TaxTMI 
TaxTMI 
2023 (6) TMI 1380
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.... Covid-19 during that time. It is noted that the period of delay falls during the time of Pandemic of Covid-19 which has been excluded by the Hon'ble Supreme Court in the case of suo moto Writ Petition (C) No. 3 of 2020 dated 10.01.2022 by which the period from 15.03.2020 to 28.02.2022 has been directed to be excluded for the purpose of limitation. Vide this order a further period of 90 days has been granted for providing the limitation from 01.03.2022. Accordingly, we condone the delay and proceed to admit the appeal for hearing. 3. The assessee is in appeal before this Tribunal raising the following grounds: "1. For that the Ld. Principal CIT erred in exercising the power of revision for the purpose of directing the A.O. to hold another investigation when the A.O. had complied with the directions of the predecessor Principal CIT, Kolkata-4 in the preceding order u/s 263 passed on 02.12.2015 and there is no finding in the order now passed that the AO failed to carry out the directions in the earlier order u/s 263. 2. For that the Ld Pr CIT erred in invoking the provisions of section 263 when the order passed in consequence to the order of the Ld Pr. CIT in the....
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....4/03/2015 is erroneous and prejudicial to the interest of the revenue and directed the Assessing Officer to carry out proper examination of the books of account, purchase and sale, loans and advances, investment in bank account and also examined the source of share application, identity of the investors and its genuineness. In compliance to the directions given by the ld. Pr. CIT in the order u/s 263 of the Act dt. 02/12/2015, the ld. Assessing Officer carried out the assessment proceedings and also called for the details about the share application money and share premium amounting to Rs.11.10 Crores. The ld. Assessing Officer also called for the various other details in the notice issued u/s 142(1) of the Act. There was sufficient compliance to the said notices and information called for by the Assessing Officer. Summons were also issued u/s 131 of the Act and the Directors were produced and statements were recorded. Based on these detailed investigation and examining the details filed by the assessee, the ld. Assessing Officer concluded the assessment. Subsequently, the ld. Pr. CIT again called for the assessment records which was forming part of the record for the scrutiny proc....
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....oceedings referring to various judicial pronouncements thereby holding that the assessment proceedings carried out vide order dt. 28/10/2016, as erroneous and prejudicial to the interest of the revenue. Para 7 of the impugned order reads as follows:- "7. I have carefully considered and perused that the material available on record and found that the issues pointed out in the show cause needs verification as merely accepting submission without calling for logically relevant material/evidences in order to have an overview of totality of facts and circumstances, during the course of assessment proceedings the A.O. failed to examine the above referred issue rendering the assessment order erroneous on the ground of lack of enquiry. After having considered the position of law and facts and circumstances of the instant case, I am of the considered opinion that the assessment order passed by the A.O. is erroneous in so far as it is prejudicial to the interest of revenue in accordance with the Explanation 2 (c) below section 263 (1) of the Act on the ground of lack of enquiry. Accordingly, the assessment dated 28-10-2016 passed u/s 143(3)/263 is set aside de-novo on specific issue ....
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....ts for AY 20120-13 3. Notice u/s 142(1) dated 07.01.16 4. Notice u/s 142(1) dated 06.05.16 5. Details of Share applicants, date of payment and source thereof 6. Notice u/s 133(6) dated 26.04.2016 to M/s. Oven Commercials Pvt. Ltd. and its reply with enclosures 7. Notice u/s 133(6) dated 26.04.2016 to M/s. Chaturang Commercials Pvt. Ltd. and its reply with enclosures 8. Notice u/s 133(6) dated 26.04.2016 to M/s. Eastern Synthetics Pvt. Ltd. and its reply with enclosures 9. Statement of Shri Satya Narayan Bhartia director of shareholder Oven Commercial P. Ltd. recorded u/s 131 10. Statement of Shri Sanjay Kumar Bhartia director of shareholder Chaturanga Commercial P. Ltd. recorded u/s 131 11. Statement of Shri Subhash Chandra Bhartia director of shareholder Easter Synthetics P. Ltd. recorded u/s 131 12. Statement of Shri Nitesh Bhartia director of assessee company recorded u/s 131 13. Assessment order u/s 144/147 of Oven Commercial Pvt. Ltd. for AY 2012-13 14. Assessment order u/s 143(3) of Eastern Synthetics Pvt. Ltd. for AY 2012-13 15. Assessment order u/s 143(3) of Chaturang Commercial Pvt. Ltd. for AY 2....
