M/s. Daffodil Dealers Pvt. Ltd., , Kolkata V. ITO, Ward - 8(2), Kolkata, Kolkata

ITA 1524/KOL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4540 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 27-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MD USMAN
• Assessee Lawyers: S JHAJHARIA AR SHRI SUJOY SEN
• Section: 143(3); 142(1); 133(6); 147; 131; 68; 148; 263; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA [BEFORE HONBLE SHRI S.S. GODARA, JM & SHRI M.BAL AGANESH, AM ] I.T.A NO. 1524/KOL/20 17 ASSESSMENT YEAR : 2008-0 9 M/S DAFFODIL DEALERS PVT. LTD. -VS- ITO, WAR D-8(2), KOLKATA [PAN: AACCD 6956 D ] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI S. JHAJHARIA, AR SHRI SUJOY SEN, AR FOR THE RESPONDENT : SHRI MD. USMAN, CIT DR DATE OF HEARING : 26.07.2018 DATE OF PRONOUNCEMENT : 03.08.2018 ORDER PER M.BALAGANESH, AM 1. THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAIN ST THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 16, KOLKATA [ IN SHORT THE LD CITA] IN APPEAL NO. 633/CIT-(A)-16/KOL/2015-16/W-8(2) DATED 31.1.2 017 AGAINST THE ORDER OF ASSESSMENT FRAMED BY THE LEARNED INCOME TAX OFFICER , WARD 8(2), KOLKATA [ IN SHORT THE LD AO] UNDER SECTION 144/263/143(3)/147 OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) DATED 14.03.2014 FOR THE ASSESSMENT YEAR 2008-09. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD CITA WAS JUSTIFIED IN UPHOLDING THE ADDITION MADE U/S 68 OF THE ACT TO WARDS SHARE CAPITAL IN THE SUM OF RS 10,31,00,000/- , IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2 ITA NO.1524/KOL/2017 M/S DAFFODIL DEALERS PVT. LTD. A.YR. 2008-09 2 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESS EE IS AN INVESTMENT COMPANY . THE ASSESSMENT FOR THE ASST YEAR 2008-09 WAS FRAMED U/S 143(3) / 147 OF THE ACT ON 12.5.2010 DETERMINING TOTAL INCOME OF RS 35,777/- A S AGAINST THE RETURNED INCOME OF RS NIL. THIS RE-ASSESSMENT WAS SUBJECTED TO REVISION PROCEEDINGS U/S 263 OF THE ACT BY THE LD CIT ON THE GROUND THAT THE LD AO HAD NOT PROPERL Y ENQUIRED AND VERIFIED THE GENUINENESS AND SOURCE OF SHARE CAPITAL AND SHARE P REMIUM AS WELL AS THE IDENTITY AND CREDITWORTHINESS OF THE SHAREHOLDERS WHO HAD APPLIE D FOR SHARES OF THE COMPANY. HENCE THE LD CIT PASSED THE REVISION ORDER U/S 263 OF THE ACT ON 12.3.2013 BY SETTING ASIDE THE ORDER PASSED BY THE LD AO U/S 147/143(3) OF THE ACT DATED 12.5.2010 WITH CERTAIN SPECIFIC GUIDELINES REGARDING INVESTIGATION TO BE CARRIED OUT WHILE ASSESSING THE ASSESSEE DE NOVO. THE LD AO OBSERVED THAT THE AS SESSEE HAD RAISED SHARE CAPITAL TO THE TUNE OF RS 10,31,00,000/- BY ISSUING SHARES AT A PR EMIUM. A NOTICE U/S 142(1) OF THE ACT DATED 15.11.2013 CALLING FOR CERTAIN DETAILS WA S ISSUED ON THE ASSESSEE ASKING IT TO PRODUCE AND SUBMIT CERTAIN DETAILS AND DOCUMENTS. THE SAID NOTICE COULD NOT BE SERVED ON THE ASSESSEE. LATER THE INSPECTOR OF INCOME TAX WAS DEPUTED TO SERVE THE NOTICE WHICH WENT INVAIN AND ACCORDINGLY THE SAID NOTICE W AS SERVED BY AFFIXTURE AT THE LAST RECORDED ADDRESS OF THE ASSESSEE. THERE WAS NO RES PONSE FROM THE ASSESSEE TO THIS NOTICE. LATER A SUMMONS U/S 131 OF THE ACT WAS ISSU ED TO