAPITAL ASSET. THEREFORE, THE WAIVER IN THE LOAN HA S BEEN REDUCED FROM THE PROJECT COST. D. IT IS SUBMITTED THAT OUR COMPANY HAS NOT DEBITED AND C LAIMED DEDUCTION OF ANY INTEREST CHARGED BY THE SOCIETY. THEREFORE, A S PER OUR OPINION THE QUESTION OF WAIVER OF LOAN OF RS.2.33 AS REVENUE INCOM E DOES NOT ARISE. IT IS SUBMITTED THAT WE HAVE RELIED ON THE FOLLOWING DECISIONS : I. HONBLE BOMBAY HIGH COURT (2003-(IT2)-GJX-0042-BOM) IN CASE OF MAHINDRA AND MAHINDRA V. COMMISSIONER OF INCOME TA X DECISION COPY ALREADY SUBMITTED WITH OUR PREVIOUS SUBMI SSION DATED IST SEPT. 2011. II. DECIDED BY ITAT, AHMEDABAD BENCH B, AHMEDABAD IN THE CASE OF GOVINDBHAI C. PATEL V. DCIT, APPEAL NO. ITA NO.1675/AHD/2009, DECIDED ON OCTOBER 30, 2009. III. [2009] 30 SOT 31 (MUM), IN THE ITAT MUMBAI BENCH D DSA ENGINEERS (BOM) VS. INCOME TAX OFFICER, WARD 19(1)-3, MUMBAI IT APPEAL NO.5354 (MUM) OF 2007 [ASSESSMENT YEAR 2003-0 4], DECISION DATED MARCH 12, 2009. 52. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE NOTED THAT ALL THE DECISIONS CITED BY T HE ASSESSEE ARE DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESE NT CASE. ACCORDING TO THE AO, THE FACTS OF THE CASE IS COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF SOLID CONTAINERS LTD. VS. DCIT REPORTED IN 308 ITR 417. THE LOAN HAS BEEN OBTAIN ED FOR BUSINESS PURPOSES AND UTILIZED FOR BUSINESS PURPOSES. THE INTEREST REQUIRES TO BE CAPITALIZED TILL DATE OF BOT PROJECT IS COMPLE TED AND THEREFORE CAPITALIZATION OF INTEREST TOWARDS PROJECT IS AS PER THE SYSTEM OF ACCOUNTANCY. HOWEVER, WAIVER OF LOAN/INTEREST IS A REVE NUE RECEIPT AND THEREFORE IT SHOULD HAVE BEEN CREDITED TO THE PROFIT AND LOSS ACCOUNT. SINCE IT HAS NOT BEEN DONE AND THE ASSESSEE, JUST TO REDUCE 31 ITA NOS.844 & 848/PN/2013 THE INCOME AND TO AVOID PAYMENT OF TAX, HAS ADOPTED THIS METHODOLOGY AND DIRECTLY DEBITED FROM WIP, THE SAME, ACCORDING TO TH E AO IS NOT IN ORDER. ACCORDING TO THE AO THE SAME IS A REVENUE REC EIPT AND HENCE TAXABLE. HE ACCORDINGLY MADE ADDITION OF RS.6,11,00,000/- T O THE TOTAL INCOME OF THE ASSESSEE BEING THE WAIVER OF LOAN AND INTEREST. 53. IN APPEAL THE LD.CIT(A), BASED ON THE ARGUMENTS ADV ANCED BY THE ASSESSEE, HELD THAT THE PRINCIPAL AMOUNT OF RS.2.33 CRORES WAIVED OFF IS TAXABLE IN THE HANDS OF THE ASSESSEE COMPANY AND THE W AIVER OF INTEREST TO THE TUNE OF RS.3.78 CRORES IS NOT TAXABLE SINC E THE SAME HAD NOT BEEN CLAIMED BY THE ASSESSEE AS EXPENDITURE IN ITS P ROFIT AND LOSS ACCOUNT. HE ACCORDINGLY DELETED THE AMOUNT OF RS.3.78 CR ORES AND SUSTAINED RS.2.33 CRORES ONLY. THE RELEVANT OBSERVATION OF THE CIT(A) AT PARA 37 OF THE CIT(A) READ AS UNDER : 37. AS REGARDS APPELLANT'S GROUND NO.5 IN REGARD TO A DDITION OF RS. 3.78 CRORE