TaxTMI 
TaxTMI 
2010 (6) TMI 787
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....nts pertaining to M/s. Dolphin Marbles (P.) Ltd., were found and seized under section 153C. Notice was issued on 9-10-2006 and served on the assessee and directed to file the return under section 142(1)(i). The assessee filed return of income on 31-3-2006. The assessee claimed net loss of Rs. 9,362 on a sale after setting-off of depreciation of current year amounting to Rs. 39,641 and shown the liability on professional tax at Rs. 2,500 in the balance sheet. Since there was no challan enclosed for payment of the liability claimed, the claim of the assessee was rejected. 4. While verifying the balance-sheet of the assessee-company share subscription from four different companies as noted below was found and explanation was sought for : (a) M/s. Transeem Commercial (P.) Ltd. Rs. 5,00,000 (b) M/s. Rajath Commercial Pvt. Ltd. Rs. 10,00,000 (c) M/s. Vikash Viniyog (P.) Ltd., Howrah Rs. 5,00,000 (d) M/s. Nihal Fiscal Service (P.) Ltd. Rs. 5,00,000 5. Not satisfied with the explanation of the assessee, the learned Assessing Officer treated the amount as income of the assessee-company under section 68 of the Income-tax Act. In the case of....
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....egistrar of company and before the revenue authority, copy of application allowed on shares. 9. The additional evidences produced were forwarded to Assessing Officer for comments and objections if any. The Assessing Officer objected to the admission of additional evidences for the reason that he had given sufficient opportunities to produce evidences which, was not complied with. Rejoinder was called for from the assessee. The assessee reiterated the submission that the Assessing Officer was not correct in reporting that several opportunities were given to the assessee at assessment stage and reiterated that only one opportunity was given to the assessee and this was sought to establish on the basis of the order sheet entry in the case of Dolphine Marbles (P.) Ltd. 10. On the basis of the above, the learned CIT(A) came to the conclusion that Assessing Officer had never directed the assessee to produce any evidences to prove the genuineness of subscribing the companies nor had he expressed any doubt regarding the genuineness of shareholding of these companies prior to treating of share capital as unexplained under section 68. He also aggrieved by the assessee with the report o....
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....tion to paper book at page Nos. 19, 53, 66, 64 and 68. Page 19 is the part of the balance sheet of Dolphine Marbles (P.) Ltd., which was filed along with the return showing the share application money. Page 53 is the letter from Transeem Commercial (P.) Ltd., confirming the application for the equity shares numbering 1250 in M/s. Dolphine Marbles (P.) Ltd. and also confirmation with regard to the payment, which was before the Assessing Officer. Page 63 is the copy of the balance sheet of the company for the year ending 31-3-2005 and page 63 is the details of stock-in-trade wherein specifically given the details of M/s. Dolphine Marbles (P.) Ltd., the number of share 1250 for Rs. 5 lakhs. Page 62 is the balance sheet abstract and companies general business profile, which is audited. Page 56 is the certificate of incorporation issued by the Registrar of Companies, West Bengal. Page No. 64 is the letter issued by M/s. Rajath Commercial (P.) Ltd. with regard to application of shares of 2500 and the details of payment. Page 65 is the letter for issuance of shares by the assessee. Page 66 is the return acknowledgement by the revenue authorities, 68 is the certificate of incorporation iss....
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....ht of the above facts, merely because in case of certain companies when the enquiry conducted, the details were not forthcoming ipso facto coming to the conclusion that the application and allotment of shares is false. 15. Under the circumstances, we are of the view that there is no material before us to disturb the order of the learned first appellate authority. The appeal by the revenue on this ground fails. 16. The second ground is against the order of the learned CIT(A) deleting the addition of Rs. 5 lakhs made on substantive basis on account of explanation of share application money from one company. 17. Coming to impugned amount of Rs. 4 lakhs, this was treated as assessee's unexplained investment in the company routed by way of share application money. During the search, as mentioned above, cash amounting to Rs. 49,11,000 was found in the residential premises of Shri Vishwanath Gupta, which was explained as 20 per cent withdrawal from other banks share application money, on which, the finding of the CIT(A) had been confirmed. Regarding this 5 lakhs, assessee explained that this was also a part of share application money. In the absence of any clinching evidence t....
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.... (iii) Similarly, a photocopy of certificate was filed from M/s. Nihal Fiscal Service (P.) Ltd., confirming that they had applied for 1250 shares of the assessee and payment of Rs. 5 lakh was made as per Demand Draft dated 20-8-2004. (iv) A copy of letter addressed to the Assessing Officer by M/s. Transeem Commercial (P.) Ltd., was also filed. It was claimed that the aforestated Transeem Commercial (P.) Ltd., had applied for the shares of the assessee-company at a premium of Rs. 300 per share. (v) Confirmation letter dated nil from Rajath Commercial (P.) Ltd., was also filed according to which they had applied for 2,500 equity shares of assessee-company of Rs. 100 each at a premium of Rs. 300 per share. (vi) The assessee also filed copy of computer generated ledger account in support of the claim of aforestated share application money. 4. The Assessing Officer observed that : (a) the letter of M/s. Transeem Commercial (P.) Ltd., was addressed to him but instead of filing the original letter, the assessee only submitted a photocopy of the aforestated letter, and the basis of fixing the premium was not known as no evidence was filed in that re....
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....nted money in its books of account under the garb of share application money. 8. The evidence filed was thus not sufficient to prove the capacity, genuineness and creditworthiness of the parties. 9. The assessee could not file the relevant details of filing of income-tax returns of aforestated companies, along with capital account and balance sheet for the relevant period and the earlier years to prove the availability of funds with them. 10. In view of inquiries discussed above and in view of the fact that the relevant details were not filed by the assessee before the Assessing Officer, the Assessing Officer held that burden of proof to establish the financial capacity of the investors was not discharged by the assessee. 11. According to the Assessing Officer : (a) It was held in the cases of Shankar Industries v. CIT ((1978)) 114 ITR 689 (Cal.) and C. Kant & Co. v. CIT ((1980)) 126 ITR 63 1 (Cal.) that establishing the identity of the creditor was not enough. (b) It was held in the cases of Bharat (P.) Ltd. v. CIT ((1978)) 111 ITR 951 (Cal.); CIT v. W.J. Walker & Co. ((1979)) 117 ITR 690 (Cal.) that mere filing of confirmatory letters was not suffici....
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....ssessing Officer that repeated opportunity were given to the assessee to prove the genuineness of the claim of receipt of share application money from the aforestated four companies was not correct, because the case of the assessee-company was heard only on 10-10-2006 as could be seen from the entry in the relevant order sheet, which is reproduced below : Dolphine Marbles (P.) Ltd., Katni05-06 10-10-2006 Shri Vishwanath Pd. Gupta with Shri Lokesh Sethi, Accountant attended and produced books of a/c and filed submission which has been kept on record, Case for 6/11 Sd/- 10/10 (iii) it was clear from the order sheet entry reproduced above that the Assessing Officer neither expressed any doubt nor raised any query regarding the Kolkata based companies during the assessment proceedings in the case of the assessee-company. (iv) the Assessing Officer never directed the assessee to file the copies of returns, capital accounts and balance sheets for the relevant period or the earlier years of the Kolkata based companies, who had invested in the shares of the assessee-company. (v) the report of the ADIT (Inv.), Kolkata, ....
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....atement of accounts which have been filed along with return both under the Companies Act and under the Income-tax Act. The subscription in shares of Dolphine Marbles and several other Indian companies have been specifically indicated in the balance sheet of the subscribing companies along with value of the shareholding. The department has also accepted the return of income of the subscribing companies. Once department has accepted the return of income of the sub- scribing companies, and the name of the appellant along with extent of shareholding is clearly depicted in the balance sheet of these companies, the matter ends there. The shareholding has to be accepted as genuine. For this reason, the additions of Rs. 20,00,000 on protective basis and Rs. 5,00,000 on actual basis stand deleted." 17. The ld. Vice-President has proposed to dismisses the appeal of revenue on this issue on the basis of additional evidence filed by the assessee before the ld. CIT(A), for the reasons that : (i) the companies were registered with the Registrar of the Companies, (ii) the share application and allotment of shares of the assessee company was reflected in their returns, ....
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....ective basis." 19. The ld. CIT(A) has only considered the order sheet entry in the case of Dolphine Marbles (P.) Ltd., i.e., the assessee. Before changing the finding of fact given by the Assessing Officer that the assessee did not file the relevant details despite several opportunities. The ld. CIT(A) should have confronted the Assessing Officer with the submissions of the assessee that only one opportunity was given. He should have also perused the order sheet entries in the case of Shri Vishwanath Prasad Gupta, in whose case the issue regarding share capital of Rs. 25 lakh has been discussed in detail in the assessment order dated 26-12-2006 while making the addition of Rs. 20 lakh under consideration on substantive basis. 20. It is also seen that the Assessing Officer has finalised the assessment order in the case of the assessee Shri Vishwanath Prasad Gupta for assessment year 2005-06 on the same date i.e., 26-12-2006, which is subject-matter of ITA No. 221/Jab./2008, heard by us on 25-2-2009, along with this appeal of the assessee-company. It is observed that the assessment proceedings in the case of Shri Vishwanath Gupta were initiated by issuing notices under section ....
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....n 131 of the Income-tax Act; (b) they were not found at the addresses given by the assessee to the Assessing Officer; and (c) the report of the ADIT (Inv.), Kolkata that the parties were not actually in existence. 23. By its very nature the additional evidence filed by the assessee before the ld. CIT(A) was also such as could not justify the failure of the assessee to file the same before the Assessing Officer because the copies of : (i) certificates of registration with the Registrar of Companies; (ii) acknowledgements of filing the respective returns of income; and (iii) the balance sheets etc. could have been readily available with the parities and the assessee had no justifiable reason for not fling the same before the Assessing Officer. There was no reason that the assessee should have waited till the hearing of appeal before the ld. CIT(A) to file the same. 24. The ld. CIT(A) also ignored that the ABN-AMRO Bank, Kolkata had informed the Assessing Officer that the DD of Rs. 5 lakh claimed to have been sent to the assessee by M/s. Nihal Fiscal Service (P.) Ltd., was never issued by the aforestated bank. 25. It is also observ....
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....ssing Officer] has refused to admit evidence which ought to have been admitted; or (b) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the [Assessing Officer]; or (c) where the appellant was prevented by sufficient cause from producing before the [Assessing Officer] any evidence which is relevant to any ground of appeal; or (d) where the [Assessing Officer] has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal. (2) No evidence shall be admitted under sub-rule (1) unless the [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)] records in writing the reasons for its admission. (3) The [Deputy Commissioner (Appeals)] - [or, as the case may be, the Commissioner (Appeals)] shall not take into account any evidence produced under sub-rule (1) unless the [Assessing Officer] has been allowed a reasonable opportunity- (a) to examine the evidence or document or to cross-examine the witness produced by the appellant, or (b) to produce any ev....
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....sessing Officer did not appear in response to notice under section 250(2)(b) cannot empower the appellate authority to take into account the additional evidence without allowing and affording a reasonable opportunity to the Assessing Officer as required by rule 46A(3) CIT v. Valimohammad Ahmadbhai ((1982)) 134 ITR 214 (Guj.). (Chaturvedi & Pithisaria's Income Tax Law, 5th edition, Volume 5 pages 7661-7662)" 30. The CBDT as per Circular No. 108 [F. No. 131(9)/73-TPL], dated 20-3-1973 has also explained the provisions regarding admission of additional evidence by the first appellate authority, relevant portion of which is reproduced below : "The rule requires the Appellate Assistant Commissioner to record his reasons for admitting the additional evidence and also allow to the Income-tax Officer an opportunity of examining the evidence or document or cross-examine the witness produced by the appellant and also to produce new evidence on his side in rebuttal of the additional evidence produced by the appellant." [Emphasis supplied] 31. Thus, the decision of the ld. CIT(A) to admit the new evidence and to allow the appeal of the assessee on the basis thereof with....
