TaxTMI 
TaxTMI 
2021 (11) TMI 999
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....f the Act. 3. The PCIT sought to revise the assessment order dated 20.04.2017 passed under s. 143(3) of the Act by way of a show cause notice dated 26.02.2020 served upon the assessee, which is reproduced hereunder: "Subject: Notice for Hearing in respect of Revision proceedings u/sec 263 of the THE INCOME TAX ACT, 1961 - Year 2015-16. In this regard, a hearing in the matter is fixed on 05/03/2020 at 04:30 PM. You are requested to attend in person or through an authorised representative and file any additional information/documents in support of your application. Attendance is not necessary, if you wish that the Revision application be decided on the basis of your written submission which may be furnished in this office, on or before the said date. You also have the option to file your submission from the e-filing portal using the link: incometaxindiaefiling.gov.in This is to inform you that the undersigned has examined your assessment records for the A.Y. 2015-16 and from the examination of the assessment order passed in your case u/s. 143 of the Act dated 20/04/2017, it is seen and observed that the assessment order passed by the AO is erroneous in s....
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....ccount shows no other significant transactions. Further returned income is only Rs. 3,16,200/- and as per balance sheet he has made investment of Rs. 14,79,500/- in this company only and he has no other asset. 06 KK Mishra ( HUF) 524000 Cash deposit of Rs. 1,60,000/- on 21.04.2014. Cash deposit of Rs. 2,00,000/- and transfer amount of Rs. 1,60,000/- on 15.01,2015 and 20.01.2015 respectively. The bank account shows no other significant transactions. Further returned income is only Rs. 2,44,100/- and as per balance sheet he has made investment of Rs. 18,22,300/- in this company only and he has no other asset. 07 Madan Sahu 459000 Cash deposit of Rs. 65,000/- on 05.01.2015 and transfer amount of Rs. 3,92,000/- on 21.01.2015 and 25.02.2015 respectively. The bank account shows no other significant transactions. Further returned income is only Rs. 2,67,300/- and as per balance sheet he has made investment of Rs. 13,68,950/- in this company only and he has no other asset. 08 Raj Bahadur Tiwari 302000 Cash deposit of Rs. 3,02,000/- on 05.01.2015. The bank account shows no other significant transactions. Further returned income is only Rs. 2,68,500/- and ....
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....the creditworthiness of share applicants and genuineness of the transactions. The AO has not properly examined the return of income, balance sheet, computation of income and bank statements of the share applicants. The AO has not properly verified and examined this aspect of the case. 2.2 Record reveals that you have received total fund of Rs. 3,96,52,350/- by way of share capital (Rs. 86,29,290 (share capital) + Rs. 3,10,23,060 (Security premium)). The AO has not verified and examined this aspect of the case. 2.3 Record reveals that there is inventory of land of Rs. 3,03,07,934/-. The AO has not verified and examined this aspect of the case. 2.4 P & L account reveals that there are purchases of Rs. 1,85,27,550/- against sale of goods of Rs. 1,77,15,556/- i.e. showing loss. The AO has not verified and examined this aspect of the case. 3. In view of the above lapses on the part of the AO and lack of examination and verification on the part of the AO in respect of the above issues and points, 1 find that the assessment order passed by the AO as on 20/04/2017 to be erroneous in so far as it is prejudicial to the interest of the revenue. Hence, it is....
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....nfirmation 2. Copy of acknowledgement of Return 3. Computation of total income. 4. Capital account and balance sheet. 5. Copy of Ban account. 6. Apart from that, learned Assessing Officer recorded statement on oath from all the share applicants. All the necessary information & explanation taken from them. Necessary enquiries made for identity, creditworthiness and genuineness of the transaction including source of share application money. During the assessment proceedings assessee has explained source of deposit in bank account of the share applicants. A list explaining those details is enclosed herewith for kind reference. Therefore, with regard to this issue also, the order of the ld. Assessing Officer is not erroneous is so far as prejudicial to the interest of revenue. The list so submitted is reproduced as under:- S.No. Name Amount Source 01 Amritlal Kashyap 1061200 1,08,000 Cash from Own Past savings 9,41,224 Loan given to M/s S K Minerals in earlier years, received back 11,976 Bank Balance 02 Baldev Rajpoot ....
