TMI Blog2010 (6) TMI 787X X X X Extracts X X X X X X X X Extracts X X X X ..... ence and it was accepted and remand report was called for. The registration of the Companies is evidenced by the Registrar s certificate issued by the Registrar of Companies. The share application is also reflected in their returns. The allotment of share is also reflected from the share allotment done by the assessee. From the Schedule 3, i.e., investment in shares by this companies, which appears that they had their holding, which they had applied for shares from among other companies, which is reflected and was before the competent authorities, which was produced along with the return and this fact is not denied. All these indicate the existence of companies. Registration of the companies cannot be denied in the light 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. Thus, 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. Deletion of the addition on substantive basis on account of explanat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt) This appeal by the revenue is for the assessment year 2005-06 and the assessee filed the Cross-objection. 2. The first objection by the revenue is against the order of learned Commissioner of Income-tax deleting the addition of ₹ 20 lakhs made by the Assessing Officer on protective basis on account of unexplained share application money from three companies. 3. There was search and seizure action in the case of Vishwanath Prasad Gupta of Katni on 11-3-2005 at the business as well as residential premises. The business-cum-residential premises was occupied by servants and other family members including the assessee. Incriminating documents 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 ₹ 9,362 on a sale after setting-off of depreciation of current year amounting to ₹ 39,641 and shown the liability on professional tax at ₹ 2,500 in the balance sheet. Since there was no challan enclosed for payment of the liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or raised any enquiry with regard to Calcutta based companies. The assessee was never directed to file the copy of the return. Capital account and balance sheet filed in the relevant period and earlier period of Calcutta based party who made investment share in share of the assessee-company. It was further submitted that the report of the ADIT referred to by the Assessing Officer was never confronted to the assessee and never any explanation was sought for. Hence it was contended that it is against the principle of natural justice. The assessee was never directed to file the audited statement of account of the parties, which was filed before the learned CIT(A) including certification of incorporation of the Calcutta based companies that had subscribed share of assessee-company. Companies of audited statement of Calcutta based companies filed their return before the registrar 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R supported the order of the officer and particularly brought our attention to page 2 of the order, wherein he held that evidences filed by the assessee are not sufficient to prove the capacity and genuineness and creditworthiness of the creditors. He also invited our attention to the finding of the officer that the letter addressed by M/s. Rajath Commercial (P.) Ltd. was returned by the postal authorities with a note not known and also the fact of denial of issuance of D.D. by ABN-Amro Bank, Calcutta Branch to M/s. Nihal Fiscal Services (P.) Ltd. He also relied on the decision relied by the Assessing Officer for the proposition that merely establishing the identity of the creditor is not sufficient and also where filing of the confirmation letter does not amount to discharge onus cost upon the assessee. Reply to the above, learned counsel for the assessee brought our attention 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 num ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Assessing Officer. That alone is not sufficient to remand the matter back to the file of the Assessing Officer. Assessee made request to admit additional evidence and it was accepted and remand report was called for. The registration of the Companies is evidenced by the Registrar s certificate issued by the Registrar of Companies. The share application is also reflected in their returns. The allotment of share is also reflected from the share allotment done by the assessee. From the Schedule 3, i.e., investment in shares by this companies, which appears that they had their holding, which they had applied for shares from among other companies, which is reflected and was before the competent authorities, which was produced along with the return and this fact is not denied. All these indicate the existence of companies. Registration of the companies cannot be denied in the light 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition for which had been made in the case of Shri Vishwanath Prasad Gupta. The Assessing Officer also added ₹ 5 lakh on account of unexplained share application money to the income of the assessee. 