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TMI Blog2021 (3) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Ld. Pr. CIT u/s. 263 is bad in law. Hence, we quash the same. - ITA No. 303/Kol/2020 - - - Dated:- 17-2-2021 - J. Sudhakar Reddy , Member ( A ) And S. S. Godara , Member ( J ) For the Appellant : S. M. Surana , Advocate For the Respondents : Imokaba Jamir , CIT , D/R ORDER J. Sudhakar Reddy, Member (A) This appeal filed by the assessee is directed against the order of the Learned Pr. Commissioner of Income Tax (Appeals)-4, Kolkata, (hereinafter the Ld. Pr. CIT ), passed u/s. 263 of the Income Tax Act, 1961 (the 'Act'), dt. 20/02/2020, for the Assessment Year 2013-14, wherein he set aside the order of the Assessing Officer passed u/s. 263 r.w.s. 143(3) of the Act on 22/12/2017 for de novo assessment on the specified issue of addition u/s. 68 of the Act of share capital received along with share premium. 2. The facts of the case are brought out at page 1 of the assessment order. This is extracted for ready reference:- In the instant case Assessee Company had filed its return of Income for the A.Y. 2013-2014 declaring total loss at ₹ 96,30,335/- on 26.09.2013. The same was processed u/s. 143(1) of the I.T. Act, 61 on the returne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision u/s. 68 of the IT Act, 61 and may be entangled accordingly for taxation. Otherwise, it is next to impossible to prove any credit clearing transaction transacted through electronic system as unexplained credit and should not be taxed within the purview of IT Act, 61. Unless department showing that the investment made by subscribers actually emanated from coffers of assessee to be treated as undisclosed income of the assessee. No such transaction has been identified from the documentary evidence collected from various enquiries especially in the bank statement of any share holding companies where from adverse inference can be drawn. It is observed that the shareholders are private limited companies, registered with the Ministry of Corporate, regularly filing its return of income stating the Fairview state of affairs and letter issued u/s. 133(6) and summon/s 131 of the I.T. Act, 61 were duly received. So, it may be established that the share holding companies have an established identity. Moreover, the directors of all the companies have responded to summons u/s. 131 with the evidences as asked for. Moreover, addresses have been verified with the PAN database and found corr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f shares was of face value of ₹ 10/- at the beginning of the year was ₹ 338.37 ps. He further pointed out that the share capital and free reserves at the closing of the year had a break up value of share at ₹ 352/- on a face value of ₹ 10/- per share. He submitted that during the year, the assessee had issued 1,49,391 shares to M/s. Lakshmi Dealmark Private Limited at ₹ 338/- per share, which included face value of ₹ 10/- and premium of ₹ 328/-. He submitted that the share value got approved from the valuer and that all these shares were allotted to a group concern of the assessee and not to any outside person/party. He pointed out that the capital and reserves of M/s. Lakshmi Dealmark Private Limited was ₹ 14.65 Crores. He submitted that all these facts with documents and details were filed before he Assessing Officer and despite the share holder company being a group company having creditworthiness and despite the fact that the share premium was genuine and supported by facts and was accepted, the addition was made by the Assessing Officer in the original assessment order passed u/s. 143(3) of the Act. The Ld. Pr. CIT, set aside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts no addition can be made u/s. 68 of the Act, in this case and the Ld. Pr. CIT, without relevance to the facts of the case passed the order u/s. 263 of the Act, directing addition wherever share capital is received by the company from a group company and where the share premium charged is perfectly justified based of the audited financial statement of the assessee company. He prayed that the order passed by the Ld. Pr. CIT u/s. 263 of the Act be quashed. 9. The Ld. D/R, on the other hand, opposed the contentions of the assessee and submitted that the Assessing Officer has merely collected information and not applied his mind to the facts of the case and had simply accepted the arguments of the assessee. He referred to para 5 of the Ld. Pr. CIT's order at page 11 and submitted that a clear finding has been given that the details and documents were not examined judiciously and that there were not enough enquiries made to reach a logical conclusion. He argued that the Assessing Officer has not discussed about the shares issued and shares subscribed and had also not worked out the shares issued with premium and shares issued on face value without premium. He pointed out t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im of the assessee. The Ld. Pr. CIT in his order