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TMI Blog2012 (5) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... granted by CIT(A) - held that:- litigant must not be thrown out of the litigation at the very threshold without providing an opportunity of hearing. Particularly in this case, we have noticed that the assessee was vigilant about his right of appeal and, therefore, knocking one door or the other and seeking for justice. It is not the case that no appeal at all was filed earlier. The first appeal was filed very much in time but it was treated as non-est due to non-payment of tax. A second appeal was filed after making the payment of taxes, stated to be a sum of Rs. 3,47,830/- as T.D.S. and Rs. 10,96,409/- as self assessment tax thus totalling to Rs.14,44,239/- i.e. admitted tax liability. Meanwhile, against the first appeal, the assessee had gone before Tribunal, however, that appeal was withdrawn in the month of November-2005 because by that time the assessee obtained the impugned order of CIT(A) Ahmedabad which was dated 27/10/2005, the impugned appellate order now under appeal before us. On account of these facts, it is not logical to conclude that the assessee was negligent or irresponsible, therefore, did not entitled for any discretion or sympathy. - Decided in favor of assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. He has also argued that the issue of condonation of delay could not be said to be the root of the matter because it has no connection with the quantum addition involved in their appeal. 4. On hearing the submissions, prima-facie we are of the view that no prejudice should be caused to the respondent-assessee if we admit this additional ground and thereupon decide as per law. As per our understanding of law, which we have formed on the basis of several precedents cited on this subject, the Tribunal is under a statutory obligation to entertain an additional ground no matter at what stage it was moved provided that on the question of admission both the parties are duly heard and also provided that the issue raised as per the additional ground goes to the root of the cause. Rather, in one of the precedent, it was commented that refusal to entertain a legal ground could be regarded as an improper exercise of discretion. However, before the admission of an additional ground, it is necessary to satisfy that the connected facts in respect of the issue raised in the additional ground have borne out of the record of the case. In this regard, we may like to refer Rule 11 of Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... faulter of non-payment of self-assessment tax as prescribed u/s.140A of the I.T. Act. ld. DR has pleaded that the assessee had sufficient funds as on 31/03/1996 which were to the extent of 1.05 crores therefore it was difficult to accept that due to paucity of funds the taxes could not be paid. He has vehemently contested that the CIT(A) has unduly accepted this plea of insufficiency of funds and thereupon condone the delay. 5.1 From the side of the respondent-assessee, Mr. Tushar Hemani argued that there was no two appeals were pending at the same time. According to him, rather it was a technical mistake which was committed due to wrong advice. As soon as the correct position of law was found; the mistake committed earlier was rectified by withdrawing the appeal from the Tribunal. In this connection, Mr. Tushar Hemani has placed reliance on a judgement of ITAT Mumbai pronounced in the case of ITO v. Saikrupa Construction Co. [2007] 13 SOT 459 wherein as per Head Note it was held as under, only relevant portion reproduced below:- "1. Section 249 of the Income-tax Act, 1961 - Commissioner (Appeals) - Form of appeal and limitation - Assessment years 1996-97 to 1999-2000 - W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31.03.2002 98775 971490 1070265 (172091) 31.03.2003 30227 237878 265709 (273384) 31.03.2004 21931 439835 461766 (501302) 31.03.2005 609203 14248612 14857815 19098866 6. Having heard the submissions of both the sides, we are of the considered view that a litigant must not be thrown out of the litigation at the very threshold without providing an opportunity of hearing. Particularly in this case, we have noticed that the assessee was vigilant about his right of appeal and, therefore, knocking one door or the other and seeking for justice. It is not the case that no appeal at all was filed earlier. The first appeal was filed very much in time but it was treated as non-est due to non-payment of tax. A second appeal was filed after making the payment of taxes, stated to be a sum of Rs. 3,47,830/- as T.D.S. and Rs. 10,96,409/- as self assessment tax thus totalling to Rs.14,44,239/- i.e. admitted tax liability. Meanwhile, against the first appeal, the assessee had gone before Tribunal, however, that appeal was withdrawn in the month of November-2005 beca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the said clause. An inference can be drawn on combined reading of both the sub-clauses of sub-section (4) of section 249 that in case of default of non-payment of tax an appeal is not to be admitted, but on removal of the defect of non-payment of tax an appeal deserves to be admitted and in one of the condition the assessee can be granted exemption by ld. CIT(A). An another aspect has also been discussed before us that on one hand sub-section(3) of section 249 pertains to those appellants who have filed the return and paid the tax but belatedly filed an appeal. On the other hand, sub-section (4) of section 249 pertains to those appellants who have defaulted in payment of tax or did not file the return. Since the present appellant is in the category of sub-section (4), therefore, we are of the considered view that ld. CIT(A) was judicially correct in condoning the delay. This objection of the Revenue is therefore dismissed. 8.1 Even the other plank of argument of Ld. DR Mr. Gupta is duly dealt with by ITAT Mumbai in the case of Saikrupa Construction Co. ( supra ), wherein an appeal was dismissed on the ground of non-payment of tax due but subsequently a fresh appeal wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of those investors was not complete. According to him, addresses were not properly filled and in some of the cases signatures were not proper. He has also commented that though it was claimed that all the amount was received in cheque but the details of the bank accounts were not furnished. Finally, a sum of Rs. 2,19,64,000/- was held as unexplained credit in the form of share application money and taxed by invoking the provisions of section 68 of I.T. Act. The said addition was challenged before ld. CIT(A). 11. After detailed discussion, ld. CIT(A) has decided the issue in assessee's favour vide following paragraph:- "4.2. I have carefully considered the findings given in the assessment order, documentary evidences produced in the course of assessment as well as in the course of penalty proceedings and also before the CIT(A) in an appeal against the order passed u/s. 271(1)(c). I have also considered the findings of my predecessor given in the appellate order passed in the case of the appellant while dealing with the issue of levy of penalty u/s. 271(1)(c) in Appeal No. CIT (A)-V/JC (A) SR-1/83/2000-01 dtd. 03/02/2003. I find that in the course of assessment, appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pies of share application of all the applicants and copies of Form No. 2 (Returns of allotment) were filed before the Assessing Officer by the appellant. It is also seen that share application money in all the cases was paid by the account payee cheuqes and bank statement of the appellant company was also filed. In such circumstances and an availability of such material, Assessing Officer could have resorted to some material investigation and on that basis he could come to some clear conclusion but this course has not been adopted by the Assessing Officer. The Assessing Officer made only a general remark that all the application forms filed by the appellant before him did not contain complete details and based on that he made the addition on adhoc basis u/s. 68 of Income-tax Act without referring to specific cases of the shareholders, treating the amount representing the share application money as undisclosed ." In view of the above stated facts, I have no hesitation in deleting the addition made on account of unexplained share capital u/s. 68. The appellant therefore gets relief of Rs. 2,19,64,000/-." 12. Now the Revenue is in appeal. 13. Ld. DR. Mr. S.K. Gupta has cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtain other authorities, such as, Merchant Banks, SEBI, Stock Exchange authorities where the shares were listed, etc. have not raised any objection. In support, case laws cited are CIT v. Lovely Exports (P.) Ltd. [Application No. 11993 of 2007, dated 11-1-2008] and Modern Cements Ltd. [IT Appeal No. 2506 (Ahd.) of 2006, dated 30-6-2011]. 15. Heard both sides at length. In the compilation, Form No. 2, i.e. share application filed before Registrar of Companies, has been placed on record. The compilation is also consisted relevant bank statements through which the amount was collected and deposited. The assessee has also furnished addresses of all the investors. In the light of those evidences, we have to discuss few case laws pronounced on this issue. The decisions are: (i) Lovely Exports (P.) Ltd. ( supra ), (ii) CIT v. Steller Investment Ltd. [2001] 251 ITR 263/115 Taxman 99 (SC), (iii) CIT v. Steller Investment Ltd. [1991] 192 ITR 287/59 Taxman 568 (Delhi), (iv) Sophia Finance Ltd. ( supra ), CIT v. Oasis Hospitalities (P.) Ltd. [2011] 333 ITR 119/198 Taxman 247/9 taxmann.com 179 (Delhi). In the case of Steller Investment Ltd. ( supra ), it was held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then the amount received by the company would be regarded as a capital receipt and to that extent the observation in Steller Investment Ltd. ( supra ) was held as correct. The Hon'ble Full Bench has further said that if the subscribers to the capital were not genuine, then under no circumstances the amount of share capital be regarded as disclosed income of the company. It was a case of a limited company in the business of stocks and financing. By invoking the provisions of section 263 the Commissioner has arrived at the conclusion that there was lack of enquiry by the ITO. It was held that it was the duty of the ITO to enquire into the genuineness of the shareholders and directed to enquire whether the so-called shareholders were actually in existence or not. The Tribunal has found that the company had filed a large number of enclosures alongwith its return including the list of shareholders, forms containing the full addresses as well as the allotment letters before the ITO. The Tribunal came to the conclusion that the company was incorporated and the money was received immediately on incorporation would show that even u/s.68 no assessment could be made in the hands of the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the said cited appeal, facts have revealed that no explanation was offered and the notices could not be served then the provisions of section 68 were invoked to assess the impugned amount in the hands of the assessee. 16.1 Thereafter, the aforesaid decision of Steller Investment Ltd. ( supra ) has reached before the Hon'ble Supreme Court and vide an order dated 20/07/2000 titled as Steller Investment Ltd. ( supra ) the question as referred by the Revenue was not admitted and held that the Tribunal came to the conclusion on facts hence no interference was called for. 16.2 From the side of the assessee, a decision of Hon'ble Supreme Court in the case of Lovely Exports (P.) Ltd. ( supra ) is cited. In this case the SLP of the Revenue Department was dismissed, but an important observation was made that if the share application money is received by the assessee-company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Relevant portion reproduced below:- "Order - By The Court:- Delay condoned. 2. Can the amount of share money be regarded as undisclo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee had received share application money of Rs. 3 lakhs each from six private limited companies during the year relevant to the assessment year 2004-05. Notice under section 148 was issued in respect of the assessment year 2003-04 and reassessment done. The Assessing Officer made addition of Rs. 18 lakhs to the income of the assessee on protective basis in the assessment year 2004-05. On appeal : Held, dismissing the appeal, that the assessee had filed copies of PAN, acknowledgment of filing income-tax returns of the companies, their bank accounts statements for the relevant period but had not produced the directors of the companies. The addition made by the Assessing Officer could not be sustained as the primary onus was discharged by the assessee. The Assessing Officer had not investigated whether the modus operandi by the entry operator discussed by the Investigation Wing existed in the case or not. Even the bank statements as claimed by the Assessing Officer revealed that the assessee had received cheques from the shareholders. The assessee received Rs. 99.18 lakhs on account of share application money. It filed confirmations from 30 parties. Notices issued were ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n record. Further, initial burden can also be said to be discharged if the mode of payment is also placed on record. The initial burden or the primary onus can also be said to be discharged if the genuineness of the transaction, i.e. share applications are also placed on record. As far as the facts of the present appeal is concerned, it is evident that all those basic informations were very much on record. Compilation placed before us contains a summary chart narrating the dates of allotment, names of the share-holders, their addresses, number of shares allotted, confirmation status, etc. It is also vehemently contested that since all the payments have been received through cheques, therefore, the primary burden to establish the source of money has duly been discharged by the assessee. Once all those documents were produced, then it can be safely held that the requisite primary onus, as casted upon an assessee, has been discharged. Thereafter, it is for the AO to scrutinize those details. The Hon'ble Courts, as cited hereinabove, have suggested that if the AO had made certain enquiries and nurtures any doubt about the creditworthiness of those investors, then he is free to take app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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