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Income Tax Appellate Tribunal, “C” BENCH: KOLKATA
ORDER Per Shri A.T.Varkey, JM This appeal preferred by the assessee is against the order of the Ld. CIT(A)-2, Kolkata dated 18.01.2016 for AY 2008-09.
At the outset itself, the Ld. AR drew our attention to the fact that the assessee did not get proper opportunity before the AO who was giving effect to the order of the Ld. CIT’s order passed u/s. 263 of the Act. The Ld. AR drew our attention to the copy of the order sheet entries made by the AO which shows that the AO has gone through the order passed by the Ld CIT, Kol-2 dated 30.03.2013 on 20.12.2013 and issued notice u/s. 142(1) of the Act for hearing which was fixed on 02.01.2014. We note that the reassessment order has been passed by the AO giving effect to the Ld. CIT’s order on 31.03.2014 i.e. within a span of three months. We note from a perusal of the order sheet that on 02.01.2014 Shri Jagdish Agarwal, FCA, the Ld. AR appeared and produced the documents/replies asked for in the notice u/s. 142(1) of the Act. After acknowledging that the Ld. AR of the assessee has produced replies as asked for in the notice u/s. 142(1) the AO and having recorded the same in the order sheet, the AO records that after discussing the case with the Ld. AR he asked the Ld. AR to submit circumstances which necessitated the change in directorship of Shivangan Promoters Pvt. Ltd., AY 2008-09 the assessee company and thereafter fixed the matter on 07.02.2014. Then, he issued notice u/s. 133(6) to the share investors. The AO acknowledges that the fact that the Ld. AR of the assessee appeared before him on 07.02.2014 and produced replies as asked for in the earlier hearing (02.01.2014). Thereafter, we note that the AO issued notice u/s. 131 of the Act to the directors and also notice u/s. 133(6) of the Act to the Branch Manager of the bank and thereafter he has passed the order of reassessment on 31.03.2014. The Ld. AR drew our attention to the order sheet entry on 04.03.2014 and contended before us that in the order sheet entry it is only recorded that “notice u/s. 131 issued to the directors” and submitted that the assessee company’s directors did not receive any notice and it is not clear from the recording on the order sheet as to whether the AO has issued notice u/s. 131 to the director of the assessee company or the subscribing companies and since the assessee had not received any such notices as stated in the order sheet and also in that context pointed out that presently the assessee company was not aware of the present directors of the share subscribing companies, since the transaction under enquiry happened in the assessment year 2008-09. Further, the Ld. AR contended that the AO has not gone by the following guidelines given by the Ld. CIT in this case while exercising his revisional jurisdiction u/s. 263 of the Act to unearth the unscrupulous activities carried out: “The AO is directed to (i) Examine the genuineness and source of share capital, not on a test check basis, but in respect of each and every shareholder by conducting independent enquiry not through the assessee. The bank account for the entire period should be examined in the course of verification to find out the money trail of the share capital. ii) Further the AO should examine the directors as well as examine the circumstances which necessitated the change in directorship if applicable. He should examine them on oath to verify their credentials as director and reach a logical conclusion regarding the controlling interest. iii) The AO is directed examine the source of realization from the liquidation of assets shown in the balance sheet after the change of Directors, if any.”
However, we note that AO’s investigation and order as per his own words as stated as under:
“3. In the light of aforesaid order passed u/s. 263 of I. T. Act by Ld. CIT, Kol-II, Kolkata, a formal notice u/s. 142(1) of the Income Tax Act 1961 and questionnaire was issued and served upon the assessee on 20.12.2013, asking it to produce and submit certain details and documents to substantiate its Return of Income. In response to the said notice, Sri J.P. Agarwal, FCA & AlR of the assessee appeared and produced written submissions.
Shivangan Promoters Pvt. Ltd., AY 2008-09 4. It was noticed the assessee during the year has raised a paid-up share capital of Rs. 13.055 crores by issuing equity shares including premium. To verify the genuineness of the said transactions and to verify the identity and creditworthiness of the shareholders of the assessee company, notice u/s 131 of I.T. Act was issued to directors. They were asked to appear personally before the undersigned and to produce furnish details/documents in support of the justification for the investment made by them in the assessee company and other details as asked for. But none was appeared in response to the notice u/s 131 of IT Act 1961. From the aforesaid facts and discussion it is evident that assessee has nothing to say in this matter. It is very clear that assessee has introduced its own unaccounted fund in the form of share application money, to legalize its own black money. Considering the aforesaid facts and discussion, share application money of Rs.13.055 crores received by the assessee during the year is disallowed and added to the total income of the assessee as unaccounted cash credit in the books of the assessee as per the provisions of section 68 of I.T. Act.”
However the main grievance of the assessee is that no proper opportunity was given to the assessee to discharge the onus casted upon it as required in sec. 68 matters. We note that other than a notice u/s. 131 of the Act issued to the directors to appear personally to produce details/documents , no other investigation as suggested by the Ld. CIT (guidelines we referred supra) was carried out by AO since it is not discernable from the order and the fact was that the entire enquiry was wrapped up within less than three months and in the light of the fact that the AO acknowledges the participation of the Ld. AR of the assessee during the hearing fixed by the AO. So, we find force in the submission of the Ld. AR that no proper opportunity the assessee got before the AO during the reassessment proceedings. Since proper opportunity was not given to assessee by AO during the reassessment proceedings, we are of the opinion that assessee should get proper opportunity before the AO during reassessment proceedings. In this respect 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.” 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 Shivangan Promoters Pvt. Ltd., AY 2008-09 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.”
In similar case this Tribunal in 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 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 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.
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 Shivangan Promoters Pvt. Ltd., AY 2008-09 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.
In the result, the appeal of assessee is allowed for statistical purposes.
Order pronounced in the open court on 28th November, 2018.