DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 6(3), MUMBAI V. BHAVYA SALES PRIVATE LIMITED , MUMBAI

ITA 4881/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7664 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 13-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BHARTI SINGH
• Keywords: Question of law; Accommodation entries
• Section: 143(3); 133(6); 143(1); 131; 68; 148

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE HONBLE SH. SANDEEP GOSAIN , J M & HONBLE SH. G. MANJUNATHA , A M ./ I.T.A. NO . 4881 /MUM/201 7 ( / ASSESSMENT YEAR: 2007 - 08 ) DCIT CEN CIR 6(3), 19 TH FLOOR, AIR INDIA BLDG, NARIMAN POINT, MUMBAI - 400 021 / VS. BHAVYA SALES PVT. LTD. A - 405, WESTERN HILL, WESTERN EXPRESS, HIGWAY, BORIVALI (EAST), MUMBAI - 400 066 ./ ./ PAN NO. AA CCB5858N ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : MS. BHARTI SINGH, DR / RESPONDENTBY : NONE / DATE OF HEARING : 09.01 .201 9 / DATE OF PRONOUNCEMENT : 17.01.2019 / 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) 20, MUMBAI DATED 04.04 .17 F OR AY 20 07 - 08. 2 I.T.A. NO. 4881 /MUM/201 7 BHAVYA SALES 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 NOTICED THAT NOTICE OF THIS APPEAL WAS SENT THROUGH REGISTERED POST ALONGWITH AD ON THE ADDRESS MENTIONED BY THE ASSESSEE HIMSELF IN FORM 36. THE SAID REGISTERED AD NOTICE WAS RETURNED BACK WIT H THE REMARKS INCOMPLETE ADDRESS BY THE POSTAL AUTHORITY. 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 M ATERIAL PLACED ON RECORD. 3 . THE ONLY GRIEVANCE RAISED BY THE REVENUE IS CHALLENGING AGAINST THE ORDER OF LD. CIT (A) IN DELETING THE ADDITION MADE U/S 68 OF THE I.T. ACT ON ACCOUNT OF NON - GENUINENESS OF TRANSACTIONS AND SOURCES OF THE SHARE APPLICATION MO NEY. 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 3 I.T.A. NO. 4881 /MUM/201 7 BHAVYA SALES PVT. LTD. COMPANY HAD FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 29.01.08 DECLARING THE TOTAL INCOME AS NIL AN D THE SAME WAS PROCESSED U/S 143(1) OF THE I.T. ACT. SUBSEQUENTLY, THE CASE WAS REOPENED AND ORDER U/S 143(3) R.W.S. 147 OF THE ACT WAS PASSED ON 31.03.15 THEREBY MAKING ADDITIONS U/S 68 OF TH E I.T. ACT. 5 . AS PER THE FACTS OF THE PRESENT CASE, THE INCOME TAX DEPARTMENT DURING THE SEARCH ON THE M/S WELL KNOWN POLYESTER LTD. HAD CARRIED OUT DETAILED INVESTIGATIONS AND DISCOVERED THE MODUS OPERANDI OF THE PK GROUP AND ALSO RECORDED THE ADMISSIO NS OF THE RESPECTIVE OPERATORS AND BENEFICIARIES. ON THE BASIS OF THE ENTIRE FACTUAL POSITION, THE AO HAD CONCLUDED THAT . M/S ALKA DIAMOND INDUSTRIES LTD, M/S YASH - V JEWELS LTD, M/S LEXUS INFOTEC LTD, M/S JAVDA INDIA IMPEX LTD AND M/S KUSH HINDUSTAN ENTER TAINMENT LTD. WERE NOT ENGAGED IN ANY GENUINE BUSINESS ACTIVITIES RATHER THESE COMPANIES WERE CONTROLLED BY PK (PRAVEEN KUMAR) AND ENGAGED ONLY IN PROVIDING ACCOMMODATION ENTRIES AND THUS MADE ADDITION U/S 68 OF THE ACT. 4 I.T.A. NO. 4881 /MUM/201 7 BHAVYA SALES PVT. LTD. 6. LD. CIT(A) DELETED THE ADDITION S BY HOLDING THAT SINCE MONEY WAS ROUTED THROUGH BANKING CHANNEL, THUS TRANSACTION CANNOT BE ASSUMED AS WERE NOT GENUINE. AND CHARGING OF HIRE PREMIUM CANNOT BE SUBJECT MATTER OF THE ENQUIRY. TO OUR MIND, ROUTING OF MONEY THROUGH BANKING CHANNEL ITSELF CAN NOT BE A SOLE CRITERIA FOR TERMING THE TRANSACTIONS AS SACROSANCT. FURTHER THE LD. CIT(A) HAD POINTED OUT FAULTS IN THE ORDER PASSED BY AO BY HOLDING THAT AO HAS NOT MADE MUCH INVESTIGATION EXCEPT ISSUANCE OF NOTICE U/S 133(6) WHICH EVEN OTHERWISE COULD NO T BE SERVED ON THE SHARE APPLICANTS IN TWO CASES DUE TO CHANGE OF ADDRESS AND IN 3 CASES PART REPLIES WERE FILED. IT WAS ALSO POINTED OUT THAT AO HAD NOT CARRIED OUT FURTHER INQUIRIES WHICH WERE REQUIRED TO BE DONE IN THE PRESENT CASE. 7. LD. CIT(A) HAD DELETED THE ADDITIONS ONLY BY FINDING SHORTCOMING AND FAULTS IN THE ORDER OF ASSESSMENT. THE LD. CIT(A) HAD POINTED OUT THAT AO HAD NOT ASKED FOR FURTHER MATERIAL AND NOT EVEN ISSUED SUMMONS U/S 131 OF THE I.T. ACT. WITHOUT CONTROVERTING THE SPECIFIC FINDI NGS RECORDED BY AO, DELETED THE ADDITIONS. THUS IN THIS WAY, T HE LD. CIT(A) HAD ONLY 5 I.T.A. NO. 4881 /MUM/201 7 BHAVYA SALES PVT. LTD. FOUND FAULTS IN THE ORDERS PASSED BY THE AO AND DELETED THE ADDITIONS. WHEREAS IT IS TRUE THAT THE POWERS OF LD. CIT(A) ARE CO - TERMINUS WITH THAT OF THE AO AND THE LD. CI T(A) COULD HIMSELF CARRIED OUT FURTHER INVESTIGATION WHICH OUGHT TO HAVE BEEN CARRIED OUT BY THE AO. THE LD. CIT(A) HAD NOT CONTROVERTED THE FACTUAL FINDINGS RECORDED BY AO BY ELABORATING THE DOCUMENTARY EVIDENCE. THE FINDINGS OF LD. CIT(A) ARE NOT SUPPOR TED BY ANY DOCUMENTARY EVIDENCES. 8. BE THAT AS IT MAY, IT IS THE PRIMARY DUTY WHICH IS BESTOWED UPON LD. CIT(A) TO BRING ON RECORD THE COMPLETE 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 FORMALITY. IT MUST BE EFFECTIVE AND WITH A SENSE OF PURPOSE. THERE IS AN ELABORATE PROCEDURE SET OUT WHICH REQUIRES SC RUPULOUS ADHERENCE AND FOLLOWED UP ON. IN THE HIERARCHY OF THE AUTHORITIES, THE AO IS PLACED AT THE 6 I.T.A. NO. 4881 /MUM/201 7 BHAVYA SALES 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, PO WER 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', I F 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 INQUIRE 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. 4881 /MUM/201 7 BHAVYA SALES 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 AFFO RDED 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 ANY A PPEAL, 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 PROPER 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 DELE TING THE ADDITIONS MADE. IT WAS ALSO THE OBLIGATION OF THE FIRST APPELLATE 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. 4881 /MUM/201 7 BHAVYA SALES PVT. LTD. PATTERN OF CASH DEPOSITS OF EQUAL AMOUNTS IN THE RESPECTIVE ACCOUNTS PRECEDING THE TRANSACTIONS IN QUESTION. 9. 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 H E 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 PROCEEDI NGS 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 STAT UTE DOES NOT SAY THAT SUCH A DIRECTION CANNOT BE ISSUED BY THE APPELLATE AUTHORITY IN A CASE OF THIS NATURE. 10. 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 DIRECTION TO CARRY OUT FURTHER NECESSARY INVESTIGATIONS /VERIFICATION AND TO MEET OUT THE SHORTCOMINGS 9 I.T.A. NO. 4881 /MUM/201 7 BHAVYA SALES PVT. LTD. 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 PROVIDE SUFFICIENT OPPORTUNITY OF HEARING TO THE ASSESS E E. 11. 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 REFLECT ION OR EXPRESSION ON THE MERITS OF THE DISPUTE, WHICH SHALL BE ADJUDICATED BY THE AO INDEPENDENTLY IN ACCORDANCE WITH LAW. WITH THESE DIRECTIONS, THIS GROUND OF APPEAL RAISED BY THE REVENUE IS PARTLY A LLOWED FOR STATISTICAL PURPOSES. 1 2 . IN THE NET RESULT , THE APPEAL FILED BY THE REVENUE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH JAN, 2019. SD/ - SD/ - ( G. MANJUNATHA ) (SANDEEP GOSAIN) / A COUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 17 . 01 .201 9 SR.PS . DHANANJAY 10 I.T.A. NO. 4881 /MUM/201 7 BHAVYA SALES 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