TaxTMI 
TaxTMI 
TaxTMI 
2025 (5) TMI 1710
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..... 3. The ground raised by the assessee are as under: 1. That the order u/s 143(3) r.w.s. 263 of the Act passed by Ld. AO is bad in law and is passed in contravention of prevailing law as well as facts of the case, therefore liable to be annulled. 2. That the order passed by Ld. AO u/s 143(3) r.w.s. 263 of the Act is further illegal and not tenable under the law as the reassessment order passed u/s 147 of the Act itself was illegal and not tenable under the law and thus, no valid proceedings u/s 263 of the Act could have been undertaken against the same. 3. That the order passed by Ld. AO u/s 143(3) r.w.s. 263 of the Act is further illegal and not tenable under the law as all the evidences were duly furnished by the assessee during the course of original assessment proceedings and the said evidences were duly adjudicated by Ld. AO. 4. That the Ld. AO grossly erred in law and in facts of the case in making addition of Rs. 12,86,00,000/- under Section 68 of the Act despite the fact that the onus cast upon the assessee was duly discharged and no deficiency in the submissions of the assessee was enumerated in the assessment order. 5. That the Ld. AO grossly erred in law and i....
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....eet that during the financial year the assessee has issued 6,43,000 new equity shares of Rs. 10/- each at premium of Rs. 190/- per share to 39 subscribers out of which the Assessing Officer picked up only 25 subscribers for verification by issuing notices u/s. 133(6) of the Act. Thereafter, the Assessing Officer noted that the Ld. Pr. CIT upon examination of the assessment records observed that the Assessing Officer has not conducted any independent enquiry though the evidences were called for from the assessee as well as from the subscribers u/s. 133(6) of the Act. Thereafter, the Assessing Officer extracted the revisionary order from page 2 to 7 in the assessment order and thereafter in two paras concluded the assessment. In the second para of page no. 7, the Assessing Officer noted that as per the specific direction of Ld. Pr. CIT, notices u/s. 131 of the Act were issued to the shareholders and they were specifically asked to appear in order to verify the identity and creditworthiness of the shareholders and genuineness of the transactions. The Assessing Officer noted that none appeared and thereafter issued show cause notice to produce evidences failing which why this should no....
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....pellant has also submitted that the legality of reassessment proceedings completed u/s 148 of the Act can be challenged at this stage and that the same has been held valid in many judicial precedents. The appellant has relied on the case of Westlife Development Ltd. vs. PCIT (2016) 47 CCH 0305 (Mum)(Trib) wherein it was held that as per law, the validity of the order passed in the primary (original) proceedings should be allowed to be examined even at the subsequent stages, only for the limited purpose of examining whether the collateral (subsequent) proceedings have been initiated on a valid legal platform or not and for examining the validity of assumption of jurisdiction to initiate the collateral proceedings. It was held that the Assessee should be permitted to challenge the validity of order passed u/s 263 on the ground that the impugned assessment order was non est. 5.4 The appellant has also submitted that it has been judicially settled that only valid assessment order can be sought to be amended by invoking powers conferred u/s 263 of the Act and when re-assessment order itself is bad in law, same cannot" be revised u/s 263, since, only valid re-assessment order can be re....
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.... The Ld. AR submitted that it is not the case that reopening was made on the ground of non-genuine share capital/share premium raised by the assessee from 39 subscribers. Dad it been so then the Assessing Officer would have the occasion during the reassessment proceeding to call for records from the assessee qua the said share capital/share premium. The ld AR argued that despite that the Assessing Officer called for the explanation/evidences from the assessee on the share capital/premium raised during the year and verified these transactions on the basis of evidences furnished by the assessee. The ld. AR submitted that the AO in order to independently verify the transactions of share capital/premium issued notices u/s. 133(6) to 25 subscribers out of total 39 subscribers. Thereafter, the Assessing Officer after examining these evidences and also the replies received in response to notices u/s. 133(6) did not make any addition, though no discussion was made in the assessment order qua this issue. The ld. AR submitted that the said order passed by the Assessing Officer is neither erroneous nor prejudicial to the interest of the revenue as the Assessing Officer has taken a plausible a....
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....ssing Officer and the assessment was framed after taking into account of the evidences and details filed by the assessee and, therefore, the assessment framed is not prejudicial to the interest of the revenue. The Ld. AR submitted that there is grave miscarriage of justice as the assessment was revised even without giving proper show cause notice to the assessee. 13. On the issue of Assessing Officer's conducting proper enquiry the ld. Counsel for the assessee vehemently argued that the revisionary jurisdiction u/s. 263 of the Act is available only where there is complete lack of enquiry and not in a case of inadequate enquiry. The Ld. AR submitted that the Ld. Pr. CIT has to give a definitive finding on the issue which was proposed to be the basis for revision of the assessment order but in the present case, the Ld. Pr. CIT has not given a finding as to how the inadequate enquiry by the Assessing Officer into the issue has rendered the assessment order erroneous and prejudicial to the interest of the revenue. In other words, the Ld. Pr. CIT has no jurisdiction u/s. 263 to direct the Assessing Officer to conduct enquiry to verify and find out whether the order passed assessment fr....
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....tal issue expenses of Rs. 22,600/- and, therefore, the income has escaped assessment to that extent. Though in the reassessment proceedings, the Assessing Officer has called for the evidences/explanation from the assessee qua the share capital/share premium which were duly furnished during the reassessment proceedings. The Assessing Officer has independently verified the transactions by calling for information/details by issuing issue notices u/s. 133(6) to 25 subscribers out of 39 subscribers who complied with the said notices by furnishing all the details/evidences. Pertain to state that assessee issued 6,43,000/- equity shares to 39 subscribers of face value of Rs. 10/- each at a premium of Rs. 190/- per share. The Assessing Officer during the reassessment proceedings examined the documents furnished by the assessee as well as by the subscribers and accepted the plea of the assessee and no addition was made. Now, the Ld. Pr. CIT invoked 263 proceedings on the ground that the order passed by the Assessing Officer u/s. 143(3)/147 is rendered erroneous and prejudicial to the interest of the revenue on the ground that the AO has not conducted proper enquiries into the issue of share....
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.... void in the eyes of law on any jurisdictional grounds, then, whether it can give rise to initiation of further proceedings and whether such subsequent proceedings would be valid under the law as contained in Income Tax Act? It has been vehemently argued before us that the subsequent proceedings (i.e. collateral proceedings) derive strength only from the order passed in the original proceedings (i.e. primary proceedings). Thus, if order passed in the original proceedings is itself illegal, then that cannot give rise to valid revision proceedings. Therefore, as per law, the validity of the order passed in the primary (original proceedings should be allowed to be examined even at the subsequent stages, only for the limited purpose of examining whether the collateral (subsequent) proceedings have been initiated on a valid legal platform or not an or examining the validity of assumption of jurisdiction to initiate the collateral proceedings. If It is not so allowed, then, it may so happen that though order passed in the original proceedings was illegal and thus order passed in the subsequent proceedings in turn would also be illegal, but in absence of a remedy to contest the same, it m....
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....ns of issue of shares to 39 subscribers also issued notices u/s. 133(6) to 25 subscribers who duly responded to the said notices and the replies were part of the assessment records. The Assessing Officer while framing the reassessment dated 29.04.2010 has taken a plausible view after taking into account the arguments of the assessee and also the documents/evidences filed by the assessee as well as by the share subscribers. Therefore, in our opinion, the said order cannot be said to be erroneous and prejudicial to the interest of the revenue. Once it proved that order is not erroneous and prejudicial to the interest of the revenue which are the primary conditions to be fulfilled for invoking jurisdiction u/s. 263 of the Act then the Ld. Pr. CIT has no jurisdiction to resort to the revisionary powers to set aside the assessment order. The case of the assessee finds support from the decision of Malabar Industrial Co. Ltd. Vs. CIT (supra), wherein it has been held that the satisfaction of twin condition i.e. erroneous and prejudicial to the interest of the revenue are to be satisfied simultaneously and even if one of the two conditions is satisfied, the jurisdiction u/s. 263 of the Act....
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....343 ITR 349 (Delhi), wherein it has been held that where the Ld. Pr. CIT revised the assessment order it is incumbent upon him to record a finding as to how the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the revenue due to the items proposed in the revisionary order. Since this is not the case before us, therefore, on this score the revisionary order is invalid. 21. Even if we consider that revision could be invoked to the assessment framed u/s 143(1) dated 03.09.2012, but the same is hopelessly barred by limitation and the same is beyond the time limit provided u/s. 263(2) of the Act as has been held by the Hon'ble Apex Court in PCIT Vs. Alegendran Finance Ltd. (Supra). 22. Considering the above facts and circumstances and the legal position as laid down by the various judicial forums, we are inclined to hold that the assessment framed by the Assessing Officer u/s. 143(3)/263 of the Act in the set aside proceedings is invalid as the same emanated from the revisionary order u/s 263 of the Act which is itself invalid and nullity in the eyes of law. 23. So far as the merits of the case are concerned, we find that during the year the asses....
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....ares where the information is within the personal knowledge of the appellant as the share holders are supposed to be not some strangers or some unknown entities to whom the appellant has sold its shares without due diligence and knowledge. The appellant produced documents like Confirmation of accounts having description of source of investment, Copy of ITR filing acknowledgment, Audited financials of subscribers, list of Investment of subscriber companies, Extract of bank statement of subscribers etc. and that shows that the appellant is in contact with the share subscribers and therefore if they were indeed genuine, the appellant could have produced them before the AO but have failed to do so, as it shows that the share holders are only paper companies and not genuine. Initial onus is on the appellant to establish the identity of the person, creditworthiness of the person in the sense of financial capacity and the genuineness of the transaction, as the facts are within the exclusive knowledge of the appellant as laid down by the Hon'ble Supreme. Court in case of PCIT (Central)-1 vs. NRA Iron & Steel (P) Ltd. [2019] 103 taxmann.com 48/262 Taxman 74/412 ITR 161 (SC) and I find t....
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....king into consideration, the legal effect of the statement of AKA also took note of the fact that the notices which were issued by the Assessing Officer under section 133(6) to the lenders where duly acknowledged and all the lenders confirmed the loan transactions by filing the documents which were placed before the tribunal in the form of a paper book. These materials were available on the file of the Assessing Officer and there is no discussion on this aspect. Thus, the tribunal rightly dismissed the appeal filed by the revenue." 27. The assessee has filed before us all these documents qua 39 share subscribers by way of paper book with written submissions and explained the creditworthiness and capacity of the subscribers to invest in the assessee company with all facts and details. Therefore, we are inclined to hold that the share subscribers were had adequate sources to invest in the assessee company. It is not the case of the Ld. CIT(A) or the Assessing Officer and that there was cash deposited into the bank accounts of the subscribers before making investments in the assessee company. These subscribers paid money through banking channel and the subscribers were having suffici....