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2021 (3) TMI 328 - AT - Income TaxRevision u/s 263 - Addition u/s 68 - HELD THAT - For proving the identity of share applicants, the assessee furnished the name, address, PAN of share applicants together with the copies of balance sheets and Income Tax Returns. With regard to the creditworthiness of share applicants, these Companies are having enough capital and the investment made in the appellant company is only a small part of their capital. Transactions are also duly reflected in the balance sheets of the share applicants, so creditworthiness is proved. Even if there was any doubt if any regarding the creditworthiness of the share applicants was still subsisting, then AO should have made enquiries from the AO of the share subscribers as held by Hon ble jurisdictional High Court in CIT vs DATAWARE 2011 (9) TMI 175 - CALCUTTA HIGH COURT which has not been done, so no adverse view could have been drawn. Third ingredient is genuineness of the transactions, for which we note that the monies have been directly paid to the assessee company by account payee cheques out of sufficient bank balances available in their bank accounts on behalf of the share applicants. It will be evident from the paper book that the appellant has even demonstrated the source of money deposited into their bank accounts which in turn has been used by them to subscribe to the assessee company as share application. Hence the source of source of source is proved by the assessee in the instant case though the same is not required to be done by the assessee as per law as it stood/ applicable in this assessment year. The share applicants have confirmed the share application in response to the notice u/s 133(6) of the Act and have also confirmed the payments which are duly corroborated with their respective bank statements and all the payments are by account payee cheques. Assessee has discharged the onus on it; and twice the AO enquired about it and in the reassessment this issue has been thoroughly enquired as discussed supra and the view taken by AO is a plausible view in line with the judicial precedence supra and so it cannot be called erroneous. So the Ld PCIT erred in holding the AO s re-assessment order as erroneous. AO has conducted enquiries in respect of share capital premium collected by the assessee company before accepting the share subscribers identity, creditworthiness and genuineness of the transaction and being satisfied did not find it necessary to make any addition u/s 68 of the Act, which action could not have been interfered by the Ld. PCIT u/s 263 of the Act since the jurisdictional condition precedent for invoking the same is not satisfied in the facts of this case. However in case still if he (Ld. PCIT) wanted to exercise his jurisdiction despite the AO making enquiries as found by us then he (Ld. PCIT) should have himself conducted preliminary enquiry and should have been able to show that AO s enquiry was not correctly made by finding deficiency/infirmity in the documents/ material collected by the AO or even able to disprove the transaction of share capital by bringing material to suggest that the share transaction of assessee was an eye wash. This exercise the Ld. PCIT has not carried out. So according to us, in the light of the enquiries conducted by the AO in respect of share transaction, the Ld. PCIT could not have found the action of AO to be erroneous for want of no enquiry. And the view taken by the AO in respect of share transaction is a plausible view; and at any rate cannot be termed as un-sustainable view. We note that the action of Ld. PCIT smacks of arbitraries and is bad in law for non-application of mind and the Ld. PCIT proceeded on wrong, assumption of facts. Since the Ld. PCIT has interfered by invoking 263 jurisdiction without satisfying the condition precedent i.e. AO s order to be erroneous as well as prejudicial to the Revenue, the issuance of SCN and consequent impugned action is null in the eyes of law. Therefore, the assumption of revisional jurisdiction is bad in law and so quashed. - Decided in favour of assessee.
Issues Involved:
1. Jurisdiction of the Principal Commissioner of Income Tax (PCIT) to invoke revisional power under Section 263 of the Income Tax Act, 1961. 2. Examination of whether the Assessing Officer (AO) conducted adequate inquiries during the reassessment proceedings. 3. Validity of the additional ground of appeal regarding jurisdictional defects in the reassessment order passed under Section 147 of the Act. Detailed Analysis: 1. Jurisdiction of the PCIT to Invoke Revisional Power under Section 263: The main grievance of the assessee was that the PCIT did not enjoy the requisite jurisdiction to invoke revisional power under Section 263 for AY 2012-13. The assessee contended that the PCIT failed to satisfy the essential condition precedent as stipulated by the Statute, i.e., the AO's reassessment order must be erroneous as well as prejudicial to the interest of revenue. The PCIT issued a show-cause notice (SCN) stating that the AO did not examine the identity, creditworthiness, and genuineness of the transaction relating to share capital and share premium received by the assessee company. The assessee argued that this issue had already undergone scrutiny twice and was thoroughly investigated by the AO. The Tribunal found that the AO had indeed conducted thorough inquiries during the reassessment proceedings, including issuing notices under Sections 133(6) and 131 of the Act, and had accepted the identity, creditworthiness, and genuineness of the share transactions. The Tribunal concluded that the PCIT's finding of no inquiry was erroneous and that the AO's view was a plausible one in line with the judicial precedents. Therefore, the PCIT's invocation of Section 263 was quashed as it did not satisfy the conditions precedent. 2. Examination of Whether the AO Conducted Adequate Inquiries: The Tribunal examined the history of the assessment and found that the AO had reopened the original assessment based on information received from the Investigation Wing regarding dubious share capital raised by the assessee. During the reassessment proceedings, the AO conducted hearings on eight occasions, issued notices under Sections 143(2) and 142(1), and summoned various documents to substantiate the identity, creditworthiness, and genuineness of the share transactions. The AO also issued notices under Section 133(6) to the share applicants and recorded the statement of the director of the assessee company under oath. The Tribunal noted that the AO had accepted the share capital and premium after thorough investigation, which was a plausible view as per the law applicable for AY 2012-13. The Tribunal held that the PCIT's finding of no inquiry was perverse and that the AO had discharged his duty as an investigator and adjudicator in accordance with the law. 3. Validity of the Additional Ground of Appeal: The assessee raised an additional ground of appeal contending that the reassessment order itself was not valid due to various jurisdictional defects. However, since the Tribunal had already allowed the legal issue that the PCIT lacked jurisdiction to invoke Section 263, it did not adjudicate the additional ground of appeal as it had become academic. Conclusion: The Tribunal allowed the appeal of the assessee, quashing the PCIT's invocation of Section 263, as the AO had conducted adequate inquiries during the reassessment proceedings, and the PCIT's action was found to be based on erroneous assumptions. The additional ground of appeal was left open as it had become academic.
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