2018 (9) TMI 1008 - AT - Income Tax

Addition u/s 68 - unexplained share application money - Held that - As gone through the orders of the authorities below. The revenue has not disputed with regard to the fact that the co-ordinate benches of this Tribunal in respect of share application money received from Javda India Impex Ltd. found that the party is genuine and transaction was treated to be genuine. There is no change in the facts and circumstances. However, in respect of the other share applicants, assessee has not brought any material to rebut the finding arrived by the authorities below, hence we direct the A.O. to delete the addition of ₹ 25 lakhs in respect of share application money received from Javda India Impex Ltd. The ground raised in this appeal is partly allowed. Addition u/s 14A - Held that - There was no exempt income during the year under appeal, therefore, respectfully following the decision rendered by Hon ble Delhi High Court in the case of Cheminvest Ltd. Vs. CIT-IV 2015 (9) TMI 238 - DELHI HIGH COURT . Penalty u/s 271(1)(c) - Held that - In view of the binding precedent of the Hon ble jurisdictional High Court in the case of PCIT Vs. Kulwant Singh Bhatia 2018 (5) TMI 960 - MADHYA PRADESH HIGH COURT we hereby set aside the order of Ld. CIT(A) and restore the issue to his file for deciding the facts in the light of the judgement

Issues Involved:
1. Addition of share application money under Section 68 of the Income Tax Act.
2. Disallowance under Section 14A of the Income Tax Act.
3. Disallowance of delayed payment of Employee contribution to ESI and PF.
4. Disallowance of interest paid on late deposit of taxes.
5. Penalty proceedings under Section 271(1)(c) of the Income Tax Act.

Detailed Analysis:

1. Addition of Share Application Money under Section 68:
The primary issue pertains to the addition of share application money received by the assessee from various entities, which the Assessing Officer (A.O.) deemed unexplained under Section 68 of the Income Tax Act, 1961. For the assessment year 2007-08, the A.O. added ?75,00,000/- to the income of the assessee, which was upheld by the CIT(A). The Tribunal directed the A.O. to delete the addition of ?25,00,000/- received from Javda India Impex Ltd. as it was found genuine by coordinate benches in similar cases. However, for other entities, the assessee failed to rebut the findings, and thus, the addition was sustained.

2. Disallowance under Section 14A:
For the assessment year 2008-09, the A.O. disallowed ?87,157/- under Section 14A, claiming the assessee used borrowed funds for non-business purposes. The Tribunal, referencing the Delhi High Court's decision in Cheminvest Ltd. Vs. CIT-IV and the Allahabad High Court's decision in CIT Vs. Shivam Motors (P) Ltd., directed the A.O. to delete the disallowance as no exempt income was earned during the year. Similar directions were given for the assessment years 2011-12 and 2012-13, where the Tribunal found no exempt income and directed deletion of the disallowance.

3. Disallowance of Delayed Payment of Employee Contribution to ESI and PF:
For the assessment years 2011-12 and 2012-13, the A.O. disallowed contributions to ESI and PF paid after the due date. The Tribunal, following the Rajasthan High Court's decision in Principal Commissioner of Income Tax, Jaipur-2 Vs. M/s. Rajasthan State Beverages Corporation Ltd., directed the A.O. to delete the disallowance, as the payments were made before filing the return of income.

4. Disallowance of Interest Paid on Late Deposit of Taxes:
For the assessment year 2011-12, the A.O. disallowed ?58,259/- paid as interest on late deposit of TDS and DDT. The Tribunal upheld the disallowance, stating that such interest is a statutory liability and does not qualify as a business expenditure.

5. Penalty Proceedings under Section 271(1)(c):
The Tribunal addressed the penalty imposed under Section 271(1)(c) for the assessment years 2007-08, 2008-09, and 2009-10. The assessee argued that the penalty notices did not specify the charge, rendering them invalid. The Tribunal, citing the Madhya Pradesh High Court's decision in PCIT Vs. Kulwant Singh Bhatia and SSA’s Emerald Meadows, found the notices defective as they did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars. The Tribunal set aside the penalty orders and remanded the cases to the CIT(A) for verification of the notice’s validity.

Conclusion:
The Tribunal provided detailed directions on each issue, allowing partial relief to the assessee by deleting certain additions and disallowances while upholding others. The penalty proceedings were remanded for further verification, emphasizing the importance of specifying charges in penalty notices. The judgment highlights the necessity of clear and specific notices in penalty proceedings and adherence to judicial precedents in disallowance cases.

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