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Income Tax Appellate Tribunal, “A” BENCH: KOLKATA
The appeal filed by the assessee is against the order of Ld. CIT(A)-2, Kolkata dated 08.08.2016 for AY 2008-09.
The impugned order of Ld. CIT(A) is an ex parte order. From a reading of the impugned order of the Ld. CIT (A), it is noted that he fixed the hearing of the appeal on few dates and since none represented on behalf of assessee, has passed the ex parte order. As per the Ld. AR, the assessee was promptly following up the appeal and whenever it could not represent before the Ld CIT(A) for reasons beyond its control, had promptly filed adjournment application which fact has been acknowledged by the Ld. CIT(A). However, according to Ld AR, the Ld. CIT (A) found fault with the assessee not appearing before him on 04.08.2016 and came to the conclusion that assessee is not interested in pursuing the appeal is not correct, when the facts as revealed by Ld. CIT(A) himself is that assessee had filed an adjournment application before him on 17.06.2016, and thereafter the assessee did not get any notice of hearing fixing the appeal on 04.08.2016, so the Ld. CIT(A) ought to have given opportunity to assessee to represent and present its case during appellate proceedings. So, from a perusal of the chart given by Ld CIT(A) we note that out of 7 Imtihan Vyapaar Pvt. Ltd. , AY- 2008-09 dates fixed for hearing, the assessee had filed 4 adjournment application, which fact has been acknowledged by the Ld CIT(A). And on the application of assessee on17.06.2016 the Ld CIT(A) adjourned the appeal to 04.08.2016 and thereafter passed the impugned order on 08.08.2016 concluding that assessee is not interested in pursuing the appeal. According to Ld AR, the assessee did not get the notice fixing the hearing from 17.06.2016 to 04.08.2016 and so it could not appear before proper opportunity before the first appellate authority during the appellate proceedings, which action is in violation of natural justice.
Coming to the AO’s order, we note that the AO was giving effect to the order of Ld. CIT passed u/s. 263 of the Act on 11.03.2013 wherein the Ld. CIT has given the following guidelines as to how to investigate. “xxxiv) 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. xxxv) 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. xxxvi) 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 after conducting the inquiries & verification as directed above, the AO should pass a speaking order, providing adequate opportunity of being heard to the assessee.”
However, we note that AO’s investigation as per his own words is as under: “The company issued 804000 shares at face value of Rs.10/- per share but at premium of Rs. 90/- per share. “What prompted the subscribers to the shares to pay such substantial premium on shares of a little known company having no or insignificant business activities” was a question raised by the Ld. CIT-Kolkata-III, Kolkata. So Ld. CIT-Kolkata-III, Kolkata passed an order u/s. 263 of I. T. Act, 1961 11.03.2013 in this case for the AY 2008-09 and set aside the case to the file of the AO to pass the order afresh after inquiring properly the various layers through which the share capital had been rotated. Hence, notice u/s. 142(1) of the I.T. Act, 1961 was issued on 29.10.2013 by post to be served upon the assessee for the A.Y.2008-09. But the postal authority returned the same to the office of the undersigned with a remark "Not Known". Again .Notice u/s. 142(1) of the I. T. Act, 1961 was issued on 15.01.2014 to be served upon the assessee. Previously, during the course of scrutiny assessment proceedings initiated by the notice u/s. 148 of the I T Act, 1961 the assessee submitted the name of the Directors i) Bip…… Saha, 3A, Silpi Netai Pal Lane, 2nd Floor, Kolkata-700 005. W. B. ii) Suresh Kumar Shaw,16, B.T. Road, Titagarh, Kolkata-700 119, W. B.. But on 03.03.2014 the assessee submitted the names and address of the Directors as i) Anand Kumar Agrawal, 383/Narmada Para station Road, Ganj, Raipur, and ii] Mohit Agrawal, C-1-20, SEC-2, Ma…. Road, Devendra Nagar, Raipur. The assessee did not submit any reason for changing the name of the Directors. The Assessee Imtihan Vyapaar Pvt. Ltd. , AY- 2008-09 also submitted different addresses of shareholders. The A R. of the assessee could not furnish the reason of giving different addresses. Under the circumstances, it was a great confusion about the addresses of shareholders. In reply to the notice u/s.142(1) of the IT Act, 1961, the A/R of assessee could not produce books of accounts and share registers of the assessee for A.Y. 2008-09. So the genuineness of share capital of the assessee could not be ascertained. The amount of Share Capital Fund is actually the own money of the assessee company routed through the hands of the shareholders. Under the circumstance hereby disallowed share capital of Rs.80,40,000/- and share premium Rs.7,23,60,000/- of the assessee company and added back to the total income of assessee for the A.Y.2008-09.”
So, we note that investigation as per the guidelines of the Ld. CIT has not been adhered to by the AO that is one aspect which has been pointed out by the ld AR assailing the decision of AO.
However the main grievance of the assessee is that no proper opportunity was given to the assessee to discharge the onus casted upon it as required in sec. 68 matters. According to assessee, no statutory notices were served upon it. We note that other than notices u/s. 142(1) of the Act dated 29.10.2013 and 15.01.2014, the AO has not issued any statutory notices. According to AO, the first notice dated 29.10.2013 itself was unserved. However, the AO notes that during the sec. 148 proceedings, the assessee company had provided the names of directors and address which has changed, which fact he came to know when AR of assessee on 03.03.2014 submitted different names of directors and addresses and list of shareholders was also different. So, according to AO, there was total confusion about the addresses of shareholders and since the AR of the assessee could not produce books, according to AO, genuineness of the share capital could not be ascertained. Therefore, he saddled the addition. We note that the AO acknowledges that Ld. AR of the assessee appeared before him on 03.03.2014 however the AO says his first notice dated 29.03.2013 was un-served, then the question is how the Ld AR of assessee appeared before the AO. So when the Ld. AR of the assessee appeared, AO should have called for proper explanation and conducted the investigation in a fair manner in the light of CIT order. Without doing that AO has suddenly come to a conclusion that assessee failed to prove the genuineness of the share capital. These facts per-se reveal non-application of mind. Therefore, we find force in the submission of the Ld. AR that no proper opportunity was given to assessee by AO during the reassessment proceedings and so we are, therefore, of the opinion that assessee did not get proper opportunity before the AO during reassessment Imtihan Vyapaar Pvt. Ltd. , AY- 2008-09 proceedings. The Hon’ble (three judge bench) of the Hon’ble Supreme Court in Tin Box Company Vs. CIT (2001) 249 ITR 216 (SC) has held as under:
“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. 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.”
In similar case this Tribunal in in M/s. Star Griha (P) Ltd. Vs. ITO for AY 2008-09 dated 15.12.2017 has observed as under:-
……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…….
Imtihan Vyapaar Pvt. Ltd. , AY- 2008-09 8. 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 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.
In the result, the appeal of assessee is allowed for statistical purposes .
Order is pronounced in the open court on 13th June, 2018.