STAR TRADECOM PRIVATE LIMITED.,KOLKATA vs. I.T.O., WARD - 9(1), KOLKATA, KOLKATA

Present for: Appellant by : Shri Vikas Surana, FCA Respondent by : Shri Rajeev Kumar, CIT, DR Date of Hearing : 09.01.2024 Date of Pronouncement : 18.03.2024 O R D E R

PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:

by the assessee are reproduced as under: “1.For that the Ld CIT(A)-NFAC erred in passing an ex parte order, where no notice served on appellant, despite the fact that it was specifically mentioned that no notices/ communication should be sent on email, the CIT(A) therefore provided no opportunities of hearing based on merits of the case.

2. For that the Ld CIT(A)-NFAC erred in confirming the addition made by AO towards share capital raised Rs 5,07,00,000/- when no independent enquiries made by the AO as per specific directions of Ld PCIT in order u/s 263 dated 05/03/2013, when the relevant documents wrt share applicants

3.1. Since the assessee has raised legal issues by the aforesaid additional grounds, the same are admitted for adjudication of the present appeal. 4. Brief facts of the case are that assessee filed its return of income on 11.07.2009 reporting a total income of Rs.714/-. After the processing of return u/s. 143(1) of the Act, notice u/s. 148 was issued on 16.12.2010. In compliance to the said notice, assessee had requested to treat its original return for the purpose of proceeding u/s. 147.

4.1. Reassessment was completed by making disallowance of preliminary expenses and addition on miscellaneous income at total assessed income of Rs.50,484/- vide order dated

3 Star Tradecom Pvt. Ltd., AY 2009-10 27.03.2010. Subsequently, on examination of assessment records, Ld. CIT, Kolkata-III, Kolkata held that the said reassessment order u/s. 147 read with section 143(3) was erroneous in so far as it was prejudicial to the interest of revenue on the ground that requisite enquiries were not made regarding the identity and creditworthiness of the share subscribers through which the introduction of share capital of Rs.5,07,00,000/- was made during the year under consideration.

4.2. An order u/s. 263 dated 05.03.2013 was passed setting aside the said reassessment, directing the AO to pass a speaking order after examination and enquiry as well as verification of all the relevant aspects of the case. The directions and observations given by the Ld. CIT to the AO vide its revisionary order passed u/s. 263 are reproduced as under:

“I have considered the facts of the case and the decisions of the superior Courts cited above. I am of the opinion that the A.O. by not pursuing the inquiries to their logical end has made the order erroneous and prejudicial to the interest of revenue. The order is, therefore, set aside and the A.O. is directed to carry out through & detailed enquiries in the case. He should carry out inquiries about the various layers through which the share capital has been rotated. The A.O. is also directed to summon the present & past Directors of the assessee company and the subscriber companies and examine them. The A.O. should also examine as to when this company was sold. At that point of time the fictitious assets such as shares in other companies or loans given to other companies is converted back into cash by credit in the assessee company's bank account. The source of this money also needs to be examined. Further, information should be sent to the A.Os of the subscriber companies and to the other companies through which the capitol has been rotated regarding the findings of the A.O. Subsequent to the inquiries & verification of all relevant aspects of the case, the A.O. should pass a speaking order after providing adequate opportunity to the assessee.” 4.3. Assessee went in appeal before the Coordinate Bench of Tribunal against the order passed u/s. 263 in Appeal No. ITA 4.4. In the year under consideration, assessee had raised share capital including share premium by issuing 5,07,000 equity shares at Rs. 10/- per share including share premium of Rs. 90/- per share, the details of shares issued by the assessee are tabulated as under:

4.5. Ld. AO took up the assessment proceeding pursuant to the revisionary order for which statutory notices were issued on the assessee. In the course of this effect giving assessment proceedings, in the impugned assessment order, ld. AO has noted certain facts about assessee requisitioning for copy of order sheet of the case records and issue of notices u/s. 142(1) as well as summons u/s.

6 Star Tradecom Pvt. Ltd., AY 2009-10 to the assessee fixing the case on 21.02.2014 and calling for, inter alia, details of shareholders. But, the same also came back unserved on 17/02/2014. Further, summons u/s. 131 were also issued by speed post to the directors of the assessee company fixing the hearing on 12.03.2014 and the same also came back unserved on 11/03/2014. Ultimately, the notice u/s. 142(1) had to be served by affixation through the departmental Inspector. From the above discussion it may be noted that the two vital ingredients namely identity, creditworthiness of the persons shown as shareholders of the assessee company could not be established inspite of best effort on the part of the department.”

4.6. This effect giving assessment was thus completed u/s. 144 by making an addition, inter alia, of Rs.5,07,00,000/- towards share capital including share premium u/s. 68 of the Act. Aggrieved, assessee went in appeal before the Ld. CIT(A).

4.7. In the first appellate proceeding, Ld. CIT(A) observed that assessee was granted opportunity to file submissions and documents in support of its grounds of appeal on several occasions. However, there was no response in this respect from the assessee. He, thus, dismissed the appeal of the assessee by holding that “…. Therefore, considering the above factual and legal position, the appeal filed by the appellant is dismissed for non-prosecution.” Aggrieved, assessee is in appeal before the Tribunal.

5. Before us, Ld. Counsel for the assessee has raised legal issue by way of additional grounds to contest that statutory notice u/s. 143(2) of the Act was not issued and served on the assessee in the course of reassessment proceedings u/s. 147 and, therefore, the subject matter of the revisionary proceedings is nullity. Accordingly, he claimed that revisionary proceedings u/s. 263 cannot be carried out on the basis of such non-est assessment. According to him, the 7 Star Tradecom Pvt. Ltd., AY 2009-10 impugned effect giving assessment order is, therefore, liable to be quashed which is in consequence of order passed u/s.

263. On the merits of the case, he claimed that all the relevant documentary evidences including the replies furnished by the share subscribing companies filed in response to notices u/s. 133(6) in the reassessment proceedings u/s. 147 read with sec. 143(3) were on record, Ld. AO in the effect giving assessment proceedings has failed to consider the same while passing the said order ex parte.

6. Per contra, Ld. CIT, DR asserted that all along the proceedings, assessee had been participating through its representatives and it is for the first time in the present appeal that assessee has raised the legal issue of non-service of notice u/s. 143(2) of the Act. According to him, assessee has failed to furnish anything both before the AO and Ld. CIT(A).

8 Star Tradecom Pvt. Ltd., AY 2009-10 which has been extracted above. The AO was required to conduct the impugned assessment proceeding in accordance with the specific directions given by the Ld. CIT in the revisionary proceeding. However, there is nothing on record which demonstrates conduct of such exercise to fulfil the directions given by the Ld. CIT.

7.1. Further, we take note of the fact that Ld. CIT(A) has dismissed the appeal of the assessee for non-prosecution without going into the issues raised by the assessee. In this respect, we note that Section 250(6) cast a duty on Ld. CIT(A) to pass an order in appeal which should state the points for determination and a decision as well as the reason for arriving at such decision. In the present case before us, compliance has not been met while disposing of the appeal by Ld. CIT(A). We deprecate such an approach adopted by Ld. CIT(A) while dismissing the appeal for non-prosecution which does not meet the requirements of section 250(6) of the Act.

9 Star Tradecom Pvt. Ltd., AY 2009-10 directions given by Ld. CIT in the revisionary proceedings. Therefore, we remit the matter back to the file of Ld. AO to pass a speaking order by complying with the directions of the Ld. CIT and taking into consideration the material on record. Needless to say that assessee should be given reasonable opportunity of being heard to make submissions in respect of its claim as well as the details called by the AO pursuant to directions given by the Ld. CIT. We also direct the assessee to appropriately respond to the notices and hearings fixed by the AO for expeditious disposal of the remanded proceedings. Since we remit the matter back to the file of Ld. AO for making fresh assessment pursuant to the directions of Ld. CIT, the grounds raised by the assessee including the additional grounds are allowed for statistical purposes.