AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (6) TMI 1048
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....s laid out in Section 263 of the Income-tax Act, 1961 were not fulfilled. 2. That the order dated 12-01-2018 passed u/s 263 of the Income-tax Act, 1961 passed by the Ld Pr Commissioner of Income-Tax, Delhi -9, New Delhi is against law and facts on the file in as much as he was not justified to set aside the order dated 31-12-2016 passed u/s 143(3) of the Income-tax Act, 1961 for the AIY 2014-15 by the Assistant Commissioner of Income-Tax, Circle -25 (2), New Delhi and direct the Assessing Officer to :- (a) inquire into the issue of receipt of Rs. 7.80 crores on share premium/share capital from M/s Prosperity Mercantile Pvt Ltd and also receipt of Rs. 1 crore from M/s Prosperity Mercantile Pvt Ltd on behalf of Sh 8asant Kr Jain, a shareholder / Director in the Appellant Company on the ground that M/s Prosperity Mercantile Pvt Ltd is allegedly an entry/provider/shell/paper company which had been acquired by the Appellant Company for the purpose of allegedly routing its own unaccounted money. (b) inquire into the issue of NIL WIP found in the final accounts of the Appellant Company. " 2. The facts in brief qua the issue arising in the impugned proceedings u/s 263 are that, ....
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....so it also required further enquiries /verification." 4. Accordingly a show cause notice was issued u/s 263(1) on 23.8.2017. In response to which assessee filed its detailed objection / reply stating that the AO during the course of the assessment proceedings had duly enquired about the issue of share capital/share premium received during the year from M/s. Prosperity Mercantile (P) Ltd. and assessee was asked to justify the genuineness and creditworthiness alongwith the documentary evidence of source of amounts received in the bank account of M/s. Prosperity Mercantile Ltd. Based on such documents and after he was duly satisfied, he accepted the share capital which were received during the year. Apart from that, various legal submission were also made challenging the revisionary proceedings exercised u/s 263. To prove the genuineness and creditworthiness of the share capital/premium received, the assessee had filed a) confirmation of the company; b) bank statement of M/s. Prosperity Mercantile (P) Ltd.; c) computation of income and acknowledgement of filing income-tax return of the said party; and d) copy of audited balance sheet wherein this amount was shown as investment. Thus....
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.... satisfied with the financial of the Co. and the sources of M/s. Prosperity Mercantile Private Limited. In this context he has asked the assessee to submit the documentary evidence for the sources of amount received in the bank account of M/s. Prosperity Mercantile Private Limited to verify the creditworthiness of M/s. Prosperity Mercantile Private Limited. However, the assessee in its reply dated. 23.12.2016 did not submit the requisite details as asked by the AO. In the bank statement, the payment to the assessee company' is visible but it is seen that the equivalent amount have been received by M/s. Prosperity Mercantile Private Limited on the same day or one day before through transfers or through cheque payments. The details in r/o source of these credits in the bank statement of M/s. Prosperity Mercantile Private Limited have not been furnished by the assessee. However, it is apparent that the AO has passed the assessment order on 31.12.2016 and did not make any addition on the issue of share capital/share premium u/s 68 of the IT Act. This issue has not been discussed in the order sheet or in the assessment order at all. Further, the AO called the Director of the assesse....
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.... pages 16 to 19 :- "i. During the inquiry proceedings the assessee did not co-operate with the authorities on various pretexts. The summons were also issued to Sh. Naveen Kr. Jain who appears to be Director in the assessee company as well as in M/s. Prosperity Mercantile Pvt. Ltd. ii. M/s. Prosperity Mercantile Pvt. Ltd. was incorporated in Kolkata on 25.11.2010, the Directors of this company were Sh. N. C Barik and Sh. Balai Das and these two persons were also Directors in more than 250 companies. Then Sh. BK Sultania was appointed as Director who remained as Director till March, 2014. Sh. Sultania was also Director in 72 other companies. Similarly Sh. AK Sultania was also Director in M/s. Prosperity Mercantile Pvt. Ltd. apart from being Director in 49 other companies. iii. In the very first year (F. Y. 2010-11) in a short span of four months, M/s. Prosperity Mercantile Pvt. Ltd. raised share capital of Rs. 30.39 lakhs and also received share premium of Rs. 29.10 crores which indicates that approx. share premium of Rs. 989 was received on one share which is simply astronomical for a company which had no background and having Directors who were also Directors in hundreds of....
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....M/s. Counter Stone Business Pvt. Ltd. 4) M/s. Ayudhya Wincom Pvt. Ltd. 5) M/s. Lifelong Ventures Pvt. Ltd. 6) M/s. Limbo Engineering Pvt. Ltd. 7) M/s. Orchid Infra Builders Pvt. Ltd. For the assessee company as well as for these seven shareholders same PAN No. DDDPD6061 D is used which on account of inquiry was found to be as bogus PAN, till A. Y. 2016- 17 same shareholders and same PAN is shown in the Return of income of M/s. Prosperity Mercantile Pvt. Ltd. x. The assessee company has many group companies some of which are mentioned below: 1) M/s. Astonis Marketing Pvt. Ltd. 2) M/s. Mukul Metrology Pvt. Ltd. 3) M/s. Vidya Knowledge Education Foundation 4) M/s. BDS Construction Pvt. Ltd. 5) M/s. SS Infra Ventures Pvt. Ltd. 6) M/s. SBM Business Pvt. Ltd. 7) M/s. Shubham Rolling Mills Pvt. Ltd. 8) M/s. Classic Infra Projects Pvt. Ltd. 9) M/s. Vishwanath Paper and Boards Pvt. Ltd. xi. There are some more companies which have bank transactions with M/s. Prosperity Mercantile Pvt. Ltd., these companies might also to be connected with assessee company. 1) M/s. Discreto Real Estate Pvt. Ltd. 2) M/s. Impact Realcom Pvt. Ltd. 3) M/s: K....
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....er summons were again issued to Sh. Naveen Kr. Jain and Sh. Pankaj Kr. Jain on 18.12.2017 and they were requested to appear on any working day between 19th to 22nd December, 2017during office hours. However none of them attended. Sh. Pankaj Jain vide undated letter responded that summon reached to him on 22.12.2017 only so it was not possible for him to appear on the same date. A similar undated letter was also received from Sh. Naveen Kr. lain with the same submissions. From these proceedings it is clear that three reasonable opportunities were provided to' the Directors of M/s. Prosperity Mercantile Pvt. Ltd. for their personal appearance in the case of M/s. Vidya Prakahsan Mandir Pvt. Ltd. However, from the turn of events it is obvious that none of the Directors attended the proceedings. xvi Thereafter on 19.12.2017 a letter was issued to the Director/ Principal Officer of the assessee company (M/s. Vidya Prakashan Mandir Pvt. Ltd.) and they were requested to produce the Directors of M/s. Prosperity Mercantile Pvt. Ltd. on any working day between 26th to 29th December, 2017. However, no response was received to this letter." 8. Thus, Ld. PCIT concluded that M/s. Pros....
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....n to the bank statement and submitted that the amount has been received on various dates out of huge credit balance available in the said bank account. (The copy of the bank statement is appearing from pages 53 to 59 of the paper book). Not only that, he submitted that in the case of M/s. Prosperity Mercantile Pvt. Ltd. assessment orders u/s 143(3) has been completed for the assessment year 2014-15 vide order dated 7.12.2016 and for the assessment year 2015-16 vide order dated 20.12.2017 after scrutiny. Copy of the said assessments has been placed in the supplementary paper book from pages 94 to 104 before us. Thus, he submitted that once a detailed scrutiny assessment u/s 143(3) has been made with regard to each and every item of the balance sheet and not only that investment in shares have also been examined and thereby disallowance u/s 14A were made in the case of the said company, then it cannot be held that either the genuineness or creditworthiness of the transaction can be doubted. He further pointed out that the entire investigation reports relating to M/s. Prosperity Mercantile Pvt. Ltd. can be a case for carrying out inquiry and investigation into the source of funds avai....
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....e Limited. During the course of the assessment proceedings, though AO has asked to prove the genuineness of the transaction of receiving of share capital and share premium from M/s. Prosperity Mercantile Pvt. Ltd. and also creditworthiness of the said company, but as noted by the Ld. PCIT certain requisite details as asked by the AO were not filed. From the perusal of the reply filed by the assessee during the course of assessment proceedings, we find that assessee had filed confirmation of the party, details of payment alongwith bank statement, audited balance sheets of the subscribing company, sale purchase agreement and Income Tax Returns of the said company. All the other details as required by the AO which has not been furnished have not been specified in the impugned order. Ld. PCIT wanted that AO should have inquired into the source of the credit in the bank account of M/s. Prosperity Mercantile Private Limited and since it has not been furnished before the AO, therefore he should have not accepted the amount of share capital / share premium and instead should have made addition as unexplained credit u/s 68. During the course of the revisionary proceedings u/s 263, the Ld. P....
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....t order passed by the assessing officer is erroneous, but second limb which is equally important to be established while exercising revisionary proceedings is that, such an order should also be prejudicial to the interest of the revenue, which needs to be established by the CIT/PCIT. In other words in the context of the present case, it has to be seen whether the company in whose name credit is standing in the books of the assessee, has offered any explanation about the nature and source of such sum so credited. From the entire reading of the impugned order passed u/s 263 it appears that M/s. Prosperity Mercantile Private Limited was having share holder companies who were in the either in the list of bogus shell companies or these companies may have been operated by some entry providers. The entire premise of the Ld. PCIT is that source of the credit has not been examined by the AO. Thus, in this case the key element which needs to be examined whether the source and creditworthiness of the subscribing company stands satisfied or not. In this case one glaring fact which emerges from the record is that, M/s. Prosperity Mercantile Private Limited, much prior to 31st March, 2013 had hu....
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....rutiny proceedings year after year in its case and from the same fund has investment has been made in the assessment company in this year, then source ostensibly stands proved. In case something adverse is found in the reassessment proceedings of M/s. Prosperity Mercantile Pvt. Ltd. that assessee has routed some kind of unaccounted money for this purpose, then department is free to take action under the provisions of the Act and in accordance with law. But, until the source of funds with M/s. Prosperity Mercantile Pvt. Ltd. and investment made in the shares of assessee company stands accepted by the department and that too in scrutiny proceedings u/s 143(3) for the same assessment year which till date is final, then it cannot be held that nature and source of the credit from the subscribing company is not proved. Here the subscribing company has given its confirmation, bank statement, its return of income and balance sheet to show the availability of funds and investment made to prove the source of credit. There is no iota of evidence or any link till date that assessee has routed its unaccounted money through some scrupulous manner and after such rotation of money from various ban....