3. It is seen from the assessment order that :- (i) The assessee claimed that its shares were subscribed by four different companies as per details given below :- (i) M/s. Transeem Commercial (P.) Ltd. ₹ 5 lakh (ii) M/s. Rajath Commercial (P.) Ltd. ₹ 10 lakh (iii) M/s. Vikash Viniyog (P.) Ltd. ₹ 5 lakh (iv) M/s. Nihal Fiscal Service (P.) Ltd. ₹ 5 lakh Total : ₹ 25 lakh (ii) The assessee filed copy of a letter from M/s. Vikash Viniyog (P.) Ltd., confirming that it had subscribed 1250 share of M/s. Dolphin Marbles (P.) Ltd., at a premium of ₹ 300 per share and paid ₹ 5 lakh as per Demand Draft dated 14-7-2004. (iii) Sim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he genuineness of transactions in question. The ADIT (Inv.), Calcutta reported that there was no name plate of M/s. Transeem Commercial (P.) Ltd., at the address of the aforestated party given before the Assessing Officer by the assessee but there was name plate of some other company in the name of M/s. Vatsalya Sales (P.) Ltd. It was also reported by the ADIT (Inv.) that M/s. Transeem Commercial (P.) Ltd., was only a paper company and Dolphine Marbles (P.) Ltd., had utilised it to introduce its unaccounted money as share application money in its books of account. 6. Similarly, M/s. Rajath Commercial (P.) Ltd., was also considered a non-existent bogus concern because it was not found on the given address and the Income-tax inspector could not serve summons on it. 7. M/s. Vikash Viniyog (P.) Ltd., also did not comply with the summons issued under section 131 of the Income-tax Act and income-tax inspector reported that the company was not in existence. The ADIT (Inv.), Calcutta as per his letters dated 15-12-2006 and 20-12-2006 reported that this company also existed only on paper and the assessee had utilised this concern also for introducing its unaccounted money in its books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 20 lakh was withdrawn from the account of the assessee, but the explanation was not accepted and the amount was considered as unexplained money of Shri Vishwanath Gupta introduced in the books of account of the assessee-company as share application money, which was later on withdrawn by him for his own business. The addition of ₹ 20 lakh was accordingly made on substantive basis in the case of Shri Vishwanath Gupta s case (supra) and on protective basis in the case of the assessee. The balance amount of ₹ 5 lakh out of aforestated total unexplained share capital of ₹ 25 lakh was considered unexplained in the case of the assessee-company and substantive addition of ₹ 5 lakh was made to its income. 13. The ld. CIT(A) as per para 4 of his impugned order has taken note of the foregoing facts discussed in the assessment order. It was however contended by the counsel of the assessee before the ld. CIT(A) that : (i) all the aforestated companies had subscribed to the shares of the assessee-company through demand draft, as per confirmation sent by these companies by fax directly to the Assessing Officer; (ii) the claim of the Assessing Officer that re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kh as share application money and that the ADIT (Inv.), Kolkata had reported that the companies existed only on paper. The ld. CIT(A) however admitted the additional evidence in view of the submission of the ld. Counsel that it was clear from the order sheet entry in the case of the assessee, M/s. Dolphine Marbles, that the assessment was completed in only one hearing during which the Assessing Officer did not ask the assessee to furnish any information and therefore the assessee was prevented by reasonable cause from furnishing the additional evidence. He also accepted the submission of the ld. Counsel that the report of the ADIT (Inv.), Kolkata was not an admissible evidence as it was utilised in making addition to the income of the assessee without giving opportunity to the assessee to rebut the same. 16. Ld. CIT(A) allowed the appeal of the assessee for the reasons discussed in para 10 of his decision which is reproduced below : 10. Decision.-I have gone through (i) the certificate of incorporation of all the four companies who have subscribed to share of the appellant company, (ii) their audited statement of accounts which have been filed along with return both under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this issue in detail as per para 5.1 of the assessment order dated 26-12-2006 under section 153A of the Income-tax Act, while discussing the details of sources of acquisition of cash of ₹ 49,11,000 found during the course of search on 11-3-2005 at the business and residential premises of Shri Vishwanath Prasad Gupta, who had claimed that ₹ 20 lakh out of the aforestated ₹ 49,11,000 was on account of withdrawal from Dolphine Marbles (P.) Ltd., i.e., the assessee. For the reason discussed in paras 3 to 5 of the assessment order dated 26-12-2006 in the case of Vishwanath Prasad Gupta (supra), the Assessing Officer concluded that the amount of ₹ 20 lakh was unaccounted money of Shri Vishwanath Prasad Gupta introduced in the books of account of the assessee-company by way of share application money. He, therefore, held that the amount of ₹ 20 lakh found at the residential premises which (is) stated to be amount withdrawn from Dolphine Marbles is added to the total income of Shri Vishwanath Gupta on substantive basis and the same is added in the hands of the Dolphine Marbles (P.) Ltd., on protective basis. 19. The ld. CIT(A) has only considered the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not have been accepted by the ld. CIT(A) without verification of the relevant records in the case of Vishwanath Prasad Gupta (supra) and also without giving proper opportunity to the Assessing Officer to substantiate his finding that the assessee did not produce the relevant evidence despite several opportunities. 21. It is also observed that even if the additional evidence was admitted by the ld. CIT(A) by overruling the objection of the Assessing Officer to its admission in view of the failure of the assessee to file the relevant evidence at the time of the assessment proceedings, the ld. CIT(A) should not have accepted the evidence without giving the Assessing Officer proper opportunity to examine the additional evidence in question and making enquiries or causing enquires to be made regarding the genuineness of the additional evidence filed by the assessee. 22. The ld. CIT(A) was also not correct in ignoring the evidence gathered by the Assessing Officer on the basis of enquiries conducted by the ADIT (Inv.), Kolkata especially in view of the facts that : (a) the parties did not comply with the summons issued under section 131 of the Income-tax Act; (b) they w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Kolkata, the ld. CIT(A) should have given the opportunity to the assessee or direct the Assessing Officer to do so. Instead of exercising his co-terminous powers to ascertain the correct facts as to the genuineness of the transactions in question and capacity of the creditors for the share application money of ₹ 25 lakh. Instead the ld. CIT(A) has on the one hand accepted the self-serving statement evidence of the assessee without proper examination as to the veracity of the fresh evidence and on the other hand, erroneously rejected the material evidence gathered by the Assessing Officer. 27. At this stage, it is relevant to look into the provisions of rule 46A of the Income-tax Rules, 1962, which are reproduced below for ready reference : 46A. (1) The appellant shall not be entitled to produce before the [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)], any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the [Assessing Officer], except in the following circumstances, namely :- (a) where the [Assessing Officer] has refused to admit evidence which ought to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer to the admission of fresh evidence was not sufficient because the fresh evidence was required to be examined by the Assessing Officer or the ld. CIT(A) should have himself examined the evidence and given opportunity to the Assessing Officer. The considered opinion of the ld. Authors Chaturvedi Pithisaria, on this issue is reproduced below : Rule 46A(3) enjoins the first appellate authority, if he thinks it proper to admit additional or fresh evidence, to allow and afford a reasonable opportunity to the Assessing Officer- (i) to examine the evidence or document so produced by the assessee appellant; (ii) to cross-examine any witness so produced; and (iii) to produce any evidence or document or any witness in rebuttal of the additional evidence so produced. Unless such an opportunity has been allowed to the Assessing Officer, the fresh evidence so produced cannot be taken into account by the first appellate authority.... Such an opportunity should be given after the assessee had sought to adduce additional evidence. The fact that the Assessing Officer did not appear in response to notice under section 250(2)(b) cannot empower the appellate author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rove the capacity of the parties and genuineness of the transactions in view of the evidence gathered by the Assessing Officer insofar as the ADIT (Inv.), Kolkata has reported that the companies were not traceable at their given address, the companies did not respond to the summons issued under section 131 of the Income-tax Act and the intimation by the ABN-AMRO Bank that the DD dated 20-8-2004 for ₹ 5 lakh claimed to have been received by the assessee against share application money from M/s. Nihal Fiscal Service (P.) Ltd., was not issued by them. The discussion made by the Assessing Officer in the assessment order in this regard has been ignored by the ld. CIT(A) and the appeal of the assessee has been allowed on the basis of self-serving statement of the assessee that proper opportunity was not given by the Assessing Officer and by relying on the fresh evidence which was neither examined by the ld. CIT(A) himself, nor allowed to be examined by the Assessing Officer as per rule 46A(3), nor was prima facie sufficient to prove the capacity 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal of the revenue is allowed for statistical purposes and the cross-objections of the assessee are dismissed. ORDER We, the Members of Income-tax Appellate Tribunal, Jabalpur Bench, differed in the matter in the Appeal No. 167/Jab./2008 by the revenue and the cross-objection No. 30/Jab./2008 by the assessee, in the matter of Dolphine Marbles (P.) Ltd., Katni, for the assessment year 2005-06. Hence, we are of the opinion that as per the provisions of section 255(4) of the Income-tax Act, 1961, the matter be placed before the Hon ble President for appropriate orders. The points of difference are as under : (i) Whether, on the facts and in the circumstances of the case, the learned Vice President is correct in confirming the order of the learned Commissioner of Income-tax (Appeals) holding he has not failed to comply with the provisions of Rule 46A(3) of the Income-tax Rules or the issue is to be restored to the Assessing Officer as opined by the learned AM? (ii) 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) of the addition of ₹ 20,00,000 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ab.)/2008 and C.O. No. 30 (Jab.)/ 2008. 3. As regards question Nos. (ii) and (iii), the facts as narrated in the orders of both the Learned Members are not in dispute and hence they are not repeated here. In this case, the ld. Vice President (Judicial Member) has confirmed the order of the ld. CIT(A) deleting addition of ₹ 20,00,000 made by the Assessing Officer on protective basis on account of unexplained share application money from three companies and also confirmed the deletion of ₹ 5 lakhs made by the Assessing Officer on substantive basis on account of unexplained share application money from one company. On the other hand, the ld. Accountant Member, who wrote the dissent, opined that the matter needs to be restored to the Assessing Officer for fresh consideration. 4. At the time of hearing before me, Shri S.P. Chaudhary, ld. CIT(DR) relied upon the orders of the Assessing Officer and the ld. Accountant Member. He further submitted that evidences filed by the assessee are not sufficient to prove the capacity 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer has made the addition on vague grounds and therefore, the addition was challenged before the ld. CIT(A). During the course of appellate proceedings before the ld. CIT(A), the assessee filed an application under rule 46A of Income-tax Rules, 1962 seeking admission of the following documents : (i) Certificate of incorporation of all the Kolkata based companies, who had subscribed to shares of the appellant company. (ii) Copy of audited statement of accounts of the Kolkata based companies. (iii) Copy of returns filed by the Kolkata based companies before the Registrar of Companies and before Income-tax authorities. (iv) Copy of application for allotment of equity shares made by the Kolkata based companies before the appellant company. Shri A.P. Shrivastava, Learned Counsel for the assessee pointed out that the additional evidence filed by the assessee, was forwarded to the Assessing Officer by the ld. CIT(A) for objections, if any, to admission of additional evidence. The Assessing Officer vide his letter dated 28-1-2008 objected to admission of the additional evidence on the ground that the assessee was given several opportunities to produce nece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) has not allowed the Assessing Officer an opportunity to examine the evidence. He also observed that the ADIT (Inv.), Kolkata has reported that the companies were not traceable at the given addresses, the companies did not respond to the summons under section 131 of the Act and the letter of the ABN-AMRO Bank that the DD dated 20-8-2004 for ₹ 5 lakhs claimed to have been received by the assessee against share application money from M/s. Nihal Fiscal Services (P.) Ltd., was not issued by them. Accordingly, the Accountant Member has opined that the matter needs to be restored to the Assessing Officer for fresh consideration. At the very outset, I may observe that there was no such issue before the Bench as to whether the ld. CIT(A) has violated the provisions of rule 46A of the Income-tax Rules, 1962 while admitting the additional evidence. Therefore, I do not agree with the observation of the ld. Accountant Member that the opportunity should be given to the Assessing Officer to examine the additional evidence filed by the assessee before the ld. CIT(A). Even