TaxTMI 
TaxTMI 
2003 (8) TMI 179
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....ed income and how it was justified both on facts and in law and in the absence of any such, effective show-cause notice indicating what is the case of the Department which the assessee has to meet, the impugned order passed by the Respondent ought to have been set aside and quashed by the first appellate authority and failure to do so has vitiated his orders and hence the action and orders under section 144 by the Respondent and upholding the same by the first appellate authority must be set aside and quashed and declared as unsustainable both on facts and in law. 3. The authorities below have erred both on facts and in law in invoking section 68 of the Income-tax Act which has no application whatsoever in the facts of the present case. 4. The impugned order proceeds on the assumption that every money received by the assessee towards share capital or towards loans or other liabilities repayable, would constitute income and be liable to tax automatically. There is no such provision in law nor any principle to assume every receipt as income and hence the assumption with which the respondent has proceeded is totally illegal and unsustainable apart from being perverse and hence t....
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....h has apparently been paid by the Appellant. 9. The Respondent had never issued a show-cause notice either to raise any demand or to charge any interest and hence neither demand of tax nor interest under section 234B and/or 234C could have been raised and, therefore, the entire demand sought to be raised against the Appellant is totally illegal and unsustainable both on facts and in law and must be quashed. 10. The impugned action of the Respondent in initiating action for penalty without any application of mind is evident from the impugned order and hence the direction for penalty proceedings being initiated also deserves to be set aside and quashed as there is complete non-application of mind by the Respondent in every respect: 2.1 The appeal was first taken up for hearing on21-5-2001when Mr. R. Santhanam,C.A.and Mrs. Vandana Sharda, Advocate appeared for the appellant-assessee. Mr. Santhanam, instead of arguing thereafter groundwise, proceed to argue the appeal on a consolidated basis and he submitted that all the documents, copies of which have been placed by the appellant in its Paper Book containing 85 pages, are the copies of certified copies procured by the assesse....
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....e Paper Book and the affidavit of the Director Mr. Ashish Sehgal placed at page 17 of the Paper Book arc the ample evidence to prove his statement with regard to claim that the documents copies of which are placed at pages 1 to 16 of the Paper Book had been filed by the directors of the appellant-company before the Assessing Officer on 15-2-2000 and that the documents copies of which are placed at pages 23 to 79 of the Paper Book were filed before the CIT(A) and pleaded for the permission to proceed with his submissions on the merits of the appeal. 2.3 Mr. Santhanam was allowed to proceed with his submissions on the merits of the appeal subject, however, to the verification of veracity of his statement from the Departmental Representative and the appellant's assessment records, but on this the learned Departmental Representative sought permission to submit his arguments against the statement and claim made by Mr. Santhanam with respect to the alleged fact of certain documents having been filed before the Assessing Officer and also the alleged claim that the documents, copies of which are at pages 18 to 79 of the Paper Book were before the CIT(A). The learned Departmental Represe....
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....or consideration, has to be kept on record and cannot be destroyed. The learned Departmental Representative further submitted that only because the CIT(A) has supplied the certified copies of documents, which were not admitted being additional evidence the assessee cannot plead that the same were before the CIT(A). In view of the above submissions, the learned Departmental Representative submitted that since the statement of Mr. Santhanam, cast a serious allegation on the honesty, sincerity and integrity of not only the officers of the rank of Commissioner and Dy. Commissioner of Income-tax, but of the whole of the Income-tax Department as such and if found to be correct may lead to serious consequences for the concerned officers. In view of these facts, the learned Departmental Representative pleaded that the appeal may be decided after first verifying the truthfulness of the statement and claim made by Mr. Santhanam in the open court and also for want of the truthfulness of the certificate given by the appellant's director on the Index Page of the Paper Book as well as the statement made by the director, Shri Ashish Sehgal son of Late Shri B.K. Sehgal in the affidavit placed at p....
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.... for the assessment year 1997-98. 4. Subject to aforesaid directions, the Bench proceeded to hear Mr. Santhanam on the merits of the appeal. 5. Mr. Santhanam at the outset submitted that the appellant's director Mr. Ashish Sehgal along with other director Mr. Dinesh Sehgal had appeared before the Assessing Officer on 15-2-2000 and had filed the documents/details, copies of which are placed at pages 1 to 16 of the Paper Book and it was the Assessing Officer who adjourned the hearing of his own and without requiring the director to furnish any further reply or detail or document or the books of account. According to Mr. Santhanam he was making the submission that the adjournment was by the Assessing Officer of his own, was based on his personal experience and the knowledge regarding the day to day working of the Income-tax Department the conduct of Assessing Officers, who, according to him, are in the habit of ignoring or misplacing the important documents furnished during the course of hearing and this is being done to harass the innocent and honest tax-payers. According to Mr. Santhanam so far as the appellant's case is concerned, the Assessing Officer seems to have not recor....
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....f the Act or to appear on the date of hearing or to produce the books of account and, therefore, assumption of jurisdiction by the Assessing Officer to invoke the provisions of section 144 for making ex parte assessment was illegal and bad in law. 5.3 Another plea of Mr. San than am was that under the law, the Assessing Officer before proceeding to make an assessment under section 144 of the Act, should have given opportunity to the appellant and should have issued a show cause as envisaged in the provisions of section 143(2) of the Act and since in the present case, the Assessing Officer has not issued any show-cause notice and also has not allowed an opportunity to the appellant before exercising the power vested under section 144 of the Act, ex parte assessment order is illegal and bad in law, which is liable to be quashed. In support of this submission, Mr. Santhanam relied on the decision of the Tribunal in the case of 41 ITD 273. 5.4 Mr. Santhanam further submitted that under the existing provisions of section 144 itself the assessment cannot be framed u/s 144 of the Act unless and until a proper show-cause notice allowing the assessee an opportunity of being heard is s....
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....nk account, there was no question of considering the same as assessee's income. According to Mr. Santhanam the loans were from parties, namely, (1) M/s. Concord Capital Management Co. Ltd., Und Floor, Hauz Khas,New Delhi(2) M/s. Umrao Exports (P.) Ltd., B-4/35, Paschim Vihar, New Delhi - 63, M/s. Pacquik Industries Ltd., C-120, 1st Floor, New Rajinder Nagar, New Delhi - 60 and Mr. Dinesh Sehgal, New Delhi and complete details were filed before the CIT(A) on his requirement and consequently, the assessee had discharged its onus by section 68 of the Act. In view of these facts, Mr. Santhanam submitted that the Assessing Officer was not justified in considering the unsecured loans as assessee's income under section 68 of the Act. (iv) Concluding his submissions Mr. Santhanam stood by his statement that documents, copies of which were placed at pages 1 to 76 of the Paper Book were filed under covering letter copy of which is placed at page 23 of the Paper Book by the assessee Director before the Assessing Officer on 15-2-2000 but have been ignored by the Assessing Officer with the motive to make an ex parte assessment under section 144 of the Act, which has resulted in uncalled for ....
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.... Deponent Confirmation I, Ashish Sehgal S/o Late Shri V.K. Sehgal the Director of Finquik Finance (P.) Ltd. having its Registered Office at C-120, New Rajinder Nagar, New Delhi, do hereby affirm and declare that the contents of the paras (1) to (3) above are true and correct to the best of my knowledge and belief. Place: New Delhi Sd/- Date: 21-05-2001 Deponent" (ii) Paper Book which was returned to Mr. Santhanam on21-5-2001for getting the same signed by the Managing Director or director of ....
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....he statement of Mr. Santhanam that the documents copies of which have been placed by the assessee at pages 1 to 16 of the Paper Book had been filed by the assessee's director Mr. Ashish Sehgal before the Assessing Officer on 15-2-2000 is absolutely false as there is no such document on record and supported his plea with the help of Order Sheet entry dated 15-2-2000 which we have already reproduced in the earlier part of this order to bring his point, the learned Departmental Representative handed over the original assessment records to the Bench, which were perused and it was found that none of the documents, copies which are claimed to have been placed at pages 1 to 16 of the Paper Book is available on record. The Order Sheet entry also does not mention the filing of any document or detail or producing of books of account or anything else. The assessment records were also shown by the Bench to Mr. Santhanam for his perusal and to make his comments if he so likes. After perusal of the assessment records, Mr. Santhanam simply stated that since the records were in the custody of the Revenue, he cannot spell out as to under what circumstances or how and why the documents furnished on1....
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....5-2001subject-matter of which reads as under: Dear Sir, With reference to the aforesaid case, subject we requested before your goodself to provide us with the photocopy of order sheet. We have followed up the matter at your office. We are being denied to get the same even after payment of the desired fees. We humbly request you to provide us the same as the same document is desired for our appeal at ITAT." 11. The learned Departmental Representative was directed to furnish the certified copies of the return of income and enclosures there with furnished by the assessee on 30-11-1997 vide receipt No. 0621, copies of notices issued by the Assessing Officer and all other documents, if any, filed by the appellant before passing of the ex parte assessment order on 31-3-2000. In response to this query, the learned Departmental Representative has furnished the copy of return of income for assessment year 1997 -98 along with enclosures, Statement of assessable income, notice for calling Second Annual General Meeting of the Shareholders, Director's Report, Auditor's report, Balance Sheet and Profit and Loss Account as on 31-3-1997 and Schedules 'A' to 'F', notices under section 143(....
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....ee for the assessment year 1997-98, it is noticed that the following documents are available on record: (i) Appellant's return of income for the assessment year 1997-98 in Form No. 1 consisting of then printed pages each in English and Hindi. It is the English part which has been filled by the appellant and the verification at page 10 (English version) has been signed in the date of30-11-1997by Mr. Dinesh Sehgal (Father's name not mentioned) in the capacity of the Director of the appellant-company, namely, M/s. Finquik Finance (P.) Ltd. which was filed on30-11-1997under receipt No. 0621 as mentioned on the office copy of the acknowledgement - a copy of which was issued to assessee. (ii) Statement of Assessable Income showing taxable 1 Page income at Rs. 1,00,020 and refund of Rs. 2,704 (iii) Notice calling for the second Annual General 1 Page Meeting of the shareholders of the assessee-company (iv) Directors report dated 1-9-1997 ....
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....sp; Copy of letter addressed to the Dy. Commissioner of I.Tax, Company Cir., 25(3), Room No. 384(A), Central Revenue Building, New Delhi purported to be a covering letter for filing the documents by the director before the Assessing Officer (is without date and bears no acknowledgement) 02 1 Copy of a note captioned 'Note on nature of business'. 03 1 Copy of one printed page captioned Memorandum of &nbs....
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.... Commissioner of Income-tax (Appeals)-I. Room No. 397,C.R.Building,New Delhi. In the Case of : M/s. Finquik Finance Pvt. Ltd. Assessment year 1997-98 Sub. : Application u/rule 46A(1) of The Income-tax Act, 1961. Respected Sir, With reference to the aforesaid appeal, we wish to pray before your goods elf to admit the additional evidence enclosed along with our submissions. The additional evidence are required to be submitted to explain/clarify the justifications of Receipt of Share Application Money and Unsecured Loans by the assessee-company. We pray before your honour to admit the same." 12.4 From the copies of various documents placed at Pages 23 to 78 of the Paper Book, it is found that copies of documents, whose copies are placed at pages 1 to 16 of the Paper Book and claimed to have been filed before the Assessing Officer, are also included in the evidence which was claimed by the appellant before the CIT(A) (in its letter dated 31-1-2001, copy at page 18 of the Paper Book and which has already been reproduced in para 12.3 above) as "additional evidence". The details of such documents i.e., the documents, copies of which are placed from pages 1 to 16 an....
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....bsp; Page No. 07 5 Page No. 8 Page No. 30 6 Page No. 9 Page No. 36 7 Page No. 10 Page No. 37 8 Page No. 11 &nbs....
