MITRA AGRO ENTERPRISE LTD.,HOOGHLY vs. ITO, WARD 7(1), KOLKATA, KOLKATA

This appeal preferred by the assessee is against the order of the Ld. CIT(A)-16, Kolkata dated 20.02.2017 for AY 2011-12.

Ground nos. 1, 2 and 3 of assessee’s appeal are against the order of Ld. CIT(A) for upholding the action of AO in adding the share application money received by the assessee u/s. 68 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”).

Briefly stated facts are that the assessee is a public limited company which is engaged in the business of hiring of machinery. In the assessment year under consideration the assessee had received share application money to the extent of Rs.1,17,20,000/- from 236 persons. Out of which the assessee received a sum of Rs. 35 lakhs in cash from 63 share subscribers and the balance amount of Rs.82,20,000/- was received by bank drafts. According to AO, share subscribers are not creditworthy to contribute amounts ranging from Rs.49,000/- to Rs.99,000/-. According to AO, he made enquiries through Inspector of Income Tax, locally and through Bank, and he was of the opinion that the identity, genuineness and creditworthiness of none of the share holders have been proved. In view of Mitra Agro Enterprise ltd., AY 2011-12 the above, the assessee was asked to show cause as to why Rs.1,17,20,000/- shall not be added in the hands of the assessee as unexplained cash credit u/s. 68 of the Act and after acknowledging receipt of reply from the assessee company and being not satisfied by the reply of the assessee, the AO issued summons u/s 131 of the Act to the assessee company to produce its director for verification and simultaneously the assessee company was also asked to produce the share-holders for examination u/s 131 of the Act. However, according to AO, neither the assessee produced its director for verification nor produced the share- holders for examination before him. Therefore, the AO added the entire share- capital amounting Rs. 1,17,20,000/- to the total income of the assessee as Unexplained Cash Credit u/s 68 of the Act. Further, the assessee was asked to furnish name, address, PAN for current liabilities amounting Rs. 89,019/-. Since the assessee could not furnish the details, Rs. 89,019/- was added to the total income of the assessee u/s 68 of the Act. Aggrieved, assessee preferred an appeal before the Ld. CIT(A), who confirmed the action of AO. Aggrieved, assessee preferred this appeal before us.

We have heard rival submissions and gone through the facts and circumstances of the case. At the outset, the Ld. AR brought to our notice that the assessee company is a Public Limited Company and had issued shares to local people in the vicinity who contributed Rs.49,000/- to Rs. 99,000/- and thus assessee collected share capital of Rs.1,17,20,000/-. According to Ld. AR, the entire list of 236 share subscribers were furnished to the AO along with their address which was given to the assessee company while issuing shares to them and since the amount subscribed being less than Rs. 1 lakh, the assessee company did not insist on ITR, PAN etc. of the share subscribers when they applied for shares. So, when the AO asked for all details, the assessee company did not had adequate time to get all documents from 236 share subscribers. So according to ld AR, merely because directors of the assessee company could not attend the hearing before the AO and the reason for their absence being that they were out of town, cannot be the basis for addition against the assessee. Thus, according to Ld. AR, no proper opportunity was given to the assessee by the AO while framing the assessment. Therefore, he pleads that the matter may be remanded back to the AO for de novo assessment. The Ld. CIT, DR did not had any objection if the matter is remitted back to AO, however, wants the Ld. AR to undertake to Mitra Agro Enterprise ltd., AY 2011-12 cooperate before the AO. The Ld. AR undertakes before us that the assessee will cooperate fully with the AO. In the light of the above, the Ld. AR also undertakes that the assessee will produce all evidence before the AO and, since the assessee did not get proper opportunity before the AO, we are inclined to set aside the order of Ld. CIT(A) and restore the matter to the file of AO by applying the ratio of the decision of Hon’ble (three judge bench) of the Hon’ble Supreme Court in Tin Box Company Vs. CIT (2001) 249 ITR 216 (SC) wherein it has been 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.” 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 Hon’ble Delhi High Court in the case of CIT Vs. Jansampark Advertising & Marketing Pvt. Ltd. in dated 11.03.2015 wherein after noticing inadequate enquiry by authorities below have held as under: