TaxTMI 
TaxTMI 
2022 (8) TMI 1128
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 3. Grounds of appeal raised by the assessee in "lead" case in ITA No.49/SRT/2021 are as follows: "1. The Learned Pr. Commissioner of Income Tax grossly erred in setting aside the order of AO holding that the order passed by the AO is erroneous and prejudicial to the interests of law. 2. On the facts and under the circumstances of the case, the Ld. Pr. Commissioner of Income Tax, erred in initiating the proceedings under section 263 without appreciating that case of the appellant was selected for assessment u/s 148 of the Act. Hence revision u/s 263 and directing the AO to make fresh assessment is bad in law. 3. The Ld. Pr. Commissioner of Income Tax grossly erred in law by issuing notice at the fag-end of the extension period. Revising Order without providing adequate opportunity is not only unjustified but also against the principle of natural justice and bad in law. 4. The Ld. Pr. Commissioner of Income Tax grossly erred in law and on facts of the case in confirming order u/s 263 by invoking provisions of Section 68 by ignoring the fact that the proviso to Section 68 was introduced by Finance Act, 2012 with prospective effect from April 01, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... ITBA; before the appointed date and time. The response is detailed and long as under: "...Sub: Objection to Show cause notice u/s 263 of the Income Tax Act, 1961 - A. Y. 2010-11 dated 25/03/2021 -Request for dropping the proceeding. Ref: ITBA/REV/F/REV1/2020-21/ 1031741614(1) In view of above show cause notice, details/explanations are given hereunder for your honour reference: First and foremost, the Assessee repeats and reiterates that whatever has been stated by your honour in the show cause is far from the truth and therefore the Assessee denies each and every contention, averment and allegation made in the show cause. The show cause served by your honour is vague and bad in law. Nothing contained in the reply to the above show cause should be deemed to have been admitted by the Assessee for want of specific denial. 1. Firstly, it is pertinent to note that Assessment Order u/s 143(3) r.w.s. 147 which is allegedly sough to be revised was passed on 26/12/2017. hence limitation period for revision u/s 263 of the Act was originally ended on 31/03/2020. But said limitation was extended by Section 3 of the Taxation and Other Laws (Relaxat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent fact that the investor company had made the total investment of Rs. 15.75 Crores in the assessee company and the history of such investment and status of the assessment is stated as under:... Copy of order passed by Hon'ble CIT(A)-3, Surat is attached herewith as per ANNEXURE - 4. As Hon'ble CIT(A)-3 had already favored the assessee company on the very same issue, hence no adverse view in this regard may please be drawn. Moreover, during AY 2009-10, on the very similar issue, Hon'ble CIT(A)-3, Surat had already favored the assessee company on the very same issue, hence no adverse view in this regard may please be drawn. Copy of order is enclosed herewith as per ANNEXURE-5 9. Furthermore, first proviso to Section 68 of the Act was inserted by Finance Act, 2012 w.e.f. 01/04/2013. Please appreciate that, insertion of first proviso led to paradigm shift in the law, wherein onus of proof was placed on the company to prove the genuineness of money received by the shareholder. 10. Your Honours attention is invited to Bombay High Court's ruling in case of CIT v. M/s Gagandeep Infrastructure Private Limited (ITA 1613 of 2014), wherein ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pany from alleged bogus shareholders, whose names are given to the AO, then the Department, is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment." 12. Hence, considering above in the assessee's case, pre-amended Section 68 is applicable and law declared by the Hon'ble Supreme Court in case of CIT Vs. Lovely Exports (P.) Ltd (Supra) needs to be upheld- At this juncture assessee company places reliance on the following judicial pronouncements: CIT vs. Steller Investment Ltd. SUPREME COURT OF INDIA, [2001] 115 TAXMAN 99 (SC) 4. It is evident that even if it be assumed that the subscribers to the increased share capital were not genuine, nevertheless, under no circumstances can the amount of share capital be regarded as an undisclosed income of the assessee. It may be that there are some bogus shareholders in whose name the shares had been issued and the money may have been provided by some other persons. If the assessment of the persons, who are alleged to have really advanced the money, is sought to be reopened, that would have made some sense but we fail to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ount details from the bank, other relevant material, genuineness of the transaction, payment through banking channel and even the source of source, therefore, the assessee has proved the conditions laid down u/s 68 of the Act. It is also noted that in spite of repeated request, the Ld. Assessing Officer did not provide