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TMI Blog2006 (10) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... thereafter attempted to send the notice by registered post, but these attempts also proved unsuccessful. He, therefore, proceeded to complete the assessment ex parte under section 144 of the Act. He noted that during the year the assessee has increased its share capital to Rs. 2 crore and the secured loans to Rs. 98,67,000. On the ground that the assessee did not come forward for explaining the above items in the assessment proceedings, the Assessing Officer treated these two items as the assessee s income under section 69 of the Act. The total addition came to Rs. 1,43,37,219 which was arrived at as follows : Share capital Rs. 2,00,02,300 Add: Share application money Rs. 37,91,919 Rs. 2,37,94,219 Less: Share application money received in 1998 Rs. 94,57,000 Balance added as income Rs. 1,43,37,219 3. On appeal, the CIT(A) upheld the ex parte assessment in principle. However, insofar as the above addition is concerned, he required the assessee to furnish certain information in respect of the shares allotted and the share application money, such as the names and addresses, the permanent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot justified in not asking the Assessing Officer to conduct an enquiry. He submitted that initially the CIT(A) had called for the Assessing Officer s objections to the admission of the fresh evidence, but later on after overruling the objections proceeded to examine the evidence himself which course was not justified on the facts of the instant case. He further submitted that the proper course for the CIT(A), even if he considered that the evidence should be admitted, should have been to conduct an enquiry through the Assessing Officer who has all the machinery and powers to do so. It was further submitted that though section 250(4) of the Act conferred powers upon the CIT(A) to himself conduct an enquiry it should preferably done through the Assessing Officer in an appropriate case and the present case such a case where having regard to the copious material and evidence adduced by the assessee, the Assessing Officer would have been more suited to examine the evidence and conduct the enquiry. It is submitted by Mr. Jha that it cannot be said that the CIT(A) conducted the type of enquiry which was expected of him by the aforesaid section more particularly because the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in Sophia Finance Ltd. s case ( supra ) and in conformity with the said judgment has deleted only such additions in which the identity of the shareholders has been proved and, therefore, no fault can be found with his action. He drew our attention to the various papers filed in the paper book in this behalf. Our attention was also drawn to the judgment of the Orissa High Court in Devamani Atha v. CIT [1978] 112 ITR 837 where it was held that where the assessee s explanation regarding cash credit was rejected by the Assessing Officer without any enquiry, the order of the Tribunal upholding the assessment cannot be upheld. The Ld. Counsel for the assessee further submitted that the principle laid down by the Full Bench of the Delhi High Court ( supra ) has been extended to share contributions to private limited companies by the judgment of the Hon ble Delhi High Court in CIT v. Makhni Tyagi (P.) Ltd. [2004] 267 ITR 433 . 7. So far as the assessee s appeal is concerned, the contention for the Ld. Counsel for the assessee was on the evidence adduced before the CIT(A), he ought to have deleted and was not justified in confirming the addition. It was submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... days of the receipt of this letter. Sd/- (V.K. Singhal) Commissioner of Income-tax (Appeals)-XVII, New Delhi." In response thereto, the Addl. CIT by letter dated 8th May, 2003 wrote to the CIT(A) as under: "To Shri V.K. Singhal, The Ld. Commissioner of Income Tax (Appeals)-XVII, New Delhi Sir, Subject : Remand Report in the case of M/s. Prime Telesystems Pvt. Ltd. for assessment year 1999-2000 - reg. : Kindly refer to the above. The remand report received from ITO, Ward 14(4) is enclosed along with this letter. It is submitted that the assessee s contention in respect of secured loans from M/s. UPFC may be accepted. However, the undersigned personally feels that proper enquiries in respect of shareholders have still to be conducted about their identity, genuineness of the transactions and their creditworthiness. Accordingly, necessary directions are being passed to the Assessing Officer for conducting necessary enquiries in respect of the fresh share capital introduced in this company. Accordingly, it is requested that this may be treated as an interim remand report and final remand report may be sent in the next month after conducting the necessary enqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it this fresh evidence, then in that case, it is requested that the Assessing Officer may also be given an opportunity to make further enquiries to verify the identity, genuineness of the transaction and the creditworthiness of the shareholders/share applicants. Yours faithfully, Sd/- Addl. Commissioner of Income-Tax Range - 14, New Delhi Copy to : ITO, Ward 14(4), New Delhi for necessary action at this end. Sd/- Addl. Commissioner of Income-Tax Range - 14, New Delhi." From the sequence of the letters, we find that what the CIT(A) did by his letter of 7th April was to invite the Assessing Officer to comment on the admissibility of the fresh evidence. Obviously he was having in mind the provisions of rule 46A(2) of the Income-tax Rules. He also required the Assessing Officer to file a report within 10 days. The Assessing Officer would appear to have sent the report through the Additional CIT and the latter, vide letter dated 8th May, enclosed the report and also informed the CIT(A) that the Assessing Officer was being directed to conduct the "necessary enquiries in respect of the fresh share capital introduced in this company". He, therefore, requested the CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be admitted only if the Assessing Officer had refused to admit evidence which ought to have been admitted or where the assessee was prevented by sufficient cause from producing evidence called upon to be produced before the Assessing Officer or where the assessee was prevented by sufficient cause from producing before the Assessing Officer any evidence which is relevant to any ground of appeal or where the assessee was not given any opportunity to produce the evidence by the Assessing Officer. Sub-rule (2) says that no fresh evidence shall be admitted unless the CIT(A) records in writing the reasons for its admission. Sub-rule (3) proceeds to say that the CIT(A) shall not take into account any fresh evidence unless the Assessing Officer has been allowed a reasonable opportunity to examine and rebut the evidence. In the present case, the only reason given by the CIT(A) in page 4 of his order for admitting the fresh evidence is that the Assessing Officer has made a best judgment assessment against the assessee. In our opinion, this is begging the question. It is not that the assessee could not adduce the evidence before the Assessing Officer, since the Assessing Officer passed a best ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence in an appeal against a best judgment assessment under section 144 - it is now necessary to consider the further question as to whether the Commissioner (Appeals) was justified in conducting an enquiry into the evidence adduced by the assessee all by himself and not through the Assessing Officer. The powers of the CIT(A) are plenary and have been held to be coterminus with those of the Assessing Officer and he can do what the Assessing Officer can do and can direct the Assessing Officer to do what he has failed to do as held by the Supreme Court in CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225. Further section 250(4) of the Act says that the CIT(A) may before disposing of any appeal make such further inquiry as he thinks fit, or may direct the Assessing Officer to make further inquiry and report the result of the same to him. This power is not curtailed in any manner by rule 46A of the IT Rules as has been held by the Bombay High Court in Smt. Prabhavathi S. Shah ( supra ). Both section 250(4) and rule 46A operate in different fields and this has also been recognized by rule 46A(4) itself which says that nothing in the rule shall affect the power of the CIT(A) to ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt may be. But if the assessment is opened up by the action of the assessee himself, then the powers conferred upon the Appellate Assistant Commissioner are much wider than the powers of an ordinary court of appeal. The statute provides that once an assessment comes before the Appellate Assistant Commissioner, his competence is not restricted to examining those aspects of the assessment which are complained of by the assessee; his competence ranges over the whole assessment and it is open to him to correct the Income-tax Officer not only with regard to a matter raised by the assessee but also with regard to a matter which has been considered by the Income-tax Officer and determined in the course of the assessment." 11. In CIT v. Rai Bahadur Hardutroy Motilal Chamaria [1967] 66 ITR 443 the Supreme Court approved of the above position in law. It is also necessary to bear in mind the basic principle that parties in an income-tax proceeding are expected to lead all their evidence at the stage when the matter is before the Assessing Officer. The rule "best evidence in the earliest point of time" is applicable to income-tax proceedings also. In Keshav Mills Co. Ltd. v. CIT [1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the ITO should deal with the same and if possible find some rebutting material , but in a case of this type, i.e., the date of birth, which is personal matter, the certificate of New Delhi Municipal Committee plus the affidavit of the father should be sufficient." [Emphasis supplied] The above observations offer guidelines in the present case. It would depend on the facts of each case as to whether the CIT(A) should conduct the inquiry himself or should leave it to the Assessing Officer. If the matter is complex and voluminous evidence is required to be examined, the better course for the CIT(A) would be to get the evidence examined and decided by the Assessing Officer instead of himself doing it though he has the power in law to do so himself. We find that in the present case the CIT(A) has considered copious evidence which he has himself listed in page 3 of his order. It would have been better if these details were to be verified by the Assessing Officer and in this regard we do find force in the submission of the Ld. Sr. DR that the Assessing Officer has all the paraphernalia and the infrastructure to get the evidence examined and verified and he would be in a better ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court does give authority to the Assessing Officer to enquire also into the creditworthiness of the shareholder and the genuineness of the contribution if the circumstances so warrant, notwithstanding that the identity of the shareholder is proved. Further, even with regard to the verification to the existence of the shareholders, the Commissioner (Appeals) seems to have merely accepted the confirmatory letters in which the addresses and the income-tax file numbers of the shareholders were given. As already mentioned, from these confirmatory letters, it cannot be said that the existence of the shareholders stand established beyond doubt without any further verification. The Commissioner (Appeals) has not verified the income-tax records of the shareholders, nor has he verified from the shareholders themselves by contracting them or summoning them. Thus, even with regard to the existence of the shareholders it does not stand established beyond doubt merely by the confirmatory letters unless they are subjected to further verification. This exercise has not been carried out by the Commissioner (Appeals). We are inclined to think that it is because of the lack of the necessary infras ..... X X X X Extracts X X X X X X X X Extracts X X X X
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