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Abhishek Singhvi in tax soup: officials reject his claim that 'termites ate vouchers,' slap Rs 56-crore penalty



Multiplying Congress leader Abhishek Manu Singhvi's Income Tax problems, the Settlement Commission has added over Rs 91.95 crore to his declared professional income over a three-year period and slapped a penalty of Rs 56.67 crore. The order has since been stayed. He had moved the Commission on his own but a probe was launched subsequently, prompting him to describe the proceedings as a "cat and mouse game" which "trapped" him.

Citing inability to furnish documentary proof to back his expenses claim, Singhvi had told the Commission that a termite attack on the premises of his chartered accountant in December 2012 had destroyed all records and expense vouchers, documents.

The Income Tax department and the Commission also contested Singhvi's claim that he purchased laptops worth Rs 5 crore for members of his staff over three financial years and was, therefore, entitled to 30 per cent depreciation.

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As first reported first by The Indian Express, Singhvi approached the Commission last year, seeking immunity from penalty and prosecution which has since been denied to him on some counts.

Singhvi moved the Jodhpur High Court which stayed a 103-page Commission order passed on September 11 this year.

"I have been the highest tax-payer among lawyers. Even in this case, the entire income was received by cheque, so were the expenses. So it is a case of over-expenditure and the department not agreeing to it. I went to the Settlement Commission suo motu before any survey or investigation started since I could not back up my claim due to destruction of records, and the loss of which I had reported to police before the I-T probe even began," Singhvi told The Indian Express.

The Singhvi tax case saw the Commission launching a full-fledged investigation into the expenses shown by the assessee. This is what the Commission highlighted:

> The sum has been added to Singhvi's professional taxable income since he took the plea that a termite attack on the premises of his chartered accountant in December 2012 destroyed all his records and expense vouchers/documents. This was not accepted by the Income Tax Department (ITD) and the Commission.

> The Commission's September order noted that since Singhvi's salary sheet had shown that he had employed 14 advocates/professionals to assist him, he would have had to purchase 1,250 laptops (each costing Rs 40,000) to account for the amount under that head.

> The Commission also probed Singhvi's claim that he spent Rs 35.98 crore on purchase of solar panels for his company, Rishab Enterprises. It declared that the transaction was "mainly intended at tax evasion by inflating the cost of the panels". Of Rs 25.16 crore said to have been paid by Singhvi, the company concerned admitted it received only Rs 21.39 crore. The owner of the company which sold the solar panels, and whose premises were searched by the ITD, gave a statement admitting that the cost was "inflated" and that Rs 10 crore was to be repaid to Singhvi in the form of a loan to his sons.

Incidentally, the Commission also challenged Singhvi's original contention — made at the first stage of his assessment — that the net income he earned from his legal practice was in the range of 55 per cent. The order noted the Income Tax contention that other equally senior Supreme Court lawyers had informed the tax department that their net income ranged between 90 per cent and 95 per cent.

The Commission also referred to the earlier probe by ITD in which several cheque payments made by Singhvi — to the tune of Rs 10.97 crore in the same three-year period — were found to be "non verifiable". Reason: When inquiry letters were sent to 91 parties, 37 were returned.

Following the Commission order, Singhvi approached the Jodhpur High Court which granted a stay. In his writ petition, he reiterated the stand he had taken before the tax authorities: "The record of the petitioner had been destroyed on account of termite attack and could not have established existing claims by bringing on record documentary evidence."

He said the loss of documents due to termite attack was reported to police on December 13, 2012. While contesting the I-T view, Singhvi's petition stated: "There is absolutely no finding of the commission to the effect that termite attack, consequent destruction of records or the police report in that regard is false, misleading, lack authenticity or is legally unsustainable."

Singhvi alleged that he had been "trapped" in a "cat and mouse game" and argued that the Commission did not have the jurisdiction to impose penalty on him. "No authority and power has been however been granted to the Settlement Commission in way of the provisions of Chapter XIX-A of the Act to impose and /or direct imposition of penalty under the provisions," petition stated.

On the issue of the solar power company, Singhvi's writ petition said: "No report could be furnished after 12 January 2014 being the expiry of the statutory period of 90 days for furnishing the report... DIT (Director, Income Tax investigation) Mumbai had no locus in the present proceeding... DIT Mumbai referred to ex parte enquiry conducted at Mumbai and is not tenable since the said statement was recorded under section 131 of the Act."

http://indianexpress.com/article/india/india-others/singhvi-in-tax-soup-officials-reject-his-claim-that-termites-ate-vouchers-slap-rs-56-crore-penalty/

Sir, it is 707/13. The judgement is reported here:

DIT (E) vs. Ahmedabad Management Association (Gujarat High Court)

http://itatonline.org/archives/index.php/dit-e-vs-ahmedabad-management-association-gujarat-high-court-proviso-to-s-215-which-denies-exemption-to-a-charitable-institution-carrying-on-commercial-activities-does-not-apply-to-institutions-car/

NEW DELHI: An additional district and sessions judge in Gwalior, who was heading the Vishaka committee against sexual harassment, could not save herself from the prying eyes of a Madhya Pradesh high court judge and had to resign from judicial service to protect her "dignity, womanhood and self-esteem".

After practicing law for 15 years in Delhi courts, she passed the MP Higher Judicial Service exam and was posted in Gwalior on August 1, 2011. After training under Justice D K Paliwal, she was posted as additional district and sessions judge in Gwalior in October 2012.

In April 2013, she was appointed chairperson of District Vishaka Committee. Her annual confidential report of January 2014 termed her work "excellent and outstanding". But that was not enough. The administrative judge from Gwalior bench of Madhya Pradesh HC kept pestering her to visit him in his bungalow alone, she alleged.

In her complaint to Chief Justice of India R M Lodha and Supreme Court judges Justices H L Dattu, T S Thakur, Anil R Dave, Dipak Misra and Arun Misra, as well as the MP HC chief justice, she said the administrative judge sent her a message through the district registrar to "perform dance on an item song" at a function in his residence. She avoided the function on the pretext of her daughter's birthday.

Responding to her complaint, Justice Lodha said, "This is the only profession where we refer to our colleagues as brothers and sisters. This is unfortunate. I will take appropriate action after the complaint is placed before me."

The very next day of sending a message to dance in his residence, the administrative judge told her that "he missed the opportunity of viewing a sexy and beautiful figure dancing on the floor and that he is desperate to see the same", she alleged.

The judge got angry when she did not pay heed to his "various advances and malicious aspirations". She was subjected to intense scrutiny by the administrative judge. He got more agitated when no fault was found, she said.

"I started commencing court at 10.30 am instead of 11 am and extended the working hours in the evening by one hour to 6 pm," she said but complained that this did not appease the administrative judge, who continued to harass her.

Tired of harassment, she along with her husband on June 22 went to meet the administrative judge, who was "irritated" to find her with her husband and asked her to meet him after 15 days. But even before 15 days could have elapsed, she was served with a transfer order.

In her complaint, she said, "The administrative judge, along with district judge and district judge (inspection), possibly made a false, frivolous, baseless and malicious reporting to the chief justice of MP and got me transferred on July 8, in the mid-academic session of my daughters to a remote place Sidhi by overruling the transfer policy of MP HC."

Her representation for eight-month extension to allow her daughters complete the academic session was rejected. Left with no choice, she called on the administrative judge and pleaded against the abrupt transfer saying it would affect the studies of her child who was in Class 12.

In her complaint, she said, "Mockingly, he replied that I faced this mid-academic session transfer to Sidhi for not fulfilling his aspirations and for not visiting his bungalow alone even once and he also threatened me that now he will spoil my career completely and make sure that I face ruinous prospects all my life."

She claimed the HC chief justice declined to meet her when she wanted to apprise him of the situation. "I was left with no option but to resign, so, I resigned on July 15 in compelling, humiliating and disgraceful circumstances to save my dignity, womanhood, self-esteem and career of my daughter."

Seeking justice from the CJI, she said, "Only because the perpetrator is as powerful as an 'administrative judge' that he can cast an evil eye on me, and I do not even get a hearing. What system are we following and leading this democracy to? If this is how a mother, sister and wife can be treated, who is herself no less than a judicial officer duty-bound to protect society and law, what constitutional goals are we serving?"

http://timesofindia.indiatimes.com/india/Gwalior-additional-judge-says-she-was-sexually-harassed-by-HC-judge-quits/articleshow/39569700.cms?

A sigh of relief was heard around corporate India when finance minister Arun Jaitley said that he would be forming a committee to deal with cases of retrospective taxation and also indicated that he would do away with the provision, once pending cases are dealt with. This relief was, however, not shared by a plethora of politicians from Punjab, Jaitley's home state, who made a beeline for the finance minister's office in Parliament on Monday.

Their grievance was very simple and related to a case which dates back to 2007, when a society was floated by a host of Punjabi politicians cutting across party lines.

