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TMI Blog2021 (3) TMI 811X X X X Extracts X X X X X X X X Extracts X X X X ..... t of share capital allotted to each of them during the month of December 2014, January 2015 and March 2015 totalling ₹ 120 crores. There is no explanation submitted regarding source of such funds and no documentary evidence has been brought on record by the assessee company. AO has however taken the said submission on face value and no further show-cause or enquiry/examination has been conducted by him. Useful reference can be drawn to facts and findings of Malabar Industrial Co. ltd [ 2000 (2) TMI 10 - SUPREME COURT] . In that case, the appellant entered into an agreement for sale of the estate of rubber plantation and the agreement provided, inter alia, for payment of the consideration in instalments as scheduled therein. Purchaser could not adhere to the schedule and on his request, the parties agreed to the extension of time for payment of the instalments on condition of his paying compensation/damages for loss of agricultural income and other liabilities. Accordingly, the appellant passed a resolution also to that effect on 25-9- 1983 and the purchaser paid the said amount. In the annexure to the return filed by it for the assessment in question, the amount was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case. The AO was also directed to provide an opportunity to the assessee and the said opportunity may now be read and understood to also allow the assessee to bring the distinguishing features as so contended by the AR. Increase in tangible assets where the AO failed to verify purchase of fixed assets made during the year - Pr CIT has recorded a finding that no details were available on record and such details have been submitted during the revisionary proceedings vide letter dated 9.03.2020 and the AO has been directed to verify the same. No contention has been advanced by the ld AR in this regard, hence, no interference is called for. Outward foreign remittance towards purchase of machinery which has not been examined by the AO during the assessment proceedings - Pr CIT has recorded a finding that the assessee has submitted Form 15CA vide reply dated 9.03.2020 and the AO has been directed to verify the same. No contention has been advanced by the ld AR in this regard, hence, no interference is called for. We accordingly upheld the order passed by the ld Pr CIT u/s 263 of the Act setting aside the assessment order passed by the Assessing officer for the li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year under reference and so in earlier year. AO did not make any inquiries to ascertain if the business of the assessee company got setup or not. However AO has allowed claim of business loss amounting to ₹ 56,52,325/- without looking into this aspect. 6. It is also found that you have not filed From No. 15CA during assessment proceedings which contained mandatory information of the remitter, remittee, the accountant signing the certificate, particular of remittance and TDS, taxability under the provision of the Act, any claim of relief under DTAA etc. In absence of the Form No. 15CA outward remittances to non-resident, receipts of large value foreign remittances as compared to business income have not been verified though this was also one of the reasons for selection of the case under scrutiny. 7. It is also noticed that there is an increase in tangible assets but no details are available in note- 6 to the accounts. AO also failed to verify purchase of fixed assets amounting to ₹ 63.25 Cr made during the year. 8. In view of the above, it appears that the assessment order passed under section 143(3) of the I.T Act 1961 in your case for A.Y 2015-16 on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nting to ₹ 57.50 crores stood allotted in the preceding A.Y 2014-15, the assessment in respect of which stood completed u/s 143(3) dated 18.12.2016. It was submitted that the shareholders and their source remaining the same, the inquiry conducted by the Assessing Officer in the year under consideration, was justified and cannot be said to be lacking. It was submitted that the assessment for A.Y 2016-17 was completed u/s 143(3) dated 20.12.2018 wherein there is an increase in share capital by ₹ 76.50 crores and no adverse inference with respect to the issues taken up by ld. Pr. CIT in the present case were drawn by the Assessing Officer. Similarly, it was submitted that the assessment for A.Y 2017-18 has been completed by the Assessing Officer u/s 143(3) dated 27.12.2019 wherein also there is an increase in share capital by ₹ 90 crores and no adverse inference has been drawn by the Assessing Officer. 9. It was further submitted that the ld. PCIT has placed reliance on the decision of Hon ble Bombay High Court, in the case of ALD Automotive (P.) Ltd. [2018] 91 Taxmann.com 475 (Bombay), for the proposition that the business of the assessee company had not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s selected under complete scrutiny under CASS and one of the reasons was substantial increase in share capital and after going through the details submitted by the assessee during the assessment proceedings vide Annexure C of letter dated Nil wherein the name of the share holders have been mentioned and the value of share allotment during the month of December, 2014, January, 2015 and March, 2015 are only mentioned, the ld. Pr. CIT has given a finding that no details of PAN/ITR of the persons from whom amount of ₹ 120 Cr. was received by the assessee was enquired and is not there on the record apart from source of investment by these entities. It was further noted that there is a credit entry of ₹ 30 Cr. on 06.12.2014 and of another ₹ 30 Cr. on 21.01.2015 in the bank account of the assessee company though assessee company received share capital of 10 Cr. each from Jayant Joshi, Jalaj Joshi and Nayan Joshi in December, 2014 and January, 2015. In the bank account of the assessee company credit is not reflected in the name of the three individuals but a consolidated credit entry of ₹ 30 cr. each is seen. The AO did not verify these details and did not enquire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich were imported for the purpose of imparting the training were yet to be installed. This is evident from note - 5 of Notes to the financial statements for the year. Depreciation on Fixed Assets is provided for on the basis of written down value (WDV) method based on useful life of the assets as prescribed in the Schedule II the Companies Act, 2013. Plant Machineries were purchased during the end financial year 2014-15 and installations of the same were completed during the financial year 2015-16, therefore no depreciation has been charged on the same for the financial year 2014-15. It is important to ascertain the previous year if any income is to be assessed under the head income from business or profession. The previous year is defined in section 3 as under: For the purpose of this Act, previous year means the financial year immediately preceding the assessment year. Provided that, in the case of a business or profession newly set up, or a source of income newly coming into existence, in the said financial year, the previous year shall be the period beginning with the date of setting up of the business or profession or, as the case may be, the da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 170 (Guj-HC). It is seen that in this case mining lease as well as license to establish a cement manufacturing plant was available, quarrying operations for extracting limestone from the leased area had started and installation of plant and machinery was completed in June, 1960 and manufacturing itself had started in October, 2016. Further the issue of setting up of business is to be largely determined by the facts of each case. AO is directed to verify necessary details as mentioned above with regard to setting up of business which is essential for allowing the business loss. 14. Regarding the contention of the ld AR that the records relating to any proceedings against the assessee as well as inquiries u/s 263 of the Act needed to be considered for deciding whether the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue, the ld CIT/DR submitted that there is no dispute that the entire material including material collected during the course of revisionary proceedings needs to be considered. However, given the fact that it is a case where the order has been passed by the AO without making inquiries and verification which should have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act which reads as under: Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless- (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory. 18. The provisions of section 68 therefore have rightly been held by the ld Pr CIT to be attracted in the instant case and it is for the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant passed a resolution also to that effect on 25-9- 1983 and the purchaser paid the said amount. In the annexure to the return filed by it for the assessment in question, the amount was noted as compensation and damages for loss of agricultural income. By order dated 31-10-1985, the ITO accepted the same and endorsed nil assessment for that year. The Commissioner having examined the records of the assessment found that the nil assessment order passed by the ITO was erroneous and it was prejudicial to the interests of the Revenue and held that the said amount was unconnected with any agricultural operation activity and was liable to be taxed under the head 'Income from other sources'. In the said factual matrix of the case, on appeal by the assessee, the Hon ble Supreme Court was pleased to held as under: 10. In the instant case, the Commissioner noted that the ITO passed the order of nil assessment without application of mind. Indeed, the High Court recorded the finding that the ITO failed to apply his mind to the case in all perspective and the order passed by him was erroneous. It appears that the resolution passed by the board of the appellant-company was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion cannot be held as conducting an enquiry. In our considered view, it is a clear case of no enquiry and lack of application of mind on part of the Assessing officer and the order thus passed is clearly erroneous and prejudicial to the interest of the Revenue. 23. Now, coming to the contention advanced by the ld AR that the records relating to any proceedings against the assessee as well as inquiries u/s 263 of the Act needed to be considered and with all the material available on record, the ld. Pr. CIT was duty bound to refer to the same and then come to the conclusion that the order of the AO was erroneous and prejudicial to the interest of the Revenue. In this regard, there is no dispute on the legal proposition that the record referred to in section 263 refers to all relevant record available at the time of examination by the ld Pr CIT. However, where it is a case of no enquiry as we have discussed above and fresh material and evidence has been brought on record subsequent to close of the assessment proceedings, the ld Pr CIT is well within his jurisdiction to remand the matter back to the file of the AO to examine all such material and evidence and decide the matter a fre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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