TaxTMI 
TaxTMI 
2019 (9) TMI 5
X X X X Extracts X X X X
X X X X Extracts X X X X
....panies against high premium. The Assessing Officer held that the assessee company has no track record or asset base and zero balance sheet with no visible future prospect. In order to verify the same, the summons u/s 131 of the Act were issued to the directors of the assessee as well as directors of investing companies. According to him, no compliances whatsoever made by the assessee nor by the directors of investing companies. For non-compliance, the Assessing Officer treated the share capital and premium to an extent of Rs. 9,15,00,000/- as unexplained cash credit and added to the total income of the assessee vide its order dated 25/03/2015 u/s 143(3) of the Act. 4. Having aggrieved, the assessee preferred an appeal before the CIT(A) challenging the action of the Assessing Officer in treating the share capital and premium as unexplained cash credit u/s 68 of the Act. The assessee filed Paper Book containing list of allottees, Form 2, Form 5, copy of investment with address particulars and PAN. Further copy of statement of bank account, balance sheet, Profit and Loss A/c, copy of letter filed against notices u/s 143(2) and 142(1) and summons u/s 132(1) of the Act. Further the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... well as Non-Banking Reserve Bank of India. ii) Each of the subscriber companies are independently and regularly assessed to tax and the PAN and ITR Acknowledgement were furnished in the course of Assessment. iii) Each of the subscriber companies maintained their bank accounts and copies of their respective bank accounts statement, from which they made payments to the assessee company to subscribe the shares issued to them at a premium, were furnished in the course of Assessment proceeding. I have verified the aforesaid documents submitted by the assessee company which proves the identity of the investor companies. The Assessee company has claimed the creditworthiness of the investor companies have also been proved in much as the net worth of each of the subscriber companies, far exceeded the amount of investment made by them in appellant company. The assessee company has also referred to the written declaration of each of the investor companies admitted to hive subscribed to the share capital of the Assessee Company showing the source of fund in each case with Name PAN, Address particulars of the entitles from where the investor companies received funds were available and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....infirmity with respect to the credit-worthiness of the source and the genuineness of the transaction. Based on the said report, the learned CIT (Appeal) deleted the entire addition besides quoting relevant case laws in support of his action. The learned CIT(Appeal) has not mentioned or enumerated what exactly are the additional evidences which he admitted. He has not passed any order of admitting additional evidences before remanding the matter to the learned AO as required as per the mandate of the law as prescribed in section 250(4) read with rule 46A of the IT Rules. The learned CIT(Appeal) further has not mentioned in his remand report what is the investigation to be carried out by the learned AO or points of enquiry to be made. On the contrary, by not remanding the matter on specific additional evidences or points of enquiry he wanted to carry out thorough the AO, he remanded the entire assessment giving a 2nd innings to the respondent. 7. The learned AO also has not mentioned what is the additional evidence. He merely took statements on oath from the directors of 2 out of the total 6 creditors of the respondent assessee company. There is no modicum of enquiry worth its name ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ubmits that it is to be noted that in 2 of the 6 creditors, in whose case, bank statements have been provided, as usual in such cases, equal amounts of credits have been made on the same day or few days just prior to the debit in favour of the respondent's share subscription. All the creditors have reserve only by way of share premium and no other reserve where from such subscription could have been made. All of them have meagre income, abnormally low profit which makes it unfathomable as to how such companies could go for subscribing such high premium. Finally Shri Dr. Abani Kanta Nayak submits the learned CIT appeal, ignoring all the facts uni-dimensionally relied on the report submitted by the learned AO, which in turn was perfunctory in its conclusion by lacking any investigations worth the name. He therefore, misdirected himself in reaching a faulty conclusion not based on law. By not following rule 46A, the learned CIT Appeal opened the entire vistas of assessment by granting a 2nd innings to the respondent. This is against the very spirit of the amendment made to clause (a) of sub-section 1 of section 251 and placed reliance on the Honourable High Court Of Kerala judgeme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....unts of assessee and share subscribing companies and it was perfunctory in his investigation. It is the duty of CIT(A) to examine the remand report submitted by the Assessing Officer. The CIT(A) cannot admit the remand report as it is. In support of its contention the ld. DR referred to the decision of C.S. Nambiar vs. Cheruvazhcheri Kishakkekkar of Hon'ble High Court of Kerala reported in AIR 1992 Ker 303, the relevant portion of this judgment is as under: "5. In this appeal, learned counsel for contesting defendants vehemently contended that no ground have been made out for remanding the matter. Though there is no specific plea in the plaint that the B schedule property belonged to the tarwad, the plaint proceeds on the basis that the property belonged to the tarwad consisting of plaintiffs and defendants and it is on that basis, the relief of partition was sought. Those defendants who supported the plaintiffs claim for partition have stated in the written statement that the property belonged to the tarwad. The entire focus was on the question whether the property is a tarwad property or whether 13th defendant obtained the lease hold right in the property for himself. All t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the evidence they desired, it is the duty of the First Appellate Court Co give its own conclusions upon the evidence before it. If a trial Court does not properly understand the pleadings, it is for the appellate Court to reverse the findings and give its own findings; again, if an issue has been decided by the trial Court in a very perfunctory manner. But power to order retrial after remand, where there has already been a trial on evidence before the Court of first instance, cannot be exercised merely because the appellate Court is of the view that the parties who could lead better evidence in the Court of first instance have failed to do so." 12. On perusal of the finding of the Hon'ble High Court of Kerala wherein it was held that it is a duty cast upon the Appellate Court to reverse the findings given by the Trial Court and give its own findings, if a Trial Court does not properly understand the pleadings. We find the said finding of the Hon'ble High Court rendered in a civil dispute involving a claim for partition and applying the same to the facts and circumstances of the present case, we are of the opinion that the CIT(A) observed in his order that the Assessing Officer con....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n rebuttal was afforded to the assessing authority. This finding of the Tribunal is not under challenge. In view of this finding it is difficult to accept the contention of learned counsel for the assessee that the requirements of Rule 46A have been fulfilled in the present case. Rule 46A contains principles of natural justice. Nobody should be condemned without giving opportunity of hearing. In the case in hand the appellate authority has taken into consideration fresh evidence produced before it without following the principles of natural justice. In view of this we find no legal infirmity in the order of the Tribunal. Apart from the above the Tribunal has restored back the above issue to the file of the first appellate authority. It is still open to admit additional evidence sought to be filed by the assessee after complying with the requirement of Rule 46A. Strong reliance was placed by learned counsel on paragraphs 16 and 21 of the said judgment in the case of K. Venkataramiah, AIR 1963 SC 1526. The apex court took the view that from the order passed by the High Court for admission of additional evidence it is not possible to say that the same was passed by it without applying....
X X X X Extracts X X X X
X X X X Extracts X X X X
....88 to 489 of paper book. So therefore the CIT(A) has given an opportunity for examination of the new evidences filed by the assessee in the First Appellate Proceedings and the assessing authority filed a report before the CIT(A). Therefore a finding of Hon'ble High Court of Allahabad to the facts and circumstances of the present case is not applicable. 15. Further he referred to the decision of Hon'ble High Court of Allahabad in the case of Smt. B. Jayalakshmi v. ACIT reported in [2018] 96 taxmann.com 486 (Madras) wherein it was held as under: "17. Aggrieved by the orders passed by the CIT (A), the Revenue preferred appeals before the Tribunal. The Tribunal accepted the stand taken by the Revenue and affirmed the findings recorded by the Assessing Officer. The order passed by the Tribunal is verbatim repetition of the findings of the Assessing Officer in its order dated 29.03.2001, passed under Section 143(3) read with Section 147 of the Act. We find that there is no reference to the remand report dated 25.11.2001, which was called for by the CIT (A) based on which the CIT (A) allowed the appeal. To be noted, the Assessing Officer on report being called for, has made a detailed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ional issue, which could be raised at any point of time. Secondly, the Tribunal was required to consider as to whether it had jurisdiction to entertain the appeal filed by the Revenue against the order passed by the CIT (A), which itself was based upon a remand report. As noticed above, the order passed by the Tribunal is a verbatim repetition of the assessment order, dated 29.03.2001. Thus, the Tribunal was required to consider the correctness of the order passed by the CIT (A) and if had been done in a proper prospective, the Tribunal would have noticed that the order allowing the assessee's appeal by the CIT (A) was based on the remand report. If this had been taken note of, the Tribunal would have to consider as to whether the appeal by the Revenue was maintainable before it. In the case of Jivatlal Purtapshi (supra), it was held that the department having agreed to delete the amount from the assessment and having considered the deletion before the Appellate Assistant Commissioner, cannot be aggrieved by that part of the order to enable it to file an appeal before the Tribunal and therefore, such an appeal, neither competent nor capable of being entertained by the Tribuna....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly if the assessee was aggrieved by the order of the Income Tax Officer, he had the right to file an appeal before the Appellate Assistant Commissioner and once the assessee could not have had any grievance in view of the statement made by the partner, the appeal to the Appellate Assistant Commissioner was incompetent and equally the appeal to the Tribunal was incompetent and consequently, it was held that the reference to the Court on the second question said to arise out of order of the Tribunal is also incompetent. In the case of Banta Singh Kartar Singh (supra), a similar question arose in an order under Section 271(1)(c) of the Act. The Division Bench of the High Court of Punjab & Haryana, placing reliance on the decision of the Mumbai High Court in Jivatlal Purtapshi's case (supra), held that an order based on agreement cannot give rise to grievances and the same cannot be agitated in appeal. 21. In Cochin Malabar Estates & Industries Ltd.'s case (supra), one of the question which arose for consideration before the Division Bench of the High Court of Kerala was whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the cons....
X X X X Extracts X X X X
X X X X Extracts X X X X
....enable it to file an appeal before the Tribunal because it is neither competent nor capable of being entertained by the Tribunal. In this regard, we find force in the arguments of ld. AR that the Assessing Officer has no jurisdiction to file an appeal before the Tribunal when he himself agreed to delete the addition from the assessment itself. Therefore, we find no merit in the contention of the ld. DR is that this Tribunal should consider the correctness of the order passed by the CIT(A) whether it is passed in a proper perspective or not. 17. Further, Dr. Nayak referred to the decision of Hon'ble High Court of Delhi in the case of CIT v. Jansampark Advertising & Marketing (P) Ltd. reported in [2015] 56 taxmann.com 286 (Delhi) wherein it was held as under: "38. The provision of appeal, before the CIT (Appeals) and then before the ITAT, is made more as a check on the abuse of power and authority by the AO. Whilst it is true that it is the obligation of the AO to conduct proper scrutiny of the material, given the fact that the two appellate authorities above are also forums for fact-finding, in the event of AO failing to discharge his functions properly, the obligation to conduct....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nted the assessee with the facts regarding return of some of the summons under Section 131 or not having given opportunity for the identity of all the share applicants to be properly established. The order sheet entries taken note of in the order of CIT (Appeals) seem to indicate otherwise. The order of CIT (Appeals), which was confirmed by ITAT in the second appeal, does not demonstrate as to on the basis of which material it had been concluded that the genuineness of the transactions had been duly established. There is virtually no discussion in the said orders on such score, except for vague description of the material submitted by the assessee at the appellate stage. Whilst it does appear that the time given to the assessee for proving the identity of the third party was too short, and further that it is probably not always possible for the assessee placed in such situation to be able to enforce the physical attendance of such third party (who, in the case of share applicants vis-à-vis a company, would be individuals at large and may not be even in direct or personal contact), the curtains on such exercise at verification may not be drawn and adverse inferences reached o....