M/S DHANVANTI COMMODITIES PVT. LTD.,COMPANY vs. ITO, WARD-7(3), KOLKATA, KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, KOLKATA

Before Sri J. Sudhakar Reddy, Accountant Member & Sri S.S. Viswanethra Ravi, Judicial Member I.T.A. No. 1769/Kol/2017 Assessment Year: 2012-13 M/s. Dhanvanti Commodities Pvt. Ltd………………....………………...…………………….….Appellant [PAN :AAACD 9602 N] ITO, Ward-7(3), Kolkata………............................................................…....….…………..…...Respondent Appearances by: Shri S.M. Surana, Advocate, appearing on behalf of the appellant. Shri Robin Chowdhury, Addl. CIT, Sr. DR, appearing on behalf of the Respondent.

Date of concluding the hearing : February 11, 2019 Date of pronouncing the order : February 20, 2019 O R D E R Per J. Sudhakar Reddy :- This is an appeal is filed by the assessee and is directed against the order of the ld. Commissioner of Income Tax (Appeals) - 16, Kolkata (hereinafter the ‘ld. CIT (A)’), passed u/s 250 of the Income Tax Act, 1961 (the ‘Act’), dated 20/02/2017. 2. The assessee is a company and filed its return of income on 31.10.2012 declaring total income of Rs.13,190/-. The assessment was completed u/s 143(3) on 17.03.2015 inter alia making a disallowance u/s 14A and addition of share capital introduced u/s 68 of the Act. The Assessing Officer in his order states that summons u/s 131 were issued to all subscribing companies but there was no compliance on behalf of the directors of the subscribing companies. He also states that summons u/s 131 were issued to all the subscribing companies for verification of the share transactions with the assessee and the assessee has filed few details. 3. On appeal, the ld. First Appellate Authority passed a cryptic order without reference to any evidences.

2 M/s. Dhanvanti Commodities Pvt. Ltd I.T.A. No. 1769/Kol/2017 Assessment Year: 2012-13 4. After hearing rival contentions, we find that the assessee has filed various details in support of his contention that the share capital received from eight companies was genuine. It has also pleaded before us that the Assessing Officer has at the fag end of the period of limitation for completion of assessment issued notices and many of them were returned unserved. Reliance was placed on number of decisions of the Coordinate Bench of the Tribunal and it was pleaded that the matter be remanded to the file of the Assessing Officer for fresh adjudication in accordance with law after giving the assessee adequate opportunity of being heard.

(i) In the case of M/s Daffodil Dealers Pvt. Ltd. vs. ITO, Ward-8(2), Kolkata; ITA No.1524/Kol/2017 Assessment Year 2008-09 order dated 03.08.2018 held as follows:

‘4. We have heard the rival submissions. According to the ld AR, the shareholders of the assessee had duly responded to notices issued u/s 133(6) of the Act directly to the ld AO by giving proper replies with regard to details called for by the ld AO in the first round. Therefore, according to assessee, the identity of shareholders stands proved. We find that the ld CIT in her section 263 order dated 12.3.2013 had directed the ld AO to make independent enquiries with the shareholders of the assessee company in the manner known to law and not through the assessee. This is very clear from the directions of the ld CIT. In response to this, the ld DR vehemently opposed this plea of the assessee and contended that the assessee company was very well aware of the revisional order passed by the ld CIT and should have brought all evidences before the ld AO to substantiate the identity, genuineness and creditworthiness of share subscribers. The ld AO has noted that the assessee did not co-operate with the assessment proceedings and , therefore, the assessee cannot be given another innings. The ld AO after noticing that none appeared on behalf of the assessee and on behalf of the subscriber companies, concluded that the assessee had not co-operated and , therefore, according to him, the identity and genuineness of the shareholder subscriber companies could not be established beyond doubt and, therefore, he made the addition

