M/s. Ankit Metal & Power Ltd., Kolkata V. JCIT, Range-3, Kolkata, Kolkata

ITA 869/KOL/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9749 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 27-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Assessee Lawyers: S K TULSIYAN
• Keywords: Opportunity of being heard; Principle of natural justice; Set aside
• Section: 250; 131

Judgement Text

1 ITA NO. 869/KOL/2017 M/S. ANKIT METAL & POWER LTD. A.Y. 2012-13 , C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOLKATA ( ) . . , . [ , ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, AM] I.T.A. NO. 869/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. ANKIT METAL & POWER LTD. (PAN: AAECA 5230 B) VS. JCIT, RANGE 3, KOLKATA APPELLANT RESPONDENT DATE OF HEARING 10.06.2019 DATE OF PRONOUNCEMENT 01.07.2019 FOR THE APPELLANT SHRI S.K. TULSIYAN, ADVOCATE FOR THE RESPONDENT DR. P.K. SRIHARI, CIT, DR ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) 9, KOLKATA DATED 28.02.2017 FOR ASSESSMENT YEAR 2012-13. 2. AT THE OUTSET, IT IS NOTED THAT THE IMPUGNED ORDER IS AN EX-PARTE ORDER. IT WAS BROUGHT TO OUR NOTICE BY THE LD. AR THAT THE ASSESSEE IS A PUBLIC LIMITED COMPANY LISTED WITH SEBI AND ITS SHARES ARE QUOTED ON BOMBAY STOCK EXCHANGE. THE APPELLANT COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF SPONGE IRON, MILD STEEL, CARBON, STAINLESS STEEL LONG PRODUCTS & TRADER OF STEEL ITEMS, GENERATION OF POWER FOR CAPTIVE CONSUMPTION. THUS ACCORDING TO THE LD. AR, ASSESSEE CANNOT BE TREATED AS FLY BY NIGHT COMPANY. ACCORDING TO THE LD. AR THE APPELLANT HAD ISSUED 6,25,00,000 EQUITY SHARES OF RS. 10/- EACH AT A PREMIUM OF RS. 30/- PER SHARE DURING THE YEAR BY WAY OF PREFERENTIAL ALLOTMENT. ACCORDING TO THE LD. AR, THE OBJECTIVE OF MAKING THE ISSUE OF SHARE CAPITAL WAS AS UNDER: AS PART OF ITS EXPANSION PROGRAM, THE COMPANY PROPOSES TO INCREASE ITS MANUFACTURING CAPACITY IN TWO PHASES. UNDER 1 ST PHASE, THE COMPANY PROPOSES TO INSTALL A 350 TPD SPONGE IRON PLANT, THE COMPANY PROPOSES TO INSTALL A 350 TPD SPONGE IRON PLANT, 15 MT INDUCTION FURNACE, 100,000 TPA WIRE ROD MILL AND A 33 MW CAPTIVE POWER PLANT WITH THE TOTAL CAPITAL 2 ITA NO. 869/KOL/2017 M/S. ANKIT METAL & POWER LTD. A.Y. 2012-13 OUTLAY OF RS. 311 CRORES. IN THE 2 ND PHASE, THE COMPANY PROPOSES TO INSTALL 0.6 MTPA IRON ORE PELLET PLANT, 30 TPD DRI KILN, RM PRE-HEATER, AOD CONVERTER AND RAILWAY SIDING WITH THE TOTAL OUTLAY OF RS. 316 CRORES. THE SAID EXPANSION SHALL BE FUNDED THROUGH A COMBINATION OF BANK BORROWINGS AND EQUITY INFUSION. FURTHER, THE COMPANY ALSO REQUIRES RS. 35 CRORES FOR ITS LONG TERM WORKING CAPITAL REQUIREMENTS. IN ORDER TO RAISE EQUITY, THE BOARD OF DIRECTORS PROPOSES TO ISSUE AND ALLOT 62,500,000 EQUITY SHARES OF RS. 10 EACH AT A PRICE OF RS. 40 PER EQUITY SHARE (INCLUDING PREMIUM OF RS. 30 PER EQUITY SHARE) AGGREGATING TO RS. 250 CRORES ON A PREFERENTIAL BASIS. 