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....sp; 2,67,000/- Loan given to Balaji Builders earlier years, received back 1,761/- Bank balance 13 Tarachand Kashyap 366000 2,80,000/- Cash from own past savings 85,259/- Loan given to L P Khedia in earlier years, received back 741/- Bank balance 2.2 Para 2.2 - Regarding Share Capital & Security Premium:- Details of share capital & Security Premium are as under:- S.No. Particulars Opening Balance Received FY 2015-16 Closing Balance 1 Share Capital 72,27,480/- 14,01,800/- 86,29,290/- 2 Security Premium 2,61,16,760/- 49,06,300/- 3,10,23,060/- Total 3,33,44,240/- 63,08,100/- 3,96,52,350/- From above chart it is clear that during the year assessee has received fresh share application money which was duly verified and examined by the Ld. Assessing Officer. Details are furnished at para 2.1 above. Therefore with regard to this issue also, the order of the Ld. assessing officer is not erroneous in so far as it is prejudicial to the interest of the revenue. ....
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....The creditworthiness, bonafides and the genuineness of the share application money was not examined in proper perspective. The PCIT narrated the reasons for his dissatisfaction on the enquiries conducted on share application money as per para 5(a) of his order. As per para 6 of his order, however, the other point, namely, the reply of the assessee in inventory of land and loss in trading account was accepted and dropped. 6. The PCIT thus alleged that the impugned order of AO is erroneous in so far as prejudicial to the interest of the Revenue on the grounds of inadequate enquiries with reference to Explanation (2) to Section 263 of the Act. 7. Aggrieved by the revisional order the PCIT, the assessee is in appeal before the Tribunal agitating the supervisory jurisdiction usurped by the Pr. CIT under s. 263 of the Act. 8. We have carefully considered the rival submissions and perused the revisional order of the PCIT as well as the show cause notice issued for assumption of jurisdiction as well as the case laws cited. The assumption of jurisdiction under s. 263 of the Act by the PCIT and revisional order passed as a sequel thereto seeking to set aside the completed assessment....
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....y, capacity of the share applicant and genuineness of transactions. The AO did not merely accept these evidences of receipts summarily but also issued summons to the share applicants in exercise of power under s. 131 of the Act. The requisite information was collected from the applicants and the statements of the applicants were recorded on oath. Thus, a deep enquiry was conducted into the source of share capital and share premium received during the year for which purpose, the case was selected for scrutiny through CASS. It was thus contended that the source of share capital money was fully traced by the AO to his satisfaction as contemplated under s. 68 of the Act. It is the contention of the assessee that the PCIT is merely dissatisfied with the degree of enquiry in relation to share application money from his point of view which is not permissible under s. 263 of the Act. It is further case of the assessee that PCIT himself has categorically agreed that it is not a case of complete lack of enquiry but a case of inadequate enquiry as perceived by him. It is thus contended that the assumption of jurisdiction by the PCIT under s. 263 of the Act is without any legal foundation and ....
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.... discretion in a pragmatic and judicious manner, for or against, the assessee. The AO is thus not obliged to invoke the sphere of S. 68 of the Act in all cases where the source is not proved to the last mile. This apart, it is well settled that while discharging the onus cast upon the assessee, it is not the stringent requirement of law that assessee needs also to prove the source of source i.e. money sourced by the lender to provide loan to the assessee. Once the assessee is able to establish the money has been received from the source belonging to third party, he cannot be burdened with a further onus of establishing the source from which such third party has been able to obtain money. Useful reference in this regard can be made to the decision of Hon'ble Gujarat High Court in case of Rohini Builders (supra) and also Nemi Chand Kothari (supra); ITO vs. Diza Holdings (P) Ltd. 255 ITR 573 (Kerala) and so on. 12. In the background of the tenets of law relevant to the present case as digested above, we take a look at the facts emerging from the record. As noted, the assessee has established not only the source of loan obtained but has also adequately demonstrated before the AO....
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....rds fuller enquiry is branded as 'prejudicial to the interest of Revenue'. Therefore, the mandatory twin conditions of Section 263 is also not found to be fulfilled when tested on the touchstone of taxability of share application money in the hands of assessee on the grounds of unproved source of source. Where the AO has exercised its quasi-judicial powers and arrived at a conclusion with reasonable application of mind, such action cannot be brushed aside as erroneous etc. simply because the Revisional Commissioner does not feel satisfied with extent of the inquiry and expects observance of higher standards in this regard. Where the assessee has furnished relevant material and offered explanation, the assessment cannot be ordinarily set aside for framing better assessment without any objective material on record adverse to the assessee. We thus concur with the plea on behalf of the assessee that S. 263 proceedings cannot be inflicted upon the assessee in these circumstances. 14. In support of such view, we also take note of the decision rendered by Hon'ble Bombay High Court in the case of CIT vs. Nirav Modi 390 ITR 292 (Bom.) where in somewhat similar circumstances, ....