AND RS.2.33 CRORE ON ACCOUNT OF WAIVER OF INTE REST AND PRINCIPAL, RESPECTIVELY BY SAHAKAR MITRA SHRI CHANDRAKANT HARI BADHE SIR URBAN COOPERATIVE SOCIETY, VARANGAON, I FIND THAT THE APP ELLANT HAD TAKEN SHORT TERM LOAN OF RS.32 CRORE FROM SAHAKAR MITRA SHRI CH ANDRAKANT HARI BADHE SIR URBAN COOPERATIVE SOCIETY, VARANGAON AGAINST CHA NDWAD-MANMAD- NANDGAON BOT (PHASE I) DURING A.Y. 2008-09. OF THE T OTAL AMOUNT OF RS. 32 CRORE, THE APPELLANT IS STATED TO HAVE REIMBURSED RS. 12.84 CRORE TO RIL FOR LATTER'S REPAYING ITS TERM LOAN OF SBI, MUMBAI. THE A PPELLANT INVESTED RS.17 CRORE AND RS. 74.50 LAC IN PURCHASING OF PREFERENCE SH ARES AND EQUITY SHARES, RESPECTIVELY OF RIL. CHANDRAKANT HARI BADHE SI R URBAN COOPERATIVE SOCIETY AFTER SETTLEMENT HAD WAIVED INTEREST OF RS. 3. 78 CRORE AND PRINCIPAL OF RS. 2.33 CRORE. THE APPELLANT HAD TO REPAY RS. 24. 75 CRORE TO THE ABOVE SOCIETY AS FULL AND FINAL SETTLED AMOUNT AS AGAINST AN O UTSTANDING BALANCE OF RS. 27.08 CRORE. THE INTEREST OF RS. 3.78 CRORE, CHARG ED SINCE BEGINNING TILL DATE OF CLOSURE OF ACCOUNT WAS NOT DEBITED BY THE APP ELLANT IN ITS P & L ACCOUNT. FURTHER, THE APPELLANT COMPANY HAS REDUCED RS. 2.33 CRORE(PRINCIPAL AMOUNT WAIVED BY THE SOCIETY) FROM T HE OPENING BALANCE OF BOT PROJECT COST. THE AO HAD MADE ADDITION OF RS. 6.1 1 CRORE ON ACCOUNT OF THE ABOVE REFERRED WAIVER FOLLOWING THE HON'BLE MUM BAI HIGH COURT DECISION IN THE CASE OF SOLID CONTAINERS LTD. VS. DY. C OMMISSIONER OF INCOME TAX & ANR .. THE APPELLANT'S CONTENTION THAT THE AMOUNT WAS USED FOR BOT PROJECT IS FOUND TO BE CONTRARY TO THE FACTS. APPELLANT ITSELF ADMITTED THAT OF RS.32 CRORE, RS. 30.585 CRORE WAS GI VEN TO RIL FOR PURCHASE OF PREFERENCE/EQUITY SHARES AND REIMBURSEMENT OF LOAN. ONLY RS. 7.96 LAC WAS SPENT FOR MAKING PAYMENT TO THE CONTRACT ORS AND OTHER SITE EXPENSES. THE COMPANY OBTAINED A TERM LOAN OF RS. 27 C RORE FROM FEDERAL BANK @ 13.75% RATE OF INTEREST TO REPAY THE LOAN OF SAHAKAR MITRA SHRI CHANDRAKANT HARI BADHE SIR URBAN COOPERATIVE SOCIET Y, VARANGAON. IN VIEW OF THE ABOVE, IT IS CLEARLY ESTABLISHED THAT BORROWED FUNDS WERE USED FOR 32 ITA NOS.844 & 848/PN/2013 MAKING INVESTMENT IN HOLDING COMPANY I.E. RIL AND OT HER GROUP COMPANY PIPL AND NOT FOR THE PURPOSE OF ANY CAPITAL ASSET AS C LAIMED BY THE APPELLANT. HENCE APPELLANTS REDUCTION OF RS.2.33 CR ORE (PRINCIPAL AMOUNT WAIVED OFF) FROM THE OPENING BALANCE OF BOT PROJECT COST WAS NOT IN ORDER. THE PRINCIPAL AMOUNT OF RS.2.33 CRORE BECOMES THE PRO PERTY OF THE APPELLANT. HENCE, PRINCIPAL AMOUNT OF RS.2.33 CROR E WAIVED OFF IS TAXABLE IN THE HANDS OF THE APPELLANT COMPANY. AS REGARDS WAIVER OFF OF INTEREST OF RS.3.78 CRORE ON ACCOUNT OF INTEREST THE APPELLANT HA S STATED THAT IT HAD NOT CLAIMED THE SAME AS EXPENSES IN ITS P & L ACCOUNT. SIN CE INTEREST WAS NOT DEBITED IN BOOKS OF ACCOUNT, WAIVER OF INTEREST WILL NOT LEAD TO TAXABLE INCOME IN THE HANDS OF THE APPELLANT. HENCE ADDITIO N OF RS.3.78 CRORE IS DELETED. ADDITION TO THE EXTENT OF RS.2.33 CRORE IS CONFIRMED. 