KRC Gems Pvt. Ltd., Delhi V. ACIT, Central Circle- 25, New Delhi

ITA 6757/DEL/2017

AI Insights

The case involves M/s. KRC Gems Pvt. Ltd., which appealed against the order of the Commissioner of Income Tax (Appeals)-XXIX, New Delhi, arising from an assessment order passed under Section 147 read with Section 143(3) of the Income Tax Act, 1961 for the Assessment Year 2012-13. The primary contention was regarding the legality and jurisdiction of the reassessment proceedings and the additions made under Section 68 of the Act concerning unexplained credit entries in the form of share capital and premium. The Tribunal considered the precedents set in a similar case involving M/s. Priya Diamonds Pvt. Ltd. and found merit in providing the assessee another opportunity to substantiate the credits introduced.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 121630 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: F
• Next Hearing Date: 21-11-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 08-11-2017
• Other Referred Cases: M/s. Priya Diamonds Pvt. Ltd. vs. ACIT, ITA No. 73 03 /Del / 2017
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B.S. ANANAD
• Section: 147; 148; 73; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F” DELHI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER I.T.A. No.6757/DEL/2017 Assessment Year 2012-13 M/s. KRC Gems Pvt. Ltd., 3513, Ground floor, Bank Street Pyare Lal Road, Karol Bagh Delhi. Vs. ACIT, Central Circe-25, Jhandewalan, New Delhi. TAN/PAN: AAECK4438M (Appellant) (Respondent) Appellant by: Shri Anil Jain, CA Respondent by: Shri B.S. Ananad, Sr.DR Date of hearing: 22 11 2022 Date of pronouncement: 23 01 2023 O R D E R PER PRADIP KUMAR KEDIA, A.M.: Th e cap tio n ed ap peal h as b een fil ed b y th e Assessee ag ain st th e o rd er o f th e Co mmiss io n er o f In co me Tax (Ap peals)-XXIX, New Delh i [‘CIT( A)’ in sh o rt] d a te d 0 4 .0 9 .2 01 7 arisi n g fro m th e assess men t o rd er d ated 1 1 .1 1 .20 16 p assed by th e Assessin g Officer (AO) un d er Sectio n 1 47 r.w. Sect io n 14 3 (3 ) o f th e In co me Tax Act, 1 9 6 1 (th e Act) co n cern in g AY 2 0 12 -13 . 2 . Th e g ro u nd s o f ap p eal ra ised b y th e assesse e read as u n d er: “ 1 . T h a t o n t h e f a c t s a n d c i r c u m s t a n c e s o f t h e c a s e a n d t h e p r o v i s i o n o f l a w t h e L d C I T ( A ) h a s f a i l e d t o a p p r e ci a t e t h a t i n i t i a t i o n o f r e a s s e s s m e n t p r o c e e d i n g a n d n o t i c e u /s . 1 4 7 r . w . s . 1 4 8 i s i l l e g a l , b a d i n l a w , w i t h o u t j u r i s d i c t i o n a n d t im e b a r r e d . 2 . T h a t o n t h e f a c t s a n d c i r c u m s t a n c e s o f t h e c a s e a n d t h e p r o v i s i o n o f l a w t h e L d C I T ( A ) h a s f a i l e d t o a p p r e ci a t e t h a t i m p u g n e d o r d e r p a s s e d u / s 1 4 7 / 1 4 3 ( 3 ) o f t h e I T A c t , i s i l l e g a l , b a d i n l a w , w i t h o u t j u r i s d i c t i o n a n d c o n t r a r y t o t h e f ac t s . I.T.A. No.6757/Del/2017 2 3 . T h a t o n t h e f a c t s a n d c i r c u m s t a n c e s o f t h e c a s e a n d t h e p r o v i s i o n o f l a w t h e L d C I T ( A ) h a s f a i l e d t o a p p r e ci a t e t h a t a s s e s s m e n t o r d e r p a s s e d b y t h e L d A O i s a g a i n s t t h e p r i n c i p l e s o f n a t u r a l j u s t i c e a n d h a s b e e n p a s s e d w i t h o u t r e a s o n ab l e o p p o r t u n i t y o f b e i n g h e a r d . 