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Income Tax Appellate Tribunal, KOLKATA BENCHES : D : KOLKATA
Before: SHRI P.M.JAGTAP, AM & SHRI N.V. VASUDEVAN, JM
ITA Nos.1046/Kol/2013&1047/Kol/2014
IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES : D : KOLKATA BEFORE SHRI P.M.JAGTAP, AM & SHRI N.V. VASUDEVAN, JM ITA No.1046/Kol/2013 Assessment Year:2008-09 M/s.Mahavir Vinimay Pvt.Ltd., Vs. Commissioner of Income Tax, Flat No.2E, 2nd Floor, 12-B, Kolkata-I, Mandivella Garden, Wallace AayakarBhawan, Apartment, Kolkata-700019. P-7, Chowringhee Square, Rep by Shri S.M.Surana, Advocate Kolkata – 700 069. PAN : AAFCM 3833 R Rep by Shri Niraj Kumar, CIT(DR) ITA No.1047/Kol/2014 Assessment Year:2009-10 M/s.Chariot Agency Pvt.Ltd., Vs. I.T.O., Ward-6(1), Kolkata. Narayanpur, North 24-Parganas, AayakarBhawan, P.O.Rajarhat, Gopalpur, Kolkata- P-7, Chowringhee Square, 700136. Kolkata – 700 069. Rep by Shri S.M.Surana,Advocate Rep by Shri Niraj Kumar, CIT(DR) PAN : AADCC 5568 P (Appellants) (Respondents) Date of Hearing : 25.05.2016 Date of Pronouncement : 01.06.2016.
ORDER Per N.V.Vasudevan, JM
Through these appeals, different assessees assail the correctness of separate orders passed by the Commissioners of Income-tax (CIT) u/s 263 of the Income- tax Act, 1961 (hereinafter also called ‘the Act’) in relation to the captioned assessment years. Since all these appeals are based on largely similar facts and common grounds of appeal, we are proceeding to dispose them off by this consolidated order for the sake of convenience.
ITA Nos.1046/Kol/2013&1047/Kol/2014
The ld. DR stated that the issue raised in these appeals is covered against the assessee by numerous orders passed by the tribunal. We also find that the issues raised in these appeals are squarely covered against the assessee by several orders passed by this bench including Subhlakshmi Vanijya Pvt. Ltd. vs. CIT (infra).
Briefly stated the facts of all the cases in this batch are similar inasmuch as returns were filed by such companies with meagre income; intimations were issued u/s 143(1); thereafter notices u/s 148 were issued either at the instance of such companies divulging a paltry escapement of income or otherwise ; assessment orders were passed u/s 143(3) read with section 147 after making nominal additions and the AOs, during the course of such assessment proceedings, made some formal enquiries about shares issued by such companies at huge premium by issuing notices u/s 133(6) to some of the shareholders and getting satisfied without any further investigation. The jurisdictional CITs have passed orders u/s 263 in all such cases, which have been assailed before the Tribunal.
We have heard the ld. DR and the learned counsel for the Assessee and perused the relevant material on record. It is relevant to mention that we have disposed of more than 500 cases involving same issue through certain orders with the main order having been passed in a group of cases led by Subhlakshmi Vanijya Pvt. Ltd. vs. CIT (ITA No.1104/Kol/2014) dated 30.7.2015 for the A.Y. 2009-10.
We find as has also been admitted by the ld. DR and the learned AR that facts and circumstances of the cases under consideration are mutatis mutandis similar to those decided earlier. In our aforesaid order in Subhlakshmi Vanijya Pvt. Ltd., vs. CIT (ITA No. 1104/Kol/2014 A.Y. 2009-10), we have drawn the following conclusions: -
ITA Nos.1046/Kol/2013&1047/Kol/2014
A. Contention of the assessee that since the AO of the assessee-company was not empowered to examine or make any addition on account of receipt of share capital with or without premium before amendment to section 68 by the Finance Act, 2012 w.e.f. A.Y. 2013-14 and hence the CIT by means of impugned order u/s 263 could not have directed the AO to do so, is unsustainable.
B. Failure of the AO to give a logical conclusion to the enquiry conducted by him gives power to the CIT to revise such assessment order, by holding that :-
i) the enquiry conducted by the AO in such cases can’t be construed as a proper enquiry;
ii) CIT u/s 263 can set aside the assessment order and direct the AO to conduct a thorough enquiry, notwithstanding the jurisdiction of the AO in making enquiries on the issues or matters as he considers fit in terms of section 142(1) and 143(2) of the Act, which is relevant only up to the completion of assessment ;
iii) Inadequate inquiry conducted by the AO in the given circumstances is as good as no enquiry and as such, the CIT was empowered to revise the assessment order ;
iv) The order of the CIT is not based on irrelevant considerations and further in the present circumstances, he was not obliged to positively indicate the deficiencies in the assessment order on merits on the question of issue of share capital at a huge premium ; and
ITA Nos.1046/Kol/2013&1047/Kol/2014
v) the AO in the given circumstances can’t be said to have taken a possible view as the revision is sought to be done on the premise that the AO did not make enquiry thereby rendering the assessment order erroneous and prejudicial to the interest of the revenue on that score itself.
C. In the given facts and circumstances of all such cases, the notices u/s 263 were properly served through affixture or otherwise. Further the law does not require the service of notice u/s 263 strictly as per the terms of section 282 of the Act. The only requirement enshrined in the provision is to give an opportunity of hearing to the assessee, which has been complied with in all such cases.
D. Limitation period for passing order is to be counted from the date of passing the order u/s 147 read with sec. 143(3) and not the date of Intimation issued u/s 143(1) of the Act, which is not an order for the purposes of section 263. In all the cases, the orders have been passed within the time limit.
E. The CIT having jurisdiction over the AO who passed order u/s 147 read with section 143(3), has the territorial jurisdiction to pass the order u/s 263 and not other CIT.
F. Addition in the hands of a company can be made u/s 68 in its first year of incorporation.
G. After amalgamation, no order can be passed u/s 263 in the name of the amalgamating company. But, where the intention of the assessee is to defraud the Revenue by either filing returns, after amalgamation, in the old name or otherwise, then the order passed in the old name is valid. 4
ITA Nos.1046/Kol/2013&1047/Kol/2014
H. Order passed u/s 263 on a non-working day does not become invalid, when the proceedings involving the participation of the assessee were completed on an earlier working day.
I. Order u/s 263 cannot be declared as a nullity for the notice having not been signed by the CIT, when opportunity of hearing was otherwise given by the CIT.
J. Refusal by the Revenue to accept the written submissions of the assessee sent after the conclusion of hearing cannot render the order void ab initio. At any rate, it is an irregularity.
K. Search proceedings do not debar the CIT from revising order u/s passed u/s 147 of the Act.
It is noticed that all or some of the above conclusions are applicable to the appeals in this batch. In view of the foregoing discussion and following the view taken in Subhlakshmi Vanijya Pvt. Ltd. (supra), we uphold all the impugned orders.
The learned counsel for the Assessees sought to raise issue which was to the effect that the order passed by the AO that was revised by the CIT in the impugned order passed u/s.263 of the Act, was an order passed u/s.147 of the Act. He pointed out that the proceedings u/s.147 of the Act were reopened only for the purpose of disallowing expenses in connection with issue of shares. The AO did could not have gone into the question whether the share capital received by the Assessee during the previous year was genuine or not and such examination was beyond his powers u/s.147 of the Act. Consequently the exercise of jurisdiction by the CIT u/s.263 of the Act directing the AO to go into this question was improper and on this ground the order u/s.263 of the Act has to be quashed. 5
ITA Nos.1046/Kol/2013&1047/Kol/2014
We have considered the submissions of the learned counsel for the Assessee and find that this issue has also been addressed in the case of Subhlakshmi Vanijya Pvt.Ltd.(supra) and this tribunal held as follows:
27.g. The larger question, thus, is whether the issue of share capital by the assessee during the previous year was subject matter of reassessment proceedings? It is no doubt true that in the reasons recorded for initiating proceedings u/s.147 of the Act, the issue of examination of share capital raised by the assessee during the previous year was not the reason for re-opening of the assessment. It was restricted only to share issue expenses whether capital or revenue expenditure or some other minor disallowances in other cases. Nevertheless in the reassessment proceedings in all the cases, the AOs ventured to issue notices u/s. 133(6) of the Act to some of the shareholders for examining as to whether the ingredients of sec. 68 were satisfied. As to whether such enquiry was adequate or not, is a different issue. The fact remains that by issuing notices u/s. 133(6) of the Act, the AOs tried to examine the question of genuineness of share capital in proceedings u/s 147. It thus follows that by holding that the issue of share capital at premium was not properly examined by the AOs, the ld. CIT revised the orders u/s 147 and not the Intimation u/s 143(1) of the Act.
27.h. We also find merit in the argument of the learned DR that with the introduction of Explanation 3 to section 147 with retrospective effect from 1.4.1989, the AO acquires jurisdiction not only to assess or re- assess income in respect of which he issued notice u/s 148, but also such other issues that come to his notice subsequently in the course of the proceedings u/s 147, notwithstanding that the reasons for such issue have not been included in the reasons recorded u/s 148(2). Clause 57 of the Finance (No. 2) Bill, 2009 inserting Explanation 3 in section 147 with retrospective effect from 1st April, 1989 provides as under : - "for the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue which has escaped assessment and such issue comes to his notice subsequently in the course of the proceedings under the section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section 2 of section 148".
27.i. Notes on Clauses appended to the Finance (No. 2) Bill also state that clause 57 of the Bill seeks to amend section 147 relating to income escaping assessment. It is proposed to insert Explanation 3 to the said section so as to provide that for the purpose of assessment or reassessment under this section, the Assessing 6
ITA Nos.1046/Kol/2013&1047/Kol/2014
Officer may assess or reassess income in respect of any issue which has escaped assessment and such issue comes to his notice subsequently in the course of proceeding under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148. This amendment has been made effective retrospectively from 1st April, 1989. Further, the Memorandum explaining the provisions of the Finance Bill mentions that it is a clarificatory amendment, as under : - "The existing provisions of section 147 provides, inter alia, that if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may assess or reassess such income after recording reasons for reopening the assessment. Further, he may also assess or reassess such other income which has escaped assessment and which comes to his notice subsequently in the course of proceedings under this section. Some Courts have held that the Assessing Officer has to ITA No.1104/Kol/2014 (M/s Subhalakshmi Vanijya Pvt. Ltd.) & 18 other appeals of different assessees restrict the reassessment proceedings only to issues in respect of which the reasons have been recorded for reopening the assessment. He is not empowered to touch upon any other issues for which no reasons have been recorded. The above interpretation is contrary to the legislative intent. With a view to further clarifying the legislative intent, it is proposed to insert an Explanation in section 147 to provide that the Assessing Officer may assess or reassess income in respect of any issue which comes to his notice subsequently in the course of proceedings under this section, notwithstanding that the reason for such issue has not been included in the reasons recorded under sub-section (2) of section148." 27.j. In view of the aforesaid statutory amendment, it is clear that the scope of reassessment is no more confined to the issues referred to in notice u/s 148, but also extends to other issues which come to the notice of the AO during the course of reassessment proceedings indicating the escapement of income. No doubt the issue of share capital at premium was not subject matter of notice u/s 148, nevertheless the AO proceeded to examine this aspect, thereby bringing it within the ambit of the order u/s 147.””
In the case of Chariot Agencies, the AO examined the receipt of share capital by issuing notices and has even given a finding that the share capital is properly explained. In the case of M/s.Mahavir Vinimay Pvt.Ltd., the issue in reassessment proceedings considered by the AO was whether expenses in connection with share issue were capital expenditure and had to be disallowed. It is thus clear that the AO had examined the receipt of share capital by the Assessee during the previous
ITA Nos.1046/Kol/2013&1047/Kol/2014
year and was therefore duty bound to examine the question of applicability of Sec.68 to the Share capital received during the previous year. The objections raised by the Assessee are accordingly rejected. With regard to non service of show cause notice u/s.263 of the Act, improper service of notice u/s.263 of the Act at old address of the Assessee and improper service of notice by affixture at wrong old address of the Assessee. All these aspects have already been dealt with and examined in the order referred to in the earlier part of this order. There is therefore no merit in any of the submissions made on behalf of the Assessee.
In the result, all the appeals are dismissed.
The order pronounced in the open court on 01.06.2016.
Sd/- Sd/-
[P.M.JAGTAP] [N.V. VASUDEVAN] ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated : 01.06.2016.
RG.PS