M/s Beatle Trading Pvt. Ltd., Kolkata V. Pr. C.I.T. - 4, Kolkata, Kolkata

ITA 1395/KOL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1939 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 28-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G HANGSHING
• Keywords: Unexplained cash credit; Revision of order; Opportunity of being heard
• Section: 143(3); 68; 6; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SHRI N.V.VASUDEVAN, JM & HONBLE SHRI M.BALAGANESH, AM ] I.T.A NO. 1395/KOL/20 16 ASSESSMENT YEAR : 2011-1 2 M/S BEATLE TRADING (P) LTD. -VS- PR. CIT-4, KOLKATA [PAN: AAECB 3708 K] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI SUBASH AGARWAL , ADVOCATE FOR THE REVENUE : SHRI G.HANGSHING, CIT DR DATE OF HEARING : 04.01.2018 DATE OF PRONOUNCEMENT : 10.01.2018 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER OF THE LEARNED PRINCIPAL COMMISSIONER OF INCOME TAX-4, KOLKATA [ IN SHORT TH E LD CIT] IN MEMO NO. PR.CIT-4/U/S.263/2015-16 DATED 31.03.2016 PASSED U/ S 263 OF THE ACT AGAINST THE ORDER PASSED BY THE ITO, WARD-11(4), KOLKATA [ IN SHORT THE LD AO] UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHOR T THE ACT) DATED 31.03.2016 FOR THE ASSESSMENT YEAR 2011-12. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD. CIT WAS JUSTIFIED IN ENHANCING THE ASSESSMENT BY DIRECTING THE LD. AO TO MAKE AN ADDITION 2 ITA NO.1395/KOL/2016 M/S BEATLE TRADING PVT. LTD. A.YR.2011-12 2 TOWARDS SHARE CAPITAL AND SHARE PREMIUM IN THE SUM OF RS. 25,83,10,000/- UNDER SECTION 68 OF THE ACT, IN THE FACTS AND CIRCUMSTANC ES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESS EE IS ENGAGED IN THE BUSINESS OF TRADING AND INVESTMENT IN EQUITY SHARES AND HAD ELE CTRONICALLY FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011-12 ON 27.09.201 1 DECLARING TOTAL INCOME OF RS. 10,050/-. THE ASSESSMENT WAS COMPLETED U/S 143( 3) OF THE ACT ON 31.03.2014 DETERMINING TOTAL INCOME OF RS. 1,26,250/-. THIS AS SESSMENT WAS SOUGHT TO BE REVISED BY THE LD. CIT BY INVOKING REVISIONARY JURI SDICTION U/S 263 OF THE ACT WHEREIN THE LD. CIT OBSERVED THAT THE LD. AO HAD NO T MADE ENQUIRIES WITH REGARD TO CREDITWORTHINESS OF THE SHARE SUBSCRIBERS AND TO VERIFY THE GENUINENESS OF THE TRANSACTION THEREON. THE LD. CIT OBSERVED TH AT THE ASSESSEE HAD RECEIVED SHARE CAPITAL OF RS. 2,05,76,420/- DURING THE YEAR TOGETHER WITH SHARE PREMIUM OF RS. 23,77,33,580/- (PREMIUM WORKED OUT AT RS. 499 P ER SHARE). THE LD. CIT OBSERVED IN HIS ORDER THAT THIS HUGE PREMIUM WAS NO T JUSTIFIABLE IN VIEW OF THE FACT THAT THE ASSESSEE COMPANY HAD NOT CARRIED ON A NY COMMERCIAL ACTIVITIES AND HAD DECLARED A MEAGER INCOME OF RS. 10,050/- ONLY A S IS EVIDENT FROM THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE. THE LD. CIT ALSO OBSERVED THAT THE ASSESSEE COMPANY DOES NOT HAVE ANY FIXED ASSETS IN ITS BALAN CE SHEET, SO AS TO IMPLY THE FUTURE POTENTIAL TO CARRY ON ANY BUSINESS. NONE APP EARED ON BEHALF OF THE ASSESSEE BEFORE THE LD. CIT DESPITE GIVING REPEATED OPPORTUN ITIES. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, THE LD. CIT PROCEEDED TO CONCLUD E THAT THE SHARE CAPITAL TOGETHER WITH RECEIPT OF SHARE PREMIUM AMOUNTING TO RS. 25,83,10,000/- DESERVES TO BE ADDED AS UNEXPLAINED CASH CREDIT U/S 68 OF TH E ACT AND ACCORDINGLY ENHANCED THE ASSESSMENT MADE BY THE LD. AO. WITH TH ESE OBSERVATIONS, HE HELD THAT THE ORDER PASSED BY THE LD. AO U/S 143(3) OF T HE ACT TO BE ERRONEOUS AND 3 ITA NO.1395/KOL/2016 M/S BEATLE TRADING PVT. LTD. A.YR.2011-12 3 PREJUDICIAL TO THE INTEREST OF THE ASSESSEE AND DIR ECTED THE LD. AO TO ENHANCE THE ASSESSMENT ACCORDINGLY. AGGRIEVED THE ASSESSEE IS I N APPEAL BEFORE US ON THE FOLLOWING GROUNDS: 1.(A) FOR THAT THE ORDER PASSED BY THE LEARNED COMM ISSIONER OF INCOME TAX IS BAD IN LAW AND IS LIABLE TO BE QUASHED. (B) FOR THAT THE ORDER PASSED BY THE LEARNED COMMIS SIONER OF INCOME TAX DATED 31.3.2016 PASSED UNDER SECTION 263 IS BARRED BY LIM ITATION. (C) FOR THAT THE ORDER DATED 31.03.2016 PASSED UNDE R SECTION 263 IS LIABLE TO QUASH IN THE ABSENCE OF ANY FINDING BY THE LEARNED COMMISSIONER OF INCOME TAX THAT THE ASSESSMENT IS ERRONEOUS AS WELL AS PREJUDI CIAL TO THE INTEREST OF REVENUE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, COMM ISSIONER OF INCOME TAX WAS NOT JUSTIFIED IN PASSING THE ORDER U/S 263 WITHOUT GIVING PROPER OPPORTUNITY OF HEARING/NO OPPORTUNITY OF HEARING. AS SUCH, THE SAM E IS LIABLE TO BE QUASHED. 3. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE, LEARNED COMMISSIONER OF INCOME TAX WAS NOT JUSTIFIED IN TREATING THE ENTIRE FRESH SHARE CAPITAL AND SHARE PREMIUM OF RS. 18,53,20,500/- AS UNEXPLAINED CASH C REDIT AND TREATING THE SAME AS INCOME OF THE ASSESSEE COMPANY. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEAR NED COMMISSIONER OF INCOME TAX WAS NOT JUSTIFIED IN ENHANCING THE INCOME OF TH E ASSESSEE BY TREATING THE ENTIRE SHARE CAPITAL/PREMIUM RAISED AS INCOME U/S 6 8, WHEN NO ADDITION UNDER SECTION 68 CAN BE MADE IN THE INSTANT CASE IN VIEW OF THE JUDGMENTS OF THE HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORT 319 ITR (ST.) 5 AND ALSO IN THE CASE OF BHARAT ENGINEERING & CONSTRUCTION CO. L TD. 83 ITR 187. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEAR NED COMMISSIONER OF INCOME TAX OUGHT TO HAVE CONSIDERED THAT THE ORDER PASSED BY THE ASSESSING OFFICER WAS PASSED AFTER PROPER INQUIRY OR INVESTIGATION ON THE ISSUE OF SHARE CAPITAL. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEAR NED COMMISSIONER OF INCOME TAX WAS NOT JUSTIFIED IN HOLDING THE SHARE CAPITAL/ PREMIUM TO BE INGENUINE ON THE BASIS OF A GENERALIZED BACKGROUND AND IN THE ABSENC E OF ANY SPECIFIC MATERIAL AGAINST THE ASSESSEE AND ON THE IRRELEVANT CONSIDER ATION. 4 ITA NO.1395/KOL/2016 M/S BEATLE TRADING PVT. LTD. A.YR.2011-12 4 7. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR DELETE ALL OR ANY OF THE GROUND OF APPEAL. 4. WE HAVE HEARD RIVAL SUBMISSIONS. WE FIND THAT T HE LD. CIT HAD PASSED AN ORDER EX PARTE DUE TO NON-APPEARANCE ON THE PART O F THE ASSESSEE BEFORE HIM. THE LD. AR BEFORE US FILED AN AFFIDAVIT DULY NOTARIZED STATING THE REASON FOR NON- APPEARANCE BEFORE THE LD. CIT AND PRAYED FOR SETTIN G ASIDE THE ISSUE TO THE FILE OF THE LD. CIT. WE FIND THAT THE LD. CIT INITIALLY SOU GHT TO INVOKE REVISIONARY JURISDICTION U/S 263 OF THE ACT ON THE GROUND THAT THE LD. AO HAD NOT MADE ENQUIRIES WITH REGARD TO CREDITWORTHINESS OF THE SH ARE SUBSCRIBERS TO PAY SHARE CAPITAL AND SHARE PREMIUM TO THE ASSESSEE COMPANY. FROM THE PERUSAL OF THE ORDER OF THE LD. CIT, WE FIND THAT THE LD. CIT ALSO HAD N OT CONDUCTED ANY ENQUIRY TO CONCLUDE THAT THE SHARE CAPITAL AND SHARE PREMIUM R ECEIVED BY THE ASSESSEE WAS BOGUS AND WE ALSO FIND THAT THE LD. CIT DID NOT HAV E THE BENEFIT OF FURTHER DETAILS THAT COULD HAVE BEEN FILED BY THE ASSESSEE BEFORE H IM FOR JUSTIFYING THE SHARE PREMIUM. ADMITTEDLY, THE ASSESSEE HAD NOT APPEARED BEFORE THE LD. CIT DESPITE REPEATED OPPORTUNITIES. FROM THE AFFIDAVIT FILED BY THE LD. AR BEFORE US, WE FIND THAT THE ASSESSEE HAD BEEN DEPENDENT ON ONE CHARTE RED ACCOUNTANT WHO HAS BEEN GIVEN THE BRIEF TO HANDLE THE INCOME TAX AFFAIRS BE FORE THE LD. CIT AND WHO IN TURN HAD NOT REPRESENTED THE ASSESSEE BEFORE THE LD . CIT AND THAT THE ASSESSEE WAS TOTALLY IN DARK WITH REGARD TO SUBJECT MENTIONED PR OCEEDINGS AND IT CAME TO THE KNOWLEDGE OF THE ASSESSEE ONLY ON RECEIPT OF THE OR DER OF THE LD. CIT U/S 263 OF THE ACT. WE FIND THE REASONING GIVEN IN THE AFFIDAV IT IS UNDERSTANDABLE AND DESERVED TO BE APPRECIATED AND HENCE WE DEEM IT FIT AND APPROPRIATE IN THESE FACTS AND CIRCUMSTANCES, IN THE INTEREST OF JUSTICE AND F AIR PLAY, TO REMAND THE ORDER OF LD. CIT TO THE FILE OF THE LD. CIT FOR DE NOVO ADJU DICATION OF THE ISSUE RAISED BY HIM, WITH REGARD TO SHARE CAPITAL AND SHARE PREMIUM , AFTER GIVING REASONABLE 5 ITA NO.1395/KOL/2016 M/S BEATLE TRADING PVT. LTD. A.YR.2011-12 5 OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDI NGLY GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 10.01.2018 SD/- SD/- [N.V. VASUDEVAN] [ M.BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 10.01.2018 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. M/S BEATLE TRADING PVT. LTD., 8, LAKE TOWN, BLOC K-B, KOLKATA-700089 2. PR. CIT-4, KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRIN GHEE SQUARE, KOLKATA-700069. 3..C.I.T.(A)- , KOLKATA 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S