M/s. Divyajyoti Vanijya Private Limited, Kolkata V. ITO, Ward-9(1), Kolkata, Kolkata

ITA 931/KOL/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9762 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 28-05-2019
• Assessment Year: 2008-2009
• Appeal Filed On: 03-05-2017
• Court: TRIBUNAL

Judgement Text

1 ITA NO. 931/KOL/2017 M/S. DIVYAJYOTI VANIJYA PVT. LTD.. AY 2008-09 , C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA ( ) . . , . ' # $% % , '( ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 931/KOL/2017 ASSESSMENT YEAR: 2008-09 M/S. DIVYAJYOTI VANIJYA PVT. LTD. (PAN: AACCD8032A) VS. INCOME TAX OFFICER, WD-9(1), KOLKATA APPELLANT RESPONDENT DATE OF HEARING 27.06.2019 DATE OF PRONOUNCEMENT 01.07.2019 FOR THE APPELLANT SHRI S. M. SURANA, ADVOCATE FOR THE RESPONDENT SHRI C. J. SINGH, CIT, DR ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL PREFERRED BY THE ASSESSEE IS AGAINST TH E ORDER OF THE LD. CIT(A)-16, KOLKATA DATED 17.02.2017 FOR AY 2008-09. 2. THOUGH THE ASSESSEE RAISED AS MANY AS 11 GROUN DS OF APPEAL BUT THE SOLE ISSUE INVOLVED IS AGAINST THE ACTION OF LD. CIT(A) IN CON FIRMING THE ADDITION OF RS.6,76,00,000/- AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE INCOME-TA X ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT), WHICH SUM REPRESENTED AMOUNTS RECEIVED BY THE 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. 2008-09 U/S 139(1) OF THE ACT ON 18.02.2008 DE CLARING TOTAL INCOME AT RS.2,428/- AND THE RETURN OF INCOME WAS PROCESSED U/S 143(1) OF TH E ACT. SUBSEQUENTLY, THE ASSESSMENT WAS RE-OPENED U/S 147 OF THE ACT BY ISSUING NOTICE U/S 148 OF THE ACT DATED 15.11.2010. THE ASSESSMENT WAS COMPLETED U/S 147/143(3) OF THE ACT ON 15.11.2010 AT THE ASSESSED 2 ITA NO. 931/KOL/2017 M/S. DIVYAJYOTI VANIJYA PVT. LTD.. AY 2008-09 INCOME OF RS.25,628/-. LATER ON, THE COMMISSIONER O F INCOME-TAX, KOLKATA-III, KOLKATA INITIATED THE PROCEEDINGS U/S 263 OF THE ACT BY ISS UING SHOW CAUSE NOTICE DATED 01.02.2013 . THE ORDER PASSED U/S 143(3)/147 OF THE ACT DATED 15 .11.2010 WAS SET ASIDE BY THE CIT, KOL- III , KOLKATA U/S 263 OF THE ACT VIDE ORDER DATED 0 1.03.2013. THE SAID ORDER U/S. 143(3)/147 OF THE ACT DATED 15.11.2010 HAD BEEN SET ASIDE U/S 263 FOR THE REASON THAT REQUISITE ENQUIRIES WERE NOT DONE REGARDING THE IDENTITY AND CREDITWORTHINESS OF THE SHARE HOLDERS THROUGH WHICH THE INTRODUCTION OF SHARE CAPITAL TO THE TUNE OF RS.6,76,00,000/- WAS MADE IN THE FINANCIAL YEAR UNDER QUESTION AND ACCORDINGLY A SHOW CAUSE NOTICE U/S. 263 OF THE ACT WAS ISSUED ON 01.02.2013 ASKING THE ASSESSEE COMPAN Y TO EXPLAIN AS TO WHY THE IMPUGNED ASSESSMENT O5RDER SHOULD NOT BE SET ASIDE. ULTIMAT ELY, HE SET ASIDE THE ABOVE ASSESSMENT ON 01.03.2013 WITH THE DIRECTION FOR FRESH ASSESSME NT AFTER CONDUCTING THOROUGH AND DETAILED ENQUIRIES INTO THE CASE. ACCORDINGLY, NOT ICE U/S. 142(1) DATED 24.07.2013 WAS ISSUED CALLING FOR, INTER ALIA, DETAILS OF SHAREHO LDERS AND FIXING THE CASE ON 12.08.2013. BUT DUE TO NON-COMPLIANCE REFIXATION LETTER WAS ISS UED ON 07.01.2014. IN RESPONSE, THE LD. AR HAS FILED DETAILS ON 16.01.2014. FROM THE SAID DETAILS IT WAS NOTED THAT THERE WAS A LIST OF SHAREHOLDERS TO WHOM ALLOTMENT 3,38,000 SHARES A MOUNTING TO RS.67,60,000/- WERE MADE. NOTICE U/S. 133(6) CALLING FOR VARIOUS DETAI LS INCLUDING THE SOURCE OF FUND FOR INVESTMENT IN THE ASSESSEE COMPANY WERE ISSUED ON 1 4.02.2014. OUT OF THEM, NOTICES U/S. 133(6) ISSUED TO M/S. NIRUPAMA COMMERCE PVT. LTD., M/S. MANTRA CLUB RESORT LTD., M/S. DIPIKA TIE-UP PVT LTD., M/S. DURGA COMPLEX PVT. LT D. CAME BACK UNSERVED. FURTHER SUMMONS U/S. 131(1) WERE ALSO ISSUED TO ALL THE DIR ECTORS OF THE COMPANY ON 26.02.2014 FIXING THE CASE ON 11.03.2014, BUT NO COMPLIANCE WA S MADE. THEREAFTER THE AO WAS OF THE VIEW THAT THIS IS NOTHING BUT A CASE WHERE THE ASSE SSEE HAS INTRODUCED ITS OWN UNDISCLOSED FUND IN THE GRAB OF SUBSCRIPTION BY SHAREHOLDERS. A S THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE SHAREHOLDERS COULD NOT BE ESTABL ISHED, A SUM OF RS.6,76,00,000/- SHOWN AS SHARE CAPITAL CONTRIBUTION IN THE BOOKS OF THE A SSESSEE WAS ADDED BACK TO THE TOTAL INCOME U/S. 68 OF THE ACT. AGGRIEVED, ASSESSEE PREF ERRED APPEAL BEFORE THE LD. CIT(A), WHO CONFIRMED THE ACTION OF AO. AGGRIEVED, ASSESSE E PREFERRED THIS APPEAL BEFORE US. 3 ITA NO. 931/KOL/2017 M/S. DIVYAJYOTI VANIJYA PVT. LTD.. AY 2008-09 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 01.03.2013. WE ALSO NOTE THAT THE LD. C IT IN MANY OTHER CASES HAVE GIVEN THE FOLLOWING GUIDELINES AS TO HOW TO INVESTIGATE THIS TYPE OF CASE . HENCE, THE ORDER PASSED BY THE AO U/S. 143(3) R/W 147 FOR THE AY 2008-09 IS ERRONEOUS AND PREJUDICIAL TO INTEREST OF THE REVENUE AND THEREFOR E THE ORDER IS SET ASIDE TO BE FRAMED DE NOVO AS PER FOLLOWING DIRECTIONS. THE AO SHOULD MAKE CO MPREHENSIVE AND DETAILED ENQUIRIES INTO THE SOURCE OF SUBSCRIPTION TO THE SHARE CAPITAL. TH E AO SHOULD PASS THE ASSESSMENT ORDER AFTER CONDUCTING INDEPENDENT DETAILED AND COMPLETE ENQUIR IES INTO THE DOCUMENTS FILED IN SUPPORT OF SUBSCRIPTION TO THE SHARE CAPITAL AND PREMIUM TO TH E EXTENT OF RS.5,17,50,000/- INTRODUCED IN THIS CASE. THE AO SHOULD TRACE THE SOURCE OF SHARE CAPITAL BY ENQUIRING INTO THE VARIOUS LAYERS THROUGH WHICH THE MONEY HAS BEEN INTRODUCED IN THIS COMPANY AS SHARE CAPITAL AND ALSO EXAMINE THE DIRECTORS OF SUBSCRIBER COMPANIES BY ISSUING SUMMONS U/S. 131 OF THE I. T. ACT. THE AO SHOULD NOT CONFINE HIMSELF TO CONDUCTI NG ENQUIRIES INTO THE SUBSCRIBERS TO THE SHARE CAPITAL ONLY ON SELECTIVE BASIS. THE AO SHOU LD ALSO CALL UPON THE ASSESSEE TO INDENTIFY THE PERSONS WHO ARE SHOWN AS DIRECTORS OF THESE CO MPANIES AND EXAMINE THEM ON OATH TO VERIFY THEIR CREDENTIAL AS DIRECTORS. THE AO SHOUL D PASS SPEAKING ORDER AFTER PROVIDING REASONABLE OPPORTUNITY TO THE ASSESSEE AND VERIFYIN G THE SOURCE OF SHARE CAPITAL INCLUDING THE SHARE PREMIUM OF ALL THE SUBSCRIBERS AND ROTATION O F MONEY THROUGH VARIOUS HANDS SO AS TO ASCERTAIN THE TRUE NATURE OF TRANSACTION WHICH WILL BRING TO THE FORE, THE REALITY OF THE TRANSACTIONS. 5. HOWEVER, THE MAIN GRIEVANCE OF THE ASSESSEE IS T HAT NO PROPER OPPORTUNITY WAS GIVEN TO THE ASSESSEE TO DISCHARGE THE ONUS CASTED UPON I T AS REQUIRED IN SEC. 68 MATTERS. WE NOTE THAT AO GAVE ONLY ONE OR TWO OPPORTUNITY TO THE ASS ESSEE TO PRODUCE THE SHARE SUBSCRIBERS AND THE DIRECTORS OF THE ASSESSEE COMPANY. WE NOTE THAT OTHER THAN THE NOTICE ISSUED U/S. 133(6) TO ASSESSEE AND SHAREHOLDERS (SUPRA) NO OTHE R INVESTIGATION WAS CONDUCTED BY AO AS IS DISCERNABLE FROM THE ORDER. AS NOTED ABOVE, WE FIND FORCE IN THE SUBMISSION OF THE LD. AR THAT NO PROPER OPPORTUNITY THE ASSESSEE GOT BEFO RE THE AO DURING THE REASSESSMENT PROCEEDINGS. SINCE NOTICE U/S. 133(6) OF THE ACT CO ULD NOT BE SERVED UPON THE SHARE SUBSCRIBERS AND NOTICE U/S. 133(1) OF THE ACT WAS S ERVED ON THE DIRECTORS OF THE ASSESSEE COMPANY AND JUST BECAUSE THE DIRECTOR OF ASSESSEE C OMPANY FAILED TO APPEAR BEFORE THE AO, THE AO SADDLED THE ADDITION BY DRAWING ADVERSE INFE RENCE WHICH ACTION OF A.O. CANNOT BE COUNTENANCED. SINCE PROPER OPPORTUNITY WAS NOT GIVE N TO ASSESSEE BY AO DURING THE REASSESSMENT PROCEEDINGS, WE ARE OF THE OPINION THA T ASSESSEE SHOULD GET PROPER OPPORTUNITY BEFORE THE AO DURING REASSESSMENT PROCEEDINGS. THE HONBLE (THREE JUDGE BENCH) OF THE 4 ITA NO. 931/KOL/2017 M/S. DIVYAJYOTI VANIJYA PVT. LTD.. AY 2008-09 HONBLE SUPREME COURT IN TIN BOX COMPANY VS. CIT (2 001) 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. 6. 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:- 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. 5 ITA NO. 931/KOL/2017 M/S. DIVYAJYOTI VANIJYA PVT. LTD.. AY 2008-09 7. 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.' 8. 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 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. 9. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 01/07/201 9 SD/- SD/- (DR. A. L. SAINI) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 1 ST JULY, 2019 JD.(SR.P.S.) 6 ITA NO. 931/KOL/2017 M/S. DIVYAJYOTI VANIJYA PVT. LTD.. AY 2008-09 COPY OF THE ORDER FORWARDED TO: 1 APPELLANT M/S. DIVYAJYOTI VANIJYA PVT. LTD., RAJE SH MOHAN & ASSOCIATES, UNIT NO. 18, 5 TH FLOOR, BAGATI HOUSE, 34, GANESH CHANDRA AVENUE, KO LKATA-700 013. 2 RESPONDENT ITO, WARD-9(1), KOLKATA. 3 4 5 . CIT(A)-16, KOLKATA. (SENT THROUGH E-MAIL) CIT, KOLKATA. DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR