M/s. Everest Dealer Private Ltd., Howrah V. ITO, Ward 9(2), Kolkata, Kolkata

ITA 1043/KOL/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0125 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 12-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHRISTOPHER JENOME SINGH
• Keywords: Unexplained cash credit; Opportunity of being heard; Prejudicial to interest; Reassessment proceedings
• Section: 143(3); 131; 68; 263

Judgement Text

1 ITA NO. 1043/KOL/2017 M/S. EVEREST DEALER PVT. LTD., AY 2008-09 , A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA ( ) . . , . ! . '# , $ ) [BEFORE SHRI P.M. JAGTAP, AM & SHRI A. T. VARKEY, JM] I.T.A. NO. 1043/KOL/2017 ASSESSMENT YEAR: 2008-09 M/S. EVEREST DEALER PVT. LTD. (PAN: AABCE8698N) VS. INCOME-TAX OFFICER, WD-9(2), KOLKATA. APPELLANT RESPONDENT DATE OF HEARING 04.12.2018 DATE OF PRONOUNCEMENT 12.12.2018 FOR THE APPELLANT SHRI SUBASH AGARWAL, ADVOCATE FOR THE RESPONDENT SHRI CHRISTOPHER JENOME SINGH, JCIT, SR. DR ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL PREFERRED BY THE ASSESSEE IS AGAINST TH E ORDER OF THE LD. CIT(A)-16, KOLKATA DATED 08.08.2016 FOR AY 2008-09. 2. THOUGH THE ASSESSEE HAS RAISED SIX GROUNDS OF AP PEAL BUT THE MAIN ISSUE INVOLVED IS AGAINST THE ORDER OF LD. CIT(A) CONFIRMING THE ADDI TION MADE BY THE AO OF A SUM OF RS.3,26,00,000/- ON ACCOUNT OF SHARE APPLICATION MO NEY AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED T O AS THE ACT). 3. AT THE OUTSET ITSELF, THE LD. AR DREW OUR ATTENT ION TO PAGE 2 OF THE ASSESSMENT ORDER WHEREIN WE NOTE THAT THE AO HAD ISSUED NOTICE U/S. 131 OF THE ACT TO THE ASSESSEE TO PRODUCE ITS DIRECTORS AND SINCE THE DIRECTORS DID NOT APPEA R BEFORE THE AO, HE HAD PASSED THE REASSESSMENT ORDER ON 31.03.2014. IT WAS BROUGHT TO OUR NOTICE THAT THE NOTICE OF AO DIRECTING THE ASSESSEE TO PRODUCE THE DIRECTORS BEF ORE THE AO WAS FIXED ON 17.03.2014 AND SINCE THE ASSESSEES DIRECTORS WERE OUT OF STATION, THE ASSESSEE SOUGHT REASONABLE TIME TO PRODUCE ITS DIRECTORS. HOWEVER, THE AO DID NOT GIVE PROPER OPPORTUNITY AND PASSED THE REASSESSMENT ORDER WITHIN 13 DAYS WHILE GIVING EFFE CT TO THE CITS ORDER U/S.263 OF THE ACT. WE NOTE THAT AT THE FAG END OF THE REASSESSMENT PRO CEEDINGS, THE AO ISSUED NOTICE U/S 131 OF 2 ITA NO. 1043/KOL/2017 M/S. EVEREST DEALER PVT. LTD., AY 2008-09 THE ACT TO ASSESSEE TO PRODUCE ITS DIRECTORS ON 17. 03.2014 WHICH THE ASSESSEE COULD NOT COMPLY BECAUSE ITS DIRECTORS WERE OUT OF STATION AN D HENCE, THE ASSESSEE FAILED TO PRODUCE THE DIRECTORS. THE AO THEREAFTER MADE THE IMPUGNED ADDITION. WE NOTE THAT IN SIMILAR CASES THE LD. CIT HAS PASSED ORDER U/S. 263 OF THE ACT WH EREIN THE LD. CIT HAS GIVEN THE FOLLOWING GUIDELINES AS TO HOW TO INVESTIGATE. HENCE, THE ORDER PASSED BY THE AO U/S. 143(3) R/W 147 FOR THE AY 2008-09 IS ERRONEOUS AND PREJUDICIAL TO INTEREST OF THE REVENUE AND THEREFOR E THE ORDER IS SET ASIDE TO BE FRAMED DE NOVO AS PER FOLLOWING DIRECTIONS. THE AO SHOULD MAKE CO MPREHENSIVE AND DETAILED ENQUIRIES INTO THE SOURCE OF SUBSCRIPTION TO THE SHARE CAPITAL. TH E AO SHOULD PASS THE ASSESSMENT ORDER AFTER CONDUCTING INDEPENDENT DETAILED AND COMPLETE ENQUIR IES INTO THE DOCUMENTS FILED IN SUPPORT OF SUBSCRIPTION TO THE SHARE CAPITAL AND PREMIUM TO TH E EXTENT OF RS.5,17,50,000/- INTRODUCED IN THIS CASE. THE AO SHOULD TRACE THE SOURCE OF SHARE CAPITAL BY ENQUIRING INTO THE VARIOUS LAYERS THROUGH WHICH THE MONEY HAS BEEN INTRODUCED IN THIS COMPANY AS SHARE CAPITAL AND ALSO EXAMINE THE DIRECTORS OF SUBSCRIBER COMPANIES BY ISSUING SUMMONS U/S. 131 OF THE I. T. ACT. THE AO SHOULD NOT CONFINE HIMSELF TO CONDUCTI NG ENQUIRIES INTO THE SUBSCRIBERS TO THE SHARE CAPITAL ONLY ON SELECTIVE BASIS. THE AO SHOU LD ALSO CALL UPON THE ASSESSEE TO INDENTIFY THE PERSONS WHO ARE SHOWN AS DIRECTORS OF THESE CO MPANIES AND EXAMINE THEM ON OATH TO VERIFY THEIR CREDENTIAL AS DIRECTORS. THE AO SHOUL D PASS SPEAKING ORDER AFTER PROVIDING REASONABLE OPPORTUNITY TO THE ASSESSEE AND VERIFYIN G THE SOURCE OF SHARE CAPITAL INCLUDING THE SHARE PREMIUM OF ALL THE SUBSCRIBERS AND ROTATION O F MONEY THROUGH VARIOUS HANDS SO AS TO ASCERTAIN THE TRUE NATURE OF TRANSACTION WHICH WILL BRING TO THE FORE, THE REALITY OF THE TRANSACTIONS. 3. HOWEVER, AS NOTED ABOVE, THE AO HAS NOT CONDUCTE D ANY ENQUIRY AS DIRECTED BY THE LD. CIT WHICH GUIDELINES THE AO SHOULD HAVE FOLLOWE D AND SINCE THE ASSESSEES DIRECTORS WERE NOT IN STATION IN THE LAST WEEK WHEN THE REASS ESSMENT ORDER WAS PASSED, WE ARE OF THE OPINION THAT NO PROPER OPPORTUNITY HAS BEEN GRANTED TO THE ASSESSEE. SINCE PROPER OPPORTUNITY WAS NOT GIVEN TO ASSESSEE BY AO DURING THE REASSESSMENT PROCEEDINGS, WE ARE OF THE OPINION THAT ASSESSEE SHOULD GET PROPER OPPO RTUNITY BEFORE THE AO DURING REASSESSMENT PROCEEDINGS. THE HONBLE (THREE JUDGE BENCH) OF THE HONBLE SUPREME COURT IN TIN BOX COMPANY VS. CIT (2001) 249 ITR 216 (SC) HAS HELD AS UNDER: IT IS UNNECESSARY TO GO INTO GREAT DETAIL IN THESE MATTERS FOR THERE IS A STATEMENT IN THE ORDER OF THE TRIBUNAL, THE FACT-FINDING AUTHORITY, THAT R EADS THUS : WE WILL STRAIGHTAWAY AGREE WITH THE ASSESSEES SUB MISSION THAT THE INCOME-TAX OFFICER HAD NOT GIVEN TO THE ASSESSEE PROPER OPPORTUNITY OF BEI NG HEARD. THAT THE ASSESSEE COULD HAVE PLACED EVIDENCE BEFORE THE FIRST APPELLATE AUTHORITY OR BEFORE THE TRIBUNAL IS REALLY OF NO CONSEQUENCE FOR IT IS THE ASSESSMENT ORDER THAT COUNTS. THAT ORDER MUST BE MADE AFTER THE ASSESSEE HAS BEEN GIVEN A RE ASONABLE OPPORTUNITY OF SETTING OUT HIS CASE. WE, THEREFORE, DO NOT AGREE WITH THE TRIBUNAL AND THE HIGH COURT THAT IT WAS NOT NECESSARY TO SET ASIDE THE ORDER OF ASSESSMENT AND REMAND THE MATTER TO THE ASSESSING 3 ITA NO. 1043/KOL/2017 M/S. EVEREST DEALER PVT. LTD., AY 2008-09 AUTHORITY FOR FRESH ASSESSMENT AFTER GIVING TO THE ASSESSEE A PROPER OPPORTUNITY OF BEING HEARD. TWO QUESTIONS WERE PLACED BEFORE THE HIGH COURT, OF WHICH THE SECOND QUESTION IS NOT PRESSED. THE FIRST QUESTION READS THUS : 1. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN NOT SETTING ASIDE THE ASSESSMENT ORDER IN SPITE OF A FINDING ARRIVED AT BY IT THAT THE INCOME- TAX OFFICER HAD NOT GIVEN A PROPER OPPORTUNITY OF H EARING TO THE ASSESSEE ? IN OUR OPINION, THERE CAN ONLY BE ONE ANSWER TO THI S QUESTION WHICH IS INHERENT IN THE QUESTION ITSELF : IN THE NEGATIVE AND IN FAVOUR OF THE ASSESSEE. THE APPEALS ARE ALLOWED. THE ORDER UNDER CHALLENGE IS SET ASIDE. THE ASSESSMENT ORDER, THAT OF THE COMMISSIONER (APPEALS) AND OF THE TRIBUNAL A RE ALSO SET ASIDE. THE MATTER SHALL NOW BE REMANDED TO THE ASSESSING AUTHORITY FOR FRESH CO NSIDERATION, AS AFORESTATED. 4. IN SIMILAR CASE THIS TRIBUNAL IN ITA NO.393/KOL/ 2016 IN M/S. STAR GRIHA (P) LTD. VS. ITO FOR AY 2008-09 DATED 15.12.2017 HAS OBSERVED AS UNDER:- WE ALSO NOTE THAT THE LD. CIT AFTER LOOKING INT O THE PERNICIOUS PRACTICE OF CONVERTING BLACK MONEY INTO WHITE MONEY HAS GIVEN THE GUIDELIN ES TO AO AS TO HOW THE INVESTIGATION SHOULD BE CONDUCTED TO FIND OUT THE SOURCE. SINCE SIMILAR ORDER OF THE LD. CIT PASSED U/S. 263 OF THE ACT HAS BEEN UPHELD BY THE TRIBUNAL AS WELL AS BY THE HONBLE CALCUTTA HIGH COURT AS WELL AS THE SLP HAS BEEN DISMISSED BY THE HONBLE S UPREME COURT, SIMILAR ORDER OF THE LD. CIT HAS TO BE GIVEN EFFECT TO AS DIRECTED BY THE LD . CIT. WE TAKE NOTE THAT THE LD. CIT WITH HIS EXPERIENCE AND WISDOM HAS GIVEN CERTAIN GUIDELINES IN THE BACKDROP OF BLACK MONEY MENACE SHOULD HAVE BEEN PROPERLY ENQUIRED INTO AS DIRECTED BY HIM. THE AO OUGHT TO HAVE FOLLOWED THE INVESTIGATING GUIDELINES AND METHOD AS DIRECTED BY HIM TO UNEARTH THE FACTS TO DETERMINE WHETHER THE IDENTITY, GENUINENESS AND CREDITWORTHIN ESS OF THE SHARE SUBSCRIBERS. WE NOTE THAT THE HONBLE SUPREME COURT (THREE JUDGES BENCH) IN THE CASE OF TIN BOX, (SUPRA), HAS HELD THAT SINCE THERE WAS LACK OF OPPORTUNITY TO THE ASSESSEE AT THE ASSESSMENT STAGE ITSELF, THE ASSESSMENT NEEDS TO BE DONE AFRESH AND THEREBY REVE RSED THE HONBLE HIGH COURT, TRIBUNAL AND CIT(A)S ORDERS AND REMANDED THE MATTER BACK T O AO FOR FRESH ASSESSMENT. SO, SINCE THERE WAS LACK OF OPPORTUNITY AS AFORESTATED IT HAS TO GO BACK TO AO. 5. WE ALSO NOTE THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. JANSAMPARK ADVERTISING & MARKETING PVT. LTD. IN ITA NO. 525/20 14 DATED 11.03.2015 WHEREIN AFTER NOTICING INADEQUATE ENQUIRY BY AUTHORITIES BELOW HA VE HELD AS UNDER: 41. WE ARE INCLINED TO AGREE WITH THE CIT(APPEALS) , AND CONSEQUENTLY WITH ITAT, TO THE EXTENT OF THEIR CONCLUSION THAT THE ASSESSEE HEREIN HAD COME UP WITH SOME PROOF OF IDENTITY OF SOME OF THE ENTRIES IN QUESTION. BUT, FROM THIS INF ERENCE, OR FORM THE FACT THAT THE TRANSACTIONS WERE THROUGH BANKING CHANNELS, IT DOES NOT NECESSAR ILY FOLLOWING THAT SATISFACTION AS TO THE CREDITWORTHINESS OF THE PARTIES OR THE GENUINENESS OF THE TRANSACTIONS IN QUESTION WOULD ALSO HAVE BEEN ESTABLISHED. 42. THE AO HERE MAY HAVE FAILED TO DISCHARGE HIS OB LIGATION TO CONDUCT A PROPER INQUIRY TO TAKE THE MATTER TO LOGICAL CONCLUSION. BUT CIT(APPE ALS), HAVING NOTICED WANT OF PROPER INQUIRY, COULD NOT HAVE CLOSED THE CHAPTER SIMPLY B Y ALLOWING THE APPEAL AND DELETING THE ADDITIONS MADE. IT WAS ALSO THE OBLIGATION OF THE F IRST APPELLATE AUTHORITY, AS INDEED OF ITAT, 4 ITA NO. 1043/KOL/2017 M/S. EVEREST DEALER PVT. LTD., AY 2008-09 TO HAVE ENSURED THAT EFFECTIVE INQUIRY WAS CARRIED OUT, PARTICULARLY IN THE FACT OF THE ALLEGATIONS OF THE REVENUE THAT THE ACCOUNT STATEME NTS REVEAL UNIFORM PATTERN OF CASH DEPOSITS OF EQUAL AMOUNTS IN THE RESPECTIVE ACCOUNTS PRECEDI NG THE TRANSACTIONS IN QUESTION. THIS NECESSITATED A DETAILED SCRUTINY OF THE MATERIAL SU BMITTED BY THE ASSESSEE IN RESPONSE TO THE NOTICE UNDER SECTION148 ISSUED BY THE AO, AS ALSO T HE MATERIAL SUBMITTED AT THE STAGE OF APPEALS, IF DEEMED PROPER BY WAY OF MAKING OR CAUSI NG TO BE MADE A 'FURTHER INQUIRY IN EXERCISE OF THE POWER UNDER SECTION 250(4). HIS APP ROACH NOT HAVING BEEN ADOPTED, THE IMPUGNED ORDER OF ITAT, AND CONSEQUENTLY THAT OF CI T(APPEALS), CANNOT BE APPROVED OR UPHELD.' 6. IN VIEW OF THE AFORESAID ORDER AND IN THE LIGHT OF THE HONBLE SUPREME COURTS DECISION IN TIN BOX COMPANY (SUPRA) AND TAKING INTO CONSIDERATION THE FACT THE ORDER OF THE LD. CIT PASSED U/S. 263 OF THE ACT IN SIMILAR CASES BEING UPHELD UP TO THE LEVEL OF APEX COURT, AND TAKING NOTE OF HONBLE DELHI HIGH COURT S ORDER IN JANSAMPARK ADVERTISING & MARKETING PVT. LTD. (SUPRA), WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND REMAND THE MATTER BACK TO THE FILE OF AO FOR DE NOVO ASSESSMENT AND T O DECIDE THE MATTER IN ACCORDANCE TO LAW AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSE SSEE. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 12/12/201 8 SD/- SD/- (P. M. JAGTAP) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 12TH DECEMBER, 2018 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 APPELLANT M/S. EVEREST DEALER PVT. LTD., 107, FOR ESHORE ROAD, SHIBPUR, HOWRAH- 711102, WEST BENGAL. 2 RESPONDENT ITO, WD-9(2), KOLKATA. 3 4 5 CIT(A)-16, KOLKATA. (SENT THROUGH E-MAIL) CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, SR. PVT. SECRETARY