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2018 (1) TMI 1509 - ITAT DELHIRevision u/s 263 - addition u/s 68 - reassessment orders passed by the AO wherein AO as failed to examine the share application money received from the foreign entity and has only verified the identity of the said entity but has failed to verify the creditworthiness of such investor and also the genuineness of the transaction - HELD THAT:- We are unable to appreciate such kind of remote link especially when the AO under the law was required to see the nature and source of the credit which had come from a Swiss company and not to examine the source of money advanced by M/s. Tenoch Holding Ltd to Swiss company. Going beyond as to how the M/s. Tenoch Holding Company has received the money and what is the source of M/s. Tenoch Holding Ltd. is definitely not the requirement of the law unless any contrary material is found. Otherwise there would be no end to roving and fishing inquiry. Thus, the contention raised by CIT-DR about the background of the persons who were holding Tenoch Holding Ltd. through their companies will not make much difference in the law in so far as to further examine the source of share application money/share capital brought by non-resident entity. Here in this case the PCIT has completely ignored the factum of report received from Swiss Tax Authorities, which perhaps clinches the entire issue in favour of the assessee and has not even laid down the parameters as to what should have been the inquiry made by the AO after receiving such a report. Accordingly, the reassessment orders passed by the AO for the impugned assessment years cannot be reckoned as erroneous in so far as it is prejudicial to the interest of revenue. Share application money received from the holding foreign entity, the documents as mentioned above are sufficient to hold that transaction is genuine, and in the present case also all these documents have been placed on record at some stage or the other and therefore, on merits also the additions u/s.68 is not called for. Finding of the learned PCIT with regard to the share application money received from other Indian partner, M/s. Bitcorp India Pvt. Ltd., first of all, we find that this issue was neither there in the “reasons recorded” by the Assessing Officer as the information which was received for reopening of the assessment completed u/s.143(3) was only with regard to the examination of the fund received from the foreign investor, M/s. Bycell Holdings AG in terms of Section 68; nor any ‘reason to believe’ has been entertained by AO during the course of assessment proceedings based on any tangible material coming on record. Once the case was reopened u/s 147 only to examine the source of share application money/share capital of the non-resident entity and without there being any tangible material on record that the share application money received from M/s. Bitcorp India Pvt. Ltd. is not genuine, the Assessing Officer under the law was not required to conduct any roving and fishing inquiry within the scope of re-assessment proceedings which is circumscribed or limited only to the issues raised and ‘reason to believe’ entertained in the ‘reasons recorded’; or in the terms of Explanation-3 to Section 147, i.e., on the issue which comes to the notice of AO during the course of re-assessment proceedings. Once this issue is neither flowing from the initiation of reassessment proceedings u/s.147, i.e., “reasons recorded” nor arising from the reassessment order, then without there being any adverse material on record and without issuing any show cause notice to the assessee on this point, learned PCIT cannot set aside this issue on the ground that no inquiry qua that party/ investor has been conducted by the AO. In all these years, the assessments were completed u/s. 143(3) and prior to the initiation of re-assessment proceedings all these transaction have been examined and the same has been duly accepted. While reopening such assessments u/s.147, AO should have credible information and tangible material coming to his possession to entertain reason to believe that the share application money received from M/s. Bitcorp India Pvt. Ltd. during the assessment year 2006-07 to 2008-09 was not genuine. Once there is no such material, then the finality attained in terms of orders passed u/s. 143(3) accepting the said share application money can neither be raised nor can be disturbed. Thus, on this score also, we hold that learned PCIT was not justified either in law or on facts in setting aside the issue of share application money received from M/s. Bitcorp India Pvt. Ltd. for carrying out any further inquiry or pass any fresh assessment order as it is beyond the scope of Section 263. - Decided in favour of assessee.
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