TaxTMI 
TaxTMI 
TaxTMI 
2019 (11) TMI 1823
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....ng its total income of Rs. 51,05,42,310/- thereby adding share capital / premium of Rs. 51,05,35,000/- as unexplained cash credits u/s. 68 of the Act. The CIT thereafter initiated sec. 263 revision proceedings. The same stood culminated in his revision order in former round dated 30.11.2016 holding the above stated regular assessment as erroneous causing prejudice to the interest of the revenue since the Assessing Officer had not verified genuineness of the investments made in the assessee's shares as well as its purchases of unquoted shares in various private limited companies alongwith loans and advances. The said former revision order dated 30.11.2016 forms part of paper book in pages 25 to 28. The CIT further observed that the assessee had discharged its onus of proving identity, genuineness and creditworthiness of the share capital / premium involving varying sums raised from six entities M/s Ahalya Builders and Constructions Pvt. Ltd., Aroma Tradecom Pvt. Ltd., Balaji Turnkey Project Solutions Pvt. Ltd., Compact Commodeal Pvt. Ltd., Golden Investment Management Pvt. Ltd. & Ratnagiri Commercial Pvt. Ltd. The CIT therefore directed the Assessing Officer to frame afresh assessme....
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....ntion here that the assessee company is a Private Limited Company, which is barred by law to opt for general issue of shares thus it can be inferred that the share applicant are known to it, since they are issued on private placement. If the assessee has access to the share applicant's PAN particulars, or bank account statement, surely its relationship is closer than arm's length. Under such a backdrop, the Assessing Officer was supposed to look beyond the extent of what is apparent. The enquiries should have been conducted more extensively by including the issue of viability of alleged transaction vis-à-vis the financials of the investor companies into the scope of investigation, but unfortunately the same was not done. 4.1 However, on perusal of the Assessment record, it is observed that Pr. CIT-4, Kol, has set aside the order u/s 144/143(3) of the Act for De-novo assessment with an intention to verify the issue of share capital credit in the books of the assessee, which was remained unverified for non-compliance on the part of the assessee company. It is also observed that though relevant documents were collected from the share subscribers the same were not verified ju....
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....dummy companies which have been created solely for this purpose. The Directors of such companies are more often than not low paid employees such as peons, darbans, drivers or other persons of humble means. The modus operandi for introduction of unaccounted money as share capital is that unaccounted cash is deposited in the bank accounts of different persons/companies. Thus, under such a backdrop, when the Assessing Officer has information that the assessee has raised fund through issuance of share capital by issuing shares at such a high premium, this should have raised suspicion of the Assessing Officer In fact, such high premium is not commanded even by blue chip quoted companies. Thus the Assessing Officer was expected to make independent enquiries to trace out the genuineness of the claim. Under such a scenario, the AO is duty bound to carry out through & detailed inquiries and go beyond the layers created by the so called "entry operators" so that it may be established that the share capital is genuine." 4.5 From the discussion above, it is evident that the facts, figures, evidences available on records to decide the case on merits did not find place in assessment order. Th....
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....ition to conduct enquiries for identity, creditworthiness and transaction of shareholder, AO has to verify following documents / details to check the genuineness of transactions. But he did not verify those relevant documents and accepted the documents / details furnished by assessee as it was. A. How prices are shares determined, how and where negotiation have been done B. Is there any business/personal relation with investing party directly or indirectly. C. Minutes of board, meeting for issue/share application. D. Lasts 3 years details of company in following format: AY Profit of your company Equity shares Share premium Net worth Book value E. Basis of fixing share premium all documents of meeting/advice/consultant advice. F. Copy of all minutes of meeting of related financial year and copy of board resolution. G. Resolution authorizing issuance of share under section 81(1A) of companies Act, when sent to ROC. H. Date of issue of share application form. I. Attendance register of AGM. J. Share certificate. K. Proof of communications to shareholders. L. Proof of dispatch of share certif....
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....tors have the object of creating large capital base by private placement of shares to private limited companies, but in fact these companies are mere paper companies having no real worth. b) The identity of the shareholder company is known but the transactions was not genuine transaction. c) The transactions were nominal and not real. The creditworthiness was not established as they did not have any fund of their own. Each of them has received fund from somebody and the said somebody form somebody. Prima facie the share holders are name lenders. 5.3 In the case of Commissioner of Income Tax - Vs N.R. Protfolio (P) Ltd. reported in (2013) 2014 Taxman 408 (Delhi) honourable Delhi High Court stated that: "An assessee's duty to establish that the amounts which the AO proposes to add back, under Section 68 are properly sourced, does not cease by merely furnishing the names, addresses and PAN particulars, or relying on entries in a Registrar of Companies website. One must remember that in all such cases, more often than not, the company is a private one, and share applicants are known to it, since they are issued on private placement, or even request basis. If the assessee ha....
