Commissioner of Income Tax vs Indocon Finance and Investment Ltd.

The revenue is aggrieved by an order dated 27-10-2006 passed by the Income Tax Appellate Tribunal, Delhi Bench, ''A'', New Delhi (hereinafter referred to as ''the Tribunal'') in ITA No. 470/Del/2002 relevant for the assessment year 1994-95. The issue that had arisen before the assessing officer was with respect to an amount of Rs. 12,50,000 stated to be share capital invested by bogus concerns.

It appears from the record that on 3-3-1996 the assessing officer had confronted the assessed with the genuineness of the shareholders and the assessed gave a reply to the assessing officer on 29-3-1996 that all shareholders are genuine and the share investment was made through account payee cheque. The assessed also filed affidavits of the directors of the said concerns. It appears that one K.C. Hazarika had given a statement before the Income Tax department and in light of that statement, the assessing officer did not accept the Explanation given by the assessed even though the statement was not given to the assessed nor was he allowed to cross-examine K.C. Hazarika. Faced with this situation, the assessed chose to pay tax on the amount invested by such concerns to prove its bona fides and good intention. The offer to pay tax does not appear td have been accepted by the assessing officer, who added an amount of Rs. 12,5000 to the income of the assessed and also initiated penalty proceedings. The assessed preferred an appeal before Commissioner (Appeal) (Commissioner (Appeals)) and on 3-5-1999 the Commissioner (Appeals) required the assessing officer to give his opinion with regard to the submissions made by the assessed in its letter dated 29-3-1996. The assessing officer took more than 2 years time to deal with letter dated 29-3-1996 but still did not give any reply. Under the circumstances, the Commissioner (Appeals) decided to dispose of the appeal in the absence of any response from the assessing officer and on the basis of the material already placed before him. The Commissioner (Appeals) considered the evidence filed by the assessed with regard to identity, creditworthiness and genuineness of the contributors to the share capital and deleted the addition made. The Commissioner (Appeals) also noted that the statement of K.C. Hazarika was accepted is true by the assessing officer without considering any evidence filed by the assessed and without giving the assessed an opportunity to cross-examine K.C. Hazarika. The view of the Commissioner (Appeals) was accepted by the Tribunal and that is how the revenue is before us.

Having heard learned Counsel for the revenue, we find that no error has been committed by the Commissioner (Appeals) in accepting the contention of the assessed that the evidence it wanted to produce and mentioned in its letter dated 29-3-1996 was brushed aside by the assessing officer who merely proceeded on the basis of the statement of K.C. Hazarika. The assessed had, as an alternative, offered to pay tax on the amount of Rs. 12,50,000to show its good intentions and bona fides. Of course this was without prejudice to the rights and contention of the assessed that the shareholders were genuine persons. Unfortunately this aspect of the case was not at all looked into by the assessing officer.

Learned Counsel for the revenue contends that the matter be remanded back to the file of the assessing officer to look into the issue afresh but we do not think that this will serve any purpose. The Commissioner (Appeals) had given 2years to the assessing officer to respond to the submissions made by the assessed but the assessing officer did not find it necessary to do so. Remanding back the matter to the file of assessing officer would not only delay further proceedings but would also cause further harassment to the assessee. The revenue had an opportunity to justify its stand but it failed to avail of that occasion. There is no reason why it should be given a second chance. In our opinion no substantial question of law arises. Dismissed.