DCIT, CC-I, Ludhiana V. M/s Genex Industries Ltd., Ludhiana

ITA 954/CHANDI/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6706 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-07-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 06-07-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VEENA JOSHI
• Keywords: Opportunity of being heard; Additional evidence
• Section: 153A; 250; 68; 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH A CHANDIGARH !, ' # , $ % & ' ( , )* # BEFORE: SMT. DIVA SINGH, JM & SMT.ANNAPURNA GUPTA, AM ./ ITA NO. 954/CHD/2018 / ASSESSMENT YEAR : 2010-11 THE DCIT, CENTRAL CIRCLE-I, LUDHIANA. VS M/S GENEX INDUSTRIES LTD., (FORMERLY KNOWN AS B.R. SPINNERS P.LTD., 228-D, INDUSTRIAL AREA-A, CHEEMA CHOWK, LUDHIANA. ./ PAN /TAN NO: AAACB6770H / APPELLANT / RESPONDENT / REVENUE BY : SMT.VEENA JOSHI, CIT-DR !' / ASSESSEE BY : SHRI SANJAY SOOD, CA # $ '%/ DATE OF HEARING : 11.07.2019 &'() '%/ D ATE OF PRONOUNCEMENT : 31.07.2019 )-/ ORDER PER DIVA SINGH THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE ASSAILING THE CORRECTNESS OF THE ORDER DATED 26.04. 2018 OF CIT(A)-2, JALANDHAR PERTAINING TO 2010-11 ASSESSMEN T YEAR ON THE FOLLOWING GROUNDS : 1. WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CA SE, THE LD. CIT (A) HAS ERRED IN LAW IN IGNORING THE PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT, 1961 WHILE DELETING THE ADDITION OF RS. 2.70 CRORE MADE ON ACC OUNT OF SHARE APPLICATION MONEY. 2. WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CA SE, THE LD. CIT (A) HAS ERRED IN LAW IN ACCEPTING THE ADDITIONAL EVIDENCE/GROUND IN VIOLATION OF RULE 46A OF THE INCOME TAX RULES. 3. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROU NDS OF APPEAL ON OR BEFORE IS HEARD AND DISPOSED OFF. ITA 954/CHD/2018 A.Y. 2010-11 PAGE 2 OF 14 2. THE PRESENT APPEAL CAME UP FOR HEARING ON 10.07. 2019. ON THE SAID DATE, A PRELIMINARY HEARING TOOK PLACE WHEREIN THE DEPARTMENT WAS REQUIRED TO ADDRESS THE FACTS R ELATABLE TO GROUND NO. 2. THE LD. CIT-DR MS. JOSHI RELYING U PON HER WRITTEN APPLICATION SOUGHT SOME TIME. THE HEARING W AS ACCORDINGLY ADJOURNED TO 11.07.2019. 3. ON THE SAID DATE, THE LD. CIT-DR INVITING ATTENT ION TO THE ASSESSMENT ORDER SUBMITTED THAT THE ASSESSEE BE LONGS TO GENEX GROUP OF CASES ON WHICH SEARCH & SEIZURE OPER ATION TOOK PLACE U/S 132 OF THE ACT ON 23.05.2013. DURIN G THE SEARCH OPERATION, VARIOUS DOCUMENTS WERE FOUND AND SEIZED FROM VARIOUS BUSINESS AND RESIDENTIAL PREMISES OF T HE GROUP. RETURN IN RESPONSE TO NOTICE U/S 153A WAS FILED. O N THE SUBJECT MATTER OF THE ADDITION CHALLENGED BY THE RE VENUE IN THE PRESENT CASE, IT WAS HER SUBMISSION THAT THE AS SESSEE HAD SHOWN RS. 2.70 CRORES IN HIS AUDITED BOOKS OF A CCOUNT AS RECEIPT OF SHARE APPLICATION MONEY. CARRYING TH E ARGUMENT FURTHER, IT WAS SUBMITTED THAT WHEN THE IS SUE WAS ENQUIRED INTO BY THE AO, THE ASSESSEE COULD OFFER N O EXPLANATION AND INSTEAD REPLIED THAT THE ASSESSEE H AD NOT RECEIVED ANY SHARE APPLICATION MONEY IN THE YEAR UN DER CONSIDERATION. IT WAS SUBMITTED THAT SINCE DESPITE QUERIES RAISED IN THE ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED NO SUPPORTING DOCUMENTS OR MADE ANY EFFORT TO EXPLAIN THE BALD ITA 954/CHD/2018 A.Y. 2010-11 PAGE 3 OF 14 STATEMENT, THE ASSESSING OFFICER CONSIDERING THE AU DITED BOOKS OF ACCOUNT MADE THE ADDITION. IT WAS ARGUED THAT THE ASSESSEE BEFORE THE AO FAILED TO IDENTIFY THE PERSO NS WHO ADVANCED SHARE APPLICATION MONEY AND CONSEQUENTLY N EITHER THE IDENTITY, CREDIT WORTHINESS OR THE GENUINENESS OF THE TRANSACTIONS COULD BE ESTABLISHED BY THE ASSESSEE A S THEY REMAINED UNPROVED BEFORE THE AO. CONSEQUENTLY, THE SHARE APPLICATION MONEY REFLECTED IN ITS BALANCE SHEET, I T WAS SUBMITTED, WAS ADDED AS ASSESSEE'S INCOME U/S 68 OF THE ACT. 3.1. INVITING ATTENTION TO THE IMPUGNED ORDER IT WAS HER SUBMISSION THAT THE CIT(A) TOOK A DIAMETRICALLY OPP OSITE STAND AND DELETED THE ADDITION HOLDING THAT SINCE T HE RECEIPT OF SHARE APPLICATION MONEY WAS CLAIMED ON THE BASIS OF CHEQUES WHICH HAD NOT BEEN ENCASHED, THUS HE CONCL UDED THAT IN EFFECT NO SHARE APPLICATION MONEY WAS RECEI VED. 3.2 TO COME TO THE SAID CONCLUSION, IT WAS SUBMITTE D THAT THE CIT(A) CONSIDERED FRESH EVIDENCES WHICH HAS BEE N RELIED UPON WITHOUT CONFRONTING THE EVIDENCES TO THE AO. IT WAS SUBMITTED THAT THIS VIOLATION OF RULES IS CHALLENGE D BY THE REVENUE IN THE PRESENT PROCEEDINGS. REFERRING TO TH E ORDER IT WAS HER SUBMISSION THAT THE ASSESSEE BEFORE THE AO ADMITTEDLY DID NOT FILE ANY EVIDENCES. THUS, THE OR DER PASSED IT WAS SUBMITTED, WAS NOT IN TERMS OF THE STATUTORY RULES. ITA 954/CHD/2018 A.Y. 2010-11 PAGE 4 OF 14 3.3 EVEN OTHERWISE, ON MERITS IT WAS SUBMITTED THAT THE CIT(A) HAS GLOSSED OVER THE ISSUE AND NOT APPRECIAT ED THE TRUE FACTS. REFERENCE WAS MADE TO PAPER BOOK PAGE 35 WHICH SHOWED THAT THE SHARE APPLICATION MONEY AS ON 31 ST MARCH, 2010 HAD BEEN INCREASED BY RS. 2.70 CRORES. REFERR ING TO PAPER BOOK PAGE 61, IT WAS SUBMITTED THAT THE SHARE APPLICATION MONEY AS ON 31 ST MARCH,2011 WAS THEREAFTER SHOWN TO BE NIL. ACCORDINGLY, IT WAS HER SUBMISSI ON THAT APPARENTLY, SOME SHARES, IT SHOWS HAVE BEEN ALLOTTE D AS THERE IS AN INCREASE IN THE CORRESPONDING FIGURES I N SHARE CAPITAL AS ON 31 ST MARCH,2011. 3.4 ASSAILING THE ORDER ON MERITS, IT WAS ALSO HER SUBMISSION THAT IF AS PER THE VERSION OF THE ASSESS EE WHICH HAS BEEN ACCEPTED BY THE CIT(A), CHEQUES WERE NOT E NCASHED, THEN THERE IS NO DISCLOSURE IN THE SO CALLED AUDITE D BOOKS OF ACCOUNT THAT THE SHARE APPLICATION MONEY IS RECEIVE D BY WAY OF CHEQUES LYING UN-CASHED. ACCORDINGLY, IT WAS HER SUBMISSION THAT THE POSITION AS ARGUED BEFORE THE C IT(A) AND CONSIDERED BY THE CIT(A) IS EVEN OTHERWISE NOT BORN E OUT FROM THE RECORD. 3.5 IN THE CIRCUMSTANCES, IT WAS HER SUBMISSION THA T EITHER GROUND NO. 1 RAISED BY THE REVENUE BE ALLOWED, ALTE RNATELY ADDRESSING THE VIOLATION OF RULE 46A CHALLENGED IN GROUND ITA 954/CHD/2018 A.Y. 2010-11 PAGE 5 OF 14 NO. 2 BY THE REVENUE, THE MATTER MAY BE REMANDED TO THE AO FOR SETTING RIGHT THE STATUTORY VIOLATION. 