THE ITO, AHMEDABAD Ward -1(2), v. ANKUSH FINSTOCK LTD.,

ITA 1989/AHD/2003 | 1996-1997
Pronouncement Date: 30-03-2012 | Result: Dismissed

Appeal Details

RSA Number 198920514 RSA 2003
Assessee PAN AACFA7182R
Bench Ahmedabad
Appeal Number ITA 1989/AHD/2003
Duration Of Justice 8 year(s) 10 month(s) 22 day(s)
Appellant THE ITO, AHMEDABAD Ward -1(2),
Respondent ANKUSH FINSTOCK LTD.,
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2012
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 30-03-2012
Date Of Final Hearing 28-03-2012
Next Hearing Date 28-03-2012
Assessment Year 1996-1997
Appeal Filed On 08-05-2003
Judgment Text
FIT FOR PUBLICATION SD/- SD/- (AM) (JM) IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD .. '# ' $ BEFORE SHRI MUKUL KR.SHRAWAT JUDICIAL MEMBER AND SHRI T.R. MEENA ACCOUNTANT MEMBER 1.ITA NO.1989/AHD/2003 A.Y. 1996-97 2.ITA NO.2688/AHD/2005 A.Y. 1996-97 1. THE ITO AHMEDABAD WD-1(2) AHMEDABAD 2. THE DY.CIT(OSD) RANGE-1 AHMEDABAD VS. 1.ANKUSH FINSTOCK LIMITED B-12 SULABH FLATS NARANPURA MIRAMBICA SCHOOL AHMEDABAD 2.M/S.ANKUSH FINSTOCK LTD. 6/A/12 MUNICIPAL STAFF QUARTERS B/H. LAL BUNGALOW AHMEDABAD PAN/GIR NO. : AACFA 7182 R (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI S.K. GUPTA CIT-D.R. RESPONDENT BY: SHRI TUSHAR HEMANI %& ' #/ // / DATE OF HEARING : 28/3/2012 )*+ ' # / DATE OF PRONOUNCEMENT : 30/03/12 O R D E R PER SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER : THESE TWO APPEALS HAVE BEEN FILED BY THE REVENUE A RISING FROM THE ORDERS OF LD.CIT(A)-V AHMEDABAD RESPECTIV ELY DATED 27/10/2005 AND 03/02/2003 FOR A.Y. 1996-97. ONE A PPEAL IS IN RESPECT OF QUANTUM ADDITION AND THE OTHER ONE IS IN RESPECT OF ITA NOS.1989/AHD /2003 & ITA NO.2688/AHD/2005 ITO/DY.CIT VS. ANKUSH FINSTOCK LTD. ASST.YEAR 1996-97 - 2 - CONCEALMENT PENALTY. WE SHALL FIRST TAKE UP THE AP PEAL RELATED TO THE QUANTUM ADDITION. 2. FROM THE SIDE OF THE REVENUE AN ADDITIONAL GROU ND HAS BEEN RAISED VERBATIM REPRODUCED BELOW: (I) THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN E NTERTAINING THE APPEAL OF THE ASSESSEE AS THERE WAS DELAY IN FI LING THE APPEAL OF ABOUT 6 YEARS. THE ASSESSEES PLEA IS IN CORRECT SINCE THE ASSESSEE COMPANY HAD CASH AND BANK BALANCE OF RS.1 05 09 173/- AS ON 31.03.1996. 2.1. IN RESPECT OF THE ADMISSION OF THE ADDITIONAL GROUND PARTIES HAVE BEEN HEARD. 3. FROM THE SIDE OF THE REVENUE LD.DR MR.S.K.GUPTA HAS INFORMED THAT THE IMPUGNED APPEAL HAS BEEN FILED BY THE ASSESSEE BELATEDLY BEFORE THE FIRST APPELLATE AUTHORITY. L D.DR HAS INFORMED THAT AN ASSESSMENT ORDER WAS PASSED ON 15/04/1999. THIS APPEAL WAS FILED ON 23/06/2005. THE DELAY WAS ABOUT SIX Y EARS. A CONDONATION FOR THE SAID DELAY WAS MOVED BEFORE THE LD.CIT(A). THE DELAY WAS CONDONED AND THE APPEAL WAS ADMITTED FOR HEARING BY THE FIRST APPELLATE AUTHORITY. SINCE THE ADMISSI ON OF THE APPEAL WHICH WAS FILED BEYOND THE PRESCRIBED LIMIT WAS THE VERY ROOT OF THE MATTER THEREFORE THIS ADDITIONAL GROUND SHOULD BE ADMITTED AND CONSIDERED. RELIED THE CASE LAW ON NATIONAL THE RMAL POWER CO.VS. CIT (229 ITR 383). ITA NOS.1989/AHD /2003 & ITA NO.2688/AHD/2005 ITO/DY.CIT VS. ANKUSH FINSTOCK LTD. ASST.YEAR 1996-97 - 3 - 3.1. ON THE OTHER HAND FROM THE SIDE OF THE RESPON DENT-ASSESSEE LD.AR MR.TUSHAR HEMANI APPEARED AND OBJECTED THE AD MISSION OF THIS ADDITIONAL GROUND OF THE REVENUE. HE HAS INF ORMED THAT THE REVENUE HAS FILED THE APPEAL IN THE YEAR-2005 AND T HEREAFTER ON NUMBER OF OCCASIONS IN LAST FEW YEARS THIS APPEAL W AS POSTED FOR HEARING. IN THE PAST REVENUE HAS NEVER THOUGH T IT PROPER TO FILE AN ADDITIONAL GROUND AND NOW ALMOST AFTER THE LAPSE OF FOUR YEARS FILING THIS ADDITIONAL GROUND. ACCORDING TO HIM R EVENUE HAS NOT PLACED ON RECORD ANY COGENT REASON FOR DELAY IN FI LING THIS ADDITIONAL GROUND. HE HAS ALSO ARGUED THAT THE I SSUE OF CONDONATION OF DELAY COULD NOT BE SAID TO BE THE RO OT OF THE MATTER BECAUSE IT HAS NO CONNECTION WITH THE QUANTUM ADDIT ION INVOLVED IN THEIR APPEAL. 4. ON HEARING THE SUBMISSIONS PRIMA-FACIE WE ARE O F THE VIEW THAT NO PREJUDICE SHOULD BE CAUSED TO THE RESPONDEN T-ASSESSEE IF WE ADMIT THIS ADDITIONAL GROUND AND THEREUPON DECIDE A S PER LAW. AS PER OUR UNDERSTANDING OF LAW WHICH WE HAVE FORMED ON THE BASIS OF SEVERAL PRECEDENTS CITED ON THIS SUBJECT THE TRIBU NAL IS UNDER A STATUTORY OBLIGATION TO ENTERTAIN AN ADDITIONAL GRO UND NO MATTER AT WHAT STAGE IT WAS MOVED PROVIDED THAT ON THE QUESTI ON OF ADMISSION BOTH THE PARTIES ARE DULY HEARD AND ALSO PROVIDED T HAT THE ISSUE RAISED AS PER THE ADDITIONAL GROUND GOES TO THE ROO T OF THE CAUSE. ITA NOS.1989/AHD /2003 & ITA NO.2688/AHD/2005 ITO/DY.CIT VS. ANKUSH FINSTOCK LTD. ASST.YEAR 1996-97 - 4 - RATHER IN ONE OF THE PRECEDENT IT WAS COMMENTED T HAT REFUSAL TO ENTERTAIN A LEGAL GROUND COULD BE REGARDED AS AN IM PROPER EXERCISE OF DISCRETION. HOWEVER BEFORE THE ADMISSION OF AN ADDITIONAL GROUND IT IS NECESSARY TO SATISFY THAT THE CONNECT ED FACTS IN RESPECT OF THE ISSUE RAISED IN THE ADDITIONAL GROUND HAVE B ORNE OUT OF THE RECORD OF THE CASE. IN THIS REGARD WE MAY LIKE TO REFER RULE 11 OF INCOME TAX APPELLATE TRIBUNAL RULES 1963 WHICH SAY S THAT THE TRIBUNAL SHALL NOT REST ITS DECISION ON ANY OTHER G ROUND UNLESS THE PARTY WHO MAY BE EFFECTED THEREBY HAS HAD A SUFFICI ENT OPPORTUNITY OF BEING HEARD ON THAT GROUND. THIS RULE FURTHER SAYS THAT IN DECIDING AN APPEAL THE TRIBUNAL SHALL NOT BE CONFIN ED TO THE GROUNDS SET FORTH IN THE MEMORANDUM OF APPEAL. FURTHER IT IS ALSO EXPECTED TO EXAMINE BEFORE ADMISSION THAT THE ISSUE RAISED I N AN ADDITIONAL GROUND WAS IN FACT THE SUBJECT MATTER OF FIRST APPE AL. ON HEARING BOTH THE SIDES WE HAVE NOTICED THAT SUFFICIENT MAT ERIAL HAS BEEN PLACED FROM THE SIDE OF THE REVENUE IN SUPPORT OF T HE ADMISSION OF ADDITIONAL GROUND. BY PLACING RELIANCE ON NATIONAL THERMAL POWER CO.