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Income Tax Appellate Tribunal, BENCH ‘C’ KOLKATA
Before: Hon’ble Shri S.S.Godara, JM & Dr.A.L.Saini, AM ]
This assessee’s appeal for A.Y.2008-09 calls into question the CIT(A)-1, Kolkata’s ex parte order dated 31.08.2016 passed in Appeal No.234/CIT(A)-I/Kol/W- 1(4)/2014-15 upholding the Assessing Officer’s action adding its share application money received of Rs.3,08,00,000/- in assessment order dated 21.03.2014, involving proceedings u/s 143(3)/144/147 and 263 of the Income Tax Act, 1961 (Act). Heard both the parties. Case file perused.
It emerges at the outset that the CIT (A) lower appellate order under challenge has rejected the assessee’s appeal on account of its non appearance during the lower appellate proceedings. The CIT(A) appears to have fixed the lower appeal for hearing on 09.12.2015, 18.12.2015 and 30.08.2016 wherein the assessee did not appear. We do not find any single observation in para-3 of the CIT(A) ‘s order indicating the said notices to have been actually served on the tax payer/appellant. Nor is there any adjudication on merits forthcoming from the lower appellate order as per section 250(6) of the Act containing both points for determination followed by a detailed reasoning.
Matrix Vyapaar Pvt. Ltd. A.Y.2008-09 2
Learned counsel invites our attention to the assessment order as well. This appears to be the second round of proceedings between the parties. The Assessing Officer had earlier framed the assessment/re-assessment in question on 07.07.2010 assessing the total taxable income to be Rs.10,630/-. The CIT thereafter exercise its revision jurisdiction vested u/s 263 of the Act in his order dated 07.07.2010 directing the Assessing Officer to conduct a thorough enquiry to examine the genuineness and creditworthiness of the assessee’s share application/premium of Rs.3,08,00,000/- received during the relevant previous year. Both parties are fair enough in informing us that the said directions had made it clear that the Assessing Officer would conduct independent enquiry (ies) in consequential proceedings. The Assessing Officer thereafter appears to have passed the assessment order dated 21.03.2014 making the impugned addition. He observed in his assessment order that the relevant notices issued to share subscribers seeking detailed books of accounts, identity, existence, source of funds, genuineness and creditworthiness had been received back unanswered. The Assessing Officer further reiterated the CIT’s directions passed u/s 263 proceedings asking him inter-alia to examine source of the share capital as well as various records involved therein to inform the assessing authority of the investor entities to conduct independent enquiries in respect of proof of the share capital in question on thorough basis, to call upon the assessee to identify the said persons and pass a speaking order to make the impugned addition in assessee’s hands. The CIT(A) had admittedly upheld the same in his order under challenge passed exparte.
We find in this backdrop of facts that neither of the lower authorities in assessment as well as in the appellate proceedings has complied with the CIT’s section 263 directions (supra). It emerges that the Assessing Officer had sent section 131 process to the assessee’s investor entities. He thereafter made the impugned addition without going through the corresponding particulars of the said investors on his own quoting the assessee’s and said investors’ failure in substantiating their respective claims in support of the impugned share application/premium. We observe that a coordinate bench of this tribunal in M/s. Sukanya Merchandise Pvt. Ltd. Vs ITO in this backdrop of facts decided on 15.02.2017 restores the Matrix Vyapaar Pvt. Ltd. A.Y.2008-09 3 very issue of genuineness and creditworthiness of share application/premium on account of lower authorities failure in ensuring compliance of CIT’s identical section 263 directions as under :
“6. In the case of M/s. Sukanya Merchandise Pvt. Ltd. vs ITO (ITA 291/Kol/2016 dated 15.12.2017) cited by the learned counsel for the assessee, a similar view has been taken by the Co-ordinate Bench of this Tribunal and the similar issue relating to the addition made under section 68 on account of share capital contribution by treating the same as unexplained cash credits is restored back by the Tribunal to the file of the A.O. in almost similar situation after recording its observations / findings as under:
We note that the AO pursuant to the order of Ld. CIT had taken note of the directions of the Ld. CIT and issued notice u/s. 142(1) dated 16.08.2013 and has acknowledged that the assessee had furnished the copy of final account, I. T. Acknowledgement, bank statement for the relevant period evidencing the receipt of share application money from the share applicants. Thereafter, the AO makes certain inferences based on the list of shareholders and taking note of the bank statement furnished by the assessee. We note that after the initial notice dated 16.08.2013, thereafter the AO had issued the notice on 26.02.2014 which has been reproduced at page 3 of the reassessment order, wherein AO required the directors of the assessee company to be present before him on 06.03.2014. However, according to the Ld. AR, the assessee received the notice only on 07.03.2014 and thereafter, the assessee requested the AO to provide another opportunity of hearing vide its letter dated 20.03.2014. Thereafter, the AO fixed the date of hearing on 12.03.2014 vide notice dated 10.03.2014. So, according to the assessee company since the directors were not in station till 23.03.2014, the Ld. AR had requested for adjournment till that time. Though the AO has stated that he has issued summons on 24.03.2014 to the assessee company to produce the directors of the company before him on 26.03.2014, the assessee company contended that it has not received the said summon and, therefore, could not make the personal appearance. The AO has drawn adverse conclusion basically because of non-appearance of the directors of the assessee company and that of the shareholder companies. We note that initially the AO started the enquiry on 16.08.2013 which was complied by the assessee by submitting documents which has been acknowledged by the AO. Thereafter, the enquiry was started only at the fag end of February 2014 and the assessee company had informed the AO that their directors Matrix Vyapaar Pvt. Ltd. A.Y.2008-09 4 were out of station till 23.03.2014. In the light of the aforesaid facts, we are of the opinion that the assessee did not get fair opportunity to present the evidences before the AO so, there was a lack of opportunity as aforesaid, therefore, it has to go back to AO.
8. We also note that Ld. Cit while setting aside the order of the AO which was passed u/s. 147/143(3) of the Act, the Ld. CIT gave certain guidelines to follow for conducting deep investigation. We also note that similarly placed assessees had challenged the exercise of revisional jurisdiction u/s. 263 of the Act before this Tribunal in those cases one of it of Subha Lakshmi Vanijya Pvt. Ltd. Vs. CIT in dated 30.07.2015, wherein the Tribunal was pleased to uphold the order passed by the Ld. CIT passed u/s. 263 of the Act, which we learn to have been confirmed by the Hon’ble jurisdictional High Court and the SLP preferred against the decision of the Hon’ble jurisdictional High Court has been dismissed by the Hon’ble Supreme Court. Therefore, similar order of the Ld. CIT passed u/s. 263 of the Act has been upheld. We note that the AO while giving effect to the CIT’s 263 order has noted that the assessee company has in fact furnished the documents sought by him to his notice u/s. 142(1) of the Act. However, the AO took the adverse view against the assessee on the plea that the directors of the assessee company and share subscribing companies had not appeared before him on 26.03.2014 and t after taking note that none appeared on 26.03.2014 concluded on the same day 26.03.2014 that entire amount of share application money received along with premium amounting to Rs.8,06,00,000/- which has remained unexplained and added to the income of the assessee. 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 of 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 in three judges bench in the case of Tin Box, (supra), has held that since there was lack of opportunity to the assessee at Matrix Vyapaar Pvt. Ltd. A.Y.2008-09 5 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 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 Matrix Vyapaar Pvt. Ltd. A.Y.2008-09 6
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.
We, therefore, consider it fair and proper and in the interest of justice to set aside the orders of the authorities below on the issue in dispute and restore the matter to the file of the A.O. to decide the same afresh after giving the assessee proper and sufficient opportunity of being heard and after taking into consideration the entire evidence already available on record as well as other documentary evidence which the assessee may choose to file in support of its case on the issue.
In the result, the appeal of the assessee is treated as allowed for statistical purpose.”
Learned Departmental Representative fails to rebut the above factual position as well as corresponding similar legal developments herein above. We therefore restore the instant lis as well back to the Assessing Officer for fresh adjudication as per law after affording adequate opportunity of hearing to the assessee.
This assessee’s appeal is accepted for statistical purposes. Order pronounced in the Court on 20.07.2016.