4. THESE ASPECTS POINTED OUT BY THE LD. CIT-DR WERE REQUIRED TO BE ADDRESSED BY THE LD. AR WHO IN THE CIRCUMSTANCES AGREED THAT THE MATTER MAY BE REMANDE D IN TERMS OF THE PRAYER OF THE REVENUE. NO FURTHER SUB MISSIONS WERE MADE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE ADVERTING TO FACTS, IT IS APPROPRIATE TO ADDRESS THE SPECIFIC GRIEVANCE ADDRE SSED BY THE REVENUE IN THE PRESENT PROCEEDINGS VIDE GROUND NO. 2 RAISED IN THE APPEAL. THE FACT THAT FRESH EVIDENCES HAVE BEEN FILED IS NOT DISPUTED BY THE LD. AR. THE FACT THAT FRESH EVIDENCES WERE RELEVANT OR CRUCIAL FOR DETERMINING THE ISSUES IS NOT DISPUTED BY THE REVENUE. THE FACT THAT THE REQUIREMENTS OF SUB-RULE (1) AND (2) OF THE RULE 46 A OF THE INCOME TAX RULES,1962 WERE REQUIRED TO BE FULFILLED IS ALSO NOT AN ISSUE BEFORE US AS THE REVENUE AFTER HALF HE ARTEDLY ARGUING THE ISSUE ON MERITS HAS PRIMARILY BASED ITS PRAYER ON REMAND BACK TO THE AO IN ORDER TO FULFILL THE ST ATUTORY REQUIREMENTS AS SET OUT IN SUB-RULE (3) OF RULE 46A OF THE INCOME TAX RULES. FOR THE SAID PURPOSE, WE PROPOSE TO FIRST ADDRESS THE RELEVANT PROVISION WHICH IS SOUGHT TO B E INVOKED IN THE PRESENT PROCEEDINGS. PRODUCTION OF ADDITIONA L EVIDENCE ITA 954/CHD/2018 A.Y. 2010-11 PAGE 6 OF 14 BEFORE THE CIT(A) IS GOVERNED BY RULE 46A OF THE IT AT RULES, 1963. IN VIEW OF THE FACT THAT THE DEPARTMENTAL PRA YER IS FOR REMAND BACK TO THE AO IT IS EVIDENT AS NOTED ABOVE THAT THE REVENUE SEEKS TO INVOKE THE VIOLATION OF SUB-RULE ( 3) OF RULE 46A AND IS NOT PRESSING FOR THE FULFILLMENT OF THE REQUIREMENTS AS SET OUT IN SUB-RULE (1) AND (2) OF RULE 46A. 5.1 THE RELEVANT PROVISION ADDRESSED IN THE PRESENT PROCEEDINGS IS EXTRACTED HEREUNDER FOR READY REFERE NCE : [PRODUCTION OF ADDITIONAL EVIDENCE BEFORE THE DEPUT Y COMMISSIONER (APPEALS) AND COMMISSIONER (APPEALS)]. RULE 46A SUB-RULE (3) : 1). 2). 3) THE DEPUTY COMMISSIONER (APPEALS) OR AS THE CASE MAY BE, THE COMMISSIONER (APPEALS) SHALL NOT TAKE INTO ACCOUNT ANY EVIDENCE PRODUCED UNDER SUB-RULE (1) UNLESS THE ASSESSING OFFICER HAS BEEN ALLOWED A REASONABLE OPPORTUNITY (A) TO EXAMINE THE EVIDENCE OR DOCUMENT OR TO CROSS -EXAMINE THE WITNESS PRODUCED BY THE APPELLANT, OR (B) TO PRODUCE ANY EVIDENCE OR DOCUMENT OR ANY WITN ESS IN REBUTTAL OF THE ADDITIONAL EVIDENCE PRODUCED BY THE APPELLANT (EMPHASIS SUPPLIED) 5.2 IN THE FACTS OF THE PRESENT CASE THE SAID OP PORTUNITY ADMITTEDLY HAS NOT BEEN PROVIDED TO THE AO. WE NOT E THAT THE CIT(A) HAS NOT CARED TO ADDRESS THE REQUIREMENT S OF SUB RULE (1) AND (2) OF RULE 46A IN HIS ORDER, HOWEVER, SINCE THE PRAYER OF THE DEPARTMENT AS NOTED IS LIMITED TO SEE KING A REMAND BACK TO THE AO WHICH HAS BEEN ACCEPTED BY TH E LD. AR, WE ARE NOT REQUIRED TO FURTHER DELIBERATE ON TH E ASPECT WHICH IS NOT AN ISSUE BEFORE US. THE RELEVANT DISCU SSION FROM THE IMPUGNED ORDER WHICH HAS BEEN CHALLENGED B Y THE ITA 954/CHD/2018 A.Y. 2010-11 PAGE 7 OF 14 REVENUE IN THE PRESENT PROCEEDINGS IS REPRODUCED HE REUNDER FOR THE SAKE OF COMPLETENESS: 5. THE GROUND NO. 5OF THE APPEAL IS AGAINST THE ORD ER PASSED BY THE AO WHO ERRED IN MAKING AN ADDITION OF RS. 2,70,00,000 U/S 68 OF THE IT ACT ON ACCOUNT OF SHARE APPLICATION MONEY RECEIVED. 5.1 THE APPELLANT HAS SUBMITTED AS UNDER:- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, LD AO ERRED IN MAKING COLOSSAL AND GARGANTUAN ADDITION OF RS.2,70,00,000/- BEING SHARE APPLICATI ON MONEY RECEIVED. THE AO HAS MADE ADDITION WITHOUT VE RIFYING AND GOING THROUGH THE DOCUMENTARY EVIDENCES SUBMITTED. IN THIS RESPECT, IT IS STATED THAT ON 31 ST MARCH, 2010, THE ASSESSEE RECEIVED 4 CHEQUES FROM SH.ANUBHAV AGGARWAL DIRECTOR OF THE COMPANY. D ETAILS OF CHEQUES ARE AS UNDER: DATE CHEQUE NO. AMOUNT 31.03.2010 478724 10000000.00 31.03.2010 478725 10000000.00 31.03.2010 478726 4000000.00 31.03.2010 478727 3000000.00 TOTAL 27000000.00 BUT THESE CHEQUES WERE NEVER PRESENTED INTO THE BAN K AND CANCELLED ON 05.04.2010. PHOTOCOPY OF CHEQUES CANCELLED, COPY OF SHARE APPLI CATION MONEY ARE ENCLOSED FOR YOUR REFERENCE. SINCE NO MONEY WAS RECEIVED THE AO CONTE NTION TO PROVE THE IDENTITY, GENUINENESS AND CREDIT WORTHINESS OF SH. ANUBHAV A GGARWAL WHO IS PRINCIPAL DIRECTOR OF THE COMPANY DOES NOT ARISE. HENCE IT IS PRAYED THAT THIS ADDITION OF RS.2,70,00,000/- MAY KINDLY BE DELETED. 5.2 I HAVE GONE THROUGH THE ASSESSMENT ORDER PASSED BY THE AO, SUBMISSIONS FILED BY THE APPELLANT AND FIND THAT AN ADDITION OF RS. 2.70 CRORE HAS BEEN MADE BY THE AO U/S 68OF THE IT ACT ON ACCOUNT OF SHARE APPLICATION MON EY RECEIVED IN THE YEAR UNDER CONSIDERATION. AO HAS STATED IN THE APPELLANT HAS F AILED TO PROVE THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF SHARE APPLICATION MONEY AND THEREFORE, ADDITION WAS MADE TO THE INCOME OF THE YEAR UNDER CONSIDERATION. 5.3 THE APPELLANT HAS SUBMITTED THAT ADDITION WAS MADE BY THE AO WITHOUT VERIFYING AND GOING THROUGH THE EVIDENCE SUBMITTED AS 4 CHEQU ES WERE RECEIVED FROM SH. ANUBHAV AGGARWAL, DIRECTOR OF THE COMPANY. THE DETAILS OF T HESE CHEQUES ARE AS UNDER: - DATE CHEQUE NO. AMOUNT 31.03.2010 478724 100,00,000 31.03.2010 478725 100,00,000 31.03.2010 478726 40,00,000 31.03.2010 478727 30,00,000 TOTAL 2,70,00,000 5.4 THE APPELLANT HAS FURTHER STATED THAT NONE OF THESE CHEQUES WERE PRESENTED IN THE BANK AND WERE EVENTUALLY CANCELLED ON 05. 04. 2010. A COPY OF THE CANCELLED TAX HAS ALSO BEEN PLACED ON RECORD TO SUPPORT ITS CONTENTIONS. I T IS SUBMITTED BY THE APPELLANT THAT SINCE NO SHARE APPLICATION MONEY WAS RECEIVED AND T HEREFORE THERE IS NO QUESTION OF PROVING THE IDENTITY, GENUINENESS AND CREDITWORTHIN ESS OF THE SHARE APPLICANTS. IT IS STATED THAT EVEN OTHERWISE THE SHARE APPLICANTS IS SH. ANU BHAV AGGARWAL, WHO IS THE PRINCIPAL DIRECTOR OF THE COMPANY AND THEREFORE, THESE ISSUES DO NOT ARISE. ITA 954/CHD/2018 A.Y. 2010-11 PAGE 8 OF 14 5.5 I HAVE CONSIDERED THE CONTENTIONS OF THE APPELLANT AND FIND THAT ENTRIES IN THE BOOKS OF ACCOUNTS WERE MADE BY THE APPELLANT ON REC EIPT OF CHEQUES ON 31 MARCH 2010. HOWEVER, THE FACT WHICH CANNOT BE DENIED IS THAT NO SHARE APPLICATION MONEY HAS IN FACT BEEN RECEIVED AS NONE OF THESE CHEQUES WERE PRESENT ED BY THE COMPANY IN THE BANK. A COPY OF THE BANK ACCOUNT HAS ALSO BEEN PLACED ON RE CORD TO SUPPORT ITS CONTENTIONS. THUS, IN THE ABSENCE OF RECEIPT OF ANY MONEY BY THE APPEL LANT THE QUESTION OF DISCHARGING THE ONUS WHICH IS PLACED ON THE APPELLANT IN TERMS OF P ROVISIONS OF SECTION 68 OF THE IT ACT DOES NOT ARISE. HOWEVER, THE ISSUE WHICH ARISES FOR CONSIDERATION IS WHETHER THE BOOKS OF ACCOUNTS AND FINANCIAL STATEMENTS WHICH HAVE BEEN D ULY AUDITED AND ENCLOSED WITH THE RETURN OF INCOME REPRESENT A CORRECT PICTURE OF THE STATEMENT OF AFFAIRS OR NOT. 5.6 I HAVE CONSIDERED THE LEGAL POSITION AS WELL AS ACC OUNTING AND AUDITING PRINCIPLES AND FIND THAT SO FAR AS ACCOUNTING OF SHARE APPLICA TION MONEY IS CONCERNED, THE APPELLANT WAS JUSTIFIED IN PASSING ACCOUNTING ENTRIES ON 31 M ARCH 2000 AND ON RECEIPT OF 4 CHEQUES FROM SH. ANUBHAV AGGARWAL AMOUNTING TO RS. 2.70 CRO RES. HOWEVER, WHEN THESE CHEQUES WERE NOT ENCASHED AND PRESENTED IN THE BANK ACCOUNT , THE AUDITOR WAS DUTY BOUND TO STATE IN THE AUDIT REPORT THIS FACT AS THE AMOUNT STANDS DULY REFLECTED UNDER THE HEAD SHARE APPLICATION MONEY IN THE LIABILITY SIDE OF THE BALA NCE SHEET. THIS DISCLOSURE WAS NOT MADE BY THE AUDITOR AND THEREFORE, I HOLD THAT AUDITED A CCOUNTS DID NOT REFLECT A TRUE AND FAIR PICTURE OF THE STATEMENT OF AFFAIRS. 5.7 I FIND THAT PROVISIONS OF SECTION 271J HAVE BEEN IN SERTED BY THE FINANCE ACT 2017 TO PROVIDE FOR PENAL CONSEQUENCES FOR FURNISHING AN INCORRECT INFORMATION IN ANY REPORT OR A CERTIFICATE FURNISHED BY AN ACCOUNTANT UNDER A NY PROVISIONS OF THIS ACT. IT WOULD BE RELEVANT TO REPRODUCE THE PROVISIONS OF THIS SECTIO N, WHICH ARE AS UNDER:- [PENALTY FOR FURNISHING INCORRECT INFORMATION IN RE PORTS OR CERTIFICATES. 271.J. WITHOUT PREJUDICE TO THE PROVISIONS OF THIS ACT, WHERE THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS), IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT. FINDS THAT CM ACCOUNTANT OR A MERCHANT HANKER OR A REGISTERED VALUER HAS FURNISHED INCORRECT INFORMATION IN ANY REPORT OR CE RTIFICATE FURNISHED UNDER ANY PROVISION OF THIS ACT OR THE RIDES MADE THEREUNDER, THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) MAY DIRECT THAT SUCH ACCOUNT ANT OR MERCHANT BANKER OR REGISTERED VALUER, AS THE CASE MAY BE, SHALL PAY, B Y WAY OF PENALTY, A SUM OF TEN THOUSAND RUPEES FOR EACH SUCH REPORT OR CERTIFICATE . EXPLANATIONFOR THE PURPOSES OF THIS SECTION, (A) 'ACCOUNTANT' MEANS AN ACCOUNTANT REFERRED TO IN THE EXPLANATION BELOW SUB-SECTION (2) OF SECTION 288; (B) 'MERCHANT BANKER' MEANS CATEGORY I MERCHANT BAN KER REGISTERED WITH THE SECURITIES AND EXCHANGE BOARD OF INDIA ESTABLISHED UNDER SECTION 3 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 (1 5 OF1.992); (C) 'REGISTERED