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TMI Blog2021 (12) TMI 1286X X X X Extracts X X X X X X X X Extracts X X X X ..... called for which ever additional documents/materials or issued summons or issued notices and collected those facts which according to Second Ld. Pr. CIT, the AO omitted to collect and then demonstrated that those actions/documents which he collected in that process gave result to a different finding of fact which will turn upside down the claim of the assessee and thus able to show that the actions/omission of AO in conducting the investigation was erroneous, which unfortunately is not the case before us. Second Pr. CIT has not carried out any such exercise or even spelled out in his impugned order, which all documents the second AO failed to collect for considering the total facts; and even if we presume he has conducted such an exercise, then he has not been able to bring out any adverse factual finding to upset the view of Second AO. So we find no merit in the vague allegation of second Pr. CIT that the second AO has not collected the full facts necessary to decide the issue of share capital premium. Second Ld. Pr. CIT 4 by passing the second revisional order dated 15.03.2019 has substituted the First Pr. CIT s order passed u/s. 263 of the Act dated 28.03.2016 with his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax (hereinafter referred to Ld. Pr. CIT ), Kolkata-4, Kolkata dated 15.03.2019 for the Assessment Year (in short AY ) 2012- 13 passed under section (in short u/s) 263 of the Income-tax Act, 1961 (hereinafter referred to as the Act ). 2. The main grievance of the assessee is against the action of the Ld. Pr. CIT invoking his second (2nd) revisional jurisdiction u/s. 263 of the Act against the action of the Assessing Officer (hereinafter referred to as AO ) dated 08.06.2016, who framed the re-assessment order pursuant to the first revisional order dated 28.03.2016 which impugned action of Ld. Pr. CIT, according to assessee, is without satisfying the requisite conditional precedent as stipulated u/s. 263 of the Act and therefore without jurisdiction and resultantly bad in law, so it has to be quashed. [Please note that since there are two assessment orders, and two Ld. Pr. CITs involved in this Appeal, for better easy understanding the case, the AO, who framed the original assessment order is called as First AO and the re-assessment /second assessment framed AO will be called as the Second AO and the first revisional order passed by Pr. CIT is called as First Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directed the AO to carry out de-novo assessment after proper assessment of the case. 4. Pursuant to the first revisional order passed by the First Ld. Pr. CIT dated 28.03.2016, in the second round of re-assessment, the AO (hereinafter referred to as Second AO) accepted the genuineness of the share capital premium and framed the reassessment order dated 08.06.2016 by making an addition/disallowance u/s. 14A of the Act of ₹ 6,400/- u/s. 143(3) read with section 263 of the Act (hereinafter referred to as the second assessment/re-assessment order). 5. In respect of the said second assessment/re-assessment order dated 08.06.2016, the Ld. Pr. CIT-4 (hereinafter referred to as the second Ld. Pr. CIT) issued show cause notice (SCN) wherein he proposed to exercise his revisional jurisdiction (hereinafter referred to as the second SCN). The second Ld. Pr. CIT thereafter heard the assessee and passed the impugned order dated 15.03.2019 wherein he was pleased to again set aside the reassessment order/second assessment order dated 08.06.2016 and directed de-novo adjudication (hereinafter referred to as the second impugned revisional order of Ld. Pr. CIT or impugned order) by obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the requisite conditional precedent as stipulated in Section 263 of the Act and so bad in law. According to the Shri S.K. Tulsiyan, the first Ld. Pr. CIT had taken note that the assessee had received share capital to the tune of ₹ 19,56,000/- as well as share premium to the tune of ₹ 9,09,44,000/- and pursuant to the first AO s notices u/s 142(1)/143(2) of the Act, the assessee had filed the documents to prove the nature and source of the sums credited in its books. Pursuant to the first AO s 133(6) notices which have duly been complied by all the share applicants and had filed requisite documents and details as called for by the AO. However, the AO after having gone through the documents accepted the share capital to the tune of ₹ 19,56,000/- as genuine and found fault with the share premium to the tune of ₹ 9,09,44,000/- which was added as unexplained cash credit. It was brought to our notice by Shri S.K. Tulsiyan that the assessee had filed a copy of audited books of accounts, bank statements and all details sought by the first AO was produced, however the AO made the addition of premium while he accepted the share capital which action itself being erro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d before him pursuant to the notice dated 12.05.2016 directing the assessee company to furnish the documents of the second source of the money received from the share applicants which were produced from five (5) of the investors vide letter dated 17.05.2016 (refer pages 1-220 PBII). After verifying the documents the relevant observation of the second AO at page-6 of his order is as under: ........To ensure genuinity of transactions of the shareholder companies, letter dated 12.05.2016 was issued to the assessee company to furnish the documents of second source of the money received from share applicants. The assessee company furnished all the documents as required related to second source. Records were test checked received from the parties proving identity of parties, genuinity of the transactions, creditworthiness and again it was observed that all the transactions were made through banking channel and duly recorded in the books of accounts of the parties. Accordingly it is inferred that: (i) As the shareholders are private limited companies and registered with the Ministry of Corporate Affairs they have an established identity. (ii) Details of source of funds ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake-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 while the AO (Second) was carrying out the directions of First Ld. Pr.CIT pursuant to the first revisional order, which exercise according to Shri S.K. Tulsiyan unfortunately this Second Ld. Pr.CIT has not done. So according to Shri S.K. Tulsiyan, the Second Pr. CIT cannot be permitted to again ask the AO (Third) to start the investigation in the way he thinks it proper on the very same subject on which merger has taken place by virtue of the order of First Ld. Pr. CIT. Therefore, according to Shri S.K. Tulsiyan, if this practice is allowed, there will be no end to the assessment proceedings, since if the next i.e. third or fourth Pr. CIT does not like the next assessment orders being passed by an AO under his jurisdiction, in the way he thought it as proper enquiry to have been conducted in a given case or subject matter, then he will interfere and ask the AO to re-do the assessment again and again, which is not permissible and that is exactly why the Parliament in its wisdom has brought in safe-guards, restr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee, then the AO in turn can verify the identity, creditworthiness and genuineness of the share subscriber from whom the assessee received the share capital and verify whether the identity is proper, whether the transaction took place through banking channel, etc. and the creditworthiness of the share applicant etc. According to Shri S.K. Tulsiyan, if the AO or even the Ld. Pr. CIT expecting/asking the assessee to find out the source of source of share-applicant, when the Law does not in this AY (AY 2012-13) requires assessee to fulfil, then it would be without authority of law, unreasonable, harsh and unfair practice, which action is against the Rule of Law, which is a basic feature of the Constitution of India. Since the law was that assessee should furnish the source of share capital it received in this A.Y, assessee by producing all documents in respect of share-applicants had discharged its onus, then burden shifts to the shoulder of AO to find fault with the documents or test the veracity of the documents. Despite the law was as such, then also AO in the second round, pursuant to the direction of the First Ld. Pr. CIT-4 the share applicants filed source of source for appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh the submissions as put forth on behalf of the assessee and Revenue along with the documents furnished and the case law(s) relied upon by both the parties. It is noted that in this case the original return was filed u/s. 139 of the Act and the original first assessment was framed by the First AO u/s. 143(3) of the Act on 16.03.2015 by making an addition of ₹ 9,09,44,000/-. (First AO accepted the share capital of ₹ 19,56,000/- but added the premium of ₹ 9,09,44,000/- u/s 68 of the Act). Thereafter, the First Ld. Pr.CIT-4, Kolkata issued SCN to the assessee-company conveying his intention to interdict in the First AO s action in framing the said original first assessment order dated 16.03.2015. Thereafter, the First Ld. Pr.CIT passed his First Revision order u/s. 263 of the Act on 28.03.2016, wherein he was pleased to set aside the original assessment order dated 16.03.2015 and directed de-novo assessment after proper examination of matter discussed in his order which included share capital and premium. 11. Pursuant to the direction of the First Ld. Pr.CIT dated 28.03.2016, the second AO framed the de-novo re-assessment order dated 08.06.2016, wherein the seco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the Commissioner of Income Tax ( in short, CIT ). The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer's order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii)Assessing Officer's order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated an issue before him; then the assessment order passed by the Assessing Officer can be termed as an erroneous order. Coming next to the second limb, which is required to be examined is as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue? The Hon'ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id faults as pointed out by the Second Ld. Pr. CIT in the said show cause notice was point-wise explained by the assessee. 17. Thereafter, the Second Ld. Pr.CIT again was pleased to set aside the reassessment/ second assessment order of the AO dated 08.06.2016 and directed fresh assessment (which means a third assessment to be framed). 18. The aforesaid action of the Second Ld. Pr. CIT dated 15.03.2019 is challenged before us. According to the Ld. Counsel, Shri S.K. Tulsiyan, the Ld. Pr. CIT erred in assuming his jurisdiction without satisfying the jurisdictional conditional precedents as prescribed u/s. 263 of the Act and therefore, the action of the Ld. Pr. CIT is wholly without jurisdiction and therefore, ab-initio void and therefore, need to be struck down. We note that in order to interfere with the second assessment/re-assessment order passed by the Second AO u/s. 143(3)/263 of the Act dated 08.06.2016, the Second Ld. Pr. CIT has alleged lack of enquiry on the part of the AO in respect of share application money, and for not collecting the full facts. Therefore, it is noted that according to Ld. Pr. CIT, the AO s (second AO) decision was not based on the totality of fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments has not examined these documents before making such addition. The Ld. Pr. CIT finds that all details/documents were submitted before the first AO as and when required by him. The Ld. Pr. CIT found that the AO had accepted the share capital to the tune of ₹ 19,56,000/- however, has not accepted the share premium of ₹ 9,09,44,000/- from the very same share holders, so he wondered as to the legality of the action. 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 according to him, the AO has simply jumped to the conclusion and treated the share premium as unexplained cash credit. The First Ld. Pr. CIT found fault with the action of AO for violation of natural justice. Therefore, according to the First Ld. Pr. CIT the first original assessment order framed u/s. 143(3) dated 16.03.2015 was in violation of direction of Ld. Pr. CIT, Kolkata in connection with Board s circular and office memorandum dated 07.11.2014 of CBDT in respect of adherence to non-adversarial tax regime was not followed by the first AO while framing the assessment order dated 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sional Order). Thereafter, the second AO notes that he received the reply about the second source of fund from all the share applicants (Refer page 1-220 PBII) and documents filed pursuant to Section 133(6) of the Act albeit first round (Refer page 61-272 PBI and pages 64-492 PBIII) and then he carried out the verification of documents submitted by the share applicants/investors for proving the identity, genuineness and creditworthiness and also their source of fund to invest in the assessee company The Second AO after going through the records and after enquiries made the finding of fact that the share applicants/share holders identity have been established since they are all registered with the Ministry of Corporate Affairs being Private Limited Companies and that the source of the fund for share capital premium have been submitted by all the share holders. It has also been found by the Second AO that in all the cases the investments made by them have been duly reflected in their respective annual accounts; and thereafter, he was pleased to accept the share capital and premium since the assessee was able to explain to his satisfaction the nature and source of the credit entry. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, trademarks, licences, franchises or any other business or commercial rights of similar nature. Whichever is higher: b) Venture capital company, venture capital fund, and venture capital undertaking shall have the meanings respectively assigned to them in clause (a), clause (b) and clause (c) of Explanation to clause (23FB) of section 10] . 29. So we note that in this assessment year before us i.e. AY 2012-13, the law in force was that if any sum is found credited in the books of an assessee in a financial year and, if the AO asks for the explanation of assessee in respect of the nature and source thereof, then the assessee is duty bound to explain the nature and source of the credit entry in the books and if the assessee fails to explain or if the AO is not satisfied, he may charge to income tax the sum so credited. So, the assessee is bound to explain before the AO the nature and source of share capital, i.e. the identity, creditworthiness and genuineness of the share capital. In this AY, the assessee is bound to know about the share applicants who wish to invest their identity, whether they have the financial capacity (creditworthiness) and they are genuine i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the subject years has to be read/understood as though the proviso added subsequently effective only from 1stApril, 2013 was its normal meaning. The Parliament did not introduce to Section 68 of the Act with retrospective effect nor does the proviso so introduced that it was introduced for removal of doubts or that it is declaratory . Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to Section 68 of the Act is immaterial and does not change the interpretation of section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on facts it has found satisfied. (ii) Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in CIT vis. Lovely Exports (P) Ltd. 317 ITR 218 in the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remium is a capital receipt which has to be dealt with in accordance with Sec. 78 of the Companies Act, 1956. Further, the company is not required to prove the genuineness, purpose or justification for charging premium of shares, share premium by its very nature in a capital receipt and is not income for its ordinary sense. It is not in dispute that the assessee had filed all the requisite details/documents which are required to explain in the books of accounts by the provisions of Sec. 68 of the Act. The assessee has successfully established the identity of the companies who have purchased shares at a