54. AGGRIEVED WITH SUCH PART RELIEF GIVEN BY THE CIT(A) THE REVENUE AS WELL AS THE ASSESSEE ARE IN APPEAL BEFORE US. 55. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH TH E SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. SO FAR AS THE WAIVER OF INTEREST A MOUNTING TO RS.3.78 CRORES IS CONCERNED WE FIND THE LD.CIT(A) HAS GIVEN A FINDING THAT THE INTEREST OF RS.3.78 CRORES CHARGED SINCE FROM T HE DATE OF OBTAINING OF THE LOAN TILL THE DATE OF CLOSURE OF THE ACCOUN T WAS NOT DEBITED BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT. IT HAS NOT BEEN CLAIMED IN THE COMPUTATION STATEMENT ALSO. THEREFORE, WHE N SUCH INTEREST WAS NOT DEBITED IN THE BOOKS OF ACCOUNT, WAIVER OF INTEREST BY THE BANK WILL NOT LEAD TO TAXABLE INCOME IN THE HANDS OF TH E ASSESSEE. IN OUR OPINION, WHEN ANY EXPENDITURE IS NEITHER DEBITED T O THE PROFIT AND LOSS ACCOUNTS NOR CLAIMED AS A DEDUCTION CANNOT BE DISALLOWED BY THE AO. SINCE THE LD.CIT(A) AFTER RECORDING THAT THE ASSE SSEE HAS NEITHER DEBITED THE INTEREST IN THE PROFIT AND LOSS ACCOU NT WHICH WAS WAIVED BY THE BANK NOR CLAIMED THE SAME AS DEDUCTION HA S DELETED THE ADDITION MADE BY THE AO, THEREFORE, IN ABSENCE OF ANY DISTIN GUISHABLE FEATURE BROUGHT TO OUR NOTICE BY THE LD. DEPARTMENTAL REPRESENTATIVE, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) ON THIS ISSUE. AC CORDINGLY, GROUNDS RAISED BY THE REVENUE ON THIS ISSUE ARE DISMISSED. 33 ITA NOS.844 & 848/PN/2013 56. SO FAR AS THE GROUND RAISED BY THE ASSESSEE IS CON CERNED, I.E. THE ADDITION OF RS.2.33 CRORES BEING THE PRINCIPAL AMOUNT WAIVED BY THE BANK IS CONCERNED, IT IS THE SUBMISSION OF THE LD. COUNS EL FOR THE ASSESSEE THAT THE SAID LOAN WAS TAKEN FOR CONSTRUCTION OF TOLL ROAD AND ASSESSEE REDUCED THE VALUE OF THE SAID ASSETS TO THE EXTENT OF LOAN WAIVED BY THE BANK. ACCORDING TO THE LD. COUNSEL FOR TH E ASSESSEE, IN VIEW OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CA SE OF MAHINDRA AND MAHINDRA VS. CIT REPORTED IN 261 ITR 501 S ECTION 28(IV) DO NOT APPLY TO THE WAIVER OF LOAN WHICH WAS ADVANCED T O THE ASSESSEE BY THE SUPPLIER ON CAPITAL ASSETS. IT IS ALSO HIS SUBMISSION THAT THE DECISION RELIED ON BY THE CIT(A) IN THE CASE OF SOLID CONTAINE RS LTD. REPORTED IN 308 ITR 417, IS NOT APPLICABLE TO THE FACTS O F THE CASE SINCE IN THAT CASE THE LOAN WAS TAKEN FOR TRADING ACTIVITY WHE REAS IN THE CASE OF THE ASSESSEE THE LOAN WAS INVESTED IN CAPITAL ASSETS. 57. WE FIND A SOMEWHAT SIMILAR ISSUE HAD COME UP BEFORE T HE HONBLE BOMBAY HIGH COURT IN THE CASE OF MAHINDRA AND MAHINDRA LTD. (SUPRA). IN THAT CASE, CERTAIN LOAN WAS GRANTED BY THE FOREIGN COMPA NY FOR IMPORT OF CAPITAL ASSET FOR WHICH IT HAD OBTAINED A LOAN FROM THE SUPPLIER WHICH WAS REPAYABLE AFTER 10 YEARS IN INSTALMENTS WITH INTEREST AT 6% FREE OF INCOME TAX. SUBSEQUENTLY, THE CO MPANY AGREED TO WAIVE THE PRINCIPAL AMOUNT OF LOAN. THE AO CAME TO THE CONCLUSION THAT THE WAIVER OF LOAN CREDITS REPRESENTED INCOME AND N OT A LIABILITY. THEREFORE, HE HELD THE WAIVED AMOUNT AS TAXABLE U/S.28(IV). ACCORDING TO THE AO THE LOAN ARISED FROM BUSINESS DEALINGS AND THER EFORE WHEN THE WAIVER TOOK PLACE CREDITS RECEIVED BY THE ASSESSEE NOLONGER REPRESENTED LIABILITY BUT THEY BECAME PART OF THE BUSINESS INCOME. THE CIT(A) UPHELD THE VIEW OF THE AO. HE ALSO TOOK ALTERNATE VIEW THAT THE WAIVER OF THE LOAN AMOUNTED TO REMISSION OF TRADING LIABILITY AND 34 ITA NOS.844 & 848/PN/2013 CONSEQUENTLY THE SAID AMOUNT WAS TAXABLE U/S. 41(1) OF TH E I.T. ACT. ON FURTHER APPEAL THE TRIBUNAL HELD THAT PROVISIONS OF SECT ION 28(IV) WAS NOT APPLICABLE BECAUSE BENEFIT OF CLAIM WAS NOT RECEIVE D BY THE ASSESSEE IN KIND. FURTHER, IT WAS HELD THAT PROVISIONS OF S ECTION 41(1) OF THE ACT WAS NOT APPLICABLE BECAUSE THERE WAS NO CESS ATION OF TRADING LIABILITY. ON A REFERENCE THE HONBLE HIGH COURT OBSERVED AS UNDER : FINDINGS : AT THE VERY OUTSET, WE WISH TO POINT OUT THREE FACTS W HICH ARE UNDISPUTED : (A) THAT A LOAN WAS ADVANCED BY KJC TO THE ASSESSEE, (B) THAT THE ASSESSEE HAD PAID INTEREST AT 6 PER CENT. PER ANNUM FOR TEN Y EARS BEING THE PERIOD OF CONTRACT, (C) THAT THE ASSESSEE NEVER GOT DEDUCTION FO R PAYMENT OF INTEREST UNDER SECTION 36(1)(III) OR UNDER SECTION 37 OF THE A CT. THESE THREE FACTS ARE NOT DISPUTED BY THE DEPARTMENT. THEREFORE, WE AR E REQUIRED TO CONSIDER THE APPLICABILITY OF THE PROVISIONS OF SECTIO NS 28(IV) AND 41(1) OF THE ACT IN THE LIGHT OF THE ABOVEMENTIONED THREE UN DISPUTED FACTS. (A) ON SECTION 28(IV) : AT THE OUTSET, WE WISH TO CLARIFY THAT THIS JUDGMENT I S CONFINED TO THE FACTS OF THIS CASE. THIS IS BECAUSE THE VALUE OF ANY BENEFIT O R PERQUISITE ARISING FROM BUSINESS, AS CONTEMPLATED BY SECTION 28(IV), COULD ACCRUE IN NUMEROUS WAYS. THE INCOME WHICH CAN BE TAXED UNDER SEC TION 28(IV) MUST NOT ONLY BE REFERABLE TO A BENEFIT OR PERQUISITE, BU T IT MUST BE ARISING FROM BUSINESS. SECONDLY, SECTION 28(IV) DOES NOT APPLY TO BEN EFITS IN CASH OR MONEY (SEE CIT V. ALCHEMIC PVT. LTD. [1981] 130 ITR 168 (GUJ)). APPLYING SECTION 28(IV) TO THE FACTS OF THIS CASE, ONE FINDS THAT ON JUNE 18, 1964, THE ASSESSEE ENTERED INTO AN AGREEMENT TO PURCHASE TOOLINGS F ROM KJC. IN 1964-65, INDIA