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TMI Blog2017 (4) TMI 614X X X X Extracts X X X X X X X X Extracts X X X X ..... return for the financial year 2007-08 showing loss of Rs. 6812/-. Total income of the assessee was shown to be nil. The return of the assessee was duly processed by the assessing officer, who had accepted the return. It appears from Annexure "A" to the stay petition (GA No. 3855 of 2015) taken out by the assessee in connection with this appeal that it was observed from the submission made by the assessee on 19th February, 2010 that it had earned consultancy fees of Rs. 32,500/- in cash, which was not included in its gross total income shown in the profit and loss account. In such circumstances, notice was issued under Section 148 of the Income Tax Act, 1961 taking into account the said sum of Rs. 32,500/- as the sum which had escaped assessment. The assessee's response was that the return filed by it was its final return. Thereafter, notice was issued under Sections 143 (2) and 142 (1) of the Income Tax Act, 1961. Finally, assessment was completed by passing an order on 9th April, 2010 adding back Rs. 32,500/- with the total income of the assessee. 2. As regards infusion of share capital at a premium, to which we have referred in the preceding paragraph, assessee's case is that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er was passed mechanically which was liable to turn the assessment erroneous and cause prejudice to the interest or revenue. In view of these facts, the assessee was asked to explain as to why the assessment should not be set aside u/s.263." (quoted verbatim) 4. The Commissioner in that order issued on 22nd March, 2013 observed and directed:- "I have considered the facts of the case and the decisions of the superior Courts cited above. I am of the opinion that the A.O. by not pursuing the inquiries to their logical end has made the order erroneous and prejudicial to the interest of revenue. The order is, therefore, set aside and the A.O. is directed to carry out through & detailed enquiries in the case. He should carry out inquiries about the various layers through which the share capital has been rotated. The A.O. is also directed to summon the present & past Directors of the assessee company and the subscriber companies and examine them. The A.O. should also examine as to when this company was sold. At that point of time the fictitious assets such as shares in other companies or loans given to other companies is converted back into cash by credit in the assessee company's ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered the judgement in Rajmandir Estates Private Limited (supra) upon considering the decision of the Tribunal in M/s.Subhlakshmi Vanijya Pvt. Ltd. (supra). On the same points of law and similar factual issues, we had considered ten appeals of different assessee and by a composite judgment delivered by us on 7th March, 2017 in M/s. Pragati Finance Management Private Limited Vs. CIT - II, (ITAT No. 178 of 2016), we dismissed those appeals, finding the points raised therein to be covered by Rajmandir (supra). The broad points raised by the assessees in those two appeals were that till certain amendments were effected to Sections 68 and 56 of the Act was effected by the Finance Act, 2012, the inquiry as directed by the Commissioner in his order under Section 263 of the Act was impermissible. By amendment of Section 68 by the 2012 Finance Act, two provisos were added specifying circumstances under which explanation of the assessee as regards infusion of funds as share application money, share capital and share premium would be deemed to be not satisfactory. Cash credits under similar heads, again under certain circumstances were mandated to be chargeable to income tax under the head - " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner ought to have confined his decision, while exercising power under Section 263 of the Act, only to the issue on which reassessment was made under Section 147/143(3) of the Act. The Commissioner, Mr. Agarwal has asserted, could not have had travelled beyond the grounds which triggered off the reassessment process. Mr. Agarwal's case is that in the earlier judgments of this Court, this question was not addressed to. The authorities relied upon by him on this point are (i) Commissioner of Incometax, Chennai Vs. Alagendran Finance ltd. [293 ITR 1(SC)] and Ranbaxi Laboratories Ltd. Vs. Commissioner of Income Tax [336 ITR 136 (Delhi)]. In the latter case, the assessing officer had issued notice under Section 148 of the 1961 on the ground that certain items from the assessee's accounts had escaped assessment. The assessing officer was satisfied with assessee's explanation over these heads and no disallowance was made by the assessing officer in respect of these items. In the reassessment proceeding, however, the assessing officer found certain other deductions to have had been wrongly claimed and reduced the claim of deduction. This was found to be impermissible by the Delhi H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceeding for reassessment, the triggering factor, being consultancy fees which had escaped assessment, was accepted by the assessing officer for undertaking the exercise of reassessment. Thus, it was permissible for the reassessing authority to widen the scope of reassessment. The judgment of the Delhi High Court in the case of Ranbaxy (supra) does not aid the appellant in its endeavour to invalidate the revisional proceeding. The principles enunciated in the case of Alagendran Finance (supra) also cannot rescue the appellant, as infusion of share capital formed part of the reassessment procedure. The revisional proceeding was thus commenced within the limitation period prescribed under Section 263(2) of the Act. The Tribunal has rightly held in the order impugned that limitation period for passing the order is to be counted from the date of passing the order under Section 147 read with Section 143(3) of the Act and not the date of intimation issued under Section 143(1) of the Act. We, as such, do not find the first suggested question to contain any substantial question of law. 10. Mr. Agarwal also ought to contend that there was no error in the order of reassessment and it coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee commenced business. The Tribunal found that though the explanation in respect of those cash credit entries were not true, yet from the proved circumstances those cash credits could not be held to be the income of the assessee. The Revenue failed in their appeal before the High Court and also the Supreme Court. The Supreme Court, inter alia, held:- "In our opinion, though the order of the Tribunal is not happily worded, its finding appears to be that in the very nature of things the assessee could not have earned such a huge amounts of profits very soon after it commenced its activities." The Supreme Court further observed in this judgment:- "Hence, it is reasonable to assume that those cash credit entries are capital receipts though for one reason or the other the assessee had not come out with true story as regards the person from whom it got those amounts......." 13. That judgment was delivered, as we have already observed, under the 1922 Act. The question relating to cash credit receipts was also considered by the Gujarat High Court in the case of Mitesh Rolling Mills (P) Ltd. (supra) and it has been observed in this judgment that the 1922 Act did not have any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equire the service of notice u/s 263 strictly as per the terms of section 282 of the Act. The only requirement enshrined in the provision is to give an opportunity of hearing to the assessee, which has been complied with in all such cases." 15. Mr. Agarwal has relied on the judgment of the Supreme Court in the case of C.I.T. vs. Ramendra Nath Ghosh, [(1971) 82 ITR 888 (SC)] to contend that there was no proper service of the notice to show-cause and the order passed by the Commissioner under section 263 of the 1961 Act was in breach of the principles of natural justice. In that case, it was held, on the aspect of non-service of notice, that substituted service in the manner provided under the Code of Civil Procedure ought to have been resorted to if service through regular course could not be effected. That was a judgment delivered under the provisions of 1922 Act. The said Act provided that a notice thereunder could be served on the person named therein either by post or, as if it were a summons issued by a court, under the Code of Civil Procedure. The dispute in that case was also over service of notice relating to proceedings under the 1922 Act and there was evidence of notices ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rthermore, we find from the order of Tribunal that the appellant was heard at length on factual as well as legal issues. We do not consider it necessary to go into the question as to whether Section 282 of the Act requires compliance or not for effecting service of notice in respect of a proceeding under Section 263 of the Act as we are of the opinion that substantial compliance of the provision of Section 282(1) has been effected in the case of the assessee. We do not find any perversity on the finding of the Tribunal on this issue. This issue also, in our opinion, does not involve any substantial question of law warranting our interference. 17. The question nos. 4 and 5, which were suggested by Mr. Agarwal, are already covered by our judgment in the case of Pragati (supra) and in the judgement of the Coordinate Bench in the case of Rajmandir (supra). In Pragati (supra), we have specifically held that the exercise which is contemplated by the impugned order of the Commissioner was permissible under Section 68 of the 1961 Act, as it stood prior to its amendment by the Finance Act, 2012. We found, in that judgment, that it was not necessary to deal with the question of retroactivit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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