This society, which had former Union minister Preneet Kaur (wife of Amritsar MP Amarinder Singh), MP Santosh Chaudhary, deputy chief minister of Punjab Sukhbir Singh Badal and his estranged cousin Manpreet Badal, and former deputy Speaker of the Lok Sabha Charanjit Singh Atwal, as members held 21.2 acres of prized real estate in Chandigarh.

In February 2007, the society entered into a "tripartite Joint Development Agreement (JDA)" with HASH Builders private limited and Tata Housing Development Company Ltd. Under the agreement, the society signed off on transferring its land to the developers in lieu of a four bedroom flat and Rs 82.50 lakh in cash for each member.

The grand plans were, according to top sources in the finance ministry, halted by a writ petition filed in the Supreme Court, due to which the Court has asked Tata to maintain status quo and make sure that "even a brick should not laid in the area." The apex court then referred the matter to the Delhi high court. To make matters worse the Chandigarh administration has told the high court that "political and business interests influenced the Punjab government's decision to clear the project."

"The unkindest cut however, was yet to come," said the source in the finance ministry. The Income Tax (IT) department citing provisions of transfer as defined in Clause (v) of Section 2(47)2 of the Income Tax Act, 1961 and held that the land owners were liable to pay capital gains tax on their share of the gain from the agreement.

Not just, that the assessing officer has held that the transfer arose pursuant to the JDA executed in February 2007. Accordingly, the entire amount of consideration was taxed in assessment year 2007-08. Thus the politicians were told that not only was there a legal impediment to their gaining new flats but that they were now liable to pay huge sums as tax, that too from 2007 onwards.

The Commissioner of Income Tax Appeals confirmed the Assessing Officer's orders, which was followed by a 165 page ruling by the Chandigarh Bench of the I-T Appellate Tribunal in the case of Charanjit Singh Atwal on the development agreement taxability.

This brings us back to Monday and a delegation of these leaders who made a beeline to the finance minister, who is country cousin and a close political ally of some of the members. Sources said that the finance minister heard them out, but he reportedly told them that he was unable to help them as he was opposed to retrospective changes in tax laws or orders. Quite clearly, retrospective tax cuts both ways.

http://economictimes.indiatimes.com/news/politics-and-nation/arun-jaitley-hints-at-doing-away-with-retrospective-tax/articleshow/38573602.cms?prtpage=1

CHENNAI: It could go down as the worst publicity for dhoti, considered a 'national attire' in Tamil Nadu and Kerala. A sitting judge of the Madras high court was denied entry into the Tamil Nadu Cricket Association Club at Chepauk on Friday. Reason: He was wearing a dhoti.

When Justice D Hariparanthaman alighted from his red beacon-flashing official car at the club premises to participate in a book release function organized by a former high court judge, he was least prepared for the 'reception', sources told The Times of India.

When TOI contacted, Justice Hariparanthaman confirmed the incident and said: "Former acting chief justice of the Madras high court Justice T S Arunachalam authored a book — 'Legal Fraternity Embraced Me'. Former chief justice of the Gujarat high court Justice Gokula Krishnan released it and former Chief Justice of the Himachal Pradesh high court Justice R Ratnam received the first copy. I was invited. I went to the venue at 5.25pm. I wore dhoti and shirt. I was denied entry saying unless I wear pants, I could not be permitted entry."

http://timesofindia.indiatimes.com/india/Chennai-club-turns-away-judge-for-wearing-dhoti/articleshow/38225698.cms

A Judge of Madras High Court, who was denied entry into Tamil Nadu Cricket Association Club here for wearing dhoti, the traditional attire of Tamil Nadu, today said it was unfortunate that dress code prescribed by British rulers was being followed in clubs even after independence.

When Justice D Hariparanthaman alighted from his official car at the club premises to participate in a book release function organised by TS Arunachalam, a former Chief Justice of the High Court, some staff of the club told him that he could not enter the premises wearing a dhoti.

They told him that they had instructions from the office-bearers not to allow anyone in the premises who violated the club's dress code.

Protesting the way in which the club treated invitees, Justice Hariparanthaman said in a statement that "dress code was introduced by British rulers in clubs started by them. It is very unfortunate that even after independence only the same dress code continued and our traditional dress is prohibited."

"It is not the first occasion where clubs denied entry to persons for violating dress code. Even former Supreme Court Judge Justice VR Krishna Iyer was denied entry in 1980s in the Gymkhana Club here, who wrote a protest note in the guest book", Justice Hariparanthaman said in the statement.

The book release function was held at club for which Justice Hariparanthaman was an invitee. Former Chief Justice of Gujarat High Court Justice Gokula Krishnan released the book and former Chief Justice of Himachal Pradesh High Court Justice R Rathnam received the first copy.

Senior advocate of Madras High Court R Gandhi and GR Swaminathan, an advocate of Madurai High Court, were also denied entry to the function for wearing dhoti.

http://www.dnaindia.com/india/report-madras-high-court-judge-denied-entry-to-cricket-association-for-wearing-dhoti-2001760

From Legally India:

"The Supreme Court Bar Association (SCBA) has resolved to strip the Supreme Court's library II of its title – Dr LM Singhvi library.

The association was apparently upset after the late senior advocate's son, senior advocate Abhishek Manu Singhvi, wrote a letter to the SCBA underscoring his previous Rs 20 lakh contribution toward the library's renovation but making future contributions conditional to various demands, including not being asked for money from them again.

The library was named as Dr LM Singhvi library in 2009 when Singhvi had last contributed Rs 20 lakh toward its renovation, proposing that the library be named after his late father.

In May 2014 the SCBA again asked for contribution from him to renovate the library. According to the SCBA's claims, one of which Singhvi contests, the senior counsel then stipulated four conditions in a letter on 8 May:

1. A Resolution be passed by the Executive Committee that in future SCBA will not ask for any contribution in connection with Dr. LM Singhvi Library.

2. There should be an inaugural ceremony or dedication ceremony or whatever function after the renovation is done.

3. In the costly items which will be purchased out of Rs. 20 lakh, it may be inscribed on these items that "gifted by Dr. Abhishek Singhvi in memory of Late Dr. LM Singhvi".

4. SCBA and Dr. Singhvi will withdraw all the letters exchanged on this issue and the SCBA will withdraw the resolutions passed.

According to the SCBA notice, the SCBA then passed a resolution on 10 May, noting its "consternation" at "the insinuating tenor" of Singhvi's letter, adding that in 2009 the SCBA had not agreed that "it would be only a one-time payment or that Dr Abhishek Singh [sic] will not contribute for renovation etc. from time to time".

On 13 May SCBA president PH Parekh wrote to the SCBA that he had met with Singhvi to inform him that the deadline for making the Rs 20 lakh contribution was 14 May, and that Singhvi had repeated his conditions in response. Parekh had asked the SCBA for comment on Singhvi's conditions.

On 21 May, Parekh wrote to Singhvi informing him that the conditions were not acceptable to the SCBA. Singhvi replied on 22 May stating that Parekh had "erroneously" reproduced his third condition. He said that instead of the particular inscription that "gifted by Dr Abhishek Manu Singhvi in memory of Late Dr LM Singhvi" on items he gifted to the library, he had only asked that his contribution be "suitably recognised by the Bar, [...] did not suggest any particular format".

The SCBA stated in its resolution that it could not accept any of Singhvi's conditions and that he ought to have either voluntarily contributed for the library's renovation or taken up the SCBA's offer to himself get the renovation done in case he did not want to make the contribution.

It added:

The Committee is of the unanimous view that the tone, tenor and language of the letter written by Dr. Abhishek Singhvi on 21st May ought not to have written by him. Even earlier correspondence is totally unacceptable to SCBA ...

The Executive Committee resolves that the Library no.II with immediate effect will not be described as Dr LM Singhvi library. All plates and plaques etc describing it as Dr LM Singhvi library will be removed. However, photograph of Dr LM Singhvi will continue to remain in library no.II in view of tremendous regard and respect the bar has for Dr LM Singhvi."

http://www.legallyindia.com/201407074846/Bar-Bench-Litigation/scba-strips-lm-singhvi-library-of-lsquo-lm-singhvi-rsquo

Dharamsala: A foreign couple, who is involved in a legal tussle with a local charity being run by the Tibetan administration-in-exile here for more than five decades, is now locked in another battle with two Indian advocates. 

In an unusual complaint to the Bar Council of Punjab and Haryana, the couple - US citizen Karma Lama, a composer of Tibetan music, and his Italian artist wife Paola Pivi -- has alleged that Chandigarh-based advocate brothers Ranjit and Anil Malhotra have charged an exorbitant fee of Rs.3.5 crore in just about nine months in a Tibetan child's custody case. 

The amount includes approximately Rs.35 lakh for expenses and secondary lawyers. Out of the total, Rs.2.5 crore was "paid" via traceable international bank transfers. 

Denying any wrongdoing, the Malhotras said they were engaged as counsel by the couple as per agreed and settled charges. 

The couple had moved against Tibetan Children's Village (TCV) - a home for destitute children based in Dharamsala city - for the custody and guardianship of a seven-year-old Tibetan orphaned child. The case is pending in the Himachal Pradesh courts.

Confirming the receipt of the complaint, Bar council chairman Rakesh Gupta told IANS: "We are seized of the matter." 

"Legal profession is a service, not a business. Charging exorbitant fees is not justified," he added. 

The couple claimed that fee was charged on an hourly basis. The complaint, which this correspondent accessed, alleged that "in nine-and-a-half months of litigation, we were charged a total of $5,31,000, approximately Rs.3.3 crore by the Malhotras. The fee was calculated at $300 per hour -- equivalent to more than Rs.18,000 per hour." 

The Malhotras were hired by the couple in January 2013 and formally discharged as counsel in December the same year. 

The couple said the Malhotras even counted "hours spent talking on the phone, hours spent talking among themselves, hours spent reading the case material and related material, and hours spent doing office work". 

"We made numerous appearances before the National Commission for Protection of Child Rights in New Delhi, before district courts in Dharamsala and Shimla and before Himachal Pradesh High Court while handling the case," Ranjit Malhotra told IANS. 

He said "the motives of the client are highly suspect and they are conducting a malicious campaign against us for extraneous considerations. Their allegations are totally unfounded." 

"Since the Bar Council is seized of the matter we will give the reply to it," Malhotra added. 

The case for which the Malhotras were hired is basically an ongoing row between the foreign couple and the Tibetan administration-run home for destitute children - Tibetan Children's Village (TCV), an autonomous society. 

The couple -- Karma Lama and Paola Pivi - visited Dharamsala on an international research project and met the child, an inmate of TVC, in August 2012. They agreed to sponsor him as guardians. 

In December 2012, the couple took the child (name withheld) for a holiday. 

In the meantime, the couple was informed by the TVC authorities that the child will be sent to France with Tashi Choedon, a Tibetan woman who found the abandoned child in Kathmandu and brought him to the TCV three years ago. 

She disappeared after giving the custody of the child to the TVC authorities. But Choedon came back after learning that the guardianship of the child was given to the couple and said she wanted him back.  

On Feb 4, 2013, a Dharamsala court ordered interim custody of the child to the couple. But the court ordered the couple on Aug 1, 2013 to give the custody of the child to TCV. 

Aggrieved by the order, the couple moved the Himachal Pradesh High Court, which Aug 8 stayed the Dharamsala court order. It said that the custody of the child will remain with the couple but he should not leave India. 

The matter is still pending in the courts. 

http://zeenews.india.com/news/himachal-pradesh/foreign-couple-says-indian-advocates-charged-rs-3-5-cr-fee_931591.html

The  CBI has filed closure reports in nearly a dozen cases involving around two dozen judges of various benches of the Income Tax Appellate Tribunal (ITAT) who were under probe following corruption cases registered against them between 2011-2012. The agency has concluded that there is "insufficient evidence" and the "charges cannot be substantiated".

"Closure reports have been filed in many regular cases and preliminary enquiries while one case is under trial," CBI director Ranjit Sinha told The Indian Express.

The ITAT, a quasi-judicial body, is the highest income tax appellate authority. Its bench usually has two members — a judicial and an accountant member — who are selected by a board chaired by a sitting judge of the Supreme Court.

It was in 2008 that the CBI had first registered a case against Jugal Kishore, an ITAT member from Kolkata, for allegedly receiving a bribe from the bosses of S K Tulsiyan and Co., for delivering "pre-decided'' judgments. The CBI recovered Rs 28 lakh from Kishore's residence. The agency seized 75 "pre-dated judgments" from the hard discs of Tulsiyan & Co. in Kolkata.

Besides Kishore, the CBI named S K Tulsiyan, his brother Shashi Tulsiyan, son Ravi Tulsiyan, "middleman" Nishant Jain, and Kolkata businessman Subhash Bajoria in its chargesheet filed in January 2012. This case is under trial.

Earlier, the CBI had also registered cases against ITAT members, including some sitting high court judges, who were posted in Mumbai, Indore, Ahmedabad, Hyderabad, Agra, Cuttack and Kolkata. A disproportionate assets case was also filed against then ITAT vice-president G E Veerabhadrappa.

But in its closure report, the CBI has said the charges could not be proved and the suspects were able to explain the source of income and assets owned by them and their families. Sources, however, said some of the cases were closed under duress, despite sufficient material evidence.

The agency has also concluded that the charge that the judgments were "pre-written" cannot be proved, and it is a normal practice for the benches to seek assistance from the accountant firms due to shortage of staff.

While it is learnt to have recommended departmental action against some staff members of the ITAT benches, the CBI has advised the ITAT chairman to be vigilant and review the rules and practices related to preparation and delivery of the orders. In a few cases, the agency has said there was no quid pro quo and the judgments were given on merit.

http://indianexpress.com/article/india/india-others/cbi-moves-to-close-graft-cases-against-tax-tribunal-members/

But can the deduction be denied forever? It must be given in the year of payment which is what s. 43B does.

Thank you Sir. It is an important judgement.

[HERE YOU ARE SIR. THE PDF IS IN THE ATTACHMENT (YOU HAVE TO BE LOGGED IN TO SEE THE PDF)]

HERE YOU ARE SIR. THE PDF IS IN THE ATTACHMENT (YOU HAVE TO BE LOGGED IN TO SEE THE PDF)

