A.Mohan Alankamony, Member (A) -
(1.) THESE two appeals are filed by the Assessee, aggrieved by the separate orders of the Learned Commissioner of Income -tax(A) -I, Coimbatore dated 01.10.2012 in Appeal No. 327/11 -12 and 31.10.2011 in Appeal No. 175/10 -11 passed under sections 221(1) & 143(3), read with section Sec. 250 of the Act for the assessment year 2008 -09. The Assessee has raised six elaborate grounds in his appeal No. 1965/Mds./2011 and they are reproduced herein below for reference: - -
"1. The learned Commissioner of Income Tax (appeals) ought to have appreciated the fact that the appellant pursuant to the Arbitral award consequent on the family arrangement and settlement of family disputes only received the sum of Rs. 2,26,00,000/ - as part performance of the contract (implementation of the Arbitration Award during the assessment year under consideration as a capital receipt and not hence does not fall within the ambit of chargeable section 4 of the Income Tax Act, 1961. It is the order of the Arbitrating authority which is an Alternate Disputes Redressal Forum and which is equally good to all applicable laws of the land, the Company which is being a party to the Arbitration award has lawfully respected the arbitrational award by fulfilling the conditions of the same.
2.THE learned Commissioner of Income Tax (appeals) erred in upholding the order of the AO that the sum of Rs. 2,26,00,000/ - received by the appellant pursuant to the Arbitral award consequent to the family arrangement and settlement of family disputes constitutes a "Deemed Gift" under Sec. 56(vi) on the ground that the amount received is without any consideration ignoring the very Definition of consideration as per the Indian Contract Act 1872.
The learned Commissioner of Income Tax (appeals) ought to have appreciated the fact that the payments paid by the company and received by the appellant is based on the agreements entered in to by the parties to the arbitration and irrespective of the Second award superseding the first award, the payment is made to comply with the provisions of the arbitral agreement entered prior to the awards.
3.THE learned Commissioner of Income Tax (appeals) had completely erred by ignoring the law of novation under the Indian Contract Act and hence ought to have appreciated the fact that though the earlier arbitration award has been said to supersede the earlier award, the preamble of the second Award which has the clause stating that all the other clauses are equally applicable to the present award other than the clauses which had a minor alterations and the new additions has not been considered by him and all the parties to the arbitration acceded to novation.
4.THE learned Commissioner of Income Tax (appeals) has erred by not appreciating the fact that the Arbitration Award per se is a not a family settlement/arrangement but a part of the family settlement/arrangement and also ignored the fact that the Arbitrator himself while making the award for the smooth settlement based on the principle of equality and practical approach to the issue, resorted to the piercing of Corporate veil and since the entire gamut of the present issue revolves around lifting of Corporate Veil theory, the Hon'ble Commissioner of Income Tax(Appeals) ought to have also accepted it for the purpose of adjudication as per the Income Tax Law which theory of lifting of Corporate veil has been accepted by the Hon'ble apex Court on various instances treating the closely held companies as Quasi -partnerships. The learned Commissioner of Income Tax (appeals) erred in upholding the levy of interest u/s. 234B and 234C of the Income -tax Act. The entire levy of interest is unwarranted and ought to be deleted. The Ld. CIT (A) failed to appreciate that the liability u/s. 234B will arise if there is any income liable for advance tax."
1.1 The Assessee has raised six elaborate grounds in his appeal No. 2278/Mds./2012, however the crux of the issue is ground No. 2, which is reproduced herein below for reference: - -
"2. The Ld. Commissioner of Income Tax (Appeals -I) ought to have appreciated the fact that the appellant was under the bonafide impression that since there was an appeal pending before the Honourable Appellate Tribunal consequent to which the penalty has been imposed result of which has a direct bearing on the penalty proceedings and also since there was no disposal of the stay petition by the Ld. Assessing Officer the stay of demand exists and hence he cannot be treated as assessee in default so as initiate the proceeding u/s. 221(1)."
ITA No. 1965/Mds./2011
(2.) The brief facts of the case are that the assessee Shri SKM Shree Shivkumar, is an individual, earning income from salary, short term capital gain and income from other sources, filed his return of income for the assessment year 2008 -09 on 31.07.2008 admitting total income of Rs. 24,88,930/ -. Initially the same was processed u/s. 143(1) of the Act and latter the return was taken for scrutiny and assessment was made u/s. 143(3) of the Act on 30.12.2010. The assessee is the Managing Director of the company, M/s. SKM Egg Products Exports (India) Ltd., and Director in the company M/s. SKM Animal Feeds and Foods (India) Limited. During the course of scrutiny assessment proceedings, it was noticed that the assessee had received an amount of Rs. 5,76,00,000/ -from the company M/s. SKM Animal Feeds and Foods (India) Limited out of which an amount of Rs. 2,26,00,000/ - has been received during the Financial Year 2007 -08 relevant to the assessment year 2008 -09 by way of cheque dated 26.12.2007 Rs. 1,15,00,000/ - and Rs. 76,00,000/ - dated 14.03.2008. The balance amount of Rs. 3,50,00,000/ - was received by the assessee during the Financial Year 2008 -09 vide cheque dated 04.03.2009. The assessee had also received the following assets from M/s. SKM Animal Feeds and Foods (India) Limited: - -
"1. Property situated at Chennimalai Road(Car shed), Erode town in TS Nos. 95, 96, 97B to the extent of 13,825.75 Sq.ft valued at Rs. 1,38,25,750/ -.
2. 1,06,20,000 (One Crore Six Lakhs and Twenty thousands) equity shares of Rs. 10/ - fully paid in M/s. SKM Egg Products Export (India) Ltd. valued at Rs. 20,46,90,000/ -."
The contention of the assessee was that he had not offered the aforesaid amount/assets received for taxation because he had received the same under family settlement pursuant to arbitration award.
(3.) The details of the other assets transferred to the members of the family resulting from the arbitration award are stated herein below for reference: - -
"A. Assets transferred to Dr. M. Chandrasekhar as per Schedule -II of the Arbitration award.
1212 (One Thousand Two Hundred and Twelve) equity shares of 1000/ - each fully paid in M/s. SKM Animal Feeds and Foods (India) Limited from Shri SKM Shree Shivkumar, the assessee.
B. Assets Transferred to Shri SKM Maielanandhan as per the Award - as per Schedule III of the Arbitration award dt. 08.06.2008.
276 (Two Hudred and Seventy Six) equity shares of Rs. 1,000/ - each fully paid in M/s. SKM Siddha and Ayurvedic Medicines India Private Limited held by Dr. M. Chandrasekar.
C. Assets Transferred to M/s. SKM Siddha and Ayurvedic Medicines India Private limited - as per Schedule IV of the Arbitration Award dt. 08.06.2008.
1. Land at Saminathapuram (Near Siddha Unit) in S.F. No. 210/5 to the extent of 5.435 Acres.
2. Windmills (5 Nos. having a total capacity of 2250 KW) including the land related to them and its liabilities.;