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2021 (3) TMI 811
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....Officer u/s 143(3) was held to be erroneous and prejudicial to the interest of the Revenue and was set aside to be made afresh, after giving opportunity to the assessee. Against the said order and findings of the ld. Pr. CIT-2, Jaipur, the assessee is in appeal before us. 3. At the outset, we refer to the show cause notice dated 28.02.2020 issued by the ld Pr CIT and contents thereof read as under:- "3. On perusal of the assessment record, it is noticed that in the year under reference there is an increase in authorised share capital as well as issued and subscribed capital from Rs. 57,50,00,000/- as on 31.03.2014 to Rs. 1,77,50,00,000/- showing an increase of rupees 120 crore during the year under consideration. 4. It is seen that before completing the assessment, AO has not verified the source of increase in share capital, though this was one of the reasons for selection for complete scrutiny in as much as there is no PAN/ITR details or confirmations of the persons from whom Rs. 120 crore has been received nor the source of money in the hands of the above persons was inquired into. 5. It is seen that the company was incorporated on 24.06.2013. No Rev....
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....stified and contrary to the facts available on record. 6. It was submitted that the assessment order can be revised u/s 263 only if the twin conditions of error in the order and prejudice cause to the Revenue coexist and reliance was placed on the Hon'ble Supreme Court decision in the case of Malabar Industrial Co. Ltd [2000] 109 Taxman 66 (SC). It was submitted that from the exhaustive material available on record and different enquiries made by various authorities including by the ld Pr CIT, it is abundantly clear that no prejudice, in any manner was caused to the interest of the Revenue. It was submitted that in absence of any prejudice to the interest of the Revenue, any assumption of jurisdiction u/s 263 is unjustified. 7. It was further submitted that with all the exhaustive material available on record before the ld. Pr. CIT, he was duty bound to refer to the same and then come to the conclusion that the order of the AO was erroneous and prejudicial to the interest of the Revenue, instead, the ld. Pr. CIT simply gave directions to the ld. AO to decide the matter afresh. 8. It was submitted that the shares amounting to Rs. 120 crores were allotted to the same shareho....
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....er order. At Para 5.1, Page 4 of the order, ld. PCIT has held the lack of meeting of Board of Directors for allotment of equity shares. At Para 5.4, Page 4 of the order, it is pointed out that it is not clear as to what kind of training was imparted to these employees. At Para 5.4, Page 5 of the order, the reference of no business revenue being generated to make it a case of non-commencement of business. At Para 5.4, Page 5 of the order, it has been mentioned that no clearances/licenses has been obtained from the regulatory authorities to start the courses. It was submitted that Section 263 proceedings are not meant for correcting each and every error of the ld. AO. Moreover, the issues as pointed above are not at all relevant for the ld. AO to reach to the conclusion and in support, reliance was placed on decision of Coordinate Bench in case of Torrent Pharmaceuticals Ltd. [2018] 173 ITD 130 (Ahd). 11. It was accordingly submitted that in view of the above factual and legal position, the ld Pr.CIT has grossly erred in assuming jurisdiction under section 263 of the Act and the order so passed therefore may be set-aside. 12. Per contra, the ld. Pr.CIT/DR submitted that the cas....
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....ails vide letter dated 09.03.2020 which may be verified by the AO. 5.3 In the year under reference there is large outward foreign remittance towards purchase of machinery. AR submitted Form No. 15CA vide reply dated 09.03.2020 which may be verified by the AO. 5.4 It is seen that the company was incorporated on 24.06.2013 with the main objective of establishing, promoting and running of skill development campus for different trades. It is submitted that the assessee hired employees and their training commenced to enable them to impart skill development training. Assessee incurred salary expenditure of Rs. 21,69,785/- and expenditure on their training of Rs. 4,13,608/-. It is noted that assessee has debited staff recruitment expenses of Rs. 1,15,274/- which includes Rs. 1,01,124/- paid to Right Step Consulting Pvt. Ltd. vide invoice dated 26.03.2015 for recruiting Felix Charlesworth Expenditure on their training is basically the travel expenses paid to Apple Tools Pvt. Ltd. It is not clear as to what kind of training was imparted to these employees. Apart from this, it is also noted that the building/campus is still under construction and the machinery which were im....
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.... the company. There is no detail on record if the company had obtained necessary clearances / licenses as required from the regulatory authorities to start the courses and if any broad outlines / curriculum of the courses to be imparted were drafted/ conceived. It seems that this program has eventually been carried forward by setting up a separate university by the assessee. It is seen that AO did not carry out any inquiry/verification to determine if the business of the assessee got setup and it was ready to commence before allowing the claim of business loss in the year under reference. Reliance in this regard can be placed on the decision of Hon'ble Bombay High Court given in the case of ALD Automotive (P.) Ltd. v. Deputy Commissioner of Income-tax-IS(1) [2018] 91 taxmann.com 475 (Bombay) in which Hon'ble High Court has affirmed the decision of Hon'ble ITAT denying the business loss on the ground that no business was set-up in the previous year though the appellant had purchased two vehicles and also taken office on hire. Assessee has placed reliance on the decision of Hon'ble Gujrat High Court in the case of Sarrashtra Cement and Chemical Industries Ltd. v. CIT ....
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....15. It is also a fact that the assessment for A.Y 2014-15 was completed u/s 143(3), however, there is nothing on record or brought to the notice of the Bench in terms of whether matter relating to increase in share capital was subject matter of examination by the AO for the said assessment year. In any case, where the shares have been allotted even to existing shareholders, the question that arise for consideration is whether it is incumbent on part of the AO to enquire about source of fresh funds to the tune of Rs. 120 crores infused by way of share capital during the year especially where the same is one of the reasons for selection of case under complete scrutiny. To our mind, the answer to the same is clearly in the affirmative as the AO is under a statutory obligation to examine the said transaction qua the source of funds infused during the year under consideration and record his findings and failure to carry out such examination and verification of a matter which is subject matter for selection of case for scrutiny will clearly render the order erroneous and prejudicial to the interest of Revenue. 17. Further, the ld Pr CIT has referred to the provisions of section 68 of ....
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....response, the assessee company vide letter dated NIL- Annexure C has submitted a chart giving the name of the three shareholders and amount of share capital allotted to each of them during the month of December 2014, January 2015 and March 2015 totalling Rs. 120 crores. There is no explanation submitted regarding source of such funds and no documentary evidence has been brought on record by the assessee company. The AO has however taken the said submission on face value and no further show-cause or enquiry/examination has been conducted by him. 20. In this regard, useful reference can be drawn to facts and findings of the Hon'ble Supreme Court in case of Malabar Industrial Co. ltd (supra). In that case, the appellant entered into an agreement for sale of the estate of rubber plantation and the agreement provided, inter alia, for payment of the consideration in instalments as scheduled therein. However, the purchaser could not adhere to the schedule and on his request, the parties agreed to the extension of time for payment of the instalments on condition of his paying compensation/damages for loss of agricultural income and other liabilities in a sum of Rs. 3,66,649. Accor....
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....rly erroneous and prejudicial to the interest of Revenue. 22. Having said that, when the matter was selected for the precise reason of examination of substantial increase in share capital, it is ordinarily expected that the Assessing officer shall examine these transactions thoroughly and record his satisfaction rather than just relying on the statement and basic information submitted by the assessee company. It is not a question of kind and extent of enquiry and hence, a difference of approach and methodology of examination of a particular transaction as done by the AO or suggested by the ld Pr CIT. No doubt every Assessing officer has his unique style of functioning and no hard and fast rule can be laid down as to how he should conduct the enquiry in discharge of his statutory functions. However, where the factual scenario of a case prima facie indicates claim of substantial capital infusion during the year which is also a matter and reason for selection of case under complete scrutiny and thus cry for looking deep into it, then a mere acceptance of information simplicitier without any evidence of source of such capital infusion and without conducting any further verification ....