Mitra Agro Enterprise Ltd., Hooghly V. ITO, Ward 7(1), Kolkata, Kolkata

ITA 588/KOL/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1082 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 24-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROBIN CHOUDHUR Y
• Keywords: Unexplained cash credit; Opportunity of being heard
• Section: 131; 68

Judgement Text

1 ITA NO. 588/KOL/2017 MITRA AGRO ENTERPRISE LTD., AY 2011-12 , B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA ( ) . . , . ' # $% % , '( ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 588/KOL/2017 ASSESSMENT YEAR: 2011-12 MITRA AGRO ENTERPRISE LTD. (PAN: AAGCM2412H) VS. INCOME-TAX OFFICER, WD-7(1), KOLKATA APPELLANT RESPONDENT DATE OF HEARING 04.09.2018 DATE OF PRONOUNCEMENT 30.11.2018 FOR THE APPELLANT SHRI RAVI TULSIYAN, FCA FOR THE RESPONDENT SHRI ROBIN CHOUDHURY, ADDL. CIT , SR. DR ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL PREFERRED BY THE ASSESSEE IS AGAINST TH E ORDER OF THE LD. CIT(A)-16, KOLKATA DATED 20.02.2017 FOR AY 2011-12. 2. GROUND NOS. 1, 2 AND 3 OF ASSESSEES APPEAL ARE AGAINST THE ORDER OF LD. CIT(A) FOR UPHOLDING THE ACTION OF AO IN ADDING THE SHARE APPL ICATION MONEY RECEIVED BY THE ASSESSEE U/S. 68 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER RE FERRED TO AS THE ACT). 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A PUBLIC LIMITED COMPANY WHICH IS ENGAGED IN THE BUSINESS OF HIRING OF MACHINERY. IN THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE HAD RECEIVED SHARE APPLICATION MONEY T O THE EXTENT OF RS.1,17,20,000/- FROM 236 PERSONS. OUT OF WHICH THE ASSESSEE RECEIVED A SUM OF RS. 35 LAKHS IN CASH FROM 63 SHARE SUBSCRIBERS AND THE BALANCE AMOUNT OF RS.82,2 0,000/- WAS RECEIVED BY BANK DRAFTS. ACCORDING TO AO, SHARE SUBSCRIBERS ARE NOT CREDITWO RTHY TO CONTRIBUTE AMOUNTS RANGING FROM RS.49,000/- TO RS.99,000/-. ACCORDING TO AO, HE MADE ENQUIRIES THROUGH INSPECTOR OF INCOME TAX, LOCALLY AND THROUGH BANK, AND HE WAS OF THE OPINION THAT THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF NONE OF THE SHA RE HOLDERS HAVE BEEN PROVED. IN VIEW OF 2 ITA NO. 588/KOL/2017 MITRA AGRO ENTERPRISE LTD., AY 2011-12 THE ABOVE, THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY RS.1,17,20,000/- SHALL NOT BE ADDED IN THE HANDS OF THE ASSESSEE AS UNEXPLAINED C ASH CREDIT U/S. 68 OF THE ACT AND AFTER ACKNOWLEDGING RECEIPT OF REPLY FROM THE ASSESSEE CO MPANY AND BEING NOT SATISFIED BY THE REPLY OF THE ASSESSEE, THE AO ISSUED SUMMONS U/S 13 1 OF THE ACT TO THE ASSESSEE COMPANY TO PRODUCE ITS DIRECTOR FOR VERIFICATION AND SIMULTANE OUSLY THE ASSESSEE COMPANY WAS ALSO ASKED TO PRODUCE THE SHARE-HOLDERS FOR EXAMINATION U/S 131 OF THE ACT. HOWEVER, ACCORDING TO AO, NEITHER THE ASSESSEE PRODUCED ITS DIRECTOR F OR VERIFICATION NOR PRODUCED THE SHARE- HOLDERS FOR EXAMINATION BEFORE HIM. THEREFORE, THE AO ADDED THE ENTIRE SHARE- CAPITAL AMOUNTING RS. 1,17,20,000/- TO THE TOTAL INCOME OF THE ASSESSEE AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. FURTHER, THE ASSESSEE WAS ASKED TO FURNISH NAME, ADDRESS, PAN FOR CURRENT LIABILITIES AMOUNTING RS. 89,019/-. SINCE THE ASSES SEE COULD NOT FURNISH THE DETAILS, RS. 89,019/- WAS ADDED TO THE TOTAL INCOME OF THE ASSES SEE U/S 68 OF THE ACT. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO CONFIRMED THE ACTION OF AO. AGGRIEVED, ASSESSEE PREFERRED THIS APPEAL BEFORE US . 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. AT THE OUTSET, THE LD. AR BROUGHT TO OUR NOT ICE THAT THE ASSESSEE COMPANY IS A PUBLIC LIMITED COMPANY AND HAD ISSUED SHARES TO LOCAL PEOP LE IN THE VICINITY WHO CONTRIBUTED RS.49,000/- TO RS. 99,000/- AND THUS ASSESSEE COLLE CTED SHARE CAPITAL OF RS.1,17,20,000/-. ACCORDING TO LD. AR, THE ENTIRE LIST OF 236 SHARE S UBSCRIBERS WERE FURNISHED TO THE AO ALONG WITH THEIR ADDRESS WHICH WAS GIVEN TO THE ASSESSEE COMPANY WHILE ISSUING SHARES TO THEM AND SINCE THE AMOUNT SUBSCRIBED BEING LESS THAN RS. 1 LAKH, THE ASSESSEE COMPANY DID NOT INSIST ON ITR, PAN ETC. OF THE SHARE SUBSCRIBERS WH EN THEY APPLIED FOR SHARES. SO, WHEN THE AO ASKED FOR ALL DETAILS, THE ASSESSEE COMPANY DID NOT HAD ADEQUATE TIME TO GET ALL DOCUMENTS FROM 236 SHARE SUBSCRIBERS. SO ACCORDING TO LD AR, MERELY BECAUSE DIRECTORS OF THE ASSESSEE COMPANY COULD NOT ATTEND THE HEARING B EFORE THE AO AND THE REASON FOR THEIR ABSENCE BEING THAT THEY WERE OUT OF TOWN, CANNOT BE THE BASIS FOR ADDITION AGAINST THE ASSESSEE. THUS, ACCORDING TO LD. AR, NO PROPER OPP ORTUNITY WAS GIVEN TO THE ASSESSEE BY THE AO WHILE FRAMING THE ASSESSMENT. THEREFORE, HE PLEADS THAT THE MATTER MAY BE REMANDED BACK TO THE AO FOR DE NOVO ASSESSMENT. T HE LD. CIT, DR DID NOT HAD ANY OBJECTION IF THE MATTER IS REMITTED BACK TO AO, HOW EVER, WANTS THE LD. AR TO UNDERTAKE TO 3 ITA NO. 588/KOL/2017 MITRA AGRO ENTERPRISE LTD., AY 2011-12 COOPERATE BEFORE THE AO. THE LD. AR UNDERTAKES BEF ORE US THAT THE ASSESSEE WILL COOPERATE FULLY WITH THE AO. IN THE LIGHT OF THE ABOVE, THE LD. AR ALSO UNDERTAKES THAT THE ASSESSEE WILL PRODUCE ALL EVIDENCE BEFORE THE AO AND, SINCE THE ASSESSEE DID NOT GET PROPER OPPORTUNITY BEFORE THE AO, WE ARE INCLINED TO SET ASIDE THE ORDER OF LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF AO BY APPLYING THE RATIO OF THE DECISION OF HONBLE (THREE JUDGE BENCH) OF THE HONBLE SUPREME COURT IN TIN BOX COMP ANY VS. CIT (2001) 249 ITR 216 (SC) WHEREIN IT HAS BEEN HELD AS UNDER: IT IS UNNECESSARY TO GO INTO GREAT DETAIL IN THESE MATTERS FOR THERE IS A STATEMENT IN THE ORDER OF T HE TRIBUNAL, THE FACT-FINDING AUTHORITY, THAT READS TH US : WE WILL STRAIGHTAWAY AGREE WITH THE ASSESSEES SUB MISSION THAT THE INCOME-TAX OFFICER HAD NOT GIVEN TO THE ASSESSEE PROPER OPPORTUNITY OF BEI NG HEARD. THAT THE ASSESSEE COULD HAVE PLACED EVIDENCE BEFORE THE FIRST APPELLATE AUTHORITY OR BEFORE THE TRIBUNAL IS REALLY OF NO CONSEQUENCE FOR IT IS THE ASSESSMENT ORDER THAT COUNTS. THAT ORDER MUST BE MADE AFTER THE ASSESSEE HAS BEEN GIVEN A RE ASONABLE OPPORTUNITY OF SETTING OUT HIS CASE. WE, THEREFORE, DO NOT AGREE WITH THE TRIBUNAL AND THE HIGH COURT THAT IT WAS NOT NECESSARY TO SET ASIDE THE ORDER OF ASSESSMENT AND REMAND THE MATTER TO THE ASSESSING AUTHORITY FOR FRESH ASSESSMENT AFTER GIVING TO THE ASSESSEE A PROPER OPPORTUNITY OF BEING HEARD. TWO QUESTIONS WERE PLACED BEFORE THE HIGH COURT, OF WHICH THE SECOND QUESTION IS NOT PRESSED. THE FIRST QUESTION READS THUS : 1. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN NOT SETTING ASIDE THE ASSESSMENT ORDER IN SPITE OF A FINDING ARRIVED AT BY IT THAT THE INCOME- TAX OFFICER HAD NOT GIVEN A PROPER OPPORTUNITY OF H EARING TO THE ASSESSEE ? IN OUR OPINION, THERE CAN ONLY BE ONE ANSWER TO THI S QUESTION WHICH IS INHERENT IN THE QUESTION ITSELF : IN THE NEGATIVE AND IN FAVOUR OF THE ASSESSEE. THE APPEALS ARE ALLOWED. THE ORDER UNDER CHALLENGE IS SET ASIDE. THE ASSESSMENT ORDER, THAT OF THE COMMISSIONER (APPEALS) AND OF THE TRIBUNAL A RE ALSO SET ASIDE. THE MATTER SHALL NOW BE REMANDED TO THE ASSESSING AUTHORITY FOR FRESH CO NSIDERATION, AS AFORESTATED. 5. WE ALSO NOTE THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. JANSAMPARK ADVERTISING & MARKETING PVT. LTD. IN ITA NO. 525/20 14 DATED 11.03.2015 WHEREIN AFTER NOTICING INADEQUATE ENQUIRY BY AUTHORITIES BELOW HA VE HELD AS UNDER: 41. WE ARE INCLINED TO AGREE WITH THE CIT(APPEALS) , AND CONSEQUENTLY WITH ITAT, TO THE EXTENT OF THEIR CONCLUSION THAT THE ASSESSEE HEREIN HAD COME UP WITH SOME PROOF OF IDENTITY OF SOME OF THE ENTRIES IN QUESTION. BUT, FROM THIS INF ERENCE, OR FORM THE FACT THAT THE TRANSACTIONS WERE THROUGH BANKING CHANNELS, IT DOES NOT NECESSAR ILY FOLLOWING THAT SATISFACTION AS TO THE CREDITWORTHINESS OF THE PARTIES OR THE GENUINENESS OF THE TRANSACTIONS IN QUESTION WOULD ALSO HAVE BEEN ESTABLISHED. 42. THE AO HERE MAY HAVE FAILED TO DISCHARGE HIS OB LIGATION TO CONDUCT A PROPER INQUIRY TO TAKE THE MATTER TO LOGICAL CONCLUSION. BUT CIT(APPE ALS), HAVING NOTICED WANT OF PROPER 4 ITA NO. 588/KOL/2017 MITRA AGRO ENTERPRISE LTD., AY 2011-12 INQUIRY, COULD NOT HAVE CLOSED THE CHAPTER SIMPLY B Y ALLOWING THE APPEAL AND DELETING THE ADDITIONS MADE. IT WAS ALSO THE OBLIGATION OF THE F IRST APPELLATE AUTHORITY, AS INDEED OF ITAT, TO HAVE ENSURED THAT EFFECTIVE INQUIRY WAS CARRIED OUT, PARTICULARLY IN THE FACT OF THE ALLEGATIONS OF THE REVENUE THAT THE ACCOUNT STATEME NTS REVEAL UNIFORM PATTERN OF CASH DEPOSITS OF EQUAL AMOUNTS IN THE RESPECTIVE ACCOUNTS PRECEDI NG THE TRANSACTIONS IN QUESTION. THIS NECESSITATED A DETAILED SCRUTINY OF THE MATERIAL SU BMITTED BY THE ASSESSEE IN RESPONSE TO THE NOTICE UNDER SECTION148 ISSUED BY THE AO, AS ALSO T HE MATERIAL SUBMITTED AT THE STAGE OF APPEALS, IF DEEMED PROPER BY WAY OF MAKING OR CAUSI NG TO BE MADE A 'FURTHER INQUIRY IN EXERCISE OF THE POWER UNDER SECTION 250(4). HIS APP ROACH NOT HAVING BEEN ADOPTED, THE IMPUGNED ORDER OF ITAT, AND CONSEQUENTLY THAT OF CI T(APPEALS), CANNOT BE APPROVED OR UPHELD.' 6. IN THE LIGHT OF THE HONBLE SUPREME COURTS DECI SION IN TIN BOX COMPANY (SUPRA), AND TAKING NOTE OF HONBLE DELHI HIGH COURTS ORDER IN JANSAMPARK ADVERTISING & MARKETING PVT. LTD. (SUPRA), AND TAKING NOTE THAT ASSESSEE DID NOT GET PROPER OPPORTUNITY BEFORE THE AO DURING ASSESSMENT PROCEEDINGS, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND REMAND THE MATTER BACK TO THE FILE OF AO FOR DE NOV O ASSESSMENT AND TO DECIDE THE MATTER IN ACCORDANCE TO LAW AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 30/11/201 8 SD/- SD/- (DR. A. L. SAINI) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30TH NOVEMBER, 2018 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 APPELLANT MITRA AGRO ENTERPRISE LTD., C/O S. N. G HOSH & ASSOCIATES, ADVOCATES, SEBEN BROTHERS LODGE, P.O. BUROSHIBTALA, P.S. CHI NSURAH, DIST. HOOGHLY, PIN- 712105. 2 RESPONDENT ITO, WARD-7(1), KOLKATA. 3 4 5 CIT(A)-16, KOLKATA. (SENT THROUGH E-MAIL) CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR, ITAT, KOLKATA