TaxTMI 
TaxTMI 
2021 (5) TMI 16
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....at the assessment order having been passed by the Assessing Officer after due application of mind and taking into consideration the various replies, material on record and books of account, the action resorted to by the Commissioner of Income Tax is unwarranted and uncalled for. 4. That the order of Commissioner of Income Tax is erroneous, arbitrary, opposed to the facts of the case and is unsustainable in law. From the aforesaid grounds it is gathered that only grievance of the assessee relates to the jurisdiction of the Ld. Pr. CIT assumed under section 263 of the Income Tax Act, 1961 (hereinafter referred to as 'Act'). 3. Facts of the case in brief are that the assessee filed its return of income on 04/09/2014 declaring an income of Rs. 19,52,040/- which was processed under section 143(1) of the Act, later on the case was selected for scrutiny. The A.O. assessed the income which was returned by the assessee by observing in para 2 & 3 of the assessment order dt. 27/12/2016 as under: 2. In response to said notices Sh. Ravinder Singh Khera, Chartered Accountant, Authorised representative of the assessee, attended the assessment proceedings from time ....
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....he assessee to show cause as to why the aforesaid assessment order dt. 27/12/2016 passed under section 143(3) of the Act for the A.Y. 2014-15 should not be revised/modified/enhanced or set aside with a direction to make the assessment denovo. 4.2. In response, the assessee submitted as under: That during assessment proceedings, the A.O. had required the assessee to justify the issue of shares at a premium under rule 11UA of the IT Rules, 1962. The assessee had submitted details of turnover, assessable income, tax paid from A.Ys. 2011-12 to 2015-16, and the investor companies being impressed and satisfied by the company's performance and safe investment of their funds had purchased shares of the assessee company at a premium of Rs. 15/- per share. The assessee had accumulated reserves and surpluses of Rs. 142.84 lacs against paid up capital of Rs. 103.12 lacs, thus apparently there was accumulated profit of Rs. 15/- per share against paid up capital of Rs. 10/- per share. Requirements of Rule 11UA were fully complied with which can be verified from the company's audited balance sheets which were filed during assessment proceedings. The AO had accepted the Fair Ma....
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.... that the same were also produced before the A.O. It was further stated that since all the investing company and their respective Directors were based in Calcutta therefore the commission may be issued in accordance with the provisions of law to procure whatever further information is required. 4.4. The Ld. Pr. CIT after considering the submissions of the assessee observed that the assessee during the course of assessment proceedings furnished the computation of the issue of share at a premium under Rule 11UA of the Income Tax Rules, 1962 and furnished the details of turnover, assessable income, tax paid from A.Y. 2011-12 to 2015-16 and also furnished the confirmation signed by the investing companies. The Ld. Pr. CIT also pointed out that all the so called investors have PAN, copies of bank accounts alongwith balance sheets were also filed. The Pr. CIT admitted that the funds were transferred through RTGS from respective bank accounts. However these investing companies were not produced before the A.O. even though specifically called upon, by stating that it was not possible to do so due to short notice as they were from Kolkata. 4.5. It was stated before the Ld. CIT(A) that....
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....he transaction had been examined by the A.O. only a superficial look at the documents submitted by the assessee had been made and contention of the assessee had been accepted without any in-depth examination. Such lapse had rendered the assessment order erroneous in so far as it was prejudicial to the interest of the Revenue. He also observed that not only no disallowance/addition had been made by the A.O. and that the issue had not been properly examined and inquired into, therefore, detailed and deep inquiries were required to be made on this issue before accepting the claim of the assessee. 4.8. Ld. Pr. CIT observed that the assessment record revealed that requisite enquiry were not conducted regarding the issue as to what prompted the subscribers to the shares to pay premium on shares of a little known company having no or insignificant business activities. Therefore the assessment order was passed without application of mind, no proper enquiry was conducted regarding the identity and creditworthiness of the subscribers and no proper enquiry had been made regarding the genuineness of the transactions. The reference was made to the following case laws: * Judgment of ....
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....ions made before the authorities below and further submitted that the A.O. made the proper enquiries and raised the specific queries relating to the share premium and the assessee replied the same, a reference was made to page No. 1 & 2 of the assessee's compilation which is the copy of the reply dt. 08/11/2016, in response to the notice dt. 18/10/2016 issued by the A.O. 6.1. It was further submitted that the Ld. Pr. CIT in para 2 of the impugned order although mentioned that proper and sufficient enquiry had not been made which lapses bears to have rendered the assessment order erroneous in so far as prejudicial to the interest of the Revenue, but he has not mentioned that no enquiry was made by the A.O. So, it was not a case of lack of enquiry, therefore, the Ld. Pr CIT was not justified in exercising his powers under section 263 of the Act. 6.2. It was stated that the Ld. Pr. CIT at page No. 2 of the impugned order referred that the assessee could not produce the Director of Investor Companies, on that ground also the addition could not have been made. It was submitted that the A.O. required the assessee to justify the issuance of share at a premium of Rs. 15 per share....
