BMEL Infra India Ltd., Kolkata V. CIT-3, KOLKATA, Kolkata

ITA 385/KOL/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1814 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 12-04-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 09-04-2015
• Court: TRIBUNAL
• Department Lawyers: BANIBRATA DUTTA A DDL
• Keywords: Unexplained cash credit; Business income; Opportunity of being heard; Principle of natural justice; Period of limitation; Reassessment proceedings
• Section: 143(3); 194C; 68; 148; 263; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & DR.ARJUN LAL SAINI, AM] I.T.A NO. 385/KOL/201 5 ASSESSMENT YEAR : 2006-0 7 BMEL INFRA INDIA LTD. -VS.- C.I.T.-3, KOL KATA KOLKATA KOLKATA [PAN : AACCB 6325 N] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI VIGYANE SHWAR NATH DATTA, ADVOCATE FOR THE RESPONDENT : SHRI BANI BRATA DUTTA, A DDL. CIT.SR.DR DATE OF HEARING : 12.04.2017. DATE OF PRONOUNCEMENT : 03.05.2017. ORDER PER N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 25.03.2015 OF C.I.T.(A)-KOLKATA-3, KOLKATA PASSED U/S 263 OF THE INCOME TAX ACT, 1961 (ACT). 2. THE ASSESSEE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF TRADING AND EXPORTS OF METALS. FOR A.Y.2006-07 THE ASSESSEE FILED RETUR N OF INCOME ON 29.11.2006 DECLARING TOTAL INCOME OF RS.8,08,815/-. THE RETURN WAS PROCE SSED U/S 143(1) OF THE ACT ON 03.09.2007 ACCEPTING THE RETURNED INCOME. THEREAFT ER AN ORDER OF ASSESSMENT WAS PASSED U/S 144 OF THE ACT DETERMINING THE TOTAL INC OME OF THE ASSESSEE AT RS.4,66,46,815/-. TWO ADDITIONS WERE MADE TO THE TO TAL INCOME OF THE ASSESSEE VIZ. AN ADDITION OF RS.4,00,000/- WHICH WAS CLAIMED AS COMM ISSION EXPENSES IN DETERMINING THE BUSINESS INCOME OF THE ASSESSEE WAS DISALLOWED FOR NON DEDUCTION OF TAX AT SOURCE ON THE PAYMENT OF COMMISSION AND ANOTHER ADDITION O F RS.4,54,88,000/- WAS MADE ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68 OF THE AC T NAMELY MONEY RECEIVED ON ISSUE OF SHARE CAPITAL. 2 ITA NO.385/KOL/2015 BMEL INFRA INDIA LTD. A.YR.2006-07 2 3. AGAINST THE AFORESAID ORDER OF ASSESSMENT THE A SSESSEE FILED AN APPEAL BEFORE CIT(A). THE CIT(A) VIDE ORDER DATED 28.08.2009 CONF IRMED THE ORDER OF AO. THE ASSESSEE PREFERRED FURTHER APPEAL BEFORE THE HONBL E ITAT IN ITA NO.2001/KOL/2009 AGAINST THE ORDER OF CIT(A). THE TRIBUNAL BY ITS OR DER DATED 10.01.2012 SET ASIDE THE ORDER OF CIT(A) AND REMANDED TO THE AO FOR FRESH CO NSIDERATION OF BOTH THE ADDITIONS MADE BY THE AO IN THE ORDER OF ASSESSMENT. THE FOLL OWING WERE THE RELEVANT OBSERVATIONS OF THE TRIBUNAL.: AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE STATED THAT THE ASSESSMENT FRAMED IS U/S. 144 OF THE ACT AND HUGE ADDITIONS WERE MADE ON BOTH ISSUES WITHOUT AFFORDING ANY OPPORTUNITY TO THE ASSESSEE AND THAT ALSO EX PA RTE. THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THE ASSESSEE COULD NOT COOPERA TE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS THE RECORDS WERE SEIZED B Y POLICE DEPARTMENT AND THE RELEVANT DOCUMENTS TO SUPPORT HIS CASE COULD NOT BE FURNISHED. IN RESPECT TO ISSUE OF SHARE APPLICATION MONEY, CIT(A) QUOTED THE DECIS ION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD. (200 8) 216 CTR 195 (SC) BUT RELIED ON SOME WRONG QUOTATION, WHICH IS NOT FROM LOVELY E XPORTS (P) LTD. (SUPRA) AND THAT QUOTATION READS AS UNDER: 'IN THE PRESENT CASE, THE DETAILS HAD BEEN F URNISHED TO THE ASSESSING OFFICER MUCH BEFORE MARCH, 1999, BUT HE FAILED TO REACT TO THE SHIFTING OF THE BURDEN TO INVESTIGATE INTO THE CREDITWORTHINESS OF THE SHARE APPLICANTS. THEREFORE, THE APPEAL IS DISMISSED.' HENCE, LD. COUNSEL FOR ASSESSEE FAIRLY REQUESTED TH AT THESE TWO ISSUES REQUIRE RECONSIDERATION AND FOR THAT HE REQUESTED FOR SETTI NG ASIDE TO THE FILE OF ASSESSING OFFICER, SO THAT PROPER ENQUIRIES CAN BE MADE AND P ROPER REPRESENTATION CAN BE MADE. ON THE OTHER HAND, THE LD. CIT DR SHRI T. K. DUTTA HAS NOT OBJECTED TO THE SETTING ASIDE OF BOTH THE ISSUES TO THE FILE OF ASS ESSING OFFICER AND HE CONCEDED THE POSITION THAT ASSESSMENT WAS FRAMED U/S. 144 OF THE ACT AND EVEN CIT(A) HAS RELIED ON SOME WRONG CONCLUSION. 4. IN THE INTEREST OF NATURAL JUSTICE AND FAIR PLAY , AS BOTH ISSUES WERE ADJUDICATED BY LOWER AUTHORITIES WITHOUT PROVIDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AS IS EVIDENT FROM THE ORDERS, WE SET ASIDE THESE ISSUES TO THE FILE OF ASSESSING OFFICER TO RE-ADJUDICATE AFRESH. IN RESPECT TO COMMISSION EXPE NSES, THE ASSESSEE WILL FILE DOCUMENTARY EVIDENCES TO SUBSTANTIATE ITS CLAIM OF EXPENSES AND ASSESSING OFFICER WILL DECIDE ON THE BASIS OF EVIDENCES AS PER LAW. I N RESPECT TO SHARE APPLICATION MONEY, THE ASSESSING OFFICER WILL DECIDE THE ISSUE AFRESH AFTER TAKING INTO CONSIDERATION THE EVIDENCES FILED BY ASSESSEE IN TE RMS OF LAW. APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 3 ITA NO.385/KOL/2015 BMEL INFRA INDIA LTD. A.YR.2006-07 3 4. THE AO PASSED AN ORDER DATED 14.03.2013 GIVIN G EFFECT TO THE AFORESAID ORDER OF THE TRIBUNAL IN WHICH HE MADE AN ADDITION OF ONLY RS.4 CRORES WHICH WAS COMMISSION PAYMENT FOR NON DEDUCTION OF TAX AT SOURCE. THE TOT AL INCOME OF THE ASSESSEE WAS DETERMINED BY THE AO IN THE SAID ORDER AS FOLLOWS : - SUBJECT TO THE ABOVE DISCUSSIONS TOTAL INCOME OF T HE ASSESSEE COMPANY IS COMPUTED AS UNDER : TOTAL INCOME AS PER ITR RS.8,08,815.00 ADDITION : AS DISCUSSED ABOVE IN PARA NO.3 RS.4,00 ,000.00 TOTAL INCOME RS.12,08,815.00 5. THE CIT IN EXERCISE OF HIS POWERS U/S 263 OF THE ACT WAS OF THE VIEW THAT THE AFORESAID ORDER OF THE AO DATED 14.03.2013 WAS ERRO NEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE IN AS MUCH AS THE AO HAD NO T EXAMINED THE DISALLOWANCE OF THE FOLLOWING EXPENSES FOR NON DEDUCTION OF TAX AT SOUR CE U/S 194C OF THE ACT : EXPENDITURE TO THE TUNE OF RS.97,42,692/- TOWARDS FREIGHT, RS.39,52,2465/- TOWARDS LOADING AND UNLOADING AND RS.47,76,501/- TO WARDS CLEARING AND FORWARDING CHARGES RESPECTIVELY. 6. IN RESPONSE TO THE SHOW CAUSE NOTICE U/S 263 OF THE ACT THE ASSESSEE POINTED OUT THAT THE ORIGINAL ORDER OF ASSESSMENT U/S 144 OF TH E ACT WAS PASSED BY THE AO ON 31.12.2008 AND IN THAT ORDER THE EXPENSES WHICH ARE SET OUT BY CIT IN THE SHOW CAUSE NOTICE U/S 263 OF THE ACT WERE ACCEPTED AND ALLOWED AS DEDUCTION. THE SHOW CAUSE NOTICE U/S 263 OF THE ACT SEEKS TO REVISE THE ORDER DATED 31.12.2008 THOUGH IN THE SHOW CAUSE NOTICE A REFERENCE HAS BEEN MADE TO THE ORDER DATED 14.03.2013 PASSED BY THE AO GIVING EFFECT TO THE DIRECTIONS OF THE TRIBUNAL U/S 254 R.W.S.143(3) OF THE ACT. THE ASSESSEE POINTED OUT THAT IN THE ORDER PASSED U/S 1 44 OF THE ACT DATED 31.12.2008 ONLY TWO ADDITIONS WERE MADE NAMELY DISALLOWANCE OF COMM ISSION AND ADDITION ON ACCOUNT OF UNEXPLAINED CASH CREDIT NAMELY RECEIPT OF SHARE CAPITAL. THESE WERE THE SUBJECT MATTER OF THE APPEAL BEFORE CIT(A) AND ULTIMATELY B EFORE THE TRIBUNAL. THE AO WHILE GIVING EFFECT TO THE ORDER OF THE TRIBUNAL IS NOT C OMPETENT TO LOOK INTO ANY OTHER ASPECT, 4 ITA NO.385/KOL/2015 BMEL INFRA INDIA LTD. A.YR.2006-07 4 MORE SO THE ITEM OF EXPENDITURE SET OUT BY CIT IN T HE SHOW CAUSE NOTICE U/S 263 OF THE ACT. IN OTHER WORDS, THE ASSESSEE SUBMITTED THAT IN THE GARB OF REVISING THE ORDER DATED 14.03.2013 PASSED BY THE AO U/S 254 R.W.S.143(3) OF THE ACT THE CIT VIRTUALLY SEEKS TO REVISE THE ORDER DATED 31.12.2008 PASSED BY THE AO U/S 144 OF THE ACT. (THE ORIGINAL ORDER OF ASSESSMENT ). THE ASSESEE POINTED OUT THAT THE TIME LIMIT FOR REVISING THE SAID ORDER DATED 31.12.2008 HAD ALREADY EXPIRED I.E. THE PERIOD OF TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDERS SOUGHT TO BE REVISED ARE TO BE PASSED AS LAID DOWN IN SECTION 263(2) OF THE ACT. THE ORDER SOUGHT TO B E REVISED IN THE SHOW CAUSE NOTICE WAS VIRTUALLY THE ORDER DATED 31.12.2008. THE PERIO D OF LIMITATION WOULD END IN SO FAR AS THE SAID ORDER IS CONCERNED DATED 31.03.2011. 7. THE CIT FIRSTLY HELD THAT THE POWER U/S 263 W AS VERY WIDE AND THAT FOR LACK OF PROPER INQUIRY BY THE AO WHILE CONCLUDING THE ASSES SMENT THE POWER U/S 263 CAN BE INVOKED. WITH REGARD TO THE CONTENTION OF THE PROPO SED ACTION WAS BARRED BY LIMITATION. THE CIT HELD AS FOLLOWS :- THE CONTENTION OF THE ASSESSEE THAT THE CASE IS BA RRED BY LIMITATION CAN NOT BE ACCEPTED BECAUSE THE RELEVANT DATE AND ORDER FOR LI MITATION PURPOSES IS 14.03.2013 AND THE PROVISIONS OF SEC 263(3) THE CASE OF THE AS SESSEE IS COVERED. IN RESPECT OF THE SECOND ARGUMENT OF THE ASSESSEE R EGARDING THE ISSUE HAVING BEEN ADJUDICATED BY THE HON'BLE ITAT, IT MAY BE MENTIONE D THAT THE HON'BLE TRIBUNAL HAS MERELY SET ASIDE THE ORDER OF THE AO AND IT HAS NOT DECIDED THE ISSUES ON MERITS. HENCE, THE ENTIRE CASE AND ALL THE ISSUES WERE OPEN BEFORE THE AO AND WHILE PASSING THE ASSESSMENT ORDER AFTER SET ASIDE BY THE HON'BLE