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2023 (3) TMI 406 - AT - Income TaxRevision u/s 263 by CIT - second round of revisionary proceedings u/s 263 - addition of unexplained cash credit - As per CIT assessment order framed u/s 143(3) is erroneous and prejudicial to the interests of the Revenue - As per CIT A.O passed the order without carrying out detailed investigation/ verification/ independent enquiry regarding identity, creditworthiness of the shareholders also the genuineness of transactions relating to share capital that was intended to be carried out and merely accepted the submission of the assessee in this regard - HELD THAT - Where there are two possible views and the Assessing Officer has taken one of the possible views, no action to exercise powers of revision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in case of inadequate inquiry. Our view is fortified by the judgment of CIT vs. Nirav Modi, 2016 (6) TMI 1004 - BOMBAY HIGH COURT We find that in the case of CIT vs. Anil Kumar 2010 (2) TMI 75 - DELHI HIGH COURT has held that where it was discernible from record that the A.O has applied his mind to the issue in question, the ld. CIT cannot invoke section 263 of the Act merely because he has different opinion. In the present case we observe that in the assessment proceedings u/s 143(3) of the Act were carried out in the case of the assessee for AY 2012-13 and ld. AO vide order held the share capital and share premium of Rs. 71.9 Cr as unexplained cash credit. The return of income was originally filed on 19.11.2011 at a loss of Rs. 74,252/-. In the second round of assessment proceedings ld. AO issued a notice u/s 142(1) of the Act dated 11.11.2016 and called for complete details about the share capital and share premium received by the assessee company as well as complete details of the investor companies. Complete details have been filed by the assessee. The finding of ld. AO in itself makes it amply clear that complete details were filed and the directors of the investor companies personally appeared before ld. AO on being called for by issuing summons u/s 131 - Their statements were recorded u/s 131 of the Act on oath and they also referred to various books of accounts and other relevant documents. Ld. AO was satisfied with the source of funds, identity and creditworthiness of the share applicants and genuineness of the transactions. The above finding clearly indicates that ld. AO conducted a complete enquiry and also examined all the relevant details as were directed by ld. Pr. CIT in the directions given in the order u/s 263 of the Act dated 17.10.2016. We also note that this is the second round of assessment proceedings. Even in the first round of the proceedings also all the share applicants replied directly to ld. AO enclosing the details of bank statement, financial audited balance sheet and profit and loss account, income tax return and other identity proof. Again in the second round, each and every detail have been examined by ld. AO. Therefore, complete enquiry has been conducted. Directors of the investor companies were called for and they have appeared and accepted the transactions. It is not the case of no enquiry or incomplete enquiry. In this is a case of complete enquiry conducted by ld. AO taking into consideration all the angles which need to be taken for examining such type of transactions which in some cases are bogus or in the nature of accommodation entries. We also find that ld. Pr. CIT has merely given directions but for coming to this conclusion he ought to have first discussed that what details remained to be called for by ld. AO. Ld. Pr. CIT ought to have conducted the preliminary enquiry and had found some discrepancies or some glaring fact which could indicate that the alleged share capital and share premium are bogus in nature. As considering the fact that in a case where ld. AO conducted detailed enquiry and the assessee has filed complete documentary evidences to the satisfaction of ld. AO and coupled with these documentary evidences the investors of the alleged share applicant companies have appeared before ld. AO and recorded the statements on oath explaining that the investor companies had sufficient legitimate fund to justify the investment in equity share capital of the assessee company and based on these details and submissions and detailed enquiry ld. AO after making proper application of mind and taking a view permissible under the law was satisfied that the assessee has duly explained the alleged share capital and share premium and which thus, do not call for any addition u/s 68. Pr. CIT grossly erred in assuming the jurisdiction u/s 263 of the Act and also erred in holding the assessment order dated 30.12.2016 as erroneous and prejudicial to the interests of the Revenue - Decided in favour of assessee.
Issues Involved:
1. Condonation of delay in filing the appeal. 2. Validity of the order passed under Section 263 of the Income Tax Act, 1961. 3. Examination of the assessment order's compliance with directions under Section 263. 4. Determination of whether the assessment order was erroneous and prejudicial to the interests of the Revenue. Detailed Analysis: 1. Condonation of Delay in Filing the Appeal: The appeal filed by the assessee was time-barred by 1209 days. The assessee filed a condonation application stating that the order under Section 263 dated 12.03.2019 came to their knowledge only on 24.08.2022, as it was not served earlier. The Tribunal found the reasons for the delay to be reasonable and condoned the delay, admitting the appeal for adjudication on merits. 2. Validity of the Order Passed Under Section 263 of the Income Tax Act, 1961: The primary grievance of the assessee was that the Principal Commissioner of Income Tax (PCIT) erred in invoking jurisdiction under Section 263 and holding the assessment order dated 20.03.2015 as erroneous and prejudicial to the interests of the Revenue. The PCIT had directed a de novo assessment, citing lack of proper inquiry and verification by the Assessing Officer (AO) regarding the share capital and share premium. 3. Examination of the Assessment Order's Compliance with Directions Under Section 263: In compliance with the PCIT's directions, the AO conducted a detailed inquiry during the reassessment proceedings. The AO issued notices under Sections 142(1) and 131, and the directors of the investor companies appeared and provided statements under oath. The AO verified the identity, creditworthiness, and genuineness of the transactions, concluding that the share capital and share premium were duly explained. 4. Determination of Whether the Assessment Order Was Erroneous and Prejudicial to the Interests of the Revenue: The Tribunal examined whether the AO's order was erroneous and prejudicial to the interests of the Revenue. It was noted that the AO had conducted a thorough inquiry, and the assessee had provided complete documentary evidence. The Tribunal referenced several judicial precedents, including the Supreme Court's decision in Malabar Industrial Co. Ltd. vs. CIT and the Bombay High Court's decision in CIT vs. Nirav Modi, which established that revisionary powers under Section 263 could only be exercised if the AO's order was both erroneous and prejudicial to the Revenue. The Tribunal found that the AO had made a detailed inquiry and applied his mind to the facts and circumstances of the case. The PCIT's directions for further inquiry were deemed unnecessary as the AO had already conducted a comprehensive investigation. The Tribunal cited its own decisions in similar cases, such as M/s. Bhagwati Vintrade Pvt. Ltd. vs. ITO and Swasti Realinfra Pvt. Ltd. vs. ITO, where it had quashed orders under Section 263 on similar grounds. Conclusion: The Tribunal concluded that the AO had conducted a proper and detailed inquiry and that the PCIT's order under Section 263 was not justified. The assessment order dated 30.12.2016 was restored, and the appeal filed by the assessee was allowed.
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