P S J Finance And Investment ... vs Cit-Ii New Delhi
2011 Latest Caselaw 1015 Del

R-5


*              THE HIGH COURT OF DELHI AT NEW DELHI

%                                Judgment delivered on : 21.02.2011

                           ITR 300/1994

P S J FINANCE & INVESTMENT LTD                            ..... Petitioner



                                 -versus-




CIT-II, NEW DELHI                                      ..... Respondent

Advocates who appeared in this case:

For the Petitioner        : Mr B N Goswamy, Adv.

For the Respondent        : Mr N P Sahni with Mr Ruchesh Sinha, Advs.


CORAM :-

HON'BLE MR JUSTICE SANJAY KISHAN KAUL

HON'BLE MR JUSTICE RAJIV SHAKDHER

1.     Whether the Reporters of local papers may

       be allowed to see the judgment ?

2.     To be referred to Reporters or not ?

3.     Whether the judgment should be reported

        in the Digest ?

SANJAY KISHAN KAUL, J (ORAL)



1.     The following question of law is required to be answered by

us:-

       "Whether on the facts and circumstances of the case the
       Tribunal was right in holding that a reasonable
       opportunity of being heard was afforded to the assessee
       to substantiate the genuine-ness of the loans"




ITR 300/1994                                                        Page 1 of 5
 2.     The petitioner/assessee company was running the business of

finance and investment and used to acquire and hold shares, bonds

and securities of other companies for the said purpose. The return

for assessment year 1982-83 were being scrutinized when the

assessee was asked to file confirmation inter alia of unsecured

loans. The assessee filed confirmation in respect of such unsecured

loans received except from M/s Venugopal Holdings Ltd. of Calcutta

amounting to Rs 10,75,000/-. The reason for absence of such

confirmation was stated to be that the books of accounts of M/s

Venugopal Holdings Ltd. had been seized by the Income Tax

Authorities, ITO Special Circle-IX, I-Ward, Calcutta and had still not

been released. A letter from M/s Venugopal Holdings Ltd. stating so

was also filed on record dated 09.12.85.

3.     An important fact to be noticed is that prior to the aforesaid

letter, the petitioner addressed a letter dated 30.09.85 to the

Assessing Authority stating that the loans may have been raised

from two entities connected to the same party as they had been

arranged from M/s Rajaram Bhasin & Co., Financial Consultants

and Stock Brokers, Connaught Circus, New Delhi. The addresses of

these two entities were also given i.e., M/s Venugopal Holdings Ltd

and M/s Dey Co.     The amount in question had been received by

bank drafts, details of which had been furnished to the Assessing

Authority. The assessee prayed by virtue of the said letter that the

summons under Section 131 of the Income Tax Act, 1961

(hereinafter referred to as the „IT Act‟) be issued to the creditors at

the cost and expense of the assessee and the creditors be examined

by the ITO at Calcutta (presently known as Kolkata). The assessee

agreed to bear the expenses for the same and sought leave to cross-

examine the witnesses as well.      A further prayer was made for
ITR 300/1994                                                Page 2 of 5
 issuance of summons even to Shri Harish C. Bhasin and M/s

Rajaram Bhasin & Co. under the same provision.

4.     The Assessing Authority sent a letter dated 24.02.86 to the

ITO at Calcutta asking the officer concerned to confirm the loan

amount to the assessee. However, since the assessment may have

become time barred, the Assessing Officer made an addition of Rs

10,75,000/- in the absence of information sought for.

5.     The assessee preferred an appeal to the Commissioner of

Income Tax (Appeals) [in short CIT(A)]. The confirmation in the

meantime was received from the ITO, Calcutta about the loan

advance of Rs 5,00,000 but not of the remaining balance amount of

Rs 5,75,000/- and thus the CIT (A) reduced the addition of

Rs 5,75,000/-.

6.     The assessee, thereafter, filed an appeal before the ITAT

which also dismissed the appeal vide order dated 13.05.1991. The

question referred is at the behest of the assessee.

7.     Learned counsel for the petitioner/assessee has argued before

us that in view of the statutory provisions of Section 131 of the IT

Act and given the prayer made in that behalf by the assessee, the

Assessing Authority ought to have acceded to the request of the

assessee to examine the witnesses. Learned counsel submits that

the said course of action was not only permissible but ought to have

been mandatorily followed in view of the observations of the

Supreme Court in Food Corporation of India vs Provident Fund

Commissioner & Ors.: (1990) 1 SCC 68.

7.1    The Supreme Court while dealing with the power of the

employees provident fund commissioner under Section 7-A of the

Employees‟ Provident Funds and Miscellaneous Provisions Act,

1952 observed that the Commissioner should exercise all powers to
ITR 300/1994                                              Page 3 of 5
 collect all evidence and collate all material before coming to a

proper conclusion.

8.     Learned counsel submits that the possibility of the amount

having come from M/s Dey Co. was indicated by the petitioner in

the letter dated 30.09.85 itself. Learned counsel submits that the

documents which have subsequently come to light in fact leave no

manner of doubt of payment of the amount being made by M/s Dey

Co. A certificate to that effect was even issued by M/s Dey Co.

dated 10.10.92. The occasion for production of this material before

the Assessing Authority did not arise because the Commission was

not issued and the enquiry was restricted to the books of accounts

of M/s Venugopal Holdings Ltd.

9.     We are of the considered view that the Assessing Authority

ought to have utilized all tools at its command to garner the

evidence especially when the assessee itself was praying for it and

was willing to bear the expenses for the same. In this behalf not

only the books of M/s Venugopal Holdings Ltd. but also those of M/s

Dey Co. were material. The denial of the commission resulted in

the failure of the material being brought before the Assessing

Authority. Even before the CIT(A), only the material made available

was the books of accounts of M/s Venugopal Holdings Ltd.

10.    We are thus of the considered view that the matter needs to

be remanded to the Assessing Authority for re-examination of the

issue of addition of Rs 5,75,000/- and in view of the subsequent

development of the material now being available in the hands of the

assessee, even a commission is not necessary. Learned counsel for

the assessee states that the material which is now available with

the assessee would be produced before the Assessing Officer and it


ITR 300/1994                                             Page 4 of 5
 ought to be open to the Assessing Officer to verify the material

relied upon by the assessee. We order accordingly.

11.    The impugned order of the ITAT is set aside and the question

of law is answered in favour of the assessee while remanding the

matter back to the Assessing Officer to decide afresh the question

of addition of Rs 5,75,000/- on account of unsecured loans. Parties

are left to bear their own costs.




                                     SANJAY KISHAN KAUL, J.

FEBRUARY 21, 2011 RAJIV SHAKDHER, J. mb