M/S CRYSTAL TIE-UP PVT. LTD.,KOLKATA vs. ITO, WARD-8(1). KOLKATA , KOLKATA

This is an appeal filed by the assessee against the order of Ld. CIT(A)- 16, Kolkata dated 28.03.2017 for AY 2008-09.

3. At the outset, ld. Counsel for the assessee submitted before us that the Ld. CIT(A) did not consider that the AO being influenced by the order of Ld. CIT passed u/s. 263 of the Act made the re-assessment and that too u/s. 144 of the Act (best judgment assessment) without affording proper opportunity of being heard to the assessee and ignoring all material evidences which were already on record submitted during assessment proceedings Crystal Tie-up Pvt. Ltd., AY 2008-09 and hence the addition of Rs. 7 cr. u/s. 68 of the Act sustained by him is erroneous and an arbitrary action. Hence, he urged before the bench to set aside the order of Ld. CIT(A) and restore the matter to the file of the AO for fresh adjudication. On the other hand, the Ld. DR relied on the order of Ld. CIT(A). We note that AO after receipt of Ld. CIT’s order u/s. 263 of the Act dated 18.03.2014 had issued latter letter dated 22.05.2014 and 21.09.2014. Thereafter issued summons dated 02.03.2015 for appearance of the assessee company’s director. The AO acknowledges that assessee had in fact filed “bunch of documents” at his office. However, strangely, AO says he did not examine the genuineness of the credit entry because of non-appearance of the directors of the assessee company has made the addition. Whereas we note that the Ld. CIT’s direction in similar case was to make enquiries to unravel the modus operandi by investigation as per following guidelines: “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.”

4. However, we note that AO’s investigation as per his own words as stated as under: “As per the direction of the Ld. CIT, Kolkata-II, Kolkata, the case has been set aside with the office of the undersigned directing to pass an order after examining and verifying the claim of the assessee-company. Accordingly, the case was re-fixed for hearing by way of issuing a letter dated 22.05.2014 and subsequently letter dated 21.09.2014.

Crystal Tie-up Pvt. Ltd., AY 2008-09 14. Considering the above facts and circumstances Rs.7,00,00,000/- is hereby treated as unexplained cash credit found in the books of the assessee during the AY 2008-09 and subsequently added back to the total income of the assessee.”

“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.

Crystal Tie-up Pvt. Ltd., AY 2008-09 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…….

“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.