TaxTMI 
TaxTMI 
2022 (10) TMI 1118
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....gned order dated 07.03.2019 disposes a stay application filed by the petitioner pending statutory appeals filed by it challenging orders of assessment passed in terms of the provisions of the Income Tax Act, 1961 ('in short Act') for assessment years (in short 'AY') 2009-10 and 2010-11, both dated 28.03.2013. 3. The Officer has disposed the stay application pursuant to an order passed by this Court in W.P.No.7410 of 2018 on 16.07.2018. Being convinced with the position that the petitioner is besieged with financial difficulty, the officer has proceeded to stay 90 % of the demand and has directed the petitioner to remit 10 % of the demand prior to 25.03.2019. The petitioner has, at the time of admission, obtained a stay of order dated 07.03.2019, as a result of which no payment has been made till date. 4. As far as W.P.No.1451 of 2020 is concerned, the petitioner challenges an assessment made for AY 2011-12, dated 30.09.2021. I first proceed to narrate the facts arising in both matters that will fall within a common compass. The petitioner is a company and had filed income tax returns for the three assessment years in question. 5. The petitioner had, in the retu....
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....ther enactments in terms of which action had been initiated against the various entities involved in the 2G scam. 9. There was thus a serious responsibility and burden that was cast upon the Income Tax Department as well as all other Investigative Agencies by the Hon'ble Apex Court in addition to the statutory, and already existing responsibility, to carry out investigation and assessment in a proper manner. 10. In respect of AY 2011-12, the petitioner had, in the return of income, adopted the stand that the amounts had been repaid to Cineyug from and out of advertisement revenue received from four companies, being (i)India Cements (ii) United Spirits Ltd (iii) Gemini Industries & Imaging Ltd and (iv) Anjugam Films Ltd. The claim of advertisement revenues had come to be rejected as bogus, vide order of assessment passed on 31.03.2014 making an addition of Rs.150 crores to the total income of the petitioner. 11. The assessment was confirmed in appeal and travelled to the Income Tax Appellate Tribunal in second appeal. The Tribunal had passed an order dated 09.01.2019 which is a very short order, the operative portion of which is reproduced below:- "6. We have consi....
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.... claim of receipt of advertisement advances from the four companies as aforesaid, that had, according to the petitioner, been utilized to repay the loans taken from Cineyug. The genuineness of the loans allegedly received from Cineyug and whether the amounts constitute illegal gratification, is to be decided in appeals for AY 2009-10 and 2010-11. I am now solely concerned with the procedure followed by the assessing officer in framing the assessment for AY 2011-12, remanded to his file by the Tribunal. 14. In deciding the veracity of the assessment, the Court, under Article 226 of the Constitution of India is primarily concerned with the procedure followed by the Assessing Authority. An assessment was first framed for AY 2011-12 after exchange of notices and responses on 31.03.2014 (pages 31 to 65 in compilation dated 21.01.2020 filed in W.P.No.1451 of 2020).The assessment was challenged unsuccessfully before the Commissioner of Income Tax (Appeals) and thereafter before the Tribunal that set aside the assessment by its order dated 09.01.2019, recording at para 4 as follows:- "In the assesse's appeal in ITA No.1678/Chny/2018, it was submitted by Id. A.R that in the asse....
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....s were bogus. 16. It was for the above reasons that the Tribunal had set aside the assessment restoring the matter to Assessing Authority for re-adjudication denovo. The sequence in which the matter has been directed to be re-done is relevant and the Tribunal has clearly set out the sequence and procedure to be followed as below:- (i). The Assessing Officer shall provide to the assessee all evidences collected which he proposes to use in the course of assessment against the assessee. (ii). Liberty was given to the Assessing Officer to call for further documents which he feels are necessary for completion of the assessment. 17. The time limit for completion of assessment pursuant to order dated 09.01.2019 is admittedly 31.12.2019. The Assessing Officer, in view of the large implications involved and the fact that there are directions of a superior authority i.e., the Income Tax Appellate Tribunal, to carry out the assessment in a particular manner, ought to have issued notice immediately to the assessee conveying his readiness to supply the materials collected and which he proposes to use in assessment against the assessee. This has not been done. 18. On 11.02.2019 th....