opportunity to cross examine the concerned persons and even the relevant information and allegation, if any, made therein, which has been used against the assessee, was not provided to the assessee. At this stage, we add here that mere information is not enough rather it has to be substantiated with facts. The information may and may not be correct. For fastening the liability upon anybody, the Department has to provide the authenticity of the information to the person against whom such information is used. The principle of natural justice, demands that without confronting the assessee of such evidence, if any. or the information, no addition can be made. Even otherwise, as per Article-265 of the Constitution of India, only legitimate taxes have to be levied and collected. In our humble opinion, the assessee has duly discharged the onus caste upon it, therefore, resp....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in the shareholder companies and also the role of proxies, Sh. Jwala Parasd Gupta and Sh. Sanjay Kumar Tibrewal in the investor companies of the assessee company as per relevant Reports of Investigation Wing. (5) This is a case of possible money-laundering by use of the web of Kolkata based entry operators. The basic and apparent premises are as per the Show Cause Notice in the case. However, the Assessing Officer is required to examine the fund flow of the shareholders for at least 5 layers and unearth cash deposits into Bank Accounts of the shareholders or their shareholders in the case for inquiry into money laundering, as per mandate of the Hon'ble Supreme Court of India in Rajmandir Estates (P.) Ltd. v. PCIT (supra). (6) The Assessing Officer to make an independent and detailed enquiry of the so-called investor companies from Kolkata to verify the credit-worthiness of the parties, the source of funds invested, and the genuineness of the transactions, as per the directions of the Hon'ble Apex Court in PCIT-1 v. NRA Iron & Steel (P.) Ltd. (supra); (7) Further, the Assessing Officer is to make an inquiry into the commission expenses to arrange ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sue of share application money to the tune of Rs.8 crores. Therefore, order of Ld. PCIT passed under section 263 may be upheld. 12. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld PCIT and other materials brought on record. First, we have to see whether the requisite jurisdiction necessary to assume revisional jurisdiction is there existing before the Pr. CIT to exercise his power. For that, we have to examine as to whether in the first place the order of the Assessing Officer found fault by the Principal CIT is erroneous as well as prejudicial to the interest of the Revenue. For that, let us take the guidance of judicial precedents 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 CIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the intere....
X X X X Extracts X X X X
X X X X Extracts X X X X
....k were impounded relating to P.Y. 2009-10 to 2016-17. During the survey statement of Shri Narendra M. Lunkar was recorded on oath, who is account head of the assessee company. In the statement he admitted that the impounded documents/ papers generated from the computer were written by him, which are relating to the business concern which is working here. He further admitted that cash transactions written on these documents/ papers are relating to unaccounted investment / payments of Shri Naresh Chopra director of the assessee- company. These transactions are not recorded in the personal books of accounts of the said director and the company. Various opportunities were provided to the assessee company & its directors during the post survey proceedings as well as in the scrutiny assessment of the company (AY 2014-15) to verify the impounded material with the relevant regular books of accounts. But no compliance was made by the assessee. Hence, impounded materials are not reconciled from the regular books of accounts of the assessee. 2. Later on, the assessee filed application before the Settlement Commission Addl. Bench -II, Mumbai on 01.12.2016 for the AY 2014-15, 2015-16, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessee. Hence, assessee has concealed income of Rs.27,38,235/-. 6. On perusal of page no. 15, 45 to 50, 66, 67, 70 of annexure BF-5 it is seen that various transactions of loans, advances etc. are written on these pages relating to FY 2009-10, 2010-11, 2011-12 & 2012-13, which are not accounted for in the regular books of accounts of the assessee. Details of the transaction for the FY 2009-10 are as under: Accordingly the assessee has concealed income to the extent of Rs.1,74,25,000/- . 7. As per annexure BP-8 (page no. 58) one ledger account in the name of Jainam Creation for the FT; 2009-10 was impounded, according to which the assessee has paid Rs. 3,60,292/- to Jainam Creation through cash on various dates. The above transactions are not accounted for in the regular books of accounts. Hence, assessee concealed the income of Rs.3,60,292/-. It is clear from the above discussion that the assessee has not disclosed fully and truly material fact, which are necessary for the assessment. In the light above discussion it is clear that the assessee has concealed income of Rs.2,44,52,518 (36,78,991 + 2,50,000 + 27,38,235 + 1,74,25,000 + 3,60....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that there is no scope under section 263 to reopen an assessment on subsequent event or any new material. The findings of the Hon`ble Court is reproduced below: "6. Having heard the learned counsels for the parties and considering the materials placed before me, it appears from the affidavit that there is no basis for taking action. The whole point is whether the appropriate official can issue any order of withdrawal retrospectively even in a case of fraud. I do not find any such authority. Rather, I find an authority that the department concerned cannot withdraw any approval retrospectively. The donation was effected in 1984 and the assessment order was passed in the assessment year 1985-86. The validity of the approval was till December 1985. It may be a make-believe transaction or may be a true transaction, but this Court will not enquire into these facts at this stage. The writ petitioner pursuant to the aforesaid approval had acted upon it and donation having been made and the same having been accepted by the department, all these have been accepted by all concerned. Therefore, it is not open for the department concerned to reopen the assessment on the aforesaid fact ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sions relied upon in the impugned order in Alagendran Finance Ltd.'s case (supra) and Ashoka Buildcon Ltd.'s (supra) are inapplicable as they did not deal with the issue relating to bogus bills and non-genuine purchases which arises in the present case. 11. As against the above, Ms. Vasanti Patel, learned counsel appearing for the assessee, submits that the assessment order dated June 28, 2006, passed under section 143(3)/147 of the Act dealt only with the issue of non-genuine purchases. The impugned order holds that the issue dealt with in the order dated June 28, 2006, is not erroneous. This issues has been accepted by the Revenue as no question with regard to that has been formulated. All other issues considered in the order passed under section 263 of the Act by the Commissioner of Income-tax were not the subject matter of the reassessment order dated June 28, 2006, but of assessments done earlier under section 143(1) of the Act. Therefore, the issues on which the revisional jurisdiction is being exercised were admittedly issues which arose in the proceeding/assessment done prior to reopening of the assessment. In view of passage of time the jurisdiction to exe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....us bills and non-genuine purchases, i.e., where the State is being defrauded the limitation as provided under section 263 of the Act be ignored cannot be accepted. This is for the reason that neither the Tribunal nor we, in our appellate jurisdiction, can ignore the mandate of limitation provided under the Act. This is an issue which would fall within the domain of Parliament so as to make suitable amendment to the law after considering the various competing interests. So far as the submission of Mr. Chandrapal, learned counsel for the Revenue, with regard to the decision of the Supreme Court in Alagendran Finance Ltd.'s case (supra) and of this court Ashoka Buildcon Ltd.'s case (supra) being inapplicable merely on the ground that they do not deal with the issues of bogus bills or non-genuine purchases is in fact no distinction. The principle laid down in the aforesaid decisions is that a notice under section 263 of the Act cannot be issued beyond the period of two years from the date when the order sought to be revised is passed. The case law relied upon in the impugned order are clearly applicable to the present facts. 14. In view of the fact that the impugned or....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he reassessment order under section 143(3) r.w.s 147 of the Act dated 21.12.2017, after calling for details on the issue and after considering the reply and documents and after verification of the same and after due application of mind passed the assessment order, so it cannot be termed as erroneous and prejudicial to the interest of the revenue. So, the Ld. PCIT's finding fault, with the order of the Assessing Officer is erroneous as well as prejudicial to the interest of revenue, on account of lack of inquiry in respect of issue of share capital and share premium, has to fail. Based on these facts and circumstances, we quash the order dated 31.03.2021 passed by the ld PCIT under section 263 of the Act. 19. In the Result, appeal filed by the assessee in ITA No. 49/SRT/2021, is allowed. 20. The identical and similar issues are involved in the case of assessee in assessment year 2011-12 in ITA No. 50/SRT/2021, therefore our observations in ITA No.49/SRT/2021 for A.Y.2010-11 shall apply mutatis mutandis. Hence, the appeal preferred by the assessee in ITA No. 50/SRT/2021, is also allowed. 21. In the result, Both the appeals filed by the assessee are allowed. Registry is direc....