Satyam Tradecom Pvt. Ltd., Kolkata V. ITO, Ward 5(1)/ Kolkata, Kolkata

ITA 2363/KOL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1280 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 16-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Opportunity of being heard; Earning of tax free income; Additional evidence
• Section: 143(3); 142(1); 14A; 133(6); 147; 131; 68; 148; 263; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : KOLKATA [BEFORE HONBLE SHRI ABY. T. VARKEY, JM & SHRI M. BALAGANESH, AM ] I.T.A NO. 2363/KOL/20 16 ASSESSMENT YEAR : 2009-1 0 SATYAM TRADECOM PVT. LTD. -VS- ITO, WARD-5(1),KOLKATA [PAN: AALCS 1734 P] (APPELLANT) ( RESPONDENT) FOR THE APPELLANT : SHRI MIRAJ D SHAH. FOR THE RESPONDENT : SHRI A.K.TIWARI, CIT DATE OF HEARING : 19.02.2018 DATE OF PRONOUNCEMENT : 07.03.2018 ORDER PER M.BALAGANESH, AM 1. THIS IS AN APPEAL OF THE ASSESSEE DIRECTED AGAIN ST THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 2, KOLKATA ( IN SHORT THE LD CITA) IN APPEAL NO. 44/CIT(A)-2/15-16 DATED 1.9.2016 AGAINST THE OR DER OF ASSESSMENT FRAMED BY THE LEARNED INCOME TAX OFFICER, WARD -5(1), KOLKATA (IN SHORT THE LD AO) U/S 144/263/147/143(3) OF THE ACT DATED 23.3.2015 FOR T HE ASST YEAR 2009-10. 2. THE GROUND NO. 1 RAISED BY THE ASSESSEE IS GENER AL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 3. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD CITA WAS JUSTIFIED IN UPHOLDING THE ADDITION MADE U/S 68 OF THE ACT TO WARDS SHARE APPLICATION MONEY IN THE SUM OF RS 9,54,50,000/- , IN THE FACTS AND CIRC UMSTANCES OF THE CASE. 2 ITA NO.2363/KOL/2016 SATYAM TRADECOM PVT. LTD. A.YR.2009-10 2 4. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESS EE IS AN INVESTMENT COMPANY. THE RETURN OF INCOME FOR THE ASST YEAR 2009-10 WAS FILE D ON 2.1.2010, WHICH WAS DULY PROCESSED U/S 143(1) OF THE ACT ON 4.11.2010. LATER THE ASSESSMENT WAS REOPENED BY ISSUANCE OF NOTICE U/S 148 OF THE ACT AND RE-ASSESS MENT WAS COMPLETED U/S 147/143(3) OF THE ACT ON 29.2.2012 DETERMINING TOTAL INCOME AT RS 54,620/-. THIS RE-ASSESSMENT WAS SUBJECTED TO REVISION PROCEEDINGS U/S 263 OF TH E ACT BY THE LD CIT ON THE GROUND THAT THE LD AO HAD NOT PROPERLY ENQUIRED AND VERIFI ED THE GENUINENESS AND SOURCE OF SHARE CAPITAL AS WELL AS THE IDENTITY AND CREDITWOR THINESS OF THE SHAREHOLDERS WHO HAD APPLIED FOR SHARES OF THE COMPANY. HENCE THE LD C IT PASSED THE REVISION ORDER U/S 263 OF THE ACT ON 5.3.2014 BY SETTING ASIDE THE ORDER P ASSED BY THE LD AO U/S 147/143(3) OF THE ACT DATED 29.2.2012 WITH CERTAIN SPECIFIC GUIDE LINES REGARDING INVESTIGATION TO BE CARRIED OUT WHILE ASSESSING THE ASSESSEE DE NOVO. THE LD AO IN THE CONSEQUENTIAL PROCEEDINGS GIVING EFFECT TO THE ORDER OF LD CIT U /S 263 OF THE ACT, HAD REPRODUCED THE RELEVANT PORTION OF THE LD CITS DIRECTIONS. THE N OTICE U/S 142(1) OF THE ACT CALLING FOR CERTAIN DETAILS VIDE LETTER DATED 29.5.2014 WAS ISS UED ON THE