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TMI Blog2017 (4) TMI 1523X X X X Extracts X X X X X X X X Extracts X X X X ..... - disallowance solely on the basis of the statement of Shri Naresh Kumar Jain recorded during the course of survey proceedings - statements recorded of Shri Naresh Kumar Jain during the survey, a surrender was obtained from him wherein he admitted 50% of the payment made to trainees as bogus. However, in the assessment order, the Assessing Officer made lump sum addition @ 75% of total expenditure claimed - CIT-A restrict the disallowances to 20% instead of 75% of the amount claimed by the appellant. - HELD THAT:- CIT(A) has restricted the disallowance on ad hoc basis. After considering the material placed before this Tribunal, we are of the considered view that when the inspection was carried out by the ESI and PF department, no discrepancy was reported in respect of rate of stipend and payment of stipend. The Assessing Officer has not placed any material suggesting that the number of trainees was not correct. Moreover, the Assessing Officer has based his finding on the basis of presumption that the assessee is not charitable institute than why it would provide training with stipend to the persons who would quit after training. This observation of the Assessing Officer is purely b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following grounds of appeal: Grounds of assessee s appeal in ITA No. 527/JP/2016. 1. On the facts and in the circumstances of the case the Ld. CIT(A) has grossly erred in confirming the addition made in the assessment completed u/s 143(3) solely on the basis of statements recorded during the course of survey which stood retracted by the assessee through an affidavit filed by its director. Thus, the additions made solely on the basis of such retracted statements deserve to be deleted. 1.1 That, the Ld. AO has further erred in not accepting the affidavit given by the director of the assessee company without any basis and with the sole purpose to make additions without brining on record any corroborative material found during the course of survey or during the course of assessment proceedings, and also by completely ignoring the well established law that no addition can be made solely on the basis of statements recorded on oath during the course of survey conducted u/s 133A of the Act, when the assessee extended full cooperation. Thus, the assessment order deserves to be held bad in law and the additions made thereunder deserve to be deleted. 2. On the facts and in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in support of the genuineness of the expenses claimed by assessee. Thus, the disallowance of ₹ 5,33,266/- sustained by the Ld. CIT(A) deserves to be deleted. 4.1 Without prejudice to Ground of Appeal No. 01 to 04 and in the alternative, the Ld. CIT(A) has grossly erred in confirming further disallowance of ₹ 5,33,266/- out of the stipend expenses when the trading results are not accepted and the provisions of section 145(3) are invoked. Grounds of revenue s appeal in ITA No. 595/JP/2016. 1. Whether on the facts and in the circumstances of the case and in law, the CIT(A) has erred in restricting the disallowance of stipend expenses @ 20% as against 75% applied by the A.O. 2. Whether on the facts and in the circumstances of the case and in law, the CIT(A) has erred in deleting the addition made on account of deemed dividend U/s 2(22)(e) of the I.T. Act. Similar identical grounds have also been taken by the assessee as well as the revenue in all the other appeals for the A.Y. 2007-08, 2008-09, 200910 and 2011-12. 4. Briefly stated facts of the case are that a survey U/s 133A of the Income Tax Act, 1961 (hereinafter referred as the Act) was carried o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer doubted about the payments made to M/s Kalpana Impex and M/s Kalpana Handicrafts. He submitted that both were providing services to the assessee. He submitted that the authorities have based their findings on the basis of pick and choose of the contents of statements, which is also not permissible under the law. He contended that the firms, who had rendered services were duly registered under the provisions of ESI. He contended that in the case of M/s Kalpana Impex, ESI was duly deducted from the payments made to the labourers, which established the existence of genuineness of the transactions. He submitted that the statements of Shri Naresh Kumar Jain, Director of the company, Shri Harak Chand Jain, employee of the company were taken during the course of survey without providing them books of account etc., therefore, their statements were not voluntary and as such these statements were duly retracted by the maker of the statements. Hence, it has no evidentiary value. Therefore, basing the assumption on such statement is contrary to the settled principle of law. He submitted that the statements are not the concluding piece of evidence. 7. On the contrary, the ld Sr. DR has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing contribution and depositing the same to the concerned authority. The Assessing Officer was required to make inquiry on these contents since the statement was recorded during the course of survey and such statements stated a fact which was required to be further corroborated with a plausible evidence. We find that the assessee had enclosed details of contractors from whom it had got the work done at page 9 of the paper book. A letter addressed to the Registering Authority under the Contract Labour Act is enclosed, which was received by the concerned department on 26/1/2011. At page No. 7 of paper book, a registration certificate dated 09/9/2005 is enclosed, which includes name of Smt. Kalpana Jain. These details demonstrate that Proprietor of M/s kalpana Impex was registered with concerned authority of labour department for the purpose of stitching. From the records, as made available, it is transpired that the assessee was engaging persons on contract for its work. On this aspect, no inquiry was made by the Assessing Officer. In our considered view, the Assessing Officer ought not to have based the assessment solely on the statements recorded during the course of survey, he sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer made disallowance of the stipend expenses solely on the basis of the statement of Shri Naresh Kumar Jain recorded during the course of survey proceedings. He submitted that the statements recorded of Shri Naresh Kumar Jain during the survey, a surrender was obtained from him wherein he admitted 50% of the payment made to trainees as bogus. However, in the assessment order, the Assessing Officer made lump sum addition @ 75% of total expenditure claimed by the assessee company in all the years. However, the ld CIT(A) considering the evidence and submissions by the assessee restricted the addition @ 20% of expenses claimed. He submitted that in the instant case, the Assessing Officer has rejected the books of account and made lump sum addition of ₹ 25.00 lacs on this account, which very well cover any and every discrepancy in the books of account, thus no separate disallowance is called for on the allegation of stipend expenses being held as bogus. He submitted that it is settled position of law that once books of account are rejected, the same cannot be relied for the purposes of making addition of a particular item of expenditure in the P L account. In support of this con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the salary/wages sheets. Out of list of 147 trainees submitted by the appellant, the AO noted that 50% of the mobile numbers were either wrong or incorrect Out of the 10 trainees required by the AO to produce (who were working during different periods), only 3 were produced before the AO. (vii) It is noted that the AO has just ignored the various documentary evidences filed by the appellant including the attendance sheets of the trainees, retraction by Shri Naresh Kumar Jain, copies of the complete set of appointment documents of each trainee consisting of applications made by the individuals for being appointed as trainee in the appellant, along with his bio data, qualification , address / identity verification , and the appointment letter issued by the appellant mentioning therein the date of joining, initial salary and job details, attendance register, showing the daily attendance of each trainee along with factory in and out time , on the basis of which monthly stipend payment is done , along with copy of entry card of each trainee. Copy of monthly stipend payment sheet, duly reflecting the amount paid to each trainee computed on the basis of his agreed stipend ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion such other materials or Information as are available with the Assessing Officer contained in section 158BB of the Income-tax Act, 1961, would include the materials gathered during the survey operation under section 133A, vide CIT v. G. K. Senniappan [2006] 284 ITR 220 (Mad.); (iv) The material or information found in the course of survey proceeding could not be a basis for making any addition in the block assessment, vide decision of this court in T. C (A) No. 2620 of 2006 (between CIT v. S. Ajit Kumar [2008] 300 ITR 152 (Mad.); (v) Finally, the word may used in section 133A(3) (Hi) of the Act, viz., record the statement of any person which may be useful for, or relevant to, any proceeding under this Act , as already extracted above, makes it clear that the materials collected and the statement recorded during the survey under section 133A are not conclusive piece of evidence by itself. For all these reasons, particularly, when the Commissioner and the Tribunal followed the circular of the Central Board of Direct Taxes dated March 10, 2003, extracted above, for arriving at the conclusion that the materials collected and the statement, obtained under section 133A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he considered view that when the inspection was carried out by the ESI and PF department, no discrepancy was reported in respect of rate of stipend and payment of stipend. The Assessing Officer has not placed any material suggesting that the number of trainees was not correct. Moreover, the Assessing Officer has based his finding on the basis of presumption that the assessee is not charitable institute than why it would provide training with stipend to the persons who would quit after training. This observation of the Assessing Officer is purely based on the conjecture and surmises, which cannot be the basis for making disallowance. If the Assessing Officer s reasoning is accepted, then it would make the assessee liable for prosecution for practicing the bonded labour. Therefore, this disallowance is unjustified and the same is hereby deleted. Accordingly, this ground of the revenue s appeal is dismissed. 16. Ground No. 2 of the revenue s appeal is against the decision made on account of deemed dividend. The ld. Sr.DR has supported the order of the Assessing Officer and submitted that the ld. CIT(A) was not justified in deleting the addition. 17. On the contrary, the ld A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank as collateral security for enabling M/s Ratan Papers Pvt. Ltd. to take the benefit of bank limits. Further the assessee also provided the corporate guarantee to the bank to enable M/s Ratan Papers Pvt. Ltd. to enjoy the bank limit facility. In the course of survey proceedings the sum of ₹ 36,85,000/- given as security deposits by M/s Ratan Papers Pvt. Ltd. to the assessee company was treated as deemed dividend u/s 2(22) (e), but the circumstances and nature of transaction explained above does not come within the purview of section 2(22) because the phrase by way of advance or loan appearing in sub-clause (e) of section 2(22) of the I.T. Act, 1961, must be construed to mean those advances or loans which a shareholder or any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this reply referred to as the said concern), enjoys simply on account of being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power; but if such loan or advance is given to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) No such Security Deposit is there in the Audited Balance Sheet of the assessee company as on 31/03/2011. In the liability part one is share holders fund and other segment is Loan Funds (divided in secured loans, unsecured loans and deferred liability). ii) As per the assessee, the portion to be let out was for the monthly rent of ₹ 10,000/-. It cannot be believed that security deposit for that portion was ₹ 36,85,000/-. There is no basis of the so called security deposit. iii) On perusal of the letter dated 20/07/2009 of Indian Bank, Moti Lai Atal Road, Jaipur, it is observed that this is with regard to renewal of credit facilities for M/s Ratan Paper Pvt. Ltd. and the assessee company both (as mentioned under the head other liability of the group account M/s RTPL Renewed on 01.07.2009. iv) It cannot be said that M/s Ratan Paper Pvt. Ltd alone had availed benefit of corporate guarantee by the assessee because the assessee itself is also one of the beneficiary of the bank limits. It was also observed by the AO that: The assessee is the beneficial owner of shares having more than 10% of the voting power in the company, M/s Ratan Papers Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sapna Jain 2600 Total 81200 1000 (vi) During the course of appellate proceedings, it was submitted by the AR that RTPL was not the share holder of payer company i.e. RPPL rather the Directors of the appellant company are the share holders of RPPL and the payment of the security deposit was made to the appellant company and not to its share holders, therefore, the provisions of section 2(22) (e) is not applicable to the appellant company. Reliance was placed on the decision of Hon ble Rajasthan High Court in the cases of CIT Vs Hotel Hilltop [2009] 313 ITR 116(Raj) and Hon ble ITAT, Agra in the case of Indian Casting Company vs. Income tax Department (19.07.2012) in which the above decision was followed. (vii) It may be mentioned that the Hon ble Rajasthan High Court in the case of CIT Vs Hotel Hilltop (Supra) held that: From reading of section 2(22)(e) it is clear, that it comprehends manifold requirements, the first being, the payment should be made by way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders, and not in the hands of the firm. [Para 9 (viii) Further, in the case of CIT Vs Suram Holdings P Ltd [2014] 41 taxmann.com, the Hon ble Rajasthan High Court has followed its earlier decision in the case of CIT vs. Hotel Hilltop (Supra). It would be appropriate to reproduce hereunder the decision of Hon ble Jurisdictional High Court in the case CIT vs. Suram Holdings Pvt. Ltd. (Supra) as under: 1. Instant appeal has been filed by the revenue against the order of ITAT dt. 19-3-2010 which is primarily based on the judgment of this Court in CIT v. Hotel Hilltop [2009] 313 ITR 116/[2012] 205 Taxman 91/18 taxman.com 308 decided on 17-3-2008. 2. It has been alleged by the revenue that the assessee derives income from trading of shares and during the course of assessment proceedings it was revealed that the assessee has received a sum of ₹ 23.00 lacs from M/s. Japanwala Jewellers (P.) Ltd., Jaipur on the ground that it was towards share application money. The assessing authority after taking note of Sec. 2(22) (e) and available records observed that the share application money of ₹ 23.00 lacs received by the assessee company is in the nature of unsecured loan an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered view from the submission made in our opinion, no substantial question of low emerges for consideration in the instant appeal which may require interference by this Court. 