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TMI Blog2021 (10) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... t proceedings were initiated under section 147 of the Act by the AO on the basis of the information received from the investigation wing. The contents of the information received from the investigation wing, as alleged by the ld. PCIT, reads as under: i. The assessee has received share application money from the parties as detailed below: a. Rachna Finelease Pvt. Ltd. Rs. 42,74,50,000/- b. Capaxo Logistics Pvt. Ltd. (Arham Properties Pvt Ltd) Rs. 23,50,00,000/- c. Hit Flo Control Water Treatment Pvt. Ltd Rs. 17,79,50,000/- ii. The aforesaid companies have not filed their income tax returns for the year under consideration. iii. The persons who provided funds to the aforesaid companies have also not filed their income tax returns. 3.1. However, the assessment was framed under section 143 read with section 147 of the Act after making the addition of Rs. 39,05,50,000/- under section 68 of the Act being the amount received from M/s. Rachna Finelease Pvt. Ltd. But there was no discussion/disallowance with respect to the amount credited from the remaining 2 companies. 3.2. Based on the above information, the learned Principal CIT was of the view that in the absence of retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... encing receipt of funds from Capaxo Logistics Pvt. Ltd. for A.Y. 2010-11. Contra Confirmation from the books of Ambe Tradecorp Pvt. Ltd. for A.Y. 2010-11 Bank Statement of Capaxo Logistics Pvt. Ltd. as well as Ambe Tradecorp Pvt. Ltd. evidencing it to be a banking transaction for A.Y. 2010-11 and 2011-12. Bank Book of Capaxo Logistics Pvt. Ltd. A.Y. 2010-11 and 2011-12. Ledger A/c Ambe tradecorp Pvt. Ltd. in the books of Capaxo Logistics Pvt. Ltd. evidencing repayment of share application money in A.Y. 2011-12. Contra Confirmation from the books of Ambe Tradecorp Pvt. Ltd. for A.Y. 2011-12. Contra Confirmation from the books of Capaxo Logistics Pvt. Ltd. for A.Y. 2011-12. 3.7. It was also submitted that M/s. Capaxo Logistics Pvt. also furnished the necessary details about the source of source in its hands during the assessment proceedings under section 143(3) read with section 147 of the Act. The necessary details justifying the source of source in the hands of M/s. Capaxo logistics private Ltd. stand as under: * Ledger A/c of Ramesh Thakor and Vinod Sharma for A.Y. 2009-10 evidencing loan given to them by Capaxo Logistics Pvt. Ltd. for Rs. 70,00,00,000/- * Ledger A/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. The assessee also submitted that the name of the company namely M/s. HIT Flo Control Water Treatment Pvt. Ltd. has been struck off from the register maintained by ROC under easy exit scheme 2011 vide application dated 25th November 2011. But the company was very much in existence during the relevant time when it paid money for the share application to the assessee in the financial year 2009-10 corresponding to assessment year 2010-11. 3.11. However, the learned Principal CIT disagreed with the contention of the assessee and concluded that the assessment framed under section 143 read with section 147 of the Act is erroneous insofar prejudicial to the interest of revenue by observing as under: 10. Decision:-I have carefully and thoroughly gone through submission of the assessee. The contentions of the assessee stated in their reply are not accepted for the following reason; 10.1 M/s. Rachna Finlease Private Limited, Arham Properties Pvt. Ltd. and Hit Flo Control Water Treatment Pvt. Ltd. were non-filers. As per the report M/s. Rachna Finlease Pvt. Ltd., Arham Properties Pvt. Ltd. and Hit Flo Control Water Treatment Pvt. Ltd. had paid huge amount to the assessee in F.Y. 2009-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e addition in the assessment order which was subsequently deleted by the learned CIT(A). Thus the order of the AO got merged the order of the learned CIT(A). Therefore the same cannot be revised under section 263 of the Act with respect to share capital received from Rachna Finelease Pvt. Ltd. 5.2. Likewise, the learned AR submitted that there was the assessment framed in the case of Capaxo Logistics Pvt. Ltd. wherein an addition was made which was subsequently deleted by the learned CIT(A) in the case of Capaxo Logistics Pvt. Ltd. Accordingly, the source of money received by the assessee as share application money from Capaxo Logistics Pvt. Ltd. cannot be doubted. 6. On the other hand, the learned DR before us filed the written submissions dated 3 September 2021 and contended that there was no enquiry conducted by the AO during the assessment proceedings despite the information received from the investigation wing that the assessee has received bogus share application money. 6.1. It was also contended by the learned DR that in the group case of the assessee, it was duly admitted before the settlement commission to have received accommodation entry from the companies in dispute. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cussion/disallowance made qua such share application money in the assessment framed under section 143(3) read with section 147 of the Act dated 13th December 2017 despite the fact that these companies were also not filing their income tax return and therefore, the conditions imposed under section 68 of the Act were not complied with by the assessee. Accordingly, the ld. PCIT issued a notice under section 263 of the Act dated 3rd March 2020 proposing the order of the AO as erroneous and prejudicial to the interest of Revenue which was subsequently affirmed vide order dated 31-3-2021 for the reasons which have been elaborately discussed in the preceding paragraph. 7.2. Now the controversy arises, whether the learned Principal CIT under section 263 of the Act can revise the order of the AO and direct him to make addition in the above facts and circumstances. The provisions of section 263 of the Act conferred power to Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner to set aside the order of the AO, if he/she based on records of the proceedings considers that the order of the AO is erroneous and causing prejudice to the Revenue. 7.3. An ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest of the revenue and there are materials available on record which require the Commissioner to satisfy him in a, prima facie, manner that the order is not only prejudicial to the interest of the revenue but is also erroneous in nature. In the absence of any of the factors being satisfied, he does not assume jurisdiction to initiate a suo motu power of revision. The exercise of such a power is dependent on the conditions precedent being satisfied. The Commissioner does not have unfettered power to initiate proceeding by revision, re-examining the matter and directing fresh enquiry on his own whim for change or having a different view. He has been conferred with a quasi-judicial power and the same is hedged with limitations and, therefore, it has to be exercised within the parameters of the provision. When the Commissioner is himself not able to form an opinion, he cannot direct another inquiry by the Assessing Officer under section 263. [Para 13] If the obtaining factual matrix was tested on the anvil of the aforesaid pronouncement of law, it was quite clear that the Commissioner had really made an effort to cause a routine inquiry with regard to the matter that had already be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rit or on account of non-enquiry. Further he was not sure whether the amount credited in the books of assessee are share application money or loan as he has used the word as loan while setting aside to the issue to the file of the AO whereas the assessee has received the share application money. Likewise, the ld. CIT held that the parties who applied for the share application money are non-filers of return on the information received from investigation wing whereas we find that the assessee has filed the assessment orders and ld. CIT-A orders of two companies namely M/s. Rachna Finelease Pvt. Ltd. and Capaxo Logistics Pvt. But the ld. PCIT without considering these details have given incorrect finding that they were non-filers and books were not maintained. Such finding of the ld. PCIT leads us to draw an inference that the conclusion has been drawn by him (PCIT) in arbitrary manner which is unwanted under the provisions of law. In other words, the order of the ld. PCIT was not speaking order in the light of the judgments cited above. 7.11. However, for the completeness of the case, we proceed assuming that the order of the AO has been held as erroneous insofar prejudicial to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... framed under section 147 r.w.s. 144 of the Act. Going through all these document it is established that identity, genuineness of transaction and credit worthiness/sources of fund has been established. Further the learned principal CIT have not pointed out any deficiency in these documentary evidences neither any contrary evidences brought by the learned DR before us. Thus the finding of the learned CIT that the creditworthiness of the parties were not proven was not based on the cogent reasons. Thus the finding of the learned PCIT appears to be arbitrary and non-speaking. 7.15. Further, it is also important to note that learned Principal CIT in his order has given categorical finding that the group company of the assessee being JP Iscon has admitted before the settlement commission that they have taken bogus entries in the form of loan from these companies. But the AO, during the assessment proceedings has not considered this fact. In this connection, we have gone through the order of settlement commission which is available on record. Going through para No. 12 of such order we find that the settlement commission has discussed the flow of fund transferred through cheque/banking c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 019. Thus in other words, the order of the AO has merged with the order of the learned CIT(A). Therefore the same cannot be subject matter of revision under section 263 of the Act. For this purpose we refer to clause (c) of explanation 1 of section 263 of the Act which reads as under: Explanation 1.--For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,-- (a) ******* (b) ******* (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Principal Commissioner or Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. 7.19. We also note that the Hon'ble Bombay High Court in the case of CIT vs. K. Sera Sera Productions Ltd. reported in [2016] 71 taxmann.com 40 [2015] 374 ITR 503 has held that the issues which have been considered by the learned CIT(A) cannot be subject matter of the revision under the provisions of the section 263 of the Act on the reasoning that the assessment framed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tanding the answer stands negative for the reason that proceeding under section 147 is limited to the extent of reason recorded. Though the provision section 147(1) authorizes AO to make addition with regard to any other issue if it comes to his/her notice during the proceeding. Here it is not the case. Hence the learned principal CIT cannot held the order under section 147 r.w.s. 143(3) for non-enquiry of share capital which was not the part of the proceeding. If he wanted to do so then he has to revise the order under section 143(1) of the Act as the case may be. In holding so we draw support and guidance from the judgment of Hon'ble Bombay High Court in the case of CIT vs. Lark Chemicals Ltd. reported in 55 taxman.com 446 wherein it was held as under: 12. We have considered the rival submissions. It is not disputed that save and except the issue of non-genuine purchases all other issues dealt with by the Commissioner of Income-tax in the order dated March 30, 2009, were not a subject matter of the assessment order passed on June 28, 2006, under section 143(3)/147 of the Act. all the other issues on which the Commissioner of Income-tax is seeking to exercise the jurisdictio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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