3. IT WAS ALSO POINTED OUT THAT THE SHARE ISSUE WAS MADE IN ACCORDANCE WITH THE PROVISIONS LAID DOWN FOR THE PREFERENTIAL ALLOTMENT OF SHARES IN CHAPTER VII OF THE SEBI (ICDR) REGULATIONS, 2009. IT WAS POINTED OUT THAT THE APPELLANT OBTAINED APPROVAL FROM BOMBAY STOCK EXCHANGE FOR THE ISSUE OF SHARES ON PREFERENTIAL BASIS AND AFTER RECEIPT OF APPROVAL FROM SEBI, THE SHARES WERE ALLOTTED TO 17 SHAREHOLDERS WHICH WERE CORPORATE ENTITIES. IT WAS SUBMITTED THAT AFTER THE SHARES WERE ALLOTTED, SHARES CAN BE DULY TRADABLE ON BOMBAY STOCK EXCHANGE. IT WAS BROUGHT TO OUR NOTICE THAT THE ASSESSEE HAD FILED ALL THE DOCUMENTS BEFORE THE AO, HOWEVER, THE AO HAS TAKEN ADVERSE INFERENCE AGAINST THE ASSESSEE SINCE SEVEN COMPANIES OUT OF 17 COULD NOT BE FOUND AT THE ADDRESS GIVEN BY THE ASSESSEE. WE NOTE THAT THE AO HAS ACKNOWLEDGED HAVING RECEIVED REPLY FROM 10 OF THE SHAREHOLDERS WHICH THE AO ACKNOWLEDGES AT PAGE 6 OF HIS ORDER. HOWEVER, WE NOTE THAT THE AO HAS RELIED UPON CERTAIN STATEMENTS OF SHRI JANARDHAN CHOKHANI & SHRI ANAND SHARMA WHICH WERE RECORDED ON OATH BY THE DEPARTMENT. LIKEWISE SHRI DINESH KUMAR DHANDHANIAS STATEMENT RECORDED ON OATH U/S 131 OF THE ACT DATED 19.11.2014 WAS USED TO DRAW ADVERSE INFERENCE AGAINST THE ASSESSEE. LIKEWISE THE STATEMENT OF SHRI NARENDRA JAIN RECORDED ON OATH U/S 131 ON 11.04.2014 WAS ALSO RELIED UPON BEFORE DRAWING ADVERSE INFERENCE AGAINST THE ASSESSEE. LIKEWISE SHRI SANDEEP SHARMA STATEMENT UNDER OATH U/S 131 RECORDED ON 08.04.2008 WAS ALSO USED AGAINST THE ASSESSEE. HOWEVER, IT WAS BROUGHT TO OUR NOTICE THAT THE ASSESSEE COMPANY IS A PUBLIC LIMITED COMPANY AND STAND ON A DIFFERENT PEDESTAL IN CONTRADISTINCTION TO THAT OF THE PRIVATE LIMITED COMPANY. ACCORDING TO THE LD. AR OUT OF 17 SHAREHOLDERS ALL ARE CORPORATE ENTITIES, THE AO HIMSELF HAS ACCEPTED THAT THE 10 CORPORATE ENTITIES HAVE CONFIRMED THE SHARE SUBSCRIBING WITH THE ASSESSEE COMPANY. ACCORDING TO THE LD. AR IF THE NOTICES COULD NOT BE SERVED UPON THE 7 OTHER CORPORATE ENTITIES BY CARRYING OUT ENQUIRY IT COULD HAVE BEEN EASILY FOUND OUT FROM THE ROC WEBSITE WHICH EXERCISE THE AO DID NOT BOTHER TO DO. ACCORDING TO THE LD. AR, THE AO HAS RELIED UPON STALE STATEMENTS RECORDED YEARS BACK AND THAT TOO BEHIND THE BACK OF THE ASSESSEE AND WITHOUT GIVING A COPY OF THE 3 ITA NO. 869/KOL/2017 M/S. ANKIT METAL & POWER LTD. A.Y. 2012-13 SAME TO THE ASSESSEE AND NOT ALLOWING THE ASSESSEE TO CROSS-EXAMINE THESE PERSONS HAS DRAWN ADVERSE INFERENCE AGAINST THE ASSESSEE WHICH IS IN GROSS VIOLATION OF NATURAL JUSTICE AND CANNOT BE USED AGAINST THE ASSESSEE AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES VS CCE 281 CTR 241 (SC). WE FIND CONSIDERABLE FORCE IN THE SUBMISSION OF THE LD. AR THAT THOUGH THE AO IS AT LIBERTY TO MAKE PRIVATE ENQUIRIES AGAINST THE ASSESSEE, HOWEVER THE MATERIAL, HE COLLECTED BEHIND THE BACK OF THE