TaxTMI 
TaxTMI 
2022 (1) TMI 879
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....y bad in law, so it has to be quashed. [Please note that since there are two assessment orders, and two Ld. Pr. CIT's 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 company filed its return of income for AY 2012-13 on 13-09-2012 declaring total income of Rs. 4338/-. The case was selected for scrutiny u/s. 143(3) of the Act which was completed on 21.03.2015 determining the total income at Rs. 20,41,04,380/- making an addition of Rs. 20,41,00,000/- u/s. 68 of the Act was passed by the AO (hereinafter referred to as the "first original assessment order") was passed by the AO (hereinafter referred to as the 'First AO'). Thereafter, the Ld. Pr. CIT-4, Kolkata (hereinafter referred to as 'the first Ld. Pr. CIT) by order dated 09.02.2016 (here....
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.... opinion, this is a case of lack of enquiry on the part of the AO. The decision on this issue could be taken only after examining and verifying the facts/submission of the AR on this score. 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 A.O. is erroneous in so far as it is prejudicial to the interest of revenue in accordance with the Explanation 2(c) below section 263 (1) of the Act. Accordingly, the issue is set aside to the table of A.O. The A.O. on the issue as outlined in para-2 above is directed to provide reasonable opportunity to the assessee company to produce documents & evidences which it may choose to rely upon for substantiating its own claim. The AO is further directed to adjudicate the said issue de novo and pass a fresh assessment order in accordance with the relevant provisions of law." Aggrieved by the aforesaid action of the Ld. Pr.....
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....i Miraj Shah brought to our notice that the second AO had issued notice u/s. 142(1) of the Act dated 07.03.2016 which is placed at page 15 of the paper book. Thereafter, AO had issued another notice u/s. 142(1) of the Act dated 07.04.2016 which is placed at pages 16 to 17 of the paper book. Thereafter, he drew our attention to the certified copy of the order sheet of the assessment proceedings which is placed at pages 18 to 22 of the paper book wherein the AO has recorded that the director of share subscribers M/s. Pheonix Vinimay Pvt. Ltd. has appeared before him along with regular books of account and copy of bank statement in response to the summons u/s. 131 of the Act and that he has verified the transaction and in that process has recorded the statement of Mr. Dhan Kumar Jain, director of M/s. Pheonix Vinmay Pvt. Ltd., which fact is seen from the contents of order sheet placed at page 19 of paper book-I. Likewise, he has recorded the fact of appearances of respective directors of the share subscribing companies viz., M/s. Oviation Vincom Pvt. Ltd., M/s. Approach Dealers Pvt. Ltd., M/s. Alex Tradecom Pvt. Ltd. and on 31.05.2016 the AO records in his order sheet that following d....
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.... the first Ld. Pr. CIT and on the subject matter on which specific specific directions/instructions were given by the First Ld. Pr.CIT, which since having been complied by the AO, brings into operation the doctrine of merger the subject matter i.e. share capital & premium collected by assessee company. Resultantly the second Ld. Pr.CIT, again cannot rake-up the same subject matter without the second Ld. Pr.CIT in the second revisional order spells out where the error happened to second AO as an investigator or adjudicator while the AO was carrying out the directions of First Ld. Pr.CIT pursuant to the first revisional order, which exercise according to Ld. AR unfortunately this Second Ld. Pr.CIT has not done. So according to Ld. A.R., he cannot be permitted to again ask the AO to start the investigation in the way he thinks it proper on the very same subject on which merger has taken place by virtue of the order of First Ld. Pr. CIT. Therefore, according to Ld. A.R., 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 ....
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....t ascertain that the share-applicant, who proposed to invest in assessee's company's share capital has proper identity and creditworthiness and is capable of investing in the assessee, then the AO in turn can verify the identity, creditworthiness and genuineness of the share subscriber from whom the assessee received the share capital and verify whether the identity is proper, whether the transaction took place through banking channel, etc. and the creditworthiness of the share applicant etc. According to Ld. AR, if the AO or even the Ld. Pr. CIT expecting/asking the assessee to find out the source of source of share-applicant, when the Law does not in this AY requires assessee to fulfill, then it would be quiet unreasonable, 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....
