Gravity Goods Pvt. Ltd., Kolkata V. ITO, Ward-9(2), Kolkata, Kolkata

ITA 1087/KOL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0459 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 16-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROBIN CHOUDHUR Y
• Assessee Lawyers: M D SHAH
• Keywords: Unexplained cash credit; Opportunity of being heard; Principle of natural justice; Reassessment proceedings
• Section: 142(1); 131; 263; 144; 68

Judgement Text

1 ITA NO. 1087/KOL/2017 GRAVITY GOODS PVT. LTD., AY 2009-10 , 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.A. NO. 1087/KOL/2017 ASSESSMENT YEAR: 2009-10 GRAVITY GOODS PVT. LTD. (PAN: AADCG2887M) VS. INCOME-TAX OFFICER, WARD-9(2), KOLKATA APPELLANT RESPONDENT DATE OF HEARING 06.09.2018 DATE OF PRONOUNCEMENT 19.09.2018 FOR THE APPELLANT SHRI M. D. SHAH, AR FOR THE RESPONDENT SHRI ROBIN CHOUDHURY, ADDL. CIT , SR. DR ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)- 3, KOLKATA DATED 03.03.2017 FOR AY 2009-10. 2. THE MAIN GRIEVANCE OF THE ASSESSEE IN THIS APPEA L IS AGAINST THE ACTION OF LD. CIT(A) IN UPHOLDING BY AN EX PARTE ORDER THE ADDITION OF R S.4,01,00,000/- MADE BY THE AO, WHICH, ACCORDING TO LD. AR, WAS IN VIOLATION OF THE PRINCI PLES OF NATURAL JUSTICE IN HAVING PASSED THE EX PARTE ORDER QUA THE ASSESSEE WITHOUT AFFORDI NG ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND WITHOUT ENSURING THE ONLY NOTICE FIXING HEARING ON 14.02.2017 AND 17.02.2017 WAS NEVER SERVED UPON THE ASSESSEE, WHIC H IS APPARENT FROM PARA 2 OF THE IMPUGNED ORDER OF LD. CIT(A). 3. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE S UBMITTED BEFORE US THAT THE LD. CIT(A) DID NOT CONSIDER THAT THE AO BEING INFLUENCED BY TH E ORDER OF LD. CIT PASSED U/S. 263 OF THE ACT MADE THE RE-ASSESSMENT AND THAT TOO U/S. 14 4 OF THE ACT (BEST JUDGMENT ASSESSMENT) 2 ITA NO. 1087/KOL/2017 GRAVITY GOODS PVT. LTD., AY 2009-10 WITHOUT AFFORDING PROPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND IGNORING ALL MATERIAL EVIDENCES WHICH WERE ALREADY ON RECORD SUB MITTED DURING ASSESSMENT PROCEEDINGS AND HENCE THE ADDITION OF RS.4,01,00,000/- U/S. 68 OF THE ACT SUSTAINED BY HIM IS ERRONEOUS AND AN ARBITRARY ACTION. HENCE, HE URGED BEFORE TH E BENCH TO SET ASIDE THE ORDER OF LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO FOR FRESH ADJUDICATION. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDER OF LD. CIT(A). WE NOTE THAT AO AFTER RECEIPT OF LD. CITS ORDER U/S. 263 OF THE ACT DATED 10.03.2014 HA D ISSUED NOTICE U/S. 142(1) OF THE ACT TO THE ASSESSEE COMPANY. THEREAFTER ISSUED SUMMONS U/ S. 131 OF THE ACT FOR APPEARANCE OF THE ASSESSEE COMPANYS DIRECTOR. SINCE NONE APPEAR ED BEFORE THE AO, HENCE, THE AO PASSED AN EX PARTE ORDER OF ASSESSMENT U/S. 144 OF THE ACT. WHEREAS WE NOTE THAT THE LD. CITS DIRECTION IN SIMILAR CASE WAS TO MAKE ENQUIRI ES TO UNRAVEL THE MODUS OPERANDI BY INVESTIGATION AS PER FOLLOWING GUIDELINES: THE AO IS DIRECTED TO (I) EXAMINE THE GENUINENESS A ND SOURCE OF SHARE CAPITAL, NOT ON A TEST CHECK BASIS, BUT IN RESPECT OF EACH AND EVERY SHARE HOLDER BY CONDUCTING INDEPENDENT ENQUIRY NOT THROUGH THE ASSESSEE. THE BANK ACCOUNT FOR THE ENTIRE PERIOD SHOULD BE EXAMINED IN THE COURSE OF VERIFICATION TO FIND OUT THE MONEY TRAIL OF THE SHARE CAPITAL. II) FURTHER THE AO SHOULD EXAMINE THE DIRECTORS AS WELL AS EXAMINE THE CIRCUMSTANCES WHICH NECESSITATED THE CHANGE IN DIRECTORSHIP IF APPLICAB LE. HE SHOULD EXAMINE THEM ON OATH TO VERIFY THEIR CREDENTIALS AS DIRECTOR AND REACH A LO GICAL CONCLUSION REGARDING THE CONTROLLING INTEREST. III) THE AO IS DIRECTED EXAMINE THE SOURCE OF REALI ZATION FROM THE LIQUIDATION OF ASSETS SHOWN IN THE BALANCE SHEET AFTER THE CHANGE OF DIRECTORS, IF ANY. 4. HOWEVER, WE NOTE THAT AOS INVESTIGATION AS PER HIS OWN WORDS AS STATED AS UNDER: IN COMPLIANCE TO THE DIRECTIONS OF THE LD CIT, KOL KATA-III, NOTICE U/S 142(1) OF THE ACT WAS ISSUED TO THE ASSESSEE COMPANY REQUIRING IT TO APPE AR BEFORE THE UNDERSIGNED, EITHER PERSONALLY OR THROUGH ITS AUTHORISED REPRESENTATIVE , AND FURNISH CERTAIN DETAILS. SUMMON U/S 131 OF THE ACT WAS ALSO ISSUED TO THE DIRECTORS OF THE COMPANY FOR THEIR PERSONAL ATTENDANCE. HOWEVER, NEITHER ANY ONE ON BEHALF OF THE ASSESSEE NOR THE DIRECTORS OF THE ASSESSEE COMPANY APPEARED BEFORE THE UNDERSIGNED TILL DATE. SUMMONS U/S 131 OF THE ACT WERE ALSO ISSUED TO DIRECTORS OF THE SUBSCRIBER COMPANIES, AS CLAIMED BY THE ASSESSEE IN THE COURSE OF REASSESSMENT PROCEEDING, FOR THEIR PERSONAL ATTENDA NCE. ONCE AGAIN NONE OF THE DIRECTORS OF THE SUBSCRIBER COMPANIES APPEARED BEFORE THE UNDERS IGNED TILL DATE. SINCE THERE WAS NO COMPLIANCE ON THE PART OF THE DIRECTORS OF THE ASSE SSEE COMPANY OR THE DIRECTORS OF THE SUBSCRIBER COMPANIES, THERE IS NO OPTION BUT TO PAS S THE ORDER EX-PARTE. 3 ITA NO. 1087/KOL/2017 GRAVITY GOODS PVT. LTD., AY 2009-10 FROM THE RECORD, IT WAS NOTICED THAT DURING THE FIN ANCIAL UNDER CONTENTION, THE ASSESSEE COMPANY HAD RAISED FRESH PAID UP SHARE CAPITAL OF R S. 17,00,000/- AND SHARE PREMIUM OF RS.3,84,00,000/- BY ISSUE OF 170000 SHARES HAVING F ACE VALUE OF RS 10/- AND PREMIUM OF RS.240/- EACH FOR 160000 SHARE ALLOTTED. WHENEVER A SUM IS CREDITED IN THE BOOKS OF THE ASSESSEE, THE ONUS LIES ON THE ASSESSEE COMPANY TO PROVE THREE CRITERIA: - (I) IDENTITY, (II) CREDITWORTHINESS, AND (III) GENUINENESS OF THE TRANSACTION. .. IN THE LIGHT OF THE FACTS OF THE CASE AND AFOR ESAID EXPOSITION OF THE LEGAL POSITION, WITH REGARD TO THE IDENTITY AND CREDITWORTHINESS OF THE SUBSCRIBER-COMPANIES AND THE GENUINENESS OF THE TRANSACTIONS, I AM OF THE OPINION THAT THE C REDIT OF RS. 4,01,00,000/- IN THE BOOKS OF THE ASSESSEE SHALL BE CONSIDERED AS INCOME OF THE ASSES SEE OF THE INSTANT PREVIOUS YEAR AND CHARGED TO INCOME-TAX HENCE, THE ENTIRE AMOUNT OF RS. 4,01,00,000/- WHIC H INCLUDES RS.17,00,000/- OF SHARE CAPITAL AND RS. 3,84,00,000/- OF PREMIUM IS BEING ADDED AS UNEXPLAINED CREDIT IN THE BOOKS OF THE ASSESSEE COMPANY AND ADDED TO THE TOTAL INCOME U/S 68 OF THE IT ACT, 1961. 5. HOWEVER THE MAIN GRIEVANCE OF THE ASSESSEE IS TH AT NO PROPER OPPORTUNITY WAS GIVEN TO THE ASSESSEE TO DISCHARGE THE ONUS CASTED UPON I T AS REQUIRED IN SEC. 68 MATTERS ARE CONCERNED. ACCORDING TO ASSESSEE, ONE STATUTORY NO TICE WAS ISSUED BY AO AS NOTED BY HIM IN THE ASSESSMENT ORDER. THEREAFTER AO ISSUED SUMMO NS TO THE DIRECTORS OF ASSESSEE COMPANY TO APPEAR BEFORE HIM. WE NOTE THAT NO OTHE R INVESTIGATION WAS CONDUCTED BY AO IS DISCERNABLE FROM THE ORDER. SO, WE FIND FORCE I N THE SUBMISSION OF THE LD. AR THAT NO PROPER OPPORTUNITY BEFORE THE AO DURING THE REASSES SMENT PROCEEDINGS BECAUSE ONLY ONE NOTICE AND ONE SUMMON WERE ISSUED TO ASSESSEE COMPA NY. HOWEVER, SINCE THE DIRECTOR OF ASSESSEE COMPANY COULD NOT APPEAR BEFORE THE AO IN PURSUANCE OF THE SUMMONS U/S. 131, THE AO SADDLED THE ADDITION U/S. 144 (BEST JUDGMENT ASSESSMENT) BY DRAWING ADVERSE INFERENCE WITHOUT APPLICATION OF MIND, WHICH ACTION OF A.O. CANNOT BE COUNTENANCED. SO, WE FIND FORCE IN THE SUBMISSION OF THE LD. AR THAT NO PROPER OPPORTUNITY WAS GIVEN TO ASSESSEE BY AO DURING THE REASSESSMENT PROCEEDINGS AND SO WE ARE, THEREFORE, OF THE OPINION THAT ASSESSEE DID NOT GET PROPER OPPORTUNIT Y 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: 4 ITA NO. 1087/KOL/2017 GRAVITY GOODS PVT. LTD., AY 2009-10 IT IS UNNECESSARY TO GO INTO GREAT DETAIL IN THESE MATTERS FOR THERE IS A STATEMENT IN THE ORDER OF T HE TRIBUNAL, THE FACT-FINDING AUTHORITY, THAT READS TH US : 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 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. 6. 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. 7. 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: 5 ITA NO. 1087/KOL/2017 GRAVITY GOODS PVT. LTD., AY 2009-10 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, 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.' 8. 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 AO IN SIMILAR CASES BEING UPHELD UP TO THE LEVEL OF APEX COURT, AND TAKING NOTE OF HONBLE DELHI HIGH COURTS ORDER IN JANSAMPARK ADVERTISING & MARKETING PVT. LTD. (SUPRA), AND THE LD DR ACCEPTED THAT ASSESSEE DID NOT GET PROPER OP PORTUNITY BEFORE THE AO DURING REASSESSMENT PROCEEDINGS, 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. 9. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 19/09/201 8 SD/- SD/- (DR. A. L. SAINI) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 19TH SEPTEMBER, 2018 JD.(SR.P.S.) 6 ITA NO. 1087/KOL/2017 GRAVITY GOODS PVT. LTD., AY 2009-10 COPY OF THE ORDER FORWARDED TO: 1 APPELLANT M/S. GRAVITY GOODS PVT. LTD., TEEN KANY A APARTMENT, BLOCK-C, FLAT NO. G- B, RAJARHAT ROAD, GOVINDO NIWAS, KOLKATA-700 059. 2 RESPONDENT ITO, WARD-9(2), KOLKATA 3 4 5 CIT(A)- 3, KOLKATA (SENT THROUGH E-MAIL) CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, SR. PVT. SECRETARY