M/S DIANA TRADECOM PVT. LTD.,KOLKATA vs. ITO, WARD-7(3), KOLKATA, KOLKATA

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ITA 1980/KOL/2016Status: DisposedITAT Kolkata08 August 2018AY 2008-093 pages
AI SummaryRemanded

What did the Tribunal hold?

The tribunal found that the assessee was not given an opportunity to prove its case. Therefore, the matter was remanded to the AO for independent inquiry into the genuineness and source of share capital.

What were the facts?

The AO added Rs. 3,18,00,000/- to the assessee's income as bogus share capital without issuing notice, violating natural justice. The CIT(A) confirmed this addition, relying on a previous tribunal decision.

What were the issues?

Whether the addition of share capital as bogus without proper opportunity to the assessee and adequate inquiry by the AO is justified.

Which sections of the Income-tax Act were involved?

Section 144

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, KOLKATA BENCH “B”, KOLKATA

Before: SH. J.SUDHAKAR REDDY & SH. S.S.VISWANETHRA RAVI

Hearing: 10.07.2018Pronounced: 08.08.2018

PER S.S. VISWANETHRARAVI, JUDICIAL MEMBER

1.

This appeal by the assessee against the order dated 29.08.2016 passed by CIT(A)-16, Kolkata for AY 2008-09.

2.

The Ld. AR submits the issue involved in this appeal is introduction of share capital. The AO treated the same as bogus under 144 proceedings. The AO without issuing notice and by violating the principles of natural justice added an amount of Rs. 3,18,00,000/- to the total income of the assessee. In the first appellate proceedings, the CIT(A) by placing reliance in the case of Rajmandir Estates Ltd. Vs PCIT-II, Kolkata dated 13.05.2016, confirmed the view of the AO. There was no opportunity for the assessee to prove its onus by furnishing all the relevant documents in connection with the share capital raised and urged to remand the matter to the file of the AO for conducting inquiries independently in respect of share capital subscribing companies. The Ld.DR did not controvert the same. [Assessment Year: 2008-09]

3.

Heard both and perused the material available on record. We find that there was no opportunity for the assessee in the assessment proceedings and the CIT(A) by placing reliance on the decision of this Tribunal in the case of Rajmandir Estates Ltd. Vs PCIT-II, Kolkata (supra) confirmed the view taken by the AO. Taking into consideration, the submissions of Ld.AR & Ld.DR and in the facts and circumstances of the case, we deem it proper to remand the matter to the file of the AO to conduct inquiries as set out hereunder:-

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 of the entire period should be examined in the course of verification to find out the money trail of the share capital. ii) Further the A.O. should examine the directions 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 A.O. is directed examine the source of realization from the liquidation of assets shown in the balance sheet after the change of Directors, if any.”

4.

In view of the above, grounds raised by the assessee are allowed for statistical purposes.

5.

In the result, the appeal of the assessee is allowed for statistical purposes.

Order pronounced in the open court on 08.08.2018.

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