ACIT Vs M/s Sur Buildcon Pvt. Ltd. (ITAT Delhi)
LANDMARK ORDER – Bhushan group companies get big relief by ITAT DELHI – First Of This Kind Where Addition under section 68 Quashed on Sole Ground of Violation of Natural Justice. – No Second Innings Given.
Addition under section 68 deleted of Rs.36.50 Crore in three companies who has received share capital and premium of above amount from companies having low or negligible return income where A.O concluded that since the assessees were not found existing at the registered/corporate office and as per the statement of Shri Bisht the same were paper companies, it gave reason to believe that the share capital and the share premium introduced into the assessee companies were questionable. In an appeal before CIT (A) , the CIT(A) deleted addition on account of invalidity of reasons recorded on borrowed satisfaction without having proper reasons to believe and were on suspect and dismissed ground of violation of principles of natural justice as infructuous as left for academic purpose only . The appellant taken additional ground before ITAT as :-
That the Ld. CIT(A) vide order dated 19.09.2013 passed u/s 250 of the Income tax Act, 1961 erred in dismissing the appeal of the Assessee challenging the order of the Ld. Assessing Officer to the extent is was passed in violation of Principles of Natural Justice inasmuch as the result of enquiries made by the Department on the basis of which the impugned additions were made in the hands of the Assessee were never confronted to the Assessee at any stage of the assessment proceedings, thus rendering the entire assessment proceedings as non-est, bad-in-law and void ab initio.”
4.4 The additional ground raised by the assessees is with respect to the violation of the Principles of Natural Justice in which the assessees contend that the enquires made by the Department to make the impugned additions in the hands of the assessees were never confronted to the assessees at any stage of the reassessment proceedings. Since the additional ground raised by the assessees is a question of law, we admit this ground
Conclusion
10.1.5 The Inspector Reports of Guwahati and Mumbai could have been utilized by the A.O. against the assessees vis-à-vis those investor parties that had been found to be non-existent at the given address contingent to the A.O. having confronted the assessees with the said Inspector Reports. Had the said Reports been confronted to the assessees, the discrepancies could have been reconciled. However, as already held above, these Reports had been recorded and relied upon by the A.O. behind the back of the assessees, an act that is in direct violation of Sec.142 (3) of the Act .
Applying the law to the case at hand, it is evident that the Inspector Reports, that had been relied upon by the A.O., have been reproduced in length for the first time in the Assessment Orders only. The A.O.,by failing to confront the assessees with the evidence he had gathered u/s 142(2) Act, has, therefore, erroneously skipped the mandatory intermediary step prescribed u/s 142(3) of the Act. Thus, when the A.O. has directly gone on to pass the Assessment Orders u/s 147/143(3) of the Act to make the impugned additions u/s 68, the same is in direct violation of the procedure of enquiry prescribed in the Statute that inherently encompasses the Principle(s) of Natural Justice .
The Ld. CIT – D.R. has submitted that the documents were a façade since the Inspector Reports draw a very different picture and cast a shadow on the genuineness of the investors. Our views on the veracity of these Reports and why the same could have not been utilized by the A.O behind the back of the assessees have already been expressed. Thus, in light of the aforesaid findings, the grounds taken by the Department in the aforesaid Appeals are dismissed in favour of the assessees .
FULL TEXT OF THE ORDER OF ITAT DELHI
The captioned appeals have been preferred by the Department against separate impugned orders dated 19.09.2013 passed by the Ld. Commissioner of Income Tax (Appeals) – 1, New Delhi {CIT (A)} in the case of the captioned assessees, wherein the Ld. CIT (A) has deleted the impugned additions made u/s 68 of the Income Tax Act, 1961 (hereinafter called ‘the Act’) in respect of the share capital and share premium received by the captioned three assesses. Thus, the Departmental Appeals in all three cases are having a common issue. The Assessees have also filed their respective Cross Objections challenging the orders of the Ld. CIT (A) to the extent that the Ld. CIT (A) has upheld the assumption of jurisdiction of reopening the assessments u/s 147/148 of the Act and to the extent the Assessment Orders passed by the Assessing Officer (AO) have been passed in violation of Principles of Natural Justice. The appeals and the cross objections were heard together and are being disposed of through this common order for the sake of convenience.
