Integral Barter (P) Ltd. v. Ito

Per Dr. A.L. Saini, AM: The captioned appeal filed by the assessee, pertaining to assessment year 2011-12, is directed against the order passed by the Commissioner of Income Tax (Appeal)-2, Kolkata, in appeal no. 10787/CIT(A-2/2016-17, which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3)r.w.s. 263 of the Income Tax Act, 1961 (in short the Act) dated 29/12/2016. M/s Integral Barter (P) Ltd. ITA No. 381 /Kol /2019 Assessment Year:2011-12 Page | 2

2. At the outset itself, the ld. Counsel for the assessee submitted that ld. PCIT had directed the Assessing Officer u/s 263 of the Act to conduct the independent enquiry to verify the documentsin respect of subscription of share capital which he had failed to do so. Therefore, the matter should be remitted back to the file of Assessing Officer to conduct the enquiry independently without taking assistance of the assessee. For that ld. Counsel relied on the judgment of Co-ordinate Bench in the case of Shalimar Dealers Pvt. Ltd. in ITA No. 607/Kol/2017 for AY 2009-

10 dated 20/07/2018 wherein the Tribunal has held as follows:

5. Learned counsel representing assessee submits that both the lower authorities have not complied with the CITs expressed directions issued u/s 263 of the Act making it clear that the Assessing Officer had to make an independent enquiries for the purpose of verifying its investor parties. His case therefore is that the above directions have gone unrebutted from Revenue side. Learned Departmental Representative fails to dispute the same as there is no material on record suggestingany such independent enquiries to have been conducted at the Assessing Officers end. Learned counsel thereafter invites our attention to this tribunals decision in Sukanya Merchandise Pvt. Ltd vs ITO ITA 291/Kol/2016 dated 15.12.2017 restoring the very issue back to the Assessing Officer in identical circumstances as under :- We note that the AO pursuant to the order of Ld. CIT had taken note of the directions of the Ld. CIT and issued notice u/s. 142(1) dated 16.08.2013 and has acknowledged that the assessee had furnished the copy of final account, I. T. Acknowledgement, bank statement for the relevant period evidencing the receipt of share application money from the share applicants. Thereafter, the AO makes certain inferences based on the list of shareholders and taking note of the bank statement furnished by the assessee. We note that after the initial notice dated 16.08.2013, thereafter the AO had issued the notice on 26.02.2014 which has been reproduced at page 3 of the reassessment order, wherein AO required the directors of the assessee company to be present before him on 06.03.2014. However, according to the Ld. AR, the assessee received the notice only on 07.03.2014 and thereafter, the assessee requested the AO to provide another opportunity of hearing vide its letter dated 20.03.2014. Thereafter, the AO fixed the date of hearing on 12.03.2014 vide notice dated 10.03.2014. So, according to the assessee company since the directors were not in station till 23.03.2014, the Ld. AR had requested for adjournment till that time. Though the AO has stated that he has issued summons on 24.03.2014 to the assessee company to produce the directors of the company before him on 26.03.2014, the assessee company contended that it has not received the said summon and, therefore, could not make the personal appearance. The AO has drawn adverse conclusion basically because of non-appearance of the directors of the assessee M/s Integral Barter (P) Ltd. ITA No. 381 /Kol /2019 Assessment Year:2011-12 Page | 3 company and that of the shareholder companies. We note that initially the AO started the enquiry on 16.08.2013 which was complied by the assessee by submitting documents which has been acknowledged by the AO. Thereafter, the enquiry was started only at the fag end of February 2014 and the assessee company had informed the AO that their directors were out of station till 23.03.2014. In the light of the aforesaid facts, we are of the opinion that the assessee did not get fair opportunity to present the evidences before the AO so, there was a lack of opportunity as aforesaid, therefore, it has to go back to AO.

8. We also note that Ld. Cit while setting aside the order of the AO which was passed u/s. 147/143(3) of the Act, the Ld. CIT gave certainguidelines to follow for conducting deep investigation. We also note that similarly placed assessees had challenged the exercise of revisional jurisdiction u/s.

263 of the Act before this Tribunal in those cases one of it of Subha Lakshmi Vanijya Pvt. Ltd. Vs. CIT in ITA No. 1104/Kol/2014 dated 30.07.2015, wherein the Tribunal was pleased to uphold the order passed by the Ld. CIT passed u/s. 263 of the Act, which we learn to have been confirmed by the Honble jurisdictional High Court and the SLP preferred against the decision of the Honble jurisdictional High Court has been dismissed by the Honble Supreme Court. Therefore, similar order of the Ld. CIT passed u/s. 263 of the Act has been upheld. We note that the AO while giving effect to the CITs 263 order has noted that the assessee company has in fact furnished the documents sought by him to his notice u/s. 142(1) of the Act. However, the AO took the adverse view against the assessee on the plea that the directors of the assessee company and share subscribing companies had not appeared before him on 26.03.2014 and t after taking note that none appeared on 26.03.2014 concluded on the same day 26.03.2014 that entire amount of share application money received along with premium amounting to Rs.8,06,00,000/- which has remained unexplained and added to the income of the assessee. We also note that the Ld. CIT after looking into the pernicious practice of converting black money into white money has given the guidelines to AO as to how the investigation should be conducted to find out the source of source. Since similar order of the Ld. CIT passed u/s. 263 of the Act has been upheld by the Tribunal as well as by the Honble Calcutta High Court as well as the SLP has been dismissed by the Honble Supreme Court, similar order of the Ld. CIT has to be given effect to as directed by the Ld. CIT. We take note that the Ld. CIT with his experience and wisdom has given certain guidelines in the backdrop of black money menace should have been properly enquired into as directed by him. The AO ought to have followed the investigating guidelines and method as directed by him to unearth the facts to determine whether the identity, genuineness and creditworthiness of the share subscribers. We note that the Honble Supreme Court in three judges bench in the case of Tin Box, (supra), has held that since there was lack of opportunity to the assessee at the assessment stage itself, the assessment needs to be done afresh and thereby reversed the Honble High Court, Tribunal and CIT(A)s orders and remanded the matter back to AO for fresh assessment. So, since there was lack of opportunity as aforestated it has to go back to AO. We also note that the Honble Delhi M/s Integral Barter (P) Ltd. ITA No. 381 /Kol /2019 Assessment Year:2011-12 Page | 4 High Court in the case of CIT Vs. Jansampark Advertising & Marketing Pvt. Ltd. in ITA No. 525/2014 dated 11.03.2015 wherein after noticing inadequate enquiry by authorities below have held as under:

41. We are inclined to agree with the CIT(Appeals), and consequently with ITAT, to the extent of their conclusion that the assessee herein had come up with some proof of identity of some of the entries in question. But, from this inference, or form the fact that the transactions were through banking channels, it does not necessarily following that satisfaction as to the creditworthiness of the parties or the genuineness of the transactions in question would also have been established.

42. The AO here may have failed to discharge his obligation to conduct a proper inquiry to take the matter to logical conclusion. But CIT(Appeals), having noticed want of proper inquiry, could not have closed the chapter simply by allowing the appeal and deleting the additions made. It was also the obligation of the first appellate authority, as indeed of ITAT, to have ensured that effective inquiry was carried out, particularly in the fact of the allegations of the Revenue that the account statements reveal uniform pattern of cash deposits of equal amounts in the respective accounts preceding the transactions in question. This necessitated a detailed scrutiny of the material submitted by the assessee in response to the notice under Section148 issued by the AO, as also the material submitted at the stage of appeals, if deemed proper by way of making or causing to be made a 'further inquiry in exercise of the power under Section 250(4). His approach not having been adopted, the impugned order of ITAT, and consequently that of CIT(Appeals), cannot be approved or upheld." In view of the aforesaid order and in the light of the Honble Supreme Courts decision in Tin Box Company (supra) and taking into consideration the fact the order of the Ld. CIT passed u/s. 263 of the Act in similar cases being upheld up to the level of Apex Court, and taking note of Honble Delhi High Courts order in Jansampark Advertising & Marketing Pvt. Ltd. (supra), we set aside the order of the Ld. CIT(A) and remand the matter back to the file of AO for de novo assessment and to decide the matter in accordance to law after giving opportunity of being heard to the assessee.

7. We, therefore, consider it fair and proper and in the interest of justice to set aside the orders of the authorities below on the issue in dispute and restore the matter to the file of the A.O. to decide the same afresh after giving the assessee proper and sufficient opportunity of being heard and after taking into consideration the entire evidence already available on record as well as other documentary evidence which the assessee may choose to file in support of its case on the issue. 8. In the result, the appeal of the assessee is treated as allowed for statistical purpose. M/s Integral Barter (P) Ltd. ITA No. 381 /Kol /2019 Assessment Year:2011-12 Page | 5

6. We adopt the above remand directions mutatis mutandis to restore the instant lis back to the Assessing Officer for fresh proceedings as per law after affording adequate opportunity of hearing to the assessee.

3. The ld. Counsel for the assessee took us through the relevant para of assessment order wherein the Assessing Officer quoted the direction given by ld. PCIT, which is reproduced below: Ld. Pr. CIT-2, Kolkata after describing the facts of the cases, passed an order u/s 263 of the I. T. Act, 1961 by setting aside the order passed u/s 143(3) by the A.O. with a direction to

i) Trace the source of share capital by enquiring into the various layers through which are money has been introduced in this company as share capital and also examine the directors of subscriber companies by issuingsummons u /s 131 of the IT Act. ii) Send information to the Assessing Officers having jurisdiction over the subscriber company to the share capital regarding its investment into share capital &premium paid, iii) Conduct independent enquiries to verily the documents filed in respect of proof of subscription to share-capital. iv) Call upon assessee to identify the persons who are shown as directors of the assessee company and examine them on oath to verify their credential as directors.

v) Pass speaking order after providing reasonable opportunity to the asaessee and 'verifying the source of share capital, including the share premium ofall thesubscribers. Respectfully following the direction of Pr. CIT-2, Kolkata, the case had to be assessed afresh. Accordingly a notice u/s.142(1)) of the: IT Act, 1961 dated 20.07.2016 was issued and duly served On the assessee company asking to appear and furnish certain documents on 29.07.2016 at 11:30 AM. In response to the notice, Shri V Singh, A/R of the assessee, appeared and filed part submission.

4. We note that ld. PCIT has directed the Assessing Officer to conduct the independent enquiry to verify the documents in respect of share capital which he had failed to do so, therefore order giving effect passed by the Assessing Officer is M/s Integral Barter (P) Ltd. ITA No. 381 /Kol /2019 Assessment Year:2011-12 Page | 6 not in tune with the direction given by the ld. PCIT therefore we set aside the impugned order of ld. CIT(A) and remit this issue back to the file of Assessing Officer to adjudicate the issue afresh by conducting independent enquiry, as directed by the ld PCIT.

5. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the Court on 20.03.2020 Sd/- (S.S.GODARA) Sd/- (A.L.SAINI)   / JUDICIAL MEMBER  / ACCOUNTANT MEMBER /Kolkata; / Date: 20/03/2020 (SB, Sr.PS) Copy of the order forwarded to:

1. M/s Integral Barter (P) Ltd.

2. ITO, Ward-6(4), Kolkata

3. C.I.T(A)- 4. C.I.T.- Kolkata.

5. CIT(DR), KolkataBenches, Kolkata.