TaxTMI 
TaxTMI 
2021 (3) TMI 407
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssue of shares and the same was fully examined in re-assessment proceedings whereas the issue of alleged accommodation entries by Shri Praveen Kumar Jain as per the impugned order was not the subject matter of reason to believe and re-opening. Hence, Ld. Principal CIT failed to appreciate that re-assessment order is not erroneous if seen from the point of view of reasons for re-opening. 2. That in the facts and circumstances of the case and in law, the Ld. Principal CIT has erred in passing the order u/s 263 by ignoring the fact that section 56(2)(viib) and proviso to section 68 is inserted with effect from 01.04.2013 and is prospective in nature and thus no addition could be made in the hands of the appellant company on account of excess share premium for the assessment year under consideration. Hence, re-opening of assessment itself is bad-in-law and therefore, consequential revisional proceedings is also bad-in- law and void-ab-initio. 3. That on the facts & circumstances of the case, the impugned order passed by the Ld. Principal CIT u/s 263 is time barred as per the ratio laid down by the Hon'ble Apex Court in Alagendran Finance Limited [(2007) 293 ITR 1]....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ceedings conducted on Shri. Praveen Kumar Jain, an infamous accommodation entry provider had revealed that the assessee company as a beneficiary had obtained an accommodation entry of share capital with premium aggregating to Rs. 2,18,00,000/-. Observing that the A.O while framing the reassessment under Sec. 143(3) r.w.s 147, dated 13.11.2014 had not properly verified the aforesaid issue in the backdrop of the information received from the office of the DGIT (Inv.), Mumbai, the Pr. CIT- 12, Mumbai called upon the assessee to put forth an explanation as to why the reassessment order passed by the A.O may not be revised under Sec. 263 of the Act. However, not finding favour with the reply filed by the assessee the Pr. CIT-12, Mumbai, vide his order passed under Sec. 263, dated 30.03.2017 'set aside' the assessment order with a direction to the A.O to pass a fresh order after giving a reasonable opportunity of being heard to the assessee. 4. Against the order passed under Sec. 263 by the Pr. CIT-12, Mumbai, the assessee carried the matter in appeal before the Tribunal. The Tribunal vide its order passed in ITA No. 5462/Mum/2017, dated 27.11.2017 set aside the order passed by the Pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y limitation, as the period of limitation for passing the impugned order was to be reckoned from the end of the financial year in which the intimation under Sec. 143(1) was passed in the case of the assessee; and (iii) that as per the law as was applicable to the period falling prior to A.Y. 2013-14, as no addition of any unexplained share capital or share premium credited in the books of accounts of a private limited company could have been made in the hands of the company as the same was required to be looked into in the hands of the subscriber, the view, thus, taken by the A.O while framing the reassessment being a tenable view could not have been dislodged by the Pr. CIT in exercise of his revisional jurisdiction u/s 263 of the Act. It was submitted by the ld. A.R that the case of the assessee was reopened, for the reason, that the book value per share of the assessee company did not justify the issue of shares at a premium, and also the nature and source of such unjustified premium remained unproved and unexplained within the meaning of Sec. 68 of the Act. It was submitted by the ld. A.R that the A.O in the course of the reassessment proceedings did not make any addition with ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he A.O under Sec. 143(3) r.w.s 147, dated 13.11.2014 by no means could be held to be erroneous thus, the error, if any, could only be related to the initial intimation passed under sub-section (1) to Sec.143 of the Act and the limitation contemplated in sub-section (2) to Sec. 263 of the Act was to be reckoned accordingly. It was, thus, the claim of the ld. A.R that by all means the order passed by the Pr. CIT-10, Mumbai, under Sec. 263 was barred by limitation. Adverting to his third contention, the ld. A.R assailed the validity of the jurisdiction assumed by the Pr. CIT-10, Mumbai under Sec. 263 of the Act. It was submitted by the ld. A.R that prior to the introduction of the 'first proviso' to Sec. 68 of the Act, vide the Finance Act, 2012 w.e.f 01.04.2013, the addition as regards any unexplained share capital or share premium could not have been made in the hands of the company, as the same was required to be looked into only in the hands of the subscriber of the share capital. In support of his aforesaid contention the ld. A.R relied on the judgment of the Hon'ble High Court of Delhi in the case of CIT Vs. Stellar Investments Ltd. (1991) 192 ITR 287 (Del). It was submitted by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er under Sec. 143(3) r.w.s 147, dated 13.11.2014 was passed by the A.O. It was, thus, submitted by the ld. D.R that as no infirmity did emerge from the order passed by the Pr. CIT-10, under Sec. 263 r.w.s 254, dated 04.12.2019, the appeal filed by the assessee being devoid and bereft of any force of law was therefore liable to be dismissed. 7. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. As is discernible from the records, the case of the assessee was reopened by the A.O, for the reason, that considering the book value per share of the assessee company the issuance of shares at a premium and also the nature and source of the same was found to be unjustified. On a perusal of the 'reasons to believe' dated 25.03.2014, we find that the same read as under: As can be gathered from the above, the case of the assessee was reopened on the standalone basis that the issue of its 2,18,000 shares of a face value of Rs. 10/- each at a premium of Rs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of Bombay in the case of CIT Vs. Jet Airways Limited (2010) 195 taxman 117 (Bom) had observed, that if no addition is made by the A.O while framing the assessment under Sec. 147 w.r.t the issue on the basis of which the case of the assessee was taken up for reassessment then, it would not be open to him to independently assess some other income. Accordingly, now when the A.O had not made any addition w.r.t the issue on the basis of which the case of the assessee was reopened under Sec. 147 of the Act, the Pr. CIT could not have held the reassessment order to be erroneous, on the ground, that he had failed to make an addition as regards the issue which had never formed the basis for reopening of its case, despite the fact that no addition insofar the issue forming the basis for taking up the case of the assessee for reassessment was made by the A.O. Apart from that, we are also unable to comprehend as to on what basis the Pr. CIT had attempted to improve upon the 'reasons to believe' by trying to transpose the information received from the DGIT(Inv.), Mumbai, as a part of the basis leading to the reopening of the assessee's case. In fact, we concur with the contention of the ld. A....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by the Hon'ble Supreme Court in the case of CIT vs. Stellar Investments Ltd. (2001) 251 ITR 263 (SC). Also, a similar view had been taken by the Hon'ble High Court of Bombay in CIT-1, Vs. M/s Gagandeep Infrastructure Pvt. Ltd. (2017) 394 ITR 680 (Bom). In fact, in the case of Gagandeep Infrastructure Pvt. ltd, (supra) it was held by the Hon'ble High Court that the 'first proviso' to Sec. 68 of the Act that was introduced by the Finance Act, 2012 w.e.f 1st April, 2013 would be effective only from A.Y. 2013-14 onwards. Also, we find that the Hon'ble Supreme Court in the case of CIT Vs. Lovely Exports (P) Ltd. 317 ITR 218 (SC) had held, that wherever the revenue urges that the amount of share application money had been received from bogus shareholders then, it is for the A.O to proceed by reopening the assessment of such shareholders and assess them to tax in accordance with law. It was observed by the Hon'ble Apex Court that the aforesaid factual position would not entitle the revenue to add the unexplained share capital/premium to the income of the assessee company as an unexplained cash credit. In the backdrop of the aforesaid settled position of law, we find favour with the claim....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the backdrop of the aforesaid settled position of law, we are of the considered view that the impugned order of revision passed by the Pr. CIT under Sec. 263 of the Act pertaining to the aforesaid issue which was not the subject matter of the reassessment order passed by the AO under Sec. 143(3) r.w.s 147, dated 13.11.2014, could have been validly passed within a period of two years from the end of the financial year in which the intimation under sub-section (1) of Sec. 143 sought to be revised was passed, which not having been so done within the aforesaid prescribed period was thus barred by limitation. 10. In the backdrop of our aforesaid deliberations, we are of the considered view that the Pr. CIT had wrongly assumed jurisdiction and therein passed the order under Sec. 263 r.w.s. 254 of the Act, dated 04.12.2019, which thus for the reasons discussed at length by us hereinabove cannot be sustained and is liable to be vacated. Accordingly, we herein 'set aside' the order passed by the Pr. CIT under Sec. 263 r.w.s 254, dated 04.12.2019 and restore the order passed by the A.O under Sec. 143(3) r.w.s 147, dated 13.11.2014. 11. The appeal filed by the assessee is allowed. Or....