B, IN INCOME TAX APPELLATE TRIBUNAL B BENCH: KOLKATA [Before Shri P.M. Jagtap, Vice President (KZ) & Shri A. T. Varkey, JM] I.T.A. No. 2228/Kol/2017 Assessment Year: 2006-07 M/s. Glorious Suppliers Pvt. Ltd. Vs. ITO, Ward 6(2) Kolkata PAN: AACCG2938E Appellant Respondent Date of Hearing 10.07.2019 Date of Pronouncement 04.09.2019 For Appellant Shri M.D. Shah, AR For Respondent Shri Radhey Shyam, CIT, DR ORDER Per Shri A.T.Varkey, JM This is appeal preferred by Assessee against order of Ld. CIT(A) 17, Kolkata dated 17.04.2017 for AY 2006-07. 2. main grievance which is specified in ground no. 1 of appeal is that impugned order is vitiated for violation of principles of natural justice. It was brought to our notice by ld. AR for assessee that even at assessments stage, assessee did not get proper opportunity before ld CIT(A) as well as AO misdirected himself to make additions which has no sanction under law. For buttressing this arguments ld. AR drew our attention to page 1 and 2 of assessment order wherein AO notes that search and seizure operation was conducted on 10.10.2009 in Badalia Group of cases and that number of bank accounts were found during course of search & seizure operation at premises of Mr. M.M. Daga at 3, Rabindra Sarani, 1st Floor, Kolkata 700 001 including bank account of M/s. Glorious Suppliers Private Limited (assessee) bearing Account No. 1076118 with ABN Amro Bank, Kolkata. According to AO, on verification of Bank Accounts it was observed that some credit entries were made by various beneficiaries. Thereafter, in response to query pertaining to bank accounts, it has been submitted u/s 131 of Income Tax Act, 1961 (herein after referred to as Act ) on 21.12.2009 by Shri 2 ITA No.2228/Kol/2017 M/s. Glorious Suppliers Pvt. Ltd. AY 2006-07 M.M. Daga that I am not able to explain though I agree that bank accounts were used and maintained by me. I used to take cash from various beneficiaries, deposit them in these accounts and issue cheque in name of concerns after deducting my commission. 3. Taking note of aforesaid statement, AO issued notice u/s 148 to reopen assessment of assessee for AY 2006-07on 24.07.2012 and thereafter, in reassessment proceedings observed that he had issued summons u/s 131 to directors of assessee- company however it was not responded to since show cause notice and summons have been returned back by postal authority with remark no such company . However, AO acknowledges that assessee-company has furnished copy of final account, IT return acknowledged and copy of bank statement. AO noted that assessee-company issued 3,11,900 shares to different companies and received Rs. 3,11,90,000/- @ Rs. 10/- per share and @ 9/- per share as premium. AO acknowledges that assessee has filed list of shareholders and also furnished copy of final account, IT return acknowledgement, bank statement for relevant period evidencing receipt on share application money from share applicant. AO noted that share capital so received has been invested in shares of other Private Limited Company. It was noted by AO that assessee-company is in 2nd year in operation and it deals in investment and trading in shares & securities etc. From record AO noted that authorized share capital of said company was Rs. 48,00,000/- and during year under consideration, subscribed and issued capital was Rs. 47,69,000/- and share premium account was Rs. 4,20,21,000/-. Value of fixed assets were found of Rs. Nil/- closing bank balance of Rs. 1,103/- and investment value was found to tune of Rs. 4,69,50,000/-. Since summons and show cause notice were returned back unserved, AO drew adverse inference against assessee-company in respect to genuineness of share transactions and made addition of Rs. 3,11,90,000/- u/s 68 of Act. It was also brought to our notice that AO had made addition of Rs. 1,46,203/- @ 0.30 paisa per hundred rupees on amount of Rs. 4,87,34,260/- as commission income which assessee received and was added separately. Aggrieved assessee preferred appeal before Ld. CIT(A) which was confirmed. Therefore assessee is before us. 4. Assailing impugned order, ld. AR contended that AO has made addition of Rs. 3,11,90,000/- on ground that summons u/s 131 issued to directors of 3 ITA No.2228/Kol/2017 M/s. Glorious Suppliers Pvt. Ltd. AY 2006-07 assessee-company was returned back unserved whereas it was pointed out by ld. AR that notices issued by AO u/s 143(2), 148 and 142(1) and notices of Ld. CIT(A) were duly served upon registered office of assessee-company by very same postal authorities who have returned back summons with endorsement no such company . According to ld. AR when all aforesaid statutory notices could be duly served upon assessee, it was surprising that only summons u/s 131could not be served upon assessee-company. Be that as it may, we note that AO had acknowledged that assessee had complied before AO by filing documents like copy of final account, IT return acknowledgement, copy of bank statement etc. during assessment proceedings. ld. AR stated that simply because directors could not appear cannot be ground to draw adverse inference against assessee in light of credence furnished by assessee to substantiate identity, creditworthiness & genuineness of transaction. Moreover, given chance, ld. AR undertakes to produce directors of assessee-company as well as that of share subscribing companies in respect of shares subscribed / premium paid in this assessment year if any. When we asked ld. AR about statement given by Mr. M.M. Daga, he contended that Badalia Group of assessee company may have been used as pass through entry giving accommodation entries to beneficiaries. According to ld. AR, AO has to make up his mind as to whether assessee company was only pass through entry / accommodation entry provider to beneficiaries who would deposit money in assessee s accounts which would be passed on to other companies through banking channels as described by Shri M.M. Dage and in that case, assessee s role as accommodation entry provider would be clear & then assessee-company would be entitled to only commission income; and money deposited in account of assessee cannot be brought u/s 68 of Act. However ld. DR contested claim of assessee and pointed out that AO has clearly stated that assessee-company issued shares at premium & now it cannot be turn around and say that it was only accommodation entry provider and therefore, addition made u/s 68 should not be disturbed. 5. After having heard both parties we note that AO has drawn adverse inference against assessee since summons issued u/s 131 returned back unserved. However it was brought to our notice that pursuant to statutory notices u/s 142(1) & 143(2), 4 ITA No.2228/Kol/2017 M/s. Glorious Suppliers Pvt. Ltd. AY 2006-07 assessee has responded and filed all documents to substantiate credit entries in assessee s bank account. So only on basis of notice/summons having been returned on very same address of assessee cannot be ground to draw adverse inference against assessee. 6. Since AO has acknowledged production of documents by assessee during assessment proceedings and AO has made addition only ground that summons u/s 131 could not be served upon assessee, we are inclined to set aside order of CIT(A) and remand matter back to AO for fresh adjudication in light of undertaking of ld. AR that assessee would produce their directors. We make it clear that we have not made any finding on merits and AO to frame assessment de-novo after hearing assessee and not to be influenced by any of our observation and in accordance to law. 7. In result, appeal of assessee is allowed for statistical purpose. Order is pronounced in open court on 04.09.2019 Sd/- Sd/- (P.M. Jagtap) (Aby. T. Varkey) Vice-President Judicial Member Dated : 4th September, 2019 Biswajit (Sr. P.S.) Copy of order forwarded to: 1. Appellant M/s. Glorious Suppliers Pvt. Ltd., 9, Lal Bazar Street, Block A, 3rd Floor, Room No. 7, Kolkata 700001. 2 Respondent ITO, Ward 6(2), Kolkata. 3. CIT(A) -, Kolkata. (through e-mail) 4. CIT Kolkata 5. DR, ITAT, Kolkata. (through e-mail) True Copy, By order, Assistant Registrar/H.O.O. ITAT, Kolkata Glorious Suppliers Pvt. Ltd. v. ITO, Ward-6(2), Kolkata