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....he order of the Tribunal is dated19.01.2019 and in regard to proceedings that are due to be time barred by 31.12.2019. The matter was adjourned to 20.09.2019. Admittedly, no materials, as recorded on 10.09.2019, have been produced by the petitioner and instead the petitioner writes on 20.09.2019 asking for the documents that are proposed to be utilized by the authority in framing of assessment. 23. The entirety of the details sought have been clearly set out in a tabulated form, running to 24 points. Though received by the Assessing Officer, there is no response to this communication. The matter was taken up on 20.09.2019 when, for the first time the docket sheet of hearing, reveals reference to the material that was to be furnished by the respondents to the petitioner in the following terms: Shri G.Rajendran, VP (Finance) appeared along with Sri Shiva Subramanian, CA and AR of the assessee and asked to provide material relied on by the Dept. case discussed & adjourned to 1.10.19. Sd/- 20.9.19 sd/- 20.9.19 sd/- 20.9.19 A.O dictated Sd/- 20.9.19 24.The matter stood adjourned to 01.10.2019....
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.....The petitioner has an filed additional affidavit dated 27.01.2021 stating categorically that the Auditor has received no such notice, in response to which the Standing Counsel has filed a screenshot of the ITBA portal that contains the time-sent (dispatch) as 06.12.2019 1:39 A.M, and the delivery status as 'sent'. However, there is admittedly no service of the notice, as the time-stamp in the column 'delivered' is blank. 29. Even assuming for a moment that notice has been uploaded on the portal, it is the petitioner's specific contention that this is the only occasion in the entirety of the proceedings when a notice has been issued electronically. All notices prior to and thereafter have been received by way of registered post/speed post acknowledgement due. Thus the petitioner was entirely unaware of the notice having been uploaded on the ITBA portal. There is a categoric denial in additional affidavit dated 27.01.2021 to the effect that the e-mail/notice was received by the auditor. 30. The integrity of the assessment, and the proceedings followed by the parties in the conduct of the assessment, is to be seen/tested by the Court in the light of the proceedings as noticed a....
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.... for evidences appears to be rather mechanical and nonspecific which is surprising seen in the light of the fact that it was august of 2019 and there was only four months for the expiry of limitation. 35. That apart, the direction of the Tribunal was to complete the assessment denovo, implying clearly, application of mind anew to the facts and circumstances of the case. I now test the impugned order on this score. Paragraph 6 of the order deals with the advertisement revenues from India Cements, paragraph 7, United Spirits, paragraph 8, Gemini Industries and paragraph 9, Anjugam Films Ltd. A perusal of the relevant portions of the impugned order, extracted below would serve to illustrate the abject lack of application of mind to any of the issues:- ASSESSMENT ORDER The assessee company filed its return of income for the AY 2011/12 on 30.09.2011 admitting NIL income after setting off of brought forward losses of Rs.8,11,74,628/-. The assessment was completed u/s 143 (3) of the Act on 31.03.2014 determining total income at Rs.257,23,39,010/- while making the following additions: 1. Advertisement advances received from the following three companies and treated ....
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....relevant to AY 2011-2012. While the issue of receipt of Rs.200 Crores by the assessee company was duly dealt with in A.Ys 2009-10 & 2010-11, during the AY 2011-2012, the main issue for consideration , is the source of funds for repayment of the above amount of Rs.200 Cr along with interest to M/s Cineyug Media and Entertainment Pvt Ltd, Mumbai and their genuineness and the same is elaborated in the ensuing paras . 6 . " Advertisement advance from M / s . India Cements Ltd : 6.1 M/s . KTPL, the assessee company had entered into an agreement with M/s India Cements Ltd on 12.01.2011 for telecast of advertisements. A sum of Rs.60 Crores was received in two tranches of Rs.30 Cr each on 18.01.2011 and 19.01.2011 through cash credit accounts of M/s India Cements Ltd. After collecting various details u / s 133 ( 6 ) of the Act from M/s India Cements Ltd and taking into account the details and submissions filed by the assessee, the entire amount of Rs.60 Cr was added in the original assessment finalized on 31.03.2014 as unexplained and non genuine for the following reasons : 1. The above transactions in the real sense did not serve any business purpose of the asse....
