Income Tax Appellate Tribunal - Ahmedabad
Assistant Commissioner Of Income Tax vs Modern Cement Industries Ltd. on 25 July, 2003
Equivalent citations: [2004]90ITD170(AHD), (2005)95TTJ(AHD)341
ORDER
T.N. Chopra, A.M.
1. This appeal has been filed by the Revenue against the order of the CIT(A)-II, Baroda, dt. 20th July, 1995, for asst. yr. 1992-93 whereby addition of Rs. 59,56,000 by the AO treating the share capital of the company as non genuine has been deleted.
2. During the course of hearing before us, Shri K.C. Patel, the learned counsel for the assessee submitted paper books in two volumes containing documents and evidence, earlier produced before the Revenue authorities. Paper book I containing 132 pages, in fact, is a copy of the paper book earlier filed before the CIT(A). Paper book II contains copy of return of allotment filed with the Registrar of Companies alongwith list of 373 allottees, to whom shares have been allotted through private placement. Copy of share application forms submitted to the assessee-company in respect of private placement quota are also included in this paper book.
3. Briefly stated the facts are that the assessee-company was incorporated under the Companies Act on 27th Nov., 1991, as per the certificate of incorporation placed at p. 1 of the paper book I. The Asstt. Registrar of Companies has issued the certificate for commencement of business on 2nd Dec., 1991. The company commenced commercial production of cement from 27th Feb., 1992, with the installed capacity of 35 tons per day. Asst. yr. 1992-93 is thus the first year of commercial production. The authorized share capital of the assessee-company is Rs. 5 crores divided into 50 lakh shares of Rs. 10 each. The company has been allowed allotment of 9.90 lakhs of shares by private placement and the balance shares have been offered to the public. The assessee-company received contribution through private placement in the promoters quota Rs. 98,99,300 from 373 applicants. During assessment proceedings the AO called upon the assessee to produce the persons to whom preferential share allotment has been made. The assessee furnished the particulars of the allottees. The AO made spot enquiries in respect of 50 persons. Statements of 30 allottees who have been allotted shares out of preferential quota were examined and duly confirmed the investment. With regard to the balance 20 allottees, the same address was given being 18, Semi Basement, Paradise Complex, Sayajigunj, Baroda-390 005. According to the AO enquiries made at the above address (sic) resided or that none of the allottees ever resided or worked at the said premises. On the basis of these spot enquiries, the AO recorded the finding in the assessment order that the investment of Rs. 2 lakhs made in the name of the 20 allottees is a benami investment and the identity of the investors has not been established. The AO further noted the fact that these investors have made the payment on account of share application money in cash on the same day, i.e., 20th Jan., 1992. The AO placed reliance on the Full Bench decision of Delhi High Court in the case of CIT v. Sophia Finance Ltd. (1994) 205 ITR 98 (Del)(FB) and made the addition of Rs. 2 lakhs treating the identity of the investor as non genuine.
4. The AO proceeded to make the total addition of Rs. 59,56,000 (inclusive of the aforementioned Rs. 2 lakhs) on the ground that the assessee has been able to provide confirmation from the investors to the extent of Rs. 39,43,300 and for the balance amount the share certificates have not been produced and the source of investment has not been explained. Thus, the AO made the total addition of Rs. 59,56,000 as income from undisclosed sources.
5. Aggrieved, the assessee carried the matter in appeal before the CIT(A) Before the CIT(A) the assessee furnished copies of share application forms received from the 373 allottees relating to preferential allotment and also furnished a copy of return of allotment filed with the Registar of Companies. With regard to field enquiries made by the AO the assessee submitted before the CIT(A) that the enquiries have been conducted at the back of the assessee and out of 50 persons, sought to be contacted by the AO, 30 allottees have duly confirmed their investments. With regard to the balance 20 allottees the assessee explained that these shares were allotted through the brokerage of M/s Rajyaguru & Associates whose business premises were situated at 18, Semi Basement, Paradise Complex, Sayajigunj, Baroda. The CIT(A) forwarded the documents and papers filed by the assessee in the two paper books to the AO for comments. The AO forwarded her comments on 12th July, 1995, which have been considered by the CIT(A) while deleting the impugned addition. The CIT(A) held that the assessee has duly furnished the evidence in support of genuineness of the share application money received from the allottees of the preferential quota and the impugned addition made by the AO cannot be sustained. With regard to the evidence filed by the assessee at the appellate stage, the CIT(A) observed vide para 3.9 of the appellate order that even if share application forms of the allottees are being filed at the appellate stage for the first time, yet the assessee has duly furnished full information regarding the allotment of shares at the assessment stage. The CIT(A) further observed that the AO has not made any adverse comments in her written submissions dt. 12th July, 1995, regarding the evidence filed by the assessee at the appellate stage. The CIT(A) further placed reliance on the decision of Gujarat High Court in the case of CIT v. Valimohmed Ahmedbhai (1982) 134 ITR 214 (Guj), the CIT(A) thus deleted the impugned addition of Rs. 59,56,000 treating the share application money as genuine. The Revenue is aggrieved and hence the appeal.
6. Shri N.J. Doria, the learned Departmental Representative, assailing the deletion of the impugned addition by the CIT(A), argued that there is ample evidence on record, that the 20 allottees of preferential quota giving the common address as 18, Semi Basement, Paradise Complex, Sayajigunj, Baroda, are non genuine entities. The learned Departmental Representative further argued that out of the total share application money received from preferential allottees aggregating to Rs. 98,99,300, the assessee has provided confirmation for an amount of Rs. 39,43,300 only and therefore, the balance amount of Rs. 59,56,000 has been rightly treated as unexplained by the AO by invoking the provisions of Section 68. In support of his contention the learned Departmental Representative placed reliance on the Full Bench decision of Delhi High Court in the case of Sophia Finance Ltd. (supra). The learned Departmental Representative further assailed the action of the learned CIT(A) in entertaining the additional evidence comprising share application forms of the preferential allottees which had not been produced at the assessment stage by the assessee. According to the learned Departmental Representative the entertainment of additional evidence by the CIT(A) is contrary to Rule 46A of IT Rules and therefore, the conclusion of the CIT(A) in deleting the impugned addition is grossly vitiated and deserves to be reversed.
7. Shri K.C. Patel, the learned counsel for the assessee on the other hand strongly supported the reasoning and finding reached by the learned CIT(A) while deleting the impugned addition of Rs. 59,56,000. Shri Patel argued that the assessee has furnished adequate evidence before the Revenue authorities in support of the genuineness of private quota share capital and there is absolutely no justification for the AO to treat any portion of such capital as non genuine. With regard to furnishing of additional evidence before the CIT(A), the learned counsel argued that the assessee had duly furnished the full details of preferential allottees indicating their names, addresses as well as share application money received from them. All that the assessee had produced before the CIT(A) is copies of the share application forms received from the 373 allottees which cannot be considered as additional evidence inasmuch as the entire information had earlier been furnished at the assessment stage. The learned counsel further submitted that the CIT(A) has duly taken note of Rule 46A of IT Rules, 1962, and also referred to the fact that no adverse comments have been made by the AO in her written submissions dt. 12th July, 1995, before the CIT(A). Shri Patel further referred to the decision of Gujarat High Court in the case of Pari Mangaldas Girdhardas v. CIT wherein the High Court has considered at length the basis criteria for admission of additional evidence by the Tribunal under Rule 29 of ITAT Rules, 1963. According to the learned counsel, the discretion given to the appellate authority to receive and admit additional evidence is a judicial one and such evidence may be allowed in the interest of justice. The learned counsel submitted that there is no infirmity in the impugned order of the CIT(A) in considering the share application forms filed by the assessee. Regarding the enquiries made by the AO, the learned counsel made strong grievance of the fact that even after making enquiries at the back of the assessee and collecting confirmation of investment by 30 allottees in the preferential quota of the share capital of the company, such investments have been treated as non-genuine by the AO, With regard to 20 allottees, which are found to be untraceable at the address given in the share application form learned counsel argued that these allotments have been made through Rajyaguru & Associates 18, Semi Basement, Paradise Complex, Sayajigunj, Baroda, who was one of the broker/underwriter to the public issue of the assessee-company. The learned counsel in this connection invited our attention to p. 83 of the paper book where Rajyaguru & Associates have been listed as broker/underwriter to the public issue. The learned counsel further invited our attention to p. 89 of the paper book I containing copy of the agreement dt. 22nd July, 1992, entered by Rajyaguru & Associates for under writing the issue to the extent of Rs. 35,000 at the rate of 2.5 per cent of under writing commission. Details of under writing commission have also been furnished which indicate that a sum of Rs. 875 has been paid to the said broker by way of under writing commission. The learned counsel argued that the Revenue has not challenged the genuineness of M/s Rajyaguru & Associates who worked as broker/underwriter of the public issue of the assessee-company. Payment of brokerage as well as commission on the share allotments through Rajyaguru & Associates have been duly allowed by the AO. According to the learned counsel, mere fact that address of the broker has been given in the share application form by the 20 allottees would not by itself lead to the inference that the allottees are non-genuine or fictitious entities. According to Shri Patel, the AO has totally ignored the fact that the premises at which enquiries were made were the business premises of the broker and the said broker could have been examined for ascertaining the residential or business addresses of the allottees who have been allotted shares through the brokerage of M/s Rajyaguru & Associates. The learned counsel heavily relied upon the decision of Delhi High Court in CIT v. Steller Investment Ltd. (1991) 192 ITR 287 (Del) which has been upheld by the Supreme Court in CIT v. Stellar Investment Ltd. (2001) 251 ITR 263 (SC). Further reliance is placed on the following decisions :
1. Dy. CIT v. Core Healthcare Ltd. (2001) 251 ITR 61 (Guj).
2. CIT v. Smt. P.K. Noorjahan (1999) 237 ITR 570 (SC).
3. CIT v. Ramanathapuram Distt. Co-op. Central Bank Ltd. (2002) 255 ITR 423 (SC).
4. CIT v. Lanco Industries Ltd. (2000) 242 ITR 357 (AP).
8. We have given our thoughtful consideration to the rival contentions and also gone through the facts and material on record. In our considered opinion, the finding reached by the learned CIT(A) and the reasoning adopted in support thereof are entirely well conceived and no interference on our part is called for. The very first objection raised by the Revenue against entertainment of additional evidence by the CIT(A) lacks substance and is liable to be rejected. The learned CIT(A) has duly considered the issue of admitting fresh evidence in the light of Rule 46A of IT Rules, 1962, and took note of the fact that the AO in her written submissions dt. 12th July, 1995, did not make any adverse comments with regard to the evidence produced by the assessee-company. We are inclined to agree with the learned CIT(A) that the assessee had furnished full details regarding the share application money paid by 373 allottees during the assessment proceedings and that furnishing of the share application forms of such allottees at the appellate stage could not be treated as additional evidence. In our opinion, learned CIT(A) has rightly referred to Rule 46(4) while admitting the share application forms as permissible evidence in support of assessee's case. The principles laid down by the Hon'ble Gujarat High Court In the case of Pan Mangaldas Girdhardas (supra), cited by the learned counsel governing the production of additional evidence before the appellate authorities have to be borne in mind while considering the applicability of Rule 46A in the instant case. Rule 46(4) contemplates admission of additional evidence by the CIT(A) to enable him to dispose of the appeal or for any other substantial cause. Obviously, the amplitude of the discretion vested with the CIT(A) would extend to admit additional evidence which would fill up the gaps or same obscurity or lacuna in the evidence already available on record. In the instant case, the assessee had duly furnished full details of allottees of preferential quota of share capital at the assessment stage whereas before the CIT(A), share application forms as filed by such allottees were produced and copies thereof placed on record. Looking to the facts and circumstances of the case and particularly the nature of the evidence placed at the appellate stage we feel that the essential conditions contained under Rule 46A are satisfied and there is no illegality vitiating the conclusion of the CIT(A).
9. Coming now to the merits of the case, we find that the AO examined 30 allottees who confirmed the investment made in the share capital of the assessee-company. Once the allottees have confirmed the investment, we see no reason for the AO to treat such investment as non genuine. Regarding the 20 allottees with same address, being 18, Semi Basement, Paradise Complex, Sayajigunj, Baroda, we feel that the AO has hastily jumped to the conclusion that these persons are fictitious entities totally ignoring the vital fact that at the address given by the 20 allottees are situated at the business premises of Rajyaguru & Associates, share broker, who was one of the brokers and under writers to the public issue of the assessee-company. The AO has not disputed the fact that these 20 allottees have been allotted shares on the basis of share application forms submitted through Rajyaguru & Associates, share broker. The said broker has been remunerated for the services rendered to the assessee firm. Once the basic fact is accepted that share application money has been received through Rajyaguru & Associates along with the share application forms, the AO should have examined the share broker before jumping to the conclusion that the allottees are not available at the said address. We find that there is not even a whisper of any enquiry made by the AO from the said broker regarding the identity or whereabouts of the applicants who have made applications along with the share application money for allotment of shares out of preferential quota. Without making any enquiries from the broker the AO has proceeded to treat the investment as undisclosed income of the assessee-company. If the investment belongs to the assessee-company, there was no occasion for the AO to allow deduction for under waiting commission or brokerage to M/s Rajyaguru & Associates through whom the said investment in shares has apparently been made. Apart from the glaring illogic in the Revenue's case, it is important to note that spot enquiries have been made at the back of the assessee and proper opportunity has not been afforded to the assessee, thus violating the principles of natural justice as well as the express provisions of Section 142(3) of the IT Act. We are, therefore, inclined to endorse the conclusion of the CIT(A) that the addition of Rs. 2 lakhs made by the AO is without substance and is liable to be deleted.
10. Now coming to the question of applicability of Section 68 in respect of share capital introduced in the books of the assessee-company, there is no denying the fact that Section 68 is widely worded and brings within its purview share capital reflected in the books of a company. The decisions of Delhi High Court in Sophia Finance Ltd.'s case (supra) and Steller Investment Ltd.'s case (supra), cited before us support the proposition that the provisions of Section 68 get attracted even in cases where the assessee-company claims to have received money towards share capital. Sophia Finance Ltd.'s case (supra) is a Full Bench decision rendered by the Hon'ble Delhi High Court and clarifies the legal position in the context of its earlier decision in Steller Investment Ltd.'s case (supra) and observed that Section 68 would be applicable in respect of genuineness of share capital and if the share holders are identified and it is established that they have invested money in the purchase of shares then the amount received by the company would be treated as explained. Now, in the instant case, the assessee has duly furnished the confirmation from the investors in the share capital to the extent of Rs. 39,43,000 out of the total investment in share capital aggregating to Rs. 98,99,300. The AO has examined 30 allottees of share capital who have confirmed the investment. Before the CIT(A), the assessee has furnished share application forms of all the 373 allottees which contained the information regarding investment made, number of shares applied for, addresses of the applicants as well as signatures of the applicants who have applied for allotment of shares. The assessee has also furnished copy of return of allotment filed with the Registrar of Companies, Gujarat. From these facts, it clearly emerges, that the assessee has discharged the onus which lay upon it by virtue of provisions of Section 68. Regarding the contention of the AO that share certificates have not been produced, we feel that such a requirement has no nexus with the issue of onus under Section 68. There are as many as 373 allottees spread all over the country and allotments have been made in conformity with the procedure laid down under the Companies Act. Share application forms submitted by the allottees are available on record. The assessee has furnished copy of return of allotment filed with the Registrar of Companies, Gujarat. The AO has examined as many as 30 allottees who have confirmed the investment. With regard to 20 allottees with the same address as 18, Semi Basement, Paradise Complex, Sayajigunj, Baroda, it is amply established that M/s Rajyaguru & Associates was the share broker who was the broker and underwriter to the issue duly approved by the Baroda Stock Exchange and it was through this broker that share application money as well as share applications have been filed with the assessee-company. The question of onus of proving the source and nature of credits has to be examined in the backdrop of facts and circumstances of the case keeping in view practical and pragmatical considerations. The fact that credits in question are of the nature of share capital contributed by a large number of shareholders spread all over the country in response to private placement offer of the company, made in accordance with the requirements and procedures as contained under the provisions of the Companies Act would have to be kept in view while considering the question of onus under the provisions of Section 68 of the IT Act. Looked at from this perspective, we feel that the assessee has discharged the onus under Section 68 and therefore, the CIT(A) has rightly deleted the impugned addition of Rs. 59,56,000. We would therefore, uphold the order of the CIT(A) and dismiss the appeal of the Revenue.
11. In the result, the appeal filed by the Revenue is dismissed.
T.K. Sharma, J.M.
1. I have perused the order proposed by my colleague, learned AM. However, I could not persuade myself to agree with his conclusion arrived at. Therefore, I am compelled to record my finding separately.
2. The facts are narrated by my learned brother. However, for the sake of completeness I would like to furnish the same briefly. The assessee-company was incorporated under the Companies Act on 27th Nov., 1991, as per the certificate of incorporation placed at p. 1 of the paper book I. For the assessment year under appeal, it filed the return of income on 31st Dec., 1992, showing a nil income. The authorised share capital of the assessee-company is Rs. 5 crores and amount available for private placement through promoters quota was Rs. 98,99,300. During the course of assessment proceedings, AO asked the assessee to submit the list of people to whom the promoters quota have been offered and the individual share holdings. After repeated opportunities being given to the assessee-company to produce the list of promoters' quota throughout a period of 1-1/2 years, the promoters' quota details was finally produced before the AO on 6th Feb., 1995. Keeping in view the provisions contained in IT Act, regarding limitation for completing the assessment, AO was required to complete the assessment by 31st March, 1995. The AO accordingly asked the assessee to produce a number of persons together with their confirmations and bank pass-book for confirming their investments. The assessee produced none of the parties called for. The AO finally conducted field enquiries and out of total of 373 allottees, 50 people were interrogated. Out of 50, 30 people have confirmed their investments. However, a total of 20 people could not be located at the address which was given to the AO. All these 20 people have given the address of 18, Semi Basement, Paradise Complex, Sayajigunj, Baroda-390005, and the field enquiry revealed that no such persons have ever resided or worked at such a premises. The present occupants of the address are unable to supply any details. The AO accordingly concluded that address given against the name of 20 persons is bogus. The names of these 20 persons as given by the AO in the assessment order are as under :
____________________________________________________________ Sr. No. Sr. No. list Name of investor/holder Investment Rs.
____________________________________________________________
1. 115 Rajiv Parikh 10,000
2. 116 Vishwas Parikh 10,000
3. 117 Manoj A. Parikh 10,000
4. 118 Samarath Sharma 10,000
5. 119 Sujata Sharma 10,000
6. 120 Suketu Sharma 10,000
7. 121 Rajesh Sharma 10,000
8. 122 Ramesh Sharma 10,000
9. 123 Parthir Sharma 10,000
10. 124 O. Mehta 10,000
11. 125 P. Mehta 10,000
12. 126 Shashikant Parikh 10,000
13. 127 Rakesh Patel 10,000
14. 128 Mukesh Patel 10,000
15. 129 Dinesh Patel 10,000
16. 130 Chandrakant Patel 10,000
17. 131 Subhash Patel 10,000
18. 132 J. Mehta 10,000
19. 133 K. Mehta 10,000
20. 134 A. Mehta 10,000 ____________________________________________________________
3. In the assessment order AO has also mentioned that it seems that aforesaid investments are benami as the company has not been able to prove the whereabouts of these investors. The AO also observed that in the share application money account, all these receipts are in cash on the same date, i.e., 20th Jan., 1992.