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....g share capital and premium collected by assessee. So according to Ld. CIT/DR the contention of Ld. AR that the second Ld. Pr. CIT cannot have directed fresh assessment on share capital & premium is devoid of merit and no merger took place as contended by the Ld. AR, so the doctrine of merger did not take place in this case because the Ld. Pr. CIT (First) has directed de novo assessment. So according to Ld. CIT DR, the Second Ld. Pr. CIT's impugned action is correct since the AO's second assessment order was erroneous for lack of enquiry. And, therefore, he does not want us to interfere. 8. We have heard both the parties and carefully gone through the submissions as put forth on behalf of the assessee and Revenue along with the documents furnished and the case law(s) relied upon by both the parties. It is noted that in this case the original return was filed u/s. 139 of the Act and the original first assessment was framed by the First AO u/s. 143(3) of the Act on 21-03-2015 by making an addition of Rs. 20,41,00,000/-. Thereafter, the First Ld. Pr.CIT-4, Kolkata issued SCN to the assessee-company conveying his intention to interdict in the First AO's action in framing....
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....IT can invoke the revisional jurisdiction, if the assessment order is erroneous in so far as prejudicial to the Revenue. Keeping this in mind, we have to examine as to whether in the first place the order of the Second Assessing Officer found fault by the Second Principal CIT is erroneous as well as prejudicial to the interest of the Revenue. For that, let us take the guidance of judicial precedent laid down by the Hon'ble Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83 (SC), wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s. 263 of the Act by the Commissioner of Income Tax (in short, 'CIT'). The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer's order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii) Assessing Officer's order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Of....
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.... order was passed without making inquiries or verifications which should have been made and therefore the order passed on 21.03.2015 stands erroneous insofar as prejudicial to the interest of the revenue and is set aside de novo with a direction to the AO to carry out proper examination of the books of accounts and bank accounts of assessee as well as investors. AO is also directed to examine the source of share application, identity of investor and its genuineness. The assessment proceedings may be initiated at the earliest and to be completed without waiting time barring date. The AO must provide sufficient opportunity of being heard to the assessee in order to meet natural justice, equity and fairness." 12. Pursuant to the aforesaid direction of the First Ld. Pr. CIT, the Second AO has framed the re-assessment/second assessment order by making an addition of only Rs. 57,482/- u/s. 14A of the Act vide order dated 17-06-2016 as under: ""During the course of scrutiny proceedings, it is observed that the assessee company had investment in equity shares. The assessee company claimed other expenses of Rs. 55,994/-. The assessee had average investment of Rs. 10,20,....
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....arlier revisional order of the First Ld. Pr. CIT's passed u/s. 263 of the Act dated 09.02.2016, when the fact remains that the AO has followed the direction of the First Ld. Pr. CIT-4 on the subject matter i.e. share application money (share capital & premium) while passing the second re-assessment order dated 17-06-2016. In order to appreciate this contention of Ld. AR, we perused the first revisional order dated 09-02-2016 passed u/s. 263 of the Act by the first incumbent Ld. Pr. CIT while setting aside the original first assessment order dated 21-03-2015 wherein he has recorded certain finding of fact after perusal of the records (first assessment folder/records of assessee). The First Pr CIT has acknowledged that in the first round of assessment proceedings, the assessee company had duly furnished before the AO documents/replies requisitioned by the first AO and his first order noted the facts brought to his notice the following:- "(a) The assessee was always willing to submit all details/documents, as required by AO for completion of assessment proceedings and on every occasions, assessee replied to all the notices issued by A.O. and all the relevant documentary e....
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....ering the assessee's request assessment order was passed. Even, show cause notice in respect of points of additions to be made was also given, which is also against the principal of natural justice, equity and fairness. [Emphasis given]" 17. The First Ld. Pr. CIT found that during the first assessment proceedings the following documents were filed by the assessee/share subscribers to prove the identity of all the share subscribers their respective (i) Registration with ROC (ii) PAN (iii) Return of Income. And to prove their respective creditworthiness their respective audited financial statements from which it can be seen that all the subscribing companies had sufficient funds in the form of share capital and reserves. And since all the transaction has taken place through the banking channel, the respective bank statement proved that transaction was genuine and a perusal of bank statements show that no cash was deposited in their (share subscribers) accounts. So on the strength of the aforesaid documents filed before the First AO, the assessee contended before the Ld. PCIT that it had duly discharged the burden of proving the identity, creditworthiness & genuineness....
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....First Ld. Pr. CIT by order dt. 09/02/2016 has set aside the first original assessment order dated 21-03-2015. 19. So we note that the second AO was specifically directed by the First Ld. Pr. CIT to carry out the followings actions in addition to de-novo assessment. Thereafter, we note that the original assessment of AO dated 21.03.2015 was set aside back to AO u/s. 263 of the Act by the First Ld. Pr. CIT by his first revisional order dated 09.02.2016 for de-novo assessment which means the second AO was free to assess the income of assessee afresh, but with specific directions to AO while framing the reassessment order vide para 4(v) of his order. The specific directions of First Ld. Pr CIT to AO are as under: i) To carry out proper examination of the books of accounts and bank account of the assessee; ii) To carry out proper examination of the books of accounts and bank account of the investors; iii) AO to examine the source of the share applicants; iv) The AO to examine the identity of the investor and its genuineness; v) The AO to complete the assessment at the earliest without waiting for the time barring date. 20. Now let us....
