Hon’ble Division Bench Of This Court In The Case Of M/S. Pragatifinancial Management Pvt. Ltd v. “Whether In The Facts And C

OD-64 ITAT/294/2017IA NO: GA/1/2017(Old No.GA/2698/2017)IN THE HIGH COURT AT CALCUTTASPECIAL JURISDICTION (INCOME TAX)ORIGINAL SIDE NEELKANTHA COMMOSALES PVT. LTD. & ANR.VERSUSINCOME TAX OFFICER, WARD –1(2), KOLKATA & ORS. BEFORE : THE HON’BLE JUSTICE T.S. SIVAGNANAM AndTHE HON’BLE JUSTICE HIRANMAY BHATTACHARYYA Date : 23[rd] November, 2021 Appearance :- Mr. Debasish Chowdhury , Adv.… For Appellant The Court : This appeal by the assessee filed under Section260A of the Income Tax Act, 1961 (the Act, for brevity) is directedagainst the order dated 1[st] March, 2017 passed by the Income TaxAppellate Tribunal, “D” Bench, Kolkata in ITA No.644/Kol/2015 forassessment year 2009-10. The appellant has raised the followingquestions of law for consideration :- I.Whether on the facts and circumstances of the case the LearnedTribunal passed the orders under section 263 in the case of 5out of six share applicants, wherein the learned Commissionerof Income Tax, Kolkata-1 initiated proceedings since in their cases also the Commissioner felt that those persons failed toprove their identity, genuinity and credit worthiness. However inall the five cases the proceedings were dropped after makingenquiry. In respect of the sixth share holder also the petitionerfiled all the details and evidences on which there was no adversecomment by the Commissioner of Income Tax or by theTribunal. The learned Tribunal however has confirmed the orderof the Commissioner of Income Tax passed under section 263 ? II.Whether on the facts and circumstances of the case the LearnedTribunal is incorrect in law and in facts in confirming that theCommissioner of Income Tax, Kolkata-1 was justified ininvoking the provision under section 263 when he himselfexamined the assessment records of the Investors and droppedproceedings under section 263 in their case ? III. Whether on the facts and circumstances of the case the LearnedTribunal has wrongly placed reliance on the lead order in thecase of M/s. Subhalakshmi Vanijya Ltd. & Ors. Vs.Commissioner of Income Tax inasmuch as the factual findingsof the Learned Tribunal in that case are not applicable to thecase of your petitioners ? None appears for the appellant. We have heard Mr. Debasish Chowdhury, learned StandingCounsel appearing for the respondent revenue. We find that thequestions raised before us is squarely covered by the decision of the Hon’ble Division Bench of this Court in the case of M/s. PragatiFinancial Management Pvt. Ltd. vs. The Commissioner of Income Tax– II & Ors. in ITAT 178 of 2016, dated 7[th] March, 2017. By the saidjudgment appeals were dismissed observing that there is nosubstantial questions of law arising for consideration. The operativeportion of the judgement reads as follows :- “9.Main thrust of the appellant’s case is that the provisions ofSection 68 of the Act as amended could not be given retrospectiveoperation and if that position of law was accepted, then it was notopen to the C.I.T. to direct an enquiry to ascertain the source andgenuineness of the sums being projected by the appellants as capitalreceipts. Mr. Majumdar wants us to reject the finding of the Tribunalthat Section 68 of the Act, as amended, has retrospective operation. Insupport of his submissions on this point, he has relied upon on aConstitution Bench judgement of Supreme Court delivered in the case of Commissioner of Income Tax Vs. Vatika Township Pvt. Ltd.(2015) 1 SCC 1. Argument of the appellant is that in the event theamendment made to section 56(2) of the Act is given prospective effectalong with provisos to Section 68, then sums received as share capitalor share premium would not be taxable in the light of particularsalready disclosed by each appellant, and the exercise directed by theC.I.T. would be a futile or redundant exercise. Mr. Majumdar wantsthe appeal to be admitted on formulating the following question,which, according to him, would involve substantial question of law:- of Commissioner of Income Tax Vs. Vatika Township Pvt. Ltd.(2015) 1 SCC 1. Argument of the appellant is that in the event theamendment made to section 56(2) of the Act is given prospective effectalong with provisos to Section 68, then sums received as share capitalor share premium would not be taxable in the light of particularsalready disclosed by each appellant, and the exercise directed by theC.I.T. would be a futile or redundant exercise. Mr. Majumdar wantsthe appeal to be admitted on formulating the following question,which, according to him, would involve substantial question of law:- “Whether in the facts and circumstances of thecase and in law, the learned Tribunal erred in holdingthat the proviso to Section 68 inserted by the FinanceAct, 2012 with effect from April 1, 2013 would beapplicable to Assessment Year 2008-09?” 10.A Coordinate Bench of this Court in dealing with an almostidentically worded order of the C.I.T. in the case of RajmandirEstates Private Limited Vs. Principal Commissioner ofIncome Tax, Kolkata – III, Kolkata, [G.A. No. 509 of 2016 withI.T.A.T. No.113 of 2016] found such order to be sustainable inlaw. In the judgement, Their Lordships construed the provisionsof section 68 as it was before the aforesaid amendment being thelaw which prevailed in the relevant previous year in thatproceeding, and held, inter alia :- “We are unable to accept the submission thatany further investigation is futile because the moneywas received ono capital account. The Special Bench inthe case of Sophia Finance Ltd. (supra) opined that“the use of the words “any sum found credited in thebooks” in Section 68 indicates that the said section isvery widely worded and an Income-Tax Officer is notprecluded from making an enquiry as to the truenature and source thereof even if the same is creditedas receipt of share application money. Mere fact thatthe payment was received by cheque or that theapplicants were companies, borne on the file ofRegistrar of Companies were held to be neutral factsand did not prove that the transaction was genuine aswas held in the case of CIT – Vs – Nova Promoters andFinlease (P) Ltd. (supra). Similar views were expressedby this Court in the case of CIT – Vs – PrecisionFinance Pvt. Ltd. (supra). We need not decide in thiscase as to whether the proviso to Section 68 of the Income Tax Act is retrospective in nature. To thatextent the question is kept open. We may howeverpoint out that the Special Bench of Delhi High Court inthe case of Sophia Finance Ltd. (supra) held that “theITO may even be justified in trying to ascertain thesource of depositor”. Therefor, the submission that thesource of source is not a relevant enquiry does notappear to be correct. We find no substance in thesubmission that the exercise of power under Section263 by the Commissioner was an act of reactivatingstate issues.” 12.The judgement was carried up in appeal by the assesseebefore the Hon’ble Supreme Court by filing a petition for specialleave to appeal (Petition(s) for Special Leave to Appeal(c) . . . ccNo (s) 22566-22567/2016). On 9[th] January, 2017, the Hon’bleSupreme Court was pleased to dismiss the special leave petitionfinding no reason to entertain the same. A copy of the order ofthe Hon’ble Supreme Court has been made available to us by Mr.Nizamuddin, learned counsel representing the Revenue. 13.In that judgement, the Coordinate Bench had referred toparticulars of the assessee’s account in detail. Reference wasmade specially to its subsisting share capital, quantum rise inshare capital and reserve and surplus on issue of share capitalwith high premium during the relevant previous year. In thisjudgement, we do not consider it necessary either to reproducethe particulars of accounts of individual assessees or to refer tothe manner in which the capital receipts were realised. Thefactual background of these cases are more or less similar to thefacts involved in the case of Rajmandir Estates Private Ltd. 13.In that judgement, the Coordinate Bench had referred toparticulars of the assessee’s account in detail. Reference wasmade specially to its subsisting share capital, quantum rise inshare capital and reserve and surplus on issue of share capitalwith high premium during the relevant previous year. In thisjudgement, we do not consider it necessary either to reproducethe particulars of accounts of individual assessees or to refer tothe manner in which the capital receipts were realised. Thefactual background of these cases are more or less similar to thefacts involved in the case of Rajmandir Estates Private Ltd. (supra), and the learned counsel for the parties have alsoconfined their submissions to points of law only. The capitalreceipts in respect of which inquiries have been ordered by theC.I.T. have similar features, being fresh share capital issued athigh premium. Mr. Majumdar, however, drew his strength tourge the point that it was only after the aforesaid amendmentssuch inquiries would have relevance. He sought to take cue fromthe observation of the Coordinate Bench that the question as towhether proviso to Section 68 of Income Tax Act is retrospectivein nature or not was being kept open. He also cited thejudgement of the Hon’ble Supreme Court in the case of Sneh Vs.Commissioner of Customs (2006) 7 SCC 714] to contend that ajudgement is the authority on the proposition which it decidesand not what can logically be deduced from, and sought todistinguish the case of Rajmandir Estates Private Ltd. (supra),on that basis. Submission of the appellants is that the points oflaw urged in these appeals were not raised before the CoordinateBench. Main argument of the appellants before us has been thatthe amendment to Section 68 does not have retrospectiveoperation. According to the appellants, if it is found that theamended provisions of Section 68 of the Act do not haveretrospective operation, then having regard to what has beenheld by the Tribunal in the case of Subhalakshmi Vanija Pvt.Ltd. (supra), the inquiry, as directed would be impermissible. 14.We have already observed that the judgement in the case ofRajmandir Estates Private Ltd. (supra) was deliveredconsidering the unamended provision of Section 68 of the Act. Inthe case of the assessees before us, there is no differing featureso far as applicability of the said statutory provision is concerned, even though the Tribunal in Subhalakshmi VanijaPvt. Ltd. (supra) had held that the provisos to Section 68 of theAct are retrospective in their operation, and delivered thedecision against the assessee in that case that reasoning. In theappeal of Rajmandir Estates Private Ltd. (supra), theCoordinate Bench did not consider it necessary to examine thequestion of retroactivity of the aforesaid provision. TheCoordinate Bench found the order of the C.I.T. to be validexamining the order applying the unamended provision ofSection 68 of the Act only. We do not find any otherdistinguishing element in these appeals which would requireaddressing the question s to whether the amendment to Section68 of the Act was retrospective in operation or not. Neither do weneed to address the issue that if the inquiries, as directed,revealed that share capital infused were actually unaccountedmoney, whether the same could be taxed in accordance withSection 56(2)(vii)(b) or not. The ratio of the Constitution Benchdecision of the Hon’ble Supreme Court in the case of VedikaTownship Private Ltd. (supra) does not apply in the legalcontext in which we are deciding these appeals. It is notnecessary in these appeals to deal with the question ofretroactivity of the aforesaid provisions, for which that authoritywas cited. 15.Arguments in all these appeals have been advanced in thesame line, and for that reason we have not recorded in thisjudgement the submissions made individually in each appeal.Another decision of a Coordinate Bench in ITA No.723 of2008 in the case of Commissioner of Income Tax, Central II,Kolkata Vs. Shyam Sel Ltd. Decided on 28[th] June 2016 was 15.Arguments in all these appeals have been advanced in thesame line, and for that reason we have not recorded in thisjudgement the submissions made individually in each appeal.Another decision of a Coordinate Bench in ITA No.723 of2008 in the case of Commissioner of Income Tax, Central II,Kolkata Vs. Shyam Sel Ltd. Decided on 28[th] June 2016 was referred to on behalf of the appellants. This decision was cited tocontend that the assessee cannot be asked to discharge the onusor proving the genuineness of transaction relating to the sourceof its source of share application. But in the decision ofRajmandir Estates Private Ltd. (supra), the Coordinate Benchhad directly addressed this issue and observed that source ofsource can be relevant inquiry.16.The points sought to be raised before us in these appealsstand covered by the aforesaid judgement of the CoordinateBench. The Special Leave Petition against that judgement hasbeen dismissed. We accordingly dismiss these appeals, findingthat there is no substantial question of law involved in them.” Thus, following the above decision of the Hon’ble DivisionBench, this appeal is dismissed and we hold there is no substantialquestions of law arising for consideration. With the dismissal of the appeal, the connected application isalso dismissed. (T.S. SIVAGNANAM, J.) (HIRANMAY BHATTACHARYYA, J.)