Dreamland Vintrade Pvt. Ltd., Kolkata V. ITO, Ward - 6(1), Kolkata , Kolkata

ITA 771/KOL/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3043 (ITAT-KOLKATA)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 23-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANKAR HALDER
• Keywords: Unexplained cash credit; Opportunity of being heard; Reassessment proceedings
• Section: 142(1); 143(1); 131; 68; 263; 63; 144

Judgement Text

1 ITA NO.771/KOL/2018 DREAMLAND VINTR ADE PVT. LTD., AY- 2010-11 , D , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: KOL KATA ( ) . . , . . ! , ' #$ ) [BEFORE SHRI P.M. JAGTAP, VICE PRESIDENT & SHRI A. T. VARKEY, JM] I.T.A. NO. 771/KOL/2018 ASSESSMENT YEAR: 2010-11 DREAMLAND VINTRADE PVT. LTD. (PAN: AADCD3425E) VS. INCOME-TAX OFFICER, WD. 6(1), KOLKATA APPELLANT RESPONDENT DATE OF HEARING 09.01.2019 DATE OF PRONOUNCEMENT 27.02.2019 FOR THE APPELLANT SHRI SUBASH AGARWAL, ADVOCATE FOR THE RESPONDENT SHRI SANKAR HALDER, JCIT, SR. DR ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-7, KOLKATA DATED 28.02.2018 FOR AY 2010-11. 2. THOUGH THE ASSESSEE HAVE RAISED 5 GROUNDS OF A PPEAL, BUT THE SOLE ISSUE INVOLVED IS AGAINST THE ACTION OF LD. CIT(A) IN CONFIRMING THE ADDITION OF RS.8,97,65,750/- AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE INCOME-TAX A CT, 1961 (HEREINAFTER REFERRED TO AS THE ACT), WHICH SUM REPRESENTED AMOUNTS RECEIVED BY T HE ASSESSEE TOWARDS SHARE CAPITAL AND SHARE PREMIUM. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE COMPA NY FILED ITS RETURN OF INCOME FOR THE A.Y. 2010-11 U/S 139(1) OF THE ACT ON 18.03.2011 SH OWING TOTAL INCOME OF RS.4,750/-. THE RETURN WAS PROCESSED 143(1) OF THE ACT. SUBSEQUENT LY, THE ASSESSMENT WAS COMPLETED U/S 147/143(3) OF THE ACT ON 19.01.2012 AT THE ASSESSED INCOME OF RS.44,753/-. LATER ON, THE COMMISSIONER OF INCOME-TAX, KOLKATA-II, KOLKATA INI TIATED THE PROCEEDINGS U/S 263 OF THE ACT. THE ORDER PASSED U/S 143(3)/147 OF THE ACT DAT ED 19.01.2012 WAS SET ASIDE BY THE CIT, KOL-II , KOLKATA U/S 263 OF THE ACT VIDE ORDER DATE D 14.03.2013. THE SAID ORDER U/S. 143(3)/147 OF THE ACT DATED 21.03.2014 HAD BEEN SET ASIDE U/S 263 FOR THE REASON THAT 2 ITA NO.771/KOL/2018 DREAMLAND VINTR ADE PVT. LTD., AY- 2010-11 REQUISITE AND PROPER INQUIRIES WERE NOT CONDUCTED R EGARDING THE IDENTITY AND CREDITWORTHINESS OF THE SHAREHOLDERS AND THE IMPUGN ED ORDER WAS PASSED MECHANICALLY WITHOUT APPLICATION OF MIND WHICH RENDERED THE ASSE SSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AS PER THE PROVISIONS OF SEC. 263 OF THE ACT. SUBSEQUENT TO THE ORDER U/S.263, THE AO INITIATED THE ASSESSMENT PROC EEDINGS AND PASSED AN ORDER U/S 144/263/147/143(3) OF THE ACT ON 10.03.2015 AT THE ASSESSED INCOME OF RS.8,97,65,750/-. WHILE COMPLETING THE