Rose Goods Pvt. Ltd., Kolkata V. ITO, WD-9(3), KOLKATA, Kolkata

ITA 1168/KOL/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9758 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 26-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K SRIHARI
• Keywords: Unexplained cash credit; Opportunity of being heard; Reassessment proceedings
• Section: 133(6); 131; 68; 263

Judgement Text

1 ITA NO. 1168/KOL/2016 ROSE GOODS PVT. LTD., AY 2009-10 , C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA ( ) BEFORE . . , /AND . , ) [BEFORE SHRI A. T. VARKEY, JM & SHRI M. BALAGANESH , AM] I.T.A. NO. 1168/KOL/2016 ASSESSMENT YEAR: 2009-10 ROSE GOODS PVT. LTD. (PAN: AAECR2204C) VS. INCOME-TAX OFFICER, WD-9(3), KOLKATA APPELLANT RESPONDENT DATE OF HEARING 27.11.2018 DATE OF PRONOUNCEMENT 12.12.2018 FOR THE APPELLANT SHRI SOUMITRA CHOUDHURY, ADVOCAT E FOR THE RESPONDENT SHRI P. K. SRIHARI, CIT, DR ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL PREFERRED BY THE ASSESSEE IS AGAINST TH E ORDER OF THE LD. CIT(A)-3, KOLKATA DATED 10.03.2016 FOR AY 2009-10. 2. THOUGH THE ASSESSEE HAVE RAISED 5 GROUNDS OF A PPEAL, BUT THE SOLE ISSUE INVOLVED IS AGAINST THE ACTION OF LD. CIT(A) IN CONFIRMING THE ADDITION OF RS.8,19,00,000/- AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE INCOME-TAX A CT, 1961 (HEREINAFTER REFERRED TO AS THE ACT), WHICH SUM REPRESENTED AMOUNTS RECEIVED BY T HE ASSESSEE TOWARDS SHARE CAPITAL AND SHARE PREMIUM. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE COMPA NY FILED ITS RETURN OF INCOME FOR THE A.Y. 2009-10 U/S 139(1) OF THE ACT ON 29.06.2009 DE CLARING GROSS TOTAL INCOME 0F RS.1550/-. THE RETURN WAS PROCESSED 143(1) OF THE A CT. SUBSEQUENTLY, THE ASSESSMENT WAS COMPLETED U/S 147/143(3) OF THE ACT ON 16.03.2011 A T THE ASSESSED INCOME OF RS.35,350/-. LATER ON, THE COMMISSIONER OF INCOME-TAX, KOLKATA-I II, KOLKATA INITIATED THE PROCEEDINGS 2 ITA NO. 1168/KOL/2016 ROSE GOODS PVT. LTD., AY 2009-10 U/S 263 OF THE ACT. THE ORDER PASSED U/S 143(3)/147 OF THE ACT DATED 16.03.2011 WAS SET ASIDE BY THE CIT, KOL-III , KOLKATA U/S 263 OF THE ACT VIDE ORDER DATED 14.03.2013. THE SAID ORDER U/S. 143(3)/147 OF THE ACT DATED 16.03.2 011 HAD BEEN SET ASIDE U/S 263 FOR THE REASON THAT THE ASSESSEE COMPANY HAD INTRODUCED SUB STANTIAL AMOUNT OF SHARE CAPITAL AND SHARE PREMIUM IN THE ASSESSMENT YEAR 2009-10, BUT T HE AO HAD DONE VERIFICATION ONLY ON TEST CHECK BASIS AND HE DID NOT EXAMINE THE ISSUE O F INTRODUCTION OF SHARE CAPITAL AND SHARE PREMIUM IN DETAIL. SUBSEQUENT TO THE ORDER U/S.263, THE INITIATED THE ASSESSMENT PROCEEDINGS AND PASSED AN ORDER U/S 147/143(3)/263/143(3) OF TH E ACT ON 31.03.2014 AT THE ASSESSED INCOME OF RS.8,19,35,350/-. WHILE COMPLETING THE RE ASSESSMENT THE AO MADE AN ADDITION OF RS.5,19,00,000/- U/S 68 OF THE ACT ON ACCOUNT OF INTRODUCTION OF SHARE CAPITAL AND SHARE PREMIUM SUBSCRIBED BY VARIOUS SHAREHOLDERS IN THE Y EAR UNDER CONSIDERATION. DURING THE COURSE OF REASSESSMENT PROCEEDINGS, ON PERUSAL OF T HE BALANCE SHEET OF THE ASSESSEE COMPANY AS ON 31.03.2009, IT WAS OBSERVED BY THE AO THAT IN THE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY HAD RAISED SHARE CAPITAL OF RS .21,45,000/- BY ISSUING 2,14,500 EQUITY SHARES OF FACE VALUE OF RS.10/- EACH AT A TOTAL PRE MIUM OF RS.8,97,55,000/- @ RS.190/- PER SHARE. THE AO NOTED THAT ASSESSEE COMPANY WITHIN A SHORT TIME PERIOD HAD COME UP WITH THE ISSUE OF SHARE CAPITAL OF MORE THAN RS.8 CRORE AND THAT TOO, WITH A PREMIUM OF 19 TIMES THE FACE VALUE OF EACH SHARE. ON OBSERVING THIS, TH E AO WAS OF THE OPINION THAT THE SUBSTANTIAL AMOUNT OF RS.8,97,55,000/- CREDITED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE COMPANY IN THE GARB OF SHARE CAPITAL INCLUDING SHAR E PREMIUM NEEDS INVESTIGATION. FOR THAT AO ISSUED SUMMONS U/S 131 OF THE ACT TO THE DIRECTO RS OF THE ASSESSEE COMPANY AT THEIR GIVEN ADDRESSES. BUT, ACCORDING TO AO, ONLY ONE SUC H DIRECTOR BY THE NAME OF SHRI RAJ KUMAR SHAW FILED A LETTER ON 12.03.2014 DENYING ANY CONNECTION WITH THE ASSESSEE COMPANY. 4. SO, THE AO CONCLUDED THAT THE SUBSCRIBER COMPANI ES HAD USED FICTIONAL NAMES AS DIRECTORS OF ASSESSEE COMPANY AND ALSO THAT OF FICT ITIOUS IDENTITY OF THE SUBSCRIBER COMPANIES AND WAS OF THE OPINION THAT THESE FACTS E STABLISHED THAT INTRODUCTION OF THE SHARE CAPITAL IN THE ASSESSEE COMPANY IS NOT GENUINE. AC CORDING TO AO, THE IDENTITY AS WELL AS THE CREDITWORTHINESS AND GENUINENESS OF THE SHAREHO LDERS COULD NOT BE ESTABLISHED, SO THE 3 ITA NO. 1168/KOL/2016 ROSE GOODS PVT. LTD., AY 2009-10 ENTIRE AMOUNT OF RS.8,19,00,000/- WHICH INCLUDES RS .21,45,000/- OF SHARE CAPITAL AND RS.7,97,55,000/- OF PREMIUM WAS ADDED BY THE AO AS UNEXPLAINED CREDIT IN THE BOOKS OF THE ASSESSEE COMPANY AND ADDED TO THE TOTAL INCOME U/S. 68 OF THE ACT. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A), WHO CONFIRM ED THE ACTION OF AO. AGGRIEVED, ASSESSEE PREFERRED THIS APPEAL BEFORE US. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE AO WAS GIVING EFFECT TO THE ORDER OF LD. CIT PASSED U/S. 263 OF THE ACT ON 14.03.2013. WHEREAS WE NOTE THAT THE LD. CITS DIRECTION IN SIMILAR CASE WAS TO MAKE ENQUIRIES TO UNRAVEL THE MODUS OPERANDI BY INV ESTIGATION 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. 6. HOWEVER, THE LD. AR DREW OUR ATTENTION TO THE AO S INVESTIGATION WHEREIN HE HAS ACKNOWLEDGED RECEIPT OF REPLIES TO NOTICE U/S. 133( 6) OF THE ACT .THE AO NOTES ON EXAMINATION OF THE REPLIES RECEIVED TO THE NOTI CES U/S 133(6) IT IS SEEN THAT THE BANK STATEMENTS OF THE SUBSCRIBER COMPANIES IS FOR A VER Y LIMITED PERIOD AND NOT FOR THE WHOLE YEAR. ON ANALYSIS OF THE BANK STATEMENTS IT IS SEEN THAT THE BANK ACCOUNTS WERE OPENED ONLY FOR THE PURPOSE OF CHANNELIZING THE FUND TO REACH T HE ULTIMATE DESTINATION. IT DOES NOT THROW MUCH LIGHT INTO THE GENUINENESS OF THE-TRANSACTIONS , SO, ACCORDING TO LD. AR ONLY BECAUSE THE DIRECTORS DID NOT RESPOND/TURN UP BEFORE THE AO FOR NOTICE SENT AT THE FAG END WHEN ASSESSMENT WAS TIME BARRED, THE AO HAS MADE THE EX PARTE ORDER, WITHOUT GIVING ANY CREDENCE TO THE DOC UMENTS FILED BEFORE HIM. 7. 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. WE NOTE THAT AO ACKNOWLEDGED RECEIPT OF REPLIES FROM SHARE SUBSCRIBERS ASKED VIDE NOTICE U/S. 4 ITA NO. 1168/KOL/2016 ROSE GOODS PVT. LTD., AY 2009-10 133(6) OF THE ACT. HOWEVER, SINCE THE DIRECTOR OF THE ASSESSEE COMPANY DID NOT TURN UP BEFORE HIM AND AFTER RECEIPT OF A LETTER FROM A DIR ECTOR INFORMING THAT HE HAS NO CONNECTION WITH THE ASSESSEE COMPANY, HAS DRAWN ADVERSE INFERE NCE AGAINST THE ASSESSEE COMPANY. AND WE NOTE THAT SEC. 131 NOTICES WERE SENT AT THE FAG END WHEN THE ASSESSMENT WAS GETTING TIME BARRED. EXCEPT THAT NO OTHER INVESTIGATION W AS CONDUCTED BY AO AS IS DISCERNABLE FROM THE ORDER. SO, WE FIND FORCE IN THE SUBMISSIO N OF THE LD. AR THAT NO PROPER OPPORTUNITY THE ASSESSEE GOT BEFORE THE AO DURING T HE REASSESSMENT PROCEEDINGS. SINCE PROPER OPPORTUNITY WAS NOT GIVEN TO ASSESSEE BY AO DURING THE REASSESSMENT PROCEEDINGS, WE ARE OF THE OPINION THAT ASSESSEE SHOULD GET PROP ER OPPORTUNITY 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 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. 8. 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:- 5 ITA NO. 1168/KOL/2016 ROSE GOODS PVT. LTD., AY 2009-10 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. 9. 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, 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.' 10. 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 6 ITA NO. 1168/KOL/2016 ROSE GOODS PVT. LTD., AY 2009-10 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. 11. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 12/12/201 8 SD/- SD/- (M. BALAGANESH) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 12 TH DECEMBER, 2018 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 APPELLANT ROSE GOODS PVT. LTD., 147, NILGUNGE ROA D, BELGHORIA, KOLKATA-700 056. 2 RESPONDENT ITO, WD-9(3), 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