ITAT, HE HAS FAILED TO LOOK INTO THE ASPECT OF TDS IN RESPECT OF PAYMENT O F FREIGHT, LOADING & UNLOADING CHARGES AND CLEARING AND FORWARDING CHARGES. THIS M AKES THE ORDER OF THE AO DTD 14.03.2013 PREJUDICIAL TO THE INTEREST OF REVENUE A S WELL AS ERRONEOUS. THE AO HAS NOT EXAMINED ALL FACTS AND DETAILS, OR MADE NECESSA RY ENQUIRIES, WHILE ALLOWING EXPENDITURE TO THE ASSESSEE WHICH HAS RESULTED IN W RONG ASSUMPTION OF FACTS AND INCORRECT APPLICATION OF LAW. THE ASSESSMENT ORDER IS THEREFORE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. I AM OF THE OPINION THAT THE CASE HAS TO GO BACK TO THE A.O. FOR FRESH ASSESSMENT AFTER EXAMINI NG ALL THE FACTS AND SUBMISSIONS OF THE ASSESSEE. 5 ITA NO.385/KOL/2015 BMEL INFRA INDIA LTD. A.YR.2006-07 5 8. AGGRIEVED BY THE ORDER OF CIT THE CIT HAS PRE FERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 9. THE LD. COUNSEL FOR THE ASSESSEE REITERATED T HE SUBMISSIONS AS WERE MADE BEFORE CIT IN REPLY TO THE SHOW CAUSE NOTICE U/S 263 OF TH E ACT. HE FURTHER PLACED RELIANCE TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF CIT VS ALAGENDRAN FINANCE LTD. 293 ITR 1(SC). IN THE AFORESAID DECISION THE A SSESSMENT OF THE ASSESSEE FOR A.Y.S.1994-95 TO 1996-97 WAS COMPLETED U/S 143(3) O F THE ACT AND IN SUCH ASSESSMENTS THE ASSESSEE CLAIMED FOR DEDUCTION ON ACCOUNT OF LE ASE EQUALISATION FUND WAS ACCEPTED BY THE AO. THEREAFTER PROCEEDINGS U/S 148 OF THE AC T WAS INITIATED IN RESPECT TO SOME OTHER ITEM OF INCOME NOT RELATED TO LEASE EQUALIZAT ION FUND AND AN ORDER OF ASSESSMENT WAS MADE. THE CIT IN EXERCISE OF HIS POWERS U/S 263 OF THE ACT REVISED THE REASSESSMENT ORDER U/S 148 OF THE ACT. IN THAT HE D IRECTED THE AO TO VERIFY AND ASSESS THE LEASE EQUALIZATION FUND. THE QUESTION BEFORE TH E HONBLE SUPREME COURT WAS WHETHER THE ORDER U/S 263 OF THE ACT WAS BARRED BY LIMITATION IN AS MUCH AS IT SOUGHT TO REVISE THE ORIGINAL ORDER OF ASSESSMENT IN THE GARB OF REVISING THE ORDER OF REASSESSMENT PASSED U/S 148 OF THE ACT. THE HONBLE SUPREME COUR T HELD AS FOLLOWS :- 25. WE, THEREFORE, ARE CLEARLY OF THE OPINION THAT KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THIS CASE AND, IN PARTICULAR, HAVI NG REGARD TO THE FACT THAT THE COMMISSIONER OF INCOME-TAX EXERCISING HIS REVISIONA L JURISDICTION REOPENED THE ORDER OF ASSESSMENT ONLY IN RELATION TO LEASE EQUAL ISATION FUND WHICH BEING NOT THE SUBJECT OF THE REASSESSMENT PROCEEDINGS, THE PERIOD OF LIMITATION PROVIDED FOR UNDER SUB-SECTION (2) OF SECTION 263 OF THE ACT WOU LD BEGIN TO RUN FROM THE DATE OF THE ORDER OF ASSESSMENT AND NOT FROM THE ORDER OF R EASSESSMENT. THE REVISIONAL JURISDICTION HAVING, THUS, BEEN INVOKED BY THE COMM ISSIONER OF INCOME-TAX BEYOND THE PERIOD OF LIMITATION, IT WAS WHOLLY WITHOUT JUR ISDICTION RENDERING THE ENTIRE PROCEEDING A NULLITY. 