Shivangan Promoters Pvt. Ltd., Kolkata V. ITO, Ward - 6(1), Kolkata, Kolkata

ITA 263/KOL/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1243 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 22-02-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K SRIHARI
• Keywords: Unexplained cash credit; Opportunity of being heard; Reassessment proceedings
• Section: 142(1); 133(6); 131; 68; 263

Judgement Text

1 ITA NO. 263/KOL/2016 SHIVANGAN PROMOTERS PVT. LTD., AY 2008-09 , C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA ( ) BEFORE . . , /AND . , ) [BEFORE SHRI A. T. VARKEY, JM & SHRI M. BALAGANESH , AM] I.T.A. NO. 263/KOL/2016 ASSESSMENT YEAR: 2008-09 SHIVANGAN PROMOTERS PVT. LTD. (PAN: AALCS6099R) VS. INCOME-TAX OFFICER, WD-6(1), KOLKATA APPELLANT RESPONDENT DATE OF HEARING 22.11.2018 DATE OF PRONOUNCEMENT 28.11.2018 FOR THE APPELLANT SHRI SUBASH AGARWAL, ADVOCATE FOR THE RESPONDENT SHRI P. K. SRIHARI, CIT, DR ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL PREFERRED BY THE ASSESSEE IS AGAINST TH E ORDER OF THE LD. CIT(A)-2, KOLKATA DATED 18.01.2016 FOR AY 2008-09. 2. AT THE OUTSET ITSELF, THE LD. AR DREW OUR ATTENT ION TO THE FACT THAT THE ASSESSEE DID NOT GET PROPER OPPORTUNITY BEFORE THE AO WHO WAS GI VING EFFECT TO THE ORDER OF THE LD. CITS ORDER PASSED U/S. 263 OF THE ACT. THE LD. AR DREW OUR ATTENTION TO THE COPY OF THE ORDER SHEET ENTRIES MADE BY THE AO WHICH SHOWS THAT THE AO HAS GONE THROUGH THE ORDER PASSED BY THE LD CIT, KOL-2 DATED 30.03.2013 ON 20. 12.2013 AND ISSUED NOTICE U/S. 142(1) OF THE ACT FOR HEARING WHICH WAS FIXED ON 02.01.201 4. WE NOTE THAT THE REASSESSMENT ORDER HAS BEEN PASSED BY THE AO GIVING EFFECT TO THE LD. CITS ORDER ON 31.03.2014 I.E. WITHIN A SPAN OF THREE MONTHS. WE NOTE FROM A PERUSAL OF TH E ORDER SHEET THAT ON 02.01.2014 SHRI JAGDISH AGARWAL, FCA, THE LD. AR APPEARED AND PRODU CED THE DOCUMENTS/REPLIES ASKED FOR IN THE NOTICE U/S. 142(1) OF THE ACT. AFTER ACKNOW LEDGING THAT THE LD. AR OF THE ASSESSEE HAS PRODUCED REPLIES AS ASKED FOR IN THE NOTICE U/S . 142(1) THE AO AND HAVING RECORDED THE SAME IN THE ORDER SHEET, THE AO RECORDS THAT AFTER DISCUSSING THE CASE WITH THE LD. AR HE ASKED THE LD. AR TO SUBMIT CIRCUMSTANCES WHICH NECE SSITATED THE CHANGE IN DIRECTORSHIP OF 2 ITA NO. 263/KOL/2016 SHIVANGAN PROMOTERS PVT. LTD., AY 2008-09 THE ASSESSEE COMPANY AND THEREAFTER FIXED THE MATTE R ON 07.02.2014. THEN, HE ISSUED NOTICE U/S. 133(6) TO THE SHARE INVESTORS. THE AO ACKNOWLE DGES THAT THE FACT THAT THE LD. AR OF THE ASSESSEE APPEARED BEFORE HIM ON 07.02.2014 AND PROD UCED REPLIES AS ASKED FOR IN THE EARLIER HEARING (02.01.2014). THEREAFTER, WE NOTE THAT THE AO ISSUED NOTICE U/S. 131 OF THE ACT TO THE DIRECTORS AND ALSO NOTICE U/S. 133(6) OF THE AC T TO THE BRANCH MANAGER OF THE BANK AND THEREAFTER HE HAS PASSED THE ORDER OF REASSESSMENT ON 31.03.2014. THE LD. AR DREW OUR ATTENTION TO THE ORDER SHEET ENTRY ON 04.03.2014 AN D CONTENDED BEFORE US THAT IN THE ORDER SHEET ENTRY IT IS ONLY RECORDED THAT NOTICE U/S. 131 ISSUED TO THE DIRECTORS AND SUBMITTED THAT THE ASSESSEE COMPANYS DIRECTORS DID NOT RECEI VE ANY NOTICE AND IT IS NOT CLEAR FROM THE RECORDING ON THE ORDER SHEET AS TO WHETHER THE AO HAS ISSUED NOTICE U/S. 131 TO THE DIRECTOR OF THE ASSESSEE COMPANY OR THE SUBSCRIBING COMPANIE S AND SINCE THE ASSESSEE HAD NOT RECEIVED ANY SUCH NOTICES AS STATED IN THE ORDER SH EET AND ALSO IN THAT CONTEXT POINTED OUT THAT PRESENTLY THE ASSESSEE COMPANY WAS NOT AWARE OF THE PRESENT DIRECTORS OF THE SHARE SUBSCRIBING COMPANIES, SINCE THE TRANSACTION UNDER ENQUIRY HAPPENED IN THE ASSESSMENT YEAR 2008-09. FURTHER, THE LD. AR CONTENDED THAT T HE AO HAS NOT GONE BY THE FOLLOWING GUIDELINES GIVEN BY THE LD. CIT IN THIS CASE WHILE EXERCISING HIS REVISIONAL JURISDICTION U/S. 263 OF THE ACT TO UNEARTH THE UNSCRUPULOUS ACTIVITI ES CARRIED OUT: 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. 3. HOWEVER, WE NOTE THAT AOS INVESTIGATION AND ORD ER 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 20.12.2013, ASKING IT T O PRODUCE AND SUBMIT CERTAIN DETAILS AND DOCUMENTS TO SUBSTANTIATE ITS RETURN OF INCOME. IN RESPONSE TO THE SAID NOTICE, SRI J.P. AGARWAL, FCA & ALR OF THE ASSESSEE APPEARED AND PRO DUCED WRITTEN SUBMISSIONS. 3 ITA NO. 263/KOL/2016 SHIVANGAN PROMOTERS PVT. LTD., AY 2008-09 4. IT WAS NOTICED THE ASSESSEE DURING THE YEAR HAS RAISED A PAID-UP SHARE CAPITAL OF RS. 13.055 CRORES BY ISSUING EQUITY SHARES INCLUDING PR EMIUM. TO VERIFY THE GENUINENESS OF THE SAID TRANSACTIONS AND TO VERIFY THE IDENTITY AND CR EDITWORTHINESS 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.13.055 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. 4. 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. WE NOTE THAT OTHER THAN A NOTICE U/S. 131 OF THE ACT ISSUE D TO THE DIRECTORS TO APPEAR PERSONALLY TO PRODUCE DETAILS/DOCUMENTS , NO OTHER INVESTIGATION AS SUGGESTED BY THE LD. CIT (GUIDELINES WE REFERRED SUPRA) WAS CARRIED OUT BY AO SINCE IT I S NOT DISCERNABLE FROM THE ORDER AND THE FACT WAS THAT THE ENTIRE ENQUIRY WAS WRAPPED UP WIT HIN LESS THAN THREE MONTHS AND IN THE LIGHT OF THE FACT THAT THE AO ACKNOWLEDGES THE PART ICIPATION OF THE LD. AR OF THE ASSESSEE DURING THE HEARING FIXED BY THE AO. SO, WE FIND FO RCE IN THE SUBMISSION OF THE LD. AR THAT NO PROPER OPPORTUNITY THE ASSESSEE GOT BEFORE THE A O DURING THE REASSESSMENT PROCEEDINGS. SINCE PROPER OPPORTUNITY WAS NOT GIVEN TO ASSESSEE BY AO DURING THE REASSESSMENT PROCEEDINGS, WE ARE OF THE OPINION THAT ASSESSEE SH OULD GET PROPER OPPORTUNITY BEFORE THE AO DURING REASSESSMENT PROCEEDINGS. IN THIS RESPECT THE HONBLE (THREE JUDGE BENCH) OF THE HONBLE SUPREME COURT IN TIN BOX COMPANY VS. CIT (2 001) 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 THE TRIBUNAL, THE FACT-FINDING AUTHORITY, THAT R EADS THUS : 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 4 ITA NO. 263/KOL/2016 SHIVANGAN PROMOTERS PVT. LTD., AY 2008-09 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. 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. 5. 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. 6. 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 5 ITA NO. 263/KOL/2016 SHIVANGAN PROMOTERS PVT. LTD., AY 2008-09 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 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.' 7. 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 LD. CIT PASSED U/S. 263 OF THE ACT IN SIMILAR CASES BEING UPHELD UP TO THE LEVEL OF APEX COURT, AND TAKING NOTE OF HONBLE DELHI HIGH COURT S ORDER IN JANSAMPARK ADVERTISING & MARKETING PVT. LTD. (SUPRA), 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. 8. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 28TH NOVEMBE R, 2018. SD/- (M. BALAGANESH) SD/-(A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 28TH NOVEMBER, 2018 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 APPELLANT SHIVANGAN PROMOTERS PVT. LTD., ROOM NO. 704, 7 TH FLOOR, CITY CENTRE, 19, SYNAGOGUE STREET, KOLKATA-700 001. 2 RESPONDENT ITO, WARD-6(1), KOLKATA 3 4 5 CIT(A) -2, KOLKATA (SENT THROUGH E-MAIL) CIT , KOLKATA. DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, SR. PVT. SECRETARY