TaxTMI 
TaxTMI 
2020 (8) TMI 407
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....tisfying the requisite conditional precedent as stipulated u/s. 263 of the Act and therefore without jurisdiction and resultantly bad in law, so it has to be quashed. [Please note that since there are two assessment orders, and two Ld. Pr. CIT's involved in this Appeal, for better & easy understanding the case, the AO, who framed the original assessment order is called as 'First AO' and the re-assessment /second assessment framed AO will be called as the 'Second AO' and the first revisional order passed by Pr. CIT is called as 'First Ld. Pr. CIT' and the second incumbent, who passed the impugned order is called as 'Second Ld. Pr. C.I.T']. 3. Brief facts of the case are that the assessee company filed its return of income on 30-03-2013 declaring an income of Rs. 1630/-. The case was selected for scrutiny u/s. 143(2) of the Act under CASS citing the reason "large share premium received" and assessment u/s. 143(3) of the Act was framed by the AO (hereinafter referred to as the First AO) in the original first assessment on 26.03.2015 making addition of total income of Rs. 45,66,01,634/- under section 68 of the Act on account of alleged unexplained cash credit being share capital rec....
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....s computed herein below: A. 14A r.w.r. 8D(1): Particulars Rs. Audit Fees 1,500 Printing & Stationery 1,125 Communication Expenses 740 Travelling & Conveyance 2,890 Salaries & Wages 3,800 General Expenses 311 Total 10,366 5. In respect of the said second assessment/re-assessment order dated 07.12.2016, the Ld. Pr. CIT-4 (hereinafter referred to as the second Ld. Pr. CIT, vide his show cause notice (SCN) dated 16.01.2019 proposed to exercise his revisional jurisdiction (hereinafter referred to as the second SCN). The second Ld. Pr. CIT thereafter heard the assessee and passed the impugned order dated 14.03.2019 wherein he was pleased to again set aside the reassessment order/second assessment order dated 07.12.2016 and directed de-novo adjudication (hereinafter referred to as the second impugned revisional order of Ld. Pr. CIT or impugned order) by observing as under: "7. In my considered opinion, this is a case of lack of enquiry on the part of the AO. Not collecting the full facts and not taking enquiry to logical end which could enable AO to take decision based on the totality of facts makes this order e....
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.... grounds and is without authority of law, accordingly all subsequent proceedings including impugned order u/s 263 (dated 14.03.2019) is void ab initio and deserves to be quashed" 2. That impugned order passed u/s 263 dated /4.03.2019 (IInd round) by PCIT 4 Kolkata for the period under consideration is void ab initio as there is no power under the statute to invoke section 263 qua order passed in consequence to first revision order u/s. 263 and that too by again setting aside the second order passed in consequence to first revision order u/s 263 accordingly same (order passed u/s. 263 dated 14.03.2019) deserves to be quashed. 3. That impugned order passed u/s 263 dated 14.03.2019(IInd round) by PClT 4 Kolkata for the period under consideration is void ab initio as both the foundational orders namely first assessment order u/s 143(3) dated 26.03.2015 is invalid and unlawful order (which in turn can cause no valid prejudice u/s 263) and further first revision (thereon u/s 263 to improvise the said asst. order (no such power u/s 263 there) is also invalidly passed and all subsequent proceedings including impugned order u/s 263 (dated 14.03.2019) being based on invalid....
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.... out that in the second/re-assessment order, the second AO has accepted that the aforesaid details were examined and thereafter the second AO further records the facts that he issued notice u/s. 133(6) of the Act to all the shareholders and directed them to prove their identity, genuineness and creditworthiness of the share transaction as required by the First Ld. Pr. CIT vide his order dated 23.08.2016 passed u/s. 263 of the Act (first revisional order of Ld. Pr. CIT). The Ld. AR also drew our attention to the fact that the second AO has clearly acknowledged that the shareholders have replied to all his queries to prove their identity, genuineness and creditworthiness as well as the source of funds which facts have been duly verified by him. The Ld. AR pointed out that the AO has observed in the second/re-assessment order that the assessee-company was incorporated on 11.02.2012 i.e. this is the first assessment year of the assessee-company after incorporation and the AO has admited that he has examined the books of account and found that the assessee company has shown Rs. 44,61,00,000/- as non-current investment as on 31.03.2012 and thereafter has made only an addition/disallowanc....
