Dhenu Merchandise Pvt. Ltd., , Kolkata V. ITO, Ward - 6(1), Kolkata , Kolkata

ITA 1745/KOL/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 9844 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 28-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K TIWARI
• Assessee Lawyers: M D SHAH
• Keywords: Unexplained cash credit; Revision of order; Opportunity of being heard; Principle of natural justice; Reassessment proceedings
• Section: 142(1); 131; 263; 68

Judgement Text

1 ITA NO. 1745/KOL/2017 DHENU MERCHANDISE PVT. LTD., AY 2008-09 , D , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: KOL KATA ( ) BEFORE . , /AND . . , ) [BEFORE SHRI J. SUDHAKAR REDDY, AM & SHRI A. T. VA RKEY, JM] I.T.A. NO. 1745/KOL/2017 ASSESSMENT YEAR: 2008-09 DHENU MERCHANDISE PVT. LTD. (PAN: AABCD1124A) VS. INCOME-TAX OFFICER, WARD-6(1), KOLKATA APPELLANT RESPONDENT DATE OF HEARING 01.08.2018 DATE OF PRONOUNCEMENT 26.09.2018 FOR THE APPELLANT SHRI M. D. SHAH, AR FOR THE RESPONDENT SHRI A. K. TIWARI, CIT, DR ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)- 17, KOLKATA DATED 20.03.2017 FOR AY 2008-09. 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. 6,40,85,000/- 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. 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 WITHOUT AFFORDING PR OPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND IGNORING ALL MATERIAL EVIDENCES WHICH WERE ALREADY ON RECORD SUBMITTED DURING ASSESSMENT PROCEEDINGS AND HENCE THE ADDITIO N OF RS. 6,40,85,000/- U/S. 68 OF THE ACT SUSTAINED BY HIM IS ERRONEOUS AND AN ARBITRARY ACTION. HENCE, HE URGED BEFORE THE 2 ITA NO. 1745/KOL/2017 DHENU MERCHANDISE PVT. LTD., AY 2008-09 BENCH TO SET ASIDE THE ORDER OF LD. CIT(A) AND REST ORE THE MATTER TO THE FILE OF THE AO FOR FRESH ADJUDICATION. ON THE OTHER HAND, THE LD. DR R ELIED ON THE ORDER OF LD. CIT(A). WE NOTE THAT AO AFTER RECEIPT OF LD. CITS ORDER U/S. 263 OF THE ACT DATED 28.03.2013 HAD ISSUED FORMAL NOTICE U/S. 142(1) OF THE ACT AND QUE STIONNAIRE WAS SERVED UPON THE ASSESSEE ON 16.12.2013. THEREAFTER ISSUED NOTICE U/S. 131 OF THE ACT FOR APPEARANCE OF THE ASSESSEE COMPANYS DIRECTOR. BECAUSE OF NON-APPEARANCE OF T HE DIRECTORS OF THE ASSESSEE COMPANY THE AO HAS MADE THE ADDITION. WHEREAS WE NOTE THAT THE LD. CITS DIRECTION IN SIMILAR CASE WAS TO MAKE ENQUIRIES TO UNRAVEL THE MODUS OPE RANDI 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: 3. IN THE LIGHT OF AFORESAID ORDER PASSED U/S 263 OF I.T. ACT BY LD. CIT, KOL-II, KOLKATA, A FORMAL NOTICE U/S 142(1) OF THE INCOME TAX ACT, 196 1 AND QUESTIONNAIRE WAS ISSUED AND SERVED UPON THE ASSESSEE ON 16.12.2013, ASKING IT T O PRODUCE AND SUBMIT CERTAIN DETAILS AND DOCUMENTS TO SUBSTANTIATE ITS RETURN OF INCOME. NON E APPEARED IN RESPONSE TO THE SAID NOTICE. 4. IT WAS NOTICED THE ASSESSEE DURING THE YEAR HAS RAISED A PAID-UP SHARE CAPITAL OF RS. 6.40 CRORES BY ISSUING EQUITY SHARES INCLUDING PREMIUM. TO VERIFY THE GENUINENESS OF THE SAID TRANSACTIONS AND TO VERIFY THE IDENTITY AND CREDITW ORTHINESS OF THE SHAREHOLDERS OF THE ASSESSEE COMPANY, NOTICE U/S 131 OF I.T. ACT WAS IS SUED TO DIRECTORS. THEY WERE ASKED TO APPEAR PERSONALLY BEFORE THE UNDERSIGNED AND TO PRO DUCE/FURNISH DETAILS/DOCUMENTS IN SUPPORT OF THE JUSTIFICATION FOR THE INVESTMENT MAD E BY THEM IN THE ASSESSEE COMPANY AND OTHER DETAILS AS ASKED FOR. BUT NONE WAS APPEARED I N RESPONSE TO THE NOTICE U/S 131 OF IT ACT 1961. FROM THE AFORESAID FACTS AND DISCUSSION IT IS EVIDE NT THAT ASSESSEE HAS NOTHING TO SAY IN THIS MATTER. IT IS VERY CLEAR THAT ASSESSEE HAS INTRODUC ED ITS OWN UNACCOUNTED FUND IN THE FORM OF SHARE APPLICATION MONEY, TO LEGALIZE ITS OWN BLACK MONEY. CONSIDERING THE AFORESAID FACTS AND DISCUSSION, SHA RE APPLICATION MONEY OF RS. 6.40 CRORES RECEIVED BY THE ASSESSEE DURING THE YEAR IS DISALLO WED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE AS UNACCOUNTED CASH CREDIT IN THE BOOKS OF THE ASSESSEE AS PER THE PROVISIONS OF SECTION 68 OF I. T. ACT.. 3 ITA NO. 1745/KOL/2017 DHENU MERCHANDISE PVT. LTD., AY 2008-09 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 FORMAL NOTIC E U/S. 142(1) OF THE ACT WAS ISSUED BY AO AS NOTED BY HIM IN THE ASSESSMENT ORDER I.E. FIX ING THE DATE OF HEARING ON 16.12.2013. THEREAFTER, AO IN THE ASSESSMENT ORDER NOTES THAT H E ISSUED NOTICE U/S. 131 OF THE ACT TO THE DIRECTORS OF ASSESSEE COMPANY TO APPEAR BEFORE HIM. HOWEVER, THE CONTENTION OF THE ASSESSEE IS THAT THE DIRECTORS DID NOT RECEIVE ANY SUCH NOTICE. WE NOTE THAT THOUGH THE AO HAS STATED THAT HE HAS ISSUED SUMMONS U/S. 131 OF T HE ACT, NO DATES OF ISSUE OF SUMMONS HAVE BEEN MENTIONED IN THE ASSESSMENT ORDER. WE NO TE THAT NO OTHER INVESTIGATION WAS CONDUCTED BY AO IS DISCERNABLE FROM THE ORDER. SO, WE FIND FORCE IN THE SUBMISSION OF THE LD. AR THAT NO PROPER OPPORTUNITY BEFORE THE AO DUR ING THE REASSESSMENT PROCEEDINGS BECAUSE ONLY ONE DATE WAS FIXED FOR HEARING ON 16.1 2.2013 TO ASSESSEE COMPANY. WE NOTE THAT SINCE THE DIRECTORS OF ASSESSEE COMPANY COULD NOT APPEAR BEFORE THE AO IN PURSUANCE OF THE SUMMONS U/S. 131 (THIS FACT OF SUMMONS ISSUE D IS CONTESTED BY ASSESSEE), THE AO SADDLED THE ADDITION BY DRAWING ADVERSE INFERENCE I S PER-SE WITHOUT APPLICATION OF MIND, WHICH ACTION OF A.O. CANNOT BE COUNTENANCED. SO, W E FIND FORCE IN THE SUBMISSION OF THE LD. AR THAT NO PROPER OPPORTUNITY WAS GIVEN TO ASSE SSEE BY AO DURING THE REASSESSMENT PROCEEDINGS AND SO WE ARE, THEREFORE, OF THE OPINIO N THAT ASSESSEE DID NOT GET PROPER OPPORTUNITY BEFORE THE AO DURING REASSESSMENT PROCE EDINGS. THE HONBLE (THREE JUDGE BENCH) OF THE HONBLE SUPREME COURT IN TIN BOX COMP ANY 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 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. 4 ITA NO. 1745/KOL/2017 DHENU MERCHANDISE PVT. LTD., AY 2008-09 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: 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 5 ITA NO. 1745/KOL/2017 DHENU MERCHANDISE PVT. LTD., AY 2008-09 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 26/09/201 8 SD/- SD/- (J. SUDHAKAR REDDY) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 26TH SEPTEMBER, 2018 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 APPELLANT DHENU MERCHANDISE PVT. LTD., C/O D. J. SHAH & CO., KALYAN BHAVAN, 2, ELGIN ROAD, KOLKAT-20. 2 RESPONDENT ITO, WARD-6(1), KOLKATA 3 4 5 CIT(A)- 17, KOLKATA (SENT THROUGH E-MAIL) CIT , KOLKATA DR, KOLKATA BE NCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, SR. PVT. SECRETARY