TaxTMI 
TaxTMI 
2022 (1) TMI 879
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....e 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 (hereinafter the first revisional order u/s. 263 of ....
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.... 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. CIT the assessee is before us challenging the action of the Second Ld. ....
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....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 directors of the share subscribing companies appeared before him with their....
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....d. 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 the way he thought it as proper enquiry to have been conducted in a given case or subject matter, then he will interfere and ....
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....y 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, then also AO in the second round, pursuant to the specific direction of the First Ld. Pr. CIT-4, issued summons u/s. 131 of....
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....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 the said original first assessment order dated 21-03-2015. Thereafter, the First Ld. Pr.CIT passed his First Revision order u/s.....
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.... 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 Officer without application of mind; (v) if the AO has not investigated an issue before him; then the assessment order passed by the As....
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....roneous 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. 10,20,00,000/-. As per section 14A read with Rule 8D, 1/2% of such investment, i.e. Rs. 5,10,000/- is to be disallowed. Since the total expenses as debited in its p....
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....e 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 evidences were furnished before the A.O. but, the A.O. did not examine/verify the same and only those were placed on records. (b) The AO in the assessment order, simply add....
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...., 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 of the share capital & premium collected by it. However, the Ld. PCIT noted that the first AO has not examined these documents, which according to him, should have been carried out by the AO. Further, the Firs....
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.... 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 examine whether the second AO carried out his role of an investigator when the matter was remanded for de-nova assessment. In this respect, we note that pursuant to the aforesaid direction of the First Ld. Pr. CIT (first revisional order) dated 09-02-2....
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....n 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 erroneous for lack of enquiry. On a conjoint reading of the second SCN and operative portion of the impugned order, it can be safely deduced that according to Second Ld. Pr. CIT, the AO in the second round has not enquired about the share capital & premium collected by the assessee. For that we need to carefully examine ....
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....ent 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 the shares: Provided that this clause shall not apply where the consideration for issue of shares is received- (i) By a venture capital undertaking from a venture capital company or a venture capital fund, or (ii) By a company from a class or classes of persons as may be notified by the Central Government in this behalf. Explanation-For the purposes of this clause, (a) The fair market value....
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....nd 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 the Learned DR, the assessee-company had a meager return of income in the year under consideration and therefore, question of any person subscribing such high premium to the shares of the assessee-company cannot be believed. A:cording to the Learned DR when the income of the assessee is meager, the action of the share subscribing companies in giving astronomical prices for the shares is against preponderance of probabilities and cited the decision of the Hon....
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.... 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 knowledge of the company and the subscribers to the share application money and the AO does not have any role to play as long as the assessee has proved genuineness of transactions. We further notice that the AO cannot question issue of shares at a premium and also cannot bring to tax such share premium within the provisions of section 68 of the Act, before (supra) held that Proviso inserted to section 68 is prospective in nature. Hon'ble M.P. High Court in the case of CIT vs. Chain House Interna....
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....ort 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: "(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 the shares: Provided that this clause shall not apply where the consideration for issue of shares is received- (iii) By a venture capital undertaking from a venture capital company or a venture capital fund....
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....nt 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 appearing for the Revenue also fairly states that the issue of applicability of section 68 of the Act was not urged by the Revenue before the Tribunal. (b) It is a settled position in law as held by this court in CIT v. Tata Chemicals Ltd. [2002] J 22 Taxman 6431256 ITR 395 (Bom.) that in an appeal under section 260A of the Act, the High Court can only decide a question if it had been raised before the Tribunal even if not determined by the Tribunal. Therefore, no occasion to consider the question as prayed for arises. (c) 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....
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....ases 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 the share premium received by the respondent-assessee in the previous year relevant to the assessment year 2012-13. Similarly, the amendment to section 68 of the Act by addition of proviso was made subsequent to previous year relevant to the subject assessment year 2012-13 and cannot be invoked. It may be pointed out that this court in CIT v. Gagandeep Infrastructure (P.) Ltd. [2017] 80 taxmann.com 272/247 Taxman 245/394 ITR 680 (Bom.) has while refusing to entertain a question with regard to section 68 of the Act has held that the proviso to section 68 of the Act introduced with effect from April 1, 2013 will not have retrospective effect and would be effective only from the assessment year 201....
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....andate 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 assessee as held by the Hon'ble Supreme Court in the case of CIT v. Smt. P.K. Noorjahan [1999] 237 ITR 570. 37. In a case wherein the AO made the addition u/s. 68 of the Act because the lenders of loan to assessee did not turn up before him [AO], the Hon'ble Apex Court in the case of Orissa Corpn. (P) Ltd. (supra) 159 ITR 78 has held that onus of the assessee (in whose books of account credit appears) stands fully discharged if the identity of the creditor is established and actual receipt of money from such creditor is proved. In case, the Assessing Officer is dissatisfied about the source of cash deposited in the bank accounts of the creditors, the proper course would be to assess such credit in the hands....
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....r 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 reproduced herein below:- "While interpreting the meaning and scope of section 68, one has to bear in mind that normally, interpretation of a statute shall be general, in nature, subject only to such exceptions as may be logically permitted by the statute itself or by some other law connected therewith or relevant thereto. Keeping in view these fundamentals of interpretation of statutes, when we read carefully the provisions of section 68, we notice nothing in section 68 to show that the scope of the inquiry under section 68 by the Revenue Department shall remain confined to the transactions, which have taken place between the assessee and the creditor nor does the wording of section 68 indicate that section 68 does not authori....
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.... 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 burden of the assessee to prove the genuineness of the transactions between his creditor and sub-creditors nor is it the burden of the assessee to prove that the sub-creditor had the creditworthiness to advance the cash credit to the creditor from whom the cash credit has been eventually, received by the assessee. It, therefore, further logically follows that the creditor's creditworthiness has to be Judged vis-a-vis. the transactions, which have taken place between the assessee and the creditor, and it is not the business of the assessee to find out the source of money of his creditor or of the genuineness of the transactions, which took between the creditor and sub-creditor and/or creditworthiness of the sub-creditors, for, these aspects may not be wit....
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....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 fact the fact that the assessee had received the said amounts by way of cheques was not in dispute. Once the assessee had established that he had received the said amounts from the creditors aforementioned by way of cheques, the assessee must be taken to have proved that the creditor had the creditworthiness to advance the loans. Thereafter the burden had shifted to the Assessing Officer to prove the contrary. On mere failure on the part of the creditors to show that their sub-creditors had creditworthiness to advance the said loan amounts to the assessee, such failure, as a corollary, could not have been and ought not to have been, under the law, treated as the income from the undisclosed sources of the assessee himself, when there was neither direct nor circumstantial evidence on record that....
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....ation, 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 account payee cheques, no doubt, prima facie, discharged the initial burden and those materials disclosed by the assessee prompted the Assessing Officer to enquire through the Inspector to verify the statements." 40. In a case where the issue was whether the assessee availed cash credit as against future sale of product, the AO issued summons to the creditors who did not turn up before him, so AO disbelieved the existence of creditors and saddled the addition, which was overturned by Ld. CIT(A). However, the Tribunal reversed the decision of the Ld. CIT(A) and upheld the AO's decision, which action of Tribunal was challenged in the Hon'ble High Court, Calcutta in the case of Crystal Networks (P.) Ltd. v. Commissioner of Income-tax 353 ITR 171 wherein the Tribunal's decision was overturned and decision of Ld. ....
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....ials 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 product of the assessee or not. When it was found by the Commissioner of Income-tax (Appeals) on facts having examined the documents that the advance given by the creditors have been established the Tribunal should not have ignored this-fact finding. Indeed the Tribunal did not really touch the aforesaid fact finding of the Commissioner of Income-tax (Appeals) as rightly pointed out by the learned counsel. The Supreme Court has already stated as to what should be the duty of the learned Tribunal to decide in this situation. In the said judgment noted by us at page 464, the Supreme Court has observed as follows: "The Income-tax Appellate Tribunal performs a judicial function under the Indian Income-tax Act; it is invested with authority to determine finally all questions of fact. The Tribunal must, in deciding an appeal, consider with due car....
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....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 rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness" of transaction through account payee cheque has been established. We find that both the Commissioner of Income Tax (Appeal) and the Tribunal below followed the well-accepted principle which are required to be followed in considering the effect of Section 68 of the Act and we thus find no reason to interfere with the concurrent findings of fact recorded by both the authorities." 42. Our attention was also drawn to the decision of the Hon'ble Supreme Court while dismissing SLP in the case of Lovely Exports as has been reported as judgment delivered by the CTR at 216 CTR 295: "Can the amount of share money be regarded as undisclosed income under section 68 of the Income tax Act, 1961? We find no merit in this special....
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....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 involved in this appeal. The appeal is devoid of any substance and is dismissed. 44. Our attention was drawn to the decision of the Hon'ble High Court, Calcutta in the case of Commissioner Of Income Tax vs. M/s. Nishan Indo Commerce Ltd. dated 2 December, 2013 in INCOME TAX APPEAL NO. 52 OF 2001 wherein the Court held as follows: "The Assessing Officer was of the view that the increase in share capital by Rs. 52,03,500/- was nothing but the introduction of the assessee's own undisclosed funds/income into the books of accounts of the assessee company. The Assessing Officer accordingly treated the investment as unexplained credit under Section 68 of the Income Tax Act and added the same to the income of the assessee. Being aggrieved, the assessee filed 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 capita....
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....ly 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 Division Bench of this Court in Commissioner of Income Tax Vs. Ruby Traders and Exporters Limited reported in 236 (2003) ITR 3000 where a Division Bench of this Court held that when Section 68 is resorted to, it is incumbent on the assessee company to prove and establish the identity of the subscribers, their credit worthiness and the genuineness of the transaction. The aforesaid judgment was rendered in the context of the factual background of the aforesaid case where, despite several opportunities being given to the assessee, nothing was disclosed about the identity of the shareholders. In the instant case, the assessee disclosed the identity and address and particulars of share allocation of the shareholders. It was also found on the facts that all the shareholders 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 ....
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....assessee was shifted and it was the duty of the Assessing Officer to enquire whether those particulars were correct or not and if the Assessing Officer was of the view that the particulars supplied were insufficient to detect the real share applicants, to ask for further particulars. The Assessing Officer has not adopted either of the aforesaid courses but has simply blamed the assessee for not producing those share applicants. In our view, in the case before us so long the Assessing Officer was unable to arrive at a finding that the particulars given by the assessee were false, there was no scope of adding those money under section 68 of the Income-tax Act and the Tribunal below rightly held that the onus was validly discharged. We, thus, find that both the authorities below, on consideration of the materials on record, rightly applied the correct law which are required to be applied in the 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. 46. In the ligh....
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.... proving the identity, creditworthiness & genuineness of the share capital & premium collected by it. The First Ld. Pr. CIT found that the AO had issued notice u/s. 133(6) of the Act to all the share subscribing companies and pursuant to which all of them had replied to it. The Ld. PCIT also noted that summons u/s. 131 was issued, pursuant to which the assessee had filed written submission, which was also not mentioned in the order sheet. We note that the First Ld. Pr. CIT in his first revisional order, found that AO in the first assessment proceedings though has been provided with the aforesaid documents has not examined these documents, which according to him, should have been carried out by the AO. The First Ld. Pr. CIT at para (5) of his first revisional order has clearly made a finding that: 5. It is seen from the records that the assessee furnished copy of financial statement such as Audited balance sheet & P & L Account of the assessee and all the shareholders Bank Statements, ROC details of etc 17.07.2014. The AO issued notice u/s. 142(1) on 27.07.2014 requesting assessee to furnish various details/documents, in reply of notice u/s. 142(1) u/s. 142(1), the assessee furnis....
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....d it fit to order denovo assessment and gave specific direction to enquire in respect of share capital & premium collected by assessee including the source of share application. 48. Thereafter, the ld. Pr. CIT was pleased to direct "...............assessment order passed on 21.03.2015 is set aside denovo with the direction to the AO to carry out proper examination of books of account and bank statement of the assessee as well as the investor. The AO is also directed to examine the source of share application, identity of investor and its genuineness". (emphasis given by us). 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 specific direction, the First Ld. Pr. CIT has set aside the first original assessment order dated 21-03-2015. 49. 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 which means the second AO is free to assess the income of assessee afresh, however, he has to do the following specific actions as directed in respect of share-applicants who applied for shares i....
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.... copy of bank statement and he has verified the documents, transaction and has recorded the statement of the director and signature of Smt. Shalini Jain was also seen affixed on it. 52. Thereafter AO notes that Shri N.K. Mondal, the director of M/s. Approach Dealers 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 N.K. Mondal is also seen affixed. 53. Thereafter AO notes that Shri Narendra Kumar M, the director of M/s. Alex Tradecom 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 Narendra was also seen affixed. 54. Now coming to page 21 it is noted that the AO has recorded that on 31.05.2016 Shri V.A. Patel, the director of M/s. Vidhika Dealers Pvt. Lt....
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....ts, transaction and has recorded the statement of the director and signature of Shri Bimal Das is also seen affixed. 60. The AO notes that Shri British Rajak, 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 British Rajak is also seen affixed. 61. The AO notes that Shri Sindoor Vineet Mittal, the director of M/s. Integral Distributors 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 Sindoor Vineet Mittal is also seen affixed. 62. The AO also notes that Shri Manish Kumar Gupta, the director of M/s. Vayu Marketing Pvt. Ltd. (share subscribing company) appeared pursuant to the summons issued by the AO u/s. 131 of the Act. ....
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.... to investors to establish identity, creditworthiness & genuineness.] After examining these documents, we also find that the second AO issued summons u/s. 131 of the Act to all the thirteen (13) share applicants and pursuant to the notice, all the shareholders have filed their respective (i) PAN details, (ii) CIN detail, (iii) Audited Annual Report for FY 2011-12 (AY 2012-13), (iv) ITR acknowledgment for AY 2012-13 which the AO acknowledges that he verified the same and thus we note that the identity of the investors were duly furnished by the assessee's A.R.; and the AO verified the veracity of the same from all the share applicants by issuing summons u/s. 131 of the Act and the AO had recorded the statements of the directors of all the thirteen (13) share applicant and moreover it is common knowledge that in this computer/digital era, the AO on a click of the mouse, could have easily verified the identity of the share applicant which is available in the website of Ministry of Corporate Affairs and the ITR Acknowledgments filed by them, will enable the AO to cross verify and collect details from the AO of the respective share applicants and independently from the Revenue's....
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....rawn to the balance sheet of the shareholders (PB-2) 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 Relevant page No. Source of investment (Paper Book 2) Capital & Reserve as on 31.03.2012 Relevant page No. showing capital (Paper Book 3) Sum Invested in the assessee company 1 TWISTER VINCOM PVT. LTD. 18 33,01,01,663 90 1,00,00,000 2 KAMNA SALES PVT. LTD. 23 33,01,02,415 91 1,00,00,000 3 CRYSTAL DEALERMARK PVT. LTD. 28 33,88,07,769 92 1,00,00,000 4 GLITER COMMOSALE PVT. LTD. 33 33,00,72,356 93 1,00,00,000 5 VIDHIKA DEALERS PVT. LTD. 39 33,00,72,636 94 4,00,00,000 6 ACTION TIE UP PVT. LTD. 45 53,01,02,637 95 2,00,00,000 7 VAYU MARKETING PVT. LTD. 50 89,57,52,560 96 2,00,00,000 8 INTERGRAL DISTRIBUTORS PVT. LTD. 57 91,13,52,783 97 2,00,00,000 9 CHERRY MARCOM PVT. LTD. 62 12,21,02,480 98 2,00,00,000 10 APPROCH DEALERS PVT. LTD. 74 12,21,02,11....
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....s share subscribing company is found placed at page No. 14 to 18 of PB-II and page No. 90 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 U52190WB2010PTC153713. This company has filed its return of income before ITO Ward 9(1), Kolkata and was having PAN AADCT6206F. This company was having a paid-up capital with free reserves and surplus of Rs. 33,01,01,663/- 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. 90. The copy of the bank statement of the Company is found placed in the paper book 2 at page No. 16-17 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 investment in the share capital/premium is found placed in the paper book 2 on page No. 18. The Director of this Company appeared in response to the summons issued u/s. 131 of the Act before the AO and produced their books of accounts, bank statements and their statements were ....
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.... 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 found placed in the paper book 2 at page No. 28. 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). (d) M/s. Gliter Commosale Pvt. Ltd. (Now Known as Gloria Tradelink Pvt. Ltd.): During of this share subscribing company is found placed at page No. 29-33 of PB-II and at page 93 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 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 AADCG9840N. This company was having a paid-up capital with free reserves and surplus of Rs. 33,00....
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..../- in the appellant company. The share application is seen to have been made by account payee cheque. This company was incorporated on 21/06/2011 and was having company identification number U52190WB2011PTC164011. This company has filed its return of income before ITO Ward 9(2), Kolkata and was having PAN AAJCA5944R. This company was having a paid-up capital with free reserves and surplus of Rs. 53,01,02,637/- 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. 95. The copy of the bank statement of the Company is duly available in the paper book 2 at page No. 43-44. 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 on page No. 45. 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 page 19 of PB-I). (g) M....
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....ion is found placed in the paper book 2 at page No. 57. 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 of PB-I). (i) M/s. Cherry Marcom Pvt. Ltd. Documents of this share subscribing company is found placed at Page 58 to 62 of PB-II and page No. 98 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 U74999WB2011PTC164134. This company has filed its return of income before ITO Ward 10(1), Kolkata and was having PAN AAECC4513B. This company was having a paid up capital with free reserves and surplus of Rs. 12,21,02,480/- 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. 98. The copy of the bank statement of the Company is found placed i....
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....ion number U74999WB2011PTC164126. This company has filed its return of income before ITO Ward 10(1), Kolkata and was having PAN AAJCA6146P. This company was having a paid-up capital with free reserves and surplus of Rs. 14,71,01,307/- as on 31/03/2012. The copy of the Balance Sheet of the Company is found placed in the paper book 3 on page No. 100. The copy of the bank statement of the Company is found placed in the paper book 2 on page No. 78-79. 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. 80. 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). (l) M/s. Pheonix Vinimay Private Limited: Documents of this share subscribing company is found placed at Page 81 to 84 of PB-II and page No. 101 of PB-III. This Company inv....
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....ounts, 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). Thus we find that all the thirteen (13) share subscribing companies identity and credit worthiness has been brought on record and genuineness of the transaction are discernable from the bank statements. Thus the second AO on the basis of the aforesaid documents has taken a plausible view and did not draw any adverse inference against the assessee, and the view thus taken by the AO cannot be termed as unsustainable in law. 54. So, from the aforesaid facts revealed during the second round, we note that AO has discharged his duty as an Investigator and enquired as per the direction of the First Ld. Pr. CIT dated 9.02.2016 u/s. 263 of the Act (First 263 order) and further we note that the Second Ld. Pr. CIT while issuing the Show Cause Notice/impugned order while exercising his revisional jurisdiction for second time has not made even a single allegation about the non-compliance/failure on the part of Second AO in respect of the specific direction given by ....
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....here was enquiry made by the second AO, however, he concludes that there was lack of enquiry. So when there was an enquiry conducted by AO then the AO has discharged the duty of an investigator. And we note that all the documents referred to above are available is the assessment folder before the Second Ld. Pr. CIT and he could have easily examined the veracity of these documents from the department's data base by click of a mouse and could have recorded his finding of fact if he found anything wrong with these share subscribers and could have pointed out the adverse fact, if any, which the Second Ld. Pr. CIT has not made in the impugned order. So the inference that can be drawn is that the veracity of the factual contents of the documents running more than 200 pages (PB-1-3) could not be factually controverted by the Second Ld. Pr. CIT. And still if the Ld. Pr. CIT is 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 erro....
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....e bald allegation/fault that second AO has not collected total facts cannot be accepted being vague and based on conjectures and surmises and so meritless. Since the assessee company has discharged its onus as discussed supra, and still if the Second Pr. CIT had to find the order of Second AO erroneous for lack of enquiry or for not collecting the entire facts, then the Second Pr. CIT ought to have called for the additional facts which he thinks that the Second AO has not collected from the assessee or the shareholders and then explained in his impugned order as to what effect those additional documents would have made on the second assessment order/reassessment order or in other words the impact on the decision making process of framing the second assessment order due to the 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....