D.C.I.T., CIRCLE-6(1), KOLKATA, KOLKATA vs. M/S GUINESS SECURITIES PVT. LTD., KOLKATA

In both these appeals, the Revenue has challenged the order of Ld. CIT(A) in deleting the addition made u/s. 68 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”).

At the outset itself we note that the Ld. CIT(A) has followed the order passed in respect to M/s. Guiness Portfolio Management Services Pvt. Ltd. to give relief to M/s. Guiness Selcurities Pvt. Ltd. Therefore, we take up the appeal of the revenue in respect to M/s. Guiness Portfolio Management Services Pvt. Ltd. (ITA No. 2107/Kol/2016) as the lead case to decide the appeal of both cases.

Brief facts of the case as noted by the AO at page 1 para 2 of his order for reopening u/s. 147 of the Act in his own words are as under:

Thereafter the AO reopened the assessment and during re-assessment proceeding the AO noted that the assessee had received Rs.75,50,000/- from M/s. Juggan Prasad Baijnath (in short JPB) and based on his finding in the other assessee’s case [M/s. Guiness Commodities Pvt. Ltd.] that the said JPB is a bogus entity (share-broker) made the addition of Rs.75,50,000/- which the assessee received from JPB in this assessment year to the income of the assessee company. Aggrieved the assessee preferred an appeal before the Ld. CIT(A) who was pleased to delete the same. Aggrieved, the Revenue is before us.

We have heard both the parties and perused the records carefully. We note that the foundation on which the entire exercise for reopening and consequent reassessment order was based on the fact the AO discovered on an assessment of an another assessee company M/s. Guiness Commodities Pvt. Ltd. that M/s. JPB was non-existent, bogus share broker. We note later, when the case of M/s. Guiness Commodities Pvt. Ltd. reached this Tribunal in & 521 of 2010 it was held that M/s. JPB cannot be said to be non-existing share-broker and the said assessment order was set aside back to AO for de novo assessment. In the set aside proceedings, [2 Round] we note that the AO vide order dated 3.03.2013 accepted the fact that M/s. JPB is an existing entity and the transaction with the said share-broker by that assessee company was genuine and consequently made no addition in that case.

So we note that AO in M/s. Guiness Commodities Pvt. Ltd. has accepted the genuineness of M/s. JPB as a share broker.

We note that the reopening in both the assessee’s case before us was reopened by the AO on the ground that M/s. JPB is a non-existing share-broker and addition was slapped on them based on the receipt of sums from M/s. JPB.

We note that the entire exercise of reopening and reassessment in the case of assessees before us was based on the finding made by the AO in the initial round of assessment made in the case of M/s. Guiness Commodities Pvt. Ltd. that M/s. JPB was a bogus entity. Now that the AO during the second round of de-novo assessment of M/s. Guiness Commodities Pvt. Ltd. has himself accepted the fact that M/s. JPB was an existing genuine stock broker, in such a scenario, the foundation on which the reopening and consequent reassessment/addition now does not exist in both the assessee’s case. Therefore, the case of assessee is squarely covered by the legal Maxim “Sublato Fundamento Credit Opus” meaning in case foundation is removed, the super-structure falls. In Badrinath Vs. Tamilnadu AIR 2000 SC 3243, the Hon’ble Supreme Court held that once the basis of proceedings is gone, all consequential order/acts would fall on the ground automatically which is applicable to judicial/quasi judicial proceedings.

In the light of the aforesaid facts, the Ld. CIT(A)’s action after appreciating the aforesaid facts has rightly ordered the deletion of the addition which warrants no interference from our part. We also note it is not the case of the Revenue that M/s. JPB is a non-existent/bogus broker, which fact has not been agitated in the grounds raised before us in the present appeals nor the Ld. DR could controvert this factual aspect, so the appeals preferred by the revenue have no merits. So, the order impugned orders before us are confirmed and, therefore, both the appeals of Revenue are dismissed.

In the result, both the appeals of revenue are dismissed.