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....ry by the second Ld. Pr.CIT and the precise question is whether the action of second AO in respect of share capital and premium collected by the assessee can be termed as a case of lack of enquiry. 22. According to us, when the Assessment Order is framed on an issue which is the result of lack of enquiry, then the assessment order in respect of that issue would be erroneous because of that omission on the part of the AO to investigate that relevant fact which if enquired could have created a different result and consequently affected the veracity of the very claim made by the assessee. Then in that case we can say that the AO failed to discharge his role as an investigator, which omission caused prejudice to the Revenue, then the condition precedent to invoke revisional jurisdiction u/s. 263 of the Act will be satisfied. So the question is whether this fault i.e. lack of enquiry on share capital and premium alleged by the second Ld. Pr.CIT is correct, which is a mixed question of fact and law. 23. So the question is whether there is any merit on the finding of the Second Ld. Pr. CIT that the second assessment order/re-assessment order dated 17-06-2016 can be termed as erroneo....
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.... ......... xvi) any consideration received for issue of shares as exceeds the Fair Market Value of the shares referred to in clause (viib) of sub-section (2) of section 56. 26. It is noted that this amendment was made by an insertion of clause (xvi) in section 2(24) of the Act was by Finance Act 2012 with effect from 01.04.2013. 27. Correspondingly, the Parliament inserted sub-clause (viib) in sub-section 2 of section 56 of the Act by Finance Act 2012, w.e.f. 01.04.2013, that is for AY 2013-14 (not this AY 2012-13) in respect of computing and taxing the premium of shares in the hands of assessee (i.e. to tax the difference in consideration of value of shares if it exceeded the fair market value), which for the purpose of complete understanding of the law though not applicable is reproduced as under:- Section 56(2)(viib): "Where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of t....
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.... next AY i.e. AY 2013-14 and not in this A.Y. because section 56(2)(viib) has been inserted Section 56(2)(viib) has been inserted (treating premium in excess of fair value as an income from Other Source) with effect from assessment year 2013-2014 and are not applicable in the year under assessment, i.e. till A.Y. 2012-13, there was no law/provisions in relation to the amount of premium at which the shares should have been issued. It has to be borne in mind that in the subsequent years too the law has not treated excess premium as a cash credit. It has merely deemed the premium received as an Income from other Source instead of a Capital Receipt as it was treated in earlier years. For coming to such a conclusion let us discuss few case laws: (A) Coming to the share premium, it is noted that this Tribunal in ITA-2411/KOL/2017 in the case of Kanchan Plywood Products Pvt. Ltd. vs. ITO vide order dated 01.05.2019 has taken note that - Per contra, the Learned DR vehemently supported the order of the authorities below and wondered us to how the assessee-company issued share to three Private Limited Companies when its face value of Rs. 10/- at a premium of Rs. 990/-. According to ....
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....l 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 vs. 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 Tribunal Mumbai Bench in the case of DCIT vs. M/s. Alcon Biosciences (P) Ltd., ITA No. 1946/M/2016, Order dated 28.02.2018 held as under: "As regards the AOs observation with regard to the issue of shares at a face value of Rs. 10/- issued at a premium of Rs. 990 per share, we find that there is no merit in the findings of the AO for the reason that the issue of shares at a premium and subscription to such shares is within the knowled....
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.... 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. 68of 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) ITA-2270/KOL/2016 - Trend Infra Developers Pvt. Ltd. The assessee specifically argued before the ld. CIT(A) that the allotment of shares at a premium cannot be considered as sham or income of the assessee. It was pleaded at a preliminary level that the receipt of share capital and share premium is on capital account and that the same cannot be subject to tax as income. Specific submissions were also made in the context of introduction of section 56(2)(viib) inserted by the Finance Act, 2012 with effect from 01.04.2013 which reads as under: ....
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....dia [2013] 359 ITR 450 (Bom)? B. Whether on the facts and circumstances of the case and in law, the Tribunal as well as the Commissioner of Income Tax (Appeals) was right in deleting addition made by the Assessing Officer, by holding that the share premium receipt is capital in nature?" The Hon'ble Court held as under: Regarding Question A: (a) The issue raised by the Revenue in this question is to bring to tax the share premium received under section 68 of the Act. We find that the issue of bringing the share premium to tax under section 68 of the Act was not an issue which was urged by the appellant Revenue before the Tribunal. The only issue which was urged before the Tribunal as recorded in para (sic) of the impugned order is the addition of share capital and share application money in the hands of the assessee as income under section 28(iv) of the Act. We find that the Commissioner of Income-tax (Appeals) did consider the issue of applicability of section 68 of the Act and concluded that it does not apply. The Revenue seems to have accepted the same and did not urge this issue before the Tribunal. Mr. Bhoot, learned counsel appe....
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....hat shareholder/share applicants were unidentifiable or bogus. (e) In the above view Question No. A is not being entertained in view of the decision in Tata Chemical Ltd. (supra). Accordingly, the question (A) is not entertained. Regarding Question B: (a) We find that the impugned order of the Tribunal upheld the view of the Commissioner of Income-tax (Appeals) to hold that share premium is capital receipt and therefore, cannot be taxed as income. This conclusion was reached by the impugned order following the decision of this court in Vodafone India Services (P.) Ltd. (supra) and of the apex court in G.S. Homes and Hotel (P.) Ltd. (supra). In both the above cases the court has held that the amount received on issue of share capital including premium are on capital account and cannot be considered to be income. (c) It is further pertinent to note that the definition of income as provided under section 2(24) of the Act at the relevant time did not define as income any consideration received for issue of share in excess of its fair market value. This came into the statute only with effect from April 1, 2013 and thus, would have no application to th....
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....er which the addition has been made by the Assessing Officer reads as under: "68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year." The phraseology of section 68 is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year. In this case the legislative mandate is not in terms of the words 'shall' be charged to income-tax as the income of the assessee of that previous year". The Hon'ble Supreme Court while interpreting similar phraseology used in section 69 has held that in creating the legal fiction the phraseology employs the word "may" and not "shall". Thus the un-satisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the income of the a....
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....d have been to make assessments in the cases of those creditors by treating the cash deposits in their bank accounts as unexplained investments of those creditors under section 69". 38. In the case of Nemi Chand Kothari 136 Taxman 213, (supra), the Hon'ble Gauhati High Court has thrown light on another aspect touching the issue of onus on assessee under section 68 of the Act, by holding that the same should be decided by taking into consideration also the provision of section 106 of the Evidence Act which says that a person can be required to prove only such facts which are in his knowledge. The Hon'ble Court in the said case held that, once it is found that an assessee has actually taken money from depositor/lender who has been fully identified, the assessee/borrower cannot be called upon to explain, much less prove the affairs of such third party, which he is not even supposed to know or about which he cannot be held to be accredited with any knowledge. In this view, the Hon'ble Court has laid down that section 68 of Income-tax Act, should be read along with section 106 of Evidence Act. The relevant observations at page 260 to 262, 264 and 265 of the order are repr....
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....s, while section 68 gives the liberty to the Assessing Officer to enquire into the source/source from where the creditor has received the money, section 106 makes the assessee liable to disclose only the source(s) from where he has himself received the credit and IT is not the burden of the assessee to prove the creditworthiness of the source(s) of the sub-creditors. If section 106 and section 68 are to stand together, which they must, then, the interpretation of section 68 are to stand together, which they must, then the interpretation of section 68 has to be in such a way that it does not make section 106 redundant. Hence, the harmonious construction of section 106 of the Evidence Act and section 68 of the Income-tax Act will be that though apart from establishing the identity of the creditor, the assessee must establish the genuineness of the transaction as well as the creditworthiness of his creditor, the burden of the assessee to prove the genuineness of the transactions as well as the creditworthiness of the creditor must remain confined to the transactions, which have taken place between the assessee and the creditor. What follows, as a corollary, is that it is not the burde....
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....******* "In other words, though under section 68 an Assessing Officer is free to show, with the help of the inquiry conducted by him into the transactions, which have taken place between the creditor and the sub-creditor, that the transaction between the two were not genuine and that the sub-creditor had no creditworthiness, it will not necessarily mean that the loan advanced by the sub-creditor to the creditor was income of the assessee from undisclosed source unless there is evidence, direct or circumstantial, to show that the amount which has been advanced by the sub-creditor to the creditor, had actually been received by the sub-creditor from the assessee...." ********** "Keeping in view the above position of law, when we turn to the factual matrix of the present case, we find that so far as the appellant is concerned, he has established the identity of the creditors, namely, NemichandNahata and Sons (HUF) and Pawan Kumar Agarwalla. The appellant had also shown, in accordance with the burden, which rested on him under section 106 of the Evidence Act, that the said amounts had been received by him by way of cheques from the creditors aforementioned. In....
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.... setting aside the assessment order." 39. We also take note of the decision of the Hon'ble High Court, Calcutta in the case of S.K. Bothra & Sons, HUF v. Income-tax Officer, Ward-46(3), Kolkata 347 ITR 347 wherein the Court held as follows: "15. It is now a settled law that while considering the question whether the alleged loan taken by the assessee was a genuine transaction, the initial onus is always upon the assessee and if no explanation is given or the explanation given by the appellant is not satisfactory, the Assessing Officer can disbelieve the alleged transaction of loan. But the law is equally settled that if the initial burden is discharged by the assessee by producing sufficient materials in support of the loan transaction, the onus shifts upon the Assessing Officer and after verification, he can call for further explanation from the assessee and in the process, the onus may again shift from the Assessing Officer to assessee. 16. In the case before us, the appellant by producing the loan-confirmation-certificates signed by the creditors, disclosing their permanent account numbers and address and further indicating that the loan was taken by acc....
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....[1967] 66 ITR 462. In this judgment it is noticed that the Supreme Court as proposition of law held that 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. 10. We find considerable force of the submissions of the learned counsel for the appellant that the Tribunal has merely noticed that since the summons issued before assessment returned unserved and no one came forward to prove. Therefore, it shall be assumed that the assessee failed to prove the existence of the creditors or for that matter the creditworthiness. As rightly pointed out by the learned counsel that the Commissioner of Income-tax (Appeals) has taken the trouble of examining of all other materials and documents, viz., confirmatory statements, invoices, challans and vouchers showing supply of bidis as against the advance. Therefore, the attendance of the witnesses pursuant to the summons issued, in our view, is not important. The important is to prove as to whether the said cash credit was received as against the future sale of the pr....
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....al Calcutta High Court that the creditworthiness of the creditor cannot be disputed by the AO of the assessee but the AO of the creditor. In this regards our attention was drawn to the decision of the Hon'ble High Court, Calcutta in the COMMISSIONER OF INCOME TAX, KOLKA TA-III Vs. DATAWARE PRIVATE LIMITED ITAT No. 263 of 2011 Date: 21st September, 2011 wherein the Hon'ble Court held as follows: "In our opinion, in such circumstances, the Assessing officer of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness" of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted by the creditor has been re....
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....mentioned in the assessment order. The Assessing Officer, therefore, concluded that nature and source of such money was questionable and evidence produced was unsatisfactory. Consequently, the Assessing Officer invoked the provisions under Section 68/69 of the Income Tax Act and made addition of Rs. 24,00,000/-. On appeal the Learned CIT(A) by following the decision of the Supreme Court in the case of C.I.T. vs. M/s. Lovely Exports Pvt. Ltd., reported in (2008) 216 CTR 195 allowed the appeal by holding-that share capital/premium of Rs. 24,00,000/- received from the investors was not liable to be treated under Section 68 as unexplained credits and it should not be taxed in the hands of the appellant company. As indicated earlier, the Tribunal below dismissed the appeal filed by the Revenue. After hearing the learned counsel for the appellant and after going through the decision of the Supreme Court in the case of C.I.T. vs. M/s. Lovely Exports Pvt. Ltd. [supra], we are at one with the Tribunal below that the point involved in this appeal is covered by the said Supreme Court decision in favour of the assessee and thus, no substantial question of law is invo....
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....ed by the Income Tax Inspector had revealed that nine persons making applications for 900 shares were not available at the given address and rightly concluded that the total share capital issued by the Assessee Company could not be added as unexplained cash credit under 'Section 68 of the Income Tax Act. Moreover, if the nature and source of investment by any shareholder, in shares of the Assessee Company remained unexplained, liability could not be foisted on the company. The concerned shareholders would have to explain the source of their fund. The learned Commissioner on considering the submissions of the, respective parties and considering the materials, found that the Assessing Officer had applied the provisions of Section 68 of the Income Tax Act arbitrarily and illegally and in any case without giving the assessee adequate opportunity of representation and/or hearing. Learned Tribunal agreed with the factual findings of the learned Commissioner and accordingly the learned Tribunal dismissed the appeal of the Revenue and affirmed the decision of the learned Commissioner. Mr. Dutta appearing on behalf of the petitioners cited judgment of the Divi....
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....1,50,000/- and Rs. 13,00,000/- made by the Assessing Officer on account of share capital, share application money and investment in HTCCL respectively. After hearing Md. Nizamuddin, learned Advocate appearing on behalf of the appellant and after going through the materials on record, we find that all such application money were received by the assessee by way of account payee cheques and the assessee also disclosed the complete list of shareholders with their complete addresses and GIR Numbers for the relevant assessment years in which share application was contributed. It further appears that all the payments were made by the applicants by account payee cheques. It appears from the Assessing Officers order that his grievance was that the assessee was not willing to produce the parties who had allegedly advanced the fund. In our opinion, both the Commissioner of Income-tax (Appeals) and the Tribunal below were justified in holding that after disclosure of the full particulars indicated above, the initial onus of the assessee was shifted and it was the duty of the Assessing Officer to enquire whether those particulars were correct or not and if the Assessi....
