Income Tax Appellate Tribunal - Kolkata
Shri Ram Tradevin (P) Ltd., Kolkata vs Assessee on 10 March, 2015
ITA No. 1086/Kol/2014
Assessment Year : 2009-2010
IN THE INCOME TAX APPELLATE TRIBUNAL,
KOLKATA 'B' BENCH, KOLKATA
Before Shri Shamim Yahya, Accountant M ember
and Shri Ge orge M atha n, Judicia l M ember
I.T .A. No . 108 6 /KOL/ 2 01 4
Assess ment year : 2009 -2 01 0
Sh ri Ra m Tra d evin (P) Ltd .,...... ........ ............... ..................Ap p ella n t
Fla t N o. 18, Trimurti,
4, Lower Ra wd on S tree t,
Kol ka ta -700 020
[PA N : AA MCS 3519 H]
-Vs.-
Income Ta x Office r,........ .............................. ........ ...................Resp ond e nt
Wa rd -9(4), Kolka ta
Appeara nces by :
Shri R uches h Sinha, Advocate, f or the assessee
Shri Ajay Kumar Singh , CIT, D.R., for th e Departm ent
Dat e of concluding t he hearin g : M arch 04, 2 015
Dat e of pr onouncing th e order : M arch 10, 2 015
O R D E R
Per Ge orge M athan:
This i s an app eal filed by the assess ee again st th e o rder of ld. Commissioner of Inco me T ax, Kolkata-III pass ed under section 263 of the Incom e Tax Act 1961, in No. CIT-III/ DC( Hq)-3/Ko l/263/20 13-1 4/7012-14 dated 25.03.20 14 for the a ss ess ment y ear 2009-10. The adjournme nt sought on behalf of the assessee has bee n granted by my ld. brother. However as I am unwilling to cause contempt of the order of the Hon'ble High Court of Calcu tta date d 12.02.2015 in W.P. No 128 of 2015, the adjournment sought is rej ected a nd the appeal disposed off.
2. Sh ri Ruch esh Sinha, Advocate, rep res ent ed on b ehalf of th e assessee and Sh ri Ajay Kumar Sin gh, CIT, D.R. represent ed on behalf of the Revenue.
1 ITA No. 1086/Kol/2014Assessment Year : 2009-2010
3. This order is b ein g p assed as this appe al ha s had a hi ghly ch equered hi story. The ap peal of t he asses see h as be en filed on 20.05.2014. The assessee had b een in f ormed that in Column No . 11 the respo ndent 's add ress is i ncomplete. On 18.08.201 4, a lette r wa s sen t on beh alf of the asse ss ee by Shri Umesh Sh ukla, Director o f the ass ess ee- co mpany dated 1 1.08.2014, wherein it wa s requested th at the app eal of the as se ss ee may be h eard o n an early date. Con sequently the ap peal was posted fo r h earin g on 10.11.201 4. On 10.11.2014 none rep resent ed on beh alf of th e asses see. Ho weve r, an ad journment lett er was sent on th e ground that all the matt ers rel ated to the app eals with regard to s ection 263 have been d ef erred fo r hea rin g and th e m atte r will b e heard by a larger Bench of the ITAT. On thi s g round , an adjournm ent had been sought. The app eal of the assessee was adjourned to 15.1 2.2014. On 15.12.2014 again an adjournment letter wa s sen t, whe rein it was mention ed th at th e asses see-comp any has filed a W rit Petit ion befo re the Hon'ble Hi gh Court. The revenue h ad also fil ed a l etter opposin g adjou rnment vide a l etter d at ed 12.1 2.2014 on the g roun d that the is sue s in the asses see's appe al were squa rely covered by the various d eci sions of the Co ordin ate Bench of th is T ribu nal as follows :-
(i) Sta r Griha Pvt. L td . in ITA No. 1244 /Kol/2 013;
(ii) B ee T ee credit Mar keting Pvt. Ltd. in ITA No. 1598/Kol/2 013;
(iii) Bisakha Sales Pv t. Ltd . in ITA No. 149 3/Kol/2 013;
(iv) Vrindavan Commodities Pvt. Ltd. in ITA No. 1607/Kol/2 013;
(v)by th e Hon'ble High Court of Calcu tta in th e case o f Zigma Commodities Pvt. Ltd. [46 Taxmann.com 339(Cal)],
(vi)Ridhi Sidhi Vincom Pvt. Ltd. in ITA No. 1410/Kol/2013 of 2008-09
(vii)Patangi Trade & Ho ldings Pvt. Ltd. I.T. No . 15 33 to 1537/Kol/2 013 of 2 004-05, 05-06, 07-08, 08 -09 an d 09 -
10. However, o n 15. 12.2014 in the interest of justice, anothe r adjourn men t was g ranted to 11.02.2013.
2 ITA No. 1086/Kol/2014Assessment Year : 2009-2010
4. On 11.02.2015, the Bench did not sit and th e app eal was adjou rnment to 06.05.2015. On 23.02.2015, the asses see filed a Mi scella neous App lic ation, which was n oted as Stay Application No . 9 of 2015, wh erein it was in formed th at th e Ho n'ble Hi gh Court of Calcutta had passed an o rd er in a W rit Peti ti on no. 1 28 of 201 5, wherein th e Hon'ble Hi gh Court had di re cted as follows:-
ORDER SHEET WP 128/2015 IN THE HIGH COURT AT CALCUTTA Constitutional Writ Jurisdiction ORIGINAL SIDE M/S. SHRI RAM TRADEVIN PRIVATE LIMITED Versus THE COMMISSIONER OF INCOME TAX, KOLKATA-III, KOLKATA & ORS. BEFORE:
The Hon'ble JUSTICE I. P. MUKERJI Date : 12th February, 2015.
Mr. A. Tripathi, Adv. with Mr. R. Sinha, Adv., and Mr. A.K. Sanyal, Adv., for petitioner.
Mr. S.B. Saraf, Adv., with Mr. R. Bhardwaj, Adv., for respondents.
The Court : An appeal was filed before the Income Tax (Appellate) Tribunal, Kolkata, against the order dated 13th March, 2014, in section 263 proceedings. Such appeal is still pending. By this Writ, the writ petitioner wants this Court to pass an interim order of stay of operation of the order dated 13th March, 2014.
After having heard the learned counsel for the parties, this writ application is disposed of by directing the ITAT to consider the question of stay of the section 263 order dated 13th March, 2014 on the existing papers, or upon the petitioner filing an application for stay within one week from date, within three weeks from this date.
For a period of four weeks from date, the Assessing Officer will not take any coercive steps against the petitioner.
After four weeks this order will automatically stand vacated and any action by the Income Tax Department will abide by the order passed by the Assessing Officer or to be passed by the Appellate Tribunal.
Affidavits were not invited. The allegations contained in the petition are deemed not to be admitted.
Sd/-
(I. P. MUKERJI, J.)
5. This St ay Applicat io n No. 9 of 2015 i s si gn ed by one Shri R ake sh Kuma r Ve rma as Directo r of the asses se e-comp any. The annexu res are signed by Shri Ru ch esh. This Stay Petit ion filed by the asses see c ame to 3 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 be po sted for hearin g on 23. 02.2015 wherein th e o rder-sh eet noting is as follows:-
S.P. No. 0 9/Kol/2015 & ITA No. 1086/Kol/2014 23.02.2015 : P ost b efore th e B en ch on 2 5.02.20 15 fo r decid ing the fixation of th e sta y and appeal. This is a High Court direction matter and the same is to be disposed of on or before 12 .03.20 15 compulso rily, as per the W rit P etition order dated 12 t h F ebruary, 2015 of the Hon'ble Hig h Court in W.P. No . 128 of 2015.
Sd/-
(Mahavir Singh) Judicial Member On 25.02.20 15 when the St ay Petition was h ea rd, none rep resent ed on behalf of the assessee and the Div isi on Bench of this Tribunal h as held as follows:-
"4. In view of the above precedent, we find that the facts in the present petition is identical to the same. Hence, this stay petition is dismissed. But this petition is in response to the directions of Hon'ble Calcutta High Court in Writ Jurisdiction vide order sheet WP 128/2015 dated 12th February, 2015 wherein the directions of the Hon'ble High Court was that "After having heard the learned counsel for the parties, this writ application is disposed of by directing the ITAT to consider the question of stay of the section 263 order dated 13th March, 2014 on the existing papers, or upon the petitioner filing an application for stay within one week from date, within three weeks from this date. For a period of four weeks from date, the Assessing Officer will not take any coercive steps against the petitioner. After four weeks this order will automatically stand vacated and any action by the Income tax Department will abide by the order passed by the Assessing Officer or to be passed by the Appellate Tribunal "
In view of the directions of the Hon'ble Calcutta High Court, we feel that the appeal be heard at an early date to avoid any injustice to the assessee. Hence we fix the appeal for hearing on 4th March, 2015. No further notice will be sent to either of the parties. This order will be treated as a notice. Registry is directed to serve this order on urgent basis".
