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TMI Blog2019 (4) TMI 701X X X X Extracts X X X X X X X X Extracts X X X X ..... ction claimed by the assessee u/s 36 (1)(ii) of the Act in respect of bonus paid to its shareholder employees was allowable. We are of the considered view that AO as well as ld. CIT (A) have erred in making addition on account of bonus paid to the Director employee which is ordered to be deleted. Disallowance of legal and consultancy charges - assessee claimed bogus expenses - HELD THAT:- When the entire case of the Revenue in treating legal and consultancy service charges as bogus hinges upon statement of Shri Ravinder Kumar Shukla, ex-Director of the assessee company, his statement cannot be read into evidence against the assessee unless right to cross-examination of Shri Ravinder Kumar Shukla is not provided to the assessee. Assessee claimed to have paid service tax on the amount paid to M/s. Rockhard Infrastructure Pvt. Ltd. and has also filed no TDS certificate issued by the Income-tax Department to M/s. Rockhard Infrastructure Pvt. Ltd., which fact prima facie goes to prove that the payment was made. So, in these circumstances, we deem it necessary to set aside this issue to the AO who shall provide adequate opportunity of being heard to the assessee by providing the ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has come up before the Tribunal by way of filing the present appeal. 4. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case. GROUND NO.1 5. The ld. AR for the assessee challenging the impugned addition u/s 115-O of the Act inserted w.e.f. 01.06.1997 contended inter alia that every company is liable to pay the tax @ 15% on account of dividend distributed by it to its shareholders under subsection (2) of section 115-O; that this tax is applicable even if the domestic company has no income and that section 115-O is nonobstante provision which overrides the general provisions of section 36(1)(ii) of the Act; and relied upon the decision rendered by the Hon ble Delhi High Court in the case of Chrys Capital vs. DCIT 376 ITR 183 (Delhi) and the coordinate Bench of the Tribunal in New Silk Route vs. DCIT 43 CCH 372 (Mum.) . 6. Ld. AR for the assessee further contended inter alia that the assessee had not paid bonus out of dividend or profit; that Ms. Suparna Bhalla, Director has paid the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to as tax on distributed profits) at the rate of fifteen per cent: (2) Notwithstanding that no income-tax is payable by a domestic company on its total income computed in accordance with the provisions of this Act, the tax on distributed profits under subsection (1) shall be payable by such company. 11. Bare perusal of provisions contained u/s 115-O applicable to the present case being of AY 2012-13 goes to prove that these are non-obstante provisions which override the general provisions of section 36(1)(ii) of the Act, under which the assessee company is liable to pay the tax @ 15% on the amount of dividend distributed by it to its shareholders. 12. When we examine the proposition at hand it becomes clear that in case, the bonus of ₹ 12,00,000/- was not paid to Ms. Suparna Bhalla, the company would have been liable to pay the tax @ 15%. However, when the amount of ₹ 12,00,000/- have been paid to Director, she being in the highest slab of a tax payee paid a tax @ 30%. So, this fact goes to prove that payment of bonus by the company to the Director was not a ploy to evade the tax as Ms. Suparna Bhalla being Director as well as shareholder has actuall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case laws relied upon by the ld. DR for the Revenue are not applicable to the facts and circumstances of the case. Consequently, we are of the considered view that AO as well as ld. CIT (A) have erred in making addition of ₹ 12,00,000/- on account of bonus paid to the Director employee which is ordered to be deleted, hence ground no.1 is determined in favour of the assessee. GROUNDS NO.2, 3 4 16. AO as well as ld. CIT (A) have made/confirmed addition of ₹ 25,00,000/- by way of disallowance of legal and consultancy charges by the assessee on the ground that the assessee has claimed bogus expenses. 17. It is the case of the assessee that legal and consultancy services charges of ₹ 25,00,000/- paid to M/s. Rockhard Infrastructure Pvt. Ltd. from whom it has taken services in the form of project reports, specialized research data provisions, etc. On query raised by the AO, assessee provided address of M/s. Rockhard Infrastructure Pvt. Ltd. with its Directors namely Shri Shyam Lal and Shri Rajeev Kumar. AO deputed two Inspectors for making enquiries who has given report dated 16.02.2015 and summon was served upon Shri Ravinder Kumar Shukla, Director of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant to AY 2012-13 and signed the agreement on behalf of the company as Director. No due diligence about expertise of M/s. Rockhard Infrastructure Pvt. Ltd. is admitted by you was done. The expenditure claimed is not supported by field enquiries that have been duly apprise to you. Do you think Ms Suparna Bhalla other Director will be in a position to explain or prove the genuineness of this expense? Ans. No, it is not required. I am competent to state what has been stated in my statement to your specific queries. Q.24 What are your sources of income and Income-tax particulars? Ans. I am having income of approximately 10 to 12 Lakhs per annum as freelancer in construction work. I am income-tax assessee and my PAN is AVPPS1222A 18. AO by relying upon the statement of Shri Ravinder Kumar Shukla found the expenditure claimed by the assessee as bogus and thereby disallowed the same. 19. Ld. CIT (A) also confirmed the findings of the AO which are based upon the statement of Shri Ravinder Kumar Shukla, Director of the assessee company who has stated that he has never visited the office of M/s. Rockhard Infrastructure Pvt. Ltd., Calcutta and as such, how h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quences under the Indian Penal Code as well. 3.2.7 Granting copies An assessee should be provided with copies of statements before the latter are utilised against him for the purpose of assessment. Granting of copies should be recorded in the ordersheet and brought out in the assessment order as well. A witness is not entitled to a copy of his statement. 21. We are of the considered view that when the entire case of the Revenue in treating legal and consultancy service charges as bogus hinges upon statement of Shri Ravinder Kumar Shukla, ex-Director of the assessee company, his statement cannot be read into evidence against the assessee unless right to cross-examination of Shri Ravinder Kumar Shukla is not provided to the assessee. Moreover, assessee claimed to have paid service tax on the amount paid to M/s. Rockhard Infrastructure Pvt. Ltd. and has also filed no TDS certificate issued by the Income-tax Department to M/s. Rockhard Infrastructure Pvt. Ltd., which fact prima facie goes to prove that the payment was made. So, in these circumstances, we deem it necessary to set aside this issue to the AO who shall provide adequate opportunity of being heard to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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