2023 (6) TMI 1380 - AT - Income Tax

ITAT overturns CIT revision order u/s 263 on share capital transactions after finding AO conducted proper enquiry

M/s. Rani Sati Agro Tech Pvt. Ltd. Versus Income Tax Officer, Ward-12 (3), Kolkata

ITAT Kolkata allowed the assessee's appeal against CIT's revision order u/s 263 regarding share capital and premium transactions. The AO had conducted ... Validity of Revision u/s 263 - transactions of receiving share capital and share premium - as per CIT AO has taken wrong figures and has neither examined nor gathered any evidence from any source/witnesses - HELD THAT:- We notice that the AO in order to make independent enquiry with the share applicants, called information u/s 133(6) of the Act from all the three share applicants commonly calling therefrom the informations - In compliance to these notices, details were filed by the share applicants addressing them directly to the Assessing Officer providing the copies of share application forms, source of funds, copy of bank statement, copy of board resolution, copy of audited balance sheet etc. After having conducted all these enquiries, in order to satisfy about the identity and creditworthiness of the share applicants and genuineness of the transactions, the ld. Assessing Officer moved a step forward and issued summons to the directors of the assessee company as well as investing companies to which necessary compliance was made and all the summoned persons appeared before the Assessing Officer and recorded under oath on 05/05/2016 and they form part of the assessment records. We find that AO has conducted extensive enquiry on the issues and directions mentioned u/s 263 and further on perusal of the impugned order, we notice that all the issue which the ld. Pr. CIT has referred has already been addressed by the AO in the detailed enquiry conducted in the course of assessment proceedings. It is neither a case of no enquiry nor a case of incomplete enquiry but it is a case where extensive enquiry has been conducted on which all the issues which have been raised in the impugned order and based on these detailed examination, ld. Assessing Officer came to a conclusion that the assessee has successfully satisfied, with documentary evidence as well as the evidence collected from the share applicants that the transactions of issuing shares at premium and received the share application money is a genuine transaction and the share applicants have successfully proved the identity and the creditworthiness to have invested in the equity shares capital of the assessee company. It is well settled that when an issue on which detailed examination has been carried out by the Assessing Officer, before holding such assessment order as erroneous and so far as prejudicial to the interest of the revenue, the ld. Pr. CIT is required to conduct an enquiry and bring such information on record, failing which assumption of jurisdiction u/s 263 of the Act cannot be held to be justified. Assessee appeal allowed. Issues Involved:1. Condonation of delay in filing the appeal.2. Validity of the order passed under Section 263 of the Income Tax Act, 1961.3. Adequacy of the Assessing Officer's enquiry.4. Whether the assessment order was erroneous and prejudicial to the interest of the Revenue.Summary:Condonation of Delay:The appeal filed by the assessee was delayed by 139 days due to the Covid-19 pandemic. The Tribunal condoned the delay, referencing the Supreme Court's suo moto Writ Petition (C) No. 3 of 2020, which excluded the period from 15.03.2020 to 28.02.2022 for the purpose of limitation.Validity of the Order Passed Under Section 263:The Principal Commissioner of Income Tax (Pr. CIT) invoked Section 263, claiming the assessment order was erroneous and prejudicial to the interest of the Revenue due to inadequate enquiry. The Tribunal examined whether the Pr. CIT's invocation of Section 263 was justified.Adequacy of the Assessing Officer's Enquiry:The Assessing Officer (AO) conducted extensive enquiries, including issuing notices under Sections 142(1) and 133(6), and summons under Section 131. The AO verified the identity, creditworthiness, and genuineness of the share applicants, and recorded statements from directors under oath. The Tribunal found that the AO had made a thorough enquiry and applied his mind to the issues.Erroneous and Prejudicial to the Interest of the Revenue:The Tribunal emphasized that for an order to be revised under Section 263, it must be both erroneous and prejudicial to the interest of the Revenue. It noted that the AO had conducted a detailed investigation and taken a plausible view. The Pr. CIT did not bring any new facts or evidence to show that the AO's order was erroneous.Conclusion:The Tribunal quashed the Pr. CIT's order under Section 263, restoring the AO's assessment order. It held that the Pr. CIT had erred in assuming jurisdiction under Section 263, as the AO had conducted a detailed enquiry and taken a permissible view under the law. The appeal of the assessee was allowed.