ITO 13(1)(1), MUMBAI V. NIDHI PREMISES P LTD, MUMBAI

ITA 3607/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7707 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 17-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N HEMLATHA
• Keywords: Question of law; Accommodation entries
• Section: 143(3); 133(6); 68; 148

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE HONBLE SH. B. R. BASKARAN, AM & HONBLE SH. SANDEEP GOSAIN , J M ./ I.T.A. NO . 3607 /MUM/201 7 ( / ASSESSMENT YEAR: 2007 - 08 ) ITO 13(1)(1), R. NO. 225, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400 020 / VS. NIDHI PREMISES PVT. LTD. B - 16, ROOPKAMAL, SV ROAD, KANDIVALI (W) , MUMBAI - 400 067 ./ ./ PAN NO. AA CCN3605K ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : MS. N. HEMLATHA , DR / RESPONDENTBY : NONE / DATE OF HEARING : 28.11 .201 8 / DATE OF PRONOUNCEMENT : 16.01.2019 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE P RESENT APPE AL FILED BY THE REVENUE IS AGAINST THE ORDER OF LD. CIT (APPEAL) 21, MUMBAI DATED 20.03 .17 F OR AY 20 07 - 08. 2 I.T.A. NO. 3607 /MUM/201 7 NIDHI PREMISES PVT. LTD. 2. AT THE VERY OUTSET, IT IS NOTICED THAT NONE HAS APPEARED ON BEHALF OF ASSESSEE IN SPITE OF CALLS AND EVEN NO APPLICATION FOR ADJOURNMENT WAS MOVED. FROM THE RECORDS, WE N OTICED THAT LD. CIT - DR HAD FILED A LETTER DATED 27.11.18 THEREBY MENTIONING THAT NOTICE OF HEARING HAS BEEN SERVED UPON THE ASSESSEE. IN THIS RESPECT, PHOTOCOPY ALONGWITH REPORT OF ITO HAS ALREADY BEEN PLACED ON RECORD. ON THE OTHER HAND L D. DR IS PRESENT IN THE COURT AND IS READY WITH ARGUMENTS. THEREFORE WE HAVE DECIDED TO PROCEED WITH THE HEARING OF THE CASE EX - PARTE WITH THE ASSISTANCE OF THE L D. DR AND THE MATERIAL PLACED ON RECORD. 3 . THE ONLY GRIEVANCE RAISED BY THE REVENUE IS CHALLENGING AGAINST THE ORDER OF LD. CIT (A) IN DELETING THE ADDITION ON ACCOUNT OF SHARE PREMIUM / SHARE APPLICATION M ONEY AND CORRESPONDING ADDITION ON ACCOUNT OF COMMISSION EXPENSES. 4 . WE HAVE HEARD LD. DR AT LENGTH AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. WE FIND FROM THE RECORDS THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF REAL ESTATE AND 3 I.T.A. NO. 3607 /MUM/201 7 NIDHI PREMISES PVT. LTD. CONSTRUCTION AND FILED ITS RETURN OF INCOME FOR T HE YEAR UNDER CONSIDERATION O N 02.11.07 DECLARING THE TOTAL LOSS OF RS. ( - ) 1,40,544. LATER ON THE CASE WAS SELECTED FOR SCRUTINY AND AFTER SERVING STATUTORY NOTICES, ASSESSMENT ORDER U/S 143(3) WAS COMPLETED ON 30.11.09 DETERMINING THE TOTAL INCOME AT RS. 52,460/ - . SUBSEQUENTLY, THE CASE WAS REOPENED BY ISSUING NOTICE U/S 148 OF THE ACT ON 26.03.14 WHICH WAS DULY SERVED ON THE ASSESSEE AND AFTER SEEKING REPLY