10. OUR ATTENTION WAS ALSO DRAWN TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF ASHOKA BUILDCON LTD. VS ACIT 325 ITR 574 (BOM) WHEREIN ON IDENTICAL FACTS THE HONBLE BOMBAY HIGH COURT HELD THAT NOTIC E U/S 263 OF THE ACT ISSUED ON THE 6 ITA NO.385/KOL/2015 BMEL INFRA INDIA LTD. A.YR.2006-07 6 ISSUES UNRELATED TO GROUNDS ON WHICH THE ASSESSMENT WAS REOPENED, THE PERIOD OF LIMITATION WOULD START FROM THE ORIGINAL ASSESSMENT ORDER AND NOT FROM THE REASSESSMENT ORDER. REFERENCE WAS ALSO MADE TO THE DECISION OF I TAT HYDERABAD BENCH IN THE CASE OF LOUIS BERGER GROUP INC. VS ADIT (INTERNATIONAL T AXATION) 152 ITD 587 LAYING DOWN IDENTICAL PROPOSITION AS WAS LAID DOWN IN THE DECIS ION OF SUPREME COURT AND HONBLE BOMBAY HIGH COURT REFERRED TO EARLIER. THE LD. DR P LACED RELIANCE ON THE ORDER OF CIT U/S 263 OF THE ACT. 11. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND ARE OF THE VIEW THAT THE SCOPE OF PROCEEDINGS BEFORE THE AO PURSUANT TO THE ORDER OF TRIBUNAL DATED 10.01.2012 IS VERY LIMITED NAMELY CONSIDERING THE TWO ADDITIONS ONE ON ACCOUNT OF DISALLOWANCE OF COMMISSION AND THE SECOND ONE RE LATING TO RECEIPT OF SHARE CAPITAL U/S 68 OF THE ACT. IN THE IMPUGNED ORDER, THE CIT H AS SOUGHT TO DIRECT THE AO TO MAKE ENQUIRIES IN REGARD TO DISALLOWANCE OF FREIGHT LOAD ING AND UNLOADING CHARGES AND CLEARING AND FORWARDING CHARGES. THESE ITEMS OF EXP ENDITURE WAS NEVER THE SUBJECT MATTER OF DISALLOWANCE IN THE ORIGINAL ORDER OF ASS ESSMENT AND WAS THEREFORE NOT THE SUBJECT MATTER OF THE DISPUTE BEFORE THE TRIBUNAL A S WELL AS IN THE PROCEEDINGS BEFORE THE AO PURSUANT TO THE ORDER DATED 10.01.2012. IN THE G ARB OF REVISING THE ORDER OF AO DATED 14.03.2013PASSED U/S 254 R.W.S.143(3) OF THE ACT, THE CT WAS VIRTUALLY SEEKING TO REVISE THE ORDER DATED 31.12.2008 PASSED BY THE AO U/S 144 OF THE ACT WHICH IS THE ORIGINAL ASSESSMENT ORDER. THE PERIOD OF LIMITATION FOR AN ACTION U/S 263 OF THE ACT IN SO FAR AS ORDER DATED 31.12.2008 WOULD END ON 31.03.20 11. THE IMPUGNED ORDER HAS BEEN PASSED BY CIT ON 25.03.2015 WHICH IS CLEARLY BARRED BY TIME IN SO FAR THE ISSUE SOUGHT TO BE REVISED IN THE IMPUGNED ORDER IS CONCERNED. WE ARE OF THE VIEW THAT THE DECISIONS REFERRED TO BY THE LD. COUNSEL FOR THE ASSESSEE ARE CLEARLY APPLICABLE TO THE FACTS OF THE PRESENT CASE AND FOLLOWING THE RATIO LAID DOWN THE REIN WE HOLD THAT THE ORDER U/S 263 OF THE ACT WAS BARRED BY LIMITATION AND THEREFORE NON- EST IN LAW. THE ORDER U/S 263 OF THE ACT IS ACCORDINGLY QUASHED. THE APPEAL OF THE ASSES SEE IS ALLOWED. 7 ITA NO.385/KOL/2015 BMEL INFRA INDIA LTD. A.YR.2006-07 7 12. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE CO URT ON 03.05.2017. SD/- SD/- [DR.ARJUN LAL SAINI] [ N.V.VASUDEVA N ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 03.05.2017. [RG PS] COPY OF THE ORDER FORWARDED TO: 1. BMEL INFRA INDIA LTD., PODDAR POINT, 113, PARK S TREET, KOLKATA-700016. 2. C.I.T.-3, KOLKATA. 3. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSTT.REGISTRAR, ITAT, KOLKATA BENCHES