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TaxTMI 
TaxTMI 
TaxTMI 
2017 (12) TMI 108
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....ufacturing PVC pipes. It filed return on March 31, 2003 stating loss of Rs. 60,56,640. Its turnover in the impugned assessment year was of Rs. 33,48,51,667 with other income of Rs. 49,37,686 stating net profit of Rs. 95,17,392 as compared to the corresponding figures in the preceding assessment year of Rs. 25,13,43,604, Rs. 31,36,669 and Rs. 1,25,79,237 respectively. The Assessing Officer then noticed the above net profit to have come down from 4.94 per cent. to 2.35 per cent. in the two assessment years. He issued various notices under section 142(1) of the Act in scrutiny seeking reasons thereof. The assessee filed its reply. It pleaded therein that its in charge person Shri Chandrakant Patel had gone out since 11-12 months. It therefore expressed its inability to produce all of its books as its creditors M/s. GSFC, J and K Bank and IDBI had got its factory premises sealed. This made the assessing authority to reject its books under section 145 of the Act. He thereafter adopted net profit rate of 4.94 per cent. in best judgment assessment framed under section 144 of the Act making the impugned addition of Rs. 79,85,090 in his order dated March 2, 2005. The Commissioner of Income-....
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....ent as per law. 17. The assessee also taken a ground of appeal against the addition made of Rs. 5.31 crores under section 68 of the Income-tax Act, 1961 in respect of share premium money for want of details. The other objection which was raised by the assessee being that the learned Commissioner of Income-tax (Appeals) having refused the additional grounds of appeal which were in respect of allowance of deduction for deferred revenue expenditure of Rs. 18,37,270 which was debited in the balance-sheet and the claim for deduction under section 80-IA of the Income-tax Act, 1961. We find that the addition of Rs. 5.31 crores was made for want of details which the assessee could not furnish before the Assessing Officer for reasons beyond his control. In the circumstances, in our considered opinion, the learned Commissioner of Income-tax (Appeals) was not justified in not admitting the fresh evidence filed by the assessee by following rule 46A. However, as we have set aside the issue regarding determination of business income to the file of the Assessing Officer, we also set aside the issue to the file of the Assessing Officer. Similarly, in respect of disallowance for deferred revenue ....
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.... various pleas explaining its net profit rate of 2.59 per cent. in the impugned assessment year as compared to that at the rate 4.94 per cent. in the preceding assessment year as follows : "1. In the paper book he contends that book should not have been rejected because the assessee was in a peculiar condition as the company's premises were sealed. The assessee further contends that the reason for fall in the net profit was due to increased interest cost and claim of depreciation. 2. The assessee's premises were sealed vide order dated August 22, 2007 whereas the original assessment order was passed on March 2, 2005 therefore the contention that 'assessee was in a peculiar condition as the company's premises were sealed' is not correct and cannot be acceded to. 3. As regards fall in the net profit the assessee accepts that it is due to increased interest cost and claim of depreciation. (A) Increased interest cost The assessee has not produced any evidence to show that -the amount borrowed has been used for the purpose of business -the increase in interest expenditure was justified and as per the provisions of the Act. The expenditure on 'inte....
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....arned authorised representative appearing at the assessee's behest. He pleads first of all that the assessee could not file its necessary books in the instant second round as well as the learned city civil court had sealed the assessee's premises. This first plea goes against the record as learned co-ordinate Bench in earlier round of litigation (supra) had duly observed that relevant books of account stood released by that time, i.e., well before June 12, 2009. There is hardly any quarrel that the said clinching observation has attained finality. The assessee never made any attempt to get the same modified in any manner whatsoever. It rather chose to adopt total non-co-operation in consequential round of assessment. It claimed before the Assessing Officer that the learned city civil court had sealed its factory premises vide order dated August 22, 2007 despite the fact that the learned co-ordinate Bench had just made the above contrary observation. There is no material in the instant case file indicating as to how and in what circumstances the assessee has come to be in possession of the impugned additional evidence (supra) claiming interest expenditure and deprecation in ....
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....its profit and loss accounts indicating interest outgo of Rs. 12,950,103 at page 3. Pages 4-5 are its schedules annexed to and forming part of accounts. We however find that there is no evidence available in all the abovestated material ; item-wise indicating bills and vouchers of relevant fixed asset purchases. Nor does the entire above evidence highlight the crucial nexus between the assessee's so-called secured loans to have been actually utilised in purchase of the above fixed assets only. We wish to repeat that we are in second round of proceedings. Much water has flown down the bridge since the impugned assessment year 2002-03. There is no possibility for the lower authorities to verify this crucial fact at the instant belated stage which has involved two assessment orders, three remand reports and two Commissioner of Income-tax (Appeals)'s order along with this Tribunal's remand order. We therefore see no reason to accept the assessee's instant plea on merit as well seeking to delete the impugned net profit addition of Rs. 79,85,090. 12. Next comes the assessee's challenge to the Commissioner of Income-tax (Appeals)'s order that his findings adjudica....
