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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 ..... AO. 4. That the impugned appellate order is arbitrary, illegal, bad in law and in violation of rudimentary principles of contemporary jurisprudence." 2. Briefly stated the facts necessary for adjudication of the controversy at hand are : Assessing Officer made addition of Rs. 12,00,000/- being the bonus paid to Ms. Suparna Bhalla, one of the Directors under section 37(1)(ii) of the Income-tax Act, 1961 (for short 'the Act') on the ground that Ms. Suparna Bhalla is also holding 50% shares in the assessee company and is entitled for salary of Rs. 6,00,000/- and by virtue of her shareholding was entitled to receive the said amount of services rendered in the form of shares in profit as dividend. AO also made addition of Rs. 25,00,000/- claimed to have been paid to M/s. Rockhard Infrastructure Pvt. Ltd. on account of legal and professional charges on failure of the assessee to prove the genuineness of such expenditure. 3. Assessee carried the matter by way of an appeal before the ld. CIT (A) who has confirmed the additions by dismissing the appeal. Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal. 4. We have heard the ld. Authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person who is entitled to received the profit or dividend from the employer. 9. In the backdrop of the undisputed facts, arguments addressed by the ld. ARs of the parties to the appeal, orders passed by the lower authorities and cases relied upon, the question arises for determination in this case is : "as to whether provisions contained u/s 115-O being non-obstante provisions override the general provisions of section 36(1)(ii) of the Act?" 10. For facility of reference, provisions contained u/s 115-O(1) and (2) are extracted as under :- "(1) Notwithstanding anything contained in any other provision of this Act and subject to the provisions of this section, in addition to the income-tax chargeable in respect of the total income of a domestic company for any assessment year, any amount declared, distributed or paid by such company by way of dividends (whether interim or otherwise) on or after the 1st day of April, 2003, whether out of current or accumulated profits shall be charged to additional income-tax (hereafter referred 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax payment." 14. Hon'ble Delhi High Court in case of Chrys Capital (supra) also held that when shareholders also held directorial position in the assessee's company, the deduction claimed by the assessee u/s 36 (1)(ii) of the Act in respect of bonus paid to its shareholder employees was allowable. Operative part of the decision of the Hon'ble Delhi High Court in Chrys Capital (supra) is reproduced as under :- "(ii) That the bonuses paid to the two shareholder-directors in the preceding two financial years were in the ratio of 60-65 per cent. : 40-35 per cent. even though their shareholding was 1 : 1. The balance-sheet of the assessee placed on record also indicated that the two shareholders also held directorial positions in the assessee. The deductions claimed by the assessee under section 36(1)(ii) of the Act in respect of the bonuses paid to its shareholder-employees was allowable." 15. So, in view of what has been discussed above, we are of the considered view that the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s year related to the said company or to prove the bona fide of the agreement entered with M/s. Rockhard Infrastructure Pvt. Ltd. Ans. No, I will not be able to produce the Directors or authorized signatory of M/s Rockhard Infrastructure Pvt. Ltd. to prove genuineness of the expenditure incurred. Q.22 It is again being clarified that M/s. Rockhard Infrastructure Pvt. Ltd. is shown to be registered at Kolkata. Do you think sending an inquiry letter or Inspector at their Kolkata address will be of any assistance to verify the genuineness of the expenditure claimed. Ans. No, as I am not sure. I have never been to the office of M/s. Rockhard Infrastructure Pvt. Ltd. at Delhi or at Kolkata. Q.23 From your above statement, it seems amply clear that the expenditure claimed is not substantiated and it does not appear to be genuine. You were Director in the company in the relevant previous year 2011-12 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e truth and nothing but the truth". v. A witness should first be examined by the party producing him (assessee or the AO), followed by cross-examination by the other party. After the cross-examination there can be a re-examination by the original party. vi. The statement recorded from a departmental witness cannot be used against the assessee unless the assessee is given an opportunity to crossexamine the witness. A statement without such cross examination would not be admissible evidence. A copy of the statement so recorded should be given to the assessee. In case the assessee does not wish to cross-examine the witness, that fact should be recorded in the order sheet as well as in the body of the statement. The signature of the assessee should be obtained on such noting. Offences relating to depositions attract various penal consequences 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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