4. The AO made the addition of Rs. 2,00,000 observing as under :
"In the case of CIT v. Sophia Finance Ltd. (1993) 70 Taxman 69 (Del)(FB) it has been held that it is the responsibility of the assessee-company to establish the identity of the investors. Till the establishment of the identity and genuineness of the investors the onus of proof rests on the assessee-company. Thereafter, the onus shifts on to the Department. If the assessee-company is unable to prove the identity of its investors then the investments can be treated at par with cash credits and added in the hands of the company. In the instant case the assessee has not been able to prove the identity of the investors as mentioned on its rolls. Enquiry has shown that the genuineness and existence of such investors are highly dubious and on this spot verification failed to unearth any such people Therefore, a total addition of Rs. 2 lakhs is made on this point."
5. During the course of assessment proceedings before the AO, out of total allotment of shares of Rs. 98,99,300, assessee-company was able to provide the confirmation for the amount of Rs. 39,43,300. The AO allowed ample opportunity to the assessee to provide the details of the balance amount; but the same were not produced. The AO accordingly observed that the view of the fact that assessee has not been able to discharge its obligation to contact its share holders and unable the Department of Income-tax to verify the source of their investment, treated the balance amount of Rs. 59,56,000 as income of the assessee.
6. The assessee carried the matter in appeal and before the CIT(A), assessee furnished copies of share application forms received from the 373 allottees relating to preferential allotment and also furnished a copy of return of allotment filed with the Registrar of Companies. The counsel of the assessee appeared before the CIT(A), also referred to the provisions of the Companies Act relating to share capital, etc. and submitted that names of 373 allottees were filed before the AO. The counsel of the assessee also drew attention to the individual share application forms and also to the contents stated in the list of 373 allottees to prove that all the contents stated therein had been adequately recorded and stated in the list filed before the AO. In view of this fact before the CIT(A), it was submitted that contention of the AO that complete details were not filed was wholly incorrect.
7. The CIT(A) forwarded the two paper books filed before him to the AO and AO with regard to admissibility of additional evidence, submitted that share application forms were not produced for the purpose of examination during the course of assessment proceedings. The AO also pointed out that some of the application forms does not carry any signature of the applicant. The learned CIT(A) deleted the addition of Rs. 59,56,000 (including addition of Rs. 2,00,000) for the reasons given in paras 3.48 to 3.52 in the impugned order which is reproduced as under :
"3.48. I have verified the original application form as well as the copies and find that all the application forms that have been submitted before me carry the signature of the applicants. Therefore, the observation of the AO is incorrect.
3.49. The contents of the application form, as available in the details submitted with the AO, are also found to be identical. The form in which the submissions were made before the AO have also been filed before me. It is seen that material information contained in the share application forms were already submitted to the AO. The AO has pointed out some minor defects in the forms such as non-filing of some columns of the application form which are really not significant. Merely change in the form of submission does not alter the substance of its contents and so AO's contention about admissibility of additional evidence does not carry any weight. The submission of the share application form is allowed to be admitted to enable me to dispose of the appeal. This is in accordance with provisions of Rule 46A(4) of the IT Rules.
3.50. However, I may add that in the written submissions made before me, no adverse comments have been provided with regard to the evidences furnished before the AO. The decision arrived by me is made on an appreciation of material that was placed on the records of the case. In fact, no additional evidence adduced by the appellant before me have been considered for the purposes of arriving at the decision.
3.51. This appeal has been decided on the evidences recorded on the course of assessment proceedings only. In absence of any proof against the appellant's version, in my view, the AO should not have rejected the claim of the appellant that the amounts received were the share application money. For the purposes, reliance is placed on the decision in the case of CIT v. Vali Mohd. Ahmedbhai (1982) 134 ITR 214 (Guj).
3.52. I, therefore, hold that the entire share application money of Rs. 99,98,300 for which allotment was completed, were the share capital of the appellant company and cannot be treated as the income of the appellant company from undisclosed sources. The AO is directed to delete the addition of Rs. 59,56,000 made to the total income."
8. Aggrieved by the order of learned CIT(A), Revenue is in appeal before us on the following ground :
"On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition of Rs. 59,56,000 (inclusive of Rs. 2,00,000) in respect of share capital being non-genuine."
9. At the time of hearing before us on behalf of Revenue, Shri N.J. Doria, learned Departmental Representative appeared and submitted that share application amount of Rs. 59,56,000 was found credited in the books of the assessee-company and as per provision of Section 68, AO was within his power to enquire about identity of the shareholder, their capacity to invest and genuineness of transaction. The learned Departmental Representative drew our attention to para 2 of the assessment order wherein AO has stated that after repeated opportunity being given to the assessee-company to produce the list of promoters' quota throughout a period of 1-1/2 years, the promoters' quota details were finally produced on 6th Feb., 1995. The AO was required to complete the assessment before 31st March, 1995. The assessee has furnished confirmation only in respect of Rs. 39,43,300. In respect of balance amount, confirmations were not filed. The AO also made field enquiry and in respect of 20 persons' the list of which has been given by AO in the assessment order, found that even the address given against their names is bogus and they have no connection with the address given either in the past or in the present. In these circumstances, AO is fully justified in relying on the decision of Hon'ble Delhi Full Bench in the case of Sophia Finance Ltd. (supra). The learned Departmental Representative also drew our attention to the Full Bench decision in the case of Sophia Finance Ltd. (supra) wherein the Hon'ble High Court has taken the following view :
"The ITO would be entitled to enquire, and it would indeed be his duty to do so, whether the alleged shareholders do in fact exist or not. If the shareholders exist then, possibly, no further enquiry need be made. But if the ITO finds that the alleged shareholders do not exist then, in effect, it would mean that there is no valid issuance of share capital. Shares cannot be issued in the name of non-existing persons. The use of the words 'may be charged' (emphasis added) in Section 68 clearly indicates that the ITO would then have the jurisdiction, if the facts so warrant, to treat such a credit to be the income of the assessee.
If the shareholders are identified and it is established that they have invested money in the purchase of shares then the amount received by the company would be regarded as capital receipt and to that extent the observations in the case of CIT v. Stellar Investment Ltd. (1991) 192 ITR 287 (Del) are correct, but if, on the other hand, the assessee offers no explanation at all or the explanation offered is not satisfactory then, the provisions of Section 68 may be invoked. In the latter case Section 68, being a substantive section, empowers the ITO to treat such a sum as income of the assessee which is liable to be taxed in the previous year in which the entry is made in the books of account of the assessee."
10. The learned Departmental Representative finally submitted that there is no justification whatsoever on the part of learned CIT(A) in deleting the addition of Rs. 59,56,000 made by AO because the addition of Rs. 2,00,000 was made by AO on the ground that field enquiry could not prove the identity of the applicants who applied for shares of Rs. 2,00,000. AO concluded that in respect of amount of Rs. 59,56,000 assessee has not furnished confirmation from the persons who applied for shares. Therefore, it was not possible to make necessary enquiry as provided in Section 68 of the IT Act, 1961. In the absence of confirmation, AO was fully justified in invoking the provisions contained in Section 68 of the IT Act, 1961, and CIT(A) in the impugned order is not justified in admitting the fresh evidence. In the impugned order, learned CIT(A) on the one hand stated that he is not admitted the fresh evidences and deciding the appeals without admitting the fresh evidence and on the other hand, he decided the appeal admitting additional evidences. As per provisions contained in Section 46A(4), looking to the nature of fresh evidences filed before the CIT(A), learned CIT(A) either remanded the matter back to the AO or he should have conducted the enquiry himself to find out why the 20 persons who were not found residing at the address given in the application form. Similarly, in respect of additional evidences the learned CIT(A) should have directed the AO to make further enquiry as required by Section 68 and asked him to furnish the necessary report. During the hearing of appeal, the learned CIT(A) has never indicated to AO that he has admitted the fresh evidences. The CIT(A) asked simply comments and AO has objected that these fresh evidences cannot be admitted and in spite of this he has not passed any order on admissibility of additional evidences as required by Rule 46A(4). The learned Departmental Representative concluded that addition was correctly made by AO under Section 68 and learned CIT(A) is not justified in deleting the same.
11. The learned Authorised Representative appeared for the assessee, supported the orders of authorities below.
12. I have carefully considered the arguments of both the sides and have perused the materials placed before us. It is undisputed fact that before the AO list of shareholders were furnished in the month of February, 1995, and AO was required to complete the assessment by 31st March, 1995. It is also not disputed by learned counsel of the assessee that assessee-company took about 1-1/2 years to produce the list of persons who applied in promoter's quota, Keeping in view the paucity of the time, AO conducted field enquiry and found that 20 persons who applied for share of face value of Rs. 2 lakhs were not genuine as the address given against their names is bogus. The AO has also mentioned that the share application money has been paid by all these 20 persons in cash and same is dt. 20th Jan., 1992. Since due to paucity of the time, it was not possible for the AO to confer the assessee with field inquiry report, AO made the addition of Rs. 2 lakhs. In my opinion the AO after obtaining the field inquiry report, keeping in view the principle of natural justice should have confronted the assessee with the finding of inquiry report. Since this was not done, in my opinion, it will meet the end of justice, if the issue regarding addition of Rs. 2,00,000 is remitted to the file of AO with the direction that AO will inform the assessee the outcome of field report and re-adjudicate this addition afresh.
13. It is pertinent to note that in case of private placement through promoter's quota generally no under writer is involved. Therefore, in case of private placement, heavy burden lies on the assessee to prove three parameters stated earlier of Section 68 of the Act. On share application form itself it has been stated "For Private Circulation Only'. This clearly indicates that in this issue neither any promoter nor any underwriter was involved. As per letter of consent of Rajyaguru & Associates, dt. 22nd July, 1992 (p. 89 of paper book No. 1), they have agreed for underwrite 3,500 equity shares of nominal value of Rs. 35,000 for which commission of Rs. 875 (@ 2.5 per cent of Rs. 35,000) was paid in the previous year relevant to the asst. yr. 1993-94.
14. The question whether Section 68 of the Act is applicable to the issue of share capital by a company, came for consideration of Hon'ble Delhi High Court (Full Bench) in the case of Sophia Finance Ltd. (supra). The Full Bench decision, after reconsidering the observations made in Stellar Investment Ltd.'s case (supra) took the view that it is not correct to say that share capital of a company can never be assessed as undisclosed income of the assessee. The judgment of both these cases were considered by Tribunal, Ahmedabad (Third Member) in the case of Cas Card Finance Ltd. v. Asstt. CIT (ITA No. 201/A of 1997 dt. 29th July, 2002) [reported at (2003) 78 TTJ (Ahd)(TM) 55--Ed.] and it was held that if inquiry is made by the AO regarding share application money and he is not satisfied that the true nature of share application money is of capital receipt, he can invoke Section 68 of the IT Act.
15. In the present case, the assessee-company has not furnished the confirmation before the AO. The share application forms furnished before the first appellate authority, as per AO were incomplete because some of the application forms do not carry any signature of the applicant. In the impugned order, learned CIT(A) is not clear about admissibility of the fresh evidences. On the one hand, he has stated that he is deciding the appeal without admitting the fresh evidence and on the other hand he is stating that submission of share application is allowed to be admitted to enable him to dispose of the appeal. It is pertinent to note that the assessee has not filed any confirmation before the AO and even before the CIT(A), in lieu of confirmation, the assessee-company has furnished share application form. Therefore, learned CIT(A), in these circumstances should have remitted this issue to the file of AO with the direction that assessee-company should furnish authenticated share application form/confirmation from persons who applied for shares along with other particulars like PAN if any, brief source of income of the applicant so that AO may conduct necessary enquiry as provided in Section 68 of the IT Act. The facts of the case clearly indicates that before the AO that the assessee has neither furnished confirmation nor authenticated application form. I, therefore, set-aside the order of learned CIT(A) and remit this issue to the file of AO with the direction that assessee should furnish confirmation/authenticated application form to the AO who will conduct the necessary enquiry as provided under Section 68 and re-adjudicate the addition of Rs. 59,56,000 afresh in accordance with law after giving an opportunity of being heard to the assessee.
