KC MEREANTILE LTD., Jaipur V. DCIT, CIRCLE-2, Jaipur

ITA 356/JPR/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5087 (ITAT-JAIPUR)
• Duration Of Justice: 5 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-12-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 20-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROSHANTA MEENA JCIT DHK
• Keywords: Unexplained cash credit; Reassessment proceedings
• Section: 143(3); 68; 148

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T; IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO. 356/JP/11 & ITA NO. 71/JP/14 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2002-03 M/S K.C. MERCANTILE LTD. (PRESENTLY KNOWN AS GENUS INNOVATION LTD.) B-9, GANPATI ENCLAVE AJMER ROAD, JAIPUR CUKE VS. THE DY. CIT, CIRCLE -2, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AABCK 4300P VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MANISH AGARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : MS. ROSHANTA MEENA(J CIT ) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 05.05.2016 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 21/07/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THESE ARE TWO APPEALS FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-I, JAIPUR DATED 18.03.2011 & 13.12.2013 RESP ECTIVELY WHEREIN THE ASSESSEE HAS CHALLENGED THE INITIATION OF THE REASS ESSMENT PROCEEDINGS AND THE CONSEQUENT ADDITIONS IN THE QUANTUM PROCEEDINGS AND IN THE SECOND APPEAL, HAS CHALLENGED THE LEVY OF PENALTY U/S 271(1)(C) ON THE ADDITIONS SUSTAINED BY THE LD CIT(A) IN THE QUANTUM PROCEEDINGS. FIRSTLY, WE WILL TAKE UP THE APPEAL IN ITA NO. 356/ JP/11 WHEREIN THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: ITA NO. 356JP/11 M/S K.C. MERCANTILE LTD. VS. DCIT CIRCLE-2, JAIPUR 2 (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS GROSSLY ERRED IN UPHOLDING THE PROCEEDINGS U/S 148 OF THE IT ACT 1961 INITIATED BY THE AO, THUS THE CONSEQUENT ORDERS U/S 143(3)/148 DESERVES TO BE HOLD IN LAW. (I.I) THAT THE LD. CIT(A) HAS FURTHER ERRED IN NOT CONSIDERING THE PLEA OF THE ASSESSEE THAT THE AO HAS NOT DISPOSED OFF THE OBJEC TIONS RAISED BY THE ASSESSEE AGAINST THE RE-OPENING THE ASSESSMENT U/S 148 OF THE IT ACT, 1961. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. CIT(A) HAS GROSSLY ERRED IN SUSTAINING AN ADDITION OF RS.17,50 ,000/- MADE BY THE AO ON A/C OF SHARE CAPITAL U/S 68 OF IT ACT, 1961 BY H OLDING THE SAME AS UNEXPLAINED WITHOUT PROPERLY CONSIDERING THE SUBMIS SIONS MADE, EVIDENCES ADDUCED AND THE LEGAL POSITION IN RESPECT TO THE CREDITS ON ACCOUNT OF SHARE CAPITAL, THUS THE ENTIRE ADDITIONS DESERVES TO BE DELETED IN TOTO. (III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS GROSSLY ERRED IN SUSTAINING AN ADDITION OF RS.29,50 ,000/- MADE BY THE AO ON ACCOUNT OF SHARE APPLICATION MONEY U/S 68 OF THE IT ACT, 1961 RECEIVED FROM VARIOUS PERSONS AS UNEXPLAINED AND HA VE FURTHER ERRED IN IGNORING HE EVIDENCES ADDUCED AND SUBMISSIONS MADE, THUS THE ADDITIONS AS MADE DESERVES TO BE DELETED IN TOTO. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE APPE LLANT IS A LIMITED COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 AND ENG AGED IN THE BUSINESS OF MANUFACTURING OF ELECTRONICS ENERGY METERS BESIDES DOING WORK ON JOB BASIS. THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.2,79,230/- WAS FILED BY THE ASSESSEE WHICH WAS PROCESSED U/S 143(1) OF THE IT ACT, 1961. THEREAFTER THE RE-ASSESSMENT PROCEEDINGS WERE INITIATED U/S 14 8 AND THE ASSESSMENT STOOD COMPLETED U/S 143(3)/148 AT TOTAL INCOME OF R S. 49,79,230/- BY MAKING ADDITION OF RS. 47,00,000/- ON ACCOUNT OF SHARE APP LICATION MONEY AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. THE LD. CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE. HENCE, THE PRESENT APPEAL BEFORE U S. ITA NO. 356JP/11 M/S K.C. MERCANTILE LTD. VS. DCIT CIRCLE-2, JAIPUR 3 2.1 IN GROUNDS OF APPEAL NO. 1 & 1.1, THE APPELLANT HAS CHALLENGED THE ORDER PASSED BY LD. CIT(A) IN CONFIRMING THE ACTION OF AO IN RE-OPENING THE ASSESSMENT PROCEEDINGS U/S 148 OF THE I.T. ACT, 196 1. 2.2 DURING THE COURSE OF HEARING, THE LD AR SUBMITT ED THAT THE LD. AO ISSUED A NOTICE U/S 148 OF THE IT ACT, 1961 AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A COPY OF THE REASON RECORDED WERE SUP PLIED TO THE ASSESSEE. FROM THE PERUSAL OF REASONS RECORDED BY THE AO, IT IS EVIDENT THAT THE ASSESSMENT WAS REOPENED MERELY ON THE BASIS OF INFO RMATION RECEIVED FROM THE INVESTIGATION WING, NEW DELHI AND WITHOUT ARRIV ING AT THE OBJECTIVE CONCLUSION DRAWN AFTER EXAMINING THE SO CALLED INFO RMATION RECEIVED AND THE BELIEF HAS BEEN FORMED FOLLOWING CONCLUSION DRAWN B Y THE ADIT, NEW DELHI AND A HUGE ADDITION OF RS. 17,50,000/- HAS BEEN MADE ON THAT BASIS WITHOUT DISPOSING OFF THE OBJECTIONS RAISED BY THE ASSESSEE . 2.3 LD AR FURTHER SUBMITTED THAT THE ASSESSEE HAS T AKEN A SPECIFIC GROUND BEFORE THE LD CIT(A) AGAINST THE INITIATION OF THE REASSESSMENT PROCEEDINGS U/S 148, HOWEVER THE LD. CIT(A) HAS SIMPLY STATED THA T AO HAD SUFFICIENT MATERIAL IN THE FORM OF REPORT FROM THE INVESTIGATION WING F OR REASONABLE BELIEF THAT INCOME HAD ESCAPED ASSESSMENT AND THE DUE PROCESS O F LAW HAS BEEN FOLLOWING BY THE AO BY SUPPLYING COPY OF REASONS RE CORDED TO THE ASSESSEE. 