5. Consequently, the appeal being devoid of merit is hereby dismissed. (ix) In view of the above discussion and respectfully following the decisions of jurisdictional High Court in the above referred cases, it is held that the AO was not justified in treating the sum of ₹ 36,85,000/- as deemed dividend in the hands of the appellant company as the appellant company is not the registered owner of shares of RPPL. Therefore, the addition of ₹ 36,85,000/- made by the AO u/s 2(22) (e) of the Act is hereby deleted. It was contended before the ld. CIT(A) that the assessee company was not the share holder of the bare company rather the Directors of the appellant company are the share holders of the RPPL and the payment of the security deposit are made to the appellant company and not to share holders. Therefore, the provisions of Section 2(22)(e) of the Act is not applicable to the appellant company. In this regard, reliance is placed on the decision of the Hon ble Jurisdictional High court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is paid by the company to the concern. [Para 8] Thus, the significant requirement of section 2(22)(e) is not shown to exist. The liability of tax, as deemed dividend, could be attracted in the hands of the individuals, being the shareholders, and not in the hands of the firm. [Para 9 We find that the ld. CIT(A) has rightly followed the decision of the Hon'ble jurisdictional High Court. The revenue has not placed any contrary material before this Bench, therefore, we sustain the order of the ld. CIT(A) on this issue and dismiss the revenue s ground of appeal. Hence, the revenue s appeal in ITA No. 595/JP/2016 is dismissed. 19. Now we take ITA No. 528/JP/2016 filed by the assessee and ITA No. 596/JP/2016 filed by the revenue pertaining to the assessment year 201112. In both the appeals, the assessee and the revenue have taken following grounds of appeal: Grounds of assessee s appeal in ITA No. 528/JP/2016. 1. On the facts and in the circumstances of the case the Ld. CIT(A) has grossly erred in confirming the addition made in the assessment completed u/s 143(3) solely on the basis of statements recorded during the course of survey which stood retracted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (though no separate addition made on this account) when all the necessary details regarding rendering of services by these parties were submitted, thus the job charges paid to these concern deserves to be treated as genuine and the observation of Ld. AO treating the aforesaid payment as non-genuine / unverifiable deserves to be ignored and excluded and the addition made based on such conclusion deserves to be deleted. 4. On the facts and in the circumstances of the case, the Ld. CIT(A) has further erred in sustaining the disallowance of ₹ 6,23,627/- being 20% of the stipend expenses claimed by assessee out of the total disallowance of ₹ 23,38,603/- made by Ld. AO being 75% of the stipend expenses claimed at ₹ 31,18,137/-, without any basis and without considering the submissions made by assessee and the evidences adduced in support of the genuineness of the expenses claimed by assessee. Thus, the disallowance of ₹ 6,23,627/- sustained by the Ld. CIT(A) deserves to be deleted. 4.1 Without prejudice to Ground of Appeal No. 01 to 04 and in the alternative, the Ld. CIT(A) has grossly erred in confirming further disallowance of ₹ 6,23,627/- out of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find that the assessee has enclosed details of contractors from whom it had got the work done at page 9 of the paper book. A letter addressed to the Registering Authority under the Contract Labour Act is enclosed, which was received by the concerned department on 26/1/2011. At page No. 7 of paper book, a registration certificate dated 09/9/2005 is enclosed, which includes name of Smt. Kalpana Jain. These details demonstrate that Proprietor of M/s kalpana Impex was registered with concerned authority of labour department for the purpose of stitching. From the records, as made available, it is transpired that the assessee was engaging persons on contract for its work. On this aspect, no inquiry was made by the Assessing Officer. In our considered view, the Assessing Officer ought not to have based the assessment solely on the statements recorded during the course of survey, he should have brought material suggesting that no job work was done by the said firms. The Hon ble Rajasthan High Court in the case of CIT, Udaipur Vs. Shri Roshan Lal Lodha in I.T. appeal No. 185/2014 order dated 03/11/2015 has held as under:- In the case aforesaid, Hon'ble Apex Court held that Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,55,585/- 2007-08 ₹ 27,37,958/- 2008-09 ₹ 30,85,592/- 2009-10 ₹ 26,66,320/- Total ₹ 95,41,465/- (vi) However, subsequently, the said surrender was retracted by the appellant. It is noted from the assessment order that the AO relied heavily on the statements of Shri Naresh Jain and Shri Bunkar recorded during the course of survey u/s 133A of the Act. The AO disallowed 75% of the stipend expenditure claimed by the appellant against approximately 50% surrendered during survey on the basis of following additional findings: The payments were made in cash and no PF/ESI has been deducted while making such payments. There is no basis of determining minimum or maximum