Samayak Sales Pvt. Ltd, Kolkata V. PCIT-1, Kolkata

ITA 147/KOL/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 5875 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 22-04-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Assessment record; Reassessment proceedings; Set aside
• Section: 147; 68; 263; 143(3); 143(1); 195; 250; 73

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘B’ BENCH, KOLKATA Before SRI MANISH BORAD, ACCOUNTANT MEMBER & SRI SONJOY SARMA, JUDICIAL MEMBER I.T.A. No.: 147/Kol/2021 Assessment Year: 2011-12 Samayak Sales (P) Ltd.............................................Appellant [PAN: AADCS 8354 H] Vs. PCIT, Kolkata-1, Kolkata......................................Respondent Appearances by: Sh. Tarak Nath Jaiswal, Adv. & Sh. Akshay Ringasia, CA, appeared on behalf of the Assessee. Smt. Sucheta Chattopadhyay Ray, CIT, D/R, appeared on behalf of the Revenue. Date of concluding the hearing : May 24 th , 2022 Date of pronouncing the order : July 19 th , 2022 ORDER Per Manish Borad, Accountant Member: This appeal filed by the assessee pertaining to the Assessment Year (in short “AY”) 2011-12 is directed against the order passed u/s 263 of the Income Tax Act, 1961 (in short the “Act”) by ld. Pr. Commissioner of Income-tax, Kolkata-1, Kolkata [in short ld. “PCIT”] dated 31.03.2021. 2. The assessee is in appeal before the Tribunal raising the following grounds: “1. a) For that on the facts and in the circumstances of the case, the order passed by the ld. Pr. CIT u/s 263 of the Act is bad in law and is liable to be quashed. I.T.A. No.: 147/Kol/2021 Assessment Year: 2011-12 Samayak Sales (P) Ltd. Page 2 of 9 (b) For that on the facts and in the circumstances of the case, the ld. Pr. CIT was not justified in initiating proceedings u/s 263. 2. For that order passed u/s 143(3) /147 dated 26.11.2018 is not valid in the eye of law. As such, the instant order passed u/s 263 dated 31.03.2021 by the Pr. CIT, Kolkata-1 revising the said order u/s 143(3) /147 is also not sustainable in law and is liable to be quashed. 3.(a) For that the ld. Pr. CIT, Kolkata-1 was not justified in holding that the amount of sale consideration of Rs. 5,61,375/- received on account of sale of shares of M/s S.V. Electricals Ltd (Now, M/s. Nivyah Infrastructure & Telecom Services Ltd) was liable to be added back u/s 68. (b) For that the ld. Pr. CIT, Kolkata - 1 was not justified in holding that the amount of sale consideration of Rs. 63,34,831/- received on account of sale of shares of M/s Splash Media (Now, Loharuka Media & Infra Ltd) was liable to be added back u/s 68. 4. For that the appellant craves leave to add, alter or delete all or any of the grounds of appeal.” 3. Brief facts of the case as culled out from the records are that the assessee is a private limited company. Income of Rs. 1,78,360/- declared in return of income filed on 24.09.2011. Return processed under Section 143(1) of the Act on10.01.2012. Post receiving information from the Deputy Director of Income Tax (Investigation), re-assessment proceedings were carried out and the same were completed on 26.11.2018 accepting the returned income shown by the assessee. Subsequently, on perusal of the assessment records learned PCIT invoked the provisions of Section 263 of the Act and issued the following show cause notice to the assessee: “Whereas the undersigned had called for and examined the record of your case and it is considered that the impugned assessment-order passed u/s 143(3)/147 of the I T Act, 1961 by the ITO, Ward - 7(1), Kolkata on 26.11.2018 for A.Y. 2011-12 is, prima facie, erroneous in I.T.A. No.: 147/Kol/2021 Assessment Year: 2011-12 Samayak Sales (P) Ltd. Page 3 of 9 so far as it is prejudicial to the interests of the revenue for the following reasons: In the instant case, the assessment was completed at an income of Rs. 1,78,360/-. The assessment was completed u/s. 143(3)/147 on 26.11.2018. The assessment records of the assessee company were called for and on the basis of verification of materials on record it was found that the order is, prima fade, erroneous in so far as it is prejudicial to the interest of the revenue for the following reasons: (1) The assessee had transacted in the penny of M/s. S.V. Electricals Ltd (now- M/s. Nivyah Infrastructure and Telecom Services Ltd. bearing scrip code-517534). Total traded value in this scrip was for Rs.5,61,375/- which was accepted by the assessee in his submission dated 15.11.2018 and was even claimed in the PA. account for the relevant assessment year. Hence the amount of sale consideration for Rs.5,61,375/- was liable to be added back u/s. 68 of the Act. (2) The assessee had transacted in the penny stock- M/s. S. V. Electricals Ltd. (now- M/s. Nivyah Infrastructure and Telecom Services Ltd. bearing scrip code - 517534. It is also detected that the assessee had further transacted in another penny stock Splash Media (now Laharuka Media and Infra Ltd.) bearing scrip code- 512048. Total traded value in this scrip was for Rs.63,34,831/- which was accepted by the assessee in his submission dated 15.11.2018 and was even claimed in the P/L account for the relevant assessment year. Hence, the amount of sale consideration for Rs.63,34,831/- was liable to be added back u/s.68 of the Act. AO has passed the impugned assessment order without any application of mind nor conducting any enquiries or verifications which should have been made in this case. 2. Having regard to the facts and circumstances of the case and in law and in accordance with the provisions of Sea 263(1) of I T Act, 1961 you are hereby given an opportunity of being heard to show cause as to why the impugned assessment order passed u/s 143(3)/147 by ITO, Ward - 7(1), Kolkata on 26.11.2018 for A.Y. 2011- 12 should not be held as erroneous in so far as it is prejudicial to the interests of the revenue. You may accordingly furnish your written submissions u/s 263(1) of I.T. Act, 1961 on 28.01.2021 at 02:45 P.M. in this regard, elaborating and/or evidencing your contentions/submissions. Considering the pandemic situations arising due to COVID-19, you are requested to make written I.T.A. No.: 147/Kol/2021 Assessment Year: 2011-12 Samayak Sales (P) Ltd. Page 4 of 9 submissions with necessary details through E-mail ID: [e-mail]” 4. During the course of revisionary proceedings, it was submitted by the assessee that the issues mentioned in the show cause notice stands duly examined in detail by the Assessing Officer and all the relevant details along with supporting documents in connection with the said transactions referred in the show cause notice as reproduced above were filed/produced before learned Assessing Officer which were thoroughly examined by him. However, learned PCIT was not satisfied and he, after considering the judicial precedence, came to the conclusion that the assessment order under Section 147 of the Act dated 26.11.2018 is erroneous and prejudicial to the interests of the Revenue and deserves to be set aside to the file of the learned Assessing Officer for passing afresh assessment order considering the observations given in the impugned order. 5. Aggrieved, the assessee is now in appeal before the Tribunal. Learned Counsel for the assessee vehemently argued referring to the following written submissions and the summary of the arguments are categorised in three limbs and the same is reproduced below: “1 st Limb 1. That the AO had enquired in the form of obtaining necessary documents like contract note, proof of STT, bank statements etc. He had also perused the confirmation from stock broker confirming the said transaction and relying on the information as updated on the IT portal. Rather PCIT has wrongly mentioned that these actions are absent when the same were duly considered and part of assessment records. I.T.A. No.: 147/Kol/2021 Assessment Year: 2011-12 Samayak Sales (P) Ltd. Page 5 of 9 Thus, it is not a case of no enquiry and 263 can be invoked only in case of “no inquiry”. Reliance is placed on case of CIT v. Sunbeam Auto Ltd. [2010] 189 Taxman 436/[2011] 332 ITR 167 (Delhi) (para 10) and CIT v. Anil Kumar Sharma [2010] 194 Taxman 504/[2011] 335 ITR 83 (Delhi) (para 4) The above plea has been upheld in recent order of Satish Kumar Lakhmani v. Principal Commissioner of Income Tax-10, Kolkata 2021] 190 ITD 73 (Kolkata - Trib.) It is also submitted that on same set of facts, the Ld. PCIT had tried to impose his own changed opinion when the AO had already taken a possible view. This is not permissible in law as the dictum of Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83/109 Taxman 66. 2 nd Limb i) Once no addition is made against the “reason to believe” as recorded by AO, the very initiation of 148 becomes bad in law as held in case of CIT vs. Jet Airways (I) Ltd. (2011) 331 ITR 236 (Bom)(HC) and Ranbaxy Laboratories Ltd vs. CIT (2011) 60 DTR 77(Delhi) (High Court). Once the notice under 148 stands void, invocation of 263 is equally bad in law as held in a very recent judgement of Mumbai ITAT in case of Aishwarya Rai Bachchan v. Principal Commissioner of Income-tax-8 [[2022] 135 taxmann.com 335 (Mumbai - Trib.)] 3 rd Limb i) That the Ld. PCIT in his order has directed the AO to make an addition under section 68 terming the present transaction to be a case of bogus long term capital gain which pertains to a transaction of unexplained cash credit. However, in case of present transaction, there is no such allegation whatsoever as all the money had flown from assessee’s bank account and credited back to it via the Bombay Stock Exchange. Unfortunately, the PCIT has directed the addition of a single leg of transaction without dealing with the fact that the assessee has rather incurred a loss and not LTCG and considering a single leg of transaction is equally unjustified. Thus, terming the order to be erroneous on such grounds is completely bad in law. Reliance placed on orders of jurisdictional HC in case of: CIT vs Carbo Industries holdings Ltd. 244 ITR 422 (Cal) CIT vs Emerald Commercial Ltd. 250 ITR 539 (Cal)” I.T.A. No.: 147/Kol/2021 Assessment Year: 2011-12 Samayak Sales (P) Ltd. Page 6 of 9 6. Per contra, learned Department Representative vehemently argued supporting the order of the learned PCIT. 7. We have heard rival contentions and perused the records placed before us. Though the assessee has raised various grounds of appeal but they all challenge the legality of the revisionary proceedings carried out under Section 263 of the Act and also contending that the learned PCIT erred in appreciating the fact that the issues raised in the show cause notice already stand examined by the learned Assessing Officer by carrying out a thorough enquiry. 8. We will first take of the arguments of the learned Counsel for the assessee mentioned in the second limb stating that in case of a re-assessment proceedings, if no addition is made on the reasons to believe “as recorded by the Assessing Officer” then such re- assessment proceedings are bad in law and the subsequent invocation of Section 263 of the Act on such order is equally bad in law. Examining this contention of the learned Counsel for the assessee in light of the facts of the case, we find that a notice under Section 148 of the Act was issued on 28.03.2018 pertaining to the assessment year 2011-12 for the reason that during the course of investigation in the case of M/s. Nivyah Infrastructure and Telecom Services Ltd., it was revealed that this company used to facilitate introduction of unaccounted income in the form of exempt capital gain or short-term capital loss in their books of accounts. It is, further, recorded in the notice under Section 148 of the Act that one of such beneficiary companies is the assessee which has traded in this scrip i.e. M/s. Nivyah Infrastructure and I.T.A. No.: 147/Kol/2021 Assessment Year: 2011-12 Samayak Sales (P) Ltd. Page 7 of 9 Telecom Services Ltd. during financial year 2010-11. We, further, observe that the re-assessment proceedings were carried out for the above stated reasons and the assessee filed all relevant details including bank statement, audit report and other documents pertaining to financial year 2010-11 and after considering these documents learned Assessing Officer kept the returned income unchanged. In other words, no addition was made on the issue raised in the reasons recorded. Now, since no addition has been made on the reasons recorded the re-assessment proceedings in itself becomes bad in law. Now, whether such re-assessment proceedings which are itself bad in law can be a subject matter of revisionary proceedings? 9. We find that the decision of the coordinate bench of Mumbai Tribunal in the case of Aishwariya Rai Bachchan vs. PCIT-8 reported in [2022] 135 taxmann.com 335 (Mumbai-Trib.) is squarely applicable on the issue raised before us and the facts of the case are almost identical. Relevant observation of the coordinate bench of Mumbai Tribunal in para no. 4.1 of this decision reads as follows: “ 4.1. One more excruciating fact that needs to be addressed in the instant case is that the ld. PCIT herein is only seeking to revise the order passed by the ld. AO u/s.143(3) r.w.s. 147 of the Act dated 12/12/2018. In the said reassessment proceedings, the ld. AO had not even made any addition despite the fact that he had reason to believe that income of Rs.11,55,330/- had escaped assessment in the hands of the assessee which was sought to be taxed u/s.56 of the Act as per the reasons recorded. Hence, when the very basis of reasons recorded by the ld. AO was ultimately not added by the ld. AO in the reassessment proceedings, then the primary reason to believe that income of the assessee had escaped assessment fails and such reassessment cannot be treated as a valid order in the eyes I.T.A. No.: 147/Kol/2021 Assessment Year: 2011-12 Samayak Sales (P) Ltd. Page 8 of 9 of law. The same is to be declared as void ab initio. Reliance in this regard was rightly placed on the decision of the Hon'ble Jurisdictional High Court in the case of CIT v. Jet Airways (I) Ltd. [2010] 195 Taxman 117/[2011] 331 ITR 236 (Bom.). When an assessment framed by the ld. AO is unsustainable in the eyes of law, the said invalid and illegal order cannot be subject matter of section 263 proceedings. On this count also, the revision order passed by the ld. PCIT u/s.263 of the Act deserves to be quashed.” 10. On going through the above finding of this Tribunal we find that the same is squarely applicable on the present case before us and we, therefore, respectfully following the same, are of the considered view that if the assessment framed by learned Assessing Officer is unsustainable in the eyes of law, such order cannot be a subject matter of proceedings under Section 263 of the Act and such revision orders passed under Section 263 of the Act deserves to be quashed. 11. We, therefore, quash the impugned order passed under Section 263 of the Act holding it to be bad in law and relevant grounds raised by the assessee are allowed. 12. In the result, the appeal filed by the assessee is allowed. Kolkata, the 19 th July, 2022. Sd/- Sd/- [Sonjoy Sarma] [Manish Borad] Judicial Member Accountant Member Dated: 19.07.2022 Bidhan (P.S.) I.T.A. No.: 147/Kol/2021 Assessment Year: 2011-12 Samayak Sales (P) Ltd. Page 9 of 9 Copy of the order forwarded to: 1. Samayak Sales (P) Ltd., C/o Subash Agarwal & Associates, Advocates Siddha Gibson, 1, Gibson Lane, Suite 213, 2 nd Floor, Kolkata-700 069. 2. PCIT, Kolkata-1, Kolkata. 3. CIT(A)- 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. True copy By order Assistant Registrar ITAT, Kolkata Benches Kolkata