TaxTMI 
TaxTMI 
2022 (8) TMI 1166
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....n taken up for complete scrutiny assessment to examine the followings: 1) Whether outward foreign remittance is from disclosed sources and appropriate withholding and reporting obligation have been complied with; 2) Whether the share capital is genuine and from disclosed sources; 3) Whether receipt of foreign remittance has been correctly offered for tax; and, 4) Whether sundry creditors are genuine. 2.1. Notices u/s. 143(2) and 142(1) have been issued to the assessee through 'ITBA-Assessment' portal. The assessee filed its submission through online. It is noticed by the A.O. from ITS data that the assessee has received interest income on fixed deposits amounting to Rs. 4,01,458/- whereas the same receipt is shown at Rs. 59,318/- by the assessee. Therefore the difference of Rs. 3,42,140/- being the interest income received on fixed deposits is added as the taxable income and thereby determined the assessed income as Rs. 4,01,460/- and demanded tax thereon. 2.2 This assessment order was being verified by the Ld. PCIT. It is found that 1,80,09,970/- equity shares have been issued at Rs. 10 each raising equity share capital of Rs. 18,00,99,700....
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.... YES 3 NileshR Makadia 5000000 11950000 2016-17 388370 738612 YES No No 4 Sapna Vipul Shah 200000 3000000 2016-17 405460 20454 YES YES No 5. Viral C Dhodasara 5000000 21249700 2016-17 748870 558666 illegible YES YES 6.Dilipbhai Adroja 0 13500000 2016-17 2041480 1349703 YES No No 7. Geetaben Adroja 0 800000 2016-17 331S50 0 YES No YES 8. Jitendra Ramvadh Rai 0 400000 2016-17 533367 0 YES No No 9. Natwarlal L Bhila 0 4000000 2016-17 283775 0 YES No No 10. Parimal D Ambani 0 2000000 2016-17 192790 0 YES No No 11 Parsottam Laljibhai Patel 0 6500000 2016-17 906850 880843 YES No No 12. Ratilal Laljibhai Patel 0 6500000 2016-17 1027400 552507 YES No No 13. RitabenDilipbhai Adroja (Patel) 0 16500000 2016-17 740680 0 YES NO No 14. Sunil Mittal 0 13000000 2016-17 617660 267 Limited No No 15. Shweta Mittal 0 8000000 No No No Yes NO YES 16. Adr....
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....ctor of the assessee company and also belong to the same community. For this reason, even though interest has not been paid on the unsecured loans, due to this being the first year of the assessee company. Regarding the allegation of the bank statements of shareholders are not visible or are incomplete, unsigned. The assessee replied that complete details have been submitted to the A.O. during the course of assessment proceedings by uploading the same. This alone would not be legal ground to initiate revision proceedings u/s. 263 of the Act especially when the assessee submitted every details before the Assessing Officer. However a hard copy of all the documents related to the shareholders are submitted before Ld. PCIT. The next allegation of some of the shareholders have invested in assessee company which is more than 10 to 30 times of their annual income. The assessee submitted that it is a normal business practice from all over the world to invest in shares of companies by borrowing from either family members, friends or from banks & financial institutions. The law does not stipulate that a shareholder can invest in share of company only out of his current annual income, whereas....
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.... cause notice, apart from mere filing of balance sheet, no explanation of any share holder is available on record explaining the nature and source of investment recorded in the books of the assessee company. It was the duty of the A.O. to have properly verified the identity, creditworthiness as also genuineness of all the share holders and creditors who have introduced their money during this financial year. However the A.O. has not conducted any inquiry to this effect and In fact simply accepted the assessee's submission. Therefore, it is a case where assessment has been completed without any inquiry on the points for which the case was selected for scrutiny. 16. It is settled law that any order is passed by the AO without conducting proper inquiry is deemed to be erroneous order and prejudicial to the interest of revenue. For such proposition of law reliance is placed on the following case laws:- i. CIT vs. Kamal Galani, 2018 ITL 1562(Gujarat). ii. Deniel Merchants Pvt. Ltd. vs.lTO (Appeal No. 2396/2017) dated 29.11.2017(SC). iii. Malabar Industrial Co. Ltd. Vs CIT, 243 ITR 83 (SC). iv. Ramesh Kumar Vs. ITO, Wd-3, Hisar, I....
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....ed by the assessing officer is hereby set aside. The AO is directed to frame the assessment order afresh after conducting indepth inquiries in respect of share capital, share premium as also sundry creditors shown during the period under consideration. The AO is also directed to properly consider the observations and discussions on these issues made in the above paras and complete the assessment after giving proper opportunity of being heard to the assessee. 3. Aggrieved against the impugned revision order, the assessee before us raising the following Grounds of Appeal: 1. Ld. Pr. CIT, Rajkot - 1 erred in law and on facts revising a scrutiny assessment order which is neither erroneous nor prejudicial to the interest of revenue. 2. This action of Id. Pr. CIT revising an order passed by AO raising relevant queries and extensive verification of the details submitted during assessment by the appellant is without any justification to invoke revisional jurisdiction. 3. Ld. Pr. CIT erred in law and on facts holding that assessment completed without any inquiry on the points for which case was selected for scrutiny as erroneous and prejudicial to the interest ....
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..... The assessee vide its reply dated 28-10-2018 which is available at page no. 43 of the Paper Book held as follows: 6. Complete and Exhaustive details of Unsecured Loan: a. Details of Unsecured Loans remained outstanding at the end of previous year are as under: Sr. No. Name O/s. Amount as on 31.03.2018 1 Bhavin N Bhiia 5000000 2 Dansukhbhai 3 Kasundra 6500000 3 Nilesh R Makadia 5000000 4 Sapna V Shah 200000 5 Viral C Godasara 5000000 9. No interest received from parties and paid to parties during the year under consideration. 11. Name and address of sundry Creditor and Sundry debtors along with statement are as under: Metropole Tiles Pvt Ltd List of Sundry Creditors As on 31.03.2016 Sr. No. Supplier/Vendor Name Due/Outstanding Amount (Rs.) 1 Krishna Colour Chem-Morbi 637,193 2 Simco Sales Agency-Morbi 412,113 3 Urna International-Morbi 1,308,276 4 '.Gujarat Gas Ltd-Morbi 3,268,715 5 'Vldres India Ceramics Pvt Ltd-Kadi 579,383 6 IParesh Plastic Industries-Morbi 58,454 7 Tu....
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....raders-Rajkot 798,000 57 Nifkenth Tractor & Agriculture-Morbi 300,000 58 Omtkar Electricals-Morbi 1,331,270 59 Par Techno-Heat Private Limited-Ahmedabad 306,000 60 P. Prabhudas Engineering Pvt. Ltd-Rajkot 172,370 61 Ptafeant Gears - Ahmedabad 279,726 62 Royal Battery Service-Morbi 79,889 63 Sacmi Engineering India Pvt Ltd-Ahmedabad 727,239 64 SaiilSJesels Pvt. Ltd-Rajkot 23,888 65 Shiwkran Dlgitek Pvt. Ltd-Ahmedabad 121,380 66 Shiwkewn Microweigh Products-Ahmedabad 13,052 67 Sunrobo Energy System - Morbi 173,565 68 Super Stainless Steel - Ahmedabad 375,773 69 Vijayvaragiya Technologies Pvt. Ltd. -Morbi 66,150 70 Tradesafe-Ahmedabad 3,500 71 Rajavi Esterprise-Ahmedabad 1,536,150 72 Sonu Enterprise-Morbi 970,834 73 Gopi LogJstic-Khutch 18,360 74 Kajol Freight Carriers-Khuch 51,480 Grand Total of Creditors 47,825,921 Copy of Accounts are enclosed herewith as EXHIBIT D. Further, contra ledger of Sundry Creditor for Indigenous Machinery are also enclosed herewith as EXHIBIT D. Commerci....
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....; TOTAL 100,000 180,099,700 180,099,700 180,099,700 100.00% Copy of Ledger account and copy of ITR and Computation of Income with Copy of bank statement attached herewith as EXHIBIT H. Justification for not complied with notice u/s. 142(1) served on us dated 18.07.2018 We would humbly like to draw your kind attention to the fact that we did not received any u/s 142(1) of Income Tax Act, 1961, issued by your good selves on 18.07.2018. It is only upon the receipt of another notice, we become aware about the aforesaid notice. It is not ignorance or willful object to non-comply from our side. 4.3. The ld. Senior Counsel submitted there were proper and detailed enquiries conducted by the Assessing Officer by issuing notice u/s. 142(1) and 143(2) and in reply the assessee furnished details with evidences to the queries raised by the Assessing Officer. Therefore the revision proceedings initiated by the Ld. PCIT is against the provisions of Section 263 of the Act and relied upon judgment by the Calcutta High Court in the case of PCIT vs. Anindita Steels Ltd. (2022) 137 taxmann.com 203 wherein the Hon'ble High Court held as follows: ....
