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Second article on “S.68 NRA iron and Steel P. Ltd. (SC) - A fit case for recall and reconsideration by the Supreme Court to avoid miscarriage of justice and in- justice in future”. |
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Second article on “S.68 NRA iron and Steel P. Ltd. (SC) - A fit case for recall and reconsideration by the Supreme Court to avoid miscarriage of justice and in- justice in future”. |
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First article was webhosted on 26.03.2019 on the following link: https://www.taxmanagementindia.com/visitor/detail_article.asp?ArticleID=8431 In that article author had pointed out that earlier precedence by way of judgment on SLP of Revenue were not brought to the notice of their lordships and were not considered. Recent precedence of the same bench/ judges of Supreme Court was also not placed: We find that the same judges has passed the following order/ judgment on same and similar issue before judgment in case of NRA iron and steel P. Ltd was rendered: 2019 (2) TMI 1213 - SUPREME COURT PR. COMMISSIONER OF INCOME TAX (I) VERSUS M/S CHAIN HOUSE INTERNATIONAL (P) LTD. Special Leave Petition (Civil) Diary No(s). 1992/2019 Dated: - 18 February 2019 Judgment / Order HON'BLE MR. JUSTICE UDAY UMESH LALIT And HON'BLE MS. JUSTICE INDU MALHOTRA For the Petitioner : Mr. Sanjay Jain,ASG Ms. Akanksh Kaul,Adv.Mr. Chinmaya Chandra,Adv. Mr. Vidur Mohan,Adv. Mrs. Anil Katiyar, AOR For the Respondent : Ms. Kavita Jha,Adv. ORDER Delay condoned. We see no reason to interfere with the impugned order. The special leave petition is, accordingly, dismissed. Pending application(s), if any, shall stand disposed of.
In NRA iron the order was passed by the same judges as can be seen from headings in that case: 2019 (3) TMI 323 - SUPREME COURT PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL) - 1 VERSUS NRA IRON & STEEL PVT. LTD.CIVIL APPEAL NO…..OF 2019 (Arising out of SLP (Civil) No. 29855 of 2018) Dated: - 05 March 2019 Judgment / Order Uday Umesh Lalit And Indu Malhotra, JJ. xxx JUDGMENT Indu Malhotra, J.
While passing judgment on 05.03.2019 by the same judges namely HON'BLE MR. JUSTICE UDAY UMESH LALIT And HON'BLE MS. JUSTICE INDU MALHOTRA the order dated 18.02.19 in case of CHAIN HOUSE INTERNATIONAL (P) LTD was also not considered besides several judgments of the Supreme Court as pointed out in earlier article on the same subject. Is team support is lacking: From this case it seems that honorable judges are not getting full support from their team. If proper case history was prepared and place before their lordship, perhaps their lordships would have decided matter in favor of assesse in case of NRA iron, or they could have appointed an amicus curiae to assist their lordship. It appears that the Advocates on record and counsels of revenue have also not acted in fair and reasonable manner so as to assist their lordship and perhaps they have deliberately suppressed precedence on the same and similar issue. This is really un-expected and unfortunate behavior of Advocate on Record and Counsels engaged by revenue. Therefore, author again re-iterate that the judgment in case of NRA Iron need to be recalled and decided afresh.
2019 (3) TMI 323 - SUPREME COURT PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL) - 1 VERSUS NRA IRON & STEEL PVT. LTD. Dated: - 05 March 2019 Related provision- section 68 of the Income-tax Act, 1961. Related judgments: PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL) - 1 VERSUS NRA IRON & STEEL PVT. LTD. 2019 (3) TMI 323 - SUPREME COURT CIVIL APPEAL NO…..OF 2019 (Arising out of SLP (Civil) No. 29855 of 2018) Dated: - 05 March 2019 PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL) - 1 VERSUS NRA IRON & STEEL PVT. LTD. 2018 (2) TMI 1850 - DELHI HIGH COURT ITA 244/2018 Dated: - 26 February 2018 And judgments cited in above judgments/ reported cases. Synopsis: Over confidence of respondent / assesse caused confirmation of suspicion based addition made by the AO, by the Supreme Court in case of NRA iron and Steel P. Ltd. The counsels of revenue also failed to point out case status of similar cases causing miscarriage of justice. Relevant provisions of other law and position of person receiving cheque / payment not considered properly. A fit case for recall and reconsideration by the Supreme Court. Conduct of assesse showing over confidence and casual approach: Not represented before honorable Supreme Court. From reading of the judgment it is not clear whether there was any effective/ operational advocate on record. Not finding such details author searched websites. Even on search of website of the Supreme Court we do not find any advocate for respondent - the relevant column is blank, as follows: From https://www.sci.gov.in/judgments:
Therefore, it is clear that there was no advocate on behalf of respondent at any stage after the Tribunal. This may be due to over confidence of assesse or ill advise of counsels that the matter is purely on question of fact, fact found by Tribunal are final and therefore there is no need to make representation before honorable high Court and honorable Supreme Court also. Not represented before honorable Delhi High Court. Before Tribunal the Assessee was represented through Shri Ashwani Kumar, Advocate And Shri Aditya Kumar, C.A. Before the CIT(A) and AO assesse was represented, however, it seems that some of doubts raised by the AO about non-existing shareholders at given address, low income and reason for high premium were not explained properly. Though these can be explained by very nature of investment activity and premium as a method of keeping capital base strong without adversely affecting investor. Case status and report on related cases: It appears that the status of case and status of related cases decided or pending before the Supreme Court was also not updated. The counsels of revenue have failed in their duty to apprise their lordships about judgments / orders of the Supreme Court on similar matters. Counsels, as officers of the Court are expected to bring to notice of their lordships even judgments and orders which are against his client. However, unfortunately, this rule is not followed. A good counsel is one who can openly bring to the notice of judges a judgment which is prima facie against his client and then can distinguish and press upon the Court with his arguments that those judgments should not be followed. Judgments and orders of the Supreme Court not referred and considered: On reading of the judgment of the honorable Supreme Court and citations therein we find that the honorable Supreme Court had not considered several judgments and order of the honorable Supreme Court which are favor of assesse and many are very recent also. Surprisingly even judgment of honorable Supreme Court in case of of CIT Vs, Lovely Exports P. Ltd 2008 (1) TMI 575 - SUPREME COURT OF INDIA was not referred and cited. has been considered. This is clearly indicative that the counsels of revenue has suppressed status of cases on similar issues. The following recent judgments and orders of the Supreme Court, dismissing SLP of revenue on similar issues have not been referred and considered, not even find a reference in the judgment of the Supreme Court in case of NRA Iron: Even some orders of the honorable Supreme Court considered by the CIT(A) , Tribunal and High Court while allowing relief to assess were not referred in case of NRA Iron. This was a case where counsels for revenue should have pointed out present status of precedence: This was a case where assesse was not represented, the issue involved was substantial one. The issue will affect not only companies raising share capital and premium but also general public who obtain personal loans and financial accommodation from relatives, neighbors, friends and associates. Therefore, it was duty of counsels of appellant / revenue to place before honorable Supreme Court status of related judgments. It can be said that instead of assisting the honorable Supreme Court, in rendering justice, the Ld. Counsels of revenue have adopted practice of suppressing settled legal position causing miscarriage of justice and a judgment from the Supreme Court which is not in accordance with judgments of the Supreme Court rendered earlier on the same subject. Provisions of Evidence Act, Companies Act, Negotiable Instrument Act, and banking practices not considered: It appears that provisions of Indian Evidence Act, Companies Act, and negotiable Instruments Act and banking practices have not at all been considered. In relation to Cheques received, held, deposited as holder in due course and paid by drawee bank as payment in due course, various provisions need to be looked into and applied. However, we find no whisper about the same in the judgment. A company by issuing share certificate and entering name of shareholder in public records acknowledge liability and obligations. This cannot be brushed aside. A person issuing cheque undertakes liability and obligation to arrange for its payments. Probability is to be examined from the position of person receiving payment. How a person receiving cheque can ask the drawer of cheque about source of his funds from which cheque will be cleared. If one ask such question any one will not pay to him. Other articles by the same Ld. Author on related issues: Ld. Author Shri Dev Kumar Kothari had contributed articles on various topics related to S.68 of Income Tax Act, 1961 like issue of shares at premium as a financial strategy, S.68 and probability from point of view of person receiving payment, S.68 and negotiable instrument Act etc. which are related to the issue. Readers may refer to them. NRA Iron – a fit case for recall and reconsideration: In view of above discussions author, with due respect to their lordships feel that the judgment in the case of NRA Iron (supra.) need to be recalled and reconsidered. The position of a person receiving payment in any manner should be considered from his position. It is wrong to say that the person receiving payment can be expected to explain source of person who is paying to him. In case of cash receipts from close relatives also person receiving money from his relative cannot be expected to explain source of person paying. What was the source of money in hands of person paying can only be explained by the person paying. In case of receipt of money on presentation of cheque received, held and presented as holder in due course, and paid by drawee bank as payment in due course, there should not be any doubt about nature and source of receipt and the payee of cheque should not be expected or obliged to explain source of his receipt. Investors make investments out of their capital and reserves, it is not necessary that they have substantial regular recurring income. If they have source by way of balance in bank, against which cheque issued is honored, having any income or not is not material. Premium issue is a strategy in interest of company and investors. So far holding proportion continue undisturbed, number of shares does not make any difference. Therefore, amount of premium should not be a consideration to create doubts in mind of authorities and Courts.
By: CA DEV KUMAR KOTHARI - April 13, 2019
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