otherwise also, the ld. CIT(A) has correctly admitted the additional evidence produced before him and he has not viol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal evidence. The ld. CIT(A) as well as the ld. V.P. has correctly observed that the report of the ADIT, Kolkata cannot be used against the assessee as the assessee was never given copy of the same, which could have enabled the assessee to disprove the contents of the report. It is well-settled principle of law that evidence gathered by the Assessing Officer at the back of the assessee cannot be used against the assessee without confronting the same to the assessee. Even otherwise, there is ample evidence on record to disprove the said report. The ld. A.M. has also observed that the letter of ABN-AMRO Bank revealed that the DD dated 20-8-2004 for ₹ 5 lakhs claimed to have been received by the assessee against share application money from Nihal Fiscal Services was not issued by them. In my opinion, there was no justification in remanding the matter to the file of the Assessing Officer on this score. There is a copy of certificate sent by M/s. Nihal Fiscal Services to ACIT, Katni confirming that the Kolkata Company applied for shares and deposited ₹ 5 lakhs vide DD dated 20-8-2004, which is available at page 73 of the Paper Book. The said company has also filed a copy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to board of directors of assessee-company applying for 2,500 equity shares in Dolphin Marbles (P.) Ltd., and deposited ₹ 5,00,000 vide DD No. 636425, dated 30-7-2004 drawn on Oriental Bank of Commerce, Kolkata. (A copy of the same is available at page 65 of the assessee s Paper Book filed before the Tribunal). (iii) Copy of acknowledgement of return of income showing address of company and PAN. (A copy of the same is available at page 66 of the assessee s Paper Book filed before the Tribunal). (iv) Letter by Kolkata company to assessee-company requesting issue of equity shares along with draft of ₹ 5 lakhs. (A copy of the same is available at page 67 of the assessee s Paper Book filed before the Tribunal). (v) Certificate of incorporation of company issued by Registrar of Companies, West Bengal. (A copy of the same is available at page 68 of the assessee s Paper Book filed before the Tribunal). (vi) Balance sheet of the company for the year ending 31-3-2005 wherein investment of ₹ 10 lakhs in M/s. Dolphin Marble (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 sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee s Paper Book filed before the Tribunal). (v) Balance sheet of the company for the year ending 31-3-2005 wherein investment of ₹ 5 lakhs in Dolphin Marble Pvt. 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 available at pages 87 to 88 of the assessee s Paper Book filed before the Tribunal). (vi) Form of application for equity shares (A copy of the same is available at page 89 of the assessee s Paper Book filed before the Tribunal). 8. I have carefully examined the above documents, which are available in assessee s Paper Book filed before the Tribunal. In my opinion, the assessee has discharged the onus which lay upon him under section 68 of the Act. It is observed that the ld. CIT(A) has also examined the documentary evidences referred to above furnished by the assessee before him and after examining the same, the ld. CIT(A) came to the conclusion that the shareholding has to be accepted as genuine. 9. In the case of Bhav Shakti Steel Mines (P.) Ltd. (supra) on similar facts, Hon ble Delhi High Court held that the Tribunal was unjustified in coming to the conclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lected in their income-tax returns as well as in their balance sheets. In these circumstances, we see merit in what the learned counsel for the appellant has submitted that we feel that the Tribunal was unjustified in coming to the conclusion that the Commissioner of Income-tax (Appeals) had not considered the matter in the right perspective. Consequently we decide the question in favour of assessee and set aside the order passed by the Tribunal. (p. 621) In the instant case also the ld. CIT(A) and the ld. V.P. have examined the question of identity, creditworthiness and genuineness of each of the shareholders. Even the documentary evidence referred to above shows that the assessee has offered an explanation about the nature and source of the sum found credited in its books and the explanation is satisfactory. The assessee has not only established the identity of each of the shareholders but has also proved that each of them are income-tax assessees and had disclosed the share application money in their accounts which were duly reflected in their income-tax returns as well as in their balance sheets. Thus, no addition is called for. 10. The decision relied upon by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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