amount of stipend. Various discrepancies are noticed in the salary/wages sheets. Out of list of 147 trainees submitted by the appellant, the AO noted that 50% of the mobile numbers were either wrong or incorrect Out of the 10 trainees required by the AO to produce (who were working during different periods), only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow that it is incorrect and that the assessee should be given a proper opportunity to show that the books of account do not correctly disclose the correct state of facts, vide decision of the apex court in Pulkngode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18; (ii) In contradistinction to the power under section 133A, section 132(4] of the Income-tax Act enables the authorized officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Income-tax Act. On the other hand, whatever statement is recorded under section 133A of the Income-tax Act is not given any evidentiary value obviously for the reason that the officer is not authorized to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law, vide Paul Mathews and Sons v. CIT [2003] 263 ITR 101 (Ker.); (iii) The expression such other materials or Information as are available with the Assessing Officer contained in section 158BB of the Income-tax Act, 1961, would include the materials gathered during the survey operation under section 133A, vide CIT v. G. K. Senniappan [2006] 284 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is for making disallowance. If the Assessing Officer s reasoning is accepted, then it would make the assessee liable for prosecution for practicing the bonded labour. Therefore, this disallowance is unjustified and the same is hereby deleted. The facts are identical in this year as well as no change into the facts is pointed out by the revenue. Therefore, the grounds of appeal are allowed. 21. The 5th ground of the assessee s appeal is against sustaining the addition of ₹ 45,795/- made by the Assessing Officer U/s 14A of the Act. The Assessing Officer observed that the assessee company had debited interest expenses of ₹ 44,74,970/- and had shown dividend income of ₹ 40,353/-. The dividend income was exempted income U/s 10(34) of the Act. The Assessing Officer asked the assessee to explain as to why disallowance U/s 14A should not be made on this income. The Assessing Officer observed that there cannot be any separation with regard to day to day investments out of the bank accounts what which part pertain to the interest bearing funds and which part not. Therefore, he disallowed ₹ 45,795/- U/s 14A of the Act. 22. The ld. CIT(A) sustained the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serving as under:- From the above, it is evident that the ld. CIT(A) has restricted the disallowance on ad hoc basis. After considering the material placed before this Tribunal, we are of the considered view that when the inspection was carried out by the ESI and PF department, no discrepancy was reported in respect of rate of stipend and payment of stipend. The Assessing Officer has not placed any material suggesting that the number of trainees was not correct. Moreover, the Assessing Officer has based his finding on the basis of presumption that the assessee is not charitable institute than why it would provide training with stipend to the persons who would quit after training. This observation of the Assessing Officer is purely based on the conjecture and surmises, which cannot be the basis for making disallowance. If the Assessing Officer s reasoning is accepted, then it would make the assessee liable for prosecution for practicing the bonded labour. Therefore, this disallowance is unjustified and the same is hereby deleted. Accordingly, this ground of the revenue s appeal is dismissed. 18. We have heard the rival contentions of both the parties, perused the materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . to enjoy the bank limit facility. In the course of survey proceedings the sum of ₹ 36,85,000/- given as security deposits by M/s Ratan Papers Pvt. Ltd. to the assessee company was treated as deemed dividend u/s 2(22) (e), but the circumstances and nature of transaction explained above does not come within the purview of section 2(22) because the phrase by way of advance or loan appearing in sub-clause (e) of section 2(22) of the I.T. Act, 1961, must be construed to mean those advances or loans which a shareholder or any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this reply referred to as the said concern), enjoys simply on account of being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power; but if such loan or advance is given to such shareholder or any concern in which such shareholder is a member or a partner and in which he has a substantial interest as a consequence of any further consideration which is beneficial to the company r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loans, unsecured loans and deferred liability). ii) As per the assessee, the portion to be let out was for the monthly rent of ₹ 10,000/-. It cannot be believed that security deposit for that portion was ₹ 36,85,000/-. There is no basis of the so called security deposit. iii) On perusal of the letter dated 20/07/2009 of Indian Bank, Moti Lai Atal Road, Jaipur, it is observed that this