Calcutta High Court Order In Swati Bajaj & Ors Vs PCIT
In this article with all respect to the Honble HC I would like to discuss in brief about some shortcomings and errors which have appeared in the said judgement in my humble thinking. It is known fact that for long time huge controversy is going on penny stock matter. While most of the ITAT has passed favourable order for assesses with few exceptions which has landed the income tax departments well concerted effort to unearth huge black money that according to the department have been ploughed back in to white money by employing a colourable device of huge price rigging in penny stock by a well organized syndicate of accommodation entry providers mostly of whom are stock brokers and shell companies. Now in this back drop department had challenged 90 orders passed by the Honble ITAT Kolkata in assesses favour time to time and the Honble divison bench of HC after lengthy hearing is pleased to pass a lengthy order in favour of the department thus nullified all ITAT orders including the pending cases. Now in this factual back drop I would like to ink a critical appreciation of the said judgement in brief manner as:
1 That on going through the entire judgement wherein it appeared to me that the central spirit which has driven the Honble bench to pass the order in favour of the department is the non consideration of principle of preponderance of probabilities or what is apparent is not real, the principal laid down by the Apex court in Sumati Dayal vs CIT and P. Mohonkala vs CIT wherein the Honble apex court had pronounced a new rule of law that in taxation matter department is not bound by only documentary evidences furnished by the assessee before the A.O. A.O as an investigator is empowered to look at the surrounding circumstances including the circumstantial evidences apart from documental evidences. It means what is apparent in documental evidences furnished by the assessee are not real if the department goes for further investigation on these matters. Therefore Honble bench mostly relied on the investigation report of DIT(INV), Kolkata wherein entire modus operandi of penny stock is dealt with including the gullible method of price rigging by a well organized syndicate of brokers and shell companies. In the opinion of the Honble bench while passing orders in penny stock cases ITAT should have given weightage of this well established legal principle of Apex court and should have look after the surrounding circumstances which they did not. Therefore these bunch of orders of ITAT are vitiated with injustice to the department.
That now in this factual back drop my humble contention is that as per income tax law ITAT is the highest fact finding quasi judicial forum. Neither High court nor Supreme court has any power to interfere with the factual findings of tribunal. Only they have power to admit and adjudicate the question of law if involve in any appellate matter. Now in this context my question is can Honble bench deal with factual matrix like modus operandi of penny stock, findings by the DIT(INV) and deficiency on evidential values of documentary evidences furnished by the assesses in the touch stone of circumstantial evidences as such modus operandi of syndicate, brokers etc. these are all question of fact where ITAT is the full and final adjudicator and when it is clearly seen from the perusal of HC order that Honble bench is highly enamoured by the lack of fact findings by the tribunal on circumstantial evidences. Is not it a good case of assumption of jurisdiction of ITAT by the Honble HC?
2 That my next and last observation is that in the said order Honble bench has not noticed a vital observation made by tribunal in most penny stock cases and that is investigation and assessment are different proceeding in income tax law. Investigation is mostly of general nature conducted by a separate wing of the department and in penny stock cases DIT(INV) report is general in nature and in most cases name of the assesses and their brokers has not figured out at all. Assessment being separate proceeding all benches of the tribunal have correctly observed in their order that A.O as an investigator is duty bound to initiate a separate assessee specific enquiry including looking in to the involvement of assessee concern which only matters in assessment proceeding in the penny stock racket and A.O had ample power to look in to the circumstantial evidences as par from documentary evidences which he did not. Therefore tribunal most correctly concluded that where A.O has failed to prove the involvement of assessee in the price rigging process and where assesses name nowhere has figure out in investigation report then assessee can not be crucified by the department in penny stock cases being bogus and colourable. But alas Honble HC has totally overlapped this most crucial legal and factual point in its adjudication. Honble bench was duty bound either to establish the involvement of assesses in the racket which was actually department job or to set aside all files to A.O for fresh investigation. But instead of doing it Honble bench appeared too earnest and anxious to establish the guilt of assessee without distinguishing the case laws relied upon by it are of different context and such a serious issue like country wide investigation by the government was not issue in those cases. In my opinion Honble bench totally misread the said judgements of apex court contextually. One basic question can fall flat the impugned order of HC and that is can any body be held guilty for an offence when his or her name has nowhere figure out in the investigation report? If Honble bench reasoning is accepted then it means any person can be hanged in the country although investigation or enquiry report which is basis of charging a person for any offence has not spare a word or evidence about the involvement of that hanged person in any offence. Will it not be travesty of justice or a judgement by a kangaroo court of law? How important the role of A.O and how much responsibility he carries as a quasi judicial authority was long ago established by the Honble Delhi HC order in the case of GEE VEE Enterprises cited supra justified making of inquiries by the Assessing Officer by observing as under:
“14. The reason is obvious. The position and function of the Income Tax Officer is very different from that of a civil court. The statements made in a pleading proved by the minimum amount of evidence may he accepted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The Income Tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word “erroneous” in section 263 emerges out of this contract. It is because it is incumbent on the Income Tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word “erroneous” in section 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct nor can it be said that it was necessary for the Commissioner to himself make such inquiry before cancelling the order of assessment.”
Will not this judgement allow the department to reap benefit of its negligence on statutory duty?
3 That another amazing aspect of this order is that it has not spared even those assesses whose penny stock companies have been exonerated from price rigging offence by the highest body of country security market SEBI. If the penny stock companies in investigation are exonerated by the jurisdictional highest authority of the country then how come genus of offence be dragged down by the Honble bench?
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