ACIT Vs Versatile Polytech P. Ltd (ITAT Delhi)
Conclusion: Although the powers of the CIT(A) were co-terminus with that of the powers of AO, yet, it had jurisdiction only on those items which had been considered by AO irrespective of the fact whether the issue was subject matter of appeal or not. Thus, where AO in the assessment order had neither discussed the issue nor made any addition u/s 56(2)(viib), CIT(A) had no power to adjudicate the issue by introducing a new source of income and his order had to be confined to those items of income which was subject matter of original assessment.
Held: AO in the instant case made addition of Rs.3,73,00,120/- u/s 68 on account of share application money received by assessee on the ground that assessee failed to establish the identity, credit worthiness and genuineness of the parties wherever funds received by the investors of assessee who were also group companies of assessee group. CIT(A) deleted the addition of Rs.14,34,620/- on the ground that no incriminating material was found during the course of search and, therefore, addition of the same could not be made u/s 153A. However, department invoked the Rule 27 of ITAT Rules and tried to argue the relief granted by the CIT(A). It was held in view of finding while deciding the appeal for assessment year 2009-10, the argument of the department that the relief granted by CIT(A) should be reversed did not hold good. Since no incriminating material were found during the course of search and the assessment was completed and the order was passed u/s 143(1) and the assessment was not pending on the date of search, therefore, while deciding the appeal for the assessment year 2009-10, the addition made by AO was liable to be quashed. Coming to the addition made by CIT(A) by invoking the provisions of section 56(2)(viib) was concerned, it was an admitted fact that AO in the body of the assessment order had neither discussed this issue nor made any addition on this account. Although the powers of the CIT(A) were co-terminus with that of the powers of AO, yet, it had jurisdiction only on those items which had been considered by AO irrespective of the fact whether the issue was subject matter of appeal or not. However, it did not have any jurisdiction over an issue which had not been considered by AO. In case it was accepted that CIT(A) had power to consider an issue which was not considered by AO then, the provisions of section 263 or 147 would become otiose. Thus, considering the fact that AO in the assessment order had neither discussed this issue nor made any addition u/s 56(2)(viib), therefore, CIT(A) had no power to adjudicate the issue by introducing a new source of income and his order had to be confined to those items of income which was subject matter of original assessment.
FULL TEXT OF THE ITAT JUDGEMENT
ITA No.2257/Del/2018 filed by the Revenue is directed against the order dated 5th January, 2018 of the CIT(A)-26, New Delhi, relating to assessment year 2009-10.
ITA No.1088/Del/2018 filed by the assessee is directed against the order dated 3rd January, 2018 of the CIT(A)-26, New Delhi relating to the assessment year 2014-15. For the sake of convenience both the appeals were heard together and are being disposed of by this common order.
ITA No.2257/Del/2018 (A.Y. 2009-10)
2. Facts of the case, in brief, are that the assessee is a company engaged in the business of manufacturing of ‘pet plastic preforms.’ It filed its return of income on 29th September, 2009 declaring nil income. Original assessment was completed u/s 143(3) on 26th December, 2011 at a loss of Rs.1,06,53,140/-. Tax was levied u/s 115JB on the book profit of Rs.1,19,22,760/-. A search and seizure operation u/s 132 of the IT Act was carried out on 28th March, 2015 in the case of M.M. Aggarwal Group of cases during which the case of the assessee was also covered. In response to notice u/s 153A of the Act issued to the assessee on 10th May, 2016, the assessee filed the return of income on 28th May, 2016 declaring nil income. During the course of assessment proceedings, the Assessing Officer observed that it was gathered during the course of pre-search enquiries that the assessee group had received substantial amount of share capital from various non-descript and shell companies which did not have any factual identity and credit worthiness. The search action established beyond doubt that the assessee company like other group companies had received share capital from various non-descript and shell companies/entities which grossly lacked credit worthiness and were in the nature of accommodation entries. He observed that during pre-search verification spot enquiries were made at the registered address of M/s MSG Finance India Pvt. Ltd. at 201H, Gautam Nagar, New Delhi from whom Rs.3.50 crores were shown to have been received by M/s Heritage Beverages Pvt. Ltd. It was found that no company is being run from the stated address. He observed that Kandhari group also had received bogus share premium from Indogulf Infrastructure Investment Pvt. Ltd. who had also provided share premium to M.M. Agrawal group of companies.
3. During the course of search action conducted at the office premises of Sh, Varinder Pal Singh Kandhari at Plot no. 237-238, Udyog Vihar, Gurgaon on 28/03/2015, the above facts were confronted to Mr. Pradeep Kumar Shastri, Director in Kandhari group companies, who had admitted that a part of share premium received by M/s Indogulf Infrastructure Investment Pvt. Ltd and M/s MSG Finance India Pvt. Ltd which was further given to M/s Heritage Beverages Pvt. Ltd and M/s Versatile Polytech Pvt. Ltd was nothing but its own unexplained income from undisclosed sources of these two companies introduced in the names of other entities. Therefore, he admitted to offer for taxation a sum of Rs.8,63,36,000/- in the hands of M/s Indogulf Infrastructure Investment Pvt. Ltd for the F.Y. 2008-09 and further sum of Rs.3,50,00,000/- in the hands of M/s MSG Finance Pvt. Ltd for the F.Y. 2010-11, aggregating to Rs. 12,13,36,000/-.
4. The Assessing Officer referred to the relevant portion of statement of Shri Pradeep Kumar Shastri recorded u/s 132(4) of the Act on 29thMarch, 2015 wherein he had offered an amount of Rs.12,13,36,000/- as additional business income. He observed that subsequently, the said admission of additional business income aggregating to Rs.12,13,36,000/- made by Shri Pradeep Kumar Shastri were also confirmed by Shri Varinder Pal Singh Kandhari in his statement recorded on oath u/s 132(4) of the Act on 28th March, 2015.
5. Further during the course of revoking of prohibitory order on 22/05/2015 which was placed u/s 132(3) of l.T. Act on 29.03.2015 during the course of search action, Shri Varinder Pal Singh Kandhari was specifically asked to explain the breakup of the admitted amount of Rs.12.13 Crores wherein he had fully agreed with the version of Mr. Pradeep Kumar Shastri regarding admission of addition income of Rs.8,63,36,000/- in the hands of M/s Indo Gulf Fertilizers and Rs.3,50,00,000/- in the hands of M/s MSG Finance India Ltd.
6. The Assessing Officer observed that the assessee has received the share capital/share premium and share application money from different persons during assessment year 2008-09 to 2015-16 which are as under:-
1. M/s Versatile Polytech Private Limited
