M/s Sagun Sales Pvt. Ltd., Kolkata V. CIT (A)-2, KOLKATA, Kolkata

ITA 647/KOL/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0157 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 11-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RADHEY SHYAM
• Assessee Lawyers: J P KHAITAN; SANJOY MODI
• Keywords: Unexplained cash credit
• Section: 142(1); 131; 68; 263; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH (A), KOLKATA [BEFORE SHRI P.M. JAGTAP, VICE PRESIDENT & SHRI S.S. VISWANETHRA RAVI, JM] I.T.A. NO. 647/KOL/2016 ASSESSMENT YEAR: 2008-09 M/S. SAGUN SALES PVT. LTD...................................................................APPELLANT 24, PARK STREET, 3 RD FLOOR, UNIT 3/B, KOLKATA 700 016. [PAN: AALCS 0017 R] ITO WARD 4(2) KOLKATA........................................RESPONDENT P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069. APPEARANCES BY: SHRI J.P. KHAITAN, SR. ADVOCATE & SHRI SANJOY MODI, FCA APPEARING ON BEHALF OF THE ASSESSEE. SHRI RADHEY SHYAM, CIT DR APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : NOVEMBER 29, 2018 DATE OF PRONOUNCING THE ORDER : DECEMBER 05, 2018 ORDER PER P.M. JAGTAP, VICE PRESIDENT THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) 2, KOLKATA DATED 20.01.2016 AND THE SOLITARY ISSUE INVOLVED THEREIN RELATES TO THE ADDITION OF RS. 16,30,00,000/- MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF SHARE CAPITAL RECEIVED BY THE ASSESSEE BY TREATING THE SAME AS UNEXPLAINED CASH CREDITS. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY. IN THE ASSESSMENT COMPLETED U/S 143(3)/147 VIDE AN ORDER DATED 28.05.2010, ITS TOTAL INCOME WAS DETERMINED BY THE AO AT RS. 87,610/-. THE SAID ASSESSMENT WAS SUBSEQUENTLY SET ASIDE BY THE CONCERNED LD. CIT VIDE HIS ORDER DATED 30.03.2013 PASSED U/S 263 BY 2 I.T.A. NO. 647/KOL/2016 ASSESSMENT YEAR: 2008-09 M/S. SAGUN SALES PVT. LTD. HOLDING THE SAME TO BE ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE ON THE GROUND THAT THE ISSUE RELATING TO THE ASSESSEES CLAIM OF HAVING RECEIVED SHARE CAPITAL AMOUNT OF RS. 16,30,00,000/- INCLUDING SHARE PREMIUM OF RS. 15,47,55,000/- WAS NOT PROPERLY EXAMINED OR LOOKED INTO BY THE AO. VIDE HIS ORDER DATED 30.03.2013 PASSED U/S 263, THE LD. CIT(A) GAVE THE FOLLOWING DIRECTIONS TO THE AO IN THIS REGARD: I. EXAMINE THE GENUINENESS AND SOURCE OF SHARE CAPITAL, NOT ON A TEST CHECK BASIS, BUT IN RESPECT OF EACH AND EVERY SHAREHOLDER BY CONDUCTING INDEPENDENT ENQUIRY NOT THROUGH THE ASSESSEE. THE BANK ACCOUNT FOR THE ENTIRE PERIOD SHOULD BE EXAMINED IN COURSE OF VERIFICATION TO FIND OUT THE MONEY TRAIL OF THE SHARE CAPITAL. II. FURTHER THE A.O. SHOULD EXAMINE THE DIRECTORS AS WELL AS EXAMINE THE CIRCUMSTANCES WHICH NECESSITATED THE CHANGE IN DIRECTORSHIP IF APPLICABLE. HE SHOULD EXAMINE THEM ON OATH TO VERIFY THEIR CREDENTIALS AS DIRECTOR AND REACH A LOGICAL CONCLUSION REGARDING THE CONTROLLING INTEREST. III. THE A.O. IS DIRECTED EXAMINE THE SOURCE OF REALIZATION FROM THE LIQUIDATION OF ASSETS SHOWN IN THE BALANCE SHEET AFTER THE CHANGE OF DIRECTORS, IF ANY 3. AS PER THE DIRECTIONS GIVEN BY THE LD. CIT U/S 263, A NOTICE U/S 142(1) WAS ISSUED BY THE AO TO THE ASSESSEE ON 19.08.2013. ALTHOUGH THE ASSESSEE DID NOT COMPLY FULLY WITH THE SAID NOTICE AS WELL AS THE SUBSEQUENT NOTICES ISSUED BY THE AO, CERTAIN RELEVANT DETAILS WERE FURNISHED BY IT AS REQUIRED BY THE AO. THE SUMMONS ISSUED BY THE AO U/S 131 OF THE ACT TO ERSTWHILE DIRECTORS OF THE ASSESSEE COMPANY NAMELY MR. PROSENJIT SINGH AND MR. ASHOK KUMAR DERASARI ALSO REMAINED INCOMPLIED WITH. THE AO HELD THAT IT WAS NOT POSSIBLE TO IMPLEMENT THE DIRECTIONS GIVEN BY THE LD. CIT IN THE ORDER U/S 263 WITHOUT EXAMINATION OF THE ERSTWHILE DIRECTORS AND PROCEEDED TO MAKE THE ADDITION OF RS. 16,30,00,000/- TO THE TOTAL INCOME OF THE ASSESSEE BY TREATING THE SAME AS UNEXPLAINED CASH CREDITS U/S 68 IN 3 I.T.A. NO. 647/KOL/2016 ASSESSMENT YEAR: 2008-09 M/S. SAGUN SALES PVT. LTD. THE ASSESSMENT COMPLETED VIDE AN ORDER DATED 26.03.2014 U/S 147/143(3)/263. 4. AGAINST THE ORDER PASSED BY THE AO U/S 147/143(3)/263, AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A). DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A), IT WAS CONTENDED ON BEHALF OF THE ASSESSEE COMPANY THAT THE DIRECTIONS GIVEN BY THE LD. CIT IN THE ORDER PASSED U/S 263 WERE NOT DULY COMPLIED WITH BY THE AO AND THE ADDITION U/S 68 BY TREATING THE SHARE CAPITAL AS UNEXPLAINED CASH CREDITS WAS MADE BY HIM MERELY ON THE BASIS OF NON-APPEARANCE OF THE ERSTWHILE DIRECTORS OF THE ASSESSEE COMPANY WITHOUT MAKING NECESSARY ENQUIRY AS PER THE DIRECTIONS GIVEN BY THE LD. CIT U/S 263. THE LD. CIT(A) DID NOT FIND MERIT IN THIS CONTENTION OF THE ASSESSEE AND AFTER DISCUSSING THE SCOPE OF SECTION 68 AND THE ONUS THAT LIES ON THE ASSESSEE TO EXPLAIN THE RELEVANT CASH CREDITS IN TERMS OF THE SAID PROVISION, HE CONFIRMED THE ADDITION MADE BY THE AO U/S 68 FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO 6.14 OF HIS IMPUGNED ORDER: 6.14 AS DISCUSSED HEREINABOVE, THE ERSTWHILE DIRECTORS OF THE ASSESSEE COMPANY HAD NOT APPEARED BEFORE THE AO IN RESPONSE TO HIS SUMMON ISSUED U/S 131 AND THE ASSESSEE ALSO FAILED TO PRODUCE THEM BEFORE THE AO. THE PRESENCE OF THE PERSONS WORKING AS DIRECTORS OF THE ASSESSEE COMPANY WHEN THE ALLEGED SHARE APPLICATION MONEY WAS RAISED, WAS OF IMMENSE IMPORTANCE TO UNDERSTAND THE MODUS-OPERANDI OF THE BUSINESS AND TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS AND CREDITWORTHINESS OF THE SUBSCRIBING COMPANIES. THE ASSESSEE, THEREFORE, FAILED TO PROVE THE IDENTITY AND CAPACITY OF THE SO-CALLED SHAREHOLDERS ALONG WITH THE GENUINENESS OF THE TRANSACTIONS. THIS BEING THE ISSUES AND ALSO CONSIDERING THE PERNICIOUS PRACTICE OF CONVERSION OF UNACCOUNTED MONEY THROUGH MASQUERADE OF INVESTMENT IN THE SHARE CAPITAL OF A COMPANY, THE A.O., THEREFORE, WAS WITHIN HIS JURISDICTION IN TREATING SUCH SHARE CAPITAL AND SHARE PREMIUM AS UNACCOUNTED CASH CREDIT OF THE ASSESSEE COMPANY AND 4 I.T.A. NO. 647/KOL/2016 ASSESSMENT YEAR: 2008-09 M/S. SAGUN SALES PVT. LTD. ADDING THE SAME U/S 68 OF THE ACT. THE ADDITION OF RS. 16,30,00,000/- IS THEREFORE, CONFIRMED. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 5. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUTSET INVITED OUR ATTENTION TO THE DIRECTIONS GIVEN BY THE LD. CIT VIDE HIS ORDER PASSED U/S 263 TO THE ASSESSING OFFICER FOR THE PURPOSE OF EXAMINING THE ISSUE RELATING TO SHARE CAPITAL AMOUNT IN QUESTION RECEIVED BY THE ASSESSEE. HE CONTENDED THAT THE ASSESSING OFFICER HOWEVER DID NOT COMPLY WITH THE SAID DIRECTIONS AND SENT SUMMONS TO THE ERSTWHILE DIRECTORS OF THE ASSESSEE COMPANY WHICH REMAINED INCOMPLIED WITH AS THE SAME WERE SENT TO THE OLD ADDRESS. HE CONTENDED THAT EVEN THIS NON-COMPLIANCE TO THE SUMMONS ISSUED U/S 131 TO THE ERSTWHILE DIRECTOR WAS NOT INFORMED BY THE AO TO THE ASSESSEE AND NO OPPORTUNITY WAS GIVEN BY HIM TO THE ASSESSEE TO PRODUCE THE SAID DIRECTORS BEFORE HIM FOR EXAMINATION. HE CONTENDED THAT THIS FACT WAS SPECIFICALLY BROUGHT TO THE NOTICE OF THE LD. CIT(A) BY THE ASSESSEE BUT THE LD. CIT(A) OVERLOOKED THE SAME AND PROCEEDED TO CONFIRM THE ADDITION MADE BY THE AO U/S 68. HE CONTENDED THAT THE ASSESSEE THUS HAS NOT GOT EFFECTIVELY AN OPPORTUNITY TO PRODUCE THE ERSTWHILE DIRECTORS FOR EXAMINATION BEFORE THE AO AND SINCE THE AO HAS NOT FULLY COMPLIED WITH THE DIRECTIONS GIVEN BY THE LD. CIT(A) IN THE ORDER PASSED U/S 263, THE MATTER MAY BE SENT BACK TO THE AO FOR CONSIDERATION AFRESH. 5 I.T.A. NO. 647/KOL/2016 ASSESSMENT YEAR: 2008-09 M/S. SAGUN SALES PVT. LTD. 6. THE LEARNED DR, ON THE OTHER HAND, CONTENDED THAT THERE WAS NO COMPLIANCE ON THE PART OF THE ERSTWHILE DIRECTORS OF THE ASSESSEE COMPANY TO THE SUMMONS ISSUED BY THE AO U/S 131 AND UNLESS AND UNTIL THE ASSESSEE UNDERTAKES TO PRODUCE THE SAID DIRECTORS FOR EXAMINATION BEFORE THE AO, NO PURPOSE WOULD BE SERVED BY SENDING THE MATTER BACK TO THE AO FOR RECONSIDERATION. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT THE ASSESSMENT ORDER ORIGINALLY PASSED BY THE AO IN THIS CASE U/S 143(3)/147 WAS SET ASIDE BY THE LD. CIT VIDE HIS ORDER PASSED U/S 263 AND THE AO WAS DIRECTED BY HIM TO MAKE THE ASSESSMENT AFRESH. AS PER THE SAID SPECIFIC DIRECTIONS GIVEN IN THE ORDER U/S 263, THE AO WAS DIRECTED BY THE LD. CIT TO EXAMINE THE GENUINENESS AND THE SOURCE OF SHARE CAPITAL IN RESPECT OF EACH AND EVERY SHAREHOLDERS BY CONDUCTING INDEPENDENT ENQUIRY NOT THROUGH THE ASSESSEE. THE AO WAS ALSO DIRECTED TO EXAMINE THE BANK ACCOUNT FOR THE ENTIRE PERIOD TO FIND OUT THE MONEY TRAIL OF THE SHARE CAPITAL. THE AO WAS FURTHER DIRECTED BY THE LD. CIT TO EXAMINE THE DIRECTORS OF THE ASSESSEE COMPANY AS WELL AS TO EXAMINE THE CIRCUMSTANCES WHICH NECESSITATED THE CHANGE IN DIRECTORSHIP. HE WAS ALSO DIRECTED TO EXAMINE THE SOURCE OF REALISATION FROM THE LIQUIDATION OF ASSETS SHOWN IN THE BALANCE SHEET AFTER THE CHANGE OF DIRECTORS. A PERUSAL OF THE ASSESSMENT ORDER PASSED BY THE AO U/S 143(3)/147/263 HOWEVER SHOWS THAT THESE SPECIFIC DIRECTIONS GIVEN BY THE LD. CIT VIDE HIS ORDER PASSED U/S 263 WERE NOT COMPLIED WITH BY THE AO AND HE PROCEEDED TO TREAT THE ENTIRE SHARE CAPITAL AMOUNT AS UNEXPLAINED CASH CREDITS U/S 68 MAINLY FOR THE NON-COMPLIANCE ON THE PART OF THE 6 I.T.A. NO. 647/KOL/2016 ASSESSMENT YEAR: 2008-09 M/S. SAGUN SALES PVT. LTD. ERSTWHILE DIRECTORS OF THE ASSESSEE COMPANY TO THE SUMMONS ISSUED BY HIM U/S 131. AS SUBMITTED ON BEHALF OF THE ASSESSEE COMPANY, THE SAID SUMMONS WERE ISSUED BY THE AO TO THE OLD ADDRESS OF THE CONCERNED DIRECTORS AND NO OPPORTUNITY WAS GIVEN BY THE AO TO THE ASSESSEE TO PRODUCE THE ERSTWHILE DIRECTORS FOR HIS EXAMINATION. AS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE, THIS VITAL ASPECT WAS BROUGHT TO THE NOTICE OF THE LD. CIT(A) BY THE ASSESSEE BUT HE APPEARS TO HAVE OVERLOOKED THE SAME. KEEPING IN VIEW ALL THESE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT IT WOULD BE FAIR AND PROPER AND IN THE INTEREST OF JUSTICE TO SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO FOR FRESH CONSIDERATION AFTER COMPLYING WITH THE SPECIFIC DIRECTIONS GIVEN BY THE LD. CIT IN THE ORDER U/S 263 AND AFTER GIVING THE ASSESSEE AN OPPORTUNITY TO PRODUCE THE ERSTWHILE DIRECTORS FOR EXAMINATION. AS UNDERTAKEN AT THE TIME OF HEARING BEFORE US, THE ASSESSEE COMPANY SHALL PRODUCE THE ERSTWHILE DIRECTORS FOR EXAMINATION BEFORE THE AO. THE ASSESSEE COMPANY, IN FACT, HAS ALSO FILED A WRITTEN CONSENT OF ONE OF SUCH DIRECTORS MR. PROSENJIT SINGH TO APPEAR FOR HIS EXAMINATION BEFORE THE AO. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH DECEMBER, 2018. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER VICE PRESIDENT DATED: 05/12/2018 BISWAJIT, SR. PS 7 I.T.A. NO. 647/KOL/2016 ASSESSMENT YEAR: 2008-09 M/S. SAGUN SALES PVT. LTD. COPY OF ORDER FORWARDED TO: 1. M/S. SAGUN SALES PVT. LTD., 24, PARK STREET, 3 RD FLOOR, UNIT 3/B, KOLKATA 700 016. 2. ITO WARD 4(2), P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069. 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY, BY ORDER, ASSISTANT REGISTRAR / H.O.O. ITAT, KOLKATA