ITO, WARD-14(1), KOLKATA, KOLKATA vs. M/S. AMBEY INFRATECH PVT. LTD., KOLKATA

The assessee is a company and is in the business of real estate i.e., land development. During the year, it filed its return of income on 30/09/2013, declaring total income of Rs.10,08,920/-. The Assessing Officer completed the assessment u/s Assessment Year: 2013-14 Assessment Year: 2013-14 M/s. Ambey Infratech Pvt. Ltd 143(3) of the Act, determining the total income of the assessee at Rs.2,25,45,046/- interalia making addition of share capital u/s 68 of the Act of Rs.50,00,000/- and unexplained deposits of Rs.2,10,36,126/-. Aggrieved, the assessee carried the matter in appeal.

Aggrieved, both the assessee as well as the revenue are in appeal before us.

The ld. Counsel for the assessee filed a paper book running into 134 pages. He submitted that the addition sustained by the ld. CIT(A) on account of share capital is bad in law for the reason that the assessee had proved the identity and creditworthiness of the share applicants which were only two companies i.e., M/s. Ekdant Tie Up Pvt. Ltd. & M/s. Good Value Vinimay Pvt. Ltd. He argued that the share applications were made by way of account payee cheques and that the identities of the companies were not in doubt and that the company M/s. Ekdant Tie Up Pvt. Ltd., was having paid up capital with free reserves and surplus of Rs.21,59,97,329/- as on 31.03.2011 and that th share capital and reserves was Rs.26,31,22,160/- in the case of M/s. Good Value Vinimay Pvt. Ltd. He vehemently contended that there is no allegation by the Assessing Officer that these share applicant companies had deposited cash in their bank account, prior to making payment through banking channels for subscription of shares in the assessee company. He submitted that the source of source was explained. He relied on a number of case-law in support of his contentions that no addition can be made u/s 68 of the Act, under these circumstances. We would be discussing these case-law as and when necessary. 5. The ld. D/R, on the other hand, submitted that the Assessing Officer had relied on the report of the investigation wing. He submitted that Shri Bhagaban Das Agarwal, in a statement had confirmed that the two allottee companies were being run by his front men, one being the Director of the said allottee company named Shri Santanu Bose. While pointing out that Shri Santanu Bose has retracted from his statement, he Assessment Year: 2013-14 Assessment Year: 2013-14 M/s. Ambey Infratech Pvt. Ltd submitted that these are front paper companies of Shri Bhagaban Das Agarwal. He relied on the assessment order and the evidence gathered therein in support of the ld. CIT(A). 5.1. On the revenue’s appeal, the ld. D/R submitted that the ld. CIT(A) was wrong in granting relief to the assessee. He submitted that an amount of Rs.1,75,969.40/- and Rs.2,06,84,187.20/- were found to have been deposited in the bank account of the assessee company on 24/08.2012 and 05/10/2012 respectively and when the assessee was asked to explain the said deposits, he was not able to explain the same properly. He also pointed out that the DIT (Inv.), Kolkata had vide letter dt. 04/12/2015, had provided information that Shri Bhagaban Das Agarwal, director of M/s. Sincere Commodities and Derivatives Pvt. Ltd., was a know entry operator of Kolkata who had accepted on oath the fact of providing bogus entries to different companies. He relied on para 13 of the assessment order. He argued that the ld. CIT(A) was wrong in considering both the money given and money received back and thereafter giving relief to the assessee.

The ld. Counsel for the assessee, on the other hand, submitted that the ld. CIT(A) has examined the facts and come to a conclusion that the assessee had given money to this company M/s. Sincere Commodities and Derivatives Pvt. Ltd. and also received back money and the amount of Rs.2,22,60,386/- was an aggregate progressive receipt and Rs.2,07,74,271/-, was an aggregate of the progressive payments. He relied on the findings of the ld. CIT(A) from page 8 to 10 of his order and submits that the same be upheld.

We have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows:- 8. We first take up the assessee’s appeal in I.T.A. No. 1198/Kol/2017 Assessment Year: 2013-14.

