TaxTMI 
TaxTMI 
2021 (12) TMI 1286
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.... 28.03.2016 which impugned action of Ld. Pr. CIT, according to assessee, is without satisfying 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. CITs 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 filed its return of income on 11.09.2012 declaring an income of Rs. 6,635/-. The case was selected for scrutiny u/s. 143(3) of the Act under CASS 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 16.03.2015 making addition of total income of Rs. 9,09,44,000/- under section 68 of the Act on account of alleged unexplained cash cr....
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....d assessment/re-assessment order dated 08.06.2016, the Ld. Pr. CIT-4 (hereinafter referred to as the second Ld. Pr. CIT) issued show cause notice (SCN) wherein he 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 15.03.2019 wherein he was pleased to again set aside the reassessment order/second assessment order dated 08.06.2016 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 erroneous in so far as prejudicial to the interest of revenue. After having considered the position of law and facts and circumstances of the instant case, I am of the considered opinion that the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of revenue in accordance with the Explana....
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....requisite documents and details as called for by the AO. However, the AO after having gone through the documents accepted the share capital to the tune of Rs. 19,56,000/- as genuine and found fault with the share premium to the tune of Rs. 9,09,44,000/- which was added as unexplained cash credit. It was brought to our notice by Shri S.K. Tulsiyan that the assessee had filed a copy of audited books of accounts, bank statements and all details sought by the first AO was produced, however the AO made the addition of premium while he accepted the share capital which action itself being erroneous, the Ld. Pr. CIT (First) rightly interfered taking note of the fact that the AO in the first round did not look into the replies and explanation filed by the share applicants as well as having gone through the documents filed by them and since the AO failed to take further steps towards non-adversarial tax regime as instructed by CBDT dated 07.11.2014, the Ld. first Pr. CIT was pleased to set aside the first assessment order dated 16.03.2015 with the direction for de-novo assessment and directed the AO (Second) to carry out proper examination in the light of the directions made by him. Accordin....
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....re applicants. The assessee company furnished all the documents as required related to second source. Records were test checked received from the parties proving identity of parties, genuinity of the transactions, creditworthiness and again it was observed that all the transactions were made through banking channel and duly recorded in the books of accounts of the parties. Accordingly it is inferred that: (i) As the shareholders are private limited companies and registered with the Ministry of Corporate Affairs they have an established identity. (ii) Details of source of funds have been submitted by all the share holders. (iii) None of the applications have been made otherwise than by banking channels. (iv) All the investors have submitted their Annual reports and IT returns and (v) In all the cases the investments is duly reflected in the Annual Accounts of the respective investors." 8. The Second AO after going through the records and after enquiries made the findings that the share applicants/share holders' identity have been established since they are all registered with the Ministry of Corporate Affairs being Private Limited Comp....
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....taken place by virtue of the order of First Ld. Pr. CIT. Therefore, according to Shri S.K. Tulsiyan, if this practice is allowed, there will be no end to the assessment proceedings, since if the next i.e. third or fourth Pr. CIT does not like the next assessment orders being passed by an AO under his jurisdiction, in the way he thought it as proper enquiry to have been conducted in a given case or subject matter, then he will interfere and ask the AO to re-do the assessment again and again, which is not permissible and that is exactly why the Parliament in its wisdom has brought in safe-guards, restrictions & conditions precedent to be satisfied strictly before assumption of revisional jurisdiction. According to Shri S.K. Tulsiyan, the essential conditions precedent for assumption of revisional jurisdiction 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. A/R, 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 2013-1....
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....easonable, harsh and unfair practice, which action is against the Rule of Law, which is a basic feature of the Constitution of India. Since the law was that assessee should furnish the source of share capital it received in this A.Y, assessee by producing all documents in respect of share-applicants had discharged its onus, then burden shifts to the shoulder of AO to find fault with the documents or test the veracity of the documents. Despite the law was as such, then also AO in the second round, pursuant to the direction of the First Ld. Pr. CIT-4 the share applicants filed source of source for applying for the share capital and premium, thus it was pointed out by Shri S.K. Tulsiyan 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 Shri S.K. Tulsiyan, the AO has conducted enquiries and has recorded these facts/finding and, therefore, order of the AO who is a quasi-judicial authority vested with the power to assess the income of an assessee cannot be termed as erroneous for lack of enquiry. Further according to Shri S.K. Tulsiyan, the view of ....