premium. The assessee has also filed bank details to explain the source of the share holders and the genuineness of the transaction was also established by filing copies of share application forms and Form No. 2 filed with the Registrar of Companies. Considering all these undisputed facts, it can be safely concluded that the initial burden of proof as rested upon the assessee has been successfully discharged by the assessee. Even if it is held that excess premium has been charged, it does not become income as it is a capital receipt. The receipt is not in the revenue field. Wha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the subscribers by issuing notice u/s. 133(6) of the Act. The Board of Directors contains persons who are associated with IDFC group of companies, therefore their integrity and credibility cannot be doubted. The entire grievance of the Revenue revolves around the charging of such of huge premium so much so that the Revenue authorities did not even blink their eyes in invoking provisions of Sec. 56( I) of the Act. [Hon ble Bombay High Court in the case of Apeak Infotech-88 taxmann.com. 695 (Bombay) when the question was whether the amount received as share premium on issue of share by the respondent-assessees-companies could be taxed as profits and gains of business in the hands of the assessees under section 28(iv) of the Act . In any case, we may point out that the amendment to section 68 of the Act by the addition of proviso thereto took place with effect from April 1, 2013. Therefore, it is not applicable for the subject assessment year 2012-13. So for as the pre-amended section 68 of the Act is concerned, the same cannot be invoked in this case, as evidence was led by the respondents-assessees before the Assessing Officer with regard to identity, capacity of the inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r market value of the shares: Provided that this clause shall not apply where the consideration for issue of shares is received- (iii) By a venture capital undertaking from a venture capital company or a venture capital fund, or (iv) By a company from a class or classes of persons as may be notified by the Central Government in this behalf. Explanation- For the purposes of this clause, (c) The fair market value of the shares shall be the value- (iii) As may be determined in accordance with such method as may be prescribed, or (iv) As may be substantiated by the company to the satisfaction of the Assessing Officer based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licences, franchises or anyother business or commercial rights of similar nature, whichever is higher: (d)Venture capital company, venture capital fund, and venture capital undertaking shall have the meanings respectively assigned to them in clause (a), clause (b) and clause (c) of Explanation to clause (23FB) of section 10] . It was pleaded that the aforesaid provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion if it had been raised before the Tribunal even if not determined by the Tribunal. Therefore, no occasion to consider the question as prayed for arises. (c) In any case, we may point out that the amendment to section 68 of the Act by the addition of proviso thereto took place with effect from April 1, 2013. Therefore, it is not applicable for the subject assessment year 2012-13. So for as the pre-amended section 68 of the Act is concerned, the same cannot be invoked in this case, as evidence was led by the respondents-assessees before the Assessing Officer with regard to identity, capacity of the investor as well as the genuineness of the investment. Therefore, admittedly, the Assessing Officer did not invoke section 68 of the Act to bring the share premium to tax. Similarly, the Commissioner of Income-tax (Appeals) on consideration of facts, found that section 68 of the Act cannot be invoked. In view of the above, it is likely that the Revenue may have taken an informed decision not to urge the issue of section 68 of the Act before the Tribunal. (d) We may also point out that decision of this court in Major Metals Ltd. v. Union of India [20121 19 taxmann.com 1761207 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axmann.com 272/247 Taxman 245/394 ITR 680 (Bom.) has while refusing to entertain a question with regard to section 68 of the Act has held that the proviso to section 68 of the Act introduced with effect from April 1, 2013 will not have retrospective effect and would be effective only from the assessment year 2013-14. (c) In view of the above. question No. B as proposed also does not give rise to any substantial question of law as it is an issue concluded by the decision of this court in Vodafone India Services (P.) Ltd. (supra) and in the apex court in G. S. Homes and Hotels (P.)Ltd. (supra).Thus not entertained. 30. Relying on the aforesaid judicial precedents of Hon ble High courts and the Tribunal, we are of the opinion that in this AY i.e. AY 2012-13, the amendment in section 68 of the Act took place wherein the addition of proviso was with effect from 01.04.2013 and so is not applicable in this AY. Further, as noted, the definition of income as provided under section 2(24) of the Act at the relevant time (AY 2012-13) did not define as income any consideration received for issue of shares in excess of its fair market value. This came into effect from 01.04.2013 and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redit appears) stands fully discharged if the identity of the creditor is established and actual receipt of money from such creditor is proved. In case, the Assessing Officer is dissatisfied about the source of cash deposited in the bank accounts of the creditors, the proper course would be to assess such credit in the hands of the creditor (after making due enquiries from such creditor). In arriving at this conclusion, the Hon'ble Court has further stressed the presence of word may in section 68 of the Act. The Hon ble Apex Court ratio was taken note by the Hon ble Gujarat High Court in the case of Dy. CIT vs Rohini Builders (2002) 256 ITR 360 wherein the Hon ble High Court observed at pages 369 and 370 of this order are reproduced hereunder:- Merely because summons issued to some of the creditors could not be served or they failed to attend before the Assessing Officer, cannot be a ground to treat the loans taken by the assessee from those creditors as non-genuine in view of the principles laid down by the Supreme Court in the case of Orissa Corporation [1986] 159 ITR 78. In the said decision the Supreme Court has observed that when the assessee furnishes names and add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead carefully the provisions of section 68, we notice nothing in section 68 to show that the scope of the inquiry under section 68 by the Revenue Department shall remain confined to the transactions, which have taken place between the assessee and the creditor nor does the wording of section 68 indicate that section 68 does not authorize the Revenue Department to make inquiry into the source(s) of the credit and/or sub-creditor. The language employed by section 68 cannot be read to impose such limitations on the powers of the Assessing Officer. The logical conclusion, therefore, has to be, and we hold that an inquiry under section 68 need not necessarily be kept confined by the Assessing Officer within the transactions, which took place between the assessee and his creditor, but that the same may be extended to the transactions, which have taken place between the creditor and his sub-creditor. Thus, while the Assessing Officer is under section 68, free to look into the source(s) of the creditor and/or of the sub-creditor, the burden on the assessee under section 68 is definitely limited. This limit has been imposed by section 106 of the Evidence Act which reads as follows: B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -vis the transactions, which have taken place between the assessee and the creditor, and it is not the business of the assessee to find out the source of money of his creditor or of the genuineness of the transactions, which took between the creditor and sub-creditor and/or creditworthiness of the sub- creditors, for, these aspects may not be within the special knowledge of the assessee. ********** ... If a creditor has, by any undisclosed source, a particular amount of money in the bank, there is no limitation under the law on the part of the assessee to obtain such amount of money or part thereof from the creditor, by way of cheque in the form of loan and in such a case, if the creditor fails to satisfy as to how he had actually received the said amount and happened to keep the same in the bank, the said amount cannot be treated as income of the assessee from undisclosed source. In other words, the genuineness as well as the creditworthiness of a creditor have to be adjudged vis-a-vis the transactions, which he has with the assessee. The reason why we have formed the opinion that it is not the business of the assessee to find out the actual source or sources from w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e part of the creditors to show that their sub-creditors had creditworthiness to advance the said loan amounts to the assessee, such failure, as a corollary, could not have been and ought not to have been, under the law, treated as the income from the undisclosed sources of the assessee himself, when there was neither direct nor circumstantial evidence on record that the said loan amounts actually belonged to, or were owned by, the assessee. Viewed from this angle, we have no hesitation in holding that in the case at hand, the Assessing Officer had failed to show that the amounts, which had come to the hands of the creditors from the hands of the sub-creditors, had actually been received by the sub-creditors from the assessee. In the absence of any such evidence on record, the Assessing Officer could not have treated the said amounts as income derived by the appellant from undisclosed sources. The learned Tribunal seriously fell into error in treating the said amounts as income derived by the appellant from. undisclosed sources merely on the failure of the sub-creditors to prove their creditworthiness. 34. Further, in the case of CIT v. S. Kamaljeet Singh [2005] 147 Taxman 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saddled the addition, which was overturned by Ld. CIT(A). However, the Tribunal reversed the decision of the Ld. CIT(A) and upheld the AO s decision, which action of Tribunal was challenged in the Hon'ble High Court, Calcutta in the case of Crystal Networks (P.) Ltd. v. Commissioner of Income-tax 353 ITR 171 wherein the Tribunal s decision was overturned and decision of Ld. CIT(A) upheld and the Hon ble High Court held that when the basic evidences are on record the mere failure of the creditor to appear cannot be basis to make addition. The court held as follows: 8. Assailing the said judgment of the learned Tribunal learned counsel for the appellant submits that Income-tax Officer did not consider the material evidence showing the creditworthiness and also other documents, viz., confirmatory statements of the persons, of having advanced cash amount as against the supply of bidis. These evidence were duly considered by the Commissioner of Income-tax (Appeals). Therefore, the failure of the person to turn up pursuant to the summons issued to any witness is immaterial when the material documents made available, should have been accepted and indeed in subsequent year the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he duty of the learned Tribunal to decide in this situation. In the said judgment noted by us at page 464, the Supreme Court has observed as follows: The Income-tax Appellate Tribunal performs a judicial function under the Indian Income-tax Act; it is invested with authority to determine finally all questions of fact. The Tribunal must, in deciding an appeal, consider with due care all the material facts and record its finding on all the contentions raised by the assessee and the Commissioner, in the light of the evidence and the relevant law. 11. The Tribunal must, in deciding an appeal, consider with due care all the material facts and record its finding on all contentions raised by the assessee and the Commissioner, in the light of the evidence and the relevant law. It is also ruled in the said judgment at page 465 that if the Tribunal does not discharge the duty in the manner as above then it shall be assumed the judgment of the Tribunal suffers from manifest infirmity. 12. Taking inspiration from the Supreme Court observations we are constrained to hold in this matter that the Tribunal has not adjudicated upon the case of the assessee in the light of the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concurrent findings of fact recorded by both the authorities. 38. Our attention was also drawn to the decision of the Hon'ble Supreme Court while dismissing SLP in the case of Lovely Exports as has been reported as judgment delivered by the CTR at 216 CTR 295: Can the amount of share money be regarded as undisclosed income under section 68 of the Income tax Act, 1961? We find no merit in this special leave petition for the simple reason that if the share application money is received by the assessee- company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment. 39. Our attention was also drawn to the decision of the Hon'ble Calcutta High Court while relying on the case of Lovely Exports, in the appeal of COMISSIONER OF INCOME TAX, KOLKATA-IV Vs ROSEBERRY MERCANTILE (P) LTD., ITAT No. 241 of 2010 dated 10- 01-2011 has held: On the facts and in the circumstances of the case, Ld. CIT(A) ought to have upheld the assessment order as the transaction entered into by the assessee was a scheme f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see's own undisclosed funds/income into the books of accounts of the assessee company. The Assessing Officer accordingly treated the investment as unexplained credit under Section 68 of the Income Tax Act and added the same to the income of the assessee. Being aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) being the First Appellate Authority and contended that the Assessing Officer had no material to show that the share capital was the income of the assessee company and as such the addition made by the Assessing Officer under Section 68 of the Act was wrong. The learned Commissioner of Income Tax (Appeals) after hearing the department and the Assessee Company deleted the addition of ₹ 52, 03,500/- to the income of the assessee company during the Assessment Year in question. The learned Commissioner of Income Tax Appeals found that there were as many as 2155 allottees, whose names, addresses and respective shares allocation had been disclosed. The Commissioner of Income Tax Appeals, further found that the Assessee Company received the applications through bankers to the issue, who had been appointed under the guide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unities being given to the assessee, nothing was disclosed about the identity of the shareholders. In the instant case, the assessee disclosed the identity and address and particulars of share allocation of the shareholders. It was also found on the facts that all the shareholders were in existence. Only nine shareholders subscribing to about 900 shares out of 6, 12,000 shares were not found available at their addresses, and that too, in course of assessment proceedings in the year 1994, i.e., almost 3 years after the allotment. By an order dated 2nd May, 2001, this Court admitted the appeal on three questions which essentially centre around the question of whether the Appellate Commissioner erred in law in deleting the addition of ₹ 52, 03, 500/- to the income of the assessee as made by the Assessing Officer. We are of the view that there is no question of law involved in this appeal far less any substantial question of law. The learned Tribunal has concurred with the learned Commissioner on facts and found that there were materials to show that the assessee had disclosed the particulars of the shareholders. The factual findings cannot be interfered with, in appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 68 of the Income- tax Act and the Tribunal below rightly held that the onus was validly discharged. We, thus, find that both the authorities below, on consideration of the materials on record, rightly applied the correct law which are required to be applied in the facts of the present case and, thus, we do not find any reason to interfere with the concurrent findings of fact based on materials on record. The appeal is, thus, devoid of any substance and is dismissed summarily as it does not involve any substantial question of law. 42. In the light of the afore-cited judicial precedents, let us examine the case in hand and find out whether pursuant to the direction of First Ld. Pr. CIT to frame denovo assessment, the second AO has discharged his role as an investigator in respect of share capital and premium collected by the assessee or whether the AO failed to enquire on this issue and whether his re-assessment/second assessment order is a plausible view or it can be termed as an unsustainable view in law. We on a conjoint reading of the First Revisional Order of the First Pr. CIT dated 28.03.2016 and the reassessment /Second assessment of the AO dated 08.06.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Therefore, according to the First Ld. Pr. CIT, the first original assessment order framed u/s. 143(3) of the Act dated 16.03.2015 was against the CBDT Office Memorandum (supra) and, therefore, he found it fit to order de-novo assessment to properly examine the share capital premium collected by assessee. He also directed that the assessment proceedings to be initiated at the earliest and to be completed without waiting for time bar limit. With the aforesaid direction, the First Ld. Pr. CIT has set aside the first original assessment order dated 16.03.2015. 44. So we note that the second AO was directed by the First Ld. Pr. CIT to carry out the de-novo assessment which means the second AO is free to assess the income of assessee afresh. 45. In the second round before the AO for de novo re-assessment, the second AO as per the direction of the First Ld. Pr. CIT (supra), conducted the reassessment proceeding. The Second AO firstly issued notice u/s 142(1) of the Act which was served on 04.05.2016 to prove the nature and source of credit entry and pursuant to which the A/R of the assessee company before him, who duly appeared and produced the books of account and furnished th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Paritosh Suppliers Pvt Ltd U52190WB2011 PTC 157257 AAFCP8460M Yes 2 Nirvaanam Properties Pvt Ltd U70109WB2012PTC172134 AADCN8752E Yes 3 Mangalvarsha Infraprojects Pvt Ltd U45400WB2011 PTC 171006 AAHCM5940M Yes 4 Link Dealres Pvt Ltd U52100WB2009PTC135729 AABCL6216H Yes 5 Earmark Infraprojects Pvt Ltd U70109WB2012PTC172223 AACCE9394E Yes 6 Casio Commosales Pvt Ltd U52190WB2009PTC136197 AADCC6980H Yes 7 Blockdeal Advisory Services Pvt Ltd U74140WB2012PTC172280 AAECB8504B Yes 8 Derby Realbuild Pvt Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 201 204 7 Blockdeal Advisory Services Pvt Ltd 2,20,00,000 7,70,03,774 219 227 207 8 Derby Realbuild Pvt Ltd 89,00,000 6,61,04,194 261 268 272 48. So, from a perusal of the above chart, we note that the assessee and the shareholders have brought to the notice of Second AO that they (share subscribers) have enough net worth to invest in the assessee company and the share subscribing companies pursuant to the first AO s notice u/s. 133(6) of the Act have furnished their respective audited accounts which are available in the assessment folder (Refer page 64-492 PBIII and pages 61-272 PBI) from which the aforesaid facts are clearly discernible and moreover the share subscribers have also filed before the second AO the source from which they subscribed to shares of assessee (though not required as per law in force for AY 2012-13, refer PBI pages 1-220), bank statement, audi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 1,00,00,000/- was received by the assessee through normal banking channels on 29-03-2012. The financial statement of this share applicant shows that it had enough funds to invest in the assessee-company and the transaction has happened through normal banking channels. 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. 2. Nirvaanam Properties Pvt Ltd On perusal of the paper book-1, it reveals that documents are found placed at page 84- 111 PBI of share applicant, Nirvaanam Properties Pvt Ltd, which is a Private Limited Company and which has Permanent Account No. AADCN8752E and CIN U70109WB2012PTC172134.We note that this share applicant has filed its Pan Card, ITR acknowledgment, source of funds, Allotment Advice issued by the assessee company, relevant Bank Statement and audited accounts in response to the notice issued u/s 133(6) of the Act. A copy of its Income Tax Return Acknowledgment for AY 2012-13 is placed at page 87 of the paper book. On perusal of Audited Accounts of this share applicant (Page 88-103), it is kindly be noted that its Net-wort ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts are found placed at page 137-158 of share applicant, M/s Link Dealers Pvt Ltd, which is a Private Limited Company and which has Permanent Account No. AABCL6216H and CIN U52100WB2009PTC135729. We note that this share applicant has filed its Pan Card, ITR acknowledgment, source of funds, Allotment Advice issued by the assessee company, relevant Bank Statement and audited accounts in response to the notice issued u/s 133(6) of the Act. A copy of its Income Tax Return Acknowledgment for AY 2012-13 is placed at page 140 of the paper book. On perusal of Audited Accounts of this share applicant (Page 141-154), it is noted that its Net-worth (Share Capital plus Reserves and Surplus) as on 31.03.2012 was ₹ 5,12,96,509/-, page 148 of the paper book and the investment made in the assessee-company including share premium was ₹ 55,00,000/-. Entire Share Application money of ₹ 55,00,000/- was received by the assessee through normal banking channels on 19-03-2012. The financial statement of this share applicant shows that it had enough funds to invest in the assessee-company and the transaction has happened through normal banking channels. 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 ..... f the paper book and the investment made in the assessee-company including share premium was ₹ 55,00,000/-. Entire Share Application money of ₹ 55,00,000/- was received by the assessee through normal banking channels on 19-03-2012. The financial statement of this share applicant shows that it had enough funds to invest in the assessee-company and the transaction has happened through normal banking channels. 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. 7. Block deal Advisory Services Pvt Ltd On perusal of the paper book-1, it reveals that documents are placed at page205-249 of share applicant, M/s Block deal Advisory Services Pvt Ltd which is a Private Limited Company and which has Permanent Account No.AAECB8504B and CIN U74140WB2012PTC172280. We note that this share applicant has filed its Pan Card, ITR acknowledgment, source of funds, Allotment Advice issued by the assessee company, relevant Bank Statement and audited accounts in response to the notice issued u/s 133(6) of the Act. A copy of its Income Tax Return Acknowledgment for AY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act (First 263 order). On examination of the submissions made by the assessee and the share applicants and the documents available in the assessment records, the second AO observed that, The assessee company furnished all the documents as required related to second source. Records were test checked received from the parties proving identity of parties, genuinity of transactions, creditworthiness and again it was observed that all the transactions were made through banking channel and duly recorded in the books of accounts of the parties. Accordingly it is inferred that: (i) As the shareholders were private limited companies and registered with the Ministry of Corporate Affairs they have an established identity. (ii) Details of source of funds have been submitted by all the shareholders. (iii) None of the applicants have been made otherwise than by banking channels. (iv) All the investors have submitted their Annual Reports and IT Returns And (v) In all the cases the investments is duly reflected in the Annual Accounts of the respective investors. 50. We further note that the Second Ld. Pr. CIT while issuing the Show Cause Notice while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conduct de-novo assessment dated 28.03.2016 u/s. 263 of the Act (First 263 order) and thus, we note that when the second AO while framing the reassessment order pursuant to the direction of the First Ld. Pr. CIT s order dated 28.03.2016 (first revisional order) has conducted inquiry and after perusal of the documents running more than 300 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 (albeit in the first round) 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. So the AO s view was a plausible view and at any rate can be termed as an unsustainable view on law or facts. 50. Further, we also take note that while he proposed to interfere u/s. 263 of the Act, he had opined that ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ethora of judicial decisions of the subject. 51. To sum up, we find from the above said facts that the Second AO has conducted enquiry on the specific subject matter i.e. share capital and premium collected by the assessee-company (CASS items). 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 that the Second AO failed to collect total facts also cannot be accepted for the simple reason that Ld. Pr. CIT has not spelt out in the impugned order what he meant by total facts or in the alternative when the assessee has discharged its onus, as required by the law in force in this AY 2012-13, then the Ld. Pr. CIT ought to have called for which ever additional documents/materials or issued summons or issued notices and collected those facts which according to Second Ld. Pr. CIT, the AO omitted to collect and then demonstrated that those actions/documents which he collected in that process gave result to a different finding of fact which will turn upside down the claim of the assessee and thus able to show that the actions/omiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany. 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 subject on which merger has taken place by virtue of the order of First Ld. Pr. CIT. And if this practice is allowed, then there will be no end to the assessment proceedings meaning no finality to assessment proceedings and that is exactly why the Parliament in its wisdom has brought in safe-guards, restrictions conditions precedent to be satisfied strictly before assumption of revisional jurisdiction. Be that as it may be, as discussed above, we find that the Second Ld. Pr. CIT without satisfying the condition precedent u/s 263 of the Act has invoked the revisional jurisdiction (second time), so all his actions are ab initio void. 52. Lastly, coming to the observations of the Second Ld. Pr.CIT that the assessment order passed by the AO is erroneous in so far a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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