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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 ..... t. Ltd and loan of Rs. 1.00 crore from M/s.Stratcap Investments Pvt. Ltd. vide agreements dated 14.04.2000 and 25.04.2000 respectively. As per these agreements, the assessee had also pledged 1,00,000 shares of M/s.DCM Asic Technology Limited with M/s.Enam Securities Pvt. Ltd. and 25,000 shares with M/s.Stratcap Investments Pvt. Ltd. Both the agreements, which were on identical terms, provided that in case of failure on part of the assessee to repay the loan along with 13.5% interest, the lenders were entitled to forfeit the shares pledged with them and on such forfeiture the entire loan amount along with interest was to be treated as repaid. The Assessing Officer found that in addition to the aforesaid one lakh and 25,000 shares pledged wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal, the assessee also filed application under Section 46(A) of the Income Tax Rules for admission of certain additional documents. The explanation given in this application was that these documents could not be submitted before 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 betw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. In my opinion, therefore, the appellant company is entitled to submit additional documents as evidence. Accordingly, additional evidence is hereby admitted in the interest of justice." 2. Thereafter the CIT(A) discussed these documents. It observed that the Assessing Officer had not made any comments on merits in his remand report. Thus proceeding on this basis that the authenticity of these documents were not challenged, on the basis of these documents, he came to conclusion that the original documents entered into between the parties had been modified by these documents, whereby the assessee had agreed to pledge further shares by way of security. We may point out in this connection that within three days of the agreement entered into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 respectively and appropriated those shares by transferring the same in their respective names. In the process, CIT(A) relied upon the judgment of the Supreme Court in K.P. Varghese v. Income Tax Officer, Ernakulam and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplanation vide letter dated 10th December, 2003 and 19th February, 2004, the assessee could have taken care to annex these documents as well. However, when specific averments were made in the aforesaid explanation, at that time even the Assessing Officer should have enquired the matter further. However, the mistake which was committed by the Assessing Officer was that in view of the clauses contained in the original agreements, there was no scope and/or reason to provide additional security. Probably because of this reason, he did not enquire into the matter further and concluded that there was no room for providing additional security. It is trite law that the terms of contract entered into between the parties can be changed, altered, mod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee was duly and properly admitted by the CIT(A), the question on merits as decided by the two authorities below does not pose any problem. It is stated at the cost of repetition that in the remand report, the Assessing Officer had not questioned the genuineness and veracity of the documents. Though he had specifically mentioned that the additional documents had been gone through and perused by him, he had only questioned the admission of these documents in view of Rule 46A of the Income Tax Act that too on the ground that the original agreements entered into between the assessee and the lenders did not provide for giving additional security on subsequent dates and for this reason alone, he contended that the assessee could not place reli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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