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....intention to interdict in the First AO's action in framing the said original first assessment order dated 16.03.2015. Thereafter, the First Ld. Pr.CIT passed his First Revision order u/s. 263 of the Act on 28.03.2016, wherein he was pleased to set aside the original assessment order dated 16.03.2015 and directed de-novo assessment after proper examination of matter discussed in his order which included share capital and premium. 11. Pursuant to the direction of the First Ld. Pr.CIT dated 28.03.2016, the second AO framed the de-novo re-assessment order dated 08.06.2016, wherein the second AO was pleased to accept the assessee's transaction in respect of collection of share capital and share premium to the tune of Rs. 9.28 crore. And the AO framed the second assessment order by making an addition of only Rs. 6,400/- u/s. 14A of the Act. Thereafter, the new incumbent in the office of Pr. CIT-4, Kolkata issued show cause notice and conveyed his intention to revise the re-assessment/second assessment order of the second AO dated 08.06.2016. After hearing the assessee, the second Ld. Pr. CIT has set aside the said re-assessment/second assessment order of the AO dated 08.06.2016, where....
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.... the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated an issue before him; then the assessment order passed by the Assessing Officer can be termed as an erroneous order. Coming next to the second limb, which is required to be examined is as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue? The Hon'ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. "prejudicial to the interest of the revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the Pr. CIT/CIT does not agree, it cannot be treated as an erroneous order prejudic....
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.... of the Act and therefore, the action of the Ld. Pr. CIT is wholly without jurisdiction and therefore, ab-initio void and therefore, need to be struck down. We note that in order to interfere with the second assessment/re-assessment order passed by the Second AO u/s. 143(3)/263 of the Act dated 08.06.2016, the Second Ld. Pr. CIT has alleged lack of enquiry on the part of the AO in respect of share application money, and for not collecting the full facts. Therefore, it is noted that according to Ld. Pr. CIT, the AO's (second AO) decision was not based on the totality of facts, which makes the second assessment/re-assessment order erroneous in so far as prejudicial to the interest of the revenue. The second Ld. Pr. CIT also opines that the AO's order dated 08.06.2016 of the AO (second assessment/re-assessment order) is in accordance with the Explanation 2(c) 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 S....
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....against the assessee and according to him, the AO has simply jumped to the conclusion and treated the share premium as unexplained cash credit. The First Ld. Pr. CIT found fault with the action of AO for violation of natural justice. Therefore, according to the First Ld. Pr. CIT the first original assessment order framed u/s. 143(3) dated 16.03.2015 was in violation of direction of Ld. Pr. CIT, Kolkata in connection with Board's circular and office memorandum dated 07.11.2014 of CBDT in respect of adherence to non-adversarial tax regime was not followed by the first AO while framing the assessment order dated 16.03.2015 and, therefore, he found it fit to order de-novo assessment and gave direction to examine the share capital & premium collected by assessee. 20. So we note that the second AO was specifically directed by the First Ld. Pr. CIT to carry out the de-novo assessment. Thereafter, we note that the original assessment of AO dated 16.03.2016 was set aside back to AO u/s. 263 of the Act by the First Ld. Pr. CIT by his first revisional order dated 28.03.2016 for de-novo assessment which means the second AO was free to assess the income of assessee afresh. 21. Now let us ....
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....Second AO after going through the records and after enquiries made the finding of fact that the share applicants/share holders' identity have been established since they are all registered with the Ministry of Corporate Affairs being Private Limited Companies and that the source of the fund for share capital & premium have been submitted by all the share holders. It has also been found by the Second AO that in all the cases the investments made by them have been duly reflected in their respective annual accounts; and thereafter, he was pleased to accept the share capital and premium since the assessee was able to explain to his satisfaction the nature and source of the credit entry. Thereafter, he made only an addition of disallowance to the tune of Rs. 6,400/- u/s 14A of the Act. Thus it is noted that second AO did not draw any adverse inference against the share capital and premium collected by the assessee after carrying out the aforesaid exercise as directed by the First Ld. Pr. CIT to him. This exercise carried out by the second AO while framing the second assessment/reassessment has been faulted as a case of lack of enquiry by the second Ld. Pr.CIT and the precise question is....
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....sists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee company shall be deemed to be not satisfactory, unless- (a) The person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) Such explanation in the opinion of the Assessing officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10]. 25. Here it is to be noted that the first proviso and second proviso was inserted by Finance Act, 2012 with effect from 01.04.2013, so it is applicable only for/from AY 2013-14 and not for this relevant AY 2012-13. 26. Next let us refer to the definition of income stated in Section 2(24) of the Act. Section 2(24) of the Act includes:- i) profits and gains ........ ......... xvi) any consi....
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....orce was that if any sum is found credited in the books of an assessee in a financial year and, if the AO asks for the explanation of assessee in respect of the nature and source thereof, then the assessee is duty bound to explain the nature and source of the credit entry in the books and if the assessee fails to explain or if the AO is not satisfied, he may charge to income tax the sum so credited. So, the assessee is bound to explain before the AO the nature and source of share capital, i.e. the identity, creditworthiness and genuineness of the share capital. In this AY, the assessee is bound to know about the share applicants who wish to invest their identity, whether they have the financial capacity (creditworthiness) and they are genuine investors in their company (assessee). In this relevant AY, the assessee is not bound by law at the time of collection of share capital to ask the share-applicants from where it is getting the money to invest in the assessee's company. And we also note that share premium can be taxed if it exceeds the fair market value only from next AY i.e. AY 2013-14 and not in this A.Y. For coming to such a conclusion let us discuss few case laws: (A) Co....
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....ion of the proviso to Section 68 of the Act is immaterial and does not change the interpretation of section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on facts it has found satisfied. (ii) Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in CIT vis. Lovely Exports (P) Ltd. 317 ITR 218 in the context to the pre-amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the assessee's income as unexplained cash credit." (B) The Tribun....
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....n in the books of accounts by the provisions of Sec. 68 of the Act. The assessee has successfully established the identity of the companies who have purchased shares at a premium. The assessee has also filed bank details to explain the source of the share holders and the genuineness of the transaction was also established by filing copies of share application forms and Form No. 2 filed with the Registrar of Companies. Considering all these undisputed facts, it can be safely concluded that the initial burden of proof as rested upon the assessee has been successfully discharged by the assessee. Even if it is held that excess premium has been charged, it does not become income as it is a capital receipt. The receipt is not in the revenue field. What is to be probed by the AO is whether the identity of the assessee is proved or not. In the case of share capital, if the identity is proved, no addition can be made u/s 68 of the Act. We draw support from the decision of the Hon'ble Supreme Court in the case of Lovely Exports Ltd. 317 ITR 218." (D) [Green Infra Limtied - 38 taxmann.com 253 (Mumbai-Trib). 10. We have considered the rival submissions and carefully pe....
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....rt in the case of Apeak Infotech-88 taxmann.com. 695 (Bombay) when the question was "whether the amount received as share premium on issue of share by the respondent-assessees-companies could be taxed as profits and gains of business in the hands of the assessees under section 28(iv) of the Act". In any case, we may point out that the amendment to section 68 of the Act by the addition of proviso thereto took place with effect from April 1, 2013. Therefore, it is not applicable for the subject assessment year 2012-13. So for as the pre-amended section 68 of the Act is concerned, the same cannot be invoked in this case, as evidence was led by the respondents-assessees before the Assessing Officer with regard to identity, capacity of the investor as well as the genuineness of the investment. Therefore, admittedly, the Assessing Officer did not invoke section 68 of the Act to bring the share premium to tax. Similarly, the Commissioner of Income-tax (Appeals) on consideration of facts, found that section 68 of the Act cannot be invoked. In view of the above, it is likely that the Revenue may have taken an informed decision not to urge the issue of section 68 of the Act before t....