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of Rs 10,31,00,000/- . We note that the ld CIT invoked the revisional jurisdiction u/s 263 of the Act and found that the assessee company in its Balance Sheet has shown to have infused equity share capital of Rs 10,31,00,000/- including share premium and since the ld AO had not enquired into the source of the share capital and premium infused into the assessee company by verifying the identity, genuineness and creditworthiness of the shareholders, the ld CIT found the AO while doing assessment did not exercise the role of investigator and, therefore, the order of ld AO is erroneous so far as prejudicial to the interest of the revenue and directed the ld AO to make fresh assessment after taking into consideration the pernicious practice of converting black money by the modus operandi as described by the ld CIT. We also note in the said backdrop, the ld CIT has given certain guidelines which were given in order to facilitate deep investigation into the case. The ld AO cannot remain quiet after issuing summons u/s 131 to the share subscriber companies. The same when went unanswered, the ld AO should have resorted to other actions available as per law, which was not done in the instant case. Without resorting to such further verification / investigation / action as per law, the ld AO ought not to have drawn any adverse inference against the assessee company. 5. At the cost of repetition, we would like to state that the ld CIT had specifically given the manner in which investigation and further enquiries are to be carried out by the ld AO to understand the genuineness of share capital raised by the assessee company in his order passed u/s 263 of the Act, wherein it is specifically mentioned that the enquires and investigation should be carried out independently by the ld AO and not through the assessee. 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 Subhalakshmi Vanijya Pvt Ltd vs CIT in ITA No. 1104/Kol/2014 dated 30.7.2015, 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. We note that the shareholders had duly replied during the original re-assessment proceedings confirming the factum of investments before the ld AO . We find that it is not in dispute that the entire transactions of share capital and share premium was the subject matter of verification in the re- assessment proceedings by the ld AO, wherein the shareholders had duly responded to notice u/s 133(6) of the Act by confirming the fact of making investments in the assessee company. The shareholders had also duly furnished their income tax assessment particulars. Pursuant to directions of the ld CIT u/s 263 of the Act, the ld AO was mandated to make direct verifications about the genuineness of the transactions and creditworthiness of the shareholders by making necessary specific enquiries as listed out in the revision order u/s 263 of the Act. The ld CIT had specifically directed the ld AO to make enquiries directly from the shareholders and not through the assessee. Hence non-appearance of the assessee before the ld AO and nonproduction of the shareholders of the assessee company before the ld AO, intentionally or unintentionally does not make any relevance here. The ld CIT had directed the ld AO to investigate into multiple layers of the investment in shares made by respective shareholders and identify the ultimate person holding controlling interest including the change in shareholding, directorship etc and then take the entire matter to its logical conclusion to bring out the facts on record. From the perusal of the assessment order, we find that this has not been done by the ld AO. In this regard, we would like to place reliance on the decision of Hon’ble Delhi High Court in the case of CIT vs Jansampark Advertising & Marketing Pvt. Ltd in ITA No. 525/2014 dated 11.3.2015 wherein after noticing inadequate enquiry by authorities below, the court had 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 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 obligation to conduct a proper

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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 Section 148 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 enquiry' 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.” 5.1. In view of the aforesaid findings in the facts and circumstances of the case and respectfully following the decision of Hon’ble Delhi High Court supra, we deem it fit and appropriate, in the interest of justice and fair play, to remand the matter back to the file of the ld AO for de novo assessment and to decide the matter as mandated by the ld CIT in section 263 order, after giving sufficient opportunity of being heard to the assessee. Accordingly, the Grounds raised by the assessee are allowed for statistical purposes.”

(ii) In the case of Bihari Distributors Pvt. Ltd. vs. ITO, Wd-14(1), Kolkata; ITA No.521/Kol/2017 Assessment Year 2009-10 order dated 16.10.2018 held as follows:

“4. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the AO has given effect to the Ld. CIT’s order passed u/s. 263 of the Act by passing the best judgment assessment on 31.03.2015. However, the main grievance of the assessee is that no proper opportunity was given to the assessee to prove identity, creditworthiness and genuineness of the transaction. For that the Ld. AR drew our attention to page 5 of the assessment order and specifically to para 11 from where we note that the AO has received the records only on 18.03.2015 and he has passed the impugned assessment order on 31.03.2015 i.e. within a period of 12 days wherein he was pleased to saddle the entire share application money as the income of the assessee. The Ld. AR pleads before us that within 12 days the assessment could not have been property made and there has been gross violation of natural justice. So, we find force in the submission of the Ld. AR that 12 days were insufficient for the AO to frame the assessment order. Therefore, according to Ld. AR, no proper opportunity was given to assessee by AO during the reassessment proceedings and so we are, therefore, of the opinion that assessee did not get proper opportunity before the AO during reassessment proceedings. The Hon’ble (three judge bench) of the Hon’ble Supreme Court in Tin Box Company Vs. CIT (2001) 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 reads thus : “We will straightaway agree with the assessee’s submission that the Income-tax Officer had not given to the assessee proper opportunity of being heard.”

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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 reasonable 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 Incometax Officer had not given a proper opportunity of hearing to the assessee ?” In our opinion, there can only be one answer to this 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 are also set aside. The matter shall now be remanded to the assessing authority for fresh consideration, as aforestated.” 5. 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 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. 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 (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 afore-stated it has to go back to AO…….” 6. 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 following that satisfaction as to the creditworthiness of the parties or the genuineness of the transactions in question would also have been established.

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(iii) In the case of M/s. AIC Sponge & Power Pvt. Ltd. vs. ITO, Wd-2(2), Kolkata; ITA No.995/Kol/2017 Assessment Year 2012-13 order dated 15.06.2018 held as follows:

“4. We have heard the arguments of both the sides and also perused the relevant material available on record. In support of the preliminary issue raised by the assessee in this appeal challenging the impugned order passed by the Ld. CIT(A) ex-parte, the learned counsel for the assessee has submitted that the appeal of the assessee was fixed for hearing by the Ld. CIT(A) on three dates i.e. 09.11.2016, 14.12.2016 and 02.02.2017. He has submitted that the assessee on all these three occasions sought adjournments in writing by filing the applications which were duly received by the office of the Ld. CIT(A) well before the corresponding dates of hearing. He has also filed the copies of the said applications duly received by the office of the Ld. CIT(A) and contended that the Ld. CIT(A) failed to take cognizance of the said applications and proceeded to dispose of the appeal of the assessee vide impugned order passed ex-parte on the ground that there was no compliance on the part of the assessee to the notices of hearings issued by him. He has contended that the Ld. CIT(A) thus has dismissed the appeal of the assessee without giving proper and sufficient opportunity of being heard and there is a clear violation of principle of natural justice. The learned DR has not disputed this position which is clearly evident from the material placed on record. He however has contended that there was no compliance on the part of the assessee even during the course of assessment proceedings before the AO and the matter therefore may be sent back to the AO in order to give him an opportunity to examine the claim of the assessee of having received share capital and share premium amount of Rs. 2,42,00,000/- We find merit in this contention of the learned DR. The impugned order of the Ld. CIT(A) passed ex-parte is accordingly set aside and the matter is restored to the file of the AO for deciding the same afresh on merit in accordance with law after giving one more opportunity of being heard to the assessee. As undertaken by the learned counsel for the assessee, the assessee shall make due compliance before the AO and shall extend all the

7 M/s. Dhanvanti Commodities Pvt. Ltd I.T.A. No. 1769/Kol/2017 Assessment Year: 2012-13 possible cooperation in order to enable the AO to complete the assessment afresh expeditiously.” 5. Consistent with the view taken therein, we set aside the matter to the file of Assessing Officer for fresh adjudication in accordance with law after giving assessee adequate opportunity of being heard on the ground of violations of principle of natural justice. The Assessing Officer is direct to follow the guidelines/specific directions given by the ld. CIT(A) u/s 263 orders, which were upheld by the Hon’ble Supreme Court in the case of Subhalaxmi Vanijya Pvt. Ltd. vs. CIT (ITA No.1104/Kol/2014). 6. In the result, the appeal is allowed for statistical purposes.

Kolkata, the 20th February, 2019.

Sd/- Sd/- [S.S. Viswanethra Ravi] [J. Sudhakar Reddy] Judicial Member Accountant Member Dated : 20.02.2019 (RS, Sr. PS) Copy of the order forwarded to: 1. M/s. Dhanvanti Commodities Pvt. Ltd., 18A, Ramakanta Bose Street, Kolkata – 700 003. 2. ITO, Ward-7(3), Kolkata. 3. CIT(A)- 4. CIT- , 5. CIT(DR), Kolkata Benches, Kolkata.