TMI Blog2018 (4) TMI 1419X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee to produce relevant details with respect to the identity, creditworthiness of the investor companies as well as the genuineness of the transaction. In the peculiar circumstances and the facts, and where the post-search enquiries also prove otherwise, the higher onus is cast upon the assessee and therefore The assessee is directed to discharge its onus by producing the relevant details as well as the books of accounts of the investor companies along with the directors of those companies before the assessing officer for the examination. They need to explain that how despite making such a huge investments it is not shown in the balance sheet as investments. AO may examine the directors of the investor company along with the books of account and respective bank statements and balance sheets of the investor company and then decide the issue in accordance with the law - ITA No. 3428 & 3425/Del/2013 And ITA No. 3427/Del/2013 - - - Dated:- 5-3-2018 - SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The Revenue : Ms. Rachna Singh, CIT DR For The Assessee : None ORDER PER PRASHANT MAHARISHI, A. M. 1. All th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tting their confirmation, pan number, acknowledgement of income tax return and relevant portion of bank statement of shareholders. It was submitted that these two shareholders have also purchased shares from another person during the year. The Ld. assessing officer noted that no details with respect to the original allottee of shares Mr. Varun Verma has been submitted to whom the share capital of ₹ 40 lakhs have been allotted and similarly bank statement showing outflow of ₹ 30 lakhs in case of Sri Suresh Verma is not filed. Therefore, the Ld. assessing officer made an addition of ₹ 70 lakhs under section 68 of the income tax act. 5. Assessee aggrieved with the order of the Ld. AO preferred an appeal before the Ld. CIT (A) submitting certain additional evidences vide para No. 2.7 of the order of the Ld. CIT (A). Further such details are also referred vide para No. 2.12 of his order. Vide para No. 3.3 of the order in the remand report revenue objected the admission of the additional evidence placed by the assessee before him. The Ld. CIT (A) decided the issue vide para No. 3.4 as under:- 3.4 I have considered the assessment order, documents filed, submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In my opinion, no case for adding the share capital in the hands of the appellant company is made out. The identity and capacity of the two directors, shareholders who are admittedly assessed to tax with the same AO, cannot be under doubt. In view of the matter, the addition made cannot be sustained and is deleted. This ground of appeal is allowed and appellant gets a relief of ₹ 70 lakhs. 6. The Ld. CIT departmental representative vehemently contested that the first appellate authority has admitted the additional evidence without giving proper opportunity of hearing to the assessing officer. She further submitted that where additional evidences was admitted reasons are required to be recorded in writing by the Ld. CIT (A) satisfying one of the conditions laid down under section 46A of the income tax rules. She submitted that the Ld. first appellate authority does not record such finding. She further pressed reliance upon Hon‟ble jurisdictional High Court‟s decision in case of CIT versus Manish build well (P) Ltd 16 Taxmann.com 27 (Delhi) wherein it has been held that where additional evidences was admitted and accepted as genuineness at 1st appellate stage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 225 , but in this case, the CIT (A) did not exercise this right. This power, which is recognized in sub- Section (4) of section 250, has to be exercised by the CIT (A) and there should be material on record to show that he, while disposing of the appeal, had directed further enquiry and called for the confirmation letters from the assessee even in respect of receipt of monies from customers by way of cheques. Rule 46A is a provision in the Income Tax Rules, 1962 which is invoked, on the other hand, by the assessee who is in an appeal before the CIT (A). Once the assessee invokes Rule 46A and prays for admission of additional evidence before the CIT (A), then the procedure prescribed in the said rule has to be scrupulously followed. The fact that sub-Section (4) of Section 250 confers powers on the CIT (A) to conduct an enquiry as he thinks fit, while disposing of the appeal, cannot be relied upon to contend that the procedural requirements of Rule 46A need not be complied with. If such a plea of the assessee is accepted, it would reduce Rule 46A to a dead letter because it would then be open to every assessee to furnish additional evidence before the CIT (A) and thereafter contend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer], except in the following circumstances, namely : ( a) where the [Assessing Officer] has refused to admit evidence which ought to have been admitted ; or ( b) where the appellant was prevented by sufficientcause from producing the evidence which he was called upon to produce by the [Assessing Officer] ; r ( 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 ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule 46A have been complied with. However, sub-rule (3) which interdicts the CIT (A) from taking into account any evidence produced for the first time before him unless the Assessing Officer has had a reasonable opportunity of examining the evidence and rebut the same, has not been complied with. There is nothing in the order of the CIT (A) to show that the Assessing Officer was confronted with the confirmation letters received by the assessee from the customers who paid the amounts by cheques and asked for comments. Thus, the end result has been that additional evidence was admitted and accepted as genuine without the Assessing Officer furnishing his comments and without verification. Since this is an indispensable requirement, we are of the view that the Tribunal ought to have restored the matter to the CIT (A) with the direction to him to comply with sub-rule (3) of Rule 46A. In our opinion and with respect, the error committed by the Tribunal is that it proceeded to mix up the powers of the CIT (A) under sub-section (4) of Section 250 with the powers vested in him under Rule 46A. The Tribunal seems to have overlooked sub-rule (4) of Rule 46A which itself takes note of the distin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AY 2008-09 DCIT V Diamond Hut India (P) Limited 12. This appeal is filed by The Deputy Commissioner Of Income Tax, Central Circle 13, New Delhi against the order of Commissioner Of Income Tax Appeals 1, New Delhi dated 22/3/2013 passed in case of M/s Diamond HUTS (India) private limited wherein addition of ₹ 68250000/ made by The Assistant Commissioner Of Income Tax, Central Circle 13, New Delhi vide his order dated 30/12/2011 under section 153A read with section 143 (3) of the act was deleted to the extent of ₹ 3.17 crores and confirmed to the extent of ₹ 3 555 0000/ on protective basis on account of unexplained share capital received by the assessee. The revenue has raised the following grounds of appeal in ITA No. 3427/Del/2013 for the Assessment Year 2008-09: 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 deleting the addition of ₹ 3,17,00,000/-, and upholding the addition (on protective basis) of ₹ 3,55,50,000/- on a/c of unexplained share capital received by the assessee company whose genuineness could not be prove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of registered office of the shareholder companies in different cities. The inspectors were also deputed to find out whereabouts of the above-mentioned companies however, none of the companies were found to be in existence at the known address of the shareholders. During the course of assessment proceedings assessee was also given an opportunity to explain the identity, capacity, and genuineness of the persons to whom the shares were issued. However, no reply was furnished initially but later on 16/12/2011, the assessee submitted the details of the investors submitting their income tax return, bank account statement, and balance sheet etc. On examination of the details, the Ld. assessing officer noted that these companies have meager income in its return of income further these companies do not possess fixed assets and also does not have any real activity to perform but are used for providing accommodation entries only. In view of this, addition under section 68 of the income tax act was made of ₹ 68250000/ vide assessment order dated 30/12/2011 made by the Ld. assessing officer under section 153A read with section 143 (3) of the act wherein the total income of the assessee w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e eight companies, which are recorded in the table wherein most of the companies have invested from ₹ 20 Lacs to ₹ 80 Lacs in the share capital of the assessee company. She further stated that the Ld. CIT appeal has grossly erred in mentioning that no enquiry has been made by the Ld. assessing officer whereas referring to the table prepared by the Ld. assessing officer where each of these companies have been considered and has been held by the Ld. assessing officer that the company does not possess any fixed assets or does not have any real activity to perform. Therefore, according to her, the ld AO has conclusively held that investments are not genuine and investors do not have any capacity to invest. She further referred to serial No. 10,11, 12, 13, 15, 16, 17 and 19 of that particular table to show that these companies do not have any capacity to make investment in the shares of the company. She further stated that what is the purpose of this company in making an investment in the assessee company where there is no payment of any dividend or there is no exit route available to this company. She submitted that moot point is that assessee is a private limited company a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the necessary enquiries conducted by the Ld. assessing officer. In view of this, she submitted that the whole addition of ₹ 6.82 crores made by the Ld. assessing officer deserves to be confirmed. Even otherwise, it was submitted that whole issue is shrouded by the mystery and therefore assessee must come out with the clean hands to avoid any addition. 18. Despite notice none appeared on behalf of the assessee are no application for adjournment was received. Therefore, the issue is decided on merits of the case based on information available on record. 