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Income Tax Appellate Tribunal, “D” BENCH: KOLKATA
Before: Shri A. T. Varkey, JM & Dr. A. L. Saini, AM]
Per Shri A.T.Varkey, JM
This is appeal preferred by the assessee company against the order of the Ld. CIT(A) – 9, Kolkata dated 28.02.2017 for assessment year 2012-13. We note that the impugned assessment order of the Ld. CIT(A) is an ex-parte order and the CIT(A) had given the following reasons for doing so in para 1 and 2 of his order reproduced as under:
The Appellant has filed an appeal against the order passed on 30.03.2015 by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961. Notice u/s 250 was served on the appellant as well as on the AO. In this case, notice u/s 250 was issued on 26.10.2016 by which date of hearing was fixed on 10.11.2016 however, neither anybody attended nor any written reply was received on the date of hearing. Therefore, fresh notice dated 19.12.2016 and 30.01.2017 was issued but there was no compliance on the part of the appellant. Since there is no compliance during the appellant proceedings and there is no new fact/details available for consideration, I do not find any infirmity in the AO’s order. Therefore, appeal is dismissed.
2. We note that the Ld. CIT(A) fixed the cases for hearing on 10.11.2016 by issuing notice on 26.10.2016. However, thereafter the Ld. CIT(A) issued notices on 19.12.2016 and 30.01.2017 but has not spelled out the dates on which hearing was fixed. However, since none appeared on behalf of the assessee, the Ld. CIT(A) was pleased to pass an ex-parte
Alco Infotech Pvt. Ltd., AY 2012-13 order dismissing the appeal of the assessee in limine. According to the Ld. AR, none of the notices were served upon the assessee and in the absence of receipt of notices, the Ld. AR of the assessee could not comply by attending for hearing of the appeal before the Ld. CIT(A). The learned AR submitted that the impugned order was passed thus without giving adequate opportunity of being heard and therefore there was violation of principles of natural justice and, therefore, according to Ld. AR, the order of the Ld. CIT(A) is fragile in the eyes of law.
Further the learned AR brought to our notice that during assessment proceedings the AO had issued notice u/s 142(1) dated 22.07.2014 in which the assessee was asked to produce documents and information details in respect of 22 specific points. Vide (i) and (iii) of the said notice, the assessee was called upon to provide names, address, PAN No of the share-holders as well as share applicants from whom shares subscription was received during the relevant year. According to the learned AR, the assessee had in fact furnished complete details as requisitioned by the AO in his notice u/s 142(1). The learned AR submitted that after the submission of the aforesaid details, the assessee received only one summon dated 19.03.2015 wherein the assessee company had to produce the managing director before the AO on 30.03.2015 when the fact was that the very next day, i.e. 31.03.2015, the assessment was getting time barred. However, pursuant to the notice of the AO, the Managing Director appeared before the AO on 30.03.2015 but was told that the assessment was already framed and assessment order has been passed. The learned AR submitted that though the AO in the assessment order referred to section 131 notice being sent through speed post to all the 16 subscribers from whom share subscription amounts were received requiring personal appearances of the directors and submission of requisite documents, it was pointed out that 7 letters returned unserved. And in respect of companies which received the notice u/s 131, they did not comply with the notices on the fixed date of hearing. The ld AR pointed out that though the AO acknowledges the fact that 9 (nine) share subscribers had responded and forwarded certain papers through post or internal DAK on 27.03.2015, however the AO brushed aside the same on the reasoning that these documents do not inspire confidence because of some similarities, etc. Thereafter AO was of the opinion that since there is no compliance with the notices u/s 131 by directors of the share 2
Alco Infotech Pvt. Ltd., AY 2012-13 applicants companies and since the shares were issued at substantial premium, he concluded that the share subscription amounts received were unexplained cash credit and accordingly assessed u/s 68 of the Act.
4. The learned AR submitted that the prior to issue of notice u/s 131 of the Act, the AO had issued notices u/s 133(6) of the Act requiring the share applicants to furnish various documents like confirmation of transactions with the assessee. The Ld. AR drew our attention to the fact that notices u/s 133(6) of the Act were not only served but in response, the share applicants had in fact furnished the documents as requisitioned by the AO. According to the learned AR even though the share applicants had complied with the AO’s requisition and furnished documents requisitioned by the AO, however, the AO’s order is conspicuously silent on this aspect. The learned AR further submitted that even though the AO required the share applicants to provide information and documents by issuing notice u/s 133(6) and 131 of the Act, the assessee were totally kept in the dark and the enquiries were conducted behind the back of the assessee. According to the assessee before the addition of Rs. 7.73 crores were made, no show cause notice were issued to the appellant requiring appellant to furnish any explanation. The learned AR pointed out that although notice u/s 131 of the Act was issued to the Managing Director of the appellant company requiring personal appearances and that too on the penultimate day of the limitation period, no intimation/information was given by the AO about the alleged non-compliance of the share applicants. According to the learned AR, before an adverse inference was drawn against the assessee, the AO ought to have provided the documents / information collected behind the back of the assessee, so that the assessee would have been able to explain the facts and circumstances or rebut the evidence collected by the AO. Thus according to the learned AR, there is a clear cut violation of natural justice committed by the AO and because of this act/omission on the part of AO, assessment has been completed without granting adequate opportunity to the assessee company during the assessment proceedings. According to the learned AR, the Hon’ble Supreme Court in the decision of Tin Box Co. 249 ITR 216 (SC) has held as under:
Alco Infotech Pvt. Ltd., AY 2012-13 “1. 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 selling 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.
3. 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 asses-see.
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. No order as to costs
5. According to ld. AR, since there was lack of opportunity to the assessee during assessment proceeding to set out its case before the AO, the plea of the learned AR is to restore the mater back to AO. This plea of the Ld. AR of the assessee has been vehemently opposed by the learned DR, who expressed his no-objection to restoring the appeal back to Ld. CIT(A) and not before AO.
Having heard the rival submission and perused the material furnished before us, we note that AO had raised 22 specific points to the assessee company vide his notice u/s 142(1) dated 22.07.2014, which has been complied by the assessee company. Thereafter, the AO has not asked from appellant any other documents or explanation in support of the share subscription amounts received from various applicants. It is noted that the AO had 4
Alco Infotech Pvt. Ltd., AY 2012-13 issued notice to 16 share applicants u/s 133(6) and had in turn received some replies from nine share applicants along with requisitioned documents as evident from the paper book filed before us. Though there was partial compliance from the part of some share applicants, the AO’s order is conspicuously silent about the information gathered by him in terms of section 133(6) of the Act. The AO is no doubt an authority appointed by the Parliament to exercise statutory powers to ascertain the income of a subject and the tax payable by him to the State. Wide though his powers are, the AO must act in consonance with Rule of Natural Justice. One such Rule is that he shall not use any material against the assessee without giving him (assessee) an opportunity to meet it. In short, the AO cannot assess by keeping the assessee in dark as to the materials against him.
We would like to clarify that the assessment proceedings are purely administrative proceedings and so AO can make private enquiries even behind the back of the assessee, as they are all administrative enquiries. They assume a quasi-judicial character only after the issuance of notice for assessment. This is so because AO is not a court (Dhakeswari Cotton Mills Ltd. 23 ITR 775). However it has to be kept in mind that though AO is at liberty to enquire even behind the back of the assessee, however if he is proposing to use it against the assessee or draw adverse inference against the assessee, then he is bound to furnish a copy of the same to the assessee and has to give opportunity to the assessee to meet it (explain or rebut).
The Hon’ble Supreme Court in M.S.Gill vs The Chief Election Commission 1978 AIR SC 851 held “The dichotomy between administrative and quasi-judicial function vis-à- vis the doctrine of natural justice is presumably obsolescent after Kraipak (A.K. Kraipak vs UOI AIR 1970 SC 150) which makes the water-shed in the application of natural justice to administrative proceedings. The rules of natural justice are rooted in all legal systems and are not any new theology. They are manifested in the twin principles of nemo judex in parte sua (no person shall be a judge in his own case) and audi alterem partem (the right to be heard). It has been pointed out that the aim of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice.
Alco Infotech Pvt. Ltd., AY 2012-13 9. Coming back to the present case in hand, we note that only towards the fag end of the assessment proceedings, the AO issued notice u/s 131 to the Managing Director to produce the director of the share-applicants on 30.03.2015 knowing very well that assessment was getting time barred on the very next day i.e. 31.03.2015. We note that when the Managing Director of assessee company appeared before the AO on 30.03.2015, he was told that assessment order has been already framed and passed i.e. on 30.03.2015 without giving an opportunity to the assessee to explain or rebut the materials collected by the AO behind the back of the assessee, which violates the Natural Justice of the assessee and so we hold that assessee did not get proper opportunity before the AO during assessment proceeding. In such a scenario in the light of the Hon’ble Supreme Court’s decision in Tin Box Company (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 the assessee is allowed for statistical purposes.
Order is pronounced in the open court on 08.06.2018 Sd/- Sd/- (Dr. A.L. Saini) (Aby. T. Varkey) Accountant Member Judicial Member Dated : 8th June, 2018 Biswajit.(Sr.P.S.) Copy of the order forwarded to:
1. 1. Appellant – M/s. Alco Infotech Pvt. Ltd., 5, Princep Street, Ground Floor, Kolkata – 700 072. 2 Respondent – DCIT, Circle 2(1), Aayakar Bhawan, P-7, Chowringhee Square, Kolkata – 700 069.
3. The CIT(A) Kolkata.