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....transaction; (vi) Records relating to investors in order to establish identity, genuineness and creditworthiness of the share subscribers. (Ld. PCIT noted that share subscribers replied along with documents to notice u/s. 133(6) of the Act & the AO has not mentioned about it/compliance in his order sheet). 47. The First Ld. Pr. CIT found that AO in the first assessment proceedings the following documents to prove the identity of all the share subscribers their respective (i) Registration with ROC (ii) PAN (iii) Return of Income. And to prove their respective creditworthiness their respective audited financial statements from which it can be seen that all the subscribing companies had sufficient funds in the form of share capital and reserves. And since all the transaction has taken place through the banking channel, the respective bank statement proved that transaction was genuine and a perusal of bank statements show that no cash was deposited in their (share subscribers) accounts. So on the strength of the aforesaid documents the assessee contended before the Ld. PCIT that it had duly discharged the burden of proving the identity, creditworthiness & genuineness of the....
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....s on record and jumped on judicial decisions, which are irrelevant in the present case and without bringing any evidences on records against assessee in any form. Therefore, the observation and finding in assessment order are out of context. The facts, figures, evidence available on records to decide the case on merits did not find place in assessment order. The A.O. did not follow the principal of natural justice, equity and fairness in course of assessment proceedings, even the A.O. did not Issue show cause to assessee on proposed addition to be made, before finalising the assessment order. The AO also failed to comply with the direction of Pr. CCIT. Kolkata dated 17.03.2015 in connection with Boards circular, and office memorandum dated 07.11.2014 of Hon'ble CBDT in respect of non-adversarial tax regime. So he noted that AO simply jumped to the conclusion that the share capital collected by assessee as unexplained cash credit u/s. 68 of the Act. Therefore, according to the First Ld. Pr. CIT, the first original assessment order framed u/s. 143(3) of the Act dated 21-03-2015 was against the principle of natural justice and, therefore, he found it fit to or....
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....ed 7.9.2016 that the assessee had filed the submissions before him. The second AO notes that on 19.05.2016 he had issued summons u/s. 131 of the Act. According to second AO on 24.05.2016 Shri Praveen Kumar who duly appeared with regular books of accounts, bills, vouchers and copy of bank statement the second AO also acknowledges that he has taken note of enhancement of share capital and he directed the Ld. A.R. to appear on 15.06.2016. From page 19 of the PB which is the continuation of the order sheet it is noted that on 30.05.2016 Shri Dhan Kumar Jain, the director of M/s. Phoenix Vinimay Pvt. Ltd. (share subscribing company) appeared pursuant to the summons issued by the AO u/s. 131 of the Act. According to AO the director produced with the regular books of accounts, copy of bank statement and he has verified the documents, transaction and has recorded the statement of the director and signature of Shri Dhan Kumar Jain was also affixed on it. 51. Thereafter the AO notes that Smt. Shalini Jain, the director of M/s. Oviation Vincom Pvt. Ltd. (share subscribing company) appeared pursuant to the summons issued by the AO u/s. 131 of the Act. According to AO the director produced t....
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....nature of Shri K.S. Shah is also affixed. 57. Thereafter AO notes that Shri Bhusan Rathod, the director of M/s. Kamna Sales Pvt. Ltd. (share subscribing company) appeared pursuant to the summons issued by the AO u/s. 131 of the Act. According to AO the director produced the regular books of accounts, copy of bank statement and he has verified the documents, transaction and has recorded the statement of the director and signature of Shri Bhusan Rathod is also seen affixed. 58. Thereafter AO notes that Shri Aman Virani, the director of M/s. Twista Vincom Pvt. Ltd. (share subscribing company) appeared pursuant to the summons issued by the AO u/s. 131 of the Act. According to AO the director produced the regular books of accounts, copy of bank statement and he has verified the documents, transaction and has recorded the statement of the director and signature of Shri Aman Virani is also seen affixed. 59. Now coming to page 21 it is noted that Shri Bimal Das, the director of M/s. Cherry Marcom Pvt. Ltd. (share subscribing company) appeared pursuant to the summons issued by the AO u/s. 131 of the Act. According to AO the director produced the regular books of accounts, copy of b....
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.... order sheet. Thus we note that the AO has summoned all the share subscribers companies and had verified their books and have also verified share capital transaction with the assessee. The AO has also gone through the books of accounts as well as verify the transaction and has recorded the assessee's investment into equity shares. Thus we note that from the order sheet entries as well as paper book filed before us, it transpires that the following documents were furnished namely 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, (vii) Form 2, (viii) Form 5, (ix) bank statements evidencing payment through banking transaction, which fact the AO has acknowledged in the reassessment order. [And here we should keep in mind that the First Ld. Pr. CIT's finding of fact after perusal of original assessment records that assessee in the first round before AO has produced requisitioned audited financial statements, ROC details of the share applicants and pursuant to section 133(6) notice the investor companies have filed their financial, bank st....
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....PVT. LTD. U52190WB2011PTC164703 AACCI6701R Yes 9 CHERRY MARCOM PVT. LTD. U74999WB2011PTC164134 AAECC4513B Yes 10 APPROCH DEALERS PVT. LTD. U74999WB2011PTC164128 AAJCA6145Q Yes 11 ALEX TRADECOM PVT. LTD. U74999WB2011PTC164126 AAJCA6146P Yes 12 PHEONIX VINIMAY PVT. LTD. U74999UP2011PTC086893 AAGCP0817K Yes 13 OVIATION VINCOM PVT. LTD. U74999UP2011PTC087075 AABCO4659B Yes 51. Thus, we note that the AO after verification as aforesaid, has not drawn any adverse opinion or doubted the identity of the share applicants which view of AO is a possible view in the light of the documents referred to above and we also by applying the presumption in section 114 of Indian Evidence Act 1872, we presume the fact that the quasi-judicial act of the second AO have been regularly performed. 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'....
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....bed to shares of assessee (though not required as per law in force for AY 2012-13), bank statement, audited balance sheet. Thus the assessee had discharged the onus on it about the creditworthiness of the share-holders. So we note that the source of the investments has been clearly brought to the notice of the second AO during the assessment/reassessment proceedings. Further, the bank statements of all the shareholders as well as that of assessee were filed before the AO, which revealed that the share capital and premium have been subscribed by them through banking channel (NEFT or cheque) which goes on to show that the assessee has discharged the onus in respect of genuineness of the transaction. Based on the documents and materials called for by the AO who accepted the same after verification is an act of enquiry. And we note that revenue has not brought on record any material to challenge the 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 presumption 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 ....
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....of the Balance Sheet of the Company is found placed in the paper book 3 at page No. 91. The copy of the bank statement of the Company is found placed in the paper book 2 on page No. 22 On examination of the bank statement it is seen that there is no deposit of cash. The details of source of funds from which this company had made the share application are also available in the paper book 2 at page No. 23. The Director of this Company appeared in response to the summons issued u/s. 131 of the Act and produced their books of accounts, bank statements and their statements were recorded by the Assessing Officer and confirmed the transactions of share application before the assessing officer which was verified by him (Refer Order sheet page No. 19 PB-I). (c) M/s. Crystal Dealmark Pvt. Ltd.: Documents of this share subscribing company is found placed at page 24 to 28 of PB-II and page 92 of PB-III. This Company invested a sum of Rs. 1,00,00,000/- in the appellant company. The share application is seen to have been made by account payee cheque. This company was incorporated on 01/10/2010 and was having company identification number U52399WB2010PTC153719. This company has filed its....
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....et at page 19 PB-I). (e) M/s. Vidhika Dealers Pvt. Ltd.: Documents of this share subscribing company is found placed at pages 34 to 39 of PB-II and page 94 of PB-III. This Company invested a sum of Rs. 4,00,00,000/- in the appellant company. The share application is seen to have been made by account payee cheque. This company was incorporated on 04/10/2010 and was having company identification number U51101WB2010PTC153746. This company duly filed its return of income before ITO Ward 9(2), Kolkata and was having PAN AADCV4285A. This company was having a paid-up capital with free reserves and surplus of Rs. 33,00,72,636/- as on 31/03/2012. The copy of the Balance Sheet of the Company is found placed in the paper book 3 at page No. 94. The copy of the bank statement of the Company is found placed in the paper book 2 at page No. 37-38. On examination of the bank statement it is seen that there is no deposit of cash. The details of source of funds from which this company had made the share application are also available in the paper book 2 at page No. 39. The Director of this Company appeared in response to the summons issued u/s. 131 of the Act and produced their books of acco....
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....s found placed in the paper book 2 at page No. 49. On examination of the bank statement it will be seen that there is no deposit of cash. The details of source of funds from which this company had made the share application is found placed in the paper book 2 on page No. 50. The Director of this Company appeared in response to the summons issued u/s. 131 of the Act and produced their books of accounts, bank statements and their statements were recorded by the Assessing Officer wherein it confirmed the transactions of share application before the assessing officer which was verified by him (Refer Order sheet page 19 PB-I). (h) M/s. Integral Distributors Private Limited: Documents of this share subscribing company is found placed at Page 51 to 57 of PB-II and page No. 97 of PB-III. This Company invested a sum of Rs. 2,00,00,000/- in the appellant company. The share application is seen to have been made by account payee cheque. This company was incorporated on 24/06/2011 and was having company identification number U52190WB2011PTC164703. This company has filed its return of income before ITO Ward 10(1), Kolkata and was having PAN AACCI6701R. This company was having a paid-up ....
