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TMI Blog2022 (8) TMI 1166X X X X Extracts X X X X X X X X Extracts X X X X ..... to examine the followings: 1) Whether outward foreign remittance is from disclosed sources and appropriate withholding and reporting obligation have been complied with; 2) Whether the share capital is genuine and from disclosed sources; 3) Whether receipt of foreign remittance has been correctly offered for tax; and, 4) Whether sundry creditors are genuine. 2.1. Notices u/s. 143(2) and 142(1) have been issued to the assessee through 'ITBA-Assessment' portal. The assessee filed its submission through online. It is noticed by the A.O. from ITS data that the assessee has received interest income on fixed deposits amounting to Rs. 4,01,458/- whereas the same receipt is shown at Rs. 59,318/- by the assessee. Therefore the difference of Rs. 3,42,140/- being the interest income received on fixed deposits is added as the taxable income and thereby determined the assessed income as Rs. 4,01,460/- and demanded tax thereon. 2.2 This assessment order was being verified by the Ld. PCIT. It is found that 1,80,09,970/- equity shares have been issued at Rs. 10 each raising equity share capital of Rs. 18,00,99,700/- and total 23 persons/entities have subscribed to the Share Capital. Besid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 2016-17 405460 20454 YES YES No 5. Viral C Dhodasara 5000000 21249700 2016-17 748870 558666 illegible YES YES 6.Dilipbhai Adroja 0 13500000 2016-17 2041480 1349703 YES No No 7. Geetaben Adroja 0 800000 2016-17 331S50 0 YES No YES 8. Jitendra Ramvadh Rai 0 400000 2016-17 533367 0 YES No No 9. Natwarlal L Bhila 0 4000000 2016-17 283775 0 YES No No 10. Parimal D Ambani 0 2000000 2016-17 192790 0 YES No No 11 Parsottam Laljibhai Patel 0 6500000 2016-17 906850 880843 YES No No 12. Ratilal Laljibhai Patel 0 6500000 2016-17 1027400 552507 YES No No 13. RitabenDilipbhai Adroja (Patel) 0 16500000 2016-17 740680 0 YES NO No 14. Sunil Mittal 0 13000000 2016-17 617660 267 Limited No No 15. Shweta Mittal 0 8000000 No No No Yes NO YES 16. Adroja Tejablben Chandrashekar 0 11500000 2016-17 727260 0 Yes No No 17. Vasantiben Makadia 0 10000000 2016-17 200830 62144 Yes No YES 18. Chandresh Ratilal Patel 0 19500000 No No No No No No 19. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the A.O. during the course of assessment proceedings by uploading the same. This alone would not be legal ground to initiate revision proceedings u/s. 263 of the Act especially when the assessee submitted every details before the Assessing Officer. However a hard copy of all the documents related to the shareholders are submitted before Ld. PCIT. The next allegation of some of the shareholders have invested in assessee company which is more than 10 to 30 times of their annual income. The assessee submitted that it is a normal business practice from all over the world to invest in shares of companies by borrowing from either family members, friends or from banks & financial institutions. The law does not stipulate that a shareholder can invest in share of company only out of his current annual income, whereas the shareholder can also borrow money from others and invest in shares. Therefore this cannot be a reason to revise the assessment order passed by the Ld. A.O. Regarding the Supreme Court judgment in the case of PCIT vs. NRA Iron & Steel Pvt. Ltd. (2019) 103 Taxmann.com 48 (SC). The facts of the judgment is in relation to shareholder companies based in Kolkata which were just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng this financial year. However the A.O. has not conducted any inquiry to this effect and In fact simply accepted the assessee's submission. Therefore, it is a case where assessment has been completed without any inquiry on the points for which the case was selected for scrutiny. 16. It is settled law that any order is passed by the AO without conducting proper inquiry is deemed to be erroneous order and prejudicial to the interest of revenue. For such proposition of law reliance is placed on the following case laws:- i. CIT vs. Kamal Galani, 2018 ITL 1562(Gujarat). ii. Deniel Merchants Pvt. Ltd. vs.lTO (Appeal No. 2396/2017) dated 29.11.2017(SC). iii. Malabar Industrial Co. Ltd. Vs CIT, 243 ITR 83 (SC). iv. Ramesh Kumar Vs. ITO, Wd-3, Hisar, ITA No. 1982/Del/2018 dated 25.01.2019 ITAT(Delhi Bench "F"). v. Rampyari Devi Sarogi Vs. CIT 67 ITR 84 (SC) vi. Malabar Industrial Co. Ltd. Vs. CIT 243 ITR 83 (SC) vii.Swarup Vegetable Products Industries Ltd. Vs. CIT 187 ITR 412 (ALL) viii.Rajalakshmi Mills Ltd. Vs. ITO 121 ITD 343, 313 ITR(AT) 182 ix. SRM Systems & Software Pvt. Ltd. Vs. ACIT 2010-TIOL-646-HC- MAD-IT (ITAT, SB-Chennai) 17. I have carefully consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the following Grounds of Appeal: 1. Ld. Pr. CIT, Rajkot - 1 erred in law and on facts revising a scrutiny assessment order which is neither erroneous nor prejudicial to the interest of revenue. 