High Court Of Punjab & Haryana
Such Chain Chits (P) Ltd. vs. CIT
Section 68
Asst. Year 1992-93
Adarsh Kumar Goel & Mrs. Daya Chaudhary, JJ.
IT Appeal No. 489 of 2009
25th August, 2009
Counsel Appeared : Pankaj Jain, for the Appellant
ORDER
BY THE COURT :
Delay condoned, subject to just exceptions. Heard on merits.
2. This appeal has been preferred by the assessee under s. 260A of the IT Act, 1961 (for short, “the Act”) against order dt. 22nd Sept., 2006 of the Tribunal, Delhi Bench ‘B’, New Delhi in ITA No. 1905 (Del) of 2003 for the asst. yr. 1992-93, proposing to raise following substantial questions of law :
“(i) Whether on the true and correct interpretation of the provisions of ss. 69B, 69C the amount can be treated as income without piercing the corporate veil under s. 34 of the Companies Act, 1956 ?
(ii) Whether the Tribunal order is sustainable when the finding has resulted into enhancement, which are unreasonable ?”
3. The AO made additions to the declared income under s. 68 of the Act in respect of amount purported to have been paid to its directors as chit money. It was held that payments were not in fact made and the amount remained available with the assessee as its income. The CIT(A) deleted the said additions. It was observed : “5.2. The learned Authorised Representative has submitted that AO was not at all justified in making above additions by invoking the provisions of s. 68 of the Act because s. 68 is about receipt of money by any assessee and the same is not about any payments. My attention has been invited to the affidavits of all the persons receiving the chit amounts which have been filed during appellate proceedings and which affidavits have already been taken on record. It has been pointed out that all these persons who have received the chit amounts were existing income-tax assessees, their PAN/G.I.R. Numbers having been given in the respective affidavits. Thus, it has been contended that on facts as well as in law, the AO was not at all justified in making the additions. 5.3. In addition to above submissions, the learned Authorised Representative has produced photostat copy of the assessment order passed under s. 143(3) in the case of the appellant for the asst. yr. 1991-92 and has invited my attention that the chits being run by the appellant have all been accepted by the Department as genuine. It has further been contended that the chits are continuing process because the same get matured and finally settled after substantial period of time. With this background, it has been argued that the receipt of money too from the persons who have contributed to the chits was not in doubt.”
4. The Tribunal accepted the appeal of the Revenue by observing :
“2.10. Coming to the other payments, it is found that the cheques were drawn in favour of Shri Suresh Chand Gupta and not in favour of the respective chit- holders. This did not amount to any payment to the chit-holders at all. Therefore, the affidavits filed by them are against the tenor of the evidence obtained from the bank. Such an evidence by way of affidavits is not reliable and it does not establish that the payments were made to the concerned chit-holders. We are also not able to countenance the argument of the learned counsel that in such a situation, the action lied in the hands of the recipients. They were the directors of the assessee company, which is a private limited company, controlled by them. Their acts are the acts of the company and, therefore, payment to them amounts to the payment to company itself. Further, money received by the assessee on chits belonging to it as it merges with the money lying in its till. The money paid out to chit-holders will be the expenditure incurred by the assessee. However, if the money involved in the expenditure is appropriated by its, as payment to directors has already been held to be payment to self, then, no expenditure can be said to have been incurred. Therefore, we are of the view that the learned CIT(A) erred in deleting the addition of Rs. 6,63,650 without discussing the matter in detail by merely mentioning that he found sufficient force in the submissions of the learned Departmental Representative on facts as well as in law.” We have heard learned counsel for the appellant. Contention raised is that case for piercing the corporate veil was not made out and additions, if at all, should have been made in the hands of the director. As far as the assessee company is concerned, the payments had been duly made. The amount received by the director whose identity is known would be unexplained income of the said director. Reliance has been placed on judgment of Hon’ble Supreme Court in CIT vs. Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195.
We are unable to accept the submission. The Tribunal has found that the amount representing payment to chitholders was in fact paid to Suresh Chand Gupta, a director of the assessee, which was a private company controlled by the recipient of the amount. The amount was available with the assessee itself and payments were made representing expenditure which was never incurred. The amount was, thus, available with the assessee as undisclosed income which justified additions made by the AO. In view of this finding, judgment in Lovely Exports (supra) is distinguishable. The finding of the Tribunal being finding of fact, we do not find any ground to interfere under s. 260A of the Act. No substantial question of law arises. The appeal is dismissed.
[Citation : 321 ITR 471]