2.0 The common facts relating to the three assessees are that the A.O. had, in all the three cases, issued Notices u/s 148 of the Act, after recording identical reasons for reopening the assessments.
2.1 The reasons recorded in the case of Sur Buildcon Pvt. Ltd. are being reproduced herein under for the sake of completeness:
“Reasons recorded for re-opening the case of M/s Sur Buildcon Pvt. Ltd. for the A.Y. 2009-10 u/s 147 of the Income Tax Act, 1961:
19.09.2011: A survey operation was conducted on 3 March 2010 by the officers of the Investigation wing of the Income Tax Department on the corporate office address of M/s Sur Buildcon Pvt. Ltd. i.e. 315, E-Block, 3rd Floor, International Trade Tower, Nehru Place, New Delhi. In the survey, it was found that it was a premise run occupied and controlled by the management of Bhushan Group. During the course | of survey operation in this premise, it was found that all the staff members of that premises were the staff members of M/s Bhushan Steel Ltd. In the statement recorded on oath, Sh. B.S. Bisht, Assistant Secretarial Officer, with M/s Bhushan Steei Ltd. categorically stated that his job was to look after the ROC matters of various companies of Bhushan Group and the companies with the registered office address of this premise are just paper companies with no actual business to do. The relevant abstract of the statement of Sh. B.S. Bisht is as under: –
“Q.5 Which are the companies run from this premises & which are the companies got registered office in this premise?”
B. I have already given you a list in answer to Q.No.3. Total 41 companies (except at SI.No.19) are being run from this premise.
Following companies have their registered office at 315, E-Block, International Trade Tower, Delhi
1. Adamine Constructions (P) Ltd.
2. BBN Transportation (P) Ltd.
3. BNR Infotech (P) Ltd.
4. BNS Steel Trading (P) Ltd.
5. Gold star Cement (P) Ltd.
6. NRA Iron & Steel (P) Ltd.
7. Starlight Consumer Electronics (P) Ltd.
8. Sur Buildcon (P) Ltd.
9. Tremendous Mining & Minerals (P) Ltd.
10. UNA Power (P) Ltd.
11. Vistrat Real Estate (P) Ltd.
Q.6 Are you director in any company.
B. I am not director in any of companies.
Q.7 What are the nature of business of such companies that run from this premise ?
A. Main companies are M/s Bhushan Steel Ltd. & M/s Bhushan Energy Ltd. They are doing actual work of steel & energy respectively/ rest of the companies are paper company, they are not doing any actual work or business.
Q.8 Who are directors’of such companies ?
A. I don’t know name of directors at present. Generally, when we incorporate a company. On the recommendation of Sh. Brij Bhushan Singhal, Chairman of our group, we appoint directors of that company, the persons to whom directorship is offered are generally employees of group companies and are trust worthy of management”.
2. The Income Tax Return of the company for the A.Y.2009-10 was examined and it has been found that company is having the total share capital of Rs.2,31,00,000 and securities premium of Rs.17,10,000/-. There is debit balance of Rs.7,39,005/- in the P&L Account of the company. Company has shown gross total income in its ITR of Rs.970 during the F.Y. 2008-09 (relevant to A.Y.2009-10). After careful examination of the aforesaid facts the following issues arises.
(i) That a company which has been found not existing at the address of its registered/corporate office and as per the statement of Sh. B. S. Bisht which is a paper company, the genuineness with respect to introduction of Rs.2,30,00,000/-approximately in the shape of share capital and Rs.17,10.00.000 in the shape of securities premium is! questionable.
2.1. It gives reasons to believe that this company is just a paper company established for introducing money from unexplained sources.
2.2 Financial Statistics about the company