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....ced on the following case laws: * Director of Income Tax Vs. Jyoti Foundation [2013] 357 ITR 388 (Delhi) * M/s. Colors Textiles Limited Vs. ITO in ITA No. 1514/Chd/2017 for the A.Y. 2013-14 dt. 05/12/2018 * Sh. Abhimanyu Gupta Vs. The Pr. CIT in ITA No. 771/Chd/2017 for the A.Y. 2012-13 dt. 09/04/2018 * M/s. Worldwide Immigration Consultancy Pvt. Ltd. Vs. Pr. CIT-I in ITA No. 772/Chd/2017 for the A.Y. 2012-13 dt. 13/11/2019. 6.7. It was reiterated that the A.O. asked the assessee to furnish the information relating to investor companies which were furnished vide letter dt. 14/12/2016 copy of which is placed at page No. 188 to 196 of the assessee's paper book, therefore it was not a case of lack of enquiry and only on the suspicion, the assessment order framed by the A.O. after the proper enquiry and application of mind, cannot be set aside, the reliance was placed on the following case laws: * CIT Vs. Sunbeam Auto Ltd. [2011] 332 ITR 167 (Delhi) * Director of Income Tax Vs. Jyoti Foundation [2013] 357 ITR 388 (Delhi) * Malabar Industrial Co. Ltd. Vs. CIT [2000] 243 ITR 83 (SC) Reliance was also placed on the d....
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....der section 142(1) alongwith Questionnaire to the assessee on 03/06/2016. In response to the said notice the assessee furnished reply. Thereafter again the A.O. issued notice dt. 18/10/2016 in response to which the assessee submitted as under: Respected Madam, Kindly refer to the notice as mentioned above. During the assessment proceedings pending before your kind Honor your good self has directed the assessee to file certain information and documents for A.Y. 20: 2015. In this connection, the assessee most respectfully submits here with following information and documents for your kind perusal and records:- 1. As per para 1, detail of addition to share application money, share capital and share premium is attached here with for your kind perusal and records. 2. As per para 2, copy of ITRs, Computation of Income, Bank Statements and Confirmations of Sh. Lokesh Kumar, Smt. Madhu Aul and Lokesh Kumar HUF is enclosed here with for your kind reference and records. A copy of Share Application Money Form, confirmation certificate from depositor company, copy of resolution for share application to the assessee company, bank statement, ....
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....r companies were not produced, so the genuineness of the transaction was not established. 8.2. Ld. Pr. CIT also observed that only a superficial laok at the documents submitted by the assessee had been made and contention of the assessee had been accepted by the A.O. without any indepth examination and such lapse had rendered the assessment order erroneous in so far as it was prejudicial to the interest of the Revenue. The reliance was placed mainly on the judgment of the Hon'ble Kolkata High Court in the case Rajmandir Estates Pvt. Ltd. Vs. PCIT in ITA No. 173 of 2016 order dt. 13/05/2016 along with other case laws mentioned at page No. 11 to 14 of the impugned order. 8.3. Now we have to consider as to whether the A.O. had made the proper enquiry or not and that the view taken by the A.O. was a possible view in accordance with law or not. 8.4. The power of the Ld. Pr. CIT under section 263 of the Act and the condition to invoke the same may be summarized as under: (i) "The Pr. CIT must record satisfaction that the order of the AO is erroneous and prejudicial to the interests of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 cannot ....
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....ith confirmation certificate from depositor company, copies of the resolution for share application money to the assessee company, bank statement, copy of PAN Card and Memorandum & Article of Association of the investor companies, details of the share issued at premium, copy of bank statement of the assessee company maintained with Bank of Baroda, copy of the return of allotment of shares filed with ROC in Form No. PAS-3, copy of the Audited Report alongwith audited balance sheet, P & L Account and Bank Statement etc of the investor companies. The A.O. issued the notice under section 133(6) of the Act to the investor companies, copies of which are placed at page Nos. 275 to 280 of the assessee's compilation. In response to those letters, the investor companies furnished the confirmatory letters to the A.O. alongwith documents relating to the Financial Statements filed with the Registrar of the Companies, copies of the said documents are placed at page No. 281 to 370 of the assessee's compilation. The Assessee also furnished the detailed calculation sheet of Fair Market Value of unquoted equity shares, copies of which is placed at page Nos. 476 & 477 of the assessee's co....
