Mackmorn Commodities Private Limited , Kolkata V. DCIT, Central Circle - 1(4), Kolkata , Kolkata

CO 15/KOL/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6719 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 23-01-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 16-01-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R P AGARWAL SR
• Assessee Lawyers: AJOY KUMAR SINGH
• Keywords: Search and seizure; Documents seized
• Section: 68; 132

Judgement Text

1 IT(SS)A NO. 157/KOL/2017 & CO NO.15/KOL/2018 MACKMORN COMMODITIES PVT. LTD., AY 2010-11 , B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA ( ) . . , . ' # $% % , '( ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T(SS).A. NO. 157/KOL/2017 ASSESSMENT YEAR: 2010-11 DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1(4), KOLKATA. VS. M/S. MACKMORN COMMODITIES PVT. LTD. (PAN: AACCM1810D) APPELLANT RESPONDENT & C.O. NO. 15/KOL/2018 IN I.T(SS).A. NO. 157/KOL/2017 ASSESSMENT YEAR: 2010-11 M/S. MACKMORN COMMODITIES PVT. LTD. (PAN: AACCM1810D) VS. DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1(4), KOLKATA. CROSS OBJECTOR RESPONDENT DATE OF HEARING 02.01.2019 DATE OF PRONOUNCEMENT 23.01.2019 FOR THE APPELLANT SHRI AJOY KUMAR SINGH CIT, DR FOR THE RESPONDENT SHRI R. P. AGARWAL, SR. COUNSEL ORDER 2 IT(SS)A NO. 157/KOL/2017 & CO NO.15/KOL/2018 MACKMORN COMMODITIES PVT. LTD., AY 2010-11 PER SHRI A.T.VARKEY, JM THIS APPEAL PREFERRED BY THE REVENUE IS AGAINST THE ORDER OF THE LD. CIT(A)-20, KOLKATA WHEREIN HE ALLOWED THE LEGAL ISSUE RAISED B Y THE ASSESSEE (GROUND NO. 1, 3(A), (B), 4(A), (B) AND (C) RAISED BEFORE HIM AND THE CROSS O BJECTION PREFERRED BY THE ASSESSEE IS AGAINST THE ORDER OF LD. CIT(A) WHEREIN HE DID NOT DISPOSE OF THE GROUNDS RAISED OTHER THAN LEGAL ISSUES (GROUND NO. 2, 5 TO 8) RAISED BEFORE H IM DATED 10.08.2017 FOR AY 2010-11. 2. THE MAIN GRIEVANCE OF THE REVENUE IS AGAINST THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION MADE BY AO ON ACCOUNT OF CASH CREDIT U /S. 68 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) BY INVOKING SECTION 153C OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE THAT A SEARCH AND S EIZURE OPERATION WAS CONDUCTED AT THE PREMISES OF KUSHAL GROUP ON 05.08.2014 AND ACCORDIN G TO AO, SOME DOCUMENTS WERE SEIZED OF THE ASSESSEE COMPANY PURSUANT TO WHICH HE INVOKED PROCEEDINGS UNDER SECTION 153C OF THE ACT AGAINST THE ASSESSEE. WHEN THE NOT ICE FOR INVOKING SEC. 153C PROCEEDINGS WAS BROUGHT TO THE NOTICE OF THE ASSESSEE, THE ASSE SSEE REQUESTED FOR SATISFACTION RECORDED BY THE AO BEFORE ASSUMPTION OF JURISDICTION U/S. 153C AGAINST THE ASSESSEE. THE AO PURSUANT TO THE REQUEST OF THE ASSESSEE FORWARDED A COPY OF THE SATISFACTION NOTE DATED 13.12.2016 TO THE ASSESSEE, WHICH READS AS UNDER: 3 IT(SS)A NO. 157/KOL/2017 & CO NO.15/KOL/2018 MACKMORN COMMODITIES PVT. LTD., AY 2010-11 4 IT(SS)A NO. 157/KOL/2017 & CO NO.15/KOL/2018 MACKMORN COMMODITIES PVT. LTD., AY 2010-11 5 IT(SS)A NO. 157/KOL/2017 & CO NO.15/KOL/2018 MACKMORN COMMODITIES PVT. LTD., AY 2010-11 THEREAFTER, DESPITE OBJECTION OF THE ASSESSEE FOR A SSUMPTION OF JURISDICTION BY THE AO U/S. 153C OF THE ACT, THE AO CONCLUDED THE ASSESSMENT U/ S. 153C/144 OF THE ACT ON 31.12.2016 MAKING ADDITION OF RS.2,20,01,040/-. AGGRIEVED, TH E ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHEREIN THE ASSESSEE CHALLENGED THE ASSU MPTION OF JURISDICTION BY THE AO U/S. 153C OF THE ACT AGAINST THE ASSESSEE FOR RELEVANT A Y 2010-11, WHICH WAS ADJUDICATED BY THE LD. CIT(A) IN FAVOUR OF THE ASSESSEE. AGGRIEVED, R EVENUE IS BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND CAREFULLY GO NE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THE LD. CIT, DR VEHEMEN TLY ASSAILED THE ORDER OF LD. CIT(A) AND WANT US TO REVERSE THE ORDER AND RESTORE THE OR DER OF AO. ACCORDING TO HIM, INCRIMINATING MATERIAL LIKE ALLOTTEE COMPANIES WERE JAMA KHARCHI COMPANIES CAME TO THE NOTICE OF THE DEPARTMENT ONLY DURING THE SEARCH, SO LD. CIT(A) ERRED IN FINDING THAT THERE WAS NO INCRIMINATING MATERIAL AGAINST THE ASSESSEE. PER CONTRA, THE LD. AR SUPPORTED THE ORDER OF THE LD. CIT(A) AND DOES NOT WANT US TO IN TERFERE. WE NOTE THAT THE LD. CIT(A) HAS UPHELD THE GROUND OF APPEAL OF THE ASSESSEE CHALLEN GING THE LEGAL ISSUE OF AOS ASSUMPTION OF JURISDICTION U/S. 153C OF THE ACT AND HELD THAT AOS ASSUMPTION OF JURISDICTION U/S. 153C OF THE ACT WAS WITHOUT JURISDICTION BY OBSERVING AS UNDER: I HAVE CONSIDERED THE FINDINGS OF THE AO IN THE A SSESSMENT ORDER, DIFFERENT CASE LAWS BROUGHT ON RECORD AND APPEAL ORDERS PASSED BY MY PREDECESSO RS ON THIS LEGAL ISSUE. I FIND FROM THE ASSESSMENT ORDER THAT DURING THE SEARCH AND SEIZURE OPERATIONS CONDUCTED U/S 132 OF THE I T ACT, 1961, INCRIMINATING DOCUMENTS/PAPERS WERE NOT SEIZED. AT LEAST, ADDITIONS MADE BY THE AO IN THE ASSESSMENT ORDER PASSED U/S. 153C/144 ARE NOT BASED ON ANY INCRIMINATING DOCUMENTS/PAPERS SEIZED DURING THE SEARCH OPERATION IN THE RESIDENTIAL, OFFICE AND FACTORY PREMISES OF 'KUSHAL' GROUP. IT WOULD ALSO NOT BE OU T OF CONTEXT TO MENTION HERE THAT IN THIS CASE, ON THE DATE OF SEARCH, NO ASSESSMENT FOR THIS YEAR WAS PENDING. THEREFORE, KEEPING IN VIEW THE RATIO DECIDED BY THE JURISDICTIONAL BENCH OF KOLKATA TRIBUNAL IN CASES REFERRED ABOVE AND THE RATIO DECIDED BY THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF VEERPRABHU MARKETING LTD (SUPRA) IN THE LIGHT OF CBDT'S DECISI ON OF NOT FILING SLP IN THIS CASE IN THE SUPREME .COURT AND KEEPING IN VIEW THE APEX COURT'S DECISION TO DISMISS SLP ON SIMILAR ISSUE IN THE CASE OF PR CIT VS KURELE PAPER MILLS PVT. LT D : SLP (C) NO.34554 OF 2015 DT.07-12- 2015, I AM OF THIS VIEW THAT IN ORDER TO MAINTAIN J UDICIAL CONTINUITY ON THIS ISSUE AND RESPECTFULLY FOLLOWING THE RATIO DECIDED BY THE HON 'BLE CALCUTTA HIGH COURT IN THE CASE OF VEER PRABHU MARKETING LTD (SUPRA), ASSESSEE'S APPEAL ON GROUND NO 1, 3(A), 3(B), 4(A), 4(B) AND 4(C) ARE ALLOWED AND AS SUCH I AM NOT INCLINED TO A DJUDICATE APPEAL ON GROUND NO 2 AND 5 TO 8 ON MERIT. SINCE THE APPEAL IN THIS CASE HAS BEEN AD JUDICATED ON TECHNICAL GROUND, THEREFORE, I AM NOT INCLINED TO ADJUDICATE APPEALS ON OTHER GROU NDS ON MERIT. 6 IT(SS)A NO. 157/KOL/2017 & CO NO.15/KOL/2018 MACKMORN COMMODITIES PVT. LTD., AY 2010-11 5. WE NOTE THAT AS THE LAW AS IT STOOD DURING THE R ELEVANT PERIOD WAS THAT BEFORE INVOKING JURISDICTION U/S. 153C OF THE ACT, THE AO HAS TO RECORD THE SATISFACTION THAT THE SEARCH PARTY WHILE EXERCISING SEARCH ON THE STRENGT H OF THE WARRANT ISSUED U/S. 132 OF THE ACT HAS SEIZED CERTAIN/SPECIFIC DOCUMENTS BELONGING TO A THIRD PARTY (OTHER THAN THAT OF THE SEARCHED PARTY) WHICH DOCUMENT DISCLOSED UNDISCLOSE D INCOME OF THE THIRD PARTY[ LIKE ASSESSEE] THEN, THE AO OF THE SEARCHED PARTY HAS TO FIRST SEGREGATE THE SEIZED MATERIALS OF THE SEARCHED PARTY AND THAT OF THE THIRD PARTY SEPARATE LY AND THEREAFTER HE HAS TO RECORD HIS SATISFACTION THAT THE INCRIMINATING DOCUMENT FOUND DURING SEARCH BELONGED TO THE THIRD PARTY AND THAT FACTUAL SATISFACTION AS PRESCRIBED BY LAW HAS TO BE RECORDED AND KEPT IN THE FILE OF THE SEARCHED PERSON AND THE SEIZED INCRIMINATING MA TERIAL OF THE THIRD PARTY SHOULD BE TAKEN OUT FROM THE FOLDER OF SEARCHED PARTY AND FORWARDED TO THE AO OF THE THIRD PARTY. ON RECEIPT OF THE SEIZED MATERIAL, THEN THE AO OF THE THIRD PA RTY AFTER GOING THROUGH THE DOCUMENTS FORWARDED TO HIM, APPLY HIS MIND AND AFTER SATISFYI NG THAT THE DOCUMENTS SEIZED ARE INDEED BELONGING TO THE THIRD PARTY RECORD HIS SATISFACTIO N TO INVOKE JURISDICTION U/S. 153C OF THE ACT AND THEREAFTER ONLY HE CAN INVOKE JURISDICTION U/S. 153C FOR ISSUING NOTICE AGAINST THE THIRD PARTY [AS IN THIS CASE, THE ASSESSEE]. SO, W HEN THE AO CONVEYED HIS DESIRE TO INVOKE SEC. 153C JURISDICTION, THE ASSESSEE ASKED FOR THE SATISFACTION HE HAS RECORDED TO INVOKE SEC. 153C JURISDICTION. PURSUANT TO WHICH THE AO CONVEY ED THE LETTER DATED 13.12.2016 (SUPRA). FROM A BARE PERUSAL OF THE SATISFACTION NOTE (SUPRA ), WE NOTE THAT THE AO HAS TAKEN NOTE FROM THE PERUSAL OF SEIZED MATERIAL THAT THE ASSESS EE COMPANY HAS ALLOTTED 22,00,104 SHARES ON 24.08.2009 TO VARIOUS COMPANIES AT A VALUE OF RS .2,20,01,040/- AND THEREAFTER, HE SAYS ABOUT THE APPRAISAL REPORT (WHICH THE DEPARTMENT PREPARES AFTER ANALYSING THE SEIZED MATERIAL) WHICH IS POST SEARCH EXERCISE FROM WHICH HE CAME TO UNDERSTAND THAT THE ALLOTTEE COMPANIES ARE NOT EXISTING AT THEIR RESPECTIVE ADDR ESSES AND, THEREFORE, HE HAS DRAWN ADVERSE INFERENCE THAT THE SHARE CAPITAL INTRODUCED BELONGS TO ASSESSEE COMPANY WHICH HAS BEEN RETURNED THROUGH THE JAMA KHARCHI COMPANIES (ALLOTT EE COMPANIES). THESE FACTS LED HIM TO ISSUE SEC. 153C NOTICE. BEFORE WE ADVERT INTO THE LEGAL VALIDITY OF SATISFACTION REQUIRED U/S. 7 IT(SS)A NO. 157/KOL/2017 & CO NO.15/KOL/2018 MACKMORN COMMODITIES PVT. LTD., AY 2010-11 153C FOR USURPATION OF JURISDICTION, LET US LOOK IN TO THE FACTS ABOUT THIS RAISING OF SHARE CAPITAL AND ALLOTMENT ETC. WE NOTE FROM A PERUSAL OF THE BALANCE SHEET FILED BEFORE US PLACED AT PAGE 48 OF THE PAPER BOOK THAT THE ASSESS EE HAD RECEIVED THE SHARE CAPITAL OF RS.2,58,17,660/- BEFORE 31.03.2009 WHICH WAS SHOWN IN SHARE CAPITAL SUSPENSE ACCOUNT WHICH MEANS THAT THE AMOUNT IN QUESTION HAS BEEN CR EDITED WITH THE ASSESSEE COMPANY IN AY 2009-10 AND NOT IN THIS RELEVANT AY 2010-11. SO, QUESTION OF MAKING ADDITION U/S. 68 OF THE ACT DOES NOT RISE IN THIS ASSESSMENT YEAR I.E. AY 2010-11, WHEN THE SHARE CAPITAL ADDED WAS CREDITED THOUGH SHOWN IN SUSPENSE ACCOUNT OF AY 2009-10. SO LEGALLY SEC. 68 ADDITION OF THE SHARE CAPITAL CANNOT BE MADE IN THIS AY 2010 -11 AS DISCUSSED ABOVE. FURTHER, THE LD. AR EXPLAINED THAT THE ALLOTMENT OF SHARES HAPPENED IN THIS RELEVANT ASSESSMENT YEAR I.E. IN AY 2010-11 AND CORRESPONDING DECREASE IN THE AMOUNT IN THE SHARE CAPITAL SUSPENSE ACCOUNT CAN BE NOTED AS ON 31.03.2010, WHICH WE NOTE TO HAV E COME DOWN TO RS.11,54,290/-. FROM A PERUSAL OF THE BALANCE SHEET, WE NOTE THAT THE AS SESSEES ALLOTMENT OF SHARES TO THE 15 COMPANIES AND TO ITS OWN DIRECTORS WAS BROUGHT TO T HE NOTICE OF THE DEPARTMENT WHILE FILING OF THE RETURN OF INCOME FOR AY 2010-11. SO, THERE IS NO UNDISCLOSED FACTS WHICH HAS BEEN UNEARTHED DURING THE SEARCH CONDUCTED ON 05.08.2014 . SO THE LD. CIT(A) IS CORRECT TO FIND THAT THERE IS NO INCRIMINATING MATERIAL QUA THE ASS ESSEE IN THIS ASSESSMENT YEAR. THE SETTLED POSITION OF LAW AS HELD BY THE HONBLE JURISDICTION AL HIGH COURT IN THE CASE OF CIT VS. VEERPRABHU MARKETING LTD. (2016) 73 TAXMAN 143 (CAL ) READS AS UNDER: WE AGREE WITH THE VIEW EXPRESSED BY THE KARNATAKA HIGH COURT THAT INCRIMINATING MATERIAL IS PRE-REQUISITE BEFORE POWER COULD HAVE BEEN EXERCISE D U/S 153(C) R.W SECTION 153(A). IN THE CASE BEFORE US, THE AO HAS MADE A DISALLOWANCE OF T HE EXPENDITURE, WHICH WAS HELD DISCLOSED, FOR ONE REASON OR THE OTHER, BUT SUCH DISALLOWANCES MADE BY THE AO WERE UPHELD BY THE LD.CIT(A) BUT THE LD. TRIBUNAL DELETED THESE DISALL OWANCE. WE FIND NO INFIRMITY IN THE AFORESAID ACT OF THE LD. TRIBUNAL. THE APPEAL IS, T HEREFORE, DISMISSED. 6. WE NOTE THAT THE LD. CIT(A) HAS GIVEN RELIEF TO THE ASSESSEE BY TAKING NOTE OF THE AFORESAID DECISION OF THE HONBLE JURISDICTIONAL HI GH COURT (SUPRA) AND SINCE THERE WAS NO INCRIMINATING DOCUMENTS BELONGING TO THE ASSESSEE Q UA THIS ASSESSMENT YEAR UNEARTHED FROM THE PREMISES OF KUSHAL GROUP, THE AO OUGHT NOT TO H AVE INVOKED JURISDICTION U/S. 153C OF THE ACT AGAINST THE ASSESSEE. THE INVOCATION OF JU RISDICTION U/S. 153C OF THE ACT IN THE FACTS 8 IT(SS)A NO. 157/KOL/2017 & CO NO.15/KOL/2018 MACKMORN COMMODITIES PVT. LTD., AY 2010-11 AND CIRCUMSTANCES OF THE CASE IS WITHOUT JURISDICTI ON AND IS QUORAM NON JUDICE AND, THEREFORE INVOCATION OF PROCEEDINGS U/S. 153C OF THE ACT IS N ULL IN THE EYES OF LAW AND, THEREFORE, THE LD. CIT(A) HAS RIGHTLY QUASHED THE ORDER OF THE AO PASSED U/S. 153C OF THE ACT AND HAS RIGHTLY ALLOWED THE APPEAL OF THE ASSESSEE ON THIS LEGAL ISSUE WHICH DOES NOT REQUIRE ANY INTERFERENCE FROM OUR PART AND, THEREFORE, WE CONFI RM THE SAME AND DISMISS THE APPEAL OF THE REVENUE. 7. SINCE CROSS OBJECTION OF ASSESSEE IS IN SUPPORT OF THE ORDER OF LD. CIT(A), THE SAME IS INFRUCTUOUS AND IS DISMISSED. 8. IN THE RESULT, APPEAL OF REVENUE AS WELL AS THE CROSS OBJECTION OF ASSESSEE IS DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 23RD JANUA RY, 2019. SD/- SD/- (DR. A. L. SAINI) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 23RD JANUARY, 2019 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 APPELLANT DCIT, CENTRAL CIRCLE-1(4), KOLKATA. 2 RESPONDENT M/S. MACKMORN COMMODITIES PVT. LTD., 1 6, GANESH CHANDRA AVENUE, KOLKATA-700 013 3 4 5 CIT(A) -20, KOLKATA (SENT THROUGH E-MAIL) CIT , KOLKATA. DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR