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Income Tax Appellate Tribunal, DELHI BENCH “F” DELHI
Before: SHRI CHALLA NAGENDRA PRASAD & SHRI PRADIP KUMAR KEDIA
The captioned appeal has been filed by the Assessee against the order of the Commissioner of Income Tax (Appeals)-XXIX, New Delhi [‘CIT(A)’ in short] dated 04.09.2017 arising from the assessment order dated 11.11.2016 passed by the Assessing Officer (AO) under Section 147 r.w. Section 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2012-13. 2. The grounds of appeal raised by the assessee read as under: “1. That on the facts and circumstances of the case and the provision of law the Ld CIT(A) has failed to appreciate that initiation of reassessment proceeding and notice u/s. 147 r.w.s. 148 is illegal, bad in law, without jurisdiction and time barred.
2. That on the facts and circumstances of the case and the provision of law the Ld CIT(A) has failed to appreciate that impugned order passed u/s 147/143(3) of the IT Act, is illegal, bad in law, without jurisdiction and contrary to the facts.
3. That on the facts and circumstances of the case and the provision of law the Ld CIT(A) has failed to appreciate that assessment order passed by the Ld AO is against the principles of natural justice and has been passed without reasonable opportunity of being heard.
4. That on the facts and circumstances of the case and the provisions of the law, the Ld. CIT Appeal has erred in Sustaining an addition of Rs.90,00,000/- on account of increase in Share Capital and Premium as Unexplained Credit u/s. 68. 5. That the appellant craves leave to reserve to itself the right to add, alter amend, vary, modify and/or withdraw and ground(s) of appeal at or before the time of hearing.”
3. Briefly stated, a survey operation under Section 133A of the Act was carried out at the business premises of M/s. KRC Gems Pvt. Ltd. on 19.12.2013 by the Investigation Wing of the Income Tax Department. In the course of survey operation, an amount of Rs.90 lakh introduced in the garb of share capital/share premium in the assessee-company in Financial Year 2012-13 relevant to Assessment Year 2012-13 in question was noticed. It was further noticed that share applicant companies/concerns were found to be based in Kolkata and the assessee failed to corroborate the genuineness of such subscription in the survey proceedings. Consequent upon survey, the case was reopened after recording reasons by issuance of notice under Section 148 r.w. Section 147 of the Act. The assessment was thereafter framed under Section 147 r.w. Section 143(3) of the Act dated 11.11.2016 wherein an addition of Rs.90 lakh towards credit entries received by way of share capital/share premium was made on the touchstone of Section 68 of the Act by holding the nature and source of such credits to be unsatisfactory.
4. Aggrieved, the assessee preferred appeal before the CIT(A). The assessee challenged the jurisdiction assumed under Section 147 of the Act as well as the merits of the additions made under Section 68 of the Act. The CIT(A) however upheld the validity of jurisdiction assumed under Section 147 of the Act. The CIT(A) also found that case made out by the assessee to be bereft of any merits. Consequently, the CIT(A) upheld the action of the Assessing Officer on both counts namely jurisdiction as well as on factual matrix and thus dismissed the appeal of the assessee.
5. Further aggrieved, the assessee preferred appeal before the Tribunal. The ld. counsel for the assessee strongly relied upon the decision rendered by the Co-ordinate Bench in M/s. Priya Diamonds Pvt. Ltd. vs. ACIT, order dated 27.01.2022 and submitted that the said assessee, i.e, M/s. Priya Diamonds is a sister concern of the assessee-company and the survey under Section 133A were carried out on both the concerns by the Investigation Wing simultaneously. The ld. counsel submitted that in the identical facts while the legal issue of jurisdiction was decided against the assessee but however the action of the Revenue Authorities were set aside to the Assessing Officer for re-examination on merits on the ground that copy of alleged statement of Shri Pramod Kumar Sharma allegedly recorded by the DDIT (Inv.) Unit, Kolkata has not been provided to the assessee. The ld. counsel thus prayed for similar relief as granted in the case of sister concern M/s. Priya Diamonds.
The ld. DR for the Revenue, on the other hand, relied upon the action of the lower authorities.
7. We have considered the rival submissions.
The Co-ordinate Bench in M/s. Priya Diamond (supra) has granted partial relief to the assessee on merits. The relevant operative paragraph of the order of the Co-ordinate Bench in M/s. Priya Diamonds in ITA No.7303/Del/2017 order dated 27.01.2022 is reproduced herein for ready reference: “6. We have considered the rival arguments made by both the sides, perused the orders of the A.O. and the Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the A.O. in the instant case reopened the assessment as per the provisions of Section 147 of the I.T. Act, 1961 after recording reasons which has already been reproduced in the preceding paragraph. It is the submission of the Learned Counsel for the Assessee that the A.O. has reopened the assessment on the basis of report of the Investigation Wing and in a mechanical manner without independent application of mind and on borrowed satisfaction and, therefore, such reopening of assessment being not in accordance with law should be quashed. It is also his submission that approving authority has not given approval in accordance with the provisions of law since there is no proper satisfaction recorded by the Addl. CIT before granting approval. We do not find any force in the above arguments of the Learned Counsel for the Assessee. Admittedly, the survey operation under section 133A of the I.T. Act, 1961' was carried-out at the business premises of the assessee itself during which it was found that an amount of Rs.1 crore was introduced in the garb of share application/ share premium in the assessee company in the F.Y. 2011-12. It was also found that most of the share applicant companies /concerns are Kolkata based companies and the assessee during the course of survey proceedings could not produce any supporting details/ documents as provided in Section 68 of the I.T. Act, 1961. The Director of the assessee company namely Shri Karan Singh Soni and the Accountant Yogesh Chouhan had no knowledge of the share application forms, share issue certificate, share allotment register, share holder register or any other documentary evidences regarding the introduction of share capital/ share premium in the assessee company. Since the assessee failed to provide any documentary evidences during the course of survey or post-survey proceedings, the A.O. has reopened the assessment after recording reasons and the reasons are already reproduced in the preceding paragraph. Therefore, the various decisions relied on by the Learned Counsel for the Assessee in the instant case that the A.O. has recorded the satisfaction in a mechanical manner without application of independent mind and on borrowed satisfaction do not hold good. In all those cases the reopening had taken place on the basis of search and seizure operation or survey proceedings in the case of entry providers. But, here is a case where the survey had taken place in assessee's own premises and the Director as well as Accountant of the assessee company had failed to provide any evidence regarding introduction of share capital. Further the Addl. CIT while granting approval has also recorded his satisfaction. Under these circumstances, we do not find any infirmity in the order of the Ld. CIT(A) in upholding the validity of re-assessment proceedings. Accordingly, grounds raised by the assessee challenging the validity of re-assessment proceedings are dismissed. 6.1. So far as the merits of the case is concerned, we find from the order of the A.O. as well as Ld. CIT(A) that there is not a whisper regarding any opportunity to the assessee to substantiate the introduction of Rs.1 crore towards share capital as well as share premium. The so-called statement of Shri Pramod Kumar Sharma, the entry operator who admitted to have provided entries to the assessee company has not been provided to the assessee nor the assessee was given an opportunity to cross-examine the entry provider Shri Pramod Kumar Sharma. Principles of natural justice demands that the assessee Should be given an opportunity to rebut the statement of third party which is the basis for addition and an opportunity to cross-examine the same person, if demanded. Considering the totality of the facts and circumstances of the case and in the interest of justice, we deem it proper to restore the issue to the file of A.O. with a direction to grant one more opportunity to the assessee to substantiate the introduction of Rs.1 crore towards share capital/ share premium and decide the issue as per fact and law. Needless to say the A.O. shall give due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds challenging the addition on merit is accordingly allowed for statistical purposes.
In the result, appeal filed by the assessee is partly allowed for statistical purposes.”
As stated on behalf of the assessee, the assessment orders in the case of Assessee and Priya Diamonds are identical. As further stated, the factual matrix in the case of the assessee in M/s. Priya Diamonds are similar. In the instant case also, the Revenue has committed infringement of principles of natural justice by not confronting the copy of statement adverse to the assessee while placing reliance on such statement as printed out by the assessee. Thus, owing to similarities on facts, the findings rendered in M/s. Priya Diamonds shall apply mutatis mutandis to the case of the assessee.
In conclusion, objection towards lack of jurisdiction conferred under Section 147 of the Act is adjudicated against the assessee while the objection towards adjudication of merit is referred back to the Assessing Officer for de novo determination.
The order of the CIT(A) is thus set aside on merits for fresh determination by the Assessing Officer. The Assessing Officer shall determine the issue on merits afresh in accordance with law keeping in mind the sacro sanct principles of natural justice. The statement of third party if relied upon by the Department, shall be necessarily confronted to the assessee for its comments and cross-examination, if demanded. The observations made in M/s. Priya Diamonds shall be adhered too.
In conclusion, the matter is remitted and restored to the file of the Assessing Officer for determination of issue on merits afresh in accordance with law. 13. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on 23/01/2023.