The Tax Publishers2020 TaxPub(DT) 5267 (Kol-Trib) : (2020) 084 ITR (Trib) 0432



Mataranivintrade (P) Ltd. v. ITO

I.T.A. No. 343/Kol/2018

4 November, 2020

In favour of assessee.

Appellant by: S.K. Tulsiyan, Advocate & Puja Somani, CA

Respondent by: Vijay Shankar, CIT, DR


A.T. Varkey, J.M.

This is an appeal preferred by the assessee against the order of learned Commissioner (Appeals)-5, Kolkata dated 31-3-2017 for the assessment year 2012-13.

2. The main grievance of the assessee is against the action of the learned Commissioner (Appeals) in enhancing the addition by violating the law inter alia in violation of section 251(2) of the Income Tax Act, 1961 (hereinafter, referred to as the 'Act'). According to assessee, the learned Commissioner (Appeals) is supposed to decide the appeal as per provisions of sub-section (6) of section 250 of the Act, wherein he [Commissioner (Appeals)] has to specify the points for determination and thereafter decide by passing a reasoned order. For convenience, sub-section (6) of section 250 of the Act reads as under :--

'(6) The order of the Commissioner (Appeals) disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reason for the decision.'

3. Shri S.K. Tulsiyan, the learned Authorised Representative (in short, the 'Ld. AR') of the assessee assailing the impugned order of the learned Commissioner (Appeals) contended that the learned Commissioner (Appeals) has enhanced the addition from Rs. 84 lakhs to Rs. 21.38 cr. (enhanced Rs. 20.54 cr.) in a haste, without even enquiring the veracity of the voluminous documents and the statement recorded by assessing officer which were available in the assessment folder. So, according to learned A.R. the impugned action of learned Commissioner (Appeals) is arbitrary, whimsical and against Rule of Law. According to learned AR, though the learned Commissioner (Appeals) enjoys coterminous powers of assessing officer, he while discharging his first appellate jurisdiction has to record his factual finding by disproving the finding/conclusion of assessing officer, if he has to differ from the view taken by the assessing officer.

According to learned AR, the learned Commissioner (Appeals) while adjudicating the appeal of the assessee against the addition of Rs. 84 lakhs as ordered by assessing officer, had in fact sent the first three notices to the old address [even though change of address was intimated to assessing officer & learned Commissioner (Appeals) by assessee vide Letter, dated 14-1-2015 which fact has been acknowledged by learned Commissioner (Appeals) at page 4, para 3.3] and the other three notices were sent in a span of twenty days, which was not served upon the assessee-company for reasons beyond its control for which the assessee-company has filed an affidavit of the director duly sworn in before the Notary explaining the cause for non-receipt of notice. According to learned AR, the assessing officer while passing the scrutiny assessment under section 143(3) of the Act had made thorough enquiry into the share capital amount received by the assessee for the assessment year 2012-13 by issuing notices under section 142(1) and 142(2) of the Act to the assessee and also has issued notices to all the share applicants/shareholders and after having received their replies and supporting document, had summoned under section 131 of the Act Shri Manish Kumar Dubey, director of the assessee-company and after recording his statement on oath had accepted the share capital amount received from thirty six (36) share applicants/shareholders out of total thirty eight (38) share holders and made addition of Rs. 84 lakhs in respect of share capital raised from two companies, namely M/s. Omeshwar Tracom Pvt. Ltd. and M/s. Harmony Vanijya Pvt. Ltd.

According to the learned A.R. when assessee challenged the action of the assessing officer in making the addition of Rs. 84 lakhs, the learned Commissioner (Appeals) without serving of notice enhanced the addition to Rs. 21.38 crores by enhancing an amount of Rs. 20.54 crores. According to the learned AR, this action of learned Commissioner (Appeals) is arbitrary exercise of power, which he could not have done without conducting enquiry/investigation and is able to show from the out-come of the enquiry he conducted that it gives a different result than from what results the assessing officer got from his enquiry. Without doing such an exercise of enquiry or investigation, the learned Commissioner (Appeals) has erroneously made enhancement of addition which is per se arbitrary, whimsical and is untenable in law. According to the learned A.R. when all the results of enquiry by assessing officer and documents collected are available in the assessment folder of the assessing officer, the action of learned Commissioner (Appeals) to have resorted to enhancement of addition without conducting any enquiry from his part is on the basis of surmises and conjecture. According to the learned A.R. even though the power of the learned Commissioner (Appeals) is co-terminus with that of the assessing officer and if he nurses any doubt about the investigation carried out by the assessing officer or about the veracity of the documents collected by the assessing officer, then he was duty bound to issue notices under section 131 of the Act and summon the shareholders as well as the director of the assessee-company, which he has not done and therefore, the enhancement of addition made by the learned Commissioner (Appeals) in the hands of the assessee is arbitrary and therefore, the same should be deleted.

4. Per contra, Shri Vijay Shankar, learned CIT, D.R. vehemently opposing the plea of the learned A.R. contended that the learned Commissioner (Appeals) had fixed the appeal of the assessee on six (6) occasions and the assessee did not bother to attend/appear before the learned Commissioner (Appeals). According to the learned D.R. the reason that assessee did not receive any notice cannot be a ground to challenge the impugned order of the learned Commissioner (Appeals), when the notices were issued at the address given by assessee. According to the learned DR, the learned Commissioner (Appeals) has co-terminus power as that of the assessing officer. And even though the documents have been collected by the assessing officer for taking a favorable view of assessee in respect of share capital collected to the tune of Rs. 20.54 cr., however, the learned Commissioner (Appeals) who enjoys a coterminous power as that of assessing officer, can still differ from the view taken by the assessing officer from the very same documents, which is found in the assessment folder.

According to him, when an assessee has in its books, a sum of money credited, then the assessee is bound to satisfy the assessing officer about the identity, genuineness and creditworthiness of the source of credit/money. According to learned DR, the documents on the strength of which the assessing officer has recorded the satisfaction for not making an addition under section 68 of the Act, the learned Commissioner (Appeals) can draw adverse view against the assessee, since satisfaction is subjective in nature and therefore, even if the assessing officer is satisfied on perusal of the documents furnished by the assessee/share applicants, the learned Commissioner (Appeals) is not bound to agree with him. Thus, according to the learned DR, subjective satisfaction can differ and in this case, while exercising his first appellate jurisdiction, the learned Commissioner (Appeals) has exercised his power and was not satisfied with the documents found/available in the assessment folder had issued enhancement notice and since there was no representation from the side of assessee had drawn adverse inference and made the enhancement of Rs. 20.54 cr. He further submitted that the learned Commissioner (Appeals) in his order has noted that the assessment order passed by the assessing officer was pre-judicial to the interest of the revenue, so he has rightly enhanced the addition. It was pointed out by the learned CIT D.R. that the assessing officer after recording the statement of Shri Manish Dubey, one of the directors of the assessee-company (during that period) and after examining him on oath under section 131 of the Act, had simply believed his statement and did not draw any adverse view against thirty six share applicants. According to learned CIT DR, the assessing officer simply gulped what Shri Dubey said that he would be able to produce all the shareholders/share applicants other than said two companies namely M/s. Omeshwar Tracom Pvt. Ltd. and M/s. Harmony Vanijya Pvt. Ltd. According to learned DR, the assessing officer erred in believing the words of Shri Dubey by adding only the share capital amount raised from these two companies to the tune of Rs. 84 lakhs. According to the learned DR, this action of the assessing officer is erroneous and cannot be termed as an outcome of proper enquiry and since the assessing officer has not carried out proper enquiry/investigation, the action of the assessing officer was rightly interfered by the learned Commissioner (Appeals) and, therefore, he enhanced the addition as per law. Therefore, he does not want us to interfere with the impugned order of the learned Commissioner (Appeals).