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Income Tax Appellate Tribunal, BENCH ‘D’ KOLKATA
Before: Hon’ble Shri S.S.Godara, JM & Dr.A.L.Saini, AM ]
This assessee’s appeal for A.Y.2009-10 calls into question correctness of the CIT(A)-1, Kolkata’s order dated 16.01.2017 passed in Appeal No.1187/CIT(A)-I/W- 1(3)/2015-16 upholding the Assessing Officer’s action inter-alia adding undisclosed miscellaneous income, capital expenditure, section 14A r.w.r. 8D disallowance and unexplained cash credit addition of share capital involving corresponding sums of Rs.26,150/-, Rs.4,600/-, Rs.22,003/- and Rs.5,29,50,000/; respectively in assessment order dated 31.03.2015, involving proceedings u/s 143(3) r.w.s. 263 of the Income Tax Act, 1961 (Act).
Heard both the parties. Case file perused. 2. It emerges at the outset that the CIT (A)’s order under challenge has been passed exparte after alleging that he had granted three opportunities of hearing on 14.12.2016, 28.12.2016 and 13.01.2017 wherein none appeared at the tax payers’ behest. We do not see any discussion in CIT(A)’s order in para-3 as to whether the assessee had been actually served the said notices or not.
M/s Shalimar Dealers Pvt. Ltd. A.Y.2009-10 2
Coupled with this, it transpires that the instant lis has emanated from CIT’s section 263 revision directions dated 24.03.2014 terming the earlier assessment framed on 29.04.2011 be erroneous and prejudicial to the interest of the Revenue on account of lack of adequate enquiry therein. The CIT made it clear to the Assessing Officer that he shall conduct independent enquiries to verify the identity, source, genuineness and creditworthiness of assessee’s investors entities in question.
The Assessing Officer took up consequential proceedings. We notice from assessment order dated 31.03.2015 that he had issued process to its two individual parties as well as its 17 investor entities. None of them appeared. The Assessing Officer thereafter observed that the assessee; a private limited company, had issued 10,000 shares and 10,570 shares to the above investors with a premium of Rs..490/- thereby receiving the sum of Rs.5,29,50,000/- as issue. He was of the view that the assessee had failed to satisfy the above criteria of identity, genuineness and creditworthiness of its investors. More so because the tax payer entity had been incorporated in the relevant financial year only, the investor entities had meagre income without any business activities, their bank statements indicated frequent deposits and withdrawals and their profit and loss accounts demonstrated minimal loss figures only. He therefore concluded that the impugned amount represented assessee’s unaccounted income ploughed back as share application/premium in the impugned assessment year. The Assessing Officer therefore made the impugned section 68 as well as various other additions of undisclosed income, section 14A disallowance as well as capital expenditure (supra). The CIT(A) has upheld the same in his exparte lower appellate order under challenge.
Learned counsel representing assessee submits that both the lower authorities have not complied with the CIT’s expressed directions issued u/s 263 of the Act making it clear that the Assessing Officer had to make an independent enquiries for the purpose of verifying its investor parties. His case therefore is that the above directions have gone unrebutted from Revenue side. Learned Departmental Representative fails to dispute the same as there is no material on record suggesting M/s Shalimar Dealers Pvt. Ltd. A.Y.2009-10 3 any such independent enquiries to have been conducted at the Assessing Officer’s end. Learned counsel thereafter invites our attention to this tribunal’s decision in Sukanya Merchandise Pvt. Ltd vs ITO ITA 291/Kol/2016 dated 15.12.2017 restoring the very issue back to the Assessing Officer in identical circumstances 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 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 M/s Shalimar Dealers Pvt. Ltd. A.Y.2009-10 4
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 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 ITA No. 525/2014 dated 11.03.2015 M/s Shalimar Dealers Pvt. Ltd. A.Y.2009-10 5 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 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.
7. 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 M/s Shalimar Dealers Pvt. Ltd. A.Y.2009-10 6
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.”
We adopt the above remand directions mutatis mutandis to restore the instant lis back to the Assessing Officer for fresh proceedings 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 20.07.2018.