TaxTMI 
TaxTMI 
2018 (4) TMI 1419
X X X X Extracts X X X X
X X X X Extracts X X X X
....mmissioner of income tax, Central circle - 13, New Delhi vide order dated 30/12/2011 under section 153A read with section 143 (3) of the act was deleted. The revenue has raised the following grounds of appeal in ITA No. 3428/Del/2013 for the Assessment Year 2004-05: "1. The order of the ld CIT(A) is not correct in law and facts. 2. On the facts and circumstances of the case the ld CIT(A) has erred in law and fact in deleting the addition of Rs. 7000000/- made by AO on a/c of unexplained credit/ share capital received by the assessee company whose genuineness could not be proved and creditworthiness of investors could not be proved. 3. On the facts and circumstances of the case the ld CIT(A) has erred in not appreciating the fact that the assessee has not produced any documentary evidence of investors and the bank account of statement of the investors to prove the genuineness of the transactions." 3. Brief facts of the case are that search and seizure action under section 132 of the income tax act was carried out in M/s Diamond Hut group of cases on 27/10/2009. The assessee is one of the group concerns. Notice under section 153A was issued on 13/4/2010 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ails during the assessment proceedings. However, the AO disbelieve the claim in absence of the supporting evidence. The appellant on the other hand claims that the AO did not give any further indication that he was not satisfied with the reply and did not give an opportunity before taking any adverse view in the matter. In remand, the case of the revenue is that the documents now submitted should have been submitted during the assessment proceedings and as no reason has been given for nonsubmission, the document filed should not be admitted as evidence. The case of the appellant is that the revenue cannot take this plea because the shareholders are assessed to tax by the same AO who has all the tax returns and other books of accounts and seized documents in his possession. I have considered the rival submissions. Fact remains that at the end of the previous year the ownership of entire sale capital of Rs. 71 Lacs was with the directors of the company who are assessed to tax with the same AO and that tax records and other documents were available with him. The documents relating to Sh. Varun Verma, who earlier held equity in the company will not be relevant as his shares is transfer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rd. 9. We have carefully considered the impugned orders as well as submission made by the Ld. CIT department representative. The first ground of appeal challenges the order of the Ld. CIT (A) on law and facts of the case and therefore the issue of admission of additional evidences are covered in that. Admittedly, in this case the Ld. CIT (A) has admitted additional evidences however the Ld. assessing officer has not commented upon such additional evidences. The Hon‟ble Delhi High Court in 16 Taxmann.com 27 (Delhi) (2011) in CIT versus Manish build well private limited has held in para No. 22 onwards while dealing with rule 46A as under:- "22. As we have with the consent of the learned counsel, heard them on merits, we proceed to decide the aforesaid substantial questions of law. Since the CIT (A) himself refers to Rule 46A and has also admitted that the confirmation letters adduced by the assessee before him were technically fresh evidence, it is not possible to accept the plea of the learned counsel for the assessee that the CIT (A), in examining the confirmation letters, was exercising his independent powers of enquiry under sub-Section (4) of Section 250 of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dence in his possession at the earliest point of time. This ensures full, fair and detailed enquiry and verification. A 7-Judge Bench of the Supreme Court in Keshav Mills Co. Ltd. v. CIT [1965] 56 ITR 365 had observed as under:- "Proceedings taken for the recovery of tax under the provisions of the Act are naturally intended to be over without unnecessary delay, and so, it is the duty of the parties, both the department and the assessee, to lead all their evidence at the stage when the matter is in charge of the Income-tax Officer." 23. It is for the aforesaid reason that Rule 46A starts in a negative manner by saying that an appellant before the CIT (A) shall not be entitled to produce before him any evidence, whether oral or documentary, other than the evidence adduced by him before the assessing officer. After making such a general statement, which is in consonance with the principle stated in the above judgment, exceptions have been carved out that in certain circumstances it would be open to the CIT (A) to admit additional evidence. Therefore, additional evidence can be produced at the first appellate stage when conditions stipulate in the Rule 46A are satisf....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hting these aspects only to press home the point that the conditions prescribed in Rule 46A must be shown to exist before additional evidence is admitted and every procedural requirement mentioned in the Rule has to be strictly complied with so that the Rule is meaningfully exercised and not exercised in a routine or cursory manner. A distinction should be recognized and maintained between a case where the assessee invokes Rule 46A to adduce additional evidence before the CIT (A) and a case where the CIT (A), without being prompted by the assessee, while dealing with the appeal, considers it fit to cause or make a further enquiry by virtue of the powers vested in him under sub-Section (4) of Section 250. It is only when he exercises his statutory suo moto power under the above sub-section that the requirements of Rule 46A need not be followed. On the other hand, whenever the assessee who is in appeal before him invokes Rule 46A, it is incumbent upon the CIT (A) to comply with the requirements of the Rule strictly. 24. In the present case, the CIT (A) has observed that the additional evidence should be admitted because the assessee was prevented by adducing them before the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (A) is vested with conterminous powers over the assessment orders or powers of independent enquiry under sub-section (4) of Section 250. That is a consequence which cannot at all be countenanced. 25. For the above reasons, we answer the substantial questions of law framed in paragraph 21 above, in favour of the Revenue and against the assessee. The issue relating to the addition of Rs. 1,61,67,600/- made under Section 68 of the Act is restored to the CIT (A) who shall comply with the requirements of Rule 46A and take a fresh decision on the merits of the addition in accordance with law." 10. The present case is squarely covered by the decision of the jurisdictional High Court as far as the issue of admitting the additional evidences are concerned. We do not find any reasons recorded by the ld CIT (A) while admitting the additional evidence. Therefore, respectfully following the decision of the jurisdictional High Court we set aside the whole issue back to the file of the Ld. assessing officer with a direction to consider the above additional evidences submitted by the assessee before the Ld. CIT (A) and after giving an opportunity of hearing to the assessee decide the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ection 132 of The Income Tax Act 1961 was carried out in Diamond Hut group of cases on 27/10/2009. Notice under section 153A was issued on 13/4/2010. Assessee filed return on 7/9/2010 declaring total income of Rs. 1005 3080/-. 14. The Ld. assessing officer has noted that on the basis of the enquiries conducted by the investigation wing of the Department, during the presearch investigation and post search proceedings, it was noted that M/s Diamond Hut India private limited and M/s Diamond Jewels private limited companies of Diamond Hut group had accumulated huge share capital during the past years. Therefore, the shareholding of the various group companies was examined and it was noted that apart from the family members various non descript company have also hold most of the shares of these companies. On verification of shareholders by the investigation wing it was found that the shareholders companies were either not existing at their known address their present where about were not known. In the post-search enquiries, also, the verification of the shareholder was carried out and same result was found. During the course of post-search enquiries, summonses were also issued to the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nce sheets of all the 19 companies and stated that the income shown by these companies is insufficient or having insufficient assets. Therefore the Ld. CIT (A) held that in case of 8 companies where the total share capital of Rs. 3.17 crores have been allotted which are not subject to any verification by the Ld. assessing officer cannot be added into the hands of the assessee. Further with respect to the share capital of 3555 0000/- pertaining to 11 companies, the Ld. CIT (A) set aside the whole matter back to the file of the Ld. assessing officer to carry out further enquiries and confirmed the addition in the hands of the assessee on protective basis only whereas the Ld. assessing officer made the addition on substantive basis. 16. The revenue is aggrieved with the order of the Ld. CIT (A) and vehemently opposed the decision passed by him for upholding the addition only on protective basis in the hands of the assessee whereas the Ld. assessing officer has made substantive addition on the basis of complete investigation report. It was further submitted that with respect to the deletion of the addition of Rs. 3.17 crores there is no finding by the Ld. CIT (A) about these compani....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessee has those investors of such a huge amount in its books therefore it is the duty of the assessee to produce the directors of the investor companies before the AO for proper examination showing how they have made investments, for what purposes and what is the expected return and what they propose to do with the investments. She stated that it is surprising that investments of such a huge magnitude made in the assessee companies by those investors and they vanish in to the thin air without a trace. 