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TMI Blog2019 (5) TMI 1592X X X X Extracts X X X X X X X X Extracts X X X X ..... nd circumstances of the case, we do not find any reason that there was any lack of enquiry done by the AO or non-application of mind qua the creditworthiness or genuineness of the transaction. Once, the Assessing Officer has found that a transaction is not in terms of any money after the detailed inquiry and getting the entire records from these 15 companies, then we are unable to appreciate as to how the CIT had reached to a conclusion that the Assessing Officer has failed to investigate the genuineness and creditworthiness of source of funds credited in the books of account of the assessee company. Here in this case, firstly , identity of the parties cannot be in dispute; secondly , the genuineness of the transaction is fully proven by the fact that these companies have given shares to the assessee in lieu of shares allotted to them; and lastly , there is no requirement to examine the creditworthiness of any sum advanced or invested by these companies because there is no transaction in terms of cash/money. The source of investment which has been transferred to the assessee company is flowing from their balance sheets as these shares were held by these companies as invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Scrutiny Assessment in the case of the assessee for AY-2011-12 u/s 143(2) was selected through CASS and notice was sent on 12-08-2013. The return for AY 2011-12 was filed on 12-12- 2012. The CASS reasons for selection of the case for AY-2011-12 was Large Share Premium Received . However, form B/s for AY- 2011-12, no such introduction of Share Capital, Share Premium (Reserve Surplus), Unsecured Loans, Investments were seen. There were no changes in them in the AY 2011-12. The assessee was asked to file B/s for AY 2010-11 wherein it could be seen that the introduction of new Share Capital amounting to ₹ 48,40,520/-, Share Premium (Reserve Surplus) amounting to ₹ 11,61,72,480/- and also Investments of ₹ 12,07,70,000/- had taken place. The assessee has not filed the ITR for AY 2010-11. Therefore the above mentioned new introductions in share capital, share premium with related investments are required to be scrutinized as it could not be done due to assessee's non- filing of ITR for AY-2010-11. Due to this reason the share capital, share premium and Investments are not scrutinized in the AY 2011-12; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment order passed u/s 147/143(3) dated 29.03.2015 for the A.Y. 2010-11 is erroneous in so far as it is prejudicial to the interest of revenue and hence needs a review u/s 263 of the IT Act, 1961. 3. Ld. Pr. CIT in his impugned order had incorporated exactly the same reasoning as was proposed by the Assessing Officer vide letter dated 20.04.2015, placed at paper book page 537 to 543, and held that the order framed by the Assessing Officer u/s. 147/143(3) is not only erroneous in law but also prejudicial to the interest of Revenue. Accordingly, he set aside the assessment with the direction to reframe the assessment de novo. The main facts noted by the ld. Pr. CIT, can be summarised as under: (i). Prior to issuance of notice u/s. 148, the assessee had not filed its return of income for the assessment year 2010-11. (ii). The balance sheet of the assessee as on 31.03.2010 reveals that the assessee has issued 4,94,052 equity shares at a face value of ₹ 10/- and premium of ₹ 240/- per share. The paid up capital was increased from ₹ 1,00,000/- to ₹ 49,40,520/- and the assessee had reserves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... themselves did not had any financial worth. Further, Form No. 2 and other documents filed with the ROC were only after a lapse of four years of share application money, i.e., on 25.02.2014. On these reasons, he set aside the assessment order. 4. Before us, the ld. counsel for the assessee, first of all raised legal objection that here in this case, the Assessing Officer has sent a proposal to the Pr. CIT to initiate proceedings u/s. 263 and without any independent application of mind, the ld. Pr. CIT has initiated the revisionary proceedings u/s. 263. There has to be independent application of mind after the Pr. CIT has examined the assessment records himself and then reach to a conclusion that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue and he cannot acquire jurisdiction merely on the proposal of the Assessing Officer. In support, he relied upon following decisions: (i). Kishore Madnani vs. CIT (ITA No. 508/JP/2013- order dated 31.01.2014) (ii). Shri Dharmendra Kumar Bansal vs. CIT (ITA No. 350/JP/2013- order dated 28.02.2014. (iii) Shri Gaurav Bhatia vs. CIT ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of money which has been found to be credited in the books of account of the assessee maintained for any previous year. Once, there is no money or amount received against the issue of shares, then where is the question of invoking the deeming provision of section 68. Hence, on this ground also, the impugned revisionary order deserves to be quashed. 5. On the other hand, the ld. DR strongly supported the order of Ld. PCIT and submitted that mere filing of all the documents by the assessee does not mean that the AO has examined the issue. The Assessing Officer has to conduct proper enquiry about the creditworthiness and genuineness of the transaction specifically when proceedings have been initiated u/s. 147. Even from the perusal of the documents furnished by these companies like, Income-tax returns, balance sheet, profit and loss account, it can be seen that the income of all the 15 companies did not commensurate with the amount of share application money and share premium. This shows that there was no application of mind of the Assessing Officer on the details furnished by the assessee. He further submitted that the assessment order is very crypti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e set aside to the Assessing Officer for fresh assessment. In support of this proposition, he relied upon the judgment of Pr. CIT vs. Delhi Air Port Express Pvt. Ltd. ITA No. 705/2017 order dated 05.09.2017 . 7. We have heard the rival submissions, the judgments relied upon by the parties, findings given in the impugned order as well as various material and documents referred to before us at the time of hearing. In this case, action u/s. 147 was taken by the Assessing Officer only to examine the introduction of share capital and share premium aggregating to ₹ 12,10,13,000/-. From the records submitted before us, we find that the Assessing Officer in his notice u/s. 142(1) dated 17.07.2014 apart from asking various other details, had specifically asked for new share application money and share premium received during the financial year and to file confirmations along with all the details and also required the assessee to justify as to under what circumstances, shares were issued at such a high premium. In response, the assessee had filed detailed reply along with the documents as are available in the paper book. It was also informed to the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om Bankey Confirmation from Bankey for subscribing the shares of assessee Agreement for purchase of shares Allotment letter from Salasarji Infosoft Leasing P Ltd. to Bankey -do- from Maharathi Steel P Ltd. to Bankey -do- from Realframe Infrastructure P Ltd. to Bankey -do- from Flima Ispat P Ltd. to Bankey -do- from Subham Shoppers Khazana P Ltd. to Bankey -do- from Kanhaiya Impex Ltd. to Bankey Affidavit by director of Bankey Certificate of Incorporation of Bankey M/S. Jaguar Softeeh (P) Ltd t₹ 90,00,000/-) Notice U/s. 133(6) dtd. 27.10.14. Reply dtd. 03.1 1.14 of notice U/s. 133(6) ITR Ack. -A.Y. 10-11. Audited Financial statements - A.Y. 10-11. Ledger A/c of assessee in the books of Jaguar - A.Y. 10-11. Confirmation of A/c from Jaguar Confirmation from Jaguar for subscribing the shares of assessee Agreement for purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd (₹ 85,00,000/-) Notice U/s. 133(6) dtd. 27.10.14. Reply dtd. 04.11.14 of notice U/s. 133(6) PAN Card ITR Ack. -A.Y. 10-11. Audited Financial statements - A.Y. 10-11. Ledger A/c of assessee in the books of Royal - A.Y. 10 - 11. Confirmation of A/c from Royal Confirmation from Royal for subscribing the shares of assessee Agreement for purchase of shares Allotment letter from Upvan Leasing P Ltd. to Royal Affidavit by director of Royal Certificate of Incorporation of Royal M/S. Greenvision Construction (P) Ltd (₹ 70,00,000/-) Notice U/s. 133(6) dtd. 27.10.14. Reply dtd. 07.11.14 of notice U/s. 133(6) PAN Card ITR Ack -A.Y. 10-11. Audited Financial Statement - A.Y. 10-11. Ledger A/c of assessee in the books of Greenvision - A.Y. 10 - 11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Reply dtd. 04.1 1.14 of notice U/s. 133(6) ITRAck. -A.Y. 10-11. Audited Financial statements - A.Y. 10- 11. Ledger A/c of assessee in the books of Join Fashion - A.Y. 10 11 Confirmation of A/c from Join Fashion Confirmation from Join Fashion for subscribing the shares of assessee Agreement for purchase of shares Confirmation for applying the shares by Bhoomi Earthmovers P Ltd. to Join Fashion Allotment letter from Prabhash Motor Finance Co. P Ltd. to Join Fashion -do- from Saral Communications P Ltd. to Join Fashion Affidavit by director of Join Fashion Certificate of Incorporation of Join Fashion M/S. Accent Telecom Services (P) Ltd (₹ 89,00,000/-) Notice U/s. 133(6) dtd. 27.10.14. Reply dtd. 03.11.14 of notice U/s. 133(6) ITR Ack. -A.Y. 10-11. Ledger A/c of assessee in the books of Accent - A.Y. 10-11. Confirmation of A/c from Accen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/S. Transmission Mercandise (P) Ltd (₹ 45,00,000/-) Notice U/s. 133(6) dtd. 27.10.14. Reply of notice U/s. 133(6) ITR Ack. -A.Y. 10-11. Audited Financial statements - A.Y. 10-11. Ledger A/c of assessee in the books of Transmission - A.Y. 10-11. Confirmation of A/c from Transmission Confirmation from Transmission for subscribing the shares of assessee Agreement for purchase of shares Confirmation for applying the shares by Ganesh Ganga Investment P Ltd. to Transmission Affidavit by director of Transmission Certificate of Incorporation of Transmission M/S. White Collar Management Services (PI Ltd (₹ 43,40,000/-) PAN Notice U/s. 133(6) dtd. 27.10.14. Reply dtd. 03.11.14 of notice U/s. 133(6) ITR Ack. -A.Y. 10-11. Audited Financial statements - A.Y. 10 - 11. Ledger A/c of assessee in the books of White Collar - A.Y. 10 - 11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (36400 Eq shares of ₹ 10 each at a premium of ₹ 240 per share) Salasarji Infosoft Pvt. Ltd. Maharthi Steels Pvt. Ltd. Real Frame Infrastructure Pvt. Ltd. Welco Agencies Pvt. Ltd. Kanahiya Impex Limited Shubham Shoppers Khazana (P)Ltd. Hima Ispat Pvt. 15000 23000 15000 1600 10000 2000 600 100 100 100 1250 100 100 1000 1500000 2300000 1500000 2000000 1000000 200000 600000 9100000 2 Saffron Logistics Pvt. Ltd. (37680 Eq shares of ₹ 10 eac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8000000 5 Rhythm Exim Pvt. Ltd. (36412 Eq shares of ₹ 10 each at a premium of ₹ 240 per share) Upvan Leasing Pvt. Ltd. Saffron Logistics Pvt. Ltd. 4000 510300 1000 10 4000000 5103000 9103000 6 Royal Mirage Financial Consultants (P) Ltd. (34000 Eq shares of ₹ 10 each at a premium of ₹ 240 per share) Upvan Leasing Pvt. Ltd. Sainger Capital . Securities Pvt. Ltd. 5000 35000 1000 100 5000000 3500000 8500000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8000000 11 At a premium of ₹ 240 per share) Ganesh Ganga Investment Pvt. Ltd. Rhythm Exim Pvt. Ltd. 45000 190000 100 10 4500000 1900000 8900000 12 Subh Propbuild Pvt. Ltd. (34000 Eq shares of ₹ 10 each at a premium of ₹ 240 per share) Rewin Ceramics Pvt. Ltd. Saral Communications Pvt. Ltd. Ganesh Ganga Investment Pvt. Ltd. Prabhas Motor Finance Co. Pvt. Ltd. 20000 12500 5000 7000 100 200 100 500 2000000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven details of investments held by them which duly disclosed in their respective balance sheets which has been transferred or sold to the assessee in lieu of which the assessee has allotted shares to these companies. For instance, one of the company, Saffron Logistics Pvt. Ltd. in response to notice u/s. 133(6), vide letter dated 07.11.2014 had stated as under: 07th November, 2014 To, Income Tax Officer, Ward 3(2), 385A, CR Building, ITO, New Delhi Respected Sir, Ref : Your notice dated 22/10/2014 for information required as per section 133 (B) in case of CANTON TEXTILE MILLS P. LTD. for A.Y. 2010-11 reg.- In above reference our submission is stated as following : That copy of ledger account for transactions with concerned company for F.Y. 2003-10 as per books of our company is attached for your kind reference. That we have not made any payment or received any amount by cash or bank from the said company during F.Y. 2003-10. That our company has subscribed 37680 equity shares o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, i.e., in cash or cheque, then deeming provision of section 68 will not apply. 11. Here in this case, what the ld. Pr. CIT in the impugned revisionary order has noted is that, all these companies have declared very meager amount of income and also these companies have substantial amount of investment in their balance sheet in the form of shares and share premium and nothing has been received in dividend and profit from these investments. What is required to be seen in such cases, where the issue of creditworthiness of the sum invested is at focal point is, whether these companies had financial worth or capital or investment or income to make such huge investments in a company. If the entities making investments are unable to offer explanation about the nature and source of investment in the form of share application money, then deeming provision of section 68 can be invoked for taxing the said amount in the hands of the assessee. Here in this case, once there is no transaction in terms of any money, then there could be no question of seeing the creditworthiness by way of their annual revenue or income. The reason being, all these companies were holding investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer was insufficient or there is no verification of the evidences. This proposition is fully supported by the judgments of Hon ble Jurisdictional High Court as relied by the ld. Counsel. Explanation 2 contemplates a situation where Assessing Officer has passed the order without making any inquiry or verification. The said Explanation cannot be invoked where Assessing Officer has called for the evidences and sought assessee s explanation and has verified the evidences and then carried out inquiry u/s 133(6) from the parties from where he gathered that no money in form of cash or cheque has been received in lieu of share subscription and share premium. Under these facts and circumstances the assessment order cannot be set aside on the ground that no inquiry has been made or such an order is erroneous and prejudicial to the interest of revenue. Accordingly, we quash the impugned revisionary order u/s. 263 and restore the assessment order. 13. In the result, the appeal is allowed. Order pronounced in the open court on 4th April, 2019 - - TaxTMI - TMITax - Income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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