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....ed. In such a case, the assessee would not have discharged the primary onus contemplated by Section 68 of the Act. 6. The power of revision by the CIT u/s.263 of the Act is very wide and it is in the nature of supervisory jurisdiction. It is well settled that incorrect assumption of facts or application of law satisfies the requirement of law i.e. order being erroneous & prejudicial to the interest of the revenue. The order passed by the AO without application of mind or order showing apparent error of reasoning or the order where the AO simply accepts where the assessee stated in his return of income and fails to make the enquiries which are called for in the facts and circumstances of the case will also call for intervention u/s 263 of the Act by the CIT/Pr.cit. I is a trite law that the disclosure of facts by the assessee in the return of income and / or in the course of assessment proceedings cannot give immunity from revisional jurisdiction of the CIT / PR. CIT u/s.263. In this context, it may be mentioned here that in the case of Commissioner of Income tax, Central-I Kolkata Vs. Maithan International, it was held by Calcutta High Court [2015] 56 taxmann.com 283 (Calcutta) ....
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....d prejudicial to the interest of the revenue within the meaning and scope of Section 263 of the Income Tax Act,1961. 6.4 The afore stated decisions postulate that when the officer is expected to make an inquiry of a particular item of income and if he does not make an inquiry as expected, that would be ground for the Commissioner to interfere with the order passed by the Officer since such an order passed by the Officer is erroneous and prejudicial to the interests of the Revenue (K.A. Ramaswamy Chettiar V. CIT (1996) 220 ITR 657). 6.5 Learned. A/R has referred to some case laws in his submission, the same has been considered. As they are clearly distinguishable and not applicable to the facts of the assessee hence the said case laws are not acceptable. 7. In my considered opinion, this is a cases of lack of enquiry on the part of the AO. Not collecting the full facts and not taking enquiry to logical end which could enable AO to take decision based on the totality of facts makes this order erroneous in so far as it is prejudicial to the interest of revenue in accordance with the Explanation 2(c) below section 263 of the Act. Accordingly, the issue is set aside to the tabl....
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....26.09.2018 14 ABA Earthline Communications Ltd. Vs. Ito Ward-1(4), Kolkata (ITA No.1141/Kol/2017 dated 09.11.2018 15 ITO Ward-10(1), Kolkata Vs. Sunglow Dealcom Pvt. Ltd. (ITA No.2178/Kol/2016 dated 16.11.2018 16 ITO Ward-1(4), Kolkata Vs Kaner Investments, Ltd. (ITA No.2095/Kol/2017) dated 23.01.2019 17 ITO Ward-5(3), Kolkata Vs. Bhagwat Marcom Pvt. Ltd. (ITA No.2236/Kol/2017) dated 31.07.2019 It is accordingly prayed that the PCIT's revision order under challenge is not sustainable since the Assessing Officer's latter assessment is neither erroneous nor prejudicial to the interest of the Revenue as per hon'ble apex court's landmark decision in Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC). 5. Learned CIT-DR strongly supports the PCIT's assumption of revision jurisdiction in facts of the instant case. He submits that the former round of revision proceedings could not be interpreted as going in assessee's favour since the purpose thereof is to make it sure that the Assessing Officer's earlier assessment is not erroneous causing prejudice to the interest of revenue. He buttress the PCIT's findings under challenge that the Assessing Officer had not co....
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....sactions. The said transactions were entered into in the books of account of the assessee company by way of journal entries and it did not involve any credit to the cash amount. The learned DR at the time of hearing has not brought anything on record to rebut or controvert this position. He however has contended by relying on the decision of Hon'ble Madhya Pradesh High Court in the case of V.I.S.P.(P) Ltd. (supra) as well as the decision of Mumbai Bench of this Tribunal in the case of Panna S.Khatau (supra) that section 68 was still applicable in the present case involving credit to the share capital and share premium amount. It is however observed that the facts involved in the case of V.I.S.P. (P) Ltd. were different inasmuch as the liability in question in the said case represented trading liability of the assessee accruing as a result of purchase made by the assessee during the relevant year and since the said liability was found to be a bogus liability, addition made by the AO was held to be stainable by the Hon'ble Madhya Pradesh High Court 7. In the case of Panna S. Khatau (supra) cited by the learned DR, both section 68 and 56(2)(vi) were held to be applicable by....