TMI Blog2019 (1) TMI 143X X X X Extracts X X X X X X X X Extracts X X X X ..... s in right perspective and deleted the additions. As in the case of Kapurchand Shrimal Vrs. CIT [1981 (8) TMI 2 - SUPREME COURT] has held that the duty of the Tribunal does not end with making a declaration that the assessments are illegal and it is duty bound to issue further directions. The appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh unless forbidden from doing so by the statute and the statute does not say that such a direction cannot be issued by the appellate authority in a case of this nature. Therefore, we remit the matter back to the file of AO with a direction to carry further ‘investigation/verification’, if so required, and to remove the doubts /suspicion if any, and to pass afresh order - Appeal filed by the revenue is partly allowed for statistical purposes. Disallowance of Legal & Professional Charges - allowable business expenditure - Held that:- After verification with the actual bills received and on verification, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m/2015 filed by revenue for AY 2011-12. 4. The brief facts of the case are that the return of income was filed on 30.09.12 declaring total loss of ₹ 4,53,277/-. Subsequently the case was selected for scrutiny and after serving statutory notices and providing opportunity of hearing, assessment order u/s 143(3) of the I.T. Act was passed on 28.03.142 thereby assessed income at ₹ 3 crore and made certain additions. Aggrieved by the order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the case of both the parties partly allowed the appeal of the assessee. Now before us, the revenue as well as assessee have preferred their respective appeals. Firstly we are dealing with the appeal filed by the revenue. 5. The solitary ground raised by the revenue is against challenging the order of Ld. CIT(A) in deleting the disallowance made by the AO on account of the cost of the project being overruled at ₹ 14.25 crores which according to the revenue, is nothing but to claim excessive WIP and the assessee had made it a colourable device to increase the WIP of the project by routing of advance without any substance. 6. We have he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee company namely 'Lalita Sigita' and 'Nikhil Sigtia' has transfer their shares to the Shri Sudhakar Shetty(Present director) and M/s. Sahana Construction Pvt. Ltd. for a total consideration of ₹ 14.25Cr. after releasing the total liability of the company as on 07/01/2011 of ₹ 1,56,77,440/- by the new share holders vide agreement dt.08/01/2011 on ₹ 100/- stamp Paper, which was not registered before the stamp duty authority. The paid up share capital of the company was ₹ 1,04,000/- of 10,400/-equiry shares having a face value of ₹ 10 each, unsecured loan was ₹ 62,45,739/-, share money application money was ₹ 1,83,000/-, W.I.P was ₹ 60,27,308/-, Cash/Bank Balance was ₹ 3,76,431/-, Loan and advance was ₹ 3,50,000/- and current liabilities was ₹ 2,46,000/as on 31/03/2010. 14. During the course of assessment proceeding the assessee had furnished investment agreement between the loan creditor(Vinod Sigtia and Lalita Sigtia) and the assessee's company and Sahana Construction Pvt. Ltd. (one of the assessee's group concern) .This investment agreement is not being registered thereby there is no l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nitiated for concealment of income and furnishing inaccurate particulars of income. Operative portion of CIT s Order 7.3 I have examined the facts on record, the assessment order and the submissions of the appellant carefully. The facts are that the amount of ₹ 3 crores has been received from Lalita Sigtia and Nikhil Sigtia, whose identity is not in doubt, who are assessed to tax, and the sources of the advance are also not in doubt. What remains is the view of the assessing officer that the transactions are colourable and that the sale consideration of shares by the Sigtias are undervalued and that construction space offered by appellant to the Sigtias is at much lower than the market value. Now even if it is assumed that the suspicion of the appellant is correct, then the correct action would be to tax the Sigtias for a higher value than that considered by them in their return of income while computing the capital gains. If a company passes on valuable assets to its past shareholder at less than market value, the assessment will be in the hands of the recipient. If and when such property is constructed and sold, the cost to be considered will also remain lower ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tc. From the ordersheet noting dated 07.01.14, the assessee was again asked to prove the genuineness and nature of transactions with the above persons of ₹ 3 crores with supporting documentary evidence. But the assessee could not prove the nature of transactions. From the records, we noticed that the above two persons had transferred their shares in favour of Sudhakar Shetty (present director) and M/s Sahaha Construction Pvt. Ltd. for a total consideration of ₹ 14.25 crores vide agreement dated 08.01.11. According to the records, the paid up share capital of the company was 1,04,000 of 10,400 equity shares having a face value of ₹ 10 each, unsecured loan was ₹ 62,45,739/-, share application money was ₹ 1,83,000/-, WIP