AI Drafter 
TaxTMI 
TaxTMI 
2022 (2) TMI 1349
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted on facts of the case and also after giving due opportunity of being heard to the assessee before passing the assessment order. 02. Assessee is aggrieved with the revisionary order and therefore has raised following grounds of appeal: - "On the facts and circumstances of the case and in law:- 1. The Ld PCIT-1, Mumbai erred in holding that the assessment order passed by the AO on 21.12.2016 was erroneous in so far as prejudicial to the interest of revenue. 2. The Ld PCIT failed to appreciate that the AO has passed the order following the specific direction of PCIT-4, Kolkata and the PCIT nowhere could found that the AO has failed to follow any direction given by the PCIT-4, Kolkata. 3. The Ld. PCIT-1, Mumbai grossly erred and inter alia reviewing the order of his predecessor PCIT-4, Kolkata in garb of section 263 order which is illegal & beyond his jurisdiction. 4. The Ld. PCIT failed to appreciate that AO has not only carried out detailed inquiries as per law but also carried our verification by obtaining reply of 133(6) notice and recording statement u/s 131 and verifying the identity, genuineness and creditworthiness of the inves....
X X X X Extracts X X X X
X X X X Extracts X X X X
....section 148 of the act assessee reiterated the original return filed. Subsequently the respective notices under section 143 (2) and notice under section 142 (1) of the act was issued and 16/11/2011. Thereafter the hearing took place on several dates. On 28/11/2011 the assessment order under section 147 read with section 143 (3) of the act was passed. In the above order, the total income offered in the return of income of Rs. 31,898/- was assessed at Rs. 101,900. iii. Thereafter, on examination of the records of the assessee, the Commissioner of income tax Kolkata- II, Calcutta issued notice under section 263 of the income tax act on 3/2/2014 questioning that why the order passed under section 148 of the act dated 28/11/2011 be not held to be an order erroneous and prejudicial to the interest of the revenue because the balance sheet of the assessee company shows a share capital of Rs. 45.34 crores in the result of Rs. 44.43 crores and the learned assessing officer has not carried out requisite and proper enquiries regarding the identity, creditworthiness of the shareholders and genuineness of the transaction and therefore the impugned order was passed mechanically, without ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessing officer issued notices under section 133 (6) to all the shareholders companies and most of the notices were answered but after known service of the notice issued to the shareholders, AO did not make any further attempt to serve those notices upon the shareholders. The notices were replied in some of the case is under section 133 (6) but the AO did not bother to examine those notices or to mention these in assessment order. (2) the AO issued summons under section 131 to the directors of the assessee company, some of the summons were unserved and returned back, the learned assessing officer did not make mention in the assessment order about the replies received in response of two summons. (3) The learned assessing officer has completed the assessment proceedings without examining the details and documents available in the record the AO did not look into the site of the Ministry of corporate affairs to obtain the latest address of the assessee company and its directors. The AO did not serve any notices under section 133 (6) of the act to the shareholders of the assessee company or the entity was served. The learned AO also did not look at the replies received. The assessment....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rding to the revisionary order passed under section 263 of the act dated 19/10/2016. It was also mentioned that directors of the investor companies appeared, the statement were recorded under section 131 of the act along with the books of accounts and other relevant documents of the investor companies. The notices under section 133 (6) were also issued to the investor companies, the submissions were received which was verified and checked. The source of fund, identity, genuineness and creditworthiness were found in order after verification. The source of fund was also verified and found an order. Accordingly the assessment order under section 143 (3)/263/144/263/147/143 (3) was passed on 21/12/2016 in which the original addition made of Rs. 473,550,000/- made in the assessment order dated 2/3/2015 was not made. x. Subsequently on examination of the record, the learned principal Commissioner of income tax - 4, Calcutta issued notice under section 263 of the act on 19/2/2019 stating that assessment order passed under section 143 (3)/263/144/263/147/143 (3) dated 21/12/2016 for the impugned assessment year i.e. 2010 - 11 is erroneous and prejudicial to the interest of the rev....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the revisionary order number 3, the assessee preferred appeal before the coordinate bench in ITA number 2311/Kol/2019 wherein the coordinate bench held that the learned principal Commissioner of income tax issued notices on the assessee only on 19/2/2018 and 1/3/2018 and more this notices were not served on the assessee. Therefore, the learned PCIT passed an order without giving adequate opportunity to the assessee. The coordinate bench by order dated 24/12/2019 restored the matter back to the file of the learned PCIT for de novo adjudication after giving sufficient opportunity of being heard to the assessee. xiii. Therefore, pursuant to the order of the coordinate bench, the assessee was issued notice under section 263 of the income tax act, which was replied by letter dated 25/2/2022. The assesse submitted several details before the learned PCIT. It was stated that the proceedings may be dropped in view of the earlier order of assessment, revisionary order, the details submitted by the assessee, summons issued by the learned assessing officer, reply given by the investor, statement given by the directors of the investor company, exhaustive detail submitted before the le....
X X X X Extracts X X X X
X X X X Extracts X X X X
....other related judgments dealing with identity of creditors, genuineness of transactions and creditworthiness of the creditors and complete the assessment accordingly. 04. This order passed under section 263 of the income tax act on 26/3/2022 (revisionary order number 4) is under challenge before us. 05. The learned authorized representative submitted i. Written submission made before the learned principal Commissioner of income tax on 11/3/2022. He further referred the chart showing the name of the subscriber of share capital, number of shares subscribed, total amount of contribution of share capital and networks of the subscriber of the share capital to prove that the subscriber of the share capital were having sufficient creditworthiness. He further referred to the name of the subscribers of the share capital along with the list of shell companies notified by the government to prove that none of the subscriber of the share capital has ever been termed as a shell company. He further submitted that the summons issued under section 131 by the learned assessing officer obtained from the respective subscriber during the course of assessment proceedings following the dir....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me tax act. Therefore, any order passed pursuance to the direction of the learned principal Commissioner of income tax cannot be held to be erroneous and prejudicial to the interest of revenue. ii. He referred to his 879 pages paper book to show that all the information with respect to the investors were submitted before the lower authorities, they were properly investigated, those parties are properly replied, based on this the learned assessing officer once made the assessment and did not make the addition, itself shows that there is nothing left out to be enquired by the learned assessing officer. iii. He further submitted that if the learned PCIT was so sure on all four occasions that the addition should have been made, there are empowered under section 263 of the income tax act to make the addition itself. However, on all four occasions no additions were made by the learned PCIT. iv. He further stated that once the learned assessing officer has made the addition of Rs. 45 crores in the hence of the assessee. That order cannot be held to be erroneous or prejudicial to the interest of the revenue. When the addition has been made completely of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the assessing officer has made the addition once and did not make the addition once and therefore invoking of the provisions under section 263 of the act on both the occasions clearly shows that there are to views possible onset of the facts available. vii. It was further submitted that the order could not be revised under section 263 of the income tax if active the learned assessing officer had made reasonable enquiries. He further submitted that the order under section 263 of the act could not be passed to conduct further enquiries. viii. In the end he relied upon the decision of the coordinate bench in case of Narayanan Rane 70 taxmann.com 227 to support that the explanation 2 (A) to section 263 does not authorize or give unfettered powers to the Commissioner to revise each and every order, if in his opinion, same has not been passed without making inquiries verification which should have been made. ix. He further referred to the decision of the coordinate bench in case of JRD Tata trust versus deputy Commissioner of income tax (2020) 122 taxmann.com 275 wherein it has been held that test for finding out whether the explanation 2 to section 263 has bee....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... filed on 09/10/2010. No Assessment u/s 143 (3) was made. First Assessment was passed on 28/11/2011 u/s 143 (3) rws 147 of The Act. In reasons recorded for reopening of assessment only issue was wrt non-taxability of income to the extent of RS 30,000/-. Ultimately, in the reassessment order dated 28/11/2011, only disallowance of Rs 40,000/- u/s 14 A of the Act and addition of RS 30,000/- of consultancy fees was made. Order us/ 263 of The Act can be passed within two years from the end of the financial year in which order sought to be revised is passed. Therefore the LD PCIT has powers only to revises those issues on which the order u/s 147 is passed. For the other income there is no assessment made. If any other view is taken that will give powers to LD PCIT to revises any income in case of reassessment cases, which is even, not part of reassessment. Therefore firstly in this case there is no assessment as the ROI was accepted u/s 143 (1) as case was not picked up for scrutiny and ROI was accepted as it is. Therefore, in such cases there is no assessment. Further, in case of reassessment, PCIT has only power to revise those issues based on which reassessment is made. In this case t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2015 the complete addition was made by the learned assessing officer after making the complete enquiry, rejecting all submissions of the assessee. In the assessment proceedings, the AO considered the modus operandi of the accommodation entry providers, summonses were issued under section 131 to the directors of the shareholder company of the assessee, none of them appeared. The assessee was informed about that and asked to produce them. The show cause notice was issued that why the above amount of share application money is/share capital/sale premium should not be added under section 68 of the act. The assessee did not comply with that. The AO identified the directors of each of the company analyzed their financial worth, looked at the capacity of the company to invest, the income stream of the investor company and thereafter reached at a conclusion that (1) there is no business activity of the company, (2) almost entire amount of share application money received by the assessee has been invested into the shares of other companies, (3) assessee company do not have any worth except the investment in shares of other companies, (4) assessee company do not have any reputation in the ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ness. At this stage, it is very important to note that assessment where the addition of Rs. 47 crores was made was passed on 2/3/2015. This order has not been challenged by the assessee before CIT - A. Despite this addition, the learned principal Commissioner of income tax revised the order passed by the AO holding that it is erroneous and prejudicial to the interest of the revenue. Reasons provided for invoking the provisions of section 263 of the act are self-evident. 010. Another interesting part of the case is that the order under section 263 of the act was passed on 19/10/2016; the AO completed the assessment order in pursuance to that order on 21/12/2016. He issues notices under section 142 (1) on 15/11/2016. In between this that is almost within a period of one month, the summons were issued under section 131 of the act of all the parties, notices under section 133 (6) were also issued to the investor companies. Summons were responded to by the investors and notices under section 133 (6) were also responded to favourably. The AO takes a view that there is no addition under section 68 could be made in the hence of the assessee with respect to the share capital and premium ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rovisions of explanation (2) (a) of section 263 cannot be invoked. In this case there is no reference that what are the further enquiries which would have been made what are the further verification which should have been made by the learned assessing officer even after making the addition of Rs. 47 crores. 014. In Principal Commissioner of Income tax, Surat-2 V Shreeji Prints (P.) Ltd.* [2021] 130 taxmann.com 294 (SC)/[2021] 282 Taxman 464 (SC) [2021] 130 taxmann.com 293 (Guj.) It is held that "5 The Tribunal has found that in the order passed by the PCIT, Explanation 2 of section 263 of the Act, 1961 is made applicable. The Tribunal observed that the PCIT has not mentioned in the show cause notice to invoke the Explanation 2 of section 263 of the Act 1961. Therefore, by invocation of Explanation in the order without confronting the assessee and giving an opportunity of being heard to the assessee is not appropriate and sustainable in law. 6 Thus, the Tribunal has considered in detail the aspect of revisional power to be exercised by the PCIT in the facts of the case and has given a finding of facts that the Assessing Officer has made inquiries in detail and after appl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f revenue, for example, when ITR adopts one of the courses permissible in law and it has resulted in loss of revenue, or to views possible and the ITO has taken one view which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue, unless the view taken by the ITO is unsustainable in law. In the present case, the AO has taken a view once a making an addition and second time deleting the addition on the same set of facts. Thus, it cannot be said that the view taken by the AO is not sustainable. Thus, the revision is barred in such cases. 017. With respect to the limitation period, we reject the argument of the assessee in view of the decision of the honourable Calcutta High Court on identical facts and circumstances of the case in [2017] 80 taxmann.com 262 (Calcutta) as under :- "8. On the first question suggested by him, submission of Mr. Agarwal is that the Commissioner ought to have confined his decision, while exercising power under Section 263 of the Act, only to the issue on which reassessment was made under Section 147/143(3) of the Act. The Commissioner, Mr. Agarwal has asserted, could not have had t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as that if revisional power was sought to be exercised in relation to items which did not form the basis of reassessment proceeding, then the Commissioner's jurisdiction could not be exercised because of the limitation provision contained in Section 263(2) of the 1961 Act. 9. The ratio of these two authorities does not apply in the facts of the case out of which this appeal arises. It is apparent from the reassessment order, a copy of which has been made Annexure "A" to the stay petition, that the issue of share capital at premium was examined by the assessing officer in the reassessment proceeding. There is specific reference to that aspect of the appellant's account in that order passed on 9th April 2010. The said order also records that detail with respect to increase of share capital submitted by the assessee was examined through issue of notice under Section 133(6) of the Act. Though the question of issue of share capital was not a factor which prompted the proceeding for reassessment, the triggering factor, being consultancy fees which had escaped assessment, was accepted by the assessing officer for undertaking the exercise of reassessment. Thus, it was perm....