2.4 LD AR FURTHER SUBMITTED THAT LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE HAS RAISED THE OBJECTION AGAINST THE R EOPENING OF THE ASSESSMENT U/S 148 AND FILED ALL THE NECESSARY EVIDENCES IN S UPPORT OF TRANSACTION OF RECEIPT OF SHARE APPLICATION MONEY FROM ALLEGED PAR TIES BUT THE LD. AO HAS NOT DISPOSED OFF THE OBJECTIONS RAISED BY THE ASSESSEE. IN THIS REGARD RELIANCE IS PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GKN ITA NO. 356JP/11 M/S K.C. MERCANTILE LTD. VS. DCIT CIRCLE-2, JAIPUR 4 DRIVESHAFTS (INDIA) LTD. REPORTED IN 259 ITR 19. H OWEVER, IN THE PRESENT CASE, NO SUCH SPEAKING ORDER IS PASSED DESPITE THE FACT T HAT ASSESSEE HAS OBJECTED TO THE REOPENING. FURTHER, THE OBJECTION RAISED BY TH E ASSESSEE COMPANY WAS PURELY ON LEGAL GROUND DULY SUPPORTED BY CORROBORAT IVE MATERIAL AND NECESSARY EVIDENCES, THUS THE LD. AO OUGHT TO HAVE CONSIDERED THE ISSUE OBJECTIVELY AND NOT ON THE SO CALLED INFORMATION RECEIVED FROM SOME OTHER OFFICIAL, THEREFORE, THE ACTION OF LD. AO IN REOPENING THE COMPLETED ASS ESSMENT WITHOUT INDEPENDENT APPLICATION OF MIND DESERVES TO BE HELD BAD IN LAW. 2.5 THE LD. CIT(A) UPHELD THE ACTION OF THE AO WHIL E OBSERVING AT PAGE 2 OF HIS APPELLATE ORDER AS UNDER: FROM THE ASSESSMENT ORDER IT IS CLEAR THAT THE IN FORMATION WAS RECEIVED FROM THE INVESTIGATION WING REGARDING BOGUS ENTRY OPERATORS. THE AO AFTER RECORDING REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT ISSUED NOTICE U/S 148. INFORMATION RECEIVED FROM INVESTIGATION WING IS CERTAINLY AN INFORMATION AS UNDERSTOOD FOR THE SECT ION OF 147. THE DUE PROCESS OF LAW HAS BEEN FOLLOWED BY THE AO AND THE COPY OF REASONS RECORDED WAS MADE AVAILABLE TO THE APPELLANT. TO V ERIFY THE CORRECTNESS OF INFORMATION GATHERED ONLY THE REOPENING PROCEEDI NGS WAS INITIATED. THE AO HAD SUFFICIENT MATERIAL IN THE FORM OF REPOR T FROM THE INVESTIGATION WING FOR REASONABLE BELIEF THAT INCOM E HAD ESCAPED ASSESSMENT . THE AO HAS FURTHER DISCLOSED THE PROC ESS OF REASONING BY MAKING AVAILABLE THE COPY OF REASONS RECORDED. THE RE EXISTS NEXUS BETWEEN THE CONCLUSION DRAWN AND MATERIAL BELIEF AN D THEREFORE, NOTICE ISSUED U/S 148 IS A VALID NOTICE. 2.6 THE LD DR IS HEARD WHO HAS RELIED UPON THE ORDE R OF THE LD CIT(A) AND SUBMITTED THAT THE AO HAS RIGHTLY FOLLOWED THE DUE PROCESS OF LAW IN INITIATING THE REASSESSMENT PROCEEDINGS. 2.7 WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT FACTS, WE FIND THAT THE ASSESSMENT ORDER PASSED U/S 143(3) READ WITH SECTION 148 WAS PASSED ON 29TH DEC EMBER, 2009 WITHOUT HAVING DISPOSED OFF THE ASSESSEES OBJECTIONS TO TH E REASONS RECORDED IN SUPPORT OF THE IMPUGNED NOTICE ISSUED UNDER 148 SER VED ON THE ASSESSEE ON ITA NO. 356JP/11 M/S K.C. MERCANTILE LTD. VS. DCIT CIRCLE-2, JAIPUR 5 24 TH MARCH 2009. THE REASONS WERE SUPPLIED TO THE ASSES SEE ON 7 TH AUGUST 2009 AND THE ASSESSEE HAD THEREAFTER FILED ITS OBJE CTIONS TO THE SAME VIDE ITS LETTER DATED NIL AVAILABLE AT PAPERBOOK PAGE 13 AND 14. THIS PASSING OF THE ASSESSMENT ORDER