19. We have carefully considered the contentions of the revenue as well as perused the orders of lower authorities. We have also considered the paper book filed by the assesse. In the present case the assessee has received share application money of ₹ 6 825000/ . The assessing officer has made the addition under section 68 of the above sum as assessee has failed to prove the identity, creditworthiness, genuineness of the investor companies. The assessee also could not give detail of ₹ 10 Lacs to whom the such shares have been allotted. Therefore, to the extent of ₹ 10 Lacs the Ld. CIT appeal has correctly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttedly, the confirmation submitted by the investor there is no reference from which bank account the check is issued of ₹ 25 Lacs each on two different dates. Surprisingly the list of investments is annexed to the balance sheet but not shown by submitting the copy of the account of the investment made in the assessee company. Similarly is the case with another investor company, which has also invested 50 lakhs rupees by the name of Moni Mala Delhi properties private limited. There is no reference of the bank account from which the check is issued and similarly the confirmation submitted also does not show from which bank account the check is issued. Further with respect to Sukant steels private limited which has invested ₹ 25 Lacs in the assessee company surprising to note that the check are issued from the axis bank account of the investor company however while looking at schedule 4 of the balance sheet there is no Axis bank account in the balance sheet of the investor company. No confirmation with respect to the above investment by submitting the copy of the Ledger account of investment from the books of the investor company was submitted. Further, with respect to war ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee with the arguments of the ld DR. On production of all details of the investor companies, directors of the investor companies and thereafter examining them, Ld. assessing officer will decide the issue afresh. The assessing officer is directed to minutely examine these investments in the assessee company in the light of our observations made earlier in this order. In case if after giving the notice to the assessee company, if assessee does not furnish the requisite details and fail to produce the directors of the investor companies along with the books of those companies , the ld AO may take view in accordance with the law. In the result we do not agree with the order of the ld CIT (A) to In the result ground No. 1 4 of the appeal of the revenue is allowed accordingly. 22. In the result ITA No. 3427/del/2013 for assessment year 2008 09 in case of Diamond Hut India private limited preferred by revenue is allowed for statistical purposes. ITA No. 3425/Del/2013 Assessment Year 2008-09 Diamond Jewels Limited 23. This is the appeal filed by The Deputy Commissioner Of Income Tax, Central Circle 13, New Delhi against the order of The Commissioner Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores was made in the hands of the assessee under section 68 of the income tax act. 25. The Ld. CIT (A) deleted the addition on substantive basis made by the assessing officer part directed him to retain the addition on protective basis in the hands of the company noting that whether the subscription to the share capital was genuineness or unaccounted funds were brought in share capital for which further enquiries are required. The Ld. CIT (A) held that appellant company is the present beneficiary of funds raised their share capital and therefore he upheld the addition of ₹ 4 crores on protective basis in the hands of the company. 26. Revenue aggrieved with the order of the first appellate authority has preferred an appeal before us. The Ld. CIT departmental representative vehemently submitted that issue involved in this appeal is identical to issue involved in appeal No. 3427/del/2013 for assessment year 2008 09 in case of Diamond Hut India private limited where the Ld. CIT (A) has deleted the addition of ₹ 3.17 crores on identical facts and circumstances. It was further submitted by her that in that particular case the CIT (A) has deleted the addition on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spite notice, none appeared on behalf of the assessee and therefore we decide the issue on the information available on record on the merits of the case. 28. We have considered the orders of the lower authorities as well as the arguments of the Ld. CIT departmental representative and paper book filed by the assesse. Admittedly, the assessee company has issued shares worth ₹ 4 crores to 7 companies. Assessee has submitted certain details in the form of the balance sheet, the permanent account number, and certain bank accounts. The confirmation submitted by the investor companies are merely on the letterhead however, no Ledger accounts of such investments are submitted. Further, in the balance sheet of most of the investor company the investment made by them into the assessee company are not shown as an investment therefore the confirmation submitted by the assessee are also shrouded with doubt. On looking at the balance sheet of all these investor companies there is no investment as stated by the Ld. departmental representative. Even on examination by us, also we could not find that investment has been shown by the investor companies in the assessee company. Naturally, thes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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