Marina Ship Brokers , CHENNAI V. ITO Non Corporate Ward 11(2) , CHENNAI

ITA 1956/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6115 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 07-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: P RAGHUNATHAN
• Keywords: Principle of natural justice; Accommodation entries

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.1956/MDS/2017 ( )( / ASSESSMENT YEAR : 2013-14 M/S MARINA SHIP BROKERS, M/S RAGHUNATH & ASSOSICATES, ADVOCATES, 2 ND FLOOR, LAKSHMI BUILDING, KANNUR ROAD, CALICUT-673 001. KERALA. PAN : AATFM 7860 M V. THE INCOME TAX OFFICER, NON-CORPORATE WARD 11(2), CHENNAI. (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SHRI P. RAGHUNATHAN, ADVOCATE -.+, / 0 / RESPONDENT BY : MS. S. VIJAYAPRABHA, JCIT 1 / 2% / DATE OF HEARING : 21.09.2017 3') / 2% / DATE OF PRONOUNCEMENT : 27.09.2017 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 13, CHEN NAI, DATED 04.05.2017 AND PERTAINS TO ASSESSMENT YEAR 2013-14. 2 I.T.A. NO.1956/MDS/17 2. SHRI P. RAGHUNATHAN, THE LD. COUNSEL FOR THE ASS ESSEE, SUBMITTED THAT FOR THE YEAR UNDER CONSIDERATION, TH E NET PROFIT DISCLOSED BY THE ASSESSEE IS ABOUT ` 40 LAKHS. OUT OF THIS ` 40 LAKHS, A SUM OF ` 20 LAKHS WAS DONATED TO M/S HERBICURE HEALTH CARE AND BIO HERBAL HEALTH FOUNDATION. ANOTHER SUM OF ` 3 LAKHS WAS DONATED TO SCHOOL OF HUMAN GENETICS AND POPULAT ION HEALTH. ACCORDING TO THE LD. COUNSEL, BOTH THE INSTITUTIONS WERE RESEARCH INSTITUTIONS, THEREFORE, THE ASSESSEE IS ELIGIBLE F OR DEDUCTION UNDER SECTION 35(1)(II) OF THE INCOME-TAX ACT, 1961 (IN S HORT 'THE ACT'). ACCORDING TO THE LD. COUNSEL, A SURVEY WAS CONDUCTE D IN THE PREMISES OF THE ABOVE SAID TWO RESEARCH ORGANIZATIO NS AT KOLKATA AND IT WAS FOUND DURING THE COURSE OF SURVEY THAT T RANSACTIONS OF DONATIONS WERE NOT GENUINE AND IT WAS ONLY ACCOMMOD ATION ENTRY ROUTED THROUGH BANKING CHANNEL. ACCORDING TO THE L D. COUNSEL, THE ASSESSEE, IN FACT, DONATED THE FUNDS AND THE FUNDS WERE TRANSFERRED THROUGH RTGS MODE TO THE ACCOUNT OF THE RESPECTIVE RESEARCH INSTITUTIONS. 3. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITT ED THAT THE REVENUE AUTHORITIES APPEAR TO HAVE EXAMINED SOME PE RSONNEL IN KOLKATA. THE PERSONS WHO WERE EXAMINED BY THE REVE NUE 3 I.T.A. NO.1956/MDS/17 AUTHORITIES CLAIMED THAT THEY HAVE REFUNDED THE FUN DS TO THE COMPANIES WHO ARE IDENTIFIED BY THE DONORS AFTER TA KING SMALL AMOUNT TOWARDS COMMISSION. ACCORDING TO THE LD. CO UNSEL, A COPY OF STATEMENT AND OTHER DOCUMENTS RELIED ON BY THE A SSESSING OFFICER FOR COMPLETING THE ASSESSMENT WERE NOT FURN ISHED TO THE ASSESSEE, THEREFORE, THE ASSESSEE IS NOT IN A POSIT ION TO EXPLAIN THE CASE IN AN EFFECTIVE MANNER BEFORE THE ASSESSING OF FICER AND BEFORE THE CIT(APPEALS). EVEN NOW, ACCORDING TO THE LD. C OUNSEL, A COPY OF THE STATEMENT SAID TO BE RECORDED BY REVENUE AUT HORITIES AND OTHER RELEVANT DOCUMENTS RELIED ON BY THE ASSESSING OFFICER WERE NOT FURNISHED TO THE ASSESSEE. PLACING RELIANCE ON THE JUDGEMENT OF APEX COURT IN KISHANCHAND CHELLARAM V. CIT 90 TMI 3 , 1980, SC, THE LD. COUNSEL SUBMITTED THAT EVIDENCE COLLECTED A T THE BACK OF THE ASSESSEE HAS TO BE CONFRONTED TO THE ASSESSEE GIVIN G AN OPPORTUNITY TO REBUT THE EVIDENCE, OTHERWISE THE SA ME CANNOT BE RELIED UPON BY THE REVENUE AUTHORITIES. PLACING RE LIANCE ON THE JUDGEMENT OF DELHI HIGH COURT IN CIT V. SMC SHARE B ROKER LTD. 159 TAXMAN 306, THE LD. COUNSEL SUBMITTED THAT THE STAT EMENT CANNOT BE RELIED UPON UNLESS AN OPPORTUNITY WAS GIVEN TO T HE ASSESSEE TO CROSS-EXAMINE. 4 I.T.A. NO.1956/MDS/17 4. ON A QUERY FROM THE BENCH, IS THERE ANY SPECIAL REASON FOR DONATING THE INSTITUTIONS IN KOLKATA WHEN THERE ARE SEVERAL INSTITUTIONS OF SIMILAR NATURE IN THE CITY OF CHENN AI? THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE HAS CHOSEN THE KOLKATA INSTITUTIONS FOR GIVING DONATION. SINCE DONATIONS WERE GIVEN TO THE RESEARCH INSTITUTIONS, ACCORDING TO THE LD. COUNSEL, THE ASS ESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 35(1)(II) OF THE ACT. SINC E A COPY OF STATEMENT AND OTHER DOCUMENTS WERE NOT FURNISHED TO THE ASSESSEE, ACCORDING TO THE LD. COUNSEL, THERE WAS A GROSS VIO LATION OF PRINCIPLES OF NATURAL JUSTICE. 5. WE HAVE HEARD MS. VIJAYAPRABHA, THE LD. DEPARTME NTAL REPRESENTATIVE ALSO. ACCORDING TO THE LD. D.R., T HE ASSESSEE HAS NOT REQUESTED EITHER THE ASSESSING OFFICER OR ANY O THER INCOME-TAX AUTHORITIES TO GIVE COPY OF STATEMENT AND OTHER DOC UMENTS . SINCE THE ASSESSEE HAS NOT MADE ANY REQUEST BEFORE THE LO WER AUTHORITIES, ACCORDING TO THE LD. D.R., THE ASSESSE E CANNOT MAKE ANY COMPLIANT AT THIS STAGE. ON A QUERY FROM THE B ENCH, IS IT NECESSARY TO MAKE A REQUEST BY THE ASSESSEE IN RESP ECT OF STATEMENT AND DOCUMENTS WHICH WERE RELIED UPON BY T HE ASSESSING OFFICER IN THE ASSESSMENT ORDER? THE LD. D.R. SUBM ITTED THAT AS 5 I.T.A. NO.1956/MDS/17 PER THE OFFICE MANUAL OF INCOME-TAX DEPARTMENT, THE ASSESSEE HAS TO MAKE REQUEST IF IT LIKES TO HAVE A COPY OF STATE MENT AND OTHER MATERIAL RELIED UPON BY THE ASSESSING OFFICER. THE REFORE, ACCORDING TO THE LD. D.R., THERE IS NO VIOLATION OF PRINCIPLE S OF NATURAL JUSTICE SINCE NO REQUEST WAS RECEIVED BY THE ASSESSING OFFI CER OR THE CIT(APPEALS) AT ANY STAGE OF PROCEEDING. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. FROM THE ORDERS OF THE LOWER AUTHORITIES IT APPEARS THAT OUT OF ` 40 LAKHS OF NET PROFIT, ` 23 LAKHS WAS DONATED TO TWO INSTITUTIONS AT KOLKATA FOR THE PURPOSE OF CLAIMING DEDUCTION UNDER SECTION 35(1)(II) OF TH E ACT. ON THE BASIS OF THE SURVEY CONDUCTED BY THE REVENUE AUTHOR ITIES IN THE PREMISES OF THE ABOVE SAID TWO RESEARCH INSTITUTION S AT KOLKATA, IT WAS FOUND THAT THE SAID INSTITUTIONS WERE PROVIDING ACCOMMODATION ENTRIES BY RECEIVING BOGUS DONATION. ONE OF THE DI RECTORS WHO WAS EXAMINED, CATEGORICALLY ADMITTED THAT THE DONATIONS WERE RECEIVED FROM VARIOUS PERSONS ACROSS THE COUNTRY AND AFTER R ECEIVING SMALL AMOUNTS OF CASH AT 3% IN THE INITIAL YEAR TO 8% IN THE LATER YEARS, THE BALANCE AMOUNT WAS RETURNED BACK TO THE COMPANIES/P ERSONS WHO ARE IDENTIFIED BY THE DONORS. SOME OF THE FUNDS AL SO APPEAR TO HAVE 6 I.T.A. NO.1956/MDS/17 BEEN REFUNDED TO THE DONORS THROUGH BANKING CHANNEL . FROM THE ORDER OF THE ASSESSING OFFICER IT APPEARS THAT ONE OF THE INSTITUTIONS, NAMELY, SCHOOL OF HUMAN GENETICS AND POPULATION HEA LTH MOVED THE SETTLEMENT COMMISSION AND ADMITTED THAT THEY HA VE PROVIDED ACCOMMODATION ENTRIES IN RESPECT OF BOGUS DONATIONS RECEIVED BY THEM. SIMILARLY, THE DIRECTOR OF HERBICURE HEALTHC ARE BIO HERBAL RESEARCH FOUNDATION HAS ALSO ADMITTED TO HAVE GIVEN ACCOMMODATION ENTRIES AFTER RECEIVING COMMISSION. THE ASSESSING OFFICER AFTER REPRODUCING THE STATEMENT RECORDED FR OM THE RESPECTIVE PERSONS, HAS CONCLUDED THAT THE CLAIM OF DONATION M ORE THAN 50% OF PROFIT WAS FAR-FETCHED ONE. 7. NOW THE ISSUE BEFORE THIS TRIBUNAL IS WHETHER TH E ASSESSEE IS ENTITLED TO RECEIVE COPY OF STATEMENT AND OTHER MATERIAL WHICH WERE RELIED UPON BY THE ASSESSING OFFICER IN THE AS SESSMENT ORDER? THE REVENUE CLAIMS THAT AS PER OFFICE MANUAL / PROC EDURE, UNLESS A REQUEST WAS RECEIVED FROM THE ASSESSEE FOR FURNISHI NG OF COPY OF STATEMENT AND OTHER DOCUMENTS, THE REVENUE NEED NOT PROVIDED SUCH STATEMENT AND DOCUMENTS. THE FACT REMAINS THA T THE PROCEEDING BEFORE THE ASSESSING OFFICER IS A JUDICI AL PROCEEDING UNDER SECTION 136 OF THE ACT. WHEN A STATEMENT OR OTHER MATERIAL 7 I.T.A. NO.1956/MDS/17 COLLECTED BY THE ASSESSING OFFICER OR OTHER INCOME- TAX AUTHORITIES IN THE COURSE OF INVESTIGATION OR ENQUIRY, THE SAME HA S TO BE FURNISHED TO THE ASSESSEE AND AN OPPORTUNITY SHALL BE GIVEN T O THE ASSESSEE TO REBUT THE SAME. IN INDIA, WE ARE FOLLOWING ADVE RSARY SYSTEM OF JUDICIAL ADMINISTRATION, THEREFORE, NO ORDER CAN BE PASSED AGAINST ANY PERSON BY THE JUDICIAL AUTHORITIES / OFFICERS W HO ARE ENTRUSTED WITH JUDICIAL WORK WITHOUT FURNISHING RELEVANT COPI ES OF THE DOCUMENT AND STATEMENT ON WHICH RELIANCE WAS PLACED. 8. IN THIS CASE, ADMITTEDLY, THE ASSESSING OFFICER PLACED RELIANCE ON THE STATEMENT RECORDED DURING THE COURS E OF SURVEY OPERATION AND OTHER MATERIAL FOUND DURING THE COURS E OF SURVEY OPERATION. PRINCIPLES OF NATURAL JUSTICE IS ONE OF THE CORDIAL RULE TO BE FOLLOWED IN THE ADVERSARY SYSTEM OF JUDICIAL ADM INISTRATION. RULE OF LAW IS SUPREME IN THIS COUNTRY, THEREFORE, UNLES S IT OTHERWISE PROVIDED IN THE RELEVANT STATUTE ENACTED BY THE LEG ISLATURE, THE PRINCIPLES OF NATURAL JUSTICE CANNOT BE TAKEN AWAY BY MEANS OF THE PROCEDURE OR THE FORMALITIES PRESCRIBED IN THE OFFI CE MANUAL WHICH IS MEANT FOR THE INTERNAL ADMINISTRATION OF DEPARTMENT . IN THIS CASE, EVEN THE OFFICE MANUAL WAS NOT BROUGHT TO THE NOTIC E OF THE BENCH EVEN THOUGH THE LD. D.R. CLAIMS THAT AS PER OFFICE MANUAL, COPIES 8 I.T.A. NO.1956/MDS/17 NEED TO BE FURNISHED ONLY ON REQUEST. THIS TRIBUNA L IS OF THE CONSIDERED OPINION THAT IRRESPECTIVE OF THE REQUEST OF THE ASSESSEE FOR THE COPIES OF STATEMENT AND DOCUMENTS, THE SAME SHALL BE FURNISHED TO THE ASSESSEE IN CASE THE ASSESSING OFF ICER INTENDED TO RELY ON SUCH STATEMENT AND THE DOCUMENTS. IN THIS CASE, THE COPIES OF THE STATEMENT AND OTHER DOCUMENTS RELIED UPON BY THE ASSESSING OFFICER WERE NOT FURNISHED TO THE ASSESSEE, THEREFO RE, THERE WAS GROSS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. ACCORDINGLY, THE ORDERS OF THE AUTHORITIES BELOW ARE SET ASIDE AND T HE ENTIRE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL FURNISH THE COPIES OF DOCUMENTS AND S TATEMENT TO THE ASSESSEE AND GIVE SUFFICIENT OPPORTUNITY TO REBUT T HE SAME, AND THEREAFTER DECIDE THE ISSUE AFRESH IN ACCORDANCE WI TH LAW. 9. IT IS MADE CLEAR THAT THIS BEING AN ACCOMMODATIO N ENTRY AND SUCH TYPE OF DONATIONS ARE RAMPANT FROM CHENNAI TO KOLKATA INSTITUTIONS, THE ASSESSING OFFICER SHALL MAKE A TH OROUGH INVESTIGATION. THE ASSESSING OFFICER SHALL ALSO EX AMINE, IF NECESSARY, THROUGH HIS COUNTERPART AT KOLKATA HOW T HE BANK ACCOUNTS ARE OPENED AT KOLKATA BY SUCH INSTITUTIONS . WHETHER ANY BANK OFFICIALS WERE INVOLVED IN OPENING SUCH ACCOUN TS ALSO NEEDS TO 9 I.T.A. NO.1956/MDS/17 BE FOUND OUT SO THAT THIS KIND OF IRREGULARITIES CA N BE PUT TO AN END AT EARLIER STAGE. 10. WITH THE ABOVE OBSERVATION, THE APPEAL OF THE A SSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 27 TH SEPTEMBER, 2017 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 27 TH SEPTEMBER, 2017. KRI. / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-13, CHENNAI 4. PRINCIPAL CIT-8, CHENNAI-34 5. 7: -2 /DR 6. ( ; /GF.