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....n its wisdom has brought in safeguards, restrictions & conditions precedent to be satisfied strictly before assumption of revisional jurisdiction. According to Ld.AR, the conditions precedent is that the Ld. Pr. CIT should find that assessment order framed by the AO as erroneous in so far as prejudicial to the Revenue. According to Ld.AR, the Second Ld. Pr. CIT without satisfying this condition precedent has invoked the revisional jurisdiction (second time), so all his actions are ab initio void. The Ld. AR also pointed out that only from the next AY i.e. AY 2013-14 i.e. with effect from 01.04.2013, the Parliament has inserted sub-clause (vii) (b) in sub-section(2) to section 56of the Act by which the share premium could have been ascertained and brought to tax. The Ld. AR also pointed out that only from AY 2013-14, the AO when considering section 68 of the Act could have even looked for the second source of the share capital & premium. In this assessment year (AY 2012-13) the onus on the assessee in respect of credit found in the books was confined to prove the identity, creditworthiness and genuineness of the Source i.e. only the first source not the second source also. And since....
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....ded the fact that all of them had given their confirmation of subscribing to the share capital and premium in assessee's company as well as their source of income for applying for the share capital and premium, thus it was pointed out by the Ld AR that the source of source was also disclosed before the second AO and also furnished inter-alia information that they are having PAN and regularly filing tax returns. Therefore, according to Ld. AR, the AO has conducted enquiries and has recorded these facts and, therefore, order of the AO who is a quasijudicial authority vested with the power to assess the income of an assessee cannot be termed as erroneous for lack of enquiry. Further according to Ld. AR, the view of the second AO on the facts of the case is a plausible view and the Second Ld. Pr. CIT has not termed the view of second AO to be unsustainable in Law. So the Ld AR contented that the very action of invoking of jurisdiction u/s. 263 of the Act by the Second Ld. Pr. CIT is bad in law and so has to be quashed. 9. Per contra, the Ld CIT/DR Shri Vijay Shankar vehemently opposed the plea of the Ld. AR and contended that the Second Ld. Pr. CIT had the jurisdiction to interfere ....
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....herefore, he does not want us to interfere. 10. In his rejoinder, Ld.AR drew our attention to page-32 of the P/B-1, wherein one of the investors (Flow Top Agency Pvt. Ltd) vide dated 25-11-2016 has clearly mentioned that it was replying pursuant to the receipt of notices issued by the AO u/s. 133(6) dated 07-11- 2016 and furnished the answers to the queries raised by AO and filed all documents called for by the AO. He also drew our attention to the fact that in the reply to the Second Ld. Pr. CIT's show cause notice dated 16-01-2019, the assessee vide reply dated 05-02-2019 has clearly pointed out that the AO had issued notices u/s. 133(6) of the Act to all the share applicants and after verifying their respective replies and documents, the Second AO has accepted the identity, creditworthiness and genuineness of the investors/share applicants and after applying his mind ( i.e after verification) has decided not to draw any adverse inference against the assessee in respect of share capital and premium transaction with assessee. And only after completion of enquiry, the AO has passed a speaking order and drew our attention to the second/re-assessment order. However, according to L....
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....was duly explained by the director and thereafter had gone through the documents submitted by assessee and thereafter had issued notices u/s. 133(6) of the Act and has acknowledged in his order that he received the replies from the shareholders along with documents to substantiate the identity, creditworthiness and genuineness of the share capital & premium invested by them along with the source of fund, which facts were verified by the Second AO. And after satisfying himself, the second AO accepted the share capital & premiums, and in that process did not draw any adverse view or made any addition u/s. 68 of the Act, which view is a possible view as per law and cannot at any rate be classified as unsustainable in law. So according to Ld. AR, the order of second AO in respect of his view/satisfaction regarding share capital & premium is the result of specific direction of the First Ld. Pr. CIT, so doctrine of merger has taken place and on this subject matter, the second Pr. CIT cannot enter into and again revise, which power he does not enjoy. Notwithstanding this contention, according to Ld.AR the mandatory condition precedent to invoke the revisionary jurisdiction u/s. 263 has....
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....on before us is twofold. Firstly, whether the second Ld. Pr. CIT satisfied the statutory condition-precedent as prescribed in section 263 of the Act before invoking the Revisionary Jurisdiction. Secondly, whether the Second Ld Pr. CIT can again interfere in the re-assessment order framed by the AO which was pursuant to the first revisional order passed by the First Ld. Pr. CIT u/s. 263 of the Act, when the subject matter was the same and the re-assessment order of the second AO has merged with the First Revisional order of First Ld. Pr. CIT. In order to adjudicate both this legal issue, first of all we need to examine the basic jurisdictional issue i.e. whether the condition precedent stipulated by section 263 of the Act was satisfied, so that the Second Ld. Pr. CIT could have exercised his revisional power which he is empowered to do by the Act. For that, we note that the statutory condition precedent as prescribed by section 263 of the Act is that the Ld. Pr. CIT can invoke the revisional jurisdiction, if the assessment order is erroneous in so far as prejudicial to the Revenue. Keeping this in mind, we have to examine as to whether in the first place the order of the Second Asse....
