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TMI Blog2011 (5) TMI 569X X X X Extracts X X X X X X X X Extracts X X X X ..... genuine and exchanged between the parties. Once this position is accepted coupled with the fact that the parties to the contract have agreed to change the terms thereof and it was actually done in the instant case, the furnishing of additional security became justified and there was no reason to treat the same as long-term capital gain, authorities below in this behalf have rightly referred to the judgment of K.P. Verghese (1981 (9) TMI 1 - SUPREME Court) in arriving at this decision – Appeal is dismissed - ITA No.995/2009 - - - Dated:- 24-5-2011 - MR. JUSTICE A.K. SIKRI, MR. JUSTICE M.L. MEHTA, JJ. For Appellant :Ms.Prem Lata Bansal, Sr. Advocate with Mr,Deepak Anand, Advocate For Respondent :Mr.M.S. Syali, Sr. Advocate with Mr.V.P. Gupta and Mr.Basant Kumar and Ms.Husnali Syali, A.K. SIKRI, J. (Oral) 1. For the assessment year 2001-2002, the respondent/assessee filed its return declaring income of ₹ 3,67,26,812/-. While making the assessment, the Assessing Officer noticed that the assessee had taken a loan of ₹ 4.00 crores from M/s.Enam Securities Pvt. Ltd and loan of ₹ 1.00 crore from M/s.Stratcap Investments Pvt. Ltd. vide agreements da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the Assessing Officer as proper opportunities had not been given. To put it precisely, the case of the assessee was that when the justification for giving additional security was asked for by the Assessing Officer, the assessee had explained the same vide letters dated 10th December, 2003 and 19th February, 2004, but the Assessing Officer, thereafter, did not raise any further queries. On this premise, plea was taken by the assessee that the assessee could not furnish the said correspondence which was exchanged between the assessee and the two lender companies as per which further security was agreed to be given. The CIT(A) called for the remand report. The remand report dated 08.09.2004 was furnished by the AO to the CIT(A). In this report, the AO stated that he had gone through the additional documents, however, the admissibility thereof was questioned by the Assessing officer on the ground that the original agreements dated 14.04.2000 and 25.04.2000 entered into between the assessee and two lenders respectively did not provide for giving additional security at subsequent dates and, therefore, reliance on the subsequent correspondence between the lender and the borrower could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2000, the lenders had written to the assessee that the performance of the M/s.DCM Asic Technology Limited was not improving and in fact there were wide gap between provisional six monthly figures and projected estimates, because of this reason the lenders asked for additional security of 50,000 and 12,500 equity shares respectively of M/s.DCM Asic Technology Limited. It was on the basis of this correspondence exchanged between the parties whereby the assessee had agreed to provide additional security that ultimately the assessee pledged further shares with the two lender companies. Based on this correspondence exchanged between the parties, the CIT(A) came to the conclusion that the original agreement was mutually novated/modified by the lenders and the assessee and there was sufficient reason to believe the contentions of the assessee in this behalf. On this basis, the CIT(A) accepted the justification given by the assessee in giving the additional security. It is a matter of record that the assessee had pledged to pay the loan amount along with interest, in liquidation of which both the lenders had forfeited the security which was now to the tune of 1,50,000 and 37,500 shares r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act entered into between the parties can be changed, altered, modified and even rescinded by further mutual agreements. Such a novation is permissible as per Section 62 of the Contract Act. The CIT(Appeal) has also found justification in such a step taken by the parties. It is inter alia observed that during that period the value of shares of IT companies had suffered substantially and data of CNX IT index showed that fall in the value of IT companies was almost 50%. Even if we take the value of the share pledged at ₹ 400 at the time of entering into the original agreements, if it was fallen by 50%, in October 2000, the value would be ₹ 200/-. In these circumstances, even by giving additional security of 50000/12500 additional shares, it was a prudent act on the part of the assessee to ensure liquidation of the entire liability of ₹ 4.00 crores/₹ 1.00 crore along with interest which had accrued thereupon. 6. This Court in CIT v. Hewlett Packard India (P) Ltd., 314 ITR 55 (Del.) has held that admissibility of additional evidence by CIT(A) would not give rise to any substantial question of law, provided the CIT(A) or the Tribunal had not acted on any wrong p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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