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....(c) The fair market value of the shares shall be the value- (iii) As may be determined in accordance with such method as may be prescribed, or (iv) As may be substantiated by the company to the satisfaction of the Assessing Officer based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licences, franchises or anyother business or commercial rights of similar nature, whichever is higher: (d)Venture capital company, venture capital fund, and venture capital undertaking shall have the meanings respectively assigned to them in clause (a), clause (b) and clause (c) of Explanation to clause (23FB) of section 10]". It was pleaded that the aforesaid provisions cannot be made applicable for the year under appeal. Accordingly, it was argued that the issuance of shares of premium cannot be brought to tax under any section of the Income Tax Act up to assessment year 2012- 13. We find that the reliance placed by the Id. AR in the decision of Hon'ble Bombay High Court in Pr. CIT vs. Apeak Infotech reported in 88 Taxmann.com 695 dt 08.06.2017 wherein ....
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....012-13. So for as the pre-amended section 68 of the Act is concerned, the same cannot be invoked in this case, as evidence was led by the respondents-assessees before the Assessing Officer with regard to identity, capacity of the investor as well as the genuineness of the investment. Therefore, admittedly, the Assessing Officer did not invoke section 68 of the Act to bring the share premium to tax. Similarly, the Commissioner of Income-tax (Appeals) on consideration of facts, found that section 68 of the Act cannot be invoked. In view of the above, it is likely that the Revenue may have taken an informed decision not to urge the issue of section 68 of the Act before the Tribunal. (d) We may also point out that decision of this court in Major Metals Ltd. v. Union of India [20121 19 taxmann.com 1761207 Taxman 185/[20131 359 ITR 450 Bom. proceeded on its own facts to uphold the invocation of section 68 of the Act by the Settlement Commission. In the above case, the Settlement Commission arrived at a finding of fact that the subscribers to shares of the assessee-company were not creditworthy inasmuch as they did not have financial standing which would enable them to make an in....
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....d also does not give rise to any substantial question of law as it is an issue concluded by the decision of this court in Vodafone India Services (P.) Ltd. (supra) and in the apex court in G. S. Homes and Hotels (P.)Ltd. (supra).Thus not entertained. 30. Relying on the aforesaid judicial precedents of Hon'ble High courts and the Tribunal, we are of the opinion that in this AY i.e. AY 2012-13, the amendment in section 68 of the Act took place wherein the addition of proviso was with effect from 01.04.2013 and so is not applicable in this AY. Further, as noted, the definition of income as provided under section 2(24) of the Act at the relevant time (AY 2012-13) did not define as income any consideration received for issue of shares in excess of its fair market value. This came into effect from 01.04.2013 and thus would have no application to the share premium received by the assessee in the previous year relevant to AY 2012-13. With this back-drop in respect of the requirement of law, let us study the judicial precedents which were laid by the Hon'ble Apex Court and Hon'ble High Courts on the provision of section 68 of the Act, while dealing with Share Capital/loan etc. so that we....
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.... such creditor). In arriving at this conclusion, the Hon'ble Court has further stressed the presence of word "may" in section 68 of the Act. The Hon'ble Apex Court ratio was taken note by the Hon'ble Gujarat High Court in the case of Dy. CIT vs Rohini Builders (2002) 256 ITR 360 wherein the Hon'ble High Court observed at pages 369 and 370 of this order are reproduced hereunder:- "Merely because summons issued to some of the creditors could not be served or they failed to attend before the Assessing Officer, cannot be a ground to treat the loans taken by the assessee from those creditors as non-genuine in view of the principles laid down by the Supreme Court in the case of Orissa Corporation [1986] 159 ITR 78. In the said decision the Supreme Court has observed that when the assessee furnishes names and addresses of the alleged creditors and the GIR numbers, the burden shifts to the Department to establish the Revenue's case and in order to sustain the addition the Revenue has to pursue the enquiry and to establish the lack of creditworthiness and mere non-compliance of summons issued by the Assessing Officer under section 131, by the alleged creditors will not be s....
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....ake inquiry into the source(s) of the credit and/or sub-creditor. The language employed by section 68 cannot be read to impose such limitations on the powers of the Assessing Officer. The logical conclusion, therefore, has to be, and we hold that an inquiry under section 68 need not necessarily be kept confined by the Assessing Officer within the transactions, which took place between the assessee and his creditor, but that the same may be extended to the transactions, which have taken place between the creditor and his sub-creditor. Thus, while the Assessing Officer is under section 68, free to look into the source(s) of the creditor and/or of the sub-creditor, the burden on the assessee under section 68 is definitely limited. This limit has been imposed by section 106 of the Evidence Act which reads as follows: "Burden of proving fact especially within knowledge.-When any fact is especially within the knowledge of any person, the burden) of proving that fact is upon him." ******** What, thus, transpires from the above discussion is that white section 106 of the Evidence Act limits the onus of the assessee to the extent of his proving the source from whi....