is with regard to renewal of credit facilities for M/s Ratan Paper Pvt. Ltd. and the assessee company both (as mentioned under the head other liability of the group account M/s RTPL Renewed on 01.07.2009. iv) It cannot be said that M/s Ratan Paper Pvt. Ltd alone had availed benefit of corporate guarantee by the assessee because the assessee itself is also one of the beneficiary of the bank limits. It was also observed by the AO that: The assessee is the beneficial owner of shares having more than 10% of the voting power in the company, M/s Ratan Papers Pvt. Ltd. The assessee during the year under consideration has taken loan from M/s Ratan Papers Pvt. Ltd, claiming the same as security deposit. From the copy of account of the assessee in the books of M/s Ratan Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1000 (vi) During the course of appellate proceedings, it was submitted by the AR that RTPL was not the share holder of payer company i.e. RPPL rather the Directors of the appellant company are the share holders of RPPL and the payment of the security deposit was made to the appellant company and not to its share holders, therefore, the provisions of section 2(22) (e) is not applicable to the appellant company. Reliance was placed on the decision of Hon ble Rajasthan High Court in the cases of CIT Vs Hotel Hilltop [2009] 313 ITR 116(Raj) and Hon ble ITAT, Agra in the case of Indian Casting Company vs. Income tax Department (19.07.2012) in which the above decision was followed. (vii) It may be mentioned that the Hon ble Rajasthan High Court in the case of CIT Vs Hotel Hilltop (Supra) held that: From reading of section 2(22)(e) it is clear, that it comprehends manifold requirements, the first being, the payment should be made by way of loan or advance, to the concern. Of course on this aspect, the conclusion has been recorded by the Tribunal against the Revenue, but then on bare reading of the agreement and considering the totality of ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of CIT vs. Hotel Hilltop (Supra). It would be appropriate to reproduce hereunder the decision of Hon ble Jurisdictional High Court in the case CIT vs. Suram Holdings Pvt. Ltd. (Supra) as under: 1. Instant appeal has been filed by the revenue against the order of ITAT dt. 19-3-2010 which is primarily based on the judgment of this Court in CIT v. Hotel Hilltop [2009] 313 ITR 116/[2012] 205 Taxman 91/18 taxman.com 308 decided on 17-3-2008. 2. It has been alleged by the revenue that the assessee derives income from trading of shares and during the course of assessment proceedings it was revealed that the assessee has received a sum of ₹ 23.00 lacs from M/s. Japanwala Jewellers (P.) Ltd., Jaipur on the ground that it was towards share application money. The assessing authority after taking note of Sec. 2(22) (e) and available records observed that the share application money of ₹ 23.00 lacs received by the assessee company is in the nature of unsecured loan and further held to be the deemed dividend in the hands of assessee company as per provisions of Sec. 2(22] (e] of IT Act, 1961 and such deemed dividend was considered as income in the hands of the assessee. How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being devoid of merit is hereby dismissed. (ix) In view of the above discussion and respectfully following the decisions of jurisdictional High Court in the above referred cases, it is held that the AO was not justified in treating the sum of ₹ 36,85,000/- as deemed dividend in the hands of the appellant company as the appellant company is not the registered owner of shares of RPPL. Therefore, the addition of ₹ 36,85,000/- made by the AO u/s 2(22) (e) of the Act is hereby deleted. It was contended before the ld. CIT(A) that the assessee company was not the share holder of the bare company rather the Directors of the appellant company are the share holders of the RPPL and the payment of the security deposit are made to the appellant company and not to share holders. Therefore, the provisions of Section 2(22)(e) of the Act is not applicable to the appellant company. In this regard, reliance is placed on the decision of the Hon ble Jurisdictional High court in the case of CIT Vs. Hotel Hilltop (supra), wherein the Hon'ble High Court has held as under:- From reading of section 2(22)(e) it is clear, that it comprehends manifold requirements, the first being, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he individuals, being the shareholders, and not in the hands of the firm. [Para 9 We find that the ld. CIT(A) has rightly followed the decision of the Hon'ble jurisdictional High Court. The revenue has not placed any contrary material before this Bench, therefore, we sustain the order of the ld. CIT(A) on this issue and dismiss the revenue s ground of appeal. The facts are identical in this year as well as no change into the facts and circumstances. The revenue has not pointed out any new material fact, therefore, the grounds of appeal are dismissed. 27. Now we take assessee s appeal being ITA No. 531, 525 526/JP/2016 pertaining to the assessment year 2007-08 to 2009-10. In ITA No. 531/JP/2016, the assessee has taken following grounds of appeal:- 1. On the facts and in the circumstances of the case the Ld. CIT(A) has grossly erred in confirming the addition made in the assessment completed u/s 143(3) solely on the basis of statements recorded during the course of survey which stood retracted by the assessee through an affidavit filed by its director. Thus, the additions made solely on the basis of such retracted statements deserve to be deleted. 1.1 That, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es paid to these concern deserves to be treated as genuine and the observation of Ld. AO treating the aforesaid payment as non-genuine / unverifiable deserves to be ignored and excluded and the addition made based on such conclusion deserves to be deleted. 4. On the facts and in the circumstances of the case, the Ld. CIT(A) has further erred in sustaining the disallowance of ₹ 2,05,809/- being 20% of the stipend expenses claimed by assessee out of the total disallowance of ₹ 7,71,784/- made by Ld. AO being 75% of the stipend expenses claimed at ₹ 10,29,045/-, without any basis and without considering the submissions made by assessee and the evidences adduced in support of the genuineness of the expenses claimed by assessee. Thus, the disallowance of ₹ 2,05,809/- sustained by the Ld. CIT(A) deserves to be deleted. 4.1 Without prejudice to Ground of Appeal No. 01 to 04 and in the alternative, the Ld. CIT(A) has grossly erred in confirming further disallowance of ₹ 2,05,809/- out of the stipend expenses when the trading results are not accepted and the provisions of section 145(3) are invoked. 5. That the appellant craves the right to add, del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e course of survey, he should have brought material suggesting that no job work was done by the said firms. The Hon ble Rajasthan High Court in the case of CIT, Udaipur Vs. Shri Roshan Lal Lodha in I.T. appeal No. 185/2014 order dated 03/11/2015 has held as under:- In the case aforesaid, Hon'ble Apex Court held that Section 133-A of the Income Tax Act does not empower Income Tax officer to examine any person on oath; hence, the statement recorded under Section 133-A has no evidentiary value and any admission made during such statement cannot be made basis of addition. The appeal preferred by the revenue before the Income Tax Appellate Tribunal came Lo be dismissed by the judgment impugned. Learned counsel appearing on behalf of the appellant submits that the assessee in the instant matter did not retract from his statement, therefore, the law laid down in the case of S. Khader Khan Son (supra) is not applicable. We do not find any merit in the argument advanced. The assessee filed an appeal before the [3] Commissioner, Income Tax (Appeals), with specific assertion that the statement made by him would have not been accepted to make any addition and therefore, his de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aximum amount of stipend. Various discrepancies are noticed in the salary/wages sheets. Out of list of 147 trainees submitted by the appellant, the AO noted that 50% of the mobile numbers were either wrong or incorrect Out of the 10 trainees required by the AO to produce (who were working during different periods), only 3 were produced before the AO. (vii) It is noted that the AO has just ignored the various documentary evidences filed by the appellant including the attendance sheets of the trainees, retraction by Shri Naresh Kumar Jain, copies of the complete set of appointment documents of each trainee consisting of applications made by the individuals for being appointed as trainee in the appellant, along with his bio data, qualification , address / identity verification , and the appointment letter issued by the appellant mentioning therein the date of joining, initial salary and job details, attendance register, showing the daily attendance of each trainee along with factory in and out time , on the basis of which monthly stipend payment is done , along with copy of entry card of each trainee. Copy of monthly stipend payment sheet, duly reflecting the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hews and Sons v. CIT [2003] 263 ITR 101 (Ker.); (iii) The expression such other materials or Information as are available with the Assessing Officer contained in section 158BB of the Income-tax Act, 1961, would include the materials gathered during the survey operation under section 133A, vide CIT v. G. K. Senniappan [2006] 284 ITR 220 (Mad.); (iv) The material or information found in the course of survey proceeding could not be a basis for making any addition in the block assessment, vide decision of this court in T. C (A) No. 2620 of 2006 (between CIT v. S. Ajit Kumar [2008] 300 ITR 152 (Mad.); (v) Finally, the word may used in section 133A(3) (Hi) of the Act, viz., record the statement of any person which may be useful for, or relevant to, any proceeding under this Act , as already extracted above, makes it clear that the materials collected and the statement recorded during the survey under section 133A are not conclusive piece of evidence by itself. For all these reasons, particularly, when the Commissioner and the Tribunal followed the circular of the Central Board of Direct Taxes dated March 10, 2003, extracted above, for arriving at the conclusion that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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