THE DIRECTORS OF THE ASSESSEE COMPANY AS WELL AS OF THE SUBSCRIBER COMPANIES. AL L THE SUMMONS WERE RETURNED BACK BY THE POSTAL AUTHORITY WITH REMARKS MOVED / NOT F OUND/ NOT KNOWN / NO SUCH COMPANY IN THIS ADDRESS ETC. ACCORDINGLY THE SUMMONS U/S 131 OF THE ACT WAS SERVED BY AFFIXTURE. THERE WAS NO RESPONSE TO THIS SUMMONS EITHER FROM THE ASSESSEE OR FROM THE SUBSCRIBER COMPANIES. THE LD AO ACCORDINGLY OBSERV ED THAT THE TRANSACTIONS OF SHARE CAPITAL ARE NOT GENUINE ONE IN AS MUCH AS THE ASSES SEE HAD FAILED TO PRODUCE THE SHAREHOLDERS FOR VERIFICATION OF SHARE CAPITAL INVE STMENTS OBTAINED FROM THEM. THEREFORE, THE ENTIRE SHARE CAPITAL AND SHARE PREMI UM MONEY OF RS 10,31,00,000/- WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE BY THE LD AO. THE LD CITA UPHELD THE ACTION OF THE LD AO. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 3 ITA NO.1524/KOL/2017 M/S DAFFODIL DEALERS PVT. LTD. A.YR. 2008-09 3 4. WE HAVE HEARD THE RIVAL SUBMISSIONS. ACCORDING TO THE LD AR, THE SHAREHOLDERS OF THE ASSESSEE HAD DULY RESPONDED TO NOTICES ISSUED U /S 133(6) OF THE ACT DIRECTLY TO THE LD AO BY GIVING PROPER REPLIES WITH REGARD TO DETAILS CALLED FOR BY THE LD AO IN THE FIRST ROUND. THEREFORE, ACCORDING TO ASSESSEE, THE IDENT ITY OF SHAREHOLDERS STANDS PROVED. WE FIND THAT THE LD CIT IN HER SECTION 263 ORDER DATED 12.3.2013 HAD DIRECTED THE LD AO TO MAKE INDEPENDENT ENQUIRIES WITH THE SHAREHOLDERS OF THE ASSESSEE COMPANY IN THE MANNER KNOWN TO LAW AND NOT THROUGH THE ASSESSEE. THIS IS VERY CLEAR FROM THE DIRECTIONS OF THE LD CIT. IN RESPONSE TO THIS, TH E LD DR VEHEMENTLY OPPOSED THIS PLEA OF THE ASSESSEE AND CONTENDED THAT THE ASSESSEE COMPAN Y WAS VERY WELL AWARE OF THE REVISIONAL ORDER PASSED BY THE LD CIT AND SHOULD HA VE BROUGHT ALL EVIDENCES BEFORE THE LD AO TO SUBSTANTIATE THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF SHARE SUBSCRIBERS. THE LD AO HAS NOTED THAT THE ASSESSE E DID NOT CO-OPERATE WITH THE ASSESSMENT PROCEEDINGS AND , THEREFORE, THE ASSESSE E CANNOT BE GIVEN ANOTHER INNINGS. THE LD AO AFTER NOTICING THAT NONE APPEARED ON BEHA LF OF THE ASSESSEE AND ON BEHALF OF THE SUBSCRIBER COMPANIES, CONCLUDED THAT THE ASSESS EE HAD NOT CO-OPERATED AND , THEREFORE, ACCORDING TO HIM, THE IDENTITY AND GENUI NENESS OF THE SHAREHOLDER SUBSCRIBER COMPANIES COULD NOT BE ESTABLISHED BEYOND DOUBT AND , THEREFORE, HE MADE THE ADDITION OF RS 10,31,00,000/- . WE NOTE THAT THE LD CIT INV OKED THE REVISIONAL JURISDICTION U/S 263 OF THE ACT AND FOUND THAT THE ASSESSEE COMPANY IN ITS BALANCE SHEET HAS SHOWN TO HAVE INFUSED EQUITY SHARE CAPITAL OF RS 10,31,00,00 0/- INCLUDING SHARE PREMIUM AND SINCE THE LD AO HAD NOT ENQUIRED INTO THE SOURCE OF THE SHARE CAPITAL AND PREMIUM INFUSED INTO THE ASSESSEE COMPANY BY VERIFYING THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE SHAREHOLDERS, THE LD CIT FO UND THE AO WHILE DOING ASSESSMENT DID NOT EXERCISE THE ROLE OF INVESTIGATOR AND, THER EFORE, THE ORDER OF LD AO IS ERRONEOUS SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENU E AND DIRECTED THE LD AO TO MAKE FRESH ASSESSMENT AFTER TAKING INTO CONSIDERATION THE PERN ICIOUS PRACTICE OF CONVERTING BLACK MONEY BY THE MODUS OPERANDI AS DESCRIBED BY THE LD CIT. WE ALSO NOTE IN THE SAID BACKDROP, THE LD CIT HAS GIVEN CERTAIN GUIDELINES W HICH WERE GIVEN IN ORDER TO FACILITATE 4 ITA NO.1524/KOL/2017 M/S DAFFODIL DEALERS PVT. LTD. A.YR. 2008-09 4 DEEP INVESTIGATION INTO THE CASE. THE LD AO CANNOT REMAIN QUIET AFTER ISSUING SUMMONS U/S 131 TO THE SHARE SUBSCRIBER COMPANIES. THE SAM E WHEN WENT UNANSWERED, THE LD AO SHOULD HAVE RESORTED TO OTHER ACTIONS AVAILABLE AS PER LAW, WHICH WAS NOT DONE IN THE INSTANT CASE. WITHOUT RESORTING TO SUCH FURTHER VE RIFICATION / INVESTIGATION / ACTION AS PER LAW, THE LD AO OUGHT NOT TO HAVE DRAWN ANY ADVERSE INFERENCE AGAINST THE ASSESSEE COMPANY. 5. AT THE COST OF REPETITION, WE WOULD LIKE TO STAT E THAT THE LD CIT HAD SPECIFICALLY GIVEN THE MANNER IN WHICH INVESTIGATION AND FURTHER ENQUI RIES ARE TO BE CARRIED OUT BY THE LD AO TO UNDERSTAND THE GENUINENESS OF SHARE CAPITAL R AISED BY THE ASSESSEE COMPANY IN HIS ORDER PASSED U/S 263 OF THE ACT, WHEREIN IT IS SPEC IFICALLY MENTIONED THAT THE ENQUIRES AND INVESTIGATION SHOULD BE CARRIED OUT INDEPENDENT LY BY THE LD AO AND NOT THROUGH THE ASSESSEE. WE ALSO NOTE THAT SIMILARLY PLACED ASS ESSEES HAD CHALLENGED THE EXERCISE OF REVISIONAL JURISDICTION U/S 263 OF THE ACT BEFORE T HIS TRIBUNAL IN THOSE CASES , ONE OF IT OF SUBHALAKSHMI VANIJYA PVT LTD VS CIT IN ITA NO. 1104 /KOL/2014 DATED 30.7.2015, WHEREIN THE TRIBUNAL WAS PLEASED TO UPHOLD THE ORDE R PASSED BY THE LD CIT PASSED U/S 263 OF THE ACT , WHICH WE LEARN TO HAVE BEEN CONFIR MED BY THE HONBLE JURISDICTIONAL HIGH COURT AND THE SLP PREFERRED AGAINST THE DECISI ON OF THE HONBLE JURISDICTIONAL HIGH COURT HAS BEEN DISMISSED BY THE HONBLE SUPREM E COURT. WE NOTE THAT THE SHAREHOLDERS HAD DULY REPLIED DURING THE ORIGINAL R E-ASSESSMENT PROCEEDINGS CONFIRMING THE FACTUM OF INVESTMENTS BEFORE THE LD AO . WE F IND THAT IT IS NOT IN DISPUTE THAT THE ENTIRE TRANSACTIONS OF SHARE CAPITAL AND SHARE PREM IUM WAS THE SUBJECT MATTER OF VERIFICATION IN THE RE-ASSESSMENT PROCEEDINGS BY TH E LD AO, WHEREIN THE SHAREHOLDERS HAD DULY RESPONDED TO NOTICE U/S 133(6) OF THE ACT BY CONFIRMING THE FACT OF MAKING INVESTMENTS IN THE ASSESSEE COMPANY. THE SHAREHOLD ERS HAD ALSO DULY FURNISHED THEIR INCOME TAX ASSESSMENT PARTICULARS. PURSUANT TO DI RECTIONS OF THE LD CIT U/S 263 OF THE ACT, THE LD AO WAS MANDATED TO MAKE DIRECT VERIFICA TIONS ABOUT THE GENUINENESS OF THE TRANSACTIONS AND CREDITWORTHINESS OF THE SHAREHOLDE RS BY MAKING NECESSARY SPECIFIC 5 ITA NO.1524/KOL/2017 M/S DAFFODIL DEALERS PVT. LTD. A.YR. 2008-09 5 ENQUIRIES AS LISTED OUT IN THE REVISION ORDER U/S 2 63 OF THE ACT. THE LD CIT HAD SPECIFICALLY DIRECTED THE LD AO TO MAKE ENQUIRIES D IRECTLY FROM THE SHAREHOLDERS AND NOT THROUGH THE ASSESSEE. HENCE NON-APPEARANCE OF THE ASSESSEE BEFORE THE LD AO AND NON- PRODUCTION OF THE SHAREHOLDERS OF THE ASSESSEE COMP ANY BEFORE THE LD AO, INTENTIONALLY OR UNINTENTIONALLY DOES NOT MAKE ANY RELEVANCE HERE . THE LD CIT HAD DIRECTED THE LD AO TO INVESTIGATE INTO MULTIPLE LAYERS OF THE INVES TMENT IN SHARES MADE BY RESPECTIVE SHAREHOLDERS AND IDENTIFY THE ULTIMATE PERSON HOLDI NG CONTROLLING INTEREST INCLUDING THE CHANGE IN SHAREHOLDING, DIRECTORSHIP ETC AND THEN T AKE THE ENTIRE MATTER TO ITS LOGICAL CONCLUSION TO BRING OUT THE FACTS ON RECORD. FROM THE PERUSAL OF THE ASSESSMENT ORDER, WE FIND THAT THIS HAS NOT BEEN DONE BY THE LD AO. IN THIS REGARD, WE WOULD LIKE TO PLACE RELIANCE ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS JANS AMPARK ADVERTISING & MARKETING PVT LTD IN ITA NO. 525/2014 DATED 11.3.2015 WHEREIN AFTER NOTICING INADEQUATE ENQUIRY BY AUTHORITIES BELOW, T HE COURT HAD 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 HE REIN HAD COME UP WITH SOME PROOF OF IDENTITY OF SOME OF THE ENTRIES IN QUESTION. BUT, F ROM THIS INFERENCE, OR FORM THE FACT THAT THE TRANSACTIONS WERE THROUGH BANKING CHANNELS, IT DOES NOT NECESSARILY FOLLOWING THAT SATISFACTION AS TO THE CREDITWORTHINESS OF THE PART IES OR THE GENUINENESS OF THE TRANSACTIONS IN QUESTION WOULD ALSO HAVE BEEN ESTAB LISHED. 42. THE AO HERE MAY HAVE FAILED TO DISCHARGE HIS OBLIGATION TO CONDUCT A PRO PER INQUIRY TO TAKE THE MATTER TO LOGICAL CONCLUSION. BUT CIT(APPEALS), HAVING NOTICE D WANT OF PROPER INQUIRY, COULD NOT HAVE CLOSED THE CHAPTER SIMPLY BY ALLOWING THE APPE AL AND DELETING THE ADDITIONS MADE. IT WAS ALSO THE OBLIGATION OF THE FIRST APPELLATE A UTHORITY, AS INDEED OF ITAT, TO HAVE ENSURED THAT EFFECTIVE INQUIRY WAS CARRIED OUT, PAR TICULARLY IN THE FACT OF THE ALLEGATIONS OF THE REVENUE THAT THE ACCOUNT STATEMENTS REVEAL U NIFORM PATTERN OF CASH DEPOSITS OF EQUAL AMOUNTS IN THE RESPECTIVE ACCOUNTS PRECEDING THE TRANSACTIONS IN QUESTION. THIS NECESSITATED A DETAILED SCRUTINY OF THE MATERIAL SU BMITTED BY THE ASSESSEE IN RESPONSE TO THE NOTICE UNDER SECTION 148 ISSUED BY THE AO, AS A LSO THE MATERIAL SUBMITTED AT THE STAGE OF APPEALS, IF DEEMED PROPER BY WAY OF MAKING OR CAUSING TO BE MADE A 'FURTHER ENQUIRY' IN EXERCISE OF THE POWER UNDER SECTION 250 (4). HIS APPROACH NOT HAVING BEEN ADOPTED, THE IMPUGNED ORDER OF ITAT, AND CONSEQUENT LY THAT OF CIT(APPEALS), CANNOT BE APPROVED OR UPHELD. 5.1. IN VIEW OF THE AFORESAID FINDINGS IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE DECISION OF HONBLE DELH I HIGH COURT SUPRA, WE DEEM IT FIT 6 ITA NO.1524/KOL/2017 M/S DAFFODIL DEALERS PVT. LTD. A.YR. 2008-09 6 AND APPROPRIATE, IN THE INTEREST OF JUSTICE AND FAI R PLAY, TO REMAND THE MATTER BACK TO THE FILE OF THE LD AO FOR DE NOVO ASSESSMENT AND TO DEC IDE THE MATTER AS MANDATED BY THE LD CIT IN SECTION 263 ORDER, AFTER GIVING SUFFICIENT O PPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, THE GROUNDS RAISED BY THE A SSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 6. THE GROUND NO. 5 RAISED BY THE ASSESSEE IS GENER AL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 03.08.2018 SD/- SD/- [S.S. GODARA] [ M .BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEM BER DATED : 03.08.2018 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. M/S DAFFODIL DEALERS PVT. LTD.,C/O, SALARPURIA J AJODIA & CO. 7, C.R. AVENUE, KOLKATA-700072. 2. ITO, WARD-8(2), KOLKATA, 54/1, RAFI AHMED KIDWAI ROAD, KOLKATA-700016. 3..C.I.T.(A)- 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