The share application in question in this case was received from two entities M/s. Ekdant Tie Up Pvt. Ltd. & M/s. Good Value Vinimay Pvt. Ltd.. One Shri Bhagaban Das Agarwal had stated before the investigation wing officers that these companies

We also note that Ld. Cit while setting aside the order of the AO which was passed u/s. 147/143(3) of the Act, the Ld. CIT gave certain guidelines to follow for conducting deep investigation. We also note that similarly placed assessees had challenged the exercise of revisional jurisdiction u/s. 263 of the Act before this Tribunal in those cases one of it of Subha Lakshmi Vanijya Pvt. Ltd. Vs. CIT in ITA No. 1104/Kol/2014 dated 30.07.2015, wherein the Tribunal was pleased to uphold the order passed by the Ld. CIT passed u/s. 263 of the Act, which we learn to have been confirmed by the Hon’ble jurisdictional High Court and the SLP preferred against the decision of the Hon’ble jurisdictional High Court has been dismissed by the Hon’ble Supreme Court. Therefore, similar order of the Ld. CIT passed u/s. 263 of the Act has been upheld. We note that the AO while giving effect to the CIT’s 263 order has noted that the assessee company has in fact furnished the documents sought by him to his notice u/s. 142(1) of the Act. However, the AO took the adverse view against the assessee on the plea that the directors of the assessee company and share subscribing companies had not appeared before him on 26.03.2014 and t after taking note that none appeared on 26.03.2014 concluded on the same day 26.03.2014 that entire amount of share application money received along with premium amounting to Rs.8,06,00,000/- which has remained unexplained and added to the income of the assessee. We also note that the Ld. CIT after looking into the pernicious practice of converting black money into white money has given the guidelines to AO as to how the investigation should be conducted to find out the source of 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 Hon’ble Calcutta High Court as well as the SLP has been dismissed by the Hon’ble Supreme 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 creditworthiness of the share subscribers. We note that the Hon’ble Supreme Court in 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 reversed the Hon’ble High Court, Tribunal and CIT(A)’s orders and remanded the matter back to AO for fresh assessment. So, since there was lack of opportunity as aforestated it has to go back to AO. We also note that the Hon’ble Delhi High Court in the case of CIT Vs. Jansampark Advertising & Marketing Pvt. Ltd. in ITA No. 525/2014 dated 11.03.2015 wherein after noticing inadequate enquiry by authorities below have 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 inference, or form the fact that the transactions were through banking channels, it does not necessarily Assessment Year: 2013-14 Assessment Year: 2013-14 M/s. Ambey Infratech Pvt. Ltd following that satisfaction as to the creditworthiness of the parties or the genuineness of the transactions in question would also have been established.

The AO here may have failed to discharge his obligation to conduct a proper inquiry to take the matter to logical conclusion. But CIT(Appeals), having noticed want of proper inquiry, could not have closed the chapter simply by allowing the appeal and deleting the additions made. It was also the obligation of the first 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 statements reveal uniform pattern of cash deposits of equal amounts in the respective accounts preceding the transactions in question. This necessitated a detailed scrutiny of the material submitted by the assessee in response to the notice under Section148 issued by the AO, as also the material submitted at the stage of appeals, if deemed proper by way of making or causing to be made a 'further inquiry’ in exercise of the power under Section 250(4). His approach not having been adopted, the impugned order of ITAT, and consequently that of CIT(Appeals), cannot be approved or upheld." In view of the aforesaid order and in the light of the Hon’ble Supreme Court’s 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 Hon’ble 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 to decide the matter in accordance to law after giving opportunity of being heard to the assessee.

Consistent with the view taken therein, we are of the considered opinion that this issue should be set aside to the file of the Assessing Officer for fresh adjudication, in accordance with law, after giving the assessee adequate opportunity of being heard. The Assessing Officer should confront the assessee with the material being used against it and also provide opportunity of cross-examination. In the result, appeal of the assessee is allowed for statistical purposes.

Coming to the revenue’s appeal in Assessment Year: 2013- 14, the facts recorded by the ld. CIT(A) are that the assessee had given money to M/s. Sincere Commodities and Derivatives Pvt. Ltd. and also received money back from them. At pages 8, 9 & 10 of his order, he held as follows:-

In the result appeal of the revenue is dismissed and appeal of the assessee is allowed for statistical purposes.