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....ation of the above , the CIT (A) upheld the addition made by the assessing officer in respect of amount received from M/s India Cements Ltd for the following reasons : (i). Neither M/s India Cements Ltd nor the assessee had such arrangement in the form of advertisement advance in the past or in the future. (ii). The AO has brought out the anomalies in the agreements for receiving advance towards future advertisements in the assessment order. (iii). The AO has brought out that in terms of TRP rating , there was no business exigency. (iv). The AO has also brought out the discrepancies in terms of telecast of advertisement to prove the point that the money received was not really for advertisement. (v). For the reasons mentioned by the AO in the assessment order, the money received under the head "advertisement advance" is nothing but a colorable device which are to be treated as non genuine and unexplained. 6.3. For the same reasons as elaborated in original assessment order and for the same reasons as elaborated by CIT (A) in his order referred above, the entire amount of Rs.60 Cr received from M/s India Cements Ltd is added to t....
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....g but a colorable device which are to be treated as non genuine and unexplained. 8.5 During the course of appeal proceedings before CIT ( A ), the assessee pointed out the arithmetical mistake in the addition made in the assessment order to the effect that an amount of Rs.14,45,50,000/- only was received by the assessee during the AY 2011-2012 from M/s GIIL . For the same reasons as elaborated in original assessment order and for the same reasons as elaborated by CIT (A) in his order referred above, the entire amount of Rs.14,45,50,000/- ( not Rs.25 Cr as assessed in original assessment order) received from M/s Gemini Industries Imaging Ltd is added to the income returned by the assessee as unexplained , non genuine and not for the purposes of business . 9. Unexplained amount received from M/s Anjugam Films Ltd: 9.1 M / s Anjugam Films Pvt Ltd , a 100 % subsidiary of M / s KTPL has extended a loan of Rs.83 Cr to the parent company M/s KTPL between 24.12.2010 and 18.01.2011. When the source of M/s Anjugam Films Pvt Ltd for making the above loan payment to M / s KTPL was examined , it is found that it received loan of Rs.83 Cr from M/s Sapphire Media Infras....
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.... the judgment of the CBI Special Court and has appealed against the same. 4. Payment through banking channel is not sufficient to discharge the onus cast upon the assessee u/s 68 of the Act. 5. In the case of Mc Dowell & Co Ltd ( 1985 ) 154 ITR 148 ( SC ) , the apex court has held that when there are colorable devices by resorting to dubious methods, corporate veil can be lifted to check tax avoidance measures. 9.4 During the course of appeal proceedings before CIT (A), the assessee pointed out that out of the amount received of Rs.83 Cr from M/s Anjugam Films Pvt Ltd, an amount of Rs79.62 Cr was utilized for loan repayment to M/s CMEPL and the balance of Rs.3.38 Cr was used for business/bank loan repayment. Based on the submissions made by the assessee, the CIT (A) gave partial relief to the extent of Rs.3.38 Cr to the assessee. Here, it is pertinent to mention that the decision of CIT (A) on this count is not accepted by the Department for the reason that the entire amount of loan received from M/s. AFPL of Rs.88 Cr was taxed as unexplained by treating the same as sham transaction For the same reasons as elaborated in original assessment order, the enti....
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....hat has been set aside. The officer does have the liberty to adopt the same view as earlier taken, however, following the proper procedure in regard to the framing of a denovo assessment. 40. In the present case, the facts, as set out above leave me in no doubt that there was no intention of the officer to afford a fair or a denovo hearing, which, in my view, borders on contempt. The framing of an assessment has to be in line with the procedures that have been set out in the Manual of office procedure - Volume-II issued by the Directorate of Income Tax. I refer to the Manual only to drive home the point that the proper procedure for framing of assessment is not just one evolved by the Courts, but one codified by the department by way of the Guidelines framed for the Officers. 41.The principles of natural justice are reiterated therein on all fronts. That apart at paragraph 3.2.7 the manual requires officers to furnish copies of all documents that are referred to in the assessment order and relied upon by the Officer to the assessee. This has not been done in this matter despite a specific direction by the Tribunal in this regard. Courts have consistently reiterated the positi....