O/TAXAP/264/2013 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 264 of 2013
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE M.R. SHAH Sd/-
and
HONOURABLE MS JUSTICE SONIA GOKANI Sd/-
===========================================================
1 Whether Reporters of Local Papers may be allowed to
see the judgment ?
NO
2 To be referred to the Reporter or not ? NO
3 Whether their Lordships wish to see the fair copy of
the judgment ?
NO
4 Whether this case involves a substantial question of
law as to the interpretation of the Constitution of
India, 1950 or any order made thereunder ?
NO
5 Whether it is to be circulated to the civil judge ? NO
================================================================
COMMISSIONER OF INCOME TAX VI....Appellant(s)
Versus
PRADYUMAN M PATEL....Opponent(s)
================================================================
Appearance:
MR MANISH BHATT FOR MS MAUNA M BHATT, ADVOCATE for the
Appellant(s) No. 1
MR RK PATEL, ADVOCATE for the Opponent(s) No. 1
================================================================
CORAM: HONOURABLE MR.JUSTICE M.R. SHAH
and
HONOURABLE MS JUSTICE SONIA GOKANI
Date : 10/09/2013
ORAL JUDGMENT
(PER : HONOURABLE MR.JUSTICE M.R. SHAH)
Page 1 of 27
1 of 27
TAX APPEAL/264/2013 24/11/2013 08:16:15 PM
O/TAXAP/264/2013 JUDGMENT
1.00. As by order dtd. 4/4/2013, Notice has been issued
for final disposal and with the consent of the learned
advocates appearing on behalf of the respective parties,
present appeal is taken up for final hearing today.
2.00. Present Tax Appeal has been preferred by the
appellant – revenue challenging the judgement and order dtd.
14/9/2012 passed by the learned Income Tax Appellate
Tribunal in Appeal No.2 of 2003 with respect to Block period
from 1/4/1988 to 29/7/1998, on the following proposed
substantial questions of law :
"(I) Whether on facts and circumstances of the case,
appellate tribunal was right in deleting the addition of Rs.67
lakhs as unexplained capital and peak credits amounting to
Rs.1,25,94,803/- :-
(i) by accepting the claim of the assessee regarding
the booking amount received from 24 farmers
without examining the fact whether any of the
farmers finally brought the flats/plots from Prithvi
Builders;
(ii)By holding that there is no need to give any
copies of the statement of the 24 farmers to the
assessing officer particularly where the
statement were recorded by the CIT (A) himself
without confirming then to the AO?
(II) Whether the Appellate Tribunal is right in law and on
facts in confirming the order passed by CIT (Appeals), who
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TAX APPEAL/264/2013 24/11/2013 08:16:15 PM
O/TAXAP/264/2013 JUDGMENT
had deleted the additions relying upon the statements
recorded by him, without giving an opportunity to the
Assessing Officer as mandated under Rule 46A of the Income
Tax Rules, 1962?
(III) Whether the Appellate Tribunal is right in law and on
facts in confirming the deletion of addition of Rs.56 lacs
made in respect of unexplained capital of an amount of
Rs.1,25,94,803/- made on account of peak credits?
3.00. As for the reasons stated hereinafter, the matter is
to be remanded to the CIT(A) as there is violation of Rule 46A
of the Income Tax Rules, 1962, we are not entering into the
merits of other substantial question of law.
4.00. Facts leading to the present appeal, in nutshell, are
as under :-
4.01. A search and seizure action was carried out by the
Income Tax Department at the premises of the assessee and
its other group concerns on 29/7/1998. Thereafter, a notice
under section 158BC of the Income Tax Act was served upon
the assessee on 18/1/1999. The assessee filed his return of
income on 3/3/1999 declaring total income of Rs.Nil for the
block period. The assessment was completed under section
158BE of the Act determining the total income at
Rs.1,93,94,403/-. It appears that during the assessment
proceedings and to verify the authenticity of the assessee's
claim with respect foreign depositors, the Assessing Officer
issued Summons for verification of the depositors through the
assessee's authorised representative. However, the Summons
Page 3 of 27
3 of 27
TAX APPEAL/264/2013 24/11/2013 08:16:15 PM
O/TAXAP/264/2013 JUDGMENT
could not be served upon the authorised representative and
thereafter by passing the assessment order, the AO included
the said amount in the income of the assessee treating it as
undisclosed income.
4.02. Feeling aggrieved by and dissatisfied with the block
assessment order, the assessee preferred an appeal before the
CIT(A). During the course of the appellate proceedings, CIT(A)
remanded the case to the AO along with the copy of the
submissions made by the assessee and the AO sent remand
report to the CIT(A). It appears that the learned CIT(A) was not
satisfied with the remand report submitted by the AO and the
CIT(A) was of the opinion that in the remand report the AO has
neither brought any material to substantiate his claim nor
brought on record any positive evidence for sustaining addition
made by him and in fact, in the reassessment report, AO has
merely repeated the reasons given in the assessment order.
That the learned CIT(A) thought it fit to hold an inquiry under
section 250(4) of the Act and asked the assessee to produce
the investors (24 in number who filed Affidavits before the AO)
at the Income Tax Office at Bhavnagar on 27/9/2002 and on
that day, the CIT(A) personally camp at Bhavnagar on the said
date and statements of all 24 investors came to be recorded
by the Inspectors of Income Tax in his presence and relying
upon those statements of the investors and without giving an
opportunity to cross-examine those investors by the AO the
learned CIT(A) has deleted addition made by the AO of
Rs.1,93,94,403/- by holding that in the statements of the
investors recorded by the Inspectors, the investors have
confirmed the fact of making investment in the project of
M/s.Prithvi Builders through the assessee. The learned CIT(A)
Page 4 of 27
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TAX APPEAL/264/2013 24/11/2013 08:16:15 PM
O/TAXAP/264/2013 JUDGMENT
also observed that the statements of various investors
recorded by the Inspectors substantiate the submission made
by the assessee and therefore, he found the same to be
correct. Consequently, the learned CIT(A) by the order dtd.
18/10/2002 has allowed the said appeal and deleted addition
Rs.1,93,94,403/- made by the the AO while assessing the
block assessment year.
4.03. Feeling aggrieved by and dissatisfied with the order
passed by the CIT(A) dtd. 18/10/2002 in allowing the appeal
preferred by the assessee and deleting the addition made by
the AO, the revenue preferred appeal before the ITAT. It
appears that there was delay of 2 days in preferring appeal
and for that the revenue submitted an application for
condonation of delay which came to be allowed and the delay
came to be condoned by the learned tribunal. During the
appeal before the tribunal, the revenue raised additional
ground for violation of Rule 46A of the Income Tax Rules, 1962
by the CIT(A) and the requested to permit to raise the following
additional ground :
"The Learned Commissioner of Income-Tax (Appeals)
has erred in deleting the additions made by the
Assessing Officer on the basis of statements recorded
by his office without giving the Assessing Officer an
opportunity to examine the statements thereby
violating Rule 46A of the Income Tax Rules, 1962."
4.04. It appears that by order dtd. 7/2/2012 and by
observing that as per Sub Rule (2) of Rule 46A, the learned
CIT(A) is within his powers to examine any witness and
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therefore, there is no infringement of Rule 46A and by
observing so, the learned tribunal did not admit the additional
ground and proceeded further with the hearing of the appeal
and by the impugned judgement and order, the learned
tribunal has dismissed the said appeal preferred by the
revenue confirming the order passed by the CIT(A) deleting the
addition of Rs.1,93,94,403/- made by the AO.
4.05. Feeling aggrieved by and dissatisfied with the
impugned order passed by the learned tribunal, the revenue
has preferred the present Tax Appeal with the aforesaid
proposed substantial questions of law.
5.00. Having heard Mr.Manish Bhatt, learned counsel
appearing on behalf of the appellant – revenue and Mr.R.K.
Patel, learned counsel appearing on behalf of the assessee
and considering the order passed by the CIT(A) as well as the
impugned judgement and order passed by the learned
tribunal, it appears that there is violation of Rule 46A of
Income Tax Rules, 1962. It is not in dispute that during the
appellate proceedings, initially CIT(A) remanded the matter to
the AO along with the copy of the submission made by the
assessee more particularly with respect to case on behalf of
the assessee with respect to 24 investors / depositors and the
AO submitted remand report. It also appears from the order
passed by the CIT(A) that the CIT(A) was not satisfied with the
remand report submitted by the AO and therefore, during the
appellate proceedings, the CIT(A) decided to hold inquiry
under section 250(4) of the Act and asked the assessee to
produce investors at the Income Tax Office at Bhavnagar on
27/9/2002. It appears that the learned CIT(A) personally camp
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at Bhavnagar on 27/9/2002 and on that day, the assessee
produced 24 investors and statements of all those 24 investors
came to be recorded by the Inspectors of the Income Tax
Department in presence of the CIT(A) and relying upon the
statements of all those 24 investors recorded by the
inspectors, CIT(A) has deleted addition of Rs.1,93,94,403/-
made by the AO by observing that in the statements of the
investors recorded by the Inspectors the investors have
confirmed the fact of making investment in the project of
M/s.Prithvi Builders through the assessee and the said
statements substantiate the submission made by the
assessee. It is an admitted position that the CIT(A) has not
given any opportunity to the AO to cross-examine those
witnesses / investors whose statements came to be recorded
during the inquiry ordered by the CIT(A) held during the
appellate proceedings and the CIT(A) has relied upon the
statements of those 24 investors without giving any
opportunity to the AO to cross-examine them.
5.01. It is required to be noted that though before the
learned Tribunal, the revenue submitted application requesting
to permit the revenue to raise additional ground of violation of
Rule 46A of the Income Tax Rules, 1962, the learned tribunal
by order dtd. 7/2/2012 did not permit the revenue to raise the
aforesaid ground by observing that as per Sub Rule (4) of Rule
46A, CIT(A) is within his powers to examine any witness.
6.00. Mr.R.K. Patel, learned counsel appearing on behalf
of the assessee has heavily relied upon the decision of the
Hon'ble Supreme Court in the case of Commissioner of
Income Tax, U.P. Versus Kanpur Coal Syndicate, reported
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in 53 ITR 225 in support of his submission on the exercise of
power by the appellate tribunal. Relying upon the aforesaid
decision, Mr.Patel, learned counsel appearing on behalf of the
assessee has submitted that while exercising power, the
appellate authority has plenary power to dispose of the appeal
and the scope of his power is conterminous with that of the
Income Tax Officer and he can do what the Income Tax Officer
can do and can also direct him to do what he has failed to do.
6.01. Mr.R.K. Patel, learned counsel appearing on
behalf of the assessee has also relied upon the decision of the
Rajasthan High Court in the case of Silver and Art Palace
Vs. Commissioner of Income Tax, reported in 1994 (206)
ITR 501 in support of his submission that while keeping an
appeal pending under section 250(4) and before disposing of
it, power is conferred on the CIT(A) to make such further
inquiry as he may deem fit or direct AO to make further
inquiry.
6.02. It is required to be noted that power of the
Commissioner (Appeals) to hold inquiry during the pendency of
the appeal under section 250(4) of the Act cannot be disputed
and is not disputed. The learned counsel appearing on behalf
of the revenue is also not disputing the power of the CIT(A) to
hold inquiry in a proper case pending the appeal, under section
250(4) of the Act. However, grievance which is voiced is with
respect to violation of Rule 46A of the Income Tax Rules, 1964
i.e. not giving opportunity to the AO to cross-examine those
investors whose statements came to be recorded by the
Inspectors during the course of inquiry held in exercise of
powers under section 250(4) of the Act and whose statements
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are relied upon by the learned CIT(A) while deleting addition
of Rs.1,93,94,403/- made by the AO. Sub-section (4) of Section
250 permits the Commissioner (Appeals) to make such further
inquiry as he thinks fit or may direct AO to make further
inquiry and report the result of the same to him before
disposing of any appeal before him. Rule 46A of the Income
Tax Rules, 1962 is with respect to production of additional
evidence before the CIT(A). Rule 46A of the Rules reads as
under :
46A. Production of additional evidence before
the Deputy Commissioner (Appeals) and Commissioner
(Appeals) :
(1). The appellant shall not be entitled to produce
before the Deputy Commissioner (Appeals) or as the
case may be, the Commissioner (Appeals), any
evidence, whether oral or documentary, other than the
evidence produced by him during the course of
proceedings before the Assessing Officer, except in the
following circumstances, namely :-
(a) where the Assessing Officer has refused to
admit evidence which ought to have been
admitted; or
(b) where the appellant was prevented by
sufficient cause from producing the evidence
which he was called upon to produce by the
Assessing Officer; or