OF THE ASSESSEE AND CARRYING OUT NECESSARY INVESTIGATIONS, ASSESSMENT ORDER U/S 143(3) R.W.S. 147 OF THE I.T. ACT WAS PASSED ON 27 .03.15 THEREBY MAKING ADDITIONS ON ACCOUNT OF SHARE PREMIUM /SHARE APPLICATION MONEY AND COMMISSION EXPENSES U/S 68 OF THE I.T. ACT. ON APPEAL, LD. CIT(A) AFTER CONSIDERING THE CASE OF BOTH THE PARTIES, PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 5. AFTER HAVING GONE THROUGH THE MATERIAL PLACED ON RECORD AS WELL AS ORDERS PASSED BY THE REVENUE AUTHORITIES, WE FIND THAT AO HAD CARRIED OUT DETAIL INVESTIGATIONS AND PASSED ITS ELABORATE /DETAILED ORDER THEREBY CATEGORICALLY HO LDING THAT PK (PRAVEEN KUMAR) WAS INDULGED IN PROVIDING ACCOMMODATION 4 I.T.A. NO. 3607 /MUM/201 7 NIDHI PREMISES PVT. LTD. ENTRIES AND THE BUSINESS ENTITIES OPERATED BY PK WERE NOT CARRYING OUT ANY GENUINE BUSINESS BUT WERE SOLELY USED AS CONDUITS FOR PROVIDING ACCOMMODATION ENTRIES. THE EVIDENCES COLLECTED DURING SEARCHES, SURVEYS AND INQUIRIES AND EXAMINATION ON OATH OF VARIOUS PERSONS SUBSTANTIATES THE MODUS OPERANDI, WHICH IS CONTAINED IN PARA NO. 5 TO 8 OF ITS ORDER. 6 . WE ALSO FIND THAT LD. CIT(A) AFTER APPRECIATING THE FACTS OF THE PRESENT CASE HAD DELETED THE ADDITIONS BY RELYING UPON THE JU DGMENTS MENTIONED IN ITS ORDER AND HAD CA TEGORICALLY MENTIONED THAT WHILE ARRIVING AT THE CONCLUSION, THE AO HAD NOT CARRIED OUT DETAILED INQUIRIES /FULL INQUIRIES, BUT PASSED HIS ORDER ON THE HIGH VALUE OF SHARE APPLICATION MONEY /SHARE PREMIUM. IT WAS FURTHER HE LD BY LD. CIT(A) THAT THE AO HAD NOT RECORDED ANY FINDINGS AS TO HOW THE ALLEGED UNACCOUNTED CASH /MONEY OF THE ASSESSEE COMPANY WAS ROUTED THROUGH VARIOUS LEVELS AND AO HAD NOT MADE MUCH INVESTIGATION EX CEPT ISSUANCE OF NOTICE U/S 133(6) WHICH EVEN OTHERWISE COULD NOT BE SERVED ON THE SHARE APPLICANTS IN TWO CASES DUE TO CHANGE OF ADDRESS AND IN 3 CASES PART REPLIES WERE FIL ED. THE LD. CIT(A) HAD ONLY FOUND FAULT S IN THE ORDERS 5 I.T.A. NO. 3607 /MUM/201 7 NIDHI PREMISES PVT. LTD. PASSED BY T HE AO AND DELETE D THE ADDITIONS. W HEREAS IT IS TRUE THAT THE POWERS OF LD. CIT(A) ARE CO - TERMINUS WITH THAT OF THE AO AND THE LD. CIT(A) COULD HIMSELF CARRIED OUT FURTHER INVESTIGATION WHICH OUGHT TO H AVE BEEN CARRIED OUT BY THE AO. THE LD. CIT(A) HAD NOT CONTROVERTED T HE FACTUAL FINDINGS RECORDED BY AO BY ELABORATING THE D OCUMENTARY EVIDENCE. T HE FINDINGS OF LD. CIT(A) ARE NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCES. 7 . BE THAT AS IT MAY, IT IS THE PRIMARY DUTY WHICH IS BESTOWED UPON LD. CIT(A) TO BRING ON RECORD THE CO MPLETE AND ALL RELEVANT FACTS OF THE CASE WHILE DECIDING THE APPEAL. IT WOULD BE RELEVANT HERE TO QUOTE FROM HONBLE DELHI HIGH COURT IN THE CASE OF CIT VRS. JANSAMPARK ADVERTISING AND MARKETING PVT. LTD. DATED 11.03.15, WHEREIN IT WAS HELD AS UNDER: - 35. ASSESSMENT PROCEEDINGS UNDER THE INCOME TAX ACT ARE NOT A GAME OF HIDE AND SEEK. THE INQUIRY IN THE WAKE OF A NOTICE UNDER SECTION 148 IS NOT AN EMPTY F ORMALITY. IT MUST BE EFFECTIVE AND WITH A SENSE OF PURPOSE. THERE IS AN ELABORATE PROCEDURE SET OUT WHICH REQUIRES SCRUPULOUS ADHERENCE AND FOLLOWED UP ON. IN THE HIERARCHY OF THE AUTHORITIES, THE AO IS PLACED AT THE 6 I.T.A. NO. 3607 /MUM/201 7 NIDHI PREMISES PVT. LTD. BOTTOM RUNG. THE TWO LAYERS OF APPEALS, BEFORE THE MATTER ENGAGES THE APPELLATE JURISDICTION OF THIS COURT, ARE AUTHORITIES VESTED WITH THE JURISDICTION, POWER AND OBLIGATION TO REACH APPROPRIATE FINDINGS ON FACTS. NOTICEABLY, IT IS ONLY THE APPEAL TO THE HIGH COURT, UNDER SECTION 260 - A , WHICH IS RESTRICTED TO CONSIDERATION OF 'SUBSTANTIAL QUESTION OF LAW', IF ANY ARISING. AS WOULD BE SEEN FROM THE DISCUSSION THAT FOLLOWS, THE OBLIGATION TO MAKE PROPER INQUIRY AND REACH FINDING ON FACTS DOES NOT END WITH THE AO. THIS OBLIGATION MOVES UPWARDS TO CIT (APPEALS), AND ALSO ITAT, SHOULD IT COME TO THEIR NOTICE THAT THERE HAS BEEN DEFAULT IN SUCH RESPECT ON THE PART OF THE AO. IN SUCH EVENT, IT IS THEY WHO ARE DUTY BOUND TO EITHER THEMSELVES PROPERLY IN QUIRE OR CAUSE SUCH INQUIRY TO BE COMPLETED. IF THIS WERE NOT TO BE DONE, THE POWER UNDER SECTION 148 WOULD BE RENDERED PRONE TO ABUSE. 38. THE PROVISION OF APPEAL, BEFORE THE CIT (APPEALS) AND THEN BEFORE THE ITAT, IS MADE MORE AS A CHECK ON THE ABUSE OF POWER AND AUTHORITY BY THE AO. WHILST IT IS TRUE THAT IT IS THE OBLIGATION OF THE AO TO CONDUCT PROPER SCRUTINY OF THE MATERIAL, GIVEN THE FACT THAT THE TWO APPELLATE AUTHORITIES ABOVE ARE ALSO FORUMS FOR FACT - FINDING, IN THE EVENT OF AO FAILING TO DISCHARGE HIS FUNCTIONS PROPERLY, THE OBLIGATION TO 7 I.T.A. NO. 3607 /MUM/201 7 NIDHI PREMISES PVT. LTD. CONDUCT PROPER INQUIRY ON FACTS WOULD NATURALLY SHIFT TO THE DOOR OF THE SAID APPELLATE AUTHORITY. FOR SUCH PURPOSES, WE ONLY NEED TO POINT OUT ONE STEP IN THE PROCEDURE IN APPEAL AS PRESCRIBED IN SECTION 250 OF THE INCOME TAX ACT WHEREIN, BESIDES IT BEING OBLIGATORY FOR THE RIGHT OF HEARING TO BE AFFORDED NOT ONLY TO THE ASSESSEE BUT ALSO THE AO, THE FIRST APPELLATE AUTHORITY IS GIVEN THE LIBERTY TO MAKE, OR CAUSE TO BE MADE, 'FURTHER INQUIRY', IN TERMS OF SUB - SECTION (4) WHICH READS AS UNDER: - THE COMMISSIONER (APPEALS) MAY, BEFORE DISPOSING OF A NY APPEAL, MAKE SUCH FURTHER INQUIRY AS HE THINKS FIT, OR MAY DIRECT THE ASSESSING OFFICER TO MAKE FURTHER INQUIRY AND REPORT THE RESULT OF THE SAME TO THE COMMISSIONER (APPEALS). 42. THE AO HERE MAY HAVE FAILED TO DISCHARGE HIS OBLIGATION TO CONDUCT A P ROPER INQUIRY TO TAKE THE MATTER TO LOGICAL CONCLUSION. BUT CIT (APPEALS), HAVING NOTICED WANT OF PROPER INQUIRY, COULD NOT HAVE CLOSED THE CHAPTER SIMPLY BY ALLOWING THE APPEAL AND DELETING THE ADDITIONS MADE. IT WAS ALSO THE OBLIGATION OF THE FIRST APPEL LATE AUTHORITY, AS INDEED OF ITAT, TO HAVE ENSURED THAT EFFECTIVE INQUIRY WAS CARRIED OUT, PARTICULARLY IN THE FACE OF THE ALLEGATIONS OF THE REVENUE THAT THE ACCOUNT STATEMENTS REVEAL A UNIFORM 8 I.T.A. NO. 3607 /MUM/201 7 NIDHI PREMISES PVT. LTD. PATTERN OF CASH DEPOSITS OF EQUAL AMOUNTS IN THE RESPECTIVE A CCOUNTS PRECEDING THE TRANSACTIONS IN QUESTION. 8 . APART FROM ABOVE, WE FIND THAT HONBLE APEX COURT IN THE CASE OF KAPURCHAND SHRIMAL VRS. CIT 1981 131(ITR) PAGE 451 HAS HELD THAT T HE DUTY OF THE TRIBUNAL DOES NOT END WITH MAKING A DECLARATION THAT THE ASSESSMENTS ARE ILLEGAL AND IT IS DUTY BOUND TO ISSUE FURTHER DIRECTIONS. THE APPELLATE AUTHORITY HAS THE JURISDICTION AS WELL AS THE DUTY TO CORRECT ALL ERRORS IN THE PROCEED INGS UNDER APPEAL AND TO ISSUE, IF NECESSARY, APPROPRIATE DIRECTIONS TO THE AUTHORITY AGAINST WHOSE DECISION THE APPEAL IS PREFERRED TO DISPOSE OF THE WHOLE OR ANY PART OF THE MATTER AFRESH UNLESS FORBIDDEN FROM DOING SO BY THE STATUTE AND THE STA TUTE DOES NOT SAY THAT SUCH A DIRECTION CANNOT BE ISSUED BY THE APPELLATE AUTHORITY IN A CASE OF THIS NATURE. 9 . THEREFORE, KEEPING IN VIEW THE INTEREST OF JUSTICE, WE SET ASIDE THE ORDER OF LD. CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF AO WITH A D IRECTION TO CARRY OUT FURTHER NECESSARY 9 I.T.A. NO. 3607 /MUM/201 7 NIDHI PREMISES PVT. LTD. INVESTIGATIONS /VERIFICATION AND TO MEET OUT THE SHORTCOMINGS POINTED OUT BY LD. CIT(A) AND THEREAFTER PASS AFRESH ORDER. IT IS NEEDLESS HERE TO MENTION THAT BEFORE PASSING AFRESH ORDER OF ASSESSMENT, THE AO SHALL PR OVIDE SUFFICIENT OPPORTUNITY OF HEARING TO THE ASSESS E E. 1 0 . BEFORE PARTING, WE MAY MAKE IT CLEAR THAT OUR DECISION TO RESTORE THE MATTER BACK TO THE FILE OF AO SHALL IN NO WAY BE CONSTRUED AS HAVING ANY REFLECTION OR EXPRESSION ON THE MERITS OF THE DISP UTE, WHICH SHALL BE ADJUDICATED BY THE AO INDEPENDENTLY IN ACCORDANCE WITH LAW. WITH THESE DIRECTIONS, THIS GROUND O F APPEAL RAISED BY THE REVENUE IS PARTLY A LLOWED FOR STATISTICAL PURPOSES. 1 1 . IN THE NET RESULT, THE APPEAL FILED BY THE REVENUE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH JAN, 2019. SD/ - SD/ - ( B. R. BASKARAN ) (SANDEEP GOSAIN) / A COUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 16 . 01 .201 9 SR.PS . DHANANJAY 10 I.T.A. NO. 3607 /MUM/201 7 NIDHI PREMISES PVT. LTD. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI