ACIT vs Prime Telesystems Ltd. Citation 2007 11 SOT 361
Summary AY 1999-2000. It was desirable to get the fresh evidence examined through the AO even if the CIT(A) was empowered to admit such evidence and examine it himself. Since the amount of addition made to the assessees income was substantial and the fresh evidence produced was voluminous and complex, the case was restored to the AO for deciding it afresh after examining the fresh evidence.
S.250(4) of the Income Tax Act 1961 Rule 46A of the Income Tax Rules 1962
ACIT vs Prime Telesystems Ltd.
IT Appeal No. 4565 (Delhi) of 2003 and C.O. No. 117 (Delhi) of 2006 [Assessment Year 1999-2000]
R.V. Easwar, Vice President and P.M. Jagtap, Accountant Member
13 October 2006
K. Sampath for the Appellant Shisher Jha for the Respondent
R.V. Easwar, Vice President. - These are one appeal filed by the department and one cross-objection filed by the assessee, both pertaining to the assessment year 1990-2000. Since they were heard together, they are disposed of by a single order for the sake of convenience.
2. The assessee is a company engaged in the business of telecom consultancy and technology products. In this appeal, we are concerned with the assessment year 1999-2000 for which the previous year ended on 31-3-1999. The assessee filed a return declaring total income of Rs. 46,987 as its income under section 115JA. The return was originally processed under section 143(1) but was later picked up for scrutiny. Several notices were issued by the Assessing Officer which were not attended to. The Assessing Officer thereafter attempted to send the notice by registered post, but these attempts also proved unsuccessful. He, therefore, proceeded to complete the assessment ex parte under section 144 of the Act. He noted that during the year the assessee has increased its share capital to Rs. 2 crore and the secured loans to Rs. 98,67,000. On the ground that the assessee did not come forward for explaining the above items in the assessment proceedings, the Assessing Officer treated these two items as the assessee's income under section 69 of the Act. The total addition came to Rs. 1,43,37,219 which was arrived at as follows :
Add: Share application money
Less: Share application money received in 1998
Balance added as income
3. On appeal, the CIT(A) upheld the ex" parte assessment in principle. However, insofar as the above addition is concerned, he required the assessee to furnish certain information in respect of the shares allotted and the share application money, such as the names and addresses, the permanent account numbers of the concerned persons, date and mode of receipt of the money, photocopies of share application forms and confirmations. In response to the directions of the CIT(A), the assessee by letter dated 5-12-2002, filed certain details which are listed in page 3 of the order of the CIT(A) and hence not reproduced here for the sake of brevity. Thereafter, the CIT(A) noted that the information consisted of some fresh evidence and therefore, sent the papers and details to the Assessing Officer for his comments on the admissibility of the evidence. The Assessing Officer objected to the admission of the fresh evidence and also claimed that in case the evidence is admitted, he should be given an opportunity to make further enquiries into the share contribution and share applicants. The CIT(A) while dealing with the objections of the Assessing Officer observed that the assessee could not file the details of the shareholders because the Assessing Officer has passed the best judgment assessment. He also refused to accept the Assessing Officer's plea for verifying the identity and creditworthiness of the shareholders and the genuineness of the transactions in view of the judgment of the Delhi Court in the case of CIT. Stellar Investment Ltd.  192 ITR 287 and CIT v. Sophia. Finance Ltd.  205 ITR 98 (Delhi) (FB). The CIT(A) held that the fresh evidence is admitted and then proceeded to examine the share contribution himself. Wherever the identity of the shareholder was proved, the CIT(A) accepted the same share contribution as proved and wherever the confirmation letters were not signed by the shareholders or the income-tax assessment particulars were not given, the share contribution were not accepted. Since the details share contribution-wise has been discussed in the impugned order of the CIT(A), they are not reproduced here, for the sake of brevity. In this manner, the CIT(A) deleted the addition of Rs. 96,49,219 against which the department has filed the appeal and confirmed the addition of Rs. 46,88,000 against which the assessee has filed the cross-objection.
4. In support of the appeal filed by the department, the Ld. Sr. DR, Mr. Shisher Jha contended that the CIT(A) did not conduct any worthwhile enquiry, that he did not examine the contra evidence and merely accepted the evidence adduced before him by the assessee and was not justified in not asking the Assessing Officer to conduct an enquiry. He submitted that initially the CIT(A) had called for the Assessing Officer's objections to the admission of the fresh evidence, but later on after overruling the objections proceeded to examine the evidence himself which course was not justified on the facts of the instant case. He further submitted that the proper course for the CIT(A), even if he considered that the evidence should be admitted, should have been to conduct an enquiry through the Assessing Officer who has all the machinery and powers to do so. It was further submitted that though section 250(4) of the Act conferred powers upon the CIT(A) to himself conduct an enquiry it should preferably done through the Assessing Officer in an appropriate case and the present case such a case where having regard to the copious material and evidence adduced by the assessee, the Assessing Officer would have been more suited to examine the evidence and conduct the enquiry. It is submitted by Mr. Jha that it cannot be said that the CIT(A) conducted the type of enquiry which was expected of him by the aforesaid section more particularly because the Assessing Officer was not given a right of hearing with regard to the merits of the evidence. As regards the evidence, Mr. Jha submitted that the CIT(A) merely accepted the same without putting it through the rigorous tests. He, therefore, contended that the matter should receive fresh consideration in the hands of the Assessing Officer.
5. On behalf of the assessee, it was contended that it is open to the CIT(A) to conduct an enquiry himself since his powers are co-terminus with those of the Assessing Officer and also because of the specific provisions of section 250(4). Our attention was drawn to the judgment of the Delhi High Court in Addl. CIT v. Anupam Fashion Palace  42 CTR (Delhi) 147. On the basis of this judgment, it was contended that there was nothing wrong if the CIT(A) had himself conducted an enquiry into the evidence and it was not necessary for him to have the same conducted through the Assessing Officer. In this behalf, our attention as drawn to the judgment of the Bombay High Court in Smt. Prabhavati S. Shah v. CIT 231 ITR 1 where it was held that the power conferred on the CIT(A) under section 250(4) being a quasi-judicial power, it is incumbent on him to exercise the same if the facts and the circumstances justifies and further that if he fails to exercise the discretion judiciary and arbitrarily refuses to make an enquiry in a case where the facts and circumstances so demand his action would be open for correction by a higher authority. Reference was also made to rule 46A(4) which says that the restrictions placed on the production of additional evidence would not affect the powers of the CIT(A) to call for production of any document or the examination of any witness to enable him to dispose of the appeal. It was, therefore, submitted that in the present case when the CIT(A) conducted his own enquiry into the evidence adduced before him he committed no wrong and his action cannot be called in question. It was a discretion vested in him under section 250(4) whether to conduct the enquiry himself or through the Assessing Officer and if he has chosen the former course, the action cannot be questioned without anything more.
6. As regards the merits of the evidence the Ld. Counsel for the assessee submitted that the CIT(A) has examined the same minutely and has applied the judgment of the Full Bench of the Hon'ble Delhi High Court in Sophia Finance Ltd.'s case (supra) and in conformity with the said judgment has deleted only such additions in which the identity of the shareholders has been proved and, therefore, no fault can be found with his action. He drew our attention to the various papers filed in the paper book in this behalf. Our attention was also drawn to the judgment of the Orissa High Court in Devamani Atha v. CIT 112 ITR 837 where it was held that where the assessee's explanation regarding cash credit was rejected by the Assessing Officer without any enquiry, the order of the Tribunal upholding the assessment cannot be upheld. The Ld. Counsel for the assessee further submitted that the principle laid down by the Full Bench of the Delhi High Court (supra) has been extended to share contributions to private limited companies by the judgment of the Hon'ble Delhi High Court in CIT v. Makhni and Tyagi (P.) Ltd.  267 ITR 433.
7. So far as the assessee's appeal is concerned, the contention for the Ld. Counsel for the assessee was on the evidence adduced before the CIT(A), he ought to have deleted and was not justified in confirming the addition. It was submitted that there was no difference, qualitatively, between the evidence on the basis of which the CIT(A) deleted the additions and the evidence which he rejected.
8. We have carefully considered the facts and the rival contentions. On a consideration of these, the main question that arises for decision is whether the CIT(A) committed any error in examining the evidence himself without conducting an enquiry through the Assessing Officer. Before we proceed to consider this question and the provisions of section 250(4) of the Act, it is necessary to allude to a few important facts. The order of the CIT(A) at page 3 refers to the fact that he had required the assessee to file certain information in respect of the shares allotted and the shares application money, such as names and addresses of the share applicants/allottees, their permanent account numbers, the date and mode of receipt of the monies and photocopies of the share applications and confirmations from them. Vide letter dated 5th December, 2002 the assessee had filed copious documents/details which are listed in the same page of the order of the CIT(A). In the course of the hearing of the appeal, the learned Sr. DR Mr. Jha filed copies of certain letters from the file of the CIT(A) from which we find that after the assessee had filed the information required by the CIT(A), he had, by letter dated 7th April, 2003 written to the Assessing Officer as under :
"To Mr. O.P. Chaudhary, ITO, Ward 14(4), New Delhi
Subject : Appeal in the case of M/s. Prime Telesystems Ltd., Appeal No. 14/2002-03 Assessment Year 1999-2000 regarding:
During the appellate proceedings the appellant company has filed before me details of the share application money received during the year under appeal. Confirmations in respect of some of the shareholders have also been filed. In some of the cases, other details such as cheque No., details of bank account, details regarding the death of the concerned person etc. have also been filed. Further the appellant-company has also filed confirmatory letter from the UPFC regarding the outstanding loan of Rs. 98,67,000. Copies of all these documents are being forwarded to you. As all these documents seem to have been filed before me for the first time, you may comment on the admissibility of this fresh evidence.
The needful may be done early and a report may be submitted to me within 10 days of the receipt of this letter.
Sd/- (V.K. Singhal) Commissioner of Income-tax (Appeals)-XVII, New Delhi."
In response thereto, the Addl. CIT by letter dated 8th May, 2003 wrote to the CIT(A) as under
"To Shri V.K. Singhal, The Ld. Commissioner of Income Tax (Appeals)-XVII, New Delhi
Subject: Remand Report in the case of M/s. Prime Telesystems Pvt. Ltd. for assessment year 1999-2000 - reg.:
Kindly refer to the above. The remand report received from ITO, Ward 14(4) is enclosed along with this letter. It is submitted that the assessee's contention in respect of secured loans from M/s. UPFC may be accepted. However, the undersigned personally feels that proper enquiries in respect of shareholders have still to be conducted about their identity, genuineness of the transactions and their creditworthiness. Accordingly, necessary directions are being passed to the Assessing Officer for conducting necessary enquiries in respect of the fresh share capital introduced in this company.
Accordingly, it is requested that this may be treated as an interim remand report and final remand report may be sent in the next month after conducting the necessary enquiries.
Sd/- Addl. Commissioner of Income-tax Range - 14, New Delhi
Copy to: ITO, Ward 14(4), New Delhi for conducting necessary action in the matter.
Sd/- Addl. Commissioner of Income-tax Range - 14, New Delhi."
To the above letter, the CIT(A) replied by letter dated 14th May, 2003 as under
"To The Addl. Commissioner of Income-tax Range - 14, New Delhi
Subject: Remand Report in the case of Prime Telesystems Pvt. Ltd. for Assessment year 1999-2000 - Regarding:
Please refer to your letter No......dated 8-5-2003 on the above referred subject. In this letter it has been stated by you that necessary directions are being passed to the Assessing Officer for conducting inquiries in respect of the share capital introduced by the appellant company. In this regard, your attention is drawn to my letter dated 7th April, 2003 addressed to the Assessing Officer vide which, the Assessing Officer was required to comment regarding the admissibility of the fresh evidence filed by the appellant-company. The Assessing Officer was not authorised to make any fresh inquiries. Since the matter was not remanded back to the Assessing Officer for conducting any fresh inquiry, he is not authorised to make any fresh inquiries.
The appellate proceedings now stand adjourned for 20-5-2003. If the Assessing Officer has anything more to say in this matter, he may attend the proceedings on that date.
The Assessing Officer may be informed accordingly.
Sd/- Commissioner of Income-tax (Appeals)-XVII, New Delhi
Copy to: The ITO, Ward 14(4), New Delhi for information and necessary action.
Sd/- Commissioner of Income-tax (Appeals)-XVII, New Delhi."
On the same day, the Addl. CIT wrote a letter to the CIT(A) which is as under:
"To Shri V.K. Singhal, The Ld. Commissioner of Income-tax (A)-XVII, New Delhi
Subject: Remand report in the case of M/s. Prime Telesystems Pvt. Ltd. for assessment year 1999-2000 - reg.:
Kindly refer to your letter No. 39 dated 14-5-2003 on the above subject. In view of the above, Assessing Officer has been instructed not to make any fresh enquiries.
Since all the evidences in respect of share application money (like confirmation letter) were not filed before the Assessing Officer, so it is requested that the same may not be considered/admitted by your honour. However, if your honour decides to consider/admit this fresh evidence, then in that case, it is requested that the Assessing Officer may also be given an opportunity to make further enquiries to verify the identity, genuineness of the transaction and the creditworthiness of the shareholders/share applicants.
Yours faithfully, Sd/- Addl. Commissioner of Income-Tax Range - 14, New Delhi
Copy to : ITO, Ward 14(4), New Delhi for necessary action at this end.
Sd/- Addl. Commissioner of Income-Tax Range - 14, New Delhi."
From the sequence of the letters, we find that what the CIT(A) did by his letter of 7th April was to invite the Assessing Officer to comment on the admissibility of the fresh evidence. Obviously he was having in mind the provisions of rule 46A(2) of the Income-tax Rules. He also required the Assessing Officer to file a report within 10 days. The Assessing Officer would appear to have sent the report through the Additional CIT and the latter, vide letter dated 8th May, enclosed the report and also informed the CIT(A) that the Assessing Officer was being directed to conduct the "necessary enquiries in respect of the fresh share capital introduced in this company". He, therefore, requested the CIT(A) to treat the report as an interim report and sought time to send the final report. The CIT(A) took objection to the directions given by the Addl. CIT to the Assessing Officer to enquire into the fresh share capital and clarified by his letter dated 14th May that he had only asked the Assessing Officer "to comment regarding the admissibility of the fresh evidence" filed by the assessee and that the Assessing Officer was not authorized by him to make fresh enquiries. He also stated that the Assessing Officer may attend the next hearing if he had to say anything in the matter. Thereafter the Addl. CIT wrote to the CIT(A) that the Assessing Officer has been instructed not to make any fresh enquiries, but raised an objection to the admissibility of the fresh evidence with an alternative plea that if the fresh evidence is admitted the Assessing Officer may be given "an opportunity to make further enquiries to verify the identity, genuineness of the transaction and the creditworthiness of the shareholders/share applicants". A copy of this letter was marked to the Assessing Officer for necessary action at his end. It appears to us from the above exchange of correspondence that the CIT(A) rightly called upon the Assessing Officer to send his objections, if any, to the admission of fresh evidence and obviously felt that the question of enquiring into the fresh evidence would arise only if the same is admitted. It is for this reason, as we understand, that the CIT(A).took objection to the Assessing Officer conducting fresh enquiries into the evidence and the objection, in our opinion, was rightly accepted by the Addl. CIT who thereafter instructed the Assessing Officer suitably.
9. Having thus invited the Assessing Officer to file his objections to the admission of the fresh evidence the CIT(A), and the Addl. CIT having raised the objection vide letter dated 14th May, 2003 that the fresh evidence should not be admitted as they were not filed before the Assessing Officer, the CIT(A), with respect and in our humble opinion, was not justified in not examining the question of admitting the fresh evidence in the light of rule 46A(1). That rule says that the assessee shall not be entitled to produce additional or fresh evidence before the CIT(A) except under certain circumstances. These circumstances are listed in sub-rule (2). Under this sub-rule, fresh evidence may be admitted only if the Assessing Officer had refused to admit evidence which ought to have been admitted or where the assessee was prevented by sufficient cause from producing evidence called upon to be produced before the Assessing Officer or where the assessee was prevented by sufficient cause from producing before the Assessing Officer any evidence which is relevant to any ground of appeal or where the assessee was not given any opportunity to produce the evidence by the Assessing Officer. Sub-rule (2) says that no fresh evidence shall be admitted unless the CIT(A) records in writing the reasons for its admission. Sub-rule (3) proceeds to say that the CIT(A) shall not take into account any fresh evidence unless the Assessing Officer has been allowed a reasonable opportunity to examine and rebut the evidence. In the present case, the only reason given by the CIT(A) in page 4 of his order for admitting the fresh evidence is that the Assessing Officer has made a best judgment assessment against the assessee. In our opinion, this is begging the question. It is not that the assessee could not adduce the evidence before the Assessing Officer, since the Assessing Officer passed a best judgment assessment before the assessee could adduce the evidence. If this is the reason for admission of additional evidence, in every case where a best judgment assessment is made, the CIT(A) would stand justified in admitting the additional evidence by saying that the evidence could not be adduced before the Assessing Officer because a best judgment assessment had already been made. A best judgment assessment is made on the contrary, because the assessee did not adduce the evidence before the Assessing Officer despite opportunity. We find from the assessment order that except on 16-1-2001 and 5-3-2001, when the Manager, Accounts attended before the Assessing Officer in response to the notice under section 143(2), there has been no attendance before the Assessing Officer. The notices issued from April, 2001 could not be served on the assessee. It is true, as claimed in the statement of facts and grounds of appeal filed before the CIT(A) that the assessee had intimated the Income-tax Department about the change of the address from New Delhi to Noida, but this change seems to have been noticed by the Assessing Officer who has issued notices in February, 2002 to Noida which also came back unserved. The Assessing Officer thereafter sent notices to Bombay and Bangalore which were also returned with the remarks "not claimed". Ultimately, the notices were served by affixture at the registered office of the assessee and the residence of the director. Thus, even the notices sent to the new address did not evoke any response. In these circumstances, it was not justified on the part of the CIT(A) to admit the additional evidence on the ground that it could not be adduced before the Assessing Officer since the Assessing Officer had completed the best judgment assessment. In any case, this has not been listed as a reason for admitting the additional evidence in rule 46A(2).
10. Be that as it may, and if it is assumed for the sake of argument that the CIT(A) was justified in admitting the additional evidence - it must be stated that the department has neither raised a ground of appeal questioning the admission of fresh evidence nor was the point taken in the course of the arguments before us on its behalf and so our decision in the preceding paragraph is merely academic, nor did the department raise the argument that it was not open to the CIT(A) to look into fresh evidence in an appeal against a best judgment assessment under section 144 - it is now necessary to consider the further question as to whether the Commissioner (Appeals) was justified in conducting an enquiry into the evidence adduced by the assessee all by himself and not through the Assessing Officer. The powers of the CIT(A) are plenary and have been held to be coterminus with those of the Assessing Officer and he can do what the Assessing Officer can do and can direct the Assessing Officer to do what he has failed to do as held by the Supreme Court in CIT v. Kanpur Coal Syndicate  53 ITR 225. Further section 250(4) of the Act says that the CIT(A) may before disposing of any appeal make such further inquiry as he thinks fit, or may direct the Assessing Officer to make further inquiry and report the result of the same to him. This power is not curtailed in any manner by rule 46A of the IT Rules as has been held by the Bombay High Court in Smt. Prabhavathi S. Shah (supra). Both section 250(4) and rule 46A operate in different fields and this has also been recognized by rule 46A(4) itself which says that nothing in the rule shall affect the power of the CIT(A) to call for the production of any document or examination of any witness for the purpose of enabling him to dispose of the appeal or for any other substantial cause including enhancement of the assessment or imposition of penalty under section 271. The question however is not simply whether the CIT(A) has the power to conduct the enquiry. That he undoubtedly has. The question is whether he should have conducted it all by himself or should have allowed the Assessing Officer to conduct the enquiry. The choice is given by the sub-section itself. What are the parameters which are applicable to decide whether he has rightly exercised one option or the other? This precisely appears to be the question. While deciding this question it is necessary for us to bear in mind the peculiar position occupied by the CIT(A). In Narrondas Manordass v. CIT  31 ITR 909 the Bombay High Court observed as under :
"Now, in order to understand what the competence of the Appellate Assistant Commissioner is and what are the powers conferred upon the Appellate Assistant Commissioner, it is necessary to bear in mind certain salient facts. It is only the assessee who has a right conferred upon him to prefer an appeal against the order of the assessment passed by the Income-tax Officer. If the assessee" does not choose to appeal, the order of the assessment becomes final subject to any power of revision that the Commissioner might have under section 33B of the Income-tax Act. Therefore, it would be wholly erroneous to try and compare the powers of the Appellate Assistant Commissioner with the powers possessed by a court of appeal, under the Civil Procedure Code. The Appellate Assistant Commissioner is not an ordinary court of appeal in the sense in which that expression is understood in the Civil Procedure Code. It is impossible to talk of a court of appeal when only one party to the original decision is entitled to appeal and not the other party, and in view of this peculiar position occupied by the Appellate Assistant Commissioner, the Legislature, as we shall presently point out, has conferred very wide powers upon the Appellate Assistant Commissioner once an appeal is preferred to him by the assessee. If the assessee chooses to remain content with the order of the Income-tax Officer there is nothing that the Appellate Assistant Commissioner can do, however, erroneous the assessment may be. But if the assessment is opened up by the action of the assessee himself, then the powers conferred upon the Appellate Assistant Commissioner are much wider than the powers of an ordinary court of appeal. The statute provides that once an assessment comes before the Appellate Assistant Commissioner, his competence is not restricted to examining those aspects of the assessment which are complained of by the assessee; his competence ranges over the whole assessment and it is open to him to correct the Income-tax Officer not only with regard to a matter raised by the assessee but also with regard to a matter which has been considered by the Income-tax Officer and determined in the course of the assessment."
11. In CIT v. Rai Bahadur Hardutroy Motilal Chamaria  66 ITR 443 the Supreme Court approved of the above position in law. It is also necessary to bear in mind the basic principle that parties in an income-tax proceeding are expected to lead all their evidence at the stage when the matter is before the Assessing Officer. The rule "best evidence in the earliest point of time" is applicable to income-tax proceedings also. In Keshav Mills Co. Ltd. v. CIT  56 ITR 365 (SC), Hon'ble Justice Gajendragadkar speaking for a Bench of seven Judges of the Supreme Court observed at page 381 as follows:
"Proceedings taken for the recovery of tax under the provisions of the Act are naturally intended to be over without unnecessary delay, and so, it is the duty of the parties, both the department and the assessee, to lead all their evidence at the stage when the matter is in charge of the Income-tax Officer. Opportunity is, however, given for additional evidence by section 31(2) and rule 29;....."
12. In Smt. Prabhavati S. Shah's case (supra) also the Bombay High Court recognized the position by observing that the purpose of rule 46A "appears to be to ensure that evidence is primarily led before the Income-tax Officer".
13. Reverting to section 250(4), bearing in mind the important position occupied by the CIT(A) it is necessary for us to consider in the present case whether he was justified in conducting the enquiry himself. There is guidance available from the judgment of the Hon'ble Delhi High Court in Anupamm Fashion Palace's case (supra). In this case, the High Court held that a choice is available under section 250(4) with regard to the procedure to be adopted and that the two procedures - one under which the CIT(A) admits the evidence and decides the issue himself and the other under which he admits the evidence but directs the Assessing Officer to examine the same and decide the issue - cannot be mixed up. In the case before the High Court, it was felt that the issue was quite simple and to restore the matter to the Assessing Officer after such a long lapse of time would not be proper. The evidence before the Court was the certificate issued by the NDMC and the Court felt that just to examine the correctness of the certificate, it may not be proper to send the matter back to the Assessing Officer at the late stage. However, the Hon'ble High Court has expressed caution in the following words :
"We can understand of some different facts where it may be difficult to insist on the AAC deciding the case on new facts himself and it may be necessary that there should be remand order to the ITO. Such a remand order is dealt with in section 251, because the AAC may either decide the case himself or give directions to the ITO to deal with the case. If complex new facts arise, no doubt, it is better that the ITO should deal with the same and if possible find some rebutting material, but in a case of this type, i.e., the date of birth, which is personal matter, the certificate of New Delhi Municipal Committee plus the affidavit of the father should be sufficient." [Emphasis supplied]
The above observations offer guidelines in the present case. It would depend on the facts of each case as to whether the CIT(A) should conduct the inquiry himself or should leave it to the Assessing Officer. If the matter is complex and voluminous evidence is required to be examined, the better course for the CIT(A) would be to get the evidence examined and decided by the Assessing Officer instead of himself doing it though he has the power in law to do so himself. We find that in the present case the CIT(A) has considered copious evidence which he has himself listed in page 3 of his order. It would have been better if these details were to be verified by the Assessing Officer and in this regard we do find force in the submission of the Ld. Sr. DR that the Assessing Officer has all the paraphernalia and the infrastructure to get the evidence examined and verified and he would be in a better and more appropriate position to do so than the CIT(A). For instance, the CIT(A) has accepted the share contributions where confirmatory letters and complete addresses of the persons were furnished along with their income-tax file numbers. He has stated that from these letters the identity of the persons stands established. In our opinion, it would have been better if the CIT(A) had called for the income-tax files of these persons and verified whether the share contributions are reflected therein. This would have not only proved the identity of the shareholders but also the genuineness of the transactions. The alternative was to have the income-tax assessment record of the shareholders verified through the Assessing Officer. The Assessing Officer could have also been directed to verify the addresses and the genuineness of the confirmatory letters in case it was necessary to do so. In such matters, where a detailed enquiry is required, it seems to us that it would be more appropriate that the Assessing Officer is entrusted with the task instead of the Commissioner (Appeals) doing it all by himself. In the present case, the amount of the addition is also very substantial, namely, Rs. 1,43,37,219 and it involves considerable evidence. Therefore, in our humble view, the CIT(A) would have been justified if he had got the evidence verified by the Assessing Officer under section 250(4) of the Act.
The Ld. Counsel for the assessee had submitted that the CIT(A) was only following the judgment of the Full Bench of the Delhi High Court in Sophia Finance Ltd.'s case (supra) when he accepted the share contributions once he was satisfied about the identity of the shareholders. This is no doubt one way of looking at the matter but the creditworthiness of the shareholders as well as genuineness of the transactions also need to be verified, having regard to the fact that the Hon'ble High Court itself has held in the same decision that section 68 is attracted also to contributions to share capital. It should also be remembered that the Hon'ble High Court has observed in the judgment that if the shareholders exist, then possibly no further enquiries need be made. The mere filing of confirmatory letters and the income-tax file numbers need not necessarily establish the existence of the shareholders conclusively. That apart, the use of the word "possibly" by the Hon'ble High Court does give authority to the Assessing Officer to enquire also into the creditworthiness of the shareholder and the genuineness of the contribution if the circumstances so warrant, notwithstanding that the identity of the shareholder is proved. Further, even with regard to the verification to the existence of the shareholders, the Commissioner (Appeals) seems to have merely accepted the confirmatory letters in which the addresses and the income-tax file numbers of the shareholders were given. As already mentioned, from these confirmatory letters, it cannot be said that the existence of the shareholders stand established beyond doubt without any further verification. The Commissioner (Appeals) has not verified the income-tax records of the shareholders, nor has he verified from the shareholders themselves by contracting them or summoning them. Thus, even with regard to the existence of the shareholders it does not stand established beyond doubt merely by the confirmatory letters unless they are subjected to further verification. This exercise has not been carried out by the Commissioner (Appeals). We are inclined to think that it is because of the lack of the necessary infrastructure available to the CIT(A) that he was unable to conduct an enquiry into the evidence in such a manner as would have been done by the Assessing Officer. This is not a simple case, but a complex one. We, therefore, hold that having regard to the judgment of the Hon'ble Delhi High Court in the case of Anupam Fashion Palace (supra), the CIT(A) ought to have remanded the case to the Assessing Officer for examining the evidence and to decide the issue accordingly.
14. For these reasons, we set aside the order of the CIT(A). We restore the matter to the file of the Assessing Officer with a direction to him to examine the evidence adduced by the assessee before the CIT(A) and take a decision afresh in accordance with law. Needless to add, that the assessee shall be given adequate opportunity of being heard. Thus, both the appeals are deemed to be allowed for statistical purposes.