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TMI Blog2017 (3) TMI 138X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that order of the AO was erroneous and prejudicial to the interest of the revenue. The reference in the impugned order regarding existence of nine share holders when in fact there are only six share holders, in our view is not very material. What is material is the quality of enquiry that was made by the AO. This enquiry was not proper and had not been carried to its logical conclusion. The fact that proceedings initiated in the case of the share applicants u/s 263 of the Act were dropped is not very material and that fact ipso facto cannot be the basis to conclude that proceedings u/s 263 ought not to have been invoked by the CIT in the case of the case of the assessee. Reference made by the ld. Counsel for the assessee to Instruction No.2 of 2015 of CBDT dated 29.01.2015 is thoroughly misplaced as those instructions of CBDT was given in the context of transfer pricing provisions u/s 92 of the Act and has no relevance to the present case. We therefore hold that jurisdiction u/s 263 was properly exercised by the CIT and his action does not call for any interference. - Decided against assessee. - ITA No.644/Kol/2015 - - - Dated:- 1-3-2017 - SHRI P.M.JAGTAP, AM AND SHR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to inform the AO of the persons who had subscribed to the share capital of the assessee regarding the amount paid by them as contribution to the share capital of the assessee. 5. The CIT also noticed from the copy of the bank statement of the assessee that there were several debit and credit entries of similar figures involving huge transactions during different periods. The Assessee being a newly formed company scrutiny in respect of the peculiar nature of such bank transactions were required to be made. Hence the CIT was of the view that thorough and proper inquiry into the existence, credit-worthiness and genuineness of subscribers in the case as claimed by the assessee company was not made by the A.O., nor the genuineness of the company and its directors were examined. 6. The CIT issued show cause notice u/s 263 of the Act. In reply to the show cause notice the assessee filed explanation for huge share premium, details of payments, source of funds, copy of income tax returns , Balance sheet and bank statements of the share holders etc. 7. The CIT after considering the submissions of the assessee was of the view that the modus operandi of the introduction of such b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed and was revised by order u/s 263 of the Act are identical: A. Contention of the assessee that since the AO of the assessee-company was not empowered to examine or make any addition on account of receipt of share capital with or without premium before amendment to section 68 by the Finance Act, 2012 w.e.f. A.Y. 2013-14 and hence the CIT by means of impugned order u/s 263 could not have directed the AO to do so, is unsustainable. B. Failure of the AO to give a logical conclusion to the enquiry conducted by him gives power to the CIT to revise such assessment order, by holding that :- i) the enquiry conducted by the AO in such cases can t be construed as a proper enquiry; ii) CIT u/s 263 can set aside the assessment order and direct the AO to conduct a thorough enquiry, notwithstanding the jurisdiction of the AO in making enquiries on the issues or matters as he considers fit in terms of section 142(1) and 143(2) of the Act, which is relevant only up to the completion of assessment ; iii) Inadequate inquiry conducted by the AO in the given circumstances is as good as no enquiry and as such, the CIT was empowered to revise the assessment order ; iv) The order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the CIT from revising order u/s passed u/s 147 of the Act. 9. The ld. Counsel for the assessee however submitted that the facts of the assessee s case stood on a different footing from the facts of the case decided by the Tribunal in the case of Subhlakshmi Vanijya Pvt. Ltd. vs. CIT (supra). In this regard he brought to our notice that share capital and share premium was received by the assessee was from six different persons as follows :- 10. He drew our attention to the order of CIT u/s 263 of the Act and pointed out that the CIT has presumed that there were nine share holders and the AO issued notices u/s 133(6) of the Act only to six out of the nine share holders. He pointed out that the AO had issued notices to all the six share holders. These share holders had filed reply to the notices issued u/s 133(6) of the Act issued by the AO in the course of the proceedings u/s 147 of the Act. These replies are placed at pages 29 to 34 of the assessee s paper book. He also pointed out that the CIT in the impugned order has also observed that the AO has failed to send any intimation to the persons of the AO who has subscribed to the share capital of the assessee. In this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es which were warranted in the facts and circumstances of the case. Apart from the above, we also find from para-16 of the impugned order that the CIT has clearly observed that order of the AO was erroneous and prejudicial to the interest of the revenue. 12. The reference in the impugned order regarding existence of nine share holders when in fact there are only six share holders, in our view is not very material. What is material is the quality of enquiry that was made by the AO. This enquiry was not proper and had not been carried to its logical conclusion. The fact that proceedings initiated in the case of the share applicants u/s 263 of the Act were dropped is not very material and that fact ipso facto cannot be the basis to conclude that proceedings u/s 263 ought not to have been invoked by the CIT in the case of the case of the assessee. Reference made by the ld. Counsel for the assessee to Instruction No.2 of 2015 of CBDT dated 29.01.2015 is thoroughly misplaced as those instructions of CBDT was given in the context of transfer pricing provisions u/s 92 of the Act and has no relevance to the present case. We are of the view that conclusions drawn by ITAT, Kolkata in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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