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.... of the parties to send the money in question and the genuineness of the transaction. The decision of the ld. CIT(A) as per impugned order cannot therefore be upheld. 33. It is also observed that since the amount of Rs. 25 lakh was credited to the books of account of the assessee as share subscription in the name of the aforestated four companies, the onus to explain the same was on the assessee in view of the decisions in the case of : (i) CIT v. Sophia Finance Ltd. ((1994)) 205 ITR 98 (Delhi); (ii) CIT v. Kundan Investment Ltd. ((2003)) 263 ITR 626 (Cal.); and (iii) CIT v. Rathi Finlease Ltd. [IT Appeal No. 63 (MP) of 2004, dated 11-10-2007]. 34. In view of the provisions of section 46A, CBDT circular and case laws discussed above, with due respect, I do not agree with the view of the ld. V.P. in per para 14 of his proposed order, which is reproduced below : "that there is no material to disturb the order of the first appellate authority it is true that some of the evidences were not before the Assessing Officer. That alone is not sufficient to remand that matter back to the file of Assessing Officer." 35. However, in all fairness look....
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....mstances of the case, the learned Vice President is correct in confirming the order of the Commissioner of Income-tax (Appeals) of the addition of Rs. 20,00,000 made by the Assessing Officer on protective basis on account of unexplained share application money from three companies or the issue is to be restored to Assessing Officer for fresh consideration, as opined by the learned AM? (iii) Whether, on facts and in the circumstances of the case, the learned Vice President is correct in confirming the order of the Commissioner of Income-tax (Appeals) deleting the addition of Rs. 5,00,000 made by Assessing Officer on substantive basis on account of unexplained share application money from one company, or the issue is to be restored to Assessing Officer for fresh consideration as opined by the learned AM?" We, accordingly, forward the records of the appeal mentioned above to the President of the Tribunal. THIRD MEMBER ORDER Per H.L. Karwa (Vice President) (As a Third Member) The following points of difference have been referred to me under section 255(4) of the Income-tax Act, 1961 ('the Act') : "(i) Whether, on the facts and in the circumstances of the c....
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....y and genuineness and creditworthiness of the creditors. He relied on the decision of the Hon'ble jurisdictional High Court in the case of Rathi Finlease Ltd. (supra), wherein it has been held that section 68 of the Act enjoined the assessee to offer explanation about the nature and source of the sum found credited in the books and if the explanation was not satisfactory, the amount can be credited and charged to income-tax as income of the assessee. In the instant case, the assessee has failed to prove the nature and source of cash credit. He, therefore, submitted that in the facts and circumstances of the case, the ld. Accountant Member has correctly remanded the matter to the file of the Assessing Officer for fresh consideration. 5. Shri A.P. Shrivastava, Advocate, Learned Counsel for the assessee supported the orders of the ld. CIT(A) and the ld. V.P. He further submitted that the assessee-company had received share application money of Rs. 25 lakhs from the following four companies : (i) M/s. Transeem Commercial Pvt. Ltd., 23A, NS Road, 1st Floor, Room No. 217A, Kolkata 23-7-2004 5,00,000 (ii) M/s. Rajath Commercial Pvt. Ltd., 14/2, Old China Bazar Street,....
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....ed Rs. 25 lakhs as share application money. The Assessing Officer also stated that because of non-submission of the same, enquiry was conducted through the ADIT (Inv.), Unit-IV(1), Kolkata who reported that companies are only on paper and not actually in existence. Therefore, not only such additional evidence has got to be rejected, the addition of Rs. 25 lakhs is required to be confirmed. Shri A.P. Shrivastava, ld. Counsel for the assessee submitted that from the order sheet entry dated 10-10-2006 in the case of Dolphine Marbles (P.) Ltd., it is amply clear that the assessment was completed in only one hearing during which the Assessing Officer did not ask the assessee to furnish any information. The assessee was prevented by reasonable cause from furnishing the additional evidence and therefore, the ld. CIT(A) has admitted the same. He further pointed out that the report of the ADIT (Inv.), Kolkata is not an admissible evidence as it was never confronted to the assessee before utilizing the same in making assessment of income of the assessee. He, therefore, submitted that in view of the additional evidence submitted by the assessee before the ld. CIT(A), the ld. CIT(A) has correc....
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....tional evidence which was not produced before the Assessing Officer only if the Assessing Officer has refused to admit the evidence or the assessee was prevented by sufficient cause from producing the evidence before the Assessing Officer or the Assessing Officer had final- ized the assessment without giving sufficient opportunity to the assessee to adduce the evidence. In the instant case, the ld. CIT(A) has categorically stated that after going through the certified copy of order sheet entry in the case of Dolphine Marbles, he was satisfied that the Assessing Officer never directed the assessee to produce any evidence to prove the genuineness of shareholding by the subscribing companies nor had he expressed any doubts regarding the genuineness of shareholding of these companies prior to treating of share capital as unexplained under section 68. It is apparent from record that in the case of Dolphine Marbles, the assessment was completed in only one hearing where the assessee was not asked to furnish any information. Therefore, the assessee was prevented by reasonable cause from furnishing the additional evidence. One of the condition prescribed in rule 46A is that the ld. CIT(A) ....
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....heet as on 31-3-2005. The Balance Sheet shows that the said company has purchased the shares of the assessee-company worth Rs. 5 lakhs. In my opinion, there is no justification in remanding the matter to the file of the Assessing Officer. 7. As regards the merits of the case, the assessee has furnished the following details before the ld. CIT(A) in respect of Transeem Commercial (P.) Ltd. (i) Letter addressed by Transeem Commercial (P.) Ltd. to ACIT, Katni confirming that Kolkata Company applied for 1250 equity shares in Dolphine Marbles (P.) Ltd., vide DD No. 636381, dated 28-7-2004 drawn on Oriental Bank of Commerce, Station Road, Kolkata. (A copy of the same is available at page 53 of the assessee's Paper Book filed before the Tribunal). (ii) Copy of acknowledgement of return of income showing address of company and PAN. (A copy of the same is available at page 54 of the assessee's Paper Book filed before the Tribunal). (iii) Letter by Kolkata company to assessee-company requesting issue of 1250 equity shares along with draft of Rs. 5 lakhs. (A copy of the same is available at page 55 of the assessee's Paper Book filed before the Tribunal). ....
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....filed before the Tribunal). 7.2 The assessee also submitted the following details before the ld. CIT(A) in respect of Nihal Fiscal Services (P.) Ltd., Kolkata : (i) Certificate sent by Nihal Fiscal Services (P.) Ltd., Kolkata to ACIT, Katni confirming that Kolkata company applied for 1250 equity shares in Dolphin Marble (P.) Ltd. and deposited Rs. 5,00,000 vide DD dated 20-8-2004 drawn on ABN-AMRO Bank, Kolkata. (A copy of the same is available at page 73 of the assessee's Paper Book filed before the Tribunal). (ii) Copy of acknowledgement of return of income showing address of company and PAN. (A copy of the same is available at page 74 of the assessee's Paper Book filed before the Tribunal). (iii) Certificate of incorporation of companies issued by Registrar of Companies, West Bengal. (A copy of the same is available at page 75 of the assessee's Paper Book filed before the Tribunal). (iv) Balance sheet of the company for the year ending 31-3-2005 wherein investment of Rs. 5 lakhs in M/s. Dolphin Marbles (P.) Ltd., is claimed to have been made. This balance sheet was filed along with return of income and audit report. (A copy of the same is a....
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....ter in right perspective. The question raised before the Hon'ble High Court was as under : "Whether the Income-tax Appellate Tribunal was justified in law in remanding back the case to the Assessing Officer when the matter has been examined on the merits by the Commissioner of Income-tax (Appeals)?" The Hon'ble High Court referred to the decision of the Hon'ble Supreme Court in the case of Lovely Exports (P.) Ltd. (supra) and the decision of the Hon'ble Delhi High Court in the case of CIT v. Divine Leasing & Finance Ltd. ((2008)) 299 ITR 268 and held as under : "However, when we went through the order of the Commissioner of Income-tax (Appeals) we find that he has examined the question of identity, creditworthiness and genuineness of each of the shareholders. The said examination appears in sub-paras (i) to (xx) in paragraph 2.4, which run from pages 48 to 57 of the appeal papers. We find that the Commissioner of Income-tax (Appeals) had considered in detail the case of each of shareholders and came to a conclusion of fact that the identity and creditworthiness of the shareholders and the genuineness of the transactions stood established. Therefore, the finding....