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.... that the assessee's balance- sheet on the one hand had stated receipt of these amounts between April 1, 2001 to March 31, 2002 whereas its chart in additional evidence revealed the relevant dates between February to March 2001 to the contrary. He therefore confirmed the impugned addition. It has already come on record that this Tribunal's earlier order (supra) sent back the case to the Assessing Officer. The assessee admittedly to choose to adopt non-co-operation in the second round of assessment as well. It rather raised a total false plea that its relevant books were not available in view of the learned city civil court's order sealing its premises (supra). The Assessing Officer therefore reiterated the impugned addition in his consequential assessment order. 15. We proceed further to notice that the assessee filed its additional evidence/submissions in the second round of lower appellate proceedings in the nature of share premium applicant's name, cheque No., bank's branch, date, amount and permanent account number etc. on October 7, 2011. The Assessing Officer's first remand report (supra) rejected the said explanation on the ground that it had failed ....
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....e therefore is the lower authorities ought not to have made the impugned addition in its hands. Case law CIT v. Pragati Co-operative Bank Ltd. [2005] 278 ITR 170 (Guj) and Murlidhar Lahorimal v. CIT [2006] 280 ITR 512 (Guj) is quoted in support. 18. The learned Departmental representative draws strong support from both the lower authorities' action making the impugned addition. He points out that some of the above share premium paying parties did not even have permanent account number cards. One of such party M/s. Frontline Biosystems Ltd.'s application(s) form part of the paper-book pages 102-104 indicating absence of permanent account number card. The same is the case with M/s. Kutchh Gujarat Finstock Ltd. (page 107). The Revenue further highlights that one of the said applicants claimed to have applied for permanent account number only in 2005 whereas we are dealing with the assessment year 2002-03. It thereafter submits that the assessee has not filed even the original confirmation in case of a single party in spite of the fact that the instant issue has seen 8 innings till date. It is accordingly argued that the assessee's mere assertion of having filed permanent ....
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....onus so as to satisfy the basic factors of identity, capacity, genuineness and creditworthiness of the 13 parties in question who have paid it a very hefty share premium of Rs. 90 per share in question. We find in this factual backdrop that all the above evidence is not sufficient to delete the impugned addition. We observe in the light of the hon'ble Calcutta High Court's decisions (supra) that such an onus does not get discharged by mere filing of confirmation letter or by receiving the amount in question through banking channel or by filing permanent account number particulars. 20. We now advert to the assessee's case law. Former judicial precedent of Pragati Co-operative Bank (supra) does not seem to apply in the facts of the instant case as the assessee therein was a co-operative bank already governed under the Banking Regulations Act, 1949 duly maintaining all requisite details of its customers depositing the money in question. So is the position regarding the assessee's latter decision in Muralidhar Lahorimal's case (supra) wherein the issue in question was a gift instance. The donor had duly supported the said assessee's case before the Assessing O....
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....;ble Supreme Court's observation, in the case of CIT v. Durga Prasad More [1971] 82 ITR 540 (SC), to the effect that 'science has not yet invented any instrument to test the reliability of the evidence placed before a court or tribunal. Therefore, the courts and tribunals have to judge the evidence before them by applying the test of human probabilities'. Similarly, in a later decision in the case of Sumati Dayal v. CIT [1995] 214 ITR 801 (SC), the hon'ble Supreme Court rejected the theory that it is for alleger to prove that the apparent and not real, and observed that, 'This, in our opinion, is a superficial approach to the problem. The matter has to be considered in the light of human probabilities. . . Similarly the observation. . . that if it is alleged that these tickets were obtained through fraudulent means, it is upon the alleger to prove that it is so, ignores the reality. The transaction about purchase of winning ticket takes place in secret and direct evidence about such purchase would be rarely available. . . . In our opinion, the majority opinion after considering surrounding circumstances and applying the test of human probabilities has rightly....
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....#39;human minds may differ as to the reliability of a piece of evidence but in that sphere the decision of the final fact finding authority is made conclusive by law'. This faith in the Tribunal by the hon'ble courts above makes the job of the Tribunal even more onerous and demanding and, in my considered view, it does require the Tribunal to take a holistic view of the matter, in the light of surrounding circumstances, preponderance of probabilities and ground realities, rather than being swayed by the not so convincing, but apparently in order, documents and examining them, in a pedantic manner, with the blinkers on. I may also add that the phenomenon of shell entities being subjected to deep scrutiny by tax and enforcement officials is rather recent, and that, till recently, little was known, outside the underbelly of financial world, about modus operandi of shell entities. There were, therefore, not many questions raised about genuineness of transactions in respect of shell entities. That is not the case any longer. Just because these issues were not raised in the past does not mean that these issues cannot be raised now as well, and, to that extent, the earlier judicia....