(SUPRA) WE THEREFORE ADMIT THE SAME AND HEREI NBELOW DECIDE AS PER LAW. 5. AT THE OUTSET WE DEEM IT PROPER TO DECIDE THE I SSUE OF CONDONATION OF DELAY AS GRANTED BY LD.CIT(A). FA CTS AS NARRATED BY THE LD.DR MR.S.K.GUPTA WERE THAT THE ASSESSMENT U/S .143(3) OF THE IT ACT WAS MADE ON 16/03/1999. A RETURN OF INCOME WAS FILED ON 30/11/1996 DISCLOSING AN INCOME OF RS.31 39 650/- AS AGAINST THAT ITA NOS.1989/AHD /2003 & ITA NO.2688/AHD/2005 ITO/DY.CIT VS. ANKUSH FINSTOCK LTD. ASST.YEAR 1996-97 - 5 - ASSESSMENT WAS FRAMED ON THE INCOME OF RS.2 72 07 3 40/-. LD.DR HAS INFORMED THAT THE ADMITTED FACTUAL POSITION WAS THAT THE ASSESSEE HAS NOT DEPOSITED THE SELF-ASSESSMENT TAX. DUE T O THE SAID DEFAULT THOUGH AN APPEAL WAS FILED BY THE ASSESSEE AGAINST THAT ASSESSMENT ORDER BUT THAT APPEAL OF THE ASSESSEE WAS DISMISSE D BY LD.CIT(A)-V AHMEDABAD VIDE AN ORDER DATED 21.12.99. THAT AP PEAL WAS TREATED AS NON EST AND NOTED AS TO BE FILED BY THE CIT(A). A C OPY OF THE ORDER HAS BEEN PLACED BEFORE US. THE ASSESSEE THEREAFTER HAS FILED AN APPEAL BEFORE THE TRIBUNAL AND THAT APPEAL WAS WITHDRAWN BY THE ASSESSEE VIDE ITAT AHMEDABAD BENCH A IN IT A NO.631/AHD/2000 FOR A.Y. 1996-97 TITLED AS ANKUSH F INSTOCK LTD. VS. JT.CIT ORDER DATED 11/11/2005. THE MAIN CONTE NTION IS THAT WHEN AN APPEAL WAS PENDING BEFORE THE RESPECTED ITA T MEANWHILE HOW AN ANOTHER APPEAL WAS FILED BEFORE LD.CIT(A). LD.DR HAS INFORMED THAT THE IMPUGNED ORDER OF LD.CIT(A) NOW UNDER APPEAL IS DATED 27/10/2005 HOWEVER THE ORDER OF THE TRIBUNA L IS DATED 11/11/2005. MEANING THEREBY THAT THE ASSESSEE HA S INFRINGED THE LAW BY SIMULTANEOUSLY FILING TWO APPEALS FOR THE SA ME ASSESSMENT YEAR. HIS NEXT PLANK OF ARGUMENT WAS THAT THERE WAS NO SUFFICIENT CAUSE FOR FILING A BELATED APPEAL. THE ASSESSEE WAS DEFAULTER OF NON-PAYMENT OF SELF-ASSESSMENT TAX AS PRESCRIBED U/ S.140A OF THE I.T.ACT. LD.DR HAS PLEADED THAT THE ASSESSEE HAD S UFFICIENT FUNDS AS ON 31/03/1996 WHICH WERE TO THE EXTENT OF 1.05 CROR ES THEREFORE IT WAS DIFFICULT TO ACCEPT THAT DUE TO PAUCITY OF FUND S THE TAXES COULD ITA NOS.1989/AHD /2003 & ITA NO.2688/AHD/2005 ITO/DY.CIT VS. ANKUSH FINSTOCK LTD. ASST.YEAR 1996-97 - 6 - NOT BE PAID. HE HAS VEHEMENTLY CONTESTED THAT THE CIT(A) HAS UNDULY ACCEPTED THIS PLEA OF INSUFFICIENCY OF FUNDS AND THEREUPON CONDONE THE DELAY. 5.1. FROM THE SIDE OF THE RESPONDENT-ASSESSEE MR.T USHAR HEMANI ARGUED THAT THERE WAS NO TWO APPEALS WERE PENDING A T THE SAME TIME. ACCORDING TO HIM RATHER IT WAS A TECHNICAL MISTAK E WHICH WAS COMMITTED DUE TO WRONG ADVICE. AS SOON AS THE CO RRECT POSITION OF LAW WAS FOUND; THE MISTAKE COMMITTED EARLIER WAS RE CTIFIED BY WITHDRAWING THE APPEAL FROM THE TRIBUNAL. IN THIS CONNECTION MR.TUSHAR HEMANI HAS PLACED RELIANCE ON A JUDGEMEN T OF ITAT MUMBAI PRONOUNCED IN THE CASE OF ITO VS. SAI KRUPA CONSTRUCTION CO. REPORTED AS [2007]13 SOT 459 (MUM.) WHEREIN AS PER HEAD NOTE IT WAS HELD AS UNDER ONLY RELEVANT PORTION RE PRODUCED BELOW:- 1. SECTION 249 OF THE INCOME-TAX ACT 1961 COMM ISSIONER (APPEALS) FORM OF APPEAL AND LIMITATION ASSESSM ENT YEARS 1996-97 TO 1999-2000 WHETHER IF AN APPEAL IS FILE D BEYOND TIME-LIMIT BUT AFTER PAYMENT OF TAXES AS STIPULATED IN SECTION 249(4) IT CANNOT BE SAID THAT REQUIREMENTS OF SECT ION 249(4) ARE NOT COMPLIED WITH HELD YES COMMISSIONER (A PPEALS) DISMISSED APPEALS FILED BY ASSESSEE ON GROUND THAT ASSESSEE HAD NOT PAID TAXES DUE ON RETURNED INCOME AND THER EFORE APPEALS WERE NOT MAINTAINABLE BY VIRTUE OF SECTION 249(4)(A) SUBSEQUENTLY ASSESSEE AFTER PAYMENT OF TAXES DUE FILED FRESH APPEALS AND ALSO SOUGHT CONDONATION OF DELAY IN FIL ING APPEALS WITHIN TIME COMMISSIONER (APPEALS) CONDONED DELAY AND ADMITTED APPEAL AS ACCORDING TO HIM THERE WAS SUFF ICIENT CAUSE FOR DELAY IN FILING APPEALS WHERE ORDER OF ITA NOS.1989/AHD /2003 & ITA NO.2688/AHD/2005 ITO/DY.CIT VS. ANKUSH FINSTOCK LTD. ASST.YEAR 1996-97 - 7 - COMMISSIONER (APPEALS) DID NOT SUFFER FROM ANY LEGA L INFIRMITY. 5.2. IN RESPECT OF THE INSUFFICIENCY OF FUNDS LD.A R HAS EXPLAINED THAT THE POSITION OF FUNDS WERE DULY CONSIDERED BY THE LD.CIT(A) AND THEREAFTER A CONSCIOUS DECISION WAS TAKEN TO CONDON E THE DELAY WHEN THE TAXES WERE PAID. LD.AR HAS DRAWN OUR ATTENT ION ON CERTAIN FACTS THAT A RETURN U/S.139 OF THE ACT WAS FILED ON 30/11/1996 AND AN INCOME OF RS.31 39 650/- WAS DECLARED. THE TAX LIA BILITY ON THE SAID DECLARED INCOME WAS AT RS.14 44 239/-. AGAINST T HE SAID TAX LIABILITY A TDS OF RS.3 47 830/- WAS DEDUCTED. THE ASSESSEE COULD NOT PAY THE BALANCE AMOUNT OF TAX AT THAT TIME OWIN G TO SEVERE FINANCIAL CRUNCH DUE TO COLLAPSE OF STOCK MARKET. THE ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT ON 16/03/1999 A ND THEREUPON THE ASSESSEE HAS FILED AN APPEAL BEFORE CIT(A) ON 1 5/04/1999. LD.AR HAS AGREED THAT INDEED THERE WAS A DEFAULT OF NON-PAYMENT OF SELF-ASSESSMENT TAX U/S.140A OF THE ACT BUT LATER ON AFTER REALIZING THE ERROR THE SAME WAS RECTIFIED BY MAKING A PAYMEN T OF HUGE AMOUNT. THERE WAS A SEVERE FINANCIAL PROBLEM A ND THE BREAK-UP OF THE FINANCIAL POSITION WAS DULY EXPLAINED TO LD. CIT(A) AND FOR READY REFERENCE HE HAS DRAWN OUR ATTENTION ON THE FOLLOWING CHART:- FINANCIAL POSITION AS ON AVAILABLE CASH AND BANK BALANCES OTHER RECEIVABLES TOTAL CURRENT ASSETS PROFITS/ (LOSSES) (1) (2) (3) (2)+(3) =(4) (5) 31.03.1999 25452 767276 792728 (495784) 31.03.2000 35302 1424730 1460032 45862 ITA NOS.1989/AHD /2003 & ITA NO.2688/AHD/2005 ITO/DY.CIT VS. ANKUSH FINSTOCK LTD. ASST.YEAR 1996-97 - 8 - 31.03.2001 44304 717222 761526 (351301) 31.03.2002 98775 971490 1070265 (172091) 31.03.2003 30227 237878 265709 (273384) 31.03.2004 21931 439835 461766 (501302) 31.03.2005 609203 14248612 14857815 19098866 6. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES WE ARE OF THE CONSIDERED VIEW THAT A LITIGANT MUST NOT BE THROWN OUT OF THE LITIGATION AT THE VERY THRESHOLD WITHOUT PROVIDING AN OPPORTUNITY OF HEARING. PARTICULARLY IN THIS CASE WE HAVE NOTI CED THAT THE ASSESSEE WAS VIGILANT ABOUT HIS RIGHT OF APPEAL AND THEREFO RE KNOCKING ONE DOOR OR THE OTHER AND SEEKING FOR JUSTICE. IT I S NOT THE CASE THAT NO APPEAL AT ALL WAS FILED EARLIER. THE FIRST APPEAL WAS FILED VERY MUCH IN TIME BUT IT WAS TREATED AS NON-EST DUE TO NON-P AYMENT OF TAX. A SECOND APPEAL WAS FILED AFTER MAKING THE PAYMENT OF TAXES STATED TO BE A SUM OF RS.3 47 830/- AS T.D.S. AND RS.10 96 40 9/- AS SELF ASSESSMENT TAX THUS TOTALLING TO RS.14 44 239/- I. E.ADMITTED TAX LIABILITY. MEANWHILE AGAINST THE FIRST APPEAL THE ASSESSEE HAD GONE BEFORE TRIBUNAL HOWEVER THAT APPEAL WAS WITHDRAWN IN THE MONTH OF NOVEMBER-2005 BECAUSE BY THAT TIME THE ASSESSEE OBTAINED THE IMPUGNED ORDER OF CIT(A) AHMEDABAD WHICH WAS DATED 27/10/2005 THE IMPUGNED APPELLATE ORDER NOW UNDER APPEAL BEFORE US. ON ACCOUNT OF THESE FACTS IT IS NOT LOGICAL TO CONCLUDE THAT THE ASSESSEE WAS NEGLIGENT OR IRRESPONSIBLE THEREFORE DID NOT ENTITLED FOR ANY DISCRETION OR SYMPATHY. ON THE CONTRARY IN SUCH ITA NOS.1989/AHD /2003 & ITA NO.2688/AHD/2005 ITO/DY.CIT VS. ANKUSH FINSTOCK LTD. ASST.YEAR 1996-97 - 9 - CIRCUMSTANCES THE HONBLE SUPERIOR COURTS HAVE TAK EN A VIEW FAVOURING SUCH A DEFAULTER. 7. FOLLOWING A LANDMARK DECISION OF HONBLE SUPREME CO URT IN THE CASE OF COLLECTOR LAND ACQUISITION VS. MST KAT IJI AND OTHERS 167 ITR-471 (SC) WHEREIN CERTAIN GUIDELINES HAVE BE EN LAID DOWN SUCH AS THAT REFUSING TO CONDONE THE DELAY CAN RESU LT IN A MERITORIOUS CASE BEING THROWN OUT AT THE VERY THRESHHOLD AND T HEREFORE THE CAUSE OF JUSTICE COULD BE DEFEATED. THE HONBLE COU RT HAS ALSO SAID THAT WHEN SUBSTANTIAL JUSTICE AND TECHNICAL CONSIDE RATIONS ARE PITTED AGAINST EACH OTHER THE CAUSE OF SUBSTANTIAL JUSTIC E DESERVES TO BE PREFERRED. ALSO PLACING RELIANCE ON AUDO CENTRE VS . STATE OF U.P. AND OTHERS 278 ITR 291 (ALL) AND VOLTAS LIMITED 241 ITR 471 (AP). WE HEREBY AFFIRM THE FINDING OF LD. CIT(APPE ALS) THAT THE APPELLANT LEGALLY DESERVES CONDONATION OF DELAY. 8. FURTHER IN THE CASE OF RAJENDRAKUMAR MANEKLAL S HETH REPORTED AT 213 ITR 715 (GUJ.) IT WAS HELD THAT IF THE FIRST APPELLATE AUTHORITY HAD HELD THAT THE LIQUIDITY CRUNCH WAS A REASONABLE CAUSE THEN ORDINARILY SUCH DISCRETIONARY POWER SHOULD NOT BE DISTURBED. WE MAY ALSO LIKE TO ADD THAT SECTION 249(3) OF THE ACT PRESCRIBES THAT CIT(A) MAY ADMIT AN APPEAL AFTER THE EXPIRATIO N OF THE SAID PERIOD IF HE SATISFIED THAT THE APPELLANT HAD SUFFI CIENT CAUSE FOR NOT PRESENTING THE APPEAL WITHIN THE PRESCRIBED PERIOD. THERE IS AN ITA NOS.1989/AHD /2003 & ITA NO.2688/AHD/2005 ITO/DY.CIT VS. ANKUSH FINSTOCK LTD. ASST.YEAR 1996-97 - 10 - ANOTHER SUB-SECTION IN THAT CHAPTER PRESCRIBING TH E CONDITIONS FOR THE ADMISSION OF AN APPEAL. AS PER SECTION 249(4) OF THE ACT NO APPEAL BEFORE CIT(A) SHOULD BE ADMITTED UNLESS AT T HE TIME OF FILING OF THE APPEAL WHERE A RETURN HAS BEEN FILED BY THE ASSESSEE TAX DUE ON THE INCOME RETURNED HAS BEEN PAID. IN THIS SU B-SECTION THERE IS A CLAUSE (B) WHICH IS IN RESPECT OF A CONDITION WHE RE NO RETURN AT ALL HAS BEEN FILED BY THE ASSESSEE. A PROVISO UNDERNE ATH THE SECTION ALSO PRESCRIBES THAT THE CASES FALLING UNDER THE SA ID CLAUSE(B) LD.CIT(A) CAN GRANT EXEMPTION FROM THE OPERATION OF THE SAID CLAUSE. AN INFERENCE CAN BE DRAWN ON COMBINED READING OF BO TH THE SUB- CLAUSES OF SUB-SECTION(4) OF SECTION 249 THAT IN CA SE OF DEFAULT OF NON-PAYMENT OF TAX AN APPEAL IS NOT TO BE ADMITTED BUT ON REMOVAL OF THE DEFECT OF NON-PAYMENT OF TAX AN APPEAL DESER VES TO BE ADMITTED AND IN ONE OF THE CONDITION THE ASSESSEE C AN BE GRANTED EXEMPTION BY LD.CIT(A). AN ANOTHER ASPECT HAS AL SO BEEN DISCUSSED BEFORE US THAT ON ONE HAND SUB-SECTION(3) OF SECTION 249 PERTAINS TO THOSE APPELLANTS WHO HAVE FILED THE RET URN AND PAID THE TAX BUT BELATEDLY FILED AN APPEAL. ON THE OTHER HAND SUB-SECTION(4) OF SECTION 249 PERTAINS TO THOSE APPELLANTS WHO HAV E DEFAULTED IN PAYMENT OF TAX OR DID NOT FILE THE RETURN. SINCE T HE PRESENT APPELLANT IS IN THE CATEGORY OF SUB-SECTION (4) THEREFORE W E ARE OF THE CONSIDERED VIEW THAT LD.CIT(A) WAS JUDICIALLY CORRE CT IN CONDONING THE DELAY. THIS OBJECTION OF THE REVENUE IS THER EFORE DISMISSED. ITA NOS.1989/AHD /2003 & ITA NO.2688/AHD/2005 ITO/DY.CIT VS. ANKUSH FINSTOCK LTD. ASST.YEAR 1996-97 - 11 - 8.1. EVEN THE OTHER PLANK OF ARGUMENT OF LD.DR MR.GUPTA IS DULY DEALT WITH BY ITAT MUMBAI IN THE CASE OF ITO VS. SA IKRUPA CONSTRUCTION CO. 13 SOT 459 (MUM.) WHEREIN AN APPE AL WAS DISMISSED ON THE GROUND OF NON-PAYMENT OF TAX DUE B UT SUBSEQUENTLY A FRESH APPEAL WAS FILED BELATEDLY AFT ER MAKING THE PAYMENT OF TAXES AND THAT APPEAL WAS ADMITTED AFTER CONDONING THE DELAY. THE RESPECTED CO-ORDINATE BENCH HAS HELD T HAT THE ONLY REQUIREMENT OF SECTION 249(4) IS PAYMENT OF TAX DUE ON RETURNED INCOME. THERE IS NO TIME LIMIT IS PRESCRIBED FOR P AYMENT OF SUCH TAXES. IF AN APPEAL HAS BEEN FILED AFTER MAKING OF PAYMENT IT CANNOT BE SAID THAT THE REQUIREMENT OF SECTION 249(4) HAS NOT BEEN COMPLIED WITH. FOLLOWING THIS DECISION WE HEREBY UPHOLD TH E VIEW OF LD.CIT(A) AND REJECT THIS GROUND OF THE REVENUE. 9. MAIN GROUND IS IN RESPECT OF THE QUANTUM ADDITIO N OF THE REVENUE WHICH READS AS UNDER:- THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON FA CTS OF THE CASE IN DIRECTING TO DELETE THE UNEXPLAINED SHA RE CAPITAL UNDER PROMOTERS QUOTA U/S.68 OF RS.2 19 64 000/-. 10. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDIN G ASSESSMENT ORDER PASSED U/S.143(3) OF THE IT ACT DATED 16/03/1 999 WERE THAT THE ASSESSEE-COMPANY WAS AN INVESTMENT AND FINANCE COMP ANY. IT WAS NOTED BY THE AO THAT A PUBLIC ISSUE WAS BROUGHT OUT DURING THE YEAR. ITA NOS.1989/AHD /2003 & ITA NO.2688/AHD/2005 ITO/DY.CIT VS. ANKUSH FINSTOCK LTD. ASST.YEAR 1996-97 - 12 - IT HAS ALSO BEEN NOTED THAT PRIOR TO THE PUBLIC ISS UE THERE WAS ALLOTMENT OF SHARES UNDER PROMOTERS QUOTA. SHAR ES UNDER PROMOTERS QUOTA WERE 3918400 IN NUMBER FOR A VAL UE OF RS.3 91 84 000/-. THE AO HAS ENQUIRED ABOUT THE P ERSONS WHO HAVE INVESTED IN PROMOTERS QUOTA. OUT OF THE TO TAL AMOUNT OF INVESTMENT UNDER THE PROMOTERS QUOTA IT WAS FOUND BY THE AO THAT A SUM OF RS.1 68 25 000/- WAS ACCEPTABLE AND IN THI S REGARD THE AO HAS COMMENTED AS FOLLOWS:- 2.3. IN SPITE OF REPEATED APPORTUNITIES GIVEN TO P RODUCE THE ABOVE THE ASSESSEE COMPANY WAS ABLE TO FURNISH CON FIRMATION LETTER FOR SHARE APPLICATION MONEY ALONGWITH PAN/AS SESSING OFFICER IN RESPECT OF THE FOLLOWING PARTIES ONLY: NAME AMOUNT SAMIR P.SHAH RS. 18 20 000 50 000 BHARAT M.SHAH RS.1 46 05 000 BHARAT SHAH RS. 3 50 000 ------------------- RS.1 68 25 000 ============ 10.1. FOR REST OF THE AMOUNT SHOW-CAUSE WAS ISSUED AS TO WHY THE SAME BE NOT TREATED AS UNEXPLAINED CASH CREDIT IN T ERMS OF SECTION 68 OF I.T. ACT. THE AO HAS QUOTED SOPHIA FINANCE LT D. 205 ITR 98(DEL). IN VIEW OF AO THE CONFIRMATION LETTERS AND THE APPLICATION FORMS FURNISHED BY THE ASSESSEE IN RESP ECT OF THOSE INVESTORS WAS NOT COMPLETE. ACCORDING TO HIM AD DRESSES WERE NOT PROPERLY FILLED AND IN SOME OF THE CASES SIGNATURES WERE NOT PROPER. ITA NOS.1989/AHD /2003 & ITA NO.2688/AHD/2005 ITO/DY.CIT VS. ANKUSH FINSTOCK LTD. ASST.YEAR 1996-97 - 13 - HE HAS ALSO COMMENTED THAT THOUGH IT WAS CLAIMED TH AT ALL THE AMOUNT WAS RECEIVED IN CHEQUE BUT THE DETAILS OF TH E BANK ACCOUNTS WERE NOT FURNISHED. FINALLY A SUM OF RS.2 19 64 000/- WAS HELD AS UNEXPLAINED CREDIT IN THE FORM OF SHARE APPLICATION MONEY AND TAXED BY INVOKING THE PROVISIONS OF SECTION 68 OF I.T. AC T. THE SAID ADDITION WAS CHALLENGED BEFORE LD.CIT(A). 11. AFTER DETAILED DISCUSSION LD.CIT(A) HAS DECIDED THE ISSUE IN ASSESSEES FAVOUR VIDE FOLLOWING PARAGRAPH:- 4.2. I HAVE CAREFULLY CONSIDERED THE FINDINGS GIVE N IN THE ASSESSMENT ORDER DOCUMENTARY EVIDENCES PRODUCED IN THE COURSE OF ASSESSMENT AS WELL AS IN THE COURSE OF PENALTY P ROCEEDINGS AND ALSO BEFORE THE CIT(A) IN AN APPEAL AGAINST THE ORD ER PASSED U/S.271(1)(C). I HAVE ALSO CONSIDERED THE FINDINGS OF MY PREDECESSOR GIVEN IN THE APPELLATE ORDER PASSED IN THE CASE OF THE APPELLANT WHILE DEALING WITH THE ISSUE OF LEVY OF P ENALTY U/S.271(1)(C) IN APPEAL NO.CIT (A)-V/JC (A) SR-1/83 /2000-01 DTD. 03/02/2003. I FIND THAT IN THE COURSE OF ASSESSMEN T APPELLANT HAD FURNISHED ALL THE RELEVANT INFORMATION TO THE ASSES SING OFFICER SUCH AS COPIES OF THE SHARE APPLICATIONS BANK STATEMENT S FORM NO.2 BEING RETURN OF ALLOTMENT FILED WITH THE REGISTRAR OF COMPANIES INDICATING NUMBER OF SHARES ALLOTTED NAMES AND ADD RESS OF THE RESPECTIVE SHARE HOLDERS AND CONFIRMATORY LETTERS ETC. I ALSO FIND THAT THE AUDITORS OF THE COMPANY HAVE ALSO CERTIFIE D THE CORRECTNESS OF THE SHARE CAPITAL NOT ONLY IN THE NORMAL AUDITS CONDUCTED UNDER THE COMPANIES ACT AND THE INCOME-TAX ACT BUT HAD AL SO CERTIFIED FOR THE PURPOSE OF ISSUE OF PROSPECTUS FOR THE PURP OSE OF PUBLIC ISSUE FOR WHICH THEY COULD BE BOOKED BOTH UNDER THE CIVIL LAW AS WELL AS UNDER THE CRIMINAL LAW IF ANY DISCLOSURE MA DE THEREIN IS FOUND INCORRECT. I ALSO FIND THAT THE CORRECTNESS OF THE ISSUE OF SHARE CAPITAL WAS FURTHER VETTED BY THE REGISTRAR O F COMPANIES MERCHANT BANKERS APPOINTED FOR THE PUBLIC ISSUE SE BI AS WELL AS ITA NOS.1989/AHD /2003 & ITA NO.2688/AHD/2005 ITO/DY.CIT VS. ANKUSH FINSTOCK LTD. ASST.YEAR 1996-97 - 14 - THE STOCK EXCHANGES BEFORE PERMITTING THE APPELLANT TO PROCEED WITH THE PUBLIC ISSUE AND NONE OF THE AUTHORITIES H AVE DOUBTED GENUINENESS OF THE SHARE CAPITAL OR THE EXISTENCE O F THE SHARE HOLDERS EITHER BEFORE THE PUBLIC ISSUE OR THEREAFTE R. NO COMPLAINT HAS BEEN MADE AGAINST THE COMPANY FOR FALSIFICATION IN THE ISSUE OF THE SHARE CAPITAL TILL DATE. I ALSO FIND THAT IN A BSENCE OF ANY CORROBORATIVE EVIDENCE OF NON EXISTENCE OF THE SHAR EHOLDERS IN THE HANDS OF THE ASSESSING OFFICER RATIO OF THE HONBLE HIGH COURT IN THE CASE OF SOHPHIA FINANCE LTD. CANNOT BE APPLIED AGAINST THE APPELLANT. I ALSO FIND THAT DECISIONS RELIED UPON BY THE APPLICANT IN THE COURSE OF APPELLATE PROCEEDINGS ARE SQUARELY AP PLICABLE TO THE FACTS OF THE CASE AS ASSESSING OFFICER HAS NOT EXER CISED HIS POWERS U/S.131 OR U/S.133(6) INSPITE OF AVAILABILITY OF TH E RELEVANT INFORMATION SUCH NAMES AND ADDRESSES OF THE SHAREHO LDERS IN THE FORM NO.2 AND ALSO THE BANK STATEMENT OF THE APPELL ANT INDICATING CREDIT OF CHEQUES THROUGH CLEARING. I ALSO FIND TH AT MY PREDECESSOR WHILE DEALING WITH THE APPEAL FOR LEVY OF PENALTY U /S.271(1)(C) HAD OBSERVED IN PARA 3.3 AS BELOW: I HAVE GONE THROUGH THE PENALTY ORDER PASSED BY TH E ASSESSING OFFICER AND AFTER GIVING A CAREFUL CONSIDERATION TO THE FACTS OF THE CASE AND SUBMISSIONS PUTFORTH BEFORE ME ALONGWITH DECISIONS OF DIFFERENT COURTS CITED ON THE POINT BY THE AUTHORIS ED REPRESENTATIVE. I FIND THAT DURING THE COURSE OF ASSESSMENT PROCEEDING COPIES OF SHARE APPLICATION OF ALL THE A PPLICANTS AND COPIES OF FORM NO.2 (RETURNS OF ALLOTMENT) WERE FIL ED BEFORE THE ASSESSING OFFICER BY THE APPELLANT. IT IS ALSO SEE N THAT SHARE APPLICATION MONEY IN ALL THE CASES WAS PAID BY THE ACCOUNT PAYEE CHEUQES AND BANK STATEMENT OF THE APPELLANT COMPANY WAS ALSO FILED. IN SUCH CIRCUMSTANCES AND AN AVAILABILITY O F SUCH MATERIAL ASSESSING OFFICER COULD HAVE RESORTED TO SOME MATER IAL INVESTIGATION AND ON THAT BASIS HE COULD COME TO SO ME CLEAR CONCLUSION BUT THIS COURSE HAS NOT BEEN ADOPTED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER MADE ONLY A GENERAL REMARK THAT ALL THE APPLICATION FORMS FILED BY THE APPELLANT BE FORE HIM DID NOT CONTAIN COMPLETE DETAILS AND BASED ON THAT HE MADE THE ADDITION ON ADHOC BASIS U/S.68 OF INCOME-TAX ACT WITHOUT REF ERRING TO SPECIFIC CASES OF THE SHAREHOLDERS TREATING THE AM OUNT REPRESENTING THE SHARE APPLICATION MONEY AS UNDISCL OSED. ITA NOS.1989/AHD /2003 & ITA NO.2688/AHD/2005 ITO/DY.CIT VS. ANKUSH FINSTOCK LTD. ASST.YEAR 1996-97 - 15 - IN VIEW OF THE ABOVE STATED FACTS I HAVE NO HESITA TION IN DELETING THE ADDITION MADE ON ACCOUNT OF UNEXPLAINED SHARE C APITAL U/S.68. THE APPELLANT THEREFORE GETS RELIEF OF RS.2 19 64 0 00/-. 12. NOW THE REVENUE IS IN APPEAL. 13. LD.DR. MR. S.K. GUPTA HAS CONTESTED THAT AS PER THE PROVISIONS OF SECTION 68 OF THE ACT IT WAS NECESSA RY FOR THE ASSESSEE TO PLACE ON RECORD THE COMPLETE ADDRESS AND NAMES O F THE INVESTORS RELEVANT INFORMATION ABOUT THEIR IDENTITY GENUINEN ESS OF THE TRANSACTION AND THE CREDITWORTHINESS OF THE INVESTO RS. HE HAS ARGUED THAT THOUGH THE AO HAD MADE ATTEMPTS BY GRANTING SU FFICIENT OPPORTUNITY TO THE ASSESSEE BUT DUE TO INCOMPLETE I NFORMATION THE IMPUGNED ADDITION WAS MADE. HE HAS ALSO ARGUED THA T THE ASSESSEE SHOULD HAVE BEEN IN POSSESSION OF THE RELEVANT INFO RMATION BECAUSE THE SHARES WERE ALLOTTED OUT OF THE PROMOTERS QUOT A. UNDER THIS QUOTA GENERALLY THE KNOWN PERSONS FRIENDS OR REL ATIVES WERE GRANTED SHARES. IT WAS NOT DIFFICULT FOR THE ASSES SEE TO FURNISH THE REQUISITE INFORMATION TO THE AO. LD.DR HAS ALSO DRAWN OUR ATTENTION ON SOME OF THE CONFIRMATIONS WHICH WERE P LACED IN THE COMPILATION TO DEMONSTRATE THAT SOME OF THEM HAVE INVESTED SUBSTANTIAL AMOUNT BUT DID NOT HAVING THE PAN OF TH E REVENUE DEPARTMENT. IN SOME OF THE CASES THOUGH THE INVES TMENT HAS EXCEEDED RS.1 LAC BUT IT WAS STATED IN THE CONFIRMA TION LETTER THAT THEY HAVE APPLIED FOR PAN. APART FROM THE CASE L AWS CITED BY ITA NOS.1989/AHD /2003 & ITA NO.2688/AHD/2005 ITO/DY.CIT VS. ANKUSH FINSTOCK LTD. ASST.YEAR 1996-97 - 16 - A.O. HE HAS PLACED RELIANCE ON AMTRAC AUTOMOTIVE I NDIA (P) LTD. VS. ACIT 02 ITR 649 (TRIB.)[DEL.] WHEREIN LOVELY EXPORTS 299 ITR 260 (DEL.) HAS BEEN REFERRED AND THEN IT WAS HE LD THAT WHERE ASSESSEE EXCEPT PRODUCING PAPERS COULD NOT PROVE EX ISTENCE OR AVAILABILITY OF RESPECTIVE SHARE APPLICANTS THEN A DDITION OF SHARE APPLICATION MONEY WAS JUSTIFIED. 14. FROM THE SIDE OF THE RESPONDENT LD.AR MR.TUSHA R HEMANI APPEARE1D AND INFORMED THAT THE FULL DETAILS OF ADD RESSES CHEQUE NUMBERS AMOUNT INVESTED THEIR RESPECTIVE BANK DETA ILS WERE VERY MUCH BEFORE THE A.O. HE HAS ALSO PLEADED THAT THOS E VERY DETAILS WERE ALSO FURNISHED TO AN ANOTHER AUTHORITY I.E. R.O.C. ALONGWITH THE DETAILS OF NUMBER OF EQUITY SHARES ALLOTTED. N OW THROUGH A CONSOLIDATED CHART LD.AR HAS DEMONSTRATED THE NAME S ADDRESSES NUMBER OF SHARES ALLOTTED AMOUNT RECEIVED DETAILS OF CHEQUE NUMBER ETC. HAVE BEEN FURNISHED. HE HAS ALSO INFO RMED THAT SUBSEQUENT TO THE ALLOTMENT OF THE SAID SHARES THE ASSESSEE HAD COME OUT WITH A PUBLIC ISSUE AND THEN ALSO MADE THE COMP LETE DISCLOSURE. AT THAT TIME ALSO THE AUDITORS REPORT AND PROSPEC TUS WAS DULY VETED BY THE REGISTRAR OF COMPANIES. CERTAIN OTHER AUTHO RITIES SUCH AS MERCHANT BANKS SEBI STOCK EXCHANGE AUTHORITIES WH ERE THE SHARES WERE LISTED ETC. HAVE NOT RAISED ANY OJECTI ON. IN SUPPORT CASE LAWS CITED ARE LOVELY EXPORTS PVT.LTD. 216 ITR 195 (SC) AND MODERN CEMENTS LTD. (ITA NO.2506/AHD/2006 DATED 30/ 06/2011). ITA NOS.1989/AHD /2003 & ITA NO.2688/AHD/2005 ITO/DY.CIT VS. ANKUSH FINSTOCK LTD. ASST.YEAR 1996-97 - 17 - 15. HEARD BOTH SIDES AT LENGTH. IN THE COMPILATI ON FORM NO.2 I.E. SHARE APPLICATION FILED BEFORE REGISTRAR OF COMPANI ES HAS BEEN PLACED ON RECORD. THE COMPILATION IS ALSO CONSIST ED RELEVANT BANK STATEMENTS THROUGH WHICH THE AMOUNT WAS COLLECTED A ND DEPOSITED. THE ASSESSEE HAS ALSO FURNISHED ADDRESSES OF ALL TH E INVESTORS. IN THE LIGHT OF THOSE EVIDENCES WE HAVE TO DISCUSS FEW CA SE LAWS PRONOUNCED ON THIS ISSUE. THE DECISIONS ARE: (I) CIT VS. LOVELY EXPORTS PVT.LTD. REPORTED AT 6 DTR 308 (SC):: 216 CTR (SC)195 (II) CIT VS. STELLAR INVESTMENT LTD. REPORTED AT 2 51 ITR 263(SC) (III) CIT VS. STELLER INVESTMENT 192 ITR 287(DEL.) (IV) CIT VS. SOPHIA FINANCE LTD. 205 ITR 98 [DELHI](F.B.) CIT VS. OASIS HOSPITALITIES P.LTD. REPORTED AT [2001] 333 ITR 19 (DEL). IN THE CASE OF STELLER INVESTMENT 192 ITR 287 (DELHI) IT WAS HELD THAT QUOTE EVEN IF IT BE ASSUMED THAT THE SUBSCRIBERS TO THE I NCREASED SHARE CAPITAL WERE NOT GENUINE UNDER NO CIRCUMSTANCES CO ULD THE AMOUNT OF SHARE CAPITAL BE REGARDED AS UNDISCLOSED INCOME OF THE COMPANY. NO QUESTION OF LAW AROSE OUT OF THE TRIBUNALS ORDER. UNQUOTE. THE ISSUE WAS LIMITED BEFORE THE HONBLE COURT BECAUSE THE IN COME TAX OFFICER HAS ACCEPTED THE INCREASE IN THE SUBSCRIBED CAPITAL WHICH WAS SUBJECT TO REVIEW BY THE LD.COMMISSIONER U/S.263 WHO HAS HEL D THAT THE AO DID NOT CARRY OUT A DETAILED INVESTIGATION INASMUCH AS THERE HAD BEEN A DEVICE OF CONVERTING BLACK MONEY INTO WHITE WHILE ISSUING SHARES WITH THE HELP OF FORMATION OF AN INVESTMENT COMPANY. THE COMMISS IONER FURTHER HELD THAT THE AO DID NOT MAKE ENQUIRIES WITH