TaxTMI 
TaxTMI 
2022 (8) TMI 1168
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....peals were heard together and we deem it fit to adjudicate the same with this common order. As facts and grounds taken in both the appeal are almost similar, we have taken facts and grounds from the folder of Rajendra and Ursula Joshi Skill Development Private Limited, in ITA No. 190/JP/2022 and this case is taken as lead case. 3. In ITA No. 190/JP/2022 the assessee has raised following grounds: - "1. In the facts and circumstances of the present case and as per established law and legal precedents, ld. PCIT has grossly erred in exceeding his jurisdiction in passing the Order dated 30-03-2022 u/s 263 of the Income Tax Act, in respect of Assessment Order dated 27.12.2019 passed u/s 143(3) for A. Y. 2017-18, ld. PCIT has grossly erred in passing revisionary order u/s 263 and issuing directions to verify and enquire into source of money in the hands of shareholders of the company. Appellant prays that all the necessary inquiries required for completing assessment, were made by ld. AO during assessment proceedings. Thus, the Assessment Order dated 27.12.2019 passed by the Ld. AO is neither erroneous nor prejudicial to the interest of revenue and therefore, no revision of th....
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....ll result in earning of exempted income in the form of dividend. Even though the company has not earned any exempted income in the year, any direct expenses related to such investment to earn any exempt income is to be disallowed as per Rule 8D r.w.s. 14 of the Act as clarified by the CBDT circular no 5/2014 dated 11.02.2014 dated 11.02.2014. Based on these observations a show cause notice dated 19.02.2022 was issued u/s. 263 of the Act asking the assessee to file the reply on or before 02.03.2022. 6. In response the assessee has submitted that in the financial year 2016-17, the assessee company received the total share capital of Rs. 90,00,00,000/- (Rupee Ninety cores only) which has been contributed equally by three existing shareholders of the company namely Mr. Jayant Joshi, Shri Jalal Joshi and Shri Nayan Joshi each of them for the amount of Rs. 30,00,00,000/- (Rupee thirty crores only) Share capital. Each of them has paid this amount out of the money received by them through cheque and proper banking channel by way of Gift from their uncle (real brother of their father) Late Dr. Rajendra Kumar Joshi who was a swiss national. It is also submitted that the gifts received fro....
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....that Dr. Rajendra Kumar Joshi in Switzerland filed any return and the money was gifted from disclosed sources. In the course of present proceeding also AR has submitted a certificate dated 23.03.2021 of a Chartered Accountant certifying that Mr. Rajendra Kumar Joshi had been regularly filing his Income Tax Declarations in Switzerland from the year 2006 till 2019, for each year and his income and net worth fully supports all the gifts made by him to his relatives in India. It is also noted that BIOGEN a U.S. Biotech Company acquired 100% share capital of Fumapharm AG and paid USD 220 Million that happened in the year 2006 and the amounts under reference were transferred in the year 2016. In the course of present proceedings AR also submitted declaration/gift deeds executed by Mrs. Ursula Joshi. The said deeds are executed much after the gift was made and these are not notarized. In view of the above, it is evident that AO passed the order without carrying out detailed verification and investigations which was warranted considering the facts of the case. As regards the disallowance as per Rule 8D r.w.s. 14A of the Act, the assessee submitted that the company has not claimed any expen....
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....lows in this case. "In all these cases, we find that the Commissioner of Income Tax had passed an order under section 263 of the Income Tax Act, 1961 with the observations that the Assessing Officer did not make any proper inquiry while making the assessment and accepting the explanation of the assessee(s) insofar as receipt of share application money is concerned. On that basis the Commissioner of Income Tax had, after setting aside the order of the Assessing Officer, simply directed the Assessing Officer to carry thorough and detailed inquiry. It is this order which is upheld by the High Court. We see no reason to interfere with the order of the High Court. The Special Leave Petition are dismissed." Reliance has been placed on the following judicial pronouncements in this regard: 1. In the case of M/s Gee Vee Enterprises 99 ITR 375 (Delhi High Court)[1995]. It was held that the Assessing Officer (AO) is not only an adjudicator but also an investigator, and failure of the AO to conduct the required inquiring and accepting the statement of the assessee without due verification renders the order erroneous as well as prejudicial to the interests of....
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....cial to the Revenue, then Sec.263 cannot be invoked. This provision cannot be invoked to correct each and every type of mistake or error committed by the AO; it is only when an order is erroneous as also prejudicial to revenue's interest, that the provision will be attracted. An incorrect assumption of the fact or an incorrect application of law will satisfy the requirement of the order being erroneous. The phrase 'prejudicial to the interest of the revenue' has to be read in conjunction with an erroneous order passed by the AO. Every loss of Revenue as a consequence of the order of the AO cannot be treated as prejudicial to the interest of the Revenue. For example, if the AO has adopted one of the two or more courses permissible in law and it has resulted in loss of revenue, or where two views are possible and AO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by the AO is totally unsustainable in law. Kindly refer Malabar Industrial Co. Ltd. v/s CIT (2000) 243 ITR 83 (SC). 1.2 Also kindly refer CIT v/s Max India Ltd. (2007) 295 ITR 282 (SC) ....
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....eat detail w.r.t all the aspects. It cannot be presumed that a quasi-judicial authority having raised the relevant queries would not have asked anything from the AR during the course of the personal hearing and remained a silent spectator. More particularly, when all the 3 shareholders were regular IT assesses with PAN no. and after discussion with them, he was having the authority and a technical infrastructure to look into the assessment record of this year as well as the preceding year along with the enclosures filed with or within the ROI by the concerned shareholder. Thus, unless there was something negative available on record or so alleged by the ld. CIT, his attempt to find fault in the actions of the AO, is not legally justified 2.1 Due application of mind: It is submitted with respect to identity, creditworthiness and genuineness of the share capital and that the receipts towards the share capital of Rs. 90 Crs was from disclosed sources to the extent he was supposed to act in law. Hence the assessment has been made under scrutiny, the AO is supposed to act accordance with law after due application of mind which, in fact, has been done in this c....
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....ce of source. Hence addition cannot be sustained." 3.2.2 In Aravali Trading Co. v/s ITO (2008) 8 DTR 199 (Raj) held that: "Once the existence of the creditors is proved and such persons own the credits which are found in the books of the appellant, the appellant's onus stand discharged and the latter is not further required to prove the sources from which the creditors could have acquired the money deposited with him and, therefore the addition u/s 68 cannot be sustained in the absence of anything to establish that the sources of the creditors deposits flew from the appellant itself." 3.2.3 In CIT v. G. M. Mittal Stainless Steel (P.) Ltd. [2003] 263 ITR 255 (SC) "Precedent-Binding nature of judgment-Decision of the jurisdictional High Court-Where the decision of the jurisdictional High Court has not been set aside or at least has not been appended from it would be binding-In view of this CIT proceeding on the basis of the High Court other than jurisdictional High Court on the basis that jurisdictional High Court was erroneous and that the AO who had acted in terms of the High Court's decision had acted erroneously, was not justified" 4.1....
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....e. We rely on the CIT vs. Lovely Exports (P.) Ltd. [2008] 216 CTR 195 (SC). 4.2.3 Capacity Proved: Further the creditworthiness of the shareholders also stands fully established in as much as the direct source of the amounts given was the gift received by the shareholders from Late Dr. Rajendra Kumar Joshi, and this clear fact cannot be denied as the transaction have made through account payee cheque/account transfer, reflected in the bank statement of donor as well as the donees and also mentioned in the Gift deed signed by both the parties (PB 44-55). The assessee has not only submitted their PAN no. but also provided copies of Income Tax return of income which contains the computation of total income (PB 67-340). Needless to say that the entire information of that particular shareholder being the ITR, details of income declared, subjected transactions done with the assesse company in the current year as also his creditworthiness/ financial capacity was duly verified by the AO. The Ld CIT, in fact, did not apply his mind on this aspect and ignored that the AO was empowered legally and technically to have examined the veracity of the claim made by the assesse wit....
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....ant assessment year-Thus, while recording the said finding, the AO has taken one of the plausible views in allowing the claim of the assessee- Therefore, CIT could not have set aside the order of assessment merely on the ground of inadequacy of enquiry- Order passed by the CIT was not sustainable in law hence, the Tribunal rightly set aside the impugned order of the CIT. The ld. CIT is completely silent on this aspect in the impugned order. 6.1 The allegations made by the Ld. CIT are completely baseless, and hold no ground against the clear and well established facts: The allegation and the basis of holding the Assessment Order erroneous etc. to the effect that the fact of receipt of a gift of Rs. 90 Crs was not supported by gift deed and that there was no document on record from the donor Late Dr. Rajendra Kumar Joshi about the nature of the transaction showing that it was a gift, are not much relevant and does not render any help to the Department in as much as, the substantive fact fully established is that all the 3 shareholders had received the amount of Rs. 90 Crs through E-banking channels. The availability of the fund in the NRE A/c of late Dr. Joshi (PB 3....
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....property was made voluntarily and without consideration and solely out of love and affection by the Donor - Dr. Rajendra Kumar Joshi to the Donees- 3 Shareholders (his nephews), and the gift was accepted by the donees by utilizing the same for their individual investments in the Assessee company. 6.5 Section 123 of the Transfer of Property Act makes it further clear that only the gift of IMMOVEABLE PROPERTY must be effected by a registered instrument signed by or behalf of the donor. Section 123 clearly mentions that - "For the purpose of making a gift of moveable property, the transfer may be effected either by a registered instrument signed or by delivery". Since MONEY I.E. MOVEABLE PROPERTY was gifted by the Donor late Dr. Rajendra Kumar Joshi to the Donees (his nephews) and the same was delivered to them through the bank transfer from the Donor's bank account to the bank account of the donees; Therefore the Gift was valid, legal and complete and did not require any written instrument for its legality or efficacy. 6.6 It is further clarified that it is not the case that the gift is being made or created in the present time by this gift Deed/Declaration; on the ....
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....ountant so as to ascertain the validity of certificate. But apart from this the substantive fact going to the root is that the amount received by the late Dr Joshi in Switzerland from the declared sources as narrated in Para 5 of the Impugned Order as also through a detailed reply to the SCN u/s 263 (PB 6-17), the entire money so received is through transfer from the Non Resident External (NRE) A/c of late Dr Joshi being maintained in India. It is from this very SBBJ NRE account no 61158966195 (PB 366-367), that all the funds were transferred to shareholders. 7.1 Beyond the scope of enquiry contemplated u/s 263: The scope of enquiry in the present case was limited to the extent of the issues made a basis for selection of the case. The admitted fact was that the case was selected for limited scrutiny so as to examine whether the funds received in the form of share capital are from disclosed sources as per notice issued u/s 142(1) (PB 16-22). It is also a fact available on record that limited scrutiny was not converted to full scrutiny nor the higher authorities did so. Thus, the scope of examination by the AO in this limited scrutiny was confined: a) Only ....
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.... an enquiry on the issue which is outside the limited scrutiny would be beyond the jurisdiction of the AO- Therefore, where the matter is selected for limited scrutiny, revisional jurisdiction cannot be exercised for broadening the scope of jurisdiction that was originally vested with the AO while framing the assessment-For the purposes of converting limited scrutiny to complete scrutiny, what is relevant is that there must be some credible material or information on face of the record indicating that there is possibility of underassessment of income if the case is not examined under 'complete scrutiny'-In the instant case, there was no tangible material or information available during the course of assessment proceedings basis which reasonable belief can be formed of escapement or underassessment of income which could have led the AO to seek permission to convert limited scrutiny into complete scrutiny-Issue of valuation of closing work-in-progress as well as matter relating to agriculture income, which are held by the Principal CIT as matters not examined by the AO, are matters which are not part of the reasons for which the case was selected for limited scrutiny-As far a....
