Effluent Channel Project Ltd., (Now Vadodara Enviro Channel Ltd.), Baroda V. The ACIT.,Circle-1(2), Baroda

ITA 878/AHD/2015

AI Insights

The case involves Effluent Channel Project Ltd. (now Vadodara Enviro Channel Ltd.), which appealed against the order of the Commissioner of Income Tax (Appeals)-I, Vadodara, concerning the assessment year 2011-12. The primary contention was about the taxability of capital contributions received from member industries, which were treated as revenue receipts by the AO. The Tribunal considered the precedents set in earlier years and the specific circumstances of the contributions received in the year under appeal. The Tribunal noted that the contributions were to be taxed on a deferred basis over five years, as per earlier ITAT decisions, and not in the year of receipt.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133455 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 28-02-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 12-04-2015
• Other Referred Cases: Sanjay Kumar Singh Vs. The State of Jharkhand, Civil Appeal No.1760 of 2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Additional evidence; Capital receipt
• Section: 271(1)(c); 143(3); 274

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘A’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER ITA No.878/Ahd/2015 Assessment Year :2011-12 Effluent Channel Project Ltd. (Now Vadodara Enviro Channel Ltd) 4 th Floor, Commerce Centre Sayajigunj, Vadodara PAN : AAACE 8486 B ACIT, Cir.1(2) Baroda. (Applicant) (Responent) Assesseeby : Shri Manish J. Shah, AR & Shri Rushin Patel, AR Revenue by : Shri Atul Pandey, Sr.DR स ु नवाई क तार ख/Date of Hearing : 01/03/2023 घोषणा क तार ख /Date of Pronouncement: 26/05/2023 आदेश/O R D E R PERANNAPURNA GUPTA, ACCOUNTANT MEMBER Present appeal has been filed by the assessee against order passed by the ld. Commissioner of Income Tax (Appeals)-I, Vadodara [hereinafter referred to as “Ld.CIT(A) under section 250(6) of the Income Tax Act, 1961 ("the Act" for short) dated 28.1.2015 pertaining to the Asst.Year 2011-12. 2. The effectivegrounds raised in the appeal are as under: 1. The learned C.I.T.(Appeals) has erred in confirming the disallowance of Rs.61,50,000/- out of total Rs.3,11,86,450/- ITA No.878/Ahd/2015 2 being contribution received from industries. Your Appellant submits that Rs.61,50,000/- is an advance received from industries to whom membership have not been granted till date by GPCB, and therefore, it is current liabilities of the appellant, and therefore, not liable to tax. It is submitted that it be so held now. 2. The learned C.I.T.(Appeals) has erred in confirming the balance amount of Rs.2,50,36,450/- out of total Rs.3,11,86,450/- being contribution received from member industries as revenue receipt. Your appellant submits that the said contribution is in the nature of deferred revenue receipt, and therefore, it is to be deferred over a period of five years, and therefore, only 20% of the total contribution received is liable to tax and balance 80% is to be deferred in succeeding years. It is submitted that the 80% of addition of the total contribution, be deleted now. 3. The learned C.I.T.(Appeals) has erred in enhancing the income by Rs.39,19,484/- being 1/5th of contribution relating to Asst. Year 2007-08, 2008-09 and 2009-10. Your appellant submits that the said amount is not liable to tax. It is submitted that it be so held now. 3. Brief facts relating to the case are that theassesseecompany is a cooperative venture of member industries looking after disposal of effluent discharged by the companies into 55 km. long channel from their respective industrial sites leading to Gulf of Cambay (Khambat); theassessee-company was set up to create a facility of Common Effluent Disposal System by five major industrial companies, GSFC, IPCL, IOCL, GAIL & GIDC, under the directiveof the Gujarat High Court. These five companies are the shareholders of the assessee, and are also the initial users of the Common Effluent Disposal system, who have contributed towards the cost of the construction Common Effluent Disposal system by introducing their share of funds as share capital; that subsequent users of the Common Effluent Disposal system also contributed a lump sum non-refundable amount for the right to use the Common Effluent Disposal system but were not admitted as shareholders. The non- refundable contribution received from such other members at the ITA No.878/Ahd/2015 3 time of their admission is based on their capacity utilization, and is treated by the assessee as capital receipt and termed as ‘capital contribution. 4. The above facts have been extracted from para-3of the assessment order passed u/s 143(3) of the Act in the present case. 5. Solitary issue pertaining to which addition was made in the assessment framed for the impugned year related to the aforestatedcapital contribution received by the assessee during the year which was treated by the AO as being revenue in nature. The amount in all being Rs.3,11,86,450/- . 6. Before the ld.CIT(A) the assessee challenged the entire addition on two premises, viz. (i) that out of total capital contribution of Rs.3,11,86,450/-, Rs.61,50,000/- was received only by way of advances, and therefore, there was no question of treating it as income of the assessee for the year; (ii) that for the balance amount of Rs.2,50,36,450/-, the assessee agreed to treat it as Revenue receipt though on deferred basis spread over five years, relying upon decision of the ITAT in its own case in Asst.Year 2001-02;the impugned year before us being 2011-12. 7. The ld.CIT(A) rejected the assessee’s contention of Rs.61.50 lakhs of capital contribution as being not taxable on account of being received as advance, on the ground that no evidence inthis regard was filed by the assessee; that its contention remained totally unsubstantiated. With respect to theassessee’ plea ofdeferring the remaining capitalcontribution of Rs.2.50 crores in five years, theld.CIT(A) admitted to the ITAT having held so in the case of the assessee in Asst.Year 2001-02, but at the same time, he noted that ITA No.878/Ahd/2015 4 in Asst.Year 2009-10theld.CIT(A) had held entire capital receipts to be taxable in the same year noting that the assessee had violated theorderof the ITAT directing deferment of capital contribution in five years, in the preceding years. Theld.CIT(A), in Asst.Year 2009- 10, noted that the assessee had not returned to tax the said deferred income of the preceding year, and therefore, he had held the entire capital receipt of the impugned year to be brought to tax.Following this decision of the ld.CIT(A) in Asst.Year 2009-10 for the impugned year , theld.CIT(A) held the entire amount of capital contribution to be subjected to tax. Further, he noted that since the assessee had not returned to tax deferred capital contribution of the preceding years, he directed the AO to subject the same to tax in the impugned year, thus resulting in enhancing the assessee’s income to the extent of Rs.39,19,848/-. Aggrieved by this order of the ld.CIT(A) the assessee has come in appeal before the Tribunal raising the grounds as noted above. 8. At the outset, ld.counsel for the assessee pointed out that the issue raised in ground no.2 and 3 of the entire capital contribution received by the assessee during the impugned year being subjected to tax by the ld.CIT(A) following the decision of the ld.CIT(A) in the case of the assessee for Asst.Year 2009-10 should be taken up firstfor adjudication, since the assessee’s appeal against the order passed by the ld.CIT(A) in Asst.Year 2009-10 also stood adjudicatedby the ITAT inits order passed in ITA No.1420/Ahd/2012 dated 30.11.2015. Copy of the said order was placed before us and our attention was drawn to para-5 of the order holding that capital contribution has to be subjected to tax on deferred basis as per the order of the ITAT in Asst.Year 2001-02, thus restoring the issue to the AO for re-working the amount of capital contribution to be ITA No.878/Ahd/2015 5 subjected to tax. It was further pointed out that second issue of deferred income from capital contribution in preceding years, which the ld.CIT(A) had added by way of enhancing the assessee’s income, was also dealt with by the ITAT in the said portion of the order stating that the same would be covered by its finding that capital contribution is to be taxed on deferred basis,takingnote of the portion of the capital contribution of the preceding years to be taxed in the impugned year also. The relevant portion of the order of the ITAT is as under: “5. We have heard both the parties and perused the case file. It emanates from the case file that a co-ordinate bench of a tribunal in similar cross appeals ITA Nos. 1945/Ahd/2011 and 1948/Ahd/2011 for assessment year 2008-09 decided on 24-07-2015 remits back the issue of assessment of assessee's above stated capital receipt contribution back to the assessing authority for reworking as per earlier order in assessment year 2001-02. It further observes that the receipts received during the relevant accounting period are to be spread over for a period of five years instead of assessing the same in one assessment year. The second issue of enhancement stands decided against assessee. We follow suit in these facts and want of distinction being pointed out in the above stated decision. The assessee's first ground accordingly is remitted back to Assessing Officer. Second substantive ground fails accordingly. ITA 1420/Ahd/2012 is partly allowed for statistical purposes.” 9. The ld.DR however relied on the order of the ld.CIT(A) in this regard. He drew our attention to para 5.5& 5.6 of the orderwhich deal with the taxationof entire capital contribution received during the impugned year, as under: “5.5 Again, for the year under consideration the appellant has offered only Rs. 62,37,290/- out of total receipt of Rs. 3,11,86,450/-. However, it is seen that for the assessment year under consideration also l/5th capital contribution received in assessment years 2007-08, 2008-09 and 2009-10 have not been offered by the appellant to tax. Besides, the capital contribution of Rs. 3,11,86,450/- received in FY 2010-11, 1/5th of contribution received in assessment years from 2007-08 to 2009-10 totaling to Rs.39,19,848/- should also be taxed in AY 2011-12. Thus, the appellant did not follow the decision of the Hon'ble ITAT Ahmedabad which was given in its own case for AY 2001-02 and for subsequent years. ITA No.878/Ahd/2015 6 5.6 Considering all these facts, the Ld. CIT(A)-1, Baroda, i.e. my predecessor while deciding the appeal of the appellant for AY 2009-10 on similar issue has held that in absence of offer by the appellant to stagger/defer it over the years as done in earlier years, taxation of entire capital contribution in the year of receipt as made by the AO for such assessment year 2009-10 was justified. Accordingly, the Ld. CIT(A)-1 Baroda vide his order in appeal no. CAB-1/201/11-12 dated 20/04/2012 upheld the addition of capital contribution of Rs. 39,00,000/- as received by the appellant during FY 2008-09 relevant to above AY 2009-10. As stated in earlier paragraphs that in assessment years 2001-02, 2004-05 and 2005-06, the Hon'ble TTAT Ahmedabad by following decision of ITATs Special Bench in the case of Mahindra Holiday & Resort (I) Ltd. (2010), 131 TTJ (Chennai) and by referring to AS-9, accepted appellant's offer to tax on deferred basis one- time contribution received from members. Thus, it was the appellant who itself offered/pleaded before the Hon'ble ITAT Ahmedabad to tax on deferred basis one-time contribution received from members and it offered one-time contribution as income on deferred basis over a period of five /ears till AY 2007-08. However, from AY 2008-09 it started not offering one-time contribution as income on deferred basis for five years. Despite the fact that there was clear direction of the Hon'ble ITAT Ahmedabad, the appellant started not offering capital contribution on deferred basis and for the year under consideration also it has not. offered l/5th of capital contribution received in assessment years 2007-08 to 2009-10 i.e. totaling to Rs. 39,19,848/-. Thus, the appellant has not fully complied with the direction of Hon'ble ITAT, Ahmedabad. As stated in earlier paragraphs that the Ld. CIT(A) while deciding the appeal of the appellant for AY 2009-10 on similar issue has held that in absence of offer by the appellant to stagger/defer it over the years as done in earlier years, taxation of entire capital contribution in the year of receipt as made by the AO for such assessment year 2009- 10was justified. Following this decision of Ld. CIT(A) for AY 2010-11 also the addition made by the AO of the entire capital contribution of Rs. 3,97,27,8007- as received by the appellant was confirmed. Again, for the year under consideration i.e. for AY 2011-12 also it is held that the addition of entire capital of Rs. 3,11,86,450/- as made by the AO is hereby confirmed. In this regard the submissions of the appellant is not found to be acceptable. Thus, the ground of appeal No. 1 and 2 of the appellant are dismissed.” 10. He further drew our attention to para 5.7 to 5.9 of the order dealing with enhancement of the income on account of taxing the deferred capital contribution of the preceding years in the impugned order are as under: “5.7 Since the appellant failed to offer the l/5th of capital contribution received in financial years 2006-07, 2007-08 and 2008-09 (i.e. relevant to assessment years from 2007-08 to 2009-10) to tax in assessment year 2011-12, i.e. for the year under consideration and therefore a show-cause noticed u/s 251(2) of the Act bearing No. CAB-1/123/14-15/ECPL/2014-15 ITA No.878/Ahd/2015 7 dated 09/01/2015 was issued to it and such show-cause notice is reproduced hereunder for reference: "You have filed an appeal in your case against the order u/s 143(3) of the IT Act dated 12/02/2014 as passed by ACIT, Circle -l(2), Baroda for AY 2011- 12. The appeal has been filed by you for this assessment year in respect of addition made by the AO of Rs. 3,11,86,450/- by treating capital receipt of members' contribution as received by you as revenue receipt On perusal of details and records as filed by you, it is seen that from AY 2001-02 up till AY 2007-08, you had offered to tax capital contribution received from the members in each year on deferred revenue basis, i.e. l/5th for each year beginning year of receipt. However, such I/5th capital contribution received in FYs 2007-08, 2008-09 and 2009-10 have not been offered to tax in AY 2011-12, i.e. for the year under consideration. Besides, the capital contribution of Rs.3,11,86,450/- received in FY 2010-11, l/5th of contribution received in Financial Years from 2007-08 to 2009-10, totaling to Rs. 39,19,848/- should also be taxed in AY 2011-12, An opportunity in terms of section 251(2) is provided to you and to show-cause as to why the assessment for AY 2011-12 be not enhanced by deferred amount as above of Rs. 39,19,848/-. The matter is fixed for hearing on 16/01/2015 at 11.00 a.m." 5.8 It may be mentioned that in the above show-cause notice u/s 251(2) instead of mentioning assessment years 2007-08, 2008-09 and 2009-10 it has inadvertently been mentioned F Yrs 2007-08, 2008-09 and 2009-10. This fact was clarified to the AR of the appellant during the course of appellate proceedings vide order sheet noting dated 23/01/2015 and she was requested to read as A Yrs 2007-08, 2008-09 and 2009-10 instead of F Yrs 2007-08,2008-09 and 2009-10. In response to above show-cause notice u/s 251(2) of the Act, the AR of the appellant has furnished the reply vide letter dated 23/01/2015 and such reply is also reproduced hereunder for reference: "With regard to the above referred subject, we cordially submit as under on behalf of the Appellant-Appellate has received amount of contribution from different companies for Effluent Disposal System. Till the AY 2007-08, Appellate Company was treating the contribution from industries as deferred revenue income in five years. But from AY 2008-09, Appellate Company changed the method of treating such contribution and considered such contribution as Capital Receipt. However, considering its own case of Hon'ble Tribunal for the AY 2001-02, 2004-05, 2006-07 & 2007-08, decided in favour of Appellate Company, Company has adopted to treat the contribution received as deferred revenue income in five years. But, Appellate did not recognize l/5th portion of the Contribution for the A Y 2007-08, Asst.Year 2008-09 &Asst.Year 2009-10 of Rs.39,19,848/- to be recognized in AY 2011-12. This amount of contribution was not recognized and thus did not offer such amount for tax due to negligence. However, there was no malafide intention of appellate to escape from the same and mere negligence was the base reason for not recognizing the contribution. ITA No.878/Ahd/2015 8 Thus, Appellate has agreed to the enhancement of Rs. 39,19,848/- pertaining to the l/5th of the Contribution relating to AY 2007-08, 2008-09 & 2009-10. Please allow same and oblige. " 5.9 The appellant's AR in her above submission has admitted the fact that l/5th portion of contribution of assessment years 2007-08, 2008-09 and 2009-10 of Rs. 39,19,484/- was not offered for taxation in AY 2010-11. The submission of AR of the appellant is that this non offering of l/5th of capital contributions of these three assessment years was due to negligence. But the fact remains that the decision/direction of Hon'ble ITAT, Ahmedabad has not been fully complied with by the appellant and therefore the AO is directed to enhance the assessment for AY 2011-12 accordingly by Rs.39,19,484/-. Since the appellant has failed to offer/disclose this amount of Rs. 39,19,484/- (being l/5th of capital contributions received in AYrs 2007-08, 2008-09 and 2009-10) in the return of income for AY 2011-12 and therefore penalty proceedings u/s 271(1)(c) r.w.s. 274 for concealment of particulars of income are also initiated in respect of above enhanced income of Rs.39,19,484/-. 11. We have heard the rival contentions. It is undisputed and admitted fact that the issue of treatment of capital contribution received by the assessee for taxation has already been decided by the ITAT in the case of assessee in Asst.Year 2001-02 holding that it is to be treated as revenue in nature to be taxed on deferred basis in five years. Even the ld.CIT() has noted this fact. But however, he has followed order of the ld.CIT(A) in the case of the assessee for Asst.Year 2009-10 for subjecting the entire capital contribution for the impugned year to tax. Further he also enhancedthe income of the assessee by subjecting to tax the deferred capital contribution of the preceding year. The ITAT for Asst.Year 2009-10 has emphatically reiterated that the proposition laid down for taxing capital contribution received by theassessee in Asst.Year 2001-02 is tobe followed, and the capital contribution are to be subjected to tax in 5 years on deferred basis. There remains no scope, therefore, for following any other method for taxing capital contribution received by the assessee. In view of the same, therefore, we hold that capital contributions are tobe subjected to tax as per the decision of the ITA No.878/Ahd/2015 9 ITAT in the case of the assessee for Asst.Year 2001-02 taxing entire capital contribution received on deferred basis in 5 years. In sum and substance, 1/5 th of capital contribution received during the year is to be subjected to tax in the impugned year, and all capital contributions received in preceding years which are to be subjected to tax on deferred basis in the impugned year are also tobe included in the income of the assessee. The issue is, therefore, restored to the AO to re-work the amount of capital contribution to be brought to tax in accordance with the order of the ITAT in the case of the assessee for Asst.Year 2001-02. Ground No.2 and 3, therefore, are allowed for statistical purpose. 12. Only issue which now remains, and which has been raised by the assessee in ground no.1 is vis-à-vis addition of capital contribution of Rs.61,50,000/- whichthe assessee has pleaded consistently is only in the nature of advance and therefore cannot be subjected to tax in the impugned year. The ld.counsel for the assessee pointed out that since the assessee was unable to substantiate its pleading, the ld.CIT(A) rejected the same. He drew our attention to para-5.4 of the order of the ld.CIT(A) containing the pleadings and the finding of the ld.CIT(A) on the issue as under: “5.4. However, for the year under consideration, the appellant has considered an amount of Rs. 61,50,000/- (i.e. the amount which is included in total receipt of Rs.3,11,86,450/- as made for the year under consideration) as not taxable being the same as advance received from the persons to whom membership were not allotted and they were not allowed to get the benefit of disposal system. As per the AR such amount of Rs. 61,50,000/- is not taxable item as membership was not allotted to such industries and remaining amount of Rs.2,50,36,450/- crore was to be deferred in 5 years. But this submission of the appellant is not found to be tenable. In my opinion, the entire receipt of Rs.3,11,86,450/- as got by the appellant from different persons/industries are taxable item. The appellant has filed a chart showing name of industries, amount received from such industries as fee for membership and the year in which such amounts have been received. It is observed that this entire amount of Rs.61,50,000/- is shown to have been received by the appellant in FY 2010-11. As per the AR, ITA No.878/Ahd/2015 10 if the membership was not allotted to the persons/industries from whom this amount of Rs.61,50,000/- was received, then such amount was required to be refunded to these persons/industries. However, till date i.e. almost after four years also neither this amount has been claimed by those persons/ industries nor the same have been refunded by the appellant to them. The appellant has not explained that whether in the liability side of balance sheet for FY 2010-11, this particular amount of Rs. 61,50,000/- has been shown as liability under the head 'loans & advances'. How this amount as claimed to be loans & advances have been treated in the books of account for FYrs 2010-11, 2011-12 and 2013-14 are not explained. The appellant has also not explained as to why membership could not be allotted to the persons/ industries from whom the above amount Rs.61,50,000/- were received and why such amount were not claimed by such persons/industries. The appellant has not filed confirmations from the persons/industries from whom the above amount of Rs.61,50,000/- are received. It is not explained as to how these persons/industries have treated this amount of Rs.61,50,000/- in their books of account. In my opinion, no prudent businessman would allow the appellant to keep their money with it for such a long period when membership was not allotted to them and they have not got any benefit from the appellant. Considering all these facts, it is held that this amount of Rs.61,50,000/- being part of total receipt of Rs.3,11,86,450/- is also required to be taxed.” 13. Drawing our attention to the finding of the ld.CIT(A), the ld.counsel for the assessee pointed out that the ld.CIT(A) rejected the assessee’s contention that the amount of Rs.61.50 lakhs represented advances received for capital contribution, in the absence of any substantiation of the same by the assessee. He pointed out that the ld.CIT(A) noted the fact that such huge amount received during the impugned year as advance remained as such till the date of order passed by the ld.CIT(A) on 28.1.2015 i.e. four years after the receipt of the same, the impugned year involved being A.Y 2011-12 pertaining to F.Y 2010-11, and the same had neither been refunded nor claimed by the said parties. 14. The ld.counsel for the assessee thereafter contended that subsequent to the order passed by the ld.CIT(A) in 2015, the assessee had refunded all these amounts of advances received from the respective parties in the year 2016. He explained that the reason for the same was the fact that the acceptance of the ITA No.878/Ahd/2015 11 membership of these companies was subjected to approval by the Gujarat Pollution Control Board (GPCB) which was a condition explicitly stated in the letter of intent issued to these parties; that since the approval of GPCB was not obtained, therefore, all amounts received by way of advances from these parties was refunded in 2016. The ld.counsel for the assessee stated that the assessee was now in possession of evidence of refund of all these advances by way of letters issued to the respective parties refunding their amounts, copies of cheques issued to the parties, as also bank statement of the assessee, reflecting the issuance of cheques to these parties in the year 2016-17, refunding the advance received from them towards capital contribution. The ld.counsel for the assessee contended that he was also in possession of letter of intent issued to these parties mentioning the fact of receipt of a portion of capital contribution as advance for the membership to the venture being subjected to approval of GPCB, in the cases of all parties. All the above, the ld.counsel for the assessee stated, were being placed before us as additional evidence, and since they were not available at the time the order was passed by the ld.CIT(A) they could not be placed before him. The contentionof the ld.counsel for the assessee was that this constituted additional evidences which being contemporaneous in nature and though they were not filed earlier, were relevant for adjudicating the issue at hand. He drew support from the judgment of Hon’ble Apex Court in the case of Sanjay Kumar Singh Vs. The State of Jharkhand, Civil Appeal No.1760 of 2022 dated 10.3.2022 for the consideration to be kept in mind by a Court of law while admitting the additional evidences. He drew our attention to para-4 & 5 of the said order. Copy of which was placed before us as under: ITA No.878/Ahd/2015 12 “4. It is true that the general principle is that the appellate court should not travel outside the record of the lower court and cannot take any evidence in appeal. However, as an exception, Order 41 Rule 27 CPC enables the appellate court to take additional evidence in exceptional circumstances. It may also be true that the appellate court may permit additional evidence if the conditions laid down in this Rule are found to exist and the parties are not entitled, as of right, to the admission of such However, at the same time, where the additional evidence sought to be adduced removes the cloud of doubt over the case and the evidence has a direct and important bearing on the main issue in the suit and interest of justice clearly renders it imperative that it may be allowed to be permitted on record, such application may be allowed. Even, one of the circumstances in which the production of additional evidence under Order 41 Rule 27 CPC by the appellate court is to be considered is, whether or not the appellate court requires the additional evidence so as to enable it to pronouncement judgment or for any other substantial cause of like nature. As observed and held by this Court in the case of A. AndisamyChettiar v. A. SubburajChettiar, reported in (2015) 17 SCO 713, the admissibility of additional evidence does not depend upon the relevancy to the issue on hand, or on the fact, whether the applicant had an opportunity for adducing such evidence at an earlier stage or not, but it depends upon whether or not the appellate court requires the evidence sought to be adduced to enable it to pronounce judgment or for any other substantial cause. It is further observed that the true test, therefore is, whether the appellate court is able to pronounce judgment on the materials before it without taking into consideration the additional evidence sought to be adduced. 5. Applying the law laid down by this Court in the aforesaid decision to the facts of the case on hand, we are of the opinion that while considering the application for additional evidence, the High Court has not at all adverted to the aforesaid relevant consideration, i.e., whether the additional evidence sought to be adduced would have a direct bearing on pronouncing the judgment or for any other substantial cause-As observed hereinabove, except sale deed 29.12.1987, which as such was rejected, there was no other material available on record to arrive at a fair market value of the acquired land. Therefore, in the facts and circumstances of the case, the High Court ought to have allowed the application for additional evidence. However, at the same time, even after permitting to adduce the additional evidence, the applicant has to prove the existence, authenticity and genuineness of the documents including contents thereof, in accordance with law and for the aforesaid purpose, the matter is to be remanded to the Reference Court.” 15. The ld.counsel for the assessee stated that in view of the above, this additional evidence substantiated his contention that capital contribution to the extent of Rs.61.50 lakhs were in fact in the nature of advances only, and thus should be brought to tax in ITA No.878/Ahd/2015 13 the impugned year by admitting and consider for adjudicating the issue. 16. The assessee filed a letter dated 7.9.2022 listing additional evidences as pointed out above, as also reason for filing them now before us and for admission of the same. The contents of the same are as under: Sr. No. Description of document Page No. 1 Copy of letters and cheques issued to parties who were refunded advances of membership fees 1 to 18 2 Extracts of Bank Statements showing amount refunded to parties 19 to 28 3 Supreme Court Judgement 29 to 36 3 LOI/Intimation letters issued to parties 37 to 52 All the above documents are annexed herewith this application. 2. Most of the aforesaid additional evidences are executed or obtained after passing of order by learned CIT(Appeals). The Applicant is required to adduce additional evidences to rebut the findings given by learned C.I.T.(Appeals) in his order. The letters and cheques issued along with corresponding entries in the bank statement of the Applicant, proves beyond doubt that, the amount received by the Applicant from the concerned parties was an advance and the same was refunded to them in the subsequent years as they were not accorded permission by the Gujarat Pollution Control Board and hence, the same cannot be added as Revenue Income in the year of receipt. The documents relating to refund of the advances are required to be adduced as additional evidence because the learned C.I.T.(Appeals) for the first time in his Appellate Order, has dealt with the component of the advances of Rs.61,50,000/- from the total membership fees received of Rs.3,11,86,450/- separately and has rejected the stand of the Applicant on the ground of non-refund of such advances. Moreover, these documents being contemporary in nature and depicting events which occurred subsequently to the order of the learned C.I.T.(Appeals), the said evidence which is necessary to controvert those findings could not be produced before the lower authorities. 3. In this view of the matter, it is most humbly submitted that, above mentioned additional evidences are extremely important pieces of evidence, to prove the bona fides of the Applicant. The additional evidences sought to ITA No.878/Ahd/2015 14 be adduced, removes the cloud of doubt cast upon the Applicant and such evidences have direct and important bearing on the issue impugned under the first ground of the present appeal. Thus, it is requested that, the aforesaid evidences may kindly be admitted for the substantial cause of justice and also in light of the recent judgment of Hon'ble Supreme Court in case of Sanjaykumar Singh vs. State of Jharkhand (Civil Appeal No.1760 of 2022 dated 10.03.2022) (copy attached herewith). All these evidences are going to the root of the controversy, and hence, are integral for the proper and fair dispensation of justice.” 17. The ld.DR strongly objected to the admission of additional evidences pointing out that no reason has been brought out by the ld.counsel for the assessee for not furnishing this additional evidence earlier. Further taking note of the additional evidences now filed, the ld.DR pointed out even as per this evidence advances have been refunded after six years. He pointed out that advances though received in impugned year i.e. F.Y.2010-11, had been refunded in 2016. He stated that there was no reason for holding the advances for so long and they must have been utilized by the assessee in the intervening period, and therefore, for all purposes, ought to be treated as revenue income of the assessee. 18. We have heard both the parties. Undoubtedly, the contention of the assessee with regard to the capital contribution of Rs.61.50 lakhs hasconsistently beenthat it represented advances received from various parties towards capital contribution, and therefore, could not be subjected to tax as capital contribution for the impugned year. It is also matter of record that this contention of the assessee was repeatedly rejected by the lower authorities for want of substantiation. Before us, the ld.counsel for the assessee has now filed evidences in the form of letter of intent issued to these parties mentioning fact of a portion of the total contribution being received during the impugned year as part of their capital contribution towards the membership of the assessee company; the balance being paid on receipt of NOC from GPCB. The contents of one of the ITA No.878/Ahd/2015 15 letters of intent so issued by the assessee-company are reproduced hereunder: ITA No.878/Ahd/2015 16 19. The assessee has also filed copy of letter issued to these parties in the year 2016 refunding their contribution so received and stating that they have no right whatsoever as mentioned in the LOI issued in the past. The contents of one of the said letter issued to the party whose LOI reproduced above i.e. M/s.Ami Life Sciences P.Ltd. is reproduced hereunder: ITA No.878/Ahd/2015 17 20. The said letter is accompanied by copy of cheque issued to it and is also shown to be reflected in the bank statement of the assessee. Thus, the above additional evidences filed in the case of ITA No.878/Ahd/2015 18 all the parties from whom the purported advances were received, the assessee has sought to demonstrate and substantiate its pleading that the amount received from them was only in the nature of advances by way of capital contribution, which was refunded to them on account of approval of GPCB not being obtained in their cases. These evidences, undoubtedly being generated post the order passed by the ld.CIT(A), therefore, could not be filed before him, and at the same time, undoubtedly, they do substantiate the assessee’s plea that the amount received from these parties was not full and final payment of these parties towards capital contribution, but was only portion of the capital contribution to be made by them given by way of advance towards membership of the assessee-company subjected to approval by GPCB. Since these evidences throw light and bring out the nature of the purported amount, they are relevant for adjudicating the controversy before us, whether the impugned amounts were in the nature of advance for capital contribution or not. The Revenue authorities have no basis for holding the entire receipts not being in the nature of advance except for the fact that they were retained by the assessee for a very long period of time. These evidences shedding light on the nature of receipts therefore we hold,need to be admitted for fair and proper dispensation of justice as per the principle laid down by the Hon’ble apex court for admission of additional evidences in the case of Sanjay Kumar Singh Vs. The State of Jharkhand, Civil Appeal No.1760 of 2022 dated 10.3.2022. The additional evidences, therefore, are admitted for adjudication, and the issue is restored back to the AO to verify the additional evidences and thereafter determine the true nature of the amounts of Rs.61.50 lakhs received by the assessee, and thus ITA No.878/Ahd/2015 19 adjudicate the issue, whether they represent advance towards capital contribution or are in the nature of capital contribution, for determining their taxability in the impugned year. The AO is directed to adjudicate the issue in accordance with law after verifying the evidences filed by the assessee. Needless to add, the assessee be given proper opportunity of hearing by the AO in accordance with law. 21. Ground no.1 is therefore allowed for statistical purposes. 22. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the Court on 26 th May, 2023 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad, dated 26/05/2023