16. In the result, for statistical purposes, the appeal of the Revenue is allowed.
REFERENCE UNDER SECTION 255(4) OF THE IT ACT, 1961 Pursuant of difference of opinion amongst the Members constituting the Division Bench, the following point of difference is referred to the President, Tribunal under Section 255(4) of the IT Act, 1961 :
"Whether, on the facts and circumstances of the case, the AM is justified in deleting the impugned addition of Rs. 59,56,000 on account of investment of share capital or whether JM is justified in setting aside the issue to the file of the AO for fresh adjudication."
R.P. Garg, Vice President
1. On a difference of opinion between the AM and the JM, the following point is referred by the Hon'ble President, Tribunal, under Section 255(4) of the IT Act for my opinion :
"Whether, on the facts and in the circumstances of the case, the AM is justified in deleting the impugned addition of Rs. 58,56,000 on account of investment of share capital or whether JM is justified in setting aside the issue to the file of the AO to fresh adjudication ?"
2. The assessee-company was incorporated as a limited company under the Companies Act on 27th Nov., 1991, Out of the total authorised capital of Rs. 5 crores it had issued, subscribed and paid up capital of Rs. 99 lakhs during the year under consideration. This consisted of 9,90,000 equity shares of Rs. 10 each. 70 shares were issued and subscribed by the 7 promoters aggregating to Rs. 700 and the balance of Rs. 98,99,300 was the contribution received through private placement in the promoter's quota by 373 applicants. The company is e'ngaged in manufacture of cement with an installed capacity of 35 tons per day and the commercial production commenced from 27th Feb., 1992. The AO required the assessee to produce the list of promoters quota which was filed by the assessee after a period of 1-1/2 years on 6th Feb., 1995. The AO thereafter asked the assessee to produce the number of persons together with their confirmation and bank pass book for confirming their investments. On enquiry from 50 persons only 30 people have confirmed their investments and the balance 20 were not found at the common address given being as 18, Semi Basement, Paradise Complex, Sayajigunj, Baroda-390 005, The AO also made field enquiry which revealed that no such people have ever resided or worked at that place and the present occupants of the premises were unable to furnish any details. He, therefore, observed that these investments were Benami as the company has not been able to prove the whereabouts of these investors. He also noticed that in the share application money account all the receipts were in cash on the same date, i.e., 20th Jan., 1992. He, therefore, added the said sum of Rs. 2 lakhs in respect of the above 20 people to the income of the assessee. He further observed that out of the total allotment of Rs. 98,99,300 the assessee has furnished the confirmation in respect of the amount of Rs. 39,43,300. He added the balance of Rs. 59,56,000 to the income of the assessee by observing that the assessee was given ample opportunity to provide the details of balance amount but has failed to produce any details. The share certificate showing allotment of shares were not produced and, therefore, the assessee had been unable to discharge its obligation to contact its shareholders and made unable the Department of Income-tax to verify the sources of investments.
3. Before the CIT(A), the assessee furnished copies of the share application forms received from the aforesaid 373 people including the 20 which were filed before the AO and also furnished a copy of the return of allotment filed with the Registrar of Companies. The CIT(A) forwarded the said documents to the AO for her comments who reported that share application forms were not produced for the purpose of examination during the course of assessment proceedings and that some of the application forms did not carry any signature of the applicants. It was also contended by the assessee before the CIT(A) that the field enquiry was made by the AO from the 50 people at the back of the assessee. The CIT(A) deleted the addition by observing - (i) that all the application forms which have been submitted before him carry the signature of the applicants and, therefore, the observation of the AO was incorrect; (ii) that material information contained in the share application forms were already submitted to the AO and the AO had pointed out some minor defects in the forms such as non-filing of some columns of the application forms which were really not significant and that it was mere change in the form submission which does not alter the substance of the contents and, accordingly, the AO's contention about the admissibility of additional evidence did not carry any weight; (iii) that no adverse comments have been provided with regard to the evidence furnished before the AO; and (iv) that in absence of any proof against the assessee's version, the AO should not have rejected the claim of the assessee that the amounts received were the share application money and in this connection, he placed reliance on the decision in the case of Valimohmed Ahmedbhai (supra). On the basis of the aforesaid, he held that the entire share application money for which allotment was completed were share capital of the assessee-company and cannot be treated as income of the assessee from undisclosed sources. He, therefore, deleted the addition of Rs. 59,56,000 made by the AO which included the aforesaid sum of Rs. 2 lakhs in respect of 20 persons aforesaid.
4. The matter was carried in appeal before the Tribunal and the two Members struck a note of difference - the AM upholding the order of the CIT(A) in deleting the addition and the JM setting aside the issue for fresh examination by the AO with the direction that the assessee should furnish confirmation/ authenticated application forms to the AO who may conduct the necessary enquiries as provided under Section 68 of the Act to readjudicate the addition afresh in accordance with law and after giving an opportunity of being heard to the assessee.
5. The first dispute of the CIT-Departmental Representative is that the CIT(A) was not justified in making an observation that he has verified the original application forms as well as the copies and found that all the application forms that have been submitted before him carried the signatures of the applicants and, therefore, the observation of the AO to the effect was incorrect. The learned CIT- Departmental Representative pointed out four such instances from the application forms wherein the signatures have not been put by the applicants which are amongst the 20 people. They are at p. 561 of the paper book in the case of Shri Mukesh Patel, p. 507 Shri O. Mehta, p. 452 Shri Chandrakant Patel and p. 396 Shri P. Mehta. The deletion of addition of Rs. 2 lakhs by the CIT(A) is not justified also in view of the fact that none of the aforesaid 20 people have filed their confirmations for investment in shares of the assessee-company which by itself could not prove the identity of those persons. In respect of the other 323 shareholders the assessee has given only the names and addresses of these persons and not given any material before the AO either in the shape of the application form or their confirmation letters of source for making the investment in the shares of the company. They were placed before the CIT(A) for the first time and in that connection, the AO made an observation that some of the forms did not carry even the signature of the applicant. These forms were in the form of additional evidence furnished by the assessee before the CIT(A) for the first time and, therefore, the CIT(A) was not justified in observing that they were not in the nature of additional evidence and that the material information contained in the share application forms were already submitted to the AO and that it was a mere change in the form of submission which did not alter the substance of the contents and consequently, the AO's contention about the admissibility of additional evidence does not carry any weight. It may be noted that Rule 46A of the IT Rules empowers the CIT(A) to admit the additional evidence but it is subject to a condition provided in Sub-rule (3) which states that the CIT(A) shall not take into consideration any evidence produced under Sub-rule (1) unless the AO has been allowed a reasonable opportunity - (a) to examine the evidence or document or to cross-examine the witness produced by the assessee; or (b) to produce any evidence or document or evidence in rebuttal to the evidence produced by the assessee. In any case, the evidence submitted by the assessee before the CIT(A) in the shape of the application forms submitted by the promoter's quota of applicants was not sufficient to prove their identity unless the said documents are proved by the confirmations filed by those persons in the course of assessment proceedings or appellate proceedings by any other evidence or material to establish their identity.
6. The second dispute raised by the learned CIT- Departmental Representative is that the observations of the learned AM that private placement of promoter's quota by 20 persons was through brokers M/s Rajyaguru & Associates whose address was the address given by these 20 people is not born out of the record. This was not the case of the assessee either before the AO or before the CIT(A). There is also no evidence on record that it was through the said broker. The learned CIT-Departmental Representative also doubts as to whether the private placement could be through the broker because it has to be arranged by the promoter from his friends and relatives. The forms of the said 20 applicants, copies of which are also filed do not show any such endorsement as they were through the brokers. In some of the other application forms name of one "K.B. Jain" stands on the right corner of the application but what does that denote also was not clarified. Further, the observation of the learned AM that spot enquiries have been made at the back of the assessee and proper opportunity has not been afforded to the assessee thus violated the principle of natural justice as well as express provisions of Section 142(3) of the Act all the more require that the matter should have been set aside for making the said field enquiry report available to the assessee for its comments as directed by the learned JM and then make the fresh assessment instead of endorsing the conclusion of the CIT(A) that the addition of Rs. 2 lakhs made by the AO was without substance and liable to be deleted.
7. The learned counsel of the assessee, Shri K.C. Patel submitted that the assessee is a public limited company incorporated on 27th Nov., 1991, that it started production only on 27th Feb., 1992, with an installed capacity of 35 tons per day and thus it was in existence for commercial field for about a month. He submitted that it had a share capital as on 31st March, 1992, of Rs. 99 lakhs besides the share application money of Rs. 62,41,700, that it had a sale of Rs. 38,01,346 besides the interest income of Rs. 1,27,490, that it had paid up capital of Rs. 99 lakhs which was subscribed by the private placement from the promoter's quota. He submitted that list of the 20 persons along with the photo copy of the application forms for promoters (for private circulation) were submitted to the AO. He then referred to the prospectus for the issue open on 12th Oct., 1992, i.e., in the subsequent year which incorporates the fact that equity shares already allotted and to be allotted to the promoters, etc. shall not be sold/hypothecated/transferred for at least three years from the date of allotment, that out of Rs. 99 lakhs paid up. capital Rs. 700 has been subscribed by promoter signatories to the memorandum of association and the balance Rs. 98,99,300 was placed for private circulation as promoters quota, that out of the aforesaid confirmation letters have been filed by the assessee with respect to the sum of Rs. 39,43,300 and thus, there was a balance of Rs. 59,56,000 which was added by the AO to the income of the assessee which included the confirmation of Rs. 3 lakhs by the 30 out of 50 allottees from whom the AO has made direct enquiries and who have confirmed the making of investment. He then referred to the decision of Delhi High Court in the case of Steller Investment Ltd. (supra) which has been upheld by the Supreme Court in Steller Investment Ltd.'s case (supra). He then referred to the observation of the Full Bench decision of the Delhi High Court in the case of Sophia Finance Ltd. (supra) observations at p. 105. He then referred to the decision of Supreme Court in the case of Smt P.K. Noorjahan (supra), a case under Section 69 wherein also the word "may" has been used like Section 68 and the apex Court has upheld the view of the Tribunal that the investment could not be treated as income of the assessee which was based upon taking into account the circumstances in which the assessee was placed. He also referred to the unreported decision of Bombay High Court in the case of CIT v. Belenje Investment Trading Co. (IT Appln. No. 314 of 1993, dt. 8th Dec., 1993) dismissing an application under Section 256(2) of the Act by observing that it was difficult to hold that the assessee-company could have in this short period earned profit to the extent of Rs. 4,40,000.
8. I have considered the rival submissions and gone through the record. Difference of the two Members in this case is whether the amount credited by the assessee in share capital in promoter's quota of Rs. 59,56,000 is to be deleted on the material on record or it requires to be set aside for further verification and gather material to come to a conclusion, one way or the other. The AO says assessee has not filed confirmations with regard to investment of Rs. 59,56,000 and on field enquiries 20 out of 50 allottees were not found even existing at the given common address 18, Semi Basement, Paradise Complex, Sayajigunj, Baroda-390005, though for 30, he accepts, have confirmed their investment. The CIT(A) says necessary details were given by assessee to AO and in a change from before him, i.e., the copies of application forms submitted by them to assessee-company and on having same made available, the AO did not advance any adverse comment on merits except objecting for admission of evidence on the ground of its being new. The CIT(A) also claims to have verified and states all the forms submitted carry signature and holds the AO to be wrong in observing that some of the forms did not carry any signature.
9. The AM agreed with the CIT(A) on all counts and also by observing that private placement was through broker M/s Rajyaguru & Associates whose address was given by all the said 20 persons who did not appear before the AO, and having not examined the broker, the AO was not justified in making the addition. The JM however, held that the material was not given to the AO and it was new evidence that the forms were not authenticated one, confirmation was not filed and their genuineness or sources was not proved.
10. In my view, it is a fit case for further verification - firstly only the details giving address and amount invested by all 373 allottees was given to the AO;secondly, though copies of 20 persons' forms of application was given, but I find some of which as rightly observed by the AO carry no signature. To cite : S. No. 561 Shri Mukesh Patel, S. No. 507 Shri O. Mehta, S. No. 452 Shri Chandrakant Patel and S. No. 396 Shri A. Mehta. The CIT(A), it is evident, wrongly assumed that all the forms were signed; thirdly that it was a case of private placement by promoters which has to be from their friends and relatives and the question of their investment through broker does not seem to be probable; fourthly the field enquiries conducted at the back of the assessee had to be made available to the assessee for his comments; fifthly if assessee claims that the investment was through broker he may produce the broker for examination by AO, if he is so advised and sixthly, in any case the submission of forms by itself does not establish the identity of the allottees and those investments made by them unless the documents are proved by confirmation of the parties and sources of investment by them. I however, feel that it should be left to the assessee as to how he proves that and we should refrain ourselves to restrict the way and mode of enquiry of material to be gathered or produced by the parties. The AO would readjudicate the issue on the basis of material brought and sufficiently thereof in the light of the provisions of Section 68 of the Act, the applicability of which is agreed to by both the Members.
