DCIT -3(3)(1), MUMBAI V. ROCKWOOD HOTELS & RESORTS LTD., MUMBAI

ITA 4217/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6728 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 08-06-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Keywords: Unexplained cash credit; Tangible material; Reason to believe
• Section: 143(3); 133(6); 147; 68; 148; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI RAVISH SOOD, JM ITA NO. 4217 /MUM/ 2017 (ASSESSMENT YEAR: 2008 - 09 ) DY. CIT - 3(3)(1) ROOM NO. 609, 6 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400 020 VS. M/S. ROCKWOOD HOTELS & RESORTS LTD. 1520, 15 TH FLOOR, MAKER CHAMBERS V, NARIMAN POINT, MUMBAI - 400 021 PAN/GIR NO. AAACH 8611 F ( REVENUE ) : ( ASSESSEE ) AND CO NO. 318/MUM/2018 (ARISING OUT OF ITA NO. 4217 /MUM/ 2017) (ASSESSMENT YEAR: 2008 - 09 ) M/S. ROCKWOOD HOTELS & RESORTS LTD. 1520, 15 TH FLOOR, MAKER CHAMBERS V, NARIMAN POINT, MUMBAI - 400 021 VS. DY. CIT - 3(3)(1) ROOM NO. 609, 6 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400 020 PAN/GIR NO. AAACH 8611 F ( ASSESSEE ) : ( REVENUE ) REVENUE BY : SHRI CHAITANYA ANJARIA ASSESSEE BY : SHRI PRAKASH G. JHUNJHUNWALA DATE OF HEARING : 01.11.2018 DATE OF PRONOUNCEMENT : 22.01 .2019 O R D E R PER SHAMIM YAHYA, A. M.: THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE ARISE OUT OF THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 8, MUMBAI ( LD.CIT(A) FOR SHORT) DATED 31.03.2017 AND PERTAINS TO THE ASSESSMENT YEAR (A.Y.) 2008 - 09. 2. THE GROUNDS OF APPEAL RAISED IN REVENUES APPEAL READ AS UNDER: '1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN QUASHING OF RE - OPENING OF ASSESSMENT U/S. 147 O F THE I .T.ACT, 1961 WITHOUT APPRECIATING THAT THEAO WAS IN POSSESSION OF CONCRETE INFORMATION WHILE INITIATING THE PROCEEDINGS U/S. 147. 2 ITA NO.4217/MUM/2017 A ND CO NO. 318/MUM/2018 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.C I T(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT IT WAS SUFFICIENT FOR THE AO TO HAVE REASON TO BELIEVE THAT INCOME CHARGEAB LE TO TAX HAS ESCAPED ASSESSMENT BASED ON THE INFORMATION AT HAND SINCE THERE WAS NO PRIOR ORDER U/S. 1 43(3) OF THE I T.ACT, 1961 PASSED IN THIS CASE AS IS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF APT V/S. RAJESH J HAVERI STOCK BROKERS (P.) LTD. [2007 ] 291ITR 500. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.C I T(A) HAS ERRED IN NOT ADJUDICATING THE ADDITION OF RS. 9,13,45,599/ - MADE BY THE AO U/S,68 OF THE L.TACT, 1961 ON MERITS OF THE ISSUE INVOLVED THEREIN. 4. THE APPELL ANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. THE GROUNDS OF APPEAL RAISED IN CROSS OBJECTION BY THE ASSESSEE READ AS UNDER: THE APPELLANT PREFERS A CROSS OBJECTION APPEAL AGAINST AN ORDER DATED 31/03/2017 PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEAL) 8, MUMBAI ON FOLLOWING AMONGST OTHER GROUNDS EACH OF WHICH ARE WITHOUT PREJUDICE TO ANY OTHER: - 1.0 ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE RE - ASSESSMENT ORDER PASSED U/S. 143(3) R.W.S.147 IS BAD IN LAW SINCE HAD BEEN PASSED BEFORE 30 DAYS OF THE DISPOSAL OF OBJECTION ORDER THEREBY VIOLATED THE GUIDELINES LAID BY HON'BLE JURISDICTIONAL HIGH COURT OF BOMBAY; 2.0 ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, TH E NOTICE U/S 148 IS BAD IN LAW SINCE THE ADDITION OF SHARE PREMIUM PROPOSED IN THE RECORDED REASONS OF RS.21,50,06,090/ - HAS NOT BEEN MADE IN THE REASSESSMENT ORDER U/S 147 OF THE AC T. ' 3.0 ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) OUGHT TO HAVE DELE TED THE ADDITION, ON MERITS, OF THE SHARE APPLICATION MONEY RECEIVED DURING THE YEAR OF RS.9,13,45,599/ - . 4. BRIEF FACTS OF THE CASE ARE AS UNDER: DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ON GOING THROUGH THE FINANCIAL STATEMENTS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE COMPANY HAD ALLOTTED A TOTAL NUMBER OF 11,31,611 EQUITY SHARES OF RS.10/ - EACH AT A PREMIUM OF RS.190/ - TO VARIOUS SHAREHOLDERS. THEREFORE, THE ASSESSEE WAS ASKED TO FURNISH COMPLETE PARTY WISE DETAILS REGARDING THE AMOUNT OF SHARE APPLICATION MONEY INCLUDING PREMIUM RECEIVED DURING THE YEAR UNDER CONSIDERATION AND ALSO THE DETAILS IN RESPECT OF RECEIPT OF S UC H SHARE APPLICATION MONEY , I.E ., COPY OF APPLICATION MADE BY THE SAID ENTITIES FOR 3 ITA NO.4217/MUM/2017 A ND CO NO. 318/MUM/2018 ALLOTMENT OF SHARES, COPY OF BANK STATEMENTS OF THE SAID PARTIES IN RESPECT OF PAYMENTS RECEIVED, COPY OF ITR, BALANCE SHEET AND CONFIRMATION FROM ALL PARTIES EXTENDING SH ARE APPLICATION MONEY AND WORKING OF AMOUNT OF PREMIUM THEREON AND ANY OTHER MATERIAL TO JUSTIFY THE RECEIPT OF MONEY FROM THE SAID ENTITIES. THE ASSESSEE WAS ALSO ASKED TO SUBMIT COMPLETE RECONCILIATION REGARDING THE TOTAL NUMBER OF SHARES ALLOTTED DURING THE YEAR AND THE SOURCE OF ALL SHARE APPLICATION MONEY RECEIVED DURING THE YEAR. THE ASSESSING OFFICER HAD OBSERVED THAT THE ASSESSEE HAD RECEIVED A TOTAL AMOUNT OF SHARE APPLICATION MONEY DURING THE YEAR OF RS.9,13,45,599/ - WHICH WAS INCLUSIVE OF SHARE P REMIUM AN D THE DETAILS WERE AS UNDER: SR. NO NAME OF THE SHARE APPLICANTS AMOUNT (RS.) 1 M/S HILTON FINANCE LTD. RS. 3,25,57,232 / - 2 M/S MAXIM SUPPLIERS PVT. LTD. RS. 2,76,33,429 / - 3 M/S NIMBUS VYAPAR PVT. LTD. RS. 3,06,04,938/ - 4 M/S RAJASTHAN CONSTRUCTION (PROP. OMPRAKASH AGARWAL) RS. 5,50,000 / - TOTAL RS. 9,13,45,599/ - 5. IN RESPONSE, THE ASSESSEE FURNISHED ONLY PAN CARD, CERTIFICATE OF INCORPORATION AND BANK STATEMENTS IN RESPECT OF THE ABOVE PARTIES. NO ITR OR AUDITED BALANCE SHEETS OF THE PARTIES WERE PROVIDED TO ESTABLISH THE CREDITWORTHINESS OF THE PARTIES. MOREOVER, THE ASSESSING OFFICER ALSO OBSERVED THAT THE COMPANIES WERE GROUP COMPANIES WITH A COMMON DIRECTOR I.E. SHRI SOMESH AGARWAL AND FROM THE DETAILS SUBMITTED BY THE ASSESSEE IT WAS NOTED THAT THESE COMPANIES WERE BASICALLY DEFUNCT COMPANIES WITH NO OPERATIONS AND NO BUSINESS ACTIVITIE S. TO VERIFY THE GENUINENESS OF THE TRANSACTIONS, THE ASSESSING OFFICER ISSUED NOTICE U/S. 133(6) TO THE ABOVE MENTIONED PARTIES BUT THE NOTICES 4 ITA NO.4217/MUM/2017 A ND CO NO. 318/MUM/2018 REMAINED UNSERVED AND WERE RETURNED BACK BY THE POSTAL AUTHORITIES. SINCE, THE