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2022 (1) TMI 932 - AT - Income TaxRevision u/s 263 by CIT - Reopening of assessment u/s 147 consequent to the order u/s. 263 - Addition u/s 68 - HELD THAT - Having gone through in detail into the order u/s. 147/143 of the ITO, Ward-6(2), Kolkata dated 30.01.2012, the order u/s. 263 of ld. CIT, Kolkata-2 and the order u/s. 263/143 of the ITO, Ward-1(2), Kolkata, we find that the AO has miserably failed to bring anything on record to prove the case of the revenue. Unfortunately, the detailed instructions given by the ld. CIT have been given a crackpot. While the ld. CIT has examined the issue in detail and set aside the order, the revenue authorities down below the line valiantly ignored the directions and given a go by to all the well considered examination and directives of the ld. CIT. Case has been reopened u/s. 148 and the share capital has been examined. The ld. CIT has passed order on 21.03.2014 wherein the previous order of the AO has been set aside for fresh adjudication. The process of reassessment consequent to the order u/s. 263 was initiated on 26.12.2015 by issue of notice i.e. 9 months after the passing of the order from the order by the ld. CIT. Having initiated the proceedings on 26.02.2015, the order has been passed on 31.03.2015 in a lightning speed within a narrow span of 33 days and made addition of approximately ₹ 40 crores. There were neither any directions nor reference sought u/s. 144, either by the ITO or suo moto by supervisory authorities. We have seen the action of the AO while making the addition in terms of investigation and enquiry. The AO issued summons on 10.03.2015 and held that most of the summons returned unserved which indicates that the summons have been send by post. Owing to the unserving of the summons, the AO directly came to the conclusion that it is a dummy company which was brought into existence merely for building share capital. (Refer Assessment Order of the AO) At the same time, the AO mentions that the documents have been filed with regard to the shareholders. The AO absolutely did not make any enquiry whatsoever it is to come to a conclusion that it is a case assessed u/s. 68. No field enquiry was conducted nor the Inspector has been deputed nor the help of the Investigation Wing has been requisitioned nor there have been any pre-enquiries conducted by the revenue department to aid the AO to come to conclusion of treating this amounts u/s. 68. This is a classic case of collective failure on the part of the revenue authorities. CIT(A) confirmed the addition solely on the basis of low returned income of the subscribers. On the other hand, the assessee has filed all the documents to prove their case prima facie and thus discharge the primary onus. At this juncture, it is for the revenue to pick up the addresses, names, locations and carry on further investigations to prove the credibility non-creditability of the parties which was abysmally lacking. On going through the entire order of the ld. CIT(A), other than the theoretical rhetoric, no iota of tangible material has been brought on record. The established adages are that the primary onus to prove that the income is non-taxable lies on the assessee whereas the primary onus to prove that the income is taxable lie with the revenue authorities. In the instant case, we find that nothing has been proved to come to a conclusion that the income falls within the ambit of Section 68 - we hold that the action of the ld. CIT(A) cannot be sustained. Decided in favour of assessee.
Issues Involved:
1. Validity of the reassessment proceedings initiated under section 147 of the Income Tax Act, 1961. 2. Validity of the revision order passed under section 263 of the Income Tax Act, 1961. 3. Addition of ?42,70,00,000 under section 68 of the Income Tax Act, 1961 for unexplained cash credits. Detailed Analysis: 1. Validity of the Reassessment Proceedings Initiated Under Section 147 of the Income Tax Act, 1961: The reassessment proceedings were initiated after the assessee filed a letter stating that consultancy charges of ?37,500/- received in cash were not accounted for in the financial year 2009-10. This led to the issuance of a notice under section 148. The reassessment was completed with additions of ?37,500/- for consultancy charges and ?25,500/- for excess preliminary expenses written off, making the total assessed income ?82,340/-. 2. Validity of the Revision Order Passed Under Section 263 of the Income Tax Act, 1961: The Commissioner of Income Tax (CIT) found the original assessment order to be erroneous and prejudicial to the interest of the revenue, primarily because the Assessing Officer (AO) did not thoroughly examine the receipt of share capital amounting to ?42.70 Crores. The CIT directed the AO to conduct a detailed inquiry into the genuineness and source of the share capital by examining each shareholder independently and scrutinizing their bank accounts for the entire period to trace the money trail. The CIT's order emphasized the necessity of lifting the corporate veil to ensure that the share capital was not a means to introduce unaccounted money into the books. 3. Addition of ?42,70,00,000 Under Section 68 of the Income Tax Act, 1961 for Unexplained Cash Credits: The AO, following the CIT's directions, issued summons to the shareholders, which mostly returned unserved. The AO inferred that the shareholders were dubious entities and added ?42,70,00,000 (comprising ?1,73,28,500 as share capital and ?40,96,71,500 as share premium) to the assessee's income under section 68. The assessee contended that all necessary documents, including PAN, bank statements, and income tax returns of the shareholders, were provided to prove the identity, creditworthiness, and genuineness of the transactions. The CIT(A) upheld the AO's addition, citing the failure of the shareholders to respond to the summons and the lack of tangible assets or significant income in their financial statements. However, the ITAT found that the AO did not conduct any field inquiries or utilize the Investigation Wing to verify the shareholders' credentials, thereby failing to substantiate the addition under section 68 adequately. The ITAT referred to several judicial precedents, including the decisions in Gangeshwari Metal (P) Ltd., Gagandeep Infrastructure Pvt. Ltd., and Creative World Telefilms Ltd., which emphasized that the primary onus to prove the genuineness of share application money lies with the assessee, but once the assessee provides prima facie evidence, the burden shifts to the revenue to disprove it. The ITAT concluded that the AO and CIT(A) did not bring any tangible material on record to justify the addition under section 68. The assessee had discharged its initial onus by providing substantial documentary evidence, and the revenue authorities failed to conduct a thorough investigation to counter the assessee's claims. Therefore, the ITAT allowed the assessee's appeal and deleted the addition of ?42,70,00,000. Conclusion: The ITAT ruled in favor of the assessee, holding that the revenue authorities failed to substantiate the addition under section 68 with adequate evidence and proper investigation. The reassessment proceedings and the revision order under section 263 were found to be procedurally valid, but the ultimate addition made by the AO was not upheld due to lack of sufficient inquiry and evidence.
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