Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, ‘A’ BENCH, KOLKATA
Before: Shri Rajpal Yadav, Vice- & Dr. Manish Borad
Per Manish Borad, Accountant Member:- This appeal at the instance of assessee for assessment year 2010-11 is directed against the order of ld. Commissioner of Income Tax (Appeals)-3, Kolkata dated 26.02.2018, which is arising out of the order under
Assessment Year : 2010-2011 Veshnawy Vyapaar Pvt. Limited section 143(3)/147/263/144 of the Act on 16.03.2014 framed by ld. ITO, Ward-9(2), Kolkata.
The grounds of appeal raised by the assessee read as under:-
(1) That on the fact and circumstances of the case, the commissioner of income tax (appeals) erred in confirming the additions made by the Assessing officer devoid of facts and documentary evidences filed in support and not considering the appeal on merit. (2) On the facts and circumstances of the case, the Ld Commissioner (appeal) ought to have found that the section 68 is wrongly applied on transactions of the appellant, when the appellant duly discharged the onus to prove the identity, creditworthiness of the share subscribers and also the genuineness of the transactions. (3) That the Ld commissioner (appeals) ought to have considered the documentary evidences filed towards the identity, creditworthiness of the share allottees and about the genuineness of the transactions, hence the act of the Ld Commissioner (appeals) in dismissing the appeal of the appellant, without considering the facts, only on surmise, presumption and speculation, is against the justice. (4) The appellate craves leave to add, modify or amend the ground of appeal and to adduce additional evidence in support of ground of appeal at the time of hearing of
The assessee has also raised the following additional grounds of appeal:- On the facts and circumstance of the case and in law, (1) the Learned Commissioner of Income Tax (Appeal)-3. Kolkata erred in not adjudicating the objection of the assessee that the impugned order by Income Tax Officer, Ward-9(2), Kolkata is without jurisdiction, hence is bad in law. On the facts and circumstance of the case and in law, (2) the Learned Commissioner of Income Tax (Appeal)-3, Kolkata
Assessment Year : 2010-2011 Veshnawy Vyapaar Pvt. Limited erred in not adjudicating the objection of the assessee that the assessment ex-parte order passed by Income Tax Officer, Ward-9(2), Kolkata u/s.l43(3)/147/263/144 of the Act on 16.03.2014 is bad in law.
The case was listed for hearing on 01.03.2023 and after hearing both the parties, the judgment was reserved and 25 days time was given to the Revenue for making necessary submission as to whether ld. Assessing Officer has complied with the direction given under section 263 of the Act. The contents of the said order-sheet passed by us on 01.03.2023 read as under:- “IN THE INCOME TAX APPELLATE TRIBUNAL VYAPAAR PVT. LTD.] O R D E R Dt.:- 23/05/2023 This appeal was heard on 01/03/2023 and by a detailed order passed on 01/03/2023, the judgment was reserved but 25 days were given to the revenue for submission of the report of the Assessing Officer containing the fact that whether ITO, Ward-9(2), Kolkata has issued summons u/ 131 of the Act and if yes then also supply copy of such documents, if any, issued by both the Assessing Officers as alleged by the assessee. The revenue authorities vide their letter dt. 22/03/2023, has furnished various documents in the form of Annexure-1 - Annexure-4, which includes copy of the summons issued u/ s 131 of the Act, notice issued u/s 143(2) & 142(1) of the Act and notice issued u/s 133(6) of the Act. Since these documents have been filed after the conclusion of hearing and, therefore, in order to given an opportunity to the assessee, for making necessary submissions and also to consider the arguments of both the sides on the details filed after the conclusion of hearing, we deem it proper to re-fix this appeal for hearing for the purpose of clarification on 5th July, 2023, Registry is directed to inform both the parties.
