TaxTMI 
TaxTMI 
2005 (11) TMI 197
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....share transfer forms, sale bills, receipts, affidavits and share certificates in original. Shri Alok Agarwal renders consultancy services. 3. In block assessment framed under s. 158BC of the Act of Shri Alok Agarwal, the person searched, his AO. Dy. CIT, Special Range-3,New Delhitreated the share capital of Rs. 19,58,070 as his undisclosed income. This assessment was framed on31st May, 1997. This assessment stood set aside by the Tribunal and in the fresh assessment completed on30th March, 2001of the searched person addition has again been made on protective basis. 4. Proceedings in the case of the appellant were initiated under s. 158BD r/w s. 158BC of the Act on21st May, 2001with the allegation that most of the persons in whose names the share capital has been introduced are non-existent. Return of income for block period disclosing nil income has been filed. The appellant was required to file complete list of shareholders of the company. The AO on his own issued summons under s. 131 to various shareholders. The summons were served and replies have been received confirming their investment in purchase of shares by way of being an affidavit inter alia filing the proof of the....
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....n the appellant's case before us the raising of share' capital through account payee cheques and recording of all the entries in respect of share issue stand disclosed in the regular books of account is not in dispute. The IT return drawn on the basis of such accounts stood accepted in the regular assessment of the appellant. The return for allotment of shares had been filed with the office of Registrar of Companies and all the persons in whose names' shares were allotted had become legally the shareholders of the appellant company. Details of such shareholding with complete particulars as to the identity, capacity and genuineness of the shareholding and their confirmations/affidavits had been placed on record. The AO himself had initiated enquiry by issuance of summons under s. 131 of the IT Act on all such shareholders. These were duly served and complied with by the shareholders. The shareholders in the enquiry proceedings by the AO had filed affidavits confirming investment in purchase of shares of appellant company as their own investment. This investment was duly disclosed by them in their respective IT returns, copies of which were also placed on record along with assessment....
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....h share certificates etc. were found from Shri Alok Agarwal. Documents found and seized did not reveal any investment outside books by the appellant nor any enquiry resulted into any contrary finding. The appellant was found to have received the share money through account payee cheques and shares allotted and share certificates also stood issued and found with a third party incidentally a consultant by profession. The circumstances under which these certificates were lying with the consultants also stood explained and no infirmity is found in the explanation of the appellant. The AO did not reject the explanation of the assessee. Apparently the investment in shares was of all such persons who had become shareholders and holding the same as their own investment which was duly disclosed and also stood accepted in their individual IT return. The AO without bringing any material is found to have erred in saying that the apparent is not real. For alleging so, the burden was on Revenue. This has not been discharged. Such a principle is found laid by the apex Court in CIT vs. Daulat Ram Rawat Mull 1972 CTR (SC) 411 : (1973) 87 ITR 349 (SC). We also find that without there being any mater....
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....ing a long drawn enquiry, there was no basis to say about only a part of the share capital of Rs. 21,63,070 as bogus or genuineness of which not proved. The AO is speaking two different things in the same tongue without discharging his burden which in law lay upon him after the genuineness of investment in shares stood admitted by each of the shareholders. Having regard to the totality of facts and the findings as arrived at for the genuineness of transaction of shares having been proved by the appellant and for lack of positive material, evidence or information as envisaged under Chapter XIV-B such an addition cannot be allowed to sustain. 9. The Tribunal in IT(SS)A No. 284/Del/2001 dt.18th Aug., 2003in the case of Indradhan Agro Products Ltd. vs. Dy. CIT [reported at (2004) 89 TTJ (Del) 158Ed.] while dealing with the addition under s. 68 of the Act as undisclosed income on the ground of genuineness has held as under: "We may look at the entire issue from another angle, namely the impact of provisions of s. 68 in the context of block assessment proceedings. The AO has taken resort to the provisions of s. 68 and held that the assessee failed to discharge the onus of proving t....
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....considered by the Tribunal in the case of Makhani & Tyagi (P) Ltd., wherein relying upon the jurisdictional decision of the High Court in the case of CIT vs. Ravi Kant Jain (2001) 167 CTR (Del) 566 : (2001) 250 ITR 141 (Del) and Gujarat High Court in the case of N.R. Paper & Board Ltd. vs. Dy. CIT (1998) 146 CTR (Guj) 612 : (1998) 234 ITR 733 (Guj) amongst others has deleted the additions. The Tribunal has also considered the decision of the Delhi High Court in the case of CIT vs. Steller Investment (2000) 164 CTR (SC) 287 : (2001) 251 ITR 263 (SC) and Supreme Court in the case of CIT vs. Sophia Finance Ltd. (1993) 113 CTR (Del)(FB) 472 : (1994) 205 ITR 98 (Del). We have even taken ourselves through various pages of the paper books and observed that the assessee has regularly been filing his returns. The replies of the assessee before the AO in the block assessment proceedings and the submissions with regard to Inspector's report, past assessments of the assessee have also been taken into consideration. After duly considering the entire plethora of arguments and evidences, we are of the view that in the facts of the case, the AO could not have made additions in block assessment and....
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.... of Shri Alok Aggarwal, chartered accountant, hereinafter referred to as the searched person, had in sheer helplessness and misery submitted that documents have been found in the course of the search from the premises of the searched person and admittedly amongst them are blank transfer forms where the part to whom they are to be transferred have been left as blank, however signatures of the alleged shareholders are there. The irony of deleting additions in the hands of the chartered accountant as well as in the hands of the companies despite a seizure of documents was questioned by the learned Departmental Representative. The helplessness experienced in the situation where despite seizure of documents found in the search resulting in the end where Revenue is left standing helplessly was expressed by him. The learned Departmental Representative in sheer helplessness with misery writ large on his face attempted to paint out the irony that how in the case of all the companies floated as Benami or served as a professional consultant by the searched person, all the shareholders at the point of time came to be under circumstances where they were in dire need of money. This paper work an....
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....earing No. 245, 234 and 224, Anarkali Bazar, Jhandewalan,New Delhi, incriminating documents pertaining to the present assessee were seized. The AO of Shri Alok Aggarwal completed the assessment under s. 158BC in his case. He found that undisclosed income arising out of those incriminating documents related to the assessee. As such, the seized documents books of account were handed over to the AO of M/s Real Overseas (P) Ltd., the assessee here. Accordingly, in this background, the assessment was framed in the hands of the assessee. 4. Notice under s. 158BD r/w s. 158BC was issued to the assessee on 21st Aug., 2000 in response to which, return for the block period 1987-88 to 1996-97 and 1997-98 (part period 1st April, 1996 to 19th April, 1996) was filed on 24th Aug., 2001 under protest as per the statement of facts placed before us. 5. The AO was of the view that the assessee is engaged in the activities of giving accommodating entries and looking at the documents seized, he was of the view that the shareholders of the assessee-company are Benami and have in fact signed blank receipts, blank sale bills, blank share transfer forms and also confirmatory affidavits which form par....
