M/S CALYPSO TIE UP & FINCO (P) LTD.,KOLKATA vs. ITO, WARD-7(4), KOLKATA, KOLKATA

ORDER Per Shri A.T.Varkey, JM

This appeal preferred by the assessee is against the order of the Ld. CIT(A)-16, Kolkata dated 09.02.2017 for AY 2012-13.

“1. That under the facts and in the circumstances of the case, the Ld. CIT(A) erred in confirming the addition of a sum of Rs.1,77,99,000/- made by the AO for the share capital raised during the year. The addition is unjustified and need to be deleted.” 2. That, the appellant craves leave to add, alter, amend or withdraw any ground or grounds of appeal before or at the time of hearing.”

3. At the outset itself, the Ld. AR of the assessee contended that the AO has made the addition of the entire share subscription the assessee received, since the assessee failed to produce its own directors; and the directors of the share subscribing companies. According to Ld. AR, the entire details of the share subscribers to prove their identity, creditworthiness

M/s. Calypso Tie Up & Finco (P) Ltd., AY 2012-13 and genuineness were furnished before the Ld. CIT(A). However, for the failure on the part of the assessee to produce the directors, the AO has made the addition which has been confirmed by the Ld. CIT(A) that too by passing a cryptic order. We note that the assessee is a non-banking financial company and since in this assessment year the assessee has issued the share capital along with premium and the AO taking note that the assessee could not produce the directors of the assessee as well as that of the share subscribing companies has saddled the entire share capital raised along with premium u/s. 68 of the Act. Before us, the assessee has filed the bulky paper book which runs to 476 pages and the Ld. AR drew our attention to the fact that 11 share subscribers had subscribed to the shares of the assessee and in order to prove the identity, creditworthiness and genuineness of the transaction has filed (i) income tax return for AY 2012-13; (ii) Certificate of Incorporation; (iii) audited accounts for AY 2012-13; (iv) share application form; (v) share allotment letter; (vi) bank statement; (vii) assessment order passed u/s. 143(1) of the Act and (viii) the sources of source of the share application money were filed. However, merely because the assessee failed to produce the directors of the assessee company as well as that of the share subscribing companies, the entire share capital and premium has been added on the assessee u/s. 68 of the Act. According to Ld. AR, the directors of share subscribing companies and its own directors were not in Kolkata when the AO asked them to be present before him. So, according to Ld. AR, no proper opportunity was given to the assessee during assessment proceedings. Our attention was drawn to several cases in which no proper opportunity the assessee got at the assessment stage, we have remanded the matter back to the file of the AO relying the decision of the Hon’ble (three judge bench) of the Hon’ble Supreme Court in Tin Box Company Vs. CIT (2001) 249 ITR 216 (SC), wherein it was 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.”

M/s. Calypso Tie Up & Finco (P) Ltd., AY 2012-13 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 Income- tax 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.”

……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 aforestated it has to go back to AO…….