Highlight Commotrade Pvt. Ltd., , Kolkata V. ITO, Ward - 1(4) , Kolkata

ITA 2588/KOL/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7761 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 11-12-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: IMOKABA JAMIR
• Assessee Lawyers: MIRAJ D. SHAH
• Keywords: Unexplained cash credit; Set aside
• Section: 234B; 147; 68; 263

Judgement Text

1 ITA NO.2588/KOL/2018 HIGHLIGHT COMMOTRADE PVT. LTD., AY 2009-10 , C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA ( )BEFORE . , /AND . # . $ , ) [BEFORE SHRI J. SUDHAKAR REDDY, AM & SHRI A. T. VAR KEY, JM] I.T.A. NO. 2588/KOL/2018 ASSESSMENT YEAR: 2009-10 HIGHLIGHT COMMOTRADE PVT. LTD. (PAN: AACCH0877P) VS. INCOME-TAX OFFICER, WARD-1(4), KOLKATA. APPELLANT RESPONDENT DATE OF HEARING 14.01.2020 DATE OF PRONOUNCEMENT 29.01.2020 FOR THE APPELLANT SHRI MIRAJ D. SHAH, ADVOCATE FOR THE RESPONDENT SHRI IMOKABA JAMIR, CIT, DR ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-5, KOLKATA DATED 04.09.2018 FOR AY 2009-10. 2. THE SOLE ISSUE INVOLVED IN THIS APPEAL OF ASSESS EE IS AGAINST THE ACTION OF LD. CIT(A) IN CONFIRMING THE ADDITION OF RS.13,21,00,00 0/- MADE ON ACCOUNT OF SHARE CAPITAL AND PREMIUM AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) AND ALSO AGA INST THE CONFIRMING OF INTEREST U/S. 234A, 234B AND 234C OF THE ACT. 3. BRIEFLY STATED FACTS ARE THAT THE AO IN ASSESSME NT ORDER HAD OBSERVED THAT THE ASSESSEE COMPANY WAS INCORPORATED ON 09.07.2008 WIT H THE OBJECT OF CARRY ON THE BUSINESS OF TRADING AND INVESTMENT IN SHARES AND SE CURITIES [REFER MEMORANDUM & ARTICLES OF ASSOCIATIONS OF THE COMPANY]. THE AO NO TED THAT THE RETURN OF INCOME FILED BY THE ASSESSEE COMPANY FOR THE AY 2009-10 WHICH WA S ITS FIRST YEAR. THE AO NOTED 2 ITA NO.2588/KOL/2018 HIGHLIGHT COMMOTRADE PVT. LTD., AY 2009-10 THAT THE ASSESSEE COMPANY HAD CLAIMED TO HAVE RECEI VED SHARE CAPITAL OF RS.L,00,000/- IN CASH FROM TWO PERSONS NAMELY SHRI MANOJ KURNAR A GARWAL AND SHRI MALAY DAS. ACCORDING TO AO, THE ASSESSEE COMPANY HAD FURTHER C LAIMED THE RECEIPT OF SHARE CAPITAL AND SHARE PREMIUM OF RS. 13,20,00,000/- FROM EIGHT (8) COMPANIES AND THAT EACH SHARE OF THE ASSESSEE COMPANY OF THE FACE VALUE OF RUPEE 1/- WAS ISSUED AT PREMIUM OF RS.99/- TO THE 8 COMPANIES. IN THE COURSE OF ASSESS MENT PROCEEDINGS, THE AO ACKNOWLEDGES THAT THE ASSESSEE COMPANY PRODUCED ITS DIRECTOR SHRI MANOJ JAIN AND DIRECTORS OF THE 8 COMPANIES WHICH WERE CLAIMED TO HAVE MADE PAYMENT TO THE ASSESSEE COMPANY ON ACCOUNT OF SHARE CAPITAL INCLUDING SHARE PREMIUM. THE AO NOTED THAT ALL THE PERSONS PRODUCED BEFORE HIM WERE RELATIVES OF T HE DIRECTOR OF THE ASSESSEE COMPANY SHRI MANOJ JAIN. HOWEVER, THE AO WAS NOT CONVINCED WITH THE PERSONAL APPEARANCE OF THE ASSESSEES DIRECTORS AS WELL AS THAT OF THE DIR ECTORS OF EIGHT (8) SHARE SUBSCRIBING COMPANIES SINCE THEY WERE ALL THE RELATIVES OF THE ASSESSEES DIRECTOR SHRI MANOJ JAIN AND THE AO WONDERED AS TO HOW A COMPANY IN ITS FIRS T YEAR OF INCORPORATION COULD COMMAND PREMIUM OF RS.99/- PER SHARE. ACCORDING TO AO, THE ASSESSEE FAILED TO GIVE ANY PROPER EXPLANATION ON THIS ISSUE WHICH PROMPTED HIM TO ADD THE ENTIRE SHARE CAPITAL AND PREMIUM AS INCOME OF THE ASSESSEE BY OBSERVING AS UNDER: IN THIS PRESENT CASE IT IS OBSERVED THAT THE ASSE SSEE, VIRTUALLY, WAS NOT ENGAGED IN ANY BUSINESS ACTIVITY DURING THE YEAR. THE SHARE HOLDER S HAVE MADE SUBSCRIPTION TOWARDS SHARE CAPITAL, OF ASSESSEE COMPANY, AT A HIGH PREMI UM. IT IS NOT BELIEVABLE THAT ANY PERSON, HAVING ANY PRUDENT BUSINESS SENSE, WILL MAK E INVESTMENTS BY WAY OF HUGE SHARE SUBSCRIPTION ALONGWITH SUCH HUGE SHARE PREMIUM, IN THIS ASSESSEE COMPANY WHICH HAS VIRTUALLY NO BUSINESS ACTIVITY AND ALSO WHICH VIRTU ALLY DOES NOT SHOW ANY BRIGHT APPRECIATION IN THE NEAR FUTURE TO GIVE ANY SORT OF DIVIDEND TO ITS INVESTOR. IT IS ALSO NOT BELIEVABLE THAT ANY CONCERN OR PERSON WILL BE ATTRA CTED TO INVEST ITS FUNDS, FOR ANY SORT OF LUCRATIVE RETURN, FROM THIS ASSESSEE COMPANY. HENCE IT WAS NECESSARY TO EXAMINE THE ACTUAL MOTIVE OF THE SHARE SUBSCRIBERS WHO HAD INVE STED THEIR FUNDS IN THE ASSESSEE COMPANY, TO ARRIVE AT THE LOGICAL CONCLUSION ABOUT THE TRUE NATURE OF THE AFORESAID SHARE TRANSACTIONS BETWEEN THE ASSESSEE COMPANY AND ITS P URPORTED INVESTORS. THIS COULD NOT BE EXPLAINED BY THE ASSESSEE COMPANY AND ITS SUBSCRIBE RS. IN THE LIGHT OF THE RATIO LAID DOWN IN THE AFORESAI D JUDICIAL PRONOUNCEMENTS AND DISCUSSION MADE IN THE AFORESAID PARAS VIS -A VIS T HE FACTS AND CIRCUMSTANCES IN THE INSTANT CASE AS WELL AS UNSATISFACTORY EXPLANATION OF THE ASSESSEE COMPANY REGARDING ITS CLAIM OF INTRODUCTION OF FRESH SHARE CAPITAL, INCLU DING PREMIUM, IT IS HELD THAT ITS PURPORTED FRESH SHARE CAPITAL, ALONG WITH SHARE PRE MIUM, AMOUNTING TO RS.13,21,00,000/- 3 ITA NO.2588/KOL/2018 HIGHLIGHT COMMOTRADE PVT. LTD., AY 2009-10 , IS NOTHING BUT ASSESSEE'S OWN MONEY CONDUTED UNDE R THE GRAB OF FRESH SHARE CAPITAL INTO ITS BOOKS OF ACCOUNT. IT IS APPARENT THAT SUCH FUND S HAVE BEEN UTILIZED BY THE ASSESSEE FOR MAKING ITS OWN INVESTMENTS. HENCE, THE AO TREATED T HE SUM OF RS.13,21,00,000/- AS UNEXPLAINED CASH CREDIT FOUND IN THE BOOKS OF ACCOU NT OF THE ASSESSEE RELEVANT TO AY 2009-10 AND WAS ACCORDINGLY ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE COMPANY. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE T HE LD. CIT(A) WHO DISMISSED THE APPEAL OF THE ASSESSEE BY STATING THAT THE ASS ESSEE COULD NOT ESTABLISH THE GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF THE SHAREHOLDERS. HENCE, THE CONFIRMED THE ADDITION OF RS.13,21,00,000/- U/S. 68 OF THE ACT. AGGRIEVED, ASSESSEE IS BEFORE US. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THIS WAS THE SECOND ROUN D OF ASSESSMENT BEFORE THE AO. IN THE FIRST ROUND, THE AO REOPENED THE ASSESSMENT U/S . 147 AND COMPLETED IT ON 13.04.2012 U/S. 147/143(2) OF THE ACT. HOWEVER, IT WAS INTERFERED BY THE LD. PR. CIT- 1, KOLKATA U/S. 263 OF THE ACT AND THE REASSESSMENT ORDER DATED 13.04.2012 WAS SET- ASIDE BACK TO THE AO ALONG WITH DETAILED GUIDELINES TO CONDUCT THE INVESTIGATION INTO THE INFUSION OF SHARE CAPITAL AND PREMIUM. WE NOTE THAT THE LD. PR. CIT U/S. 263 OF THE ACT HAD SET ASIDE THE REASSESSMENT WITH THE DIRECTI ON THAT THE AO SHOULD PASS THE ASSESSMENT ORDER AFTER CONDUCTING INDEPENDENT DETAI LED AND COMPLETE ENQUIRIES INTO THE SUBSCRIPTION TO THE SHARE CAPITAL AND PREMIUM TO TH E EXTENT OF RS.13,21,00,000/- INTRODUCED IN THE INSTANT CASE, AND INVESTMENTS OF RS.13,21,00,000/- MADE IN THIS CASE. IT WAS FURTHER OBSERVED BY THE LD. PR. COMMISSIONER OF INCOME TAX-1, KOLKATA THAT THOROUGH AND PROPER ENQUIRY INTO THE EXISTENCE, AND CREDITWORTHINESS OF THE SHARE SUBSCRIBERS AND THE GENUINENESS OF SHARE SUBSCRIPTI ON TRANSACTIONS CLAIMED BY THE ASSESSEE COMPANY WAS NOT MADE AND ALSO THE GENUINEN ESS OF THE ASSESSEE COMPANY AND ITS DIRECTORS WAS NOT EXAMINED IN THE ASSESSMENT OR DER DATED 13.04.2012 PASSED U/S. 147/143(3) OF THE ACT. 6. HOWEVER, WE NOTE THAT IN THE SECOND ROUND, THE A SSESSEE PURSUANT TO THE SUMMONS ISSUED BY THE AO PRODUCED THE DIRECTORS OF THE ASSESSEE COMPANY AS WELL AS 4 ITA NO.2588/KOL/2018 HIGHLIGHT COMMOTRADE PVT. LTD., AY 2009-10 THE DIRECTOR OF EIGHT (8) SHARE SUBSCRIBING COMPANI ES. HOWEVER THE AO HAVE NOT ACCEPTED THE GENUINENESS OF THE OF SHARE CAPITAL AN D PREMIUM ON THE GROUND THAT ASSESSEE BEING A NEW COMPANY [SINCE IT WAS INCORPOR ATED ONLY ON 09.07.2008] COULD NOT HAVE RECEIVED PREMIUM OF RS.99/- PER SHARE IN I TS FIRST YEAR I.E. AY 2009-10 AND ACCORDING TO AO, NO PRUDENT BUSINESSMEN WOULD HAVE VENTURED TO INVEST IN A NEW COMPANY SUCH A HUGE AMOUNT WITHOUT SEEING ANY EXTRA ORDINARY FUTURE PROSPECTS. SINCE ACCORDING TO AO, THE ASSESSEE FAILED TO GIVE SATISF ACTORY EXPLANATION ABOUT THIS ISSUE AS WELL AS COULD NOT CONVINCE HIM THAT THE ASSESSEE CO MPANY WAS INTO GENUINE BUSINESS ACTIVITY WITH PROPER INFRASTRUCTURE, THE AO TOOK AD VERSE VIEW AGAINST THE ASSESSEE. HOWEVER, BEFORE US, THE MAIN GRIEVANCE OF THE LD. A R OF THE ASSESSEE WAS THAT THOUGH THE LD. PR. CIT U/S. 263 BY ORDER DATED 27.02.2015 HAS GIVEN DETAILED GUIDELINES WHILE SETTING ASIDE THE REASSESSMENT ORDER DATED 13.04.20 12, THE AO HAS NOT BOTHERED TO CARRY OUT THE SAME AS ORDERED AND HAS BASED HIS DEC ISION ON SUSPICION AND CONJECTURES AND HAVE MULCT THE ADDITION AGAINST THE ASSESSEE WI THOUT PROVIDING PROPER OPPORTUNITY TO ASSESSEE WHEN THE ASSESSEE HAD COMPLIED WITH THE SUMMONS BY PROMPTLY PRODUCING DIRECTORS ETC. BEFORE THE AO. ACCORDING TO HIM, IF THE AO STILL HAD SOME DOUBTS IN HIS MIND SHOULD HAVE TAKEN STEPS TO CONFRONT THE ASSESS EE AND THEN ONLY SHOULD HAVE DRAWN ADVERSE INFERENCE AGAINST THE ASSESSEE. SO, ACCORDI NG TO HIM, THIS OMISSION ON THE PART OF AO TO CONFRONT THE ASSESSEE WITH THE DOUBTS IN H IS MIND AMOUNTED TO LACK OF PROPER OPPORTUNITY BEFORE THE AO DURING ASSESSMENT STAGE A ND RELYING ON THE DECISION OF HONBLE SUPREME COURT IN TIN BOX COMPANY VS. CIT (2001) 249 ITR 216 (SC) WANTS ONE MORE OPPORTUNITY BEFORE AO . WE FIND FORCE IN THE SUBMISSION OF AR, SINCE THE ASSESSEE PRODUCED THE DIRECTOR OF ASSESSEE COMPANY AS WELL AS THE DIRECTORS OF EIGHT SHARE SUBSCRIBING COMPANIES AND PRODUCED DOCUMENTS TO DISCHARGE THE ONUS, STILL IF AO NURSED SOME DOUBTS AGAINST THE ASSESSEE, THEN IT WA S INCUMBENT UPON HIM TO CONFRONT THE ASSESSEE WITHOUT WHICH HIS ACTION IS BAD IN LAW . AND SINCE THE OMISSION AS NOTED ABOVE TANTAMOUNT TO LACK OF PROPER OPPORTUNITY BEFO RE THE AO DURING ASSESSMENT STAGE, WE ARE INCLINED TO SET ASIDE THE IMPUGNED ORDER OF LD. CIT(A) AND REMAND THE MATTER BACK TO AO FOR FRESH ASSESSMENT AS PER THE GUIDELIN ES GIVEN BY LD. PR CIT U/S. 263 OF 5 ITA NO.2588/KOL/2018 HIGHLIGHT COMMOTRADE PVT. LTD., AY 2009-10 THE ACT AFTER GIVING PROPER OPPORTUNITY TO ASSESSEE . AND THE ASSESSEE IS DIRECTED TO PARTICIPATE DILIGENTLY DURING THE ASSESSMENT PROCEE DINGS BEFORE THE AO. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 29 TH JANUARY, 2020 SD/- SD/- (J. SUDHAKAR REDDY) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 29TH JANUARY, 2020 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT HIGHLIGHT COMMOTRADE PVT. LTD., C/O, VA SUDHA JAIN, 15B, DR. RAJENDRA PRASAD SARANI, KOLKATA-700 001. 2 RESPONDENT ITO, WARD-1(4), KOLKATA. 3 . THE CIT(A)-5, KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .