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TMI Blog2021 (11) TMI 999X X X X Extracts X X X X X X X X Extracts X X X X ..... ry and deposed on oath for the subscription made. The share applicants are assessed to tax and confirmed the subscription. On these facts, a question would arise as to whether it was incumbent upon the AO to disregard such evidences and hold the explanation to be unsatisfactory in terms of Section 68 of the Act or not. Having regard to the prerogative vested with the AO towards the extent and manner of inquiry for drawing satisfaction, it is difficult to hold that the action of the AO is unintelligible. In our view, the AO has not committed any error in not chasing 'will o the wisp' in the absence of any brazen circumstances. In the light of aforesaid discussion, the basis of issuance of show cause notice under s. 263 of the Act does not appear to be tenable in law in the peculiar set of facts. Consequently, the assumption of jurisdiction under s. 263 of the Act will have to be regarded as without authority of law. As noted, the share applicants have unequivocally confirmed the share subscription. In such facts, it will be difficult to discredit the share application money received per se and make additions in the realm of s. 68 of the Act in the hands of the assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wish that the Revision application be decided on the basis of your written submission which may be furnished in this office, on or before the said date. You also have the option to file your submission from the e-filing portal using the link: incometaxindiaefiling.gov.in This is to inform you that the undersigned has examined your assessment records for the A.Y. 2015-16 and from the examination of the assessment order passed in your case u/s. 143 of the Act dated 20/04/2017, it is seen and observed that the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of revenue. In the assessment order the AO has accepted the income returned by you without making proper enquiries and verification. Thus, the assessment order being erroneous in so far as it is prejudicial to the interest of revenue, it is proposed to take revisionary proceedings u/s. 263 of the Act in this case. 2. However, in the interest of natural justice and fair play I am giving you an opportunity to furnish your submission in writing alongwith documentary evidences if any with regard to following points. 2.1 The record reveals that during the year under cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce sheet he has made investment of ₹ 14,79,500/- in this company only and he has no other asset. 06 KK Mishra ( HUF) 524000 Cash deposit of ₹ 1,60,000/- on 21.04.2014. Cash deposit of ₹ 2,00,000/- and transfer amount of ₹ 1,60,000/- on 15.01,2015 and 20.01.2015 respectively. The bank account shows no other significant transactions. Further returned income is only ₹ 2,44,100/- and as per balance sheet he has made investment of ₹ 18,22,300/- in this company only and he has no other asset. 07 Madan Sahu 459000 Cash deposit of ₹ 65,000/- on 05.01.2015 and transfer amount of ₹ 3,92,000/- on 21.01.2015 and 25.02.2015 respectively. The bank account shows no other significant transactions. Further returned income is only ₹ 2,67,300/- and as per balance sheet he has made investment of ₹ 13,68,950/- in this company only and he has no other asset. 08 Raj Bahadur Tiwari 302000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account shows no other significant transactions. Further returned income is only ₹ 2,68,300/- and as per balance sheet he has made investment of ₹ 14,29,800/- in this company only arid he has no other asset. TOTAL 6711010 From the records it is seen that AO has not made proper examination/enquiry with respect to the source of share application money whereas these amount were got transferred from the account of share applicants either after depositing cash on the accounts or transferred in the bank account of share applicants. The AO has not properly examined/verified the creditworthiness of share applicants and genuineness of the transactions. The AO has not properly examined the return of income, balance sheet, computation of income and bank statements of the share applicants. The AO has not properly verified and examined this aspect of the case. 2.2 Record reveals that you have received total fund of ₹ 3,96,52,350/- by way of share capital (₹ 86,29,290 (share capital) + ₹ 3,10,23,060 (Security premium)). The AO has not verified and exami ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment proceedings. After in depth examination only, the ld. Assessing officer came to conclusion ad the assessment order was passed accordingly. Submitted as below:- Para 2.1 - Receipt of Share application money The facts are on the record that the assessee has received ₹ 63,11,010/- (Total Receipt was out of which ₹ 4,00,000/- was repaid and again received back, Hence, net receipt was ₹ 63,11,010/-) At the time of assessment proceedings assessee has submitted following documents of share applicants to discharge the burden casted upon the assessee with regard to identity, capacity of the share applicant, and genuineness of the transaction:- 1. Confirmation 2. Copy of acknowledgement of Return 3. Computation of total income. 4. Capital account and balance sheet. 5. Copy of Ban account. 6. Apart from that, learned Assessing Officer recorded statement on oath from all the share applicants. All the necessary information explanation taken from them. Necessary enquiries made for identity, creditworthiness and genuineness of the transaction including source of share application money. During the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en to Shri Shaktidham Infraventures Pvt. Ltd. during the year, received back, ₹ 1,60,000/-was deposited as cash on 21.04.2014 4,000/- Bank Balances 07 Madan Sahu 459000 65,000/- Cash from own past savings 1,25,000/- Loan given to Shri Nishant Khandelwal In earlier years, received back 2,67,000/- Loan given to Balaji Builders earlier years, received back 2000 Bank balance 08 Raj Bahadur Tiwari 302000 3,02,000/- Cash from own past savings 09 Ramkumar Kashyap (HUF) 208000 2,08,000/- Cash from ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as under:- S.No. Particulars Opening Balance Received FY 2015-16 Closing Balance 1 Share Capital 72,27,480/- 14,01,800/- 86,29,290/- 2 Security Premium 2,61,16,760/- 49,06,300/- 3,10,23,060/- Total 3,33,44,240/- 63,08,100/- 3,96,52,350/- From above chart it is clear that during the year assessee has received fresh share application money which was duly verified and examined by the Ld. Assessing Officer. Details are furnished at para 2.1 above. Therefore with regard to this issue also, the order of the Ld. assessing officer is not erroneous in so far as it is prejudicial to the interest of the revenue. Para 2.3 - Regarding inventory of land Submitted that there was inventory of land of ₹ 3,03,07,934/-, details of which are as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,87,067/- 5,16,38,645/- 5,16,38,645/- From the above it is clear that assessee has earned gross profit. Therefore with regard to this issue also, the order of the Ld. assessing officer is not erroneous in so far as it is prejudicial to the interest of th e revenue. In view of the above it is prayed to drop the proposal. 5. The PCIT, however, did not accede to the submissions made on behalf of the assessee and observed that the AO has not made enquiries in relation to share application money which he should have, in the context of the facts of the case. The creditworthiness, bonafides and the genuineness of the share application money was not examined in proper perspective. The PCIT narrated the reasons for his dissatisfaction on the enquiries conducted on share application money as per para 5(a) of his order. As per para 6 of his order, however, the other point, namely, the reply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious aspects of an issue. 8.3 On perusal of the show cause notice (SCN) dated 26.02.2020 issued by the Revisional Commissioner proposing to set aside the assessment order dated 20.04.2017 passed by AO under s. 143(3) of the Act, we notice that the Pr. CIT is essentially dissatisfied with the degree of inquiry made in respect of issues raised therein. 8.4 The solitary premise to displace the completed assessment is inadequacy in enquiry on share application money. As vociferously pointed out on behalf of the assessee, the share application money to the tune of ₹ 63,08,100/- were received during the year from certain parties. In the course of the assessment, the assessee has submitted several documents, such as, confirmation, acknowledgement of return, computation of income, capital account, balance sheet and copy of bank account etc. to support the identity, capacity of the share applicant and genuineness of transactions. The AO did not merely accept these evidences of receipts summarily but also issued summons to the share applicants in exercise of power under s. 131 of the Act. The requisite information was collected from the applicants and the statements of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the books of accounts of the assessee, he is expected to offer an explanation about its nature and source thereof to the satisfaction of the AO. Thus, the initial onus is indisputably on the assessee to establish there ingredients (a) identity (b) capacity of the creditor for advancement the money (prima facie creditworthiness) and (c) genuineness of transaction. The law however does not prescribe any quantitative test to find out whether the onus in a particular case has been discharged or not. It all depends on the facts and circumstances of each case. In some cases, the onus may be heavy whereas in others it may be nominal. There is nothing rigid about it as observed by the Hon'ble Supreme Court in the case of CIT v. Durga Prasad More, [1971] 82 ITR 540 (SC). Significantly, S. 68 of the Act uses the expression 'may' and thus enables the AO to exercise statutory discretion in a pragmatic and judicious manner, for or against, the assessee. The AO is thus not obliged to invoke the sphere of S. 68 of the Act in all cases where the source is not proved to the last mile. This apart, it is well settled that while discharging the onus cast upon the assessee, it is not the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e absence of any brazen circumstances. In the light of aforesaid discussion, the basis of issuance of show cause notice under s. 263 of the Act does not appear to be tenable in law in the peculiar set of facts. Consequently, the assumption of jurisdiction under s. 263 of the Act will have to be regarded as without authority of law. 13. As noted, the share applicants have unequivocally confirmed the share subscription. In such facts, it will be difficult to discredit the share application money received per se and make additions in the realm of s. 68 of the Act in the hands of the assessee in place of the share applicants where 'source of source' allegedly remains unproved in the opinion of the PCIT. Therefore purported inadequacy in inquiry as alleged, cannot be stated to be 'erroneous' per se in so far as assessee is concerned, even if, such inaction of AO towards fuller enquiry is branded as 'prejudicial to the interest of Revenue'. Therefore, the mandatory twin conditions of Section 263 is also not found to be fulfilled when tested on the touchstone of taxability of share application money in the hands of assessee on the grounds of unproved source of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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