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2017 (3) TMI 1249 - AT - Income TaxRevision u/s 263 - receipt of share capital and share premium - Held that - In the case of Subhlakshmi Vanijya Pvt. Ltd. Subhlakshmi Vanijya Pvt. Ltd. Vs CIT 2015 (8) TMI 174 - ITAT KOLKATA CIT ought to have set aside the order of AO and direct the AO to make fresh enquiry with regard to the receipt of share capital and share premium by the assessee during the previous year. As rightly pointed out by the ld. Counsel for the assessee, since the proceedings u/s 263 of the Act were concluded ex-parte, the Assessee had no occasion to place material to satisfactorily explain the receipt of share capital and share premium by the Assessee. There was however no material on the basis of which the CIT could have come to the conclusion that the receipt of share capital and share premium was not satisfactorily explained by the assessee. As rightly contended by the assessee, the CIT ought to have set aside the order of the AO and directed the AO to conduct fresh enquiry on the lines indicated in the order of this Tribunal in the case of Subhlakshmi Vanijya Pvt. Ltd. (supra). We therefore modify the order of CIT and direct the AO to make fresh enquiry with regard to the receipt of share capital and share premium during the previous year after affording Assessee opportunity of being heard. With these observations the appeal of the assessee is treated as partly allowed.
Issues:
1. Delay in filing the appeal by the Assessee. 2. Correctness of the order passed by the AO regarding the receipt of share capital and share premium. 3. Validity of the order passed by the CIT under section 263 of the Income Tax Act, 1961. 4. Whether the CIT was justified in enhancing the assessment amount by adding share capital as unexplained cash credit. 5. Applicability of the findings of the Tribunal in similar cases to the present case. 6. Proper course of action for the CIT in case of an ex-parte conclusion. Issue 1: Delay in filing the appeal by the Assessee The Assessee appealed against an order dated 28.01.2016 of Pr.CIT-3, Kolkata passed under section 263 of the Income tax Act, 1961 (Act) for AY 2012-13. The Assessee explained a delay of 126 days in filing the appeal due to a misunderstanding regarding the direction in the order. The Tribunal condoned the delay after considering the reasons given in the affidavit. Issue 2: Correctness of the AO's order regarding the receipt of share capital and share premium The Assessee, a company, received ?58.80 crores towards share premium on the issue of share capital of ?1.20 crores during the previous year. The AO accepted the transaction as explained under section 143(3) of the Act. Issue 3: Validity of the CIT's order under section 263 of the Act The CIT, in exercise of powers under section 263, found the AO's order erroneous and prejudicial to revenue as no inquiry was made into the genuineness of transactions and the capacity of investors. The CIT directed the AO to treat the amounts as unexplained income of the Assessee. Issue 4: Justification of enhancing the assessment amount by adding share capital as unexplained cash credit The Assessee challenged the CIT's decision to enhance the assessment by ?60 crores, arguing that proper inquiry was not made. The Tribunal found that the CIT should have directed a fresh inquiry by the AO instead of adding the amount as unexplained cash credit. Issue 5: Applicability of Tribunal's findings in similar cases The Tribunal applied its previous findings in a similar case to the present situation, emphasizing the need for a thorough inquiry by the AO before accepting transactions. Issue 6: Proper course of action for the CIT in an ex-parte conclusion In cases concluded ex-parte, the Assessee had no opportunity to explain the transactions. The Tribunal held that the CIT should have set aside the AO's order and directed a fresh inquiry, similar to previous cases, to ensure a fair assessment. In conclusion, the Tribunal partly allowed the Assessee's appeal, modifying the CIT's order and directing the AO to conduct a fresh inquiry on the receipt of share capital and share premium after affording the Assessee an opportunity to be heard.
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