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....ecial knowledge of the assessee." ********** " ... If a creditor has, by any undisclosed source, a particular amount of money in the bank, there is no limitation under the law on the part of the assessee to obtain such amount of money or part thereof from the creditor, by way of cheque in the form of loan and in such a case, if the creditor fails to satisfy as to how he had actually received the said amount and happened to keep the same in the bank, the said amount cannot be treated as income of the assessee from undisclosed source. In other words, the genuineness as well as the creditworthiness of a creditor have to be adjudged vis-a-vis the transactions, which he has with the assessee. The reason why we have formed the opinion that it is not the business of the assessee to find out the actual source or sources from where the creditor has accumulated the amount, which he advances, as loan, to the assessee is that so far as an assessee is concerned, he has to prove the genuineness of the transaction and the creditworthiness of the creditor vis-a-vis the transactions which had taken place between the assessee and the creditor and not between the creditor and the su....
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....mstantial evidence on record that the said loan amounts actually belonged to, or were owned by, the assessee. Viewed from this angle, we have no hesitation in holding that in the case at hand, the Assessing Officer had failed to show that the amounts, which had come to the hands of the creditors from the hands of the sub-creditors, had actually been received by the sub-creditors from the assessee. In the absence of any such evidence on record, the Assessing Officer could not have treated the said amounts as income derived by the appellant from undisclosed sources. The learned Tribunal seriously fell into error in treating the said amounts as income derived by the appellant from. undisclosed sources merely on the failure of the sub-creditors to prove their creditworthiness." 34. Further, in the case of CIT v. S. Kamaljeet Singh [2005] 147 Taxman 18(All.) their lordships, on the issue of discharge of assessee's onus in relation to a cash credit appearing in his books of account, has observed and held as under: "4. The Tribunal has recorded a finding that the assessee has discharged the onus which was on him to explain the nature and source of cash credit in question. ....
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....ibunal's decision was overturned and decision of Ld. CIT(A) upheld and the Hon'ble High Court held that when the basic evidences are on record the mere failure of the creditor to appear cannot be basis to make addition. The court held as follows: 8. Assailing the said judgment of the learned Tribunal learned counsel for the appellant submits that Income-tax Officer did not consider the material evidence showing the creditworthiness and also other documents, viz., confirmatory statements of the persons, of having advanced cash amount as against the supply of bidis. These evidence were duly considered by the Commissioner of Income-tax (Appeals). Therefore, the failure of the person to turn up pursuant to the summons issued to any witness is immaterial when the material documents made available, should have been accepted and indeed in subsequent year the same explanation was accepted by the Income-tax Officer. He further contended that when the Tribunal has relied on the entire judgment of the Commissioner of Incometax (Appeals), therefore, it was not proper to take up some portion of the judgment of the Commissioner of Income-tax (Appeals) and to ignore the other portion of ....
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....ns of fact. 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. " 11. The Tribunal must, in deciding an appeal, consider with due care all the material facts and record its finding on all contentions raised by the assessee and the Commissioner, in the light of the evidence and the relevant law. It is also ruled in the said judgment at page 465 that if the Tribunal does not discharge the duty in the manner as above then it shall be assumed the judgment of the Tribunal suffers from manifest infirmity. 12. Taking inspiration from the Supreme Court observations we are constrained to hold in this matter that the Tribunal has not adjudicated upon the case of the assessee in the light of the evidence as found by the Commissioner of Income-tax (Appeals). We also found no single word has been spared to up set the fact finding of the Commissioner of Income-tax (Appeals) that there are materials to show the cash credit was received from various persons and supply as against cash credit also made. ....
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....share money be regarded as undisclosed income under section 68 of the Income tax Act, 1961? We find no merit in this special leave petition for the simple reason that if the share application money is received by the assessee- company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment. 39. Our attention was also drawn to the decision of the Hon'ble Calcutta High Court while relying on the case of Lovely Exports, in the appeal of COMISSIONER OF INCOME TAX, KOLKATA-IV Vs ROSEBERRY MERCANTILE (P) LTD., ITAT No. 241 of 2010 dated 10- 01-2011 has held: "On the facts and in the circumstances of the case, Ld. CIT(A) ought to have upheld the assessment order as the transaction entered into by the assessee was a scheme for laundering black money into white money or accounted money and the Ld. CIT (A) ought to have held that the assessee had not established the genuineness of the transaction. " It appears from the record that in the assessment proceedings it was noticed that the assessee company du....
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....led an appeal before the Commissioner of Income Tax (Appeals) being the First Appellate Authority and contended that the Assessing Officer had no material to show that the share capital was the income of the assessee company and as such the addition made by the Assessing Officer under Section 68 of the Act was wrong. The learned Commissioner of Income Tax (Appeals) after hearing the department and the Assessee Company deleted the addition of Rs. 52, 03,500/- to the income of the assessee company during the Assessment Year in question. The learned Commissioner of Income Tax Appeals found that there were as many as 2155 allottees, whose names, addresses and respective shares allocation had been disclosed. The Commissioner of Income Tax Appeals, further found that the Assessee Company received the applications through bankers to the issue, who had been appointed under the guidelines of the Stock Exchange and the Assessee Company had been allotted shares on the basis of allotment approved by the Stock Exchange. The Assessee Company had duly filed the return of allotment with the Registrar of Companies, giving complete particulars of the allottees. The Commiss....
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....s were in existence. Only nine shareholders subscribing to about 900 shares out of 6, 12,000 shares were not found available at their addresses, and that too, in course of assessment proceedings in the year 1994, i.e., almost 3 years after the allotment. By an order dated 2nd May, 2001, this Court admitted the appeal on three questions which essentially centre around the question of whether the Appellate Commissioner erred in law in deleting the addition of Rs. 52, 03, 500/- to the income of the assessee as made by the Assessing Officer. We are of the view that there is no question of law involved in this appeal far less any substantial question of law. The learned Tribunal has concurred with the learned Commissioner on facts and found that there were materials to show that the assessee had disclosed the particulars of the shareholders. The factual findings cannot be interfered with, in appeal. We are of the view that once the identity and other relevant particulars of shareholders are disclosed, it is for those shareholders to explain the source of their funds and not for the assessee company to show wherefrom these shareholders obtained funds." 41. Further, o....
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....e facts of the present case and, thus, we do not find any reason to interfere with the concurrent findings of fact based on materials on record. The appeal is, thus, devoid of any substance and is dismissed summarily as it does not involve any substantial question of law." 42. In the light of the afore-cited judicial precedents, let us examine the case in hand and find out whether pursuant to the direction of First Ld. Pr. CIT to frame denovo assessment, the second AO has discharged his role as an investigator in respect of share capital and premium collected by the assessee or whether the AO failed to enquire on this issue and whether his re-assessment/second assessment order is a plausible view or it can be termed as an unsustainable view in law. We on a conjoint reading of the First Revisional Order of the First Pr. CIT dated 28.03.2016 and the reassessment /Second assessment of the AO dated 08.06.2016, the following facts can be discerned: (a) The First Ld. Pr. CIT has recorded a finding after perusal of the first assessment records/folder that during the first round of scrutiny proceeding, the assessee company as well as the share subscribers pursuant to notice ....
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....order de-novo assessment to properly examine the share capital & premium collected by assessee. He also directed that the assessment proceedings to be initiated at the earliest and to be completed without waiting for time bar limit. With the aforesaid direction, the First Ld. Pr. CIT has set aside the first original assessment order dated 16.03.2015. 44. So we note that the second AO was directed by the First Ld. Pr. CIT to carry out the de-novo assessment which means the second AO is free to assess the income of assessee afresh. 45. In the second round before the AO for de novo re-assessment, the second AO as per the direction of the First Ld. Pr. CIT (supra), conducted the reassessment proceeding. The Second AO firstly issued notice u/s 142(1) of the Act which was served on 04.05.2016 to prove the nature and source of credit entry and pursuant to which the A/R of the assessee company before him, who duly appeared and produced the books of account 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, (vi....
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.... Yes 5 Earmark Infraprojects Pvt Ltd U70109WB2012PTC172223 AACCE9394E Yes 6 Casio Commosales Pvt Ltd U52190WB2009PTC136197 AADCC6980H Yes 7 Blockdeal Advisory Services Pvt Ltd U74140WB2012PTC172280 AAECB8504B Yes 8 Derby Realbuild Pvt Ltd U45400WB2011 PTC 170693 AAECD0569L Yes 46. The aforesaid share subscribers are corporate entities and their respective CIN, PAN, ITR, filed prove the identity, of the share subscribers. And we also note that all the share-holders are regular income tax assessee's. Therefore in the light of the aforesaid documents discussed their identity cannot be disbelieved and the AO's satisfaction in respect of identity of the shareholders is a possible view and cannot be termed as unsustainable in law or facts. 47. Coming to the creditworthiness of the shareholders, our attention was drawn to the balance sheet of the shareholders which was filed before the AO and the Ld. Pr. CIT and we note that their source of investment and net worth as per balance sheet as on 31.03.2012 as well as the sum invested by them in the assessee is discernible as under: SL NO NAME OF ALLOTTEE Amount investe....
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....he veracity of the documents referred to above. Moreover, the second Ld. Pr. CIT in his impugned order has not brought any material to rebut the action of second AO to justify his intervention u/s. 263 of the Act and which would have upset the decision of the second AO's factual view on the identity, creditworthiness and genuinity of the share transaction. In such a scenario, the second AO's view based on the documents referred to by him is a plausible view and in consonance with judicial precedents (supra) which we would like to discuss/examine each share subscribers totaling thirteen (13) infra: 1. Paritosh Suppliers Pvt Ltd On perusal of the paper book-1, it reveals that documents are found placed at page 61-83 PBI of share applicant, M/s Paritosh Suppliers Pvt Ltd which is a Private Limited Company and which has Permanent Account No. is AAFCP8460M and CIN U52190WB2011PTC157257. We note that this share applicant has filed its Pan Card, ITR acknowledgment, source of funds, Allotment Advice issued by the assessee company, relevant Bank Statement and audited accounts in response to the notice issued u/s 133(6) of the Act. A copy of its Income Tax Return Acknowledgment for AY ....
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.... On perusal of the paper book-1, it reveals that documents are found placed at page 112-136 of the paper Book-I of share applicant, Mangalvarsha Infra projects Pvt Ltd which is a Private Limited Company and which has Permanent Account No.AAHCM5940M and CIN U45400WB2011PTC171006. We note that this share applicant has filed its Pan Card, ITR acknowledgment, source of funds, Allotment Advice issued by the assessee company, relevant Bank Statement and audited accounts in response to the notice issued u/s 133(6) of the Act. On perusal of Audited Accounts of this share applicant (Page 115-131), it is noted that its Net-worth (Share Capital plus Reserves and Surplus) as on 31.03.2012 was Rs. 10,85,94,050/-, page 125 of the paper book and the investment made in the assessee-company including share premium was Rs. 2,59,00,000/-. Entire Share Application money was received by the assessee through normal banking channels. Sum of Rs. 75,00,000/- was received by the assessee on 26-03-2012,sum of Rs. 90,00,000/- was received on 27-03-2012 and a sum of Rs. 95,00,000/- was received on 27-03-2012. The financial statement of this share applicant shows that it had enough funds to invest in the asse....
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.... (Share Capital plus Reserves and Surplus) as on 31.03.2012 was Rs. 2,36,02,831/-, page 172 of the paper book and the investment made in the assessee-company including share premium was Rs. 40,00,000/-. Entire Share Application money of Rs. 40,00,000/- was received by the assessee through normal banking channels on 22-03-2012. The financial statement of this share applicant shows that it had enough funds to invest in the assessee-company and the transaction has happened through normal banking channels. 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. 6. Casio Commo sales Pvt Ltd On perusal of the paper book-1, it reveals that documents are placed at page 183-204 of share applicant, Casio Commo sales Pvt Ltd which is a Private Limited Company and which has Permanent Account No.AADCC6980H and CIN U52190WB2009PTC136197. We note that this share applicant has filed its Pan Card, ITR acknowledgment, source of funds, Allotment Advice issued by the assessee company, relevant Bank Statement and audited accounts in response to the notice issued u/s 133(6) of the Ac....
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....laced at page 250-272 of share applicant, M/s Derby Real build Pvt Ltd which is a Private Limited Company and which has Permanent Account No.AAECD0569L and CIN U45400WB2011PTC170693. We note that this share applicant has filed its Pan Card, ITR acknowledgment, source of funds, Allotment Advice issued by the assessee company, relevant Bank Statement and audited accounts in response to the notice issued u/s 133(6) of the Act. A copy of its Income Tax Return Acknowledgment for AY 2012-13 is placed at page 252 of the paper book. On perusal of Audited Accounts of this share applicant (Page 253-267), it is that its Net-worth (Share Capital plus Reserves and Surplus) as on 31.03.2012 was Rs. 6,61,04,194/-, page 261 of the paper book and the investment made in the assessee-company including share premium was Rs. 89,00,000/-. Entire Share Application money was received by the assessee through normal banking channels on 23-03-2012. The financial statement of this share applicant shows that it had enough funds to invest in the assessee-company and the transaction has happened through normal banking channels. Further, it is noted that the share applicant had furnished the source of investment ....
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.... identity, creditworthiness and genuineness of the share capital and premium collected by the assessee from the share subscribers, the satisfaction of AO as envisaged in sec. 68 of the Act is a plausible view and the fact that the share subscribers responded to the notice issued u/s 133(6) of the Act and produced all documents along with the audited financial statements and other documents (albeit during first round) referred supra, the assessee had discharged the onus upon it about the identity, creditworthiness and genuineness of the share capital and premium collected by the assessee from the respective share subscribers. Since the aforesaid exercise was carried out by the second AO in the reassessment proceedings and the documents referred to above are in the assessment folder, the Second Ld. Pr. CIT erred in holding the reassessment order of the AO in respect of share capital and premium collected by the assessee as erroneous as well as prejudicial to the interest of the revenue. In the light of the aforesaid discussions and on perusal of the documents, we are of the view that AO's view to accept the identity, creditworthiness and genuineness of the share capital and premium c....
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....es (Refer page 61-272 PBI and pages 64- 492PBIII) could not be factually controverted by the Second Ld. Pr. CIT. And still if the Ld. Pr. CIT was not satisfied and wanted to interfere invoking jurisdiction u/s. 263 of the Act, he has to show that the enquiry conducted by AO was flawed or the enquiry conducted by AO was on a wrong direction or on wrong assumption of fact/law or that the AO misdirected himself in factual investigation or applied the law erroneously in respect of the facts collected by him. For doing so, in the facts discussed supra, he second (Ld. Pr. CIT) should himself had conducted an enquiry or at least conducted a preliminary enquiry and was able to bring some evidence/material on record to upset the AO's satisfaction in respect of identity, creditworthiness or genuineness of the share subscribers and thus recorded a finding of fact that the decision of AO's enquiry was faulted or wrong and in that process tried to show that it has resulted in a view which is "unsustainable in law" which would have justified his action of passing the impugned order u/s. 263 of the Act, which unfortunately is not the case. Since the AO's view on the facts collected and discussed ....
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.... 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 considering the total facts; and even if we presume he has conducted such an exercise, then he has not been able to bring out any adverse factual finding to upset the view of Second AO. So we find no merit in the vague allegation of second Pr. CIT that the second AO has not collected the full facts necessary to decide the issue of share capital & premium.So we note that the Second AO, the assessing authority who is a quasi- judicial office has discharged his dual role as an investigator as well as an adjudicator. Looking from another angle of doctrine of merger canvassed before us, we note from the facts of this case that the second Ld. Pr. CIT - 4 by passing the second revisional order dated 15.03.2019 has substituted the First Pr. CIT's order passed u/s. 263 of the Act dated 28.03.2016 with his own order which he cannot do since the second assessment order/re-assessment of the Second AO dated 08.06.2016 was pursuant to the first revisio....