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(c) where the appellant was prevented by
sufficient cause from producing before the
Assessing Officer any evidence which is relevant
to any ground of appeal; or
(d) where the Assessing Officer has made the
order appealed against without giving sufficient
opportunity to the appellant adduce evidence
relevant to any ground of appeal.
(2) No evidence shall be admitted under sub-rule (1)
unless the Deputy Commissioner (Appeals) or, as the
case may be, the Commissioner (Appeals) records in
writing the reasons for its admission.
(3) The Deputy Commissioner (Appeals) or as the
case may be, the Commissioner (Appeals) shall not take
into account any evidence produced under sub-rule (1)
unless the Assessing Officer has been allowed a
reasonable opportunity -
(a) to examine the evidence or document or to
cross-examine the witness produced by the
appellant, or
(b) to produce any evidence or document or
any witness in rebuttal of the additional evidence
produced by the appellant.
(4) Nothing contained in this rule shall affect the
power of the Deputy Commissioner (Appeals) or, as the
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case may be, the Commissioner (Appeals) to direct the
production of any document, or the examination of any
witness, to enable him to dispose of the appeal, or for
any other substantial case including the enhancement
of the assessment or penalty (whether on his own
motion or on the request of the Assessing Officer under
clause (a) of sub-section (1) of Section 215 or the
imposition of penalty under section 271."
As per Sub-Rule (4) of Rule 46A not withstanding
anything contained in Rule 46A, Commissioner (Appeals) may
direct production of any document or examination of any
witness, to enable him to dispose of the appeal. Therefore,
considering Sub-Rule (4) of Rule 46A, it is always open for the
Commissioner (Appeals) to direct production of any document
or examination of any witness to enable him to dispose of the
appeal. However, while exercising such powers and examining
any witness, who are permitted to be examined in exercise of
the powers under Sub-Rule (4) of Rule 46A, AO is required to
be given an opportunity to cross-examine such witness. Unless
and until the AO is given an opportunity to cross-examine such
witness/es who are examined during the pendency of the
appeal in exercise of the powers under Sub-Rule (4) of Rule
46A, Commissioner (Appeals) cannot rely upon the statements
/ depositions of such witnesses, as it would be in violation of
the principles of natural justice.
6.03. It is required to be noted that in the present case,
though Summonses were issued by the AO to be served
through the authorised representative of the assessee, they
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could not be served and even the assessee did not produce
those 24 investors before the AO and all those investors came
to be produced for the first time before the CIT(A) during the
pendency of the appeal and while holding inquiry by the CIT(A)
in exercise of the power under section 250(4) of the Act. As
stated above, the learned CIT(A) has relied upon the
statements of those 24 investors recorded by the Inspectors
recorded during the pendency of the appeal and while holding
inquiry in exercise of powers under section 250(4) of the Act
and has deleted addition of Rs.1,93,94,403/- made by the AO,
without giving any opportunity of being heard to the AO to
cross-examine those 24 investors and therefore, the same is in
violation of Rule 46A of the Income Tax Rules, 1962, and
therefore, the order passed by the CIT(A) cannot be sustained
and therefore, the learned tribunal has materially erred in
dismissing the appeal preferred by the revenue and confirming
the order passed by the CIT(A) and not permitting the revenue
to raise additional ground of violation of Rule 46A.
7.00. In view of the above and for the reasons stated
above and without further entering into the merits of the case
and solely on the ground that the order passed by the CIT(A) is
in breach of violation of Rule 46A of the Income Tax Rules,
1962, the order passed by the CIT(A) as well as the impugned
judgement and order passed by the ITAT deserve to be
quashed and set aside and are accordingly quashed and set
aside on the aforesaid ground alone and the matter is
remanded to the CIT(A) to decide and dispose of the appeal
afresh in accordance with law and on merits and after giving
an opportunity to the AO to cross-examine those investors /
witnesses whose statements were recorded on 27/9/2002 in
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presence of the CIT(A) at the Income Tax Office at Bhavnagar
and relied upon by the learned CIT(A) while deleting addition
of Rs.1,93,94,403/- made by the AO. The aforesaid exercise
shall be completed by the CIT(A) at the earliest but not later
than six months from the date of the present order. However,
it is made clear that this Court has not expressed any opinion
in favour of either of the parties and the impugned orders are
set aside solely on the ground of violation of Rule 46A of the
Income Tax Rules, 1962. Present appeal is allowed to the
aforesaid extent. In the facts and circumstances of the case,
there shall be no order as to costs.
Sd/-
(M.R.SHAH, J.)
Per : SONIA GOKANI, J. (Concurring)
8.00. I had a privilege to peruse the order of the learned
Brother Judge (Justice Mr.M.R. Shah), although while agreeing
on conclusion of remand with the learned Brother Judge,
separate reasonings are given hereinafter in this order.
9.00. This Tax Appeal is preferred by the Revenue under
section 260A of the Income-Tax Act, 1961 (hereinafter referred
to as 'the Act') being aggrieved by the order dated September
14, 2012 passed by the Income-tax Appellate Tribunal
(hereinafter referred to as 'the Tribunal') for block period from
April 01, 1998 to July 29, 1998.
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10.00. The following brief facts would be necessary for
grasping the issues under adjudication :
10.01. On July 29, 1998 a search and seizure operation at
the residential premises and other group concerns of the
respondent-assessee was carried out under section 132 of the
Act. In pursuance of the same, a notice under section 158BC of
the Act was served upon the respondent-assessee on January
18, 1999. The return of income was filed with the total income
of "NIL" for the concerned block period. The respondentassessee
is the partner/ director in various firms engaged
mainly in construction and manufacturing activities. On
completion of the assessment under section 158BC, the total
income of the respondent-assessee was determined at
Rs.1,93,94,403/-.
10.02. The respondent-assessee preferred an appeal
before the Commissioner of Income-tax (Appeals) [hereinafter
referred to as 'the CIT(Appeals)'] raising various grounds
challenging the additions made by the Assessing Officer.
10.03. The CIT (Appeals) noted that the grounds of appeal
Nos.9 to 14 were considered together in view of similarity of
nature of additions. In search and seizure action under section
132 of the Act, the computerised data of the unaccounted
account of the said firm were found and seized. They were
labelled as TEST data in the name of the respondent-assessee
and his family members. The details of accounts in the name
of the respondent-assessee and his family members were
submitted by the respondent-assessee to the Assessing
Officer. The respondent-assessee also submitted that various
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debit and credit entries appearing in the accounts submitted
by him were from the premises of M/s.Pruthvi Builders Ltd..
Qua the transaction of the respondent-assessee with
M/s.Pruthvi Builders Ltd., when he was directed to prove the
source of such credit entries appearing in the above account,
he had given the explanation in respect of the source of the
credit entries along with supporting documentary evidence. In
support of the amount received, the respondent-assessee
submitted affidavits of various investors who had made
investment in M/s.Pruthvi Builders through the respondentassessee.
It was also noted by the CIT (Appeals) that the
Assessing Officer disbelieved such submissions and made a
total addition of Rs.1,92,94,803/-.
10.04. During the course of the appellate proceedings,
therefore, along with the copy of submissions made by the
respondent-assessee, the case of the assessee was remanded
to the Assessing Officer by the CIT (Appeals), having
jurisdiction over the respondent-assessee's case. In the
remand report submitted by the Assessing Officer, no material
was brought to substantiate his claim as noted by the CIT
(Appeals) and the Assessing Officer, as further recorded by the
CIT (Appeals) merely repeated the reasons recorded in the
assessment order. The submissions made by the respondentassessee
were not negatived by the Assessing Officer by
bringing any substantiating evidence on record or by further
inquiry. The CIT (Appeals), therefore, made an inquiry under
section 250(4) of the Act directing the respondent-assessee to
produce the investors at Income-tax Office at Bhavnagar on
September 22, 2002 by camping at Bhavnagar and the
statements of in all 24 investors were recorded by the
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Inspector in his presence. The investors confirmed the facts of
investment made through the respondent-assessee and the
contents of the affidavit also were confirmed by these persons,
thereby substantiating the submissions of the respondentassessee.
The CIT (Appeals), therefore, on extensively giving
the reasons held vide its order dated October 18, 2002 that the
respondent-assessee has discharged his onus of proving the
genuineness of the transaction and his explanation and
nothing has been brought on record by the Assessing Officer to
show that explanation and various documents submitted by
the respondent-assessee were not correct. Therefore, it held
that the respondent-assessee succeeded in establishing the
source of the credit entries appearing in his account and the
accounts of his family members in the TEST ledger. He
accordingly directed the Assessing Officer to delete the
addition of Rs.1,92,94,803/-.
10.05. This was challenged by the Revenue before the
Tribunal. The Revenue vehemently submitted before the
Tribunal that no opportunity was given to the Assessing Officer
while accepting the evidence collected by the CIT (Appeals)
itself under section 250(4) of the Act, which was in clear
violation of principles embodied in Rule 46A of the Rules.
10.06. It was argued by the other side before the Tribunal
that it was incidental that the inquiry conducted by the CIT
(Appeals) supported the case of the respondent-assessee and
not the Revenue. However, there would be no requirement
under the law that the First Appellate Authority should
invariably permit the Assessing Officer an opportunity every
time when the additional evidence, not otherwise adduced
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before the Assessing Officer, came on record at the instance of
the First Appellate Authority, even if the same is on its own
motion.
10.07. The Tribunal confirmed the deletion of additions of
Rs.1,93,94,403/- made by the Assessing Officer by not
sustaining additional ground of violation of Rule 46A of the
Rules.
10.08. Aggrieved by concurrent findings of the CIT
(Appeals) and the Tribunal, the Revenue has approached this
Court challenging these orders by proposing the following
questions of law for our consideration :
"(A) Whether the Appellate Tribunal is right in law
and on facts in confirming the order passed by the
CIT (Appeals), who had deleted the additions
relying upon the statements recorded by him,
without giving an opportunity to the Assessing
Officer as mandated under Rule 46A of the Income
Tax Rules, 1962 ?
(B) Whether the Appellate Tribunal is right in law
and on facts in confirming the deletion of addition
of Rs.67 lacs made in respect of unexplained capital
of an amount of Rs.1,25,94,803/- made on account
of peak credits ?"
11.00. The learned Senior Counsel Mr.Manish Bhatt
appearing with the learned advocate Mrs.Mauna Bhatt on
behalf of the appellant-Revenue has forcefully submitted that
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the opportunity was given to the respondent-assessee to
produce the creditors during the course of assessment.
However, the respondent-assessee chose not to avail such an
opportunity and at an appellate stage, the CIT (Appeals)
exercised suo motu powers to summon the creditors and
recorded their statements. While admitting such additional
evidence, no opportunity was given to the Assessing Officer to
either cross-examine such witnesses or to rebut their evidence.
This, according to him, is a clear breach of provision of section
46A of the Act and, therefore, it is urged that the matter may
be remanded to the Tribunal by a specific direction of affording
the opportunity to the Assessing Officer as well as to the
respondent-assessee, if it so desires.
12.00. Per contra, the learned counsel Mr.R.K. Patel
appearing for the respondent-assessee has urged that where
the additional evidence is admitted by the First Appellate
Authority on its own motion, there is no requirement under the
law under sub-rule (2) of Rule 46A of the Rules to allow the
Assessing Officer a fresh opportunity to rebut such evidence
and again in absence of any explicit provision, such
requirement cannot be said to be a part of the rule mandating
the Appellate Authority to afford an opportunity of rebuttal to
the Assessing Officer. It is not the case where the respondentassessee
has requested for further evidence, but the CIT
(Appeals) itself felt requirement of calling for such evidence.
Therefore, sub-rule (3) of Rule 46A needs not to be invoked. He
sought to rely upon two authorities (i) in the case of
Commissioner of Income-tax U.P. v. Kanpur Coal
Syndicate, reported in (1964) 53 ITR 225 and (ii) the
decision rendered by the Rajasthan High Court in the case
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of Silver & Art Palace v. CIT, (1994) 206 ITR 501 (Raj.).
The Apex Court in the case of Kanpur Coal (supra) has held
that the Appellate Authority can exercise the powers which the
Assessing Officer is empowered to exercise.
In the case of Silver & Art Palace (supra), the
Rajasthan High Court has held that the Appellate Authority has
powers during the process of appeal under section 250(4) of
the Act to make such further inquiry as he deems fit or direct
the Assessing Officer to so do it.
What has aggrieved the Revenue is non-availment of due
opportunity while permitting such additional material which
became determinative in effecting deletion of additions made
by the Assessing Officer.
13.00. Upon thus hearing both the sides and considering
the orders of the revenue authorities, before adverting to the
facts of the present case, it can be said at the outset that the
powers of Commissioner during the pendency of appeal to
inquire or direct the inquiry and adducing evidence, are not
under challenge. It would be profitable, therefore, to reproduce
Rule 46A of the Income Tax Rules, 1962 (hereinafter referred
to as 'the Rules') as under :
"Production of additional evidence
before the Deputy Commissioner
(Appeals) and Commissioner (Appeals)
46A. (1) The appellant shall not be entitled
to produce before the Deputy Commissioner
(Appeals) or, as the case may be, the
Commissioner (Appeals), any evidence,
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whether oral or documentary, other than the
evidence produced by him during the course
of proceedings before the Assessing Officer,
except in the following circumstances, namely
:-
(a) where the Assessing Officer has refused
to admit evidence which ought to have been
admitted; or
(b) where the appellant was prevented by
sufficient cause from producing the evidence
which he was called upon to produce by the
Assessing Officer; or
(c) where the appellant was prevented by
sufficient cause from producing before the
Assessing Officer any evidence which is
relevant to any ground of appeal; or
(d)where the Assessing Officer has made the
order appealed against without giving
sufficient opportunity to the appellant to
adduce evidence relevant to any ground of
appeal.
(2) No evidence shall be admitted under
sub-rule (1) unless the Deputy Commissioner
(Appeals), or the case may be, the
Commissioner (Appeals) records in writing the
reasons for its admission.
(3) The Deputy Commissioner (Appeals) or,
as the case may be, the Commissioner
(Appeals) shall not take into account any
evidence produced under sub-rule (1) unless
the Assessing Officer has been allowed a
reasonable opportunity-
(a) to examine the evidence or the
document or to cross-examine the witness
produced by the appellant, or
(b) to produce any evidence or document or
any witness in rebuttal of the additional
evidence produced by the appellant.
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(4) Nothing contained in this rule shall affect
the power of the Deputy Commissioner
(Appeals) or, as the case may be, the
Commissioner (Appeals) to direct the
production of any document, or the
examination of any witness, to enable him to
dispose of the appeal, or for any other
substantial cause including the enhancement
of the assessment or penalty (whether on his
own motion or on the request of the Assessing
Officer under clause (a) of sub-section (1) of
section 251 or the imposition of penalty under
section 271."
13.01. Rule 46A provides for production of any additional
evidence, oral or documentary, before the Deputy
Commissioner (Appeals) and Commissioner (Appeals). This
Rule provides for two modes for adducement of additional
evidence at the First Appellate stage, either at the instance of
the appellant under sub-rules (1) to (3) or at the instance of
Appellate Authority under sub-rule (4) of Rule 46A of the Rules.
As far as discretion to be exercised by the Commissioner at the
instance of appellant is concerned, the Rule explicitly provides
for affording an opportunity, however, under sub-rule (4) no
such express provision is found. The appellant, except in the
circumstances mentioned in sub-rule (1), shall not be entitled
to produce oral or documentary evidence before the Deputy
Commissioner (Appeals) and Commissioner (Appeals), : (a)
where the Assessing Officer ought to have refused to admit the
evidence; or (b) where the appellant should have been
prevented by sufficient cause from producing the evidence
which otherwise he was called upon by the Assessing Officer;
or (c) where the appellant would have been prevented by
sufficient cause from producing before the Assessing Officer
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any evidence which is relevant to any ground of appeal; or (d)
where the Assessing Officer has made the order appealed
against without giving sufficient opportunity to the appellant to
adduce evidence relevant to any ground of appeal. Recording
of reasons of such admission is also made explicit by way of
sub-rule (2) of Rule 46A of the Rules.
13.02. Sub-rule (3) of Rule 46A of the Rules provides that
the Commissioner unless provides a reasonable opportunity to
the Assessing Officer in respect of the evidence produced
under sub-rule (1), such evidence shall not be taken into
account. Where the Assessing Officer is not only to be
permitted to examine or cross-examine the evidence/
document or the witnesses, but also to be offered an
opportunity of rebuttal of evidence.
13.03. Thus, this Rule provides that whenever a prayer for
additional evidence is made by the appellant, it is independent
and substantive application seeking a new right. The Assessing
Officer is always afforded a reasonable opportunity to oppose
and test the additional evidence or counter effect thereof to
produce the evidence in rebuttal as held in the case of
Commissioner of Income-tax, Gujarat v. Vali Mohmed,
reported in 134 ITR 214.
The scheme of sub-rule (1) to (3) of Rule 46A
clearly, thus, requires offering a reasonable opportunity to the
Assessing Officer whenever the additional evidence is
permitted by the First Appellate Authority.
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13.04. As far as sub-rule (4) of Rule 46A of the Rules is
concerned, it speaks of the power of Commissioner (Appeals)
to direct production of any document or evidence or
examination of witness, (i) to enable him to dispose of the
appeal, (ii) for any other substantial cause including the
enhancement of the assessment, (iii) for imposition of penalty
under clause (a) of sub-section (1) of section 251 or (iv)
imposition of penalty under section 271. As far as sub-rule (4)
of Rule 46A is concerned, the powers are exercised by the
Deputy Commissioner (Appeals) or Commissioner (Appeals)
directing the appellant to produce any document or
examination of witness. These powers are needed to be
exercised for enabling the Commissioner to dispose of the
appeals or for any substantial cause or for the purpose of
imposition of penalty as provided under this Rule. Although
there is no explicit provision made for affording a reasonable
opportunity to the assessee when suo motu powers are
exercised, it will not be difficult to hold that the reasonable
opportunity of hearing to the parties, before the fresh evidence
is admitted, requires to be afforded. The Commissioner
(Appeals) would have ample power to call for any additional
evidence, oral or documentary, if it considers such production
necessary in the interest of justice for disposing of the appeal
or for any other substantial cause. It goes without saying that
while exercising such powers of admission of the additional
evidence, the powers are required to be exercised within the
limits imposed by the Rule and both sides are required to be
afforded due and reasonable opportunity in respect of such
evidences.
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13.05. Even in absence of any explicit provision, when suo
motu powers are exercised by the Deputy Commissioner
(Appeals) or Commissioner (Appeals), as the case may be, for
meeting the ends of justice as also for fair-play while adducing
the additional evidence in the appeal in exercise of powers
under sub-rule (4) of Rule 46A, the opportunity is required to
be given to both the sides to test the evidence or to counter
the effect of the evidence in rebuttal or otherwise.
13.06. It needs to be remembered at this juncture that this
Court in the case of Vali Mohmed (supra), while answering
the question in respect of sub-rule (3) of Rule 46A of the Rules
went to the extent of saying that :
".. .. .. When a prayer for additional evidence
was made, it was an independent and
substantive application seeking a new right.
Notice of such application was necessary to
the ITO and he ought to have been afforded
both an opportunity to oppose it and to test
the additional evidence or counter the effect
thereof or produce evidence in rebuttal. No
such order granting the request could have
been passed behind the back of the ITO in
violation of the principles of natural justice. At
the cost of repetition, it be stated that notice
of appeal cannot be equated with notice of a
future application to lead additional evidence
which no one could have anticipated or
reasonably foreseen. Ordinarily, the appeal
would be decided on the evidence recorded
in the course of assessment proceedings. The
ITO, therefore, may not, in a given case, think
it necessary to remain present at the hearing
of the appeal. He, however, cannot be
expected to anticipate that additional
evidence might be produced by the assessee
in his appeal. It is for this reason that it is
necessary to give him an opportunity to meet
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the additional evidence. The Tribunal has,
therefore, fallen into an error in rejecting the
plea of the revenue that the AAC ought to
have given an opportunity to the ITO to
examine the additional evidence or to crossexamine
the witnesses whose evidence was
taken on record or to rebut the additional
evidence. We, therefore, answer the question
referred to us in the negative and against the
assessee."
13.07. This Court is conscious of the fact that such findings
were rendered while answering the question in relation to subrule
(3) of Rule 46A of the Rules, where the Rule itself provides
for reasonable opportunity of examining the evidence as also
for rebuttal of evidence to the Assessing Officer, however, the
analogy employed by this Court in case of Vali Mohmed
(supra) would apply mutatis mutandis even in case of
exercise of suo motu powers. The Assessing Officer would have
no clue of possibility of exercise of such powers by
Commissioner. Any evidence adduced additionally would
surely require testing of its truthfulness and veracity at the
hands of otherside and availment of such opportunity thus is
must before the same is taken into account.
13.08. Even at the cost of reiteration, it is being stated that
the opportunity of hearing is to be read as interwoven while
exercising powers under sub-rule (4) of Rule 46A of the Rules
and, therefore, the Tribunal surely committed an error in not
allowing the opportunity of hearing to the Revenue, despite its
fervent request for affording opportunity in respect of
additional evidence.
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13.09. At this stage, the learned advocate Mr.R.K. Patel
appearing for the respondent-assessee has urged that such
opportunity should also be afforded to the respondentassessee,
who also had no say in the entire matter and it is a
sheer coincidence that such evidence resulted into favouring
the cause of the respondent-assessee. He also further urged
that the appeal relates to the block period of 1988-1999 and
the Tribunal has decided the matter after a decade nearly.
Such request from the Revenue also has come belatedly and,
therefore, after much lapse of time, when this Court is
remanding the matter to the Tribunal, the possibility cannot be
ruled out that all the witnesses who were examined by the
Commissioner (Appeals) may not be available for various
reasons and in such circumstances, adverse inference may not
be drawn against the assessee.
13.10. As extensively discussed hereinabove, while
interpreting sub-rule (4) of Rule 46A of the Rules and its
implication, affording an opportunity of hearing to the
respondent-assessee is also necessary in respect of the
additional evidence collected by the Commissioner (Appeals).
13.11. With regard to the second request of the
respondent-assessee of not drawing adverse inference in the
event of absence of any investors, particularly when
substantial period has elapsed in pursuing the legal remedies,
the respondent-assessee would be within its rights to raise all
the contentions, including this, before the revenue authorities
at an appropriate time, if such need so arises; and the
concerned authority may consider the same in accordance
with law having regard to all the facts and circumstances.
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14.00. For the foregoing reasons, the present appeal
succeeds and the same is, accordingly, partly allowed. The
impugned orders are quashed and set aside, remanding the
matter to the Commissioner (Appeals), for deciding the Appeal
afresh on affording reasonable opportunity to both the sides in
respect of the additional evidence collected by it in exercise of
powers under sub-rule (4) of Rule 46A. Needless to say that
nothing is opined on the merits of the case by this Court and
none of the observations made hereinabove shall, in any
manner, prejudice the right of either of the parties in deciding
the appeal afresh by the revenue authorities.
Sd/-
(MS SONIA GOKANI, J.)
Rafik/Aakar.
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Sir, what is the issue involved on which there are so many conflicting judgements? Is it shares gain - capital or revenue?

As Pawan Sir has rightly stated, solution is to file appeal before the Hon'ble ITAT.

Spain's sunshine toll: Row over proposed solar tax

"We will be the only country in the world charging for the use of the sun," says Jaume Serrasolses.

"Strange things are happening in Spain. This is one of them."

Mr Serrasolses, the secretary of an association promoting the use of solar energy, SEBA, is referring to the government's proposal for a tax solely on those who generate their own electricity.

They would pay a backup toll for the power from their solar panels, in addition to the access toll paid by everyone who consumes electricity from the conventional grid.

Although the tolls vary, if you pay an access toll of 0.053 euros per kWh, you could face a backup toll of 0.068 euros per kWh.

The new tax would extend the average time it would take for solar panels to pay for themselves from eight to 25 years, according to the solar lobby.

The government says that with increasing "self-consumption", the income for conventional energy systems will decrease, but grid maintenance will cost the same.

"If I produce my own energy, but am connected to the grid, having the backup in case my production fails, I have to contribute to the cost of the entire system," says Energy Secretary Alberto Nadal.

The government is hoping the energy reform will settle a debt of 26bn euros (£22bn; $35bn), which has built up over years as a result of regulating energy costs and prices.

Broken promises

This is just the latest in a series of setbacks for the renewable energy sector.

The government has gradually lowered a feed-in tariff - a scheme that paid people to produce their own "green electricity" - first reducing the period over which it was paid, then limiting it to already existing installations and finally an energy reform in July opened up the possibility of withdrawing it retroactively.

At the same time it has not endorsed net metering, a policy allowing solar panel owners to send surplus energy to the grid and use it later. The idea was part of a previous proposal but was not included in the latest reform proposal.

But while the government may have been heavily promoting solar energy six years ago, those who followed that lead may now pay dearly for their investment.

"The majority are people like your or my parents who at one time had savings and wanted to make an investment with a better return," says Piet Holtrop, a Dutch lawyer who is defending over 1,000 of them.

http://www.bbc.co.uk/news/business-24272061

Gujarat High Court Chief Justice Bhaskar Bhattacharya has complained that Chief Justice of India Altamas Kabir — who retires on July 18 — blocked his elevation to the Supreme Court earlier this year because, as a member of the collegium of the Calcutta High Court, he had opposed the appointment of CJI Kabir's lawyer sister to the Bench, a decision he said was tantamount to "rape" of the court.
On September 13, 2010, the CJI's sister, Shukla Kabir Sinha, was appointed to the bench of the Calcutta HC after the HC collegium ignored Justice Bhattacharya's written submission on why she should not be appointed to the post.

CJI Kabir — then a senior judge of the apex court — was a member of the SC collegium that considered the HC's recommendation. However, sources said he had recused himself from the meeting.

On March 19 this year, after being overlooked for elevation to the Supreme Court by a collegium headed by CJI Kabir, Chief Justice Bhattacharya, who was the third seniormost High Court Chief Justice at the time, sent a 10-page letter to the President of India, Prime Minister and the Chief Justice of India.

Two other High Court CJs — Bombay High Court CJ Mohit S Shah and Uttarakhand High Court CJ Barin Ghosh — too were overlooked for elevation.

In his letter to the CJI, accessed by The Indian Express, Chief Justice Bhattacharya wrote: "As a human being, I have a reasonable basis to apprehend that the fact that as a member of the collegium while I was a judge of the Calcutta HC, I raised serious objections against the elevation of Smt Shukla Kabir Sinha, your (CJI Altamas Kabir's) younger sister, is the real reason for making such observations against me."

When contacted, the Prime Minister's spokesperson said: "The letter was addressed to the Chief Justice of India, and the PMO had no role to play in it as appointments of judges are decided by the collegium."

Justice Bhattacharya has asked that his letter be shown to all members of the collegium. He has also requested that he be shown "the material which led you (CJI Kabir) to take such a decision regarding my competence and character". He has said that he will resign if he is given "justifiable reasons".

Neither CJI Kabir nor Justice Bhattacharya could be reached for a comment. Questionnaires emailed to their offices elicited no response. Justice Shukla Kabir Sinha was not available for a comment. Law Minister Kapil Sibal declined to comment.

While rejecting the claim of the three seniormost CJs, the collegium had said that they were "not suitable to hold the office of Supreme Court judge and their elevation as such would prove to be counter-productive and not conducive to administration of justice," according to a Hindustan Times report which Justice Bhattacharya has quoted in his letter.

Justice Bhattacharya has also given his reasons for opposing the CJI's sister's name for judgeship, including what he has called her poor practice, reflected in her annual income-tax statements.

"In my view as an advocate who at the age of 58 years is just capable of earning a net amount of Rs 88,000 from practice should in no case be recommended for judgeship. We cannot lose sight of the fact that a High Court chaprasi gets more than Rs 13,000 per month as salary which is equivalent to Rs 1,56,000 per annum which is almost double the income of Mrs Shukla Kabir Sinha from her practice as a lawyer," he wrote in his note for the collegium, extracts from which are part of his letter to the CJI.

The letter also says that he had raised the issue of the CJI's sister taking "four years for passing BA examination after clearing senior Cambridge and five years for getting MA degree after graduation, although the usual time taken for clearing these examinations is three years and two years respectively".

"I don't have a personal inimical feeling against Mrs Sinha who is just like my sister... However, as I treat the HC to which I belong for the full time-being as my mother, I earnestly believed that to elevate Mrs Sinha at the age of 59, there is no instance in the past of elevation of a Judge from the Bar at the age of 59 years... would give a wrong signal and people would lose faith in the judiciary and the collegium system... For the above reasons, I made my observations which, however, didn't get the approval of the Chief Justice of the Calcutta HC and of Judge Pinaki Chandra Ghose, who was the other member of the collegium and who has superseded me this time," the letter reads. "So far as I can remember, Justice Pinaki Ghose in his recommendation observed that if Shukla Kabir is elevated as a judge, she would be an asset to the judiciary."

Justice Bhattacharya has also written, "When time came for selection of Smt Shukla Kabir Sinha as a Judge of the HC, I was pressured to agree to such a proposal as a member of the collegium, but I thought it would amount to committing rape of the Calcutta HC, which was like my mother and if I didn't raise any objections that would amount to closing my eyes while my mother was being raped. As a result, I used rather strong words so that by looking at the nature of words used by me, the person responsible for sending such a recommendation would have a second thought... Unfortunately, I was unsuccessful in resisting the rape of my mother in spite of my earnest endeavour. However, at the time of my death, I will not repent that I ever compromised with wrong for the sake of my career."

'Another incident'

* Justice Bhaskar Bhattacharya also referred to "another recent incident" that he says could have made the collegium reject him.

* According to Justice Bhattacharya, a former Gujarat HC Chief Justice who is now in the Supreme Court withdrew an excess amount of Rs 54,650 as TA/DA which is not permissible without furnishing proof.

* "There are several other honourable judges who had withdrawn similar amounts in excess of the rules. After receiving such clarification from the Centre, I, as the chief justice of the Gujarat HC, placed the matter in the Standing Committee of seven judges and they unanimously resolved that the honourable judges... should pay back the excess amount," his letter reads.

* As per the letter, when the judge, who is now in the Supreme Court, was requested to repay the excess amount, his office wrote to the HC registrar telling him "not to make any such unnecessary and unwarranted correspondence."

* "As your younger brother, I seek advice from you as to what should be my duty as the present CJ if I find that a former Chief Justice of the High Court who is now judge of the SC is found to have withdrawn excess amount not intentionally but due to some ambiguity in existing rules?" the CJ asks the CJI.

http://www.indianexpress.com/news/gujarat-cj-says-he-lost-sc-berth-because-he-opposed-hc-judgeship-for-cji-kabirs-sister/1140897/0

Ernst & Young LLP has agreed to pay $123 million to resolve a federal tax shelter investigation while admitting wrongful conduct by certain E&Y partners and employees.

The agreement comes in connection with the firm's admitted participation, from 1999 to 2004, in four tax shelters that were used by approximately 200 E&Y clients in an effort to defer, reduce, or eliminate tax liabilities of more than $2 billion, according to the Manhattan U.S. Attorney's Office.

E&Y entered into a non-prosecution agreement with the United States, in which the firm agreed to pay $123 million to the United States and acknowledged a detailed Statement of Facts in which it admitted the wrongful conduct of certain partners and employees. E&Y also agreed to certain permanent restrictions and controls on its tax practice, including a prohibition against planning, promoting or recommending any "listed transaction," which is the same as, or substantially similar to, one that the IRS has determined to be a tax avoidance transaction.

The NPA also requires E&Y's continued cooperation with the government's investigation. In exchange, the United States agreed not to criminally prosecute E&Y for its participation in the tax shelter scheme. The NPA applies only to E&Y and not to any individuals. The Justice Department noted that E&Y has cooperated with the government's investigation into these tax shelters since approximately 2003. In the event that the firm violates the agreement, however, the U.S. Attorney's Office may prosecute E&Y.

According to the Statement of Facts to which E&Y has admitted, and as proven at the criminal trial of certain former E&Y partners:

Beginning in 1999 and ending in 2002, E&Y, in conjunction with various law firms, banks, and investment advisers, developed, marketed and implemented four tax shelter products called COBRA, CDS, CDS Add-On, and PICO. E&Y implemented these four tax shelter products for approximately 200 high net worth clients in an effort to defer, reduce, or eliminate $2 billion in aggregate tax liabilities. E&Y prepared tax returns reflecting tax losses claimed to have been derived from those tax shelter products and subsequently defended certain of its clients in connection with audits of those transactions by the IRS.

A small group within E&Y known as the Strategic Individual Solutions Group was primarily responsible for supervising and coordinating the marketing, implementation and defense of E&Y's tax shelter products. Certain SISG tax shelter products were designed to appear to the IRS to be substantive investments that had favorable tax consequences when, in reality, the products were actually designed and marketed to clients as a series of preplanned steps that would defer, reduce or eliminate their tax liabilities. The typical client participating in these shelters was primarily, if not exclusively, motivated to achieve a desired tax savings.

In order to deceive the IRS as to the true nature of the tax strategies, and to bolster arguments that the transactions had economic substance, some SISG personnel agreed upon and directed other E&Y employees to participate in a concerted effort not to create, disseminate, or publicize documents reflecting the tax motivation behind the strategies, or the preplanned sequence of steps necessary to effect the strategies. These SISG personnel thereby sought to prevent the IRS from detecting their clients' purposes in employing these strategies. For example, in certain instances, members of SISG falsely portrayed the transactions under examination as purely investment-driven transactions, and falsely denied a tax motivation for the transactions in response to IRS Information Document Requests and in testimony to the IRS.

Further, in implementing the sale of tax shelter products, certain members of SISG also prepared documents or correspondence that falsely and inaccurately reflected events or conversations, and that were designed to improperly influence the IRS's view of the merits of the transactions in the event of an audit. These activities continued into 2003 and 2004.

http://www.accountingtoday.com/news/Ernst-Young-Pay-Settle-Tax-Shelter-Fraud-Charges-65931-1.html