VALUER' MEANS A PERSON DEFINED IN C LAUSE (OAA) OF SECTION 2 OF THE WEALTH-TAX ACT, 1957 (27 OF 1957),] 5.8 IN THIS CASE CLEARLY IT CAN BE SEEN THAT AUDITO R WAS UNDER AN OBLIGATION TO STATE THIS FACT THAT NO SHARE APPLICATION MONEY HAS ACTUA LLY BEEN RECEIVED IN THE YEAR UNDER CONSIDERATION, FOR WHICH NO DISCLOSURE WAS MADE IN THE AUDIT REPORT. THEREFORE, I HOLD THAT AUDITOR NAVNEET SEHGAL & CO., CHARTERED ACCOUN TANTS ARE LIABLE FOR PENALTY U/S 271J OF THE IT ACT. ACCORDINGLY, PENALTY PROCEEDINGS U/S 271J OF THE ACT HAVE BEEN INITIATED SEPARATELY BY ISSUE OF NOTICE. 5.9 THUS, IN VIEW OF ABOVE MENTIONED FACTS, IT IS C LEAR THAT NO MONEY WAS ACTUALLY RECEIVED BY THE APPELLANT AND THEREFORE, AO IS BEIN G DIRECTED TO DELETE THE ADDITION OF RS. 2.70 CRORE MADE ON THIS ACCOUNT. ITA 954/CHD/2018 A.Y. 2010-11 PAGE 9 OF 14 (EMPHASIS SUPPLIED) 5.3. THE LD.CIT-DR IN THE COURSE OF THE HEARING BEF ORE US HAS INVITED ATTENTION TO THE PAPER BOOK PAGE 35 AND 61 SO AS TO ARGUE THAT THE POSITION AS REFLECTED IN THE AUDI TED BOOKS OF ACCOUNT AS ON 31 ST MARCH, 2010 REFLECTED AN INCREASE IN SHARE APPLICATION MONEY TO THE TUNE OF RS. 2.70 CRORE THE POSITION AS ON 31.03.2010 REFLECTED THAT THERE WAS A SHARE APPLICATION MONEY AVAILABLE WITH THE ASSESSEE TO TH E TUNE OF RS. 4.17 LACS ODD AND THE POSITION AS ON 31.03.2011 IS SHOWN TO BE ZERO. IT IS SEEN THAT THE ASSESSEE H AS ARGUED THAT SHARE APPLICATION MONEY TO THE EXTENT OF RS. 2 .70 CR HAS NOT BEEN ENCASHED AND HAS BEEN RETURNED BACK, HOWEV ER, THE POSITION AS REFLECTED SHOWS ZERO FUNDS AS AVAILAB LE AS ON 31 ST MARCH, 2011 WITH INCREASE IN SHARE CAPITAL SUGGEST ING THAT SOME SHARES HAVE BEEN ISSUED. REFERENCE AT THI S POINT OF TIME MAY ALSO BE MADE AGAIN TO THE BALANCE SHEET AS ON 31 ST MARCH, 2011 EXTRACTED IN THE EARLIER PART OF THIS ORDER WHICH SHOWS THAT THERE IS AN INCREASE IN RESERVES A ND SURPLUS FROM RS. 9 CRORE ODD TO RS. 18 CRORE ODD. WHEN THE SAID POSITION IS CONSIDERED AS EXPANDED IN SCHEDULE -2 TO THE SAID BALANCE SHEET AVAILABLE AT PAPER BOOK PAGE 63, IT IS SEEN THAT THERE IS AN INCREASE IN SHARE PREMIUM FRO M RS. 7.70 CRORE TO RS. 14.77 CRORE ODD, THEREBY SUGGESTI NG THAT POSSIBLY SHARES HAVE BEEN ALLOTTED AT A PREMIUM. TH E ITA 954/CHD/2018 A.Y. 2010-11 PAGE 10 OF 14 RELEVANT EXTRACT OF BALANCE SHEET FROM THE RESPECTI VE PAGES IN THE PAPER BOOK RELIED UPON BY THE LD. CIT-DR ARE EXTRACTED HEREUNDER FOR THE SAKE OF COMPLETENESS: ( EXTRACT OF BALANCE SHEET FROM PAPER BOOK PAGE 35) MESSERS B.R. SPINNERS PRIVATE LIMITED, LUDHIANA BALANCE SHEET AS ON 31 ST MARCH 2010 SOURCES OF FUNDS SCHEDULE 31 ST MARCH 31 ST MARCH NO. 2010 20 09 SHARE HOLDER'S FUNDS SHARE CAPITAL RS 1 47186500.00 47186500.00 RESERVES & SURPLUS 2 94278634.41 90759144.31 SHARE APPLICATION MONEY 41713500 .00 14713500.00 183178634.41 152 659144.31 ( EXTRACT OF BALANCE SHEET FROM PAPER BOOK PAGE 61) MESSERS B.R. SPINNERS PRIVATE LIMITED, LUDHIANA BALANCE SHEET AS ON 31 ST MARCH 2011 SOURCES OF FUNDS SCHEDULE 31 ST MARCH 31 ST MARCH NO. 2011 20 10 SHARE HOLDER'S FUNDS SHARE CAPITAL RS 1 49000000.00 47186500.00 RESERVES & SURPLUS 2 180008588.13 94278634.41 SHARE APPLICATION MONEY 0.00 41713500.00 229008588.13 1 83178634.41 5.4 THE RELEVANT EXTRACT FROM PAGE 63 IS EXTRACTED HEREUNDER FOR READY REFERENCE : ( EXTRACT OF BALANCE SHEET FROM PAPER BOOK PAGE 63) MESSERS B.R. SPINNERS PRIVATE LIMITED, LUDHIANA BALANCE SHEET AS ON 31 ST MARCH 2011 SCHEDULE NO. 2 AS AT 31 ST MARCH AS AT 31 ST MARCH 2011 2010 RESERVES AND SURPLUS SHARE PREMIUM RS. 147750000.00 77023500.00 PROFIT & LOSS ACCOUNT 32258588.13 17255134.41 TOTAL RS. 180008588.13 94278634.41 5.5 ACCORDINGLY, WE FIND THAT IN THE PECULIAR FACTS AND CIRCUMSTANCES, THE ORDER PASSED CANNOT BE UPHELD. THE FRESH EVIDENCES FILED ON RECORD, IT APPEARS HAVE BE EN BLINDLY ITA 954/CHD/2018 A.Y. 2010-11 PAGE 11 OF 14 ACCEPTED BY THE CIT(A) WHICH ADMITTEDLY HAVE NOT BE EN CONFRONTED TO THE AO. ACCORDINGLY, IN THE LIGHT OF THE SUBMISSIONS OF THE PARTIES BEFORE THE BENCH AND ON A PERUSAL OF THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT T HE LD. CIT(A) IN VIOLATION OF SUB-RULE (3) OF RULE 46A HAS ACCEPTED FRESH EVIDENCES WITHOUT PROVIDING THE ASSESSING OFF ICER A REASONABLE OPPORTUNITY OF EXAMINING THE EVIDENCE AN D REBUTTING IT ETC. THE STATUTORY MANDATE TO PROVIDE THE ASSESSING OFFICER OPPORTUNITY TO REBUT THE EVIDENCE IS NOT DISCRETIONARY. THE REQUIREMENT HAS BEEN CONSIDERED TO BE A INDISPENSABLE REQUIREMENT BY THE DELHI HIGH COURT IN THE CASE OF MANISH BUILDWELL 204 TAXMAN 106 (DELHI) WHEREIN CONFIRMATION LETTERS RECEIVED BY THE ASSESSEE WERE ACCEPTED BY THE FIRST APPELLATE AUTHORITY AS GENUINE WITHOUT THE ASSESSING OFFICER FURNISHING HIS COMMENTS THEREON A ND WITHOUT ANY VERIFICATION BY THE SAID AUTHORITY. TH E SAID CONCLUSION OF THE CIT(A) ON APPEAL HAD BEEN UPHELD BY THE ITAT. THE ISSUE WAS CARRIED IN APPEAL BEFORE THE H IGH COURT BY THE REVENUE. THE COURT HELD THAT SINCE THIS IS AN INDISPENSABLE REQUIREMENT, WE ARE OF THE VIEW THAT THE TRIBUNAL OUGHT TO HAVE RESTORED THE MATTER TO THE C IT (A) WITH THE DIRECTION TO HIM TO COMPLY WITH SUB-RULE (3) OF RULE 46A. THE PROCEDURE WHICH THE CIT(A) IS REQUIRED TO FOLLO W IS SET OUT IN SECTION 250 OF THE INCOME TAX ACT. THE COUR T WENT ON ITA 954/CHD/2018 A.Y. 2010-11 PAGE 12 OF 14 TO EXAMINE THE DISTINCTION BETWEEN SUB-RULE (4) OF RULE 46A WITH SUB-SECTION (4) OF SECTION 250 OF THE ACT. SU B SECTION (4) OF SECTION 250 OF THE INCOME TAX ACT EMPOWERS T HE FIRST APPELLATE AUTHORITY THAT; HE MAY DIRECT THE ASSESSING] OFFICER TO MAKE FURTHER INQUIRY AND REPORT THE RESU LT OF THE SAME TO THE DEPUTY COMMISSIONER (APPEALS)] OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS)]. AS NOTED RULE 46A OF THE INCOME TAX RULES GOVERNS PRODUCTION OF ADDITION AL EVIDENCE BEFORE THE DEPUTY COMMISSIONER (APPEALS) AND COMMIS SIONER (APPEALS). SUB-RULE (4) OF RULE 46A UNAMBIGUOUSLY C LARIFIES THAT, NOTHING CONTAINED IN THIS RULE SHALL AFFECT THE PO WER OF THE [DEPUTY COMMISSIONER (APPEALS)] [OR, AS THE CAS E MAY BE, THE COMMISSIONER (APPEALS)] TO DIRECT THE PRODUCTIO N OF ANY DOCUMENT, OR THE EXAMINATION OF ANY WITNESS, TO ENA BLE HIM TO DISPOSE OF THE APPEAL, OR FOR ANY OTHER SUBSTANTIAL CAUSE INCLUDING THE ENHANCEMENT OF THE ASSESSMENT OR PENA LTY (WHETHER ON HIS OWN MOTION OR ON THE REQUEST OF THE [ASSESSING OFFICER]) UNDER CLAUSE (A) OF SUB-SECTIO N (1) OF SECTION 251 OR THE IMPOSITION OF PENALTY UNDER SECT ION 271.] THE COURT COMPARING AND DISTINGUISHING THE TWO WENT ON TO HOLD THAT; IN OUR OPINION AND WITH RESPECT, THE ERROR COMMITTED BY THE TRIBUNAL IS THAT IT PROCEEDED TO M IX UP THE POWERS OF THE CIT (A) UNDER SECTION (4) OF SECTION 250 WITH THE POWERS VESTED IN HIM UNDER RULE 46A. THE TRIBUNAL S EEMS TO ITA 954/CHD/2018 A.Y. 2010-11 PAGE 13 OF 14 HAVE OVERLOOKED SUB-RULE(4) OF RULE 46A WHICH ITSEL F TAKES NOTE OF THE DISTINCTION BETWEEN THE POWERS CONFERRE D BY THE CIT (A) UNDER THE STATUTE WHILE DISPOSING OF THE AS SESSEES APPEAL AND THE POWERS CONFERRED UPON HIM UNDER RULE 46A. THE TRIBUNAL ERRED IN ITS INTERPRETATION OF THE PRO VISIONS OF RULE 46A VIS--VIS SECTION 250(4). ITS VIEW THAT SI NCE IN ANY CASE THE CIT (A), BY VIRTUE OF HIS CONTERMINOUS POW ERS OVER THE ASSESSMENT ORDER, WAS EMPOWERED TO CALL FOR ANY DOCUMENT OR MAKE ANY FURTHER ENQUIRY AS HE THINKS F IT, THERE WAS NO VIOLATION OF RULE 46A IS ERRONEOUS. THE TRIBUNAL APPEARS TO HAVE NOT APPRECIATED THE DISTINCTION BET WEEN THE TWO PROVISIONS. IF THE VIEW OF THE TRIBUNAL IS ACCE PTED, IT WOULD MAKE RULE 46A OTIOSE AND IT WOULD OPEN UP THE POSSIBILITY OF THE ASSESSEES CONTENDING THAT ANY A DDITIONAL EVIDENCE SOUGHT TO BE INTRODUCED BY THEM BEFORE THE CIT (A) CANNOT BE SUBJECTED TO THE CONDITIONS PRESCRIBED IN RULE 46A BECAUSE IN ANY CASE THE CIT (A) IS VESTED WITH CONT ERMINOUS POWERS OVER THE ASSESSMENT ORDERS OR POWERS OF INDE PENDENT ENQUIRY UNDER SUB-SECTION (4) OF SECTION 250. THAT IS A CONSEQUENCE WHICH CANNOT AT ALL BE COUNTENANCED . IN THE FACTS OF THE PRESENT CASE, THE FACT THAT FRESH EVID ENCE HAS BEEN ADMITTED WHICH HAS NOT BEEN CONFRONTED TO THE AO TO OFFER HIS REBUTTAL ETC. IS NOT DISPUTED BY THE LD. AR DESPITE A DETAILED HEARING ON THE ISSUE. ACCORDINGLY, TO SET RIGHT THIS ITA 954/CHD/2018 A.Y. 2010-11 PAGE 14 OF 14 STATUTORY DEFICIT, THE ISSUE IS REMANDED BACK TO TH E FILE OF THE AO WITH THE DIRECTION TO PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE A REA SONABLE OPPORTUNITY OF BEING HEARD. THE ASSESSEE IN ITS OWN INTERESTS IS ADVISED TO PARTICIPATE FULLY AND FAIRLY IN THE P ROCEEDINGS AS IN THE EVENTUALITY OF ABUSE OF THE TRUST REPOSED, I T IS MADE CLEAR THAT THE ASSESSING OFFICER SHALL BE AT LIBERTY TO P ASS AN ORDER ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. SAID ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ITSELF. 6. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JULY,2019. SD/- SD/- ( $ % & ' ( ) ( ! ) (ANNAPURNA GUPTA) (DIVA SINGH) )* #/ ACCOUNTANT MEMBER ' #/ JUDICIAL MEMBER