REGARD TO T HE GENUINENESS OF THE ITA NOS.1989/AHD /2003 & ITA NO.2688/AHD/2005 ITO/DY.CIT VS. ANKUSH FINSTOCK LTD. ASST.YEAR 1996-97 - 18 - SUBSCRIBERS OF THE SHARE CAPITAL. EVEN IN THAT CAS E THE HONBLE COURT HAS MADE AN OBSERVATION QUOTE IF THE ASSESSMENT OF THE PERSONS WHO ARE ALLEGED TO HAVE REALLY ADVANCED THE MONEY IS SOUGHT TO BE REOPENED THAT WOULD HAVE MADE SOME SENSE BUT WE FAIL TO UNDERSTAN D AS TO HOW THIS AMOUNT OF INCREASED SHARE CAPITAL CAN BE ASSESSED I N THE HANDS OF THE COMPANY ITSELF. UNQUOTE. THE DIFFICULTY IN THE AFORECITED PRECE DENT WAS THAT THOUGH THE SHARE APPLICATIONS WERE ON RECO RD BUT SOME OF THE INVESTORS WERE NOT AVAILABLE AT THE ADDRESSES GIVEN HENCE IN RESPECT OF FEW INVESTORS IT WAS NOT POSSIBLE FOR THE REVENUE T O ASSESS THEIR INVESTMENT IN THEIR RESPECTIVE HANDS. ON THE OTHER HAND IN THE CASE BEFORE US THERE WAS NO SUCH DIFFICULTY BECAUSE ALL THE REQUISITE INFORMATION ABOUT THE SHARE ALLOTTEES WAS VERY MUCH AVAILABLE TO THE A.O. HENCE IF HE HAS CHOSEN NOT TO INVESTIGATE THO SE PERSONS THEN MERELY ON PRESUMPTION THE ASSESSEE COULD NOT BE TREATED I N DEFAULT. 16. NEXT FULL BENCH OF DELHI HIGH COURT WAS CONSTITU TED AND VIDE AN ORDER DATED 27/08/1993 IN THE CASE OF CIT VS. SO PHIA FINANCE LTD. 205 ITR 98(DEL.)[FB] THE AFORECITED DECISION OF CIT VS . STELLAR INVESTMENT LTD.(SUPRA) WAS REVERSED. THERE WAS A PETITION BEF ORE THE HONBLE DELHI HIGH COURT U/S.256(2) WHICH HAS BEEN REFERRED TO TH E FULL BENCH BECAUSE THE CORRECTNESS OF THE OBSERVATIONS IN THE JUDGMENT OF A DIVISION BENCH IN THE CASE OF CIT VS. STELLAR INVESTMENT LTD. 192 ITR 287 WAS DOUBTED. THE CRUX OF THIS DECISION OF THE FULL BENCH WAS THA T IF THE SHAREHOLDERS ARE IDENTIFIED AND IT IS ESTABLISHED THAT THEY HAVE INVESTED MONEY IN THE PURCHASE OF SHARES THEN THE AMOUNT RECEIVED BY THE COMPANY WOULD BE REGARDED AS A CAPITAL RECEIPT AND TO THAT EXTENT TH E OBSERVATION IN STELLAR ITA NOS.1989/AHD /2003 & ITA NO.2688/AHD/2005 ITO/DY.CIT VS. ANKUSH FINSTOCK LTD. ASST.YEAR 1996-97 - 19 - INVESTMENT LTD.(SUPRA) WAS HELD AS CORRECT. THE HO NBLE FULL BENCH HAS FURTHER SAID THAT IF THE SUBSCRIBERS TO THE CAPITAL WERE NOT GENUINE THEN UNDER NO CIRCUMSTANCES THE AMOUNT OF SHARE CAPITAL BE REGARDED AS DISCLOSED INCOME OF THE COMPANY. IT WAS A CASE OF A LIMITED COMPANY IN THE BUSINESS OF STOCKS AND FINANCING. BY INVOKING THE PROVISIONS OF SECTION 263 THE COMMISSIONER HAS ARRIVED AT THE CON CLUSION THAT THERE WAS LACK OF ENQUIRY BY THE ITO. IT WAS HELD THAT I T WAS THE DUTY OF THE ITO TO ENQUIRE INTO THE GENUINENESS OF THE SHAREHOL DERS AND DIRECTED TO ENQUIRE WHETHER THE SO-CALLED SHAREHOLDERS WERE ACT UALLY IN EXISTENCE OR NOT. THE TRIBUNAL HAS FOUND THAT THE COMPANY HAD FILED A LARGE NUMBER OF ENCLOSURES ALONGWITH ITS RETURN INCLUDING THE LI ST OF SHAREHOLDERS FORMS CONTAINING THE FULL ADDRESSES AS WELL AS THE ALLOTMENT LETTERS BEFORE THE ITO. THE TRIBUNAL CAME TO THE CONCLUSION THAT THE COMPANY WAS INCORPORATED AND THE MONEY WAS RECEIVED IMMEDIATELY ON INCORPORATION WOULD SHOW THAT EVEN U/S.68 NO ASSESSMENT COULD B E MADE IN THE HANDS OF THE COMPANY. RELEVANT OBSERVATION IS WORTH RE PRODUCTION: IT IS NEITHER NECESSARY NOR DESIRABLE TO GIVE EXA MPLES TO INDICATE UNDER WHAT CIRCUMSTANCE SECTION 68 OF THE ACT CAN O R CANNOT BE INVOKED. WHAT IS CLEAR HOWEVER IS THAT SECTION 68 CLEARLY PERMITS AN INCOME-TAX OFFICER TO MAKE ENQUIRIES WITH REGARD TO THE NATURE AND SOURCE OF ANY OR ALL THE SUMS CREDITED IN THE B OOKS OF ACCOUNT OF THE COMPANY IRRESPECTIVE OF THE NOMENCLATURE OR THE SOURCE INDICATED BY THE ASSESSEE. IN OTHER WORDS THE TRUT HFULNESS OF THE ASSERTION OF THE ASSESSEE REGARDING THE NATURE AND THE SOURCE OF THE CREDIT IN ITS BOOKS OF ACCOUNT CAN BE GONE INTO BY THE INCOME- TAX OFFICER. IN THE CASE OF STELLAR INVESTMENT LTD. [1991] 192 ITR 287 (DELHI) THE INCOME-TAX OFFICER HAD ACCEPTED TH E INCREASED SUBSCRIBED SHARE CAPITAL. SECTION 68 OF THE ACT WAS NOT REFERRED TO AND THE OBSERVATIONS IN THE SAID JUDGMENT CANNOT ME AN THAT THE ITA NOS.1989/AHD /2003 & ITA NO.2688/AHD/2005 ITO/DY.CIT VS. ANKUSH FINSTOCK LTD. ASST.YEAR 1996-97 - 20 - INCOME-TAX OFFICER CANNOT OR SHOULD NOT GO INTO THE QUESTION AS TO WHETHER THE ALLEGED SHAREHOLDERS ACTUALLY EXISTED O R NOT. IF SHAREHOLDERS ARE IDENTIFIED AND IT IS ESTABLISHED T HAT THEY HAVE INVESTED MONEY IN THE PURCHASE OF SHARES THEN THE A MOUNT RECEIVED BY THE COMPANY WOULD BE REGARDED AS CAPITAL RECEIPT AND TO THAT EXTENT THE OBSERVATIONS IN THE CASE OF STELLAR INVE STMENT LTD. [1991] 192 ITR 287 (DELHI) ARE CORRECT BUT IF ON THE OTHER HAND THE ASSESSEE OFFERS NO EXPLANATION AT ALL OR THE EX PLANATION OFFERED IS NOT SATISFACTORY THEN THE PROVISIONS OF SECTION 68 MAY BE INVOKED. IN THE LATTER CASE SECTION 68 BEING A SUB STANTIVE SECTION EMPOWERS THE INCOME-TAX OFFICER TO TREAT SUCH A SUM AS INCOME OF THE ASSESSEE WHICH IS LIABLE TO BE TAXED IN THE PRE VIOUS YEAR IN WHICH THE ENTRY IS MADE IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE HONBLE FULL BENCH HAS ALSO MADE CLEAR THAT IT WAS NOT THEIR INTENTION TO DECIDE AS TO WHAT EXTENT THE ONUS IS W HEN AN AMOUNT IS CREDITED IN THE BOOKS OF ACCOUNT IN SHARE CAPITAL A ND WHEN DOES THAT ONUS STAND DISCHARGED BECAUSE THAT WILL DEPEND ON THE FA CTS OF EACH CASE. THUS FULL BENCH DECISION HAS MADE CLEAR THAT IF THE ASSESSEE OFFERS NO EXPLANATION OR THE EXPLANATION OFFERED IS NOT SATIS FACTORY THEN SECTION 68 HAS TO BE INVOKED BEING A SUBSTANTIVE SECTION AND EMPOWERS THE ITO TO TREAT SUCH AMOUNT AS THE INCOME OF THE ASSESSEE LI ABLE TO BE TAXED IN THE PREVIOUS YEAR IN WHICH THE ENTRY IS MADE IN THE BOO K OF ACCOUNT. SINCE IN THE SAID CITED APPEAL FACTS HAVE REVEALED THAT NO EXPLANATION WAS OFFERED AND THE NOTICES COULD NOT BE SERVED THEN THE PROVIS IONS OF SECTION 68 WERE INVOKED TO ASSESS THE IMPUGNED AMOUNT IN THE HANDS OF THE ASSESSEE. 16.1 THEREAFTER THE AFORESAID DECISION OF STELLAR INVE STMENT LTD. HAS REACHED BEFORE THE HONBLE SUPREME COURT AND VIDE A N ORDER DATED 20/07/2000 TITLED AS CIT VS. STELLAR INVESTMENT LTD . 251 ITR 263(SC) THE ITA NOS.1989/AHD /2003 & ITA NO.2688/AHD/2005 ITO/DY.CIT VS. ANKUSH FINSTOCK LTD. ASST.YEAR 1996-97 - 21 - QUESTION AS REFERRED BY THE REVENUE WAS NOT ADMITTE D AND HELD THAT THE TRIBUNAL CAME TO THE CONCLUSION ON FACTS HENCE NO I NTERFERENCE WAS CALLED FOR. 16.2. FROM THE SIDE OF THE ASSESSEE A DECISION OF HONB LE SUPREME COURT IN THE CASE OF LOVELY EXPORTS PVT.LTD . 216 CTR 195 DATED 11/01/2008 IS CITED. IN THIS CASE THE SLP OF THE REVENUE DEPARTMENT WAS DISMISSED BUT AN IMPORTANT OBSERV ATION WAS MADE THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE A SSESSEE-COMPANY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAMES ARE GIVEN T O THE AO THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIV IDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. RELEVANT PORTION REPRODUCED BELOW:- ORDER BY THE COURT:- DELAY CONDONED. 2. 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 TH E SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY I S 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 JUDGEMENT. 3. SUBJECT TO THE ABOVE SPECIAL LEAVE PETITION IS DISMISSED. 17. RATHER IN A LATEST DECISION OF HONBLE DELHI HIGH COURT PRONOUNCED IN THE CASE OF CIT VS. OASIS HOSPITALIT IES P.LTD. REPORTED AT [2001]333 ITR 19 (DEL.) THE HONBLE COURT HAS HELD AS UNDER: ITA NOS.1989/AHD /2003 & ITA NO.2688/AHD/2005 ITO/DY.CIT VS. ANKUSH FINSTOCK LTD. ASST.YEAR 1996-97 - 22 - THE INITIAL BURDEN IS UPON THE ASSESSEE TO EXPLAIN THE NATURE AND SOURCE OF THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSE E. IN ORDER TO DISCHARGE THIS BURDEN THE ASSESSEE IS REQUIRED TO PROVE (I) THE IDENTITY OF THE SHARE- HOLDER (II) THE GENUINENESS OF THE TRANSACTION AN D (C) THE CREDITWORTHINESS OF THE SHAREHOLDERS. IN CASE THE INVESTOR/SHAREHOLDER IS AN INDIVIDUAL SOME DOCUMENTS WILL HAVE TO BE FILED OR THE SHAREHOLDER WILL HAVE TO BE PRODUCED BEFORE THE ASSESSING OFFICER TO PROVE HIS IDENTITY. IF THE CREDITOR/SUBSCRIBER IS A COMPANY THEN THE DETAILS IN THE FORM OF REGISTER ED ADDRESS OR PAN IDENTITY ETC. CAN BE FURNISHED. WHEN THE MONEY IS RECEIVED BY CHEQUE AND IS TRANSMITTED THROUGH BANKING OR OTHER INDISPUTABLE C HANNELS THE GENUINENESS OF THE TRANSACTION WOULD BE PROVED. OTHER DOCUMENTS SHOWING THE GENUINENESS OF THE TRANSACTION COULD BE COPIES OF T HE SHAREHOLDERS REGISTER SHARE APPLICATION FORMS SHARE TRANSFER REGISTER E TC. AS FAR AS THE CREDITWORTHINESS OR FINANCIAL STRENGTH OF THE CREDI TOR/SUBSCRIBER IS CONCERNED THAT CAN BE PROVED BY PRODUCING THE BANK STATEMENT OF THE CREDITORS/SUBSCRIBERS SHOWING THAT IT HAD SUFFICIEN T BALANCE IN ITS ACCOUNTS TO ENABLE IT TO SUBSCRIBE TO THE SHARE CAPITAL. ONCE T HESE DOCUMENTS ARE PRODUCED THE ASSESSEE WOULD HAVE SATISFACTORILY DI SCHARGED THE ONUS CAST UPON HIM. THEREAFTER IT IS FOR THE ASSESSING OFFIC ER TO SCRUTINISE THE SAME AND IN CASE HE NURTURES ANY DOUBT ABOUT THE VERACIT Y OF THESE DOCUMENTS TO PROBE THE MATTER FURTHER. HOWEVER TO DISCREDIT THE DOCUMENTS PRODUCED BY THE ASSESSEE ON THE ASPECTS THERE HAVE TO BE SOME COGENT REASONS AND MATERIALS FOR THE ASSESSING OFFICER AND HE CANNOT G O INTO THE REALM OF SUSPICION. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD RECEIVED SHARE APPLICATION MONEY OF RS. 3 LAKHS EACH FROM SIX PRIV ATE LIMITED COMPANIES DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR 200 4-05. NOTICE UNDER SECTION 148 WAS ISSUED IN RESPECT OF THE ASSESSMENT YEAR 2003-04 AND REASSESSMENT DONE. THE ASSESSING OFFICER MADE ADDIT ION OF RS. 18 LAKHS TO THE INCOME OF THE ASSESSEE ON PROTECTIVE BASIS IN T HE ASSESSMENT YEAR 2004- 05. ON APPEAL : _HELD _ DISMISSING THE APPEAL THAT THE ASSESSEE HA D FILED COPIES OF PAN ACKNOWLEDGMENT OF FILING INCOME-TAX RETURNS OF THE COMPANIES THEIR BANK ACCOUNTS STATEMENTS FOR THE RELEVANT PERIOD BUT HAD NOT PRODUCED THE DIRECTORS OF THE COMPANIES. THE ADDITION MADE BY TH E ASSESSING OFFICER COULD NOT BE SUSTAINED AS THE PRIMARY ONUS WAS DISCHARGED BY THE ASSESSEE. THE ASSESSING OFFICER HAD NOT INVESTIGATED WHETHER THE MODUS OPERANDI BY THE ENTRY OPERATOR DISCUSSED BY THE INVESTIGATION WING EXISTED IN THE CASE OR NOT. EVEN THE BANK STATEMENTS AS CLAIMED BY THE ASSESSIN G OFFICER REVEALED THAT THE ASSESSEE HAD RECEIVED CHEQUES FROM THE SHAREHOL DERS. THE ASSESSEE RECEIVED RS. 99.18 LAKHS ON ACCOUNT OF SHARE APPLICATION MONEY. IT FILED CONFIRMATIONS FROM 30 PARTIES. NOTI CES ISSUED WERE RETURNED UNSERVED ON 22 OUT OF 30 PARTIES AND THE REMAINING 8 PARTIES DID NOT RESPOND. THE INSPECTOR MADE LOCAL INQUIRIES WHICH REVEALED T HAT THE PARTIES DID NOT EXIST AT THE GIVEN ADDRESSES. ON ENQUIRIES FROM THE BANK THE ASSESSING ITA NOS.1989/AHD /2003 & ITA NO.2688/AHD/2005 ITO/DY.CIT VS. ANKUSH FINSTOCK LTD. ASST.YEAR 1996-97 - 23 - OFFICER FOUND VARIOUS DISCREPANCIES BETWEEN THE STA TEMENT SENT BY THE BANK AND THE STATEMENT PROCURED BY THE ASSESSEE. THE ASS ESSING OFFICER CONFRONTED THE ENTIRE MATERIAL TO THE ASSESSEE AND ALLOWED VARIOUS OPPORTUNITIES BUT THE ASSESSEE DID NOT PRODUCE A SI NGLE PARTY. THEREFORE THE ASSESSING OFFICER MADE AN ADDITION OF RS. 99.18 LAK HS ON ACCOUNT OF UNEXPLAINED SHARE CAPITAL UNDER SECTION 68. SIMILAR LY THE ASSESSING OFFICER ALSO MADE ADDITION OF RS. 3.10 LAKHS ON ACCOUNT OF UNEXPLAINED CREDIT UNDER SECTION 68. THE COMMISSIONER (APPEALS) DELETED THE ADDITION. THIS WAS CONFIRMED BY THE TRIBUNAL. ON APPEAL : _HELD _ DISMISSING THE APPEAL THAT THE ADDITION WA S RIGHTLY DELETED BY THE COMMISSIONER (APPEALS) AND THE TRIBUNAL. REQUISITE DOCUMENTS WERE F- URNISHED SHOWING THE EXISTENCE OF THE SHAREHOLDERS FROM ACCOUNTS AND EVEN THEIR INCOME-TAX DETAILS. FROM BANK ACCOUNTS OF THE SE SHAREHOLDERS IT WAS FOUND THAT THEY HAD DEPOSITED CERTAIN CASH AND THE SOURCE THEREOF WAS QUESTIONABLE. THE ASSESSING OFFICER SHOULD HAVE MADE FURTHER PROB E WHICH HE FAILED TO DO. MOREOVER THE REMEDY WITH TH E DEPARTMENT LAY IN REOPENING THE CASE OF THE INVESTORS AND THE ADDITIO N COULD NOT BE MADE IN THE HANDS OF THE ASSESSEE. _HELD _ALSO THAT IN SO FAR AS THE STATEMENTS OF TH E PERSONS WHO WERE PRODUCED WERE CONCERNED THEY WERE GONE INTO AND AN ALYSED BY THE THREE AUTHORITIES BELOW ON THE BASIS OF WHICH FINDING OF FACT WAS ARRIVED AT THAT NEITHER THEIR IDENTITY WAS ESTABLISHED NOR THEIR CA PACITY TO INVEST THIS KIND OF MONEY WAS PROVED. THEY WERE ALL AGRICULTURISTS AND HAD NOT PRODUCED A SINGLE DOCUMENT TO SUPPORT THEIR VERSION. THE ASSES SEE HAD NOT BEEN ABLE TO DISCHARGE THE ONUS AND THE ADDITION WAS RIGHTLY MAD E. THIS WAS A CASE WHERE THE ASSESSEE COULD NOT DISCHARGE THE ONUS BUT IT COULD NOT BE SAID THAT IT WAS THE CASE OF CONCEALMENT OF INCOME. THE TRIBU NAL RIGHTLY DELETED THE PENALTY. 17.1. THE SALIENT FEATURE OF THESE DECISIONS ARE THAT THE ASSESSEE HAS TO DISCHARGE THE PRIMARY ONUS BY PLACING ON RECORD THE BASIC INFORMATION ABOUT THE INVESTORS. THIS INITIAL BURDEN CAN BE SA ID TO BE DISCHARGED IF THE NAMES AND ADDRESSES OF THE INVESTORS ARE PLACED ON RECORD. FURTHER INITIAL BURDEN CAN ALSO BE SAID TO BE DISCHARGED IF THE MODE OF PAYMENT IS ALSO PLACED ON RECORD. THE INITIAL BURDEN OR THE P RIMARY ONUS CAN ALSO BE SAID TO BE DISCHARGED IF THE GENUINENESS OF THE TRA NSACTION I.E. SHARE APPLICATIONS ARE ALSO PLACED ON RECORD. AS FAR A S THE FACTS OF THE PRESENT APPEAL IS CONCERNED IT IS EVIDENT THAT ALL THOSE B ASIC INFORMATION WERE ITA NOS.1989/AHD /2003 & ITA NO.2688/AHD/2005 ITO/DY.CIT VS. ANKUSH FINSTOCK LTD. ASST.YEAR 1996-97 - 24 - VERY MUCH ON RECORD. COMPILATION PLACED BEFORE U S CONTAINS A SUMMARY CHART NARRATING THE DATES OF ALLOTMENT NAM ES OF THE SHARE- HOLDERS THEIR ADDRESSES NUMBER OF SHARES ALLOTTED CONFIRMATION STATUS ETC. IT IS ALSO VEHEMENTLY CONTESTED THAT SINCE ALL THE PAYMENTS HAVE BEEN RECEIVED THROUGH CHEQUES THEREFORE THE PRIMA RY BURDEN TO ESTABLISH THE SOURCE OF MONEY HAS DULY BEEN DISCHARGED BY THE ASSESSEE. ONCE ALL THOSE DOCUMENTS WERE PRODUCED THEN IT CAN BE SAFEL Y HELD THAT THE REQUISITE PRIMARY ONUS AS CASTED UPON AN ASSESSEE HAS BEEN DISCHARGED. THEREAFTER IT IS FOR THE AO TO SCRUTINIZE THOSE DE TAILS. THE HONBLE COURTS AS CITED HEREINABOVE HAVE SUGGESTED THAT I F THE AO HAD MADE CERTAIN ENQUIRIES AND NURTURES ANY DOUBT ABOUT THE CREDITWORTHINESS OF THOSE INVESTORS THEN HE IS FREE TO TAKE APPROPRIAT E ACTION IN THEIR RESPECTIVE HANDS. HOWEVER IT IS NECESSARY THAT TO PROBE FURTHER THERE MUST BE BASIC INFORMATION IN POSSESSION OF THE AO. THOSE BASIC INFORMATION CAN BE SAID TO BE THE CORRECT ADDRESSES OF THE INVESTORS SO THAT FURTHER ACTION CAN BE TAKEN AGAINST THEM. F OR THIS LEGAL PROPOSITION WE PLACE RELIANCE ON ITAT C BENCH DECISION OF MOD ERN CEMENT INDUSTRIES (ITA NO.2506/AHD/2006 A.Y. 1992-93 & I TA NO.1673/AHD/2007 404/AHD/2008 A CONSOLIDATED ORDE R DATED 30/06/2011 ONE OF US I.E. J.M. IN THE SIGNATORY) FOLLOWING THE ABOVE CITED DECISIONS WE HEREBY AFFIRM THE LEGAL AS ALSO FACTUAL FINDING OF LD.CIT(A) AND DISMISS THE GROUND OF THE REVENUE. 18. IN THE RESULT REVENUES APPEAL I.E. ITA NO.2 688/AHD/2005 IS DISMISSED. ITA NOS.1989/AHD /2003 & ITA NO.2688/AHD/2005 ITO/DY.CIT VS. ANKUSH FINSTOCK LTD. ASST.YEAR 1996-97 - 25 - (B) ITA NO.1989/AHD/2003 19. IN THIS APPEAL REVENUE HAS CHALLENGED THE DELE TION OF PENALTY LEVIED U/S.271(1)(C) OF RS.1 02 12 690/-. 20. WHILE DELETING THE PENALTY LD.CIT(A) HAS MENT IONED THE APPELLANT COMPANY HAD FURNISHED THE SHARE APPLICATION FORMS D URING THE ASSESSMENT PROCEEDINGS AND THE AO HAD NOT POINTED OUT THAT THO SE SHARE-HOLDERS WERE NOT GENUINE. ACCORDING TO LD.CIT(A) THE AD DITION WAS MADE IN A VERY CASUAL MANNER. IN THE SAID ORDER IT WAS ALSO COMMENTED THAT AO HAD EVEN NOT BROUGHT ANY MATERIAL ON RECORD TO EST ABLISH THAT CASH CREDITORS WERE NOT GENUINE AND THAT THE MONEY HAD B ELONGED TO THE DIRECTORS OR THE ASSESSEE-COMPANY WHICH WAS ROUTED AS A SHAREHOLDERS APPLICATION MONEY. IN ADDITION TO THESE OBSERVAT IONS NOW THE ISSUE OF ADDITION U/S.68 OF THE ACT IS SETTLED IN FAVOUR OF THE ASSESSEE THEREFORE NO MORE RES INTEGRA. WE THEREFORE HOLD THAT THE PENALTY WAS RIGHTLY DELETED. THIS GROUND OF THE REVENUE IS DISMISSED. 21. IN THE RESULT BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. SD/- SD/- ( .. ) ( ) '# ( T.R. MEENA ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL ME MBER AHMEDABAD; DATED 30/ 03 /2012 ..% .%../ T.C. NAIR SR. PS ITA NOS.1989/AHD /2003 & ITA NO.2688/AHD/2005 ITO/DY.CIT VS. ANKUSH FINSTOCK LTD. ASST.YEAR 1996-97 - 26 - ' ' -. /'.+ ' ' -. /'.+ ' ' -. /'.+ ' ' -. /'.+/ COPY OF THE ORDER FORWARDED TO : 1. 01 / THE APPELLANT 2. -201 / THE RESPONDENT. 3. 3 / CONCERNED CIT 4. 3() / THE CIT(A)- 5. .67 -% / DR ITAT AHMEDABAD 6. 78 9& / GUARD FILE. ' % ' % ' % ' % / BY ORDER 2. - //TRUE COPY// : :: :/ // / ; ; ; ; ( DY./ASSTT.REGISTRAR) / ITAT AHMEDABAD 1. DATE OF DICTATION.. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S30.3.12 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 30.3.12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER