AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (5) TMI 356
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent as stipulated u/s. 263 of the Act and therefore without jurisdiction and resultantly bad in law, so it has to be quashed. [Please note that since there are two assessment orders, and two Ld. Pr. 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 had filed its return of income for the assessment year 2012-13 declaring at NIL income. Subsequently the case was selected for scrutiny. The AO after issuing the statutory notices under section 143(2) and 142(1) of the Act noted that the assessee has received from seven (7) share subscribers share capital of Rs.5,19,840/- and premium of Rs.9,91,80,160/- totaling to Rs.9,97,00,000/-. The AO noted that the assessee-company is a private limited company and, therefore, taking note of the share capital premium collected by the assessee, the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s at the earliest. With the aforesaid observation, he set aside the 1st assessment order dated 16.03.2015 by an order dated 03.06.2016 (hereinafter referred to as the 1st Ld. Pr. CIT's order/revisionary order). The 1st Ld. Pr. CIT's specific direction is given below- "Considering the facts and circumstances of case as discussed above and as per submission of assessee, the assessment order was passed without making inquiries or verifications which should have been made and therefore the order passed on 16.03.2015 stands erroneous insofar as prejudicial to the interest of revenue and is set aside denovo with a direction to AO to carry out proper examination of 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." 4. Pursuant to the 1st revisionary order passed by the Ld. Pr. CIT dated 03.06.2016, in the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 7. Assailing the action of the Ld. Pr. CIT (2nd) to have invoked his revisionary jurisdiction, the Authorised Representative of the assessee Advocate Shri Soumitra Choudhury submitted that the 2nd AO had conducted enquiries as directed by the 1st Ld. Pr. CIT by order dated 03.06.2016. The Ld. A.R. pointed out that the specific directions by the 1st Ld. Pr. CIT to the 2nd AO was the following (i) proper examination of the books of account; (ii) proper examination of Bank accounts of the assessee as well as that of the investors; (iii) to examine the source of share application money, the identity of the investors and genuineness of the transactions. According to the Ld. A.R., all the aforesaid directions of the Ld. Pr. CIT (1st) were complied in letter and spirit by the 2nd AO. The Ld. A.R. also reminded us that the 1st Ld. Pr. CIT in his first revisionary order dated 03.06.2016 has already made a finding of fact that the 1st AO had, in fact, issued notices under section 133(6) of the Act to all the seven (7) share applicants and pursuant to which all of them had replied directly to the AO along with the documents requisitioned by him to prove the identity, creditworthiness and g....
X X X X Extracts X X X X
X X X X Extracts X X X X
....not carried out proper enquiry as found by the 2nd Ld. Pr. CIT in his impugned order dated 11.03.2019; and since there is lack of enquiry on the part of the 2nd AO, the Ld. Pr. CIT has all the jurisdiction to enquire with the second assessment order passed by him. According to Ld. CITDR, since there is lack of enquiry on the part of 2nd AO, the order of 2nd AO is erroneous as well as prejudicial to the revenue and therefore, he rightly exercised his revisionary jurisdiction under section 263 of the Act and therefore, does not want us to interfere with the impugned order. 9. We have heard both the parties and gone through the submissions on behalf of the assessee and the revenue along with the documents furnished and the case laws relied upon by both the parties. In this case, the assessee had filed return of income declaring total income at 'NIL' and later the case of the assessee was selected for scrutiny under CASS Thereafter the First AO issued statutory notices to the assessee and framed the assessment order under section 143(3) of the Act dated 16.03.2015 by making an addition of Rs.9,97,00,000/-. Thereafter the 1st Ld. Pr. CIT-4, Kolkata invoked his revisional jurisdiction....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urisdiction. Secondly, whether the Second Ld Pr. CIT can again interfere in the re-assessment order framed by the AO which was pursuant to the first revisional order passed by the First Ld. Pr. CIT u/s. 263 of the Act, when the subject matter was the same and the re-assessment order of the second AO has merged with the First Revisional order of First Ld. Pr. CIT. In order to adjudicate both this legal issue, first of all we need to examine the basic jurisdictional issue i.e. whether the condition precedent stipulated by section 263 of the Act was satisfied, so that the Second Ld. Pr. CIT could have exercised his revisional power which he is empowered to do by the Act. For that, we note that the statutory condition precedent as prescribed by section 263 of the Act is that the Ld. Pr. CIT 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 lai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the original first assessment order passed u/s 143(3) of the Act made an addition of Rs. 9,97,00,000/- by an order dated 16.03.2015, which has been interdicted by the First revisional order passed by the First Ld. PCIT vide order dated 03.06.2016, wherein the Ld. PCIT was pleased to set aside the original first assessment order dated 16.03.2015 and directed the AO to denovo assess the income of the assessee and give specific direction to enquire about share capital and premium. The operative portion of first revisional order dated 03.06.2016 is again reproduced below for the sake of continuity: "4.v) Considering the facts and circumstances of case as discussed above and as per submission of assessee, the assessment 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 revenue and is set aside denovo with a direction to AO to carry out proper examination of 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. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uld not have modified the earlier revisional order of the First Ld. Pr. CIT order passed u/s 263 of the Act dated 03-06-2016, when the fact remains that the AO has followed the direction of the Ld. First Pr. CIT on the subject matter i.e. share application money (share capital & premium ) while passing the second re-assessment order dated 19-08-2016. In order to appreciate this contention of Ld AR, we perused the first revisional order dated 03-06-2016 passed u/s. 263 of the Act by the first incumbent Ld. Pr. CIT while setting aside the original first assessment order dated 16- 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 taken note that in the first round of assessment proceedings, the assessee company had duly furnished before the AO the following documents:- (i) audited financial statements; (ii) copy of Form filed with the ROC; (Form 2 & 5) (iii) copy of ITR of the assessee company as well as that of share applicants; (iv) details and copy of share applicants; (v) bank statement reflecting the transaction; (vi) records....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... assessment of AO dated 16.03.2015 was set aside back to AO u/s. 263 of the Act by the First Ld. Pr. CIT by his first revisional order dated 03.06.2016 for de-novo assessment which means the second AO is free to assess the income of assessee afresh, but with specific directions to AO while framing the reassessment order vide para 4(iv) 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. 19. Now let us examine whether the second AO carried out his role of an investigator. In this respect, we note that pursuant to the aforesaid direction of the First Ld. Pr. CIT (first revisional order) dated 03-06-2016, the Second AO had issued notice u/s 142(1) of the Act pursuant to which the Ld. A.R. of the assessee pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion 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. 22. 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 19.08.2016 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 as to whether the second AO has carried out his dual role as an investigator as well as an adjudicator while deciding the issue of share capital and premium collected by the assessee for AY 2012-13. Before we examine about the investigative role of the AO, we need to examine the law as it stood in AY 2012-13 and is applicable in this case. Section 68 of the Act reads as under:- Section 68: Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iib): "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 of the shares shall be the value- (i) As may be determined in accordance with such method as may be prescribed, or (ii) As may be substantiated by the company to the satisfaction of the Assessing Officer based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licences, franchises or any other business o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the shares is against preponderance of probabilities and cited the decision of the Hon'ble Supreme Court as well as Delhi High Court in CIT vs N .R. Portfolio Pvt. Ltd. Further, according to Ld. AR in the case of unlisted companies, it is common knowledge that premium fixed is a matter of mutual agreement and ITAT Mumbai in the case of Gagandeep Infrastructure Pvt. Ltd., (supra) has held that it is a prerogative of the Board of Directors of the company to decide the premium amount and it is the wisdom of the shareholders whether they want to subscribe to such a heavy premium. And the aforesaid view of the ITAT has been upheld by the Hon'ble Bombay High Court order dated 20th March 2017. Further the Hon'ble High Court observed as under- "(i) We find that the proviso to Section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1stApril, 2013. Thus it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. Infact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso ad....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted to section 68 is prospective in nature. Hon'ble M.P. High Court in the case of CIT vs. Chain House International (P) Ltd., order dated 07.08.2018, decision reported in 98 taxmann.com47 has held at para 52 as under- "Issuing the share at a premium was a commercial decision. It is the prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of shareholder whether they want to subscribe the shares at such a premium or not. This was a mutual decision between both the companies. In day to day market, unless and until, the rates if fixed by any Govt. Authority or unless there is any restriction on the amount of share premium under any law, the price of the shares is decided on the mutual understanding of the parties concerned ..". (C) The Mumbai Tribunal in the case of ACIT-l(l) vs. M/s. Gagandeep Infrastructure Pvt. Ltd. the ITAT has held as under: "We have carefully perused the orders of the lower authorities. In our considered view, the issue of shares at premium is always a commercial decision which does not require any justification. Further the premium is a capital receipt which has to be dealt with in a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d and allotted to IDFC PE Fund-Il which company is a Front Manager of IDFC Ltd., in which company Government of India is holding 18% of shares. The contributors to the IDFC PE Fund-Il who is a subscriber to the assessee's share capital, are LIC, Union of India, Oriental Bank of Commerce, Indian Overseas Bank and Canara Bank which are all public sector undertakings. Therefore, to raise eyebrows to a transaction where there is so much of involvement of the Government directly or indirectly does not make any sense. 10.1 No doubt a non-est company or a zero balance company asking for a share premium of Rs. 490/- per share defies all commercial prudence but at the same time we cannot ignore the fact that it is a prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of the share holders whether they want to subscribe to such a heavy premium. The Revenue authorities cannot question the charging of such of huge premium without any bar from any legislated law of the land. Details of subscribers were before the Revenue authorities. The AO has also confirmed the transaction from the subscribers by issuing notice u/s. 133(6) of the Ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....efusing to entertain a question with regard -to the .proviso 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 2013-14. (E) 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 01.04.20l3 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: ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 paraJ J 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. [20021 J 22 Taxman 6431256 ITR 395 (Bom.) that in an appeal under section 260A of the Act, the High Court....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 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. Gagan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 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' becharged to income-tax as the income of the assessee of that previous year". The Hon'bleSupreme 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'bleSupreme Court in the case of CIT v. Smt. P. K. Noorjahan [1999] 237 ITR 570. 30. 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 ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 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 r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o 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 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ditor 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 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 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." 34. 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sel 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 product of the assessee or not. When it was found by the Commissioner of Incometax (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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 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 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Cl. 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 Cl. 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. 38. 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 APPEALNO.52 OF 2001 wherein the Court held as follows: "The Assessing Officer was of the view that the increase in share capital....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ned 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 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 c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sclosed 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 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 par....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lso recorded a finding of fact that in the first round "The AO issued notices u/s 133(6) of the Act to all the seven (7) share applicants and reply from all of them were duly received". However, the Ld. PCIT noted that despite the assessee and the share subscribers having provided all the documents as requisitioned by him, the AO has not examined these documents, which according to him, should have been carried out by the AO. The First Ld. Pr. CIT thereafter found that the first AO failed to record the facts of receipt of the replies from share subscribers pursuant to his notice u/s 133(6) of the Act and has slept over the file without making any further action. The First Ld. Pr. CIT found fault with the AO' s order in not discussing the basis of evidence on which adverse inference was drawn against the assessee. Moreover, the First Ld. Pr. CIT found fault with the AO for being caused in examining the contention of the assessee or to bring on record anything against the assessee and thus according to him, the AO has completed the assessment is a very casual manner without following all established procedure as expected from a quasi-judicial authority. According to Ld. PCIT, the AO ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ory notices as per the Act and has acknowledged that the AR of the assessee presented himself before him with all documents requisitioned by him in respect of all the seven (7) share subscribing companies and furnished the relevant details viz., (i) copy of ITR, (ii) audited accounts, (iii) details