ASSESSEE CANNOT BE USED AGAINST THE ASSESSEE WITHOUT FURNISHING THE SAME TO THE ASSESSEE AND IF THE MATERIAL STATEMENT IS ADVERSE IN NATURE AGAINST THE ASSESSEE THEN AN OPPORTUNITY TO CROSS-EXAMINE THE MAKER OF THE DOCUMENT OR THE THIRD PERSON WHO MADE THE STATEMENT HAS TO BE GIVEN TO THE ASSESSEE AS HELD BY THE HONBLE SUPREME COURT IN ANDAMAN TIMBER INDUSTRIES (SUPRA). WE NOTE THAT THE AO HAS NOT MADE ANY ENDEAVOUR TO GIVE A COPY OF THE STATEMENTS PURPORTEDLY RECORDED DURING SEARCH U/S. 132(4) OF THE ACT OR RECORDED U/S 131 OF THE ACT WHICH THE AO CLAIMS TO CONTAIN ADVERSE STATEMENTS AGAINST THE ASSESSEE, WHICH ACTION IS IN GROSS VIOLATION OF NATURAL JUSTICE FOR THE SIMPLE REASON THAT THE AO CANNOT USE A MATERIAL WHICH IS ADVERSE AGAINST THE ASSESSEE WITHOUT CONFRONTING HIM WITH THAT TO SAY IN OTHER WORDS THE AO CANNOT KEEP THE ASSESSEE IN DARK AND DRAW ADVERSE INFERENCE WITHOUT CONFRONTING THE ASSESSEE WITH THE MATERIALS/THIRD PARTIES STATEMENT WHICH THE AO INTENDS TO USE AGAINST THE ASSESSEE AND AN OPPORTUNITY TO CROSS-EXAMINE THOSE THIRD PARTYS MUST BE GIVEN TO THE ASSESSEE WITHOUT WHICH THE THIRD PARTIES STATEMENT CANNOT BE RELIED UPON BY THE AO. IN THE LIGHT OF THE ABOVE, WE FIND THAT NO PROPER OPPORTUNITY THE ASSESSEE GOT BEFORE THE AO THEREFORE, RELYING ON THE DECISION OF THE HONBLE SUPREME COURT IN TIN BOX COMPANY LTD. WHEREIN THE LORDSHIP 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 READS THUS : WE WILL STRAIGHTAWAY AGREE WITH THE ASSESSEES SUBMISSION THAT THE INCOME-TAX OFFICER HAD NOT GIVEN TO THE ASSESSEE PROPER OPPORTUNITY OF BEING 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 REASONABLE 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. 4 ITA NO. 869/KOL/2017 M/S. ANKIT METAL & POWER LTD. A.Y. 2012-13 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 HEARING TO THE ASSESSEE ? IN OUR OPINION, THERE CAN ONLY BE ONE ANSWER TO THIS 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 ARE ALSO SET ASIDE. THE MATTER SHALL NOW BE REMANDED TO THE ASSESSING AUTHORITY FOR FRESH CONSIDERATION, AS AFORESTATED. THEREFORE IN THE LIGHT OF THE AFORESAID DECISION OF THE HONBLE SUPREME COURT AND IN THE LIGHT OF THE AFORESAID DISCUSSIONS, WE ARE INCLINED TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND REMAND IT BACK TO AO WITH A DIRECTION TO FRAME ASSESSMENT DE-NOVO AFTER HEARING THE ASSESSEE AND IN ACCORDANCE TO LAW AND KEEPING THE DISCUSSION (SUPRA) IN MIND. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 01 JULY, 2019 SD/- SD/- (DR. A. L. SAINI) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 01 JULY, 2019 BISWAJIT, SR. PS COPY OF THE ORDER FORWARDED TO: 1 APPELLANT M/S. ANKIT METAL & POWER LTD., 35, CHITTARANJAN AVENUE, BOW BAZAR, KOLKATA 700 012. 2 RESPONDENT JCIT, RANGE-3, KOLKATA. 3 4 5 CIT(A)-9, KOLKATA (SENT THROUGH E-MAIL) CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR