ITO, New Delhi V. M/s Lifeline Biotech Limited, New Delhi

ITA 2620/DEL/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81650 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 02-09-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 01-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR B R R KUMAR
• Assessee Lawyers: ASHWANI TANEJA
• Keywords: Depreciation; Opportunity of being heard; Additional evidence; Reasonable cause; Assessment record; Onus to prove
• Section: 43B; 142(1); 133(6); 131; 68; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SH. R. S. SYAL, AM AND SH. A. T. VARKEY, JM ITA NO. 2620/DEL/2010 : ASSTT. YEAR : 2006-07 INCOME-TAX OFFICER, WARD-4(4), NEW DELHI VS M/S LIFE LINE BIOTECH LTD., B-86, 1 ST FLOOR, OKHLA INDL. AREA, PHASE-II, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AAACL1154F ASSESSEE BY : SH. ASHWANI TANEJA & SOMIL AGGARWAL & ROHAN KHARE, ADV. REVENUE BY : DR. B. R. R. KUMAR, SR. DR DATE OF HEARING : 03.09.2014 DATE OF PRONOUNCEMENT : 8.9.2014 ORDER PER R. S. SYAL, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A) ON 16.3.2010 IN RELATION TO THE ASSE SSMENT YEAR 2006-07. 2. THE FIRST GROUND IS GENERAL WHICH DOES NOT REQUI RE ANY ADJUDICATION. 3. THE SECOND GROUND OF THE APPEAL IS AGAINST THE DELETION OF ADDITION OF RS. 95,30,000/- MADE BY THE ASSESSING OFFICER (AO) U/S 68 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER ALSO CALLED THE ACT), BEING THE UNEXPLAINED SHARE APPLICATION MONEY. GROUND NO. 9 O F THE APPEAL IS ITA NO. 2620/DEL/2010 LIFELIN E BIOTECH LIMITED 2 AGAINST ACCEPTING ADDITIONAL EVIDENCE BY THE LD. CI T(A) IN VIOLATION OF UNDER RULE 46A OF THE INCOME-TAX RULES, 1962, DESP ITE THE FACT THAT THE AO IN HIS REMAND REPORT HAD OBJECTED TO THE ADMISS ION OF ADDITIONAL EVIDENCE. 4. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE FILED ITS RETURN DECLARING INCOME OF RS.6,44,246/-. THE ASSES SEE SHOWED TO HAVE RECEIVED SHARE APPLICATION MONEY TO THE TUNE OF RS. 95,36,000/-. THE ASSESSING OFFICER, VIDE QUESTION NO. 18 OF THE QUES TIONNAIRE DATED 28.8.2008, REQUIRED THE ASSESSEE TO FURNISH THE DET AILS OF SHARE APPLICATION MONEY INTRODUCED DURING THE YEAR WITH N AME/ADDRESS/PROOF OF IDENTITY/PAN /CONFIRMATION ETC. OF EACH OF THE S UBSCRIBERS. THE ASSESSEE FURNISHED ONLY A BARE LIST OF PERSONS WHO HAD PAID SHARE APPLICATION MONEY AMOUNTING TO RS.95.36 LAC VIDE IT S LETTER DATED 10/20.10.2008. NEITHER ANY PAN DETAILS NOR ADDRESSE S OR ANY OTHER PARTICULARS OF THE SHARE APPLICANTS WERE GIVEN. VID E ORDER SHEET ENTRY DATED 24.10.2008, THE ASSESSEE WAS AGAIN ASKED TO F URNISH COMPLETE DETAILS/PROOFS OF IDENTITY/CONFIRMATIONS AND COPIES OF INCOME-TAX RETURNS. DESPITE SEVERAL REMINDERS, THE ASSESSEE FA ILED TO FURNISH SUCH DETAILS TILL THE LAST DATE OF HEARING. IN THE LIGHT OF THESE FACTS, THE ASSESSING OFFICER MADE ADDITION OF RS.95.36 LAC U/S 68 OF THE ACT. ITA NO. 2620/DEL/2010 LIFELIN E BIOTECH LIMITED 3 5. DURING THE COURSE OF FIRST APPELLATE PROCEEDI NGS, THE ASSESSEE FILED ADDITIONAL EVIDENCE IN THE FORM OF NAMES AND ADDRES SES OF THE SHARE APPLICANTS, PANS, MODE OF PAYMENT OF SHARE APPLICAT ION MONEY, DETAILS OF BANK OF THE SHARE APPLICANTS AND THE CONFIRMATIO NS. IT WAS REQUESTED THAT THE SAME BE ADMITTED UNDER RULE 46A. THE LD. C IT(A) SENT SUCH EVIDENCE TO THE ASSESSING OFFICER REQUESTING HIM TO SEND THE REMAND REPORT. THE ASSESSING OFFICER, IN REMAND REPORT SU BMITTED VIDE HIS LETTER DATED 29.10.2010, REQUESTED THE LD. CIT(A) NOT TO A DMIT THE ADDITIONAL EVIDENCE AS MORE THAN ADEQUATE OPPORTUNITIES WERE GRANTED TO THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S, WHICH IT FAILED TO AVAIL. IN CONTESTING THE ADMISSION OF ADDITIONAL EV IDENCE, THE ASSESSING OFFICER RELIED ON SUB-RULE (1) OF RULE 46A TO CONTE ND THAT THE ASSESSEE WAS NEVER DENIED ANY OPPORTUNITY TO FILE ADDITIONAL EVIDENCE NOR WAS IT PREVENTED FROM DOING SO BY SUFFICIENT CAUSE. THE LD . CIT(A) ACCEPTED THE ADDITIONAL EVIDENCE AND THEREAFTER, DELETED THE ADDITION AMOUNTING TO RS.95.36 LAC MADE BY THE AO U/S 68 OF THE ACT. THE REVENUE IS AGGRIEVED AGAINST THE ADMISSION OF ADDITIONAL EVIDE NCE AND THE DELETION OF THE ADDITION. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE RELEVANT MATERIAL ON RECORD. IN ORDER TO DECIDE THE GROUND C HALLENGING THE ADMISSION OF ADDITIONAL EVIDENCE IN CONTRAVENTION O F RULE 46-A, IT IS RELEVANT TO ACCENTUATE CERTAIN DETAILS QUA THE GRANTING OF OPPORTUNITY OF ITA NO. 2620/DEL/2010 LIFELIN E BIOTECH LIMITED 4 HEARING BY THE AO. NOTICE U/S 143(2) OF THE ACT WA S ISSUED ON 22.11.2007 AND WAS ALSO SERVED ON THE ASSESSEE. VID E NOTICE DATED 25.6.2008 ISSUED U/S 142(1) OF THE ACT, THE ASSESSE E WAS ASKED TO FURNISH COPIES OF THE ANNUAL ACCOUNTS WITH SCHEDULES AND CO MPUTATION OF INCOME, WHICH WERE NOT FURNISHED. ANOTHER NOTICE DA TED 14.7.2008 U/S 142(1) WAS ISSUED REQUESTING THE ASSESSEE TO FURNIS H THE INFORMATION AS EARLIER CALLED FOR. THIS NOTICE WAS SERVED BY HAND THROUGH THE INSPECTOR. THE ASSESSEE REQUESTED FOR ADJOURNMENT VIDE ITS LET TER DATED 21.7.2008. THE DOCUMENTS WERE FILED VIDE LETTER DATED 8.6.2008 ON 25.8.2008. THEREAFTER, A DETAILED QUESTIONNAIRE ALONG WITH THE NOTICES U/S 143(2) AND 142(1) WAS ISSUED ON 28.8.2008, FIXING THE CASE FO R HEARING ON 5.9.2008. ON THE ASSESSEES REQUEST, THE HEARING WAS ADJOURNE D TO 11.9.2008. ON THAT DATE AGAIN, THE ASSESSEE REQUESTED FOR ADJOURN MENT, WHICH WAS ALLOWED AND THE HEARING WAS ADJOURNED TO 15.9.2008. THE ASSESSEE DID NOT ATTEND ON THE SCHEDULED DATE. THEREAFTER, NOTIC E FOR PENALTY U/S 271(1)(B) OF THE ACT WAS ISSUED. ON 10.10.2008 AND SUBSEQUENTLY ON 15.10.2008, 20.10.2008 AND 31.10.2008, THE ASSESSEE FILED PART DETAILS. THE HEARING WAS ADJOURNED ON THE ASSESSEES REQUEST TO 6.11.2008. THE ASSESSEE DID NOT ATTEND ON 6.11.2008. A LAST OPPORT UNITY WAS GIVEN VIDE LETTER DATED 11.11.2008 REQUIRING THE ASSESSEE TO F URNISH THE DETAILS AND PRODUCE BOOKS OF ACCOUNTS WITH BILLS/VOUCHERS ETC. ON 18.11.2008. THE ASSESSEE FAILED TO ATTEND ON THAT DATE ALSO. THEREA FTER, A FINAL OPPORTUNITY WAS GIVEN TO THE ASSESSEE VIDE LETTER DATED 26.11.2 008 FIXING THE DATE OF ITA NO. 2620/DEL/2010 LIFELIN E BIOTECH LIMITED 5 HEARING AS 3.12.2008. THE AUTHORIZED REPRESENTATIVE APPEARED ON THE SCHEDULED DATE AND AGAIN FILED ONLY PART DETAILS. N EITHER THE BOOKS OF ACCOUNTS NOR ANY SUPPORTING BILLS/VOUCHERS WERE PRO DUCED BEFORE THE AO. THAT IS HOW, THE AO FINALIZED THE ASSESSMENT ON THE BASIS OF WHATEVER LITTLE MATERIAL WAS AVAILABLE ON RECORD AN D MADE ADDITION, INTER ALIA , U/S 68 OF THE ACT. IT IS APPARENT FROM THE ABOV E NARRATION OF FACTS THAT THE ASSESSING OFFICER GAVE COUNTLESS OPP ORTUNITIES TO THE ASSESSEE FOR SUBMITTING THE REQUIRED DETAILS SO THA T THE ASSESSMENT MAY BE COMPLETED IN A PROPER MANNER. EXCEPT FOR PART C OMPLIANCE MADE FOUR TIMES IN THE MONTH OF OCTOBER 2008, THE ASSESSEE MI SERABLY FAILED TO FURNISH ALL THE RELEVANT DETAILS CALLED FOR BY THE ASSESSING OFFICER. WHAT TO TALK OF FURNISHING THE DETAILS, THE ASSESSEE EVE N DID NOT PRODUCE ANY BOOKS OF ACCOUNTS AND SUPPORTING BILL/VOUCHERS. SPE CIFICALLY, QUA THE ADDITION ON ACCOUNT OF SHARE APPLICATION MONEY, THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO FILE CONFIRMATIONS FROM TH E PERSONS WHO HAD APPLIED FOR SHARES ALONG WITH THEIR ADDRESSES, PROO FS OF IDENTITY AND PAN ETC. NONE OF SUCH DETAILS WERE FILED EXCEPT GIVING A BALD LIST CONTAINING ONLY NAMES OF SUCH PERSONS. LEFT WITH NO OPTION, TH E ASSESSING OFFICER ADDED THE SAME U/S 68 OF THE ACT. NOW, THE MOOT QUE STION IS WHETHER THE LD. CIT(A) WAS JUSTIFIED IN ADMITTING THE ADDITION AL EVIDENCE IN SUCH CIRCUMSTANCES AND THEN DELETING THE ADDITION BY HO LDING THAT THE ASSESSEE DISCHARGED THE INITIAL BURDEN TO PROVE THE GENUINENESS OF THE CREDIT ENTRIES. IN DELETING THIS ADDITION, THE LD. CIT(A) OBSERVED IN PARA ITA NO. 2620/DEL/2010 LIFELIN E BIOTECH LIMITED 6 4.3 OF THE IMPUGNED ORDER: THAT THE ASSESSING OFFICER COULD NOT POINT OUT ANY DISCREPANCY IN THE EVIDENCES RELIED UPON BY THE ASSESSEE. HE HAS NEITHER BROUGHT OUT ANY DIRECT OR INFERENTIAL EVIDE NCE TO CONTRADICT THE CONTENTION OF THE ASSESSEE. IT IS FURTHER OBSERVED THAT EVEN THAT A.O HAS VAST POWERS U/S 131 AND 133(6) OF THE ACT, HE HAS NOT USED ANY OF HIS POWERS TO VERIFY THE GENUINENESS OF THE CLAIM OF TH E ASSESSEE BY VERIFYING THE DOCUMENTS FURNISHED BY IT. FROM THE ABOVE OBSERVATIONS OF THE LD. FIRST APPELLATE AUTHORITY, IT IS MANIFEST THAT HE HAS IMPUTED INACTION AND FAILURE ON THE ASSESSING OFFICER IN POINTING OUT DE FICIENCIES IN THE EVIDENCE, WHEREAS THE FACT IS THAT THE ASSESSEE FAI LED TO FILE ANY EVIDENCE BEFORE THE ASSESSING OFFICER DURING THE COURSE OF A SSESSMENT PROCEEDINGS. THE LD. CIT(A) FURTHER NOTICED IN THE SAME PARA THAT: THE SHARE APPLICANTS WERE EXISTING ON THE FILE OF THE INCOME-TAX DEPARTMENT AND THEIR INCOME-TAX DETAILS WERE MADE A VAILABLE TO THE AO. IT WAS EQUALLY THE DUTY OF THE AO TO HAVE TAKEN STE PS TO VERIFY THEIR ASSESSMENT RECORDS AND IF NECESSARY TO ALSO HAVE THEM EXAMINED BY THE RESPECTIVE AOS HAVING JURISDICTION OVER THEM (S HARE APPLICANTS), WHICH HAS NOT BEEN DONE BY HIM. AGAIN WE ARE UNAB LE TO AGREE WITH THE LD. CIT(A) THAT THE AO COULD HAVE VERIFIED THE RECO RDS OF THE DEPARTMENT, WHEN THE FACT IS THAT THE ASSESSEE DID NOT PRODUCE ANY DETAIL WORTH THE NAME OF SUCH SHARE APPLICANTS INCLUDING T HEIR PAN NOS. OR ADDRESSES ETC. THE LD. CIT(A) APPEARS TO HAVE BEEN SWAYED BY THE ASSESSEES POINT OF VIEW AND TREATED THE ENTIRE ADD ITIONAL EVIDENCE AS A ITA NO. 2620/DEL/2010 LIFELIN E BIOTECH LIMITED 7 GOSPEL TRUTH WITHOUT FEELING ANY NEED OF VERIFICATI ON, MORE SPECIFICALLY WHEN THE ASSESSEE HAD ADOPTED COMPLETELY UNRECEPTIV E ATTITUDE BEFORE THE AO. HE DECIDED THE ISSUE AS IF THE ASSESSING OF FICER HAD ALSO EXAMINED THE ENTIRE EVIDENCE AND HAD NOT ADVERSELY COMMENTED ON IT. WE WILL DISCUSS INFRA (PARAS 8.1 TO 8.3 OF THIS ORDER) THE INFIRMITY RENDERING THE ADMISSION OF THE ADDITIONAL EVIDENCE BY THE LD. CIT(A) AS ILLEGAL, WHEN THE ASSESSING OFFICER OPPOSED ITS ADM ISSION TOOTH AND NAIL WITHOUT DELIBERATING UPON THE MERITS OF SUCH ADDITI ONAL EVIDENCE. 7.1. NOW WE TURN TO THE VIEW TAKEN BY THE AO IN THE REMAND REPORT THAT THE ADDITIONAL EVIDENCE BE NOT ADMITTED AS THE PRESCRIPTION OF SUB- RULE (1) OF RULE 46A WAS NOT SATISFIED. A PERUSAL O F THIS SUB-RULE TRANSPIRES THAT AN ASSESSEE CAN FILE ADDITIONAL EVI DENCE, INTER ALIA , UNDER CLAUSE (B) ON THE GROUND THAT HE WAS PREVENTED BY S UFFICIENT CAUSE FROM PRODUCING THE EVIDENCE WHICH HE WAS CALLED UPON TO PRODUCE BY THE ASSESSING OFFICER. THE LD. CIT(A) HAS COVERED THE C ASE OF THE ASSESSEE UNDER THIS CLAUSE OF RULE 46A(1) BY HOLDING THAT IT WAS PREVENTED FROM FILING SUCH EVIDENCE INCLUDING THE PARTICULARS OF S HARE APPLICANTS WITH THEIR ADDRESSES AND PAN ETC. BEFORE THE AO DUE TO SERIOUS DIFFERENCES AMONGST THE DIRECTORS WHICH PARALYZED THE ENTIRE BU SINESS DURING THE JUNE 2008 TO DECEMBER 2008. WE FIND THAT SUCH POSIT ION STATED BEFORE THE LD. CIT(A) AND SO ACCEPTED BY HIM WITHOUT ANY S UBSTANTIATION, RUNS CONTRARY TO WHAT EMANATES FROM THE ASSESSMENT ORDER ITSELF. IT CAN BE ITA NO. 2620/DEL/2010 LIFELIN E BIOTECH LIMITED 8 NOTICED THAT THE ASSESSEE FILED PART DETAILS ON FOU R OCCASIONS DURING THE MONTH OF OCTOBER 2008. IF THERE WAS REALLY ANY DISP UTE GOING ON AMONGST THE DIRECTORS DURING THE PERIOD JUNE 2008 T O DECEMBER 2008 WHICH PREVENTED THE ASSESSEE FROM FILING THE REQUIS ITE INFORMATION AS CALLED FOR BY THE A.O, THEN HOW THE ASSESSEE SUCCEE DED IN FURNISHING PART INFORMATION FOUR TIMES IN A ROW IN THE MONTH O F OCTOBER 2008 ITSELF, WHICH OSTENSIBLY FALLS WITHIN THE SO-CALLED PERIOD OF DISPUTE. FURTHER, OUR ATTENTION HAS NOT BEEN DRAWN TOWARDS ANY MATERI AL TO DEMONSTRATE THAT SUCH REASONABLE CAUSE OF THE EXISTENCE OF DISP UTE AMONGST THE DIRECTORS AT THE MATERIAL TIME WAS BROUGHT TO THE N OTICE OF THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THERE IS NO C HANGE IN THE POSITION BEFORE US AS WELL INASMUCH AS DESPITE A SPECIFIC RE QUISITION, THE LD. AR FAILED TO BRING ANY MATERIAL ON RECORD TO ESTABLISH THAT THERE WAS ANY DISPUTE AMONGST THE DIRECTORS DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WHICH COINCIDENTLY CAME TO AN END WITH THE PASSING OF THE ASSESSMENT ORDER. THIS MAKES THE INTENTION OF THE A SSESSEE PATENT THAT IT WAS NOT WILLING TO SHARE THE CRUCIAL DETAILS WITH T HE ASSESSING OFFICER AND INTENTIONALLY AVOIDED FURNISHING THE SAME DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS. 7.2. IT CAN ALSO BE SEEN FROM PARA 4 OF THE IMPUG NED ORDER THAT : ALL THESE SHARE HOLDERS ARE FAMILY MEMBERS AND ASSOCIA TED CONCERNS. IF THE ASSESSEE COULD FILE THE LIST OF SHARE APPLICANT S DURING THE SO-CALLED ITA NO. 2620/DEL/2010 LIFELIN E BIOTECH LIMITED 9 PARALYZED PHASE OF BUSINESS, WE FAIL TO COMPREHEND AS TO WHAT PREVENTED IT IN NOT FURNISHING THE ADDRESSES AND PANS OF SUC H PERSONS, ALL OF WHOM ARE ADMITTEDLY THE FAMILY MEMBERS AND ASSOCIA TED CONCERNS. WHEN THE FACTS OF THE CASE ARE CONSIDERED IN TOTALI TY, IT BECOMES CRYSTAL CLEAR THAT THE ASSESSEE ADOPTED A HOSTILE ATTITUDE AND INTENTIONALLY AVOIDED EXTENDING CO-OPERATION TO THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE THEORY OF THE DISPUTE AMONGST THE DIRECTORS PROPOUNDED BY THE ASSESSEE BEFORE THE LD . CIT(A) TO MAKE IT LOOK LIKE A REASONABLE CAUSE IN TERMS OF RULE 46A, THEREFORE, FALLS TO THE GROUND. 8.1. BE THAT AS IT MAY, IT IS SEEN THAT THE LD. C IT(A) SENT THE DETAILS FURNISHED BY THE ASSESSEE TO THE AO ASKING FOR THE REMAND REPORT. AS DISCUSSED ABOVE, THE ASSESSING OFFICER STRONGLY OBJ ECTED TO THE ADMISSION OF SUCH ADDITIONAL EVIDENCE BY CONTENDING THAT THE CASE WAS NOT COVERED UNDER ANY OF THE FOUR CLAUSES OF RULE 4 6A(1). IT WAS ALSO STATED IN THE REMAND REPORT THAT MORE THAN ADEQUATE OPPORTUNITIES WERE GRANTED TO THE ASSESSEE TO COMPLY WITH THE REQUIREM ENTS AND HENCE THERE COULD BE NO REASON TO ACCEPT THAT THE ASSESSEE WAS PREVENTED BY A REASONABLE CAUSE IN PRODUCING SUCH EVIDENCE CALLED FOR DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE REMAND REPORT HAS BE EN REPRODUCED ON PAGES 2 AND 3 OF THE IMPUGNED ORDER, FROM WHICH IT IS MANIFEST THAT THE AO SIMPLY OBJECTED TO THE ADMISSION OF ADDITIONAL E VIDENCE IN THE LIGHT ITA NO. 2620/DEL/2010 LIFELIN E BIOTECH LIMITED 10 OF THE FACT THAT THERE WAS A COMPLETE FAILURE ON TH E PART OF THE ASSESSEE DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. H E FURTHER MENTIONED THAT THE SUBMISSION OF THE DETAILS LATER ON WOULD N OT DISAPPROVE THE REASONS ON WHICH THE ADDITIONS WERE MADE. IT IS AXI OMATIC THAT THE SUM AND SUBSTANCE OF THE ASSESSING OFFICERS REMAND REP ORT IS THAT HE STRONGLY OBJECTED TO THE ADMISSION OF ADDITIONAL EV IDENCE FOR THE REASONS DISCUSSED ABOVE AND AS SUCH HAD NO REASON TO EMBARK UPON THE EXERCISE OF VERIFYING THE CORRECTNESS OF THE ADDITIONAL EVID ENCE. THE LD. CIT(A) REJECTED THE VIEW POINT OF THE AO BY HOLDING THAT T HE PRESCRIPTION OF SUB- RULE (1) OF RULE 46-A WAS FULFILLED. EX CONSEQUENTI, THE ADDITIONAL EVIDENCE WAS ACCEPTED, BUT WITHOUT CONVEYING TO TH E ASSESSING OFFICER THAT HIS SOLITARY PRELIMINARY OBJECTION TAKEN IN T HE REMAND REPORT WAS REJECTED AND HE MAY VERIFY SUCH ADDITIONAL EVIDENCE ON MERITS AS THE ADDITIONAL EVIDENCE WAS GOING TO BE ADMITTED. 8.2. AT THIS JUNCTURE, IT WOULD BE RELEVANT TO N OTE THE MANDATE OF RULE 46A. SUB-RULE (1) ENUMERATES FOUR CIRCUMSTANCES IN WHICH THE ASSESSEE CAN FILE ADDITIONAL EVIDENCE BEFORE THE LD. CIT(A), WHICH, INTER ALIA, INCLUDE A CASE (B) WHERE THE APPELLANT WAS PREVENT ED BY SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE WHICH HE WAS CALLED UPO N TO PRODUCE BY THE ASSESSING OFFICER. SUB-RULE (3) IS IMPORTANT F OR OUR PURPOSE, WHICH READS AS UNDER : - (3) THE DEPUTY COMMISSIONER (APPEALS) OR, AS THE C ASE MAY BE, THE COMMISSIONER (APPEALS) SHALL NOT TAKE INTO ACCOUNT ANY EVIDENCE PRODUCED ITA NO. 2620/DEL/2010 LIFELIN E BIOTECH LIMITED 11 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 WITN ESS IN REBUTTAL OF THE ADDITIONAL EVIDENCE PRODUCED BY THE APPELLANT. 8.3. IT IS DISCERNIBLE ON A BARE PERUSAL OF THIS SUB-RULE THAT THE CIT(A) SHALL NOT TAKE INTO ACCOUNT ANY FRESH EVIDENCE FILE D BY THE ASSESSEE BEFORE HIM UNLESS THE ASSESSING OFFICER HAS BEEN AL LOWED A REASONABLE OPPORTUNITY TO EXAMINE SUCH EVIDENCE OR DOCUMENT ETC. FILED BY THE ASSESSEE OR TO PRODUCE ANY EVIDENCE OR DOCUMENT ETC . IN REBUTTAL OF SUCH ADDITIONAL EVIDENCE PRODUCED BY THE ASSESSEE. THUS IT IS DIVULGED THAT UNLESS THE ASSESSING OFFICER IS ALLOWED A REASONAB LE OPPORTUNITY TO DO THIS, THE CIT(A) CANNOT TAKE INTO ACCOUNT SUCH ADDI TIONAL EVIDENCE PRODUCED BY THE ASSESSEE BEFORE HIM. THE EXPRESSIO N A REASONABLE OPPORTUNITY MEANS AN EFFECTIVE OPPORTUNITY AND NOT A MERE EYE WASH. ADVERTING TO THE FACTS OF THE INSTANT CASE, IT CAN BE SEEN THAT THE AO OBJECTED TO THE ADMISSION OF ADDITIONAL EVIDENCE IN THE REMAND REPORT ON A PRELIMINARY ISSUE OF THE ASSESSEES CASE BEING NO T COVERED WITHIN ANY OF THE FOUR CLAUSES OF SUB-RULE (1) OF RULE 46A. AS HE OPINED THAT THE ADDITIONAL EVIDENCE WAS NOT LIABLE TO BE ADMITTED, HE NATURALLY COULD NOT HAVE DELVED INTO VETTING OF SUCH EVIDENCE. THE LD. CIT(A) REJECTED SUCH CONTENTION AND DID NOT CONSIDER IT EXPEDIENT TO INF ORM THE ASSESSING OFFICER THAT HE WAS GOING TO ADMIT THE ADDITIONAL E VIDENCE AS IN HIS ITA NO. 2620/DEL/2010 LIFELIN E BIOTECH LIMITED 12 OPINION THE CASE WAS COVERED UNDER CLAUSE (1)(B) OF RULE 46A(1) AND THAT THE ASSESSING OFFICER MAY EXAMINE SUCH ADDITIONAL E VIDENCE ON MERITS AND ALSO PRODUCE ANY EVIDENCE OR DOCUMENT OR ANY WI TNESS IN REBUTTAL OF SUCH ADDITIONAL EVIDENCE PRODUCED BY THE APPELLANT, IF ANY. BY NOT COMMUNICATING TO THE ASSESSING OFFICER ABOUT THE RE JECTION OF HIS REQUEST AND PROCEEDING TO ADMIT THE ADDITIONAL EVID ENCE WITHOUT GIVING ANY FURTHER OPPORTUNITY TO EXAMINE THE ADDITIONAL E VIDENCE ON MERITS, THE LD. CIT(A) VIOLATED THE PRESCRIPTION OF SUB-RULE ( 3) OF RULE 46A. FULFILLMENT OF THE MANDATE OF SUB-RULE (3) IS A PRE -CONDITION FOR ACCEPTING ANY ADDITIONAL EVIDENCE. THE NATURAL CORO LLARY IS THAT ANY FRESH EVIDENCE ACCEPTED IN VIOLATION OF THIS PROVISION, I S LIABLE TO BE IGNORED. SINCE, THE LD. CIT(A) FAILED TO GIVE A REASONABLE OPPORTUNITY TO THE AO, IN OUR CONSIDERED THE MANDATE OF SUB-RULE (3) OF RULE 46A HAS NOT BEEN COMPLIED WITH, THUS JEOPARDIZING THE ADMISSIO N OF THE ADDITIONAL EVIDENCE. 9. WHEN WE CONSIDER THE ENTIRETY OF THE FACTS AN D CIRCUMSTANCES OF THE INSTANT CASE, IT IS PATENTLY BORNE OUT THAT THE ASS ESSEE INTENTIONALLY IGNORED THE ASSESSMENT PROCEEDINGS AND NO EFFECTIVE CASE HAS BEEN MADE OUT THAT IT WAS PREVENTED BY A SUFFICIENT CAUSE IN PRODUCING THE BOOKS OF ACCOUNT AND RELEVANT EVIDENCE BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HOWEVER, CONSIDER ING THE FACT THAT THE ASSESSEE DID PLACE SUCH THINGS BEFORE THE LD. CIT(A ) AND THE FURTHER FACT ITA NO. 2620/DEL/2010 LIFELIN E BIOTECH LIMITED 13 THAT THE PURPOSE OF ASSESSMENT IS TO DETERMINE COR RECT TOTAL INCOME, WE ARE OF THE CONSIDERED OPINION THAT THE ENDS OF JUST ICE WOULD MEET ADEQUATELY IF THE ASSESSEE IS GRANTED ONE MORE OPPO RTUNITY TO ADDUCE NECESSARY DETAILS AND BOOKS OF ACCOUNT ETC. BEFORE THE ASSESSING OFFICER ENABLING HIM TO FINALIZE THE ASSESSMENT AS PER LAW. EVEN OTHERWISE, THE REQUIREMENT OF SUB-RULE (3) OF RULE 46A CAN BE MET UNDER THE GIVEN CIRCUMSTANCES, IF EITHER THE LD. CIT(A) IS DIRECTE D TO SEND THE ADDITIONAL EVIDENCE TO THE AO BY COMMUNICATING THAT HIS THRES HOLD OBJECTION WAS NOT ACCEPTABLE AND HE MAY EXAMINE THE ADDITIONAL EV IDENCE ON MERITS OR THE MATTER IS RESTORED TO THE AO WITH A DIRECTION T O DECIDE THIS ISSUE AFRESH AFTER TAKING INTO CONSIDERATION THE ADDITIO NAL EVIDENCE FILED BY THE ASSESSEE BEFORE THE LD. CIT(A) AND ALLOWING A F URTHER OPPORTUNITY TO THE ASSESSEE TO LEAD FURTHER EVIDENCE, IF ANY. WE F EEL THAT THE SECOND COURSE OF ACTION IS MORE BEFITTING AND TIME SAVING AS WELL. WE, THEREFORE, SET ASIDE THE IMPUGNED ORDER AND REMIT THE MATTER T O THE FILE OF AO FOR DECIDING THE QUESTION OF ADDITION U/S 68 AFRESH AS PER LAW AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSE SSEE. 10. WE WANT TO CLARIFY THAT NO REFERENCE HAS BE EN MADE IN THIS ORDER TO THE DECISIONS RELIED UPON BY THE LD. AR IN SUPPORT OF HIS CASE BECAUSE NONE OF THEM IS GERMANE TO THE SITUATION OBTAINING IN THE INSTANT CASE. THESE DECISIONS DEAL WITH OTHER ASPECTS OF RULE 46A , WHICH DO NOT COHERE WITH THE FACTUAL SCENARIO PREVAILING BEFORE US. WE FURTHER WANT TO MAKE ITA NO. 2620/DEL/2010 LIFELIN E BIOTECH LIMITED 14 IT CLEAR THAT THE ASSESSING OFFICER WOULD MAKE THE ASSESSMENT AFRESH AS PER LAW UNINFLUENCED BY ANY OBSERVATIONS MADE IN TH IS ORDER TOUCHING THE MERITS OF THE CASE, WHICH HAVE BEEN MADE SIMPLY TO DEMONSTRATE THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN ACCEPTING THE A DDITIONAL EVIDENCE AND THEN DELETING THE ADDITIONS WITHOUT AFFORDING A REA SONABLE OPPORTUNITY TO THE ASSESSING OFFICER. 11. BEFORE PARTING WITH THESE GROUNDS, WE CONSI DER IT APPOSITE TO DEAL WITH THE CONTENTION OF THE LD. AR THAT THE POWERS O F CIT(A) ARE CO- TERMINUS WITH THOSE OF ASSESSING OFFICER INASMUCH A S HE CAN ALSO DO WHAT ASSESSING OFFICER CAN DO. RELYING ON A COUPLE OF DECISIONS, HE TRIED TO JUSTIFY THE ACTION OF THE LD. CIT(A) IN DE LETING THE ADDITION ON APPRECIATION OF ADDITIONAL EVIDENCE FILED BEFORE HI M BY ARGUING THAT IT FELL WITHIN HIS DOMAIN TO ADMIT ADDITIONAL EVIDENCE SINCE THE APPELLATE PROCEEDINGS ARE CONTINUATION OF THE ASSESSMENT PROC EEDINGS. THIS CONTENTION, IN OUR CONSIDERED OPINION, IS PARTLY CO RRECT. THERE IS NOT AND CANNOT BE ANY DISPUTE ABOUT SUCH PROPOSITION LAID D OWN BY THE HONBLE COURTS. HOWEVER, THE RATIO DECIDENDI OF SUCH DECISIONS NEEDS TO BE VIEWED IN THE BACKDROP OF THE FACTS WHICH WERE BEFO RE THE HONBLE COURTS AND MORE IMPORTANTLY, THE CONTEXT IN WHICH T HESE WERE MADE. THERE CAN BE NO GAINSAYING THAT THE CIT(A) CAN MAKE AN INQUIRY, WHICH WAS NECESSARY ON THE FACTS OF THE CASE, BUT WAS NOT MADE BY THE ASSESSING OFFICER. BUT, THIS PROPOSITION CANNOT BE STRETCHED TO SUCH AN ITA NO. 2620/DEL/2010 LIFELIN E BIOTECH LIMITED 15 EXTENT SO AS TO SUBSTITUTE ASSESSMENT PROCEEDINGS W ITH THE APPELLATE PROCEEDINGS. THERE IS HARDLY ANY NEED TO EMPHASIZE THAT IT IS THE PREROGATIVE OF THE ASSESSING OFFICER TO MAKE AN ASS ESSMENT. THE ASSESSEE HAS NO CHOICE TO INDIRECTLY BID GOODBYE TO THE ASSESSING OFFICER BY NOT PRODUCING BOOKS OF ACCOUNT AND RELEVANT DETA ILS AND INSTEAD OPT TO BE INDIRECTLY ASSESSED BY THE CIT(A), IN THE GAR B OF CO-TERMINUS POWERS OF CIT(A), BY FILING SUCH THINGS BEFORE THE FIRST APPELLATE AUTHORITY, AS HAS BEEN SOUGHT TO BE DONE IN THE INS TANT CASE. THE COMPLEXION OF THE CASE BEFORE US IS THAT THERE IS N O DEFICIENCY ON THE PART OF THE ASSESSING OFFICER TO CONDUCT INQUIRY, WHICH IN THE OPINION OF THE LD. CIT(A), WAS WARRANTED. RATHER, WE ARE CONFRONTE D WITH A SITUATION OF COMPLETE FAILURE ON THE PART OF THE ASSESSEE TO EXT END ANY CO-OPERATION TO THE ASSESSING OFFICER. THIS CONTENTION ADVANCED ON BEHALF OF THE ASSESSEE IS DEVOID OF MERITS AND HENCE JETTISONED. 12. WE, THEREFORE, ALLOW GROUND NO. 9 AND ALSO A LLOW GROUND NO. 2 FOR STATISTICAL PURPOSES. 13.1. GROUND NO. 3 OF THE APPEAL IS AGAINST THE D ELETION OF ADDITION OF RS.7,09,812/- MADE BY THE A.O. ON ACCOUNT OF PRIOR PERIOD EXPENSES REPRESENTING SALES TAX FOR THE YEAR 2000-01. THE AS SESSING OFFICER NOTICED THAT A SUM OF RS. 7,09,812/- (RS. 3,00,000/ - PLUS RS. 4,09,812/-) WAS PAID FOR THE FINANCIAL YEAR 2000-01 AND THE SAM E BEING PRIOR PERIOD ITA NO. 2620/DEL/2010 LIFELIN E BIOTECH LIMITED 16 EXPENDITURE, WAS NOT ALLOWED AS DEDUCTION. THE LD. CIT(A) OVERTURNED THE ASSESSMENT ORDER ON THIS POINT. 13.2. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THIS ISSU E IS NO MORE RES INTEGRA IN VIEW OF THE SPECIAL BENCH DECISION IN THE CASE O F DCIT VS GLAXO SMITHKLINE CONSUMER HEALTHCARE LTD. (2007) 107 ITD 343 (CHD.) (SB) IN WHICH IT HAS BEEN HELD THAT DEDUCTION FOR SALES TAX OR OTHER TAX AND DUTY ETC. IS ALLOWABLE U/S 43B ON PAYMENT BASIS. AS THE NATURE OF THE AMOUNT PAID BY THE ASSESSEE, BEING SALES TAX IS NOT DISPUTED AND THE FURTHER FACT THAT SUCH SUM WAS PAID DURING THE PREV IOUS YEAR, WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT(A) WAS JUST IFIED IN ALLOWING THIS CLAIM. THIS GROUND IS NOT ALLOWED. 14.1. GROUND NO. 4 OF THE APPEAL IS AGAINST THE D ELETION OF ADDITION OF RS. 37,04,440/- MADE BY THE A.O BY DISALLOWING MARK ETING EXPENSES. THE ASSESSING OFFICER OBSERVED THAT THE AMOUNT OF M ARKETING EXPENSES INCREASED FROM RS. 91.56 LAC IN THE PRECEDING YEAR TO RS. 1.85 CRORE IN THE CURRENT YEAR. THE ASSESSEE WAS CALLED UPON TO F ILE DETAILS OF SUCH EXPENSES. ONLY SUMMARY SHEET OF SUCH EXPENSES UNDER BROADER HEADS WAS GIVEN WITHOUT PRODUCING ANY SUPPORTING BILLS/VO UCHERS. CONSIDERING THESE FACTS, THE ASSESSING OFFICER MADE DISALLOWANC E @ 20% OF MARKETING EXPENSES, WHICH RESULTED INTO AN ADDITION OF RS. 37,04,440/-. ITA NO. 2620/DEL/2010 LIFELIN E BIOTECH LIMITED 17 THE LD. CIT(A), ON THE BASIS OF DETAILS FURNISHED B EFORE HIM AS ADDITIONAL EVIDENCE, CAME TO HOLD THAT NO DISALLOWANCE WAS CAL LED FOR. 14.2. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT THE ASSESSE E DID NOT FURNISH SUPPORTING BILL/VOUCHERS OF SUCH EXPENSES BEFORE TH E AO FOR EXAMINATION. SINCE, THE LD. CIT(A) HAS DELETED THE ADDITION BY RELYING ON THE ADDITIONAL EVIDENCE IN CONTRAVENTION OF RULE 46 A(3) [AS DISCUSSED SUPRA ], FOLLOWING THE VIEW TAKEN HEREINABOVE, WE SET A SIDE THE IMPUGNED ORDER ON THIS SCORE AND REMIT THE MATTER T O THE FILE OF AO FOR A FRESH ADJUDICATION AFTER CONSIDERING THE ADDITIONAL EVIDENCE ALREADY FILED BY THE ASSESSEE OR ANY OTHER FRESH EVIDENCE AS THE ASSESSEE MAY LIKE TO FILE BEFORE HIM. 15.1. GROUND NO. 5 OF THE APPEAL IS AGAINST RESTR ICTING THE ADDITION OF FOREIGN TRAVELLING EXPENSES AMOUNTING TO RS.11,30, 474/- MADE BY THE AO TO RS.2,00,000/-. A SUM OF RS.56,52,374/- WAS CL AIMED AS DEDUCTION ON ACCOUNT OF AMOUNT SPENT ON TRAVELLING/BOARDING/A ND LODGING EXPENSES OF DOCTORS. IN THE ABSENCE OF ANY DETAILS FILED BY THE ASSESSEE, THE A.O DISALLOWED 20% OF SUCH EXPENSES. THIS RESULTED INTO DISALLOWANCE OF RS. 11,30,474/-. THE LD. CIT(A) REDUCED THE DISALLOWANC E TO RS. 2,00,000/- BY CONSIDERING THE ADDITIONAL EVIDENCE FILED BEFORE HIM. ITA NO. 2620/DEL/2010 LIFELIN E BIOTECH LIMITED 18 15.2. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT THE MANNER IN WHICH THIS ADDITION WAS MADE BY THE ASSESSING OF FICER AND REDUCED BY THE LD. CIT(A) IS SIMILAR TO THE EARLIER GROUNDS . FOLLOWING THE VIEW TAKEN HEREINABOVE, WE SET ASIDE THE IMPUGNED ORDER ON THIS ISSUE AND SEND IT TO THE AO FOR A FRESH EXAMINATION IN THE LI GHT OF EVIDENCE FILED OR TO BE FILED BY THE ASSESSEE IN SUPPORT OF THE GENUI NENESS OF EXPENSES CLAIMED UNDER THIS HEAD. 16.1. GROUND NO. 6 OF THE APPEAL IS AGAINST THE DELETION OF ADDITION OF RS.2,50,000/- MADE BY THE AO ON ACCOUNT OF UNEXPLAI NED FOREIGN TRAVELLING EXPENSES. IT WAS NOTICED BY AO THAT A SU M OF RS. 2.50 LAC WAS SPENT ON DIRECTORS TRAVEL TO SOUTH AFRICA. NEITHER ANY BILLS FOR THIS EXPENSE WERE PRODUCED NOR ANY JUSTIFICATION WAS SHO WN FOR ITS DEDUCTIBILITY. THE AO MADE DISALLOWANCE FOR THIS SU M, WHICH CAME TO BE DELETED BY THE LD. CIT(A) ON THE CONSIDERATION OF T HE ADDITIONAL EVIDENCE FILED BEFORE HIM. 16.2. HAVING HEARD THE RIVAL SUBMISSIONS AND PER USED THE RELEVANT MATERIAL ON RECORD, IT IS AGAIN OBSERVED THAT THE A DDITION WAS MADE BY THE ASSESSING OFFICER FOR LACK OF EVIDENCE AND DELE TED BY THE LD. CIT(A) BY CONSIDERING ADDITIONAL EVIDENCE WITHOUT GIVING A REASONABLE OPPORTUNITY TO THE ASSESSING OFFICER IN TERMS OF RU LE 46A(3). FOLLOWING THE VIEW TAKEN HEREINABOVE, WE SET ASIDE THE IMPUGNED ORDER ITA NO. 2620/DEL/2010 LIFELIN E BIOTECH LIMITED 19 ON THIS SCORE AND SEND THE MATTER TO THE AO FOR A F RESH ADJUDICATION AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 17.1. GROUND NO. 7 OF THE APPEAL IS AGAINST THE DELETION OF ADDITION OF RS. 26,436/- MADE BY THE ASSESSING OFFICER OUT OF M ISCELLANEOUS EXPENSES. THIS DISALLOWANCE @ 20% OF THE EXPENSES W AS MADE BY THE ASSESSING OFFICER FOR WANT OF DETAILS OR EVIDENCE. THE LD. CIT(A) DELETED THE ADDITION BY CONSIDERING THE ADDITIONAL EVIDENCE. 17.2. IN OUR CONSIDERED OPINION AND FOLLOWING THE VIEW TAKEN HEREINABOVE, WE SET ASIDE THE IMPUGNED ORDER ON THI S ISSUE AND REMIT THE MATTER TO THE FILE OF AO FOR TAKING A FRESH DECISIO N AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE IN TERMS OF OPTION TO PUT FORTH ANY FRESH EVIDENCE IN SUPPORT OF THIS CLAIM. 18.1. GROUND NO. 8 OF THE APPEAL IS AGAINST THE DELETION OF ADDITION OF RS.1,06,436/- MADE BY THE A.O BY DISALLOWING DEPREC IATION CLAIMED ON CERTAIN ADDITIONS TO THE FIXED ASSETS. VIDE QUESTIO NNAIRE DATED 22.8.2008, THE ASSESSEE WAS ASKED TO FURNISH PHOTOCOPIES OF BI LLS OF ADDITIONS TO FIXED ASSETS ABOVE RS. 20,000/-. SUCH DETAILS WERE PARTLY FURNISHED BY THE ASSESSEE. IT WAS OBSERVED THAT NO COPIES OF BIL LS OF ASSETS PURCHASED, TABULATED ON LAST PAGE OF THE ASSESSMENT ORDER, WER E FURNISHED ON WHICH DEPRECIATION OF RS.1,06,436/- WAS CLAIMED. THE ASSE SSING OFFICER ITA NO. 2620/DEL/2010 LIFELIN E BIOTECH LIMITED 20 DISALLOWED DEPRECIATION TO THIS EXTENT. THE LD. CIT (A), ON APPRECIATION OF THE DETAILS ADDUCED BEFORE HIM FOR THE FIRST TIM E, DELETED THE ADDITION. 18.2. AFTER CONSIDERING THE RIVAL SUBMISSIONS AN D PERUSING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE FACTS AND CIRC UMSTANCES OF THIS GROUND ARE MUTATIS MUTANDIS SIMILAR TO THE GROUNDS DISCUSSED ABOVE. FOLLOWING THE VIEW TAKEN ABOVE ON SUCH OTHER GROUND S, WE SET ASIDE THE IMPUGNED ORDER AND SEND THE MATTER BACK TO THE FILE OF AO FOR DECIDING THIS ISSUE AFRESH IN THE LIGHT OF MATERIAL ALREADY FILED OR TO BE FILED BY THE ASSESSEE IN SUPPORT OF THE CLAIM OF DEDUCTION ON AC COUNT OF DEPRECIATION. 19. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 8/9/2014. SD/- SD/- (A. T. VARKEY) ( R. S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 8/9/2014 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. 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