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....failed to deal with other issues which did not fall within the realm of the limited reasons for which the case was selected for scrutiny assessment-Thus, the order passed by the AO under s. 143(3) cannot be said to be erroneous- Therefore, order passed by the Principal CIT under s. 263 is quashed." In Nayek Paper Converters vs. ACIT (2005) 93 TTJ (Cal) 574, it was held that: "Revision-Erroneous order and/or order prejudicial to Revenue-Limited scrutiny assessment by AO under s. 143(2)(1)-Exercise of revisional jurisdiction by CIT directing AO to make comprehensive scrutiny assessment under s. 143(2)(ii)-Invalid-It is the exclusive discretion of the AO to proceed under s. 143(2)(i) or 143(2)(ii) in a given case-AO having chosen to make assessment under s. 143(2)(i) after obtaining approval of Addl. CIT and making proper enquiries, order of AO could not be said to be erroneous and prejudicial to the interest of Revenue-Further, time limit for issue of notice under s. 143(2)(ii) had also expired-Still further, only miniscule cases were to be taken up for comprehensive scrutiny under s. 143(2)(i) as per guidelines issued by CBDT" 8. Alternatively and without ....
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.... Solutions (P.) Ltd. vs CIT (infra). 11. Even the amendment (Expl. 2(a)) does not confer blind powers: It is held that despite there being an amendment, enlarging the scope of the revisionary power of the ld. PCIT u/s 263 to some extent, it cannot justify the invoking of the Expl. 2(a) in the facts of the present case. Before referring to that Explanation, one has to understand what was the true meaning of the Explanation in the context of application of mind by a quasi-judicial authority. In the case of Narayan Tatu Rane Vs. ITO Itat, (2013) 7 NYPTTJ 1493 (Mum) it was held that newly inserted Explanation 2(a) to Sec. 263 does not authorize or give unfettered powers to Commissioner to revise each and every order, if in his (subjective) opinion, same has been passed without making enquiries or verification which should have been made. 12. The Ld. CIT has observed that as per balance sheet for the year under consideration that the assessee has made huge investment of Rs. 1,30,03,08,000/- in unlisted equities, which would result exempted income in the form of dividend and thus provisions of section 14A are applicable in this case.(Para 7 of the order passed ....
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....ssessee, the decision of the AO cannot be held to be erroneous simply because in his order not make an elaborate discussion in that regard." 13.2 In CIT v/s Ganpat Ram Bishnoi (2005) 198 CTR (Raj) 546 held that from the record of the proceedings, in the present case, no presumption can be drawn that the AO had not applied its mind to the various aspects of the matter. In such circumstances, without even prima facie laying foundation for holding that assessment order is erroneous and prejudicial to interest in any matter merely on spacious ground that the AO was required to make an enquiry, cannot be held to satisfy the test of existing necessary condition for invoking jurisdiction u/s 263. Jurisdiction u/s 263 cannot be invoked for making short enquiries or to go into the process of assessment again and again merely on the basis that more enquiry ought to have been conducted to find something. 13.3 In Gabriel India Ltd. [1993] 203 ITR 108 (Bom), law on this aspect was discussed in the following manner (page 113): " . . . From a rending of sub-section (1) of section 263, it is clear that the power of suomotu revision can be exercised by the Commissioner only if, on....
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....nation of the record as well as the parties in person. We further note that the assessee has also filed the bank statements of these companies showing the transaction of payment of share premium as well as loans to the assessee. The transactions were also reflected in the return of income filed by these companies, therefore, in any case if the Department has any doubt about the genuineness of arranging the funds by these share applicant companies, the enquiry and investigation should have been conducted in those cases as held by the hon'ble Delhi High Court in the case of Lovely Exports (P.) Ltd. (supra) which has been confirmed by the hon'ble Supreme Court by dismissing the special leave petition filed by the Department." 13.5 In case of Rajmal Kanwar v. CIT-I [2017] 82 taxmann.com 119 (Jaipur - Trib.) it was held that orders prejudicial to interest of revenue - Assessment year 2011-12 - Where AO had made sufficient enquiries, considered survey records and surrender made by assessee and after considering submissions of assessee completed assessment proceedings under section 143(3), assessment order could not be held to be an erroneous order which was prejudicial t....
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....016, thus showing an increase of Rs.76,50,00,000/. In this regard, the assessee has submitted the details of shareholders from whom the share capital have been received. It is seen that the share capital of Rs.76,50,00,000/- was received from Shri Jayant Joshi, Shri Jalaj Joshi & Shri Nayan Joshi (each Rs.25,50,00,000/-). In support the assessee has submitted that the sources of capital introduced by these persons are from gift received from their uncle Mr. Rajendra Kumar Joshi. In support of the same. the assessee has submitted copies of declarations. The assessee has failed to furnish the other relevant supporting evidence(s) to substantiate the creditworthiness of the donor. In this regard, the assessee has submitted that since late Dr. Rajendra Kumar Joshi and Mrs. Ursula Joshi are citizens of Switzerland and therefore only subject to the laws and jurisdiction of Switzerland and in support of the legality and tax compliance with the laws of Switzerland, the certificate issued by the certified Chartered Accountant of late Dr. Rajendra Kumar Joshi declaring the compliance with the Swiss Income Tax Laws and declarations from the year 2006 till 2019 was furnished by the assessee. H....
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.... in the case of Shankar Industries v. CIT [1978] 114 ITR 689 the Calcutta High Court held that for the burden of proof of genuineness, the assessee must prove not only the identity of the creditor, capacity of the creditor to advance money and genuineness of the transaction. A mere proof of identity of creditor is not sufficient. Reliance can also be placed on the following decisions (1) CIT v. Precision Finance (P.) Ltd. [1994] 208 ITR 465 (CAL) "It was for the assessee to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions. On the facts of this case, the Tribunal did not take into account all these ingredients which had to be satisfied by the assessee. Mere furnishing of the particulars was not enough. The enquiry of the ITO revealed that either the assessee was not traceable or there was no such file and, accordingly, the first ingredient as to the identity of the creditors had not been established. If the identity of the creditors had not been established, consequently, the question of establishment of the genuineness of the transactions or the creditworthiness of the creditors did not and could not arise. The Tr....
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....response, the assessee vide response dated 19.03.2022 has submitted that This is with reference to the above-mentioned Show Cause Notice for proposed variations u/s 143(3). We do not accept the proposed variation and vehemently deny the same. We would like categorically state on record that all the documents and details have been submitted in detail about the creditworthiness and relationship of Shareholders with Late Dr Rajendra Kumar Joshi to establish the identity of the shareholders and their creditworthiness and genuineness of the transactions. At no point of time we have been in default or in failure to furnish any document demanded by the Assessing Officer during this ongoing assessment, rather we have fully complied and submitted all the documents, details and information sought by the Assessing Officer through the previous notices. We hereby re-submit our detailed response as follows: 1. Introduction of share capital of Rs.76,50,00,000/- Company has issued the share Capital of Rs. 76.50 Crores to Shareholders. Company has received the share capital amount through banking channel in the Bank of India account No. 66292011....
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....d Wealth Tax Laws of Switzerland Annexure-5 8. Handelsregister, a Govt. document showing him as a shareholder in M/s Fumapharm AG Annexure-9 9. Register of shareholders of M/s. Fumapharm AG Annexure-9 10. Confirmation Letter of Mr. Andreas Bachmann, a Swiss Lawyer representing the former shareholders of M/s. Fumapharm AG Annexure-9 11. UBS AG Bank advice showing deposit of USD 215 Million Annexure-9 Since in the Show Cause Notice dated 16/03/2022 being replied hereunder, the concern regarding the quantified amount of the Gifts not being mentioned in the previous certificate has been expressed by the Assessing Officer, we further hereby provide the Certificate issued by Chartered Accountant BSP Treuhand AG. (Certified Chartered Accountant of Switzerland) wherein amounts of gifts given to Mr Jayant Joshi, Mr Jalaj Joshi and Mr Nayan Joshi has been quantified and clearly mentioned the source and credibility of the same. This Certificate is attached herewith and marked as Annexure-1. The Certificate also clearly provides that above gifts are duly declared in the Donors' income and wealth declaration of 2015 and 2016. ....
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.... same have not been considered in the Show Cause Notice dated 16/03/3022 therefore the following is re-submitted for your kind reference and consideration: We have relied on the decision of Apex Court in the case of PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL) - 1 VERSUS NRA IRON & STEEL PVT. LTD. 2019 (3) TMI 323 - SUPREME COURT, wherein the principles which emerge where sums of money are credited as Share Capital/Premium are :- i. The assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors, and creditworthiness of the investors who should have the financial capacity to make the investment in question, to the satisfaction of the AO, so as to discharge the primary onus. - ii. The Assessing Officer is duty bound to investigate the creditworthiness of the creditor/ subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of name-lenders. - iii. If the enquiries and investigations reveal that the identity of the creditors to be dubious or doubtful, or lack credit-worthiness, then the genuineness of the transaction would n....
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....e shareholders. Reliance is placed on the decision of the Hon'ble Apex Court in the case of CIT vs Lovely Exports (P) Ud reported in (2008) 216 CTR 195 (SC), wherein, it has been very clearly held that the only obligation of the company receiving the share application money is to prove the existence of the shareholders and for which the assessee had discharged the onus of proving their existence and also the source of share application money received." Reliance is also placed on the case of M/S. KUMAR NIRMAN AND NIVESH PVT. LTD. VERSUS THE ASSISTANT COMMISSIONER OF INCOME TAX BANGALORE 2020 (3) TMI 340 - KARNATAKA HIGH COURT- wherein it has been held that the assessee in support of identity, genuineness of transaction and credit worthiness of M/s Bhuwania Bros. Pvt. Ltd. had supplied a copy of the balance sheet and profit and loss account to the Assessing Officer. The appellant had also filed the copy of the return of income of M/s. Bhuwania Bros Pvt. Ltd. as well as copy of information letter. The appellant having proved the identity and credit worthiness of the party as well as the genuineness of the transaction had discharged its burden and it was for the reven....
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....t the assessee had established the identity of the share applicants, the genuineness of transactions and their credit-worthiness. The AO chose to proceed no further but merely added the amounts because of the absence of the Directors physically present themselves before him. (6) We are of the opinion that no question of law arises, having regard to the concurrent findings of fact. The assessee has, in our opinion, complied with the law spelt out by the Supreme Court in CIT vs. Lovely Exports Pvt. Ltd. 216 CTR (SC) 195. The appeal is meritless and is consequently dismissed." We also rely on the decision of Hon'ble Rajasthan High Court in the case of M/S SHREENATH HERITAGE LIQUOR PVT. LTD. VERSUS PR COMMISSIONER OF INCOME TAX 2018 (11) TMI 952, wherein it has held that where the assessee has discharged the initial burden placed upon him under sec. 68 to prove and establish the identity and creditworthiness of the share applicant and the genuineness of the transaction, the burden of proof shifts on the Assessing officer. In such a case, the AO cannot sit back with folded hands till the assessee exhausts all the evidence or material in his possession and then come for....
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.... the Show Cause Notice wrongly alleges that the relationship between the Donor and the Donees is not tax exempt for gift purpose, therefore the above documentary proofs are again attached herewith for your record and kind perusal and marked as "Annexure-2" Specific details of the Gifts and DONOR and DONEE relation are summarised below: DONOR DONEE DONEE Father Details Donor's Relation to Donee Late Dr Rajendra Kumar Joshi s/o late Shri Mahabir Prasad Joshi Jayant Joshi s/o Mr. Jitendra Kumar Joshi Mr Jitendra Kumar Joshi s/o late Shri Mahabir Prasad Joshi Uncle (Brother of the parent/father of Donee) Late Dr Rajendra Kumar Joshi s/o late Shri Mahabir Prasad Joshi Jalaj Joshi s/o Mr. Jitendra Kumar Joshi Mr Jitendra Kumar Joshi s/o late Shri Mahabir Prasad Joshi Uncle (Brother of the parent/father of Donee) Late Dr Rajendra Kumar Joshi s/o late Shri Mahabir Prasad Joshi Nayan Joshi s/o Mr. Vinod Kumar Joshi Mr Vinod Kumar Joshi s/o late Shri Mahabir Prasad Joshi Uncle (Brother of the parent/father of Donee) It may be seen that aforementioned shareholders have each received such amount as Gift from Dr. Rajendra Kumar J....
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....aft Assessment Order conveyed through the Show Cause Notice dated 16/03/2022 may kindly be dropped and no addition should be made. We request your good office to provide opportunity of Personal Hearing before passing the order in the present assessment proceedings. 6.1 The explanation of the assessee has been examined with reference to the facts of the case. As a result, the explanation of the assessee has been found acceptable. The order u/s 263 of the Act was passed to conduct the necessary inquiries and verification to ascertain the sources of the share capital introduced. Based on the explanation and documents submitted by the assessee, the sources of share capital introduced appears to be in order. Hence, no adverse inference is drawn and the setaside assessment is completed accordingly." Thus, the action of the reopening of the investor share holder case it self proves that the department has already accepted the fact that the identity, genuineness and capacity of the shareholder is proved and no addition can be made in the case of the company and if at all the addition is to be made and it should be made considering the receipt of the gift from relative ....
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....ine reply and thus the issue not examined as per rule 8D r.w.s. 14A of the Act. Thus, the ld. AO has not examined this issue and thus he supported the order of the Pr. CIT. As regards the introduction of share capital the money has been invested by the shareholder out of the gift received by his relative and thus, the AO has to verify the source of the source in view of the amendment in the provision of section 68 of the Act. The judgement relied upon by the ld. AR are all either on the different facts or are before the amendment of section 68 of the Act. The AO has not done any independent enquiry about the gift that the shareholders has received. Even the gift deed was signed by Mrs. Joshi as Mr. Joshi is no more and the deeds were executed afterwards. In the light of these facts relying on the judgement of Gee Vee Enterprises vs. Addl. CIT 99 ITR 375 (Delhi) and the explanation 2 of section 263 ld. DR supported the action of the ld. Pr. CIT quashing the order of the assessing officer. In addition to these the ld. DR in support his arguments and contentions raised has relied on the following decisions: * [2000] 109 Taxman 66(SC) Malabar Industrial Co. Ltd., Vs. Commissio....
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.... whole is not sure as to whether the subjected amount of investment in share capital was the undisclosed income of the appellant company for want of established source or it's the undisclosed income of the respective shareholders or it's unexplained income of Doner. Moreover, the issuance of these notices also impels that the ld. CIT wrongly alleged the subjected assessment order of the appellant as erroneous and prejudicial to the interest of revenue because the respective AO's having reopened the case, shall ask the shareholders to explain the source, failing which additions could be made in their hands. This will result in proceeding on the same issue in the hands of the Four assessee as also addition of same income four times, which is not permissible in the eyes of law." He further submitted that pursuant to the proceeding u/s. 143(3) r.w.s. 263 read with section 144B of the Act for the assessment year 2016-17 has after giving the detailed show cause considered the submission of the assessee and accepted the fact that the investment made by the shareholder is genuine and no addition can be made in the hands of the company. Considering these facts, the view of the ld. Pr. CIT t....
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....o correct each and every type of mistake or error committed by the AO; it is only when an order is erroneous as also prejudicial to Revenue's interest, that the provision will be attracted. An incorrect assumption of the fact or an incorrect application of law will satisfy the requirement of the order being erroneous. The phrase 'prejudicial to the interest of the Revenue has to be read in conjunction with an erroneous order passed by the AO. Every loss of revenue as a consequence of the order of the AO cannot be treated as prejudicial to the interest of the Revenue. It is pertinent to mention that if the AO has adopted one of the two or more courses permissible in law and it has resulted in loss of revenue, or where two views are possible and AO has taken one view with which the Pr. CIT does not agree, it cannot be treated as an erroneous order and it is prejudicial to the interest of the Revenue, unless the view taken by the AO is totally unsustainable in law. In this regard, we draw strength from the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 159 CTR (SC) 1: (2000) 243 ITR 83 (SC). We also draw strength from the de....
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.... addition was made in the case of the company what else the ld. AO can do in this case so as to prove the investment made by the shareholder in the assessee company. Even the factual input made by the ld. AR that the case of shareholders are re-opened to check the genuineness of the investment made by them in that circumstances we believe the plausible view was taken by the AO on this issue. As regards, the disallowance under section 14A r.w.r. 8D the ld. AR of the assessee has submitted that there is no exempt income for the year under consideration and there is no expenditure incurred to earn the exempt income. This view and argument were accepted by the AO. On this aspect the ld. AR of the assessee relied upon the judgement reported at 275 Taxman 408 in the case of CIT Vs. Chemsworth Private Limited. The relevant finding of the court in this case is extracted here in below for the sake of brevity: 5. We have considered the submissions made by learned counsel for the parties and have perused the record. Before proceeding further, it is apposite to take note of the relevant extract of section 263 of the Act, which reads as under: 263. Revision of orders prejudici....
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....has to be examined from the record of the case. The question of lack of enquiry/inadequate enquiry is also required to be kept in mind and mere inadequacy of the enquiry would not confer jurisdiction on the Commissioner of Income-tax under section 263 of the Act. In the instant case, the Commissioner of Income-tax has held that the enquiry conducted by the Assessing Officer is inadequate and has assumed the revisional jurisdiction. The assessee has filed all the details before the Assessing Officer and Assessing Officer has accepted the contention of the assessee that no expenditure is attributable to the exempt income during the relevant Assessment Year. Thus, while recording the aforesaid finding, the Assessing Officer has taken one of the plausible views in allowing the claim of the assessee and therefore, the Commissioner of Income-tax could not have set aside the order of assessment merely on the ground of inadequacy of enquiry, the order passed by the Commissioner of Income-tax is not sustainable in law and the same has rightly been set aside by the Tribunal. In view of preceding analysis, the substantial question of law framed by this court is answered against the r....
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.... by the assessee in this appeal No. 192/JP/2022 is equally similar on set of facts and grounds. Therefore, it is not imperative to repeat the facts and various grounds raised by both the parties. Hence, the bench feels that the decision taken by us in ITA No. 190/JP/2022 for the Assessment Year 2017-18 shall apply mutatis mutandis in ITA No. 192-JP-2022 for the Assessment Year 2017-18. In the result both the appeal of the assessee is allowed. Order pronounced in the open court on 24/08/2022 ============= Document 1 2 Gift Received From Gift Received by 3 Investment of Gift Amount Name of DONOR Amount of Gift Given Name Amount of Gift Received Investment by Company Late Dr Rajendra Kumar Joshi 1,659,999,900 Jayant Joshi Jalaj Joshi Nayan Joshi Jayant Joshi Name of the Company in Which Investment Made 300,000,000 Rajendra and Ursula Joshi Skill Development Pvt Ltd 300,000,000 Rajendra and Ursula Joshi Skill Development Pvt Ltd 300,000,000 Fajendra and Ursula Joshi Skill Development Pvt Ltd 60,000,000 Amount of Investment in Amount of Investment Company Investment 300,000,000 NA ....