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....ellant's director had not filed any detail or document as claimed by Mr. Santhanam, before the Assessing Officer on15-2-2000; (ii) Neither there was any question of getting the certified copies of any of these documents from the Assessing Officer nor Mr. Santhanam has been able to prove it by any direct or indirect evidence. He was not in a position to furnish any evidence even for having applied for copies of any of these documents; (iii) The statement of Mr. Santhanam that "the director of the appellant had filed the documents, copies of which are placed at Pages 1 to 16 of the Paper Book, for the Assessing Officer on 15-2-2000" and that "the copies placed at pages 1 to 16 of the Paper Book" were the photo copies of certified copies procured by the appellant from the Assessing Officer is not substantiated by any direct or indirect or circumstantial evidence - even the concept of preponderance of probabilities has failed to support the statement of Mr. Santhanam and, therefore, the only conclusion is that the claim as well as the statement of Mr. Santhanam made before the Bench during the course of hearing of the aforesaid appeal on 21-5-2001 as well as on 22-5-2001 were fal....
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....of the directors and not of his own and therefore, no documents, detail or information or books of account were furnished/produced before Assessing Officer. Had the directors furnished any documents or details or produced the books of account then the director would not have signed the entry without getting incorporated the fact of furnishing of the documents etc. or, at least there would have been some reference to these documents in the letters submitted for copies, but as is clear from the copies of all the applications furnished by the assessee (contents of which have already been reproduced in the earlier part of this order) that the assessee had never asked for copy of any of these documents. (vi) Similarly and for there as one stated as above, the statement of the director made in the affidavit dated 2-5-2001 and 21-5-2001 are held to be false and having been made knowing the same to be false. 12.4A The other reasons for having arrived at the above findings by us are-- (i) In spite of the specific direction of the Bench, the Director has not specified the details of the documents claimed to have been furnished before the Assessing Officer on15-2-2000; (ii) The co....
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....r considering the statement of Mr. Santhanam and the copy of the appellant's letter written to the CIT(A) on 31-1-2001 placed at page 18 of the Paper Book have no hesitation in holding that the statement of Mr. Santhanam is not corroborated by any evidence - direct or indirect or circumstantial and, therefore, has to be held to be false - having been made knowing the same to be false and with the intention to mislead the Bench so that the Bench may get biased against the Revenue authorities, especially the CIT(A). 12.8 In view of the above, we have found the statement of Mr. Santhanam made during the course of hearing of the appeal on 21st May and 22nd May, 2001 and the statement of the director of the Appellant-company made in the affidavits and also the certificate given by the director on the Index page of the Paper Book as false having been made knowing the same to be false and with the intention to mislead the Bench. Consequently, the claim made by Mr. Santhanam and by the director of the assessee-company that the documents, copies of which are placed at pages 1 to 16 of the Paper Book had been filed by the director before the Assessing Officer on 15th February, 2000, that ....
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....efore parting with this aspect of the matter, we would like to consider the contents of appellant's written submissions made before the CIT(A) as contained in first and 2nd paragraph, copy at pages 19 to 22 of the Paper Book, which read as under: "With reference to the aforesaid case and subject, we wish to state and submit that the Assessing Company could not respond to the notices of the Assessing Officer as all the notices received by the assessee-company has been sent to the Auditor of the company. The directors of the company were under impression that the auditor is attending the case. On receipt of notice dated6th Jan., 2000, Mr. Ashish Sehgal attended the hearing on31st Jan., 2000and noted the various requirements of the Assessing Officer for finalising the case and the case was adjourned to8th Feb., 2000. On15th Feb., 2000Mr. Ashish Sehgal and Dinesh Sehgal, Directors attended the case and submitted the information (The copy of letter enclosed as Annexure 'A') and the case was adjourned to24th Feb., 2000. Due to unavoidable circumstances the directors could not attend the case on24th Feb., 2000. When they approached the Assessing Officer in the first week of March, 2000....
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.....14 In view of the above, we are of the opinion that truthfulness of the statement of Mr. Santhanam made during the course of hearing of the appeal and of the director, Sh. Ashish Sehgal made in the affidavits and by way of certificate on the Index page of the Paper Book remained unsubstantiated and the concept of preponderance of probabilities also belies their statements. 12.15 Documents placed at pages 80 - 83 which are, copy of Post Office receipt for dispatch of Registered letter to the appellant, Notice under section 143(2), Power of Attorney and Notice under section 143(2), are, however, definitely the copies of certified copies procured by assessee from Assessing Officer, but this do not proves the truthfulness of their statements. Similarly the documents placed at pages 18 - 79 are the copies of certified copies procured from CIT(A), but, since CIT(A) had not admitted this 'additional evidence' under rule 46A of the Income-tax Rules, the same cannot be claimed, as we have already stated in earlier part of this order to be before him and consequently, this fact also fails to prove the truthfulness of the statements under reference. 13. So far as the merits of the case....
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....bsp; 14th July, 1999 03-08-1999 4. under section 271(1) 13th December, 22-12-1999 (c) of the Act 1999 5. under section 142(1) 13th December 1999 22-12-1999 6. - do- 6th January, 2000 18-01-2000 ------------------------------------------------------------------------------------------- As per notice under section 142(1) dated13-12-1999and6th January, 2000, the assessee was specifically required to produce the evidence in-tiupport of genuinenes....
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....gal and Sh. Dinesh Sehgal, directors. Case adj. to 24-2-2000 on their request." 15.2 Since nobody attended the hearing on 24-2-2000 and no details or documents or books of account were produced or filed on or before 24-2-2000, the Assessing Officer by exercising his powers vested by virtue of provisions of section 144 of the Act, proceeded to frame the ex parte assessment and in that process assessed the appellant's income at Rs. 52,65,457 after considering the credits amounting to Rs. 8,60,000 appearing in the balance sheet under the head "Share Capital Money" and amounting to Rs. 39,80,985 appearing in the balance sheet under the head "unsecured loans" by invoking the provisions of section 68 of the Act and observing as under: "Return has been filed on30-11-1997declaring total income at Rs. 1,00,020. Notice under section 143(2) dated2-7-1998was issued by my predecessor under registered cover. Postal receipt evidencing the issue of notice is placed on record. Thereafter notice under section 143(2) dated3-6-1999was issued by registered post f....