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....e No. 99 of PB-III. This Company invested a sum of Rs. 2,00,00,000/- in the appellant company. The share application is seen to have been made by account payee cheque. This company was incorporated on 24/06/2011 and was having company identification number U74999WB2011PTC164128. This company duly filed its return of income before ITO Ward 10(1), Kolkata and was having PAN AAJCA6145Q. This company was having a paid-up capital with free reserves and surplus of Rs. 12,21,02,114/- as on 31/03/2012. The copy of the Balance Sheet of the Company is found placed in the paper book 3 at page No. 99. The copy of the bank statement of the Company is found placed in the paper book 2 at page No. 72-73. On examination of the bank statement it is seen that there is no deposit of cash. The details of source of funds from which this company had made the share application is found placed in the paper book 2 at page No. 74. The Director of this Company appeared in response to the summons issued u/s. 131 of the Act and produced their books of accounts, bank statements and their statements were recorded by the Assessing Officer wherein it confirmed the transactions of share application before the assess....
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....sit of cash. The details of source of funds from which this company had made the share application is found placed in the paper book 2 at page No. 84. The Director of this Company appeared in response to the summons issued u/s. 131 of the Act and produced their books of accounts, bank statements and their statements were recorded by the Assessing Officer wherein it confirmed the transactions of share application before the assessing officer which was verified by him (Refer order sheet page 19 PB-I). (m) M/s. Oviation Vincom Pvt. Ltd.: Documents of this share subscribing company is found placed at Page 85 to 88 of PB-II and page No. 102 of PB-III. This Company invested a sum of Rs. 20,00,000/- in the appellant company. The share application is seen to have been made by account payee cheque. This company was incorporated on 27/06/2011 and was having company identification number U74999UP2011PTC087075. This company duly filed its return of income before ITO Ward 10(1), Kolkata and was having PAN AABCO4956B. This company was having a paid-up capital with free reserves and surplus of Rs. 20,94,620/- as on 31/03/2012. The copy of the Balance Sheet of the Company is found placed ....
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....ch reveals the 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 sec. 133(6) notice albeit in the first round and in the second round, the Directors of all investors pursuant to summons u/s. 131 appeared before second AO and produced all documents along with the audited financial statements and other documents 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 ....
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....n the facts collected and discussed is definitely a possible view, so in the factual background discussed in detail, we are of the considered opinion that Ld. second Pr. CIT ought not to have interfered with the AO's reassessment order which in any case can be classified as 'unsustainable in law' since it is in line with plethora of judicial decisions on the subject. 56. To sum up, we find from the above said facts that the Second AO has conducted enquiry as directed by the First Ld. Pr. CIT on the specific subject matter i.e. share capital and premium collected by the assessee-company. Therefore, the finding of Second Pr. CIT that the Second AO has not conducted enquiry is incorrect and is flowing from suspicion only. And as discussed, the allegation/fault pointed out by the Second Ld. Pr. CIT that the Second AO failed to collect total facts also cannot be accepted for the simple reason that Ld. Pr. CIT has not spelt out in the impugned order what he meant by total facts or in the alternative when the assessee has discharged its onus, as required by the law in force in this AY 2012-13, then the Ld. Pr. CIT ought to have called for which ever additional documents/mat....
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....-assessment of the Second AO dated 17.06.2016 was pursuant to the first revisional order of the First Ld. Pr. CIT and on the very same subject matter on which specific directions/instructions were given by the First Ld. Pr.CIT, which direction since having been complied by the AO, brings into operation the doctrine of merger the subject matter i.e. share capital & premium collected by assessee company. Resultantly the second Ld. Pr.CIT, again cannot rake-up the same subject matter without the second Ld. Pr.CIT in the second revisional order spells out where the error happened to second AO as an investigator or adjudicator, which exercise the Second Ld. Pr.CIT has not done, so the second Ld. Pr. CIT cannot be permitted to again ask the AO to start the investigation in the way he thinks it proper on the very same subject on which merger has taken place by virtue of the order of First Ld. Pr. CIT. And if this practice is allowed, then there will be no end to the assessment proceedings meaning no finality to assessment proceedings and that is exactly why the Parliament in its wisdom has brought in safe-guards, restrictions & conditions precedent to be satisfied strictly before assumpti....