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....o the same, it was submitted that the block assessment order in the case of the chartered accountant. Shri Alok Aggarwal, was set aside by the Tribunal. As a result of it, additions on identical lines were made in the case of Makhani & Tyagi (P) Ltd. It was further argued that the income added in the block assessment already stands disclosed in the regular assessments of the assessee. Inviting attention to p. 123, it was stated that the assessee has been filing its return from 1989-90 which was filed on 29th Dec., 1989, i.e., much before the date of the search which was conducted on the official and residential premises of Shri Alok Aggarwal only on 19th April, 1996. Paper book p. 120 was also referred to in support of the contention that the return for 1990-91 was filed on31st Dec., 1990. Similarly, it was submitted that the returns for 1992-93, 1994-95, 1995-96 and 1996-97 have been filed by the assessee. In support of the above claim, our attention was invited to p. 101 which is the intimation under s. 143(1)(a) in the case of the assessee for 1994-95 which was issued on 28th Feb., 1995, i.e., much before the date of the search on Mr. Alok Aggarwal, the chartered accountant of t....
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....d not be invoked against the assessee since the fact is not in dispute that the share capital was recorded in the account books maintained by the assessee on the basis of which it stood assessed in regular assessment proceedings year after year right upto asst. yr. 1996-97." 9. The submissions in response to the arguments which have been reproduced above as well as various other arguments on facts were responded to by the learned Departmental Representative Shri Ujagar Singh in the following manner: "18. Learned Departmental Representative, in reply, with respect to the jurisdiction placed reliance on the documents placed before the Bench and the observation in the assessment order so as to contend that the jurisdiction of the AO was neither barred by limitation nor otherwise. 19. With respect to the additions made, reliance was placed upon the block assessment order though nothing was stated to controvert the submission of the assessee that the issue is fully covered vide order dt.21st July, 2003in IT(SS) No. 204/Del/2002 in the case of Makhani & Tyagi (P) Ltd. It was specifically put to him that whether he would like to point out any distinguishing fact or circumstance. ....
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....ng the addition on merit deserve to be allowed." 11. At this juncture, it may also be relevant to consider the order of the Tribunal in the case of Makhani & Tyagi vs. Dy. CIT in IT(SS)A No. 204/Del/2002 wherein the arguments advanced on behalf of the Revenue were as under: "3. The learned Departmental Representatives relied on the assessment order and submitted that the share capital appears to be bogus because none of the shareholders having appeared before the AO under s. 131 of the IT Act, the same had not been proved to be genuine. He, therefore, submitted that no interference was called for in the block assessment order as passed by the AO." 12. Considering this, the issue was decided as under: "4. We have perused various documents placed before us in the form of paper book and have given our thoughtful consideration to the facts of this case. The facts stated by the learned counsel for the assessee have neither been controverted nor disproved by the learned Departmental Representatives. Admittedly, the entire share capital stood disclosed to the Department as having been entered in the regular account books maintained by the assessee-company prior to the date of ....
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....XIV-B of the IT Act was certainly on the AO which had not at all been discharged. On the other hand, necessary documentary evidence was placed on record to prove the identity of all the shareholders including furnishing of their GIR/PAN numbers and filing of other documentary evidence in the form of ration cards, etc. which had neither been controverted nor disproved by the AO. All the shareholders had subscribed share capital by account payee cheques/drafts-a fact also controverted or disproved by the AO. There was no justification on the part of the AO to ignore the confirmation letters as had been received by him directly in response to summons under s. 131 of the IT Act from various shareholders. It was held by the jurisdictional Delhi High Court in. the case of CIT vs. Steller Investment Ltd. (1991) 99 CTR (Del) 40 : (1991) 192 ITR 287 (Del) that "even if it be assumed that the subscribers to the increased share capital were not genuine, under no circumstance, could the amount of share capital be regarded as undisclosed income of the appellant". This judgment was affirmed by Supreme Court in CIT vs. Steller Investment Ltd. (2000) 164 CTR (SC) 287 : (2001) 251 ITR 263 (SC). Jur....
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....from the one appreciated by this very Bench in the case of Real Estates. In the circumstances, the facts as argued need due consideration and the alarm sounded by the learned Departmental Representative cannot be wished away. 14. Being of the view that the issue cannot be decided by wearing blinkers, the full scope of the picture which emerges has to be taken cognizance of and dealt with and merely blindly disposing the issue holding it as covered in the peculiar facts as are emerging from the impugned order will to my mind in the circumstances be not appropriate as once a judicial consciousness has been stirred, then it must be taken to its logical conclusion. Accordingly, in the circumstances, reference may be made to p. 2 of the assessment order which is under challenge. Since this is a period in which a direct appeal was coming to the Tribunal wherein in para 2 of the said page, the AO observes as under: "During the course, of the search proceedings incriminating documents in the form of blank but signed share transfer forms, sale bills, receipts, affidavits and share certificates relating to M/s NPAR Drugs (P) Ltd. were seized from 245, Anarkali Bazar, Delhi, which is th....
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....question of any cash having been received or paid at any time. It may further be stated that the documents were lying with Shri Alok Aggarwal, chartered accountant as he is professional consultant to the company and his opinion is normally taken in all such matters so as to maintain strict compliance with the provisions of the Companies Act. It may also be brought to your kind notice that this mode of signing of advance receipts and return of original documents is a prevalent practice followed for claiming refund of deposit or receipts of any payment from Central or State Governments, DDA and other Housing Corporations etc. The advance receipts are not valid till cheques/drafts nos. are entered in them at the time of actual payment. 19. As though this was not enough, the AO observes that in each of these cases on a perusal of the blank pass book of the shareholder, it revealed that "funds had been deposited of an equivalent amount just before the date of withdrawal of the share money from the respective bank accounts in a majority of the shareholders". He fairly observes that although the identity and capacity for investment has been furnished by all the shareholders, however, t....
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....dered by applying the test of human probabilities, Sumati Dayal vs. CIT (1995) 125 CTR (SC) 124 : (1995) 214 ITR 801 (SC) and CIT vs. Durga Prasad More 1973 CTR (SC) 500 : (1971) 82 ITR 540 (SC). In the case of the assessee, the surrounding circumstances discussed above leads one to the conclusion that the share application money in respect of the persons mentioned above is not genuine investment." 21. On account of these facts, an amount of Rs. 21,63,000 was added as bogus share capital in the hands of the assessee-company. 22. It may be pertinent to briefly observe that their Lordships in the cases of CIT vs. Steller Investment (1991) 99 CTR (Del) 40 : (1991) 192 ITR 287 (Del) and CIT vs. Sophia Investment Ltd. (1993) 113 CTR (Del)(FB) 472 : (1994) 205 ITR 98 (Del)(FB) have considered the aspect of genuineness in the context of the identity of the shareholder. The Hon'ble Supreme Court has endorsed the judgment of Delhi High Court in the case of CIT vs. Steller Investment (2000) 164 CTR (SC) 287 : (2001) 251 ITR 263 (SC). 23. Accordingly, after having considered the entire peculiar facts and circumstances which have not been addressed or considered by us in the case of R....
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....tatistical purposes. REFERENCE UNDER S. 255(4) OF THE IT ACT, 1961 B.R. JAIN, A.M.: March, 2004 Since there is a difference of opinion between the Members of the Bench we state the following points of difference and refer the same to the Hon'ble President for further necessary action as envisaged under s. 255(4) of the IT Act, 1961. "Whether, on the facts and findings, issue being identical and covered by various Tribunal orders arising from the same search and in the light of material on record, the learned AM is justified in deleting the addition on account of investment in share capital of Rs. 21,63,070 made as undisclosed income of the block period of the appellant or that the learned JM is justified in restoring the issue back to the file of AO for adjudication afresh? SMT. DIVA SINGH, J.M.: 25th May, 2004 I have received the following proposed question under s. 255(4) of the IT Act, 1961 in ITA No. 206/Del/2002. "Whether on the facts and findings, issue being identical and covered by various Tribunal orders arising from the same search and in the light of material on record, the learned AM is justified in deleting the addition on account of investment in ....
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.... the learned AM justified in not considering the submissions of the Revenue at all. Q.5. Whether, in view of the surrounding circumstances, relied upon by the AO in terms of the decisions in Sumati Dayal vs. CIT (1995) 125 CTR (SC) 124 : (1995) 214 ITR 801 (SC) and CIT vs. Durga Prasad More 1973 CTR (SC) 500 : (1971) 82 ITR 540 (SC), is the action of the JM justified in restoring for verification of facts to address the arguments advanced by the Revenue or is the learned AM justified in ignoring the decision relied upon by the AO as well as the arguments of the Revenue and coming to a conclusion only on the basis of the arguments advanced by the assessee? Q.6. Whether, where the factum of arguments based on material addressed by the Revenue, which has not been considered by other orders should be ignored especially since this aspect was not challenged on behalf of the assessee or should the Tribunal consider arguments of both the sides with even hand? S.C. TIWARI, A.M. (AS THIRD MEMBER): 30th November, 2005 In this case the appeal filed by the assessee on19th June, 2002against the order under s. 158BD, dt.31st May, 2002for the block period1st April, 1986to19th April,....
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....t had to be received only through crossed cheques/draft and the relevant number of cheque and other particulars would have been filled in the blank receipts. There was no question of any cash having been received or paid at any time. It may further be stated that the documents were lying with Shri Alok Aggarwal, chartered accountant as he is professional consultant to the company and his opinion is normally taken in all such matters so as to maintain strict compliance with the provisions of the Companies Act. It may also be brought to your kind notice that this mode of signing of advance receipts and return of original documents is a prevalent practice followed for claiming refund of deposits or receipts of any payment from Central or State Governments, DDA and other Housing Corporations, etc. The advance receipts are not valid till cheques/drafts numbers are entered in them at the time of actual payment." The AO considered the submissions made by the assessee and the confirmations submitted by the shareholders. Examination of the bank passbooks of shareholders revealed that in every case there was a deposit of an equivalent amount just before the date of withdrawal of share mon....
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....obability. In support of this proposition, the learned AO relied upon the judgments reported in CIT vs. Durga Prasad More 1973 CTR (SC) 500 : (1971) 82 ITR 540 (SC) and Sumati Dayal vs. CIT (1995) 125 CTR (SC) 124 : (1995) 214 ITR 801 (SC). He held that the surrounding circumstances in the case of the assessee led to the conclusion that the share application money in respect of documents found and seized did not represent genuine investments. He, therefore, made an addition of Rs. 21,63,070 on account of bogus share capital under the provisions of s. 68 as per the details given in the impugned order under s. 158BD. 4. Aggrieved by the aforesaid order under s. 158BD, the assessee filed appeal before the Tribunal that was heard in Bench "B" on7th Jan., 2004. Thereafter Hon'ble AM made an order of the Bench in writing and forwarded the same to Hon'ble JM for counter-signature. He noted that as a consequence of the same search similar facts and documents were taken into possession of the Revenue authorities in the cases of certain other companies, viz., Real Overseas (P) Ltd., M/s Makhani & Tyagi (P) Ltd., Indradhan Agro Products Ltd., Akriti Media (P) Ltd. and Garg Polymers (P) Ltd....
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....nted the presence of the shareholders, he should have enforced their attendance by virtue of powers vested in AO. He could not require the assessee to produce those persons who were not under the control of the assessee-company. Once the initial onus that lay upon the assessee had been discharged, the burden lay upon the Revenue to verify and examine the correctness of material. The Hon'ble AM found that stand fortified by the decision of the Hon'ble Supreme Court in CIT vs. Orissa Corporation (P) Ltd. (1986) 52 CTR (SC) 138 : (1986) 159 ITR 78 (SC). 6. The learned AM found that presumption under s. 132(4A) of the Act was in favour of the assessee. The circumstances under which the share certificates were lying with Shri Alok Aggarwal also stood explained and no infirmity was found in the explanation of the assessee. Apparently, the investment in shares was of all such persons who had become shareholders and the AO without bringing any material erred in saying that the apparent was not real. That burden was on Revenue as held by the apex Court in CIT vs. Daulatram Rawatmull 1972 CTR (SC) 411 : (1973) 87 ITR 349 (SC). The assessment was made by the learned AO on the basis of susp....
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....adesh High Court in the case of CIT vs. Godawari Corporation Ltd. (1984) 43 CTR (MP) 148 : (1985) 156 ITR 835 (MP). 9. The Hon'ble JM found herself unable to concur with the reasoning and conclusion of Hon'ble AM. She made her separate order dt.26th March, 2004. She pointed out that during the course of hearing of the appeal in the present instant case, the learned Departmental Representative was confronted with the orders of the Tribunal in the case of different companies where similar additions made had been deleted. The learned Departmental Representative in sheer helplessness with misery writ large on his face, attempted to point out how in the case of all the companies floated or served as a professional consultant by the searched person, all the shareholders at the same paint of time came to be under circumstances where they were in dire need of money. The valiant attempt was made by him to point out as to how all the shareholders who were in dire need of money could sign blank share transfer forms, sale bills, cash receipts, affidavits etc. at the same time in identical manner. The learned Departmental Representative painted out that the surrounding circumstances and the ....
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....ly, 2003 in IT(SS)A No. 204/Del/2002 in the case of M/s Makhni & Tyagi (P) Ltd. It was specifically put to him that whether he would like to point out any distinguishing fact or circumstance. The learned Departmental Representative did not point out any distinguishing fact or circumstances and, in fact, conceded that the facts more or less are identical As such, the issue is covered by the said order. It was fairly conceded that the additions in identical circumstances have been made in the case of Makhni & Tyagi (P) Ltd. but for the record, reliance was placed upon the impugned order." The Hon'ble JM pointed out that on the basis of these submissions and material placed on record, the Tribunal found that identical issue had been considered by Makhni & Tyagi Pvt. Ltd., wherein reliance had been placed on the judgment of jurisdictional High Court in the case of CIT vs. Ravi Kant Jain; CIT vs. Steller Investment and CIT vs. Sophia Finance Ltd. On that basis it was held that the AO could not have made addition in the block assessment order and if he was of the view that the documents had not been considered in the regular assessments, he could have reopened the same under s. 147/14....
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....nd had not the learned Departmental Representative made his impassioned submissions, then probably the appeal in the case of the present assessee would have followed the same course. However, in the present appeal the Hon'ble JM found herself faced with a scenario entirely different from the one appreciated by that very Bench in the case of Real Overseas. The learned JM thereafter observed: "In the circumstances, the facts as argued need due consideration and the alarm sounded by the learned Departmental Representative cannot be wished away. 14. Being of the view that the issue cannot be decided by wearing blinkers, the full scope of the picture which emerges has to be taken cognizance of and dealt with and merely blindly disposing the issue holding it as covered in the peculiar facts as are emerging from the impugned order will to my mind in the circumstances be not appropriate as once a judicial consciousness has been stirred, then it must be taken to its logical conclusion." 12. The learned JM also took note of the observations of the AO that in the shareholders' bank passbooks, it was found that funds had been deposited of an equivalent amount just before the date of w....
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....n the facts and findings, issue being identical and covered by various Tribunal orders arising from the same search and in the light of material on record, the learned AM is justified in deleting the addition on account of investment in share capital of Rs. 21,63,070 made as undisclosed income of the block period of the appellant or that the learned JM is justified in restoring the issue back to the file of AO for adjudication afresh?" On receipt of the aforesaid proposed question from the Hon'ble AM, the Hon'ble JM suggested the following questions to bring out the point of difference to be referred to the Hon'ble President for further action: "Q1. Whether, in view of the facts and material on record referred to by the Departmental Representative in his arguments, which was not rebutted by the Authorised Representative and admittedly has not been considered in the other orders of the Tribunal, on which reliance has been placed by the assessee, is the action of JM justified in restoring the issue for necessary verification to the AO or is the learned AM justified in not considering those facts, material on record and the arguments of the Departmental Representative and deleti....
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....and?" 15. Hon'ble President has nominated me to consider and express my opinion on the points of difference in opinion, as stated by the Hon'ble AM and by the Hon'ble JM in relation to the present appeal. 16. During the course of hearing before me Shri O.P. Sapra, the learned counsel for the assessee, argued that the dispute in this appeal stands concluded by the judgment of Hon'ble Delhi High Court in the case of CIT vs. Makhni & Tyagi (P) Ltd. (2004) 187 CTR (Del) 550 : (2004) 267 ITR 433 (Del). He pointed out that that judgment relates to the very search in relation to which the order under s. 158BD was made in the case of the assessee before me. The learned counsel pointed out that earlier there was judgment of Hon'ble Delhi High Court in the case of CIT vs. Steller Investment Ltd. (1991) 99 CTR (Del) 40 : (1991) 192 ITR 287 (Del). According to that judgment under no circumstances the amount of share capital may be regarded as undisclosed income of the company. That judgment of Hon'ble Delhi High Court has also been affirmed by Hon'ble Supreme Court by their judgment reported in CIT vs. Steller Investment Ltd. Besides, the Full Bench of the Hon'ble Delhi High Court had he....
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....itself. If the search did not yield any evidence as to undisclosed income, the AO was precluded from assessment of undisclosed income in the block assessment proceedings under s. 158BC/158BD. On that aspect also there was no difference of opinion and, therefore, the matter stood concluded by the findings recorded by the Hon'ble AM. 18. The learned counsel argued that there was lot of overlapping in the questions framed by the Hon'ble JM. Those questions were more of academic interest than any real controversy arising on the facts and in the circumstances of the case. The allegations contained in those questions that the arguments of the learned Departmental Representative had not been considered in the order made by the Hon'ble AM were not correct. In the order written by Hon'ble AM there were references to the arguments of the learned Departmental Representative at various places. The AM had recorded, "The learned Departmental Representative present in the proceedings admits that facts, circumstances and issues are identical and has not shown any new or distinguishing findings of the AO." In other words the learned Departmental Representative himself accepted that the facts of ....
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....trong facts that spoke for themselves. The inferences drawn by the learned AO were self-evident on the basis of discovery of material as a result of the search. The burden cast upon the assessee was very heavy as to why all the shareholders should en masse sign these blank documents and deposit them with the chartered accountant? The learned Departmental Representative referred to the letter of the assessee dt.28th May, 2002addressed to the AO and placed at pp. 6 to 12 of the assessee's paper book. According to the assessee, the papers found were advance receipts for sale of shares. This explanation was not substantiated by pointing at even a single prospective buyer of those shares. How could every shareholder of several companies comprehensively sign all the blank documents even when there was no prospective buyer in sight. Those facts pointed out that there was no genuine shareholders and mere name lenders who had already signed blank documents for the safety of the assessee to whom the money actually belonged. The learned Departmental Representative argued that the distinguishing feature noticed by the Hon'ble JM in the instant case was that while in the case of each of the ass....
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....iled the returns of income below taxable limit. Returns of income filed, PAN numbers applied and all those things were mere exercise of make-believe than anything in substance. In many cases the balance-sheets of the shareholders did not reflect the shares of the assessee-company. The learned Departmental Representative referred to assessee's paper book p. 31 as an illustration of that point. 22. The learned Departmental Representative argued that the abundant facts found during the course of search constituted the focal point of the order of the Hon'ble JM and, therefore, it cannot be said that she had disregarded the judgment of Hon'ble jurisdictional High Court in the case of Ravi Kant Jain or the findings of the Tribunal in the case of Sunder Agencies. As to the presumption raised in s. 132(4A), the correct legal position was that such presumption was for the purpose of conducting search proceedings only and could not be raised by either side during the course of assessment proceedings. The learned Departmental Representative argued that orders of the Tribunal in the cases of other assessee-companies relating to the same search, as also the judgment of Hon'ble Delhi High Cou....
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....cide the matter afresh if facts and material on record and arguments based on such material not considered by the earlier orders of the Tribunal are raised before the subsequent Bench. Further, Hon'ble JM has raised the question of the significance of surrounding circumstances and human probabilities. Hon'ble JM has stated also that the arguments of Revenue, not being arguments of the assessee, have not been given due consideration in the order of the Hon'ble AM. 25. On analyzing the points of reference by both Hon'ble AM and Hon'ble JM, I find that the first and foremost issue before me is the force and impact of the earlier orders of the Tribunal in the appeal before me. 26. While considering the question of the binding nature of the order of one Bench of the Tribunal on another Bench, it is very important to bear in mind the difference between High Courts and Tribunal. Tribunal is not a formal source of law in the sense Hon'ble High Courts are in accordance with Art. 141 of the Constitution ofIndia. Secondly, Tribunal is not a Court of record. The orders passed by various Benches of the Tribunal by and large go unpublished and only minuscule number of orders are published ....
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....under: "In the matter of assessment of income-tax, each year's assessment is complete and the decision arrived at in a previous year on materials before the taxing authorities cannot be regarded as binding in the assessment for the subsequent years. The Tribunal is not shown to have omitted to consider the material facts. The decision of the Tribunal was on a question of fact and no question of law arose which could be directed to be referred under s. 66(2) of the IT Act." 30. In the case of M.M. Ipoh & Ors. vs. CIT (1968) 67 ITR 106 (SC), the Hon'ble Supreme Court once again reiterated: "The doctrine of res judicata does not apply so as to make a decision on a question of fact or law in a proceeding for assessment in one year binding in another year. The assessment and the facts found are conclusive only in the year of assessment: the findings on questions of fact may be good and cogent evidence in subsequent years, when the same question falls to be determined in another year," 31. In the case of CIT vs. Brij Lal Lohia & Mahabir Prasad Khemka 1974 CTR (SC) 167 : (1972) 84 ITR 273 (SC), Tribunal decided for asst. yrs. 1945-46 and 1946-47 that the gifts in question were....
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.... see any necessity for it. I have thus no hesitation in answering the first question as reframed in the negative as it must be held that the Tribunal was not correct in coming to the conclusion that the gifts were inchoate and incomplete only on the ground that this question was concluded by the Tribunal's previous order in relation to the asst. yr. 1954-55." 33. In the case of Surjidevi Kunjilal-Jaipuria Charitable Trust vs. CIT (1978) 114 ITR 685 (All), the Tribunal decided the appeal simply following the earlier decision. Hon'ble Allahabad High Court, therefore, considered it necessary to direct the Tribunal to rehear the appeal in the following words: "The position is that there is no finding by the Tribunal on the merits of the matter, specially on the two objects which were the subject-matter of concession on the previous occasion. Learned counsel for the trust argues that each of the objects is an object of public charity which is covered by the relevant clause in the IT Act of 1961, entitling the trust to exemption. Since the Tribunal has not recorded any finding on the merits of the matter, we are unable to decide the question of law as it has been framed. In our opi....
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....dge takes a view different from the one taken by another judge on a question of law, he does not finally pronounce his view and the matter is referred to a Division Bench. Similarly, if a Division Bench differs from the view taken by another Division Bench, it does not express disagreement and pronounce its different views, but has the matter posted before a Fuller Bench for considering the question. If that is the position even with regard to a question of law, the position will be a fortiori with regard to a question of fact. If the Tribunal in the present case wanted to take an opinion different from the one taken by the earlier Bench, it should have placed the matter before the President of the Tribunal so that he could have referred the case to a Full Bench of the Tribunal. consisting of three or more members for which there is provision in the Act itself." 36. In the case of Namdang Tea Co. Ltd. vs. CIT (1982) 138 ITR 326 (Cal) Hon'bleCalcuttaHigh Court distinguished the aforesaid judgments of Hon'ble Madras High Court in the case of L.G. Ramamurthi and pronounced the legal position in the following words: "Much reliance has been placed on behalf of the appellant on the....
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....Indian IT Act, 1922?" 38. It was strongly contended on behalf of the Revenue that it was not open to the subsequent Bench to take a different view of the matter and if different views were taken, that would create chaos and uncertainty. Strong reliance was placed on Madras High Court judgment. Reliance on behalf of the assessee was placed on the judgment reported in (1968) 67 ITR 106 (SC). Hon'ble High Court referred to the Supreme Court judgments reported in New Jehangir Vakil Mills Co. Ltd. vs. CIT (1963) 49 ITR 137 (SC) and 1974 CTR (SC) 167 : (1972) 84 ITR 273 (SC) and some other judgments and thereafter held: "It is not useful to multiply the authorities. It may be taken as an established rule of law that the decisions rendered in earlier proceedings under the IT Act do not operate as res judicata in connection with the subsequent assessment years nor the question of estoppel arises. The decision rendered is a decision for that particular year. So far as the present case is concerned, we need not be guided by the broader proposition propounded, for, it may be stated that the Tribunal, Bombay Bench "B", has not proceeded to determine the question solely on the basis of th....
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....erits by the Tribunal." 42. In the case of CIT vs. Mohanlal Ranchhodas (1992) 108 CTR (Guj) 22 : (1993) 203 ITR 304 (Guj), the Hon'ble High Court laid down that a subsequent Bench should consider in a subsequent appeal any new issue that was not considered while arriving at the earlier decision. The Hon'ble High Court observed: "The Tribunal has, however, recorded in para 7 of its judgment a finding that the surplus arising out of Arvind Mills and Atul Products shares should be treated as capital gains as has been rightly held by the ITO. Based on this finding of the Tribunal in the earlier appeal, it was contended before the Tribunal by the Revenue that the subsequent appeals against the order of the AAC were not maintainable because this ground was already concluded by the Tribunal in its earlier order in IT Appeals Nos. 225 and 226/Ahd of 1970-71. The Tribunal, while dealing with the said preliminary objection, rightly found that, while deciding the earlier appeals, the Tribunal has not actually gone into the question of conversion of investment shares into stock-in-trade for ready share business." 43. In the case of CIT vs. Kalpetta Estates Ltd. (1994) 122 CTR (Ker) 41....
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....tive in favour of the assessee and in respect of question No.2 it is held that as a matter of prudence the Tribunal is to take into notice and consider the decision given by another Bench of the Tribunal though that may not be entirely binding upon the Tribunal." 45. There is unanimity in the judgments of High Courts and the apex Court inIndiathat the decision of one Bench of the Tribunal carries no binding force on another Bench of equal strength -in another appeal on similar issues or facts. Hon'ble Madras High Court too, have not said so in their judgment in the case of L.G. Ramamurthi & Ors. and held only that if a Bench wanted to take a opinion different from the one taken by the earlier Bench, it should place the matter before the President of the Tribunal for reference to a Full Bench of the Tribunal. This view of Hon'ble Madras High Court has been reiterated by some other High Courts as well. 46. In the case of CIT vs. Goodlass Nerolac Paints Ltd. (1990) 90 CTR (Bom) 184 (1991) 188 ITR 1 (Bom), the Hon'ble Bombay High Court have given the same advice in the following words: "Before parting with this question, we consider it desirable to mention that the Tribunal is....
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....Bench of the Tribunal deciding the similar issue. There is unanimity and direct authority of Hon'ble Supreme Court in more than one judgments that in income-tax matters the decision of one Bench of the Tribunal does not constitute a binding precedent on subsequent Bench of the Tribunal deciding upon the same or similar issues or facts. There is, however, a strong undercurrent in judicial thinking that where there is only difference of opinion on the same facts and the same aspects, the subsequent Bench ought not to proceed to decide the matter on its own contrary to the earlier decision and should refer the matter to the President of the Tribunal for constitution of a larger Bench. At the same time there is plethora of authority that a subsequent Bench can draw different conclusion if there is adequate justification to depart from the earlier view, e.g. where subsequently new or more facts come to light. (1961) 41 ITR 685 (SC); 1974 CTR (SC) 167: (1972) 84 ITR 273 (SC); (1982) 138 ITR 326 (Cal); (1986) 57 CTR (Raj) 249 : (1986) 160 ITR 243 (Raj), etc. or if the earlier bench omitted to consider certain material aspects (1961) 41 ITR 685 (SC); (1962) 44 ITR 529 (SC); (1993) 203 ITR ....
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....of the case, the Tribunal was justified in law in departing from its previous finding that Hiralal was trustee of the minor Vasantlal." A large number of authorities were cited before the Hon'ble Bombay High Court. The Hon'ble Bombay High Court referred to the judgment in the case of IRC vs. Sleath 17 Tax Cases 149 at 163. "The assessment is final and conclusive between the parties only in relation to the assessment for the particular year for which it is made. No doubt, a decision reached in one year would be a cogent factor in the determination of a similar point in a following year, but I cannot think that it is to be treated as an estoppel binding upon the same party for all years." Hon'ble High Court found that the principle that each assessment is a different assessment year is not merely helpful to the IT authorities but it is equally helpful to the assessee. Shri N.A. Palkhiwala, the eminent counsel for the assessee argued that the Tribunal stood on a different footing from an IT authority not bound by an earlier decision. Reliance was placed by him on a large number of authorities including the statement of the law with regard to 'res judicata' appearing in Halsbury, Vo....
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.... between fresh facts being placed before the second and the second Tribunal taking into consideration certain material facts which the first Tribunal failed to take into consideration. It may be said that even though the first Tribunal may take into consideration all the facts, still its decision may be so erroneous as to justify the subsequent Tribunal in not adhering to that decision. In a case like this, which indeed must be an extreme case, it could be said that the decision of the first Tribunal was a perverse, decision, and if the decision of the first Tribunal was either arbitrary or perverse it would justify the second Tribunal in departing from the decision arrived at by the first Tribunal. Therefore, in our opinion, an earlier decision on the same question cannot be reopened if that decision is not arbitrary or perverse, if it had been arrived at after due inquiry, if no fresh facts are placed before the Tribunal giving the later decision and if the Tribunal giving the earlier decision has, taken into consideration all material evidence. We should also like to sound a note of warning, especially with regard to a Tribunal like the Appellate Tribunal, that it should be extr....
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....ntical facts in the case of Real Overseas (P) Ltd.; Makhni & Tyagi (P) Ltd.; Indradhan Agro Products Ltd.; Akriti Media (P) Ltd. and Garg Polymers (P) Ltd., each in isolation without examining the totality of the picture that emerges once all these cases are considered as pieces of a large mosaic. In other words, what the learned AM considered to be the strength of the case of the assessee, precisely the same has been considered by the learned JM, to be the weakness in the case of the assessee. According to the learned JM by valiant efforts made, the learned Departmental Representative could change the entire complexion of the case as compared to the cases earlier decided by the Tribunal including herself. It is needless to say that in such circumstances the case before her fell in the category of exceptions carved out by the series of judgments of Hon'ble Supreme Court and of various High Courts discussed by me at length from para 28 onwards. In my opinion, the learned AM (sic-JM) was entitled to take a different view of the matter when an altogether different case was presented before her. 52. The second limb of the question framed by the Hon'ble AM relates to "material on rec....
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....t would have made some sense but we fail to understand as to how this amount of increased share capital can be assessed in the hands of the company itself. In our opinion, no question of law arises and the petition is, therefore, dismissed." 54. The matter thereafter came before Full Bench of the Hon'ble Delhi High Court in the case of CIT vs. Sophia Finance Ltd. The assessee in that case was incorporated on27th April, 1983. The assessee disclosed paid-up capital of Rs. 20 lakhs. During the course of assessment proceedings the assessee furnished necessary details and confirmation. The AO made an assessment order accepting the return filed by the assessee. Thereafter the CIT issued a notice under s. 263. He held that it was the duty of the AO to enquire into the genuineness of the shareholders because in a large number of similar cases enquiries had revealed that either the shareholders did not exist at the addresses given or they were mere name lenders. The learned CIT, therefore, set aside the assessment order and directed the AO to make farther enquiries. On assessee's appeal the Tribunal took note of its decision in the case of Standard Cylinders (P) Ltd. vs. ITO (1988) 24 IT....
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....at s. 68 clearly permits an ITO to make enquiries with regard to the nature and source of any or all the sums credited in the books of account of the company irrespective of the nomenclature or the source indicated by the assessee. In other words, the truthfulness of the assertion of the assessee regarding the nature and the source of the credit in its books of account can be gone into by the ITO. In the case of CIT vs. Steller Investment Ltd. (1991) 99 CTR (Del) 40 : (1991) 192 ITR 287 (Del), the ITO had accepted the increased subscribed share capital. Sec. 68 of the Act was not referred to and the observations in the said judgment cannot mean that the ITO cannot or should not go into the question as to whether the alleged shareholders actually existed or not. If the shareholders are identified and it is established that they have invested money in the purchase of shares, then the amount received by the company would be regarded as a capital receipt and to that extent the observations in the case of Steller Investment Ltd., are correct but if, on the other hand, the assessee offers no explanation at all or the explanation offered is not satisfactory then the provisions of s. 68 ma....
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....stion involved or has not decided the ratio laid down. It had plainly held that it was a question of fact. The Supreme Court has not laid down any proposition with regard to the question. It was purely a question of fact with which the apex Court had dealt with and was in agreement with the High Court on conclusion of facts. Therefore, it cannot be said that the Supreme Court answered the ratio laid down as sought to be propounded by the Delhi High Court in CIT vs. Steller Investment Ltd. (1991) 99 CTR (Del) 40 : (1991) 192 ITR 287 (Del). A decision becomes binding as a precedent only when the Court decides a particular question of law or lays down the ratio through conscious adjudication. Agreement with the finding of fact without adverting to the ratio laid down does not create a precedent. In order to support this view, we may refer to the decisions in Municipal Corporation of Delhi vs. Gurnam Kaur AIR 1989 SC 38; Gangadharan vs. Janardhana Mallan AIR 1996 SC 2127 and Director of Settlements vs. M.R. Apparao (2002) 4 SCC 638, 650. We are, therefore, unable to agree with the contention of Mr. Pal that the decision in CIT vs. Sophia Finance Ltd. (1993) 113 CTR (Del)(FB) 472 : (199....
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....vil appeals are dismissed. No order as to costs." In that case the assessee M/s Gujarat Heavy Chemicals Ltd. was a joint sector company. 40 per cent of shareholding was by public sector undertaking, public shareholding was 31 per cent and 29 per cent shareholding was by the Dalmia Group of companies. There was allegation against one of the shareholder company, viz., Golden Investment (Sikkim) (P) Ltd. that it was a bogus company and being used by big industrialists for laundering of their black money. On these facts the learned CIT(A) held that there was no justification for assessing the share capital contributed bySikkimcompany in the assessment of Gujarat Heavy Chemicals Ltd. On Revenue's appeal the Tribunal found that while the Department's enquiries pointed to a person to whom such income might belong, yet it was attempting to take the income in the hands of the assessee-company. On reference to Hon'ble Gujarat High Court, the Hon'ble High Court held that the appeal involved question of appreciation of evidence only. 60. In the case of CIT vs. Down Town Hospital (P) Ltd. (2004) 267 ITR 439 (Gau), the following question No.2 was presented to Hon'ble High Court for admissi....
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....ectors of the assessee-company, the same cannot be treated as unaccounted income of the assessee. There was no such finding by the assessing authority. In this view of the matter, the ultimate conclusion of the Tribunal cannot be faulted in any case. We, therefore, see no ground to admit this appeal as no substantial question of law arises for consideration. The income-tax appeal is dismissed." 62. There are two recent judgments of Hon'ble Delhi High Court viz., CIT vs. Makhni & Tyagi (P) Ltd. and CIT vs. Achal Investment Ltd. (2004) 187 CTR (Del) 475 : (2004) 268 ITR 211 (Del). According to the learned counsel for the assessee, the judgment in the case of Makhni & Tyagi Pvt. Ltd. is an authority to the proposition that in the case of a company no addition can be made in relation to its share capital. The assessee in that case is one among many companies in relation to which the identical material was seized during the course of the same search as in the present case. The Tribunal, as we have already noted, decided the matter in favour of the assessee on the ground that the share capital stood recorded in the account books maintained by the assessee which were seized during the ....
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....owing conclusion: 'We find that the identity of the shareholders who had also confirmed their investment in the share capital in response to summons under s. 131 of the IT Act also stood proved. Consequently, the addition of Rs. 30 lakhs is deleted.' In the backdrop of this finding on facts, we find that no substantial question of law arises in this matter and hence the appeal is dismissed." 63. In the case of CIT vs. Achal Investment Ltd., the AO completed the assessment under s. 143(3) and accepted the assessee's claim of having received share application money. The learned CIT, however, held that the AO did not verify the genuineness of the confirmation letters and set aside the assessment order directing him to carry out the exercise as indicated in the order under s. 263. The Tribunal following the decision of Delhi Tribunal in the case of Steller Investment Ltd. decided the appeal in favour of the assessee. The Revenue thereafter moved the High Court under s. 256(2) and thereupon the Hon'ble Delhi High Court have pronounced the following judgment: "We are not required to examine the matter in detail as we are of the opinion that the Tribunal has allowed the appeal....
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....gi (P) Ltd. nor in the case of Achal Investment Ltd. laid down any proposition of law, much less the proposition that in the case of a company under no circumstances any addition can be made in relation to its share capital. In the case of Makhni & Tyagi (P) Ltd., the Hon'ble High Court considered the Full Bench judgment in the case of Sophia Finance Ltd. and found that no substantial question of law had arisen and, therefore, the Revenue's appeal was dismissed. In the case of Achal Investment Ltd., the Hon'ble Delhi High Court held the view that the question framed need not be answered. Thus, in both the cases the Hon'ble High Court have not made any declaration of law. This position emerges clearly because in both cases the Hon'ble High Court held that there was no question of law. Hence the position remains the same as explained by Hon'ble Calcutta High Court in the case of Hindustan Tea Trading Co. Ltd. vs. CIT in relation to the Supreme Court pronouncement in the case of Steller Investment Ltd. The same reasoning would apply in relation to the verdict of Hon'ble Delhi High Court in these two cases. 65. In the case of Nirma Industries Ltd. vs. Asstt. CIT (2005) 95 TTJ (Ahd)(....
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....tional High Court on the issues raised by the parties." 66. On perusal of the above enumerated judgments in relation to the assessment of unexplained share capital of a company it is seen that the Courts have held that the question is predominantly a question of fact. It should be borne in mind that in the case of CIT vs. Steller Investment Ltd., the Revenue's petition has been dismissed with the remark, "No question of law arises". When the Hon'ble High Court themselves have observed that no question of law has arisen from the order of the Tribunal, it is hard to see as to how that judgment may be considered to have made a declaration of law on the subject. In the case of Sophia Finance Ltd., Hon'ble High Court have held that it would be open to the AO to go into the question as to whether the amount credited as share capital is indeed share capital of that company. The Hon'ble Delhi High Court have further held that it would be the duty of the AO to enquire whether the alleged shareholders do in fact exist or not. If the alleged shareholders do not exist, then, in effect it would mean that there is no valid issuance of share capital. In the decision reported in the case of CIT....
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....rmit an IT authority to make enquiries and if necessary to assess the same as representing the income of the company. In this context a question as to whether or not the shareholder really exists becomes the most relevant question. I may mention here that similar view has been held by the Hon'ble Third Member in the case of Asstt. CIT vs. Modern Cement Industries Ltd. (2005) 95 TTJ (Ahd)(TM) 341 :(2004) 90 ITD 170 (Ahd)(TM). I therefore, do not see any force in the preliminary objection of the learned counsel for the assessee in the present appeal because here the learned AO has called in question the very issuance of the share capital itself. 67. The second aspect raised by the learned counsel for the assessee is whether these amounts can be made part of the undisclosed income of the assessee within the meaning of the provisions of s. 158BC. He has raised the plea of presumption under s. 132(4A) also. It is true that while making an order under s. 158BC, the AO does not have the same jurisdiction that he has while assessing the income of an assessee under the general provisions of the Act. An order under s. 158BC can be made only in respect of that undisclosed income which the ....
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....he case of Ravi Kant Jain. On consideration of the matter I find that the Hon'ble JM has based her order on the discovery of the very same documents, which according to the assessee establishes its case of genuineness of the share capital. It cannot, therefore, be said that in the order of the Hon'ble JM no basis have been found in the material/evidence found during the course of the search. The case of the assessee is that these were the documents made in the ordinary course of the business of the assessee and supported by the books of account of the assessee and, therefore, it cannot be said that there is any discovery or detection during the course of the search. According to the contention or the Revenue, the discovery itself of all these documents, coupled with blank signed transfer forms and blank signed affidavits indicated that the assessee had merely fabricated a bogus claim of share application money as credited in the assessee's books of account. On consideration of the matter I do not see that the order of the Hon'ble JM suffers for want of jurisdiction within the provisions of s. 158BC. At the outset, it may be stated that it is not true that all the material found dur....
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....4A) is linked with search and seizure and is applicable only in relation to provisional adjudication contemplated under s. 132(5) of the Act. Hon'ble Delhi High Court have further held that operation of s. 68 remains unaffected. The same view has been taken by Hon'ble Allahabad High Court in Pushkar Narain Sarraf vs. CIT (1990) 86 CTR (All) 110 : (1990) 183 ITR 388 (All); by Hon'ble Gujarat High Court in Mansukhlal Nanjibhai Patel vs. Dy. CIT (2001) 170 CTR (Guj) 25 : (2001) 251 ITR 341 (Guj); by Hon'ble Rajasthan High Court in Man Mohan Gupta vs. Asstt. CIT (2004) 189 CTR (Raj) 331 : (2005) 274 ITR 179 (Raj). Hon'ble Karnataka High Court have in the case of CIT vs. P.R. Metrani (HUF) (2001) 169 CTR (Kar) 149 : (2001) 251 ITR 244 (Kar) held that in relation to assessment proceedings it raises a rebuttable presumption only. I, therefore, hold that there is no assistance to the assessee by virtue of the provisions of s. 132(4A). I, therefore, do not see force in the second objection either of the learned counsel for the assessee. 68. I now proceed to consider the second limb of the question referred to by the Hon'ble AM, i.e., whether in the light of material on record the learned....
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....ee had been accepted in the regular assessments. Details of shareholding and confirmations/affidavits of the shareholders had been placed on record. Bank passbooks were also produced. With all that material on record, genuineness of investment stood proved. There is not much discussion, however, in the order of the Hon'ble AM as to how blank but signed share transfer forms, sale bills, cash receipts and affidavits along with original share certificates themselves from such a large number of persons could be found at the premises of Shri Alok Aggarwal. For that, the learned AM has relied upon the earlier orders of the Tribunal in the cases of the various companies relating to the same search under s. 132 where similarly blank signed sale bills, share transfer forms, cash receipts and affidavits along with share certificates in large scale were found with Shri Alok Aggarwal. He has relied upon the orders of the Tribunal on identical facts in the cases of Real Overseas (P) Ltd.; Makhni & Tyagi (P) Ltd.; Indradhan Agro Products Ltd.; Akriti Media (P) Ltd. and Garg Polymers (P) Ltd. It is pointed out that the decision of the Tribunal in the case of Real Overseas (P) Ltd. has been render....
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....facts as argued need due consideration and the alarm sounded by the learned Departmental Representative cannot be wished away. 14. Being of the view that the issue cannot be decided by wearing blinkers, the full scope of the picture which emerges has to be taken cognizance of and dealt with and merely blindly disposing the issue holding it as covered in the peculiar facts as are emerging from the impugned order will to my mind in the circumstances be not appropriate as once a judicial consciousness has been stirred, then it must be taken to its logical conclusion." 69. While on the question of "material" I find it is of crucial importance to bear in mind the fundamental distinction between income-tax assessment proceedings and the proceedings before a Court. It is settled position that the proceedings before the AO are not a "suit" between the contesting parties, as held by the Hon'ble Supreme Court in the case of S.S Gadgil vs. Lal & Co. (1964) 53 ITR 231 (SC). Accordingly the proceedings before the AO are not strictly judicial proceedings. This aspect is in-built in the statutory provisions of s. 143(3) itself. According to the sub-section, the AO should take into considera....
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....ts reported in Gopinath Naik vs. CIT (1936) 4 ITR 1 (All); Gunda Subbayya vs. CIT (1939) 7 ITR 21 (Mad); Anraj Narain Dass vs. CIT (1951) 20 ITR 562 (Punj); Laxmi Co. vs. CIT (1959) 37 ITR 461 (All); C. Vasantlal & Co. vs. CIT (1962) 45 ITR 206 (SC); Raj Mohan Saha & Ors. vs. CIT (1964) 52 ITR 231 (Assam); Devidas Madho Prasad vs. CIT (1967) 63 ITR 356 (All); Motipur Zamindari Co. (P) Ltd. vs. Agril. ITO (1972) 83 ITR 778 (Pat); State Bank ofPatialavs.Unionof India & Ors. (1973) 91 ITR 630 (P&H); J.S. Parkar vs. V.B. Palekar & Ors. (1974) 94 ITR 616 (Bom); Mriganka Mohan Sur vs. CIT (1979) 120 ITR 529 (Cal) and CIT vs.East IndiaLamp & Components (1981) 21 CTR (Cal) 278 : (1981) 129 ITR 426 (Cal). What is necessary is that the AO should have material upon which to base the assessment. Such material may be distinguishable from evidence both direct and circumstantial. The only requirement is that the AO should act having regard to the principles of natural justice. As pointed out by Hon'ble Supreme Court in the case of CIT vs. Simon Carves Ltd. 1976 CTR (SC) 418 : (1976) 105 ITR 212 (SC), it is not as if the AO should exercise his powers only in a manner beneficial to the Revenue and ....
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....emselves, and only to take their colour from the combination of circumstances in which they are found to occur.' This furnishes the corrective to the course adopted by counsel for the appellant in his argument." The aforesaid ruling of Hon'ble Supreme Court in the case of Sree Meenakshi Mills has been followed by Hon'ble Bombay High Court in the case of Gordhandas Hargovandas vs. CIT (1979) 12 CTR (Bom) 19 : (1980) 126 ITR 560 (Bom) and by Hon'ble Rajasthan High Court in the case of Hemandass Dhanrajmal vs. CIT (1981) 132 ITR 369 (Raj) and by Hon'ble Supreme Court once again in the case of Sir Shadilal Sugar & General Mills Ltd. vs. CIT (1987) 64 CTR (SC) 199: (1987) 168 ITR 705 (SC) and so on. 73. In the case of CIT vs. Karam Chand Thapar & Bros. (P) Ltd. (1989) 76 CTR (SC) 36 : (1989) 176 ITR 535 (SC), the Hon'ble Supreme Court have observed: "It is true that the Tribunal has not stated in terms that it has considered the cumulative effect of the circumstances pointed out to the Tribunal, but, on the other hand, a plain reading of the judgment of the Tribunal makes it clear that the Tribunal has, in fact, taken into account the cumulative effect of the circumstances o....
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....r view, a neutral circumstance, because if the appellant had purchased the winning ticket after the event she would be having the winning ticket with her which she could surrender to the race club. The observation by the Chairman of the Settlement Commission that fraudulent sale of winning tickets is not an usual practice but is very much of an unusual practice" ignores the prevalent malpractice that was noticed by the Direct Taxes Enquiry Committee and the recommendations made by the said Committee which led to the amendment of the Act by the Finance Act of 1972, whereby the exemption from tax that was available in respect of winnings from lotteries, crossword puzzles, races, etc., was withdrawn. Similarly, the observation by the chairman that if it is alleged that these tickets were obtained through fraudulent means, it is upon the alleged to prove that it is so, ignores the reality. The transaction about purchase of winning ticket takes place in secret arid direct evidence about such purchase would be rarely available. An inference about such a purchase has to be drawn on the basis of the circumstances available on the record. Having regard to the conduct of the appellant as dis....