2018 (1) TMI 1289 - AT - Income Tax

Non recognition of assessee as an assessee under the Income Tax Act - bogus entity or not - main grievance of the assessee is that the assessee is a NBFC - doctrine of consistency - Held that - From a perusal of the above chart it is evident that the AO has accepted the return of income filed by the assessee A.Y.2011-12 to A.Y.2016-17; and that assessee even received refund of 10, 22, 110/- for A.Y.2014-15 and 75, 92, 120/- for A.Y.2016-17.We find force in the said arguments of the ld. AR when the fact remains same unless the facts and law applicable in this relevant A.Y. is different the AO s action for earlier years and subsequent years must be the same in line with the doctrine of consistency. Since in the earlier assessment years and subsequent assessment year the assessee s return of income has been accepted and even refunds have been allowed treating the assessee an NBFC company as bogus need to be supported by material/evidence which the AO has not spelt out. The ld. CIT(A) has categorically held that there is no material on the basis of which it can be concluded that the assessee is fake and bogus. In the light of such a finding of ld. CIT(A) and the subsequent action of the AO accepting the return of income of the assessee up to A.Y.2016-17 and in the light of Rule of consistency we therefore are inclined to set aside the order of ld. CIT(A) and remand the matter back to the file of the AO for denovo adjudication. - Decided in favour of revenue for statistical purposes

Summary

Issues:
Appeals filed by revenue against CIT(A) orders for AY 2010-11 regarding recognition of assessee as NBFC and acceptance of return.

Analysis:
The six appeals before the ITAT Kolkata involved the revenue challenging separate orders of the CIT(A) for AY 2010-11 regarding the recognition of the assessee as a Non-Banking Financial Company (NBFC). The AO had not accepted the assessee's return, considering it a bogus entity, leading to no demand raised against the assessee. However, the CIT(A) allowed the appeal, directing the AO to accept the return. The main contention was that the assessee, being an NBFC, had its returns accepted for subsequent assessment years up to AY 2016-17, with refunds granted. The AR argued for consistency in treatment, citing legal precedents emphasizing the importance of maintaining consistency in similar cases over different assessment years.

The ITAT referred to the principle of consistency highlighted in the case of Radhosamy Satsang vs CIT, stressing that a uniform approach must be adopted unless there are substantial differences in facts or law for the relevant assessment year. The tribunal also cited the case of Hoystead vs Commissioner of Taxation, emphasizing the need for finality in legal proceedings and discouraging the reactivation of stale issues beyond a certain point. The ITAT found merit in the AR's argument, noting that the AO's treatment of the assessee as bogus in the specific assessment year lacked supporting evidence, especially considering the acceptance of returns and refunds in other years. As the CIT(A) found no material to deem the assessee fake, and in line with the doctrine of consistency, the ITAT set aside the CIT(A)'s order and remanded the matter to the AO for fresh adjudication.

Ultimately, the ITAT allowed all appeals of the revenue for statistical purposes, emphasizing the need for a thorough examination of the AO's treatment of the assessee as a bogus entity in the specific assessment year. The judgment underscored the importance of consistency in tax assessments and the requirement for supporting evidence to justify deviations from past practices.