GAJANAND VINCOM PVT LTD,KOLKATA vs. I.T.O WD - 2(3), KOLKATA

The assessee in the present case is a Company, which is engaged in the business of share trading and investment. The return of income for the year under consideration was filed by it on 01.01.2009 declaring a loss of Rs.35,287/-. In the assessment originally completed under section 143(3)/147 of the Act vide an order dated 14.09.2010, the total income of 1 Assessment Year: 2008-2009 Gajanand Vincom Pvt. Limited the assessee was determined by the Assessing Officer at Rs.44,400/- after making the addition, inter alia, on account of undisclosed income from service charges. The record of the said assessment came to be examined by the concerned ld. CIT and on such examination he found the assessment order passed by the Assessing Officer under section 143(3)/147 to be erroneous as well as prejudicial to the interest of the revenue, inasmuch as, the claim of the assessee having received the share capital and share premium aggregating to Rs.3,24,00,000/- was accepted by the Assessing Officer without conducting complete enquiry into the subscription of the share capital and the large amount of premium. He accordingly passed an order under section 263 on 11.03.2013 setting aside the order passed by the Assessing Officer under section 143(3)/147 with a direction to the Assessing Officer to make the assessment afresh as per the following directions:- “The AO should make comprehensive and detailed enquiries into the source of subscription to the share capital. The A.O. should pass the assessment order after conducting independent details and complete enquiries into the subscription to the share capital and premium to the extent of Rs.3.24 Crores introduced in this case. The A.O. should trace the source of share capital by enquiring into the various layers through which the money has been introduced in this company by issuing summons u/s.131 of the I.T. Act. The A.O. should not confine himself to conducting enquiries into the subscribers to the share capital only on selective basis. The A.O. should also send information to the A.O.s having jurisdiction over the subscriber company to the share capital regarding its investment into share capital & premium paid. The A.O. should call upon the assessee to identify the persons who are shown as directors of these companies and examine them on oath to verify their credential as directors. The A.O. should pass a speaking order after providing reasonable opportunity to the assessee and verifying the source of share capital including the share premium of all the subscribers and rotation of money through various hands so as to ascertain the true nature of transaction which will bring to the fore, the reality of the Transactions”.

As per the directions given by the ld. CIT in the order under section 263, notices under section 133(6) were issued by the Assessing Officer to all the shareholders. There was, however, no response to the said notices sent by the Assessing Officer and as mentioned by the Assessing Officer in the assessment order, some of the said notices were returned back by the Postal Authority un-served with the remark “not known”. Even the notices issued under section 131 to the Directors of the assessee- company failed to invoke any response. According to the Assessing Officer, it was the responsibility of the assessee-company to produce all the Directors of the shareholder companies for examination in order to prove the genuineness of the relevant transactions as well as the identity and creditworthiness of the shareholders as per the order of the ld. CIT passed under section 263. Since there was failure on the part of the assessee-company to do so, the Assessing officer treated the entire amount of share capital and share premium aggregating to Rs.3.25 crores as unexplained cash credit and an addition to that extent was made to the total income of the assessee under section 68 in the assessment completed under section 143(3) read with section 263 of the Act vide an order dated 28.03.2014.

Against the order passed by the Assessing Officer under section 143(3) read with section 263 of the Act, an appeal was preferred by the assessee before the ld. CIT(Appeals) and since there was no compliance on the part of the assessee to the notices issued by him fixing the said appeal for hearing from time to time, the ld. CIT(Appeals) dismissed the appeal of the assessee vide his appellate order dated 03.09.2019 passed ex-parte thereby confirming the addition made by the Assessing Officer under section 68 by treating the share capital and premium aggregating to Rs.3.24 crores as unexplained cash credit. Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.

We have heard the arguments of both the sides and also perused the relevant material available on record. The ld. Counsel for the assessee has submitted that none of the notices stated to be issued by the ld. CIT(Appeals) fixing the appeal of the assessee for hearing on certain dates was ever received by the assessee and such non-receipt of notices resulted into non-compliance on the part of the assessee before the ld. CIT(Appeals) when its appeal was fixed for hearing. He has also submitted that the assessee-company could not produce the Directors of the shareholder companies before the Assessing Officer for examination in compliance of the direction given by the ld. CIT under section 263 as proper and sufficient opportunity was not afforded to it to do so during the course of assessment proceedings. He has submitted that the assessee-company is in a position to produce the concerned shareholders for examination before the Assessing Officer along with the relevant supporting documentary evidence and urged that one more opportunity may be given to the assessee to do so by sending the matter back to the Assessing Officer. Keeping in view all the facts and circumstances of the case, we are inclined to accept this contention of the ld. Counsel for the assessee. Even the ld. D.R. has not raised any objection for sending the matter back to the Assessing officer for proper verification provided that the assessee is ready to undertake to produce the concerned shareholders for examination before the Assessing Officer along with the relevant supporting documentary evidence. Since the ld. Counsel for the assessee has undertaken to do so on behalf of the assessee, we set aside the impugned order passed by the ld. CIT(Appeals) ex-parte and restore the matter to the file of the Assessing Officer for deciding the same afresh after giving proper and sufficient opportunity to the assessee to produce the concerned shareholders for examination along with the relevant supporting documentary evidence. As undertaken by the ld. Counsel for the assessee, the assessee shall make due compliance before the Assessing Officer and shall extend all the possible cooperation in order to enable the Assessing Officer to make the assessment afresh expeditiously.

In the result, the appeal of the assessee is treated as allowed for statistical purposes. Order pronounced in the open Court on August 04, 2020.