A)Whether The Learned Tribunal Has Committed Substantial Errorin Law By Deleting The Additions Made Under Section 68 And 69Cof The Income Tax Act, 1961 ? v. Cit Reported In Slp

IN THE HIGH COURT AT CALCUTTASPECIAL JURISDICTION (INCOME TAX)ORIGINAL SIDE ITAT/98/2023 IA NO: GA/1/2023, GA/2/2023PRINCIPAL COMMISSIONER OFINCOME TAX CENTRAL KOLKATA 2VSM/S MANI SQUARE LTD. ITAT/99/2023 IA NO: GA/1/2023, GA/2/2023PRINCIPAL COMMISSIONER OFINCOME TAX CENTRAL KOLKATA 2VSM/S MANI SQUARE LTD ITAT/100/2023 IA NO: GA/1/2023, GA/2/2023PRINCIPAL COMMISSIONER OFINCOME TAX CENTRAL KOLKATA 2VSM/S MANI SQUARE LTD ITAT/101/2023 IA NO: GA/1/2023, GA/2/2023PRINCIPAL COMMISSIONER OFINCOME TAX CENTRAL KOLKATA 2VSM/S MANI SQUARE LTD ITAT/102/2023IA NO: GA/1/2023, GA/2/2023PRINCIPAL COMMISSIONER OFINCOME TAX CENTRAL KOLKATA 2VSM/S MANI SQUARE LTD BEFORE : THE HON’BLE CHIEF JUSTICE T.S. SIVAGNANAM AndTHE HON’BLE JUSTICE HIRANMAY BHATTACHARYYADate : 12[th] July, 2023 Appearance :Mr. Soumen Bhattacharjee, Adv.… for the appellant Mr. J.P Khaitan, Sr. Adv.Mr. Saumya Kejriwal, Adv.Ms. Ananya Rath, Adv.Mr. G.S. Gupta, Adv.… for the respondent nos.7-11 The Court : These appeals have been filed by the revenue underSection 260A of the Income Tax Act, 1961 (the Act) challenging thecommon order dated 6[th] August, 2020, passed by the Income TaxAppellate Tribunal “B” Bench, Kolkata (Tribunal) in IT(SS) A No.58/Kol/2019, No. 75/Kol/2019, No. 59/Kol/2019, No. 60/Kol/2019,No. 76/Kol/2019, No. 61/Kol/2019 and No. 78/Kol/2019, for theassessment years 2013-14, 2014-15, 2015-16, 2016-17 and 2017-18respectively. `The revenue has raised the following substantial questions oflaw for consideration :- a)Whether the Learned Tribunal has committed substantial errorin law by deleting the additions made under section 68 and 69Cof the Income Tax Act, 1961 ? b)Whether the Learned Tribunal has committed substantial errorin law by observing that the order passed under Section 143[3]of the Income Tax Act, 1961 as ab-initio void and bad in law inview of the notice and order issued in the name of amalgamatedentity mentioning also the name of amalgamating entityignoring the judgment of Hon’ble Apex Court in the case ofSkylight Hospitality vs. CIT reported in SLP No.7409/2018wherein it is held that mistake in notice and assessment orderis curable by application under Section 292B of the Act ? c) Whether the Learned Tribunal has committed substantial errorin law by holding that the statement recorded and thematerials/documents seized during the course of search actionunder Section 132 of the Income Tax Act, 1961 of related partycannot be constituted to be ‘incriminating’ in nature fo theassessee for drawing adverse inference ? d)Whether the Learned Tribunal has committed substantial errorin law in holding that addition made by the Assessing Officerwas beyond the scope of authority vested under Section 153A ofthe Income Tax Act, 1961 owing to absence of any incriminatingmaterial deducted as result of search conducted under Section132 of the Income Tax Act, 1961 even though there waspresence of incriminating material on record ? e) Whether the Learned Tribunal has committed substantial errorin law in allowing the bogus unsecured loans received from f) shell/paper companies and interest paid thereon withoutappreciating the fact that the assessee has failed to dischargeits primary onus to prove and establish the identity andcreditworthiness of the loan creditors and geniuses of thetransactions ? Whether the Learned Tribunal has committed substantial errorin law in declaring the order in the name of M/s. IQCIPL [thecompany which was amalgamated with M/s. Mani Square Ltd.]as ab initio void and bad in law even if the Hon’ble Apex Courtheld that in such mistake the same can be cured by invokingsection 292B of the Income Tax Act, 1961 as reported in thecase of M/s. Sky Light Hospitality LLP vs. ACIT in WP 9C10870/2017 and CM No.44503/2017 ? f) shell/paper companies and interest paid thereon withoutappreciating the fact that the assessee has failed to dischargeits primary onus to prove and establish the identity andcreditworthiness of the loan creditors and geniuses of thetransactions ? Whether the Learned Tribunal has committed substantial errorin law in declaring the order in the name of M/s. IQCIPL [thecompany which was amalgamated with M/s. Mani Square Ltd.]as ab initio void and bad in law even if the Hon’ble Apex Courtheld that in such mistake the same can be cured by invokingsection 292B of the Income Tax Act, 1961 as reported in thecase of M/s. Sky Light Hospitality LLP vs. ACIT in WP 9C10870/2017 and CM No.44503/2017 ? All the appeals have been filed with condonation of delayapplications having 820 days delay. We have perused the affidavitsfiled in support of the condone delay petition, the affidavit-in-oppositions filed by the respondent/assessee and the affidavit-in-replies filed by the revenue. As pointed out by the respondent/assessee, substantial part ofthe delay has not been properly explained except to refer to the Covidpandemic. Though we are not fully convinced with the explanationoffered, keeping in mind that these appeals have been preferred underSection 260A of the Income Tax Act, 1961 in which the Court is required to consider as to whether any substantial question of lawarises for consideration, we exercise discretion and condone the delayin filing the appeals. The learned Tribunal in paragraph 12 of the impugned orderframed five issues for consideration which are as herender : a)Whether in absence of any incriminating material found in thecourse of search at the premises of the appellant, theadditions/disallowances made in the assessments of the appellantand M/s. IQCIPL which were unabated [since assessment of AY2013-14 was non-pending] on the date of search, could be held tobe sustainable on facts and in law ?course of search at the premises of the appellant, theadditions/disallowances made in the assessments of the appellantand M/s. IQCIPL which were unabated [since assessment of AY2013-14 was non-pending] on the date of search, could be held tobe sustainable on facts and in law ? b)Whether the Ld. CIT[A] was justified in confirming the additionmade on account of alleged on-monies of Rs.4,81,38,000/- receivedupon the sale of flat and car park[s] to M/s. Satyam Bubna in the Shiromani Project ? If yes, whether based on this singularinstance, the AO was justified in extrapolating and making additionby way of unaccounted sales in respect of all units and car parkssold in the Shiromani Project ?made on account of alleged on-monies of Rs.4,81,38,000/- receivedupon the sale of flat and car park[s] to M/s. Satyam Bubna in the Shiromani Project ? If yes, whether based on this singularinstance, the AO was justified in extrapolating and making additionby way of unaccounted sales in respect of all units and car parkssold in the Shiromani Project ? c)Whether the Ld. CIT[A] was justified in confirming the AO’s ordermaking addition on account of unsecured loans and interest paidthereon u/s 68 & 69C of the Act ?making addition on account of unsecured loans and interest paidthereon u/s 68 & 69C of the Act ? d)Whether the Ld. CIT[A] was justified in deleting the addition ofRs.15,07,993/- made by the AO by way of unaccountedtransactions conducted by the appellant ?Rs.15,07,993/- made by the AO by way of unaccountedtransactions conducted by the appellant ? e)Whether the AO could be held to have validly assumed jurisdiction by issuing notices u/s 153A and 143[2] in the name of non-existent entity [M/s. IQCIPL] and consequent thereto frameseparate assessment order dated 31.12.2018 and whether suchaction of the AO was tenable in the eyes of law or not ? We shall consider the correctness of the order passed by thelearned Tribunal on the above issues in seriatim. d)Whether the Ld. CIT[A] was justified in deleting the addition ofRs.15,07,993/- made by the AO by way of unaccountedtransactions conducted by the appellant ?Rs.15,07,993/- made by the AO by way of unaccountedtransactions conducted by the appellant ? e)Whether the AO could be held to have validly assumed jurisdiction by issuing notices u/s 153A and 143[2] in the name of non-existent entity [M/s. IQCIPL] and consequent thereto frameseparate assessment order dated 31.12.2018 and whether suchaction of the AO was tenable in the eyes of law or not ? We shall consider the correctness of the order passed by thelearned Tribunal on the above issues in seriatim. The first issue is whether in the absence of any incriminatingmaterial found in course of search at the premises of the assessee, theadditions/disallowance made in the assessment of the assessee andM/s. IQCIPL, which were unabated on the date of search, could beheld to be sustainable on facts and in law. The learned Tribunal has taken note of the factual position andthe legal principle and proceeded to examine the issue and fromparagraph 20 the learned Tribunal has examined the factsmeticulously. It has been pointed out that on a careful examination ofthe materials on record it was noted that certain pages of thedocument marked RB/12 were unearthed from third party premisesand nine months before the search took place in the assessee’spremises. These were loose sheets of paper which neither containedthe name of the assessee nor any mention of its project. Further, thedocument also did not disclose that it was prepared at the instance ofthe assessee. Furthermore, the Tribunal had undertaken an exerciseto go through the entire loose papers and has recorded a factual finding that there is no mention of the any cash payment by M/s.Satyam Bubna (HUF) to the assessee. Further, the Tribunal pointedout that even if the document is taken in its face value then also itsuggests that the noting pertained to the year 2010 and no inferencemay be drawn against the assessee qua relevant assessment year,namely 2013-14. Further, the Tribunal found that the AssessingOfficer has not been able to spell out as to how he arrived at such aconclusion. The Tribunal proceeded to examine the statementrecorded from M/s. Satyam Bubna (HUF), from whose premises thedocuments were taken on 22[nd] September, 2014, who on oath statedthat the documents were merely rough calculations prepared by himand did not form part of actual transaction. Further, he had statedthat all the payments were made to the assessee through accountpayee cheques and no cash transactions were made by him. Thestatement recorded from the said person was held to strengthen thecase of the assessee. Furthermore, the Tribunal noted that theassessee had raised a query under RTI by letter dated 2[nd] March,2020 and information was secured from the Department. Upon goingthrough the response to the RTI query, the Tribunal agreed with thesubmissions made on behalf of the assessee that when Satyam Bubnahad stated that the documents were rough calculation, the AssessingOfficer accepted his submission and neither drew any adverseinference nor made any addition on account of alleged cash paymentsin its hands as unexplained expenditure. The alternate contention made on behalf of the assessee was also considered and the Tribunalin paragraph 24 of the impugned order has discussed the same andafter placing reliance on the decision of the High Court of Delhi in Pr.CIT vs. Subhas Khattar in ITA No. 60 of 2017 dated 25.07.2017,recorded a finding on facts in favour of the assessee. Thus, we find that the order passed by the Commissioner ofIncome Tax of Appeals [CIT(A)] was tested for its correctness by theTribunal on facts and after recording independent factual finding theTribunal has taken a decision in favour of the assessee by dismissingthe appeal filed by the revenue. Thus, we find no substantial questionof law arises for consideration on the said issue. made on behalf of the assessee was also considered and the Tribunalin paragraph 24 of the impugned order has discussed the same andafter placing reliance on the decision of the High Court of Delhi in Pr.CIT vs. Subhas Khattar in ITA No. 60 of 2017 dated 25.07.2017,recorded a finding on facts in favour of the assessee. Thus, we find that the order passed by the Commissioner ofIncome Tax of Appeals [CIT(A)] was tested for its correctness by theTribunal on facts and after recording independent factual finding theTribunal has taken a decision in favour of the assessee by dismissingthe appeal filed by the revenue. Thus, we find no substantial questionof law arises for consideration on the said issue. The next issue is whether the CIT(A) was justified in confirmingthe additions made on the account of the alleged on-monies receivedupon the sale of flats and car parks to M/s. Satyam Bubna inShiromani Project and if the answer to the said question is yes,whether it is based on the single instance, the Assessing Officer wasjustified in extrapolating and making addition by way of unaccountedsales in respect of all units and car parks sold in Shiromani Project. Inparagraph 30, the learned Tribunal has pointed out that the revenuehas not raised any grievance/grounds on the finding of the CIT(A) inits appeal. Furthermore, at the time of hearing the Department’srepresentative was not able to controvert the contention raised by theassessee nor the grounds of appeal preferred by the revenue hadassailed the finding recorded by the CIT(A). On the said issue, therefore the learned Tribunal held that they see no reason to interferewith the order passed by the CIT(A). Thus, this issue having not beencontested by the revenue before the Tribunal, no question of law couldarise from the said issue. The next issue is with regard to the correctness of the orderpassed by the CIT(A) with regard to the additions on the unsecuredloans and interest paid thereto under Sections 68 and 69C. The saidissue was considered by the learned Tribunal by discussing the factsfrom paragraph 31 of the order. After elaborately discussing the factsand also noting that there has been violation of principles of naturaljustice and after taking into consideration of various decisions of theHon’ble Supreme Court as well as the High Courts, in paragraph 74the learned Tribunal has discussed the facts. The Tribunal has alsoheld that the facts show that except for extracting the statement of theso called entry operators the Assessing Officer did not place on recordany credible evidence/material which could show that the assesseehad routed its unaccounted monies in the form of bogus loans.Furthermore, the Tribunal affirmed the order of the CIT(A) holdingthat there has been serious violation of principles of natural justicesince the assessee was denied the opportunity to cross-examine thethird parties whose statements were the basis of the addition. Thus,we find this issue is also fully factual and no substantial question oflaw can arise therefrom. The next issue is whether the CIT(A) was right in deleting theaddition made of Rs.15,07,993/- made by the Assessing Officeralleging the same to be unaccounted transactions conducted by theassessee. This issue has been considered and decided by the Tribunalin paragraphs 77 and 78 of the order. After noting the facts, theTribunal held that payments were made to the staff members whichwere duly recorded in the regular books if accounts, the addition andtherefore held that the CIT(A) rightly deleted the addition. This issue isalso fully factual and no substantial question of law arises out of thesame. The last issue is whether the assumption of jurisdiction by theAssessing Officer by issuing notice under Sections 153A and 143(2) inthe name of a non-existing entity and the consequent order ofassessment were tenable in the eye of law. The last issue is whether the assumption of jurisdiction by theAssessing Officer by issuing notice under Sections 153A and 143(2) inthe name of a non-existing entity and the consequent order ofassessment were tenable in the eye of law. The learned Tribunal after elaborately considering the factualposition had taken note of the decision of the Hon’ble Supreme Courtin M/s. Saraswati Industrial Syndicate vs. CIT, (1990) 186 ITR 278 (SC)and the decision of the Hon’ble Supreme Court in CIT vs. MarutiSuzuki India Limited, 416 ITR 613 (SC) had decided the issue in favourof the assessee and against the revenue. Since the learned Tribunal had rightly applied the decision of theHon’ble Supreme Court and granted relief to the assessee after takingnote of the ratio decidendi of those decisions, we find there is no errorin the order passed by the learned Tribunal. Thus, for all the above reasons, we hold that the substantialquestions of law as suggested by the revenue in questions (a), (c), (d)and (e), do not arise as they are completely factual. So far as the substantial questions of law (b) and (f), as pointedout above, the learned Tribunal had dismissed the revenue’s appealfollowing the decision of the Hon’ble Supreme Court in SaraswatiIndustrial Syndicate Ltd. and Maruti Suzuki India Limited (supra) andtherefore, there is no error in the order passed by the learned Tribunaland accordingly, the substantial questions of law (b) and (f) areanswered against the revenue. The appeals and stay applications are thus dismissedaccordingly. (T.S. SIVAGNANAM) CHIEF JUSTICE (HIRANMAY BHATTACHARYYA, J.)