M/s Jagadhatri Tracon Pvt. Ltd., Kolkata V. PCIT, CENTRAL, KOLKATA-2, Kolkata

ITA 1012/KOL/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4095 (ITAT-KOLKATA)
• Duration Of Justice: 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 18-10-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 12-05-2016
• Court: TRIBUNAL
• Keywords: Revision of order; Search and seizure; Opportunity of being heard; Deemed dividend
• Section: 143(3); 6; 263; 132

Judgement Text

1 | P A G E I T A N O . 1 0 1 2 / K O L / 1 6 M / S . J A G A D H A T R I T R A C O N P . L T D IN THE INCOME TAX APPELLATE TRIBUNAL,A BENCH KOLKATA BEFORE : SHRI M.BALAGANESH, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBE R I.T.A NO. 1012/KOL/2016 A.Y: 2012-13 M/S. JAGADHATRI TRACON VS. PR.CIT, CENTRAL, PVT. LTD. KOLKATA-2 PAN: AABCJ 3627L (APPELLANT) (RESPONDENT) APPEARANCES BY: SHRI RAVI TULSIAN, FCA , LD.AR SHRI R.S BISWAS, CIT, LD.DR DATE OF HEARING : 19-10-2016 DATE OF PRONOUNCEMENT : 14-12-2016 O R D E R SHRI S.S. VISWANETHRA RAVI, JM :- THIS APPAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 16-03-2016 PASSED BY THE PRL. COMMISSIONER OF INCOME TAX, CENTRAL, KOLKATA-2, KOLKATA FOR THE ASSESSMEN T YEAR 2012- 13. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED AS MANY AS EIGHT GROUNDS OF APPEAL AGAINST WHICH ONLY EFFECTIVE GROU ND IS TO BE DECIDED AS TO WHETHER THE PRL.CIT HAS RIGHTLY INVOK ED HIS JURISDICTION U/S. 263 OF THE ACT IN THE FACTS AND C IRCUMSTANCES OF THE CASE. 3. ACCORDING TO PRL.CIT THAT THE ASSESSEE HAD AVAIL ED LOAN TO AN EXTENT OF RS.23,25,000/- FROM M/S.SKG FLOUR MILL S PVT.LTD, 2 |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| P A G E I T A N O . 1 0 1 2 / K O L / 1 6 M / S . J A G A D H A T R I T R A C O N P . L T D 5. ON THE CONTRARY, THE LD.DR HAS RELIED ON THE ORD ER OF THE PRL.CIT. 6. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT A SEARCH AND SEIZURE OPERATION WAS CON DUCTED U/S. 132 OF THE ACT ON REI AGRO GROUP ON 15-06-2011, WHEREIN THE SE ARCH WARRANT ALSO EXECUTED ON THE ASSESSEE. DURING SEARCH OPERATION T HE REVENUE FOUND CASH AND OTHER VARIOUS DOCUMENTS IN ASSESSEES POSSESSIO N, WHICH WERE SEIZED. IN RESPONSE TO NOTICES ISSUED U/S. 143(2) AND 142(1 ) THE ASSESSEE FILED ITS RETURN OF INCOME AT RS. NIL. IN EXPLANATION, THE AS SESSEE SUBMITTED THAT THE CASH BELONGS TO M/S. REI AGRO LTD AND NOT ASSESSEE. WE ALSO FIND FROM THE SAID ASSESSMENT ORDER THAT ALL THE DETAILS WERE EXA MINED RANDOMLY WITH THE BOOKS OF ACCOUNT AND ACCEPTED THE RETURN OF INCOME AS FILED BY THE ASSESSEE AT RS. NIL. IT IS OBSERVED AS RIGHTLY POIN TED OUT BY THE PRL.CIT IN HIS ORDER THAT THERE WAS NO SUCH DISCUSSION OF EXAM INATION IN THE ASSESSMENT PROCEEDINGS BY THE AO IN RESPECT OF LOAN TRANSACTIONS, WHICH SAID TO HAVE BEEN OCCURRED BETWEEN THE ASSESSEE AND M/S. SKG FLOOR MILLS LTD. WE ARE OF THE VIEW THAT THE AO DID NOT EXAMINE THE DETAILS OF SUCH TRANSACTION AS POINTED OUT BY THE PRL.CIT IN HIS OR DER BY EXERCISING HIS POWER U/S. 263 OF THE ACT. 7. WITH REGARD TO THE DECISIONS OF THE ITAT, KOLKAT A AS RELIED ON BY THE LD.AR IN THE CASE OF SMT.GAYATRI CHAKRAVARTHY SUPRA THE FACTS THEREIN, WHERE THE ASSESSE AND ONE M/S. BRIGHT ADVT. P.LTD. EXCHANGED MONIES TO EACH OTHER. THE AO FOUND THE SAME FROM LEDGER ACCO UNT OF M/S. BRIGHT ADVERTISING PVT. LTD THAT THE ASSESSE IS A SHAREHOL DER TO AN EXTENT OF 25.24% SHARES IN M/S. BRIGHT ADVERTISING PVT. LTD A ND TREATED THE SAME AS LOAN WITHIN THE MEANING OF SECTION 2(22)(E) OF THE ACT AND THE CIT-A DELETED THE SAME. IN APPEAL BY THE REVENUE BEFORE T HE TRIBUNAL THE LD.AR THEREIN ARGUED THE SAME AS ARGUED BY THE LD.AR BEFO RE THE PRL.CIT IN THE 4 |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| P A G E I T A N O . 1 0 1 2 / K O L / 1 6 M / S . J A G A D H A T R I T R A C O N P . L T D PROPER. IN OUR VIEW THERE HAS BEEN FAILURE ON THE PART OF THE AO TO MAKE PROPER AND ADEQUATE ENQUIRIES ON THE ISSUES SET OUT BY THE CIT IN THE SHOW CAUSE NOTICE U/S 263 OF THE ACT. 9. THE CIRCUMSTANCES POINTED OUT BY PRL.CIT IN THE SHOW CAUSE NOTICE CLEARLY WARRANT AN ENQUIRY BY THE AO BEFORE CONCLUD ING THE ASSESSMENT ON THE VARIOUS ASPECT SET OUT IN THE SHOW CAUSE NOTICE OF THE CIT U/S 263 OF THE ACT. THERE HAS BEEN A FAILURE ON THE PART OF AO TO MAKE NECESSARY AND PROPER ENQUIRIES BEFORE CONCLUDING THE ASSESSMENT. WE HOWEVER FIND THAT THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF MAIT HAN INTERNATIONAL 375 ITR 128 (CAL) HAS HOWEVER TAKEN A VIEW THAT JURISDI CTION U/S 263 OF THE ACT COULD BE INVOKED WHEN THE AO FAILS TO MAKE AN E NQUIRY WHICH HE OUGHT TO HAVE MADE IN THE GIVEN FACTS AND CIRCUMSTA NCES OF A CASE. WE ARE THEREFORE UNABLE TO ACCEPT THE PLEA OF THE LD. AR FOR THE ASSESSEE IN THIS REGARD. AS WE HAVE ALREADY MENTIONED, AT THIS STAGE THAT WE NEED NOT GO INTO THE MERITS OF THE ISSUES RAISED BY THE PRL. CIT IN THE SHOW CAUSE NOTICE U/S 263 OF THE ACT BECAUSE IN THE IMPUGNED O RDER THE AO HAS ONLY BEEN DIRECTED TO EXAMINE THE ISSUES ON MERITS AFTER AFFORDING THE ASSESSEE OPPORTUNITY OF BEING HEARD. IN THE GIVEN CIRCUMSTAN CES WE ARE OF THE VIEW THAT THE ASSESSEE IS AT LIBERTY TO PUT FORTH OF ITS CLAIMS ON THE MERITS OF THE ISSUES BEFORE THE AO IN THE ASSESSMENT PROCEEDINGS TO BE COMPLETED PURSUANT TO THE IMPUGNED ORDER OF PRL.CIT. IN VIEW OF THE AFORESAID DISCUSSION, WE FEEL APPROPRIATE TO UPHOLD THE ORDER OF CIT U/S 263 OF THE ACT AND DISMISS THE APPEAL OF THE ASSESSEE. 10. FURTHER, WE ARE OF THE VIEW THAT, EXERCISE OF J URISDICTION U/S 263 OF THE ACT WAS FULLY JUSTIFIED. THE DECISION OF THE H ONBLE HIGH COURT OF CALCUTTA IN THE CASE OF CIT VS. MAITHEN INTERNATION AL 375 ITR 123 (CAL), DEALT WITH THIS ASPECT OF LACK OF ENQUIRY WITH EVEN MORE STRINGENT CONDITIONS. THE ASSESSEE IN THAT CASE OBTAINED LOA NS AGGREGATING TO RS.1.60 CRORE FROM SIX PRIVATE LIMITED COMPANIES RA NGING BETWEEN RS.7 6 | P A G E I T A N O . 1 0 1 2 / K O L / 1 6 M / S . J A G A D H A T R I T R A C O N P . L T D LAC TO RS.1.10 CRORE. THESE COMPANIES HAVE FILED T HEIR RETURNS WITH NOMINAL INCOME. THE AO MENTIONED IN THE ASSESSMENT ORDER THAT THE INSPECTOR WAS DEPUTED TO VERIFY THE FRESH LOANS REC EIVED DURING THE YEARS, WHO VERIFIED SUCH LOANS AND GAVE A POSITIVE REPORT. KEEPING SUCH REPORT ON RECORD, THE AO ACCEPTED THE GENUINENESS OF THE T RANSACTIONS. THE CIT INVOKED THE POWERS U/S 263 IN WHICH IT WAS OBSERVED THAT THE REPORT GIVEN BY THE INSPECTOR WAS VERY ELEMENTARY AND SIMP LY MENTIONED THAT HE HAD VERIFIED BANK PASSBOOKS, PROFIT & LOSS ACCOU NT AND BALANCE SHEETS OF THESE COMPANIES. IN NONE OF THE REPORTS HE HAD COMMENTED ON THE ISSUE OF CREDIT WORTHINESS OF THE PARTIES. THE CIT OPINED THAT THE AO WAS REQUIRED TO MAKE PROPER INVESTIGATION TO DETERMINE WHETHER THE LOAN WAS REALLY MADE BY THE THIRD PARTY OR IT HAD COME OUT O F THE RESOURCES OF THE ASSESSEE HIMSELF. WHEN THE MATTER CAME UP BEFORE T HE TRIBUNAL, THE ORDER U/S 263 WAS SET ASIDE BY OBSERVING THAT THE A O DID CONDUCT ENQUIRY AND: IF THERE IS AN ENQUIRY, EVEN INADEQUATE, THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE CIT TO PASS ORDER U/S 263 OF THE A CT. SETTING ASIDE THE ORDER PASSED BY THE TRIBUNAL, THE HONBLE JURISDICT IONAL HIGH COURT HAS LAID DOWN THAT: CIT HAD REASONS TO HOLD THAT CREDI T WORTHINESS OF THE ALLEGED LENDERS WAS NOT ENQUIRED INTO. IT FURTHER WENT ON TO HOLD THAT A MERE EXAMINATION OF THE BANK PASSBOOK, PROFIT & LOS S ACCOUNT AND BALANCE SHEET IS NOT ENOUGH. WHEN THE REQUISITE EN QUIRY WAS NOT MADE, THE HONBLE HIGH COURT HELD THAT THE ORDER WAS TO B E CONSIDERED AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. IT SET ASIDE THE VIEW OF THE TRIBUNAL ON INADEQUATE ENQUIRY BY HOLDI NG THAT: IF THE RELEVANT ENQUIRY WAS NOT MADE, IT MAY IN APPROPRIAT E CASES AMOUNT TO NO ENQUIRY AND MAY ALSO BE A CASE OF NON-APPLICATION O F MIND. IT FURTHER OBSERVED THAT THE QUESTION OF INADEQUATE ENQUIRY SH OULD BE UNDERSTOOD IN ITS PROPER PERSPECTIVE AND: IF IT CAN BE SHOWN THA T THE INADEQUATE ENQUIRY LED THE AO OR MAY HAVE LED INTO ASSUMPTION OF INCORRECT FACTS, THAT COULD MAKE THE ORDER ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. SETTING A BAD TREND IS ALSO PREJUDIC IAL TO THE REVENUE. 7 | P A G E I T A N O . 1 0 1 2 / K O L / 1 6 M / S . J A G A D H A T R I T R A C O N P . L T D 11. IN VIEW OF THE SAME, WE FIND NO IRREGULARITY IN THE IMPUGNED ORDER PASSED BY THE PRL.CIT AND IT DOES NOT REQUIRE ANY I NTERFERENCE FROM THIS TRIBUNAL, ACCORDINGLY, THE APPEAL FILED BY THE ASSE SSEE FAILS AND THEREFORE, GROUNDS RAISED THEREON IN SUPPORT OF THE APPEAL ARE DISMISSED. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED ORDER PRONOUNCED IN OPEN COURT ON 14-12- 2016 SD/- SD/- M.BALAGANESH S.S. VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 14/12/ 2016 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT/ ASSESSEE : M/S. JAGADHATRI TRACON PVT. LTD 15B EVEREST HOUSE, 46C CHOWRINGHEE ROAD, KOLKATA-71. 2 THE RESPONDENT/ DEPA RTMENT : PR. COMMISSIONER OF INCOME TAX, CENTRAL,/DCIT, CC-4(3), AAYKAR BHAVAN POORVA, 110 SHANTIPALLY, KOLKATA-107. 3 / THE CIT(A) 4.THE CIT 5 . DR, KOLKATA BENCH 6 . GUARD FILE . **PP/SPS TRUE COPY, BY ORDER, ASSTT REGISTRA R