ASSESSEE ASKING HIM TO PRODUCE AND SUBMIT CERTAIN DETAILS AND DOCUMENTS VI Z. COMPLETE LIST OF THE DIRECTORS OF THE COMPANY AND BANK ACCOUNTS MAINTAINED IN THE NAM E OF THE COMPANY ALONG WITH BRANCHES, COMPLETE DETAILS OF SHAREHOLDING PATTERN OF THE COMPANY SPECIFYING THE NUMBER OF SHARES HELD BY EACH SHAREHOLDER AND COMPL ETE DETAILS OF SHARE APPLICATION MONEY RECEIVED DURING THE YEAR ALONG WITH A COPY OF RELATED BANK STATEMENT HIGHLIGHTING THE RELEVANT ENTRIES FOR SUCH RECEIPTS . ANOTHER NOTICE U/S 143(2) AND 142(1) OF THE ACT DATED 8.12.2014 WERE ISSUED FIXIN G THE DATE OF HEARING ON 22.12.2014 WAS ISSUED ON THE ASSESSEE WHICH WAS NOT RESPONDED BY THE ASSESSEE. LATER A SUMMON U/S 131(1) OF THE ACT WAS ALSO ISSUED TO DIRECTORS OF THE ASSESSEE COMPANY AS WELL AS DIRECTORS OF THE ALLEGED SUBSCRIBER COMPANIES TO AP PEAR PERSONALLY. IN CASES OF SOME OF THE SUBSCRIBER COMPANIES, THE NOTICES COULD NOT EVEN GET SERVED BY THE POSTAL AUTHORITY AND SUCH NOTICES HAVE BEEN RETURNED WITH POSTAL REMARKS SUCH AS ADDRESS CANNOT BE LOOKED OUT / LEFT/ NOT KNOWN, THEREBY DE NYING THE BASIC EXISTENCE OF SUCH 3 ITA NO.2363/KOL/2016 SATYAM TRADECOM PVT. LTD. A.YR.2009-10 3 COMPANY, AT THE VERY ADDRESS, WHICH WAS PROVIDED BY THE ASSESSEE COMPANY ITSELF. THE DIRECTORS OF THE ASSESSEE COMPANY AND SUBSCRIBER CO MPANIES FAILED TO APPEAR BEFORE THE LD AO. LATER THE LD AO ISSUED A SHOW CAUSE NOTICE DATED 18.2.2015 FOR HEARING ON 26.2.2015 ASKING TO EXPLAIN WHY BEST JUDGMENT ASSES SMENT U/S 144 OF THE ACT SHOULD NOT BE DONE IN ITS CASE ON THE BASIS OF MATERIALS A ND DETAILS AVAILABLE ON RECORD. THIS TIME ALSO THE ASSESSEE FAILED TO COMPLY WITH THE SH OW CAUSE NOTICE. THE LD AO ACCORDINGLY CONCLUDED THAT THERE WAS NO RESPONSE FR OM THE SIDE OF THE ASSESSEE COMPANY OR FROM THE END OF THE ALLEGED SUBSCRIBER C OMPANIES. 5. THE LD AO NOTICED FROM THE BALANCE SHEET OF THE ASSESSEE THAT IT HAD RAISED ITS CAPITAL BY ISSUING 954500 EQUITY SHARES AT THE RATE OF RS 1 0 EACH AND RECEIVING SHARE PREMIUM OF RS 8,59,05,000/- TOTALING TO RS 9,54,50,000/- DU RING THE YEAR IN QUESTION. THE LD AO OBSERVED THAT THE ASSESSEE FAILED TO PROVIDE ANY DETAILS / DOCUMENTS IN SUPPORT OF THE SHARE APPLICATION MONEY RECEIVED AND ALSO FAILE D TO JUSTIFY THE BASIS OF SUCH A HUGE PREMIUM AMOUNT OF THE SHARES. IT WAS THE CASE OF T HE ASSESSEE THAT THE ENTIRE TRANSACTIONS OF SHARE APPLICATION MONEY WAS SUBJECT MATTER OF VERIFICATION BY THE LD AO IN THE RE-ASSESSMENT PROCEEDINGS U/S 147 OF THE ACT, WHEREIN THE ENTIRE DETAILS CALLED FOR BY THE LD AO WERE FILED ALREADY BY THE A SSESSEE AND IS THERE ON RECORD BEFORE THE LD AO. IT WAS PLEADED THAT ALL THE SUBSCRIBER COMPANIES HAD RESPONDED TO NOTICES ISSUED U/S 133(6) OF THE ACT BEFORE THE THEN AO DUR ING RE-ASSESSMENT PROCEEDINGS. SINCE NO ONE RESPONDED TO THE SUMMONS ISSUED U/S 13 1 OF THE ACT DURING THE IMPUGNED PROCEEDINGS (I.E GIVING EFFECT PROCEEDINGS TO LD CI T ORDER U/S 263 ) , THE LD AO CONCLUDED THAT THE IDENTITY OF THE SHAREHOLDERS COU LD NOT BE PROVED BEYOND DOUBT AND DUE TO LACK OF CO-OPERATION OF THE ASSESSEE, THE SH AREHOLDERS CREDITWORTHINESS COULD NOT BE ASCERTAINED. THE LD AO OBSERVED THAT FROM THE AN ALYSIS OF THE BANK STATEMENT OF THE ASSESSEE, WHICH WERE ALREADY ON RECORD, IT WAS FOUN D THAT ALMOST SIMILAR AMOUNT WAS DEBITED FROM THE ACCOUNT OF THE ASSESSEE ALMOST ON SAME DAY WHEN THIS SHARE APPLICATION MONEY WAS CREDITED TO THE ACCOUNT OF TH E ASSESSEE. FROM THE PROFIT AND 4 ITA NO.2363/KOL/2016 SATYAM TRADECOM PVT. LTD. A.YR.2009-10 4 LOSS ACCOUNT AND BALANCE SHEET OF THE ASSESSEE, IT IS EVIDENT THAT THE ASSESSEE HAD NOT CARRIED OUT ANY BUSINESS ACTIVITY. HE CONCLUDED THA T THIS PROVES THAT THE ASSESSEE HAS INTRODUCED ITS OWN UNACCOUNTED FUND IN THE FORM OF SHARE APPLICATION MONEY TO LEGALISE ITS OWN BLACK MONEY. THEREFORE, THE SUM R EFLECTED BY THE ASSESSEE IN THE BALANCE SHEET AS SHARE CAPITAL AND SHARE PREMIUM WA S ADDED BACK IN THE HANDS OF THE ASSESSEE AS UNEXPLAINED CASH CREDIT U/S 68 OF THE A CT TO THE TUNE OF RS 9,54,50,000/-. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD CITA , WHO WAS PLEASED TO DISMISS THE APPEAL AND THUS CONFIRMED THE ACTION OF THE LD AO. 6. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US O N THE FOLLOWING GROUNDS:- 2. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) PASSED THE APPELLATE ORDER WIT HOUT GIVING PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE. 3. FOR THAT THE ASSESSMENT ORDER PASSED ON 23.03.20 15 WAS NOT IN TERMS OF DIRECTION PASSED IN THE ORDER U/S 263 OF THE I.T. A CT, 1961. HENCE, THE SAID ASSESSMENT ORDER IS LIABLE TO BE SET ASIDE. 4. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE THE ORDER U/S 263 OF THE I.T. ACT, 1961 WAS BAD IN LAW HENCE, THE CONSEQUENT IAL ORDER U/S 144/263/147/143(3) OF THE I.T. ACT, 1961 WAS BAD IN LAW AND SHOULD BE QUASHED. 5. FOR THAT IN THE FACTS AND CIRCUMSTANCES THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE ADDITION OF RS. 9, 54,50,000/- ON ACCOUNT OF SHARE APPLICATION MONEY BEING ADDED AS CASH CREDIT U/S 68 OF THE I.T. ACT, 1961. THE ADDITION IS NOT CALLED FOR AND HENCE THE SAME B E DELETED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS. ACCORDING TO THE ASSESSEE, THE SHAREHOLDERS OF THE ASSESSEE HAD DULY RESPONDED TO NOTICES ISSUE D U/S 133(6) OF THE ACT DIRECTLY TO THE LD AO BY GIVING PROPER REPLIES WITH REGARD TO D ETAILS CALLED FOR BY THE LD AO. THEREFORE, ACCORDING TO ASSESSEE, THE IDENTITY OF S HAREHOLDERS STANDS PROVED. 5 ITA NO.2363/KOL/2016 SATYAM TRADECOM PVT. LTD. A.YR.2009-10 5 ACCORDING TO LD AR, SUBSEQUENTLY WHEN THE LD AO NOT ICED THAT THE DIRECTORS OF THE SHAREHOLDER COMPANIES DID NOT APPEAR BEFORE HIM PER SONALLY ALONG WITH THE DIRECTORS OF THE ASSESSEE COMPANY, THEN THE LD AO ISSUED SHOW CAUSE NOTICE TO ASSESSEE FOR INVOKING BEST JUDGEMENT ASSESSMENT AND THEREAFTER, CONCLUDED THAT THE ASSESSEE COULD NOT PROVE THE IDENTITY AND CREDITWORTHINESS OF THE SHAREHOLDERS. ACCORDINGLY TO THE LD AR, DESPITE THE FACT THAT THE LD AO WAS IN RECEIPT OF THE REVISIONAL ORDER OF THE LD CIT ON 5.3.2014 AND AFTER A LAPSE OF CONSIDERABLE TIME, THE LD AO STARTED ISSUING NOTICES TO THE SHARE SUBSCRIBERS IN ADDITION TO ISSUING NOTICE TO THE ASSESSEE AND ITS DIRECTORS. LATER THE LD AO HAD DRAWN ADVERSE INFERENCE AGAINST THE ASSESSEE AND THEREFORE, NO PROPER OPPORTUNITY WAS GRANTED TO THE ASSESSEE COMP ANY TO ASSIST THE LD AO IN PROVING THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF T HE SHAREHOLDERS. THE LD AR RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TIN BOX COMPAN Y VS CIT REPORTED IN 249 ITR 216 (SC) WHEREIN IT WAS HELD THAT:- IT IS UNNECESSARY TO GO INTO GREAT DETAIL IN THESE MATTERS FOR THERE IS A STATEMENT IN THE ORDER OF THE TRIBUNAL, THE FACT-FINDING AUTH ORITY, THAT READS THUS : WE WILL STRAIGHTAWAY AGREE WITH THE ASSESSEES SUB MISSION THAT THE INCOME-TAX OFFICER HAD NOT GIVEN TO THE ASSESSEE PROPER OPPORT UNITY OF BEING 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 ASSE SSEE HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF SETTING OUT HIS CASE. WE, THEREFORE, DO NOT AGREE WITH THE TRIBUNAL AND THE HIGH COURT THAT IT WAS NOT NEC ESSARY TO SET ASIDE THE ORDER OF ASSESSMENT AND REMAND THE MATTER TO THE ASSESSIN G AUTHORITY FOR FRESH ASSESSMENT AFTER GIVING TO THE ASSESSEE A PROPER OP PORTUNITY OF BEING HEARD. 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 P ROPER OPPORTUNITY OF HEARING 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 FAV OUR OF THE ASSESSEE. 6 ITA NO.2363/KOL/2016 SATYAM TRADECOM PVT. LTD. A.YR.2009-10 6 THE APPEALS ARE ALLOWED. THE ORDER UNDER CHALLENGE IS SET ASIDE. THE ASSESSMENT ORDER, THAT OF THE COMMISSIONER (APPEALS ) AND OF THE TRIBUNAL ARE ALSO SET ASIDE. THE MATTER SHALL NOW BE REMANDED TO THE ASSESSING AUTHORITY FOR FRESH CONSIDERATION, AS AFORE STATED. 8. IN RESPONSE TO THIS, THE LD DR VEHEMENTLY OPPOSE D THIS PLEA OF THE ASSESSEE AND CONTENDED THAT THE ASSESSEE COMPANY WAS VERY WELL A WARE OF THE REVISIONAL ORDER PASSED BY THE LD CIT AND SHOULD HAVE BROUGHT ALL EV IDENCES BEFORE THE LD AO TO SUBSTANTIATE THE IDENTITY, GENUINENESS AND CREDITWO RTHINESS OF SHARE SUBSCRIBERS. THE LD AO HAS NOTED THAT THE ASSESSEE DID NOT CO-OPERAT E WITH THE ASSESSMENT PROCEEDINGS AND , THEREFORE, THE ASSESSEE CANNOT BE GIVEN ANOTH ER INNINGS. WE NOTE THAT THE LD CITS EXERCISE OF REVISIONAL JURISDICTION U/S 263 O F THE ACT SETTING ASIDE THE 147/143(3) ORDER WAS PASSED ON 5.3.2014. THE LD AO WHILE GIVI NG EFFECT TO THE ORDER OF THE LD CIT HAS NOTED THAT HE HAD ISSUED SUMMON U/S 131 OF THE ACT TO THE DIRECTORS OF THE SHAREHOLDER COMPANIES , WHO HAD NOT APPEARED BEFORE HIM ON 22.12.2014 , THE LD AO THEREAFTER GAVE ASSESSEE ANOTHER NOTICE ON 18.2.201 5 AS TO WHY THE BEST JUDGEMENT ASSESSMENT SHOULD NOT BE RESORTED TO AND AFTER FIXI NG THE HEARING ON 26.2.2015. THE LD AO AFTER NOTICING THAT NONE APPEARED ON BEHALF OF T HE ASSESSEE, CONCLUDED THAT THE ASSESSEE HAD NOT CO-OPERATED AND , THEREFORE, ACCOR DING TO HIM, THE IDENTITY AND GENUINENESS OF THE SHAREHOLDER SUBSCRIBER COMPANIES COULD NOT BE ESTABLISHED BEYOND DOUBT AND, THEREFORE, HE MADE THE ADDITION OF RS 9, 54,50,000/- . WE NOTE THAT THE LD CIT INVOKED THE REVISIONAL JURISDICTION U/S 263 OF THE ACT AND FOUND THAT THE ASSESSEE COMPANY IN ITS BALANCE SHEET HAS SHOWN TO HAVE INFU SED EQUITY SHARE CAPITAL OF RS 9,54,50,000/- ON PREMIUM OF RS 8,59,05,000/- AND SI NCE THE LD AO HAD NOT ENQUIRED INTO THE SOURCE OF THE SHARE CAPITAL AND PREMIUM IN FUSED INTO THE ASSESSEE COMPANY BY VERIFYING THE IDENTITY, GENUINENESS AND CREDITWORTH INESS OF THE SHAREHOLDERS, THE LD CIT FOUND THE AO WHILE DOING ASSESSMENT DID NOT EXERCIS E THE ROLE OF INVESTIGATOR AND, THEREFORE, THE ORDER OF LD AO IS ERRONEOUS SO FAR A S PREJUDICIAL TO THE INTEREST OF THE REVENUE AND DIRECTED THE LD AO TO MAKE FRESH ASSESS MENT AFTER TAKING INTO CONSIDERATION THE PERNICIOUS PRACTICE OF CONVERTING BLACK MONEY BY THE MODUS 7 ITA NO.2363/KOL/2016 SATYAM TRADECOM PVT. LTD. A.YR.2009-10 7 OPERANDI AS DESCRIBED BY THE LD CIT. WE ALSO NOTED IN THE SAID BACKDROP, THE LD CIT HAS GIVEN CERTAIN GUIDELINES WHICH WERE CAN SAY IN ORDER TO FACILITATE DEEP INVESTIGATION INTO THE CASE AND FOR THAT WE NOTE TH AT THE LD CIT HAD GIVEN THE FOLLOWING DIRECTIONS:- IN VIEW OF THE SPECIAL FACTS AND CIRCUMSTANCES AS WELL AS THE JUDICIAL DECISION RELIED UPON THE IMPUGNED ORDER U/S 148 IS THEREFORE , SET ASIDE U/S 263 OF THE IT ACT AND THE AO IS DIRECTED TO: (I) EXAMINE THE GENUINENESS AND SOURCE OF SHARE CAPITAL , NOT ON A TEST CHECK BASIS, BUT IN RESPECT OF EACH AND EVERY SHAREHOLDER BY CONDUCTING INDEPENDENT ENQUIRY NOT THROUGH THE ASSESSEE. THE B ANK ACCOUNT FOR THE ENTIRE PERIOD SHOULD BE EXAMINED IN THE COURSE OF V ERIFICATION 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 DIRE CTORSHIP IF APPLICABLE. HE SHOULD EXAMINE THEM ON OATH TO VERIFY THEIR CRED ENTIALS AS DIRECTOR AND REACH A LOGICAL CONCLUSION REGARDING THE CONTROLLIN G INTEREST. (III) THE AO IS DIRECTED TO EXAMINE THE SOURCE OF REALIZA TION FROM THE LIQUIDATION OF ASSETS SHOWN IN THE BALANCE SHEET AFTER THE CHAN GE OF DIRECTORS, IF ANY AFTER CONDUCTING THE INQUIRIES & VERIFICATION AS D IRECTED ABOVE, THE AO SHOULD PASS A SPEAKING ORDER, PROVIDING ADEQUATE OPPORTUNI TY OF BEING HEARD TO THE ASSESSEE. THE IMPUGNED ORDER U/S 148 IS ACCORDINGLY SET ASIDE AND ASSESSMENT SHOULD BE DONE AFRESH. 9. WITH THE AFORESAID DIRECTION, THE LD CIT SET ASI DE THE ORDER OF THE LD AO WHICH WAS PASSED U/S 147 / 143(3) OF THE ACT. WE ALSO NOTE T HAT SIMILARLY PLACED ASSESSEES HAD CHALLENGED THE EXERCISE OF REVISIONAL JURISDICTION U/S 263 OF THE ACT BEFORE THIS TRIBUNAL IN THOSE CASES , ONE OF IT OF SUBHALAKSHMI VANIJYA PVT LTD VS CIT IN ITA NO. 8 ITA NO.2363/KOL/2016 SATYAM TRADECOM PVT. LTD. A.YR.2009-10 8 1104/KOL/2014 DATED 30.7.2015, WHEREIN THE TRIBUNAL WAS PLEASED TO UPHOLD THE ORDER PASSED BY THE LD CIT PASSED U/S 263 OF THE ACT , WH ICH WE LEARN TO HAVE BEEN CONFIRMED BY THE HONBLE JURISDICTIONAL HIG COURT A ND THE SLP PREFERRED AGAINST THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT H AS BEEN DISMISSED BY THE HONBLE SUPREME COURT. WE NOTE THAT THE SHAREHOLDERS HAD D ULY REPLIED DURING THE ORIGINAL RE- ASSESSMENT PROCEEDINGS CONFIRMING THE FACTUM OF INV ESTMENTS BEFORE THE LD AO . THE LD AO CHOSE TO ISSUE SUMMONS TO THE DIRECTORS OF TH E SHAREHOLDERS COMPANIES WHO DID NOT APPEAR BEFORE HIM WHICH LEAD TO LD AO DRAWING A DVERSE INFERENCE AGAINST THE ASSESSEE BY RESORTING TO MAKE BEST JUDGEMENT ASSESS MENT. WE FIND THAT THE ASSESSMENT ORDER HAS BEEN PASSED U/S 144 OF THE ACT ON THE GRO UND OF NON-COOPERATION BY THE ASSESSEE. SIMILARLY THE LD CITA ALSO HAD PASSED AN EXPARTE ORDER FOR NON-SERVICE OF NOTICE AND NON-APPEARANCE OF THE ASSESSEE. IN THIS REGARD, WE FIND THAT THE ADDRESS OF THE ASSESSEE NOTED BY THE LD CITA IN HIS ORDER IS M/S SATYAM TRADECOM PVT LTD , 9/12, LAL BAZAR STREET, 1 ST FLOOR, BLOCK-A, KOLKATA -700001 , WHEREAS THE ADD RESS NOTED IN THE ASSESSMENT ORDER IS M/S SATYAM TRADEC OM PVT LTD , 9/12, LAL BAZAR STREET, 1 ST FLOOR, BLOCK-A, ROOM NO. 9, KOLKATA -700001. THE LD AR STATED THAT LAL BAZAR STREET IS A HUGE PLACE AND IN THE ABSENCE OF SPECIFIC MENTION OF ROOM NUMBER, IT IS NOT PRACTICALLY NOT POSSIBLE TO SERVE ANY NOTICE . IN THE INSTANT CASE, THE NOTICES OF THE LD CITA AS TABULATED IN HIS ORDER COULD NOT BE SERV ED ON THE ASSESSEE AS HE HAD NOT MENTIONED THE ROOM NO. 9 IN THE SAID NOTICE. HE STATED THAT SIMILAR MISTAKE COULD HAVE BEEN COMMITTED BY THE LD AO ALSO WHILE SENDING CERTAIN NOTICES, WHICH IN HIS OPINION, WERE NOT COMPLIED WITH BY THE ASSESSEE. 9.1. WE FIND THAT IT IS NOT IN DISPUTE THAT THE ENT IRE TRANSACTIONS OF SHARE CAPITAL AND SHARE PREMIUM WAS THE SUBJECT MATTER OF VERIFICATIO N IN THE RE-ASSESSMENT PROCEEDINGS BY THE LD AO, WHEREIN THE SHAREHOLDERS HAD DULY RES PONDED TO NOTICE U/S 133(6) OF THE ACT BY CONFIRMING THE FACT OF MAKING INVESTMENTS IN THE ASSESSEE COMPANY. THE SHAREHOLDERS HAD ALSO DULY FURNISHED THEIR INCOME T AX ASSESSMENT PARTICULARS. 9 ITA NO.2363/KOL/2016 SATYAM TRADECOM PVT. LTD. A.YR.2009-10 9 PURSUANT TO DIRECTIONS OF THE LD CIT U/S 263 OF THE ACT, THE LD AO WAS MANDATED TO MAKE DIRECT VERIFICATIONS ABOUT THE GENUINENESS OF THE TRANSACTIONS AND CREDITWORTHINESS OF THE SHAREHOLDERS BY MAKING NECE SSARY SPECIFIC ENQUIRIES AS LISTED OUT SUPRA. THE LD CIT HAD SPECIFICALLY DIRECTED TH E LD AO TO MAKE ENQUIRIES DIRECTLY FROM THE SHAREHOLDERS AND NOT THROUGH THE ASSESSEE. HENCE NON-APPEARANCE OF THE ASSESSEE BEFORE THE LD AO INTENTIONALLY OR UNINTENT IONALLY DOES NOT MAKE ANY RELEVANCE HERE. THE LD AO ADMITTEDLY DID NOT RESORT TO MAKE ENQUIRIES IN THE MANNER STATED BY THE LD CIT U/S 263 OF THE ACT IN SPITE OF THE FACT THAT ALL THE NECESSARY DETAILS WERE VERY MUCH AVAILABLE BEFORE HIM. THE LD CIT HAD DIRECTE D THE LD AO TO INVESTIGATE INTO MULTIPLE LAYERS OF THE INVESTMENT IN SHARES MADE BY RESPECTIVE SHAREHOLDERS AND IDENTIFY THE ULTIMATE PERSON HOLDING CONTROLLING IN TEREST INCLUDING THE CHANGE IN SHAREHOLDING, DIRECTORSHIP ETC AND THEN TAKE THE EN TIRE 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 REGA RD, 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 AS SESSEE HEREIN HAD COME UP WITH SOME PROOF OF IDENTITY OF SOME OF THE ENTRIES IN QU ESTION. BUT, FROM THIS INFERENCE, OR FORM THE FACT THAT THE TRANSACTIONS WERE THROUGH BANKING CHANNELS, IT DOES NOT NECESSARILY FOLLOWING THAT SATISFACTION AS TO THE C REDITWORTHINESS OF THE PARTIES OR THE GENUINENESS OF THE TRANSACTIONS IN QUESTION WOU LD 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. B UT CIT(APPEALS), HAVING NOTICED WANT OF PROPER INQUIRY, COULD NOT HAVE CLOSED THE C HAPTER SIMPLY BY ALLOWING THE APPEAL AND DELETING THE ADDITIONS MADE. IT WAS ALSO THE OBLIGATION OF THE FIRST APPELLATE AUTHORITY, AS INDEED OF ITAT, TO HAVE ENS URED THAT EFFECTIVE INQUIRY WAS CARRIED OUT, PARTICULARLY IN THE FACT OF THE ALLEGA TIONS OF THE REVENUE THAT THE ACCOUNT STATEMENTS REVEAL UNIFORM PATTERN OF CASH D EPOSITS OF EQUAL AMOUNTS IN THE RESPECTIVE ACCOUNTS PRECEDING THE TRANSACTIONS IN QUESTION. THIS NECESSITATED A DETAILED SCRUTINY OF THE MATERIAL SUBMITTED BY TH E ASSESSEE IN RESPONSE TO THE 10 ITA NO.2363/KOL/2016 SATYAM TRADECOM PVT. LTD. A.YR.2009-10 10 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 CAUSING TO BE MADE A 'FURTHER INQUIRY IN EXERCISE OF THE POWER UNDER SE CTION 250(4). HIS APPROACH NOT HAVING BEEN ADOPTED, THE IMPUGNED ORDER OF ITAT, AN D CONSEQUENTLY THAT OF CIT(APPEALS), CANNOT BE APPROVED OR UPHELD.' 9.2. 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 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 SUFFICIEN T OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, THE GROUNDS 2 TO 5 RAISED B Y THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 10. THE NEXT ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE DISALLOWANCE U/S 14A OF THE ACT IN THE SUM OF RS 1,01,658/- COULD BE MADE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 10.1. THE LD AO OBSERVED FROM THE BALANCE SHEET OF THE ASSESSEE THAT IT HAD MADE INVESTMENT OF RS 10,31,50,000/- IN UNQUOTED EQUITY SHARES OF CERTAIN COMPANIES, FULLY PAID UP. HE OBSERVED THAT THE ASSESSEE HAD NOT REC EIVED ANY EXEMPT INCOME. HE INVOKED THE PROVISIONS OF RULE 8D(2) AND ARRIVED AT THE DISALLOWANCE OF RS 2,97,125/- UNDER THIRD LIMB OF RULE 8D(2) OF THE RULES. HOWEV ER, HE RESTRICTED THE SAID DISALLOWANCE TO RS 1,01,658/- , BEING THE TOTAL EXP ENDITURE CLAIMED IN THE PROFIT AND LOSS ACCOUNT BY THE ASSESSEE. THE LD CITA DISMISSE D THE APPEAL OF THE ASSESSEE EX PARTE FOR NON-APPEARANCE. AGGRIEVED, THE ASSESSEE I S IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 6. FOR THAT IN THE FACTS AND CIRCUMSTANCES THE LD. COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN UPHOLDING THE ADDITION OF RS. 1,01,658/- ON ACCOUNT OF 11 ITA NO.2363/KOL/2016 SATYAM TRADECOM PVT. LTD. A.YR.2009-10 11 14A OF THE I.T. ACT, 1961. THE ADDITION IS NOT CALL ED FOR AND HENCE THE SAME BE DELETED. 7. THE APPELLANT CRAVES LEAVE TO PRODUCE ADDITIONAL EVIDENCES IN TERMS OF RULE 29 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 19 63. 8. FOR THAT THE LD. COMMISSIONER OF INCOME TAX (APP EALS) DID NOT PERMIT THE ASSESSEE TO PRODUCE RELEVANT DOCUMENTS/EVIDENCES IN THE COURSE OF THE HEARING. HENCE, THE APPELLATE ORDER WAS BAD IN LAW FOR WANT OF OPPORTUNITY AND PROPER HEARING AND THUS BE QUASHED. 10.2. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT THE PROVISIONS OF SECTION 14A OF THE ACT WILL SET INTO MOTION ONLY IN THE EVE NT OF ASSESSEE DERIVING EXEMPT INCOME. IN THE INSTANT CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE HAD NOT DERIVED ANY EXEMPT INCOME. RELIANCE IS PLACED ON THE FOLLOWING DECISIONS IN THIS REGARD:- CIT VS CHETTINAD LOGISTICS (P) LTD (2017) 80 TAXM ANN.COM 221 (MAD HC) CIT VS HOLCIM INDIA PVT LTD IN ITA NO. 486 /2014 (D ELHI HC) CHEMINVEST LTD VS CIT REPORTED IN 378 ITR 33 (DELHI HC) HENCE RESPECTFULLY FOLLOWING THE AFORESAID DECISION S, WE DIRECT THE LD AO TO DELETE THE DISALLOWANCE MADE U/S 14A OF THE ACT IN THE SUM OF RS 1,01,658/-. ACCORDINGLY, THE GROUNDS 6 TO 8 RAISED BY THE ASSESSEE ARE ALLOWED. 11. THE GROUND NO. 9 RAISED BY THE ASSESSEE IS ONLY WITH REGARD TO NON-GRANT OF CREDIT FOR SELF ASSESSMENT TAX PAID IN THE SUM OF RS 2,253 /-. WE DIRECT THE LD AO TO VERIFY THIS CLAIM OF THE ASSESSEE AND IF FOUND TO BE CORRE CT, THEN THE SAME SHOULD BE GIVEN CREDIT IN THE ASSESSMENT. ACCORDINGLY, THE GROUND NO. 11 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 12 ITA NO.2363/KOL/2016 SATYAM TRADECOM PVT. LTD. A.YR.2009-10 12 12. THE GROUND NO. 10 RAISED BY THE ASSESSEE IS WIT H REGARD TO CHARGING OF INTEREST U/S 234A / 234B/ 234C AND 234D OF THE ACT WHICH IS CONS EQUENTIAL IN NATURE. WE DIRECT THE LD AO TO RE-COMPUTE THE SAME AS PER LAW. 13. THE GROUND NO. 11 RAISED BY THE ASSESSEE IS GEN ERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 07 .03.2018 SD/- SD/- [A.T. VARKEY] [ M.BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 07.03.2018 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. SATYAM TRADECOM PVT. LTD., C/O, D.J.SHAH & CO., KALYAN BHAWAN, 2, ELGIN ROAD, KOLKATA-700020. 2. ITO, WARD-5(1), AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700069. 3. C.I.T(A)- , KOLKATA 4. C.I.T.- K OLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S 13 ITA NO.2363/KOL/2016 SATYAM TRADECOM PVT. LTD. A.YR.2009-10 13