17. With respect to the other addition which has been confirmed by the Ld. CIT (A) on protective basis She submitted that the additions should have been upheld by him on substantive basis that there is no reason that it should be changed by him to tax it on protective basis. It was further contended that the assessee has failed to prove the identity, creditworthiness and genuineness of the transaction the addition is required to be upheld by him under section 68 of the act and he should not have confirmed the addition only on protective basis. It was further stated that he has directed the Ld. assessing officer to find out the real nature of this transaction and the real source o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... him or not with respect to the addition of Rs. 3.17 crore deleted by the Ld. CIT (A). The details of such companies are listed at para No. 3.7 of the order of the Ld. CIT (A). We proceed to examine the financial status of the individual investor; With respect to M/s Sharvan Tour & Transports Private Limited, the assessee has not furnished the copy of the balance sheet as at 31/3/2008 of the investor companies instead of the assessee has submitted the balance sheet as at 31/3/2007. No copy of the account of the investment from the books of the accounts of the investor company was submitted. The confirmation was in the form of affidavit but in not in the form ledger from the books of the investor company of the assessee company. In view of this, it is apparent that assessee has not discharged its onus completely with the respect to this investor. Further with respect to the investment by the Lotus real corn private limited of Rs. 50 Lacs the assessee has not submitted the complete bank account where the investment of Rs. 25 Lacs made on 05/12/2007 is reflected further the bank accounts submitted also does not so from which bank account the check are issued. The confirmation also doe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ompanies otherwise such huge investments in private limited companies cannot be made. Naturally there is considerable force in the arguments of the ld CIT DR that how the investors vanish in thin air after making such a huge investment. They must be produced by the assessee before the ld AO. 20. Further, with respect to the addition which has been made by the Ld. AO on substantive basis and CIT (A) has made it on protective basis without any reason. 21. In view of the above facts we set aside the whole issue of addition of Rs. 6.82 crores back to the file of the Ld. assessing officer with a direction to the assessee to submit the requisite details of all the companies who have invested in the share capital of the assessee company to prove their identity, creditworthiness and genuineness of such a huge investment. Such details can be further corroborated by producing the directors of those investor companies along with their books of accounts for the respective year and to show the real purpose of making investment in the assessee company. They may also be examined by the Ld. assessing officer about these investments. It is also accepted fact that when the assessee has obtaine....
X X X X Extracts X X X X
X X X X Extracts X X X X
....T(A) has erred in not appreciating the fact that the income of the investors was not commensurate with the amount of share application money given by them. 4. On the facts and circumstances of the case the Ld. CIT(A) has erred in law in adjudicating the issues involved with directions beyond the powers of CIT(A) as Section 251(l)(a) of the I.T. Act, empowers CIT(A) only to confirm, reduce, enhance or annul the issues involved in appeal." 24. As noted earlier the assessee is one of the companies belonging to the Diamond Hut group on which search under section 132 of the income tax act was carried out on 27/10/2009. Based on the various enquiries conducted prior to the search and post search it was noted that assessee has issued share capital with respect to seven companies amounting to Rs. 4 crores. The Ld. assessing officer enquired about the identity, creditworthiness and genuineness of the investment made by this company in the assessee company to which the assessee replied vide letter dated 16/12/2011. The Ld. assessing officer has stated at page No. 13 and 14 of the assessment order wherein it has been held that these companies are having very meager income and does....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ilarly, for the purpose of well-build cement private limited investment of Rs. 50 Lacs in the assessee company it was submitted that it does not have any investment in the balance sheet of that company as at 31st of March 2008. She further stated that the confirmation is also on letter pad and not the Ledger account of the investment. She further stated that 70 lakh invested by Telstar packaging private limited in the assessee company however in the balance sheet of the investor company no such investment is shown further it is also not known from which bank account the check is issued. With respect to Tuticorin texim private limited no such investments are shown in the balance sheet in the assessee company and further there is no reference from which bank account the monies given as well as the confirmation statement is not also supported by the Ledger account of investment. Similarly is the case with other three companies. Therefore, she submitted that the assessee has miserably failed to discharge its initial onus cast upon him. She therefore submitted that the addition might be confirmed by reversing the order of the Ld. CIT (A). It was further stated by her that there is no ba....