REASSESSMENT, THE AO MADE AN A DDITION OF RS.8,97,21,000/- U/S 68 OF THE ACT ON ACCOUNT OF INTRODUCTION OF SHARE CAPITAL AND SHARE PREMIUM SUBSCRIBED BY VARIOUS SHAREHOLDERS IN THE YEAR UNDER CONSIDERATIO N. DURING THE COURSE OF REASSESSMENT PROCEEDINGS, AS DIRECTED IN THE ORDER PASSED U/S. 2 63 OF THE ACT, THE AO ISSUED SUMMONS U/S. 131 OF THE ACT TO ALL SUBSCRIBERS AND TO THE A SSESSEE COMPANY. BUT NO SUBSCRIBERS WHO HAD INVESTED MONEY IN THE ASSESSEE COMPANY CAME FOR WARD FOR EXAMINATION ON OATH U/S. 131 OF THE ACT. HENCE, ACCORDING TO AO, THE GENUIN ENESS OF THE SHARE PREMIUM AND CAPITAL RECEIVED BY THE ASSESSEE COMPANY REMAINED UNVERIFIE D. ACCORDING TO AO, IT IS VERY ASTONISHING THAT THE INVESTORS WHO HAD INVESTED MON EY AT A PREMIUM OF RS.390/- PER SHARE WITH A FACE VALUE OF RS. 10/- PER SHARE IN A COMPAN Y WHOSE TOTAL INCOME FOR THE EARLIER YEAR IS SMALL AND HAS NOT TURNED OUT BEFORE HIM TO SUMMO NS U/S. 131 OF THE ACT, CREATES DOUBT AS THE IDENTITY AND CREDITWORTHINESS OF INVESTORS AND MOST IMPORTANTLY THE GENUINENESS OF TRANSACTION OF SHARE CAPITAL AND PREMIUM RECEIVED B Y THE ASSESSEE COMPANY. ACCORDING TO AO, THE IDENTITY AS WELL AS THE CREDITWORTHINESS AN D GENUINENESS OF THE SHAREHOLDERS COULD NOT BE ESTABLISHED, SO THE ENTIRE AMOUNT OF RS.8,97 ,21,000/- RECEIVED BY THE ASSESSEE DURING THE YEAR WAS ADDED BY THE AO AS UNEXPLAINED CREDIT IN THE BOOKS OF THE ASSESSEE COMPANY AND ADDED TO THE TOTAL INCOME U/S. 68 OF THE ACT. A GGRIEVED, 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. WE NOTE THAT THE AO WAS GIVING EFFECT TO THE ORDER OF LD. CIT PASSED U/S. 263 OF THE ACT ON 14.03.2013. WHEREAS WE NOTE THAT THE LD. CITS DIRECTION IN SIMILAR CASE WAS TO MAKE ENQUIRIES TO UNRAVEL THE MODUS OPERANDI BY INV ESTIGATION AS PER FOLLOWING GUIDELINES: 3 ITA NO.771/KOL/2018 DREAMLAND VINTR ADE PVT. LTD., AY- 2010-11 THE AO IS DIRECTED TO (I) EXAMINE THE GENUINENESS A ND SOURCE OF SHARE CAPITAL, NOT ON A TEST CHECK BASIS, BUT IN RESPECT OF EACH AND EVERY SHARE HOLDER BY CONDUCTING INDEPENDENT ENQUIRY NOT THROUGH THE ASSESSEE. THE BANK ACCOUNT FOR THE ENTIRE PERIOD SHOULD BE EXAMINED IN THE COURSE OF VERIFICATION TO FIND OUT THE MONEY TRAIL OF THE SHARE CAPITAL. II) FURTHER THE AO SHOULD EXAMINE THE DIRECTORS AS WELL AS EXAMINE THE CIRCUMSTANCES WHICH NECESSITATED THE CHANGE IN DIRECTORSHIP IF APPLICAB LE. HE SHOULD EXAMINE THEM ON OATH TO VERIFY THEIR CREDENTIALS AS DIRECTOR AND REACH A LO GICAL CONCLUSION REGARDING THE CONTROLLING INTEREST. III) THE AO IS DIRECTED EXAMINE THE SOURCE OF REALI ZATION FROM THE LIQUIDATION OF ASSETS SHOWN IN THE BALANCE SHEET AFTER THE CHANGE OF DIRECTORS, IF ANY. 5. HOWEVER, THE LD. AR DREW OUR ATTENTION TO THE AO S INVESTIGATION WHEREIN HE HAS OBSERVED THAT IN THE LIGHT OF AFORESAID ORDER PASSE D U/S. 263 OF THE ACT, A NOTICE U/S. 142(1) OF THE ACT AND QUESTIONNAIRE WAS ISSUED TO THE ASSE SSEE ON 21.05.2014 WHICH WAS RETURNED BY THE POSTAL AUTHORITIES. AFTER THE CHANGE IN INC UMBENCY, A FRESH NOTICE U/S. 142(1) DATED 22.09.2014 WAS SENT TO THE ASSESSEE COMPANY WHICH W AS AGAIN RETURNED BY THE POSTAL AUTHORITIES. ON 10.10.2014 A SHOW CAUSE NOTICE WAS SENT TO THE ASSESSEE THROUGH THE POST AND ON THE E MAIL ID. BUT NO RESPONSE WHATSOEVER W AS MADE BY THE ASSESSEE COMPANY. ON 27.10.2014, THE ASSESSEE INFORMED ABOUT THE CHANGE IN ADDRESS. THEREAFTER THE AO ISSUED LAST NOTICE FIXING THE HEARING ON 18.02.2015. THEN ASSESSEE FILED A WRITTEN SUBMISSION ON 17.02.2015. AFTER THAT THE AO PASSED THE REASSESSM ENT ORDER EX PARTE BY INVOKING SEC. 144 OF THE ACT. THE LD. AR ALSO SUBMITTED THAT EVEN TH E LD. CIT(A) HAS ALSO PASSED THE ORDER EX PARTE WITHOUT AFFORDING PROPER OPPORTUNITY OF BE ING HEARD TO THE ASSESSEE. 6. HENCE, THE MAIN GRIEVANCE OF THE ASSESSEE IS THA T NO PROPER OPPORTUNITY WAS GIVEN TO THE ASSESSEE TO DISCHARGE THE ONUS CASTED UPON IT A S REQUIRED WHEN SECTION 68 IS INVOLVED. WE NOTE THAT AO HAS DRAWN ADVERSE INFERENCE AGAINST THE ASSESSEE COMPANY SINCE ASSESSEE/INVESTORS FAILED TO PERSONALLY APPEAR BEFO RE HIM. AND WE NOTE THE ADDRESS OF THE ASSESSEE HAD CHANGED AND THE ASSESSEE HAD INFORMED THE AO ON 27.10.2014 THE NEW ADDRESS. THEREAFTER, WHEN THE AO FIXED THE HEARING AS LAST O PPORTUNITY TO ASSESSEE, THE ASSESSEE HAD FILED WRITTEN SUBMISSION ALONG WITH DOCUMENTS TO SU BSTANTIATE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE INVESTORS/SHARE SUBSCRIBERS . AND THE AO PASSED THE REASSESSMENT ORDER ON 10.03.2015. SO THIS EXERCISE OF EFFECTIVE VERIFICATION OF THE DOCUMENTS PRODUCED BY THE ASSESSEE COULD NOT BE POSSIBLE BECAUSE WITHI N 30 DAYS OF THE ASSESSEE SUBMITTED THE 4 ITA NO.771/KOL/2018 DREAMLAND VINTR ADE PVT. LTD., AY- 2010-11 WRITTEN SUBMISSION ALONG WITH DOCUMENTS, THE AO PA SSED THE BEST JUDGMENT ASSESSMENT U/S. 144 OF THE ACT. AND WE NOTE THAT OTHER THAN I SSUING SUMMONS U/S. 131 OF THE DIRECTORS OF THE ASSESSEE COMPANY (TO OLD ADDRESS) NO OTHER I NVESTIGATION AS DIRECTED BY LD. CIT WAS CONDUCTED BY AO AS IS DISCERNABLE FROM THE ORDER. SO, IN THE LIGHT OF THE AFORESAID FACTS, WE FIND FORCE IN THE SUBMISSION OF THE LD. AR THAT NO PROPER OPPORTUNITY THE ASSESSEE GOT DURING THE REASSESSMENT PROCEEDINGS BEFORE THE AO. SINCE PROPER OPPORTUNITY WAS NOT GIVEN TO ASSESSEE BY AO DURING THE REASSESSMENT PROCEEDIN GS, WE ARE OF THE OPINION THAT ASSESSEE SHOULD GET PROPER OPPORTUNITY BEFORE THE AO DURING REASSESSMENT PROCEEDINGS. THE HONBLE (THREE JUDGE BENCH) OF THE HONBLE SUPREME COURT IN TIN BOX COMPANY VS. CIT (2001) 249 ITR 216 (SC) HAS HELD AS UNDER: IT IS UNNECESSARY TO GO INTO GREAT DETAIL IN THESE MATTERS FOR THERE IS A STATEMENT IN THE ORDER OF THE TRIBUNAL, THE FACT-FINDING AUTHORITY, THAT R EADS THUS : 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. 7. IN SIMILAR CASE THIS TRIBUNAL IN ITA NO.393/KOL/ 2016 IN M/S. STAR GRIHA (P) LTD. VS. ITO FOR AY 2008-09 DATED 15.12.2017 HAS OBSERVED AS UNDER:- 5 ITA NO.771/KOL/2018 DREAMLAND VINTR ADE PVT. LTD., AY- 2010-11 WE ALSO NOTE THAT THE LD. CIT AFTER LOOKING INT O THE PERNICIOUS PRACTICE OF CONVERTING BLACK MONEY INTO WHITE MONEY HAS GIVEN THE GUIDELIN ES TO AO AS TO HOW THE INVESTIGATION SHOULD BE CONDUCTED TO FIND OUT THE SOURCE. SINCE SIMILAR ORDER OF THE 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 DISMISSED BY THE HONBLE S UPREME 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 BACKDROP OF BLACK MONEY MENACE SHOULD HAVE BEEN PROPERLY ENQUIRED INTO AS DIRECTED BY HIM. THE AO OUGHT TO HAVE FOLLOWED THE INVESTIGATING GUIDELINES AND METHOD AS DIRECTED BY HIM TO UNEARTH THE FACTS TO DETERMINE WHETHER THE IDENTITY, GENUINENESS AND CREDITWORTHIN ESS OF THE SHARE SUBSCRIBERS. WE NOTE THAT THE HONBLE SUPREME COURT (THREE JUDGES BENCH) IN THE CASE OF TIN BOX, (SUPRA), HAS HELD THAT SINCE THERE WAS LACK OF OPPORTUNITY TO THE ASSESSEE AT THE ASSESSMENT STAGE ITSELF, THE ASSESSMENT NEEDS TO BE DONE AFRESH AND THEREBY REVE RSED THE HONBLE HIGH COURT, TRIBUNAL AND CIT(A)S ORDERS AND REMANDED THE MATTER BACK T O AO FOR FRESH ASSESSMENT. SO, SINCE THERE WAS LACK OF OPPORTUNITY AS AFORESTATED IT HAS TO GO BACK TO AO. 8. 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 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.' 9. IN VIEW OF THE AFORESAID ORDER AND IN THE LIGHT OF THE HONBLE SUPREME COURTS DECISION IN TIN BOX COMPANY (SUPRA) AND TAKING INTO CONSIDERATION THE FACT THE ORDER OF THE LD. CIT PASSED U/S. 263 OF THE ACT IN SIMILAR CASES BEING UPHELD UP TO THE LEVEL OF APEX COURT, AND TAKING NOTE OF HONBLE DELHI HIGH COURT S ORDER IN JANSAMPARK ADVERTISING & MARKETING PVT. LTD. (SUPRA), WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND REMAND THE MATTER 6 ITA NO.771/KOL/2018 DREAMLAND VINTR ADE PVT. LTD., AY- 2010-11 BACK TO THE FILE OF AO FOR DE NOVO ASSESSMENT AND T O DECIDE THE MATTER IN ACCORDANCE TO LAW AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSE SSEE. 10. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 27TH FEBR UARY, 2019 SD/- SD/- (P. M. JAGTAP) (ABY. T. VARKEY) VICE PRESIDENT JUDICIAL MEMBER DATED : 27TH FEBRUARY, 2019 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT DREAMLAND VINTRADE PVT. LTD., 4, FAI RLIE PLACE, 5 TH FLOOR, KOLKATA-700 001. 2 RESPONDENT ITO, WARD-6(1), KOLKATA. 3. 4. CIT(A)-7, KOLKATA (SENT THROUGH E-MAIL) CIT- , KOLKATA. 5. DR, ITAT, KOLKATA. (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR