DCIT, New Delhi V. M/s. E-4 Entertainment (P) Ltd., New Delhi

ITA 4491/DEL/2010

• Counselvise Citation: 449120114 RSA 2010
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-02-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 08-10-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V K SAKSENA
• Assessee Lawyers: RAVI GUPTA; PRAKASH YADAV
• Keywords: Unexplained cash credit; Depreciation; Opportunity of being heard; Additional evidence; Assessment record; Unabsorbed depreciation
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI A.N. PAHUJA ITA NO. 4491/DEL/2010 ASSTT. YR: 2007-08 DCIT, CIR. 11(1), VS. M/S E-4 ENTERTAINMENT (P) LTD., NEW DELHI. E-311, EAST OF KAILASH, NEW DELHI. PAN/GIR NO. AABCE6843P (APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI V.K. SAKSENA CIT (DR) RESPONDENT BY : SHRI RAVI GUPTA ADV. & SHRI PRAKASH YADAV ADV. O R D E R PER R.P. TOLANI, J.M : THIS IS REVENUES APPEAL AGAINST CIT(A)S ORDER DAT ED 24-8-2010, RELATING TO A.Y. 2007-08. FOLLOWING GROUNDS ARE RAI SED: 1. THE ORDER OF LD. CIT(A) IS WRONG, PERVERSE, ILL EGAL AND AGAINST THE PROVISIONS OF LAW, LIABLE TO BE SET ASI DE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS . 1.97,61,900/- U/S 68 OF THE ACT ON ACCOUNT OF UNEXP LAINED CREDITS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS . 8,92,396/- OUT OF OPERATION AND OTHER EXPENSES INCU RRED BY THE ASSESSEE. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARIN G. 2. GROUND NOS. 1 & 4 ARE GENERAL IN NATURE AND REQU IRES NO ADJUDICATION. ITA 4491/DEL/10 E4 ENTERTAINMENT P. LTD . 2 3. BRIEF FACTS ARE: ONE OF THE DIRECTORS OF THE ASS ESSEE COMPANY SHRI SUNIL BHATIA CONTRIBUTED FOLLOWING SHARE CAPITAL AN D SHARE PREMIUM: S.NO. NAME OF PERSON SHARE APPLICATION MONEY RECEIVED 1. MR. SUNIL BHATIA TOWARDS SHARE CAPITAL 11955000 2. TOWARDS SHARE CAPITAL BY WAY OF TAKE OVER OF MR. SUNIL BHATIAS PROPRIETARY CONCERN 2261900 3. MR. SUNIL BHATIA TOWARDS SHARE PREMIUM 5895000 TOTAL 2,01,11,900 3.1. FROM THE BANK STATEMENT, IT WAS REVEALED THAT SUNIL BHATIA HAD SUBSCRIBED AN AMOUNT OF RS. 3,50,000/- THROUGH BANK , WHEREAS FOR THE BALANCE AMOUNT OF RS. 1,9761,000/- THE ASSESSEE F URNISHED ONLY COPIES OF FOREIGN REMITTANCE VOUCHERS. BESIDES, THE ASSESSEE DID NOT FURNISHED ANY RBI APPROVAL FOR SUCH FOREIGN REMITTANCE. THOUGH IT WAS PLEADED THAT SHRI SUNIL BHATIA HAD FIELD RETURN OF INCOME FOR A.Y. 2007-08 DECLARING INCOME OF RS. 2,67,967/-, ON COMPUTER CHECK IT WAS FOUND THAT APP LICATION FOR PAN WAS LYING WITH ITO WARD 23(1), NEW DELHI. AO, THEREFORE , COULD NOT CROSS CHECK THE CREDITWORTHINESS OF SHRI SUNIL BHATIA IN RESPECT OF VOUCHERS OF FOREIGN REMITTANCE. BESIDES, AO QUESTIONED THE PROP RIETY OF CHARGING OF HUGE PREMIUM IN THE VERY FIRST YEAR OF INCORPORATIO N OF COMPANY. ASSESSEE COULD NOT GIVE SATISFACTORY REPLY IN THIS BEHALF. IN THESE FACTS AND CIRCUMSTANCES, AO HELD IT TO BE ASSESSEES OWN MON EY, WHICH WAS ROUTED TO ITS BOOKS OF A/C IN THE GARB OF SHARE PREMIUM. O RELIED ON FOLLOWING CASE LAWS: - CIT VS. MUSSADILAL RAM BHAROSE (1987) 165 ITR 14 - SUMATI DAYAL VS. CIT 214 ITR 801 - SREELEKHA BANERJEE (1963) 49 ITR 112 (SC) ITA 4491/DEL/10 E4 ENTERTAINMENT P. LTD . 3 - A. GOVINDARAJULA MUDLIAR (1958) 34 ITR 807 (SC). 3.2. SINCE THE ASSESSEE FAILED TO EXPLAIN IMPUGNED CASH CREDITS SATISFACTORILY, IT WAS ADDED U/S 68 AS UNEXPLAINED CASH CREDIT. 3.3. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL BEF ORE THE LD. CIT(APPEALS). ASSESSEE FILED APPLICATION FOR ADMISS ION OF ADDITIONAL EVIDENCE UNDER RULE 46A OF THE I.T. RULES BY MAKI NG FOLLOWING SUBMISSIONS: 1. IT IS REQUESTED TO ACCORD KIND PERMISSION FOR P RODUCTION OF ADDITIONAL EVIDENCE AS THE ASSESSEE WAS NOT PROV IDED PROPER OPPORTUNITY OF BEING HEARD. BESIDES THE EVID ENCES GO TO THE VERY ROOT OF THE MATTER AND HAVE A DIRECT AND SUBSTANTIAL BEARING IN DETERMINING THE CORRECT INCO ME AND TAX LIABILITY OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. 2. KIND PERMISSION MAY KINDLY BE ACCORDED TO ADDUCE ADDITIONAL EVIDENCES WHICH ARE COMPLIED IN THE PAPE R BOOK VOL. II. 3. SINCE THE ASSESSEE WAS PREVENTED BY SUFFICIENT C AUSE FROM PRODUCTION OF ABOVE EVIDENCES BEFORE THE LD. A O. 4. IT HAS BEEN HELD IN NUMBER OF CASES INCLUDING IN KESHAW MILLS CO. LTD. VS. CIT (1965) 56 ITR 365 AND NOW RECOGNIZED AS RULE 46A THAT THE APPELLATE AUTHORITY HAS A RIGHT TO ADMIT ADDITIONAL EVIDENCE IN THE INTEREST OF JUSTICE. 5. THE ENCLOSED PAPER BOOKS ARE IN DUPLICATE WITH A REQUEST TO KINDLY ALLOW AN OPPORTUNITY TO THE LD. AO TO REB UT THE SAME IN TERMS OF RULE 46A(3). 3.4. ON THIS APPLICATION THE LD. CIT(APPEALS) CALLE D FOR AOS REMAND REPORT. THE AO IN HIS REMAND REPORT STRONGLY OBJECT TO THE ADMISSION OF ADDITIONAL EVIDENCED BY FOLLOWING OBSERVATIONS: ITA 4491/DEL/10 E4 ENTERTAINMENT P. LTD . 4 THE ADDITIONAL GROUND OF APPEAL CAN BE ADMITTED ON LY IN THE SITUATION PROVIDED UNDER RULE 46A OF THE IT RULES W HICH ARE AS BELOW: I) WHERE THE ASSESSING OFFICER HAS REFUSED TO ADMI T EVIDENCE WHICH OUGHT TO HAVE BEEN ADMITTED. II) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE WHICH HE WAS CALLED UPO N TO PRODUCE BY THE ASSESSING OFFICER. III) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIEN T CAUSE FROM PRODUCING BEFORE THE ASSESSING OFFICER ANY EVIDENCE WHICH IS RELEVANT TO ANY GROUND OF APPEAL. IV) WHERE THE ASSESSING OFFICER HAS MADE THE ORDER APPEALED AGAINST WITHOUT GIVING SUFFICIENT OPPORTUN ITY TO THE APPELLANT TO ADDUCE EVIDENCE RELEVANT TO ANY GR OUND OF APPEAL. HOWEVER, THE CASE OF THE ASSESSEE DOES NOT FALL IN ANY OF THE CONDITIONS LAID DOWN IN RULE 46A OF THE IT RULES AS REPRODUCED ABOVE. HENCE, THE ADDITIONAL GROUNDS OF APPEAL SUBM ITTED BY THE ASSESSEE SHOULD NOT BE ADMITTED, SINCE IT IS AM PLY CLEAR FROM PERUSAL OF THE ASSESSMENT PROCEEDINGS BEFORE THE AO . HOWEVER, FACTUAL REPORT IN RESPECT OF THE SUBMISSIO NS MADE BEFORE THE LD. CIT(APPEALS) IS AS UNDER: THE COMPANY WAS INCORPORATED ON 01-07-2006, HENCE, THE YEAR UNDER CONSIDERATION IS THE FIRST YEAR OF T HE ASSESSEE COMPANY. DURING THE YEAR UNDER CONSIDERATI ON, THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF CONDUCTING EXHIBITION IN NEW DELHI AT DND FLYWAY COMPOUND. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED COPY OF BALANCE SHEET, PROFIT & LOSS ITA 4491/DEL/10 E4 ENTERTAINMENT P. LTD . 5 ACCOUNT AND THE RELEVANT SCHEDULES AND ANNEXURE. FR OM THE BALANCE SHEET FILED, IT IS SEEN THAT THE ASSESS EE HAS RAISED SHARE CAPITAL TO THE TUNE OF RS. 1,42,66,900 /- AND SHARE PREMIUM OF S. 58,95,000/-. ACCORDINGLY, THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF THE PERSONS/ENTITIES CONTRIBUTING TO SHARE CAPITAL AND SHARE PREMIUM ALONG WITH DOCUMENTARY EVIDENCE. THE ASSESS EE COMPANY VIDE LETTER DATED 22-10-2009 HAS FURNISHED THE DETAILS OF THE SAME. FROM THE DETAILS FURNISHED, IT IS SEEN THAT SH. SUNIL BHATIA, ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY HAS CONTRIBUTED TO THE SHARE CAPITAL AND SH ARE PREMIUM AS PER FOLLOWING DETAILS: SL. NO. PARTICULARS AMOUNT 1. TOWARDS SHARE CAPITAL ACCOUNT 1,19,55,000 2. TOWARDS SHARE CAPITAL BY WAY OF ALLOTMENT OF SHARES ON TAKE OVER OF PROPRIETOR CONCERN E-4 ENTERTAINMENT 22,61,900 3. TOWARDS SHARE PREMIUM 58,95,000 2,01,11,900 THE ASSESSEE HAS NOT FURNISHED ANY RBI APPROVAL FOR THE SAID FOREIGN REMITTANCE. A FURTHER PERUSAL OF THE I .T. DETAILS OF SH. SUNIL BHATIA REVEALS THAT THE ASSESS EE HAS FILED ITS RETURN FOR A.Y. 2007-08 DECLARING INCOME OF RS. 2,67,967/-. ON BEING INQUIRED FROM THE COMPUTER, IT WAS GATHERED THAT THE PAN IS PRESENTLY LYING WITH ITO W ARD 23(1), NEW DELHI. HENCE, THE CREDITWORTHINESS OF TH E SUBSCRIBER IS DOUBTFUL. FURTHER, ALSO THE ASSESSEE HAS NOT FURNISHED ANY BASIS OF CHARGING OF SUCH HUGE SHARE PREMIUM IN THE VERY FIRST YEAR OF THE COMPANY. HEN CE, IT IS CLEAR THAT THE AMOUNT OF RS. 1,97,61,900/- IS NO THING BUT THE ASSESSEE COMPANYS OWN MONEY WHICH HAS BEEN MADE ROUTED TO THE BOOKS OF ACCOUNT IN THE GARB OF SHARE CAPITAL AND SHARE PREMIUM. THE ASSESSEE, THEREFORE, COULD PROVE THE CREDITWORTHINESS OF THE SUBSCRIBER. IN VIEW OF THE FACTS AS NARRATED ABOVE AND THAT THE ASSESSEE WAS PROVIDED SUFFICIENT OPPORTUNITY DURING THE ASSESSMENT PROCEEDINGS WHEREIN HE COULD NOT SUBSTAN TIATE THE RESULTS SHOWN, THE REMAND REPORT IS SUBMITTED FOR K IND ITA 4491/DEL/10 E4 ENTERTAINMENT P. LTD . 6 CONSIDERATION. THE ASSESSMENT WAS MADE AFTER GIVING AMPLE OPPORTUNITY AND SHOULD BE SUSTAINED. 3.5. LD. CIT(APPEALS), HOWEVER, ADMITTED THE ADDITI ONAL EVIDENCE BY FOLLOWING OBSERVATIONS: ON 9-02-10 ITSELF THE APPELLANT ALSO FILED AN APPL ICATION FOR ADMISSION OF ADDITIONAL EVIDENCE UNDER RULE 46A OF THE IT RULES, WHEREBY THE AR FILED COPY OF BANK A/C, PASSP ORT AND PROFESSIONAL LICENSE ISSUED TO THE FIRM IN DUBAI WH ERE SHRI SUNIL BHATIA, THE DIRECTOR OF THE APPELLANT COMPANY IS A PARTNER. AS THE ADDITION OF INCOME OF RS. 1,97,61,900/- WAS MADE BY THE AO IN THE CASE U/S 68 OF THE IT ACT BY HOLDING THA T THE SOURCE OF THIS INVESTMENT IN NAME OF SHRI SUNIL BHATIA IS UNEXPLAINED THEREFORE A REMAND REPORT FROM AO WAS CALLED FOR. I N RESPONSE THERETO THE AO HAS SUBMITTED HIS REPORT WHICH IS RE ITERATION OF THE EARLIER OBSERVATION IN THE ASSESSMENT ORDER & T HAT AS SHRI BHATIA HAD BEEN GIVEN SUFFICIENT OPPORTUNITY DURING THE ASSESSMENTS PROCEEDINGS THEREFORE, THE ADDITIONAL E VIDENCE MAY NOT BE ADMITTED U/R 46A. IN COUNTER REPLY TO THE RE MAND REPORT THE APPELLANT AGAIN SUBMITTED THAT AS SH. SUNIL BHA TIA IS A NON- RESIDENT BASED IN DUBAI THEREFORE IT TOOK SOME TIME TO GET THE ABOVE DOCUMENTS AND THAT IN MEANTIME THE AO HAD PAS SED THE ASSESSMENT ORDER ON 10-11-09, WITHOUT PROVIDING SUF FICIENT OPPORTUNITY. THAT AS THE ADDITIONAL EVIDENCED PERTA INS TO CREDITWORTHINESS OF SHRI SUNIL BHATIA THEREFORE REQ UIRED TO BE ADMITTED. ON A CONSIDERATION OF REPLY OF THE APPELLANT THE OB JECTION OF THE AO ON NON-ADMISSION OF ADDITIONAL EVIDENCE A RE NOT FOUND ACCEPTABLE AS THE ADDITIONAL EVIDENCE I FORM OF BANK A/C, PASSPORT AND THE PROFESSIONAL LICENSE OF THE FIRM I N DUBAI IN WHICH SHRI SUNIL BHATIA IS A PARTNER ARE CRUCIAL TO THE ISSUE IN GROUND NOS. 1 & 2 OF THE PRESENT APPEAL. HENCE THES E ARE ADMITTED IN ORDER TO IMPART SUBSTANTIVE JUSTICE. 3.6. THEREAFTER, LD. CIT(APPEALS) DELETED THE ADDIT ION BY FOLLOWING OBSERVATIONS: ITA 4491/DEL/10 E4 ENTERTAINMENT P. LTD . 7 I HAVE CONSIDERED THE WRITTEN SUBMISSION OF THE AP PELLANT, GONE THROUGH THE CASE LAWS RELIED UPON AND ALSO THE ADDITIONAL EVIDENCE FILED, THE REMAND REPORT & COUNTER REPLY T HERETO. AFTER CONSIDERING THE ENTIRE MATERIAL, IT IS SEEN THAT TH E ASSESSEE SUBMITTED COMPLETE DETAILS OF THE SHARE HOLDERS GIV ING FULL NAME, ADDRESSES, DETAILS OF PAYMENT MADE BY CHEUQE. IT IS SEEN FROM THE ASSESSMENT ORDER THAT THE AO HA S MADE AN ADDITION OF INCOME FOR RS. 1,97,61,900/- ON ACCOUNT OF UNEXPLAINED CASH CREDIT IN NAME OF SHRI SUNIL BHATI A, THE DIRECTOR OF THE APPELLANT COMPANY. THE APPELLANT HA S CONTENDED THAT OUT OF THE ABOVE AMOUNT AN AMOUNT OF RS. 22,61 ,900/- IS NOT A CASH CREDIT BUT RELATES TO CAPITAL OF SHRI SU NIL BHATIA AS ON 1 ST MARCH 2007 ON ACCOUNT OF M/S E-4 ENTERTAINMENT A PROPRIETORSHIP CONCERN OF SHRI SUNIL BHATIA BEING T AKEN OVER AS A RUNNING BUSINESS BY THE APPELLANT COMPANY, IN TE RMS OF AGREEMENT BETWEEN THE TWO CONCERNS ON 01-03-07. COP Y OF THE SAID AGREEMENT HAS BEEN FILED ON RECORD. IT IS MENT IONED IN CLAUSE 4 OF THE AGREEMENT THAT THE APPELLANT COMPAN Y SHALL ISSUE SHARES OF RS. 10% EACH TO THE PROPRIETOR OF E-4 ENT ERTAINMENT, SHRI SUNIL BHATIA AGAINST HIS CREDIT BALANCE IN HIS CAPITAL ACCOUNT AS AT 28 TH FEB. 2007. COPY OF CAPITAL ACCOUNT OF SHRI SUNIL BHATIA AS ON 28-02-07 IN M/S E-4 ENTERTAINMEN T, REFLECTING AN AMOUNT OF RS. 22,61,900/- HAS ALSO BE EN FILED. IT IS FOR THIS REASON THAT IN THE SHARE APPLICATION MONEY LEDGER A/C OF SHRI SUNIL BHATIA IN THE APPELLANT COMPANY, A CREDI T OF RS. 22,61,900/- HAS BEEN MADE DATED 01-03-2007 WHICH HA S THEN ALSO BEEN CREDITED IN HIS SHARE CAPITAL ACCOUNT. TH US FROM THE ABOVE, IT IS OBSERVED THAT RS. 22,61,900/- IS NOT A CASH CREDIT IN TERMS OF S. 68, BUT RELATES TO CAPITAL OF SHRI SUNI L BHATIA IN HIS NOW MERGED PROPRIETARY SHIP CONCERN M/S E-4 ENTERTA INMENT. AS REGARDS THE BALANCE AMOUNT OF RS. 1,75,00,000/- IN NAME OF SHRI SUNIL BHATIA THE APPELLANT HAS FILED H IS CONFIRMATION LETTER AS WELL AS PAN NO. AND ASSESSME NT DETAILS. IN THE ADDITIONAL EVIDENCE THE APPELLANT SUBMITTED THAT THE ABOVE AMOUNT HAS BEEN RECEIVED FROM SHRI SUNIL BHAT IA AS FOREIGN REMITTANCE AND IN SUPPORT THERETO THE COPY OF CURRENT BANK A/C NO. 90010200003863 IN BANK OF BARODA, DUBA I MAIN ITA 4491/DEL/10 E4 ENTERTAINMENT P. LTD . 8 BRANCH IN CASE OF E-4, ENTERTAINMENT P.O. BOX 48654 , DUBAI, UNITED ARAB EMIRATES WAS ALSO FILED FOR THE RELEVAN T PERIOD. COPY OF PASSPORT OF SHRI SUNIL BHATIA ISSUED FROM D UBAI ON 09- 08-2005 (DATE OF EXPIRY 08-08-05) HAS BEEN SUBMITTE D AS ALSO THE PROFESSIONAL LICENSE DATED 07-09-02 ISSUED BY T HE DEPARTMENT OF ECONOMIC DEVELOPMENT GOVERNMENT OF DU BAI IN NAME OF E-4 ENTERTAINMENT. SHRI SUNIL BHATIA IS A 50% SHARE HOLDER IN E-4 ENTERTAINMENT AS PER LICENSE. THE LIC ENSED ACTIVITIES ARE EXHIBITION, ORGANIZING PARTIES & PRI VATE FUNCTIONS, ENTERTAINMENT SERVICE, CONFERENCES AND SEMINAR ORGA NIZING. THE APPELLANT ALSO PROVIDED COPY OF CURRENT ACCOUNT OF SHRI SUNIL BHATIA IN BOOKS OF M/S E-4 ENTERTAINMENT(DUBAI), FR OM WHICH IS OBSERVED THAT A TOTAL AMOUNT OF 14,61,175/- (DH S) HAS BEEN DEBITED, WHICH HAS CONSEQUENTLY BEEN REMITTED BY S HRI SUNIL BHATIA AS SHARE CAPITAL TO E-4 ENTERTAINMENT P. LTD ., FOR RS. 1,75,00,000/- IN BANK A/C NO. 0963020000779 IN BANK OF BARODA, EAST OF KAILASH, NEW DELHI. 4. LD. DR AT THE OUT SET VEHEMENTLY ARGUES THAT: (I) ORDER OF LD. CIT(APPEALS) IS ILLEGAL AND PERVERSE I NASMUCH AS THE OBJECTIONS RAISED BY AO WERE PURPOSELY NOT COMPLIED BY ASSESSEE TO AVOID INVESTIGATION ABOUT HUGE PREMIUM CHARGED B Y ASSESSEE WHICH IS A NEWLY INCORPORATED COMPANY. (II) ADDITIONAL EVIDENCE HAS BEEN ADMITTED BY LD. CIT(AP PEALS) ONLY ON THE BASIS THAT THE EVIDENCE IS CRUCIAL TO DECIDE GROUND NOS. 1 & 2, WITHOUT APPRECIATING THAT NO GROUND WAS RAISED A BOUT SUFFICIENT OPPORTUNITY BEFORE AO. (III) RULE 46A PRESCRIBES STATUTORY CONDITIONS TO BE FOL LOWED BEFORE ADMITTING ANY ADDITIONAL EVIDENCE, WHICH HAD NOT BE EN COMPLIED. (IV) ASSESSEE HAS NOT WHISPERED EVEN A WORD AS TO HOW HE WAS PREVENTED BY SUFFICIENT CAUSE IN PRODUCING THE EVID ENCE BEFORE AO AND LD. CIT(APPEALS) GLOSSED OVER THIS ASPECT WHICH HAS RENDERED HIS ORDER INTO PERVERSITY. ITA 4491/DEL/10 E4 ENTERTAINMENT P. LTD . 9 (V) THERE IS NO ALLEGATION IN APPEAL MEMO THAT SUFFICI ENT OPPORTUNITY WAS NOT GIVEN TO ASSESSEE BEFORE AO TO ADDUCE EVID ENCE. WITHOUT COMPLIANCE WITH THIS OR OTHER MANDATORY REQUIREMENT S, LD. CIT(APPEALS) CANNOT ACCEPT IT AND AWARD RELIEF. REL IANCE IS PLACED ON HONBLE DELHI HIGH COURT JUDGMENT DATED 15-11-2 011 IN THE CASE OF CIT VS. MANISH BUILD WELL PVT. LTD. (ITA NO . 928/2011). (VI) FURTHER RELIANCE IS PLACED ON HONBLE DELHI HIGH CO URT JUDGMENT IN THE CASE OF NOVA PROMOTERS. (VII) LD. CIT(APPEALS)S ORDER GIVING RELIEF WITHOUT CONS IDERING THE ASPECT OF HUGE SHARE PREMIUM WHICH IS TAX FREE IN T HE HANDS OF ASSESSEE, IS ILLEGAL. 4.1. THE ASSESSEE DID NOT RAISE ANY GROUND IN FIRST APPEAL ABOUT INSUFFICIENCY OF HEARING, WHICH IS EVIDENT FROM GRO UNDS OF APPEAL TAKEN BY IT BEFORE LD. CIT(APPEALS), WHICH ARE AS UNDER: 1. THAT THE LD. ASSESSING OFFICER HAS ERRED ON FAC TS AND IN LAW IN MAKING AN ADDITION OF RS. 1,97,61,900 BY INV OKING THE PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT, 1961. 2. THAT THE PROVISIONS OF SECTION 68 ARE NOT AT ALL APPLICABLE IN THE CASE OF THE APPELLANT. 3. THAT THE LD. ASSESSING OFFICER HAS ERRED ON FACT S AND IN LAW IN MAKING A DISALLOWANCE OF RS. 8,92,396 OUT OF THE OPERATION AND OTHER EXPENSES INCURRED BY THE APPELL ANT. 4. THAT THE LD. ASSESSING OFFICER HAS ERRED ON FACT S AND IN LAW IN NOT ALLOWING THE BENEFIT OF UNABSORBED DEPRECIATION OF RS. 1,01,53,858/-. 5. THAT THE IMPUGNED ASSESSMENT ORDER IS ARBITRARY, ILLEGAL, BAD IN LAW AND IN VIOLATION OF RUDIMENTARY PRINCIPL ES OF CONTEMPORARY JURISPRUDENCE ITA 4491/DEL/10 E4 ENTERTAINMENT P. LTD . 10 6. THAT THE APPELLANT CRAVES LEAVE TO ADD/ ALTER AN Y/ ALL GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 4.2. A PERUSAL OF GROUNDS OF APPEAL WILL REVEAL THA T ASSESSEE HAD NO WHERE RAISED A GROUND THAT THE ASSESSMENT WAS COMPLETED I N A HURRY OR THAT SUFFICIENT OPPORTUNITY OF HEARING WAS NOT GIVEN BY AO. HAVING NOT RAISED ANY GROUND OF APPEAL BEFORE LD. CIT(APPEALS) IT WAS NEITHER JUSTIFIED FOR THE ASSESSEE TO MAKE A FALSE STATEMENT THAT ASSESSEE W AS NOT GIVEN PROPER OPPORTUNITY BY AO AND AT THE SAME TIME, LD. CIT(APP EALS) WAS NOT JUSTIFIED IN ADMITTING THE ADDITIONAL EVIDENCE WITHOUT APPREC IATING THAT THERE WAS NO COMPLIANCE TO RULE 46A. THE RELEVANT EVIDENCE WAS N OT FILED BEFORE AO TO AVOID FIRST HAND INVESTIGATIONS FOR THE REASONS BES T KNOWN TO THE ASSESSEE. 4.3. SO CALLED ADDITIONAL EVIDENCE FILED BY THE ASS ESSEE ARE COPIES OF FOREIGN RECORDS AND BANK STATEMENTS WHICH ARE NEITH ER NOTARIZED NOR VERIFIED BY ANY DIPLOMATIC AGENCY. LD. CIT(APPEALS) WITHOUT GIVING ADEQUATE REASONS FOR ADMISSION OF ADDITIONAL EVIDEN CE, FULLY RELIED ON ALL THESE UNADMISSIBLE COPIES OF DOCUMENTS. THUS, THE ENTIRE RELIEF HAS BEEN GIVEN ON EXTRANEOUS EVIDENCE WHICH WAS NEITHER BEFO RE AO NOR CERTIFIED PROPERLY. IT IS, THEREFORE, PLEADED THAT LD. CIT(AP PEALS) MISCARRIED HIMSELF IN ADMITTING THE ADDITIONAL EVIDENCE AND GIVING FU LL RELIEF BY SUMMARILY RELYING ON ALL THESE DOCUMENTS WITHOUT VERIFYING THEIR GENUINENESS AND VERACITY. ITA 4491/DEL/10 E4 ENTERTAINMENT P. LTD . 11 4.4. LD. CIT(APPEALS) HAS FAILED TO REBUT AOS FIND INGS AND REASONS AS TO WHY A FRESHLY LAUNCHED COMPANY COMMANDED SUCH HEAVY PREMIUM ON ITS SHARES. IN THE CIRCUMSTANCE, THE BURDEN PLACED ON ASSESSEE TO PROVE THESE TRANSACTIONS IS HEAVY, WHICH HAS NOT BEEN DISCHARGE D. 4.5. APROPOS OTHER GROUND ABOUT DISALLOWANCE OUT OF OPERATION AND OTHER EXPENSES INCURRED BY THE ASSESSEE, THE NECESSARY E VIDENCE WAS NOT FILED BEFORE AO, WHICH WAS DISALLOWED BY FOLLOWING OBSERV ATIONS: 5.1. AS IT IS CLEAR FROM THE ASSESSEES REPLY ITS ELF THAT THE COMPANY STARTED ITS OPERATION IN THE MONTH OF NOVEM BER, 2006, BUT HAS WORKED ONLY FOR THREE DAYS IN THE MONTH OF MARCH, 2006, HENCE, THE EXPENSES CLAIMED UNDER THE HEAD OP ERATION & OTHER EXPENSES TO THE TUNE OF RS. 35,69,585/- ARE N OT ALLOWED TO THE ASSESSEE IN THIS YEAR ONLY. HENCE, KEEPING I N VIEW THE QUANTUM OF WORK DONE IN THREE DAYS FOR THE YEAR UND ER CONSIDERATION, 25% OF THE EXPENSES HAVE BEEN DISALL OWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4.6. LD. CIT(DR) PLEADS THAT CIT(APPEALS) HAS ALLOW ED THE EXPENDITURE ONLY ON THE PLEA THAT THE VERACITY OF EXPENSES AND ANOTHER EVIDENCE/ MATERIAL WAS NOT QUESTIONED ON THE RECORD BY THE AO. IN CASE OF CLAIM OF EXPENDITURE, THE BURDEN WAS ON THE ASSESSEE TO PROVE THE SAME WH ICH CANNOT BE ALLOWED ON ASSUMPTIONS. BESIDES, LD. CIT(APPEALS) HAS NOT G IVEN ANY SOUND RESONING ABOUT DESCRIPTION OR NATURE OF EXHIBITION SITE, TH EREFORE THE RELIEF HAS BEEN GIVEN WITHOUT ASCRIBING REASONS AND BY SWEEPING FIN DINGS. IT IS PLEADED THAT THE ORDER OF LD. CIT(APPEALS), WHICH IS ILLEGAL, M AY BE REVERSED. 4.7. RELIANCE IS PLACED BY LD. DR ON HONBLE DELHI HIGH COURT JUDGMENT IN THE CASE OF CIT VS. OASIS HOSPITALITY 333 ITR 11 9 ALSO. ITA 4491/DEL/10 E4 ENTERTAINMENT P. LTD . 12 5. LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, RELIED ON THE ORDER OF LD. CIT(APPEALS) AND CONTENDS THAT THE ADD ITIONS HAVE BEEN RIGHTLY DELETED. THERE IS NO PREJUDICE CAUSED TO THE DEPAR TMENT INASMUCH AS THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE WAS DULY FORWARDED TO AO WHO HAS NOT PASSED ANY OBJECTIVE ADVERSE COMMENTS ON ME RIT. LD. COUNSEL CONTENDS THAT SHRI SUNIL BHATIA IS AN ASSESSEE WITH THE INCOME-TAX DEPARTMENT; SHRI BHATIA WAS A NON-RESIDENT INDIA ( NRI), RESIDENT OF DUBAI. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF CONDUCTING EXHIBITIONS AT DND FLYWAY COMPOUND AND OTHER ENTERTAINMENT ACTI VITIES. THE COMPANY WAS FORMED BY TAKING OVER MR. BHATIAS PROPRIETORSH IP CONCERN. THE QUESTION OF ADDITION, IF ANY, ARISES ONLY IN THE CA SE OF SHRI SUNIL BHATIA AND NOT THE ASSESSEE COMPANY. SHRI SUNIL BHATIA BEING A N IDENTIFIED INDIVIDUAL, HAVING PAN NO. AND KNOWN SOURCES OF INVESTMENT, TH E ASSESSEE HAD DISCHARGED ITS BURDEN CAST ON IT IN TERMS OF SEC. 6 8. THEREFORE, LD. CIT(APPEALS) HAS DELETED THE ADDITION ON JUST AND P ROPER CONSIDERATIONS. RELIANCE IS PLACED ON HONBLE SUPREME COURT JUDGMEN TS IN THE CASES OF LOVELY EXPORTS 216 ITR 195; AND OASIS HOSPITALITY 3 33 ITR 119. 6. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE RELEVANT MATERIAL AVAILABLE ON RECORD. 6.1. COMING TO THE ADDITIONAL EVIDENCE, WE HAVE PER USED FORM NO. 35 I.E. MEMO OF APPEAL FILED BY THE ASSESSEE BEFORE LD. CIT (APPEALS). IN THE GROUNDS RAISED, THERE IS NEITHER ANY GROUND NOR WHI SPER ABOUT NOT PROVIDING SUFFICIENT OPPORTUNITY BY AO WHILE FRAMING THE ASSE SSMENT. IT IS FURTHER EVIDENCED FROM THE FACT THAT THE ASSESSMENT PROCEED INGS COMMENCED ON 26- 9-2008 AND ASSESSMENT ORDER HAS BEEN PASSED ON 10-1 1-2009 INDICATING THAT ITA 4491/DEL/10 E4 ENTERTAINMENT P. LTD . 13 SUFFICIENT TIME WAS GIVEN TO ASSESSEE FOR COMPLIANC E. THEREFORE, THERE IS NO JUSTIFICATION IN THE AVERMENT OF ASSESSEE BEFORE LD . CIT(APPEALS) THAT SUFFICIENT OPPORTUNITY WAS NOT GIVEN BY AO, THEREFO RE ADDITIONAL EVIDENCE SHOULD BE ADMITTED. WE ARE CONSTRAINED TO OBSERVE T HAT LD. CIT(APPEALS) HAS ADMITTED THE ADDITIONAL EVIDENCE IN A PERFUNCTORY M ANNER WITHOUT APPRECIATING THE ROLE OF RULE 46A AND ITS REQUIREME NTS AND VERIFYING ASSESSEES AVERMENTS. 6.2. LD. CIT(APPEALS) HAS FAILED TO GIVE ANY SATI SFACTORY REASONS FOR EXERCISING HIS POWERS U/S 46A. HONBLE DELHI HIGH COURT IN THE CASE OF MANISH BUILD WELL PVT. LTD. (SUPRA) HAS EMPHASIZED THE MANDATORY CHARACTERISTICS OF THIS RULE AND THE SCRUPLES TO BE APPLIED WHILE ENTERTAINING SUCH ADDITIONAL EVIDENCE. WE MAY FURTHER ADD THAT T HE DOCUMENTS ADMITTED BY LD. CIT(APPEALS) ARE FOREIGN DOCUMENTS AND ARE N OT VERIFIED PROPERLY. BESIDES, THE AOS OBJECTION ABOUT CHARGING HUGE PRE MIUM REMAINS UNANSWERED. IN OUR VIEW, LD. CIT(APPEALS) OUGHT NOT HAVE ADMITTED THIS ADDITIONAL EVIDENCE INASMUCH AS THERE WAS NO GROUND RAISED BY THE ASSESSEE ABOUT EXTENSION OF TIME OR OPPORTUNITY. 6.3. CIT(APPEALS) EXCEPT RELYING ON SUCH EVIDENCE H AS NOT RECORDED ANY COGENT REASONS FOR GIVING OUTRIGHT RELIEF. IN VIEW THEREOF WE ARE INCLINED TO SET ASIDE THE MATTER BACK TO THE FILE OF LD. CIT(AP PEALS) TO DECIDE THE SAME AFRESH AFTER CALLING THE ASSESSMENT RECORD FOR HIS PERUSAL AND DECIDE THE CONTENTION OF THE ASSESSEE ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. IN VIEW THEREOF GROUND NO. 2 OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ITA 4491/DEL/10 E4 ENTERTAINMENT P. LTD . 14 6.4. APROPOS GROUND NO. 3 I.E. OPERATIONAL EXPENSES , IN OUR VIEW THE LD. CIT(APPEALS) HAS NOT GIVEN PROPER REASONS FOR DELET ING THE ADDITION. THE INTEREST OF JUSTICE WOULD BE MET IF THE LD. CIT(APP EALS) DECIDES THE SAME ON MERITS AFTER PERUSING THE ORIGINAL ASSESSMENT RECOR D AS DIRECTED ABOVE. IN VIEW THEREOF, THIS GROUND OF APPEAL TAKEN BY THE RE VENUE IS ALSO ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, REVENUES APPEAL IS ALLOWED FOR S TATISTICAL PURPOSES AS INDICATED ABOVE. ORDER PRONOUNCED IN OPEN COURT ON 11-05-2012. SD/- SD/- ( A.N. PAHUJA ) ( R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 11-05-2012. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR ITA 4491/DEL/10 E4 ENTERTAINMENT P. LTD . 15