was ₹ 60,27,308, cash /bank balance was ₹ 3,76,431/-, loan and advance was ₹ 3,50,000/- and current liabilities was ₹ 2,46,000/- as on 31.03.10. It was also noticed that assessee had furnished one investment agreeement between the loan creditors and the assessee company and Sahana Construction. This investment agreement was not registered and according to the said agreement the assessee company had a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income Tax Act are not a game of hide and seek. The inquiry in the wake of a notice under Section 148 is not an empty formality. It must be effective and with a sense of purpose. There is an elaborate procedure set out which requires scrupulous adherence and followed up on. In the hierarchy of the authorities, the AO is placed at the bottom rung. The two layers of appeals, before the matter engages the appellate jurisdiction of this court, are authorities vested with the jurisdiction, power and obligation to reach appropriate findings on facts. Noticeably, it is only the appeal to the High Court, under Section 260-A, which is restricted to consideration of substantial question of law , if any arising. As would be seen from the discussion that follows, the obligation to make proper inquiry and reach finding on facts does not end with the AO. This obligation moves upwards to CIT (Appeals), and also ITAT, should it come to their notice that there has been default in such respect on the part of the AO. In such event, it is they who are duty bound to either themselves properly inquire or cause such inquiry to be completed. If this were not to be done, the power under Section 148 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter afresh unless forbidden from doing so by the statute and the statute does not say that such a direction cannot be issued by the appellate authority in a case of this nature. Therefore, considering the above judgment and keeping in view the interest of justice, we set aside the order of Ld. CIT(A) on this ground and remit the matter back to the file of AO with a direction to carry further investigation/verification , if so required, and to remove the doubts /suspicion if any, and to pass afresh order after reaching to a specific finding based on documents / reasoning. It is needless here to mention that before passing the order of assessment, the AO shall provide sufficient opportunity of hearing to the assessee. The assessee is also at liberty to file any other additional documents, if so desires with the AO. Before parting, we may make it clear that our decision to restore the matter back to the file of AO shall in no way be construed as having any reflection or expression on the merits of the dispute, which shall be adjudicated by the AO independently in accordance with law. With these directions, this ground of appeal filed by the revenue is partly allowed for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransferred by the Sigtias to Sudhakar Shetty / Sahana Constructions Pvt. Ltd. sale of shares by the promoters was also one of the subjects on which legal advice was received. The purpose mentioned in the submissions of the AR was verified with the actual bills received and it is noted that the purpose mentioned by the AR tabulated earlier is not entirely truthful. For instance, the bill of M/s Mulla Mulla Crigie Caroe dated 31.12.2010 for ₹ 16,32,4407- mentions that it is in respect of advising in respect of proposed agreements between Sigtia Constructions Pvt. Ltd. and Lalita Vinod Sigtia and Nikhil Sigtia and Sudhakar Shetty / Sahana Constructions Pvt. Ltd. It also mentions that the bill is in respect of general advising from time to time. The other comments mentioned by AR is not found on these bills. Similarly the bill dated 31.12.2010 of Parekh Co., Delhi for ₹ 19,40,000/- is in respect of conferences of the Advocates with Advocates of Mulla and Mulla for finalizing the Share Purchase Agreement and the Investment Agreement. Similar is the purpose in the bills of ₹ 24,50,000/- of Pravin Parekh dated 7.01.2011. The other bills are in respect of various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded by Ld. CIT(A). Therefore, there are no reasons for us to interfere into or deviate from the findings so recorded by the Ld.CIT(A). Hence, we are of the considered view that the findings so recorded by the Ld. CIT (A) are judicious and are well reasoned. Resultantly, this ground raised by the assessee stands dismissed. Ground No. 2. 12. This grounds raised by the assessee relates to challenging the order of Ld. CIT(A) in not considering the expenses of ₹ 36,0007- shown under the head prior period expenses. 13. We have heard counsels for both the parties at length and we have also perused the material placed on record, judgment cited by both the parties as well as the orders passed by revenue authorities. Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A). The Ld. CIT(A) has dealt with the above grounds raised by the assesee in para no. 8.1 to 8.2 of its order. The operative portion of the order of Ld. CIT(A) is contained in para no. 8.2 of its order and the same is reproduced below:- 8.2 These expenses were not claimed in the return of income, apparently since these were prior period expenses. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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