11. The learned counsel of the assessee also submitted that the investment of Rs. 3 lakhs by 30 persons who have appeared before the AO and confirmed their investment has also been added by the AO as he has given benefit of Rs. 39,43,300, the confirmation of which was filed by the assessee and that this sum does not include the above Rs. 3 lakhs from the said 30 people in whose cases the assessee did not file any confirmation, but who have confirmed directly before the AO aforesaid. In my opinion, that should not have been added by the AO to the income of the assessee and, therefore, the sum of Rs. 3 lakhs out of Rs. 65,56,000 is required to be deleted in any case. I direct accordingly.
12. The case of Stellar Investment Ltd. (supra) relied upon by the learned counsel was for seeking a question of law under Section 256(2) of the Act and in that connection, it was observed that no question of law arose because the amount of share capital cannot be regarded as undisclosed income of the assessee. The Revenue carried the matter to the Supreme Court and the Supreme Court agreed with the High Court by observing "plainly, the Tribunal came to a conclusion on facts and no interference was called for". The observations of Steller Investments Ltd. (supra) that "under no circumstances could the amount of share capital be regarded as undisclosed income of the company" have not been approved by the Full Bench decision in the case of Sophia Finance Ltd. (supra) even though the Full Bench agreed that if the shareholders are identified and it is established that they invested money in purchase of shares, then the amount received by the assessee would be regarded as a capital receipt and to that extent the observations in Steller Investment Ltd.'s case (supra) were correct. The Full Bench of Delhi High Court also held that under Section 68 of the IT Act, 1961, the ITO has jurisdiction to make enquiries with regard to the nature and source of a sum credited in the books of account of the assessee and it is immaterial as to whether the amount was credited is given the colour of a loan or a sum representing sale proceeds or even receipt of share application money. In the opinion of Their Lordships, the use of the words "any sum found credited in the books" in Section 68, indicates that the section is very widely worded and the ITO is not precluded from making an enquiry as to the true nature of the source of a sum credited in the account books even if it is credited as share application money. The mere fact that the assessee chooses to show the receipt of money as capital does not preclude the ITO from going into the question whether this is actually so. The ITO would be entitled, and it would indeed be his duty, to enquire whether the alleged shareholders do in fact exist or not. If the shareholders exist, then possibly, no further enquiry need be made. But if the ITO finds that the alleged shareholders do not exist, then, in effect, it would mean that there is no valid issuance of share capital. Shares cannot be issued in the names of non-existing persons. The use of the words "may be charged" in Section 68 clearly indicates that the ITO would then have the jurisdiction if the facts so warrant, to treat such a credit to be the income of the assessee.
In the case of Smt P.K. Noorjahan (supra) before the Supreme Court the assessee was a Muslim lady aged about 20 years during the previous year relevant to the asst. yr. 1968-69. On 15th Nov., 1967, she had purchased 16 cents of land in Ernakulam and the amount spent by her, inclusive of stamp and registration charges, for this purchase was Rs. 34,628. On 27th Nov., 1968, she purchased another 12 cents also at Ernakulam and the total investment for this purchase was Rs. 25,902. The explanation of the assessee regarding the source of the purchase money for these investments was that the same was financed from out of the savings from the income of the properties which were left by her mother's first husband. The Tribunal though agreed with the AO that the explanation about the nature and source of purchase money was not satisfactory, but in the facts and circumstances of the case, it observed that it was not possible for the assessee to earn the amount invested in the property and that by no stretch of imagination could the assessee be credited with having earned this income in the course of assessment year or was even in a position to earn it for a decade or more. This finding was agreed with by the High Court and the Supreme Court did not find any error in the said finding recorded by the Tribunal. The Supreme Court observed that the question whether the source of investment should be treated as income or not under Section 69, has to be considered in the light of the facts of each case and that a discretion has been conferred on the ITO under Section 69 to treat the source of investment as income of the assessee and the said discretion has to be exercised keeping in view the facts and circumstances of a particular case. Similar are the observations of Bombay High Court in the case of Belenje Investment & Trading Co. (supra) in connection with rejecting an application under Section 256(2) of the Act. In that case, the share capital was subscribed by the shareholders pursuant to the public issue and the Tribunal observed that it would be impossible for the assessee to satisfy itself by making enquiries at the stage of receiving applications whether the applicants were genuine investors or not. The assessee has given the names and addresses of the applicants to the AO. The Tribunal also noted that the assessee-company was incorporated only on 6th Feb., 1991, and had commenced its business in the month of April, 1991. Soon thereafter, it made a public issue and in these circumstances, it was found to be difficult to hold that the assessee-company could have in this short period earned profits to that extent. Here in the present case, the share capital is not received by the assessee pursuant to the public issue. It was a private placement out of promoter's quota which has to be brought in by the promoter from his friends and relatives. In such a situation, where there is close connection between the investors and the promoters it cannot be said to be difficult to make enquiries at the stage of the application as was envisaged in the case of Belenje Investment & Trading Co. (supra); though that was also a case where the public issue was immediately after the company commenced its production. Be that as it may, after introduction of Section 68, this plea does not seem to have much relevance and as held by the Full Bench decision in the case of Sophia Finance Ltd. (supra) the use of the words "may be charged" in Section 68 clearly indicates that the ITO would then have the jurisdiction, if the facts so warrant, to treat such credit to be the income of the assessee. However, as the matter is to be set aside to the file of the AO for determination of the issue afresh, the assessee would be at liberty to raise this issue before the AO in the fresh proceedings who shall deal with the plea and dispose of the same in accordance with law.
T.K. Sharma, J.M.
1. There being a difference of opinion, the matter was referred to a Third Member.
2. In accordance with the majority view, we set aside the order of learned CIT(A) and remit the issue pertaining to addition of Rs. 59,56,000 to the file of AO for deciding the same afresh in accordance with law after giving opportunity of being heard to the assessee.
3. In the result, for statistical purposes, the appeal of the Revenue is treated as allowed.