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....second assessment order/re-assessment order passed by the Second AO u/s. 143(3)/263 of the Act dated 07-12-2016 is erroneous in so far as prejudicial to the interest of the revenue. As we have seen the First AO in the original first assessment order passed u/s. 143(3) of the Act made an addition of Rs. 45,66,01,634/- by an order dated 26-03-2015, which has been interdicted by the first revisional order passed by the First Ld. Pr. CIT vide order dated 28- 03-2016, wherein the Ld. Pr. CIT was pleased to set aside the original first assessment order dated 26-03-2015 and directed the AO to de novo assess the income of the assessee and gave specific direction to enquire about share capital & premium. The operative portion of the first revisional order dated 28.03.2016 is again reproduced below for the sake of continuity:- "4(v) Considering the above facts and circumstances of the case, the assessment order passed on 26.03.2015 is set aside denovo with a direction to carry out proper examination of books of accounts and Bank accounts of assessee as well as investors. The AO is also directed to examine the source of share application, identity of investors and its genuin....
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.... below section 263(1) of the Act( supra), therefore by deeming fiction of law the order is erroneous. Therefore, he was pleased to set aside the said re-assessment order/second assessment order and directed the AO to pass a fresh/ De-novo assessment order, which will be the third assessment order. According to the Ld. Counsel, the Second Ld. Pr. CIT in the second round while exercising his revisional jurisdiction could not have first of all assumed revisional jurisdiction and secondly could not have modified the earlier revisional order of the First Ld. Pr. CIT's passed u/s 263 of the Act dated 28-03-2016, when the fact remains that the AO has followed the direction of the First Ld. Pr. CIT-4 on the subject matter i.e. share application money (share capital & premium ) while passing the second re-assessment order dated 07-12-2016. In order to appreciate this contention of Ld AR, we perused the first revisional order dated 23-08-2016 passed u/s. 263 of the Act by the first incumbent Ld. Pr. CIT while setting aside the original first assessment order dated 26-03-2015 wherein he has recorded certain finding of fact after perusal of the records (first assessment folder/records of as....
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.... Pr. CIT has set aside the first original assessment order dated 26-03-2015. 24. So we note that the second AO was specifically directed by the First Ld. Pr. CIT to carry out the followings actions in addition to de-novo assessment Thereafter, we note that the original assessment of AO dated 26.03.2016 was set aside back to AO u/s. 263 of the Act by the First Ld. Pr. CIT by his first revisional order dated 23.08.2016 for de-novo assessment which means the second AO is free to assess the income of assessee afresh, but with specific directions to AO while framing the reassessment order vide para 4(v) of his order. The specific directions of First Ld Pr CIT to AO are as under: (i) To carry out proper examination of the books of accounts and bank account of the assessee; ii) To carry out proper examination of the books of accounts and bank account of the investors; iii) AO to examine the source of the share applicants; iv) The AO to examine the identity of the investor and its genuineness; v) The AO to complete the assessment at the earliest without waiting for the time barring date. 25. Now let us examine whether the second AO carried....
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....he result of lack of enquiry, then the assessment order in respect of that issue would be erroneous because of that omission on the part of the AO to investigate that relevant fact which if enquired could have created a different result and consequently affected the veracity of the very claim made by the assessee. Then in that case we can say that the AO failed to discharge his role as an investigator, which omission caused prejudice to the Revenue, then the condition precedent to invoke revisional jurisdiction us/. 263 of the Act will be satisfied. So the question is whether this fault i.e. lack of enquiry on share capital and premium alleged by the second Ld. Pr.CIT is correct, which is a mixed question of fact and law. 28. So the question is whether there is any merit on the finding of the Second Ld. Pr. CIT that the second assessment order/re-assessment order dated 7-12-2016 can be termed as erroneous for lack of enquiry. On a conjoint reading of the second SCN and operative portion of the impugned order, it can be safely deduced that according to Second Ld. Pr. CIT, the AO in the second round has not enquired about the share capital & premium collected by the assessee. For ....
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....e Act was by Finance Act 2012 with effect from 01.04.2013. 32. Correspondingly, the Parliament inserted sub-clause (viib) in sub-section 2 of section 56 of the Act by Finance Act 2012, w.e.f. 01.04.2013, that is for AY 2013-14 (not this AY 2012-13) in respect of computing and taxing the premium of shares in the hands of assessee (i.e.to tax the difference in consideration of value of shares if it exceeded the fair market value), which for the purpose of complete understanding of the law though not applicable is reproduced as under:- Section 56(2)(viib): "Where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares: Provided that this clause shall not apply where the consideration for issue of shares is received- (i) By a venture capital undertaking from a venture capital company or a venture capital fund, or (ii) By a company from a class or classes of persons as may be n....
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....he authorities below and wondered us to how the assessee-company issued share to three Private Limited Companies when its face value of Rs. 10/- at a premium of Rs. 990/-. According to the Learned DR, the assessee-company had a meager return of income in the year under consideration and therefore, question of any person subscribing such high premium to the shares of the assessee-company cannot be believed. A:cording to the Learned DR when the income of the assessee is meager, the action of the share subscribing companies in giving astronomical prices for the shares is against preponderance of probabilities and cited the decision of the Hon'ble Supreme Court as well as Delhi High Court in CIT vs N .R. Portfolio Pvt. Ltd. Further, according to Ld. AR in the case of unlisted companies, it is common knowledge that premium fixed is a matter of mutual agreement and ITAT Mumbai in the case of Gagandeep Infrastructure Pvt. Ltd., (supra) has held that it is a prerogative of the Board of Directors of the company to decide the premium amount and it is the wisdom of the shareholders whether they want to subscribe to such a heavy premium. And the aforesaid view of the ITAT has been uphel....
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....990 per share, we find that there is no merit in the findings of the AO for the reason that the issue of shares at a premium and subscription to such shares is within the knowledge of the company and the subscribers to the share application money and the AO does not have any role to play as long as the assessee has proved genuineness of transactions. We further notice that the AO cannot question issue of shares at a premium and also cannot bring to tax such share premium within the provisions of section 68 of the Act, before (supra) held that Proviso inserted to section 68 is prospective in nature. Hon'ble M.P. High Court in the case of CIT vs. Chain House International (P) Ltd., order dated 07.08.2018, decision reported in 98 taxmann.com47 has held at para 52 as under- "Issuing the share at a premium was a commercial decision. It is the prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of shareholder whether they want to subscribe the shares at such a premium or not. This was a mutual decision between both the companies. In day to day market, unless and until, the rates if fixed by any Govt. Authority or unle....
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....spute is more so because of the fact that the assessee company was incorporated during the year under consideration. Therefore, according to the revenue authorities, it is beyond any logical reasoning that a company with zero balance sheet could garner Rs. 490/-per share premium from its subscribers. Such transaction may raise eyebrows but considering the subscribers to the assessee company, the test for the genuineness of the transaction goes into oblivion. It is an undisputed fact admitted by the Revenue authorities that 10,19,000 equity shares has been subscribed and allotted to IDFC PE Fund-Il which company is a Front Manager of IDFC Ltd., in which company Government of India is holding 18% of shares. The contributors to the IDFC PE Fund-Il who is a subscriber to the assessee's share capital, are LIC, Union of India, Oriental Bank of Commerce, Indian Overseas Bank and Canara Bank which are all public sector undertakings. Therefore, to raise eyebrows to a transaction where there is so much of involvement of the Government directly or indirectly does not make any sense. 10.1 No doubt a non-est company or a zero balance company asking for a share premium of Rs. 490/- ....
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.... fair market value, This Came into the statute only with effect from April 1, 2013 and thus, would have no application to the share premium received by the respondent-assessee in the previous year relevant to the assessment year 2012-13. Similarly, the amendment to section 68 of the Act by addition of proviso was made subsequent to previous year relevant to the subject assessment year 2012-13 and cannot be invoked. It may be pointed out that this court in CIT-v.-Gagandeep Infrastructure (P.) Ltd. [201TI 80 taxmann.com.272/247 Taxman 245/394 ITR 680 (Bom) has while refusing to entertain a question with regard -to the .proviso to section 68 of the Act has held that the proviso to section 68 of the Act introduced with effect from April 1, 2013 will not have retrospective effect and would be effective only from the assessment year 2013-14. (E) ITA-2270/KOL/2016 -Trend Infra Developers Pvt. Ltd. The assessee specifically argued before the ld. CIT(A) that the allotment of shares at a premium cannot be considered as sham or income of the assessee. It was pleaded at a preliminary level that the receipt of share capital and share premium is on capital account and that the ....
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.... that the share premium received by the assessee-company cannot be taxed under Section 68 of the Act ignoring the ratio laid down by this Court in its decision reported in the case of Major Metals Ltd. vs. Union of India [2013J 3591TR 450 (Bom)? B. Whether on the facts and circumstances of the case and in law, the Tribunal as well as the Commissioner of Income Tax (Appeals) was right in deleting addition made by the Assessing Officer, by holding that the share premium receipt is capital in nature?" The Hon'ble Court held as under: Regarding Question A: (a) The issue raised by the Revenue in this question is to bring to tax the share premium received under section 68 of the Act. We find that the issue of bringing the share premium to tax under section 68 of the Act was not an issue which was urged by the appellant Revenue before the Tribunal. The only issue which was urged before the Tribunal as recorded in paraJ J of the impugned order is the addition of share capital and share application money in the hands of the assessee as income under section 28(iv) of the Act. We find that the Commissioner of Income-tax (Appeals) did considerthe issue o....
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....e person who have subscribed to the share and paid share premium have admittedly made statement on oath before the Assessing Officer as recorded by the Tribunal. No finding in this case has been given by the authorities that shareholder/share applicants were unidentifiable or bogus. (e) In the above view Question No. A is not being entertained in view of the decision in Tata Chemical Ltd. (supra). Accordingly, the question (A) is not entertained. Regarding Question B : (a) We find that the impugned order of the Tribunal upheld the view of the Commissioner of Income-tax (Appeals) to hold that share premium is capital receipt and therefore, cannot be taxed as income. This conclusion was reached by the impugned order following the decision of this court in Vodafone India Services (P.) Ltd. (supra) and of the apex court in G. S. Homes and Hotel (P.)Ltd. (supra). In both the above cases the court has held that the amount received on issue of share capital including premium are on capital account and cannot be considered to be income. (c) It is further pertinent to note that the definition of income as provided under section 2(24) of the Act at the rel....
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....can be termed as unsustainable view. Before we adjudicate let us look at section 68 of the Act as is applicable in this case and the judicial precedents on the issue at hand. 35. Section 68 under which the addition has been made by the Assessing Officer 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 thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. " The phraseology of section 68 is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year. In this case the legislative mandate is not in terms of the words 'shall' be charged to income-tax as the income of the assessee of that previous year". The Hon'ble Supreme Court while interpreting similar phraseology used in section 69 has held that in creating the legal fiction the phraseology employs the ....
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....unt payee cheques and in case the Assessing Officer was not satisfied with the cash amount deposited by those creditors in their bank accounts, the proper course would have been to make assessments in the cases of those creditors by' treating the cash deposits in their bank accounts as unexplained investments of those creditors under section 69. 37. In the case of Nemi Chand Kothari 136 Taxman 213, (supra), the Hon'ble Guahati High Court has thrown light on another aspect touching the issue of onus on assessee under section 68 of the Act, by holding that the same should be decided by taking into consideration also the provision of section 106 of the Evidence Act which says that a person can be required to prove only such facts which are in his knowledge. The Hon'ble Court in the said case held that, once it is found that an assessee has actually taken money from depositor/lender who has been fully identified, the assessee/borrower cannot be called upon to explain, much less prove the affairs of such third party, which he is not even supposed to know or about which he cannot be held to be accredited with any knowledge. In this view, the Hon'ble Court has laid down....
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....money received by the assessee, in the form of loan from the creditor, though routed through the sub-creditors, actually belongs to, or was of, the assessee himself. In other words, while section 68 gives the liberty to the Assessing Officer to enquire into the source/source from where the creditor has received the money, section 106 makes the assessee liable to disclose only the source(s) from where he has himself received the credit and IT is not the burden of the assessee to prove the creditworthiness of the source(s) of the sub-creditors. If section 106 and section 68 are to stand together, which they must, then, the interpretation of section 68 are to stand together, which they must, then the interpretation of section 68 has to be in such a way that it does not make section 106 redundant. Hence, the harmonious construction of section 106 of the Evidence Act and section 68 of the Income- tax Act will be that though apart from establishing the identity of the creditor, the assessee must establish the genuineness of the transaction as well as the creditworthiness of his creditor, the burden of the assessee to prove the genuineness of the transactions as well as the creditworthine....
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....ned only to the transactions, which he had' with the creditor and he may not know what transaction(s) had taken place between his creditor and the sub-creditor... " ********** "In other words, though under section 68 an Assessing Officer is free to show, with the help of the inquiry conducted by him into the transactions, which have taken place between the creditor and the sub-creditor, that the transaction between the two were not genuine and that the sub-creditor had no creditworthiness, it will not necessarily mean that the loan advanced by the sub-creditor to the creditor was income of the assessee from undisclosed source unless there is evidence, direct or circumstantial, to show that the amount which has been advanced by the sub-creditor to the creditor, had actually been received by the sub-creditor from the assessee ...." ********** "Keeping in view the above position of law, when we turn to the factual matrix of the present case, we find that so far as the appellant is concerned, he has established the identity of the creditors, namely, Nemichand Nahata and Sons (HUF) and Pawan Kumar Agarwalla. The appellant had also shown, in accord....
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....arged and so, no addition to his total income on account of cash credit was called for. In view of this finding, we find that the Tribunal was right in reversing the order of the AA C, setting aside the assessment order." 39. We also take note of the decision of the Hon'ble High Court, Calcutta in the case of S.K. Bothra & Sons, HUF v. Income-tax Officer, Ward- 46(3), Kolkata 347 ITR 347 wherein the Court held as follows: "15. It is now a settled law that while considering the question whether the alleged loan taken by the assessee was a genuine transaction, the initial onus is always upon the assessee and if no explanation is given or the explanation given by the appellant is not satisfactory, the Assessing Officer can disbelieve the alleged transaction of loan. But the law is equally settled that if the initial burden is discharged by the assessee by producing sufficient materials in support of the loan transaction, the onus shifts upon the Assessing Officer and after verification, he can call for further explanation from the assessee and in the process, the onus may again shift from the Assessing Officer to assessee. 16. In the case before us, the appell....
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....e Commissioner of Income-tax (Appeals). 9. In this connection he has drawn our attention to a decision of the Supreme Court in the case of Udhavdas Kewalram v. CIT [19671 66 ITR 462. In this judgment it is noticed that the Supreme Court as proposition of law held that the Tribunal must In deciding an appeal, consider with due care, all the material facts and record its finding on all the contentions raised by the assessee and the Commissioner in the light of the evidence and the relevant law. 10. We find considerable force of the submissions of the learned counsel for the appellant that the Tribunal has merely noticed that since the summons issued before assessment returned unserved and no one came forward to prove. Therefore, it shall be assumed that the assessee failed to prove the existence of the creditors or for that matter the creditworthiness. As rightly pointed out by the learned counsel that the Commissioner of Income-tax (Appeals) has taken the trouble of examining of all other materials and documents, viz., confirmatory statements, invoices, challans and vouchers showing supply of bidis as against the advance. Therefore, the attendance of the witnesses ....
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.... 41. When a question as to the creditworthiness of a creditor is to be adjudicated and if the creditor is an Income Tax assessee, it is now well settled by the decision of the Hon'ble Jurisdictional Calcutta High Court that the creditworthiness of the creditor cannot be disputed by the AO of the assessee but the AO of the creditor. In this regards our attention was drawn to the decision of the Hon'ble High Court, Calcutta in the COMMISSIONER OF INCOME TAX, KOLKA TA-Ill Versus DATAWARE PRIVATE LIMITED ITAT No. 263 of 2011 Date: 21st September, 2011 wherein the Hon'ble 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 offi....
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....anies. The Assessing Officer on his part called for the details from the assessee and also from the share applicants and analyzed the facts and ultimately observed certain abnormal features, which were mentioned in the assessment order. The Assessing Officer, therefore, concluded that nature and source of such money was questionable and evidence produced was unsatisfactory. Consequently, the Assessing Officer invoked the provisions under Section 68/69 of the Income Tax Act and made addition of Rs. 24,00,000/-. On appeal 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....
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....r investment in the Assessee Company was not genuine, on the basis of some extraneous reasons. The Commissioner of Income Tax (Appeals) took note of the observation of the Assessing Officer that enquiry conducted by the Income Tax Inspector had revealed that nine persons making applications for 900 shares were not available at the given address and rightly concluded that the total share capital issued by the Assessee Company could not be added as unexplained cash credit under 'Section 68 of the Income Tax Act. Moreover, if the nature and source 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 an....
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....Court held as follows: "The only question raised in this appeal is whether the Commissioner of Income-tax (Appeals) and the Tribunal below erred in law in deleting the addition of Rs. 8,52,000/-, Rs. 91,50,000/- and Rs. 13,00,000/- made by the Assessing Officer on account of share capital, share application money and investment in HTCCL respectively. After hearing Md. Nizamuddin, learned Advocate appearing on behalf of the appellant and after going through the materials on record, we find that all such application money were received by the assessee by 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 disclos....
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....; (iii) copy of PAN Card of the assessee company; (iv) details and copy of share applicants; (v) bank statement reflecting the transaction; (vi) records relating to investors in order to establish identity, genuineness and creditworthiness of the share subscribers. 47. We note that the First Ld. Pr. CIT in his first revisional order, found that AO in the first assessment proceedings though has been provided with the aforesaid documents has not examined these documents, which according to him, should have been carried out by the AO. The First Ld. Pr. CIT at para (4) of his first revisional order has clearly made a finding that " From the above discussion it is evident that the assessment proceedings in the case of assessee was completed in a very casual manner and hurried manner flouting all established procedures. The assessee had discharged its onus by furnishing/documents before the AO."Further, the First Ld. Pr. CIT mainly found fault with the AO's order for non-issuance of notice u/s. 133(6) of the Act to the shareholders. The First Ld. Pr. CIT found fault with the AO' s order in not discussing the basis of evidence on which adverse infere....
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....e First Ld. Pr. CIT (supra), conducted the reassessment proceeding. As per the specific direction of Ld. First Pr. CIT, the Second AO firstly summoned the director of the assessee company Shri NavinTahin before him, who duly appeared and produced the books of account on 01.12.2016 and furnished the relevant details viz., (i) copy of ITR, (ii) audited accounts, (iii) details of directors, (iv) the details of the share-applicants, (v) details of business activity, (vi) details of increase in share capital, (vii) Form 2, (viii) Form 5, (ix) bank statements evidencing payment through banking transaction, which fact the AO has acknowledged in the reassessment order. [And here we should keep in mind that the First Ld. Pr. CIT's finding of fact after perusal of original assessment records that assessee in the first round before AO has produced PAN,ROC details, audited financial statements, details and copy of share applicants, bank statements reflecting the transaction, records relating to investors to establish identity, creditworthiness & genuineness. And the finding of First Ld. Pr. CIT that assessee had discharged its onus by furnishing/documents before the AO.]Secondly, after examini....
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....U51109WB2005PTC102121 AAICS8900L yes 51. Thus, we note that the AO after verification as aforesaid, has not drawn any adverse opinion or doubted the identity of the share applicants which view of AO is a possible view in the light of the documents referred to and we also by applying the presumption in section 114 of Indian Evidence Act 1872, we presume that the quasi-judicial act of the second AO have been regularly performed. Coming to the contention of Ld. CIT, DR, that order sheet maintained by the Second AO does not reveal that AO had issued notice u/s. 133(6) of the Act to the share subscribers, we note that the AO in his reassessment/second assessment order has clearly asserted that he had issued notice u/s. 133(6) of the Act to all the share applicants as directed by the First Ld. Pr. CIT and we note from the perusal of some letters written by the share applicants clearly referring to the AO's sec. 133(6) notice (refer interalia page 32 of PB-I). So, the clear assertion of the Second AO in his order that pursuant to his issue of notice u/s. 133(6), he received the documents called for cannot be disbelieved merely because he did not mention this event in the order sh....
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....40,00,000/- M/s. Subhiksha Pvt. Ltd. Page 115Paper Book-2 Rs. 222,397,317 (page 128 PB-2) Rs. 45,00,000/- M/s. Shivarshi Construction Pvt. Ltd. Page 146Paper Book-2 Rs. 53,89,95,046 (page 153 PB-2) Rs. 4,66,00,000/- M/s. Shivashiv Pvt. Ltd. Page 170Paper Book-2 Rs. 14,29,56,146 (page 178 PB-2) Rs. 6,55,00,000/- M/s. Flowtop Agency Pvt. Ltd. Page 193Paper Book-2 Rs. 15,38,94,946 (page 200 PB-2) Rs. 4,49,00,000/- M/s. Sukh Sagar Residency Pvt. Ltd. Page 212 Paper Book-2 Rs. 56,18,93,960 (page 220 PB-2) Rs. 2,31,00,000/- M/s. Kamaldhan Developers Pvt. Ltd. Page246-247Paper Book-2 Rs. 56,18,94,080 (page 254 PB-2) Rs. 12,54,00,000/- M/s. Labhdhan Impex Pvt. Ltd. Page 270PaperBook-2 Rs. 56,18,94,080 (page 277 PB-2) Rs. 3,80,00,000/- M/s. SubhsreeI mpex Pvt. Ltd. Page 290 of paper book Rs. 76,60,93,960 (page 297 PB-2) Rs. 2,76,00.000/- M/s. Maharaja Merchants Pvt. Ltd. - Rs. 1,54,58,399 (page 313 PB-2) Rs. 50,00,000/- M/s. Sristi Sales Pvt. Ltd. - Rs. 1,12,25,632 (page 336 PB-2) Rs. 50,00,000/- 53. So, from a perusal of the above chart, we note that the assessee and t....
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....e investment made in the assessee-company including the share premium comes to Rs. 1,30,00,000/-. The payment has been made through banking channel and deposit amount of Rs. 1,05,00,000/- took place as on 01.03.2012 by NEFT and Rs. 25,00,000/- as on 06.03.2012. The Board Resolution for investment of the Company is filed and the share application form, ITR acknowledgment, Bank statement, explanation of source of funds as well as financial statements have been filed by the assessee at P. B page 3-37and thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Further, it is noted that the share applicant had furnished the source of investment made in the assessee-company after getting the notice under section 133(6) of the Act. (ii) We note from a perusal of the paper book-2 pages 38 to 77, the details of share applicant M/s. Kakrania Trading Pvt. Ltd. It is a Private Limited Company which has a PAN AABCK151611and its CI....
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....e that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Further, it is noted that the share applicants had furnished the source of investment made in the assessee-company after getting the notice under section 133(6) of the Act. (iv) We note from a perusal of the paper book pages-2,112 to 137, the details of share applicant M/s. Subhiksha Pvt. Ltd. It is a Private Limited Company which has a PAN AAPCS2068E and its CIN number is U52190WB2011PTC157073 and the Net worth of this company as on 31.3.2012 Rs. 22,23,97,317/- (PB-page 128.) and investment made in the assessee company is to the tune of Rs. 45,00,000/- and this share applicant has made the transaction through banking channel on 02.03.2012 a sum of Rs. 45 lakhs through NEFT. There is board resolution for investment in assessee's company and Share Application Form Bank statement, ITR acknowledgement, explanation of source of fund as well as financial statement available in ....
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....Act. (vi) We note from a perusal of the paper book pages-2, 160 to 184 the details of share applicant M/s. Shivashiv Dealcom Pvt. Ltd. It is a Private Limited Company which has a PAN AARCS0094C and its CIN number is U74999WB2012PTC 173749 and the net worth of this company as on 31.3.2012 Rs. 14,29,56,146/-(PBpage 178) and investment made in the assessee company is to the tune of Rs. 6,55,00,000/- and this share applicant has made the transaction through banking channel on 29.03.2012 Rs. 6,55,00,000/- through Cheque. There is board resolution for investment in assessee's company and Share Application Form Bank statement, ITR acknowledgement, explanation of source of fund as well as financial statement available in the PB-page 161 to 184 in the PB. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. This company has furnished the details of source of Funds and has duly filed financial statements and thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest....
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....n for investment in assessee's company and Share Application Form, Bank statement, ITR acknowledgement, explanation of source of fund as well as financial statement available in the PB-page 208-226 in the PB. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. This company has furnished the details of source of Funds and has duly filed financial statements and thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Thus the assessee has discharged the onus to prove the identity, creditworthiness and genuineness of the transactions. Further, it is noted that the share applicants had furnished the source of investment made in the assessee-company after getting the notice under section 133(6) of the Act. (ix) We note from a perusal of the paper book-2, pages 227 to 261 the details of share applicant M/s. Kamaldhan Developers Pvt. Ltd. It is a Private Limited Company which ha....
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....statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Thus the assessee has discharged the onus to prove the identity, creditworthiness and genuineness of the transactions. Further, it is noted that the share applicants had furnished the source of investment made in the assessee-company after getting the notice under section 133(6) of the Act. (xi) We note from a perusal of the paper book-2 pages 284 to 303 the details of share applicant M/s. Subhsree Impex Pvt. Ltd. It is a Private Limited Company which has a PAN AARCS1845D and its CIN number is U51909WB2011PTC171513 and the net worth of this company as on 31.3.2012 Rs. 76,66,93,960/- (P.B-2, page-297)and investment made in the assessee company is to the tune of Rs. 2,76,00,000/- and this share applicant has made the transaction through banking channel on 31.03.2012 a sum of Rs. 2,76,00,0000/- through NEFT. There is board resolution for investment in assessee's company and Share Application Form , Bank statement, ITR acknowledgement, explanation of source of fund as well as financial statement available in the PB-page 285-303 i....
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....hare Application, Bank statement, ITR acknowledgement, financial statement available in the PB-2, page 328 to 352. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Thus the assessee has discharged the onus to prove the identity, creditworthiness and genuineness of the transactions. Thus from the discussion above, it is noted except the last two investors the other eleven (11) share applicants out of thirteen (13) share-holders had furnished the source of investment made in the assessee-company after getting the notice from second AO under section 133(6) of the Act. Thus we note that the AO on the basis of the aforesaid documents has taken a plausible view and did not draw any adverse inference against the assessee, and the view thus taken by the AO cannot be termed as unsustainable in law. 54. So, from the aforesaid facts revealed during the second round, we note that AO has discharged his duty as an Investigator and enquired as per the direction of the First Ld. Pr. CI....
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....interfere u/s. 263 of the Act, he had opined that there was no detailed or independent enquiry but finally concluded that there was lack of enquiry. So, the Ld. Second Pr. CIT accepts that there was enquiry made by the second AO, however, he concludes that there was lack of enquiry. So when there was an enquiry conducted by AO then the AO has discharged the duty of an investigator. And we note that all the documents referred to above are available is the assessment folder before the Second Ld. Pr. CIT and he could have easily examined the veracity of these documents from the department's data base by click of a mouse and could have recorded his finding of fact if he found anything wrong with these share subscribers and could have pointed out the adverse fact, if any, which the Second Ld. Pr. CIT has not made in the impugned order. So the inference that can be drawn is that the veracity of the factual contents of the documents running more than 352 pages (PB-2) could not be factually controverted by the Second Ld. Pr. CIT. And still if the Ld. Pr. CIT is not satisfied and wanted to interfere invoking jurisdiction u/s. 263 of the Act, he has to show that the enquiry conducted by AO w....
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....s able to show that the actions/omission of AO in conducting the investigation was erroneous, which unfortunately is not the case before us. And equally bad is the bald allegation/fault that second AO has not collected total facts cannot be accepted being vague and based on conjectures and surmises and so meritless. Since the assessee company has discharged its onus as discussed supra, and still if the Second Pr. CIT had to find the order of Second AO erroneous for lack of enquiry or for not collecting the entire facts, then the Second Pr. CIT ought to have called for the additional facts which he thinks that the Second AO has not collected from the assessee or the shareholders and then explained in his impugned order as to what effect those additional documents would have made on the second assessment order/reassessment order or in other words the impact on the decision making process of framing the second assessment order due to the failure of second AO's omission to collect the additional documents. However, we note that the Second Pr. CIT has not carried out any such exercise or even spelled out in his impugned order, which all documents the second AO failed to collect for cons....