u/s. 263 of the Act dt. 29/02/2020, states that the Assessing Officer has not examined the details judiciously and that there were not enough enquiries made. This finding is factually incorrect. It is not the case of the Ld. Pr. CIT that this is a case of no enquiry or a case where the Assessing Officer has not applied his mind. It is settled law that an assessment order passed u/s. 143(3) of the Act, cannot be revised on the ground that, in the opinion of the Ld. Pr. CIT, the enquiries were not adequate. The observations of the Ld. Pr. CIT demonstrates that his grievance is that the conclusions drawn by the Assessing Officer based on the examination of evidence are different from the conclusions that might have been drawn by him had he been the Assessing Officer. This is no ground for making a revisions. The recordings of the Ld. Pr. CIT that the Assessing Officer has not examined the justification of fixing of share premium or that has not examined or enquired into the authenticity of the transaction, and that he has not enquired the possibility of the transaction being sham and the activity being a case of laundering of unaccou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his first revisional order has clearly made a finding that From the above discussion it is evident that the assessment proceedings in the case of assessee was completed in a very casual manner and hurried manner flouting all established procedures. The assessee had discharged its onus by furnishing/documents before the AO. Further, the First Ld. Pr. CIT mainly found fault with the AO's order for non-issuance of notice u/s. 133(6) of the Act to the shareholders. The First Ld. Pr. CIT found fault with the AO's order in not discussing the basis of evidence on which adverse inference was drawn against the assessee. Moreover, the First Ld. Pr. CIT found fault with the AO for not bothering to examine the contention of the assessee or to bring on record anything against the assessee and thus according to him, the AO with a pre-determined mind has simply jumped to the conclusion that the share capital collected by assessee as unexplained cash credit u/s. 68 of the Act. Therefore, according to the First Ld. Pr. CIT, the first original assessment order framed u/s. 143(3) of the Act dated 26-03-2015 was against the principle of natural justice and, therefore, he found it fit to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Shivarshi Construction Pvt. Ltd. U45400WB2011PTC170957 AAQCS7848M yes 6. M/s. Shivashiv Pvt. Ltd. U74999WB2012PTC 173749 AARCS0094C yes 7. M/s. Flowtop Agency Pvt. Ltd. U52190WB2012PTC 173352 AABCF9036D yes 8. M/s. SukhSagar Residency Pvt. Ltd. U45400WB2011PTC170958 AARCS1553N yes 9. M/s. Kamaldhan Developers Pvt. Ltd. U45400WB2011PTC170944 AAECK6810D yes 10 . M/s. LabhdhanImpex Pvt. Ltd. U51909WB2011PTC171524 AACCL2111J yes 11 . M/s. SubhsreeImpex Pvt. Ltd. U51909WB2011PTC171513 AARCS1845D yes 12 . M/s. Maharaja Merchants Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have easily verified the identity of the share applicant which is available in the website of Ministry of Corporate Affairs and the ITR Acknowledgments filed by them, will enable the AO to cross verify and collect details from the AO of the respective share applicants and independently from the Revenue's departmental data base. We note that all the share subscribing parties filed all the documents called for by the AO [PB-2] and were also examined by the AO along with audited accounts from which these details show their identity. 51. Thus, we note that the AO after verification as aforesaid, has not drawn any adverse opinion or doubted the identity of the share applicants which view of AO is a possible view in the light of the documents referred to and we also by applying the presumption in section 114 of Indian Evidence Act 1872, we presume that the quasi-judicial act of the second AO have been regularly performed. Coming to the contention of Ld. CIT, DR, that order sheet maintained by the Second AO does not reveal that AO had issued notice u/s. 133(6) of the Act to the share subscribers, we note that the AO in his reassessment/second assessment order has clearly asserted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance sheet as on 31.03.2012 as well as the sum invested by them in the assessee is discernible as under: Name Source of investment Capital Reserves Sum invested in assessee s business M/s. K. R. Overseas Pvt. Ltd. Page 8 Paper Book-2 ₹ 66,77,47,921 (page 22 PB-2 ) ₹ 1,30,000/- M/s. Kakrania Trading Pvt. Ltd. Page 45Paper Book-2 ₹ 66,52,71,914 (page 62 PB-2 ) ₹ 1,39,00,000/- M/s. AmbalaTrafinpvt. Ltd. Page 88Paper Book-2 ₹ 624,711,003 (page 101 PB- 2 ) ₹ 4,40,00,000/- M/s. Subhiksha Pvt. Ltd. Page 115Paper Book- 2 ₹ 222,397,317 (page 128 PB-2 ) ₹ 45,00,000/- M/s. Shivarshi Construction Pvt. Ltd. Page 146Paper Book-2 ₹ 53,89,95,046 ( page 153 PB-2 ) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we note that the source of the investments has been clearly brought to the notice of the second AO during the assessment/reassessment proceedings. Further, the bank statements of all the shareholders as well as that of assessee were filed before the AO, which revealed that the share capital and premium have been subscribed by them through banking channel (NEFT or cheque) which goes on to show that the assessee has discharged the onus in respect of genuineness of the transaction. Based on the documents and materials called for by the AO who accepted the same after verification is an act of enquiry. And we note that revenue has not brought on record any material to challenge the veracity of the documents referred to above. Moreover, the second Ld. Pr. CIT in his impugned order has not brought any material to rebut the presumption of second AO to justify his intervention u/s. 263 of the Act and which would have upset the decision of the second AO's factual view on the identity, creditworthiness and genuinity of the share transaction. In such a scenario, the second AO's view based on the documents referred to by him is a plausible view and in consonance with judicial precedent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. This company has furnished the details of source of Funds and has duly filed financial statements and thus we note that the assessee had duly discharged its onus to prove the identity of the share applicant by adducing PAN as well as income-tax returns. The financial statement shows that the share applicants had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Further, it is noted that the share applicant had furnished the source of investment made in the assessee-company after getting the notice under section 133(6) of the Act. (iii) We note from a perusal of the paper book-2 pages 78 to 111, the details of share applicant M/s. Ambala Trafin Pvt. Ltd. It is a Private Limited Company which has a PAN AACCA1184G and its CIN number is U67120WB1995PTC074397 and the Net worth of this company as on 31.3.2012 ₹ 62,47,11,003/- (PB-page 101) and investment made in the assessee company is to the tune of ₹ 4,40,00,000/- and this share applicant has made the transaction through banking channel on 01.03.2012 ₹ 25 lakhs; and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de in the assessee-company after getting the notice under section 133(6) of the Act. (v) We note from a perusal of the paper book-2, pages 138 to 159 the details of share applicant M/s. Shivarshi Construction Pvt. Ltd. It is a Private Limited Company which has a PAN AAQCS7848M and its CIN number is U45400WB2011PTC170957 and the net worth of this company as on 31.3.2012 ₹ 53,89,95,046/- (PB-page 153) and investment made in the assessee company is to the tune of ₹ 4,66,00,000/- and this share applicant has made the transaction through banking channel on 29.03.2012 ₹ 4,66,00,000/- through Cheque. There is board resolution for investment in assessee's company and Share Application Form Bank statement, ITR acknowledgement, explanation of source of fund as well as financial statement available in the PB-page 139 to 159 in the PB. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. This company has furnished the details of source of Funds and has duly filed financial statements. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement and thus we note that the assessee had duly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t worth of this company as on 31.3.2012 ₹ 15,38,94,946/- (PB-page 200) and investment made in the assessee company is to the tune of ₹ 4,49,00,000/- and this share applicant has made the transaction through banking channel on 30.03.2012 ₹ 4,49,00,000/- through Cheque.. There is board resolution for investment in assessee's company and Share Application Form, Bank statement, ITR acknowledgement, explanation of source of fund as well as financial statement available in the PB-page 186 to 206 the PB. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statements and thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Thus the assessee has discharged the onus to prove the identity, creditworthiness and genuineness of the transactions. Further, it is noted that the share applicants had furnished the source of investment made in the assessee-company after getting the noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. This company has furnished the details of source of Funds and has duly filed financial statements. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. This company has furnished the details of source of Funds and has duly filed financial statements. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Thus the assessee has discharged the onus to prove the identity, creditworthiness and genuineness of the transactions. Further, it is noted that the share applicants had furnished the source of investment made in the assessee-company after getting the notice under section 133(6) of the Act. (x) We note from a perusal of the paper book-2, pages 262 to 283 the details of share applicant M/s. Labhdhan Impex Pvt. Ltd. It is a Private Limited Company which has a PAN AACCL2111J and its CIN number is U51909WB2011PTC171524 and the net worth of this company as on 31.3.2012 ₹ 56,18,94,080/- (P.B.