2. This action of Id. Pr. CIT revising an order passed by AO raising relevant queries and extensive verification of the details submitted during assessment by the appellant is without any justification to invoke revisional jurisdiction. 3. Ld. Pr. CIT erred in law and on facts holding that assessment completed without any inquiry on the points for which case was selected for scrutiny as erroneous and prejudicial to the interest of revenue failed to appreciate clear difference between "Lack of inquiry" and "Inadequate inquiry." 4. Ld. Pr. CIT erred in law and on facts invoking revisional jurisdiction in absence of AO noting in assessment order response to the query raised that was properly responded by the appellant during the assessment proceedings. 5. Ld. Pr. CIT erred in law and on facts revising scrutiny assessment order merely because he held a different opinion than AO in the matter. 6. Ld. Pr. CIT erred in law and on facts revising scrutiny assessment order relying on ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tement are as under: Metropole Tiles Pvt Ltd List of Sundry Creditors As on 31.03.2016 Sr. No. Supplier/Vendor Name Due/Outstanding Amount (Rs.) 1 Krishna Colour Chem-Morbi 637,193 2 Simco Sales Agency-Morbi 412,113 3 Urna International-Morbi 1,308,276 4 '.Gujarat Gas Ltd-Morbi 3,268,715 5 'Vldres India Ceramics Pvt Ltd-Kadi 579,383 6 IParesh Plastic Industries-Morbi 58,454 7 Tushnil Impex Pvt Ltd-Morbi 75,600 8 Amarnath Marble-Kishangarh 83,875 9 Asian Solvochem-Morbi 71,336 10 Bhura Multi Minerals-Bhilwara 119,809 11 Bikaner Minerals & Chemicals-Bikaner 505,871 12 Dhartidhan Export-Bhilwara 372,959 13 Ceetanjali Minerals-Ajmer 461,598 14 Sokul Enterprise-Morbi 123,795 15 Gouri Mineral-Beawar 474,398 16 Guru Kripa Minerals-Rajasmand 268,829 17 Krishna Clay & Chemicals-Bikaner 253,292 18 Krishna Minerals-Bhilwara 67,761 19 lalji Minerals-Nagaur 309,172 20 Mahadev Mines & Chemical-Nagaur 98,731 21 Marudhar Mineral & Chemicals-Beawar 670,877 22 P. K. Minerals-Rajasmand 72,038 23 .R. D. Mines & Minerals-B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riers-Khuch 51,480 Grand Total of Creditors 47,825,921 Copy of Accounts are enclosed herewith as EXHIBIT D. Further, contra ledger of Sundry Creditor for Indigenous Machinery are also enclosed herewith as EXHIBIT D. Commercial Production is not started during the year. No Sundry debtors are o/s in the books of accounts. 4.2. The assessee also further submitted list of shareholders along with shareholding pattern as follows: 1. List of Shareholder along with Shareholding pattern Sr. No. Name Op Balance Addition during the year Share alloted amount Closing Balance % of Holding 1 Ghandrashekhar Ratilalbhai Patel o 19,500,000 19,500,000 19,500,000 10.83% 2 Dhansukhbhai Jadavjibhai Kasundra 0 7,000,000 7,000,000 7,000,000 3.89% 3 Dilipbhai Ratilalbhai Patel 0 13,500,000 13,500,000 13,500,000 7.50% 4. Falguni H. Padalia 0 2,000,000 2,000,000 2,000,000 1.11%\ 5 Gitaben Mahadevbhai Adroja 0 800,000 800,000 800,000 0.44% 6 Hasmukh Laljibhai Fultariya 0 7,000,000 7,000,000 7,000,000 3.89% 7 Jayeshbhai Pravinbhai Panara 0 4,5000,000 4,500,000 4,500,000 2.50% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court held as follows: Section 68, read with section 263, of the Income-tax Act, 1961 - Cash credits (Loans) - assessment year 2009-10 - whether Principal Commissioner cannot substitute opinion to that of Assessing Officer on same material which was noted by Assessing Officer in reassessment proceeding- Held, yes - Assessment was reopened under section 147 and after discussing case and conducting enquiry relief was granted to assessee - Thereafter, Principal Commissioner proposed to revise reassessment order by issuing show-cause notice on ground that Assessing Officer had failed to examine and that no enquiry was conducted into veracity of loans by Assessing Officer - Tribunal, however found that Assessing Officer conducted enquiries both with assessee as well as with accepted these loans as genuine - Further, Tribunal noted that no independent enquiry was conducted by Principal Commissioner to justify assumption of jurisdiction under section 263 - Whether therefore, order passed by Principal Commissioner was bad in law and Tribunal rightly granted relief to assessee - Held, yes 4.4. The Supreme Court judgment in the case of Principal Commissioner of Income Tax vs. Shreeji Prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Dwarkadhis Buildwell (P.) Ltd. vs. CIT (2019) 109 taxmann.com 5. The Hon'ble Gujarat High Court judgment in the case of Mitesh Rolling Mills (P.) Ltd. vs. CIT (2002) 124 Taxmann.com 620 (Guj.) and the Co-ordinate Bench judgment in the case of Kavita jayeshkumar Kotak vs. PCIT (Cental) in ITA No. 54/Ahd/2021 order dated 28.04.2022. 4.7. Thus the Ld. Senior Counsel submitted that when the Assessing Officer while framing assessment order made proper enquiries. Thus there is a clear difference between 'Lack of inquiry' and 'Inadequate inquiry', the ld. PCIT cannot revise the assessment order merely because he held a different opinion then that is verified by the Assessing Officer during the assessment proceedings. Therefore the revisional proceedings initiated u/s. 263 is liable to be quashed. 5. Per contra ld. D.R. Mr. Sushil Madhuk appearing on behalf of the Revenue supported the order of the Ld. PCIT and submitted the assessment order passed by the Assessing Officer is a cryptic order without any discussion on the enquiry made by the A.O. on the share application money invested by various persons. The Assessing Officer has not verified genuine of the transaction credit wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nels and the respective Income Tax Return by the investors were also been verified by the Assessing Officer. Similarly, on the unsecured loans the same were received by the assessee company through banking channels by way of cheques and the bank statements were also been produced before the Assessing Officer for verification along with Return of Income filed by the respective assessees/creditors. Thus, the Assessing Officer accepted the genuineness of the share application money and unsecured loans received by the assessee. Such a view of the Assessing Officer was a plausible view and the same cannot be considered as erroneous or prejudicial to the interest of revenue. Thus it is not open to the Ld. PCIT to revise the issues on mere apprehensive and surmises that the A.O. has not made proper verification before passing the assessment order. It is settled principle of law by the Hon'ble Apex Court in the case of CIT vs. Shreeji Prints (P.) Ltd. (cited supra) when Assessing Officer made enquiries in detail and accepted the genuineness of loan received by the assessee such view of the Assessing Officer was a plausible view and same cannot be considered as erroneous or prejudicial to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statements, confirmations letter, etc. It is the case of the assessee that all these unsecured loans transaction and investment in shares were being routed through banking channels and the respective bank accounts were being submitted before the Assessing Officer for verification. Thus the Assessing Officer having carried out such detailed inquiries satisfied with the explanation offered by the assessee, it was not open for the Ld. PCIT to thereafter revise the issues on mere apprehensions and surmises. In the light of the above facts and a legal position, we are of the considered view that the Assessing Officer had made detailed inquiries and after applying his minds and satisfied genuineness of the loans received by the assessee as well as the share application money through banking channels which is plausible view adopted by the Assessing Officer. 6.4. It would useful to refer to some of the Supreme Court and High Court decisions on this subject which would throw useful light on the scope of enquiry under Explanation 2 to Section 263 of the Act. 6.5. The case laws held as follows: (1) CIT vs. Nirav Modi [2017] 77 taxmann.com 78 (SC) Section 68, read with section 263, of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year 2008-09 - Assessee entered into a joint venture agreement for acquisition of a plot from Maharashtra Industrial Development Corporation (MIDC) - Allotment of plot was made by MIDC in February, 2006 - Assessee relinquished its right, title and interest in said plot in favour of other company - While filing return for relevant assessment year, assessee claimed that liability for payment of tax was not attracted - Assessing Officer taking a view that assessee did not carry on any business activity during relevant year or earlier years, accepted assessee's clam - Commissioner passed a revisional order setting aside assessment on ground that income earned by assessee was in nature of business income - Tribunal noted that Assessing Officer had thoroughly examined issue during course of scrutiny assessment proceedings and, had given a very categorical finding that any property whether connected with business or not other than stock-in-trade was a capital asset - Thus, Tribunal set aside revisional order passed by Commissioner - High Court upheld Tribunal's order - Whether, on facts, SLP filed against High Court's decision was to be dismissed - Held, yes [Para 2] [In fa ..... 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