Assessment Year : 2010-2011 Veshnawy Vyapaar Pvt. Limited 5. Thereafter on 10.03.2023, the Revenue has placed the letter issued by the ITO, Ward-13(1), Kolkata addressed to the ld. CIT(DR) for the purpose of remand report being submitted to this Tribunal in lieu of the directions given (supra). The contents of the said letter are reproduced as under:-
“OFFICE OF THE INCOME TAX OFFICER, WARD-13(1), KOLKATA 110. SHANTIPALLY, 7TH FLOOR, R. NO — 706A, E.M. BYEPASS. KQLKATA-700107. e-mail : kolkata.ito13.l@incometax.gov.in F.No. IT0/W-13(1) Kol/Remand Report /2022-23/649 Dated: 10.03.2023 To The Ld. Commissioner of Income Tax (DR) (ITAT)-2 & Admn, Kolkata 225C, AJC Bose Road, 6th Floor, Kolkata - 700 020. Respected Sir, (Through Proper Channel) Sub.: Remand report in the case of M/s Veshnawy Vyapaar Pvt. Ltd. (PAN: AAACV9354P) for the AY: 2010-11 - matter regd. Ref.: The letter received from the Ld. CIT (DR) (ITAT) -2 & Admn, Kolkata dated 02.03.2023. Kindly refer to the above. With reference to the above, this is to inform you that the assessee company ‘M/s Veshnawy Vyapaar Pvt. Ltd. (PAN: AAACV9354P)’ (herein after referred as assessee) is assessed in this charge since 08.10.2020. A letter has been received from the Ld. CIT (DR) (ITAT)-2 & Admn, Kolkata, dated 02.03.2023, directing the undersigned to submit a remand report in the case of the assessee for the asst. yr. 2010-11 as under:
Assessment Year : 2010-2011 Veshnawy Vyapaar Pvt. Limited The direction of the Hon’ble Bench for the AO is to have a Remand Report submitted containing the fact that, whether ITO, Ward-9(2), Kolkata has issued summons under section 131 of the Income Tax Act. The Id. Assessing Officer is further directed to supply copies of such documents, if any, issued by both the ITOs as alleged by the assessee. The Id. Assessing Officer is further directed to send the copies of any other paper, if it is available on the record exhibiting the mode and manner of conducting the inquiry.
The copy of the Order u/s. 127 of the Act passed in this case facilitating the transfer of jurisdiction in favour of the ITO, Ward-9(2), Kolkata from ITO, Ward-1(4), Kolkata may also be provided.
It is observed that an order u/s 263 of the Act was passed by the Ld. Pr. CIT(1), Kolkata on 07.03.2014-setting aside the assessment order passed u/s 143(3) of the Act dated 02.03.2012 with specific direction to the AO. Accordingly, the then AO: ITO, Wd-9(2), Kolkata passed the order u/s 143(3)/147/263/144 of the Act on 16.03.2014 (which should be 16.03.2015 as per note- sheet as well as Demand notice). It is to be mentioned here that 2 folders, in the case of the assessee for the AY 2010-11, have been received from office of the Income Tax Officer, Ward-9(1), Kolkata on 06.03.2023. The report of the undersigned, in respect of the directions of the Ld. CIT (DR) (ITAT)-2 & Admn, Kolkata, is as under: From the folders received, it is observed that ITO, Ward- (3) 9(2), Kolkata had not issued summons under section 131 of the Income Tax Act. Summons under section 131 of the Income Tax Act were issued, to various entities, by the ITO, Wd-1(4), Kolkata on 10.11.2014 for the AY 2010-11 (certified copies of summons u/s 131 enclosed). It is also observed, from the assessment folders, that the (4) notices u/s 142(1) of the Act were issued to assessee on 09.01.2015 by the ITO, Wd-9(2), Kolkata as well as by the ITO, Wd-1(4), Kolkata on 20.10.2014. (certified copies of the notices enclosed) It is also to state that notice u/s 143(2) of the Act was (5) issued by the ITO, Wd-1(4), Kolkata on 22.12,2011 for the AY 2010-11 (certified copy attached).
Assessment Year : 2010-2011 Veshnawy Vyapaar Pvt. Limited Further, it is stated that notices u/s 133(6) of the Act were (6) issued to various entities by the ITO, Wd-1(4), Kolkata on 31.01.2012 for the AY 2010-11 (certified copies attached) It is found from the jurisdiction history details, emanated from the ITBA, that the jurisdiction of the assessee lied with the then ITO, Wd-9(2), Kolkata since 16.01.2015 (copy of the jurisdiction history details enclosed). It is pertinent to mention here that the transfer of the PAN of any assessee is executed from the password/coder of the corresponding PCIT only and without passing of order u/s 127 of the Act by the corresponding CIT, the same cannot be executed. Further, it is pertinent to mention here that there is no any role at the level of the AO, as well as the Addl./Jt.CIT, regarding the transfer of jurisdiction of the PAN of the assessee company. However, it is observed, from the assessment folder of the assessee for the asst. yr. 2010-11, that there is no copy of order passed u/s 127 of the Act. This is submitted for your kind perusal and necessary direction, if any. Yours faithfully Enclo.: Stated as above. Sd/- [Anand Kumar Sant] ITO, Ward-13(1), Kolkata”
Further on 22nd March, 2023, the ld. CIT(DR) has also filed various annexure regarding summons issued under section 131 of the Income Tax Act and notices issued under sections 142(1) and 143(2) as well as notice issued under section 133(6) of the Act by the ld. Assessing Officer. The said letter reads as under:-
“GOVERNMENT OF INDIA OFFICE OF THE COMMISSIONER OF INCOME TAX (DR)(ITAT)-2 & ADMN, KOLKATA 225C, A.J.C. BOSE ROAD, 6™ FLOOR, KQLKATA-700 020 No. CIT(DR)/ITAT-2 & Admn /'A' Bench/2022-23/3101 Date: 22.03.2023 To The Hon'ble Member, 'A' Bench Income Tax Appellate Tribunal, 25C, A.J.C. Bose Road
Assessment Year : 2010-2011 Veshnawy Vyapaar Pvt. Limited Kolkata- 700 020 Respected Sir, Sub: Remand Report in the case of M/s. Veshnawy Vyapaar (P) Ltd. (PAN: AAACV9354P) vs ITO, W-9(2), Kol for the A.Y. 2010-11 - - Matter regarding - Ref: Order sheet noting dated 01.03.2023 Kindly refer to the above subject. As directed by the Hon'ble Vice President and the Member, 'A' bench in course of the hearing on 1.3.23, the remand report has duly been obtained from the concerned AO (IT0-Ward-13(l)) through the letter dated 14.03.2023 of Addl. CIT, Range-13, Kolkata under the knowledge of his Pr. CIT who was duly sent the copy of the order sheet of the Hon'ble bench. The copy of the remand report, as asked for, is enclosed along with the Annexures (1 to 4) thereto in chronological order and also a copy of the PAN jurisdiction history of the assessee, for favour of your kind perusal and necessary action please. The details of Annexures are as under: Annexure-1: (i) Summons u/s.131 of the Income Tax Act dated 20.10.2014 issued by ITO, Wd-1(4), Kol to Sri Rajendra Kumar Agarwal to make compliance to the Notice u/s.142(1) dated 20.10.2014 issued in the case of M/s. Veshnawy Vyapaar Pvt. Ltd (the assessee) (ii) Summons u/s. 131 of the Act issued to the various entities issued by the ITO, Wd-1(4), Kolkata on 10.11.2014 Annexure-2: (i) Notice u/s.142(1) of the Act issued to the assessee on 20.10.2014 by ITO, Wd-1(4), Kolkata (ii) Notice u/s.142(1) of the Act issued to the assessee on 09.01.2015 by ITO, Wd-9(2), Kolkata Annexure-3: (i) Notice U/s. 143(2) of the Act issued by the ITO, Wd-1(4), Kolkata on 22.12.2011
Assessment Year : 2010-2011 Veshnawy Vyapaar Pvt. Limited Annexure-4: (i) Notices u/s. 133(6) of the Act issued to various entities by ITO, Wd-1(4), Kol on 31.01.2012. With regards, Yours faithfully, Sd/- [Subhrajyoti Bhattacharjee] CTDR). ITAT-3. Kolkata”.
Copies of the above letters of the Revenue were given to the ld. Counsel for the assessee and he further made a written submission on 5th July, 2023 and the same reads as under:- “BEFORE THE HON'BLE INCOME TAX TRIBUNAL, KOLKATA APPEAL NO.ITA 887/KOL/2018, Bench-A WRITTEN SUBMISSION OF VESHNAWY VYAPAAR PVT LTD- Appellant With reference to hearing today, we were served a copy of remand report with annexures issued by ITO-13(l), Kolkata, were in it is informed that jurisdiction of our case from ITO, Ward-1(4), Kolkata to ITO, Ward-9(2), Kolkata was made on 16.01.2015. On perusal of other documents annexed with said remand report, we found that a copy of notice u/s.142(1) of . the Act, was issued by ITO, ward-9(2), Kolkata on 09.01.2015. It is apparent that the transfer of jurisdiction if at all admitted post the date of issue of notice u/s. 142(1) of the Act. This is the only notice issued by the ITO, Ward-9(2), Kolkata to frame the assessment order on 16.03.2015. Hence, the assumption of jurisdiction by ITO, Ward-9(2), Kolkata is bad in law, null and void. We are filing this rejoinder to day after the hearing, because the remand report annexed & documents were given to us to day during the course of hearing. Thanking You, Yours Faithfully Sd/- Date: 05.07.2023 Vinod Kumar Jain A/R, For, Appellant”
Assessment Year : 2010-2011 Veshnawy Vyapaar Pvt. Limited 8. Finally the appeal was again fixed for hearing on 05.07.2023 and after hearing both the sides, the order was reserved. Now we proceed to adjudicate the grounds of appeal raised by the assessee.
Facts in brief are that the assessee is a Private Limited Company engaged in trading and investment. Income of Rs.12,480/- declared in the return of income for A.Y. 2010-11 was filed on 02.10.2010. Thereafter the case of the assessee was reopened by issuance of a notice under section 148 of the Act and vide order dated 29.02.2012, assessment proceeding under section 147 of the Act were completed assessing the income at Rs.99,990/-. Thereafter ld. CIT invoked the power under section 263 of the Act and carried out the revisionary proceedings and vide order dated 07.03.2014 set aside the assessment order and directed the ld. Assessing Officer to conduct the detailed enquiry with regard to the share capital and share premium received from 43 persons/companies, wherein face value of equity shares of Rs.10/- per share and share premium charged thereon at Rs.240/-. In compliance to the order under section 263 of the Act, the assessment proceedings were initiated by the jurisdictional ld. Assessing Officer, Ward-1(4), Kolkata and issued notices under section 142(1) of the Act on 28.10.2014 and notices under section 131 to all the alleged share subscribers on 10.11.2014. Thereafter
Assessment Year : 2010-2011 Veshnawy Vyapaar Pvt. Limited jurisdiction was transferred from Ward-1(4) to Ward-9(2), Kolkata, who again issued notices under section 142(1) of the Act but there was no compliance on the part of the assessee-company and finally best judgment assessment was passed under section 144 read with the section 143(3)/147/263 of the Act on 16.03.2015 making an addition under section 68 at Rs.23.93 crores and thus assessed the income at Rs.23,93,99,990/-.
Aggrieved the assessee preferred appeal before the ld. CIT(Appeals) on merit of the case stating that the ld. Assessing Officer erred in making the addition under section 68 of the Act on the alleged sum and further stated that ld. Assessing Officer ought to have verified with the evidences and supporting documents furnished by the appellant or share allottees of such transactions. The ld. CIT(Appeals) has elaborately dealt with the financials of each company and came to a conclusion that all the alleged share subscriber companies are paper companies engaged in providing accommodation entries, rotating of funds and they are not engaged in the regular business activities and thereafter drawing support from various decisions as referred in the impugned order held that the assessee failed to prove the genuineness of the transactions and creditworthiness of the share subscribers for the alleged sum credited in the books of account in the form of share capital and share premium
Assessment Year : 2010-2011 Veshnawy Vyapaar Pvt. Limited and confirmed the action of the ld. Assessing Officer. Aggrieved, the assessee is now in appeal before the Tribunal.
The ld. Counsel for the assessee vehemently argued referring to detailed written submissions in the form of paper books providing various documents of all the alleged subscriber companies to explain the nature and source of the alleged sum, which includes the assessment order framed under section 143(3) of the Act, identity proof, PAN, financial statements, confirmation and other relevant details. In regard to the additional ground, it was submitted that the assessment order has been framed by the ITO, Ward-9(2), Kolkata but he was not having any jurisdiction to frame the said assessment, which thus renders the assessment proceeding as bad- in-law and also submitted that the ld. CIT(Appeals) erred in not adjudicating the objection of the assessee that assessment has been framed ex-parte without providing any opportunity to the assessee. Reliance was placed on the various decisions as placed in the paper book.
On the other hand, ld. D.R. vehemently argued supporting the order of both the lower authorities.
We have heard the rival contentions and perused the relevant record placed before us. The assessee has Assessment Year : 2010-2011 Veshnawy Vyapaar Pvt. Limited challenged the addition made under section 68 of the Act on merits in the grounds of appeal and has also raised legal issue in the additional grounds.
14. So far as the issue raised in Ground No. 1 of the additional ground is concerned, the assessee claimed that assessment order has been passed under section 143(3) read with section 147/144 of the Act on 16.03.2015 by the ld. Assessing Officer not having jurisdiction over the assessee and the same being beyond jurisdiction is liable to be held as bad-in-law. We find no merit in this ground of assessee. We notice that when the order under section 263 of the Act was passed on 07.03.2014, the jurisdiction of the assessee was lying with ITO, Ward-1(4), Kolkata. Thereafter vide internal transfer order no. 104003096164, the jurisdiction was transferred from Ward-1(4) to Ward-9(2), Kolkata. We also notice that in compliance to the direction under section 263 of the Act, Assessing Officer, Ward-1(4), Kolkata commenced the assessment proceeding and issued notice under section 142(1) of the Act dated 20.10.2014 and also issued notices under section 131 of the Act to all the share subscribers. Thereafter when the jurisdiction was transferred to Ward-9(2), again notice under section 142(1) of the Act was issued on 09.01.2015, but thereafter the assessee did not comply and the assessment was completed. The above details of Assessment Year : 2010-2011 Veshnawy Vyapaar Pvt. Limited the transfer of PAN from ITO, Ward-1(4) to Ward-9(2) has been taken from the copy of Income Tax Portal placed by the ld. D.R., wherein complete details of the jurisdiction of the assessee’s PAN has been stated right from the year 2002 to the year 2020. Under these given facts, there is no merit in Ground No. 1 of the additional ground raised by the assessee and we hold that the assessment order dated 16.03.2015 has been framed by the ld. Assessing Officer having valid jurisdiction to carry out the said proceedings. We, therefore, dismiss additional Ground No. 1 of the assessee.
15. As regards additional Ground No. 2, when the assessee has stated that ld. CIT(Appeals) erred in not adjudicating the objection of the assessee that ex-parte order has been framed. We fail to find any merit because proper notices have been issued by the ITO, Ward-1(4) and ITO, Ward-9(2). This was not the first time that notices have been sent to the assessee through scrutiny assessment proceedings. In the past also, notices were duly received and replies were given. This ground seems to be a general ground not raised effectively and also not supported by any concrete facts. Thus Ground No. 2 of the additional grounds is also dismissed.
Now we come to the main grounds of appeal and we notice that the sole issue for our consideration is Assessment Year : 2010-2011 Veshnawy Vyapaar Pvt. Limited addition under section 68 of the Act at Rs.23.93 crores for the alleged unexplained share capital and share premium received by the assessee from 43 parties. We notice that the assessee-company has issued equity shares with the face value of Rs.10/- and share premium of Rs.240/- thereby charging Rs.250/- per share on 9,57,200 equity shares issued during the year. The assessee has placed various documents to explain the identity and creditworthiness of the alleged share subscribers.
17. We have perused all the details and also the assessment orders of various share subscriber companies through scrutiny proceedings. Admittedly all the share subscriber companies are registered with Ministry of Corporate Affairs and were duly filing their income tax returns and also filing their annual return with the Ministry of Corporate Affairs along with financial statement. Various details have also been filed to explain that the source of alleged investment is from share capital and reserve & surplus in the form of share security premium received by various share subscriber companies, which are sufficient enough to explain the investment. Various judgments have also referred to in the light of these details and also the facts that parties have also replied to the notices issued under section 133(6) in the proceedings carried out in the case of Assessment Year : 2010-2011 Veshnawy Vyapaar Pvt. Limited assessee. We are satisfied with the identity of the share subscriber companies as well as their creditworthiness to have invested in the assessee-company. The third limb which needs to be examined is genuineness of the transaction. Hon’ble Supreme Court in the case of Kale Khan Mohammad Hanif –vs.- CIT (1963) 50 ITR 1 (SC) has held that onus of proving the source of a sum of money found to have been received by the assessee is on him. If he disputes liability for tax, it is for him to show either that the receipt was not income or that if it was exempt from taxation under the provisions of the Act. In the absence of such proof, the Income Tax Officer is entitled to treat it as taxable income. Hon’ble Court further held that for the purpose of examining the nature and source of the alleged sum, the assessee needs to prove the identity and creditworthiness of such person, who had given sum to the assessee-company as well as genuineness of the transaction.
In the instant case before us, we are satisfied with the identity and creditworthiness of all the alleged share subscribers but so far as the genuineness of the transactions, it remains in serious doubt. We notice that the assessee issued 9,57,200 nos. of shares at a face value of Rs.10/- and share premium of Rs.240/- totalling to Rs.250/- per share. Admittedly any investor will act prudently in order to invest its hard earned money and the object of such investment would be to earn profit. In the instant case, the book value of the equity share of the assessee-
Assessment Year : 2010-2011 Veshnawy Vyapaar Pvt. Limited company as on 31.03.2009 is Rs.12.37 i.e. just before issuing the equity shares to the alleged share subscribers which is much below the share price of Rs.250/- charged and there is no project or future plan of expansion or a new business to be added to the assessee-company’s business, which could provide huge gains in the future and discounted value of such earning brings the share valuation at a higher price justifying the charging of the huge share premium of Rs.240/- per share. The book value of each equity share at the end of the preceding financial year at Rs.12.37 and the same is computed by dividing the share capital and reserve & surplus as on 31.03.2009 with number of equity shares issued till that date. The said book value at the end of the preceding financial year is much below than the share premium charged by the company. Nothing has been placed by the ld. Counsel for the assessee before us to justify the charging of such share premium and nor could indicate that any new project was undertaken by the assessee-company in the subsequent year and if so whether the investors were provided any information about the project plan. The assessee is completely silent on this aspect. Once the assessee has issued the shares at a high premium, then, the doubt arises on the prudence of investor companies as to why they have invested in the company at a huge premium without gaining anything. All these questions remain unanswered during the past proceedings and even before us, therefore, genuineness of the transaction of investing alleged sum is not proved to our satisfaction and thus primary onus casted upon the assessee to explain the nature and source of alleged sum is Assessment Year : 2010-2011 Veshnawy Vyapaar Pvt. Limited not discharged in entirety. We find that under the given facts and circumstances, alleged sum at Rs.23.93 crores remains unexplained and thus has been rightly added under section 68 of the Act. Thus we fail to find any merit in the grounds of appeal raised by the assessee and, therefore, no infirmity is called for in the finding of the ld. CIT(Appeals). Thus all the grounds of appeal raised by the assessee are dismissed.
In the result, appeal of the assessee is dismissed. Order pronounced in the open Court on 3rd October, 2023.