2021 (2) TMI 64 - AT - Income Tax

Tribunal quashes tax order under Section 263, ruling in favor of assessee.

The Tribunal quashed the order passed by the Principal Commissioner of Income Tax under Section 263, finding it to be bad in law. It was held that the ... Revision u/s 263 - addition made u/s. 68 - second revisional jurisdiction of Pr. CIT - Whether the AO (called second AO) has not conducted enquiry while framing re-assessment order - Angle of doctrine of merger - second Pr. CIT passing the second revisional order has substituted the First Pr. CIT’s order passed u/s. 263 - HELD THAT:- Persons representing the share applicant companies have appeared before the Assessing Officer in the second round of assessment proceedings, in response to notice u/s. 131 of the Act, and their statements were recorded on oath. The share applicant companies have also responded to notice u/s. 133(6) of the Act by furnishing the information called for. The information filed by the creditor share applicant companies as Copy of I.T. Return/Acknowledgment, Copy of annual audited accounts, Balance sheet and profit & loss a/c statement and Copy of Bank Statement These documents prove the genuineness of the transactions. A perusal of these documents show that the Assessing Officer has followed the directions of the ld. Pr. CIT, issued in his first order dt. 09/09/2016 passed u/s. 263 of the Act and has taken a plausible view. It is not a case of lack of enquiry, nor a case of inadequate enquiry. A decision was taken after examination of all evidences and documents. Such a view cannot be termed as erroneous insofar as it is prejudicial to the interest of the revenue. Assessee had discharged the onus upon it about the identity creditworthiness and genuineness of the share capital and premium collected by the assessee from the respective share subscribers. Since the aforesaid exercise was carried out by the second AO in the reassessment proceedings and the documents referred to above are in the assessment folder, the Second Ld. Pr. CIT erred in holding the reassessment order of the AO in respect of share capital and premium collected by the assessee as erroneous as well as prejudicial to the interest of the revenue. AO’s action (reassessment) pursuant to the first revisional order of Ld. Pr. CIT dated 10.06.2016, to accept the share capital and premium as a possible view As specifically applying the decision of the Tribunal in the case of M/s. Amritrashi Infra Private Ltd. [2020 (8) TMI 407 - ITAT KOLKATA] and in the case of M/s. Omkar Infrastructure Pvt. Ltd. [2020 (5) TMI 209 - ITAT KOLKATA] to the facts of the case on hand, we have to necessarily hold that the exercise of revisionary power by the ld. Pr. CIT, u/s. 263 of the Act, vide order dt. 14/03/2019, is bad in law. Hence we quash the same and allow the appeal of the assessee. Issues Involved:1. Validity of the order passed under Section 263 of the Income Tax Act, 1961.2. Examination of the identity, creditworthiness, and genuineness of the transactions related to share capital and share premium.3. Compliance with directions issued in the first order under Section 263.4. Adequacy of the enquiry conducted by the Assessing Officer (AO).5. Jurisdiction of the Principal Commissioner of Income Tax (Pr. CIT) to invoke Section 263 for the second time.6. Application of the law of limitation.Detailed Analysis:1. Validity of the Order Passed Under Section 263:The appeal challenges the order passed by the Pr. CIT under Section 263 of the Income Tax Act, 1961, dated 14/03/2019, for the Assessment Year 2011-12. The assessee contends that the order is barred by the law of limitation and is bad in law. The Pr. CIT had issued a show cause notice proposing to revise the second assessment order passed under Section 263 read with Section 143(3) of the Act on 26/12/2016. The Pr. CIT held that the assessment order was erroneous and prejudicial to the interest of revenue due to lack of enquiry by the AO.2. Examination of Identity, Creditworthiness, and Genuineness of Transactions:The AO had examined the identity, creditworthiness, and genuineness of the subscriber companies in the original assessment order. The AO concluded that the assessee had introduced its own unaccounted funds in the form of share application money, adding Rs. 7,15,00,000/- to the total income as unaccounted cash credit under Section 68 of the Act. The Pr. CIT, in the first order under Section 263, directed the AO to carry out a proper examination of books of accounts, bank accounts, and the source of share application money. The AO, in the second assessment order, conducted enquiries as directed and did not make any addition under Section 68.3. Compliance with Directions Issued in the First Order Under Section 263:The AO complied with the directions issued by the Pr. CIT in the first order under Section 263. The AO issued notices under Sections 133(6) and 131, recorded statements under oath from the directors of the subscriber companies, and examined the bank statements and source of funds. The AO concluded that the identity, creditworthiness, and genuineness of the transactions were established.4. Adequacy of the Enquiry Conducted by the AO:The Pr. CIT, in the second order under Section 263, held that the AO failed to carry out detailed investigation/verification and merely accepted the submissions of the assessee. The Pr. CIT pointed out several grounds for the inadequacy of the enquiry, including failure to examine the rationale behind the share premium, the financial position of the shareholders, and the money trail. However, the Tribunal found that the AO had conducted a thorough enquiry, and the view taken by the AO was a plausible one based on the evidence on record.5. Jurisdiction of the Pr. CIT to Invoke Section 263 for the Second Time:The Tribunal held that the Pr. CIT could not invoke Section 263 for the second time on the same issue. The AO had followed the specific directions of the Pr. CIT given in the first revisionary order. The Tribunal referred to the decisions in the cases of Amritrashi Infra Private Ltd. and Omkar Infracon Private Ltd., where it was held that the Pr. CIT could not exercise revisionary jurisdiction for the second time on the same issue if the AO had complied with the directions in the first order.6. Application of the Law of Limitation:The assessee argued that the order passed under Section 263 was barred by the law of limitation. The Tribunal did not specifically address this issue in the judgment but focused on the adequacy of the enquiry conducted by the AO and the jurisdiction of the Pr. CIT to invoke Section 263 for the second time.Conclusion:The Tribunal quashed the order passed by the Pr. CIT under Section 263 of the Act, dated 14/03/2019, as it was found to be bad in law. The Tribunal held that the AO had conducted a proper enquiry as directed in the first order under Section 263, and the view taken by the AO was a plausible one. The Pr. CIT could not invoke Section 263 for the second time on the same issue. The appeal of the assessee was allowed.