M/s. Shalimar Dealers Pvt. Ltd, Kolkata V. ITO, Ward 1(3), Kolkata, Kolkata

ITA 607/KOL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5841 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 29-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A BHATTCHARJEE
• Assessee Lawyers: SOUMITRA CHOW DHURY
• Keywords: Unexplained cash credit; Income from undisclosed sources; Opportunity of being heard; Capital expenditure
• Section: 143(3); 142(1); 14A; 68

Judgement Text

ITA NO.607/KOL/2017 M/S SHALIMAR DEALERS PVT. LTD. A.Y.2009-10 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH D KOL KATA [BEFORE HONBLE SHRI S.S.GODARA, JM & DR.A.L.SAIN I, AM ] ITA NO.607/KOL/2017 ASSESSMENT YEAR : 2009-10 M/S SHALIMAR DEALERS PVT. LTD. -VERSUS- I.T. O., WARD-1(3) KOLKATA KOLKATA (PAN: AAMCS 7346 E) (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI SOUMITRA CHOWDHURY, ADV OCATE FOR THE RESPONDENT: SHRI A.BHATTCHARJEE, ADDL. CIT DATE OF HEARING : 09.07..2018. DATE OF PRONOUNCEMENT : 20.07.2018. ORDER PER S.S.GODARA, JM: THIS ASSESSEES APPEAL FOR A.Y.2009-10 CALLS INT O QUESTION CORRECTNESS OF THE CIT(A)-1, KOLKATAS ORDER DATED 16.01.2017 PASSED IN APPEAL NO.1187/CIT(A)-I/W- 1(3)/2015-16 UPHOLDING THE ASSESSING OFFICERS ACTI ON INTER-ALIA ADDING UNDISCLOSED MISCELLANEOUS INCOME, CAPITAL EXPENDITURE, SECTION 14A R.W.R. 8D DISALLOWANCE AND UNEXPLAINED CASH CREDIT ADDITION OF SHARE CAPITAL I NVOLVING CORRESPONDING SUMS OF RS.26,150/-, RS.4,600/-, RS.22,003/- AND RS.5,29,50 ,000/; RESPECTIVELY IN ASSESSMENT ORDER DATED 31.03.2015, INVOLVING PROCEEDINGS U/S 143(3) R.W.S. 263 OF THE INCOME TAX ACT, 1961 (ACT). HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. IT EMERGES AT THE OUTSET THAT THE CIT (A)S ORD ER UNDER CHALLENGE HAS BEEN PASSED EXPARTE AFTER ALLEGING THAT HE HAD GRANTED T HREE OPPORTUNITIES OF HEARING ON 14.12.2016, 28.12.2016 AND 13.01.2017 WHEREIN NONE APPEARED AT THE TAX PAYERS BEHEST. WE DO NOT SEE ANY DISCUSSION IN CIT(A)S OR DER IN PARA-3 AS TO WHETHER THE ASSESSEE HAD BEEN ACTUALLY SERVED THE SAID NOTICES OR NOT. ITA NO.607/KOL/2017 M/S SHALIMAR DEALERS PVT. LTD. A.Y.2009-10 2 3. COUPLED WITH THIS, IT TRANSPIRES THAT THE INSTA NT LIS HAS EMANATED FROM CITS SECTION 263 REVISION DIRECTIONS DATED 24.03.2014 TE RMING THE EARLIER ASSESSMENT FRAMED ON 29.04.2011 BE ERRONEOUS AND PREJUDICIAL T O THE INTEREST OF THE REVENUE ON ACCOUNT OF LACK OF ADEQUATE ENQUIRY THEREIN. THE CI T MADE IT CLEAR TO THE ASSESSING OFFICER THAT HE SHALL CONDUCT INDEPENDENT ENQUIRIES TO VERIFY THE IDENTITY, SOURCE, GENUINENESS AND CREDITWORTHINESS OF ASSESSEES INV ESTORS ENTITIES IN QUESTION. 4. THE ASSESSING OFFICER TOOK UP CONSEQUENTIAL PROC EEDINGS. WE NOTICE FROM ASSESSMENT ORDER DATED 31.03.2015 THAT HE HAD ISSUE D PROCESS TO ITS TWO INDIVIDUAL PARTIES AS WELL AS ITS 17 INVESTOR ENTITIES. NONE OF THEM APPEARED. THE ASSESSING OFFICER THEREAFTER OBSERVED THAT THE ASSESSEE; A PR IVATE LIMITED COMPANY, HAD ISSUED 10,000 SHARES AND 10,570 SHARES TO THE ABOVE INVES TORS WITH A PREMIUM OF RS..490/- THEREBY RECEIVING THE SUM OF RS.5,29,50,000/- AS IS SUE. HE WAS OF THE VIEW THAT THE ASSESSEE HAD FAILED TO SATISFY THE ABOVE CRITERIA O F IDENTITY, GENUINENESS AND CREDITWORTHINESS OF ITS INVESTORS. MORE SO BECAUSE THE TAX PAYER ENTITY HAD BEEN INCORPORATED IN THE RELEVANT FINANCIAL YEAR ONLY, T HE INVESTOR ENTITIES HAD MEAGRE INCOME WITHOUT ANY BUSINESS ACTIVITIES, THEIR BANK STATEMENTS INDICATED FREQUENT DEPOSITS AND WITHDRAWALS AND THEIR PROFIT AND LOSS ACCOUNTS DEMONSTRATED MINIMAL LOSS FIGURES ONLY. HE THEREFORE CONCLUDED THAT THE IMPUG NED AMOUNT REPRESENTED ASSESSEES UNACCOUNTED INCOME PLOUGHED BACK AS SHARE APPLICATI ON/PREMIUM IN THE IMPUGNED ASSESSMENT YEAR. THE ASSESSING OFFICER THEREFORE MA DE THE IMPUGNED SECTION 68 AS WELL AS VARIOUS OTHER ADDITIONS OF UNDISCLOSED INCO ME, SECTION 14A DISALLOWANCE AS WELL AS CAPITAL EXPENDITURE (SUPRA). THE CIT(A) HAS UPHELD THE SAME IN HIS EXPARTE LOWER APPELLATE ORDER UNDER CHALLENGE. 5. LEARNED COUNSEL REPRESENTING ASSESSEE SUBMITS TH AT BOTH THE LOWER AUTHORITIES HAVE NOT COMPLIED WITH THE CITS EXPRESSED DIRECTIO NS ISSUED U/S 263 OF THE ACT MAKING IT CLEAR THAT THE ASSESSING OFFICER HAD TO M AKE AN INDEPENDENT ENQUIRIES FOR THE PURPOSE OF VERIFYING ITS INVESTOR PARTIES. HIS CASE THEREFORE IS THAT THE ABOVE DIRECTIONS HAVE GONE UNREBUTTED FROM REVENUE SIDE. LEARNED DEPARTMENTAL REPRESENTATIVE FAILS TO DISPUTE THE SAME AS THERE I S NO MATERIAL ON RECORD SUGGESTING ITA NO.607/KOL/2017 M/S SHALIMAR DEALERS PVT. LTD. A.Y.2009-10 3 ANY SUCH INDEPENDENT ENQUIRIES TO HAVE BEEN CONDUC TED AT THE ASSESSING OFFICERS END. LEARNED COUNSEL THEREAFTER INVITES OUR ATTENTI ON TO THIS TRIBUNALS DECISION IN SUKANYA MERCHANDISE PVT. LTD VS ITO ITA 291/KOL/201 6 DATED 15.12.2017 RESTORING THE VERY ISSUE BACK TO THE ASSESSING OFFICER IN IDE NTICAL CIRCUMSTANCES AS UNDER :- WE NOTE THAT THE AO PURSUANT TO THE ORDER OF LD. C IT HAD TAKEN NOTE OF THE DIRECTIONS OF THE LD. CIT AND ISSUED NOTICE U/S. 14 2(1) DATED 16.08.2013 AND HAS ACKNOWLEDGED THAT THE ASSESSEE HAD FURNISHED TH E COPY OF FINAL ACCOUNT, I. T. ACKNOWLEDGEMENT, BANK STATEMENT FOR THE RELEV ANT PERIOD EVIDENCING THE RECEIPT OF SHARE APPLICATION MONEY FROM THE SHA RE APPLICANTS. THEREAFTER, THE AO MAKES CERTAIN INFERENCES BASED O N THE LIST OF SHAREHOLDERS AND TAKING NOTE OF THE BANK STATEMENT FURNISHED BY THE ASSESSEE. WE NOTE THAT AFTER THE INITIAL NOTICE DA TED 16.08.2013, THEREAFTER THE AO HAD ISSUED THE NOTICE ON 26.02.2014 WHICH HA S BEEN REPRODUCED AT PAGE 3 OF THE REASSESSMENT ORDER, WHEREIN AO REQUIR ED THE DIRECTORS OF THE ASSESSEE COMPANY TO BE PRESENT BEFORE HIM ON 06.03. 2014. HOWEVER, ACCORDING TO THE LD. AR, THE ASSESSEE RECEIVED THE NOTICE ONLY ON 07.03.2014 AND THEREAFTER, THE ASSESSEE REQUESTED THE AO TO PR OVIDE ANOTHER OPPORTUNITY OF HEARING VIDE ITS LETTER DATED 20.03.2014. THERE AFTER, THE AO FIXED THE DATE OF HEARING ON 12.03.2014 VIDE NOTICE DATED 10.03.20 14. SO, ACCORDING TO THE ASSESSEE COMPANY SINCE THE DIRECTORS WERE NOT IN ST ATION TILL 23.03.2014, THE LD. AR HAD REQUESTED FOR ADJOURNMENT TILL THAT TIME . THOUGH THE AO HAS STATED THAT HE HAS ISSUED SUMMONS ON 24.03.2014 TO THE ASSESSEE COMPANY TO PRODUCE THE DIRECTORS OF THE COMPANY BEFORE HIM ON 26.03.2014, THE ASSESSEE COMPANY CONTENDED THAT IT HAS NOT RECEIVED THE SAID SUMMON AND, THEREFORE, COULD NOT MAKE THE PERSONAL APPEARANCE. THE AO HAS DRAWN ADVERSE CONCLUSION BASICALLY BECAUSE OF NON-APPEARANCE OF T HE DIRECTORS OF THE ASSESSEE COMPANY AND THAT OF THE SHAREHOLDER COMPAN IES. WE NOTE THAT INITIALLY THE AO STARTED THE ENQUIRY ON 16.08.2013 WHICH WAS COMPLIED BY THE ASSESSEE BY SUBMITTING DOCUMENTS WHICH HAS BEEN ACKNOWLEDGED BY THE AO. THEREAFTER, THE ENQUIRY WAS STARTED ONLY AT T HE FAG END OF FEBRUARY 2014 AND THE ASSESSEE COMPANY HAD INFORMED THE AO T HAT THEIR DIRECTORS WERE OUT OF STATION TILL 23.03.2014. IN THE LIGHT OF THE AFORESAID FACTS, WE ARE OF THE OPINION THAT THE ASSESSEE DID NOT GET FAIR O PPORTUNITY TO PRESENT THE EVIDENCES BEFORE THE AO SO, THERE WAS A LACK OF OPP ORTUNITY AS AFORESAID, THEREFORE, IT HAS TO GO BACK TO AO. 8. WE ALSO NOTE THAT LD. CIT WHILE SETTING ASIDE TH E ORDER OF THE AO WHICH WAS PASSED U/S. 147/143(3) OF THE ACT, THE LD . CIT GAVE CERTAIN ITA NO.607/KOL/2017 M/S SHALIMAR DEALERS PVT. LTD. A.Y.2009-10 4 GUIDELINES TO FOLLOW FOR CONDUCTING DEEP INVESTIGAT ION. WE ALSO NOTE THAT SIMILARLY PLACED ASSESSEES HAD CHALLENGED THE EXERC ISE OF REVISIONAL JURISDICTION U/S. 263 OF THE ACT BEFORE THIS TRIBUN AL IN THOSE CASES ONE OF IT OF SUBHA LAKSHMI VANIJYA PVT. LTD. VS. CIT IN ITA NO. 1104/KOL/2014 DATED 30.07.2015, WHEREIN THE TRIBUNAL WAS PLEASED TO UPH OLD THE ORDER PASSED BY THE LD. CIT PASSED U/S. 263 OF THE ACT, WHICH WE LE ARN TO HAVE BEEN CONFIRMED BY THE HONBLE JURISDICTIONAL HIGH COURT AND THE SLP PREFERRED AGAINST THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT HAS BEEN DISMISSED BY THE HONBLE SUPREME COURT. THEREFORE, SIMILAR ORDER OF THE LD. CIT PASSED U/S. 263 OF THE ACT HAS BEEN UPHELD. WE NOTE THAT THE AO WHILE GIVING EFFECT TO THE CITS 263 ORDER HAS NOTED THAT THE ASSESSEE COMPANY HAS IN FACT FURNISHED THE DOCUMENTS SOUGHT BY HIM TO HI S NOTICE U/S. 142(1) OF THE ACT. HOWEVER, THE AO TOOK THE ADVERSE VIEW AGAINST THE ASSESSEE ON THE PLEA THAT THE DIRECTORS OF THE ASSESSEE COMPANY AND