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TMI Blog2022 (3) TMI 770X X X X Extracts X X X X X X X X Extracts X X X X ..... AY 2012-13, 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 investors in their company (assessee). In this AY, the assessee is not bound by law at the time of collection of share capital to ask the share-applicants from where it is getting the money to invest in the assessee s company. And we also note that share premium can be taxed if it exceeds the fair market value only from next AY i.e. AY 2013-14 and not in this A.Y 2012-13. According to us, from the aforesaid exercise carried out by the Second AO, it cannot be said that second AO did not enquire into the nature and source of the share capital collected by the assessee company. And moreover it is common knowledge that in this computer/digital ear, the AO on a click of the mouse, could have early 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 departme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 - 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. Ld. CIT(A) has made a bald statement that the AO s assessment order attracts Explanation 2(c) u/s. 263 of the Act. However, he failed to spell out in his impugned order how the action of AO while framing the assessment order is not in accordance to any order, direction or instruction issued by the Board under section 119 of the Act. So, the deeming fiction as envisaged in Explanation (2) u/s. 263 of the Act cannot be used to inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh the assessee-company filed its submissions and documents as mentioned/requisitioned by him, however despite his direction, the assessee company/share subscribing companies failed to produce their directors before him. Therefore, according to the First Assessing Officer, since the assessee s share subscribing companies failed to produce their respective directors who invested in shares with premium, he drew adverse inference against the assessee and made an addition of ₹ 20,38,00,000/- under section 68 of the Act (hereinafter referred to as the first assessment order). This action of First AO, was interdicted by the First Ld. PCIT by exercising his revisional jurisdiction u/s 263 of the Act to set aside the first assessment order passed under section 143(3) dated 21.03.2015. However in his order (first revisional order) the Ld. PCIT (first) recorded finding of fact after perusal of the first assessment order/folder that pursuant to the notices/requisition made by the first Assessing Officer, the assessee had furnished the audited books of account and other details requisitioned by him (AO) and that the details are available on records. The 1st Principal CIT noted that the F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd A.O. ) framed the re-assessment order dated 15.09.2016 by making an addition of ₹ 2,919/- under section 14A read with Rule 8D under section 143(3) /263 of the Act (hereinafter referred to as the 2nd assessment/reassessment order). 5. In respect of the said 2nd assessment order/reassessment order dated 15.09.2016, the Ld. Pr. CIT -4 (hereinafter referred to as the 2nd Ld. PCIT), wherein he issued show-cause notice dated 31.12.2018 and conveyed his desire to exercise his revisional jurisdiction again u/s 263 of the Act. The 2nd Ld. Pr. CIT thereafter heard the assessee and passed the impugned order dated 12.03.2019, wherein he was pleased to again set aside the reassessment order/2nd assessment order dated 15.09.2016 and directed denovo adjudication (hereinafter referred to as the 2nd /impugned revisionary order of Second Ld. PCIT) by observing as under:- 7.2. In my considered opinion, this is a case of lack of enquiry on the part of the AO. The decision on this issue could be taken only after examining and verifying the facts/submission of the A.R. on this score. Not collecting the full facts and not taking enquiry to logical end which could enable AO to take dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hirteen) share applicants and pursuant to which all of them had replied directly to the AO along with the documents requisitioned by him to prove the identity, creditworthiness and genuineness of the transactions. According to the Ld. A.R., even in the 2nd round, the 2nd AO had issued summons to all the 13 (thirteen) share applicant companies and directed them to produce their respective Directors and pursuant to which all the Directors of the 13 (thirteen) companies appeared before the 2nd Assessing Officer, which fact is evident from perusal of at pages 35 to 94 of the paper book. The Ld. A.R. drew our attention to the contents of these pages to show that the Directors of the share applicant companies had in fact appeared on various dates before the AO and the 2nd AO has recorded on oath their answers to the questions asked by and thereafter going through the audited books of account of all the share applicants and Bank statements; and after verifying the genuineness of the documents submitted was pleased not to draw any adverse inference against the share capital and premium collected by the assessee. Moreover according to the Ld. A.R., as directed by the 1st Ld. Pr. CIT, even t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... large share premium received . Thereafter the First AO issued statutory notices to the assessee and framed the assessment order under section 143(3) of the Act dated 21.03.2015 by making an addition of ₹ 20,38,00,000/-. Thereafter the 1st Ld. Pr. CIT-4, Kolkata invoked his revisional jurisdiction under section 263 of the Act and took note out of the fact that even though the assessee as well as the 13 (thirteen) share subscribers have replied to the First Assessing Officer s notices/requisitions u/s 133(6) of the Act and filed all the documents called for by him to prove their identity, creditworthiness and genuinety of the share transaction, the First AO drew adverse view against them because the Directors of the assessee/share applicants did not turn up before him pursuant to the summons issued under section 131 of the Act. The Ld. First PCIT found that despite all the documents being produced by the assessee/share applicants as per the requisitions of the First AO, still he made high-pitched assessment which was erroneous. The Ld. PCIT after going through the assessment records was of the opinion that there was violation of natural justice and also violation of Office Mem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Second Assessing Officer found fault by the Second Principal CIT is erroneous as well as prejudicial to the interest of the Revenue. For that, let us take the guidance of judicial precedent laid down by the Hon'bIe Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC), wherein their Lordship have held that 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, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examination of books of accounts and Bank accounts of assessee as well as investors. AO is also directed to examine the source of share application, identity of investor and its genuineness. The assessment proceedings may be initiated at the earliest and to be completed without waiting time barring date. The AO must provide sufficient opportunity of being heard to the assessee in order to meet natural justice, equity and fairness. (emphasis given by us) 13. Pursuant to the aforesaid direction of the Ld. First PCIT the Second AO has framed the reassessment/2nd assessment order by making an addition of ₹ 2,919/- u/s 14A vide order dated 15.09.2016. 14. Thereafter the 2nd Ld. PCIT again exercised his revisional jurisdiction and was pleased to set aside by order dated 12.03.2019 the reassessment/2nd reassessment order of the AO dated 15.09.2016 and directed fresh assessment (which means a 3rd assessment to be framed). 15. The aforesaid action of the 2nd Ld. PCIT dated 12.03.2019 is challenged before us. According to the Ld. Counsel Shri Soumitra Chowdhury, the Ld. PCIT erred in assuming his jurisdiction without satisfying the jurisdiction of condition precedence a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (v) bank statement reflecting the transaction; (vi) records relating to investors in order to establish their identity, genuineness and creditworthiness of the share subscribers. 16. The First Ld. Pr. CIT found that AO in the first assessment proceedings though has been provided with the aforesaid documents has not examined these documents, which according to him, should have been carried out by the AO. Further, The First Ld. Pr. CIT found fault with the AO s order for not giving any credence to the fact that pursuant to issuance of notice u/s. 133(6) of the Act by him the share subscriber had filed all documents requisition and the AO did not record the same in the order-sheet. The 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 according to him, the AO has simply jumped to the conclusion and treated the share capital as unexplained cash credit. The First Ld. Pr. CIT found fault with the action of AO for not bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act and has recorded their statement on oath from 8/7.06.206 which is evident from perusal of page 34 to 94 of PB wherein it is noted that the second AO has asked approx nineteen (19) questions to each of the directors of all the thirteen (13) share applicants. And he has recorded in his re-assessment/second assessment order that Shri Vinay Kumar Singh, A.R of the assessee company appeared and produced the books of account and bank statement of the assessee company which he has examined. The second AO acknowledged to have examined the book of the investor/share applicant companies book also. We note that the following documents have been produced by the directors of the share subscribing companies before the Second AO to prove the identity, creditworthiness and genuineness of the transaction:- i) The respective director s PAN and Address Proof ii) Ledger of assessee company in their share applicant iii) Statement in regard to application made with payment and source details iv) Bank statement for the same v) Letter of the Allotment received from assessee company vi) Statement and documents evidencing Source vii) ITR Acknowledgement and ITR-6 for the AY 2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a mixed question of fact and law. 22. So the question is whether there is any merit on the finding of the Second Ld. Pr. CIT that the second assessment order/re-assessment order dated 15.09.2016 can be termed as erroneous for lack of enquiry. On a conjoint reading of the second SCN and operative portion of the impugned order, it can be safely deduced that according to Second Ld. Pr. CIT, the AO in the second round has not enquired about the share capital premium collected by the assessee. For that we need to carefully examine as to whether the second AO has carried out his dual role as an investigator as well as an adjudicator while deciding the issue of share capital and premium collected by the assessee for AY 2012-13. Before we examine about the investigative role of the AO, we need to examine the law as it stood in AY 2012-13 and is applicable in this case. Section 68 of the Act reads as under:- Section 68: 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares: Provided that this clause shall not apply where the consideration for issue of shares is received- (i) By a venture capital undertaking from a venture capital company or a venture capital fund, or (ii) 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, (a) The fair market value of the shares shall be the value- (i) As may be determined in accordance with such method as may be prescribed, or (ii) 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies, it is common knowledge that premium fixed is a matter of mutual agreement and ITAT Mumbai in the case of Gagandeep Infrastructure Pvt. Ltd., (supra) has held that it is a prerogative of the Board of Directors of the company to decide the premium amount and it is the wisdom of the shareholders whether they want to subscribe to such a heavy premium. And the aforesaid view of the ITAT has been upheld by the Hon'ble Bombay High Court order dated 20th March 2017. Further the Hon'ble High Court observed as under17 (i) We find that the proviso to Section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1stApril, 2013. Thus it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share at a premium was a commercial decision. It is the prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of shareholder whether they want to subscribe the shares at such a premium or not. This was a mutual decision between both the companies. In day to day market, unless and until, the rates if fixed by any Govt. Authority or unless there is any restriction on the amount of share premium under any law, the price of the shares is decided on the mutual understanding of the parties concerned .. . (C) The Mumbai Tribunal in the case of ACIT-l(l) vs. M/s. Gagandeep Infrastructure Pvt. Ltd. the ITAT has held as under: We have carefully perused the orders of the lower authorities. In our considered view, the issue of shares at premium is always a commercial decision which does not require any justification. Further the premium 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 ordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia, Oriental Bank of Commerce, Indian Overseas Bank and Canara Bank which are all public sector undertakings. Therefore, to raise eyebrows to a transaction where there is so much of involvement of the Government directly or indirectly does not make any sense. 10.1 No doubt a non-est company or a zero balance company asking for a share premium of ₹ 490/- per share defies all commercial prudence but at the same time we cannot ignore the fact that it is a prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of the share holders whether they want to subscribe to such a heavy premium. The Revenue authorities cannot question the charging of such of huge premium without any bar from any legislated law of the land. Details of subscribers were before the Revenue authorities. The AO has also confirmed the transaction 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA-2270/KOL/2016 Trend Infra Developers Pvt. Ltd. The assessee specifically argued before the ld. CIT(A) that the allotment of shares at a premium cannot be considered as sham or income of the assessee. It was pleaded at a preliminary level that the receipt of share capital and share premium is on capital account and that the same cannot be subject to tax as income. Specific submissions were also made in the context of introduction of section 56(2)(viib) inserted by the Finance Act, 2012 with effect from 01.04.20l3 which reads as under: (viib) Where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in paraJ J of the impugned order is the addition of share capital and share application money in the hands of the assessee as income under section 28(iv) of the Act. We find that the Commissioner of Income-tax (Appeals) did consider the issue of applicability of section 68 of the Act and concluded that it does not apply. The Revenue seems to have accepted the same and did not urge this issue before the Tribunal. Mr. Bhoot, learned counsel appearing for the Revenue also fairly states that the issue of applicability of section 68 of the Act was not urged by the Revenue before the Tribunal. (b) It is a settled position in law as held by this court in CIT v. Tata Chemicals Ltd. [20021 J 22 Taxman 6431256 ITR 395 (Bom.) that in an appeal under section 260A of the Act, the High Court can only decide a question 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uding premium are on capital account and cannot be considered to be income. (c) It is further pertinent to note that the definition of income as provided under section 2(24) of the Act at the relevant time did not define as income any consideration received for issue of share in excess of its fair market value. This came into the statute only with effect from April 1, 2013 and thus, would have. no application to the share premium received by the respondent-assessee in the previous year relevant to the assessment year 2012-13. Similarly, the amendment to section 68 of the Act by addition of proviso was made subsequent to previous year relevant to the subject assessment year 2012-13 and cannot be invoked. It may be pointed out that this court in CIT v. Gagandeep Infrastructure (P.) Ltd. [2017] 80 taxmann.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 g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee of that previous year . The Hon ble Supreme Court while interpreting similar phraseology used in section 69 has held that in creating the legal fiction the phraseology employs the word may and not shall . Thus the un-satisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the income of the assessee as held by the Hon ble Supreme Court in the case of CIT v. Smt. P. K. Noorjahan [1999] 237 ITR 570. 30. In a case wherein the AO made the addition u/s 68 of the Act because the lenders of loan to assessee did not turn up before him [AO], the Hon'ble Apex Court in the case of Orissa Corpn. (P) Ltd. (supra) 159 ITR 78 has held that onus of the assessee (in whose books of account credit 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fairs of such third party, which he is not even supposed to know or about which he cannot be held to be accredited with any knowledge. In this view, the Hon'ble Court has laid down that section 68 of Income-tax Act, should be read along with section 106 of Evidence Act. The relevant observations at page 260 to 262, 264 and 265 of the order are reproduced herein below:- While interpreting the meaning and scope of section 68, one has to bear in mind that normally, interpretation of a statute shall be general, in nature, subject only to such exceptions as may be logically permitted by the statute itself or by some other law connected therewith or relevant thereto. Keeping in view these fundamentals of interpretation of statutes, when we read 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saction as well as the creditworthiness of his creditor, the burden of the assessee to prove the genuineness of the transactions as well as the creditworthiness of the creditor must remain confined to the transactions, which have taken place between the assessee and the creditor. What follows, as a corollary, is that it is not the burden of the assessee to prove the genuineness of the transactions between his creditor and sub-creditors nor is it the burden of the assessee to prove that the sub-creditor had the creditworthiness to advance the cash credit to the creditor from whom the cash credit has been. eventually, received by the assessee. It, therefore, further logically follows that the creditor's creditworthiness has to be Judged vis-a-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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entity of the creditors, namely, Nemichand Nahata and Sons (HUF) and Pawan Kumar Agarwalla. The appellant had also shown, in accordance with the burden, which rested on him under section 106 of the Evidence Act, that the said amounts had been received by him by way of cheques from the creditors aforementioned. In fact the fact that the assessee had received the said amounts by way of cheques was not in dispute. Once the assessee had established that he had received the said amounts from the creditors aforementioned by way of cheques, the assessee must be taken to have proved that the creditor had the creditworthiness to advance the loans. Thereafter the burden had shifted to the Assessing Officer to prove the contrary. On mere failure on the 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. View ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he process, the onus may again shift from the Assessing Officer to assessee. 16. In the case before us, the appellant by producing the loan-confirmation-certificates signed by the creditors, disclosing their permanent account numbers and address and further indicating that the loan was taken by account payee cheques, no doubt, prima facie, discharged the initial burden and those materials disclosed by the assessee prompted the Assessing Officer to enquire through the Inspector to verify the statements. 34. In a case where the issue was whether the assessee availed cash credit as against future sale of product, the AO issued summons to the creditors who did not turn up before him, so AO disbelieved the existence of creditors and 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 evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns and vouchers showing supply of bidis as against the advance. Therefore, the attendance of the witnesses pursuant to the summons issued, in our view, is not important. The important is to prove as to whether the said cash credit was received as against the future sale of the product of the assessee or not. When it was found by the Commissioner of Income-tax (Appeals) on facts having examined the documents that the advance given by the creditors have been established the Tribunal should not have ignored this -fact finding. Indeed the Tribunal did not really touch the aforesaid fact finding of the Commissioner of Income-tax (Appeals) as rightly pointed out by the learned counsel. The Supreme Court has already stated as to what should be the 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 cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted by the creditor has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness of transaction through account payee cheque has been established. We find that both the Commissioner of Income Tax (Appeal) and the Tribunal below followed the well-accepted principle which are required to be followed in considering the effect of Section 68 of the Act and we thus find no reason to interfere with the concurrent findings of fact recorded by both the authorities. 36. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Cl. T. vs. M/s. Lovely Exports Pvt. Ltd. [supra], we are at one with the Tribunal below that the point involved in this appeal is covered by the said Supreme Court decision in favour of the assessee and thus, no substantial question of law is involved in this appeal. The appeal is devoid of any substance and is dismissed. 38. Our attention was drawn to the decision of the Hon'ble High Court, Calcutta in the case of Commissioner Of Income Tax vs M/s. Nishan Indo Commerce Ltd dated 2 December, 2013 in INCOME TAX APPEAL NO.52 OF 2001 wherein the Court held as follows: The Assessing Officer was of the view that the increase in share capital by ₹ 52,03,500/- was nothing but the introduction of the assessee'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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned Commissioner and accordingly the learned Tribunal dismissed the appeal of the Revenue and affirmed the decision of the learned Commissioner. Mr. Dutta appearing on behalf of the petitioners cited judgment of the Division Bench of this Court in Commissioner of Income Tax Vs. Ruby Traders and Exporters Limited reported in 236 (2003) ITR 3000 where a Division Bench of this Court held that when Section 68 is resorted to, it is incumbent on the assessee company to prove and establish the identity of the subscribers, their credit worthiness and the genuineness of the transaction. The aforesaid judgment was rendered in the context of the factual background of the aforesaid case where, despite several opportunities 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losure of the full particulars indicated above, the initial onus of the assessee was shifted and it was the duty of the Assessing Officer to enquire whether those particulars were correct or not and if the Assessing Officer was of the view that the particulars supplied were insufficient to detect the real share applicants, to ask for further particulars. The Assessing Officer has not adopted either of the aforesaid courses but has simply blamed the assessee for not producing those share applicants. In our view, in the case before us so long the Assessing Officer was unable to arrive at a finding that the particulars given by the assessee were false, there was no scope of adding those money under section 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 dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 21.03.2015 was against the principle of natural justice and, therefore, he found it fit to order denovo assessment and gave specific direction in respect of share capital premium collected by assessee. 42. Thereafter, the Ld. Pr. CIT was pleased to direct assessment order passed on 21.03.2015 is set aside de novo with the direction to the AO to carry out proper examination of books of account and bank statement of the assessee as well as the investor. The AO is also directed to examine the source of share application, identity of investor and its genuineness . (emphasis given by us). He also directed that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act pursuant to which all the thirteen (13) share subscribers have replied along with all documents requisitioned by him] And the second AO after conducting enquiry and thereafter inspecting and verifying the books of account and the bank statement of the assessee as well as that of the investor/share subscribers, has accepted the share transaction of the assessee with premium from these thirteen (13) share subscribers. So according to us, from the aforesaid exercise carried out by the Second AO, it cannot be said that second AO did not enquire into the nature and source of the share capital collected by the assessee company. And moreover it is common knowledge that in this computer/digital ear, the AO on a click of the mouse, could have early 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-Page 111-368) and were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents 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 genuinety 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 precedents (supra). 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. 47. So, from the aforesaid facts revealed during the second round, we note that AO has discharged his duty as an Investigator and enquired as per the direction of the First Ld. Pr. CIT dated 31.03.2016 u/s. 263 of the Act (First 263 order) and further we note that the Second Ld. Pr. CIT while issuing the Show Cause Notice while exercising his revisional jurisdiction for second time has not made even a single allegation about the noncompliance/ failure on the part of Second AO in respect of the specific direction given by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iry conducted by AO then the AO has discharged the duty of an investigator. And we note that all the documents referred to above are available is the assessment folder before the Second Ld. Pr. CIT and he could have easily examined the veracity of these documents from the department s data base by click of a mouse and could have recorded his finding of fact if he found anything wrong with these share subscribers and could have pointed out the adverse fact, if any, which the Second Ld. Pr. CIT has not made in the impugned order. So the inference that can be drawn is that the veracity of the factual contents of the documents running more than 330 pages could not be factually controverted by the Second Ld. Pr. CIT. And still if the Ld. Pr. CIT is not satisfied and wanted to interfere invoking jurisdiction u/s. 263 of the Act, he has to show that the enquiry conducted by AO was flawed or the enquiry conducted by AO was on a wrong direction or on wrong assumption of fact/law or that the AO misdirected himself in factual investigation or applied the law erroneously in respect of the facts collected by him. For doing so, in the facts discussed supra, he second (Ld. Pr. CIT) should himself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Since the assessee company has discharged its onus as discussed supra, and still if the Second Pr. CIT had to find the order of Second AO erroneous for lack of enquiry or for not collecting the entire facts, then the Second Pr. CIT ought to have called for the additional facts which he thinks that the Second AO has not collected from the assessee or the shareholders and then explained in his impugned order as to what effect those additional documents would have made on the second assessment order/reassessment order or in other words the impact on the decision making process of framing the second assessment order due to the failure of second AO s omission to collect the additional documents. However, we note that the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if in the opinion of the Principal Commissioner or Commissioner,- (a) . (b) .. (c)the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or 51. However, we note that the Ld. CIT(A) has made a bald statement that the AO s assessment order attracts Explanation 2(c) u/s. 263 of the Act. However, he failed to spell out in his impugned order how the action of AO while framing the assessment order is not in accordance to any order, direction or instruction issued by the Board under section 119 of the Act. So, the deeming fiction as envisaged in Explanation (2) u/s. 263 of the Act cannot be used to interfere with the order of AO. This action of Ld. Pr. CIT is bad for non-application of mind. In the light of the aforesaid discussion and case laws cited supra, we find merit in the appeal filed by the assessee, therefore, we allow the appeal of assessee on the ground that since the Ld. Pr CIT has exercised his revisional jurisdiction u/s. 263 w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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