TaxTMI 
TaxTMI 
2024 (7) TMI 1695
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....acts and in the circumstances of the case, the learned Pr. C.I.T. (Central) has erred in treating the assessment order passed by A.C.I.T u/s 143(3) as erroneous and pre-judicial to the interest of revenue particularly in view of fact that the A.O. has passed the order after considering all the facts of the case and also after making proper enquiries in respect of claims made by the assessee. 3] That order u/s 263 of I.T. Act is bad in law and the same is liable to be cancelled. 4] That any other grounds that may be raised during the course of hearing of the appeal" 3. In this connection, the order under Section 263 of I.T. Act, 1961 is reproduced below; "ORDER U/S 263 OF INCOME TAX ACT, 1961 Return of income was filed on 22/09/2014 declaring total income of Rs.3,74,72,758/-. Assessment u/s 143(3) r.w.s. 153A was finalised on 30/12/2016 determining total income of Rs. 3,74,72,758/- for the A.Y. 2014-15. Assessee is a Company and engaged in the business as a Builder Property Developers. On perusal of balance sheet as on 31/03/2014, it is seen that assessee company has issued 2,00,000 shares (40%) to M/s Anubhav Vinimay Pvt. Ltd having v....
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....transaction would normally follow. The only thing which sets it apart from a genuine business entity is lack of genuineness in its actual operations. The operations carried out by these entities, are only to facilitate financial manoeuvring for the benefit of its clients, or, with that predominant underlying objective, to give the colour of genuineness to these entities. These shell entities, which are routinely used to launder unaccounted monies, are a fact of life, and as much a part of the underbelly of the financial world, as many other evils. Even a layman cannot be oblivious of these ground realities. The assessee has received an amount of Rs 2 crores as share capital from M/S Anubhav Vinimay Pvt Ltd. In the balance sheet of Anubhav Vinimay the same is reflected as loan to assessee. From the Assessment order it is observed that the AO has not enquired either the creditworthiness of the lender nor the genuineness of the transaction. The AO should have examined the balance sheet and Profit and loss account from the date of inception of the M/s Anubhav Vinimay Pvt. Ltd till the current year to see whether the subscriber to share capital had capacity to give the large am....
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....l Commissioner or] Commissioner under this sub-section shall extend [and shall be deemed always to have extended] to such matters as had not been considered and decided in such appeal.] [Explanation 2. For the purpose of this section, it is hereby declared that an order passed by the assessing Officer shall be deemed to be erroneous in so far as it is prejudiced to the interests of the revenue, if, the opinion of the principal Commissioner or Commissioner, - (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under Section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. ] [(2) No order shall be made under sub- section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed.]....
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....nd purposeful; (d) an Explanation cannot in any way interfere with or change the enactment or any part thereof but where gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the court in interpreting the true purport and intendment of the enactment, and (e) it cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming an hindrance in the interpretation of the same. It is profitable at this stage to refer to the Memorandum to finance Bill 2015 and notes to clauses to finance Bill, 2015 which are as under: Memorandum to Finance Bill 2015 Revision of order that is erroneous in so far as it is prejudicial to the interests of revenue. The existing provisions contained in sub-section(1) of section 263 of the Income tax Act provides that if the Principal Commissioner or Commissioner considers that any Order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an op....
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....owing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person." This amendment will take effect from 1st day of June, 2015." Now, as can be seen above, the amendment to section 263 of the Act by insertion of Explanation 2 to Section 263 of the Act is declaratory & clarificatory in nature and is inserted to provide clarity on the issue as to which orders passed by the AO shall constitute erroneous and prejudicial to the interest of Revenue, it is, inter-alia, provided that if the order is passed without making inquiries or verifications by AO which, should have been made or the order is passed allowing any relief without inquiring into the claim; the order shall be deemed to be erroneous and prejudicial to the interest of Revenue. The Hon'ble Supreme Court in the case of Malabar Industrial Company Limited v. CIT (2000)10....
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.... any enquiry regarding the receipt of Rs.2 crores as share capital. The creditworthiness of the lender nor the genuineness of the transaction is examined by ΑO. From the record, it is evident that the AO has not carried out any such factual verification. This has made the assessment orders for the A.Y. 2014-15 prejudicial in as much as erroneous to the interest of Revenue. Hence, the AO needs to carry out detailed verification on this issue before accepting the claim of the assessee. The provisions of sec 263 of the I.T. Act are clear in as much as an order passed by an AO is deemed to be erroneous in so far as it is prejudicial to the interests of Revenue if in the opinion of the Pr. CIT, the order has been passed without making enquiries regarding the claim made. In the light of the above discussion, it is evident that there was lack of enquiry and application of mind on the part of the AO which has rendered the assessment order erroneous in so far that it is prejudicial to the interests of revenue. The view taken by the AO is an erroneous and not a possible or plausible view. The Allahabad High Court in the case of Bhagavandas (272 ITR 267) and P.T. Lakshar Ram (2....
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.... wherever applicable. 4. It is also gainful to consider the assessment order dated 30/12/2016, to have a clear understanding of the case. "ASSESSMENT ORDER Return of income U/s 139(1) of the I.T. Act, 1961 was filed on 22/09/2014 by the assessee showing total income of Rs.3,74,72,758/- 2. A Search and seizure operations u/s.132 of the Income-tax Act, 1961, was conducted in the Bajoria - Agrawal group of cases of Nagpur on 02.12.2014 in which assessee was also covered by issuing warrant U/s 132. 3. Notice u/s 153A of the IT Act was issued dated 20/05/2015 which was served on 25/05/2015 for filing the return of Income. Another, Notice u/s. 142(1), was issued on 21/07/2016, which was served on 22/07/2016. In response to the notice U/s 153A, the assessee has filed the return of income on 10/08/2016 declaring total income of Rs.3,74,72,758/-. 4. Notice U/s 143(2) of the I.T. Act, 1961 dated 11/08/2016 alongwith questionnaire was issued and served to the assessee, requiring the assessee to furnish the details/explanations. 5. In response to which Shri Mukesh Agrawal, C.A. and Authorized Representative of the assessee attended from ....
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....Bench in case of Mehtab Alam vs. Asstt. CIT (ITA Nos. 288 to 294/Lkw/2014), Hyderabad Bench of the Tribunal in the case of CH. Krishna Murthy vs. Asstt CIT (ITA No. 766/Hyd/2012) and one of the judgment passed by the High Court of Judicature at Allahabad in the case of CIT vs. Ashok Kumar (IT Appeal No. 192 of 2000) and Hyderabad Bench of Tribunal in the case of Trinity Infra Ventures vs. Dy. CIT (ITA No. 584/Hyd/2015) and consistently held that once the order under s. 143(3) r/w s. 153A of the Act has been passed after taking prior approval of the Asstt CIT under S.153D of the Act, then the jurisdiction under s.263 of the Act cannot be invoked. Therefore, the view taken by the Co-ordinate Bench of the Tribunal had attained finality. Hence, the Tribunal, Indore has not committed any error of law by following the same view. 8. Even otherwise, as per s. 263 of the Act, the Principal Chief CIT or Principal CIT or CIT may call for and examine the record of any proceeding under this Act and if he considers that any order passed therein by the AO, is erroneous insofar as it is prejudicial to the interests of the Revenue, he may make enquiry as he deems necessary, pass such order....
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..../2019, wherein a sum of Rs. 2,00,00,000/- was added u/s 68 of the I.T. Act. However, CIT(A) had directed deletion of the amount. 2. We have already held in ITA No.97/Nag/2019 that the revision order is unsustainable for the detailed reasons as enunciated above. Since the very basis of invocation of Section 263 has been quashed, the assessment order has no legal nexus to stand upon. In the absence of a valid foundation, the superstructure is bound to crumble. 3. In view of above, the departmental appeal is dismissed. Since we have already quashed the order on the ground of jurisdiction, the grounds raised by the department are for academical matters and we do not feel it appropriate to deal with the same. 4. Be it as may, we further find that CIT(A) has elaborately dealt as follows in granting relief. "4.7 I have gone through the assessment order as well as the arguments of the appellant and am inclined to agree with the appellant. I find that the appellant has duly satisfied the onus cast upon it under the rigors of the provisions of section 68 of the Act. The appellant has duly proved the identity, genuineness and creditworthiness of the investor AVPL. The fact t....
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....ee by produced sufficient documentation discharged its initial onus of showing the genuineness and creditworthiness of the share applicants. It was incumbent to the assessing officer to have undertaken some inquiry and investigation before coming to a conclusion on the issue of creditworthiness. In para 39 of the decision in Nova Promoters (supra), the Court has taken note of a situation where the complete particulars of the share applicants are furnished to the assessing officer and the assessing officer fails to conduct an inquiry. The Court has observed that in that event no addition can be made in the hands of the Assessee under section 68 of the Act and it will be open to the Revenue to move against the share applicants in accordance with law. The appellant has further rightly placed reliance on Vishnulal Karwa Vs. ITO (1987) 32 Taxman 276 (Jp - Trib) wherein it has been held that even highly suspicious circumstances by itself would not lead to the conclusion that the amount belonged to the assessee. In the absence of any other evidence to the contrary, disbelieving the evidence as such would not be proper. In the case of CIT Vs. Metachem Industries (2000) 24....
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....enuineness of transactions. The AO in the present case has nowhere proven or even alleged that the amount so received from the investor has been returned back to the investor in cash which makes the addition bad in law and liable to be deleted. 4.10 In Umbrella Projects Pvt. Ltd. Vs. ITO ITA No. 5955/Del/2014 wherein the Hon'ble ITAT has held that if the assessee has discharged the initial onus regarding the identity, creditworthiness and genuineness, the onus shifts to the AO to bring material or evidence to discredit the same. The fact that the shareholders did not respond to notice u/s 133(6) is not insufficient to draw an adverse inference. However, in the present case the Investor Company AVPL has filed its reply to the AO and confirmed that it has invested Rs 2 Crores in the shares of the appellant Company. It is further rightly argued by the AR that the addition made u/s 68 is not sustainable as the AO has nowhere controverted the evidences filed by the appellant nor has produced any concrete justification for making the addition. In this regard, reliance is placed on CIT Vs. Orissa Corporation Pvt. Ltd. (1986) 159 ITR 78 (SC) wherein the Hon'ble SC....