9911796707
TMI Blog2022 (8) TMI 1168X X X X Extracts X X X X X X X X Extracts X X X X ..... disputed that the assessee has submitted the proof of identity of shareholders, capacity by showing the gift received and genuineness of the transactions as the shareholder and company both have supplied the information related to these transactions. Even the issue was similar in assessment year 2016-17 wherein the investor shareholders being same and the investment made by the shareholder were accepted and even the proceedings u/s. 143(3) r.w.s. 263 read with section 144B of the Act for the assessment year 2016-17 has after giving the detailed show cause and considered the submission of the assessee and accepted the fact that the investment made by the shareholder is genuine and no addition was made in the case of the company what else the ld. AO can do in this case so as to prove the investment made by the shareholder in the assessee company. Even the factual input made by the ld. AR that the case of shareholders are re-opened to check the genuineness of the investment made by them in that circumstances we believe the plausible view was taken by the AO on this issue. As regards, the disallowance under section 14A r.w.r. 8D the ld. AR of the assessee has submitted that there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-03-2022 u/s 263 of the Income Tax Act, in respect of Assessment Order dated 27.12.2019 passed u/s 143(3) for A. Y. 2017-18, ld. PCIT has grossly erred in passing revisionary order u/s 263 and issuing directions to verify and enquire into source of money in the hands of shareholders of the company. Appellant prays that all the necessary inquiries required for completing assessment, were made by ld. AO during assessment proceedings. Thus, the Assessment Order dated 27.12.2019 passed by the Ld. AO is neither erroneous nor prejudicial to the interest of revenue and therefore, no revision of the same is called for on this account. 2. That the ld. Pr. CIT has further erred in setting aside the Assessment Order dated 27-12-2019 u/s 263 when he portrays the Assessment Order as erroneous but fails to establish or demonstrate as to how the Assessment Order is prejudicial to the interest of revenue, more particularly when the twin requirement of being erroneous prejudicial to the interest of revenue needs to be satisfied cumulatively for invoking the provisions of section 263, thus the impugned Order dated 30-03-2022 so passed deserves to be held bad in the eye of law and be quashe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eived the total share capital of Rs. 90,00,00,000/- (Rupee Ninety cores only) which has been contributed equally by three existing shareholders of the company namely Mr. Jayant Joshi, Shri Jalal Joshi and Shri Nayan Joshi each of them for the amount of Rs. 30,00,00,000/- (Rupee thirty crores only) Share capital. Each of them has paid this amount out of the money received by them through cheque and proper banking channel by way of Gift from their uncle (real brother of their father) Late Dr. Rajendra Kumar Joshi who was a swiss national. It is also submitted that the gifts received from relatives would not be taxable as per section 56(2) of the Act. Dr. Rajendra Kumar Joshi was born in India but for past more than 40 years he was the citizen of Switzerland. He Founded a company Fumapharm AG in Switzerland where he developed medicines for many serious illnesses. In 2006 BIOGEN a U. S. Biotechnology company acquired 100 % share capital of Fumapharm AG and as a part of this BIOGEN paid USD 220 Million to Dr. Rajendra Kumar Joshi. Dr. Rajendra Kumar Joshi passed away on 01.10.2019. Assessee has submitted that the assessment was completed u/s. 143(3) of the Act after making detailed inqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the year 2006 and the amounts under reference were transferred in the year 2016. In the course of present proceedings AR also submitted declaration/gift deeds executed by Mrs. Ursula Joshi. The said deeds are executed much after the gift was made and these are not notarized. In view of the above, it is evident that AO passed the order without carrying out detailed verification and investigations which was warranted considering the facts of the case. As regards the disallowance as per Rule 8D r.w.s. 14A of the Act, the assessee submitted that the company has not claimed any expenditure related to exempt income during any period, so section 14A is not applicable. In this regard, it is noticed that as per balance sheet for the year under consideration that the assessee has made huge investment of Rs. 1,30,03,08,000/- in unlisted equities, which would result exempted income in the form of dividend and thus provisions of section 14A are applicable in this case. The investment under this head in last year was NIL. The specific contention of the assessee has been considered and found not acceptable in the light of the CBDT circular no. 5/2014 dated 11.02.2014, where in para 4 it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the order of the High Court. The Special Leave Petition are dismissed. Reliance has been placed on the following judicial pronouncements in this regard: 1. In the case of M/s Gee Vee Enterprises 99 ITR 375 (Delhi High Court)[1995]. It was held that the Assessing Officer (AO) is not only an adjudicator but also an investigator, and failure of the AO to conduct the required inquiring and accepting the statement of the assessee without due verification renders the order erroneous as well as prejudicial to the interests of the revenue. Absence of proper inquiring by the AO would render the assessment order erroneous as well as prejudicial to the interest of the revenue as held in following cases: 1 Jagdish Kumar Gulati vs CIT 269 ITR 71 (Allahabad) 2. Duggal Co. 220 ITR 456 (Delhi) 3. K.A. Rama Swami Chettiar vs CIT 220 ITR 657 (Mad) 9. Considering all the facts and circumstances of the case and for the reasons discussed above, the assessment order dated 27-12-2019 for A.Y. 2017-18 passed by the AO is held erroneous in so far as it is prejudicial to the interests of the revenue for the purpose of section 263 of the I.T. Act. The said order has been passed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e courses permissible in law and it has resulted in loss of revenue, or where two views are possible and AO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by the AO is totally unsustainable in law. Kindly refer Malabar Industrial Co. Ltd. v/s CIT (2000) 243 ITR 83 (SC). 1.2 Also kindly refer CIT v/s Max India Ltd. (2007) 295 ITR 282 (SC) wherein it is held that: The phrase prejudicial to the interests of the Revenue in S. 263 of the Income Tax Act, 1961, has to be read in conjunction with the expression erroneous order passed by the AO. Every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interests of the Revenue. For example, when the AO adopts one of two courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the AO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the Revenue, unless the view taken by the AO is unsustainable in law. Ratio of these cases fully apply on the facts of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of mind: It is submitted with respect to identity, creditworthiness and genuineness of the share capital and that the receipts towards the share capital of Rs. 90 Crs was from disclosed sources to the extent he was supposed to act in law. Hence the assessment has been made under scrutiny, the AO is supposed to act accordance with law after due application of mind which, in fact, has been done in this case. 2.2 This is also evident from queries raised and the replies given thereto, reproduced hereunder: 2.2.1 Through the Notice/s u/s 142(1) dated 23.05.2019 (PB 16-19), thereto called for explanation as under: 6. Please furnish source of share capital received along with documentary evidences The Assessee responded to the notice vide letter dated 30.05.2019 Relevant Extract of reply dated 30.05.2019 is reproduced as under.(PB- ): 13. Source of Capital Received Share Holder Name Amount of Share Capital Invested Source of Capital Invested Shri Jalaj Joshi 30,00,00,000 Own Funds through Banking channel Shri Jayant Joshi 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC) Precedent-Binding nature of judgment-Decision of the jurisdictional High Court-Where the decision of the jurisdictional High Court has not been set aside or at least has not been appended from it would be binding-In view of this CIT proceeding on the basis of the High Court other than jurisdictional High Court on the basis that jurisdictional High Court was erroneous and that the AO who had acted in terms of the High Court s decision had acted erroneously, was not justified 4.1 Accordingly, it is submitted that AO raised very specific and directly relevant queries/called for explanation and evidences w.r.t. source of amount received by the company from these shareholders, means to the extent he was supposed to act in law and in accordance with the above decisions. 4.2 As apparent from the record, it is very clear that the Assessee had discharged the burden, by satisfying all the three conditions, as under: 4.2.1 Identity Established: The facts are not denied that the assesse had already submitted complete addresses of all the shareholders as also their Permanent Account Number (PAN) which is the best evidence to prove the identity of a shareholder, in the record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Needless to say that the entire information of that particular shareholder being the ITR, details of income declared, subjected transactions done with the assesse company in the current year as also his creditworthiness/ financial capacity was duly verified by the AO. The Ld CIT, in fact, did not apply his mind on this aspect and ignored that the AO was empowered legally and technically to have examined the veracity of the claim made by the assesse with regard to the creditworthiness of the shareholders. 5.1 It is not the case of CIT that there was a complete/total lack of inquiry. The law is well settled that the Assessment order cannot be held to be erroneous simply on the allegation of inadequate enquiry. Unless there is an established case of total lack of enquiry. Kindly refer CIT vs. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Del), wherein Delhi High Court was considering the aspect, when there is no proper or full verification, and it was held that: One has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no document on record from the donor Late Dr. Rajendra Kumar Joshi about the nature of the transaction showing that it was a gift, are not much relevant and does not render any help to the Department in as much as, the substantive fact fully established is that all the 3 shareholders had received the amount of Rs. 90 Crs through E-banking channels. The availability of the fund in the NRE A/c of late Dr. Joshi (PB 366-367) and flowing of the funds from that account to the different relative shareholders to their respective accounts, was elaborately discussed and demonstrated before the AO (and also before the ld. CIT as well) wherein, he could not find any fault. Simply because the assesse could not produce gift deeds by itself does not indicate the fact that the amounts transferred through the banking channels was factually incorrect. Even assuming though not conceding for a moment that there was no gift deed and even assuming that the explanation of the assesse of receiving the fund through mode of gift is not correct then too the substantive fact of receipt in the hands of the shareholders prior to making investment in share capital of the assesse company, cannot be denied. Suppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was delivered to them through the bank transfer from the Donor s bank account to the bank account of the donees; Therefore the Gift was valid, legal and complete and did not require any written instrument for its legality or efficacy. 6.6 It is further clarified that it is not the case that the gift is being made or created in the present time by this gift Deed/Declaration; on the contrary the fact of the matter is that the gift was validly and legally given and delivered in the past at the relevant date mentioned in the bank statement of the shareholders submitted herein, and only for providing additional proof to the Income Tax Department for the gift, this declaration and additional attestation of the past gift has been executed in the present time. 6.7 Therefore, the non-availability of the gift deed at the time of the making of gift does not vitiate the gift and the present gift deed/declaration, which is merely attesting and putting in writing the fact of past Gift, is fully in accordance and conformity to Section 122 123 of the Transfer of Property Act, as well as the settled legal position. 6.8 Therefore, any reasoning or argument contrary to the aforementioned, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funds received in the form of share capital are from disclosed sources as per notice issued u/s 142(1) (PB 16-22). It is also a fact available on record that limited scrutiny was not converted to full scrutiny nor the higher authorities did so. Thus, the scope of examination by the AO in this limited scrutiny was confined: a) Only to the examination of the fact as to whether the funds received in the form of share capital were from disclosed sources or not. Evidently, there was no pointed reference made to S.68 therefore, the technical requirement of S. 68 being establishing the identity and creditworthiness of the creditor and genuineness of the transaction could not have been presumed by the Ld. Pr. CIT and consequently, he could not have expected the AO to get the same proved by the assesse to the hilt. In other words, this could not be a good basis for holding the subjected assessment as erroneous and prejudicial to the interest of the revenue. It cannot be denied that the very reason of selection was certainly enquired into by the AO in as much as the funds of Rs. 90 Crs in the form of share capital were found received from disclosed sources as they were received from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limited scrutiny into complete scrutiny-Issue of valuation of closing work-in-progress as well as matter relating to agriculture income, which are held by the Principal CIT as matters not examined by the AO, are matters which are not part of the reasons for which the case was selected for limited scrutiny-As far as matters for which case was selected for limited scrutiny in terms of mismatch of sales turnover is concerned the Principal CIT has not recorded any adverse findings in terms of lack of enquiry or inadequate enquiry on part of the AO-Therefore, the order passed by the Principal CIT under s. 263 is set aside and the order of the AO is sustained. In CIT v/s Smt. Padmavathi (2020) 4 NYPCTR 682 (Mad), it was held that: Revision-Erroneous and prejudicial order lack of proper enquiry-AO in his limited scrutiny, has verified the source of funds, noted the sale consideration paid, the expenses incurred for stamp duty and other charges-Source of funds was verified and the AO was satisfied with the same-Principal CIT while invoking his power under s. 263, faults the AO on the ground that he did not make proper enquiry-It is not clear as to what in the opinion of the Princi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l to the interest of Revenue-Further, time limit for issue of notice under s. 143(2)(ii) had also expired-Still further, only miniscule cases were to be taken up for comprehensive scrutiny under s. 143(2)(i) as per guidelines issued by CBDT 8. Alternatively and without prejudice to above, even otherwise on merits, there has been due and proper application of mind in as much as the Ld. AO raised directly relevant queries (as stated above) which were duly replied by the assesse as well. The assesse also submitted certificate stating that the amount received by Dr. Rajendra Joshi was fully offered to tax in the respective country and the amount of gift is included in swiss income and wealth declaration (PB 43) and all related filing have been done. There appears no valid basis to doubt the genuineness and source of the share capital introduced by the 3 shareholders as the same is not baked by any adverse evidence but mere suspicion. In other words, it was nothing but a substitution of opinion by the Ld. CIT. Therefore, on this aspect also the subjected assessment order could not be covered u/s 263 as it was neither erroneous nor prejudicial to the interest of the revenue. 9. Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion that the assessee has made huge investment of Rs. 1,30,03,08,000/- in unlisted equities, which would result exempted income in the form of dividend and thus provisions of section 14A are applicable in this case.(Para 7 of the order passed by Pr CIT). 12.1 It is submitted with respect to applicability of Section 14A, Ld AO . Hence the assessment has been made under scrutiny, the AO is supposed to act accordance with law after due application of mind which, in fact, has been done in this case. 12.2 This is also evident from queries raised and the replies given thereto, reproduced hereunder: Through the Notice/s u/s 142(1) dated 23.05.2019 (PB 18-19), thereto called for explanation as under: 9. Expenses debited to P L account for earning exempt income as per schedule BP of ITR is significantly lower as compared to investments made to earn exempt income. Please furnish complete details of expenses incurred for earning exempt income along with documentary evidences. Reply to the above query has been submitted to the Ld AO and also declared that no exempt income has been claimed during the Financial year. 12.3 In CIT vs. Chemsworth Pvt. Ltd. (2020) 275 Taxman 408 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner (page 113): . . . From a rending of sub-section (1) of section 263, it is clear that the power of suomotu revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue . It is not an arbitrary or unchartered power, it can be exercised only on fulfilment of the requirements laid down in sub- section (1). The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of assessee completed assessment proceedings under section 143(3), assessment order could not be held to be an erroneous order which was prejudicial to interest of revenue. 13.6 In the case of Abdul Hamid v. Income-tax Officer [2020] 117 taxmann.com 986 (Gauhati - Trib.) it was held that only probability and likelihood to find error in assessment order is not permitted u/s 263. 13.7 CIT v/s Vikas Polymers 341 (2012) ITR 0537 (Del) In view of the above submissions, legal provisions and the established Judicial Principles Precedents, the impugned order passed u/s 263 deserves to be quashed and set aside in its entirety. 10. In addition to the above written submission, the ld. AR appearing on behalf of the assessee submitted that the issue raised by the Pr. CIT to invoke the provisions of section 263 are already raised by the ld. AO in the proceeding before him and the details were called for by him. After perusing the details submitted the ld. AO has taken plausible view on both the issues. The ld. AR submitted that the gift deed and letter signed by Mrs. Joshi were submitted (page 366 of the paper book) and placed on records. The gift given was from the joint accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring the compliance with the Swiss Income Tax Laws and declarations from the year 2006 till 2019 was furnished by the assessee. However, on careful verification of these details, it has been found that the same has not been quantified anywhere in such declaration or certification. Therefore, the creditworthiness could not be established beyond doubt. 5.2 Further, it is important to mention here that the assessee claimed that the sources of share capital introduced is out of gift received by Shri Jayant Joshi, Shri Jalaj Joshi Shri Nayan Joshi amounting to Rs.45,73,77.291/- Rs.41,42,32.160/ and Rs.25,50,00, 000/- respectively. Even if the same theory is considered, ignoring the fact that no evidences have been furnished to establish the creditworthiness of the donor, then these three persons/shareholders were required to offer the amount of gift in their return of income u/s 56(2)(vii) of the Act as they do not fall under the exception provided under explanation (e) to provision of section 56(2)(vii) of the Act. However, it is seen from the returns of income filed by them that no income on account of gift received was offered for taxation u/s 56(2)(vii) of the Act. In this reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuineness of the transactions or the creditworthiness of the creditors did not and could not arise. The Tribunal did not apply its mind to the facts of this particular case and proceeded on the footing that since the transactions were through the bank account, it was to be presumed that the transactions were genuine. It was not for the ITO to find out by making investigation from the bank accounts unless the assessee proved the identity of the creditors and their creditworthiness. Mere payment by account payee cheque was not sacrosanct nor could it make a non-genuine transaction genuine. Hence, the Tribunal was not justified in deleting the additions of unexplained cash credits and interest thereon. (ii) Kale Khan Mohammad Hanif v. CITI 1963 ] 50 ITR 1 (SC) It is well established that the onus of proving the source of a sum of money found to have been received by the assessee is on him. If he disputes liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the ITO is entitled to treat it as taxable income. (iii) Sumati Dayal v. CIT[1995] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank of India account No. 662920110000752 from the three shareholders Mr. Jayant Joshi, Mr. Jalaj Joshi Mr. Nayan Joshi and all the personal details including the PAN of these three shareholders have multiple times been shared with the previous Assessing Officer, the PCIT during the 263 proceedings and with the present Assessing Officer during this ongoing assessment through the previous Reply dated 12/03/2022. The company has issued share capital to Mr Jayant Joshi, Mr Jayant Joshi and Mr Nayan Joshi (Rs. 25.50 Crore each) during the year under consideration. It is already informed that shareholders have invested in the share capital of the company from the gifts received by them from their uncle Mr Rajendra Kumar Joshi. Further, vide SCN it has been alleged that The assessee has failed to furnish the other relevant supporting evidence(s) to substantiate the creditworthiness of the donor. In this regard, the assessee has submitted that since late Dr. Rajendra Kumar Joshi and Mrs. Ursula Joshi are citizens of Switzerland and therefore only subject to the laws and jurisdiction of Switzerland and in support of the legality and tax compliance with the laws of Switzerland, the ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the Assessing Officer, we further hereby provide the Certificate issued by Chartered Accountant BSP Treuhand AG. (Certified Chartered Accountant of Switzerland) wherein amounts of gifts given to Mr Jayant Joshi, Mr Jalaj Joshi and Mr Nayan Joshi has been quantified and clearly mentioned the source and credibility of the same. This Certificate is attached herewith and marked as Annexure-1. The Certificate also clearly provides that above gifts are duly declared in the Donors income and wealth declaration of 2015 and 2016. It may be seen from the certificate that Chartered Accountant is providing the quantification as well as certifying that these Gifts were made to relatives from the Income of the Late Rajendra Kumar Joshi and such income was declared in his Income Tax Declaration during the relevant period. Further, the allegation is also made that the assessee has failed to furnish the other relevant supporting evidence(s) to substantiate the creditworthiness of the donor. This allegation is vehemently denied as all the required and relevant documents have been provided by the Assessee in the Reply dated 12/03/2022 as well as this reply. The Assessee has provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e satisfaction of the AO, so as to discharge the primary onus. ii. The Assessing Officer is duty bound to investigate the creditworthiness of the creditor/ subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of name-lenders. iii. If the enquiries and investigations reveal that the identity of the creditors to be dubious or doubtful, or lack credit-worthiness, then the genuineness of the transaction would not be established. In this regard, we have provided all the documents to establish the Creditworthiness and genuineness of the transaction. It may also be seen that all the Shareholders are filing return of income, share application form and allotment letter is available on record, the share application money was paid by the account payee cheques, details of bank account belonging to the share applicants and their bank statements is available on record and no amount was ever deposited in cash and the share applicants have substantial credit worthiness. Reliance is placed on decision of Hon ble CALCUTTA HIGH COURT, in the case of PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL-1, KOLKATA VERS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction and credit worthiness of M/s Bhuwania Bros. Pvt. Ltd. had supplied a copy of the balance sheet and profit and loss account to the Assessing Officer. The appellant had also filed the copy of the return of income of M/s. Bhuwania Bros Pvt. Ltd. as well as copy of information letter. The appellant having proved the identity and credit worthiness of the party as well as the genuineness of the transaction had discharged its burden and it was for the revenue to conduct an enquiry and to prove that the transaction in question was not genuine and the identity of the creditor was not established and it had no credit worthiness. In the instant case, the revenue has not conducted any enquiry and has failed to discharge its burden. We answer the substantial question of law in favour of the assessee and against the revenue. In line with principle laid down by Apex Court in the case of PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL) - 1 VERSUS NRA IRON STEEL PVT. LTD., Company has discharged their obligation to prove the genuineness of the transaction, the identity of the shareholders, and credit-worthiness of the investors. Now its AO duty to investigate the genuineness of the transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has held that where the assessee has discharged the initial burden placed upon him under sec. 68 to prove and establish the identity and creditworthiness of the share applicant and the genuineness of the transaction, the burden of proof shifts on the Assessing officer. In such a case, the AO cannot sit back with folded hands till the assessee exhausts all the evidence or material in his possession and then come forward to merely reject the same, without carrying out any verification or enquiry into the material placed before him. If the Assessing Officer harbours any doubts of the legitimacy of any subscription, he is empowered, and dutybound, to carry out thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings or has no material in his possession, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the Company. In view of above judicial pronouncements and legal position, it is a settled preposition that when assessee has proved identity and credit worthiness of the Shareholders as well as the genuineness of the transaction and has discharged its burden then it is for the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Joshi Jalaj Joshi s/o Mr. Jitendra Kumar Joshi Mr Jitendra Kumar Joshi s/o late Shri Mahabir Prasad Joshi Uncle (Brother of the parent/father of Donee) Late Dr Rajendra Kumar Joshi s/o late Shri Mahabir Prasad Joshi Nayan Joshi s/o Mr. Vinod Kumar Joshi Mr Vinod Kumar Joshi s/o late Shri Mahabir Prasad Joshi Uncle (Brother of the parent/father of Donee) It may be seen that aforementioned shareholders have each received such amount as Gift from Dr. Rajendra Kumar Joshi who is the real brother of their fathers, and the relationship of the Donor with each of the three recipients/Donees clearly falls under the definition of Relative under section 56(2) of Income tax Act, 1961. We would like to inform you that As Per Section 56(2) of Income Tax Act, 1961, any sum of money or kind received as gift from relatives will not be taxable at all means and there is no limit specified for amount (gift) received from the relative, hence any amount received from relatives is not taxable. Relevant Extract of the proviso of Section 56(2)(vii) and Explanation (e) is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse inference is drawn and the setaside assessment is completed accordingly. Thus, the action of the reopening of the investor share holder case it self proves that the department has already accepted the fact that the identity, genuineness and capacity of the shareholder is proved and no addition can be made in the case of the company and if at all the addition is to be made and it should be made considering the receipt of the gift from relative it can be made in the hands of the investors and not in the hands of the company. The department has already reopened the cases of the investor share holders and thus, on this issue the view taken by the Pr. CIT is contrary to the overall facts of the case. As regards the disallowance of under section 14A of the Act the ld. AO vide notice issued u/s. 142(1) dated 23.05.2019 vide question no. 9 asked the assessee as under; 9. Expenses debited to P L account for earning exempt income as per schedule BP of ITR is significantly lower as compared to investment made to earn exempt income. Please furnish complete details of expenses incurred for earning exempt income along with documentary evidences. The assessee company has relied to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d afterwards. In the light of these facts relying on the judgement of Gee Vee Enterprises vs. Addl. CIT 99 ITR 375 (Delhi) and the explanation 2 of section 263 ld. DR supported the action of the ld. Pr. CIT quashing the order of the assessing officer. In addition to these the ld. DR in support his arguments and contentions raised has relied on the following decisions: [2000] 109 Taxman 66(SC) Malabar Industrial Co. Ltd., Vs. Commissioner of Income-tax [2007] 158 Taxman 160(SC) Commissioner of Income-tax, Bhopal Vs. Raison Industries Ltd. [1975] 99 ITR 375(DELHI) Gee Vee Enterprises Vs. Additional Commissioner of Income-tax [2000] 108 Taxman 464 (Madras) Commissioner of Income-tax Vs. Seshasayee Paper Boards Ltd. [2006] 101 ITD 405(MUM.) Arvee International Vs. Additional Commissioner of Income-tax, Range 19(1), Mumbai [1986] 25 Taxman 341(MP) Commissioner of Income-tax Vs. Shriram Development Co. [2018] 95 taxmann.com 366 (SC) Deniel Merchants (P.) Ltd. Vs Income-tax Officer [1981] 7 Taxman 13 (SC) K.P. Varghese Vs. Income-tax Officer 12. We have carefully considered the finding recorded in the impugned order passed under S. 263, the riv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that pursuant to the proceeding u/s. 143(3) r.w.s. 263 read with section 144B of the Act for the assessment year 2016-17 has after giving the detailed show cause considered the submission of the assessee and accepted the fact that the investment made by the shareholder is genuine and no addition can be made in the hands of the company. Considering these facts, the view of the ld. Pr. CIT that the order passed by the ld. AO so far as regards the share capital introduced by the assessee company is neither erroneous not prejudicial to the interest of revenue. The ld. AR draw our attention that on the similar issue there was an order of the Pr. CIT for A. Y. 2016-17 which was challenged before the bench and bench based on the set of fact has taken a view that the assessee company has not placed on record the required details related to the investment made in the share capital and have taken a view that the order passed by the ld. AO for A. Y. 2016-17 was prejudicial to the interest of the revenue as the details called for was not completely placed on record. Thus, the view of the ld. Pr. CIT was confirmed for that year. But for the year under consideration the ld. AR submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pr. CIT does not agree, it cannot be treated as an erroneous order and it is prejudicial to the interest of the Revenue, unless the view taken by the AO is totally unsustainable in law. In this regard, we draw strength from the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 159 CTR (SC) 1: (2000) 243 ITR 83 (SC). We also draw strength from the decision of the Hon'ble Supreme Court in the case of CIT vs. Max India Ltd. (2007) 213 CTR (SC) 266: (2007) 295 ITR 282 (SC) wherein it was held that: The phrase 'prejudicial to the interests of the Revenue' in s. 263 of the IT Act, 1961, has to be read in conjunction with the expression 'erroneous' order passed by the AO. Every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interests of the Revenue. For example, when the AO adopts one of two courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the AO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the Revenue, unless the view taken by the AO is unsustainabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited. The relevant finding of the court in this case is extracted here in below for the sake of brevity: 5. We have considered the submissions made by learned counsel for the parties and have perused the record. Before proceeding further, it is apposite to take note of the relevant extract of section 263 of the Act, which reads as under: 263. Revision of orders prejudicial to revenue-(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous insofar as it is prejudicial to the interests of the revenue, he, may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. 6. Thus, from close scrutiny of section 263 it is evident that twin conditions are required to be satisfied for exercise of revisional jurisdiction under section 263 of the Act firstly, the order of the Assessing Officer is erroneou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Income-tax could not have set aside the order of assessment merely on the ground of inadequacy of enquiry, the order passed by the Commissioner of Income-tax is not sustainable in law and the same has rightly been set aside by the Tribunal. In view of preceding analysis, the substantial question of law framed by this court is answered against the revenue and in favour of the assessee. In the result, we do not find any merit in the appeal. The same fails and is hereby dismissed. Annexure -A In addition, the ld. AR of the of the assessee relied upon the judgment of jurisdictional High Court in the case of CIT Vs. Rajasthan Financial Corporation reported at 134 CTR 145 (Raj) it has been held by the court that Once the AO has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the assessing officer allowed the claim being satisfied with the explanation of assessee, the decision of the AO cannot be held to be erroneous simply because in his order not make an elaborate discussion in that regard. There are several other decisions cited by the ld. AR of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
