TaxTMI 
TaxTMI 
TaxTMI 
2022 (5) TMI 356
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.... 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 AO issued summons u/s 131 of the Act to the....
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....vation, 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 second-round of reassessment, the 2nd AO (hereinafter re....
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....is 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 genuineness of the transactions. According to the Ld. A.R., even in th....
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....mpugned 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 under section 263 of the Act and took note out of the fact that even tho....
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....he 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 laid down by the Hon'bIe Apex Court in Malabar Industries Ltd. vs. CIT [2000....
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....tion 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. The assessment proceedings may be initiated at the earliest and to be completed without wa....
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....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 relating to investors in order to establish their identity, genuineness and creditworthiness of the share subscribers. 16. The First Ld. ....
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....6.2016 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 produced (i) copy of the ITR (ii) audited accounts (iii) details of directors (iv) share trading (v) details of increase of share capital (vi) Form 2 & Form 5 (vii) share holders list ....
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....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 explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income tax as the inc....
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....sideration 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 or commercial rights of similar nature. Whichever is higher: (b) Venture capital company, venture capital fund, and venture capital undertaking shall have the meanings respectively assigned to them in clause (a), clause (b) and clause (c) of Explanation to clause (23FB) of section 10]". 27. So we note that in this....
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.... 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 added subsequently effective only from 1stApril, 2013 was its normal meaning. The Parliament did not introduce to Section 68 of the Act with retrospective effect nor does the proviso so introduced that it was introduced "for removal of doubts" or that it is "declaratory". Therefore it is not open to give it retrospective effect, by proceeding on the....
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....ount 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 accordance with Sec. 78 of the Companies Act, 1956. Further, the company is not required to prove the genuineness, purpose or justification for charging premium of shares, share premium by its very nature in a capital receipt and is not income for its ordinary sense. It is not in dispute that the assessee had filed all the requisite details/documents which are required to explain in the ....
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....ansaction 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 Act. The Board of Directors contains persons who are associated with IDFC group of companies, therefore their integrity and credibility cannot be doubted. The entire grievance of the Revenue revolves around the charging of such of huge premium so much so that the Revenue authorities did not even blink their eyes in invoking provisions of Sec. 56( I) of the Act. [Hon'ble Bombay High Court in the case of Apeak Inf....
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....not 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: 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, or (iv) 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, (c) The fair market value of the shares shall be the value- (iii) As may be determined in ....
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.... 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 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 effect from April 1, 2013. Therefore, it is not applicable for the subject assessment year 2012-13. So for as the pre-amended section 68 of the Act is concerned, the same cannot be invoked in this case, as evidence was led by the respondents-assessees before the As....
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.... 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 2013-14. (c) In view of the above. question No. B as proposed also does not give rise to any substantial question of law as it is an issue concluded by the decision of this court in Vodafone India Services (P.) Ltd. (supra) and in the apex court in G. S. Homes and ....
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.... 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 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 of the creditor (after making due enquiries from such creditor). In arriving at this conclusion, the Hon'ble Court has further stressed the presence of word "may" in section 68. The Hon'ble Apex Court ratio was taken note by the Hon'ble Gujarat High Court in the case of Dy CIT vsRohini Builders (2002....
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....come-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 authorize the Revenue Department to make inquiry into the source(s) of the credit and/or sub-creditor. The language employed by section 68 cannot be read to impose such limitations on the powers of the Assessing Officer. The logical conclusion, therefore, has to be, and we hold that an inquiry under section 68 need not nec....
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....ons, 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 within the special knowledge of the assessee. " ********** " ... If a creditor has, by any undisclosed source, a particular amount of money in the bank, there is no limitation under the law on the part of the assessee to obtain such amount of money or part thereof from the creditor, by way of cheque in the f....
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....id 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 the said loan amounts actually belonged to, or were owned by, the assessee. Viewed from this angle, we have no hesitation in holding that in the case at hand, the Assessing Officer had failed to show that the amounts, which had come to the hands of the creditors from the hands of the sub-creditors, had....
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....bers 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 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. CIT(A) upheld and the Hon'ble High Court held that when the basic evidences are on record the mere failure of the creditor to appear cannot be basis to make addition. The court held as follows: 8. Assailing the said judgment of the learned Tribunal learned counsel for the appellant submits that Income-ta....
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....d 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 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 care all the material facts and record its finding on all the contentions raised by the assessee and the Commissioner, in the light of the evidence and the relevant law. " 11. The Tribunal must, in deciding an appeal, consider with due care all the material facts and record its finding on all contentions ra....
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....d 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." 36. 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 leave petition for the simple reason that if the share application money is received by the assessee- company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity....
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....ny 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 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 capital was the income of the assessee company and as such the addition made by the Assessing Officer under Section 68 of the Act was wrong. The learned Commissioner of Income Tax (Appeals) after hearing the department and the Assessee Company deleted the addition of Rs. 52, 03,500/- to the income of t....
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.... 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 after the allotment. By an order dated 2nd May, 2001, this Court admitted the appeal on three questions which essentially centre around the question of whether the Appellate Commissioner erred in law in deleting the addition of Rs. 52, 03, 500/- to the income of the assessee as made by th....
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....he 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. 40. In the light of the afore-cited judicial precedents, let us examine the case in hand and find out whether pursuant to the specific direction of First Ld. Pr. CIT, the second AO has discharged his role as an investigator in respect of share capital and premium collected by the assessee or wheth....
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....ccording 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 has ignored facts on record and considered irrelevant case laws and thus jumped to the conclusion that the share capital collected by assessee was unexplained cash credit u/s. 68 of the Act. Therefore, according to the First Ld. Pr. CIT, the first original assessment order framed u/s. 143(3) of the Act dated 16.03.2015 was against the principle of natural justice and, therefore, he found it fit to order denovo assessment and gave specific direction in respect of share capital & premium collected by assessee. 42. Thereafter, the Ld. Pr. CIT was pleased to direct "...............assessment order passed on 16.03.2015 is set aside denovowith 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 t....
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....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-subscribers (7) replied along with the documents requisitioned by the AO.] Thus, we find that the first AO has issued notice u/s 133(6) of the Act pursuant to which all the seven (7) share subscribers have replied along with all documents requisitioned by him which was found by the Ld. First PCIT in the assessment folder. So we safely presume that all the seven (7) share subscribers having replied to the notice of AO u/s. 133(6) of the Act to discharge the proof of identity, genuineness of the transaction. In the second round, the AO had acknowledged to have gone through the ITR, audited accounts, details of directions, share trading registered office, details of increase of share capital, Form 2 & Form 5, shareholders list, bank a/c details and stated to have examined the same. Thereafter, the second AO has clearly stated that he has verified the documents and verified the documents submitted by them to prove their respective identity, creditworthiness & genuineness of the share capital & premium. Thus where we look at the afores....
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....been regularly performed. 46. Coming to the creditworthiness of the shareholders, our attention was drawn to the balance sheet of the shareholders which was filed before the AO and the Ld. Pr. CIT and we note that their source of investment and net worth as per balance sheet as on 31.03.2012 as well as the sum invested by them in the assessee is discernible as under: Sl No. Name Relevant Page no. Source of Investment (paper book) Capital & Reserve as on 31.03.2012 Relevant page no.showing capital (paper book) Sum invested in the assessee company 1 Diganta Commosales Pvt. Ltd 78 4,95,656.00 89 2,50,000.00 2 Devkripa Dealmark Pvt. Ltd 96 4,96,231.00 105 2,50,000.00 3 Kalyankari Wholeseller Pvt. Ltd 112 12,46,91,721 121 1,95,00,000 4 Amritrashi Shoppers Pvt. Ltd 128 9,16,91,577 141 1,45,00,000 5 Highview Construction Pvt. Ltd 150 9,51,96,720 160 2,02,00,000 6 Kamalant Suppliers Pvt.Ltd 172 5,02,96,721 180 2,00,00,000 7 Ranbhumi Wholeseller Pvt.Ltd 55 7,97,00,000 66 2,50,00,000 Total 9,97,00,000.00 47. So, from a perusal of the above chart, we note from the documents referred supra (page 40 to 189 PB) t....
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....ond Ld. Pr. CIT in the impugned order has made an observation which need to be reproduced para 5.7(page 25 of PB):- 5.7 1st Assessment Order in this case was found erroneous and prejudicial to interest of revenue by PCIT-4, Kolkata. Hence PCIT-4 vide his order u/s 263 dtd, 03.6.2016 directed AO to conduct sufficient amount of enquiries and finalize the order accordingly. Intention of said order u/s. 263 of the Act was to strengthen the assessment order passed dtd. 16.3.2015, as because of possible paucity of time AO could not conduct all the required enquiries. But subsequent order passed by AO u/s 143(3) was made without conducting proper enquiries of transactions and creditworthiness of investors AO ought to have. Any order passed subsequent to order u/s 263 must be in favor of revenue. Either earlier assessed income should be enhanced or should be same as earlier order but with enhanced enquiries so that addition should be strengthen to pass the test of appellate proceedings. But here the assessment order passed u/s. 143(3) r.w.s 263 was erroneous as addition made u/s. 68 on account of unexplained share capital/premium was not added back." From a perusal of the aforesaid obs....
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.... share capital and premium collected by the assessee from the respective share subscribers. Since the aforesaid exercise was carried out by the second AO in the reassessment proceedings and the documents referred to above are in the assessment folder, the Second Ld. Pr. CIT erred in holding the reassessment order of the AO in respect of share capital and premium collected by the assessee as erroneous as well as prejudicial to the interest of the revenue. In the light of the aforesaid discussions and on perusal of the documents, we are of the view that AO's view to accept the identity, creditworthiness and genuineness of the share capital and premium collected from the share subscribers was a plausible view and at any rate cannot be termed as an "unsustainable view" on law or facts 49. Further, we also take note that while he proposed to interfere u/s. 263 of the Act, he had opined that there was no detailed or independent enquiry but finally concluded that there was lack of enquiry or proper enquiry. So, the Ld. Second Pr. CIT accepts that there 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, th....
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....iry in respect of subject matter i.e. share capital and premium collected by the assessee-company. Therefore, the finding of Second Pr. CIT that the Second AO has not conducted enquiry is incorrect and is flowing from suspicion only. We note that the assessee has discharged its onus, as required by the law in force in this AY 2012-13, then if the Ld. Pr. CIT was not satisfied with the enquiry conducted by second AO, then he ought to have called for whatever additional documents/materials or issued summons or issued notices and collected those facts which according to Second Ld. Pr. CIT, the AO omitted to collect and then demonstrated that those actions/documents which he collected in that process gave result to a different finding of fact which will turn upside down the claim of the assessee and thus able to show that the actions/omission of AO in conducting the investigation was erroneous, which unfortunately is not the case before us. And equally bad is the 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, a....