SHAR E SUBSCRIBING COMPANIES HAD NOT APPEARED BEFORE HIM ON 26.03.2014 AND T AFT ER TAKING NOTE THAT NONE APPEARED ON 26.03.2014 CONCLUDED ON THE SAME DAY 2 6.03.2014 THAT ENTIRE AMOUNT OF SHARE APPLICATION MONEY RECEIVED ALONG WI TH PREMIUM AMOUNTING TO RS.8,06,00,000/- WHICH HAS REMAINED UNEXPLAINED AND ADDED TO THE INCOME OF THE ASSESSEE. WE ALSO NOTE THAT THE LD. C IT AFTER LOOKING INTO THE PERNICIOUS PRACTICE OF CONVERTING BLACK MONEY INTO WHITE MONEY HAS GIVEN THE GUIDELINES TO AO AS TO HOW THE INVESTIGATION SH OULD BE CONDUCTED TO FIND OUT THE SOURCE OF SOURCE. SINCE SIMILAR ORDER OF T HE LD. CIT PASSED U/S. 263 OF THE ACT HAS BEEN UPHELD BY THE TRIBUNAL AS WELL AS BY THE HONBLE CALCUTTA HIGH COURT AS WELL AS THE SLP HAS BEEN DIS MISSED BY THE HONBLE SUPREME COURT, SIMILAR ORDER OF THE LD. CIT HAS TO BE GIVEN EFFECT TO AS DIRECTED BY THE LD. CIT. WE TAKE NOTE THAT THE LD. CIT WITH HIS EXPERIENCE AND WISDOM HAS GIVEN CERTAIN GUIDELINES IN THE BACK DROP OF BLACK MONEY MENACE SHOULD HAVE BEEN PROPERLY ENQUIRED INTO AS D IRECTED BY HIM. THE AO OUGHT TO HAVE FOLLOWED THE INVESTIGATING GUIDELI NES AND METHOD AS DIRECTED BY HIM TO UNEARTH THE FACTS TO DETERMINE W HETHER THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE SHARE SUBSC RIBERS. WE NOTE THAT THE HONBLE SUPREME COURT IN THREE JUDGES BENCH IN THE CASE OF TIN BOX, (SUPRA), HAS HELD THAT SINCE THERE WAS LACK OF OPPO RTUNITY TO THE ASSESSEE AT THE ASSESSMENT STAGE ITSELF, THE ASSESSMENT NEEDS T O BE DONE AFRESH AND THEREBY REVERSED THE HONBLE HIGH COURT, TRIBUNAL A ND CIT(A)S ORDERS AND REMANDED THE MATTER BACK TO AO FOR FRESH ASSESS MENT. SO, SINCE THERE WAS LACK OF OPPORTUNITY AS AFORESTATED IT HAS TO GO BACK TO AO. WE ALSO NOTE THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF C IT VS. JANSAMPARK ADVERTISING & MARKETING PVT. LTD. IN ITA NO. 525/20 14 DATED 11.03.2015 ITA NO.607/KOL/2017 M/S SHALIMAR DEALERS PVT. LTD. A.Y.2009-10 5 WHEREIN AFTER NOTICING INADEQUATE ENQUIRY BY AUTHO RITIES BELOW HAVE HELD AS UNDER: 41. WE ARE INCLINED TO AGREE WITH THE CIT(APPEALS) , AND CONSEQUENTLY WITH ITAT, TO THE EXTENT OF THEIR CONCLUSION THAT T HE ASSESSEE HEREIN HAD COME UP WITH SOME PROOF OF IDENTITY OF SOME OF THE ENTRIES IN QUESTION. BUT, FROM THIS INFERENCE, OR FORM THE FACT THAT THE TRANSACTIONS WERE THROUGH BANKING CHANNELS, IT DOES NOT NECESSARILY F OLLOWING THAT SATISFACTION AS TO THE CREDITWORTHINESS OF THE PART IES OR THE GENUINENESS OF THE TRANSACTIONS IN QUESTION WOULD ALSO HAVE BEE N ESTABLISHED. 42. THE AO HERE MAY HAVE FAILED TO DISCHARGE HIS OB LIGATION TO CONDUCT A PROPER INQUIRY TO TAKE THE MATTER TO LOGICAL CONC LUSION. BUT CIT(APPEALS), HAVING NOTICED WANT OF PROPER INQUIRY , COULD NOT HAVE CLOSED THE CHAPTER SIMPLY BY ALLOWING THE APPEAL AN D 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 ALLEGA TIONS OF THE REVENUE THAT THE ACCOUNT STATEMENTS REVEAL UNIFORM PATTERN OF CA SH DEPOSITS OF EQUAL AMOUNTS IN THE RESPECTIVE ACCOUNTS PRECEDING THE TR ANSACTIONS IN QUESTION. THIS NECESSITATED A DETAILED SCRUTINY OF THE MATERIAL SUBMITTED BY THE ASSESSEE IN RESPONSE TO THE NOTICE UNDER SEC TION148 ISSUED BY THE AO, AS ALSO THE MATERIAL SUBMITTED AT THE STAGE OF APPEALS, IF DEEMED PROPER BY WAY OF MAKING OR CAUSING TO BE MADE A 'FU RTHER INQUIRY IN EXERCISE OF THE POWER UNDER SECTION 250(4). HIS APP ROACH NOT HAVING BEEN ADOPTED, THE IMPUGNED ORDER OF ITAT, AND CONSE QUENTLY THAT OF CIT(APPEALS), CANNOT BE APPROVED OR UPHELD.' IN VIEW OF THE AFORESAID ORDER AND IN THE LIGHT OF THE HONBLE SUPREME COURTS DECISION IN TIN BOX COMPANY (SUPRA) AND TAK ING INTO CONSIDERATION THE FACT THE ORDER OF THE LD. CIT PASSED U/S. 263 O F THE ACT IN SIMILAR CASES BEING UPHELD UP TO THE LEVEL OF APEX COURT, AND TAK ING NOTE OF HONBLE DELHI HIGH COURTS ORDER IN JANSAMPARK ADVERTISING & MARK ETING PVT. LTD. (SUPRA), WE SET ASIDE THE ORDER OF THE LD. CIT(A) A ND REMAND THE MATTER BACK TO THE FILE OF AO FOR DE NOVO ASSESSMENT AND TO DEC IDE THE MATTER IN ACCORDANCE TO LAW AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. WE, THEREFORE, CONSIDER IT FAIR AND PROPER AND IN THE INTEREST OF JUSTICE TO SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW ON TH E ISSUE IN DISPUTE AND RESTORE THE MATTER TO THE FILE OF THE A.O. TO DECIDE THE SA ME AFRESH AFTER GIVING THE ITA NO.607/KOL/2017 M/S SHALIMAR DEALERS PVT. LTD. A.Y.2009-10 6 ASSESSEE PROPER AND SUFFICIENT OPPORTUNITY OF BEING HEARD AND AFTER TAKING INTO CONSIDERATION THE ENTIRE EVIDENCE ALREADY AVAILABLE ON RECORD AS WELL AS OTHER DOCUMENTARY EVIDENCE WHICH THE ASSESSEE MAY CHOOSE TO FILE IN SUPPORT OF ITS CASE ON THE ISSUE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS ALLOWED FOR STATISTICAL PURPOSE. 6. WE ADOPT THE ABOVE REMAND DIRECTIONS MUTATIS MUTANDIS TO RESTORE THE INSTANT LIS BACK TO THE ASSESSING OFFICER FOR FRESH PROCEED INGS AS PER LAW AFTER AFFORDING ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. 7. THIS ASSESSEES APPEAL IS ACCEPTED FOR STATISTI CAL PURPOSES. O RDER PRONOUNCED IN THE COURT ON 20.07.2018. SD/- SD/- [DR.A.L.SAINI ] [ S.S.GODARA ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 20.07.2018. [RG SR.PS] COPY OF THE ORDER FORWARDED TO: 1.M/S. SHALIMAR DEALERS PVT. LTD., C/O SANJAY MUKHO PADHYAY, 4/16, CHITTARANJAN COLONY, JADAVPUR, KOLKATA-700032. 2. I.T.O., WARD-1 (3), KOLKATA. 3. C.I.T.(A)- 1, KOLKATA 4. C.I.T-1, KOLKATA 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER, SENIOR PRIVATE SECRETARY HEAD OF OFFICE/D.D.O, ITAT KOLKATA BENCHES ITA NO.607/KOL/2017 M/S SHALIMAR DEALERS PVT. LTD. A.Y.2009-10 7