TaxTMI 
TaxTMI 
2020 (3) TMI 963
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....3 of the Act was issued by the Ld Pr CIT and consequently order u/s. 263 of the Act was passed on 12-05-2016 (hereinafter referred to as the first sec. 263 order of Pr. CIT) setting aside the original assessment order of AO passed u/s. 143(3) of the Act on 25-03-2015. Thereafter, the Assessing officer while giving effect to the order passed by Ld. Pr. CIT under section 263 of the Act passed reassessment order u/s. 263/143(3) of the Act on 11-06-2016 (hereinafter referred to as the reassessment order of AO dated 11.06.2016) determining total income at Rs. 68,800/-. Thereafter, again the Ld. Pr. CIT called for the reassessment records of the assessee and on the basis of the verification of the material available on records, he was of the opinion that the order of assessment was erroneous so far as it is prejudicial to the interest revenue on the following grounds.- (i) The A.O passed the order without carrying out detailed investigation/verification/ independent enquiry regarding identity, creditworthiness of the shareholders & also the genuineness of transactions relating to share capital that was intended to be carried out and merely accepted the submission of the assessee....
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....y to the assessee company to produce documents and evidences which it may choose to rely upon for substantiating its own claim. The AO is further directed to adjudicate the said issue De novo and pass a fresh assessment order in accordance with relevant provisions of law." 4. Aggrieved, the assessee has raised the following grounds of appeal wherein the legal issue of jurisdiction of Ld. Pr. CIT to invoke and usurp the revisional jurisdiction u/s. 263 of the Act has been raised. "1. For that the Ld. Pr. CIT erred in invoking the provisions of sec. 263 in the second round when the assessment order passed on 11.7.2016 was not erroneous and accordingly cannot be considered as prejudicial to the interest of revenue. 2. For that the Ld. Pr. CIT erred in invoking the provisions of sec. 263 when the assessment order dated 11.7.2016 was passed in accordance with the directions of the pr. Commissioner of Income Tax as per his order passed on 12.5.2016 and therefore such order cannot be treated as erroneous and accordingly prejudicial to the interest of revenue. 3. for that the Ld. Pr. CIT erred in invoking the provisions of sec. 263 when all the enquiries as di....
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.... to the first revisional order of Ld Pr CIT dated 25.03.2015, has given effect to the direction of Ld Pr CIT by duly summoning the directors of the investor companies and after recording their statement being satisfied with the identity, creditworthiness and genuineness of the transaction has accepted the claim of assessee in respect of collection of share capital and premium. The aforesaid action/reassessment order of the AO dated 11.06.2016 has been found fault with by ld. Pr. CIT and has again exercised his power of revision u/s. 263 of the Act for the second time in respect of assessment/reassessment order passed by the AO in respect of assessee for AY 2012-13, without even mentioning which direction of his have not been carried out by the AO while giving effect to his first revisional order dated 12.05.2016. The assessee has raised the legal issue of lack of jurisdiction on the part of Ld. Pr. CIT to again revise the reassessment order of AO, without satisfying the condition precedent as prescribed in section 263 of the Act. Before adjudicating the issues arising from the impugned order of the ld. Pr. CIT, we have to remind ourselves as to the scope of revisional jurisdiction ....
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.... CIT does not agree, it cannot be treated as an order prejudicial to the interest of the revenue unless the view taken by the Assessing Officer is unsustainable in law. 7. Keeping the law laid by the Hon'ble Apex Court in mind supra, when we examine the case at hand, we note that during the first round of assessment (scrutiny) proceedings, the following facts were revealed. That the assessee is engaged in the business of development of properties and that the assessee had issued 4300040 equity shares at Rs. 1 each at a premium of Rs. 499 per share. So the AO directed the assessee to file details which were complied by the assessee. Thereafter, the AO issued notice u/s. 133(6) of the Act to all the 'investors for confirmation' which fact is evident from the order sheet entry dated 30.09.2014 (refer paper book page 281). Pursuant to the notice of AO u/s. 133(6) of the Act all the shareholders replied along with confirmation and supporting documents to the AO and a copies of which are found placed at page 30 to 280 of the paper book. We note from the compliance documents furnished by the investors that they had filed their confirmation about the transaction and further submitted th....
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....erein we note that they produced the documents called for by the AO viz., their books of accounts and bank statements, audited financials, etc. as is apparent from the questions and answers in their recorded statements by the AO. Further, we note that the AO also questioned them about their source, ROC details, premium, Income Tax Returns and again obtained their profit and loss account and bank statements. Not only that their books and bank statements were examined as appearing in the order sheet entry on different dates found placed at pages 289 to 294 of the paper book, the AO further issued summons u/s. 131 of the Act, pursuant to which the directors of share holding companies had appeared and also filed the ROC documents, address proof, Pan details, bank statements, Income Tax Returns and also their own ID proof. Therefore, we find that the identity of the investors were as a matter of fact examined by the AO and the transactions has also been examined by the AO and we note that the transaction has taken place through banking channel by account payee cheque. We note that the books and bank statements of all the share subscribing parties were also examined by the AO along with ....
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....he investments has been clearly brought to the notice of the AO during the assessment/reassessment proceedings. Further, the bank statements of all the share holders as well as that of assessee were filed before the AO, which revealed that the share capital and premium have been subscribed by them through banking channel which goes on to show that the assessee has discharged the onus in respect of genuineness of the transaction. The AO's action of accepting the creditworthiness and the genuineness of the transaction is plausible view and cannot be termed as an unsustainable view in law or facts. 12. Thus, we find that during the reassessment proceeding pursuant to the first revisional order under section 263 of the Act dated 12.05.2016 and pursuant to the specific directions of the Ld. Pr. CIT, the AO in the second round had summoned the directors of shareholders as well as that of assessee and examined the books and the bank statement and other documents furnished by them to discharge the onus on them about the identity, creditworthiness and genuineness of the transactions and the AO has recorded their statement during reassessment proceedings wherein he has questioned and elic....
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....d by himself in the second round atleast is able to upset the AO's satisfaction in respect of identity, creditworthiness and genuineness of the share subscribers and his decision not to make any addition under section 68 of the Act. In the light of the aforesaid discussions and on perusal of the documents, we are of the view that AO's view to accept the identity, creditworthiness and genuineness of the share capital and premium collected from the share subscribers as a plausible view and at any rate can be termed as an unsustainable view on law or facts. 13. For coming to the conclusion that based on the documents and the inquiry conducted by the AO which are on record as discussed in detail supra, the AO's action of accepting the claim of assessee in respect of collection of share capital and premium is a plausible view and at any rate cannot be held to be unsustainable in law or facts. We would like to discuss about section 68 of the Act for the sake of completeness. Section 68 of the Act reads as under:- "68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source....
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....IVATE LIMITED ITAT No. 263 of 2011 Date: 21st September, 2011 wherein the Court held as follows: "In our opinion, in such circumstances, the Assessing officer of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness" of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted by the creditor has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness" of transaction through account payee cheque has been established. We find that both the Commissioner of Income Tax (Appeal) and the Tri....
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....the Learned CIT (A) by following the decision of the Supreme Court in the case of Cl. T. vs. M/s. Lovely Exports Pvt. Ltd., reported in (2008) 216 CTR 195 allowed the appeal by holding -that share capital/premium of Rs. 24,00,000/- received from the investors was not liable to be treated under Section 68 as unexplained credits and it should not be taxed in the hands of the appellant company. As indicated earlier, the Tribunal below dismissed the appeal filed by the Revenue. After hearing the learned counsel for the appellant and after going through the decision of the Supreme Court in the case of Cl. T. vs. M/s. Lovely Exports Pvt. Ltd. [supra], we are at one with the Tribunal below that the point involved in this appeal is covered by the said Supreme Court decision in favour of the assessee and thus, no substantial question of law is involved in this appeal. The appeal is devoid of any substance and is dismissed. 18. We also rely on the decision of the Hon'ble High Court, Calcutta in the case of Commissioner Of Income Tax vs M/s. Nishan Indo Commerce Ltd dated 2 December, 2013 in INCOME TAX APPEAL NO.52 OF 2001 wherein the Court held as follows: "....
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....of investment by any shareholder, in shares of the Assessee Company remained unexplained, liability could not be foisted on the company. The concerned shareholders would have to explain the source of their fund. The learned Commissioner on considering the submissions of the, respective parties and considering the materials, found that the Assessing Officer had applied the provisions of Section 68 of the Income Tax Act arbitrarily and illegally and in any case without giving the assessee adequate opportunity of representation and/or hearing. Learned Tribunal agreed with the factual findings of the learned Commissioner and accordingly the learned Tribunal dismissed the appeal of the Revenue and affirmed the decision of the learned Commissioner. Mr. Dutta appearing on behalf of the petitioners cited judgment of the Division Bench of this Court in Commissioner of Income Tax Vs. Ruby Traders and Exporters Limited reported in 236 (2003) ITR 3000 where a Division Bench of this Court held that when Section 68 is resorted to, it is incumbent on the assessee company to prove and establish the identity of the subscribers, their credit worthiness and the genuineness ....
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....y way of account payee cheques and the assessee also disclosed the complete list of shareholders with their complete addresses and GIR Numbers for the relevant assessment years in which share application was contributed. It further appears that all the payments were made by the applicants by account payee cheques. It appears from the Assessing Officers order that his grievance was that the assessee was not willing to produce the parties who had allegedly advanced the fund. In our opinion, both the Commissioner of Income-tax (Appeals) and the Tribunal below were justified in holding that after disclosure of the full particulars indicated above, the initial onus of the assessee was shifted and it was the duty of the Assessing Officer to enquire whether those particulars were correct or not and if the Assessing Officer was of the view that the particulars supplied were insufficient to detect the real share applicants, to ask for further particulars. The Assessing Officer has not adopted either of the aforesaid courses but has simply blamed the assessee for not producing those share applicants. In our view, in the case before us so long the Assessing....
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....the assessee furnished the name, address, ROC details, PAN of share applicants together with the copies of balance sheets and Income Tax Returns. With regard to the creditworthiness of share applicants, as we noted supra, these Companies are having capital in several crores of rupees and have the capacity to make the investment in the appellant company. These transactions are also duly reflected in the balance sheets of the share applicants, so creditworthiness is proved. Third ingredient is genuineness of the transactions, for which we note that the monies have been directly paid to the assessee company by account payee cheques out of sufficient bank balances available in their bank accounts on behalf of the share applicants. It will be evident from the paper book that the appellant has even demonstrated the source of money deposited into their bank accounts which in turn has been used by them to subscribe to the assessee company as share application. Even the source of source has been brought to the notice of AO/Pr. CIT. The share applicants have confirmed the share application in response to the notice u/s 133(6) of the Act and have also confirmed the payments which are duly cor....
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.... to have held that the assessee had not established the genuineness of the transaction. " ITA No. 1669/KoI/2009-C-AM M/s. Global Mercantiles Pvt. Ltd 11 Held After hearing the learned counsel for the appellant and after going through the decision of the Supreme Court in the cases of CIT vs M/s Lovelv Exports Pvt Ltd, we are at one with the tribunal below that the point involved in this appeal is covered by the said Supreme Court decision in favour of the assessee and thus, no substantial question of law is involved in this appeal. The appeal is devoid of any substance and is dismissed. 3.4.2. In view of the aforesaid findings and respectfully following the decision of the apex court (supra) and Jurisdictional High Court (supra) , we find no infirmity in the order of the Learned CIT(A) and accordingly, the ground no.2 raised by the Revenue is dismissed. 4. The last ground to be decided in this appeal of the Revenue is as to whether the Learned CIT(A) is justified in deleting the addition u/s 68 of the Act made in respect of allotment of shares to 20 individuals for an amount of Rs. 57,00,000/- in the facts and circumstances of the case. 4. 1. The ....
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....wing ground:- "That in the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition made u/s 68 in respect of the allotment of shares to 20 numbers of individual investors for an amount of Rs. 57 lakhs, where genuineness of the transactions and creditworthiness of the investors were not established." 4.3. The Learned DR prayed for admission of the additional ground raised before us and vehemently supported the order of the Learned AO. In response to this, the Learned AR fairly conceded to admission of this additional ground and vehemently supported the order of the Learned CIT(A). 4.4. We have heard the rival submissions and perused the materials available on record including the detailed paper book filed by the assessee. We find that the additional ground raised by the assessee separately before us vide its covering letter dated 9. 12.2011 is admitted as it appears to be a genuine and bonafide error of omission on the part of the Revenue from not raising this ground in the original grounds of appeal filed along with the memorandum of appeal. Moreover, it does not require any fresh examination of facts. Hence the same is admi....
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....e (P) Ltd in GA No. 3296 of 2010 ITAT No. 241 of 2010 dated 10.1.2011, wherein the questions raised before their lordships and decision rendered thereon is as under:- - "On the facts and in the circumstances of the case, Ld. CIT(A) ought to have upheld the assessment order as the transaction entered into by the assessee was a scheme for laundering black money into white money or accounted money and the Ld. CIT(A) ought to have held that the assessee had not established the genuineness of the transaction." Held After hearing the learned counsel for the appellant and after going through the decision of the Supreme Court in the cases of CIT vs M/s Lovely Exports Pvt Ltd, we are at one with the tribunal below that the point involved in this appeal is covered by the said Supreme Court decision in favour of the assessee and thus, no substantial question of law is involved in this appeal. The appeal is devoid of any substance and is dismissed." 6.2. We find that the issue is also covered by the decision of Hon'ble Delhi High Court in the case of CIT vs Value Capital Services P Ltd reported in (2008) 307 ITR 334 (Del) , wherein it was held that: "In respect o....
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....r of Members. The AO observed that as per ROC records the addresses of the nine companies were different from the address as per Form filed with him. The AO issued notices u/s.133(6) to all the companies at the addresses furnished in Form 2 as filed with him, which were duly served at the given addresses. The A0 argued that the letters should not have been served at the given address by the assessee. He served a show a cause notice dated 09.12.2011 asking for the explanation from the assessee as to how the notices u/s. 133(6) could be served to these nine companies who had different address as per ROC records. The AO was explained vide letter dated 20.12.2011 of the assessee that those companies had changed their addresses since filing of Form 2 with the Registrar. Further, it was none of the business of the assessee to question the addresses of the applicants as long as they affirm the address. The applicants were duly incorporated bodies under the Companies Act. 1956 since long. They have been regularly filing their returns of income under the Income Tax Act and are being assessed by the Revenue since long. Some of them are even registered as Non-Banking Financial Companies with ....
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....dress and the notice sent under section 133(6) was received by the single person. Accordingly the AO opined that the assessee has used its unaccounted money in the share application transactions. However we find that all the money received in the form of share capital is duly supported with the requisite document as discussed above. To our mind the basis on which the addition was made by the AO is not tenable. The Ld. DR also could not brought anything on record to controvert the findings of the Ld. CIT(A). In view of above we find no reason to interfere in the order of the Id. CIT(A). Accordingly the ground raised by Revenue is dismissed." (d) The ITAT Kolkata in ITO vs Cygnus Developers (I) P Ltd in ITA No. 282/Kol/2012 dated 2.3.2016. In this the decision the Ld. Tribunal held as follows: "6. On appeal by the assessee the CIT(A) deleted the addition made by the AO observing as follows "6) I have considered the submission of the appellant and perused the assessment order. I have also gone through the details and documents filed by the appellant company in the course of assessment: proceedings vide letter dt. 3-10-2007. On careful consideration of the facts an....
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.... further drew our attention to the decision of Hon'ble Allahabad High Court in the case of CIT vs Raj Kumar Agarwal vide ITA No. 179/2008, dated 17. 11.2009 wherein the Hon 'ble Allahabad High Court took a view that non production of the director of a Public Limited company which is regularly assessed to Income tax having PAN, on the ground that the identity of the investor is not proved cannot be sustained. Attention was also to the similar ruling of the ITAT Kolkata bench in the case of ITO vs Devinder Singh Shant in IT A No.20BIKo112009 vide order dated 17.04.2009. 9. We have considered the rival submissions., We are of the view that order of CIT(A) does not call for any interference. It may be seen from the grounds of appeal raised by the Revenue that the Revenue disputed only the proof of identity of the shareholder. In this regard it is seen that for A Y.2004-05 Shree Shyam Trexim Pvt. Ltd., was assessed by ITO, Ward- 9(4), Kolkata and the order of assessment u/s/143(3) dated 25.01.2006 is placed in the paper book. Similarly Navalco Commodities Pvt. Ltd., was assessed to tax u/s 143(3) for A Y.2005- 06 by I TO, Ward- 9(4), Kolkata by order dated 20.03.2007. S....