4 . T h a t o n t h e f a c t s a n d c i r c u m s t a n c e s o f t h e c a s e a n d t h e p r o v i s i o n s o f t h e l a w , t h e L d . C I T A p p e a l h a s e r r e d i n S u s t a i n i n g a n a d d i t i o n o f R s . 9 0 , 0 0 , 0 0 0 / - o n a c c o u n t o f i n c r e a s e in S h a r e C a p i t a l a n d P r e m i u m a s U n e x p l a i n e d C r e d i t u / s . 6 8 . 5 . T h a t t h e a p p e l l a n t c r a v e s l e a v e t o r e s e r v e t o i ts e l f t h e r i g h t t o a d d , a l t e r a m e n d , v a r y , m o d i f y a n d / o r w i t h d r a w an d g r o u n d (s ) o f a p p e a l a t o r b e f o r e t h e t i m e o f h e a r i n g . ” 3. Bri ef l y st ate d, a s urv e y op er ati on un der Se ct io n 1 33 A of the Act was c ar ri ed o ut at the b us in es s pr e mi ses of M/s. KR C Ge ms P vt . Ltd . o n 19. 1 2.2 01 3 b y t he In ves ti ga tio n W i ng of the I nco me Ta x De par t men t. I n th e cour se of su rv e y ope ra ti on , an amo u nt of Rs .9 0 lak h i nt ro du ced in the ga rb of sha re cap it al/ sh ar e p re mi u m in t he ass es se e- co mp an y i n Fi na nc ia l Ye ar 2 01 2-1 3 r el eva nt to As ses s me nt Yea r 20 12 -1 3 in q ues ti on w as n oti ce d. It w as f u rt her n oti ce d tha t sha re ap pl ic an t c o mp ani es /c on ce rn s wer e f o un d t o be ba se d i n Ko lka ta a nd t he a s ses se e f ail ed t o co rro bo ra te t he g en u ine ne ss of suc h s ub scr ip ti on in th e su rv e y p roc ee di ng s. C on se que nt up on sur ve y, t he ca se wa s r eo pe ned af te r rec ord in g rea sons b y i ssu an ce of not ic e u nd er Sec t ion 14 8 r .w . S ec tio n 1 47 of th e Act . T he ass es s men t w as t h ere af ter f ra me d u n der Se ct io n 14 7 r . w. S ec ti on 14 3(3 ) of th e A ct dat ed 1 1.1 1. 20 16 wh ere in an a dd iti o n of Rs. 90 lak h to wa rd s c re di t e nt rie s re ce ive d b y wa y of s ha re c api ta l/ sh are pre mi u m w as mad e on t he to uc hs to ne of S ec ti on 68 of t he Ac t b y hol di ng t he n atu re and s ou rc e of su ch cre di ts to b e un sa ti sf act or y. 4. Ag gri ev ed , the a ss ess ee p ref er re d a p pea l bef or e th e CI T( A). The a sse ss ee ch al le nge d the j uri sd ic ti o n a ss u med unde r S ect io n 1 47 of the Ac t as w el l as th e me ri ts of th e addi ti on s ma de u n der S ec ti on 68 of th e A ct . The CI T( A) h o w eve r u phe ld th e val id it y of I.T.A. No.6757/Del/2017 3 jur is di ct io n as su me d un de r S ec tio n 1 4 7 of th e A ct. Th e CI T( A) a ls o f ound th at ca se ma de o ut b y th e as se s see t o b e be ref t of an y me rit s. Co ns eq uen tl y, t he CI T( A) up he ld th e act io n of th e As se s sin g Of f icer on bo th c ou nt s na mel y j u ri sd ict io n a s w el l as o n f ac tu a l mat ri x a nd thu s di s mis se d th e app ea l of th e as se ss ee. 5. Fu rth er a gg rie ve d, th e as se ss ee pr ef err ed a ppe al b ef or e t he Tri bu na l. T he ld . c ou nse l f o r t he a ss e sse e st ro ng l y re li e d u po n th e dec is io n re nd er ed b y t h e C o- or di nat e Be nch in M/ s. Pri y a Di am on ds Pvt . Lt d. v s. A CI T, ITA N o. 73 03 /D el / 20 17 o rd er d at ed 27. 01 .2 02 2 and s ub mi tte d th at th e s ai d a ss es se e, i.e , M/ s. Pr iya D ia mo nd s i s a sis te r co nc er n of th e as ses se e- co mp an y and t he sur ve y u nd er S ect io n 13 3A we re c arr ie d ou t on b ot h t he con ce rn s b y th e In ves ti ga ti on W i ng si mu lt an eo us l y. T he l d. co un se l su b mitt ed t ha t i n th e i de nt ica l f acts w hil e t he l eg al is sue of j ur is di c tio n wa s d ecid ed a gai ns t t he ass es se e bu t ho we v er th e ac ti on of th e Rev en ue A ut ho rit i es w ere s et asi de t o th e A ss es s ing Of f icer f or r e- exa mi na ti on on me rit s on the gro un d th at c op y of al le ge d sta te me nt of Sh ri P ra mod Ku mar S ha r ma all eg ed l y rec or de d b y th e D DI T ( In v .) Uni t, K ol kat a h as no t b ee n pro vi de d t o t he a s ses se e. Th e ld . c o un sel th us pra ye d f or si mi lar rel ief a s gr an ted i n the c as e of si st er co nce rn M /s. Pr i ya D i a mon ds. 6. The ld. DR f or t he Re ven ue , on th e ot her han d, rel ie d up on t he act io n of th e lo we r aut ho ri ti es. 7. W e ha ve c on si der e d t he r iva l su b mis si on s. 8. The Co -or di na te B enc h in M/ s. P riy a Di am on d (s up ra ) has gra nt ed p art ia l re lief to t he as se ss ee on mer it s. Th e rel ev ant ope ra ti ve p ar ag rap h of the or der of the C o- or di nat e B e nch in M/ s. Pri ya D ia mo nd s in IT A N o. 73 03 /D el /2 01 7 o rd er da te d 27. 01. 20 22 i s rep ro du ce d her ei n f or re ad y r ef er enc e: “ 6 . We h a v e c o n s i d e r e d t h e r i v a l a r g u m e n t s m a d e b y b o t h t h e I.T.A. No.6757/Del/2017 4 s i d e s , p e r u s e d t h e o r d e r s o f t h e A . O . a n d t h e L d . CI T ( A ) a n d t h e p a p e r b o o k f i l e d o n b e h a l f o f t h e a s s e s s e e . We h a v e a l s o c o n s i d e r e d t h e v a r i o u s d e c i s i o n s c i t e d b e f o r e u s . We f i n d t h e A . O . i n t h e i n s t a n t c a s e r e o p e n e d t h e a s s e s s m e n t a s p e r t h e p r o v i s i o n s o f S e c t i o n 1 4 7 o f t h e I . T . A c t , 1 9 6 1 a f t e r r e c o r d i ng r e a s o n s w h i c h h a s a l r e a d y b e e n r e p r o d u c e d i n t h e p r e c e d i n g p a r a g ra p h . I t i s t h e s u b m i s s i o n o f t h e L e a r n e d C o u n s e l f o r t h e A s s e s s e e t h a t t h e A . O . h a s r e o p e n e d t h e a s s e s s m e n t o n t h e b a s i s o f r e p o r t o f t h e I n v e s t i g a t i o n Wi n g a n d i n a m e c h a n i c a l m a n n e r w i t h ou t i n d e p e n d e n t a p p l i c a t i o n o f m i n d a n d o n b o r r o w e d s a ti s f a c t i o n a n d , t h e r e f o r e , s u c h r e o p e n i n g o f a s s e s s m e n t b e i n g n o t in a c c o r d a n c e w i t h l a w s h o u l d b e q u a s h e d . I t i s a l s o h i s s u b m i s s io n t h a t a p p r o v i n g a u t h o r i t y h a s n o t g i v e n a p p r o v a l i n a c c o rd a n c e w i t h t h e p r o v i s i o n s o f l a w s i n c e t h e r e i s n o p r o p e r s a t i s f a ct i o n r e c o r d e d b y t h e A d d l . C I T b e f o r e g r a n t i n g a p p r o v a l . We d o n o t fi n d a n y f o r c e i n t h e a b o v e a r g u m e n t s o f t h e L e a r n e d C o u n s e l f o r th e A s s e s s e e . A d m i t t e d l y , t h e s u r v e y o p e r a t i o n u n d e r s e c t i o n 1 3 3 A o f t h e I . T . A c t , 1 9 6 1 ' w a s c a r r i e d - o u t a t t h e b u s i n e s s p r e m i s e s o f t h e a s s e s s e e i t s e l f d u r i n g w h i c h i t w a s f o u n d t h a t a n a m o u n t o f R s . 1 c r o r e w a s i n t r o d u c e d i n t h e g a r b o f s h a r e a p p l i c a t i o n / s h a r e p r e m i u m i n t h e a s s e s s e e c o m p a n y i n t h e F . Y . 