TMI Blog2021 (7) TMI 832X X X X Extracts X X X X X X X X Extracts X X X X ..... matter is remanded back to AO for fresh consideration and to give opportunity to assessee to produce the director of sixteen investor companies in accordance to law. Appeal of the assessee is partly allowed for statistical purposes. - I.T.A. No. 554/Del/2019 - - - Dated:- 14-7-2021 - P.M. Jagtap, Vice President and A.T. Varkey, Member (J) For the Appellant : Soumitra Choudhury and Joydeep Chakraborty, Advocates For the Respondents : Manish Kanojia, CIT ORDER Per A. T. Varkey, JM This is an appeal preferred by the assessee against the order of the Ld. CIT(A)-30, New Delhi dated 26.11.2018 for AY 2014-15. 2. At the outset the Ld. A.R. of the assessee Shri Soumitra Choudhury drew our attention to the Ld. CIT(A)'s impugned order and pointed out that out of total 34 pages order upto page No. 33 are reproduction of the certain selected parts of the assessment order and Ld. CIT(A) has decided the issue by endorsing the view of the AO by a cryptic order without giving his own reason for upholding the addition/action of AO in respect of share capital and premium infused into the assessee company for AY 2014-15 to the tune of ₹ 25,54,50,000/-. Accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt order that AO had based his adverse inference by heavily relying on certain third party's statement namely viz. Shri Subash Agarwal to disbelieve the confirmation and other documents filed by the assessee/investor companies pursuant to section 133(6) notice. Therefore, according to Ld. AR, the AO has saddled the addition based on suspicion (spelling mistakes, font of letter head, no dates etc.) and by relying on third party statement which was recorded behind the back of the assessee and without providing any opportunity to cross-examine, which according to Ld. AR, the AO should not have done in the first place. According to Ld. AR, the main fault/reason for AO to have made the addition was the failure of directors of investor companies non-appearance before him; and in this respect the Ld. A.R. submitted this omission was not deliberate on the part of assessee and the reason for non-appearance has been explained in the affidavit and, therefore, in the light of the admitted fact that assessee/investor companies have responded to sec. 133(6) notice directly to AO, and had furnished all documents to discharge the onus u/s. 68 of the Act, addition only on the basis of non-appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 25,54,50,000/- in this relevant assessment year. And, therefore, as per the limited scrutiny i.e. purpose of selection Introduction of Capital Receipt of large share premium , the AO asked the assessee to prove the identity, creditworthiness and genuineness of the sixteen (16) investor companies, out of them Ten (10) were from Delhi and six (6) from Kolkata. The AO acknowledges that the assessee had filed copies of ITRs, confirmation, and bank statement of the investor companies. However, he found certain glaring discrepancies [similar spelling mistakes in all the confirmation letter]. According to AO, the notice issued u/s. 133(6) of the Act to the six (6) Kolkata based companies were returned back un-served with the remarks such as no such firm/left. Thereafter AO notes that he has issued a commission u/s. 131(1)(d) of the Act at Kolkata, however, none of them presented themselves before the authorities. Thereafter he noted that one of the investors M/s. Nortel Vanijya Pvt. Ltd. is an accommodation entry provider which was controlled by an entry operator Shri Subash Agarwal and he reproduced his statement in his order (which was recorded in some other search proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indicate an application of mind to the matter before Court is essential. Another rationale is that the affected party can know why the decision has gone against him. One of the salutary requirements of natural justice is spelling out reasons for the order made, in other words, a speaking order. Thus, failure to give reasons amounts to denial of justice. The aforesaid observation was made by Lord Denning. 7. Therefore, reasons is the soul of the quasi judicial decision and giving reason while passing an quasi-judicial order is essential and when the order/decision/action is impugned, in an appellate forum, it can be evaluated whether the reasoning was logical and based on relevant facts etc. In this case, the Ld. CIT(A) failed to give his reason as to how he agrees with the findings of the AO and disagrees with the contentions of assessee. The AO acknowledges that the assessee is an NBFC recognized by RBI and had filed ITR copies of all the sixteen (16) investor companies, confirmations from all of them, audited financials of all of them. He also acknowledges that ten (10) investor companies are residents of Delhi and has responded to his notice u/s. 133(6) of the Act. However, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been sworn before the Notary Public and has been placed on record and we have gone through it. And Mr. Jha has undertaken to comply with the directions of the AO given an opportunity is granted and as submitted earlier they would be presenting all the director of the investing companies before the AO to his satisfaction. For that he has cited the order of Hon'ble Supreme Court in the case of Tin Box Company (supra) seeking one more opportunity to be given to go before the AO. We note that the assessee has furnished ITR, confirmation, audited financials etc of all these sixteen (16) investor companies. The AO has admitted ten (10) Delhi based companies have replied to the AO pursuant to his 133(6) notice which the AO finds faults for reasons not repeated. As far as Kolkata based companies are concerned [six (6)] according to assessee there were certain changes in addresses, so therefore notice u/s. 133(6) might not have been served upon them which the AO contest. According to Ld. A.R. since the assessee company's managing director was bed ridden and so could not effectively coordinate the requirements as directed by the AO, the directors of investor companies could not be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;ble Supreme Court an opportunity is being given to the assessee to produce the director of investor companies as well as itself to the satisfaction of the AO to prove identity, creditworthiness and genuineness of the share capital and premium infused into their account. And the AO after giving proper opportunity to the assessee, to pass assessment order considering the documents and material produced post/pre this order and after appreciation of entire evidence the AO to decide the issue in accordance with law. And the assessee is at liberty to produce all documents written submission before the AO to substantiate/clarify the observation of AO in the assessment order dated 30.12.2016 and needless to say that if AO is intending to use any third party statement against the assessee, then the assessee may be given a copy of the statement/material and opportunity to cross-examine the maker of the statement. With the aforesaid observation, the impugned order is set aside, and the matter is remanded back to AO for fresh consideration and to give opportunity to assessee to produce the director of sixteen investor companies in accordance to law. 10. In the result, the appeal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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