2017-VIL-1119-CAL-DT

CALCUTTA HIGH COURT

GA NO. 698 of 2016, And ITAT NO. 137 OF 2016

Date: 10.04.2017

AIM FINCON (P.) LTD.

Vs

COMMISSIONER OF INCOME-TAX, KOLKATA-III

For The Appellant : Saumajit Dasgupta and Sankarsan Sarkar, Advs

BENCH

ANIRUDDHA BOSE, AND ARINDAM SINHA, JJ.

JUDGMENT

1. The Court : This appeal under section 260A of the Income Tax Act, 1961 is at the stage of admission and no notice thereof has as yet been served upon the Revenue. This appeal originates from an order passed by the Commissioner of Income Tax, Kolkata-III passed under section 263 of the Income Tax Act, 1961 directing enquiry to be conducted in relation to raising of share capital at premium to the extent of Rs. 21,00,000,00/- by the assessee-company. The assessment year involved is 2010-11, pertaining to the previous year 2009-10. At that point of time, the assessment was done in the name of Arihant Tradecomm Pvt. Ltd., which company merged with Aim Fincom Pvt. Ltd., with effect from 1st April, 2013 and it is this company who are the appellant before us. In their return, for the above referred previous year, the assessee had declared loss of Rs. 4,314/-. The assessment order was made accordingly. There was re-assessment proceeding triggered by a communication of the assessee informing the Assessing Officer that miscellaneous income of Rs. 24,000/- in the relevant previous year was not accounted for inadvertently. In such circumstances, there was re- assessment upon service of notice under section 148 and section 143(2) of the Act. In the order of reassessment dated 31st December, 2011, there is reference to raising of share capital at premium but that issue was not addressed to in detail by the Assessing Officer. The total income and consequential tax liability was recomputed on the basis of disclosure of Rs. 24,000/- as miscellaneous income. The order under section 263 of the Income Tax Act was passed by the Commissioner primarily addressing the question of infusion of share capital at high premium. In his order, the Commissioner had directed, in substance, fresh enquiry as regards source of funds in layers through which share capital at premium was infused. The assessee failed in their appeal before the Income Tax Appellate Tribunal.

2. We have already examined legality of an order of such nature in our judgment delivered in Success Tours and Travels (P.) Ltd. v. ITO [2017] 80 taxmann.com 262 (Cal.). In this judgment we have relied on two earlier decisions of this Court in the cases of Rajmandir Estates (P.) Ltd. v. Pr. CIT [2016] 386 ITR 162 (Cal.) and Pragati Finance Management (P.) Ltd. v. CIT [ITAT No.178 of 2016], which was decided by this Bench on, 7th March, 2017.

In all the three judgments, challenge to the orders of the Commissioner in similar terms upheld by the Income Tax Appellate Tribunal have been repelled. In the present appeal, Mr.Dasgupta, learned Advocate, appearing for the assessee sought to raise an additional point as regards the rejection of an adjournment prayer of the assessee.

3. Hearing of the proceeding under section 263 was notified by a letter dated 28th November, 2013 to the assessee (Annexure-C to the stay petition) fixing 10th December, 2013 as the date of hearing. There was prayer for adjournment of hearing on that date on the ground of passing away of father of the senior authorised representative of the assessee on 9th December, 2013. But there is no material to show that such prayer for adjournment was made on 10th December, 2013 or on any date prior thereto. As it appears from the despatch slip, photocopy of which is reflected in Annexure-D to the stay petition, the letter seeking adjournment was posted on 12th December, 2013, two days after the date fixed for hearing. The Commissioner appears to have had concluded the hearing on the scheduled date i.e. on 10th December, 2013. But the order was passed on 13th March, 2014. In this order, however, there is reference to the prayer for adjournment in paragraph 5 thereof. The Commissioner has observed in the order :-

"Notice u/s.263 of the I.T. Act was issued for the said reasons on 28.11.2013 in response to that the assessee filed an adjournment petition on 13/12/2013 by which the assessee requested for adjournment of hearing. In this respect it stated that father of senior A/R has expired, but did not annex any supporting evidence like, copy of the death certificate alongwith the adjournment petition which was submitted in the receiving section without appearing before the undersigned. But this petition can not be accepted on the face of it as the same was not supported with any evidence and also the assessee was asked to appear before the undersigned which it did not do, though the undersigned was very much present in the chamber. Hence its adjournment petition was rejected."

4. Submission of Mr. Dasgupta is that the Commissioner did not communicate the order of rejection of prayer for adjournment to the assessee. His second submission is that it was not open to the Commissioner to require or direct the Assessing Officer to dispose of the case on re-enquiry in a particular manner. On this point, he has referred to section 119 of the Act. He has argued, referring to that provision, that since the Board itself does not have the jurisdiction to pass an order of that nature, it is to be inferred that the Commissioner also lacked jurisdiction to direct the enquiry as contained in his order.

5. As regards the first point of Mr. Dasgupta, we find that the prayer for adjournment was not before the Commissioner on the day the hearing took place. Opportunity of hearing thus cannot be said to have had been denied. Reference to the letter of adjournment in the order of the Commissioner cannot be a ground for revisiting the circumstances under which the order was passed on 10th December, 2013. We are of this view because on the date scheduled for hearing the assessee had not applied for adjournment, the assessee cannot take advantage of post hearing prayer for adjournment, even though the Commissioner had referred to such prayer in his order.

6. In our opinion, mere reference to the adjournment petition in the order, which petition was received by the Assessing Officer after the date of hearing does not render the order invalid on the ground of violation of the principles of natural justice. On this point, Revenue's argument was that in exceptional cases, an order passed in violation of the principles of natural justice need not be set aside by the Writ Court in every situation, and one of the circumstances in which this principle would apply is in a case where no prejudice is caused. In the decision of the Supreme Court in the case of Aligarh Muslim University v. Mansoor Ali Khan [2000] 7 SCC 529 it has been, inter alia, held :-

"Chinnappa Reddy, J. in S.L. Kapoor case (1980) 4 SCC 379 laid down two exceptions (at SCC p.395) namely, if upon admitted or indisputable facts only one conclusion was possible, then in such a case, the principle that breach of natural justice was in itself prejudice, would not apply. In other words if no other conclusion was possible on admitted or indisputable facts, it is not necessary to quash the order which was passed in violation of natural justice. Of course, this being an exception, great care must be taken in applying this exception".

7. In our opinion, the very fact that the adjournment petition was received after the hearing was concluded at best could imply that the assessee was seeking re-hearing, and we do not think such a plea was justified. No application for adjournment was made on the day the hearing was scheduled to take place before the Commissioner. If the noticee does not turn up before the authority before whom he has to respond to the notice, but seeks adjournment of hearing after two days, the noticee cannot complain of violation of the principles of natural justice. This would constitute a default on the part of the noticee in availing of the opportunity of being heard. A subsequent prayer for rehearing would be akin to an application under Order IX Rule 13 of the Code of Civil Procedure, in which case the noticee has to demonstrate sufficient cause for recalling the order passed in a proceeding in which he could not remain present. The letter of the assessee, a copy of which has been made Annexure-"D" to the stay petition, has not been framed in such manner. The grounds of appeal before the Tribunal is also not founded on that plea. The Commissioner did not commit any error of law warranting interference from a superior appellate forum under the circumstances in deciding the case on merit. Moreover, the assessee had full opportunity to deal with the issue on merit before the Tribunal.

8. On the second point, we find from his order that the Commissioner had outlined the manner in which the enquiry was to be carried out. There is no specific direction in the order stipulating in what way the case was to be decided. The Assessing Officer has been directed to pass a speaking order after providing reasonable opportunity to the assessee and upon verifying the source of share capital including the share premium of all the subscribers and rotation of money through various hands so as to ascertain the true nature of transaction which would bring to the fore, the reality of the transactions. The Commissioner's order gives a guideline on how the Assessing Officer shall proceed with the enquiry. The order, as we have already observed, does not contain a mandate in which manner the assessing officer shall pass the order.

9. In our opinion, such a direction does not attract the prohibitory provisions of section 119. The said provision deals with power and jurisdiction of the Board to issue instruction on subordinate authorities. This provision does not relate to the power and jurisdiction of the Commissioner. But even if we proceed on the basis that the Commissioner's authority over his subordinate officers would be guided by the same principles, in such a situation also we do not think the Commissioner's order with which the assessee is aggrieved has been passed in breach of such principles.

10. We accordingly, dismiss the stay petition and the appeal, as this appeal involves no substantial question of law.

 

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