of directors, (iv) the details of the share-applicants, (v) details of business activity, (vi) details of increase in share capital, (vii) Form 2, (viii) Form 5, (ix) bank statements evidencing payment through banking transaction, [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 pursuant to the AO's notice u/s. 133(6) of the Act, direction to produce relevant documents of issuing share as per Companies Act along with photo identity proof, books of accounts and bank statement explaining each debit & credit entries, justification of issuing share premiums and also to produce the subscribers bank statement, to explain debit & credit entry, photo identity proof of directors and books of accounts for examination and pursuant to which assessee as well as the share-s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....114 of Indian Evidence Act, 1872, wherein the court has been given the discretion to presume the existence of any fact, which it thinks likely to have happened regard being had to the common course of natural events, human conduct in their relation to the facts of the particular case and illustration 'e' underneath i.e "The court may presume that judicial and official acts have been regularly performed". Moreover, we note that the AO (second) has acknowledged to have looked into the explanation given in respect of source of source of funds to subscribe for share capital/premiums as directed by Ld PCIT. 45. Thus, from the aforesaid facts discussed, we are of the considered opinion that the AO after verification of their PAN/CIN/ITR, 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 and also by applying the presumption in section 114 of Indian Evidence Act 1872, we presume that the quasi-judicial act of the second AO have been regularly performed. 46. Coming to the creditworthiness of the shareholders, our attention was drawn to the balance sheet of the shareholders whi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cepted 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 there is no factual finding after enquiry by the Ld. PCIT which would have upset the decision of the second AO's factual view on the identity, creditworthiness and genuinety of the share transaction. In such a scenario, the second AO's view based on the documents referred to by him is a plausible view and in consonance with judicial precedents (supra). Further, it is noted that the share applicants had furnished the source of investment made in the assessee-company after getting the notice under section 133(6) of the Act. 48. 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 03.06.2016 u/s. 263 of the Act (First 263 order) and further we note that the Second Ld. Pr. CIT in the impugned order h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pliance/failure on the part of Second AO in respect of the specific direction given by the First Ld. Pr. CIT dated 03.06.2016 while setting aside the original assessment order passed by the AO dated 16.03.2016, the second Ld.PCIT could not point out the specific fault/omission which can be attributable to the second AO while giving effect to the specific directions given to him in the first revisional order dt.03.06.2016. Thus, we note that when the second AO while framing the reassessment order pursuant to the specific direction of the First Ld. Pr. CIT's order dated 03.03.2016 (first revisional order) has complied with the directions of the First Ld. Pr. CIT and based on the inquiry conducted and after perusal of the documents running more than 149 pages which reveals the identity, creditworthiness and genuineness of the seven (7) share subscribers from whom the share capital and premium was collected by the assessee , then in that event it cannot be said that the satisfaction of AO as envisaged in sec. 68 of the Act is not a plausible view. So the assessee had discharged the onus upon it to prove the identity creditworthiness and genuineness of the share capital and premium coll....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the facts discussed supra, the second (Ld. Pr. CIT) should himself had conducted an enquiry or at least conducted a preliminary enquiry and was able to bring some evidence/material on record to upset the AO's satisfaction in respect of identity, creditworthiness or genuineness of the share subscribers and thus recorded a finding of fact that the decision of AO's enquiry was faulted or wrong and in that process tried to show that it has resulted in a view which is "unsustainable in law". If such an action was done by the second Ld. PCIT, then it would have justified his action of passing the impugned order u/s. 263 of the Act, which unfortunately the second Ld. PCIT did not do. And since the AO's view on 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' because it is in line with plethora of judicial decisions on the subject. 50. To sum up, we find from the above said facts that the Second AO has conducted enquiry in respect of subject m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....quasi- judicial office has discharged his dual role as an investigator as well as an adjudicator. According to us, in the aforesaid facts and circumstances, 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 assumption of revisional jurisdiction. Be that as it may be, as discussed above, we find that the Second Ld. Pr. CIT without satisfying the condition precedent u/s 263 of the Act has invoked the revisional jurisdiction (second time), so all his actions are ab initio vo....