WAS FACING FOREIGN EXCHANGE CRUNCH. I N THE CIRCUMSTANCES, AROUND JUNE 7, 1965, THE GOVERNMENT OF INDIA AND TH E RESERVE BANK OF INDIA, IN THIS CASE, APPROVED THE ARRANGEMENT UNDER WHICH KJC (SUPPLIER OF TOOLINGS) WAS PERMITTED TO ADVANCE A LOAN OF $ 6,50,0 00 TO THE ASSESSEE FOR TEN YEARS BEARING INTEREST AT THE RATE OF 6 PER CENT. , FREE FROM INCOME-TAX. KJC WAS LATER ON TAKEN OVER BY AMC AND AS A PART OF T AKE-OVER, AMC AGREED TO WAIVE THE PRINCIPAL AMOUNT OF THE LOAN AND NOT T HE INTEREST. IN THE CIRCUMSTANCES, AS STATED IN THE ABOVE THREE UNDISPUTED F ACTS, THE ASSESSEE PAID INTEREST AT 6 PER CEN. PER ANNUM FOR TEN YEARS, BEING THE CONTRACTUAL PERIOD. ACCORDING TO THE ASSESSING OFFICER, THE LOAN AR OSE FROM BUSINESS DEALINGS. ACCORDING TO THE ASSESSING OFFICER WHEN AMC W AIVED THE LOAN, THE CREDITS BECAME PART OF BUSINESS INCOME ; THAT PRIOR TO SUCH WAIVER, THE CREDITS REPRESENTED LIABILITY. IN THE CIRCUMSTANCES, TH E ASSESSING OFFICER HAS TAXED SUCH CREDITS AS BUSINESS INCOME. HOWEVER, IN THIS CO NNECTION, THERE ARE TWO IMPORTANT FACTS WHICH ARE OVERLOOKED BY THE ASSESSING OFFICER. FIRSTLY, THE ASSESSEE HAS CONTINUED TO PAY INTEREST AT 6 PER CENT. FOR A PERIOD OF TEN YEARS ON THE LOAN AMOUNT. IN THIS CASE, THE ASSESSI NG OFFICER HAS NOT GONE BEHIND THE LOAN AGREEMENT. IN THIS CASE, THE APP ROVAL BY THE GOVERNMENT OF INDIA AND THE RESERVE BANK OF INDIA AR E ON RECORD. IN THIS CASE, THE AGREEMENT FOR PURCHASE OF TOOLINGS WAS ENTERE D INTO, MUCH PRIOR TO THE APPROVAL OF THE LOAN ARRANGEMENT GIVEN BY TH E RESERVE BANK OF INDIA. THEREFORE, THE LOAN ARRANGEMENT, IN ITS ENTIRETY, WA S NOT OBLITERATED BY SUCH WAIVER. SECONDLY, IN THIS CASE WE ARE CONCERNED WITH THE PURCHASE 35 ITA NOS.844 & 848/PN/2013 CONSIDERATION RELATING TO CAPITAL ASSET. THE TOOLINGS W ERE IN THE NATURE OF DIES. THE ASSESSEE WAS A MANUFACTURER OF HEAVY VEHICLES A ND JEEPS. IT REQUIRED THESE DIES FOR EXPANSION. THEREFORE, THE IMPO RT WAS THAT OF PLANT AND MACHINERY. THE CONSIDERATION PAID WAS FOR SUCH IMP ORT. IN THE CIRCUMSTANCES, SECTION 28(IV) IS NOT ATTRACTED. LASTLY, WE MAY MENTION THAT, IN THIS CASE, AMC AGREED TO FOREGO THE PRINCIPAL AMOU NT OF LOAN AS A PART OF TAKE-OVER ARRANGEMENT WITH KJC TO WHICH THE ASSESSEE WA S NOT A PARTY. THE WAIVER OF THE PRINCIPAL AMOUNT WAS UNEXPECTED. IN TH E CIRCUMSTANCES, ONE FAILS TO UNDERSTAND HOW SUCH WAIVER WOULD CONSTITUTE BU SINESS INCOME. (B) ON SECTION 41(1) : ALTERNATIVELY, IT WAS ARGUED ON BEHALF OF THE DEPART MENT THAT IN THIS CASE WAIVER CONSTITUTED REMISSION OF TRADING LIABILITY AND, THEREFORE, SECTION 41(1) STOOD ATTRACTED. WE DO NOT FIND ANY MERIT IN T HIS ARGUMENT. FIRSTLY, IN THE PRESENT CASE, THE PREREQUISITE OF SECTION 41(1) IS N OT APPLICABLE. IN ORDER TO APPLY SECTION 41(1), AN ASSESSEE SHOULD HAVE OBT AINED A DEDUCTION IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPEND ITURE OR TRADING LIABILITY INCURRED BY THE ASSESSEE. IN THIS CASE, THE ASSESSE E HAS NOT OBTAINED SUCH ALLOWANCE OR DEDUCTION IN RESPECT OF EXPENDITURE OR TRADING LIABILITY. IT IS NOT DISPUTED THAT THE ASSESSEE HAS PAID INTEREST AT 6 PE R CENT. OVER A PERIOD OF TEN YEARS TO KJC ON RS. 57,74,064. IN RESPE CT OF THAT INTEREST, THE ASSESSEE NEVER GOT DEDUCTION UNDER SECTION 36(1)(III) OR SECTION 37. IN THE CIRCUMSTANCES, SECTION 41(1) OF THE ACT WAS NOT APPLICA BLE. SECONDLY, EVEN ASSUMING FOR THE SAKE OF ARGUMENT THAT THE ASSESSEE HAD G OT DEDUCTION ON ALLOWANCE EVEN THEN SECTION 41(1) WAS NOT APPLICABLE BECAUSE SUCH DEDUCTION WAS NOT IN RESPECT OF LOSS, EXPENDITURE OR TR ADING LIABILITY. IN ORDER TO GET OVER THIS ALTERNATIVE ARGUMENT, IT WAS A RGUED BY THE DEPARTMENT THAT THE LOAN WAS USED TO BUY TOOLINGS ON W HICH ASSESSEE GOT DEPRECIATION ALLOWANCE OF RS. 27,29,585 AND, THEREFO RE, THE AMOUNT OF RS. 27,29,585 SHOULD BE SET OFF AGAINST RS. 57,74,064. WE D O NOT FIND ANY MERIT IN THIS ARGUMENT. THE DEPARTMENT'S CASE IS THAT THE ASSESSE E GOT REMISSION OF RS. 57,74,064. REMISSION FOR DEPRECIATION IS NOT IN ISSUE BEFORE US. THE ONLY ARGUMENT OF THE DEPARTMENT THROUGHOUT HAS BEEN THAT THE WAIVER CONSTITUTED REMISSION OF RS. 57,74,064. IN THE CIRCUMSTA NCES, WE CANNOT DIRECT SET OFF OF RS. 27,29,585 AGAINST RS. 57,74,064. IT IS IMPORTANT TO BEAR IN MIND THAT BEFORE SECTION 41(1) CAME TO BE ENACTED , VARIOUS JUDGMENTS AS REPORTED IN MOHSIN REHMAN PENKAR V. CIT [1948] 16 IT R 183 (BOM) AND ORIENT CORPORATION V. CIT [1950] 18 ITR 28 (BOM) HA D LAID DOWN THAT REMISSION WAS NOT INCOME AND IN ORDER TO GET OVER THOSE JUDGMENTS SECTION 41(1) CAME TO BE ENACTED. IN THE CASE OF CIT V. PHOO L CHAND JIWAN RAM [1981] 131 ITR 37 (DELHI), THE ASSESSEE-FIRM HAD PURCH ASED GOODS. THEY HAD ALSO OBTAINED LOANS FROM A PARTY, ACCOUNTS WERE SET TLED AND THE BALANCE WAS CREDITED TO THE PARTNERS' ACCOUNT. IT WAS HELD BY THE DELHI HIGH COURT THAT THE AMOUNT REFERABLE TO LOANS WAS NOT A TRADING LIABILITY. THAT, ONLY AMOUNTS ALLOWED AS DEDUCTION IN EARLIER YE ARS COULD BE TREATED AS A TRADING LIABILITY. IN OTHER WORDS, UNLESS THE AMOU NTS HAVE BEEN ALLOWED AS DEDUCTION IN EARLIER YEARS THEY CANNOT BE TREATED AS TRADING LIABILITY. IN THE CIRCUMSTANCES, SECTION 41(1) WAS NOT APPLICABLE. TH IS CASE APPLIES TO THE FACTS OF OUR CASE ALSO. IN THE CASE OF CIT V. A.V.M . LTD. [1984] 146 ITR 355 (MAD), IT HAS BEEN HELD BY THE MADRAS HIGH COURT THAT EVERY DEPOSIT MONEY DOES NOT CONSTITUTE TRADING RECEIPT. THAT, ALTH OUGH SUCH A RECEIPT MAY BE IN CONNECTION WITH BUSINESS, IT COULD NOT BE D EALT WITH BY THE ASSESSEE AS A RECEIPT OF ITS TRADE. THEREFORE, THE AMOUNT S REFERABLE TO LOANS RECEIVED FOR PURCHASE OF CAPITAL ASSETS WOULD NOT CONSTI TUTE A TRADING LIABILITY AND ACCORDINGLY SECTION 41(1) WAS NOT ATTRA CTED. 36 ITA NOS.844 & 848/PN/2013 IN OUR CASE, THE MOST FUNDAMENTAL FACT WHICH IS REQUIR ED TO BE BORNE IN MIND IS THAT THERE WAS NO DEDUCTION GIVEN TO THE ASSESSEE IN EARLIER YEARS AND, THEREFORE, RS. 57,74,064 COULD NOT BE INCLUDED AS INCOME UNDER SECTION 41(1) OF THE ACT. LASTLY, IT IS IMPORTANT TO B EAR IN MIND THAT THE TOOLINGS CONSTITUTED CAPITAL ASSET AND NOT STOCK-IN-TRAD E. THEREFORE, TAKING INTO ACCOUNT ALL THE ABOVE FACTS, SECTION 41(1) OF TH E ACT IS NOT APPLICABLE. IN THE CIRCUMSTANCES THE ABOVE QUESTIONS ARE ALL ANSWER ED IN THE AFFIRMATIVE, I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. THIS DISPOSES OF REFERENCE APPLICATION NO. 1709 OF 1982 FILED BY THE DEPARTMENT. REFERENCE APPLICATION NO. 1708 OF 1982 FILE D BY DEPARTMENT : THE LEARNED ADVOCATES ON BOTH SIDES HAVE INFORMED U S THAT THE QUESTIONS FALLING UNDER REFERENCE APPLICATION NO. 1708 OF 198 2 STAND COVERED BY VARIOUS JUDGMENTS OF OUR COURT. ACCORDINGLY, WE ANSWER THE FOLLOWING QUESTIONS. '(I) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE ASSESSEE WAS ENTITLED TO DEDUCTION OF 100 PER CENT. OF THE INITIAL CONTRIBUTION MADE TO APPRO VED SUPERANNUATION FUND ?' ANSWER : IN VIEW OF THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF CIT V. SIRPUR PAPER MILLS [1999] 237 ITR 41, THE ABOVESAID QUESTION NO. (I) IS ANSWERED IN THE AFFIRMATIVE, I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. '(II) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, EXPENDITURE OF RS. 20,000 FOR SUPPLY OF TEA AND SOFT DRINK CONSTITUTED ENTERTAINMENT EXPENDITURE UNDER SECTION 37(2B) OF TH E INCOME-TAX ACT DURING THE ASSESSMENT YEAR IN QUESTION ?' ANSWER : SINCE THE AMOUNT INVOLVED IS ONLY RS. 20,000, WE DO N OT WISH TO ANSWER THE ABOVE SAID QUESTION NO. (II). '(III) WHETHER THE TRIBUNAL WAS RIGHT IN HOLDING TH AT THE ROADS CONSTRUCTED BY THE COMPANY CONSTITUTED PLANT WITHIN THE MEANING OF SECTION 43(3) OF THE ACT AND WHETHER IT WAS ELIGIBLE FOR DEPRECIATION ALLOWANCE ?' ANSWER : IN VIEW OF THE JUDGMENT OF THE SUPREME COURT IN TH E CASE OF CIT V. GWALIOR RAYON SILK MFG. CO. LTD. [1992] 196 ITR 149, WE HOL D THAT ROADS ARE BUILDINGS AND NOT PLANT AND, THEREFORE, THE ABOVESAID QUESTION NO. (III) IS ANSWERED IN THE NEGATIVE, I.E., IN FAVOUR OF THE DEP ARTMENT AND AGAINST THE ASSESSEE. '(IV) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE DONATION FOR RS. 92,500 TO AN EDUCATION SOCIETY WAS ALLOWABLE AS EXPENDITURE INCURR ED FOR BUSINESS PURPOSES ?' ANSWER : THE TRIBUNAL HAS GIVEN A FINDING OF FACT WHICH SHOWS T HAT MAHINDRA AND MAHINDRA HAD PAID RS. 92,500 TO AN EDUCATION SOCIETY WHICH RUNS THE 37 ITA NOS.844 & 848/PN/2013 SCHOOL IN WHICH CHILDREN OF THE EMPLOYEES OF THE COMP ANY STUDY. WE DO NOT WISH TO INTERFERE WITH THIS FINDING OF FACT. THE TRIB UNAL HAS HELD THAT THE AMOUNT SHOULD BE ALLOWED AS BUSINESS EXPENDITURE BECAUSE IT WAS INCURRED PREDOMINANTLY FOR STAFF WELFARE. IN THE CIRCUMSTANCES, WE ANSWER THE QUESTION IN THE AFFIRMATIVE, I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. REFERENCE APPLICATION NO. 1561 OF 1982 FILE D BY THE ASSESSEE : 'WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN LAW IN DISALLOWING UNDER THE PROVISION S OF SECTION 40A(7) OF THE INCOME-TAX ACT, 1961, A GRATUITY LIABILITY W AS MADE IN THE ACCOUNTS ?' IN VIEW OF THE JUDGMENT IN THE CASE OF SHREE SAJJAN MILLS LTD. V. CIT [1985] 156 ITR 585 (SC), WE ANSWER THE ABOVE QUESTION IN THE AFFIRMATIVE, I.E., IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. ACCORDINGLY, THE REFERENCE IS DISPOSED OF. NO ORDER AS TO COSTS. 58. HOWEVER, IN THE INSTANT CASE, WE FIND THE FACTS ARE NO T DISCERNIBLE FROM THE ORDER OF THE AO AS WELL AS THE ORDER OF THE CIT(A) AS TO WHE THER THE AMOUNT WAS UTILISED FOR CAPITAL ASSET OR FOR TRADING PU RPOSE. WE THEREFORE RESTORE THE ISSUE OF REMISSION OF R.2.33 CRORES B Y THE BANK TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE ISSUE AFRE SH IN THE LIGHT OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT CITED (SUP RA) AND IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING H EARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. GROUNDS RAISE D BY THE REVENUE ARE ACCORDINGLY DISMISSED AND THE GROUNDS RAIS ED BY THE ASSESSEE ON THIS ISSUE ARE ALLOWED FOR STATISTICAL PURPOSES. 59. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMIS SED AND THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 18-01-2016. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER IQ.KS PUNE ; # DATED : 18 TH JANUARY, 2016. LRH'K 38 ITA NOS.844 & 848/PN/2013 ( )'+ , / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. CIT (A) - II, NASHIK 4. 5. 6. CIT-II, NASHIK ' *, *, IQ.KS / DR, ITAT, B PUNE; / GUARD FILE. / BY ORDER , ' //TRUE COPY// / * / SR. PRIVATE SECRETARY *, IQ.KS / ITAT, PUNE
Other Referred Cases
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Laws Referred To
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1:1 Consultation on Business Development
₹1
1:1 Consultation on Business Valuations
₹1
1:1 Consultation on Startup Compliance
₹1
No Objection Letter for Use of Property – Partnership Firm
₹0
Non-Compete Agreement
₹0
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