1993 (3) TMI 360 - HC - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 1,64,70,000 under Section 68 of the Income Tax Act, 1961.
2. Admissibility of additional evidence under Rule 46A of the Income Tax Rules.
3. Discharge of onus by the assessed regarding the identity and creditworthiness of shareholders.
4. Powers of the Assessing Officer to make enquiries and collect material.
5. Application of the decision in CIT vs. Stellar Investment Ltd.

Detailed Analysis:

1. Addition of Rs. 1,64,70,000 under Section 68 of the Income Tax Act, 1961
The assessed, a limited company, claimed to have received Rs. 2,70,00,000 from various parties, including Allen Bradley Overseas Ltd., Debikay Technologies Ltd., and Majestic Trading & Services (P) Ltd. The Assessing Officer (AO) became suspicious of the genuineness of these transactions based on search and seizure operations. The AO required the assessed to produce detailed information about the shareholders and the companies involved. Due to non-compliance by the shareholders and insufficient information provided by the assessed, the AO invoked Section 68 of the IT Act, treating Rs. 1,64,70,000 as unexplained income.

2. Admissibility of Additional Evidence under Rule 46A of the Income Tax Rules
The assessed appealed to the CIT(A) and sought to furnish additional evidence, which was refused on the grounds that the conditions under Rule 46A were not met. Before the Tribunal, the assessed filed an application under Rule 29 of the ITAT Rules to admit further supporting evidence. The Tribunal considered whether the assessed was prevented by sufficient cause from producing the evidence earlier and whether the CIT(A) was justified in refusing to admit the evidence.

3. Discharge of Onus by the Assessed Regarding the Identity and Creditworthiness of Shareholders
The learned counsel for the assessed argued that the assessed had done its best to furnish the information required by the AO. The assessed requested the AO to issue summons under Section 131, which was partially complied with by Debikay Technologies Ltd. The assessed contended that it was not deliberate in not furnishing the information and that there was a change in management, making it difficult to gather the required details. The Tribunal noted that the assessed had provided confirmations, bank statements, and assessment orders of the shareholders, which could be considered as discharging the primary onus.

4. Powers of the Assessing Officer to Make Enquiries and Collect Material
The Tribunal emphasized that the AO is empowered to make enquiries and collect material under Section 143 of the IT Act. While the assessed is required to support the return of income, the AO must verify the information and gather evidence. The Tribunal observed that the AO began scrutinizing the transactions only towards the end of the assessment year and did not provide sufficient time for the assessed to furnish the required information. The AO's failure to enforce compliance from the shareholders was also noted.

5. Application of the Decision in CIT vs. Stellar Investment Ltd.
The AO distinguished the decision in CIT vs. Stellar Investment Ltd., arguing that the assessed company's money was brought into the books using other companies as conduits. The Tribunal, however, considered the primary onus discharged by the assessed and noted that the AO was justified in probing the source of the funds due to the material seized during search operations. The Tribunal decided that the cause of justice would be served by admitting the additional evidence and deciding the case on merits.

Conclusion:
The Tribunal admitted the additional evidence under Rule 29 of the ITAT Rules and restored the issue to the file of the Assessing Officer to be decided afresh in accordance with law. The appeal of the assessed was allowed for statistical purposes, and all other issues raised were also restored to the AO for fresh consideration.