-2, page 277) and investment made in the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rce of investment made in the assessee-company after getting the notice under section 133(6) of the Act. (xii) We note from a perusal of the paper book-2, pages 304 to 326 the details of share applicant M/s. Maharaja Merchants Pvt. Ltd. It is a Private Limited Company which has a PAN AAECM224E and its CIN number is U51109WB2005PTC102343 and the net worth of this company as on 31.3.2012 ₹ 1,54,58,399/- (page 313 of P.B.-2) and investment made in the assessee company is to the tune of ₹ 50 lakhs and this share applicant has made the transaction through banking channel on 28.02.2012 a sum of ₹ 50 lakhs through Cheque. There is Share Application Form, Bank statement, ITR acknowledgement, financial statement available in the PB-page 304 to 326 in the PB. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Thus the assessee has discharged the onus to prove the identity, creditworthiness and genuineness of the transactions. Further, it is noted that the share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t found fault with the action of the second AO in giving effect to the specific directions given by him while passing the first revisional order on 23.08.2016. Thus, we note that when the second AO while framing the reassessment order pursuant to the specific direction of the First Ld. Pr. CITs order dated 23.08.2016 (first revisional order) has complied with the specific directions of the First Ld. Pr. CIT and based on the inquiry conducted and after perusal of the documents running more than 352 pages which reveals the identity, creditworthiness and genuineness of the share capital and premium collected by the assessee from the share subscribers, the satisfaction of AO as envisaged in sec. 68 of the Act is a plausible view and the fact that the share subscribers responded to sec. 133(6) notice and produced all documents along with the audited financial statements and other documents referred supra, the assessee had discharged the onus upon it about the identity creditworthiness and genuineness of the share capital and premium collected by the assessee from the respective share subscribers. Since the aforesaid exercise was carried out by the second AO in the reassessment proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neness of the share subscribers and thus recorded a finding of fact that the decision of AO's enquiry was faulted or wrong and in that process tried to show that it has resulted in a view which is unsustainable in law which would have justified his action of passing the impugned order u/s. 263 of the Act, which unfortunately is not the case. Since the AO's view on the facts collected and discussed is definitely a possible view, so in the factual background discussed in detail, we are of the considered opinion that Ld. second Pr. CIT ought not to have interfered with the AO's reassessment order which in any case can be classified as 'unsustainable in law' since it is in line with plethora of judicial decisions of the subject. 56. To sum up, we find from the above said facts that the Second AO has conducted enquiry as directed by the First Ld. Pr. CIT on the specific subject matter i.e. share capital and premium collected by the assessee-company. Therefore, the finding of Second Pr. CIT that the Second AO has not conducted enquiry is incorrect and is flowing from suspicion only. And as discussed, the allegation/fault pointed out by the Second Ld. Pr. CIT th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as an adjudicator. Looking from another angle of doctrine of merger canvassed before us, we note from the facts of this case that the second Ld. Pr. CIT - 4 by passing the second revisional order dated 14.03.2019 has substituted the First Pr. CITs order passed u/s. 263 of the Act dated 23.08.2016 with his own order which he cannot do since the second assessment order/re-assessment of the Second AO dated 07.12.2016 was pursuant to the first revisional order of the First Ld. Pr. CIT and on the very same subject matter on which specific directions/instructions were given by the First Ld. Pr. CIT, which direction since having been complied by the AO, brings into operation the doctrine of merger the subject matter i.e. share capital premium collected by assessee company. Resultantly the second Ld. Pr. CIT, again cannot rake-up the same subject matter without the second Ld. Pr. CIT in the second revisional order spells out where the error happened to second AO as an investigator or adjudicator, which exercise the Second Ld. Pr. CIT has not done, so the second Ld. Pr. CIT cannot be permitted to again ask the AO to start the investigation in the way he thinks it proper on the very same ..... X X X X Extracts X X X X X X X X Extracts X X X X
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