ASSESSEE COULD NOT PRODUCE ANY DOCUMENTARY EVIDENCES TO JUSTIFY ITS CLAIM OF RECEIPT OF SUCH SUBSTANTIAL SUMS BY WAY OF 'SHARE APPLICATION MONEY', THE CREDITS REFLECTED IN THE ACCOUNTS ARE TREATED AS UNEXPLAINED BY THE ASSESSING OFFICER BY RELYING ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SUMATI DAYAL VS. C I T 214 I TR 801. THEREFORE, THE ASSESSING OFFICER CONCLUDED THAT AFTER CONSIDERING THE VARIOUS JUDICIAL PRONOUNCEMENTS AND THE PROVISIONS OF SECTION 68, THE SHARE APPLICATION MONEY INCLUDING THE PREMIUM RECEIVED FROM V ARIOUS PARTIES AMOUNTING TO RS. 9,13,45,599 / - REMAINS UNEXPLAINED IN THE HANDS OF THE ASSESSEE AND ACCORDINGLY ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE AS UNEXPLAINED CASH CREDITS U / S. 68 OF THE ACT. 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSEE WAS GIVEN AN OPPORTUNITY TO RECONCILE RECEIPTS AS PER AIR (2GAS) WITH THE INCOME DISCLOSED BY THE ASSESSEE . IT WAS OBSERVED THAT DURING THE YEAR, THE ASSESSEE RECEIVED INTEREST INCOME AMOUNTING TO RS.1,28,196 / - FROM ORIENTAL BANK OF COMMERCE AND OF RS.10,397 / - FROM RAJENDRA MECHANICAL INDUSTRIES LTD.. HOWEVER, THE ASSESSEE HAD SHOWN NOT OFFERED ANY SUCH INTEREST INCOME TOTALLING TO RS.1,38,593 / - FOR TAXATION. HENCE, THE AMOUNT OF RS.1,38,593/ - WAS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE . 7. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT PROCEEDINGS U / S.143(3) R.W.S. 147 OF THE ACT AND PA S SED ORDER DATED 31/372015 ASSESSING THE TOTAL INCOME AT RS.9,14,84,190 / - . 8. AG AINST THE ABOVE ORDER , THE ASSESSEE APPEALED BEFORE THE LEARNED CIT - A CHALLENGING BOTH THE VALIDITY OF REOPENING AND MERITS OF THE ADDITION. 5 ITA NO.4217/MUM/2017 A ND CO NO. 318/MUM/2018 9 . THE LEARNED CIT - A HELD THAT THE REOPENING WAS NOT VALID INASMUCH AS THE A.O. HAD NO FRESH TANGIBLE MATERIAL. HE ALSO REFERRED TO EARLIER YEAR LEARNED CIT ( A ) S ORDER . 10 . A S REGARDS THE MERITS OF THE ADDITION HE DECLINED TO ADJUDICATE THE SAME , HOLDING THAT THE SAME WAS NOT REQUIRED IN VIEW OF HIS EARLIER FINDINGS. 11 . AGAINST THE ABOVE ORDER , THE R EVENUE IS IN APPEAL BEFORE US CHALLENGIN G THE ISSUES THAT LD CIT - A HAS ERRED IN NOT ADJUDICAT ING THE MERITS OF THE CASE AND THE R EVENUE IS ALSO AGGRIEVED BY THE LEARNED CIT - A S ORDER THAT REOPENING IS INVALID. 12 . IN THE CROSS OBJECTION , THE ASSESSEE HAS ALSO CHALLENGED THE JURISDICTION ON TH E GROUNDS AS MENTIONED IN THE GROUNDS OF APPEAL HEARIN ABOVE. FURTHER , THE ASSESSEE IS ALSO AGGRIEVED THAT LEARNED CIT - A HAS ERRED INASMUCH AS HE IS NOT ADJUDICATED UPON THE MERITS OF THE 13. UPON HEARING BOTH THE COUNSEL AND PERUSING THE RECORDS WE ARE OF THE OPINION THAT IF A DECISION IS CHALLENGED BEFORE THE FIRST APPELLATE AUTHORITY BOTH ON THE ISSUE OF VALIDITY OF JURISDICTION AS WELL AS MERITS OF THE CASE, THE ADJUDICATION ON ONE ISSUE CAN BY NO STRETCH OF IMAGINATION BE LIABLE FOR REJECTION ON THE GROUND THAT FINDINGS HAVE BEEN GIVEN ON THE OTHER ISSUE OF THE CASE. WE FIND THAT W HAT THE L D .CIT( A ) HAS DONE IN EFFECT IS THAT HE HAS DECIDED UPON THE RE - OPENING ISSUE IN FAVOUR OF THE ASSESSEE AND HAS HENCE LEFT THE ISSUE OF ASSESSE E'S CHALLENGE TO THE V ALIDITY ON MERITS OF ADDITION UNDECIDED. 14. NOW THE REVENUE IS AGGRIEVED BY THIS ACTION OF THE LD. CIT(A ) . ALSO THE ASSESSEE HAS RAISED CROSS OBJECTION BE FOR E THE ITAT IN THIS REGARD . W E FIND THAT THE HONBLE M ADRAS HIGH COURT IN THE CASE OF CIT VS RAMDAS PHARMACY 77 ITR 276 HAD EXPOUNDED THAT AN APPELLATE AUTHORITY CANNOT 6 ITA NO.4217/MUM/2017 A ND CO NO. 318/MUM/2018 DECIDE ONLY ONE ISSUE ARISING OUT OF MANY ISSUES AND DECLINE TO GO INTO THE OTHER ISSUES RAISED BEFORE IT , ON THE GROUND THAT FURTHER ISSUES WILL NOT ARISE IN VIEW OF THE FINDING ON THE ISSUE DECIDED BY IT. IT WAS EXPOUNDED THAT IF THE APPELLATE AUTHORITY DECLINES TO CONSIDER AND DECIDE THE OTHER ISSUES , IT COULD ONLY PROTRACT AND DELAY THE PROCEEDINGS, THE AS SESSEE HAS TO GET THE DECISION OF THE APPELLATE AUTHORITY ON THE INITIAL POINT SET ASIDE BY APPROACHING A HIGHER APPELLATE AUTHORITY AND THEREAFTER AGAIN GO BEFORE THE APP ELLATE AUTHORITY FOR THE DECISION ON THE OTHER ISSUES LEFT UNDECIDED BY IT EARLIER. I T WAS HELD THAT THIS WILL AMOUNT TO MULTIPLICATION PROCEEDINGS UNDER THE ACT. IT WAS FURTHER EXPOUNDED THAT THE SUBORDINATE COURTS AND TRIBUNAL'S SHOULD AS FAR AS POSSIBLE GIVE THEIR VIEWS ON ALL THE POINTS RAISED BEFORE THEM , SO THAT THE HIGHER COURTS WIL L HAVE THE BENEFIT OF THE DE CISION ON OTHER POINTS ALSO IF NECESSITY ARISES. 15. EXAMINING THE PRESENT ISSUE ON THE TOUCHSTONE OF ABOVE SAID CASE LAW, WE FIND THAT THE ORDER OF L D CIT(A) HERE DIRECTLY FALLS UNDER THE AMBIT OF HONBLE HIGH COURT 'S ORDER AS ABOVE. THE L D . CIT(A) HAS DECIDED ONE ISSUE AND HAS LEFT UNDECIDED ANOTHER ISSUE DULY RAISED BEFORE HIM. HENCE, WE ARE OF THE CONSIDERED OPINION THAT THIS ISSUE RAISED BY THE ASSESSEE NEEDS TO BE REMITTED TO THE FILE OF LEARNED CIT - A. THE LEARNED CIT - A IS DIRECTED TO COMPLETE HIS APP ELLATE ORDER BY DECIDING ON THIS ISSUE WHICH WAS DULY RAISED BEFORE HIM BY THE ASSESSEE. AFTER THE ORDER OF THE LEARNED CIT - A IS COMPLETE UPON ADJUDICATION OF THIS ISSUE, BOTH THE PARTIES WILL BE AT LIBERTY TO FILE NECESSARY AP PEALS AS AND IF NECESSARY. 16. WE ALSO NOTE THAT THERE ARE OTHER FACETS OF CHALLENGE TO REOPENING BEFORE US, WHICH WERE NOT RAISED BEFORE THE LD. CIT(A). THE LD. CIT(A) IS DIRECTED TO PASS AN ORDER ON THIS 7 ITA NO.4217/MUM/2017 A ND CO NO. 318/MUM/2018 ASPECTS ALSO AFTER FACTUAL VERIFICATION FROM ASS ESSMENT RECORD. ACCORDINGLY , TH E ISSUE IS REMITTED TO THE FILE OF THE LD. CIT(A). IN VIEW OF OUR ORDER REMITTING THE ISSUE TO THE FILE OF THE LEARNED CIT - A SO AS TO COMPLETE HIS ORDER, OTHER ISSUES RAISED IN THESE APPEALS ARE NOT BEING ADJUDICATED. 17. IN THE RESULT, THE REVENUES APPEAL AND THE ASSESSEES CROSS OBJECTION ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 2 2 . 0 1 . 2 0 1 9 S D / - S D / - ( RAVISH SOOD ) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 2 2 . 0 1 . 2 0 1 9 ROSHANI , SR. PS 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 FILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI