Statements of Dummy director are not enough solely to make additions under section 68 of the Income Tax Act
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Case Details: |
DCIT vs. Frost Distilleries Limited |
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Appeal No.: |
ITA No. 7713/Del/2018 |
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Order pronounced by: |
ITAT Delhi |
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Date of Order: |
07-10-2021 |
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In Favour of: |
Assessee |
Brief Facts:
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A search and seizure operation u/s 132 of the Income Tax Act was carried out at the premises of the assessee. Consequently, the assessment was framed u/s 153A of the Act making an addition of Rs. 5.50 crores u/s 68 of the Act on account of unaccounted money introduced into the assessee company by 4 parties in the form of share capital and share premium. The A.O. held that the aforesaid investor companies were non-existent and paper companies through which the assessee introduced his own unaccounted money in the form of share capital and share premium. |
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The Ld. CIT (A) deleted addition in respect of 3 such companies in appeal. However, in the case of share capital/ premium received from 4th entity M/s Aachman Vanijya (P) Ltd., the Ld. CIT(A) relied upon the statements recorded of a dummy director who had stated that M/s Aachman Vanijya (P) Ltd. was a paper concern and no genuine business activities were carried out by the said company. The Ld. CIT (A) relied upon the decision of the Hon’ble Supreme Court in the case of CIT vs. S. Ajit Kumar (2018) 93 taxmann.com 294 (SC), wherein it was held that any material or evidence found/ collected in the survey, which has been simultaneously made at the premises of a connected person, can be utilized while making the Block Assessment under section 158BB read with section 158BH of the Act. Both the parties are in appeal before the Tribunal in this matter. |
Observations of the Court:
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The proposition laid down by the Apex Court in the case of CIT vs. S. Ajit Kumar (supra) is in relation to the Block Assessment made u/s 158BB r.w.s. 158BH of the Act. However, the said provisions of sections 158BB and 158BH are not applicable for the assessment year under consideration. The assessment for the assessment year under consideration, in this case, has been framed under the provisions of section 153A of the Act, wherein, such words as referred to by the Hon’ble Supreme Court do not exist. |
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The statement relied upon by the Ld. CIT(A) of the dummy director is otherwise not trustworthy and is not enough to make an addition based solely on the said statement. The director in his statement has stated that he was a dummy director only, which means, he was not aware of the actual activity of the said company i.e. M/s Aachman Vanijya (P) Ltd. The director further stated that he was not aware of the commission paid but the details of the commission could be furnished by Sh. Pramod Baid, who was the key person in the company. When he was asked as to what was the nature of the business of the company, he replied that all such information in respect of the company could be given by Sh. Pramod Baid only. |
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Except for the aforesaid statement of the dummy director, no other incriminating material or evidence has been referred in the assessment order, in respect of survey action carried out in the case of M/s Aachman Vanijya (P) Ltd. The statement of the said dummy director has not been confronted to the assessee. |
Ruling:
In our view, the action of the Ld. CIT(A) in confirming the addition on the basis of sole statement of one dummy director, recorded during the survey action, without confronting the same to the assessee, cannot be held to be justified. The impugned addition is, therefore, ordered to be deleted.
Read complete order: DCIT vs. Frost Falcon Distilleries Limited
Disclaimer: The article is based upon the judgment of the ITAT Delhi and is meant for informative purposes only. Readers are requested to act diligently and under the consultation of a professional before relying upon the information contained in this article.