2 0 1 1 - 1 2 . I t w a s a l s o fo u n d t h a t m o s t o f t h e s h a r e a p p l i c a n t c o m p a n i e s / c o n c e r n s a r e K o l ka t a b a s e d c o m p a n i e s a n d t h e a s s e s s e e d u r i n g t h e c o u r s e o f s u rv e y p r o c e e d i n g s c o u l d n o t p r o d u c e a n y s u p p o r t i n g d e t a i ls / d o c u m e n t s a s p r o v i d e d i n S e c t i o n 6 8 o f t h e I . T . A c t , 1 9 6 1 . T he D i r e c t o r o f t h e a s s e s s e e c o m p a n y n a m e l y S h r i K a r a n S i n g h S o n i a n d th e A c c o u n t a n t Y o g e s h C h o u h a n h a d n o k n o w l e d g e o f t h e sh a r e a p p l i c a t i o n f o r m s , s h a r e i s s u e c e r t i f i c a t e , s h a r e al l o t m e n t r e g i s t e r , s h a r e h o l d e r r e g i s t e r o r a n y o t h e r d o c u m e n t a r y e v i de n c e s r e g a r d i n g t h e i n t r o d u c t i o n o f s h a r e c a p i t a l / s h a r e p r e m i u m i n t h e a s s e s s e e c o m p a n y . S i n c e t h e a s s e s s e e f a i l e d t o p r o vi d e a n y d o c u m e n t a r y e v i d e n c e s d u r i n g t h e c o u r s e o f s u r v e y or p o s t - s u r v e y p r o c e e d i n g s , t h e A . O . h a s r e o p e n e d t h e a s s e s s m e n t af t e r r e c o r d i n g r e a s o n s a n d t h e r e a s o n s a r e a l r e a d y r e p r o d u c e d i n th e p r e c e d i n g p a r a g r a p h . T h e r e f o r e , t h e v a r i o u s d e c i s i o n s r e l i e d o n b y t h e L e a r n e d C o u n s e l f o r t h e A s s e s s e e i n t h e i n s t a n t c a se t h a t t h e A . O . h a s r e c o r d e d t h e s a t i s f a c t i o n i n a m e c h a n i c a l m a n n er w i t h o u t a p p l i c a t i o n o f i n d e p e n d e n t m i n d a n d o n b o r r o w e d s a ti s f a c t i o n d o n o t h o l d g o o d . I n a l l t h o s e c a s e s t h e r e o p e n i n g h a d t a k e n p l a c e o n t h e b a s i s o f s e a r c h a n d s e i z u r e o p e r a t i o n o r s u r v e y p r o c e e d i n g s i n t h e c a s e o f e n t r y p r o v i d e r s . B u t , h e r e i s a c a s e w he r e t h e s u r v e y h a d t a k e n p l a c e i n a s s e s s e e ' s o w n p r e m i s e s a n d t h e D i r e c t o r a s w e l l a s A c c o u n t a n t o f t h e a s s e s s e e c o m p a n y h a d f a i le d t o p r o v i d e a n y e v i d e n c e r e g a r d i n g i n t r o d u c t i o n o f s h a r e c a p i t al . F u r t h e r t h e A d d l . C I T w h i l e g r a n t i n g a p p r o v a l h a s a l s o r e c o r d e d h i s s a t i s f a c t i o n . U n d e r t h e s e c i r c u m s t a n c e s , w e d o n o t f i n d a n y i n f i r m i t y i n t h e o r d e r o f t h e L d . C I T ( A ) i n u p h o l d in g t h e v a l i d i t y o f r e - a s s e s s m e n t p r o c e e d i n g s . A c c o r d i n g l y , g r o u n d s r a is e d b y t h e a s s e s s e e c h a l l e n g i n g t h e v a l i d i t y o f r e - a s s e s s m e n t p r o c e e d i n g s a r e I.T.A. No.6757/Del/2017 5 d i s m i s s e d . 6 . 1 . S o f a r a s t h e m e r i t s o f t h e c a s e i s c o n c e r n e d , w e f i n d f r o m t h e o r d e r o f t h e A . O . a s w e l l a s L d . C I T ( A ) t h a t t he r e i s n o t a w h i s p e r r e g a r d i n g a n y o p p o r t u n i t y t o t h e a s s e s s e e to s u b s t a n t i a t e t h e i n t r o d u c t i o n o f R s . 1 c r o r e t o w a r d s s h a r e c a p i t al a s w e l l a s s h a r e p r e m i u m . T h e s o - c a l l e d s t a t e m e n t o f S h r i P r a mo d K u m a r S h a r m a , t h e e n t r y o p e r a t o r w h o a d m i t t e d t o h a v e p r ov i d e d e n t r i e s t o t h e a s s e s s e e c o m p a n y h a s n o t b e e n p r o v i d e d t o t he a s s e s s e e n o r t h e a s s e s s e e w a s g i v e n a n o p p o r t u n i t y t o c r o s s - e x a mi n e t h e e n t r y p r o v i d e r S h r i P r a m o d K u m a r S h a r m a . P r i n c i p l e s o f n at u r a l j u s t i c e d e m a n d s t h a t t h e a s s e s s e e S h o u l d b e g i v e n a n o p p o r tu n i t y t o r e b u t t h e s t a t e m e n t o f t h i r d p a r t y w h i c h i s t h e b a s i s f o r a d d i t i o n a n d a n o p p o r t u n i t y t o c r o s s - e x a m i n e t h e s a m e p e r s o n , i f d em a n d e d . C o n s i d e r i n g t h e t o t a l i t y o f t h e f a c t s a n d c i r c u m s t an c e s o f t h e c a s e a n d i n t h e i n t e r e s t o f j u s t i c e , w e d e e m i t p r o p e r to r e s t o r e t h e i s s u e t o t h e f i l e o f A . O . w i t h a d i r e c t i o n t o g r a n t o n e mo r e o p p o r t u n i t y t o t h e a s s e s s e e t o s u b s t a n t i a t e t h e i n t r o d u c t i o n o f R s . 1 c r o r e t o w a r d s s h a r e c a p i t a l / s h a r e p r e m i u m a n d d e c i d e t h e i s s u e a s p e r f a c t a n d l a w . N e e d l e s s t o s a y t h e A . O . s h a l l g i v e du e o p p o r t u n i t y o f b e i n g h e a r d t o t h e a s s e s s e e . We h o l d a n d d i r e c t a c co r d i n g l y . T h e g r o u n d s c h a l l e n g i n g t h e a d d i t i o n o n m e r i t i s a c c o r di n g l y a l l o w e d f o r s t a t i s t i c a l p u r p o s e s . 7 . I n t h e r e s u l t , a p p e a l f i l e d b y t h e a s s e s s e e i s pa r t l y a l l o w e d f o r s t a t i s t i c a l p u r p o s e s . ” 9. As st at ed o n b eh al f of the a ss es se e, t he as se ss me nt or de rs in the c as e of As se ss ee an d Pr i ya D ia m on ds ar e ide nt ical . As f ur th er sta te d, t he f ac tu al mat ri x i n th e ca se of the a ss essee in M/ s. P ri ya Dia mo n ds a re s i mi lar . In th e in st an t cas e al so , th e R e ven ue ha s co mmi tt ed i nf rin g e me nt of p ri nci pl es of na tu ral j ust ice b y n ot conf r on ti ng t he co p y of sta te me nt a dve rs e to t he a sse sse e wh il e pla ci ng r el ian ce o n suc h sta te me nt a s prin te d ou t by t h e ass es se e. Th us, ow in g t o s i mil ar it ie s on f a ct s, the f i ndi ng s r en de red in M/ s. Pri ya Dia mo n ds s hal l ap pl y mu ta ti s mut an di s to t he cas e of the ass es se e. 10. In co ncl us io n, o bje cti on t ow ard s lac k of ju ris di ct io n c onf err ed un der Sec ti on 1 47 of the Act i s ad j udi ca te d ag ain st t he as se ss ee wh ile th e obj ec ti on to wa rd s a dj udi ca ti on of me ri t is r ef er red ba ck to the A ss es si ng Of f ic er f o r de no vo d ete r mi nat io n. I.T.A. No.6757/Del/2017 6 11. The o rde r of the C IT( A) is t hu s s et a sid e on merit s f or f resh det er mi na ti on b y t h e As se ss in g Of f icer . Th e As se ss in g Of f icer s ha ll det er mi ne t he i ss ue on me ri ts af re sh i n acco rd an ce w it h la w ke epi ng in min d th e sa cr o sa nct pri nc ip le s of nat ura l ju st ic e. T h e sta te me nt of thi rd pa rt y if r el ied up on b y t he De par t men t, shal l b e nec es sa ril y conf r on te d t o th e a sse ss ee f or it s c o mme nts a nd cr os s- ex a mi na ti on , if de ma nd ed . The ob ser va ti on s ma de in M/ s. P ri ya D ia mo nd s sha ll be ad he re d t oo . 12. In co nc lu si on , th e mat te r is r e mit te d a nd re st or ed t o th e f ile of the As ses si ng Of f icer f or de te r mina ti o n of iss ue o n me rit s af res h in acc or da nce w it h la w. 13. In th e res ul t, t he ap pea l of th e as se ss ee is p ar tl y a ll ow ed . Order pronounced in the open Court on 23/01/2023. Sd/- Sd/- [CHALLA NAGENDRA PRASAD] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /01/2023 Prabhat