DCIT, C.C.-XXII, Kolkata, Kolkata V. M/s. Appeline Cosmetics & Toiletries Ltd., New Delhi

ITA 2181/KOL/2009

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8090 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 23-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 31-12-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S C BABERIA
• Assessee Lawyers: A K TIBREWAL
• Keywords: Unexplained cash credit
• Section: 143(3); 133(6); 68; 148

Judgement Text

I.T.A. NO.2181/ KOL. / 2009 ASSESSMENT YEAR : 2004-05 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI PRAMOD KUMAR (ACCOUNTANT MEMBER), AND SHRI MAHAVIR SINGH (JUDICIAL MEMBER) I.T.A. NO.: 2181/ KOL. / 2009 ASSESSMENT YEAR : 2004-05 DEPUTY COMMISSIONER OF INCOME TAX,..APPELLANT CENTRAL CIRCLE-XXII, KOLKATA, 18, RABINDRA SARANI, KOLKATA-700 001 -VS.- M/S. APPELINE COSMETICS & TOILETRIES LTD.,....RE SPONDENT, B-83, GROUND FLOOR, SATYA NIKETAN, MOTI BAGH-2, NEW DELHI-110 021 [PAN : AADCA 0438 N] APPEARANCES BY: SHRI S.C. BABERIA, CIT(DR) FOR THE APPELLANT SHRI A.K. TIBREWAL, A.R. FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : OCTOBER 15, 2012 DATE OF PRONOUNCING THE ORDER : OCTOBER 1 9, 2012 O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HA S CALLED INTO QUESTION CORRECTNESS OF LEARNED COMMISSIONER (APPEA LS)S ORDER DATED 30 TH OCTOBER, 2009, IN THE MATTER OF ASSESSMENT UNDER S ECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2 004-05, ON THE FOLLOWING GROUNDS :- (1) WHETHER ON THE FACT AND CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) IS JUSTIFIED IN LAW AND FACTS BY DELETIN G THE I.T.A. NO.2181/ KOL. / 2009 ASSESSMENT YEAR : 2004-05 PAGE 2 OF 6 ADDITION OF UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT AMOUNTING TO RS.13,29,67,000/-. (2) WHETHER ON THE FACT AND CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) IS JUSTIFIED IN LAW AND FACTS BY DIRECTI NG THE AO TO VERIFY 16,861 INVESTORS WHO HAVE APPLIED FOR PRE FERENCE SHARES DURING THE F.Y. 2003-04 TO THE ASSESSEE COMP ANY WHERE THE ONUS ON THE ASSESSEE TO PROVE THE EXISTEN CE AND CREDITWORTHINESS OF THE INVESTOR PRIMARILY. 2. BRIEFLY STATED, RELEVANT MATERIAL FACTS ARE LIKE THIS. THE ASSESSEE- COMPANY IS SAID TO BE ENGAGED IN THE BUSINESS OF, I NTER ALIA, MANUFACTURING OF DETERGENT CAKE, ETC. THE INCOME TA X RETURN DISCLOSING LOSS OF RS.2,67,62,939/-, BY THE ASSESSEE ON 01.11. 2004, WAS PICKED UP FOR SCRUTINY ASSESSMENT. IN THE PROCEEDINGS WHICH F OLLOWED, THE ASSESSING OFFICER NOTED THAT, AS AGAINST SHARE CAPI TAL OF RS.5,00,000/- IN THE BEGINNING OF THE YEAR, THE ASSESSEE HAD SHARE C APITAL OF RS.3,56,00,000/- AS AT THE END OF THE YEAR, AND AS AGAINST SHARE APPLICATION MONEY PENDING ALLOTMENT OF RS.12,85,87, 000/- AS AT THE BEGINNING OF THE YEAR, THE ASSESSEE HAD SHARE APPLI CATION MONEY PENDING ALLOTMENT AT RS.22,64,54,000/-. WHEN FURTHE R ENQUIRIES WERE MADE IN THIS REGARD, IT WAS FOUND THAT 16,861 PERSO NS, MOSTLY LIVING IN REMOTE AREAS OF JHARKHAND, CHATTISGARH, ASSAM AND W EST BENGAL, HAVE SUBSCRIBED TO ASSESSEES CAPITAL. OUT OF THESE 16,8 61, THE ASSESSING OFFICER SELECTED 240 PERSONS BASED ON THE CRITERION OF QUANTUM OF INVESTMENT, I.E. RS.50,000/- TO RS.1,00,000/- AND I SSUED NOTICES U/S. 133(6) TO THE SAME. HOWEVER, THIS EXERCISE DID NOT SATISFY ASSESSING OFFICER ABOUT GENUINENESS OF INVESTMENTS. WHILE A L ARGE NUMBER OF LETTERS CAME BACK WITH POSTAL REMARKS SUCH AS NO SUCH ADDRESS, NO SUCH PERSON, INCOMPLETE ADDRESS ETC., EVEN WHEN NOTICES WERE SERVED, THERE WAS HARDLY ANY RESPONSE. EVEN IN THE CASES THERE WA S RESPONSE, THE I.T.A. NO.2181/ KOL. / 2009 ASSESSMENT YEAR : 2004-05 PAGE 3 OF 6 REQUISITE INFORMATION WAS NOT GIVEN IN DESIRED MANN ER. THE ASSESSEE WAS CONFRONTED WITH ALL THESE DETAILS. NOT SATISFIE D WITH THE EXPLANATIONS OF THE ASSESSEE, AND AFTER AN ELABORAT E DISCUSSIONS ON THE JUDICIAL PRECEDENTS, THE ASSESSING OFFICER PROCEEDE D TO TREAT THE ENTIRE AMOUNT AS UNEXPLAINED CASH CREDIT AND MADE IMPUGNED ADDITION OF RS.13,29,67,000/- IN RESPECT OF THE SAME. AGGRIEVED , ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(APPEALS) WHO DELETE D THE SAME. REVENUE IS AGGRIEVED OF THE RELIEF SO GRANTED BY CI T(APPEALS) AND IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CA SE AS ALSO THE APPLICABLE LEGAL POSITION. 4. WE FIND THAT EVEN THOUGH THE IMPUGNED ORDER IS A FAIRLY LONG ORDER IN 21 PAGES, IT IS PRIMARILY A REPRODUCTION O F WRITTEN SUBMISSIONS BY THE ASSESSEE, AND THE BRIEF OPERATIVE PORTION OF THE DECISION IS AS FOLLOWS :- 12. THE WAY AO PROCEEDED TO ENQUIRE FROM 240 PERSO NS OUT OF 16,861 PERSONS WHO HAVE INVESTED IN THE COMP ANY, AND DISALLOWED THE WHOLE AMOUNT OF INVESTMENT OF RS.13,29,67,000/- IS INCORRECT IN THE PART OF AO. W HETHER AO CAN DISALLOW THE WHOLE FRESH INVESTMENT ON THE B SIS OF TEST CHECK OF A FEW SAMPLES WHICH ARE PROVED TO BE WRONG? IN SUCH TYPE OF INVESTIGATIONS THE AO SHOULD HAVE G IVEN SUFFICIENT OPPORTUNITY TO ASSESSEE TO EXPLAIN THE G ENUINENESS OF CREDITORS/ INVESTORS. THE AO ALSO COULD HAVE TAK EN HELP OF OTHER ASSESSING OFFICERS ASSESSING THOSE INVESTORS, WHO HAVE INVESTED SUBSTANTIAL AMOUNTS HERE. NOW THERE ARE TW O LIMITS OF TIME BARRING ON DEPARTMENT. THOSE INVESTORS WHO HAVE INVESTED UP TO RS.1 LAKH, ACTION U/S. 148 CAN BE TA KEN WITHIN 4 A.Y. FROM THE END OF A.Y. IN WHICH SUCH I.T.A. NO.2181/ KOL. / 2009 ASSESSMENT YEAR : 2004-05 PAGE 4 OF 6 TRANSACTION HAS TAKEN PLACE. IN THIS CASE, THE FOUR YEARS ENDED ON 31.03.2009. NOW-A-DAYS, SIZE OF THE ORGANI ZATIONS IS INCREASING VERY BIG FINANCIALLY AND GEOGRAPHICAL LY ALSO. A COORDINATED ACTION BY VARIOUS AOS IS REQUIRED TO TA CKLE SUCH ISSUES. SINCE 4 YEARS HAD ALREADY ELAPSED, IN MY OP INION, THE AO(S) CANNOT DO ANYTHING NOW. 13. THE AO HAS CITED MANY CASE LAWS IN FAVOUR OF TH E DEPARTMENT. THE ARS HAVE CITED RECENT CASE LAWS IN FAVOUR OF ASSESSEE. THE ARS DECISIONS ARE MOST RECENET ONE S AND NEW DEVELOPMENT OF JUDICIAL PRONOUNCEMENTS OF APEX COURT AND OTHER HIGH COURTS ARE IN FAVOUR OF ASSESSEE. TH E APEX COURT AND OTHER COURTS HAVE DECIDED THAT AO SHOULD TAKE ACTION ON INVESTORS (INCLUDING BOGUS INVESTORS) BY PASSING ON THE INFORMATION TO CONCERNED AOS FOR NECESSARY A CTION AT THEIR END TO BRING TO TAX NET SUCH INVESTORS. THE C APITAL ACCOUNT AND SHARE APPLICATION MONEY CANNOT BE ADDED U/S. 68 OF THE ACT AT ANY COST, EVEN IF IN A PRIVATE LIM ITED COMPANY. 14. THE ARS WERE ALSO ASKED TO DIFFERENTIATE BETWEE N PUBLIC ISSUE OF SHARES AND PRIVATE PLACEMENT OF SHA RES. IN THE PRESENT CASE, THE ASSESSEE COMPANY IS A LIMITED COMPANY, AND IT HAD COLLECTED PREFERENCE SHARE APPLICATION M ONEY THROUGHOUT THE YEAR THROUGH ITS BRANCHES IN MANY CI TIES THROUGH BANKING CHANNELS. THE IDENTITY AND GENUINEN ESS OF THE TRANSACTION ARE ESTABLISHED. AT THIS STAGE, THE CREDITWORTHINESS CAN BE VERIFIED FROM LIMITED INVES TORS WHOSE INVESTMENTS ARE MORE THAN A LAKH OF RUPEES. T HE AO IS DIRECTED TO DO THE NEEDFUL TO BRING INTO TAX NET THE POSSIBLE INVESTORS AFTER GETTING INFORMATION FROM T HE APPELLANT COMPANY. 5. WE DO NOT THINK VAGUE OBSERVATIONS LIKE THE ARS DECISIONS ARE MOST RECENT ONES AND NEW DEVELOPMENT OF JUDICIAL PR ONOUNCEMENTS OF APEX COURT AND OTHER HIGH COURTS ARE IN FAVOUR OF THE AS SESSEE CAN JUSTIFY THE CONCLUSIONS DRAWN UP BY THE CIT(APPEALS). RECORDING OF SPECIFIC AND COGENT REASONS FOR COMING TO A CONCLUSION IS AN INT EGRAL PART OF THE I.T.A. NO.2181/ KOL. / 2009 ASSESSMENT YEAR : 2004-05 PAGE 5 OF 6 DECISION MAKING PROCESS. HOWEVER, VAGUE OBSERVATION S MADE BY THE CIT(APPEALS) LEAVE A LOT TO BE DESIRED, INASMUCH AS IT DOES NOT EVEN SHOW WHICH JUDICIAL PRECEDENT FROM WHICH FORUM AND ON WHAT PROPOSITION IS HE REFERRING TO. THESE OBSERVATIONS COME AFTER REPRODUCING ALMOST 15 PAGES OF WRITTEN SUBMISSIONS BY THE ASSESSEE WHICH REFER TO A LARGE NUMBER OF JUDICIAL PRECEDENT S. WHEN NO SPECIFIC REASONS FOR A DECISION ARE ARTICULATED, IT IS NOT E VEN POSSIBLE TO DECIDE WHETHER SUCH REASONS ARE RIGHT OR WRONG, AND THE AP PELLATE AUTHORITY, WHICH HAS TO DECIDE CORRECTNESS OR ALTERATION OF SU CH A DECISION, IS SIMPLY UNABLE TO PERFORM ITS FUNCTIONS. IN THE CAS E OF CIT VS.- WALCHAND AIR 1967 SC 1435, HONBLE SUPREME COURT HA S HELD THAT, THE PRACTICE OF RECORDING OF DECISIONS WITHOUT REASONS IN SUPPORT CANNOT BUT BE DEPRECATED AND THESE OBSERVATIONS MUST EQUALLY APPLY IN CASES WHERE REASONS RECORDED ARE VAGUE AND GENERALIZED. IN THE CASE OF CIT VS.- VIKAS CHEM GUM 276 ITR 32, HONBLE PUNJAB & HARYANA HIGH COURT HAS OBSERVED AS FOLLOWS :- THE REQUIREMENT OF RECORDING OF REASONS AND COMMUN ICATION THEREOF HAS BEEN READ AS AN INTEGRAL PART OF THE CO NCEPT OF FAIR PROCEDURE. THE NECESSITY OF GIVING REASONS FLOWS FR OM THE CONCEPT OF RULE OF LAW WHICH CONSTITUTES ONE OF THE CORNER STONES OF OUR CONSTITUTIONAL SET UP. THE ADMINISTRATIVE AUTHORITI ES CHARGED WITH THE DUTY TO ACT JUDICIALLY CANNOT DECIDE THE MATTER S ON CONSIDERATION OF POLICY OR EXPEDIENCY. THE REQUIREM ENT OF RECORDING OF REASONS BY SUCH AUTHORITIES IS AN IMPO RTANT SAFEGUARD TO ENSURE OBSERVANCE OF THE RULE OF LAW. IT INTRODU CES CLARITY, CHECKS THE INTRODUCTION OF EXTRANEOUS OR IRRELEVANT CONSIDERATIONS AND MINIMIZES ARBITRARINESS IN THE DECISION MAKING PROCESS. ANOTHER REASON WHICH MAKES IT IMPERATIVE FOR THE QU ASI-JUDICIAL AUTHORITIES TO GIVE REASONS IS THAT THEIR ORDERS AR E NOT ONLY SUBJECT TO THE RIGHT OF THE AGGRIEVED PERSONS TO CHALLENGE THE SAME BY FILING STATUTORY APPEAL. I.T.A. NO.2181/ KOL. / 2009 ASSESSMENT YEAR : 2004-05 PAGE 6 OF 6 6. VIEWED THUS, THE IMPUGNED APPELLATE ORDER IS AN ORDER NOT SUPPORTED BY SPECIFIC REASONS WHICH CAN BE ADJUDICA TED BY US. NONE OF THE AUTHORITIES BELOW HAVE EXAMINED THE FACTS OF TH E CASE IN SUFFICIENT DETAIL AND HAVE ANALYZED THE THINGS IN THE RIGHT PE RSPECTIVE. IT IS A SAD COMMENTARY ON HOW CASUALLY THE CASES INVOLVING SUBS TANTIAL REVENUES ARE HANDLED BUT THEN GIVEN THESE FACTS, WE DO NOT W ISH TO JUMP TO CONCLUSIONS AT THIS STAGE. LET THE WHOLE MATTER BE EXAMINED IN THE PROPER MANNER, AND RELEVANT FACTUAL AND LEGAL ANALY SIS BE PLACED ON RECORD. WE, THEREFORE, DEEM IT FIT AND PROPER TO RE MIT THE MATTER TO THE FILE OF THE CIT(APPEALS) FOR FRESH ADJUDICATION AFT ER ANALYZING FACTS OF THE CASE PROPERLY IN THE LIGHT OF THE APPLICABLE LE GAL POSITION, AND THEN DECIDE THE MATTER IN ACCORDANCE WITH THE LAW BY WAY OF A SPEAKING ORDER. WE ORDER SO. 7. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. PRONOUNCED IN THE OPEN COURT TODAY ON 19 TH DAY OF OCTOBER, 2012. SD/- SD/- MAHAVIR SINGH PRAMOD KUMAR (JUDICIAL MEMBER) (ACC OUNTANT MEMBER) KOLKATA, THE 19 TH DAY OF OCTOBER, 2012 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.