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Income Tax Appellate Tribunal, “C” BENCH: KOLKATA
ORDER Per Bench
These four appeals i.e. 823, 825 & 829/Kol/2014 are filed by the revenue against the separate orders of Ld. CIT(A)-Central-I, Kolkata dated 21.02.2014, 19.02.2014, 19.02.2014 and 19.02.2014 respectively for AY 2010-11. Both the sides agreed that the assessee’s in these appeals are Private Limited Companies and the issue in these appeals is similar/ identical, therefore, all the four appeals can be disposed of by a common order. Hence, we treat ITA No. 821/Kol/2014 (M/s. Karva Automart Pvt. Ltd.) as the lead case and the result of the adjudication will be followed in the other three cases.
We have heard both the parties and perused the records. We note that the assessee has filed return of income on 08.11.2010 for the relevant assessment year 2010-11. The AO did not recognize the assessee as an “assessee” under the Income Tax Act, 1961 (hereinafter the ‘Act ‘) . According to the AO, the assessee was a bogus entity and he did not accept the return filed by the assessee. Resultantly, he did not raise any demand against the assessee. Aggrieved, the assessee preferred an appeal before the ld. CIT(A), who was pleased to allow the appeal and directed the AO to accept the return of income filed by the assessee. Aggrieved by the decision of the ld. CIT(A) the revenue is in appeal before us.
We note that the main grievance of the assessee is that the assessee is a Private Limited Company, and has filed its return of income, which was not accepted by the AO on the finding that it is bogus company. According to the ld. AR, subsequent to this assessment year, the return of income for the subsequent assessment years up to A.Y.2016- 17 has been accepted by the AO. In order to buttress this fact the ld. AR drew our attention to page 2 of the paper book wherein a chart is given which is reproduced as under :-
From a perusal of the above chart it is evident that the assessee has filed its return of income and according to the ld. AR, the AO has accepted the return filed form A.Y.2011-12 to A.Y.2016-17 and drew our attention to the fact that for assessment year 2014-15 the assessee in fact received refund of Rs.20,770/-; and contended that the impugned action of the AO in not treating the assessee as an assessee/bogus entity, was confined to this relevant assessment year only. In the light of the aforesaid facts emerging from the paper book filed by the assessee, the Ld. AR wanted the department to take a consistent view as held by the Hon’ble Supreme Court in the case of Radhasomy Satsang vs CIT 193 ITR 321 (SC) wherein it was held that when the facts and the law permeating in the earlier years are the same, then a divergent view should not be taken and consistency must be followed. We find force in the said arguments of the ld. AR, when the fact remains same, then unless the facts and law applicable in this relevant A.Y. is different, the AO’s action for earlier years and subsequent years must be the same and in line with the doctrine of consistency.
The Hon’ble Apex court in the case of Radhosamy Satsang vs CIT(Supra) held “though the principles of res judicata do not apply to the income tax proceedings, particularly when each assessment year is an independent unit, when a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year”.
The principle to follow the consistency was explained by the Full Bench in the case of Hoystead vs Commissioner of Taxation [1926] AC 155 (PC). Speaking for the Judicial Committee, Lord ships had stated at page 165 as under :-
Parties are not permitted to begin fresh litigations because of new views they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted, and there is abundant authority reiterating that principle. Thirdly, the same principle-namely, that of a setting to rest rights of litigants, applies to the case where a point, fundamental to the decision, taken or assumed by the plaintiff and traversable by the defendant, has not been traversed. In that case also a defendant is bound by the judgment, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken.
These observations were made in a case where taxation was in issue. This court in Parashuram Pottery Works Co.Ltd. v. ITO [1077] 106 ITR 1 at p.10 stated : “At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that, stale issues should not be reactivate beyond particular stage and that lapse of time must be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity.”
However, we note that this aspect of the matter has not been dwelt into by the AO and this aspect need to be examined as to why the AO treated the assessee company differently only in this assessment year need to be examined when the fact remains that in subsequent assessment years (i.e. A.Y.2011-12 to 2016-17) the return of income of the assessee company has been accepted by the AO and even refund has been given to assessee in AY 2014-15, the view taken by AO in this relevant assessment year before us need to be re- examined. If the company needs to be held as bogus company, there should be material/evidence to make such a finding which the AO has to spell out in the order. The ld. CIT(A) has categorically held that there is no material on the basis of which the AO could have concluded that the assessee company is fake and bogus. In the light of such a finding of ld. CIT(A), and the subsequent action of the AO, accepting the return of income of the assessee up to A.Y.2016-17 and in the light of Rule of consistency as expounded by various case laws (supra), we therefore are inclined to set aside the order of ld. CIT(A) and remand the matter back to the file of the AO for denovo adjudication.
In the result, all the appeals of the revenue are allowed for statistical purposes.
Order is pronounced in the open court on 06.12.2017