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.... the appellant filed the confirmations and other details with regard to the share application money as well as unsecured loans and it was prayed that the evidence may be admitted under Rule 46(A) of the Income-tax Rules, 1962. 3.2 On a consideration of the facts of the case, I find that no plausible explanation whatsoever has been given as to why the appellant refused to comply with notices sent by the Assessing Officer right from 1998 to January, 2000, even, thereafter, the mere attendance by the Directors and their continuous seeking adjournments without giving any plausible reasons before the Assessing Officer or filing any details whatsoever, tantamount to non-attendance and in fact deliberate non-compliance of statutory requirements. Given the appellant's conduct throughout the assessment proceedings before the Assessing Officer, I am not inclined to admit the evidence now being sought to be taken on record as none of the exceptional circumstances mentioned at Sub-clauses (a) - (d) to Sub-rule (1) of Rules 46(A) of the Income-tax Rules, 1962 apply in this case. Accordingly, the evidence now being produced is not taken on record. On the merits of the addition made, I find th....
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....nce', which cannot be taken note at this stage. Even otherwise, according to the learned Departmental Representative, to prove the genuineness of any credit entry in its Books, the assessee has to establish the three ingredients, namely (i) identity of the creditor (ii) capacity of the creditor and (iii) the genuineness of the transaction and for discharging the onus put by section 68 of the Act and the assessee having not discharged its onus, the Assessing Officer was quite justified in considering the credits appearing under the head 'Share application money' and 'unsecured loans' as appellant's income under section 68 of the Act. Commenting on Mr. Santhanam's plea that all the credited amounts having been deposited in bank, the same could not be considered as assessee's income and the decisions relied upon, the learned Departmental Representative submitted that there is no provision under the Income-tax Act which may support the assessee's plea and moreover there was no evidence to this effect before the Assessing Officer or the CIT(A). With regard to the decision of the Tribunal relied upon by the learned Counsel for the assessee, Mr. Santhanam, the learned Departmental Represe....
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....nesh Sehgal had appeared before the Assessing Officer on 15-2-2000 and had furnished the documents, copies of which are placed at pages 1 to 16 of the Paper Book, and that the appellant had complied with all the terms and conditions of all the notices and, therefore, the Assessing Officer had no justification in invoking his powers vested by virtue of provisions of section 144 of the Act. (b) Since we have already concluded in the earlier part of this order that the statement and claim of Mr. Santhanam made during the case of hearing of this appeal on 21st May and 22nd May, 2001 and Mr. Ashish Sehgal, director of the appellant-company in his affidavits dated 2nd May, 2001 and 21st May, 2001, as well as by way certificate on Index page of the Paper Book, were false and were made knowing the same to be false, the natural outcome is that none of these documents were ever filed before the Assessing Officer. This plea, therefore, fails. (ii) (a) The next plea of Mr. Santhananam with respect to this point was that the Assessing Officer having not allowed the opportunity or issued a show-cause notice as required under section 143 of the Act, the exercise of power under section 144 o....
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.... income by invoking the provisions of section 68 of the Act because the same was received from those very persons from whom the 'share application money' had been received in the past and had been accepted to be genuine. 20. After considering the submissions advanced by Mr. Santhanam and the facts and circumstances of the case, we are of the opinion that when the Assessing Officer completed the ex parte assessment there was no information in this respect and, therefore, this plea cannot be sustained and hence rejected. 21. The next important plea advanced by Mr. Santhanam was that the 'share application money' cannot be treated as appellant's income under section 68 of the Act because of the decision of the Hon'ble Supreme Court in the case of Stellar Investment Ltd., whereby the decision of Hon'ble Delhi High Court in the case of Stellar Investment Ltd. has been affirmed. 21.1 The learned Departmental Representative, on the other hand, as already mentioned, has submitted that the decision of Division Bench of Hon'ble High Court of Delhi in the case of Stellar Investment Ltd. had been discussed by the Full Bench of the same High Court in a subsequent decision in the case o....
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....ces of the case, the Income-tax Appellate Tribunal was correct both on facts and in law in holding that the provisions of section 263 have not been validly invoked in this case by ignoring the material fact that the Assessing Officer had failed to discharge his duties regarding the investigation with regard to the genuineness and creditworthiness of the shareholders, many of them being students and housewives?" 22.2 The Hon'ble High Court rejected the Commissioner's petition holding that "no question of law arises" after observing as under: "In the present case, the subscribed capital of the assessee had been increased. The Income-tax Officer assessed the company and accepted the increase in the subscribed capital. The Commissioner of Income-tax came to the conclusion that the Assessing Officer did not carry out a detailed investigation inasmuch as there had been a device of converting black money into white by issuing shares with the help of formation of an investment company. The Commissioner of Income-tax further held that the Assessing Officer did not make enquiries with regard to the genuineness of the subscribers of the share capital. He thereupon set aside the order of....
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....nch). The Commissioner of Income-tax had filed a Reference petition under section 256(1) before the Tribunal seeking the reference of the following question for the opinion of the Hon'ble Delhi High Court: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in setting aside the order of the Commissioner under section 263 of the Income-tax Act by holding that the assessment order of the company cannot be said to be erroneous and hence prejudicial to the Revenue?" 22.5 The Tribunal rejected the application vide order dated26-4-1991by holding as under: "We find that the question as projected by the Revenue is not a referable question of law because it does not require opinion on any point of law decided by the Tribunal." 22.6 Though the decision do not refer as to what was the question sought to be got referred [in the petition filed by the Commissioner under section 256(2) of the Act before the Hon'ble High Court], but since it is well-settled that the question in petition under section 256(2) has to be the same question which was sought to be referred by way of petition under section 256(1) of the Act, it has to be taken that the question ....
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....e 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 Income-tax Officer. In the case of Stellar Investment Ltd [1991] 192 ITR 287 (Delhi), the Income-tax Officer had accepted the increased subscribed share capital. Section 68 of the Act was not referred to and the observations in the said judgment cannot mean that the Income-tax Officer 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 Stellar Investment Ltd [1991] 192 ITR 287 (Delhi), 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 section 68 may be invoked. In the ....
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....h Court in case of Stellar Investment Ltd., it has to be accepted that the relevant part of that order was an order on appreciation of facts. In case this fact is not accepted then the relevant part of these orders was neither 'order' nor 'obiter dicta' and if that is the case then it can easily be said that these were merely 'observations' which have no effect on the issue relating to law and it is so because in both the cases the issue before the Hon'ble High Court was 'as to whether the order of the Tribunal gave rise to a question of law or not'. In other words, the question for the consideration of the Hon'ble High Court in both the cases was that 'where the Tribunal has set aside the order of the CIT passed under section 263 of the Act setting aside the assessment order on the ground that the Assessing Officer has not conducted proper enquiries with regard to the genuineness of the share capital share application money credited in the books of concerned Public Ltd. Company, does a question of law arises out of the order of the Tribunal?', and therefore, the observations made by the Hon'ble Court for finding out the answer to this question, in our opinion can be taken either '....
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....of Sophia Finance Ltd. 22.11 Without prejudice to the above, we are of the opinion that whatever the nature of the observations made in both these decisions may be the Law of jurisprudence requires that the decision in the case of Stellar Investment Ltd. was, even if not stated by the High Court in case of Sophia Finance Ltd. in specific terms, overruled on law point but since the same has since been affirmed by the Hon'ble Supreme Court, it has to be taken that the concerned observations made in the case of Stellar Investment Ltd. - irrespects of the fact as to whether those were relating to the facts or to law and also irrespective of the fact that the same were overruled by the decision of Full Bench in the case of Sophia Finance Ltd. and also irrespective of the fact as to whether those observations can be taken as 'an order' or 'an obiter dicta' or 'simply observations, may it be with regard to facts or to law', have been revived/confirmed which otherwise means that the observations made in that order to the effect that "It is evident that even if it be assumed that the subscribers to the increased share capital were not genuine, nevertheless, under no circumstances, can th....
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....The obligation of the public company raising the share capital, in our opinion, is simply to allot the shares as per allotment scheme and issue the share certificate in the name of concerned applicant and remit the same at the address listed in the application for allotment of shares. (ii) It was probably in the context of this factual handicap of Public Limited Company and circumstances of that case (the case of Stellar Investment Ltd. happened to be a case of Public Limited company) that the Hon'ble Delhi High Court had in the case of Stellar Investment Ltd. observed that "it is evident that even if it be assumed that the subscribers to the increased share capital were not genuine, nevertheless, under no circumstances, can the amount of share capital be regarded as undisclosed income of the assessee. It may be that there are some bogus shareholders in whose names shares had been issued and the money may have been provided by some other persons. If the assessment of the persons who are alleged to have really advanced the money is sought to be reopened, that would have made some sense but we fail to understand as to how this amount of increased share capital can be assessed in t....
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....ntity of the creditor (ii) Capacity of the creditor and (iii) Genuineness of the transaction is not uniformly or universally applicable as will be evident from the following example: Example: If an assessee has procured loans through the efforts of a broker who in turn has arrange the loans from his various customers then the onus on the assessee to prove the genuineness of the loans appearing in the name of such customers of the broker will be (i) to establish the identity of the broker and (ii) the genuineness of the transaction. In other words such an assessee is not obliged to establish either the identity of the customers or capacity of the customers. Similarly, if the assessee happens to be a Public Limited Company which has raised 'share capital' by way of a Public issue then the onus to be discharged under section 68 of the Act is only to the extent to the establishing the factum of having received the 'share allotment money' or 'call money', as the case may be as a result of proper issue of Public issue; and through proper Channels i.e., through proper Applications for allotment of shares or the call notices, as the case may be, however, it is not so if the company h....
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....tion of ex parte assessment i.e., 31-3-2000 which, cannot be said to be sufficient or satisfactory evidence to as to discharge the onus put on it by section 68 of the Act. At the same time the assessee seems to have avoided, knowingly, the production of books of account and also the details/informations directed to be furnished through notices under section 142(1) of the Act. The Assessing Officer, while proceeding under section 144 of the Act, had no option but to conclude that the appellant's non-compliance was only to safeguard the un-genuineness of the credits found recorded in its books of account under the head "share application money" and "unsecured credits/loans". 24.1 Without prejudice to the above, even if it is assumed for the sake of arguments that the decision of Supreme Court in case of Stellar Investment Ltd. was applicable to assessee's case, then also, as we have already held, before the assessee could be said to have discharged it's onus (assessee is a Pvt. Ltd. Co.) it was to establish two ingredients:-- (i) That the credit appearing under the head 'share application money' were, in fact, received for allotment of shares; and (ii) That the credited amou....
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....ould not be added in the hands of the father. Tribunal has not laid down a Universal Proposition in the terms that 'wherever a credit is found deposited in the Bank account of the assessee, the same could not be added as income under section 68 of the Act'. For the reasons stated above, that this plea also gets rejected. 24.4 In view of the above facts and circumstances we are of the opinion that Assessing Officer was quite justified in considering the fresh credits under the head "share application money" as appellant's income under section 68 of the Act and therefore, we confirm the Order of the CIT(A) confirming the addition of Rs. 8,66,000. 25. Coming to the question of treating the credited amount appearing under the head 'Unsecured loans' amounting to Rs. appellant's income under section 68 of the Act, we, in view of our findings given above that the appellant had not filed any evidence except the return of income, Balance Sheet, Profit & Loss account and Schedules thereof, four T.D.S. certificates, notice of General Meeting, Director's report and Auditor's report and having failed to produce the books of account as well as the details asked for by way of noti....
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....hereunder has, on the facts of that case, held that act of an Advocate misleading the Court resulting in erroneous order is a gross misconduct. 27.4 (i) Facts of that case were that the petitioner had filed the petition for the refund of his earnest money amounting to Rs. 25,000, which the petitioner had deposited with the respondent along with the tender for purchase of each of the rejected items (subject-matter of tender). The Respondent finding the petitioner's rates in respect to some of the items highest allowed the petitioner to lift those items, but, it seems that the petitioner insisted for purchase of all the rejected items and since the Respondent did not accept to the petitioner's claim, the petitioner did not lift the items allowed to be lifted. On petitioner's failure, the Respondent forfeited the earnest money and refused to refund the same as per the terms and conditions of the tender. The petitioner had come before the Hon'ble High Court for refund of the said earnest money of Rs. 25,000. (ii) On 3rd December, 1999 when the petition was heard for the first time one Mr. Ramesh Kumar Agrawal, Advocate appeared on behalf of the petitioner and contended that the p....
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.... his bid was the highest. In view of these facts and circumstances of the case, the Hon'ble High Court held as under: "4. The position, therefore, which clearly emerges is that Mr. Ramesh Kumar Agrawal, Advocate, appearing of the petitioner, was personally responsible for misleading this court resulting in the erroneous order dated3-12-1999by this court. This is ominous and if overlooked may result in gross miscarriage of justice, and there shall be no protection to the Court, for more often than not orders are passed ex parte, or before the respondent file their counter affidavit. Mr. Tekriwal, learned counsel for the Corporation, submits that action against Mr. Agrawal may be taken under sections 192, 196 and 209 IPc. He further submits that it may in addition be referred to the Bar Council for appropriate action in accordance with law. He is at a loss to make any submission with respect to the loss incurred by the Corporation, and submits that it can validly with hold the sum of Rs. 25,000 in deposit as earnest money. 5. I have heard Mr. R.K. Agrawal, Advocate, and Mr. Tekriwal, Advocate, Mr. Agrawal unequivocally admits his mistake, submits unconditional apology, and prom....
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....e Advocate in future, because he had admitted his mistake and had tendered an unconditional apology. So far as Mr. Santhanam is concerned, though he, instead of admitting his mistake and tendering an apology, proceeded to argue the appeal on the basis of same statement, we, at one stage were to proceed against him for contempt of Court but keeping in view his seniority in the profession and the fact that his misconduct may be for the first time, take a lenient view of the matter and leave after administering a severe warning on him with the hope that he shall hereinafter conduct himself with the dignity and the sense of responsibility expected of a professional and Officer of the Court. 28. In view of the aforesaid discussion and the totality of the circumstances, we uphold the order of the CIT(A). 29. In the result, the appeal is dismissed. Per C.L. Bokolia, Accountant Member.--This miscellaneous petition for rectification of mistakes apparent from record under section 254(2) of the IT Act arising out of order dated24-8-2001 in ITA No. 842/Del/2000 for assessment year 1997-98 is moved by the appellant. The miscellaneous petition contains 56 pages in all. Therefore, on4-1-....
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....ent before it if it was found that the respondent had for sufficient cause been unable to appear. Relying on the decision in CIT v. Ramesh Chand Modi [2000] 163 CTR (Raj.) 424 paras 6 & 7 of the judgment, it was submitted that recall of an erroneous order through the process of rectification did not amount to review. To the same effect, observations of the Supreme Court in the case of Grindlays Bank Ltd., were relied upon to show that such recall would not tantamount to a review. It was urged that when a couple of facts relied upon material, partly relevant and partly irrelevant, it was impossible to say to what extent the mind of the Court was effected by the irrelevant material used by it in arriving at its findings. It was, therefore, submitted that considering and taking into account 41 ITD 273 was relied upon irrelevant material. Omission to consider in Shiv Charan Guptas case was failure to consider relevant material. Since it could not be predicted as to the extent to which the irrelevant material had influenced the thought process. The only available course in law would have been recalled the order in toto. Observations in Dhirajlal Girdharilal v. CIT [1954] 26 ITR 736 (SC)....
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....view that keeping in view the totality of the facts, the order dated24-8-2001deserves to be recalled for de novo disposal. For doing so, we find that ground Nos. 9 & 10 have not been disposed of by the Tribunal at all. Admittedly, there is some discussion with regard to each of the three additions objected to vide Ground No. 8, yet we find that the requirements of section 144 and also the case laws on that point as cited in Shiv Charan Guptas case and Tin Box Co.'s case had not been taken note and discussed. We also find that in a situation like this, the Tribunal at its level could not have appreciated the evidentiary value of the documents and papers in the absence of any findings after expression thereof by the lower authorities in terms of Tin Box Co.'s case to remit the matter back to the assessing authorities for de novo appreciation and assessment in accordance with law. 6. We are also of the view that several adverse observations of the Bench on the aspect of certification of the paper book have not been properly appreciated and, therefore, all such comments and finding are considered as not proper and, therefore, expunged and deleted. This would specifically be directed....
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....passed and its substitution by a new order." Again at page 136, their Lordships observed as under: "The scope and ambit of application of section 254(2) is very limited. The same is restricted to rectification of mistakes apparent from the record. We shall first deal with the question of the power of the Tribunal to recall and order in its entirety. Recalling the entire order obviously would mean passing of a fresh order. That does not appear to be the legislative intent. The order passed by the Tribunal under section 254(1) is the effective order so far as the appeal is concerned. Any order passed under section 254(2) either allowing the amendment or refusing to amend gets merged with the original order passed. The order as amended or remaining unamended is the effective order for all practical purposes. The same continues to be an order under section 254(1). That is the final order in the appeal. An order under section 254(2) does not have existence de hors the order under section 254(1). Recalling of the order is not permissible under section 254(2). Recalling of an order automatically necessitates rehearing and readjudication of the entire subject-matter of appeal. The di....
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....adjudication. However, there may be a genuine case where a particular ground raised by the appellant left to be considered by the Tribunal. Non-consideration/adjudication of the grounds raised by the appellant, certainly, tantamounts to mistake apparent from the record which can be rectified only after hearing the parties to the appeal in respect of such grounds. Therefore, in such peculiar/exceptional circumstances, in my opinion, the Tribunal may partially recall the order passed under section 254(1) so that the grounds left to be decided may be adjudicated upon after hearing both the parties. Such order would also not amount to obliteration of the original order passed under section 254(1) and, therefore, would be in consonance with the spirit of the decision of the Hon'ble Delhi High Court. But in cases where the issues are adjudicated upon by the Tribunal after considering the material on the record and contentions of the parties, the recalling of order, wholly or partially is not permissible. In view of the above discussion, I am of the considered opinion that in the present case, the entire order of the Tribunal passed under section 254(1) cannot be recalled as held by the H....
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....t the aforesaid contention raised by the learned counsel for the assessee since such opportunity is not required to be given where a notice under sub-section (1) of section 142 has been issued prior to the making of an assessment under section 144 as is apparent from the second proviso to section 144. In the present case, undisputedly the notices under section 142(1) dated13-12-1999and6-1-2000were issued to the assessee as is apparent from the finding recorded by the Tribunal in the impugned order in para No. 12.1 at page 23. This being the factual position, it cannot be said that there was any violation of the provisions of section 144 as contended by the assessee's counsel and consequently, the decision of the Hon'ble Supreme Court in the case of Tin Box Co. as well as the decision of the Tribunal in Shiv Charan Gupta's case cannot be applied to the present case. It may also be added that such plea of the assessee's counsel has been dealt with in the impugned order of the Tribunal under section 254(1) at page 46 wherein it has been observed specifically that there was no necessity of providing an opportunity or serving a show-cause notice in terms of the first proviso to secti....
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....herefore, not applicable. (3) The mistake apparent from the record was committed in passing adverse comments against the conduct of the assessee's counsel. (4) The total recall of the impugned order under section 254(1) is not warranted in view of the binding judgment of the Delhi High Court in the case of Karan & Co. In view of the above findings the adverse comments against the conduct of assessee's counsel are hereby expunged. The impugned order is partially recalled for the limited purpose of adjudicating ground Nos. 9 & 10. 15. In the result, the application of assessee is partly allowed. REFERENCE UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 Since there was difference of opinion on the issue raised in the captioned misc. application, the following question is referred to the Hon'ble President of the Tribunal under section 255(4) of the Income-tax Act, 1961: "Whether on the facts of the case and in law, the entire impugned order of the Tribunal can be recalled under section 254(2)?" THIRD MEMBER ORDER R.M. Mehta, Vice-President.--There was a difference of opinion between the learned Members while deciding the Misc. application filed by the assessee ....
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....l in the course of arguing the misc. application were that there was clear sanction in law for recalling an erroneous order in the interest of justice and reliance was placed on Grindlays Bank Ltd.'s case it was emphasized that the Supreme Court in the aforesaid judgment had held that the Tribunal had power to recall an order if it thought fit to do so in the interest of justice. With reference to the same very decision the submission was that without there being an express provision in the Act or Rules a Tribunal or a body should be considered to be endowed with such inherent or incidental powers as were necessary to discharge its functions effectively for the purpose of rendering justice. Reliance was also placed on the judgment of the Hon'ble Supreme Court in Madru Singh's case for the proposition that the Tribunal had the power to set aside an order passed not only ex parte, but on merits as well against the respondent before it if it was found that the respondent had for sufficient cause been unable to appear. Reliance was also placed on ajudgment of the Hon'ble Rajasthan High Court in Ramesh Chand Modi's case for the proposition that the recall of an erroneous order through t....
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....istakes which were being pointed out were neither obvious nor patent and, therefore, not capable of rectification. Reliance was placed upon the decisions in ITAT's case [1994] 206 ITR 126 (AP), 182 ITR 50 (SC) (sic), Mrs. Khorshed Shapoor Chenai's case, K.L. Bhatia's case, ITAT's case [1992] 196 ITR 590 (Ori.), Dr. Ved Prakash's case, Ballabh Prasad Agarwalla's case and Shaw Wallace & Co. Ltd's case. 10. In considering the aforesaid submissions of the parties with reference to the case law cited, the learned Accountant Member proceeded to recall the order of the Tribunal passed under section 254(1) for de novo disposal on the following main grounds:-- (i) Ground Nos. 9 and 10 had not been disposed of by the Tribunal at all; (ii) Admittedly, there was some discussion with regard to each of the three additions objected to vide ground No. 8, yet the requirements of section 144 as also the case law on the point cited in Shiv Charan Gupta's case and Tin Box Co.'s case had not been taken note of and discussed; and (iii) There were certain adverse observations of the Bench on the aspect of the certification of the paper book and these were not considered to be appropriate and,....
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....istake apparent from the record and which could be rectified only after hearing the parties in respect of such ground and this, according to the learned Judicial Member was a situation where the Tribunal could partially recall the order passed under section 254(2) for the limited purpose of hearing the parties on the ground omitted to be adjudicated upon. This situation, according to the learned Judicial Member, did not amount to the obliteration of the order passed under section 254(1) and the same would, therefore, be in consonance with the spirit of the decision of the Hon'ble Delhi High Court in the case of Karan & Co. The learned Judicial Member also referred to the judgment of the Hon'ble Supreme Court in the case of Sun Engg. Works (P.) Ltd. for the proposition that a judgment of a court had to be understood in the context in which it was delivered. 15. In conclusion, the learned Judicial Member took the view that vis-a-vis facts of the present case, the entire order of the Tribunal passed under section 254(1) could not be recalled as held by the Hon'ble Delhi High Court and insofar as the mistakes apparent from the record were concerned, these could be rectified under se....
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....d under section 254(1) had been recalled by a Bench consisting of the same Hon'ble Members as were the party to the order in the present misc. application. In emphasizing that some of the decisions, which were relied upon for seeking a recall of the entire order were those delivered under the Excise & Custom Laws, the submission of the learned counsel was that the provisions under the aforesaid laws were pari materia to the provisions of section 254(2) of the Income-tax Act, 1961. 19. The further submission of the learned counsel was to the effect that the judgment in the case of Karan & Co. was not binding since there were judgments of the Hon'ble Supreme Court taking a view to the effect that where there had been a violation of the principles of natural justice, then the order was required to be recalled and the entire matter to be heard afresh. The learned counsel emphasized that the learned Judicial Member in his order had not considered the judgments of the Hon'ble Supreme Court in Grindlays Bank Ltd.'s caseand Madru Singh's case whereas the learned Accountant Member had done so. According to the learned counsel the judgment of the Hon'ble Delhi High Court in CIT v. Shakunt....
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....uld not argue at this stage of the proceedings that principles of natural justice had been violated and the matter required to be re-examined. In conclusion, the learned Departmental Representative vehemently supported the view expressed by the learned Judicial Member and quoted extensively from his dissenting order. Reliance was placed on the decisions in CIT v. ITAT [1992] 196 ITR 640 (Ori); Smt. Baljeet Jolly v. CIT [2001] 250 ITR 113 (Delhi); J.N. Sahni v. ITAT [2002] 257 ITR 16 (Delhi) as also the other decisions to which the learned Judicial Member had adverted in writing his dissenting order. 23. In reply the learned counsel for the assessee stated that complete information had been given to the Assessing Officer, but he did not issue a notice proposing adverse action at any stage of the proceedings. I must mention at this stage that not a word was said by the learned counsel at the time of hearing on the issue and receipt of the various statutory notices and non-compliance thereto as alleged by the learned Departmental Representative. 24. I have considered the rival submissions and, at the outset, I would observe that the Tribunal is obliged to rectify mistakes appare....
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....ements of section 144 have not been taken note of and discussed and this is also his observation in respect of the two judgments cited i.e., Tin Box Co.'s case and Shiv Charan Gupta's case. 27. As against the aforesaid the learned Judicial Member at page 2 of his dissenting order refers not only to the relevant provisions of law, but also to the factual aspect of the numerous statutory notices being issued to the assessee and there being no further requirement in law for providing an opportunity or serving a show-cause notice in terms of the first proviso to section 144. The learned Judicial Member also took note of the observations at page 46 of the order passed by the Tribunal under section 254(1) [reproduced earlier]. 28. In coming to the two judgments relied upon by the assessee, I would only like to say that in a given case, where decisions cited before the Tribunal are not considered at all, then it may be a case of a mistake apparent from the record, but there may be a situation when the decisions relied upon have been considered, but not to the advantage of a party before the Tribunal. The latter situation is not rectifiable under section 254(2), but the former is and....
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....of doing justice between the parties. 32. This judgment, in my opinion, is not applicable since in the case before me the hearing before the Tribunal was not ex parte and the matter was decided on merits by the Division Bench. The learned Judicial Member has very aptly noted in his order that under the Income-tax (Appellate Tribunal) Rules, 1963, Rule 24 provides for a recall of an ex parte order and there is, therefore, no need to press into service the inherent powers which have been vested in the Tribunal vis-a-vis the judgment of the Hon'ble Supreme Court in the case of M.K. Mohammed Kunhi. J.K. Synthetics Ltd. v. Collector of Central Excise AIR 1996 SC 3527 (sic):-- 33. This case also dealt with an ex parte dismissal of a matter by CEGAT and on the matter travelling to the Hon'ble Supreme Court, Their Lordships took note of Rule 20 of the CEGAT (Procedure) Rules which dealt with cases where an appellant had defaulted, Rule 21 which empowers CEGA T to hear appeals ex parte and there being absence of a specific rule which provided for setting aside of an ex parte order due to the absence of the respondent and lastly, a reference to Rule 41 which according to Their Lords....
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....o the Constitution Bench, could not be invoked to challenge the validity of a final order passed by the Court exhausting the remedy of review under Article 137 of the Constitution read with Order XI Rule 1 of the Supreme Court Rules, 1966. According to their Lordships, however, the Supreme Court in exercise of its inherent power with a view to prevent abuse of its process and to cure a gross miscarriage of justice could reconsider its judgments, but only in the rarest of rare cases. 38. I do not really understand vis-a-vis the facts of the present case as to how the aforesaid judgment of the Hon'ble Supreme Court can support the line of argument canvassed by the assessee's counsel. The issue before me is whether the ITAT in dealing with an application under section 254(2) can recall the entire order when it is in law obliged only to rectify mistakes apparent from the record and the recalling of the order in entirety is normally restricted to situations envisaged by Rule 24 of the Income-tax (Appellate Tribunal) Rules, 1963. That apart in the judgment of the Hon'ble Supreme Court aforesaid the view expressed was that Court may reconsider its judgment in situations where there has....
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....wrong provision of law and this has been considered to be an error apparent from the record within the meaning of section 254(2). As rightly contended by the assessee in its written submission the numerous judgments of the Hon'ble Delhi High Court on the scope of sections 154 and 254(2) of the Income-tax Act have been taken into account and I now proceed to reproduce the relevant observations of Their Lordships, as follows:-- "Before taking up the main point, we may first deal with the question with regard to the propriety of the Tribunal in recalling its order dated30th August, 1978, on assessee's application under section 254(2) of the Act. While interpreting and explaining the scope of section 154 of the Act, which provision is in pari materia with section 254(2) of the Act, the Supreme Court in T.S. Balaram, ITO v. Volkart Bros. [1971] 82 ITR 50 (SC) held that a mistake apparent from the record within the meaning of section 154 of the Act must be an "obvious" and "patent" mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake appa....
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....parent from reading the numerous judgments of the Hon'ble Delhi High Court that a mistake apparent from the record can be rectified under section 254(2), but a review cannot be carried out under the guise of rectification proceedings and considering specifically Karan & Co.'s case and Seth Madan Lal Modis case the end result is not a decisive factor since in a given case mistakes apparent from the record can be rectified and the order under section 254(1) allowed to stand with the modifications whereas in another situation mistakes apparent from the record may lead to the obliteration of the entire order passed under section 254(1) and the appeal required to be heard de novo. In other words, each case is to be decided on its own facts. 44. In conclusion and in the final analysis, I on the facts of the present case hold that the order of the Tribunal passed under section 254(1) did not merit a total recall since the mistakes apparent from the record pointed out by the assessee were capable of being rectified and both the learned Members while deciding the Misc. application were substantially in agreement with each other and on the point of dissent I am in agreement with the view ....