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....f enquiry. 8.8. Similarly the Hon'ble Delhi High Court in the case of DIT Vs. Jyoti Foundation [2013] 357 ITR 388 (supra) held as under: "that inquiries were certainly conducted by the Assessing Officer. It was not a case of no inquiry. The order under section 263 itself recorded that the Director felt that the inquiries were not sufficient and further inquiries or details should have been called for. The inquiry should have been conducted by the Director himself to record the finding that the assessment order was erroneous. He should not have set aside the order and directed the Assessing Officer to conduct the inquiry." 8.9. In the present case also the A.O. made the enquiries, so it was not a case of no enquiry and if the Ld. Pr. CIT was not satisfied from the enquiry made by the AO he should have conducted the enquiry himself to record the findings that the assessment order was erroneous he should not have set aside the order passed by the AO and directing him to conduct the enquiry. 8.10. On a similar issue the Hon'ble Jurisdictional High Court in the case of CIT Vs. M/s. Unique Autofelts (P.) Ltd. (supra) held as under: "5. From the finding ....
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....;s report and Balance Sheet of M/s. Lawa Marketing (P.) Ltd. as at 31.03.2012 alongwith a Schedule of details of investments. h) Copy of confirmation g) Copy of Share Certificate (B) M/s. Pansy Dealer (P.) Ltd. a) Copy of Summons Issued to M's Pansy Dealer Pvt. Ltd. u/s. 131 of the Income-Tax Act. 1961 by the Deputy Director of Income-Tax (Investigation), Unit 1(1), Kolkata b) Copy of Application Forms for Equity Shares c) Copy of Income-Tax Return Acknowledgement of A.Y. 2011-12 d) Copy of Letter (along with Enclosed copies) to the Deputy Director of Income-Tax, DDIT(Inv.). Unit-(1)). Kolkata; wherein Information was furnished u/s. 131 of the Income-Tax Act. 1961 in the case of M/s. Technico Metals (P.) Ltd. for A.Y. 2012-13: (i) Copy of Form of Application for Equity Shares (ii) Copy of Bank Statement of Indusind Bank from 19.03.2012 to 31.03.2012 evidencing the Fact that M/s. Pansy Dealer (P.) Ltd. had paid a Share Application Money of Rs. 25,00,000/- through RTGS dated 21.03.2012. (iii) Copy of Income-Tax Return Acknowledgement of A.Y. 2012-13 (iii) Copy of Director's Repo....
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.... was never put or confronted to the assessee and, hence, the reliance cannot be placed on the said report. 11. In this case, the share application money along with premium was received through banking channel. The details of the bank account of the investor have been duly supplied. Even the source of funds of the Investor is also explained. The income tax returns of the investor are also furnished. The investor companies have been duly registered under the Indian Companies Act and there is no evidence on file that their registration has been cancelled or that the investor companies have been declared as non-existent or shell companies. In response to summons issued by the DDIT (Inv), Kolkata, investor companies duly filed all the details and duly confirmed that they had invested in the shares of the assessee company. The only reason for which the aforesaid investment has been disbelieved by the Assessing officer is on the ground that the Inspector of the Income tax at Kolkata had reported that the aforesaid companies could not be traced out at the given address. However, we find from the record that the assessee company has furnished the bank details of the investor compan....
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.... of the assessee. 12. In view of this, we do not find any justification on the part of the lower authorities in making the impugned additions. The same are accordingly set aside/deleted. 8.12. In the aforesaid case, some of the investor companies were the same which were involved in the present case and the share premium was Rs. 390/- per share in the said case while in the present case the share premium was only of Rs. 15/- per share which was based on the valuation report. So by respectfully following the aforesaid referred to order of the ITAT and the ratio laid down by the various Hon'ble High Courts in the aforesaid referred to judgments, we are of the view that the Ld. Pr. CIT was not justified in considering the assessment order passed by the AO as erroneous and prejudicial to the interest of the Revenue, particularly when the AO after making the proper enquiry and considering the various documents furnished by the assessee, had taken a possible view. Therefore, the Ld. Pr. CIT was not justified in considering the assessment order passed by the AO as erroneous on this basis that the assessee could not produce the Directors, as has been held in the aforesaid r....
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....ew with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law." 8.14. In the present case, as we have already pointed out that the AO asked the assessee to furnish the relevant details relating to the shares issued at premium to various companies and the assessee furnished all the relevant documents which were examined by the AO who had taken a possible view, therefore as per the ratio laid down by the Hon'ble Apex Court in the aforesaid referred to case, even if the Ld. Pr. CIT did not agree with the view taken by the A.O., the said assessment order passed by the A.O., cannot be treated as an erroneous order and prejudicial to the interest of the Revenue. 8.15. In the present case the Ld. CIT DR heavily relied on the judgments of the Hon'ble Kolkata High Court in the case of Rajmandir Estates Private Ltd. Vs. Principal Commissioner of Income Tax [2016] 386 ITR 162 (Cal) wherein the Promoter/Director of the said assessee and their close relatives and Friends had united with the main objective of creating company apparently hav....