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.... to 25-7-2002 - Assessee was subjected to black assessment proceedings - during such proceedings, Assessing Officer found that there was introduction of amount in capital account of assessee - Further, assessee had received loan from his brother - With respect to introduction of capital, assessee had pointed out that he was an NRI for over two years and he had made foreign remittances over a period of time - As regards unsecured loan received from his brother, assessee pointed out that he was running a successful business of trading, was engaged in various commercial and non-commercial activities and he was man of standing and means Assessing Officer accepted explanation of assessee and did not make any addition in respect of those amounts whether once Assessing Officer carried out details inquiries, it was not open for Commissioner to reopen issues on mere apprehension and surmises- Held, yes whether, therefore, Tribunal was justified in setting aside impugned revisional order- Held, yes. 4.6. The Co-ordinate Bench judgment in the case of Ambe Tradecorp Pvt. Ltd. vs. PCIT (Central) in ITA No. 53/Ahd/2021 order dated 21.09.2021 and the Hon'ble Delhi Bench ITAT order in the case ....
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....The assessee also replied that no commercial production is started during this assessment year, therefore raw material on purchased is shown as closing stock in the books of accounts and no other expenses debited in the profit and loss account. The assessee also further submitted name and addresses of the sundry creditors and sundry debtors. Further contra ledger of sundry creditors also filed. Similarly, the assessee enclosed list of shareholders with shareholding pattern in assessee's company with copy of the ledger account, copy of the Income Tax Return and copy of the bank statement were submitted to the Assessing Officer vide Exhibit-H. It is further seen on these documents were electronically uploaded by the assessee in reply to the 143(2) notice, the A.O. having been satisfied with the explanation offered by the assessee. The Assessing Officer has accepted the explanations and completed the assessment order u/s. 143(3) of the Act. It is not the case of the assessee that the A.O. has not conducted necessary inquiry, verification before passing the assessment order. 6.1. The assessing officer has verified the share application money which were being routed through banking c....
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.... revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree it cannot be treated as an erroneous order and prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law". 6.3. In this context of the present case, applying ratio of the above referred judgments, the scope of the Commissioner's power of revision u/s. 263 of the Act would be, when the Assessing Officer conducts no inquiry or proper inquiries or does not apply his mind to the legal issues arising out of the material on record, the revisional powers would be available. On the other hand, if the Assessing Officer has conducted proper inquiries and come to legal conclusions which are plausible, the Ld. PCIT would not be justified in invoking revisional jurisdiction directing further inquiries or taking a different view. In the present case, the Assessing Officer has issued a detailed notice u/s. 142(1) calling for various details from the assessee and the assessee also had made detailed replies to the above notice with proper evidences and necessary records namely ledger account, Income tax retur....
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....ead with section 263, of the Income-tax Act, 1961 - Cash credits (FCCBs) - Assessee raised funds by way of FCCBs during year under consideration - Assessing Officer completed assessment accepting income declared by assessee - Commissioner noticed that no investigation was carried out by Assessing Officer to establish name and address, genuineness and creditworthiness of actual subscribers to FCCBs in terms of section 68 - He thus passed a revisional order setting aside assessment - Tribunal noted that Assessing Officer had made detailed enquiries about aforesaid aspect and mere fact that he did not make any reference to said issue in assessment order, could not make said order erroneous and prejudicial to interest of revenues - High Court by impugned order held that finding recorded by Tribunal being a finding of fact, no substantial question of law arose therefrom - Whether Special Leave Petition filed against impugned order was to be dismissed - Held, yes [Para 11] [In favour of assessee. (3). CIT Vs. Well Wisher Construction (P.) Ltd. [2019] 106 taxmann.com 260 (SC). Section 2(14), read with sections 28(i) and 263, of the Income-tax Act, 1961 - Capital gains - Capita....