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....ions and perused the record placed before us and carefully gone through the decisions relied upon by the ld. Counsel for the assessee. 10. With the assistance of ld. representative, we have gone through the record. Section 263 has a direct bearing on the controversy, therefore, it is pertinent to take note of this section. It reads as under: "263(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation- For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include- (i) an order of assessment mad....
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....ne them. The second feature would come when he will judge an order passed by an Assessing Officer on culmination of any proceedings or during the pendency of those proceedings. On an analysis of the record and of the order passed by the Assessing Officer, he formed an opinion that such an order is erroneous in so far as it is prejudicial to the interests of the Revenue. By this stage the learned Commissioner was not required the assistance of the assessee. Thereafter the third stage would come. The learned Commissioner would issue a show cause notice pointing out the reasons for the formation of his belief that action u/s 263 is required on a particular order of the Assessing Officer. At this stage the opportunity to the assessee would be given. The learned Commissioner has to conduct an inquiry as he may deem fit. After hearing the assessee, he will pass the order. This is the 4th compartment of this section. The learned Commissioner may annul the order of the Assessing Officer. He may enhance the assessed income by modifying the order. He may set aside the order and direct the Assessing Officer to pass a fresh order. At this stage, before considering the multi-fold contentions of....
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.... be treated as prejudicial to the interest of the Revenue. For example, when the ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO 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 ITO is unsustainable in law." 11.2. Hon'ble Madhya Pradesh High court in the case of CIT vs. Associated Food Products (P) Ltd as reported in 280 ITR 0377 has held that: "10. In view of the aforesaid pronouncement of law and taking into consideration the language employed under s. 263 of the Act, it is clear as crystal that before exercise of powers two requisites are imperative to be present. In the absence of such foundation exercise of a suomoto power is impermissible. It should not be presumed that initiation of power under suomoto revision is merely an administrative act. It is an act of a quasi-judicial authority and based on formation of an opinion with regard to existence of adequate material to satisfy that the decision taken by the AO is erroneous as well as prejudicial to the in....
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.... decision of the Hon'ble Gujarat High Court in the case of Shri Prakash Bhagchand Khatri in Tax Appeal No. 177 with Tax Appeal No.178 of 2016, wherein the Hon'ble Gujarat High Court was seized with the following substantial question of law: "Whether the Tribunal is right in law and on facts in upholding the order passed by the CIT under section 263 of the Act on merits and still storing the issue of allowability of deduction under section 54 of the Act to the file of Assessing Officer even though the working of allowability of deduction under section 54F is available in the order under section 263 which is not disputed by the assessee before ITAT." 13. We find that the Hon'ble Delhi High Court in the case of CIT vs. Anil Kumar reported in 335 ITR 83 has held that where it was discernible from record that the A.O has applied his mind to the issue in question, the ld. CIT cannot invoke section 263 of the Act merely because he has different opinion. Relevant observation of the High Court reads as under: "63. We find the Hon'ble Delhi High Court in the case of Vikas Polymer reported in 341 ITR 537 has held as under: "We are thus of the opin....
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....y reflected in the respective assessments of the partners who were I.T. assessees and the unsecured loan taken from M/s Stutee Chit & Finance (P) Ltd. was duly reflected in the assessment order of the said chit fund which was also an assessee." 64. Since in the instant case the A.O. after considering the various submissions made by the assessee from time to time and has taken a possible view, therefore, merely because the DIT does not agree with the opinion of the A.O., he cannot invoke the provisions of section 263 to substitute his own opinion. It has further been held in several decisions that when the A.O. has made enquiry to his satisfaction and it is not a case of no enquiry and the DIT/CIT wants that the case could have been investigated/ probed in a particular manner, he cannot assume jurisdiction u/s 263 of the Act. In view of the above discussion, we hold that the assumption of jurisdiction by the DIT u/s 263 of the Act is not in accordance with law. We, therefore, quash the same and grounds raised by the assessee are allowed." 13.1. The ITAT in the case of Mrs. Khatiza S. Oomerbhoy vs. ITO, Mumbai, 101 TTJ 1095, analyzed in detail various authoritative pronou....
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....le needs to be added in view of the judgment of Hon'ble Delhi High Court in the case of ITO vs. D.G. Housing Projects Ltd. [2012] 343 ITR 329 (Delhi) that the ld. CIT has to examine and verify the issue himself and give a finding on merits and form an opinion on merits that the order passed by the AO is erroneous and prejudicial to the interest of the Revenue. Relevant extract is reproduced below: "In the present case, the findings recorded by the Tribunal are correct as the CIT has not gone into and has not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the CIT is that "order passed by the Assessing Officer may be erroneous". The CIT had doubts about the valuation and sale consideration received but the CIT should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondent's computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assessing Officer b....
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....rutiny proceedings in view of the directions given in the order u/s 263 of the Act:- "6 After going through the details available in assessment records and written submission of the assesse in respect of the 263 proceedings, it is seen that the copy of audited books of accounts, details of share subscriber, sales and purchase and details of sundry creditors was available on records, but A.O failed to examine these issues. Even in the assessment order, the A.O had taken a wrong figure of share capital raised by assessee company. The AO grossly ignored the examination/verification of share capital raised by assessee company, sources of capital, Sales and Purchase of assessee company and genuineness of transaction, which was the outmost requirement, before completion of assessment proceedings. This clearly shows that the assessment was completed without proper examination/verification. The jurisdictional High Court, in the case of CIT vs Maithan International, in ITA No-375 ITR 123 (Cal), 2015 held that 23. It is not the law that the Assessing Officer Occupying the position of an investigator and adjudicator can discharge his function by perfunctory....
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....ing Amount (Dr.) Amount (Cr.) Closing Remarks (If any) Quantity Amount Quantity Amount Quantity Amount Quantity Amount 7. Details of sale & purchase during the year giving details of parties. 8. Details of advances along with confirmation statement. Name & Address Pan No. Opening Amount (Dr.) Amount (Cr.) Closing Interest Income Remarks (If any) 9. List of share applicants along with their correct postal address. Please state if any change of address has taken place. 10. Provide all documents received along with the share applications, also provide letter of allotment, Board's resolution for inviting the share application with premium amount, increase of authorized share capital with respective form, allotment of shares with respective forms and copy of annual return. 11. Furnish your detail explanation with respect to the share applicant for their identity genuineness & creditworthiness.....
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....ith the assessee or not. 7. Company PAN / IT authority under whom assessed. By virtue of powers conferred on me in sub-section 6 of section 133 of the I.T. Act, 1961, you are required to furnish the above information within 7 days from the date of receipt of this letter." 18.1. In compliance to these notices, details were filed by the share applicants addressing them directly to the Assessing Officer providing the copies of share application forms, source of funds, copy of bank statement, copy of board resolution, copy of audited balance sheet etc. 19. After having conducted all these enquiries, in order to satisfy about the identity and creditworthiness of the share applicants and genuineness of the transactions, the ld. Assessing Officer moved a step forward and issued summons to the directors of the assessee company as well as investing companies to which necessary compliance was made and all the summoned persons appeared before the Assessing Officer and recorded under oath on 05/05/2016 and they form part of the assessment records. The specific observation of the Assessing Officer in the order dt. 17/05/2016. Relating the examination of share application money is....
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....worthy that the ld. Pr. CIT in the impugned order has not made any independent effort to bring out the fact which the Assessing Officer has not been able to lay his hand or has failed to call for in the course of assessment proceedings. It is well settled that when an issue on which detailed examination has been carried out by the Assessing Officer, before holding such assessment order as erroneous and so far as prejudicial to the interest of the revenue, the ld. Pr. CIT is required to conduct an enquiry and bring such information on record, failing which assumption of jurisdiction u/s 263 of the Act cannot be held to be justified. 20. The ld. Pr. CIT in its order, has relied on the judgment PCIT(Central)-1, Kolkata vs. NRA Iron & Steel Pvt. Ltd. (supra). We note that the Hon'ble Supreme Court in the said case has taken note of the observations made by the Supreme Court in the "the land mark case of Kale Khan Mohammed Hanif v. CIT [1963] 50 ITR 1 (SC) and Roshan Di Hatti v. CIT [1977] 107 ITR 938 (SC) laying down the proposition that the onus of proving the source of a sum of money found to have been received by an assessee, is on the assessee. Once the assessee has submitted th....
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....editworthiness of the share subscribers and genuineness of the transaction, the burden shifted upon the Assessing Officer to examine the evidences furnished and even made independent inquiries and thereafter to state that on what account he was not satisfied with the details and evidences furnished by the assessee and confronting with the same to the assessee. In view of this, even applying the ratio laid down by the e Hon'ble Supreme Court in the case of PCIT vs. NRA Iron and Steel Pvt. Ltd., impugned additions are not warranted in this case. 21. We notice that this Tribunal in the case of M/s. Pearl Tracom Pvt. Ltd. (supra), has referred to the decision of this Tribunal in the case of M/s. Bhagwati Vintrade Private Limited vs. ITO in ITA No. 195/Kol/2020, order dt. 24/02/2021, which has been confirmed by the Hon'ble Jurisdictional High Court vide order dt. 18/11/2022. Relevant finding of this Tribunal in the case of M/s. Pearl Tracom Pvt. Ltd. (supra) reproduced below:- "19. We notice that the issues raised in the instant appeal and facts brought before us are almost identical to the issues dealt by this Tribunal in the case of Bhagwati Vintrade Private Limited (supra....
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....oted that assessing officer has followed the direction issued in the earlier order passed by the Section 263 of the Act. The Assessing Officer has issued summons under Section 131 of the Act to the directors of the Shareholding Company M/s. Laxmi Timber Pvt. Ltd. in consonance with the direction issued by the Principal Commissioner of Income Tax under Section 263 of the Act. This finding would be seen from paragraphs 5 to 7 of the assessment order. Thus the learned Tribunal on re-verification of the facts found that this is not a case of non application of mind nor this is a case of failure to re-appreciate the facts and concluded that the view taken by the assessing officer was a plausible view. That apart we note that the assessing officer conducted thorough enquiry and has also examined the directors of the holding company. Thus the learned Tribunal rightly dismissed the appeal filed by the revenue. Considering the facts and circumstances of the case we find that there is no question of law much less substantial question of law arising for consideration in this appeal. Accordingly, the appeal fails and dismissed." 20. The above judgment of Hon'ble Jurisdict....
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....sactions of the shareholder companies further notices u/s. 133(6) of the I. T. Act, 1961 were issued on 12.07.2016 to the parties from whom funds were received to the shareholder companies as source of investment in the assessee company. Replies were received from all the parties proving identity of parties, genuinity of the transactions and again it was observed that all the transaction were made through banking channel and duly recorded in the books of accounts of the parties. Accordingly it is inferred that (i) As the shareholders are private limited companies and registered with the Ministry of Corporate Affairs they have an estabslished identity. (ii) Details of source of funds have been submitted by all the shareholders. (iii) None of applicants have been made otherwise than by banking channels. (iv) All the investors have submitted their Annual reports and I. T. Returns. (v) In all the cases the investments is duly reflected in the Annual Accounts of the investor. (vi) Moreover, summon u/s. 131 was also issued to the director of the company. In response to the summon u/s. 131 the director of the company appeared ....
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....ed thorough enquiry and has also examined the directors of the holding company. Thus the learned Tribunal rightly dismissed the appeal filed by the revenue." 9. Since the facts of the case before us are materially same as involved in the cases decided above, we are therefore, inclined to quash the order u/s. 263 of the Act passed by the Ld. Pr. CIT second time by upholding the order passed in the first round by the AO in terms of the direction of the Ld. Pr. CIT. Accordingly, the appeal of the assessee is allowed. 10. In the result, the appeal of assessee allowed." 21. We, therefore, respectfully following the judicial pronouncements stated herein above and also considering the fact that in a case where ld. AO conducted detailed enquiry and the assessee has filed complete documentary evidences to the satisfaction of ld. AO and coupled with these documentary evidences the investors of the alleged share applicant companies have appeared before ld. AO and recorded the statements on oath explaining that the investor companies had sufficient legitimate fund to justify the investment in equity share capital of the assessee company and based on these details and....