INCOME TAX OFFICER-19(1)(2), MUMBAI V. BHUPENDRA D GANDHI, MUMBAI

ITA 4888/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7694 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 3 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: 2008-2009
• Appeal Filed On: 13-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Search and seizure; Question of law; Accommodation entries
• Section: 143(3); 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 . 4888 /MUM/201 7 ( / ASSESSMENT YEAR: 2008 - 09 ) ITO 19(1)(2), ROOM NO. 204, MATRU MANDIR, MUMBAI - 400 021 / VS. BH UPENDRA D. GANDHI, 109 - 110, SHREEJI CHAMBERS, TATA ROAD NO. 1 & 2, MUMBAI - 400 066 ./ ./ PAN NO. AA BPG7066M ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SH. ARVIND KUMAR , DR / RESPONDENTBY : NONE / DATE OF HEARING : 10 .01 .201 9 / 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) 30, MUMBAI DATED 27.03 .17 F OR AY 20 08 - 09 . 2 I.T.A. NO. 4888 /MUM/201 7 BHUPENDRA D. GANDHI, 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 WITH THE REMARKS NOT KNOWN BY THE POSTAL AU THORITY. 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 RA ISED 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 MONEY. 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. 4888 /MUM/201 7 BHUPENDRA D. GANDHI, COMPANY HAD FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION O N 20.02.2009 DECLARING THE TOT AL 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 27 .03.15 THEREBY MAKING ADDITIONS U/S 68 OF THE I.T. ACT. 5 . AS PER THE FACTS OF THE PR ESENT CASE, A SEARCH AND SEIZURE ACTION WAS CONDUCTED ON BHAWARLAL JAIN AND HIS GROUP CONCERNS ON 03.10.13 BY DGIT (INV), MUMBAI AND DURING THE SEARCH PROCEEDINGS, IT WAS UNEARTHEN D THAT THE GROUP CONCERNS ARE ALL PAPER COMPANIES /FIRMS /PROPRIETORSHIP CON CERNS WITH NO REAL BUSINESS ACTIVITIES, OPERATING SOLELY WITH THE PURPOSE OF FACILITATION OF FRAUDULENT FINANCIAL TRANSACTIONS WHICH INCLUDES PROVIDING OF ACCOMMODATION ENTRIES IN THE FORM OF UNSECURED LOANS AND BOGUS SALES BILLS. 6. THE AO HAD COMPLETE LY MENTIONED THE ENTIRE MODUS OPERADI OF THE WORKING OF BHAWARLAL JAIN GROUP IN PARA NO. 5 (5.1 TO 5.25) OF THE ORDER OF ASSESSMENT. DURING THE ASSESSMENT 4 I.T.A. NO. 4888 /MUM/201 7 BHUPENDRA D. GANDHI, PROCEEDINGS, A DATA BASE CONTAINING SALE PARTIES OF ALL 70 BENAMI CONCERNS OF BHAWARLAL JAIN GROUP WE RE COMPILED. SIMULTANEOUSLY, IT WAS FOUND THAT PARALLEL ACCOUNTS WERE MAINTAINED ON THE WHILE COLOURED SONY 4GB PENDRIVE WERE CATEGORIZED PARTY WISE. THE LEDGER ACCOUNT OF THE SALE PARTIES WERE CO - RELATED WITH THE PARRELLEL ACCOUNT FOUND IN THE PENDRIVE WH ICH SHOWS THAT THE CHEQUES WERE ISSUED AGAINST RECEIPT OF CASH FROM THE CONCERNED BENEFICIARIES. HENCE, THE AO AFTER EVALUATING THE ENTIRE FACTS OF THE PRESENT CASE, HAD CONCLUDED IN PARA NO. 8 OF THE ORDER OF ASSESSMENT THAT UNSECURED LOANS CLAIMED TO HAV E BEEN TAKEN BY THE ASSESSEE WERE NOT GENUINE. 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 FINDINGS RECORDED BY AO, DELETED THE ADDITIONS. THUS IN THIS WAY, T HE LD. CIT(A) HAD ONLY FOUND FAULTS IN THE ORDERS PASSED BY THE AO AND DELETED THE ADDITIONS. WHEREAS IT IS TRUE THAT THE POWER S OF LD. CIT(A) ARE 5 I.T.A. NO. 4888 /MUM/201 7 BHUPENDRA D. GANDHI, CO - TERMINUS WITH THAT OF THE AO AND THE LD. CIT(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 T HE DOCUMENTARY EVIDENCE. THE FINDINGS OF LD. CIT(A) ARE NOT SUPPORTED 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 S ECTION 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 SCRUPULOUS ADHERENCE AND FOLLOWED UP ON. IN THE HIERARCHY OF THE AUTHORITIES, THE AO IS PLACED AT THE BOTTOM RUNG . THE TWO LAYERS OF APPEALS, BEFORE THE MATTER ENGAGES THE APPELLATE JURISDICTION OF THIS COURT, 6 I.T.A. NO. 4888 /MUM/201 7 BHUPENDRA D. GANDHI, 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 REA CH 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 E ITHER 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 CONDUCT PROPER INQUIRY ON FACTS WOULD NATURALLY SHIFT TO THE DOOR OF THE SAID APPELLATE AUTHORITY. FOR SUCH 7 I.T.A. NO. 4888 /MUM/201 7 BHUPENDRA D. GANDHI, 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 PROPE R 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 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 PATTERN OF CASH DEPOSITS OF EQUAL AMOUNTS IN THE 8 I.T.A. NO. 4888 /MUM/201 7 BHUPENDRA D. GANDHI, RESPECTIVE ACCOU NTS 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 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. 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. 4888 /MUM/201 7 BHUPENDRA D. GANDHI, 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 P ROVIDE SUFFICIENT OPPORTUNITY OF HEARING TO THE ASSESS E E. 1 1 . 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 DIS PUTE, 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 16 TH JAN, 2019. SD/ - SD/ - ( G. MANJUNATHA ) (SANDEEP GOSAIN) / A COUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 16 . 01 .201 9 SR.PS . DHANANJAY 10 I.T.A. NO. 4888 /MUM/201 7 BHUPENDRA D. GANDHI, / 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