WITHOUT HAVING DISPOSED OFF THE OB JECTIONS RAISED BY THE ASSESSEE IS CLEARLY IN DEFIANCE OF THE HONBLE SUPR EME COURT'S DECISION IN GKN DRIVESHAFTS (INDIA) LTD. IN GKN DIVESHAFTS (INDIA) LTD. V. ITO [2003] 259 ITR 19 (SC) WHEREIN THE HON'BLE SUPREME COURT HELD AS UNDER: '5. WE SEE NO JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER UNDER CHALLENGE. HOWEVER, WE CLARIFY THAT WHEN A NOTICE U NDER SECTION 148 OF THE IT ACT IS ISSUED, THE PROPER COURSE OF ACTION F OR THE NOTICE IS TO FILE RETURN AND IF HE SO DESIRES, TO SEEK REASONS FOR IS SUING NOTICES. THE AO IS BOUND TO FURNISH REASONS WITHIN A REASONABLE TIME. ON RECEIPT OF REASONS, THE NOTICE IS ENTITLED TO FILE OBJECTIONS TO ISSUAN CE OF NOTICE AND THE AO IS BOUND TO DISPOSE OF THE SAME BY PASSING A SPEAKING ORDER. IN THE INSTANT CASE, AS THE REASONS HAVE BEEN DISCLOSED IN THESE P ROCEEDINGS, THE AO HAS TO DISPOSE OF THE OBJECTIONS, IF FILED, BY PASS ING A SPEAKING ORDER BEFORE PROCEEDING WITH THE ASSESSMENT IN RESPECT OF THE ABOVE SAID FIVE ASSESSMENT YEARS.' 2.8 ACCORDINGLY, IN LIGHT OF THE DECISION OF THE HO NBLE SUPREME COURT IN CASE OF GKN DIVESHAFTS (INDIA) LTD.(SUPRA), WE SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WHO SHALL CONSIDER THE OBJECTIONS RAISED BY THE ASSESSEE AGAINST THE RE-ASSESSMENT PROCEEDINGS INITIATED U/S 148 IN ACCORDANCE WITH LAW AND SHALL DISPOSE OFF THE SAME BY PASSING A SPEAKIN G ORDER AND THEREAFTER, SHALL BE AT LIBERTY TO COMPLETE THE REASSESSMENT PROCEEDI NGS AS PER LAW. 2.9 IN LIGHT OF ABOVE, WE ARE NOT COMMENTING ON THE OTHER GROUNDS RAISED BY THE ASSESSEE AS THE MATTER HAS BEEN SET-ASIDE TO TH E FILE OF THE AO. 2.10 IN ITA NO. 71/JP/14, THE ASSESSEE HAS CHALLENG ED THE CONSEQUENT LEVY OF PENALTY PURSUANT TO THE ADDITIONS SUSTAINED BY THE LD CIT(A) IN THE QUANTUM PROCEEDINGS WHICH WAS SUBJECT MATTER OF APPEAL IN I TA NO. 356/JP/11. AS WE HAVE ALREADY SET-ASIDE THE MATTER IN QUANTUM PROCEE DINGS TO THE FILE OF THE AO, MATTER RELATING TO CONSEQUENT LEVY OF PENALTY I S ALSO SET-ASIDE TO THE FILE OF THE AO WHO SHALL BE AT LIBERTY TO COMPLETE THE PENA LTY PROCEEDINGS AS PER LAW. IN THE RESULT THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 356JP/11 M/S K.C. MERCANTILE LTD. VS. DCIT CIRCLE-2, JAIPUR 6 ORDER PRONOUNCED IN THE OPEN COURT ON 21/0 7/2016. SD/- SD/- ( KUL BHARAT ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 21/ 07 /2016 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S K.C. MERCANTILE LTD. JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE DCIT, CIRCLE-2, JAIPUR 3. VK;DJ VK;QDR@ CIT I, JAIPUR 4. VK;DJ VK;QDRVIHY@ THE CIT(A)-I, JAIPUR 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 356/JP/2011 & ITA NO/. 71/JP/14 ) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR