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Income Tax Appellate Tribunal, DELHI BENCH ‘A’ : NEW DELHI
Before: SHRI A.T.VARKEY & SHRI L.P. SAHU
PER A.T. VARKEY, JUDICIAL MEMBER :
This appeal filed by the revenue arises from the order of Commissioner of Income-tax (Appeals)-IV, Delhi dated 23.02.2011 and relates to assessment year 2007-08.
2. The assessee company is a private limited company incorporated under the provisions of Companies Act, 1956 and is engaged in the business of sale/purchase of plots and development of commercial properties at Gurgaon. The assessee filed e-return declaring income of Rs.2,06,146/- on 07.09.2009 and the 143(1) of the Income-tax Act, 1961 (hereinafter ‘the Act’). The assessee’s case was selected for scrutiny and in response to the statutory notices, the AR of the assessee attended the proceedings and filed the details / documents. The assessment was completed u/s 143(3) of the Act on 21.12.2009 at a total taxable income at Rs.2,34,57,779/- by making various additions/disallowances.
Aggrieved, the assessee preferred an appeal to the first appellate authority and the CIT (A) allowed the appeal of the assessee by deleting the additions/disallowances.
The revenue, being aggrieved, is in appeal before us by taking the following grounds of appeal :-
“1. The Ld. CIT(A) has erred on facts and in law in deleting addition of Rs.92,95,000/- made u/s 68 of the Income Tax Act, 1961, on account of share application money. The case law relied on by Ld. CIT(A) are distinguishable from the present case as the identity of the contributor is not established here. The AO made detailed investigation by sending notice u/s 133(6) to the contributor of share applicant. No confirmation was received during the assessment proceedings.
2. The Ld. CIT (A) has erred on facts and in law in deleting addition of Rs.52,48,820/- made u/s 68 of the Income Tax Act, 1961, on account of unsecured loans. The case law relied on by Ld.CIT(A) are distinguishable from the present case as the identity of the contributor is not established here. The AO made detailed investigation by sending notice u/s 133(6) to the providers of unsecured loan. No confirmation was received during the assessment proceedings.
3. The Ld. CIT (A) has erred on facts and in law in deleting addition of Rs.74,84,106/- made u/s 69 of the Income Tax Act, 1961, on account of purchase of fixed assets. The issue of verifying the books of account at the remand report stage was not considered by Ld. CIT(A). Further, whether the ground cited by the assessee for admission of additional evidence was covered under Rule 46A of the Income tax Rules?
4. The Ld. CIT(A) has erred on facts and in law in deleting addition of Rs.12,23,707/- made on account of purchase of plot. The issue of verifying the books of account at the remand report stage was not considered by Ld. CIT(A). Further, whether the ground cited by the assessee for admission of additional evidence was covered under Rule 46A of the Income tax Rules?
5. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.”
5. Ground No.1 of revenue’s appeal is against deleting the addition of Rs.92,95,000/- made u/s 68 of the Act on account of share application money.
6. The AO issued a questionnaire dated 16.07.2009 to the assessee to file the details in respect of the share application of Rs. 92,95,000/- and specific details were solicited. The assessee in its reply dated 24.08.2009 filed details and with regard to share capital and share premium of the company, it was stated that the details are with CBI. The AO was of the opinion that the name and address of share applicants had nothing to do with the seizure of records by the CBI.
However, the assessee filed another letter dated 04.09.2009 in which a list of persons who had invested in share capital were filed. The AO observed that no details with regard to the identity, creditworthiness and genuineness of the transactions were filed. The AO referred the matter to the CBI vide letter dated
05.11.2009 but no reply was received from them. Accordingly, the AO proceeded to make an addition of Rs. 92,95,000/-.
7. The ld. CIT (A) deleted the addition by observing as under :-
“5. The matter was remanded to the Ld. AO, vide my letter no. 252 dated 24.11.2010. This reference was under Rule 46A (1). The AO has replied vide letter no.635 dated 07.01.2011, wherein he requested for a month's time. This was granted vide my letter no. 309 dated 12.01.2011. Eventually, the remand report was received vide letter no. 1204 dated 24/1/2011. The Ld. AO has made a reference to Rule 46A (1) and has mentioned that since the application of the assessee contained the words that the documents had been acquired from different sources, the assessee could have obtained the same during the assessment proceedings itself. On the other hand, the assessee kept insisting that the documents were with the CBI. In short, the Ld. AO has opposed any adducement of additional evidence, as prayed by the assessee.
Copy of the remand report was handed over to the assessee to file a rejoinder. The assessee filed a rejoinder on 17/2/2011, wherein he stated that all the documents were not additional evidences. Further, it was stated that all the documents were seized by the CBI. This led the management of the appellant to be under tremendous stress and enormous pressure. Due to CBI enquiries, even the third parties from whom documents could be obtained now were not cooperating at the time of assessment. It was added that details of all the shareholders along with their names, addresses, PAN, confirmations etc. were filed at the time of hearing before the Ld. AO. It was reiterated that out of the total addition, an amount of Rs.41,00,000/- did not even relate to the year in issue. The contention of the AO that no details had been filed was false. The appellant vide its letter dated 16/11/2009, sent by speed post, had filed the names, addresses, PAN, payment details of all the share applicants and thus could not be construed as additional evidence. Inspite of having all details, the Ld. AO did not do anything further.
I have carefully perused the Impugned order and the submissions made by the Ld. AR of the assessee. The assessment record has also been vetted. The first and the foremost thing which (to the extent relevant) should be adduced or not. There can be no doubt that the powers of CIT(A) to adduce additional evidence under Rule 46A(1) is rather fettered. Additional evidence can be adduced, only if the assessee is in a position to establish that it fell under one of the exceptional clauses as provided for in Rule 46A(1).
The powers of CIT(A) have been dealt by the Delhi Tribunal in ITO Vs. M/s Mittal International (I) Pvt. Ltd. in 2008-TIOL-474- ITAT-DEL. In a detailed order, it was held by the Hon'ble Tribunal as under:
"We have considered the rival submissions. A perusal of the order of the ld. Commissioner of Income-tax (Appeals) shows that he had called for a remand report from the Assessing Officer in regard to the additional evidences, which had been submitted by the assessee. A perusal of para 8 at page 3 of the ld. CIT (A)'s order shows that the Id. Commissioner of Income-tax (Appeals) has admitted the fresh evidences in terms of Rule 46A of the I.T. Rules 1962 and then the Assessing Officer has been provided the copies of the document filed by the assessee in support of its claim of services rendered by the commission agent. For convenience the provisions of Rule 46A (1) (2) & (3) are extracted below:-
“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 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 evidence or document or any witness in rebuttal of the additional evidence produced by the appellant.
Reading of the provisions of Rule 46A of the IT Rules 1962 show that the rules specifically bars an assessee from producing any oral or documentary evidences other than the evidences produced by him during the course of proceedings before the Assessing Officer except under the conditions provided in clause (a), (b), (c) & (d) of sub-rule (1) of rule 46A. Sub-rule (2) of Rule 46A makes it compulsory on the appellate authority who is admitting such additional evidences to record his reasons in writing for such admission. The nature of additional evidence including relevancy thereof alone cannot be ground enough to admit such additional evidence. It is the exceptional circumstances as envisaged by sub-rule (1) of rule 46A that is to be the foundation for the admission of the additional evidence along with the relevancy thereof of the additional evidence. Sub-rule (3) of rule 46A makes it compulsory for the appellate authority who has admitted the additional evidences under sub-rule (1) after recordings his reasons in writing as per sub-rule (2) to grant the same to the Assessing Officer to examine the evidences or documents or to cross-examine the witness produced by the appellant or to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant.
More recently in the case of M/s Moser Baer India Ltd. & Ors. vs. Addl. CIT (Del) (2009) 17 OTR (Del) 98, at pages 123 and 124, the Delhi High Court has held as under:
"15. A close reading of the observation would show that the dictum of' the House of Lords if applied would cover those cases where an aggrieved party has an unbridled right of appeal on facts and law, and a complete freedom to file evidence which was not filed before the original authority. In other words the appellate authority is required to examine the circumstances 'de novo on whatever evidence that may be put before the appellate Court'. In the instant case it cannot be disputed that under the provisions of sub-so (4) of s. 92CA the AO is required to compute the total income of the assessee in conformity with the ALP determined by the TPO. Against the order of the AO, an appeal is maintainable under S. 246A of the Act. While the CIT(A) under sub-so (4) of S. 250 in disposing of any appeal before it is empowered to make further inquiry either himself or by directing the AO to do so and receive the result of the same, the assessee cannot file any fresh evidence except in accordance with the provisions of r. 46A. The r. 46A inter alia permits an assessee to adduce additional evidence only if he is able to establish that he falls under one of the following situations envisaged under the said rule:
(i) Where an AO has either refused to admit evidence which he ought to have admitted; or (ii) Where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the AO: or (iii) Where the appellant was prevented by sufficient cause from producing before the AO any evidence which is relevant to any ground of appeal.
(iv) Where the AO has made the order appealed against without giving sufficient opportunity to adduce evidence relevant to any ground of appeal.
16. It is evident upon a bare reading of r. 46A that the assessee does not have a right to file additional evidence unless his case falls within one of the situations prescribed under the r. 46A. The discretion to permit the assessee to adduce additional evidence lies with the CIT(A). Therefore, it cannot be said that the CIT(A) is duty bound to admit any evidence that the assessee wishes to adduce, based on which he would conduct a de novo examination of the case before him." (emphasis, in bold, supplied)
10 On the touchstone of the law laid down by the Delhi High Court and the Delhi Tribunal, the prayer of the assessee to adduce fresh evidence needs to be dissected. There is no doubt that as and when a CBI enquiry is initiated, the Management usually comes under tremendous pressure. It is also true that even close business relations do not cooperate at this stage. Perusal of the assessment record suggests that in order to obtain the photocopies of the seized documents, the assessee through its Advocate, has filed an application dated 23/3/2009 before the Special Court of the CBI. Therein, it was submitted as under:
"In view of the facts and circumstances mentioned herein above it is respectfully prayed that this Hon'ble Court may kindly direct the officials of CBI to provide a photocopy of all documents, so seized/impounded by the officials of CBI alongwith the Original Title Deed of Property, consisting of Plot No. 6 & 7, Old Judicial Complex, Jharsa Road, Gurgaon, (HR) , for its deposits with Bank of Baroda, S.M.E. Branch, Gurgaon (HR)."
The above were extracts of the application filed before the Special Court of CBI. I am unaware of the fate of the application but the same clearly proves that it wanted to obtain copies of seized documents for purposes listed therein. The CBI also did not give photocopies of seized document inspite of letter from the AO. As such, due to the special situation, I am convinced that the assessee was prevented by sufficient cause not to have adduced the documents at the time of assessment proceedings. In other words, the additional documents as requested for are allowed to be brought on record for the purpose of disposal of the appeal.
12. From the details filed by the assessee, it is observed that the assessee had filed documents relating to share application of Smt. Indu Kumar and Shri Avinav Kumar, both of whom are promoters of the company. They have filed confirmation of investment in equity shares, copy of acknowledgement of ITR, copy of bank account statement, copy of PAN card, copy of passport and the election card. Also filed are similar documents relating to Sh. Praveen Mehta, Smt. Savitri Devi, Sh. Radhey Shyam Mehto. MIs Gold Stone Financial Services Pvt. Ltd. M/s Marudhar Building Pvt. Ltd., M/s Uppercon Marketing Pvt. Ltd., M/s Super Sadiq Enterprises Pvt. Ltd., M/s Megatronix System Pvt. Ltd., M/s U.P. Electricalsl.td., M/s Sharda India Pvt. Ltd and M/s Udhav Fashion Apparels Pvt. Ltd. If the PAN for some reason has not been given, the ITR or assessments/intimation issued by the Department has been submitted. Only in the case of Smt. Savitri Devi, no PAN card or income-tax details have been given, but copy of election card and copy of her bank statement has been provided by the assessee. The share application was given by cheque and through banking channels. In the case of Smt. Savitri Devi, her husband is an agriculturist as evident from the confirmation filed by her and even she has made the payment for 10,000 shares by cheque.
13. Be that as it may, it may be gainful to refer to the decision of the Supreme Court in M/s Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195: (2008) 6 DTR (SC) 308 wherein it has been held as under:
“Delay condoned.
Can the amount of share money be regarded as undisclosed income under s. 68 of IT Act, 1961? We find no merit in this Special Leave Petition for the simple reason that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment.
3 Subject to the above, Special Leave Petition is dismissed. "
14. From the above decision, it was being interpreted that the assessee has to only prove the identity of the shareholders However, the decision in M/s Lovely Exports (supra) has now been interpreted
Jurisdictional High Court in of 2010 in the case of Oasis Hospitalities (P) Ltd. At Paras 11 to 14, the following has been the position taken by the Jurisdictional High Court :-
"11. It is clear from the above that the initial burden is upon the assessee to explain the nature and source of the share application money received by the assessee. In order to discharge this burden, the assessee is required to prove :
(a) Identity of shareholder; (b) Genuineness of transaction; and (c) Credit worthiness of shareholders.
In case the investor/shareholder is an individual, some documents will have to be filed or the said shareholder will have to be produced before the AO to prove his identity. If the creditor/subscriber is a company, then the details in the firm of registered address or PAN identity, etc. can be furnished.
Genuineness of the transaction IS to be demonstrated by showing that the assessee had, in fact, received money from the said shareholder and it came from the coffers from that very shareholder. The Division Bench held that when the money is received by cheque and is transmitted through banking or other indisputable channels, genuineness of transaction would be proved. Other documents showing the genuineness of transaction could be the copies of the shareholders register, share application forms, share transfer register, etc.
As far as creditworthiness or financial strength of the credit/subscriber is concerned, that can be proved by producing the bank statement of the creditors/subscribers showing that it had sufficient balance in its accounts to enable it to subscribe to the share capital. This judgement further holds that once these documents are produced, the assessee would have satisfactorily discharge the onus cast upon him. Thereafter, it is for the AO to scrutinize the same and in case he nurtures any doubt about the veracity of these documents to probe the matter further. However, to discredit the documents produced by the assessee on the aforesaid aspects, there has to be some cogent reasons and materials for the AO and he cannot go into the realm of suspicion.”
Based on the decision of the Delhi High Court in Oasis Hospitalities (supra), we have to dissect whether the assessee has proved the identity of shareholders, genuineness of transaction and creditworthiness of the shareholders. In the case of the individuals, but for one case, the assessee has produced the PAN card of the person. Copy of the Election Card, bank statement and confirmations have also been filed. In the case of the individual who has not filed the ITR and whose PAN card has not been submitted, a confirmation is already on record that she was a wife of agriculturist holding huge tracts of agricultural land. In the case of the company, copy of bank statement, copy of Annual Return filed with the Registrar of Companies, confirmations etc. have been filed. In some cases, even certificates of Incorporations have also been submitted. Each of the payments, both for individuals and corporate shareholders have been made by cheque which has been considered to be an indisputable channel by the Delhi High Court. As, bank statements have been submitted, the creditworthiness also stood proved. In such circumstance, it is for the AO to scrutinize the same and in case he nurtures any doubt about the veracity of the documents, the discretion is upon him to probe the matter further, which has not been done in the case in hand. He has discredited the documents, without giving any cogent reasons and material. In such circumstance, I am of the belief that the assessee has discharged the onus cast upon him.
While on the issue, I may mention that it cannot be adjudicated that whether the assessee had Rs.41,00,000/- as share application money coming forth from the previous year, as has been articulated during the proceedings before me. However, the facts are very clear and the assessee deserves to succeed. Ground of Appeal No.2 goes in favour of the assessee.”
8. Ld. DR relied on the order of the AO and submitted that the case law relied on by Ld. CIT(A) are distinguishable from the present case as the identity of the contributor is not established here and the AO made detailed investigation by sending notice u/s 133(6) to the contributor of share. He submitted that no confirmation was received during the assessment proceedings. Accordingly, he
CIT (A) be set aside and that of the AO be upheld on this issue.
9. Ld. Counsel for the assessee, reiterating the submissions made before the ld. CIT (A), submitted that as regards share application money, the AO failed to observe that out of the amount of Rs.92,95,000/-, the amount of Rs.41,00,000/- was not even related to the year under consideration and was received in AY 2006-07. He submitted that the assessee vide its letter dated 16.11.2009 had filed the names, addresses, PAN, payment details etc. of all the share applicants before the AO. He further submitted that despite having full particulars of share applicants, the AO did not enquire any further about the veracity of the details of the share-holders during assessment proceedings and the fact was that all documents were seized by the CBI; and further documents were submitted under Rule 46A(1) which contained copy of Form No.2 filed with ROC, copy of share application money, copy of PAN of applicants, copy of master data from ROC, copy of election card, confirmation of share applicants, copy of financial statements .of share applicants, copy of bank statements of share applicants and copies of ITR acknowledgement of the share applicants. Ld. AR further submitted that the assessee was an artificial juridical person and it could not have its own unaccounted cash. He submitted that all the payments for share applications were received by the assessee by account payee cheques through banking channels which has not been rebutted by the AO. The ld. AR of the assessee relied on the decisions, which were relied upon before the ld. CIT (A), i.e. CIT Vs. Divine
Leasing & Finance Ltd. [2008] -TIOL-118-SC-IT, CIT Vs Lovely Export (P) Ltd.
216 CTR )SC) 195, CIT Vs. Divine Leasing & Finance Ltd. (2007) 207 CTR 38 (Del.), CIT Vs. Steller Investment Ltd. [2001] 251 ITR 263 (SC), CIT Vs. M/s Electro Polychem Ltd. [2008] 217 CTR (Madras) 371 and CIT Vs. Orissa Corporation Pvt. Ltd. [1986] 159 ITR 78 (SC). among others. Therefore, ld. Counsel for the assessee wants us not to interfere with the order of ld. CIT (A).
We have heard both the sides and perused the material on record. We find that Ld. CIT(A) has elaborately discussed the issue in dispute by relying upon the judgment of the Hon’ble Supreme Court in the case of Lovely Exports (supra) and of the Hon’ble Jurisdictional High Court in of 2010 in the case of Oasis Hospitalities (P) Ltd., as seen above. We further note that on the anvil of the aforesaid Hon’ble Delhi High Court decision in the case of Oasis Hospitalities, the issue in dispute has been adjudicated by the ld. CIT (A) to arrive at the impugned decision. In the present case, the assessee has produced the PAN card of the share-holders, copy of the Election Card, bank statement and confirmations have also been filed. In the case of the individual who has not filed the ITR and whose PAN card has not been submitted, a confirmation is already on record that she is the wife of an agriculturist holding huge tracts of agricultural land. In the case of the companies, who are the share-holders, copy of its bank statement, copy of Annual Return filed with the Registrar of Companies, confirmations etc. have been filed. In some cases, even certificates of Incorporations have also been submitted. All the payments, both for individuals and corporate shareholders, have been made by cheque. Bank statements reveal their creditworthiness. The assessee could not produce all the documents before the AO during assessment because of the fact that all documents were in the custody of CBI and assessee had filed application before the Special Court (CBI) for the copies of documents but could not get any favorable order. The AO himself had written to CBI authorities for copies of documents, which did not invoke any response from CBI. The assessee vide letter dated 16.11.2009 had furnished the name, PAN, addresses, payment details to the AO. When there was CBI enquiry in assessee’s case, the notice of the AO did not invoke any response from share-applicants is plausible, however that cannot be the sole ground to justify the addition unless the AO is able to show that details furnished by the assessee in respect to the identity of the share-holders are bogus, their PAN details are false, addresses are wrong and payment details are false. The AO ought to have verified the facts during assessment proceedings or even he could have done when the ld. CIT (A) has forwarded all the details filed before him under Rule 46A, which he did not after seeking one month’s time and took three months to sent the remand report which was granted by CIT (A). So, we find that there was sufficient cause for non-filing of evidence before the AO. The AO ought to have scrutinized the evidence and in case, he nurtures any doubt about the veracity of the documents, the discretion is upon him to probe the matter further, which has not been done in the case in hand. He could not have discredited the documents, without giving any cogent reasons and material.
Therefore, in view of the material filed by the assessee, we find that that the assessee has discharged the onus cast upon him. In the background of the aforesaid discussions and respectfully following the precedent, we do not find any infirmity in the order of the Ld. CIT(A), hence, we uphold the same and decide the ground no.1 against the Revenue.
11. Ground No.2 is against the deletion of addition of Rs.52,48,820/- made u/s 68 of the Act on account of unsecured loans .
12. The AO, on the basis of the reasoning made u/s 68 of the Act for making the addition on account of share capital, made the addition on account of unsecured loan of the assessee u/s 68 of the Act.
13. The ld. CIT (A) deleted the addition and the relevant portion of the ld. CIT (A)’s order is reproduced as under :-
“17. Ground of Appeal No. 3 pertains to addition u/s. 68 of Rs. 52,48,820/- on account unsecured loans. During the course of the assessment proceedings before him, it was observed by the Ld. AO that there was an increase of Rs. 52,48,8207- on account of unsecured loan The assessee was required to explain the same. Vide letter dated 4/9/2009. the assessee gave a list of persons from whom unsecured loan had been obtained. Vide letter dated 18/9/2009. the assessee further filed a letter containing the name and addresses of persons who had given unsecured loan. It had filed confirmation letter from these parties. No PAN or assessment particulars were given with regard to the proof of their existence. In response, the assessee stated that the AO's contention that the details were not submitted was totally false. The appellant, vide letter dated 16/9/2009 (delivered by hand) and letter dated 16/11/2009 (sent by post) had filed the names, addresses, details etc. of all loan creditors and even filed their confirmations as on date. Rs. 41 lacs was received from the Directors and their relatives and even their source was duly explained. Copy of PAN, copy of master data obtained from Registrar of Companies containing CIN, copy of financial statements of share applicants and copy of bank statements were also filed. It was argued that each of the payments were received by A/c Payee cheque through proper banking channel.
18. There is no doubt that the assessee has given details with regard to loans of M/s Uppercon Marketing Pvt. Ltd. in terms of confirmation, TDS certificates, bank statement and assessment particulars. In the case of loans from Smug Pharma Pvt. Ltd., Deeas Computrade Pvt. Ltd., Marudhar Builders Pvt. Ltd., M/s Inderjeet Trade Links Pvt. Ltd., similar details have been filed. As and where intimations regarding 143(1) have not been issued or are not available, the permanent account number has been submitted. In each of the cases, the payment was made vide cheque.
19. We have already discussed the decision of the Delhi High Court in Oasis Hospitalities (supra) above. At this stage, it would be gainful to refer to the Supreme Court decision in CIT Vs. Orissa Corporation (P) Ltd. [1986] 159 ITR 78 (SC) which dealt with unsecured creditors. In that case, the assessee, at the relevant time, was a private limited company and maintained accounts according to the calendar year. For the accounting year ending on 31st Dec., 1961, corresponding to the asstt. Year 1962-63, the ITO did not accept the assessee's accounts showing cash credits of Rs.1,50,000. Three amounts were shown to have been received by way of loans from three individual creditors of Calcutta under hundis. The assessee produced before the ITO, the letters of confirmation, the discharged hundis and particulars of the different creditors whose general index numbers were with the IT Department. Attempts had been made to bring those creditors before the ITO by issue of notices under s. 131 of the Act, but the said notices were returned with the endorsement “left”. The ITO, therefore, treated the entire amount of Rs.1,50,000 as unproved cash credit and added the same to the income of the assessee. It was held at Para No.13 of the order as under :-
"13 In this case, the assessee had given the names and addresses of the alleged creditors. It was In the knowledge of the revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The revenue, apart from issuing notices under s. 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do anything further. In the premises. if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises."
On the touchstone of the decision of the Supreme Court, it may be worthwhile to dissect the facts of the case. Vide letter dated 18/9/2009, the assessee had informed regarding the name and addresses of persons who had given unsecured loans. Letters of confirmations had also been filed. Assuming for a moment income tax particulars were not filed (which is disputed by the assessee), the Ld. AO had enough powers to call for the information, to satisfy himself. Nothing has been done by the AO. The case of the assessee becomes even stronger on the adducing of additional evidence which has been submitted during the appellate stage. The basic details were with AO to make enquiries, which he has not done. I find no reason how the addition can be sustained. Thus, I am deleting the addition made to the extent of Rs.52,48,820/-. The assessee succeeds in Ground of Appeal
No.3.”
14. Ld. DR relied on the order of the AO and submitted that the case law relied on by Ld. CIT(A) are distinguishable from the present case as the identity of the contributor is not established here. The AO made detailed investigation by sending notice u/s 133(6) to the providers of unsecured loan and no confirmation was received during the assessment proceedings. He pleaded to set aside the order of the ld. CIT (A) and uphold the AO on this issue.
15. The ld. AR for the assessee submitted that during the course of the assessment proceedings, the AO observed that there was an increase of Rs.52,48,820/- on account of unsecured loan and the AO required the assessee to explain the same. He submitted that vide letter dated 04.09.2009, the assessee gave a list of persons from whom unsecured loan had been obtained and further vide letter dated 18.09.2009, the assessee filed a letter containing the name and addresses of persons who had given unsecured loan. He further submitted that the assessee had also filed confirmation letter from these parties, PAN or assessment particulars were given with regard to the proof of their existence. He submitted that the AO's contention that the details were not submitted, was totally false. The assessee, vide letter dated 16.09.2009 and letter dated 16.11.2009 had filed the names, addresses, details etc. of all loan creditors and even filed their confirmations as on date. He submitted that Rs.41 lacs was received from the Directors and their relatives and even their source was duly explained. He further submitted that copy of PAN, copy of master data obtained from Registrar of Companies containing CIN, copy of financial statements of share applicants and copy of bank statements were also filed. He submitted that each of the payments was received by A/c Payee cheque through proper banking channel. Thus, he submitted that the loan transaction stood proved and the ld. CIT (A) rightly deleted the addition of Rs.52,48,820/-. Accordingly, he pleaded that the order of the ld. CIT (A) be upheld on this issue.
16. We have heard both the sides and perused the material on record. We find that Ld. CIT(A) has to referred the judgment of the Hon’ble Supreme Court of India in the case of CIT vs. Orissa Corporation (P) Ltd. [1986] 159 ITR 78 (SC), as seen above, in which the Hon’ble Supreme Court dealt with similar case as that of unsecured creditors. On the yardstick of the decision of the Hon’ble Supreme Court (supra), we note that vide letter dated 04.09.2009, the assessee gave a list of persons from whom unsecured loan had been obtained. We further note that the assessee, vide letters dated 16.09.2009 and 16.11.2009 had filed the names, addresses, details etc. of all loan creditors and even filed their confirmations as on date. He submitted that Rs.41 lacs was received from the Directors and their relatives and even their source was duly explained and further submitted copy of PAN, copy of master data obtained from Registrar of Companies containing CIN, copy of financial statements of share applicants and copy of bank statements were also filed. We also note that each of the payments was received by A/c Payee cheque through proper banking channel. We further note that with regard to confirmation of loans from M/s Uppercon Marketing Pvt. Ltd., TDS certificates, bank statement and assessment particulars were filed. Likewise, in the case of loans from Smug Pharma Pvt. Ltd., Deeas Computrade Pvt. Ltd., Marudhar Builders Pvt. Ltd. and M/s Inderjeet Trade Links Pvt. Ltd., similar details have been filed. If the AO nurtured any doubt about the veracity of the aforesaid documents, then the AO had enough powers to call for the information, to satisfy himself, however, nothing has been done by the AO. It is not the case of the revenue that additional evidences filed during the appellate proceedings were not forwarded to the AO under Rule 46A. The CIT (A) not only forwarded the additional evidences but also granted on month’s time sought by the AO to verify the veracity of the documents and the AO sent the remand report after three months. We take note that AO in his remand report has not adversely commented upon the additional documents which was in front of him for three month’s time when he could have easily cross-checked about the veracity of it. As stated earlier, the basic details were with AO at the assessment stage itself, but he preferred not to make enquiries, and made the addition which was rightly deleted by the ld. CIT (A). Therefore, in view of the above, we find that the assessee had discharged the onus cast upon him. In the background of the aforesaid discussions and respectfully following the Hon’ble Supreme Court in CIT vs. Orissa Corporation Pvt. Ltd. (supra), we do not find any infirmity in the order of the Ld. CIT(A), hence, we uphold the same and decide the ground no. 2 against the Revenue.
Ground No.3 of the revenue’s appeal read as under :-
“3. The Ld. CIT (A) has erred on facts and in law in deleting addition of Rs.74,84,106/- made u/s 69 of the Income Tax Act, 1961, on account of purchase of fixed assets. The issue of verifying the books of account at the remand report stage was not considered by Ld. CIT(A). Further, whether the ground cited by the assessee for admission of additional evidence was covered under Rule 46A of the Income tax Rules?”
The AO observed that no documentary evidence was filed on account of increase of fixed assets. As such, the AO proceeded to assess the amount of Rs.74,84,106/- as unexplained investment and added u/s 69 of the Act. The AO observed that Section 69 would only be applicable where investment is not recorded in the books of account maintained by the assessee and made the addition of Rs.74,84,106/-.
In Appeal the ld. CIT (A) deleted the addition and the relevant finding of the ld. CIT (A)’s order on this issue is reproduced below :-
22. ….In the case, the investments in building WIP was duly accounted for in the books of account and the balance sheet has been duly audited by a qualified chartered accountant. Thus, the addition of Rs.74,84,106/- was against the provisions of Section 69. In the Paper Book filed, the assessee has submitted, at Page 330 and 331, details of Plot No.6 & 7, Old Judicial Complex, Gurgaon of HUDA. It is observed that the purchase of land was for Rs. 46,58,000/-. Further, expenditure was made to the tune of Rs. 28,26,106/- towards construction on the said plot of land. From the details filed, it is evident that on the purchase of land, the payments were made by cheque. The bank statement also suggests the same. Each of the payments made for construction have also been made by cheque. The books of accounts of the assessee were also audited by R.A. Kila & Co. In other words, the books of accounts of the assessee had been audited and entry reflected in the return of income. 23 Section 69 provides for – 69. Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year.”
In the case in hand, the investment in the plot and construction thereon was made by the assessee. While, it may be true, that the Ld. AO could not have the opportunity to peruse the books of accounts of the assessee, during the assessment stage, the fact of the matter is that even at the remand stage, the matter could have been looked into. AO could have requested for permission to enquire u/s 250(4) which has not been done. I am afraid that the same has not been done. When the bank account is disclosed, through which the cheques have been issued in each of the cases, the investment in the said plot and the construction thereon cannot be taken as not recorded in the books of accounts of the assessee. Circumstantial evidence suggests otherwise. Thus, the assessee deserves to succeed in Ground of Appeal No.4.”
20. Ld. DR relied on the order of the AO and submitted that the issue of verifying the books of account at the remand report stage was not considered by Ld. CIT(A). Further, he submitted that the ground cited by the assessee for admission of additional evidence was not covered under Rule 46A of the Income tax Rules.
Ld. AR reiterated the submissions made before the ld. CIT (A) and wanted us not to interfere with the order of the ld. CIT (A) on this issue.
We have heard both the sides on this issue and perused the material on record. Before adjudicating the issue in dispute, we can gainfully refer the provisions of Section 69 of the I.T. Act as under:- “69. Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year.”
On the touchstone of the provisions of section 69, we find that in the present case, the investment in the plot and construction thereon was made by the assessee and all the transactions were through banking channel as is evident from the bank statement filed by the assessee. The ld. CIT (A) has given a clear finding in para 22 of the impugned order that the investments in building WIP was duly accounted for in the books of account and the balance sheet has been duly audited by a qualified chartered accountant and thus, according to him, the addition of Rs.74,84,106/- was against the provisions of Section 69. We find that in the Paper Book filed, at Page 330 and 331, details of Plot No.6 & 7, Old Judicial Complex, Gurgaon of HUDA. It is observed that the purchase of land was for Rs. 46,58,000/-. Further, expenditure was made to the tune of Rs. 28,26,106/- towards construction on the said plot of land. From the details filed, it is evident that on the purchase of land, the payments were made by cheque. The bank statement also suggests the same. Each of the payments made for construction have also been made by cheque. The books of accounts of the assessee were also audited by R.A.
Kila & Co. Thus, we concur with the ld. CIT (A) that the books of accounts of the assessee had been audited and entry reflected in the return of income and the balance sheet has been duly audited by a qualified chartered accountant. We find force in the submissions of the ld. AR that even if the AO could not have the opportunity to peruse the books of accounts of the assessee, during the assessment stage because, according to assessee, it was all with CBI and the fact of the matter is that even at the remand stage, the matter could have been looked into by the AO, which has not been done. So, in the light of the transactions through banking channel and audited books of account, it cannot be said that the investments were not reflected in the books of account when there is a clear finding of the CIT (A) that the investments in building WIP was duly accounted for in the books of account and the balance sheet has been duly audited by a qualified chartered accountant. Thus, in our opinion, when the bank account is disclosed, through which the cheques have been issued in each of the cases, the investment in the said plot and the construction thereon cannot be taken as not recorded in the books of accounts of the assessee. In the background of the aforesaid discussions, we do not find any infirmity in the order of the Ld. CIT(A), hence, we uphold the same and decide the ground no. 3 against the Revenue. 24. Ground No.4 of the revenue’s appeal read as under :-
“4. The Ld. CIT(A) has erred on facts and in law in deleting addition of Rs.12,23,707/- made on account of purchase of plot. The issue of verifying the books of account at the remand report stage was not considered by Ld. CIT(A). Further, whether the ground cited by the assessee for admission of additional evidence was covered under Rule 46A of the Income tax Rules?”
The AO basically made the addition due to the assessee’s inability to produce the books of accounts before him since all documents had been seized by CBI. However, ld. CIT (A) deleted the addition by observing as under :- “27. I have considered the order of the Ld. AO and the submissions made by the Ld. AR of the assessee. It is reiterated, as in Ground of Appeal No.4 that the addition has been made because of the inability of the assessee to produce the books of accounts of the assessee. However, no case has been made out by the Ld. AO that the investments made through Demand Drafts and have passed through reflected bank account were not reflected in the books of accounts of the assessee. Thus, the provisions of Section 69 have not been met. As such, the assessee succeeds In Ground of Appeal No.5”
26. Ld. DR relied on the order of the AO and submitted that the issue of verifying the books of account at the remand report stage was not considered by Ld. CIT(A).
27. Ld. AR for the assessee reiterated the submissions made before the ld. CIT (A) and submitted that the amounts related to purchase of plots of land amounting to Rs.12,23,707/-. He submitted that most of the payments were made to HUDA, a Government Agency, for installments of plots. He further submitted that each of the payments was made by Account Payee D.D. He further submitted that the AO failed to note that the plots have been shown as closing stock at the year end. He submitted that the application under Rule 46A was made for plots purchased along with copies of relevant documents. He also submitted that in the Paper Book, the details of installments have been submitted at Pages 331 & 332 and details of the demand drafts have also been furnished which were paid through A/c No.590011000518, ING Vyasa bank, Vasant Vihar, New Delhi. Accordingly, the ld. AR wants us not to interfere with the order of the ld. CIT (A).
We have heard both the sides and perused the material on record. We find that the addition in dispute has been made because of the inability of the assessee to produce the books of accounts of the assessee because all documents had been in the custody of CBI. We take note that the investments were installments for plots which were made to HUDA, a Government Agency and made through Demand Drafts and have passed through banking channels and the fact is that the books of the assessee was duly audited as per the statute and reflected in the balance sheet. The verification of the books ought to have been done by the AO during the remand proceedings which took three month’s time but he has not made any attempt to do so and the addition was based on conjectures and surmises.
Since the installments for the plot have been paid through DD to a Government agency and the books of the assessee are statutorily audited as stated by the ld. CIT (A) on the basis of evidence, we do not find the impugned order to be perverse, which does not need any interference on our part, hence, we uphold the same and dismiss the ground no. 4 raised by the Revenue. 29. Ground No.5 is general in nature. 30. In the result, the Revenue’s Appeal is dismissed.
Order pronounced in open court on this day of 27th January, 2016.