6. Consequent to th e St ay Petitio n ord er dated 25.02.2015 service of notice was also rout ed th rough the ld. CIT, D.R. The appeal was co nsequently fixed fo r h earin g on 04.03.2015. Today, when th e app eal was cam e up for hearin g ld . Counsel on behalf of the as se sse e sough t adjou rnment with a request th at th e ap peal of the assessee b e adjourn ed 4 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 and clubbed with other Section 263 matters. It was in fo rmed to him th at this bein g a n appeal wh ere there i s a direction from the Hon'ble Jurisdictional Hi gh Court, th e ap p eal h ad to be di sposed of on or before the 12 t h March, 20 15. At this point, ld. Counsel on beh alf of the a ssess ee submitted that the a ss ess ee h as the liberty to waiv e th e early hea rin g, to which the Ben ch did n ot agree. Ld. A.R. then filed an adjourn ment l ette r, aft er th e bench had risen, reques tin g th at the adjourn ment be g ranted till 31.03.2015 without giving an y re aso ns f or the sa me.
7. My Le arned Brother Shri Shamim Yah ya , ld. Ac counta nt Me mber has granted a djournment to 31. 03.2015 and the same is also signed as noted by the ld. Counse l who has appeared on behalf of the assessee e ven before it was put up before me. However, as I am unwilli ng to Cause Contempt of the de cision of the Hon'ble Jurisdictiona l High Court in the Writ Pe tition No. 128 of 2015, the matter has been treated as heard and is being disposed of on merits.
8. The ass essee has filed a p aper book containin g 372 p a ges. The Revenue h as also filed a pap er book to day, i.e. 04.03. 2015.
9. The defect in the app eal filed by the ass essee ha s not b een co rrect ed till date. I a m live to the deci sion o f the Hon 'ble Sup reme Court in the c ase of Calcutt a Di scount Co. Ltd. reported in 91 ITR 8 (S C) wherein it has been held that th e Trib un al in decidin g a c ase should not be unduly influenced by trivial proced ural techn icaliti es. The memo of app eal should be liberally s een and entertain ed. No sp ecific fo rmula i s neces sary fo r s eekin g relief at the hands of a Cou rt of T ribunal if th e neces sary g roun ds h ave been taken in the app eal memo. Ho wever the erro rs, omi ssions and co mmissio ns as elaborat ed in this o rd er would show th at the T ribunal has no other opt ion but to point o ut the same and as th e f act findin g body, adjudicate on it too. This o rder also decid es the app eal on m erits.
5 ITA No. 1086/Kol/2014Assessment Year : 2009-2010
10. On merits this i s a c as e where th e ld. CIT has in voked his po wers under section 26 3 on the gro und that the share applicat io n money and premiu m received by the asse ss ee ha s n ot been examin ed o r inqui red into to the logical end. Admitt edly the issues in this appe al are squarely co vered by th e decision of the Coordin ate B ench o f thi s T ribun al in the case o f Sta r Grih a Pvt. L td. in ITA No. 1244/Kol/2013, Bisakha Sale s Pvt. Ltd. in ITA No. 1493/Kol/2013 referred to supra. But the mo re interestin g asp ect in this ca se specific ally is the number of vari ations in signatu re s. Fo r example, the app e al of the as se ssee h as been ve ri fied by Sh ri Umesh Shukla, the Di recto r of th e as ses se e-comp any. The appeal h as been v erifi ed on 16.05.201 4. His si gn ature in th e Fo rm No. 3 6 an d the verification i s as follows:-
6 ITA No. 1086/Kol/2014Assessment Year : 2009-2010 7 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010
11. Now there is a lett er d at ed 18.07 .2014 by the ass es see address ed to the Income Tax Offi cer, Ward -9(4), whe rein Sh ri Ume sh Shukla has signed as follows:-
8 ITA No. 1086/Kol/2014Assessment Year : 2009-2010
12. Then we h av e another lette r dat ed 1 6.05.2014 by which the appeal has been fil ed befo re the Tribunal, wherein Shri Umesh Sh ukla's si gn ature is as follows:-
9 ITA No. 1086/Kol/2014Assessment Year : 2009-2010
13. The said Sh ri Umesh Shuk la was app ointed as a Di recto r in the as se sse e-comp any on 25.09. 2013 and his appoint men t expi red on 30.08.2014. The Stay Applic ation in S.A. No. 0 9/Kol/2015 is sign ed by one Sh ri R akesh Kuma r Verma. His sig natu re is as follows:-
10 ITA No. 1086/Kol/2014Assessment Year : 2009-2010 11 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010
14. Sh ri Rakesh Kuma r Verma was app ointed a s Directo r of the as se sse e-comp any on 09.02 .2012. In the Vakalathna ma dated 05. 05.2014 issu ed to th e In come Tax Of ficer, W ard-9(4) autho ri sin g Sh ri Rakesh Baid, 12 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 FCA fo r the insp ectio n of th e ass ess ment reco rds and obtainin g photocopies of the necess ary document s for th e assessment year 2009-10 co ntained th e followin g si gnatu re of Sh ri Rakesh Kuma r Verma app ea rs:-13 ITA No. 1086/Kol/2014
Assessment Year : 2009-2010
15. Now co ming to the Vak alathnama fil ed befo re the T ribun al. In the Vakalathn ama dat ed 01. 11.2014 the ld. Counsel appointed i s Sh ri Ruche sh Sinha and th e clien t who has si gn ed i s Mr. Umesh Shuk la which are as follows:-14 ITA No. 1086/Kol/2014
Assessment Year : 2009-2010
16. One should keep in mind that Sh ri Umes h Shuk la's appointment as a Directo r expi red on 30.08.201 4 and the Vakalathn ama is d ated 01.11.2014.15 ITA No. 1086/Kol/2014
Assessment Year : 2009-2010
17. The si gn ature of Sh ri Ruchesh Sinh a, the ld. Counsel on b ehalf of the as se sse e would also be int ere stin g to note. Now co min g to the adjou rnment letter filed before the T ribunal on 15 .12.2014, the sign ature 16 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 of Shri Ruch esh Sinha again changed. Copy is scann ed :-
17 ITA No. 1086/Kol/2014Assessment Year : 2009-2010
18. In th e adjourn ment l ett er dated 1 0.11.2014, again the si gnature of Sh ri Ruche sh Sinha is comp letely differe nt.
18 ITA No. 1086/Kol/2014Assessment Year : 2009-2010 Now comi ng to th e adjourn ment l etter filed on 04.03.2013, the sign atu re of Sh ri Ruch esh Sinha ag ain changes.
19 ITA No. 1086/Kol/2014Assessment Year : 2009-2010
19. Now co min g to the Vakal athnama filed by the assessee in th e St ay Petition No. 9 of 2 015, the Vakalathnama i s undat ed and of Feb ruary, 2015 and the Vak alathnama has been given in the n ame of Sh ri An up am Trip athi and Sh ri Ruche sh Sin ha, the Vak alathn am a is given by Shri 20 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 Rakesh Kumar Verma, the s i gn atures are as fo llo ws :-
21 ITA No. 1086/Kol/2014Assessment Year : 2009-2010
20. The ann exu res to th e St ay peti tion are si gn ed by one Ruche sh, the co py is scanned and att ached:-
22 ITA No. 1086/Kol/2014Assessment Year : 2009-2010
21. Now comin g to the p aper bo ok filed by the assessee, the indexes signed by the ld. Counsel fo r the asse ss ee are a s follows:-
23 ITA No. 1086/Kol/2014Assessment Year : 2009-2010 24 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 25 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 26 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010
22. Even th e nam e of the ld. Counsel is not av ailable.
27 ITA No. 1086/Kol/2014Assessment Year : 2009-2010
23. Thus we are now f ac ed with diffe rent signatu re s fo r every person, fro m the Directo rs of the ass ess ee-co mpan y as also th e ld. counsel, who are si gnato ries in th e app eal. This puts into the questio n of ve ry authenticity o f the appeal filed as al so the locus standi of the ld. Counsel app earing on behalf of the as sessee much more so the ld. Counsel, who has sought adjourn ment. The Form 36 and the g roun ds of app eal do not co ntain the s eal of the Comp any nor does th e Vakalathn ama's. Furthe r the ap peal an d th e Vakalathn ama is not accomp anied with the authorisation /minutes authorisin g th e concern ed pe rson to si gn and verify the ap peal or grant authoris ation by Vak alathnama. On this ground the app eal of th e asses see i s liable to be dis missed and I do so .
24. The judicial syste m beli ev es that th e litigant be fo re it would co me with clean h and s. Ho wever, in th e pres ent case even that is found wantin g.
25. A perusal of the copy of the Writ Petitio n filed befo re th e Hon'ble High Cou rt of Calcutta shows that re- as sessment p roc eedin g s were initiat ed ag ainst the p etitione r- as ses se e. However, the f acts sh ow th at the as se sse e had filed its retu rn of inco me for the a ssessment yea r 2009-10 on 29.09.200 9 disclosing a gro ss total income of Rs.151 /-. This retu rn was v erifi ed by one Shri Raju Mondal. Howeve r, the retu rn doe s no t co ntain th e si gnature of Shri R aju Mond al. Subsequently a letter wa s filed before the Inco me Tax Offic er, W ard-9(4) on 12.10.20 10 dated Nil wherein it i s men tioned th at th e as ses se e-comp any has exp ended Rs. 46,000/- towards non-busin ess pu rposes, co nseq uent to the s ame i s liable to be added to the net p rofit. In the s aid lette r, th e ass es see al so mention s that the inti mation under sect ion 143(1) has n ot been received. This lett er has be en si gn ed by one Sh ri P.K. Agarwal as a Di re ctor of the as se sse e-comp any. The exist en ce of this lett er is not di scus sed in th e Writ Petition. On account of th is lette r, the no tice under section 148 had been alle gedly issued on 0 1.11.2010 to which the asse ss ee h ad filed a letter d ated Nil on 26.1 1.2010 requ esting to con sider th e return fil ed 28 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 under s ection 139 (1) as th e return i n respo nse to the notice unde r sect ion 148. The as ses sment o rd er cam e to be co mpleted on 30. 12.2011 under section 143(3) read with sectio n 1 47 and even th ough there was a clear-cut conce alment of inco me as ad mitted by the ass es see, no penalty proce edin gs were initiated much le ss contempl ated.
26. In para 6 o f the Writ Petition, the as se ssee mention s that the Assessing Of fice r speci fically scrutin ized the d etail s of the share app lication money receiv ed by the petitioner du rin g the yea r und er co nsideration and lo oked into docu mentary evidenc es p roduced b efore him. However, the o rder-sheet notin g o f the A ss es sin g O fficer as al so the as se ssm ent reco rd s do es n ot show anything to even remo tely sug gest that the A ss essin g Officer h ad sc rutinized the det ails of th e sha re application mon ey rec eived by the assessee-p et itio ner durin g th e year und er co nsideration.
27. In para 10 of the W rit Petition, the assessee has submi tted that th e as se sse e h ad replied to the Assessin g of ficer st atin g th at the a ss ess ee h as filed an appeal before the ITAT and that it has a very st rong c ase on me rit s and was hopeful that the enti re p roce edin gs unde r sec tion 263 shall be quashed by th e ITAT. This lett er i s by one Mahe sh Kuma r, C.A., but no auth oris ation in his behalf i s fou nd in the assessment reco rd s.
28. In para 11 , th e assessee-p etitio ner h as submit ted th at a notice dated 2 3.07.2014 was i ssu ed by the Assessin g Offic er to which the as se sse e had submitt ed that the assess ee ha s sou ght early hea rin g of the case before the ITAT.
29. In pa ra 28 of the W rit Petition, the p etitione r- as ses se e h as submitted th at it has al ready filed an appeal befo re the IT AT, Ko lkata, Bench-'B' and no notice of hearin g is received by the petition er-as se ssee. Admitt edly the date of filin g of th e W rit Petition is not available to the Trib unal but clea rly as thi s i s a W rit P etition of 2015, it is presu med that 29 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 the Writ P etition has been fil ed aft er 01. 01.2015. With this in mind the facts in the as se ss ee's ca se sho w that the ap peal was fil ed before the Trib unal on 20.05.2014. The defect in the appe al has been inti mated to the assesese and the s ame has not b een co rrected. On 1 1.08.2014, an ea rly h earin g ap plication was fil ed on behalf of the ass es see by Shri Umesh Shukla, Directo r of the as ses se e-comp any. The appeal of the as se see e wa s posted fo r hearin g on 10.11. 2014 (copy is scan ned and scan enclosed ), on which d ate one Sh ri R uch esh Sinh a, Adv ocate, filed an adjou rnment l etter men tionin g that they have been given an understa nding th at th e Ben ch h as d ecid ed that all matters relatin g to the app eals with regard to Section 26 3 ha ve been de fe rred fo r hearing and the m atter will b e hea rd by a larger Ben ch by the Hon'ble ITAT.
30 ITA No. 1086/Kol/2014Assessment Year : 2009-2010 In vie w of the se ci rcu ms tances, an adjournment was sought fo r ei ght weeks. None was p res ent on behalf of the assessee. The appeal was 31 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 adjou rned to 1 5.12.2014. Here mu st be m ention ed that th ere wa s a request for refe ren ce to a Sp eci al Benc h in the 2 63 matter in the ca se of one M/s. Ramshila Ente rp ri ses, which was re fused by the Bench as pe r notings in the file of M/s. R amshila Ent erp ri es and on of fu rther request by the asses se e-Ramshila En te rp ries to the Hon'b le President, ITAT, the same was also rej ected b y th e Ho n'ble Pre sident, ITAT aft er d ue p ro cess. On 15.12.2 014 when the as ses se e's appeal cam e up for h earin g, the as se sse e's ld. Counsel Shri Ruche sh Si nha again sough t an adjournmen t on the ground that the as se ssee-comp any has filed a W rit Petition befo re the Hon'ble Hi gh Cou rt, the copy o f the adjournment lett er i s s cann ed and 32 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 attached herewith.
None was p resen t on beh alf o f the assessee an d th e R even ue h ad also objected to the g rantin g o f adjourn men t. The appeal of th e a sse ss ee wa s 33 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 adjou rned to 1 1.02.2015. On 11.02.2015 as B ench was not fun ctioning, the app eal was adjou rned and p ost ed to 06.05.2015. However, in th e me anti me, the a ss ess ee h as app roach ed the Hon 'ble Ju ri sdiction al Hi gh Court o f Calcutta and the Ho n'ble High Court in W rit Peti tion No. 128 of 2015 v ide an orde r d ated 12.02.2015 had held as follows :-
34 ITA No. 1086/Kol/2014Assessment Year : 2009-2010 Thus clearly ev en b efore th e Hon'ble High Co urt the ass es see h as not spoken the truth. Now wh en the m atter was po st ed on 04.03.2015, the 35 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 as se sse e h as sou ght adjourn ment vide hand-writt en let ter, copy o f which is scann ed and at tach ed.36 ITA No. 1086/Kol/2014
Assessment Year : 2009-2010 Su rprisin gly a s ment ioned ea rlier, none of the signatu re s tallied. No w this han d writt en adjourn men t l etter dated 04.03.20 15 has not been filed before th e Bench. It has b een filed aft er the Bench has ri sen . As p er the Office Manual of the Income Tax App e llate Tribunal, Chapter XI, Clause 58, in case the reque st fo r adjo urn men t is refus ed, the ap plic ant i s to be informed by a lett er. In the present ca se as mentioned earlie r th e adjou rnment l etter is itself questio nab le in rega rd to the authori sation grant ed to counsel as also on account of th e veracity of th e si gnatu res. As per Clause 59, if the request fo r adjournm ent is made by some rep resentative o f the ass es see, it shou ld invari ably be verifi ed wheth e r letter of autho rity is filed o r no t and a note to that effect should be given in the offi ce note givin g the info rmati on as required in th e p rescribed form. As p er Clau se 60 the T ribunal is n ot bound for a reply to application for adjourn ment. Rep li es will howeve r, be given as far as possible. Unles s the applicant i s info rmed that hi s appl ication fo r adjournmen t has b een grant ed, he sh ould re mai n p resent at th e h ea rin g o f th e appeal, for app lication as the c ase may b e.
In the p res ent c as e, the h and- writt en adjo urn ment lett er h as violated every a spect. Su rp risin gly the adjo urnment ha s been so ught to 31.03.2015 when the couns el was specifically informed that a s per the order of the Hon'ble High Court the Tri bunal was to pas s the o rder lat est by 12 .03.2015. Still surp ri sin gly the ad jo urnm ent has been g ranted by the ld. Accountant Member in the absenc e of the Judicial Me mber and the said adjou rnment has b een ev en not ed an d acknowled ged by the coun sel app earing for the as se ssee even befo re the sa me has been put before the Judicial Member for hi s con sent.
As I am un willing to be pulled up for c ontempt of th e o rd er dat ed 12.02.2015 of the Hon'ble Hi gh Court o f Calcutt a in W.P. No. 128 of 2015 the adjourn ment sought i s rejected and the app eal of the ass essee is being di sposed o ff in view of the p rin ciples l aid down in the c ase of S. Govinda raja Mudali ar repo rted in 206 ITR 62 (M ad.) 37 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010
30. Comin g fu rther the appeal filed by th e assessee requires th at the as se sse e bein g a Co mpany , sign atu re s must be un der the se al of the Company. The appeal i s not under the seal of the Comp any nor do es th e app eal filed contain the Co mpany's R esolution authorizi ng Sh ri Umesh Shu kla as a Di re ctor to si gn the appeal o n behalf of th e as ses see-comp any. The Vakalathnamas which a re on reco rd also do not contain the seal of the ass essee-co mpany. Ad mittedly as m ention ed earlier, the Vakalathn ama bein g an inv alid Vakalat nam a and as there i s a di rection wherein the ap p eal i s to be dispo sed o f on or b efore 12 .03.2015 as pe r the directio n of th e Hon'ble Ju ri sd ictio nal Hi gh Court of Calcutta, this app eal is li able to be dispo sed of. A co py of the direction and the ord er disposin g th e Stay Petitio n is scann ed a nd is to be t re at ed as part of this order.
38 ITA No. 1086/Kol/2014Assessment Year : 2009-2010 39 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 40 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 41 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 42 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 43 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 Notice of heari ng h as been serv ed at a ll kno wn addres s of the assess ee- Company a nd its Di rectors.
44 ITA No. 1086/Kol/2014Assessment Year : 2009-2010
31. Now co min g to the f acts in th e ass essee's case, the assessee- co mpany had filed its retu rn o f inco me on 29.06.2009 declarin g a tot al inco me of R s.151/-. The assessment order came to be pass ed unde r sect ion 147/143(3) on 30.12.2011 wherein th e As sessin g O ffic er h as mention ed as follows:-
"Subs eq uen tly it was observ ed from th e su bmissions made by the assess ee o n 1 2.10.20 10 th at t hey h ave earn ed accou nting charg es of Rs.46 ,000/- in cash, which was not included in the gross total income as sho wn in the Profit & Loss account".45 ITA No. 1086/Kol/2014
Assessment Year : 2009-2010 However, a p eru sal of the lette r dated NIL fil ed on 12 .10.2010 shows that the ass es see ha s m entioned as follows:-
46 ITA No. 1086/Kol/2014Assessment Year : 2009-2010 The a ss ess men t c ame to be compl eted u nder sectio n 147 read with sectio n 143(3) wh erein the a mount of Rs.4 6,000/- has been added. No proc eedin g for conceal ment of inco me h as been i nitiated. In the asses sment o rder, howeve r, th e A ssessin g Of ficer m entio ns that th e as ses se e-comp any has issu ed 3,3 7,750 share s @ Rs. 10/- at p remiu m @ R s.390 /- of share capital along wi th n ame, add res s & PAN o f sh areholders f rom whom the shares app lication received and shares allo tted was furn ished. The details wit h resp ect to in cre ase of share capital submitt ed by as se ssee-comp any were examin ed th rough issue of notice u/ s. 133(6) and replies are placed o n record.
The ord er shee t notin g of the as ses sme nt folde r i s scann ed and attached herewith:-47 ITA No. 1086/Kol/2014
Assessment Year : 2009-2010 48 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010
32. As ext ra cted b efore the o rder-sheet entri es do n ot show of any 133(6) notice having been i ssu ed o r repli es receiv ed. The asses sment record s, ho wev er, sho w of a f ew tea r o f acknowl edgment slip s for notice 49 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 hav ing been is sued and h and deliv ered und er s ection 133(6) o n 04.04.2011 and certain replies received fro m variou s sh are ap plicant s by han d delivery, all in the identi cal formats an d all of the m dat ed N IL. Even the B ranch o f the B ank fo r all thes e co mpani e s are the same and th e copy of the Bank Account giv en i s for th e perio d 01.03.2009 to 31. 03.2009 an d the tran saction s in each o f these acco unts v ary between R s.4. 45 crores and R s.14.77 crores cu mulativ ely for just one month and the trans action s are basi cally fu nd movement s b etween multip le account s. F or example, in the as ses se e's ca se it self the perio d for the Ban k account 03.0 3.2009 to 31.03.2009, the tran sa ction is i n the range of cumu lativ e total of R s.11.91 cro res d eposit as a gai nst R s.11.81 crore s withd rawal. The mini mum balance requiremen t wa s R s.10 ,000/- and the mi nimu m bal ance main tain ed as on 31.0 3.2009 is Rs. 10,910/-. The accou nts see ms to have been open ed on 03.03.200 9 and ca sh was int ro duced o n 05.03.2009 o f an amount of R s. 11,000/-. Then on 0 7.03.2009, the fi rst amo unt of Rs. 35,00,000/- came in and on 07.03.2 009 itself R s.35, 00,000/- went out, ag ain came i n and went out brin gin g th e balanc e of R s.11 ,000/- aga in. On 09.03.2009, Rs.40,00,0 00/- came in and went o ut, th en Rs.35,00,000 /- dep osited and then R s.35,00,000 /- withd rawn. Ag ain R s.35,00,000 /- dep osited and R s.35,00,00 0/- withd rawn and at the end o f 09.03.2009 Rs. 11,000/- mini mum b alan ce maint ain ed . S imil arly the a mounts varyin g between Rs.35,00,000/- and Rs.49,00,000 /- keep gettin g d eposit ed and withd rawn immediately. A p eru sal of th e Bal an ce-sh eet of th e as seses e fo r the year end ed 31.03.2 009 shows that i t has received accountin g charges of 6000 rupees. Admi ttedly the assess ee ha s a rent al premises, no rental expendi ture ha s been sh own, no st aff expen diture has been shown. The as se sse e d oes not have any fixed asse ts. Co nseq uently no dep rec iatio n claim is there. This is the first ye ar of busines s of the ass essee-comp an y and the tu rnover is only 6000 rupees. It doe s not have a p rodu ct description. But R s.10/- sh ares goes at a p remiu m that would put even th e global 500 compani es to sha me. In th es e facts, the ld. CIT had inv oked his powers under section 263 and h ad pas sed his ord er unde r s ection 263 o n 13.03.2014 directing th e Asse ssin g Officer th at he should conduct 50 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 indep end ent enquiries to veri fy the d ocument s in respect of p roo f of subsc ription to sha re capital including the share p remiu m and that the Assessing Offi ce r should trace th e so urce of share c apit al by enquiry thro ugh which the money h as b een int ro duced and other di rections.
33. One of th e grou nds raised by the ass ess ee is that no prop er notice of hea rin g was giv en to the app ellant. A peru sal of the o rder o f the ld. CIT shows that th e add ress mention ed in th e ord er an d th e sho w-cau se notice is as follows:-
"M/s. Shri Ram Tra devin Pvt. Ltd., 14C, Maha rishi Devendra Road, 4 t h Floor, Kolka ta-70 0 007".
A perusal of the affidavit fil ed on beh alf of th e ass essee by Shri Rakesh Kuma r Verma, Di re ctor in the Stay P etition is also th e same. The add re ss in the Writ Petition filed befo re th e Ho n''ble High Cou rt is al so the same. The said ad d res s to which th e ld. CIT having i ssu ed sho w cau se notice under section 263, is the same which has also been accepted by the as se sse e even in th e W rit Petition befo re the Hon'ble Ju ri sdictional Hi gh Court, it cannot be said that the ass es see has not been given p roper notice. It may also be m ention ed here that even th e ea rly hearin g app lication dat ed 11.08.2014 contains th e sa me add re ss. Ho weve r, it mu st be mention ed he re th at the F orm 3 6 contains of di ffe rent add ress, namely Shri Ram Tradevin Pvt. Ltd., Flat No. 18, Trimurti, 4, L ower Rawdon Street, Kolka ta-70 0 020 as also th e add ress to which the n otices were to be sent. The fees fo r filin g the app eal fo r an amou nt of Rs.500/- has been paid thro ugh HDF C Bank debit to A/c. No. 059410000000 59, Pranay Tower, Lucknow. The assessee has i ssu ed a let ter to the A ss essin g Offi cer dated 19.08.2014 wherein the a ssess ee's address is sho wn as "Shri Ram Tradevin Private Limit ed, 2 29, 2 n d , T ej K umar Plaza , Ha zratg anj, Lucknow- 226001".
Su rprisin gly none o f th e letters o f the as sessee-co mpany specifi es th e regi stered address of the as sesse e-company except the lett er with th e Lucknow address. In fact only the letter of the as ses se e-comp any showin g 51 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 the Lucknow add ress i s o n a prin ted let ter heads, rest are all on computer gen erated lette r head s. Ev en the rub ber st amp of the assessee-co mp any's nam e and Di recto r in th e Form 36 and grounds of app eal dif fe r fro m the rubber stamp in the Vakalathnam a dat ed 05. 05.2014 befo re the A sses sin g Authority.
52 ITA No. 1086/Kol/2014Assessment Year : 2009-2010 53 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010
34. After h aving con sid ered the facts in the present cas e an d I am of the 54 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 view th at the f act s on merit s in the as sesse e's case are identical to th e facts in the case of Bisakha Sal es Pvt. Ltd. in ITA No. 149 3/Kol/2013, wherein the Coordin ate B ench of thi s Tribunal has held as follows :-
"7. We have considered the rival submissions. A perusal of the order of the ld. CIT passed under section 263 shows that on the basis of substantial information available to her that there were numerous companies which were created with bogus share capital for the purpose of money laundering, the ld. CIT has called for the records and has, after due verification, issued the show cause notice to the assessee. It further shows that the ld. CIT, after obtaining the replies from the assessee and due inquiry, has drawn a conclusion that the assessment order passed under section 143(3) read with section 147 was erroneous and hence prejudicial to the interest of Revenue. A perusal of the order of the ld. CIT further shows that there are a number of companies in this regard, doing the business of money laundering under the guise of share capital introduction.
7.1. Facts in the present case show some of the peculiarities of the various number of cases on which such revision has been done by the CIT. There are more than 500 appeals against such 263 orders at the Calcutta benches of this Tribunal. We are given to understand that many more are under the process of reopening. The peculiarities of these type of cases are that after the return is filed, under the guise of a letter from the assessee, the AO's attention is drawn to this file. The AO issues notice under section 148 for some reasons. In the course of the reopened assessment, allegedly various documents in respect of share capital introduction are also placed before the AO and the issue on which the reopening is done is practically accepted as the amounts involved for the purpose of reopening are very meager. The reassessment is completed by making minor additions and without doing any investigation in respect of share capital introduced. One of the conspicuous peculiarities in these type of cases are that from the time of issuing notice under section 148 to the date of the completion of the assessment, the whole process normally is completed within a period varying between two months to four months. This is so that such reopening never gets recorded in the registers maintained by the AO in respect of such reopening and intimation to higher authorities.
7.2. The first question comes to our mind is as to why this hurry in completing the reassessment proceedings especially when substantial time is still available and detailed inquiry is expected. Normally, once reopening is done by issuance of notice under section 148, the full time as available under the Act is used by the AO but conspicuously in all such cases the assessments are closed fast. These are special cases where within such a short period of issuance of notice under section 148, assessment stands concluded without any investigation or verification or inquiry worth its name. One is left wondering as to whether it is on purpose and design or whether it was in the normal course as this feature is special only to such companies where large share capital has been introduced.
7.3. Tax avoidance is an accepted principle. Any person is entitled to adjust its affairs in such manner as to minimize tax liability. However, the methodology and acts done in such cases of capital formation is not tax avoidance. It is more in the nature of tax evasion by money laundering. These transactions have in effect three limbs. The first limb is the creation of the shell 55 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 companies with substantial share capital which is balanced with inventories in the form of shares in other shell companies. The second limb is the transfer of such shell companies to persons who desire to use such substantial share capital companies for converting their unaccounted money into accounted funds and use such shell companies to do legitimate business. The third limb is when the shell companies after being taken over, the assets in the form of inventories are encashed whereby the unaccounted monies are laundered and brought into the company for conducting the legitimate business. All these three limbs are not done in one assessment year but in different assessment years. In fact, in the present case the share capital has been introduced in the assessment year 2008-09, the management started the change in the assessment year 2010-11 and was completed in the assessment year 2011-12 when even the investments were redeemed. Thus it is not in one year the whole process is done and it is done over a period of more than two and sometimes three assessment years. There can be companies which were created in the assessment year 2005-06, or even 2006-07 being years which would be beyond the period of limitation for reopening but the change in management and the conversion of the inventories take place in 2008-09 or later which is within the period of limitation for reopening. The ld. CIT by including clauses (ii) and (iii) in her order under section 263 is but only drawing the attention of the AO as to the line of enquiry that is expected to be done. At two points unaccounted monies are laundered. At the first stage and at the third stage, i.e. once at the point of creation of share capital and then again at the point of converting the inventories/investments/ loans and advances into funds for the legitimate business purpose.
7.4. It is relevant because the creation of the shell companies and introduction of the share capital is not the only issue that comes up. This is but the tip of the iceberg. A perusal of the Balance sheet and Profit & Loss account in the case of the assessee shows that the share application monies received by the assessee along with the premium are represented in the Balance sheet in the form of current assets being the unquoted equity shares in other such companies. That is the share application money received by the assessee is used for making further investments in other such similar shell companies from whom cash is taken and rerouted through cheques. These shell companies which are acquired by the interested third parties purchase these companies at a fractional amount of the value of the shares. That means a company whose share value is Rs.10/-, the share is issued at a premium of Rs.490/- total value of the share becomes Rs.500/-. This contains first portion of the unaccounted cash brought in or converted through the accommodation entry. Now this 500 rupees share is purchased by the third party or the interested person in taking over the company for the purpose of utilizing its capital. It may be two rupees or three rupees per share. Here the purchase price is even below the face value of the shares or at the face value. The premium is in effect the bonus. The premium already introduced sits in the liability side as a reserve and on the asset side as investments in other shell companies. Now once the controlling interest is taken, then the balance sheet has to be cleaned. The balance sheet which now holds in current assets the un-quoted shares of other shell companies and loans and advances get cleaned by again liquidating these current assets. Now these current assets representing the share application money or the inventories being shares in the unquoted companies are sitting at a premium because these shares have also been applied for and purchased at a premium. How this money was brought back into the company has not been 56 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 examined. When this has come back has not been examined and who are the people responsible when these transactions took place has not been examined. Here the second round of laundering of unaccounted funds is done. Much less being examined, the details are not available nor given. This is because the inventories are also shares of shell companies and no investor worth his salt would acquire the shares of such shell companies at such premium. The question would arise also as to whether any of these shell companies in which the assessee company has made the investment, have also been sold or transferred. In such a case, it becomes more intricate. There is no information as to whether there is a claim of capital loss or there is an offer of capital gains in the returns of income of the assessee how these shares more so the current assets were cleaned from the balance sheet. These are cases of clear human ingenuinity with the clear and contumacious intention to defraud the revenue. It is not the handiwork of one person alone. One person has created the shell, another has funded the shell with an intention to launder unaccounted funds and after having acquired the shell has used it for converting its funds also. There is no information as to who are the latest beneficiaries of such shell companies and for what purpose the companies are being used. This is just the reason why the provision of section 56(viib) hasbeen introduced.
7.5. Coming to the issue of premium, though there has been an argument by the ld. Sr. Counsel that the ld. CIT has dropped the issue of premium, it is nowhere found in the order. The issue of share premium in line with the provision of section 68 needs to be examined.
7.6. We find that the ld. CIT has exercised his jurisdiction u/s 263 of the Act due to the following two reasons:
i) Huge Share premiums were received and this was not enquired into by the AO.
ii) AO has not done proper enquiry into the share application money received.
7.6.1. As regards the share premium receipt, we find that the assessee company was incorporated on 12.02.2007. During the current year the assessee company has received share application money for a share of nominal value of Rs.10 each per share at a premium of Rs.240/- each. Apparently there was no reason as to why the share of this company would command so much share premium. Since the AO has not done any examination in this respect the ld. CIT has exercised his jurisdiction u/s 263 of the Act. In this regard the ld. Counsel of the assessee has submitted that the share application money was received with a huge share premium only to reduce the incidence of ROC fee which is attracted when shares are allotted at par.The ld. Counsel of the assessee further submitted that the AO need not make any enquiry in this regard as it was not warranted as Section 56(vii)(b) was inserted by Finance Act 2012 w.e.f. 01.04.2013.
7.6.2. Now we find that the above submission of the ld. Counsel of the assessee is not acceptable. In this case shares of Rs.10 were applied at a premium of Rs.240/-.
There is no apparent reason as to why such huge amount of share premium would be paid for obtaining share of face value of Rs.10. Any normal prudent person who makes investment in shares would make the investment in accordance with the fair market value of the shares. It certainly warranted an 57 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 enquiry by the AO. Moreover, the enquiry into the other aspect of share application money receipt was also to be done keeping in view this aspect of huge share premium receipt.
7.6.3. In this regard we may note that section 56 (vii)(b) reads as under :-
56 (viib) :Where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares."
7.6.4 By no stretch of imagination it can be said that examination u/s 68 of disproportionate share premium money hinges on the provision of section 56(viib). Admittedly this sub-section was inserted by the Finance Act 2012 w.e.f. 01.04.2013. Simply because this section was inserted w.e.f. 01.04.2013 it cannot be inferred that any huge share premium receipt much beyond the fair market value prior to this insertion does not require any examination by the revenue authorities under section 68 of the IT Act. As a matter of fact section 54(v) was inserted w.e.f 01.04.2005. This was in connection with the amounts received without consideration and the treatment thereof. In other words this related to taxation of gifts received. By no stretch of imagination it can be claimed that prior to this insertion the receipt of money without consideration as gift was not required to be examined. As a matter of fact, the Hon'ble Apex Court in the case of CIT vs Mohan P. 291 ITR 278 was exactly considering this issue.
7.6.5 Hence the submission of the ld. Counsel of the assessee that as insertion of section 56(viib) was done w.e.f. 01.04.2013 there was no requirement on the part of the AO to enquire the receipt of huge share premium u/s 68 is not at all sustainable.
7.7 There is another important aspect which should also be borne in mind in this case. These shares were received after paying huge premium by the allottees.
These were subsequently transferred at face value or even at discount. This means that on transfer of shares the allottee did not receive any premium. This means that huge amount was received and paid as share premium with full knowledge that there will be no recovery or there is no scope of recovery of share premium. This was designed to facilitate the transfer of these companies to other persons on payment of nominal or discounted value of shares. In other words the value embedded in the share premium was meant to be transferred under hand, and prima facie it appears that the transfer took place upon payment of under hand money. This is a classic case of money laundering and the share premium was being received and paid to launder the black money. This happens at the second limb i.e., when the directors change and the company changes hand.
7.7.1. The above facts clearly provide that receipt of share application money with huge share premium warranted detailed enquiry by the AO and not a perfunctory enquiry.
7.8. The Hon'ble Apex Court in the case of CIT vs Durga Prasad More 82 ITR 540 and in the case of Sumati Dayal vs CIT 214 ITR 801 has expounded that revenue authorities are also supposed to consider the surrounding 58 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 circumstances and apply the test of human probability. In these cases the transactions though apparent were held to be not real ones.
7.8.1 In 63 ITR 609 in the case of CIT vs Sri Meenakshi Mills Ltd Hon'ble Apex Court has held that in exceptional circumstances courts are entitled to lift the veil of corporate entity and to pay regard to the economic realities behind the legal facade.
7.8.2. Hence just because the share application with huge and unjustified share premium was received from corporate entities through banking channel, no enquiry is warranted is not at all a sustainable plea on the facts and circumstances of the case and on the basis of exposition of the Hon'ble Apex Court as referred above. In fact it warrants a more detailed enquiry.
7.9. We further find that the Hon'ble Apex Court in the case of Bharat Fine Insurance Company vs CIT (1964) 34 Cos. 683 has held that prior to the enactment of section 78 premium received on issue of shares were profits. Now section 78 of the Act provides that aggregate value of share premium should be transferred to an account to be called the securities new account. Section 78(2) of the Act provides that share premium account may be utilized for the following purpose :-
(a) in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares :
(b) in writing off the preliminary expenses of the company;
(c) in writing off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company; or
(d) in providing for the premium payable on the redemption of any redeemable preference shares or of any debentures of the company 7.10 From the above it is apparent that but for the restriction provided u/s 78(2) the amounts credited in the share premium account would take the character of the profit and consequentially would be liable to be taxed as such. But the adherence to section 78(2) gives the share premium account the characteristic of capital receipt. In the present case before us we find that there is no examination as to whether the company has ever adhered to the prescription of the Companies Act in this regard. If the company has not adhered to the prescription of the Act, the amount involved was liable to be taxed as revenue receipt.
7.10.1. In fact this is part of the examination directed by the ld. CIT in clause (i) of her order. Another interesting factor in this case is the earnings per share (E.P.S.). Till the year ended 31/3/2010 the E.P.S. was zero. When the E.P.S. was zero the company's share with a face value of Rs.10/- was commanding a premium of Rs.490/-. As on 31/3/2011, the E.P.S. rose to Rs.6.84. This itself shows the change in the management and the liquidation of the "investment in shares", "unquoted shares". But with this E.P.S. the profit after taxation is only Rs.9,77,992/-. For the year ended 31/8/2012 the profit after taxation is Rs.15,22,581/- and the E.P.S. is Rs.10.64. Thus clearly when the E.P.S. is 0, the issuance of such premium on the shares itself calls for detailed enquiry.
7.10.2. Another interesting aspect in this case is the dates. As we mentioned earlier the change in management took place in the assessment year 2010-11, i.e. year ended 31/3/2010, i.e. the period 1/4/2009 to 31/3/2010. The reopening of the assessment and the reassessment proceedings took place during this time. This clearly shows the due diligence being attempted with the contumacious intent to attempt to obtain the seal of approval of the Income-tax department in respect of the bogus share capital introduced.
59 ITA No. 1086/Kol/2014Assessment Year : 2009-2010 7.11 Now coming to the issue of the letter at page 31 of the paper book on which the date 8/3/2010 has been incorporated. One is left wondering as to why in the first place the certified copies were being obtained. These are as admitted by the assessee to be documents and letters submitted by the assessee itself. If it is so, then the copies of the same would be available with the assessee. Now after getting the certified copies the date is not incorporated on the certified copy but on a zerox copy of the certified copy and then by mistake such incorporated Xerox copy is used for making the paper book when all other copies are the certified copies. Even to an untrained mind obviously the sight of a document without the original blue coloured seal in a mass of papers should have drawn attention. Without saying anything more, we leave the issue as it is.
7.12 The issue of the merits in respect of the addition on account of share capital, nor the change in management, nor the merits of the issue of the source of realization from the liquidation of assets shown in the balance-sheet after the change of directors, if any, are not before us. Therefore, we would not go into the merits of these issues. However, the facts in the present case clearly warrant the upholding of the order under section 263 as passed by the ld. CIT and we do so.
7.13 Now coming to the case laws that have been cited. Admittedly, we must concur with the ld. Sr. Counsel that the decision of the Hon'ble Delhi High Court in the case of Bhagwati Jewels Ltd. reported in 201 ITR 461 (Del) has no bearing in so far as in that case the Hon'ble Delhi High Court has only held that the question under reference was liable to be referred. Coming to the decision in the case of Rose Berry Mercantile (P) Ltd. in G.A. No.3296 of 2010 dated 10/01/2011, the Hon'ble Calcutta High Court has held that the issue of share capital was covered by the decision of the Hon'ble Supreme Court in the case of Lovely Exports Pvt. Ltd. reported in 216 CTR 195(SC). However, this decision has no applicability to the facts in this case in so far as the said decision is not on the issue of 263. If at all, this is a decision which could be considered when the issues are decided on merits of the addition subject to all the conditions being fulfilled therein. Coming to the decision of Lotus Capital Financial Services Ltd. in G.A. 1507 of 2012 dated 16/07/2012, the Hon'ble Calcutta High Court has upheld the quashing of the order passed under section 263 by the ITAT on the ground that the assessee has filed complete details, and the same was verified by the A.O. and the prospective shareholders also replied and the AO has given his finding in his order passed under section 143(3). In the present case, the facts are completely different. In the first place, the submission of all the details before the AO by the letter dated 08/03/2010 itself is questionable. The AO has done no further verification and the AO has not given any finding in respect of the share capital in the assessment order nor in the order-sheet notings. Only the issue of share application money received has been mentioned. The assessment order is bald in respect of the findings on the issue of share application money received. In these circumstances, this decision also is not of any help to the assessee. The decision relied upon by the ld. Sr. Counsel in the case of Mulchand Bagri reported in 68 Taxman 215 (Cal) is also not applicable in so far as in that case, there was exchange of correspondence and actual enquiries were conducted by the AO. In the assessee's case, this is not so.
7.13.1 Similarly, in the case of Spectra Share & Scrips as also Jyoti Foundation, enquiries had been done by the AO therein. In the assessee's case the absence of enquiry is expressly evident from the absence of any order-sheet noting in respect of such enquiry as also the absence of any mention of any enquiry in the assessment order.
7.14 Further the fact that the ld. CIT has in her order under section 263 addressed the issues of the three layers in the transaction clearly shows the enquiry done by the ld. CIT. Such background statements as made by the ld. CIT also clearly shows the enquiry done by her. The claim that the background is a generalized background also does not hold water in so far as the modus operandi of the assessees are similar and the differences are minimal.
7.15 Coming to the issue of tangible material, a perusal of the provisions of section 263 shows that the ld. CIT has the power to give directions for assessment of a particular issue as also the powers to set aside the assessment for fresh consideration on specific issues or de novo. When the ld. CIT is 60 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 directing to assess a particular income then such directions must be on specific tangible material. In the present case, the order under section 263 clearly shows that the ld. CIT did have very tangible information and material on the basis of which she has conducted the enquiry and then has set aside the assessment to conduct enquiry in respect of the three limbs of the transactions and grant the assessee the opportunity to explain its case. Consequently the decision relied by the ld. Sr. Counsel in the case of Development Credit Bank Ltd. reported in 323 ITR 206 (Bom.) does not help the case of the assessee.
7.15.1. In fact the decision in the case of Active Traders reported in 224 ITR 583 (Cal) wherein the Hon'ble High Court of Calcutta has held that the enquiry was not taken to its logic end is more applicable to the facts of this case. Also the decision in the case of Infosys Technologies Ltd. reported in 341 ITR 293 (Kar) wherein the Hon'ble High Court of Karnataka has held "The provision is intended to plug leakages to the revenue by erroneous orders passed by the lower authorities, whether by mistake or in ignorance or even by design" is more apt to explain the actions that have lead to the 263 orders being passed in such cases.
7.15.2. Here the decision of the Hon'ble Full Bench of the Hon'ble Gauhati High Court in the case of Jawahar Bhattacharjee reported in 341 ITR 434 (Gauhati( (FB) is found to be substantially similar to the assessee's case in so far as the Hon'ble High Court has held "Not holding such inquiry as is normal and not applying the mind to relevant material in making an assessment would be erroneous assessment warranting exercise of revisional jurisdiction." We may further extract some relevant paragraphs from the said order.
"Reference may briefly be made to the facts giving rise to the issue. The assessee was asessed for the assessment year 2002-03 by Assessing Officer (AO) giving the benefit of exemption under section 54F of the Income-tax Act, 1961, for long-term capital gains from sale of shares. The shares were purchased on April 21, 2000, for Rs.19,536 and sold on May 2, 2001, for Rs.6,36,640, i.e., on the increased price of more than 30 times in one year.
The Commissioner of Income-tax (CIT) held the order to be erroneous and prejudicial to the interests of the Revenue and exercised suo motu revisional jurisdiction under section 263 of the Act. It was inter alia, observed that " while accepting the genuineness of the share transaction, the Assessing Officer failed to make any enquiry which, in the facts and circumstances, would normally be made to ascertain the capital gain in question. The assessee was not a habitual operator of share market and had no share of any other company; share was not of a well known company; the price jumped from Rs.6 per share to Rs.200 per share within a short span of thirteen months without any apparent reason. The Assessing Officer could have obtained annual accounts of the company to satisfy himself whether the commercial activities of the company justified such a jump in price. He could have obtained price quotations of the shares on a few dates to examine the reasonableness of the jump. The alleged sellers and buyers should have been examined. Accordingly, the order was held to be erroneous and prejudicial to the interests of the Revenue. The Assessing Officer was directed to reframe the assessment after conducting the necessary enquiries."
7.16 These are the facts. Now in the findings, the Hon'ble High Court has held as follows:
"To determine the question in hand, let us first have a look at the statutory provision. "263. Revision of orders prejudicial to Revenue - (1) Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of 61 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 the Revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment."
The object of the provision is to correct an erroneous order prejudicial to the interests of Revenue, as the Department has no right to file an appeal against the order of the Assessing Officer. While the power is not meant to be substituted for the power of the Assessing Officer to make assessment, the same can certainly be exercised when the order of the Assessing Officer is erroneous and prejudicial to the interests of the Revenue. Whether or not the order is erroneous has to be decided from case to case. Interpretation of section 263 has been the subject-matter of consideration in various decisions. In Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC), it was observed (pages 87 and 88) :
"There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind ....
Mr. Abraham relied on the judgment of the Division Bench of the High Court of Madras in Venkntakrishna Rice Company v. CIT [1987] 163 ITR 129 interpreting 'prejudicial to the interests of the Revenue.' The High Court held (page 138) :
'In this context, it must be regarded as involving a conception of acts or orders which are subversive of the administration of revenue. There must be some grievous error in the order passed by the Income Tax Officer, which might set a bad trend or pattern for similar assessments, which on a broad reckoning, the Commissioner might think to be prejudicial to the interests of the Revenue administration.' In Our view, this interpretation is too narrow to merit acceptance. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue if due to an erroneous order of the Income-tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue."
7.17. We have extracted only such portion as are relevant to the issue of the revision under section 263. On the touchstone test of these decisions, we are of the view that even on jurisdiction the ld. CIT has rightly invoked her powers under section 263 of the Act and the same is upheld.
7.18. We are not taking reference to the decision in the case of Star Griha Pvt. Ltd. in ITA No.1244/Kol/2013 dated 14/08/2014 in so far as that was a case in which the assessee was unrepresented.
7.19. The ld. DR has raised an issue that in some cases, 263 proceedings have been dropped by the ld. CIT but the revenue has the liberty to reopen the assessments under section 148. This is not an issue that arises in this appeal and therefore we would not adjudicate on it other than saying that the liberties available to the revenue cannot be controlled by an appellate authority as long as the requisite conditions associated to 62 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 such actions are complied with in letter and spirit after the introduction of Explanation 2 to section 147.
7.20 This view of ours also finds support from the decision of the Hon'ble Gurajat High Court in the case of Yogendra Kumar Gupta -vs- ITO reported in 366 ITR 186 (Guj) wherein the Hon'ble Gujarat High Court has held as follows:
"18. As mentioned hereinabove, we had called for the original file, which had revealed new, valid and tangible information supporting The Assessing officer's opinion received from the Deputy Commissioner of Income-tax, Kolkata, based on the material found during the search by the CBI, where Basant Marketing Pvt. Ltd., is said to be a dummy company of one Shri Arun Dalmia. What has been emphasized by the learned senior counsel appearing for the petitioner is that the Assessing Officer had attempted to fill in the gap by terming the amount received from Basant Marketing Pvt. Ltd. as "accommodation entry", which she could not have done without further inquiry/verification. Yet another contention emphasized by the learned senior counsel is that the post-notice correspondence made after the reasons recorded could not have added anything which was lacking in the reasons themselves. He urged that in the absence of any statement given by any director of Basant Marketing Pvt. Ltd. stating that the assessee received and obtained accommodation entry in the form of loans and advances, the reasons lack basis. The director, Mr. Dalmia of Basant Marketing Pvt. Ltd. as contended also does not reveal anywhere and, therefore, it is premature on the part of the Assessing Officer to so record the reasons. It is further urged that the affidavit of Rishabh Dalmia stating on oath that the loan transactions with the petitioner are genuine for having been carried out only through cheques, prima face vindicates that the entire exercise is based on suspicion. The entire thrust, therefore, is that issuance of notice is nothing but a fishing inquiry.
As discussed at length while adverting to the law, that sufficiency of reasons recorded by the Assessing Officer need not be gone into by this court. Of course, the Assessing Officer when forms his belief on the basis of subsequent new and specific information that the income chargeable to tax has escaped assessment on account of omission on the part of the assessee to make full and true disclosure of primary facts, he may start reassessment proceedings as fresh facts revealed the nondisclosure full and true Such facts were not previously disclosed or it can be said that if previously disclosed, they expose untruthfulness of facts revealed. The Assessing Officer required jurisdiction to reopen under section 147 read with section 148 of the Act, where the information must be specific and reliable. As held by the Apex court in the case of Phool Chand Bajrang Lal (supra), since the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief, is not for the court to judge but is open to an assessee to establish that there exists no belief or that the belief is not at all a bona fide one or based on vague, irrelevant and non-specific information. To that limited extent, the court may look at the view taken by the Income-tax Officer and can examine whether any material is available on record from which the requisite belief could be formed by the Assessing Officer and whether that material has any rational connection or a live link with the formation of the requisite belief. It is also immaterial that at the time of making the original assessment, the Assessing Officer could have found by further inquiry or investigation as to whether the transactions were genuine or not. If on the basis of subsequent valid information, the Assessing Officer forms a reason to believe on satisfying the twin conditions prescribed under section 147 of the Act that no full and true disclosure of facts was made by the assessee at the time of original assessment and, 63 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 therefore, the income chargeable to tax had escaped assessment, his belief and the notice of reassessment based on such belief/opinion needs no interference.
In the present case, since both the necessary conditions have been duly fulfilled, sufficiency of the reasons is not to be gone into by this court. The information furnished at the time of original assessment, when by subsequent information received from the Deputy Commissioner of Income-tax, Kolkata itself found to be controverted, the objection to the notice of reassessment under section 147 of the Act must fail At the costs of ingemination, it needs to be mentioned that at the time of scrutiny assessment, a specific query was raised with regard to unsecured loans and advances received from the said company, namely, Basant Marketing Pvt. Ltd. based at Kolkata. These being the transactions through the cheques and drafts, there would arise no question of the Assessing Officer not accepting such version of the assessee and not treating them as genuine loans and advances. Furnishing the details of names, addresses, PANs, etc., also would lose its relevance if subsequently furnished information, which has been made basis for issuance of notice impugned, concludes that Basant Marketing Pvt. Ltd. is merely a dummy company of one Shri Arun Dalmia, which provided the accommodation entries to various beneficiaries. This court has examined the belief of the Assessing Officer to a limited extent to inquiry as to whether there was sufficient material available on record for the Assessing Officer to form a requisite belief whether there was a live link existing of the material and the income chargeable to tax that escaped assessment. This does not appear to be the case where the Assessing Officer on vague or unspecific information initiated the proceedings of reassessment, without bothering to form his own belief in respect of such material. We need to notice that the Joint Director CBI, Mumbai, intimate to the DIT (Investigation), Mumbai. A case is registered against Mr. Arun Dalmia, Harsh Dalmia and during the search at their residence and office premises, the substantial material indicated that 20 dummy companies of Mr. Arun Dalmia were engaged in money laundering and the income-tax evasion. The said entities included Basant Marketing Pvt. Ltd. also. Form the analysis of details furnished and the beneficiaries reflected, which are spread across the country, the Commissioner of Income-tax, Kolkata, suspected the accommodation entry related to the assessment year 2006-07 as well, this information has been provided to the Director General of Income- tax, Kolkata, who in turn, communicated to the Chief Commissioner o Income-tax, Ahmedabad. Further revelation of investigation as could be noticed from the record examined (file) deserves no reflection in this petition. Insistence on the part of the petitioner to provide any further material forming the part of investigation carried out against Dalmias also needs to meet with negation, as the law requires supply of information on which Assessing Officer recorded her satisfaction, without necessitating supply of any specific documents. The proceedings initiated under section 147 of the Act would not be rendered void and non-supply of such document for which confidentiality is claimed at this stage, following the decisions of the Delhi High Court in the case of Acorus Unitech Wireless (P.) Ltd. (supra). The assumption of jurisdiction on the part of the Assessing Officer is since based on fresh information, specific and reliable and otherwise sustainable under the law, challenge to reassessment proceedings warrant no interference."
"Reference to the above quoted observations in the judgment shows that the exercise of the jurisdiction has not been limited to the defect of jurisdiction. It could extend to an order which may be found to be "erroneous" or "not in accordance with law" for having been passed "without making any enquiry in undue haste". The "jurisdictional" defect has been referred to in that sense. Only limitation laid down is that the order could not be revised without the same being "erroneous" merely because a different view could also be taken. It has not been held that even an order passed, ignoring norms or material could not be interfered with under section 263 of the Act.64 ITA No. 1086/Kol/2014
Assessment Year : 2009-2010 It is well known that the word "jurisdiction" does not have a fixed meaning. Though in one sense it means entitlement to enter upon the enquiry in question and in wider sense it implies light to conduct enquiry into the matter in lawful manner. Even if there is jurisdiction to go into a matter, failure to have regard to the relevant material may also render an order without jurisdiction."
"We have already referred to the judgments of this court in Rajendra Singh [1990] 79 SIC 10 (Gauhati) and two single Bench judgments following the said judgment in Bongaigaon Refinery and Petrochemicals Ltd. [2006] 287 ITR 120 (Gauhati) and Shyam Sundar Agarwal [2003] 131 STC 70 (Gauhati) as also the second Division Bench judgment in Daga Entrade P. Ltd. [2010] 327 ITR 467 (Gauhati). No doubt, in Rajendra Singh [1990] 79 STC 10 (Gauhati), an observation was made that erroneous assessment referred to the defect which is jurisdictional in nature, as against substitution of one view for the other, merely on the ground that a different view was possible. If read as a whole. the judgment does not exclude error in assessment order, by ignoring relevant material. Not holding such inquiry as is normal and not applying mind to the relevant material would certainly be "erroneous" assessment warranting exercise of revisional jurisdiction. Judgment has to be read as a whole and an observation during the course of reasoning in the judgment should not be divorced from the context in which it was used. The judgment is neither to be interpreted as an Act of Parliament nor as a holy book. If this principle is kept in mind, we do not find any conflict in the view taken in Rajendra Singh [1990] 79 STC 10 (Gauhati) and Daga Entrade P. Ltd. [2010] 327 ITR 467 (Gauhati). Disagreement in Daga Entrade P. Ltd. [2010] 327 ITR 467 (Gauhati) is only to the interpretation which limits the ratio of the judgment by relying only one sentence in isolation divorced from the entire judgment. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being" erroneous"
non-application of mind and omission to follow natural justice are in same category. Accordingly, we hold that Daga Entrade P. Ltd. [2010] 327 ITR 467 (Gauhati) lays down correct law and the same is not in conflict with the earlier order of this court m Rajendra Singh [1990] 79 STC 10 (Gauhati). Jurisdiction under section 263 can be exercised whenever it is found that the order of assessment was erroneous and prejudicial to the interests of the Revenue. Cases of assessment order passed on wrong assumption of facts, or incorrect application of law, without due application of mind or without following the principles of natural justice are not beyond the scope of section 263 of the Act."
7.21. A perusal of the consequential assessment order passed in the present case on 31/3/2014 shows that the assessee has also not cooperated in the assessment proceedings but in the first appeal has been raising allegations against the AO that he has not accepted documents submitted and has not granted adequate opportunity. This also clearly shows the evasionary tactics that are being adopted to wriggle its way out of the corner it has put itself into by its own acts and commissions. A peculiarity in such cases that is noticed is that sheaves of paper documents are readily produced but when a summon is issued the responsible 30 persons conveniently disappear. Only the assessee knows the intricacies of its accounts. It is for the assessee to prove its claim of share capital/ application money introduction and its affairs in respect of its accounts. Merely dumping papers and documents on the table of the assessing authority does not in any way mean compliance. The burden of proof cannot be shifted on the revenue by cart loads of documents. The documents submitted must be explained. We do understand the predicament of the assessee in so far as if any responsible person appears then he would have to answer many unpleasant questions which could lead to the reopening of assessments in multiple assessment years and multiple assessees. But then what has 65 ITA No. 1086/Kol/2014 Assessment Year : 2009-2010 been created and knotted up by the assessee must be answered and unraveled only by the assessee and none else would know the facts better than the assessee itself.
7.22. We are live to the fact that some of the observations in the order are academic in nature. However, they are just our expression of distaste to the fraudulent acts done by such assessees which has set a bad trend and pattern for such acts, that even lure honest tax payers to wonder as to what fault have they done to bear the burden of tax when such evaders go scot free. In the circumstances, the appeal filed by the assessee stands dismissed.
35. A peru sal of the p ap er books filed by the asses see and th e dep art ment shows that in the co urs e of assessment origin ally do ne o n 30.12.2011, some detail s of abo ut 12 share applicants were found in the as se ssm ent record s. In the proceedin gs aft er the ord er of the ld . CIT under sect ion 263 the assess ee has written to th e Assessin g Offic er intimatin g that th e det ails with the as sesse e are mispl aced and the same may be given fro m the re cord s of the A ss essin g Officer. In the as se ssee's pap er book part details of 27 share ap plicants a re p rovided. These also unsign ed, on computer gen erated le tter heads, n o regi ste red office add res s and no seal of the re spective compani es, and no det ails of th e directors or the reso lutions. Th us clea rly fresh evidence is being attempt ed to be p roduced befo re the T ri bunal witho ut p roducing the s ame before the A ssessin g Of ficer. Even th e evidenc es produced in th e p aper book are in comp lete and un substan tiated in so fa r as the confi rmatio n letters are undated and th e p e rson s si gning a s Di rectors are not Di recto rs of the said comp ani es as o n d at e. The l etters a re no t on the lett er head of the comp anie s but on co mputer g enerat ed lett er h ead s. The Bank account detail s are i ncomplete. The n atu re o f th e b usiness o f th e comp ani es i s not av ailable. The late st audit repo rt and b alance-sheet s are absent. The re is no ment io n of the share regi ster or the in vestment register in the case of the a sse ss ee comp any, much les s the minutes bo ok or th e det ails of co nducting of th e AGMs. Thes e evidences which were n ever produced before the Asse ssin g Offic er no w bei ng p roduced befo re the T ribunal itself lends c red ence to th e action of th e ld. CIT's ord e r unde r section 263.
66 ITA No. 1086/Kol/2014Assessment Year : 2009-2010
36. In the se circum stances as the f act s are id entic al, re sp ectfully following the prin ciples laid down by the Coordinat e Bench of thi s Trib unal in the case of Bis akha Sal es Pvt. Ltd. referred to sup ra, the o rder of the ld. CIT, Kolkata-III pas sed u nder section 2 63 stands upheld. On this ground also, the app eal of the a ss ess ee is li able to be dismissed and I d o so.
37. In the result, the appeal of the assess ee is dismissed.
The Assistant Registrar is dire cted to send a compliance report to the Registrar, Hon'ble High Court of Ca lcutta in W.P. No. 128 of 2015 enclosing ce rtified copies of th e orde r-sheets and the order in S.A. 9 of 2015 as also the copies of the orde r-sheets and this orde r in the appeal in ITA 1086/ Kol/2014, on o r before 12.03. 2015.
Sd/-
(GEORGE M ATHAN) Judi cial Me mber Kolkata , the 10th day of M arch, 2015 Copy of the order is forwarded to :
(1) Shri Ra m Tra d e vin (P) Ltd ., Fla t N o. 18, Trimurti, 4, Lower Ra wd on S tree t, Kol ka ta -700 020 (2)Inc ome Ta x Offic er, Wa rd -9(4), Kolka ta (3) CIT, Kolka ta (4) D.R., ITA T, Kolka ta (5) Gua rd File True Cop y By o rder Assi stant R egi strar, Inco me T ax Appellate T rib unal, Ko lk ata Benches, Ko lk ata Laha/S r. P .S. 67