TaxTMI 
TaxTMI 
2023 (1) TMI 1478
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.... the assessment order read as under:- "Information was received from the Asst. Director of Income tax(Inv), Unit-2(3), Kolkata that M/s. Balmiki Suppliers, a proprietor ship firm maintain current account number 4002201100172. Bank of India with Bhovanipur Branch, Kolkata, M/s.Radhe Hardware, a sole proprietor ship firm maintain current account number 401320110000133, Bank of India with Manicktolla Branch, Kolkata and M/s. Airobic Distributors a proprietor ship firm maintain current account number 40022011000177. Bank of India with Bhovanipur Branch, Kolkata. These bank accounts are deposited with cash below threshold limit of Rs. 10 lakhs frequently. The cash so deposited are immediately transferred through layers of bank accounts of shell companies to the beneficiary entities or directly to the entities. One of the beneficiary identified is M/s. JVR Retails Pvt. Ltd. which has taken benefit of Rs. 1,65,00,000/- through bank accounts by routing money. The modus operandi is that the aforesaid beneficiary have brought unaccounted money in the books via money laundering through banking channel. The information received has been analysed and the fund trail reveals tha....
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....based shell company, on the ground that the assessee failed to prove the creditworthiness of the loan creditor and genuineness of the transaction. However, as per the balance sheet for the FY 2011-12, the share capital of the company has increased from Rs. 3,42,070/- to Rs. 4,85,67,070/. He observed from the Notes to the balance sheet of V.R. Sareeniketan Silks & Jewels Pvt. Ltd., which is the earlier name of the assessee company, that Skylark Commodeal Pvt. Ltd had been allotted preference share capital in the assessee company to the extent of Rs. 4,82,25,000/- (4,82,250 shares of Rs. 100 each). Thus, the actual amount flown into the company is Rs. 4,82,25,000/- and not Rs. 1,65,00,000/-. The information forwarded by ADIT, Kolkata is a piece of information indicating accommodation entries taken by the assessee company through bogus transactions. According to the PCIT, the AO should have enquired into the entire preference share capital of Rs. 4,82,25,000/- during the assessment proceedings u/s. 147. Since Skylark Commodeal Pvt. Ltd was found to be a shell company lacking credible sources, therefore, the entire preference share capital of Rs. 4,82,25,000/- should have been brought ....
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....eedings, the AO has concluded that the transactions between the assessee-company & M/s Skylark Commodeal Pvt. Ltd have failed the test of probability and affirmed that mere documenting the transaction will not render it genuine since they are established to be make-believe. Thus, the AO while completing the assessment concluded that the fund has been sourced from different accounts of shell companies to the account of Skylark Commodeal Pvt. Ltd to give the transaction a colour of genuineness in the form of share capital and treated the share capital received as unexplained income u/s 68 of the Income tax Act. However, while doing so, the AO has erroneously treated only the share capital amount at Rs. 1,65,00,000/- as non-genuine instead of Rs. 4,82,25,000/- as pointed out above. Since the AO has omitted to apply the facts of his findings to the correct amount of Rs. 4,82,25,000/- instead of only Rs. 1,65,00,000/- during the re-assessment proceedings, therefore, he held that the order passed u/s 143(3) r.w.s. 147 by the AO is erroneous and prejudicial to the interests of revenue. Accordingly, he set aside the assessment order passed for A Y 2012-13 with a direction to the AO to pass....
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....in a single point by way of one allotment and Form 2 was also filed for an amount of Rs. 4,82,25,000/- and the AO after due verification of details of total allotment of preference shares of Rs. 4,82,25,000/- to skylark Commodeal Pvt. Ltd submitted by the assessee has restricted the disallowance to the extent of Rs. 1,65,00,000/- 8. the Ld. Pr. CIT erred in issuing 263 order on the issues other than those which are subject matter of notice issued u/s. 148 of the Act and accordingly the proceedings ought to be annulled. 9. The Ld. Pr. CIT erred in issuing 263 order on an assessment u/s. 143(3) r.w.s. 147 of the Act which was reopened after 4 years without there being no failure on the part of the assessee as the information was disclosed in the annual report filed by the assessee. 10. The same Ld. Pr. CIT has approved the reopening of assessment u/s. 147, which is 263 order stated that the piece of information on basis of which reopening was made itself is not legal. 11. The Ld. Pr. CIT mentioned in order u/s. 263 that the AO got more scope and power under 147 of the Act due to amendment which will not be the scope of section 263 the Act. ....
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....form part of the reasons for reopening of the assessment. He reiterated that the verification of Rs. 4,85,00,000/- was never a part of the reasons recorded by the AO at the time of issuing notice u/s. 148 of the I.T. Act and therefore, the ld. PCIT could not have gone beyond the reasons recorded by the AO u/s. 147 of the I.T. Act to invoke his jurisdictional power u/s. 263 of the I.T. Act. For the above proposition, he relied on the following decisions: a) Pr. CIT vs Indo Enterprise Pvt. Ltd. in ITA No. 751/Pun/2019(Pun.Trib) b) CIT vs. Alagendran Finance Ltd. 162 taxman 465(SC) c) ACIT vs. Louis Berger Group Inc 51 taxman 121 10. The ld.counsel for the assessee submitted that Explanation 2 of Proviso to section 263 introduced by the Finance Act, 2015 w.e.f. 01.06.2015 does not have retrospective effect. He submitted that the AO in the instant case during the reassessment proceedings had called for information which was submitted by the assessee from time to time and after making detailed enquiry, the AO had made addition of Rs. 1,65,00,000/- which is a subject matter of appeal before the ld.CIT(A). The ld.CIT(A) has the powers to enhance the income. T....
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....d.Trib) n) Sanspareils Greenlands(P.) Ltd. vs. CIT reported in 99 taxmann.com 222 (Del.Trib) o) CIT vs. Mehrotra Brothers reported in 270 ITR 157 (MP.HC) p) CIT vs.Srinivasa Hatcheries (P.) Ltd.vs DCIT reported in [2002] 81 ITD 36(Hyd) (Hyd.Trib) q) Development Credit Bank Ltd. reported in [2011] 196 taxmann 329 12. The ld.DR on the other hand strongly supported the order of the ld.PCIT. He submitted that a perusal of the balance sheet of the assessee company shows that during the FY 2011-12, the share capital of the company was increased from Rs. 3,42,070/- to Rs. 4,85,67,070/-. The notes to accounts also give certain details regarding the allotment of preference share capital to the extent of Rs. 4,82,25,000/- and not Rs. 1,65,00,000/-. The information forwarded by the ADIT, Kolkata is a piece of information indicating accommodation entries taken by the assessee company through bogus entry operators. Therefore, the AO should have verified the entire preference share capital of Rs. 4,82,25,000/- during the re-assessment proceedings u/s. 147 of the I.T. Act. Since the AO has failed to do the enquiry which he was supposed to do before finalizin....
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....by the AO after detailed examination of the very same bank account, the same ld. PCIT again could not have initiated the revisionary proceedings u/s. 263 of the I.T. Act based on the very same information i.e. the same bank account and not any other information which the AO failed to verify. It is also his argument that when the issue is subject matter of appeal before the ld.CIT(A) who has the power of enhancement, the ld. PCIT could not have invoked the revisionary powers u/s. 263 of the I.T. Act, 1961 and that the scope of revision cannot go beyond the reasons for which the case of the assessee was reopened. 15. We find some force in the above argument of the ld.counsel for the assessee. We find the reassessment proceedings were initiated for verification of the amount of Rs. 1,65,00,000/- from M/s. Skylark Commodeal Pvt. Ltd on the basis of information obtained from the investigation wing of Kolkata. When the proposal was sent to the ld. PCIT for his approval u/s. 151(1)(a) of the Act, he had given his approval after verifying the relevant details. Therefore, we find merit in the submission of the ld.counsel for the assessee that if the reopening was made on the basis of inf....
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....n account of Rs. 5 lakhs received from two companies referred to above, which was ultimately found to be incorrect and nonexistent, therefore, there may not be any application of mind on the part of the A.O. to proceed to initiate the reassessment proceedings. There is no other material available on record except the information received from the Investigation Wing. The A.O on the basis of the information and material received from Investigation Wing has recorded reasons for reopening of the assessment which was ultimately found to be incorrect and non-existent. It is well settled law that when no new material other than examined by the A.O originally found on record for the purpose of initiating the re-assessment proceedings, the proceedings under section 148 of the I.T. Act would be invalid and bad in law. We rely upon decision of Delhi High Court in the case of Atul Kumar Swamy 362 ITR 693, Consulting Engineers Services India Pvt. Ltd., 378 ITR 318, Nestle India Ltd., 384 ITR 334 and Priyadesh Gupta 385 ITR 452. The Hon'ble Delhi High Court in the case of SNG Developers Ltd., 404 ITR 312 held that when A.O. initiated the reassessment proceedings without application of mind, ....